Note 23—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 loan origination, acquisition and sale activities. The servicing segment performs servicing of loans, execution and management of early buyout loan transactions and servicing of 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 and managing the acquired assets and correspondent production activities for PMT.

Financial performance and results by segment are as follows:


	Quarter ended September 30, 2019
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	216,132	$	19,600	$	235,732	$	—	$	235,732
Loan origination fees		49,434		—		49,434		—		49,434
Fulfillment fees from PennyMac Mortgage Investment Trust		45,149		—		45,149		—		45,149
Net loan servicing fees		—		66,229		66,229		—		66,229
Net interest income (expense):
Interest income		22,445		61,007		83,452		—		83,452
Interest expense		18,423		37,936		56,359		21		56,380
		4,022		23,071		27,093		(21)		27,072
Management fees		—		—		—		10,098		10,098
Other		324		567		891		1,742		2,633
Total net revenue		315,061		109,467		424,528		11,819		436,347
Expenses		135,777		127,581		263,358		6,792		270,150
Income before provision for income taxes	$	179,284	$	(18,114)	$	161,170	$	5,027	$	166,197
Segment assets at quarter end	$	4,850,741	$	4,433,177	$	9,283,918	$	19,281	$	9,303,199

(1)

All revenues are from external customers.


	Quarter ended September 30, 2018
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	34,947	$	21,967	$	56,914	$	—	$	56,914
Loan origination fees		26,485		—		26,485		—		26,485
Fulfillment fees from PennyMac Mortgage Investment Trust		26,256		—		26,256		—		26,256
Net loan servicing fees		—		109,703		109,703		—		109,703
Net interest income (expense):
Interest income		17,013		43,935		60,948		16		60,964
Interest expense		1,274		37,491		38,765		10		38,775
		15,739		6,444		22,183		6		22,189
Management fees		—		—		—		6,471		6,471
Carried Interest from Investment Funds		—		—		—		(17)		(17)
Other		645		805		1,450		1,478		2,928
Total net revenue		104,072		138,919		242,991		7,938		250,929
Expenses		78,405		105,346		183,751		5,481		189,232
Income before provision for income taxes	$	25,667	$	33,573	$	59,240	$	2,457	$	61,697
Segment assets at quarter end (2)	$	2,168,126	$	4,812,898	$	6,981,024	$	11,996	$	6,993,020

(1)

All revenues are from external customers.

(2)

Excludes parent Company assets, which consist of $1.8 million of cash and includes receivable from parent Company of $2.3 million.


	Nine months ended September 30, 2019
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	407,713	$	60,328	$	468,041	$	—	$	468,041
Loan origination fees		110,288		—		110,288		—		110,288
Fulfillment fees from PennyMac Mortgage Investment Trust		102,313		—		102,313		—		102,313
Net loan servicing fees		—		205,934		205,934		—		205,934
Net interest income (expense):
Interest income		55,714		156,971		212,685		—		212,685
Interest expense		36,236		110,572		146,808		39		146,847
		19,478		46,399		65,877		(39)		65,838
Management fees		—		—		—		26,178		26,178
Other		929		2,664		3,593		4,844		8,437
Total net revenue		640,721		315,325		956,046		30,983		987,029
Expenses		316,187		324,949		641,136		19,815		660,951
Income before provision for income taxes	$	324,534	$	(9,624)	$	314,910	$	11,168	$	326,078
Segment assets at period end	$	4,850,741	$	4,433,177	$	9,283,918	$	19,281	$	9,303,199

(1)

All revenues are from external customers.


	Nine months ended September 30, 2018
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	105,111	$	84,163	$	189,274	$	—	$	189,274
Loan origination fees		75,476		—		75,476		—		75,476
Fulfillment fees from PennyMac Mortgage Investment Trust		52,759		—		52,759		—		52,759
Net loan servicing fees		—		340,181		340,181		—		340,181
Net interest income (expense):
Interest income		48,135		110,532		158,667		16		158,683
Interest expense		4,401		103,694		108,095		41		108,136
		43,734		6,838		50,572		(25)		50,547
Management fees		—		—		—		17,910		17,910
Carried Interest from Investment Funds		—		—		—		(365)		(365)
Other		1,497		1,928		3,425		4,221		7,646
Total net revenue		278,577		433,110		711,687		21,741		733,428
Expenses		216,722		290,094		506,816		17,221		524,037
Income before provision for income taxes	$	61,855	$	143,016	$	204,871	$	4,520	$	209,391
Segment assets at period end (2)	$	2,168,126	$	4,812,898	$	6,981,024	$	11,996	$	6,993,020

(1)

All revenues are from external customers.

(2)

Excludes parent Company assets, which consist of $1.8 million of cash and includes receivable from parent Company of $2.3 million.