PennyMac Financial Services, Inc. (NYSE:PFSI) Q1 2022 Earnings Conference Call May 5, 2022 5:00 PM ET

Company Participants

David Spector - Chairman & Chief Executive Officer

Doug Jones - President & Chief Mortgage Banking Officer

Dan Perotti - Senior Managing Director & Chief Financial Officer

Operator

Good afternoon and welcome to the First 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 this discussion contains forward-looking statements that are subject to risks identified on Slide 2 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 first quarter 2022 results.

David Spector

Thank you, Isaac. PennyMac Financial's first quarter results demonstrate the earnings power of our comprehensive mortgage banking platform against the backdrop of a rising interest rate environment, and significant competition among industry participants with excess capacity in this smaller origination market, increased income from our servicing business more than offset the decline in production income caused by the current transition in the origination market.

As a result, PFSI produced net income of $174 million or diluted earnings per share of $2.94, representing an annualized return on equity of 20%. With regard to our capital usage, we continue to repurchase shares, and in the first quarter we repurchased 2.3 million shares of PFSI common stock for an approximate cost of $141 million. And in April, we repurchased an additional 905,000 shares for an approximate cost of $44 million. The pace of share repurchases was down from last quarter, as we believe it is prudent to retain capital during periods of greater volatility.

PFSI's Board of Directors also declared a first quarter cash dividend of $0.20 per share. In total, this strong financial performance drove continued growth in book value per share, which was up 3% from December 31 to $62.19 at March 31. Dan Perotti, PFSI's Senior Managing Director and Chief Financial Officer will review additional details of our financial performance later on in this discussion. In total, loan acquisition and origination volumes were $33 billion in the first quarter. These production volumes more than offset prepayment activity in PennyMac Servicing portfolio, which totaled nearly $520 billion in unpaid principal balance at March 31, up 2% from the end of the prior quarter, and up 16% from the same time last year.