Note 25—Segments

The Company operates in three segments: production, servicing and investment management.

Two of the segments are in the mortgage banking business: production and servicing. The production segment performs mortgage loan origination, acquisition and sale activities. The servicing segment performs servicing of newly originated mortgage loans, execution and management of early buyout transactions and servicing of mortgage loans sourced and managed by the investment management segment for PMT, including executing the loan resolution strategy identified by the investment management segment relating to distressed mortgage loans.

The investment management segment represents the activities of the Company’s investment manager, which include sourcing, performing diligence, bidding and closing investment asset acquisitions, managing correspondent production activities for PMT and managing the acquired assets for PMT.

Financial performance and results by segment are as follows:


	Year ended December 31, 2018
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net mortgage loan servicing fees	$	—	$	445,393	$	445,393	$	—	$	445,393
Net gains on mortgage loans held for sale at fair value		141,959		107,063		249,022		—		249,022
Mortgage loan origination fees		101,641		—		101,641		—		101,641
Fulfillment fees from PennyMac Mortgage Investment Trust		81,350		—		81,350		—		81,350
Net interest income (expense):
Interest income		66,408		149,992		216,400		16		216,416
Interest expense		7,371		137,177		144,548		49		144,597
		59,037		12,815		71,852		(33)		71,819
Management fees		—		—		—		24,469		24,469
Carried Interest from Investment Funds		—		—		—		(365)		(365)
Other		2,008		2,650		4,658		5,516		10,174
Total net revenue		385,995		567,921		953,916		29,587		983,503
Expenses		298,729		395,619		694,348		22,584		716,932
Income before provision for income taxes and non-segment activities		87,266		172,302		259,568		7,003		266,571
Non-segment activities (2)		—		—		—		—		1,126
Income before provision for income taxes	$	87,266	$	172,302	$	259,568	$	7,003	$	267,697
Segment assets at year end (3)	$	2,434,897	$	5,031,920	$	7,466,817	$	11,681	$	7,478,498

(1)

All revenues are from external customers.

(2)

Represents repricing of Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement.

(3)

Excludes non-segment assets, which consist of working capital of $75,000.


	Year ended December 31, 2017
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net mortgage loan servicing fees	$	—	$	306,059	$	306,059	$	—	$	306,059
Net gains on mortgage loans held for sale at fair value		286,242		105,562		391,804		—		391,804
Mortgage loan origination fees		119,202		—		119,202		—		119,202
Fulfillment fees from PennyMac Mortgage Investment Trust		80,359		—		80,359		—		80,359
Net interest income (expense):
Interest income		61,195		81,984		143,179		—		143,179
Interest expense		35,359		109,112		144,471		49		144,520
		25,836		(27,128)		(1,292)		(49)		(1,341)
Management fees		—		—		—		23,585		23,585
Carried Interest from Investment Funds		—		—		—		(1,040)		(1,040)
Other		2,002		1,710		3,712		183		3,895
Total net revenue		513,641		386,203		899,844		22,679		922,523
Expenses		275,133		327,531		602,664		16,890		619,554
Income before provision for income taxes and non-segment activities		238,508		58,672		297,180		5,789		302,969
Non-segment activities (2)		—		—		—		—		32,940
Income before provision for income taxes	$	238,508	$	58,672	$	297,180	$	5,789	$	335,909
Segment assets at year end (3)	$	2,459,014	$	4,886,594	$	7,345,608	$	19,880	$	7,365,488

(1)

All revenues are from external customers

(2)

Primarily represents repricing of Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement, of which $32.0 million is the result of the change in the federal tax rate under the Tax Act.

(3)

Excludes parent company assets, which consist primarily of working capital of $2.6 million.


	Year ended December 31, 2016
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenues: (1)
Net mortgage loan servicing fees	$	—	$	185,466	$	185,466	$	—	$	185,466
Net gains on mortgage loans held for sale at fair value		464,027		67,753		531,780		—		531,780
Mortgage loan origination fees		125,534		—		125,534		—		125,534
Fulfillment fees from PennyMac Mortgage Investment Trust		86,465		—		86,465		—		86,465
Net interest income (expense):
Interest income		48,944		32,182		81,126		1		81,127
Interest expense		32,669		73,537		106,206		50		106,256
		16,275		(41,355)		(25,080)		(49)		(25,129)
Management fees		—		—		—		22,746		22,746
Carried Interest from Investment Funds		—		—		—		980		980
Other		2,104		1,022		3,126		319		3,445
Total net revenue		694,405		212,886		907,291		23,996		931,287
Expenses		278,309		248,985		527,294		21,510		548,804
Income before provision for income taxes and non-segment activities		416,096		(36,099)		379,997		2,486		382,483
Non-segment activities (2)		—		—		—		—		600
Income before provision for income taxes	$	416,096	$	(36,099)	$	379,997	$	2,486	$	383,083
Segment assets at year end (3)	$	2,195,330	$	2,841,551	$	5,036,881	$	91,517	$	5,128,398

(1)

All revenues are from external customers.

(2)

Represents Revaluation of Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement.

(3)

Excludes parent Company assets, which consist primarily of working capital of $5.5 million