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

Financial performance and results by segment are as follows:


	Year ended December 31, 2019
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	635,464	$	90,064	$	725,528	$	—	$	725,528
Loan origination fees		174,156		—		174,156		—		174,156
Fulfillment fees from PennyMac Mortgage Investment Trust		160,610		—		160,610		—		160,610
Net loan servicing fees		—		293,665		293,665		—		293,665
Net interest income (expense):
Interest income		82,338		206,362		288,700		—		288,700
Interest expense		59,973		151,950		211,923		56		211,979
		22,365		54,412		76,777		(56)		76,721
Management fees		—		—		—		36,492		36,492
Other		1,289		2,643		3,932		6,300		10,232
Total net revenue		993,884		440,784		1,434,668		42,736		1,477,404
Expenses		466,050		455,535		921,585		26,375		947,960
Income before provision for income taxes	$	527,834	$	(14,751)	$	513,083	$	16,361	$	529,444
Segment assets at year end	$	4,836,472	$	5,347,549	$	10,184,021	$	19,996	$	10,204,017

(1)

All revenues are from external customers.


	Year ended December 31, 2018
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	141,959	$	107,063	$	249,022	$	—	$	249,022
Loan origination fees		101,641		—		101,641		—		101,641
Fulfillment fees from PennyMac Mortgage Investment Trust		81,350		—		81,350		—		81,350
Net loan servicing fees		—		445,393		445,393		—		445,393
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 parent company assets, which consist primarily of working capital of $75,000.


	Year ended December 31, 2017
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenues: (1)
Net gains on loans held for sale at fair value	$	286,242	$	105,562	$	391,804	$	—	$	391,804
Loan origination fees		119,202		—		119,202		—		119,202
Fulfillment fees from PennyMac Mortgage Investment Trust		80,359		—		80,359		—		80,359
Net loan servicing fees		—		306,059		306,059		—		306,059
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.