PennyMac reports earnings jump, tops $2B in income in 2020
PennyMac Financial Services hit a record high with pretax income of more than $2 billion last year as the company saw a sharp increase in both its fourth quarter and year-end results.
The Westlake Village-based mortgage firm reported a net income of $452.8 million for the fourth quarter of 2020, or $5.97 per share on a diluted basis, an almost 200% increase from the fourth quarter of 2019. In that year, the company’s book value per share went from $26.26 to $47.80.
The company’s board of directors declared a larger cash dividend along with the Feb. 4 earnings release. The current divided, payable as of Feb. 12, will be 20 cents per share, up from 12 cents per share a year ago.
PennyMac’s board also approved an increase in its stock repurchase authorization, from $500 million to $1 billion of outstanding common stock.
The specialty financial services firm also reported its year-end results, showing the strongest year the company has ever had. It finished the year with a pre-tax income of $2.2 billion, up 323% from the year before, and a total net revenue of $3.7 billion, up 151% from 2019.
PennyMac Financial created almost $200 billion in unpaid principal balance, an increase of 67% from 2019, and used its strong position to repurchase about 8.9 million shares of the company’s common stock. That was about 11% of all outstanding stock, and the purchase cost the company about $337 million.
“The outstanding fourth quarter was the culmination of a remarkable year for PennyMac Financial,” David Spector, PennyMac Financial Services’ president and CEO, said in the company’s earnings release. “Funding nearly $200 billion in unpaid principal balance and ending the year with a servicing portfolio of nearly 2 million customers, 2020 was certainly a record year for PFSI.”
PennyMac Mortgage Investment Trust, a real estate investment trust managed by the same executives and board as PennyMac but traded separately, also released its quarterly report on Feb. 4. Its net income rose almost 50% in the quarter, compared to a year earlier.
The company earned $76.6 million, or 78 cents per common share, of net income in the fourth quarter, a 46% increase from 2019.
PennyMac Mortgage Investment Trust also added $441 million in new mortgage servicing rights, settled its sixth credit risk transfer with Fannie Mae, placed $500 million of two-year term-notes after the deal closed and repurchased about 927,000 common shares of its stock at a weighted average price of $16.88, for a total cost of $15.6 million.
“2020 was a challenging year for mortgage REITs, many of which were forced to sell assets at distressed levels, curtail operations, or even cease market activity for some period,” Spector said. “I am proud of this management team’s commitment and the work we have done with respect to liquidity and risk management since the inception of the company, which proved enormously beneficial for PMT as we were not forced to sell assets to generate liquidity.”