pfsi_Ex99

Exhibit 99.1


		Media	Investors
		Janis Allen	Isaac Garden
		(805) 330‑4899	(818) 264‑4907

PennyMac Financial Services, Inc. Reports Third Quarter 2019 Results and Initiates Quarterly Dividend

Westlake Village, CA, October 31, 2019 – PennyMac Financial Services, Inc. (NYSE: PFSI) today reported net income of $121.5 million for the third quarter of 2019, or $1.51 per share on a diluted basis, on revenue of $436.3 million. Book value per share increased to $24.37 from $22.72 at June 30, 2019.

PFSI also announced today that it has initiated a quarterly dividend for common stockholders, and the Board of Directors has declared a cash dividend of $0.12 per share of common stock for the third quarter of 2019. This dividend will be paid on November 29, 2019, to common stockholders of record as of November 15, 2019. The dividend level will be reviewed each quarter and determined based on a number of factors, including, among other things, PennyMac Financial’s earnings, liquidity, growth outlook, the capital required to support ongoing growth opportunities, the forward-looking economic environment, and compliance with other internal and external requirements.

Third Quarter 2019 Highlights

Pretax income was $166.2 million, up 67 percent from the prior quarter and 169 percent from the third quarter of 2018

Record pretax income and operating earnings1 driven by strong Production segment results and disciplined hedging of mortgage servicing rights (MSRs)

Production segment pretax income was $179.3 million, up 82 percent from the prior quarter and 599 percent from the third quarter of 2018, driven by record production volumes and higher margins

Total loan acquisitions and originations were $34.9 billion in unpaid principal balance (UPB), up 44 percent from the prior quarter and 94 percent from the third quarter of 2018

PFSI’s correspondent interest rate lock commitments (IRLCs) totaled $16.8 billion in UPB, up 33 percent from the prior quarter and 80 percent from the third quarter of 20182

Direct lending IRLCs were a record $5.6 billion in UPB, up 39 percent from the prior quarter and 184 percent from the third quarter of 2018

Correspondent acquisitions of conventional loans fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT) were $16.6 billion in UPB, up 55 percent from the prior quarter and 122 percent from the third quarter of 2018

In the fourth quarter of 2017, diluted earnings per share were $2.44, which included a $1.79 contribution from the remeasurement of deferred tax items due to enactment of the Tax Cuts and Jobs Act of 2017

Consists of correspondent government and non-delegated IRLCs

Servicing segment pretax loss was $18.1 million, versus a pretax loss of $2.7 million in the prior quarter and pretax income of $33.6 million in the third quarter of 2018

Valuation-related items included a $295.5 million loss in the fair value of MSRs, partially offset by $254.0 million in hedging and other gains; net impact on pretax income was $(43.3) million and on earnings per share was $(0.39)

Pretax income excluding valuation-related items was $25.2 million, down 46 percent from the prior quarter and 16 percent from the third quarter of 2018

–Additional technology-related expenses of $7 million over the prior quarter related to the development and completion of our servicing system modules; servicing technology expenses are expected to be $15‑20 million lower in 2020 versus 2019

–$9.3 million increase in early buyout (EBO) loan-related expenses over the prior quarter; EBO loan volume more than doubled from the prior quarter and is expected to benefit future period income from loan redeliveries

–Higher realization of MSR cash flows due to higher prepayment expectations from lower interest rates

The servicing portfolio grew to $348.5 billion in UPB, up 4 percent from June 30, 2019 and 22 percent from September 30, 2018

Investment Management segment pretax income was $5.0 million, up from $4.0 million in the prior quarter and $2.5 million in the third quarter of 2018

Revenue was $11.8 million, an increase of 14 percent from the prior quarter and 49 percent from the third quarter of 2018

Net assets under management (AUM) were $2.2 billion, up 14 percent from June 30, 2019, and 42 percent from September 30, 2018, driven by $253 million in new common equity raised by PMT during the quarter

“PFSI delivered exceptional results this quarter, driven by record mortgage loan volumes and market share gains across all of our production channels combined with continued focus and discipline on hedging our mortgage servicing rights during this rapidly changing interest rate environment,” said President and CEO David Spector. “Our ability to quickly scale our operational capabilities and respond to the larger market environment reflects multi-year investments in our technology and infrastructure. As a result, I am pleased to note that PennyMac was the largest correspondent aggregator in the U.S. during the third quarter, as reported by Inside Mortgage Finance. Continued growth in our servicing portfolio and our customer base to more than 1.7 million consumers provides us with a strong foundation for future growth opportunities, while our hedging performance largely offset fair value losses on our MSR asset. And finally, our investment management segment continues to perform well, driven by PMT’s capital raising activities in support of its strong organic investment growth opportunities. Given the current market environment, we expect exceptional performance for PennyMac Financial to continue through the fourth quarter, while the continued growth of our production, servicing and investment management businesses is expected to drive long-term earnings performance.”

Executive Chairman Stanford L. Kurland added, “Now in our twelfth year of operations, PennyMac Financial has established itself as a leading independent mortgage banking enterprise with the demonstrated ability to profitably navigate and grow through varying market environments. We are positioned for continued growth as we evolve our loan production and servicing platforms to provide sustainable long-term competitive advantages. Notably, I am pleased to announce the successful completion of our servicing system environment, which we believe is a substantial technological advancement for PennyMac Financial. It will allow us to fully leverage cloud-based infrastructure and real-time processing, and enable us to reduce costs, increase scalability and decrease response times to changes in regulations and the market environment. I am immensely proud of PFSI’s success and also pleased to announce that our

Board of Directors has approved the initiation of a quarterly cash dividend. At the forefront of our strategic mission is to deliver superior returns and value to our stockholders, and we believe the establishment of a quarterly cash dividend is an important component in the structure of providing long-term, sustainable stockholder returns.”

The following table presents the contributions of PennyMac Financial’s segments to pretax income:


	Quarter ended September, 2019
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue
Net gains on mortgage loans held for sale at fair value	$	216,132	$	19,600	$	235,732	$	—	$	235,732
Loan origination fees		49,434		—		49,434		—		49,434
Fulfillment fees from PMT		45,149		—		45,149		—		45,149
Net servicing fees		—		66,229		66,229		—		66,229
Management fees		—		—		—		10,098		10,098
Net interest income (expense):
Interest income		22,445		61,007		83,452		—		83,452
Interest expense		18,423		37,936		56,359		21		56,380
		4,022		23,071		27,093		(21)		27,072
Other		324		567		891		1,742		2,633
Total net revenue		315,061		109,467		424,528		11,819		436,347
Expenses		135,777		127,581		263,358		6,792		270,150
Pretax income (loss)	$	179,284	$	(18,114)	$	161,170	$	5,027	$	166,197

Production Segment

Production includes the correspondent acquisition of newly originated government-insured mortgage loans for PennyMac Financial’s own account, the underwriting and acquisition of loans from correspondent sellers on a non-delegated basis, fulfillment services on behalf of PMT and direct lending through the consumer direct and broker direct channels.

PennyMac Financial’s loan production activity for the quarter totaled $34.9 billion in UPB, $18.3 billion of which was for its own account, and $16.6 billion of which was fee-based fulfillment activity for PMT. Correspondent government, non-delegated and direct lending IRLCs totaled $22.4 billion in UPB, up 34 percent from the prior quarter and 99 percent from the third quarter of 2018.

Production segment pretax income was $179.3 million, up 82 percent from the prior quarter and 599 percent from the third quarter of 2018. Production revenue totaled $315.1 million, up 60 percent from the prior quarter and 203 percent from the third quarter of 2018. The quarter-over-quarter increase was driven by a $91.3 million increase in net gains on loans held for sale, due to higher production volumes and margins across all production channels.

The components of net gains on loans held for sale are detailed in the following table:


	Quarter ended
	September 30,		June 30,		September 30,
	2019		2019		2018
	(in thousands)
Receipt of MSRs in loan sale transactions	$	227,256	$	176,493	$	147,259
Mortgage servicing rights recapture payable to PennyMac Mortgage Investment Trust		(1,896)		(1,408)		(1,157)
Provision for representations and warranties, net		(1,333)		(727)		(687)
Cash investment(1)		(108,408)		(49,005)		(90,199)
Fair value changes of pipeline, inventory and hedges		120,113		22,180		1,698
Net gains on mortgage loans held for sale	$	235,732	$	147,533	$	56,914
Net gains on mortgage loans held for sale by segment:
Production	$	216,132	$	124,860	$	34,947
Servicing		$ 19,600	$	22,673	$	21,967

⁽¹⁾

Net of cash hedging results

PennyMac Financial performs fulfillment services for conventional conforming and jumbo loans acquired by PMT from non-affiliates in its correspondent production business. These services include, but are not limited to, marketing; relationship management; correspondent seller approval and monitoring; loan file review; underwriting; pricing; hedging and activities related to the subsequent sale and securitization of loans in the secondary mortgage markets for PMT.

Fees earned from the fulfillment of correspondent loans on behalf of PMT totaled $45.1 million in the third quarter, up 53 percent from the prior quarter and 72 percent from the third quarter of 2018. The quarter-over-quarter increase in fulfillment fee revenue was driven by a 55 percent increase in acquisition volumes by PMT, partially offset by a slight decrease in the weighted average fulfillment fee rate to 27 basis points from 28 basis points in the prior quarter, reflecting discretionary reductions to facilitate successful loan acquisitions by PMT.

Net interest income totaled $4.0 million, down from $5.0 million in the prior quarter and $15.7 million in the third quarter of 2018. Net interest income in the third quarter included $1.6 million in incentives which the Company was entitled to receive under one of its master repurchase agreements to finance mortgage loans that satisfied certain consumer relief characteristics, down from $3.9 million and $12.8 million in the second quarter of 2019 and the third quarter of 2018, respectively. As expected, the lender completed the orderly wind down of the incentive program during the quarter ended September 30, 2019. The related master repurchase agreement expired on August 31, 2019.

Production segment expenses were $135.8 million, up 38 percent from the prior quarter and 73 percent from the third quarter of 2018 as a result of production volume growth.

Servicing Segment

Servicing includes income from owned MSRs, subservicing and special servicing activities. Servicing segment pretax loss was $18.1 million, versus a pretax loss of $2.7 million in the prior quarter and pretax income of $33.6 million in the third quarter of 2018. Servicing segment revenues totaled $109.5 million, up 14 percent from the prior quarter and down 21 percent from the third quarter of 2018. The quarter-over-quarter increase was primarily driven by lower net valuation-related losses resulting from the decline in mortgage rates and increased interest income related to custodial deposits, partially offset by higher realization of MSR cash flows.

Net loan servicing fees totaled $66.2 million and included $224.9 million in servicing fees reduced by $117.2 million from the realization of MSR cash flows. Net valuation-related losses totaled $41.5 million, which included MSR fair value losses of $295.5 million, partially offset by hedging gains of $250.1 million and a $3.9 million gain due to the change in fair value of the excess servicing spread liability. The MSR fair value losses primarily resulted from expectations for increased prepayment activity driven by the continued decline in mortgage rates in the quarter.

The following table presents a breakdown of net loan servicing fees:


	Quarter ended
	September 30,		June 30,		September 30,
	2019		2019		2018
	(in thousands)
Servicing fees (1)	$	224,949	$	218,329	$	174,262
Effect of MSRs:
Realization of cash flows		(117,220)		(106,774)		(71,362)
Change in fair value of MSRs		(295,510)		(259,205)		60,883
Change in fair value of excess servicing spread financing		3,864		3,604		(1,109)
Hedging gains (losses)		250,146		203,180		(52,971)
Total change in fair value of MSRs		(158,720)		(159,195)		(64,559)
Net loan servicing fees	$	66,229	$	59,134	$	109,703

⁽¹⁾

Includes contractually-specified servicing fees

Servicing segment revenue also included $19.6 million in net gains on loans held for sale from the securitization of reperforming government-insured and guaranteed loans, compared to $22.7 million in the prior quarter and $22.0 million in the third quarter of 2018. These loans were previously purchased out of Ginnie Mae securitizations as EBO loans and brought back to performing status through PennyMac Financial’s successful servicing efforts, primarily with the use of loan modifications. Net interest income totaled $23.1 million, up from $13.0 million in the prior quarter and $6.4 million in the third quarter of 2018. Interest income increased by $9.0 million from the prior quarter, primarily driven by higher interest income related to custodial deposit balances, while interest expense decreased by $1.1 million.

Servicing segment expenses totaled $127.6 million, up 29 percent from the prior quarter driven by additional technology-related expenses of approximately $7 million related to the development and completion of our servicing system modules, and $9.3 million of increased expenses related to EBO loan volume, which more than doubled from the prior quarter.

The total servicing portfolio reached $348.5 billion in UPB at September 30, 2019, an increase of 4 percent from June 30, 2019 and 22 percent from September 30, 2018, with the quarter-over-quarter growth driven by the Company’s loan production activities. PennyMac Financial subservices and conducts special servicing for $120.6 billion in UPB, an increase of 11 percent from June 30, 2019 and 38 percent from September 30, 2018. PennyMac Financial’s owned MSR portfolio grew to $227.9 billion in UPB, an increase of 1 percent from the prior quarter end and 16 percent from September 30, 2018.

The table below details PennyMac Financial’s servicing portfolio UPB:


	September 30,		June 30,		September 30,
	2019		2019		2018
	(in thousands)
Prime servicing:
Owned
Mortgage servicing rights
Originated	$	157,437,101	$	152,546,247	$	138,311,827
Acquisitions		63,778,892		68,153,929		55,347,551
		221,215,993		220,700,176		193,659,378
Mortgage servicing liabilities		2,327,687		1,297,421		1,265,461
Mortgage loans held for sale		4,323,252		3,342,187		2,352,771
		227,866,932		225,339,784		197,277,610
Subserviced for PMT		120,460,120		108,856,599		86,389,458
Total prime servicing		348,327,052		334,196,383		283,667,068
Special servicing:
Subserviced for PMT		147,956		274,626		837,003
Total loans serviced	$	348,475,008	$	334,471,009	$	284,504,071

Mortgage loans serviced:
Owned
Mortgage servicing rights	$	221,215,993	$	220,700,176	$	193,659,378
Mortgage servicing liabilities		2,327,687		1,297,421		1,265,461
Mortgage loans held for sale		4,323,252		3,342,187		2,352,771
		227,866,932		225,339,784		197,277,610
Subserviced		120,608,076		109,131,225		87,226,461
Total mortgage loans serviced	$	348,475,008	$	334,471,009	$	284,504,071

Investment Management Segment

PennyMac Financial manages PMT for which it earns base management fees and may earn incentive compensation. Net AUM were $2.2 billion as of September 30, 2019, up 14 percent from June 30, 2019 and 42 percent from September 30, 2018. The quarter-over-quarter growth was driven by PMT’s issuance of approximately $253 million of common shares during the third quarter.

Pretax income for the Investment Management segment was $5.0 million, up from $4.0 million in the prior quarter and $2.5 million in the third quarter of 2018. Management fees, which include base management and performance incentive fees from PMT, increased 14 percent from the prior quarter and 56 percent from the third quarter of 2018. Base management fees were $7.9 million in the quarter, up from $6.8 million in the prior quarter and $5.8 million in the third quarter of 2018 as a result of PFSI’s increased AUM. Performance-based incentive fees were $2.2 million, up from $2.0 million in the prior quarter and $0.7 million in the third quarter of 2018, driven by PMT’s continued strong performance.

The following table presents a breakdown of management fees and carried interest:


	Quarter ended
	September 30,		June 30,		September 30,
	2019		2019		2018
	(in thousands)
Management fees:
PennyMac Mortgage Investment Trust
Base	$	7,914	$	6,839	$	5,799
Performance incentive		2,184		1,993		683
		10,098		8,832		6,482
Investment Funds		—		—		(11)
Total management fees		10,098		8,832		6,471
Carried Interest		—		—		(17)
Total management fees and Carried Interest	$	10,098	$	8,832	$	6,454

Net assets of Advised Entities:
PennyMac Mortgage Investment Trust	$	2,219,611	$	1,943,934	$	1,558,563

Investment Management segment expenses totaled $6.8 million, up 7 percent from the prior quarter and 24 percent from the third quarter of 2018.

Consolidated Expenses

Total expenses for the third quarter were $270.2 million, up 33 percent from the prior quarter and 43 percent from the third quarter of 2018. The year-over-year change was primarily driven by higher volumes of activity in the Production segment and increased expenses in the Servicing segment as noted earlier.

***

Management’s slide presentation will be available in the Investor Relations section of the Company’s website at ir.pennymacfinancial.com beginning at 1:30 p.m. (Pacific Time) on Thursday, October 31, 2019.

About PennyMac Financial Services, Inc.

PennyMac Financial Services, Inc. is a specialty financial services firm with a comprehensive mortgage platform and integrated business focused on the production and servicing of U.S. mortgage loans and the management of investments related to the U.S. mortgage market. Additional information about PennyMac Financial Services, Inc. is available at ir.pennymacfinancial.com.

This press release 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, the recently completed corporate reorganization, the expected benefits and market and financial impact of the reorganization 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 change. Words like “believe,” “expect,” “anticipate,” “promise,” “plan,” and other expressions or words of similar meanings, as well as future or conditional verbs such as “will,” “would,” “should,” “could,” or “may” are generally intended to identify forward-looking statements. Actual results and operations for any future period may vary materially from those projected herein and from past results discussed herein. Factors which could cause actual results to differ materially from historical results or those anticipated include, but are not limited to: the continually changing federal, state and local laws and regulations applicable to the highly regulated industry in which we operate; lawsuits or governmental actions that may result from any noncompliance with the laws and regulations applicable to our businesses; the mortgage lending and servicing-related regulations promulgated by the Consumer Financial Protection Bureau and its enforcement of these regulations; our dependence on U.S. government‑sponsored entities and changes in their current roles or their guarantees or guidelines;

PENNYMAC FINANCIAL SERVICES, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	September 30,		June 30,		September 30,
	2019		2019		2018
	(in thousands, except share amounts)
ASSETS
Cash	$	201,268	$	231,388	$	102,627
Short-term investments at fair value		90,663		75,542		145,476
Loans held for sale at fair value		4,522,971		3,506,406		2,416,955
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell pledged to creditors		107,678		118,716		133,128
Derivative assets		232,948		168,116		73,618
Servicing advances, net		271,501		271,534		259,609
Investment in PennyMac Mortgage Investment Trust at fair value		1,667		1,637		1,518
Mortgage servicing rights		2,556,253		2,720,335		2,785,964
Real estate acquired in settlement of loans		20,328		8,160		2,493
Operating lease right-of-use assets		53,384		53,977		—
Furniture, fixtures, equipment and building improvements, net		32,221		33,373		31,662
Capitalized software, net		57,975		55,642		36,484
Receivable from PennyMac Mortgage Investment Trust		39,744		34,695		27,467
Loans eligible for repurchase		892,631		1,007,435		889,335
Other		221,967		111,420		86,194
Total assets	$	9,303,199	$	8,398,376	$	6,992,530

LIABILITIES
Assets sold under agreements to repurchase	$	3,538,889	$	2,747,084	$	1,739,638
Mortgage loan participation and sale agreements		514,625		523,177		524,667
Notes payable		1,293,625		1,293,180		1,291,847
Obligations under capital lease		23,881		28,295		9,630
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value		183,141		194,156		223,275
Derivative liabilities		14,035		15,952		12,693
Operating lease liabilities		72,160		73,461		-
Mortgage servicing liabilities at fair value		34,294		12,948		9,769
Accounts payable and accrued expenses		215,379		151,504		140,363
Payable to PennyMac Mortgage Investment Trust		61,862		65,605		91,818

Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement		46,537		46,537		47,605
Income taxes payable		480,559		441,336		74,158
Liability for loans eligible for repurchase		892,631		1,007,435		889,335
Liability for losses under representations and warranties		19,968		18,709		21,022
Total liabilities		7,391,586		6,619,379		5,075,820

STOCKHOLDERS' EQUITY
Common stock—authorized 200,000,000 shares of $0.0001 par value; issued and outstanding 78,434,556, 78,304,899, and 25,195,436 shares, respectively		8		8		3
Additional paid-in capital		1,328,166		1,317,023		236,457
Retained earnings		583,439		461,966		304,386
Total stockholders' equity attributable to PennyMac Financial Services, Inc. common stockholders		1,911,613		1,778,997		540,846
Noncontrolling interests in Private National Mortgage Acceptance Company, LLC		—		—		1,375,864
Total stockholders' equity		1,911,613		1,778,997		1,916,710
Total liabilities and stockholders’ equity	$	9,303,199	$	8,398,376	$	6,992,530

PENNYMAC FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


	Quarter ended
	September 30,		June 30,		September 30,
	2019		2019		2018
	(in thousands, except earnings per share)
Revenue
Net gains on loans held for sale at fair value	$	235,732	$	147,533	$	56,914
Loan origination fees		49,434		36,924		26,485
Fulfillment fees from PennyMac Mortgage Investment Trust		45,149		29,590		26,256
Net loan servicing fees:
Loan servicing fees
From non-affiliates		185,967		180,753		147,182
From PennyMac Mortgage Investment Trust		12,964		11,568		10,071
Other fees		26,018		26,008		17,009
		224,949		218,329		174,262
Change in estimated fair value of mortgage servicing rights and excess servicing spread financing		(158,720)		(159,195)		(64,559)
Net loan servicing fees		66,229		59,134		109,703
Net interest income:
Interest income		83,452		70,900		60,964
Interest expense		56,380		52,924		38,775
		27,072		17,976		22,189
Management fees, net:
From PennyMac Mortgage Investment Trust		10,098		8,832		6,482
From Investment Funds		—		—		(11)
		10,098		8,832		6,471
Carried Interest from Investment Funds		—		—		(17)
Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust		66		119		129
Results of real estate acquired in settlement of loans		188		743		194
Other		2,379		2,126		2,605
Total net revenue		436,347		302,977		250,929
Expenses
Compensation		141,132		114,717		103,364
Servicing		47,909		29,008		40,797
Technology		20,385		16,080		15,273
Loan origination		34,851		23,071		7,203
Occupancy and equipment		7,257		7,042		7,117
Professional services		9,682		6,313		7,117
Other		8,934		7,156		8,361
Total expenses		270,150		203,387		189,232
Income before provision for income taxes		166,197		99,590		61,697
Provision for income taxes		44,724		26,894		5,545
Net income		121,473		72,696		56,152
Less: Net income attributable to noncontrolling interest		—		—		41,663
Net income attributable to PennyMac Financial Services, Inc. common stockholders	$	121,473	$	72,696	$	14,489

Earnings per share
Basic	$	1.55	$	0.93	$	0.58
Diluted	$	1.51	$	0.92	$	0.57
Weighted-average common shares outstanding
Basic		78,361		78,335		25,125
Diluted		80,382		79,318		78,913