PennyMac Financial Services (PWT) reported net income of $43.5 million for the first quarter of 2014, on revenue of $105.5 million.

Net income attributable to PFSI common stockholders was $8 million, or $0.38 per diluted share.

Still, it missed expectations. The street ran with a Q1 EPS of $0.50, so that's off by by $0.12. The CEO is not concerned.

“PennyMac Financial had a strong quarter with increases in revenue and net income, reflecting how the company’s operating platform and business model are well positioned for a more normalized mortgage market,” said CEO Stanford Kurland. “We gained market share in correspondent lending, retail lending and loan servicing, and investment management assets continued to grow."

Kurland added the real estate investment trust enhanced the reporting of its mortgage banking activities by dividing them into two segments: Production and Servicing.

PennyMac reported total net revenue of $105.5 million, up 17% from the prior quarter.

Production revenue of $52.7 million is up 10% and servicing revenue of $40.2 million is up 43%.

Investment management and loan production is down according to its earnings report.

Production segment pretax income totaled $26 million, an increase of 14% from the fourth quarter, driven by a 17% increase in net gains on mortgage loans held for sale from the prior quarter.

Loan servicing pretax income totaled $17.1 million in the first quarter, an increase of 94% from the prior quarter.

Net loan servicing fees totaled $43.8 million for the quarter, a 43% quarter-over-quarter increase, which included a $3.4 million reduction in fair value of mortgage servicing rights carried at fair value and a $0.4 million provision for impairment of MSRs carried at lower of amortized cost or fair value, both driven by expectations for higher prepayment speeds as a result of lower interest rates at quarter end.

The MSR valuation adjustments were partially offset by a $4.8 million decrease in the fair value of the excess servicing spread financing liability, the earnings said.