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 available on PennyMac Financial's website at ir.pennymacfinancial.com.

Before we begin, let me remind you that our discussion contains forward-looking statements that are subject to risks identified on slide two that could cause our actual results to differ materially as well as non-GAAP measures that have been reconciled to their GAAP equivalent in our earnings presentation.

Now, I'd like to begin by introducing David Spector, PennyMac Financial's Chairman and Chief Executive Officer who will review the company's second quarter 2020 results.

David Spector

Thank you, Isaac. PFSI continues to distinguish itself as a best-in-class mortgage company, delivering strong financial results in the second quarter with an annualized return on equity of 15%. Improved margins across all three channels, combined with the quick decisive and meaningful actions taken earlier this year to align our expenses with lower expected levels of activity, led to continued profitability in our production segment, despite higher interest rates, increased volatility, and industry overcapacity.

We also saw strong contributions from our servicing business, which continues to grow organically driven by production from all three origination channels. This quarter total loan acquisition and origination volume of $27 billion, more than offset $18 billion in runoff and we ended the quarter with a servicing portfolio of 2.2 million customers, representing nearly $530 billion in unpaid principal balance, up from $519 billion at March 31st and $473 billion at June 30th, 2021.

As demonstrated by this quarter's strong results, the growth of our servicing portfolio will continue to differentiate PFSI and serve as an important asset while the origination landscape remains competitive and challenging.

In PFSI's Investment Management segment, net assets under management were $2.1 billion at quarter end, down from the prior quarter due to PMT's financial performance, which has been under pressure given the impact of widening credit spreads on its investments.

In total, this strong financial performance drove continued growth in book value per share, which was up 5% from March 31st to $65.38 at June 30th. We continue to prudently manage capital across the company and in the second quarter, we repurchased 2.4 million shares of PFSI common stock at an average price of $46.81 for an approximate cost of $114 million, significantly below current book value per share.