PennyMac Financial Services, Inc. (NYSE:PFSI) Q4 2022 Earnings Conference Call February 2, 2023 5:30 PM ET Company Participants Isaac Garden - Vice President, Investor Relations David Spector - Chairman & Chief Executive Officer Doug Jones - President Dan Perotti - Senior Managing Director & Chief Financial Officer Isaac Garden Good afternoon, and welcome to the Fourth Quarter and Full Year 2022 Earnings Discussion for PennyMac Financial Services, Inc. The slides that accompany this discussion are available ...

3Q22 EARNINGS REPORT PennyMac Financial Services, Inc. October 2022 FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management's beliefs, estimates, projections and assumptions with respect to, among other things, our financial results, future operations, business plans and investment strategies, as well as industry and market conditions, all of which are subject to change. Words ...

[PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) Unaudited consolidated financial statements for Q3 2022 reflect a decrease in total assets to $16.36 billion and net income to $135.1 million, driven by lower loan sale gains offset by MSR fair value increases [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) As of September 30, 2022, total assets decreased by 13% to $16.36 billion, primarily due to a 57% reduction in loans held for sale, while MSRs increased by 46% and total liabilities decreased by 16% Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2022 | December 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Cash | $1,558,679 | $340,069 | +358% | | Loans held for sale at fair value | $4,149,726 | $9,742,483 | -57% | | Mortgage servicing rights at fair value | $5,661,672 | $3,878,078 | +46% | | **Total assets** | **$16,361,811** | **$18,776,612** | **-13%** | | Assets sold under agreements to repurchase | $3,487,335 | $7,292,735 | -52% | | Unsecured senior notes | $1,778,988 | $1,776,219 | +0.2% | | **Total liabilities** | **$12,879,721** | **$15,358,287** | **-16%** | | **Total stockholders' equity** | **$3,482,090** | **$3,418,325** | **+1.9%** | [Consolidated Statements of Income](index=8&type=section&id=Consolidated%20Statements%20of%20Income) Q3 2022 net income decreased 45.8% to $135.1 million, primarily due to a 73.1% drop in net gains on loans held for sale, partially offset by a 624.8% increase in net loan servicing fees and a 34.9% reduction in total expenses Quarterly Income Statement Summary (in thousands, except EPS) | Metric | Q3 2022 | Q3 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Total net revenues | $476,290 | $786,612 | -39.5% | | Net gains on loans held for sale | $168,694 | $626,754 | -73.1% | | Net loan servicing fees | $243,742 | $33,630 | +624.8% | | Total expenses | $290,818 | $447,063 | -34.9% | | **Net income** | **$135,134** | **$249,310** | **-45.8%** | | **Diluted EPS** | **$2.46** | **$3.80** | **-35.3%** | Nine-Month Income Statement Summary (in thousands, except EPS) | Metric | Nine Months 2022 | Nine Months 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Total net revenues | $1,645,309 | $2,473,550 | -33.5% | | Net gains on loans held for sale | $689,720 | $1,963,743 | -64.9% | | Net loan servicing fees | $768,498 | $88,221 | +771.1% | | Total expenses | $1,047,791 | $1,348,478 | -22.3% | | **Net income** | **$437,890** | **$830,407** | **-47.3%** | | **Diluted EPS** | **$7.69** | **$11.98** | **-35.8%** | [Consolidated Statements of Changes in Stockholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity increased to $3.48 billion by September 30, 2022, driven by net income, largely offset by common stock repurchases and dividend payments Changes in Stockholders' Equity (Nine Months Ended Sep 30, 2022, in thousands) | Item | Amount | | :--- | :--- | | Balance, December 31, 2021 | $3,418,325 | | Net income | $437,890 | | Repurchase of common stock | ($354,759) | | Common stock dividends | ($44,206) | | Stock-based compensation & other | $24,840 | | **Balance, September 30, 2022** | **$3,482,090** | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly increased to $5.54 billion for the nine months ended September 30, 2022, primarily due to a decrease in loans held for sale, leading to a $1.22 billion overall cash increase Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,543,826 | $2,770,083 | | Net cash used in investing activities | ($483,567) | ($301,458) | | Net cash used in financing activities | ($3,841,670) | ($2,524,885) | | **Net increase (decrease) in cash** | **$1,218,589** | **($56,260)** | [Notes to Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, significant relationships, the $539.1 billion loan servicing portfolio, fair value of Level 3 assets like MSRs, debt structure, and regulatory capital compliance - Revenues generated from PennyMac Mortgage Investment Trust (PMT) accounted for **10% of total net revenue for Q3 2022** and **8% for the first nine months of 2022**[35](index=35&type=chunk) - The company's total loan servicing portfolio reached **$539.1 billion** as of September 30, 2022, up from **$509.7 billion** at the end of 2021, including **$308.1 billion** of owned servicing rights and **$231.0 billion** subserviced for PMT[83](index=83&type=chunk)[86](index=86&type=chunk) - The company is subject to various legal and regulatory proceedings, including a complaint from Black Knight Servicing Technologies alleging breach of contract and misappropriation of trade secrets, which management believes is without merit[204](index=204&type=chunk)[205](index=205&type=chunk) - The company's board of directors increased its common stock repurchase program to **$2 billion** in August 2021, with **6.7 million shares** repurchased for **$354.8 million** during the nine months ended September 30, 2022[211](index=211&type=chunk)[212](index=212&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=59&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the decline in pre-tax income to challenging mortgage market conditions and rising interest rates, which positively impacted MSRs, while actively reducing expenses and improving leverage ratios - Management highlights that rising interest rates are expected to reduce the total mortgage origination market from an estimated **$4.4 trillion in 2021** to a forecast of **$2.4 trillion for 2022**[253](index=253&type=chunk) - The decrease in income before taxes for Q3 2022 was primarily due to a **$458.1 million decrease in Net gains on loans held for sale**, partially offset by a **$210.1 million increase in Net loan servicing fees** and a **$156.2 million decrease in total expenses**[255](index=255&type=chunk) - The company reduced its average headcount to **4,911 in Q3 2022** from **7,247 in Q3 2021**, leading to a significant decrease in compensation expense[292](index=292&type=chunk) Leverage Ratios | Ratio | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total debt / Stockholders' equity | 2.1x | 3.2x | | Total debt / Tangible stockholders' equity | 2.2x | 3.3x | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=79&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate and prepayment risks, mitigated by derivative instruments, with sensitivity analysis showing MSR fair value decreases of **$286.3 million** and **$309.8 million** for 20% adverse changes in prepayment speed and pricing spread respectively - The primary market risks identified are **fair value risk, interest rate risk, and prepayment risk**[341](index=341&type=chunk) - The company uses a variety of derivatives to hedge its exposures, including MBS forward contracts for IRLCs and loans, and Treasury futures, interest rate swap futures, options, and swaptions for its MSR portfolio[349](index=349&type=chunk) MSR Fair Value Sensitivity as of September 30, 2022 (in thousands) | Change in fair value attributable to shift in: | +5% Adverse Change | +10% Adverse Change | +20% Adverse Change | | :--- | :--- | :--- | :--- | | Prepayment speed | $(75,034) | $(147,692) | $(286,318) | | Pricing spread | $(80,798) | $(159,312) | $(309,839) | | Annual per-loan cost of servicing | $(38,133) | $(76,265) | $(152,531) | [Item 4. Controls and Procedures](index=81&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the reporting period[354](index=354&type=chunk) - No material changes to internal control over financial reporting were identified during the quarter ended September 30, 2022[355](index=355&type=chunk) [PART II. OTHER INFORMATION](index=82&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=82&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal and regulatory proceedings in the ordinary course of business, which management does not expect to have a material adverse financial effect - The company is party to various legal proceedings but does not expect them to have a material adverse financial impact[357](index=357&type=chunk) [Item 1A. Risk Factors](index=82&type=section&id=Item%201A.%20Risk%20Factors) No material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021, were reported - No material changes to risk factors were reported for the quarter[358](index=358&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=82&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not have any unregistered equity sales in Q3 2022 but repurchased **1,949,025 shares** for **$99.7 million**, with **$334.6 million** remaining under the **$2 billion** repurchase program Stock Repurchase Summary (Q3 2022) | Period | Total Shares Purchased | Average Price Paid | | :--- | :--- | :--- | | July 2022 | 477,946 | $48.21 | | August 2022 | 531,733 | $56.18 | | September 2022 | 939,346 | $49.81 | | **Total** | **1,949,025** | **$51.15** | - As of September 30, 2022, approximately **$334.6 million** remained authorized for repurchase under the company's **$2 billion** stock repurchase program[360](index=360&type=chunk) [Item 3. Defaults Upon Senior Securities](index=82&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - The company reported no defaults upon senior securities during the period[361](index=361&type=chunk) [Item 4. Mine Safety Disclosures](index=82&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - This item is not applicable to the company[362](index=362&type=chunk) [Item 5. Other Information](index=82&type=section&id=Item%205.%20Other%20Information) No other information was reported under this item - No other information was reported under this item[362](index=362&type=chunk) [Item 6. Exhibits](index=83&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and interactive data files (XBRL)

PennyMac Financial Services, Inc. (NYSE:PFSI) Q3 2022 Results Conference Call October 27, 2022 5:00 PM ET Company Participants Isaac Garden - Vice President, Investor Relations David Spector - Chairman & Chief Executive Officer Doug Jones - President Dan Perotti - Senior Managing Director & Chief Financial Officer Isaac Garden Good afternoon and welcome to the third quarter earnings discussion for PennyMac Financial Services, Inc. The slides that accompany this discussion are available on PennyMac Financial ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-38727 PennyMac Financial Services, Inc. (Exact name of registrant as specified in its charter) (State or other j ...

PennyMac Financial Services, Inc. (NYSE:PFSI) Q2 2022 Earnings Conference Call August 2, 2022 4:30 PM ET Company Participants Isaac Garden - Vice President, Investor Relations David Spector - Chairman & Chief Executive Officer Doug Jones - President Dan Perotti - Senior Managing Director & Chief Financial Officer Conference Call Participants Isaac Garden Good afternoon and welcome to the Second Quarter Earnings Discussion for PennyMac Financial Services Inc. The slides that accompany this discussion are av ...

2Q22 EARNINGS REPORT PennyMac Financial Services, Inc. August 2022 FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management's beliefs, estimates, projections and assumptions with respect to, among other things, our financial results, future operations, business plans and investment strategies, as well as industry and market conditions, all of which are subject to change. Words l ...

Financial Data and Key Metrics Changes - PennyMac Financial Services, Inc. reported a net income of $174 million, translating to diluted earnings per share of $2.94, with an annualized return on equity of 20% [3] - The company repurchased 2.3 million shares for approximately $141 million in Q1 2022, with an additional 905,000 shares repurchased in April for about $44 million [3] - The book value per share increased by 3% from December 31 to $62.19 as of March 31 [4] Business Line Data and Key Metrics Changes - Loan acquisition and origination volumes reached $33 billion in Q1 2022, offsetting prepayment activity in the servicing portfolio, which totaled nearly $520 billion in unpaid principal balance, up 2% from the previous quarter and 16% year-over-year [4] - The servicing segment recorded pretax income of $225.2 million, up from $126.1 million in the prior quarter and $141.7 million in Q1 2021 [32] - The Investment Management segment reported net assets under management of $2.2 billion, down 6% from the prior quarter [36] Market Data and Key Metrics Changes - The origination market is projected to range from $2.6 trillion to $3.1 trillion for 2022, with potential for further decreases due to rising rates [5] - Government correspondent lock volume was $12.5 billion, down 20% from the prior quarter, while conventional correspondent acquisitions saw significant declines due to increased competition [19] - The Consumer Direct channel accounted for approximately 1.7% of total originations, with origination volumes of $8.2 billion in Q1 2022 [20] Company Strategy and Development Direction - The company emphasizes a balanced business model with leadership in both production and servicing, aiming to align future expenses with lower projected market activity [9][10] - PennyMac is committed to maintaining low levels of leverage and strong liquidity, positioning itself well to meet potential new regulatory requirements from the FHFA [11] - The company is focused on enhancing its servicing capabilities and leveraging data analytics to improve customer acquisition and retention [21][16] Management's Comments on Operating Environment and Future Outlook - Management noted the challenges posed by a rising interest rate environment and significant competition, but expressed confidence in the company's ability to navigate these changes due to its strong operational and capital planning disciplines [2][38] - The management team anticipates that ROE may trend lower before returning to pre-COVID levels over time [10] - The company is optimistic about its position as a leading producer of purchase mortgages and its ability to adapt to market conditions [38] Other Important Information - The company has implemented expense management initiatives since summer 2021 to align with market changes, including hiring freezes [9] - The fair value of the MSR increased by $324 million in Q1 2022, driven by higher mortgage rates [35] Q&A Session Summary Question: What is the outlook for the mortgage market given the current interest rate environment? - Management acknowledged the rapid changes in the mortgage market and emphasized the company's strong position due to its balanced business model and risk management capabilities [38]

1Q22 EARNINGS REPORT PennyMac Financial Services, Inc. May 2022 FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management's beliefs, estimates, projections and assumptions with respect to, among other things, our financial results, future operations, business plans and investment strategies, as well as industry and market conditions, all of which are subject to change. Words like ...

[PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=7&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited statements show a significant net income decline and reduced total assets due to lower loan production Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2022 (in millions) | December 31, 2021 (in millions) | | :--- | :--- | :--- | | **Total Assets** | **$14,617.9** | **$18,776.6** | | Loans held for sale at fair value | $5,119.2 | $9,742.5 | | Mortgage servicing rights at fair value | $4,707.0 | $3,878.1 | | **Total Liabilities** | **$11,176.3** | **$15,358.3** | | Assets sold under agreements to repurchase | $3,333.4 | $7,292.7 | | Unsecured senior notes | $1,777.1 | $1,776.2 | | **Total Stockholders' Equity** | **$3,441.6** | **$3,418.3** | Consolidated Statement of Income Highlights (Unaudited) | Account | Quarter ended March 31, 2022 (in millions) | Quarter ended March 31, 2021 (in millions) | | :--- | :--- | :--- | | Total net revenues | $657.5 | $944.7 | | Net gains on loans held for sale | $298.5 | $754.3 | | Net loan servicing fees | $286.3 | $39.7 | | Total expenses | $423.0 | $438.7 | | **Net income** | **$173.6** | **$376.9** | | **Diluted Earnings Per Share** | **$2.94** | **$5.15** | - During Q1 2022, the company repurchased **2.32 million shares** of common stock for **$141.4 million** and paid a cash dividend of $0.20 per share, totaling $11.4 million[23](index=23&type=chunk) - Net cash provided by operating activities was **$4.4 billion**, a significant positive shift from a $1.2 billion use of cash in Q1 2021, primarily driven by the sale of loans held for sale[25](index=25&type=chunk) [Notes to Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Disclosures detail accounting policies, related party transactions, and the valuation of the loan servicing portfolio - Revenues from PennyMac Mortgage Investment Trust (PMT) accounted for **6% of total net revenue** in Q1 2022, down from 9% in Q1 2021, and the company purchased 55% of its new loan production from PMT[35](index=35&type=chunk) - Mortgage Servicing Rights (MSRs), a significant Level 3 asset, had a fair value of **$4.71 billion** as of March 31, 2022, up from $3.88 billion at year-end 2021[88](index=88&type=chunk)[89](index=89&type=chunk) - The company was in compliance with all agency capital and liquidity requirements as of March 31, 2022, maintaining levels **significantly above the required minimums**[218](index=218&type=chunk) Loan Servicing Portfolio (UPB) | Category | March 31, 2022 (in billions) | December 31, 2021 (in billions) | | :--- | :--- | :--- | | Servicing rights owned | $295.9 | $287.8 | | Subservicing for PMT | $222.9 | $221.9 | | **Total Loans Serviced** | **$518.8** | **$509.7** | Segment Pre-Tax Income | Segment | Q1 2022 (in millions) | Q1 2021 (in millions) | | :--- | :--- | :--- | | Production | $9.3 | $362.9 | | Servicing | $225.2 | $141.7 | | Investment Management | $0.1 | $1.4 | | **Total** | **$234.5** | **$506.0** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=57&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Pre-tax income declined due to rising interest rates impacting production, offset by strong servicing performance - Management forecasts the U.S. mortgage origination market to decline from an estimated $4.4 trillion in 2021 to a range of **$2.6 trillion to $3.1 trillion for 2022**[243](index=243&type=chunk) - Pre-tax income for Q1 2022 **decreased by $271.5 million** compared to Q1 2021, driven by a $455.9 million decrease in Net gains on loans held for sale[244](index=244&type=chunk) - The company's total loan servicing portfolio grew to **$518.8 billion** at the end of Q1 2022, while delinquent loans in the owned portfolio decreased to $14.7 billion[269](index=269&type=chunk) - Total assets and liabilities both **decreased by $4.2 billion** during the quarter, driven by a reduction in loans held for sale and the short-term debt used to finance them[281](index=281&type=chunk)[282](index=282&type=chunk) Segment Pre-Tax Income Performance | Segment | Q1 2022 (in millions) | Q1 2021 (in millions) | | :--- | :--- | :--- | | Production | $9.8 | $362.9 | | Servicing | $224.6 | $141.7 | | **Total Mortgage Banking** | **$234.4** | **$504.6** | [Quantitative and Qualitative Disclosures About Market Risk](index=74&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages fair value, interest rate, and prepayment risks using various derivative instruments - The company's main market risks are identified as **fair value risk, interest rate risk, and prepayment risk**, which primarily affect its mortgage-related assets and liabilities[323](index=323&type=chunk) - To mitigate risk, the company uses various derivative instruments, including **MBS forward contracts, options, and Treasury futures** for its loan pipeline and MSRs[330](index=330&type=chunk) MSR Fair Value Sensitivity Analysis (as of March 31, 2022) | Change in fair value attributable to shift in: | +5% Adverse Change (in millions) | +10% Adverse Change (in millions) | +20% Adverse Change (in millions) | | :--- | :--- | :--- | :--- | | Pricing spread | $(70.1) | $(138.1) | $(268.2) | | Prepayment speed | $(77.6) | $(152.6) | $(295.1) | | Annual per-loan cost of servicing | $(36.4) | $(72.9) | $(145.7) | [Controls and Procedures](index=76&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material internal control changes - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of the end of the period covered by the report[335](index=335&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter that are reasonably likely to materially affect internal controls[336](index=336&type=chunk) [PART II. OTHER INFORMATION](index=77&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=77&type=section&id=Item%201.%20Legal%20Proceedings) The company is defending against a breach of contract and trade secret misappropriation claim in arbitration - The company is defending against a complaint from Black Knight Servicing Technologies, LLC, which alleges **breach of contract and misappropriation of trade secrets**, with the matter pending in arbitration[199](index=199&type=chunk)[200](index=200&type=chunk) [Risk Factors](index=77&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors disclosed in the 2021 Annual Report on Form 10-K have occurred - The company reports **no material changes** from the risk factors set forth in its 2021 Annual Report on Form 10-K[339](index=339&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=77&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 2.32 million shares for $141.4 million under its authorized stock repurchase program - The company's board of directors increased the common stock repurchase program to **$2 billion** in August 2021, with approximately **$548 million remaining** available for future repurchases[340](index=340&type=chunk) Common Stock Repurchases (Q1 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2022 | 847,780 | $66.03 | | Feb 2022 | 928,128 | $59.15 | | Mar 2022 | 543,632 | $56.15 | | **Total** | **2,319,540** | **$60.97** |