Pennymac
Financial
Services
earned
a
profit
of
$39.3
million
in
the
first
quarter
of
2024,
the

California-based
multichannel
lender
and
servicer
announced
Wednesday.

The
company’s
pretax
gain
in
the
first
quarter
was
$43.9
million.
That
was
less
than
the
$38.1
million
figure
it
posted
during
the
same
period
last
year
but
a
significant
improvement
from
the
pretax
loss
of
$54.2
million
it
incurred
in
fourth-quarter
2023.

“PennyMac
Financial
reported
strong
operating
earnings
in
the
first
quarter,
with
an
annualized
operating
return
on
equity
of
15
percent
in
what
is
expected
to
be
the
one
of
the
smallest
quarterly
origination
markets
of
this
cycle,”
chairman
and
CEO
David
Spector
said
in
a
news
release.
“Strong
volume
increases
in
our
consumer
and
broker
direct
channels
drove
continued
profitability
in
our
production
segment.”

The
company’s
loan
production
pretax
income
was
$35.9
million
during
the
first
quarter,
down
from
$39.4
million
in
Q4
2023
but
up
from
a
pretax
loss
of
$19.6
million
in
Q1
2023.
Production
revenue
totaled
$184.7
million,
up
5%
from
the
prior
quarter
and
up
52%
year
over
year.

Pennymac
reported
that
the
quarterly
increase
in
production
revenue
was
primarily
tied
to
higher
net
gains
on
loans
held
for
sale
at
fair
value
due
to
higher
volumes
in
its

direct-to-consumer
channel.
Meanwhile,
the
revenue
growth
compared
to
Q1
2023
was
largely
due
to
higher
overall
origination
volumes
and
margins.

The
total
value
of
its
loan
acquisitions
and
originations
dropped
to
$21.7
billion
in
unpaid
principal
balance
(UPB),
down
19%
on
a
quarterly
basis
and
5%
below
year-ago
levels.

During
an
earnings
call
on
Wednesday,
chief
financial
officer

Daniel
Perotti
said
that
“Pennymac
maintained
its
dominant
position
in
correspondent
lending
in
the
first
quarter”
as
it
acquired
$18
billion
in
volume.
That
was
down
from
$24
billion
in
the
prior
quarter
and
was
“driven
by
our
focus
on
profitability
over
volatility,”
he
said.

In
the
wholesale
channel,
Perotti
noted
that
locked
loans
were
up
20%
and
funded
loans
were
“essentially
unchanged”
from
the
prior
quarter.
But
broker-channel
margins
grew
from
79
basis
points
to
103
basis
points
during
that
period.

“The
number
of
brokers
approved
to
do
business
with
us
at
quarter
end
was
over
4,000
—
up
36%
from
the
same
time
last
year,”
Perotti
said.
“And
we
expect
this
number
to
continue
growing
as
top
brokers
increasingly
look
for
a
strong
second
option.”

Pennymac’s
servicing
portfolio
continues
to
grow.
Its
owned
mortgage
servicing
rights
(MSR)
portfolio
had
a
UPB
of
$386.6
billion
on
March
31,
up
3%
from
the
end
of
Q4
2023
and
up
18%
from
the
end
of
Q1
2023.

In
response
to
an
analyst’s
question
during
the
earnings
call,
Spector
said
he
expects
the
company’s
servicing
channel
to
lead
to
more
refinance
opportunities
when

mortgage
rates
eventually
decline.

“We
have
built
a
really
great
model
in
terms
of
growing
the
servicing
portfolio
as
a
byproduct
of
our
organic
growth
strategy,”
Spector
said.
“And
as
we
continue
to
lead
in
the
correspondent
space
and
continue
to
grow
our
presence
in
the
broker-direct
space,
I
expect
that
our
servicing
will
continue
to
grow
at
probably
even
a
little
faster
clip.
…
I
don’t
see
a
melting
ice
cube
scenario
anytime
in
the
future.”

Last
year,
Pennymac
earned
net
income
of

$144.7
million,
a
decline
of
nearly
70%
from
the
$475.5
million
profit
it
posted
in
2022.
And
in
fourth-quarter
2023
alone,
the
company
lost
$36.8
million.

Its
net
revenues
shrank
from
$2
billion
in
2022
to
$1.4
billion
in
2023.
Its
overall
profit
was
largely
due
to
the
strong
performance
of
its
servicing
portfolio.

Legal
troubles
with

Black
Knight
contributed
to
the
loss
in
Q4
2023.
Late
in
the
year,
an
arbitrator
awarded
Black
Knight

$155.2
million
in
damages
tied
to
a
breach
of
contract
claim
in
a

four-year
dispute
involving
the
companies.
Black
Knight
accused Pennymac of
copying
its
mortgage
servicing
platform.

At
the
close
of
the
market
on
Wednesday,
Pennymac’s
stock
price
was
$92.07,
up
4.86%
since
the
start
of
the
year.

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