PennyMac Financial Services(PFSI) - 2025 Q3 - Quarterly Results

Third Quarter 2025 Results Overview This section provides a comprehensive overview of PennyMac Financial Services, Inc.'s financial and operational performance for the third quarter of 2025, highlighting key achievements and strategic initiatives Financial Performance Summary PennyMac Financial Services, Inc. achieved significant financial growth in Q3 2025, with substantial increases in net income and EPS, alongside rising book value and stable cash dividends | Metric | Q3 2025 | Q2 2025 | Q3 2024 | | :--- | :--- | :--- | :--- | | Net Income | $181.5 Million | $136.5 Million | $69.4 Million | | Diluted EPS | $3.37 | $2.54 | $1.30 | | Total Net Revenue | $632.9 Million | $444.7 Million | $411.8 Million | | Book Value Per Share | $81.12 | $78.04 (as of June 30) | - | | Cash Dividend Per Share | $0.30 | $0.30 | $0.30 | Key Operational Highlights The company demonstrated strong operational performance in Q3, with significant pretax income growth in both production and servicing, driven by direct lending expansion, successful hedging, and strategic MSR sales | Metric | Q3 2025 | Q2 2025 | Q3 2024 | | :--- | :--- | :--- | :--- | | Pretax Income | $236.4 Million | $76.4 Million | $93.9 Million | | Production Segment Pretax Income | $122.9 Million | $57.8 Million | $129.4 Million | | Servicing Segment Pretax Income | $157.4 Million | $54.2 Million | $3.3 Million | | Corporate and Other Pretax Loss | $43.9 Million | $35.5 Million | $38.8 Million | | Total Loan Acquisitions and Originations (UPB) | $36.5 Billion | Down 4% QoQ | Up 15% YoY | | Servicing Portfolio (UPB) | $716.6 Billion | Up 2% QoQ | Up 11% YoY | - The company completed the sale of a $12 billion UPB MSR portfolio to Annaly Capital Management, Inc., retaining all subservicing and recapture agreements to accelerate capital-light subservicing growth and deploy capital into higher-coupon MSRs[6][7] - Repurchased 50,300 shares of common stock at an average price of $94.19 per share, totaling $4.7 million[6] - Issued $650 million of 8.5-year unsecured senior notes (due February 2034) and $300 million of 5-year term notes secured by Ginnie Mae MSRs and servicing advances[6] - Improved efficiency and performance by integrating AI and advanced data optimization tools, adopting Vesta's next-generation loan origination platform, and launching new non-QM products to expand market reach[7] Segment Performance This section details the financial and operational results of PennyMac Financial Services, Inc.'s Production, Servicing, and Corporate and Other segments for the third quarter of 2025 Production Segment The Production segment achieved significant growth in pretax and net income in Q3, driven by increased direct lending channel activity and higher volumes across all channels, despite some PMT acquisition volume decline - The Production segment includes correspondent acquisitions of newly originated government-guaranteed and conventional conforming loans, fulfillment services for PMT, and direct lending through consumer direct and broker direct channels[9] | Metric | Q3 2025 | Q2 2025 | Q3 2024 | | :--- | :--- | :--- | :--- | | Pretax Income | $122.9 Million | $57.8 Million | $129.4 Million | | Net Income | $361.8 Million | Up 29% QoQ | Up 23% YoY | | Loan Production Activity (UPB) | $36.5 Billion | Down 4% QoQ | Up 15% YoY | | PFSI Proprietary Loan Production (UPB) | $33.2 Billion | - | - | | PMT Fee-Based Fulfillment Activity (UPB) | $3.3 Billion | Up 8% QoQ | Down 44% YoY | | Total Locks (UPB) | $43.2 Billion | Flat QoQ | Up 11% YoY | | PFSI and Direct Lending IRLCs (UPB) | $38.8 Billion | Down 2% QoQ | Up 24% YoY | | PMT Correspondent Locks (UPB) | $4.4 Billion | Up 24% QoQ | Down 42% YoY | | Fulfillment Service Fees | $6.2 Million | Up 6% QoQ | Down 46% YoY | | Net Interest Income | $13.7 Million | Up 29.2% QoQ | - | | Production Segment Expenses | $238.9 Million | Up 8% QoQ | Up 44% YoY | Net Gain on Loans Held for Sale Breakdown | Item | September 30, 2025 | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | :--- | | MSRs received | $700,326 | $814,538 | $578,982 | | Gain on loans sold to PMT (net of MSR recapture) | $17,454 | $7,075 | $2,506 | | Provision (net) | $(2,354) | $(1,834) | $(589) | | Cash loss (including cash hedging results) | $(284,589) | $(678,982) | $(382,148) | | Fair value changes in pipeline, inventory, and hedges | $(116,382) | $93,862 | $58,068 | | Net gain on mortgage loans held for sale | $314,455 | $234,659 | $256,819 | | Production segment net gain on mortgage loans held for sale | $280,092 | $203,961 | $235,902 | - Under the renewed mortgage banking services agreement with PMT, correspondent production is initially acquired by PFSI as of July 1, 2025. PMT retains the right to purchase up to 100% of non-government correspondent production. PMT is expected to acquire all jumbo correspondent production and 15% to 25% of conventional conforming correspondent production in Q4 2025[14] Servicing Segment The Servicing segment achieved significant pretax and net income growth in Q3, driven by continued MSR portfolio expansion and successful hedging offsetting MSR fair value declines - Servicing segment revenue is derived from owned MSRs and subservicing. Total servicing portfolio UPB grew to $716.6 billion, with owned MSR portfolio UPB increasing to $477.6 billion and subservicing UPB to $239.0 billion[17] | Metric | Q3 2025 | Q2 2025 | Q3 2024 | | :--- | :--- | :--- | :--- | | Pretax Income | $157.4 Million | $54.2 Million | $3.3 Million | | Net Income | $259.5 Million | $153.4 Million | $105.9 Million | | Net Loan Servicing Fees | $241.2 Million | $150.4 Million | $75.8 Million | | Loan Servicing Fees | $535.1 Million | $506.7 Million | $462.0 Million | | Cash Flow Realized | $289.7 Million | $263.1 Million | $225.8 Million | | MSR Fair Value Loss | $102.5 Million | $15.9 Million (Gain) | $402.4 Million (Loss) | | Hedging Gains | $98.3 Million | $109.1 Million (Loss) | $242.1 Million (Gain) | | Net Valuation-Related Losses | $4.2 Million | - | - | | Net Interest Expense | $15.1 Million | $28.8 Million | $9.5 Million (Income) | | Servicing Segment Expenses | $102.1 Million | $99.2 Million | - | Servicing Portfolio UPB Breakdown | Item | September 30, 2025 | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | :--- | | Owned MSR | | | | | Originated | $455,894,902 | $448,312,667 | $393,947,146 | | Purchased | $14,404,290 | $14,837,637 | $16,104,333 | | Loans Held for Sale | $7,303,091 | $6,783,240 | $6,366,787 | | Subservicing | | | | | For PMT | $227,101,009 | $228,838,699 | $231,378,323 | | For U.S. Department of Veterans Affairs | $65,286 | $822,525 | $257,696 | | For other unaffiliated parties | $11,863,843 | $72,153 | - | | Total Serviced Loans | $716,632,421 | $699,666,921 | $648,054,285 | - Servicing segment revenue includes $34.4 million in net gain on loans held for sale, primarily from early buyout loans (EBOs) successfully returned to performing status through servicing efforts[22] Corporate and Other The Corporate and Other segment recorded a pretax loss in Q3, primarily due to increased expenses from technology initiatives and higher performance incentive compensation - Corporate and Other includes corporate activities not directly attributable to the Production and Servicing segments, along with management fees received from PMT[25] | Metric | Q3 2025 | Q2 2025 | Q3 2024 | | :--- | :--- | :--- | :--- | | Pretax Loss | $43.9 Million | $35.5 Million | $38.8 Million | | Net Income | $11.6 Million | - | - | | Management Fees | $6.9 Million | $6.9 Million | $7.2 Million | | Other Income | $4.4 Million | - | - | | Net Interest Income | $0.3 Million | - | - | | Expenses | $55.5 Million | $47.2 Million | $49.8 Million | | Net Assets Under Management | $1.9 Billion | Flat QoQ | Flat YoY | - Expense increase was primarily driven by technology initiative-related costs and higher performance incentive compensation[26] - No performance incentive fees were earned in the third quarter[26][28] Consolidated Financials This section presents PennyMac Financial Services, Inc.'s consolidated expenses and tax information for the third quarter of 2025 Consolidated Expenses The company's total consolidated expenses increased in Q3, primarily due to rising costs in the Production and Corporate segments | Metric | Q3 2025 | Q2 2025 | | :--- | :--- | :--- | | Total Expenses | $396.5 Million | $368.3 Million | | QoQ Change | Up 7.6% | - | - The increase in total expenses was primarily due to higher expenses in the Production and Corporate segments[29] Taxes The company recorded $54.9 million in income tax expense in Q3, resulting in an effective tax rate of 23.2% | Metric | Q3 2025 | | :--- | :--- | | Income Tax Expense | $54.9 Million | | Effective Tax Rate | 23.2% | Company Information This section provides background on PennyMac Financial Services, Inc., including its business focus, operational scale, and important forward-looking statements About PennyMac Financial Services, Inc. PennyMac Financial Services, Inc., established in 2008, is a leading financial services company specializing in U.S. mortgage production, servicing, and related investments - The company was founded in 2008 and employs approximately 4,700 individuals across the United States[33] - Total loan originations over the past twelve months reached $139 billion UPB as of September 30, 2025, positioning it as one of the nation's top originators[33] - Total loans serviced amounted to $717 billion UPB as of September 30, 2025, making it one of the nation's top mortgage servicers[33] Forward-Looking Statements This press release contains forward-looking statements regarding future financial performance, operations, business plans, and market conditions, which are subject to various risks and uncertainties - Forward-looking statements are subject to various factors that could cause actual results to differ materially from expectations, including changes in interest rates, housing prices, sales, real estate values, and macroeconomic, consumer, and real estate market conditions[35] - Additional risk factors include federal government shutdowns, compliance with evolving federal, state, and local laws and regulations, litigation or governmental actions, mortgage regulations, difficulties in scaling operations, MSR purchase opportunities, significant indebtedness, increased loan delinquencies and foreclosures, reliance on U.S. government-sponsored entities, maintaining capital and liquidity, indemnification obligations, investment management and incentive fees, accuracy of estimates, conflicts of interest, cybersecurity risks, AI developments, reputational impacts, natural disaster risks, and the ability to effectively manage and hedge risks[35] - The company undertakes no obligation to publicly update or revise any forward-looking statements, and statements in this press release are valid only as of the date of its issuance[35] Financial Statements This section presents PennyMac Financial Services, Inc.'s unaudited consolidated balance sheets and statements of income for the specified periods Consolidated Balance Sheets As of September 30, 2025, PennyMac Financial Services, Inc.'s consolidated balance sheet shows growth in total assets and stockholders' equity, reflecting business expansion and a strengthened capital base Consolidated Balance Sheets (Unaudited) | Item | September 30, 2025 | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash | $621,921 | $162,186 | $145,814 | | Short-term investments (fair value) | $62,228 | $462,262 | $667,934 | | Loans held for sale (fair value) | $7,490,473 | $6,961,224 | $6,565,704 | | Mortgage servicing rights (fair value) | $9,653,942 | $9,531,249 | $7,752,292 | | Total assets | $25,401,120 | $24,221,904 | $22,871,538 | | Liabilities | | | | | Assets sold under agreements to repurchase | $7,130,423 | $7,344,254 | $6,600,997 | | Unsecured senior notes | $4,829,113 | $4,185,012 | $3,162,239 | | Total liabilities | $21,193,234 | $20,189,404 | $19,132,360 | | Stockholders' Equity | | | | | Retained earnings | $4,121,201 | $3,955,504 | $3,684,758 | | Total stockholders' equity | $4,207,886 | $4,032,500 | $3,739,178 | Consolidated Statements of Income PennyMac Financial Services, Inc.'s consolidated statements of income for Q3 2025 show significant growth in total net revenue and net income, driven by increased net gain on loans held for sale and net loan servicing fees Consolidated Statements of Income (Unaudited) | Item | September 30, 2025 | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | :--- | | Revenue | | | | | Net gain on loans held for sale (fair value) | $314,455 | $234,659 | $256,819 | | Loan origination fees | $61,696 | $59,091 | $49,430 | | Net loan servicing fees | $241,238 | $150,395 | $75,830 | | Total net revenue | $632,898 | $444,730 | $411,834 | | Expenses | | | | | Compensation | $205,314 | $187,541 | $171,316 | | Total expenses | $396,524 | $368,288 | $317,909 | | Profit | | | | | Pretax income | $236,374 | $76,442 | $93,925 | | Income tax expense | $54,871 | $(60,021) | $24,557 | | Net income | $181,503 | $136,463 | $69,368 | | Diluted earnings per share | $3.37 | $2.54 | $1.30 |