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** |

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 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) | Delaware | 83-1098934 | | --- ...

4Q21 EARNINGS REPORT PennyMac Financial Services, Inc. February 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, the Company's financial results, future operations, business plans and investment strategies, as well as industry and market conditions, all of which are subject to cha ...

Call Start: 16:30 January 1, 0000 4:51 PM ET PennyMac Financial Services, Inc. (NYSE:PFSI) Q4 2021 Earnings Conference Call February 3, 2022, 4:30 PM ET Company Participants David Spector – President and Chief Executive Officer Doug Jones – Chief Mortgage Banking Officer Dan Perotti – Chief Financial Officer Conference Call Participants Operator Good afternoon and welcome to the Fourth Quarter and Full-Year 2021 Earnings Discussion for PennyMac Financial Services, Inc. The slides that accompany this discu ...

Financial Data and Key Metrics Changes - For Q3 2021, the company reported a net loss attributable to common shareholders of $43.9 million or $0.45 per common share, primarily due to fair value decline and interest rate sensitive strategies [3] - Book value per share decreased to $19.79 from $20.77 at the end of the prior quarter [4] - The company paid a common dividend of $0.47 per share [4] Business Line Data and Key Metrics Changes - Total correspondent acquisition volume was $44 billion, down 6% from the prior quarter and down 1% year-over-year [22] - Conventional lock volume was $29.4 billion, down 3% from the prior quarter and down 14% year-over-year [23] - Purchase volume reached a record of nearly $29 billion, up from $27.4 billion in the prior quarter and $21.5 billion in Q3 2020 [23] - The fair value of MSR assets increased to $2.8 billion from $2.6 billion at the end of the prior quarter [25] - The total UPB of loans underlying CRT investments was $35.4 billion, down 14% quarter-over-quarter [26] Market Data and Key Metrics Changes - Current forecasts for 2022 originations are strong at $3 trillion, with purchase originations expected to grow to a record $2 trillion, up 9% from the previous year [13] - Refinance originations are expected to decline to $1.1 trillion [13] - The company expects increased competition and lower margins across the industry due to a smaller origination market [7] Company Strategy and Development Direction - The company aims to capitalize on current and evolving investment opportunities, particularly in purchase money loans and MSRs [7][8] - The management emphasizes the importance of organic asset creation as a competitive advantage [9] - The company is focused on maintaining its leadership position in correspondent production and adapting to regulatory changes [14][15] Management's Comments on Operating Environment and Future Outlook - Management noted that rising interest rates are creating a competitive environment that presents near-term challenges but believes the company is well-positioned for long-term success [40] - The company remains optimistic about its ability to deliver attractive returns despite the current market transition [40] Other Important Information - The company successfully completed the issuance of $250 million in preferred shares [4] - The fair value of PMT's investment in investor loans was approximately $60 million at the end of October [6] Q&A Session Summary Question: What are the expectations for future loan performance? - Management indicated that the market expectation of significant future loss reversals is positive, with potential for additional losses to be reversed as borrowers exit forbearance [30] Question: How is the company addressing the competitive landscape? - The company is focused on maintaining flexibility in loan execution and is positioned to attract correspondent sellers looking to sell whole loans servicing released [16]

Financial Performance - Net income was $249.3 million, with diluted earnings per share (EPS) of $3.80, and an annualized return on average common stockholders' equity (ROE) of 29%[5] - The company repurchased 4.2 million shares of its common stock at a cost of $257.3 million in 3Q21, and an additional 1.4 million shares in October at a cost of $89.7 million[5] Production Segment - Production segment pretax income was $330.6 million, up 35% from 2Q21 but down 46% from 3Q20[5] - Consumer direct lock volume reached a record $16.3 billion in UPB, up 16% from 2Q21 and 50% from 3Q20[5] - Total loan acquisitions and originations were $59.1 billion in UPB, down 4% from 2Q21 but up 9% from 3Q20[5] Servicing Segment - Servicing segment pretax income was $8.0 million, down from $30.9 million in 2Q21 and $111.7 million in 3Q20[7] - Servicing portfolio grew to $495.4 billion in UPB, up 5% from June 30, 2021, and 23% from September 30, 2020[7] - MSR fair value changes and hedging results impacted pretax income by $(151.9) million, or $(1.70) in earnings per share[7] Investment Management Segment - Investment Management segment pretax income was $1.0 million, down from $4.1 million in 2Q21 and $3.3 million in 3Q20[7] - Net assets under management (AUM) were $2.5 billion, up 6% from June 30, 2021, and 9% from September 30, 2020[7]

Financial Performance - Total net revenue for the quarter ended September 30, 2021, was $786.6 million, a decrease of 29.8% from $1.12 billion in the same quarter of 2020[240] - Net income for the quarter was $249.3 million, down 53.4% from $535.2 million year-over-year[240] - Adjusted EBITDA for the quarter was $524.5 million, a decrease of 31.9% from $769.8 million in the prior year quarter[245] - Total expenses for the quarter were $447.1 million, an increase of 14.2% from $391.7 million in the prior year quarter[240] - For the quarter ended September 30, 2021, income before provision for income taxes decreased by $388.7 million compared to the same period in 2020, primarily due to a $228.5 million decrease in net gains on loans held for sale[253] - Net gains on loans held for sale at fair value totaled $626.8 million for the quarter ended September 30, 2021, a decrease of $228.5 million compared to the same period in 2020[256] - Total cash gains from loans held for sale were $126.1 million for the quarter ended September 30, 2021, compared to $533.3 million for the same period in 2020[257] Loan Origination and Servicing - Loan origination fees increased to $94.6 million, up 25.1% from $75.6 million in the prior year quarter[240] - The unpaid principal balance of the loan servicing portfolio owned was $277.4 billion, an increase from $245.4 billion year-over-year[240] - The company serviced $8.9 billion in UPB of delinquent government loans for third-party investors at the end of the quarter[250] - Total loans serviced increased to $495.4 billion as of September 30, 2021, compared to $426.8 billion in the same period of 2020, reflecting a growth of approximately 16%[282] - Net loan servicing fees for the quarter ended September 30, 2021, were $33.6 million, compared to $132.8 million for the same period in 2020[275] - The average loan servicing portfolio for the company was $255.8 billion for the quarter ended September 30, 2021, compared to $234.3 billion for the same period in 2020[275] Expenses and Compensation - The increase in total expenses for the quarter was mainly due to increases in compensation and origination expenses, reflecting growth in mortgage banking activities[253] - Compensation expenses rose by $46.7 million in Q3 2021, totaling $249.2 million, driven by an increase in headcount to support loan production and servicing activities[285] - Loan origination expenses increased by $27.2 million in Q3 2021, totaling $93.3 million for the nine months ended September 30, 2021, due to heightened lending activities[288] - Technology expenses grew by $3.4 million in Q3 2021, totaling $30.3 million for the nine months, reflecting investments in loan servicing operations[289] Financial Position and Liquidity - Total assets decreased by $11.9 billion from $31.6 billion at December 31, 2020, to $19.7 billion at September 30, 2021, primarily due to a reduction in loans eligible for repurchase[294] - Total liabilities decreased by $12.0 billion from $28.2 billion at December 31, 2020, to $16.2 billion at September 30, 2021, mainly due to a drop in liabilities for loans eligible for repurchase[295] - Net cash provided by operating activities was $2.8 billion for the nine months ended September 30, 2021, compared to a net cash used of $3.9 billion in the same period of 2020[299] - The company expects sufficient liquidity to meet current obligations and fund new originations, with primary sources being cash flows from business activities and bank borrowings[302] Shareholder Returns - The company declared a dividend of $0.20 per share, up from $0.15 per share in the same quarter last year[240] - The company increased its common stock repurchase program from $1 billion to $2 billion, having repurchased $1.0 billion of common shares through September 30, 2021[323] Risk Management - Interest rate risk significantly affects the fair value of the company's investments, particularly with fixed-rate mortgage assets[340] - The company utilizes derivative financial instruments to mitigate risks associated with interest rate fluctuations and prepayment exposure[345] Regulatory Compliance - The company is subject to a minimum liquidity requirement of $100 million and a minimum tangible net worth of $1.25 billion as established by the Federal Housing Finance Agency (FHFA)[318] - The company believes it is currently in compliance with applicable Agency requirements[322] Changes in Fair Value - Changes in fair value of mortgage servicing rights and liabilities resulted in a total change of $(234.1) million for the quarter ended September 30, 2021[279] - The fair value of mortgage servicing rights (MSRs) is sensitive to changes in pricing spreads, with a potential decrease of $225,331 for a 20% shift in pricing spread[348]

Financial Data and Key Metrics Changes - Net income for the second quarter was $204 million, or diluted earnings per share of $2.94, representing an annualized return on equity of 23% [3] - Book value per share increased by 5% to $54.49 as of June 30 [3] - Total stock repurchases year-to-date reached approximately $600 million, with an increase in stock repurchase authorization from $1 billion to $2 billion [4][5] Business Line Data and Key Metrics Changes - Loan acquisition and origination volumes totaled $61 billion in the second quarter, leading to a servicing portfolio growth of 5% quarter-over-quarter and 22% year-over-year, totaling $473 billion in unpaid principal balance [6] - The production segment pretax income was $244.4 million, down 33% from the prior quarter and 55% from the second quarter of 2020 [41] - The servicing segment recorded pretax income of $30.9 million, down from $141.7 million in the prior quarter but up from a pretax loss of $62.4 million in the second quarter of 2020 [43] Market Data and Key Metrics Changes - The origination market remains strong, with forecasts for 2021 originations ranging from $3.6 trillion to $4.2 trillion, and purchase originations expected to grow to $1.7 trillion and $1.9 trillion in 2021 and 2022, respectively [11][12] - The correspondent channel represented approximately 18% of the market, with total correspondent loan acquisition volume at $46.7 billion, down 9% from the prior quarter but up 56% year-over-year [18][19] Company Strategy and Development Direction - The company continues to invest in people, systems, and processes to achieve medium-term goals, focusing on expanding its leadership in direct origination channels [9][15] - The balanced business model, with a large and growing servicing portfolio, is seen as a competitive advantage as interest rates increase [15] Management's Comments on Operating Environment and Future Outlook - Management believes the outlook for PennyMac Financial remains strong despite expected declines in refinance origination volumes due to higher interest rates, supported by a profitable servicing business [12][15] - The company is positioned well in a changing mortgage market due to its infrastructure and risk management disciplines [16] Other Important Information - The percentage of loans in forbearance decreased to 4.9% at June 30 from 6.3% at March 31, indicating a positive trend in borrower recovery [49] - The fair value of the mortgage servicing rights (MSR) decreased by $251 million in the second quarter, primarily due to higher expectations for prepayment activity [47] Q&A Session Summary Question: What are the expectations for the origination market? - Management noted that the origination market remains strong, with significant growth expected in purchase originations over the next few years [11][12] Question: How is the company managing its servicing portfolio amidst prepayment activity? - The company reported that strong acquisition and origination volumes continue to drive the growth of the servicing portfolio despite elevated prepayment activity [31][32]