Pennymac’s 2024 Performance Driven By Strong Servicing Portfolio

PennyMac Financial Services Inc. reported Thursday that it earned $104.5 million in net income during the fourth quarter of 2024 on revenue of $470.1 million. It’s an about-face for PennyMac after it posted a net loss of $36.8 million in Q4 2023.

For 2024 as a whole, the California-based lender earned a profit of $311.4 million, up from $144.7 million in 2023. Its net revenue grew from $1.4 billion to $1.6 billion. And the company’s servicing portfolio, measured by unpaid principal balance (UPB), rose 10% during the year to $665.8 billion.

Pretax income for the final quarter of 2024 was $129.4 million, up from $93.9 million in the prior quarter and a pretax loss of $54.2 million in Q4 2023. Production segment pretax income was $78 million, down from $129.4 million in Q3 2024 and up from $44.2 million in Q4 2023.

“Total acquisition and origination volumes were $36 billion in unpaid principal balance, up 13% from the prior quarter, as many loans originally locked in the third quarter were funded in the fourth quarter,” Daniel Perotti, PennyMac’s senior managing director and chief financial officer, said during Thursday’s earnings call. 

Perotti added that the company’s total lock volumes of $36 billion were down 7% from the prior quarter due to higher mortgage rates. Of this amount, $32 billion was tied to PennyMac’s own account. “PennyMac maintained its dominant position in correspondent lending in the fourth quarter, with total acquisitions of $28 billion, up from $26 billion in the prior quarter,” he said.

PennyMac chairman and CEO David Spector spoke optimistically about the fourth-quarter figures.

“PennyMac Financial delivered strong fourth-quarter results, with a 16% annualized operating return on equity driven by continued strength in our servicing business and a solid contribution from our production segment despite higher mortgage rates,” he said during the earnings call.

Spector also shared that the total origination volume for PennyMac’s production segment was $116 billion in UPB, up 17% from 2023. “[This was] driven by a nearly 70% increase in originations from the direct lending channels,” he said. “Production segment revenues were up 47% from 2023 and despite the large mixed shift, expenses remain contained, up only 13% from 2023.”

The company’s servicing segment operating revenues were $1.5 billion in 2024, a 19% increase from 2023. “The Servicing segment recorded pre-tax income of $87 million (in Q4 2024). Excluding valuation-related changes, pre-tax income was $168 million or 10.3 basis points of average servicing portfolio UPB,” Perotti said. 

Spector said he has an optimistic outlook for the company’s 2025 financial performance.

“Our full-year results demonstrate both the ability of our balanced business model to generate operating returns on equity in the mid-teens in periods of higher rates and also a substantial improvement in operating leverage from the previous year,” he said.

“Our best-in-class management team has built a platform with significant scale and remains committed to unlocking additional efficiencies through continued investments in workflow and technology. It is for all of these reasons that I am confident in our ability to continue driving strong financial performance in this higher rate environment, bolstered by increases in the origination market in periods when mortgage rates decline.”