Despite a fourth quarter that saw net revenue increase by only 1% from the previous quarter, PennyMac Financial Services (PFSI) increased its total revenue by 34% in 2014, the company disclosed Wednesday.
According to PennyMac, the company’s total net revenue in the fourth quarter was $141.7 million, up ever so slightly from $140.6 million in the third quarter. But the company’s net revenue for the year was $518.3 million, which was up 34% from 2013’s total.
PennyMac’s revenue growth was driven by its mortgage banking revenue, which rose 41% in 2014 to $467.9 million.
“PennyMac Financial continued to grow its core mortgage banking businesses during the fourth quarter with strong performance in consumer direct originations and loan servicing portfolio growth,” said PennyMac’s Chairman and CEO, Stanford Kurland.
“The mortgage origination market is gaining momentum with the low interest rate environment, and the FHA’s recent reduction to its annual mortgage insurance premiums makes mortgage financing more affordable for many borrowers,” Kurland continued. “Industry forecasts expect these factors to lead to an increase in refinance and home purchase activity, and we believe that PFSI is well positioned to capture these opportunities, evidenced by our growing consumer direct origination activities and the pending bulk acquisitions of $21 billion in unpaid principal balance of agency MSRs.”
In the fourth quarter, PennyMac reported a pretax income of $53.2 million, which was down 15% from the previous quarter. Additionally, PennyMac also reported:
- Production revenue of $72.4 million, up 1% from the prior quarter
- Servicing revenue of $57.6 million, up 3% from the prior quarter
- Investment Management revenue of $10.4 million, down 22% from the prior quarter
In the fourth quarter, PennyMac’s total loan production activity was $8 billion, down 7% from the previous quarter, while its servicing portfolio rose 6% to $106 billion in UPB.
For the year, PennyMac reported total pretax income of $223 million, up 22% from last year. And while its mortgage banking revenue was up, its invest management revenue was down 11% to $49 million and its loan production fell 8%, to $29.1 billion.
In 2014, PennyMac grew its total servicing portfolio from $78.16 billion to $105.98 billion.
The company’s total expenses for the fourth quarter totaled $88.5 million, a 14% increase from the third quarter. Compensation expense increased 8% from the third quarter to $52.5 million, driven primarily by headcount growth in the consumer direct, correspondent production and servicing areas to support increased volumes of activity.
“The mortgage banking business is one that requires high levels of expertise and operational capabilities,” Kurland said. “Since our inception over seven years ago, we have invested in our operating platform and enterprise risk-management capabilities to ensure we have best-in-class compliance, governance and operational functionality. Our highly scalable and legacy-free operating platform has the ability to support future growth and deliver further economies of scale going forward.”