Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2025
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-38727
PennyMac Financial Services, Inc.
(Exact name of registrant as specified in its charter)
Delaware
83-1098934
(State or other jurisdiction of
(IRS Employer
incorporation or organization)
Identification No.)
3043 Townsgate Road, Westlake Village, California
91361
(Address of principal executive offices)
(Zip Code)
(818) 224-7442
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.0001 par value
PFSI
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Class
Outstanding at July 25, 2025
51,710,032
PENNYMAC FINANCIAL SERVICES, INC.
FORM 10-Q
June 30, 2025
TABLE OF CONTENTS
Page
Special Note Regarding Forward-Looking Statements
3
PART I. FINANCIAL INFORMATION
6
Item 1.
Financial Statements (Unaudited):
Consolidated Balance Sheets
Consolidated Statements of Income
7
Consolidated Statements of Changes in Stockholders’ Equity
8
Consolidated Statements of Cash Flows
9
Notes to Consolidated Financial Statements
11
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
60
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
79
Item 4.
Controls and Procedures
81
PART II. OTHER INFORMATION
82
Legal Proceedings
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
84
2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Report”) contains certain forward-looking statements that are subject to various risks and uncertainties. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” “continue,” “plan” or other similar words or expressions.
Forward-looking statements are based on certain assumptions, discuss future expectations, plans and strategies, contain financial and operating projections or state other forward-looking information. Examples of forward-looking statements include, but are not limited to, the following:
Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. There are several factors, many of which are beyond our control that could cause actual results to differ significantly from management’s expectations. Some of these factors are discussed below.
You should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties discussed elsewhere in this Quarterly Report on Form 10-Q (this “Report”), the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (“SEC”) on February 19, 2025 and in our other SEC filings.
Factors that could cause actual results to differ materially from historical results or those anticipated include, but are not limited to:
4
Other factors that could also cause results to differ from our expectations may not be described in this Report or any other document. Each of these factors could by itself, or together with one or more other factors, adversely affect our business, results of operations and/or financial condition.
Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.
5
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30,
December 31,
2025
2024
(in thousands, except share amounts)
ASSETS
Cash
$
162,186
238,482
Short-term investment at fair value
462,262
420,553
Principal-only stripped mortgage-backed securities at fair value pledged to creditors
784,958
825,865
Loans held for sale at fair value (includes $6,873,346 and $8,140,834 pledged to creditors)
6,961,224
8,217,468
Derivative assets
180,642
113,076
Servicing advances, net (includes valuation allowance of $82,025 and $85,788; $265,118 and $357,939 pledged to creditors)
430,602
568,512
Mortgage servicing rights at fair value (includes $9,350,647 and $8,609,388 pledged to creditors)
9,531,249
8,744,528
Investment in PennyMac Mortgage Investment Trust at fair value
965
944
Receivable from PennyMac Mortgage Investment Trust
30,604
30,206
Loans eligible for repurchase
4,962,535
6,157,172
Other (includes $13,124 and $16,697 pledged to creditors)
714,677
770,081
Total assets
24,221,904
26,086,887
LIABILITIES
Assets sold under agreements to repurchase
7,344,254
8,685,207
Mortgage loan participation purchase and sale agreements
700,296
496,512
Notes payable secured by mortgage servicing assets
1,327,143
2,048,972
Unsecured senior notes
4,185,012
3,164,032
Derivative liabilities to non-affiliates
32,503
40,900
Derivative liability to PMT
1,038
—
Mortgage servicing liabilities at fair value
1,643
1,683
Accounts payable and accrued expenses
394,785
354,414
Payable to PennyMac Mortgage Investment Trust
86,174
122,317
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement
24,806
25,898
Income taxes payable
1,097,452
1,131,000
Liability for loans eligible for repurchase
Liability for losses under representations and warranties
31,763
29,129
Total liabilities
20,189,404
22,257,236
Commitments and contingencies – Note 18
STOCKHOLDERS’ EQUITY
Common stock—authorized 200,000,000 shares of $0.0001 par value; issued and outstanding, 51,671,905 and 51,376,616 shares, respectively
Additional paid-in capital
76,991
56,072
Retained earnings
3,955,504
3,773,574
Total stockholders' equity
4,032,500
3,829,651
Total liabilities and stockholders' equity
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Quarter ended June 30,
Six months ended June 30,
(in thousands, except earnings per share)
Revenues
Net gains on loans held for sale at fair value:
From non-affiliates
227,584
176,537
443,783
339,331
From PennyMac Mortgage Investment Trust
7,075
(473)
11,913
(826)
234,659
176,064
455,696
338,505
Loan origination fees:
58,589
41,644
104,723
77,656
502
431
979
790
59,091
42,075
105,702
78,446
Fulfillment fees from PennyMac Mortgage Investment Trust
5,814
4,427
11,104
8,443
Net loan servicing fees:
Loan servicing fees:
435,517
375,040
853,204
733,066
21,645
20,264
43,374
40,526
Other
49,505
45,392
98,557
91,288
506,667
440,696
995,135
864,880
Change in fair value of mortgage servicing rights and mortgage servicing liabilities
(247,170)
(101,315)
(678,126)
(129,900)
Mortgage servicing rights hedging results
(109,102)
(171,777)
(2,328)
(466,422)
(356,272)
(273,092)
(680,454)
(596,322)
Net loan servicing fees
150,395
167,604
314,681
268,558
Management fees from PennyMac Mortgage Investment Trust
6,869
7,133
13,881
14,321
Net interest expense:
Interest income
221,929
200,811
411,800
357,237
Interest expense
239,577
207,871
447,659
373,640
Net interest expense
(17,648)
(7,060)
(35,859)
(16,403)
Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust
(105)
(40)
80
(30)
Results of real estate acquired in settlement of loans
47
193
(178)
599
Repricing of payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement
1,092
4,516
15,731
9,434
19,348
Total net revenues
444,730
406,127
875,633
711,787
Expenses
Compensation
187,541
141,956
369,529
288,332
Loan origination
68,836
40,270
112,932
70,838
Technology
42,257
35,690
82,454
71,657
Servicing
28,286
22,920
50,161
39,024
Marketing and advertising
12,389
5,445
21,821
9,116
Professional services
8,380
9,404
17,417
18,666
Occupancy and equipment
8,379
7,893
16,761
16,569
12,220
8,695
23,920
19,848
Total expenses
368,288
272,273
694,995
534,050
Income before (benefit from) provision for income taxes
76,442
133,854
180,638
177,737
(Benefit from) provision for income taxes
(60,021)
35,596
(32,105)
40,171
Net income
136,463
98,258
212,743
137,566
Earnings per share
Basic
2.64
1.93
4.12
2.71
Diluted
2.54
1.85
3.97
2.59
Weighted average shares outstanding
51,667
50,955
51,587
50,751
53,635
53,204
53,626
53,140
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
Quarter ended June 30, 2025
Additional
Total
Number of
Par
paid-in
Retained
stockholders'
shares
value
capital
earnings
equity
(in thousands)
Balance, March 31, 2025
51,659
68,902
3,834,849
3,903,756
Stock-based compensation
12
8,031
Issuance of common stock in settlement of directors' fees
1
58
Common stock dividend ($0.30 per share)
(15,808)
Balance, June 30, 2025
51,672
Quarter ended June 30, 2024
Balance, March 31, 2024
50,908
27,179
3,543,199
3,570,383
108
2,816
Common stock dividend ($0.20 per share)
(10,397)
Balance, June 30, 2024
51,017
30,053
3,631,060
3,661,118
Six months ended June 30, 2025
Balance, December 31, 2024
51,377
294
20,804
115
Common stock dividends ($0.60 per share)
(30,813)
Six months ended June 30, 2024
Balance, December 31, 2023
50,179
24,287
3,514,311
3,538,603
836
5,624
142
Common stock dividends ($0.40 per share)
(20,817)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Cash flow from operating activities
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Net gains on loans held for sale at fair value
(455,696)
(338,505)
678,126
129,900
2,328
466,422
Accrual of unearned discounts on principal-only stripped mortgage-backed securities
(18,034)
(9,090)
Capitalization of interest on loans held for sale
(1,598)
(247)
Amortization of debt issuance costs
17,277
14,798
Change in fair value of investment in common shares of PennyMac Mortgage Investment Trust
(21)
90
Results of real estate acquired in settlement in loans
178
(599)
(1,092)
Stock-based compensation expense
18,602
2,371
Provision for servicing advance losses
11,970
4,391
Depreciation and amortization
28,627
28,404
Amortization of operating lease right-of-use assets
7,036
6,883
Purchase of loans held for sale from PennyMac Mortgage Investment Trust
(47,382,225)
(37,161,319)
Origination of loans held for sale
(11,725,361)
(6,972,822)
Purchase of loans held for sale from non-affiliates
(2,202,139)
(1,193,246)
Purchase of loans from Ginnie Mae securities and early buyout investors
(2,195,739)
(1,579,386)
Sale to non-affiliates and principal payment of loans held for sale
62,243,471
44,537,449
Sale of loans held for sale to PennyMac Mortgage Investment Trust
1,689,692
Repurchase of loans subject to representations and warranties
(45,360)
(44,863)
Decrease in servicing advances
35,809
219,799
Increase in receivable from PennyMac Mortgage Investment Trust
(3,897)
(1,541)
Sale of real estate acquired in settlement of loans
37,325
25,671
Decrease (increase) in other assets
9,541
(39,753)
Increase (decrease) in accounts payable and accrued expenses
48,838
(145,062)
Decrease in operating lease liabilities
(9,563)
(8,809)
Decrease in payable to PennyMac Mortgage Investment Trust
(32,648)
(108,839)
(Decrease) increase in income taxes payable
(33,548)
39,511
Net cash provided by (used in) operating activities
934,642
(1,990,826)
Statements continue on the next page
(Continued)
Cash flow from investing activities
Increase in short-term investment
(41,709)
(178,504)
Purchase of principal-only stripped mortgage-backed securities
(935,356)
Repayment of principal-only stripped mortgage-backed securities
84,267
13,452
Net settlement of derivative financial instruments used for hedging of mortgage servicing rights
(10,913)
(391,462)
Acquisition of capitalized software
(16,283)
(8,661)
Purchase of furniture, fixtures, equipment and leasehold improvements
(1,676)
(1,319)
Increase in margin deposits
(140,719)
(18,556)
Net cash used in investing activities
(127,033)
(1,520,406)
Cash flow from financing activities
Sale of assets under agreements to repurchase
63,703,978
48,557,391
Repurchase of assets sold under agreements to repurchase
(65,044,887)
(45,912,545)
Issuance of mortgage loan participation purchase and sale certificates
12,277,214
10,967,597
Repayment of mortgage loan participation purchase and sale certificates
(12,072,836)
(10,901,474)
Issuance of notes payable secured by mortgage servicing assets
100,000
725,000
Repayment of notes payable secured by mortgage servicing assets
(825,000)
(875,000)
Issuance of unsecured senior notes
1,700,000
650,000
Repayment of unsecured senior notes
(650,000)
Payment of debt issuance costs
(43,763)
(25,208)
Issuance of common stock by exercise of stock options
5,965
12,654
Payment of withholding taxes relating to stock-based compensation
(3,763)
(9,401)
Payment of dividends to holders of common stock
Net cash (used in) provided by financing activities
(883,905)
3,168,197
Net decrease in cash
(76,296)
(343,035)
Cash at beginning of period
938,371
Cash at end of period
595,336
Supplemental cash flow information:
Cash paid for interest
457,513
373,389
Cash paid for income taxes, net
1,443
660
Non-cash investing activities:
Mortgage servicing rights received from loan sales
1,464,887
953,727
Operating right-of-use assets recognized
1,209
Non-cash financing activities:
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1—Organization
PennyMac Financial Services, Inc. (together, with its consolidated subsidiaries, unless the context indicates otherwise, “PFSI” or the “Company”) is a holding corporation and its primary assets are equity interests in Private National Mortgage Acceptance Company, LLC (“PNMAC”). The Company is the managing member of PNMAC, and it operates and controls all of the businesses and consolidates the financial results of PNMAC and its subsidiaries.
PNMAC is a Delaware limited liability company which, through its subsidiaries, engages in mortgage banking and investment management activities. PNMAC’s mortgage banking activities consist of residential mortgage loan production and servicing. PNMAC’s investment management activities and a portion of its mortgage banking activities are conducted on behalf of PennyMac Mortgage Investment Trust, a real estate investment trust that invests in residential mortgage-related assets that is separately listed on the New York Stock Exchange under the ticker symbol “PMT”. PNMAC’s primary wholly owned subsidiaries are:
PLS is approved as a seller/servicer of mortgage loans by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and as an issuer of securities guaranteed by the Government National Mortgage Association (“Ginnie Mae”). PLS is a licensed Federal Housing Administration Nonsupervised Title II Lender with the U.S. Department of Housing and Urban Development (“HUD”) and a lender/servicer with the U.S. Department of Veterans Affairs and U.S. Department of Agriculture (each of the above an “Agency” and collectively the “Agencies”).
Note 2—Basis of Presentation and Recently Issued Accounting Pronouncements
Basis of Presentation
The accompanying consolidated financial statements have been prepared in compliance with accounting principles generally accepted in the United States (“GAAP”) as codified in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification for interim financial information and with the SEC’s instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these consolidated financial statements and notes do not include all of the information required by GAAP for complete financial statements. This interim consolidated information should be read together with the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
The accompanying consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, income, and cash flows for the interim periods presented, but are not necessarily indicative of income that may be expected for the full year ending December 31, 2025. Intercompany accounts and transactions have been eliminated.
Preparation of financial statements in compliance with GAAP requires the Company to make judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Actual results will likely differ from those estimates.
Recently Issued Accounting Pronouncement
Income Tax Disclosures
The FASB issued Accounting Standards Update 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), that is intended to enhance the level of detail and decision usefulness of income tax disclosures. ASU 2023-09 requires disclosures of:
The disclosures specified by ASU 2023-09 are required in the Company’s annual financial statements beginning with the year ended December 31, 2025, with early adoption permitted. The Company is evaluating the effect of ASU 2023-09 on its future disclosures.
Note 3—Concentration of Risk
A portion of the Company’s activities relate to PMT. Revenues generated from PMT (generally comprised of gains on loans held for sale, loan origination and fulfillment fees, loan servicing fees, management fees, change in fair value of investment in and dividends received from PMT, and expense allocations charged to PMT) totaled 10% and 8% of total net revenues for the quarters ended June 30, 2025 and 2024, respectively, and 10% and 9% for the six months ended June 30, 2025 and 2024, respectively.
The Company maintains cash and short-term investment balances at financial institutions in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. Should one or more of the financial institutions at which the Company’s deposits are maintained fail, there is no guarantee as to the extent that the Company would recover the funds deposited, whether through FDIC coverage or otherwise, or the timing of any recovery.
Note 4—Variable Interest Entities
The Company entered into securitization transactions in which PLS transfers participation certificates in its Ginnie Mae and Fannie Mae MSRs to variable interest entities (“VIEs”) that issue variable funding notes (“VFNs”) to PLS and term debt backed by the participation certificates. PLS finances the VFNs by selling them under agreements to repurchase. The Company acts as guarantor of the VFNs and term debt. The Company determined that it is the primary beneficiary of the VIEs because as the holder of the VFNs and guarantor of the VFNs and term debt, it holds the variable interests in the VIEs. Therefore, PFSI consolidates the VIEs.
For financial reporting purposes, the MSRs financed by the consolidated VIEs are included in Mortgage servicing rights at fair value, the financing of VFNs is included in Assets sold under agreements to repurchase and the term debt is included in Notes payable secured by mortgage servicing assets on the Company’s consolidated balance sheets. This financing is detailed in Note 14 – Short-Term Debt and Note 15 – Long-Term Debt.
Note 5—Related Party Transactions
PennyMac Mortgage Investment Trust
Operating Activities
Mortgage Loan Production Activities and MSR Recapture
Mortgage Loan Purchase Agreement
The Company sells newly originated loans to PMT under a mortgage loan purchase agreement. The Company has typically utilized the mortgage loan purchase agreement for the purpose of selling to PMT conforming balance non-government insured or guaranteed loans, as well as prime jumbo residential mortgage loans.
MSR Recapture Agreement
Pursuant to the terms of an MSR recapture agreement by and between the Company and PMT, if the Company refinances (recaptures) mortgage loans for which PMT holds the MSRs, the Company is generally required to transfer and convey to PMT cash in an amount equal to:
The “recapture rate” means, during each month, the ratio of (i) the aggregate unpaid principal balance of all refinance mortgage loans originated in such month, plus the aggregate unpaid principal balance of all “preserved mortgage loans” relating to closed end second lien loans originated in such month, to (ii) the aggregate unpaid principal balance of all mortgage loans from the portfolio that PLS has determined in good faith were refinanced in such month, plus the aggregate unpaid principal balance of all “preserved mortgage loans” in such month. For purposes of such calculation, “preserved mortgage loan” means a mortgage loan in PMT’s portfolio as to which PLS or its affiliates originated a new closed end second lien loan in a subordinate position to such mortgage loan. The company has further agreed to allocate resources sufficient to target a recapture rate of at least 30%.
Through 2024, the MSR recapture agreement required the Company to transfer cash to PMT in an amount equal to:
13
The “recapture rate” meant, during each month, the ratio of (i) the aggregate unpaid principal balance of all recaptured mortgage loans, to (ii) the aggregate unpaid principal balance of all mortgage loans for which the Company held the MSRs and that were refinanced or otherwise paid off in such month.
The MSR recapture agreement expires on December 31, 2029, subject to automatic renewal for an additional 18-month period unless terminated in accordance with the terms of the agreement.
Mortgage Banking Services Agreement
Fulfillment Fees
The Company provides PMT with certain mortgage banking services, including fulfillment and disposition-related services, for which it receives a monthly fulfillment fee. Pursuant to the terms of a mortgage banking services agreement, the fulfillment fees shall not exceed the following:
Through 2024, the mortgage banking services agreement provided for a quarterly fulfillment fee not to exceed the following:
14
Sourcing Fees
PMT does not hold the Ginnie Mae approval required to issue Ginnie Mae mortgage-backed securities (“MBS”) and act as a servicer. Accordingly, under the agreement, the Company purchases mortgage loans underwritten in accordance with the Ginnie Mae MBS Guide “as is” and without recourse of any kind from PMT at PMT’s cost less an administrative fee plus accrued interest and sourcing fee ranging from one to two basis points of the unpaid principal balance (“UPB”) of the loan, generally based on the average number of calendar days the loans are held by PMT before purchase by the Company. The Company may also acquire conventional loans from PMT on the same terms upon mutual agreement between PMT and the Company.
While the Company purchases these mortgage loans “as is” and without recourse of any kind from PMT, where the Company has a claim for repurchase, indemnity or otherwise against a correspondent seller, it is entitled, at its sole expense, to pursue any such claim through or in the name of PMT.
In December 2024, the mortgage banking services agreement was renewed and amended to provide for the Company to assume the role of initial correspondent loan purchaser in place of PMT effective July 1, 2025. Under this agreement, PMT retains the right to purchase up to 100% of the non-government insured or guaranteed loans purchased by the Company through its correspondent operations at the Company’s cost plus accrued interest, less any loan administrative fees paid to the Company by the correspondent sellers and subject to quarterly fulfillment fee charges as previously described. The Company may hold or otherwise sell correspondent lending loans to other investors if PMT chooses not to purchase such loans. Accordingly, the sourcing fee arrangement will no longer have any effect for correspondent loans locked on July 1, 2025 and after.
The mortgage banking services agreement expires on December 31, 2029, subject to automatic renewal for an additional 18-month period unless terminated in accordance with the terms of the agreement.
Following is a summary of loan production and MSR recapture activities, between the Company and PMT:
Net gains (losses) on loans held for sale at fair value:
Net gains on loans sold to PMT (primarily cash)
8,549
14,595
Mortgage servicing rights recapture incurred
(1,474)
(2,682)
Sale of loans held for sale to PMT
1,034,884
UPB of loans recaptured
183,051
74,208
342,523
136,281
Tax service fees earned from PMT included in Loan origination fees
Fulfillment fee revenue
Unpaid principal balance of loans fulfilled for PMT subject to fulfillment fees
3,085,840
2,229,397
5,867,562
4,001,078
Sourcing fees included in cost of loans purchased from PMT
2,658
2,050
4,673
3,655
Unpaid principal balance of loans purchased from PMT:
Government guaranteed or insured
12,966,563
10,500,415
24,158,443
18,357,340
Conventional conforming
13,520,693
10,006,706
22,481,489
18,196,636
26,487,256
20,507,121
46,639,932
36,553,976
15
Servicing Agreement
The Company and PMT have entered into a loan servicing agreement (the “Servicing Agreement”), pursuant to which the Company provides subservicing for PMT’s MSRs and servicing for its portfolio of residential mortgage loans.
Following is a summary of loan servicing fees earned from PMT:
Base fees
19,151
19,181
38,354
38,378
Other fees
2,494
1,083
5,020
2,148
Through 2024, the loan servicing fees were established based on whether the serviced loans were “prime” loans (loans included in PMT’s MSRs, private label securitization portfolios and its inventory of loans held for sale) or “special servicing” loans (loans purchased by PMT with credit deterioration) as follows:
Prime Servicing
Special Servicing
The Servicing Agreement expires on December 31, 2029, subject to automatic renewal for an additional 18-month period unless terminated in accordance with the terms of the agreement.
16
Management Agreement
The Company has a management agreement with PMT (the “Management Agreement”), pursuant to which the Company oversees PMT’s business affairs in conformity with PMT’s investment policies for which the Company collects a base management fee and may collect a performance incentive fee. The Management Agreement provides that:
For the purpose of determining the amount of the performance incentive fee:
“Net income” is defined as net income or loss attributable to PMT’s common shares of beneficial interest computed in accordance with GAAP adjusted for certain other non-cash charges determined after discussions between the Company and PMT’s independent trustees and approval by a majority of PMT’s independent trustees.
“Common shareholders’ equity” is defined as “shareholder’s equity” less the average GAAP accounting value of the Company’s preferred equity.
“High watermark” is the annual adjustment that reflects the amount by which the “net income” (stated as a percentage of return on “equity”) in that year exceeds or falls short of the lesser of 8% and the average Fannie Mae 30-year MBS Yield (the “Target Yield”) for the year then ended. If the “net income” is lower than the Target Yield, the high watermark is increased by the difference. If the “net income” is higher than the Target Yield, the high watermark is reduced by the difference. Each time a performance incentive fee is earned, the high watermark returns to zero. As a result, the threshold amount required for the Company to earn a performance incentive fee is adjusted cumulatively based on the performance of PMT’s net income over (or under) the Target Yield, until the net income in excess of the Target Yield exceeds the then-current cumulative high watermark amount, and a performance incentive fee is earned. The high watermark is calculated based on the two years preceding the fiscal year for which the incentive fee is calculated, and will never be less than zero after including all high watermark increases and high watermark decreases over any such rolling two fiscal year period.
The performance incentive fee may be paid in cash or a combination of cash and PMT’s common shares of beneficial interest (subject to a limit of no more than 50% paid in common shares of beneficial interest), at PMT’s option.
17
In the event of termination of the Management Agreement between PMT and the Company, the Company may be entitled to a termination fee in certain circumstances. The termination fee is equal to three times the sum of (a) the average annual base management fee, and (b) the average annual performance incentive fee earned by the Company, in each case during the 24-month period immediately preceding the date of termination.
Following is a summary of the base management and performance incentive fees earned from PMT:
Base management fees
Performance incentive fees
Average PMT's shareholders' equity used to calculate base management and performance incentive fees
1,836,690
1,912,522
1,866,238
1,919,962
Through 2024, under the Management Agreement, both base management and performance incentive fees were paid quarterly and the high watermark was measured on a cumulative basis since inception.
The Management Agreement expires on December 31, 2029, subject to automatic renewal for an additional 18-month period unless terminated in accordance with the terms of the agreement.
Expense Reimbursement
Under the Management Agreement, PMT reimburses the Company for its organizational and operating expenses, including third-party expenses, incurred on PMT’s behalf, it being understood that the Company and its affiliates shall allocate a portion of their personnel’s time to provide certain legal, tax, accounting, internal audit and investor relations services for the direct benefit of PMT. PMT is also required to pay its pro rata portion of the rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the Company and its affiliates required for PMT’s and its subsidiaries’ operations. These expenses are based on the resources the Company dedicates to investment management activities for PMT, as determined by the Company in its sole discretion.
Through 2024, PMT reimbursed the Company for its organizational and operating expenses, including third-party expenses, incurred on PMT’s behalf, it being understood that the Company and its affiliates would allocate a portion of their personnel’s time to provide certain legal, tax and investor relations services for the direct benefit of PMT. With respect to the allocation of the Company’s and its affiliates’ personnel compensation, the Company was reimbursed $165,000 per fiscal quarter. Overhead expenses were previously allocated based on the ratio of PMT’s proportion of gross assets compared to all remaining gross assets owned or managed by the Company, as calculated at each fiscal quarter end.
The Company received reimbursements from PMT for expenses as follows:
Reimbursement of:
Expenses incurred on PMT's behalf, net
4,963
2,779
9,564
9,193
1,628
165
3,257
330
Common overhead incurred by the Company
982
2,000
1,963
3,944
7,573
4,944
14,784
13,467
Payments and settlements during the period (1)
32,628
29,263
60,676
59,348
18
Investing Activities
Following is a summary of investing activities between the Company and PMT:
Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust shares
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Fair value
Number of shares
75
Receivable from and Payable to PMT
Amounts receivable from and payable to PMT are summarized below:
Receivable from PMT:
Correspondent production fees
10,528
11,122
Servicing fees
7,213
6,822
Management fees
7,149
Allocated expenses and expenses incurred on PMT's behalf
5,994
3,508
Fulfillment fees
1,605
Payable to PMT:
Amounts advanced by PMT to fund its servicing advances
71,280
106,302
14,894
16,015
Exchanged Private National Mortgage Acceptance Company, LLC Unitholders
The Company entered into a tax receivable agreement with certain former owners of PNMAC that provides for the payment from time to time by the Company to PNMAC’s exchanged unitholders of an amount equal to 85% of the amount of the net tax benefits, if any, that the Company is deemed to realize as a result of (i) increases in tax basis of PNMAC’s assets resulting from exchanges of ownership interests in PNMAC and (ii) certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. The Company has recorded a $24.8 million and $25.9 million Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement as of June 30, 2025 and December 31, 2024, respectively. During the quarter ended June 30, 2025, the Company recorded a $1.1 million reduction to its estimate of the liability relating to a change in the tax rate applicable to its deferred income tax liability. The Company did not make payments under the tax receivable agreement during the quarter and six-month periods ended June 30, 2025 and 2024.
.
19
Note 6—Loan Sales and Servicing Activities
The Company originates, purchases and sells loans in the secondary mortgage market without recourse for credit losses. However, the Company maintains continuing involvement with the loans in the form of servicing arrangements and the liability under representations and warranties it makes to purchasers and insurers of the loans.
The following table summarizes cash flows between the Company and transferees as a result of the sale of loans in transactions where the Company maintains continuing involvement with the loans as servicer:
Cash flows:
Sales proceeds
34,656,042
24,860,532
Servicing fees received
411,531
348,730
807,763
684,978
The Company is contractually responsible for making the payments required to protect the loans’ beneficial interest holders’ interests in the properties collateralizing their loans and may, therefore, be required to advance amounts in excess of insurer or guarantor reimbursement limits. Therefore, the Company provides a valuation allowance on the servicing advances for these amounts to adjust their carrying values to amounts that are expected to ultimately be recovered from the loans’ insurers, guarantors, or beneficial interest holders.
The servicing advance valuation allowance is estimated based on relevant qualitative and quantitative information about past events, including historical collection and loss experience, current conditions, and reasonable and supportable forecasts that affect collectable amounts. The provision for losses on servicing advances is included in Servicing expense in the consolidated statements of income. Servicing advances are written off when they are deemed unrecoverable.
The following is a summary of the allowance for losses on servicing advances:
Balance at beginning of period
82,155
67,327
85,788
73,991
Provision for losses
7,786
5,932
Charge-offs, net
(7,916)
(4,588)
(15,733)
(9,711)
Balance at end of period
82,025
68,671
The following table summarizes the UPB of the loans sold by the Company in transactions where it maintains continuing involvement with the loans as servicer:
Unpaid principal balance of loans outstanding
448,312,667
410,393,342
Delinquent loans:
30-89 days
17,747,455
17,301,961
90 days or more:
Not in foreclosure
6,819,040
8,104,348
In foreclosure
1,183,032
693,934
Foreclosed
3,254
2,928
Loans in bankruptcy
1,936,703
1,762,324
20
The following tables summarize the Company’s loan servicing portfolio as measured by UPB:
rights owned
Subservicing
loans serviced
Investor:
Non-affiliated entities:
Originated
Purchased
14,837,637
Subserviced
894,678
463,150,304
464,044,982
228,838,699
Loans held for sale
6,783,240
469,933,544
229,733,377
699,666,921
30 days
13,661,146
2,224,538
15,885,684
60 days
4,676,437
592,689
5,269,126
7,030,633
1,080,547
8,111,180
1,174,802
130,242
1,305,044
4,264
1,815
6,079
26,547,282
4,029,831
30,577,113
2,022,830
328,672
2,351,502
Custodial funds managed by the Company (1)
7,690,392
3,037,614
10,728,006
21
December 31, 2024
15,681,406
806,584
426,074,748
426,881,332
230,753,581
8,128,914
434,203,662
231,560,165
665,763,827
13,095,250
1,996,821
15,092,071
4,838,550
676,508
5,515,058
8,289,129
1,210,270
9,499,399
730,372
106,188
836,560
3,716
2,732
6,448
26,957,017
3,992,519
30,949,536
1,852,396
286,093
2,138,489
6,171,157
2,391,875
8,563,032
Following is a summary of the geographical distribution of loans included in the Company’s loan servicing portfolio for the top five and all other states as measured by UPB:
State
California
79,108,662
76,364,993
Texas
69,822,668
65,317,775
Florida
67,648,262
63,850,638
Virginia
37,358,138
36,428,575
Georgia
29,671,069
28,499,141
All other states
416,058,122
395,302,705
22
Note 7—Fair Value
Most of the Company’s assets and certain of its liabilities are measured at or based on their fair values. The Company groups its assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the observability of the significant inputs used to determine the fair values. These levels are:
As a result of the difficulty in observing certain significant valuation inputs affecting “Level 3” fair value assets and liabilities, the Company is required to make judgments regarding these items’ fair values. Different persons in possession of the same facts may reasonably arrive at different conclusions as to the inputs to be applied in valuing these assets and liabilities and their fair values. Such differences may result in significantly different fair value measurements. Likewise, due to the general illiquidity of some of these assets and liabilities, subsequent transactions may be at values significantly different from those reported.
The Company reclassifies its assets and liabilities between levels of the fair value hierarchy when the inputs required to establish fair value at a level of the fair value hierarchy are no longer readily available, requiring the use of lower-level inputs, or when the inputs required to establish fair value at a higher level of the hierarchy become available.
23
Fair Value Accounting Elections
The Company identified its MSRs, its mortgage servicing liabilities (“MSLs”) and all of its non-cash financial assets to be accounted for at fair value so changes in fair value will be reflected in income as they occur and more timely reflect the results of the Company’s performance.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Following is a summary of assets and liabilities that are measured at fair value on a recurring basis:
Level 1
Level 2
Level 3
Assets:
Short-term investment
Principal-only stripped mortgage-backed securities
6,450,311
510,913
Derivative assets:
Interest rate lock commitments
143,061
Forward purchase contracts
89,834
Forward sales contracts
2,939
Put options on interest rate futures purchase contracts
996
Call options on interest rate futures purchase contracts
33,688
Total derivative assets before netting
34,684
92,773
270,518
Netting
(89,876)
Total derivative assets
Mortgage servicing rights
Investment in PennyMac Mortgage Investment Trust
497,911
7,328,042
10,185,223
17,921,300
Liabilities:
Derivative liabilities:
908
174
159,266
Call options on interest rate futures sale contracts
10,063
Total derivative liabilities before netting
159,440
170,411
(137,908)
Total derivative liabilities
Mortgage servicing liabilities
160,478
2,551
35,184
24
7,783,415
434,053
56,946
3,701
152,526
MBS put options
3,278
12,592
3,250
15,842
159,505
232,293
(119,217)
437,339
8,768,785
9,235,527
18,322,434
23,381
66,646
12,854
79,500
102,881
(61,981)
25,064
42,583
25
As shown above, certain of the Company’s loans held for sale, interest rate lock commitments (“IRLCs”), MSRs and MSLs are measured using Level 3 fair value inputs. Following are roll forwards of assets and liabilities measured at fair value using “Level 3” inputs at either the beginning or the end of the period presented:
Interest
Mortgage
Loans held
rate lock
servicing
Assets
for sale
commitments, net (1)
rights
441,621
109,942
8,963,889
9,515,452
Purchases and issuances, net
1,513,042
172,987
1,686,029
Capitalization of interest and servicing advances
27,315
Sales and repayments
(537,122)
Mortgage servicing rights resulting from loan sales
814,538
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk
38,010
Other factors
4,853
67,548
(247,178)
(174,777)
42,863
(136,767)
Transfers:
From Level 3 to Level 2
(976,806)
To loans held for sale
(208,324)
142,153
10,184,315
Changes in fair value recognized during the quarter relating to assets still held at June 30, 2025
25,494
(79,531)
Quarter ended
Liabilities
Mortgage servicing liabilities:
1,651
Changes in fair value included in income
(8)
Changes in fair value recognized during the quarter relating to liabilities still outstanding at June 30, 2025
26
466,392
69,808
7,483,210
8,019,410
954,081
128,241
1,082,322
14,110
(356,988)
541,207
28,011
(536)
19,542
(101,339)
(82,333)
27,475
(54,322)
Transfers from Level 3 to Level 2
(704,994)
Transfers to loans held for sale
(148,839)
400,076
68,752
7,923,078
8,391,906
Changes in fair value recognized during the quarter relating to assets still held at June 30, 2024
21,684
(10,903)
1,732
(24)
1,708
Changes in fair value recognized during the quarter relating to liabilities still outstanding at June 30, 2024
33,565
9,212,146
2,896,927
355,530
3,252,457
37,947
(1,051,768)
67,629
14,168
183,661
(678,166)
(480,337)
81,797
(412,708)
(1,888,043)
(430,603)
Changes in fair value recognized during the period relating to assets still held at June 30, 2025
28,691
(507,322)
27
Six months ended
Changes in fair value recognized during the period relating to liabilities still outstanding at June 30, 2025
478,564
89,593
7,099,348
7,667,505
1,859,941
228,512
2,088,453
25,336
(740,987)
45,153
(1,108)
31,066
(129,997)
(100,039)
44,045
(54,886)
(1,266,823)
(280,419)
Changes in fair value recognized during the period relating to assets still held at June 30, 2024
20,917
(40,328)
1,805
(97)
Changes in fair value recognized during the period relating to liabilities still outstanding at June 30, 2024
28
Assets and Liabilities Measured at Fair Value under the Fair Value Option
Net changes in fair values included in income for assets and liabilities carried at fair value, as a result of management’s election of the fair value option, by income statement line item are summarized below:
Net gains on
Net
loans held
loan
for sale at
fair value
fees
7,192
(16,460)
223,741
124,874
(239,986)
(16,245)
(117,799)
25,326
(16,771)
508,531
254,203
(652,840)
(144,309)
(146,768)
107,435
40
97
Following are the fair value and related principal amounts due upon maturity of loans held for sale:
Principal
amount
Fair
due upon
maturity
Difference
Current through 89 days delinquent
6,929,950
6,734,644
195,306
8,187,561
8,089,532
98,029
90 days or more delinquent:
23,534
27,248
(3,714)
24,663
27,901
(3,238)
7,740
21,348
(13,608)
5,244
11,481
(6,237)
177,984
88,554
29
Assets Measured at Fair Value on a Nonrecurring Basis
Following is a summary of assets that were measured at fair value on a nonrecurring basis:
Real estate acquired in settlement of loans
6,125
5,238
The following table summarizes the losses recognized on assets when they were remeasured at fair value on a nonrecurring basis:
(367)
(685)
(1,272)
(1,663)
Fair Value of Financial Instruments Carried at Amortized Cost
The Company’s Assets sold under agreements to repurchase, Mortgage loan participation purchase and sale agreements, Notes payable secured by mortgage servicing assets and Unsecured senior notes are carried at amortized cost.
These liabilities are classified as “Level 3” fair value items due to the Company’s reliance on unobservable inputs to estimate their fair values. The Company has concluded that the fair values of these liabilities other than the term notes and term loans included in Notes payable secured by mortgage servicing assets and the Unsecured senior notes approximate their carrying values due to their short terms and/or variable interest rates.
The Company estimates the fair value of the term notes, term loans and the Unsecured senior notes using indications of fair value provided by non-affiliate brokers, pricing services and internal estimates of fair value. The fair values and carrying values of these liabilities are summarized below:
Carrying value
Term notes and term loans
1,233,570
1,227,143
1,742,421
1,724,120
4,329,447
3,172,983
Valuation Governance
Most of the Company’s financial assets, and all of its derivatives, MSRs, and MSLs are carried at fair value with changes in fair value recognized in current period income. Certain of the Company’s financial assets and derivatives and all of its MSRs and MSLs are “Level 3” fair value assets and liabilities which require use of unobservable inputs that are significant to the estimation of the items’ fair values. Unobservable inputs reflect the Company’s own judgments about the factors that market participants use in pricing an asset or liability, and are based on the best information available under the circumstances.
Due to the difficulty in estimating the fair values of “Level 3” fair value assets and liabilities, the Company has assigned responsibility for estimating the fair values of these assets and liabilities to specialized staff within its capital markets group and subjects the valuation process to significant senior management oversight.
30
With respect to “Level 3” valuations other than IRLCs, the capital markets valuation staff reports to the Company’s senior management valuation subcommittee, which oversees the valuations. The capital markets valuation staff monitors the models used for valuation of the Company’s “Level 3” fair value assets and liabilities, including the models’ performance versus actual results, and reports those results as well as changes in the valuation of the non-IRLC “Level 3” fair value assets and liabilities, including major factors affecting the valuations and any changes in model methods and inputs, to the Company’s senior management valuation subcommittee. The Company’s senior management valuation subcommittee includes the Company’s chief financial, credit, and capital markets officers as well as other senior members of the Company’s finance, risk management and capital markets staffs.
To assess the reasonableness of its valuations, the capital markets valuation staff presents an analysis of the effect on the valuations of changes to the significant inputs to the models and, for MSRs, comparisons of its estimates of fair value and of key inputs to those procured from non-affiliate brokers and published surveys.
The fair value of the Company’s IRLCs is developed by its capital markets risk management staff and is reviewed by its capital markets operations staff.
Valuation Techniques and Inputs
Following is a description of the techniques and inputs used in estimating the fair values of “Level 2” and “Level 3” fair value assets and liabilities:
Principal-Only Stripped Mortgage-Backed Securities
The Company categorizes principal-only stripped MBS as “Level 2” fair value financial instruments. Fair values of these securities are established based on quoted market prices for these or similar securities.
Loans Held for Sale
Most of the Company’s loans held for sale at fair value are saleable into active markets and are therefore categorized as “Level 2” fair value assets. The fair values of “Level 2” fair value loans are determined using their contracted selling prices or quoted market prices or market price equivalents.
Certain of the Company’s loans held for sale are not saleable into active markets and are therefore categorized as “Level 3” fair value assets. Loans held for sale categorized as “Level 3” fair value assets include:
A loan becomes eligible for resale into a new Ginnie Mae guaranteed security when the loan becomes current either through completion of a modification of the loan’s terms or after three months of timely payments following either the completion of a payment deferral program or borrower reperformance and when the issuance date of the new security is at least 120 days after the date the loan was last delinquent.
31
The Company uses a discounted cash flow model to estimate the fair value of its “Level 3” fair value loans held for sale. The significant unobservable inputs used in the fair value measurement of the Company’s “Level 3” fair value loans held for sale are discount rates, home price projections, voluntary prepayment/resale and total prepayment/resale speeds. Significant changes in any of those inputs in isolation could result in a significant change to the loans’ fair value measurement. Increases in home price projections are generally accompanied by an increase in voluntary prepayment speeds.
Following is a quantitative summary of key “Level 3” fair value inputs used in the valuation of loans held for sale:
Fair value (in thousands)
Key inputs (1):
Discount rate:
Range
5.8% – 9.3%
6.5% – 9.3%
Weighted average
6.5%
7.0%
Twelve-month projected housing price index change:
1.7% – 2.2%
2.2% – 2.8%
2.0%
2.3%
Voluntary prepayment/resale speed (2):
6.3% – 50.3%
6.4% – 34.4%
29.4%
22.0%
Total prepayment/resale speed (3):
6.4% – 57.3%
6.5% – 41.3%
32.3%
23.9%
Changes in fair value of loans held for sale attributable to changes in a loan’s instrument-specific credit risk are measured with reference to the change in the respective loan’s delinquency status and performance history at period end from the later of the beginning of the period or acquisition date. Changes in fair value of loans held for sale are included in Net gains on loans held for sale at fair value in the Company’s consolidated statements of income.
Derivative Financial Instruments
Interest Rate Lock Commitments
The Company categorizes IRLCs as “Level 3” fair value assets or liabilities. The Company estimates the fair values of IRLCs based on quoted Agency MBS prices, the probability that the loans will be funded or purchased (the “pull-through rate”) and its estimate of the fair value of the MSRs it expects to receive in the sale of the loans.
The significant unobservable inputs used in the fair value measurement of the Company’s IRLCs are the pull-through rate and the estimated fair values of MSRs attributable to the mortgage loans it has committed to originate or purchase. Significant changes in the pull-through rate or the MSR components of the IRLCs, in isolation, could result in significant changes in the IRLCs’ fair value measurements. The financial effects of changes in these inputs are generally inversely correlated as increasing interest rates have a positive effect on the fair value of the MSR component of IRLC fair value, but increase the pull-through rate for the loan principal and interest payment cash flow component, which has decreased in fair value. Changes in fair value of IRLCs are included in Net gains on loans held for sale at fair value in the Company’s consolidated statements of income.
32
Following is a quantitative summary of key unobservable inputs used in the valuation of IRLCs:
Fair value (in thousands) (1)
Committed amount (in thousands)
10,998,207
7,801,677
Key inputs (2):
Pull-through rate:
29.8% – 100%
87.0%
88.2%
Mortgage servicing rights fair value expressed as:
Servicing fee multiple:
1.0 – 8.6
5.3
5.4
Percentage of loan commitment amount:
0.3% – 4.5%
0.3% – 4.6%
2.1%
2.4%
Hedging Derivatives
Fair values of derivative financial instruments actively traded on exchanges are categorized by the Company as “Level 1” fair value assets and liabilities; fair values of derivative financial instruments based on observable interest rates, volatilities and prices in the MBS or other markets are categorized by the Company as “Level 2” fair value assets and liabilities.
Changes in the fair values of hedging derivatives are included in Net gains on loans held for sale at fair value, or Net loan servicing fees – Mortgage servicing rights hedging results, as applicable, in the Company’s consolidated statements of income.
Mortgage Servicing Rights
MSRs are categorized as “Level 3” fair value assets. The Company uses a discounted cash flow approach to estimate the fair value of MSRs. The key inputs used in the estimation of the fair value of MSRs include the applicable prepayment rate (prepayment speed), pricing spread (a component of discount rate), and annual per-loan cost to service the underlying loans, all of which are unobservable. Significant changes to any of those inputs in isolation could result in a significant change in the MSR fair value measurement. Changes in these key inputs are not directly related. Changes in the fair value of MSRs are included in Net loan servicing fees—Change in fair value of mortgage servicing rights and mortgage servicing liabilities in the Company’s consolidated statements of income.
33
Following are the key inputs used in determining the fair value of MSRs received by the Company when it retains the obligation to service the mortgage loans it sells:
(Amount recognized and unpaid principal balance of underlying loans in thousands)
MSR and underlying loan characteristics:
Amount recognized
Unpaid principal balance
34,697,004
24,741,715
62,361,980
44,226,530
Weighted average servicing fee rate (in basis points)
43
44
Annual total prepayment speed (2):
6.7% – 15.5%
7.3% – 15.0%
6.6% – 15.5%
7.3% – 15.9%
8.6%
10.0%
8.7%
10.5%
Equivalent average life (in years):
3.8 – 10.1
3.5 – 9.7
3.8 – 10.2
8.8
7.9
8.7
7.7
Pricing spread (3):
4.9% – 12.6%
5.3% – 12.6%
5.5%
6.0%
6.1%
Per-loan annual cost of servicing:
$70 – $127
$100
$98
34
Following is a quantitative summary of key inputs used in the valuation of the Company’s MSRs and the effect on the fair value from adverse changes in those inputs:
(Fair value, unpaid principal balance of underlying
loans and effect on fair value amounts in thousands)
$ 9,531,249
$ 8,744,528
Underlying loan characteristics:
$ 463,132,127
$ 426,055,220
Weighted average note interest rate
4.7%
4.5%
39
38
6.2% – 19.0%
5.9% – 17.7%
8.9%
7.8%
2.6 – 8.8
2.7 – 9.1
8.1
8.4
Effect on fair value of (3):
5% adverse change
($155,827)
($126,224)
10% adverse change
($306,286)
($248,349)
20% adverse change
($592,174)
($481,100)
Pricing spread (4):
4.9% – 11.4%
5.0% – 11.3%
6.2%
($121,678)
($113,419)
($240,330)
($223,960)
($468,962)
($436,805)
$68 – $127
$68 – $130
$105
($51,524)
($48,830)
($103,048)
($97,661)
($206,097)
($195,321)
35
Mortgage Servicing Liabilities
MSLs are categorized as “Level 3” fair value liabilities. The Company uses a discounted cash flow approach to estimate the fair value of MSLs. The key inputs used in the estimation of the fair value of MSLs include the applicable annual total prepayment speed, pricing spread, and the per-loan annual cost of servicing the underlying loans. Changes in the fair value of MSLs are included in Net servicing fees—Change in fair value of mortgage servicing rights and mortgage servicing liabilities in the Company’s consolidated statements of income.
Following are the key inputs used in estimating the fair value of MSLs:
Unpaid principal balance of underlying loans (in thousands)
18,177
19,528
Servicing fee rate (in basis points)
Annual total prepayment speed (2)
15.4%
15.7%
Equivalent average life (in years)
5.2
5.1
Pricing spread (3)
8.8%
Per-loan annual cost of servicing
920
969
Note 8— Principal-Only Stripped Mortgage-Backed Securities
Following is a summary of activity in the Company’s investment in principal-only stripped MBS:
817,596
524,576
Purchases
410,617
935,356
Repayments
(46,529)
(13,336)
(84,267)
(13,452)
Accrual of purchase discounts
6,699
8,826
18,034
9,090
Valuation adjustments
13,891
(7,634)
43,360
(7,681)
914,223
36
Following is a summary of the Company’s investment in principal-only stripped MBS:
Principal balance
977,216
1,061,484
Unearned discounts
(179,383)
(197,418)
Cumulative valuation changes
(12,875)
(38,201)
Fair value of principal-only stripped mortgage-backed securities pledged to secure Assets sold under agreements to repurchase
All of the Company’s principal-only stripped MBS have remaining contractual maturities of over ten years.
Note 9—Loans Held for Sale at Fair Value
Following is a summary of loans held for sale at fair value:
Mortgage type
Government-insured or guaranteed
3,786,855
4,154,069
2,215,601
3,127,082
Jumbo
447,855
502,264
Closed-end second lien
268,600
272,285
Purchased from Ginnie Mae securities serviced by the Company
220,973
145,026
Repurchased pursuant to representations and warranties
21,340
16,742
Fair value of loans pledged to secure:
6,128,283
7,612,832
745,063
528,002
6,873,346
8,140,834
Note 10—Derivative Financial Instruments
The Company holds and issues derivative financial instruments in connection with its operating and investing activities. Derivative financial instruments are created in the Company’s loan production activities and when the Company enters into derivative transactions as part of its interest rate risk management activities. Derivative financial instruments created in the Company’s operating activities are IRLCs that are created when the Company commits to purchase or originate a loan for sale.
The Company engages in interest rate risk management activities in an effort to moderate the effect of changes in market interest rates on the fair value of certain of its assets. To manage this fair value risk resulting from interest rate risk, the Company uses derivative financial instruments acquired with the intention of reducing the risk that changes in market interest rates will result in unfavorable changes in the fair value of the Company’s IRLCs, inventory of loans held for sale and its MSRs.
The Company does not designate and qualify any of its derivatives for hedge accounting. The Company records all derivative financial instruments at fair value and records changes in fair value in current period income.
The Company has elected to present net derivative asset and liability positions, and cash collateral obtained from or posted to its counterparties when subject to a master netting arrangement that is legally enforceable on all counterparties in the event of default. The derivatives that are not subject to a master netting arrangement are IRLCs.
37
Derivative Notional Amounts and Fair Value of Derivatives
The Company had the following derivative financial instruments recorded on its consolidated balance sheets:
Notional
Derivative
Derivative instrument
amount (1)
assets
liabilities
Not subject to master netting arrangements:
Subject to master netting arrangements (2):
13,037,927
12,760,764
22,218,056
23,440,334
500,000
450,000
7,000,000
4,270,000
11,525,000
7,600,000
2,800,000
Treasury futures purchase contracts
5,998,000
7,467,000
Treasury futures sale contracts
7,347,000
10,521,000
Total derivatives before netting
Forward sale contract with PennyMac Mortgage Investment Trust
84,070
Deposits placed with (received from) derivative counterparties included in the derivative balances above, net
48,032
(57,236)
Derivative Assets, Financial Instruments, and Cash Collateral Held by Counterparty
The following table summarizes by significant counterparty the amount of derivative asset positions after considering master netting arrangements and financial instruments or cash pledged that do not meet the accounting guidance to qualify for setoff accounting.
Gross amount not
offset in the
consolidated
Net amount
balance sheet
of assets in the
Financial
collateral
Counterparty
instruments
received
RJ O' Brien
24,621
Morgan Stanley Bank, N.A.
4,597
15,260
Mizuho Bank, Ltd.
2,108
South Street Securities
1,803
Bank of America, N.A.
8,221
Bank of Montreal
3,781
Athene Annuity & Life Assurance Company
2,352
BNP Paribas
2,260
Others
4,452
6,731
Derivative Liabilities, Financial Instruments and Collateral Held by Counterparty
The following table summarizes by significant counterparty the amount of derivative liabilities and assets sold under agreements to repurchase after considering master netting arrangements and financial instruments or cash pledged that do not meet the accounting guidance to qualify for setoff accounting. All assets sold under agreements to repurchase are secured by sufficient collateral with fair values that exceed the liability amounts recorded on the consolidated balance sheets.
Gross amounts
not offset in the
of liabilities
in the
instruments (1)
pledged
Atlas Securitized Products, L.P.
2,339,762
(2,339,762)
1,938,756
(1,938,756)
1,275,935
(1,262,608)
13,327
1,294,213
(1,294,213)
JPMorgan Chase Bank, N.A.
808,309
(808,175)
134
1,220,822
(1,214,559)
6,263
Royal Bank of Canada
633,971
(633,971)
785,597
(785,597)
Wells Fargo Bank, N.A.
542,679
(541,545)
1,134
795,119
(789,305)
Citibank, N.A.
470,812
(470,812)
455,426
(455,426)
346,078
(345,257)
821
568,790
(568,790)
320,702
(320,396)
306
472,659
(472,659)
Santander US Capital Markets LLC
245,158
(240,555)
4,603
282,077
(282,077)
Nomura Corporate Funding Americas
134,739
(134,739)
175,000
(175,000)
Goldman Sachs
98,732
(97,950)
782
336,894
(336,624)
270
Barclays Capital
80,650
(80,434)
216
258,559
(254,750)
3,809
75,642
(75,642)
125,000
(125,000)
Federal National Mortgage Association
1,904
8,368
1,363
7,385,387
(7,351,846)
33,541
8,733,656
(8,692,756)
Following are the gains (losses) recognized by the Company on derivative financial instruments and the consolidated statement of income lines where such gains and losses are included:
Derivative activity
Consolidated statement of income line
Net gains on loans held for sale at fair value (1)
32,211
(1,055)
108,588
(20,841)
Hedged item:
Interest rate lock commitments and loans held for sale
(28,853)
52,955
(173,899)
105,192
Net loan servicing fees–Mortgage servicing rights hedging results
(116,294)
(155,317)
(27,654)
(449,651)
Note 11—Mortgage Servicing Rights and Mortgage Servicing Liabilities
Mortgage Servicing Rights at Fair Value
The activity in MSRs is as follows:
MSRs resulting from loan sales
Change in fair value due to:
Changes in inputs used in valuation model (1)
15,950
99,440
(189,539)
269,392
Other changes in fair value (2)
(263,128)
(200,779)
(488,627)
(399,389)
Total change in fair value
Unpaid principal balance of underlying loans at end of period
463,132,127
396,429,820
Fair value of mortgage servicing rights pledged to secure Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets
9,350,647
8,609,388
Mortgage Servicing Liabilities at Fair Value
The activity in MSLs is summarized below:
Changes in fair value due to:
(12)
(29)
(39)
(66)
(85)
21,197
41
Contractual servicing fees relating to MSRs and MSLs are recorded in Net loan servicing fees—Loan servicing fees—From non-affiliates on the Company’s consolidated statements of income; other fees relating to MSRs and MSLs are recorded in Net loan servicing fees—Loan servicing fees—Other on the Company’s consolidated statements of income. Such amounts are summarized below:
Contractual servicing fees
Other fees:
Late charges
19,855
17,248
39,906
34,857
4,060
3,149
7,539
5,789
459,432
395,437
900,649
773,712
Note 12—Other Assets
Other assets are summarized below:
Margin deposits
264,992
288,153
Capitalized software, net
112,291
120,802
Servicing fees receivable, net
45,357
38,676
Other servicing receivables
47,842
54,058
Interest receivable
41,355
41,286
Prepaid expenses
39,784
45,762
31,223
14,976
Operating lease right-of-use assets
30,745
36,572
Deposits securing Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets
13,124
16,697
Furniture, fixtures, equipment and building improvements, net
10,758
12,916
77,206
100,183
Deposits securing Assets sold under agreements to repurchase or Notes payable secured by mortgage servicing assets
42
Note 13—Leases
The Company has operating lease agreements relating to its facilities. The Company’s operating lease agreements have remaining terms ranging from less than one year to six years. Some of the operating lease agreements include options to extend the term for up to five years. None of the Company’s operating lease agreements require the Company to make variable lease payments.
The Company’s lease agreements are summarized below:
(dollars in thousands)
Lease expense:
Operating leases
4,033
4,004
8,035
Short-term leases
148
168
Sublease income
(378)
(317)
(755)
(742)
Net lease expense included in Occupancy and equipment expense
3,737
3,771
7,428
7,461
Other information:
Payments for operating leases
5,335
4,986
10,412
9,960
Operating lease right-of-use assets recognized
648
Period end weighted averages:
Remaining lease term (in years)
3.3
3.9
Discount rate
3.9%
4.0%
Lease payment obligations attributable to the Company’s operating lease liabilities are summarized below:
Twelve months ended June 30,
2026
17,736
2027
11,276
2028
5,180
2029
4,747
2030
3,385
Thereafter
1,428
Total lease payments
43,752
Less imputed interest
(3,664)
Operating lease liability included in Accounts payable and accrued expenses
40,088
Note 14—Short-Term Debt
The borrowing facilities described throughout these Notes 14 and 15 contain various covenants, including financial covenants governing the Company’s net worth, debt-to-equity ratio and liquidity. Management believes that the Company was in compliance with these covenants as of June 30, 2025.
Assets Sold Under Agreements to Repurchase
The Company has multiple borrowing facilities in the form of asset sales under agreements to repurchase. These borrowing facilities are secured by principal-only stripped MBS, loans held for sale, participation certificates backed by mortgage servicing assets or margin deposits. Eligible assets are sold at advance rates based on the fair value (as determined by the lender) of the assets sold. Interest is charged at a rate based on the Secured Overnight Financing Rate (“SOFR”). Principal-only stripped MBS, mortgage servicing assets, loans and participation certificates backed by mortgage servicing assets financed under these agreements may be re-pledged by the lenders.
Assets sold under agreements to repurchase are summarized below:
Average balance of assets sold under agreements to repurchase
7,183,987
5,761,107
6,649,802
4,651,823
Weighted average interest rate (1)
6.00%
7.06%
5.97%
7.13%
Total interest expense
112,685
106,587
206,914
177,022
Maximum daily amount outstanding
8,581,781
7,122,796
8,690,936
Carrying value:
7,351,846
8,692,756
Unamortized debt issuance costs
(7,592)
(7,549)
Weighted average interest rate
5.94%
5.89%
Available borrowing capacity (1):
Committed
1,017,655
460,000
Uncommitted
3,918,218
3,104,026
4,935,873
3,564,026
Assets securing repurchase agreements:
Servicing advances (2)
265,118
357,939
Mortgage servicing rights (2)
8,034,225
7,488,539
Deposits (2)
Maturities
Following is a summary of maturities of outstanding advances under asset repurchase agreements by maturity date:
Remaining maturity at June 30, 2025 (1)
Within 30 days
1,464,684
Over 30 to 90 days
4,512,313
Over 90 to 180 days
58,042
Over 180 days to one year
1,198,227
Over one year to two years
118,580
Total assets sold under agreements to repurchase
Weighted average maturity (in months)
3.5
Amounts at Risk
The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and interest payable) relating to the Company’s assets sold under agreements to repurchase is summarized by asset type and counterparty below as of June 30, 2025:
Loans held for sale and MSRs
Amount at risk
maturity of advances
Facility maturity
Atlas Securitized Products, L.P., Goldman Sachs Bank USA, Nomura Corporate Funding Americas and Mizuho Bank, Ltd. (1)
6,174,715
June 18, 2026
158,877
November 19, 2025
June 26, 2026
92,204
August 6, 2025
June 9, 2027
JP Morgan Chase Bank, N.A.
38,981
October 21, 2025
July 10, 2026
33,779
July 30, 2025
May 8, 2026
29,756
September 4, 2025
June 11, 2026
July 14, 2025
January 22, 2026
18,275
September 10, 2025
May 22, 2026
15,359
September 14, 2025
June 11, 2027
Barclays Bank PLC
14,165
November 6, 2025
March 6, 2026
13,186
September 30, 2026
8,733
February 19, 2026
March 14, 2026
Goldman Sachs Bank USA
2,222
September 5, 2025
February 13, 2027
45
Principal-only stripped MBS
Maturity
2,846
July 25, 2025
22,094
July 7, 2025
17,963
July 23, 2025
15,227
July 15, 2025
Mortgage Loan Participation Purchase and Sale Agreements
Two of the borrowing facilities secured by loans held for sale are in the form of mortgage loan participation purchase and sale agreements. Participation certificates, each of which represents an undivided beneficial ownership interest in mortgage loans that have been pooled with Fannie Mae, Freddie Mac or Ginnie Mae, are sold to a lender pending securitization of the mortgage loans and sale of the resulting securities. A commitment to sell the securities resulting from the pending securitization between the Company and a non-affiliate is also assigned to the lender at the time a participation certificate is sold.
The purchase price paid by the lender for each participation certificate is based on the trade price of the security, plus an amount of interest expected to accrue on the security to its anticipated delivery date, minus a present value adjustment, any related hedging costs, and a holdback amount, that is based on a percentage of the purchase price. The holdback amount is not required to be paid to the Company until the settlement of the security and its delivery to the lender.
The mortgage loan participation purchase and sale agreements are summarized below:
Average balance
283,853
236,647
272,512
235,761
5.65%
6.69%
5.64%
4,168
4,109
7,972
8,186
701,233
512,528
515,990
496,856
(937)
(344)
5.58%
Fair value of loans pledged to secure mortgage loan participation purchase and sale agreements
46
Note 15—Long-Term Debt
Notes Payable Secured by Mortgage Servicing Assets
Term Notes and Term Loans
The Company, through its wholly-owned subsidiaries PNMAC, PLS and the PNMAC GMSR ISSUER TRUST (“Issuer Trust”) has entered into a structured finance transaction, in which PLS pledges and/or sells to the Issuer Trust participation certificates representing beneficial interests in Ginnie Mae mortgage servicing assets pursuant to a repurchase agreement. The Issuer Trust has issued VFNs to PLS, has issued secured term notes (the “Term Notes”) to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”), and has entered into a series of syndicated term loans with various lenders (the “Term Loans”). The Term Notes and Term Loans are secured by the participation certificates relating to Ginnie Mae mortgage servicing assets financed pursuant to the servicing asset repurchase facilities, and rank pari passu with the mortgage servicing asset VFNs.
Following is a summary of the issued and outstanding Term Notes and Term Loans:
Maturity date
Issuance date
Annual interest rate spread (1)
Stated
Optional extension (2)
Term Notes:
February 29, 2024
425,000
3.20%
March 26, 2029
March 25, 2031
Term Loans:
February 28, 2023
680,000
3.00%
February 25, 2028
February 25, 2029
October 25, 2023
October 25, 2028
1,230,000
Freddie Mac MSR Notes Payable
The Company has notes payable facilities with two lenders that are secured by Freddie Mac MSRs. Interest is charged at a rate of SOFR plus a spread as defined in the agreements. The facilities expire on March 6 and June 11, 2026. The maximum amount that the Company may borrow under the notes payable is $900 million, $850 million of which is committed, and may be reduced by other debt outstanding with the counterparties.
Notes payable secured by mortgage servicing assets are summarized below:
1,698,132
1,872,857
1,780,415
1,911,593
7.81%
8.85%
7.83%
8.89%
35,743
41,932
72,321
85,938
Unpaid principal balance:
1,730,000
325,000
1,330,000
2,055,000
(2,857)
(6,028)
7.49%
Assets pledged to secure notes payable (1):
Servicing advances
Deposits
Unsecured Senior Notes
The Company has issued unsecured senior notes (the “Unsecured Notes”) to qualified institutional buyers under Rule 144A of the Securities Act. The Unsecured Notes are senior unsecured obligations of the Company and will rank senior in right of payment to any future subordinate indebtedness of the Company, equally in right of payment with all existing and future senior indebtedness of the Company and effectively subordinate to any existing and future secured indebtedness of the Company to the extent of the fair value of collateral securing such indebtedness.
The Unsecured Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the Company’s existing and future wholly-owned domestic subsidiaries (other than certain excluded subsidiaries defined in the indenture under which the Unsecured Notes were issued). The guarantees are senior unsecured obligations of the guarantors and will rank senior in right of payment to any future subordinate indebtedness of the guarantors, equally in right of payment with all existing and future senior indebtedness of the guarantors and effectively subordinate to any existing and future secured indebtedness of the guarantors to the extent of the fair value of collateral securing such indebtedness. The Unsecured Notes and the guarantees are structurally subordinate to the indebtedness and liabilities of the Company’s subsidiaries that do not guarantee the Unsecured Notes.
Following is a summary of the Company’s outstanding Unsecured Notes:
Note interest rate
Optional redemption date (1)
(annual)
February 11, 2021
4.25%
February 15, 2029
February 15, 2024
September 16, 2021
5.75%
September 15, 2031
September 15, 2026
December 11, 2023
750,000
7.875%
December 15, 2029
December 15, 2026
May 23, 2024
7.125%
November 15, 2030
November 15, 2026
February 6, 2025
850,000
6.875%
February 15, 2033
February 15, 2028
May 1, 2025
May 15, 2032
May 15, 2028
4,250,000
48
4,197,253
2,828,571
3,954,973
2,689,286
6.41%
6.03%
6.34%
70,157
43,968
130,294
82,800
3,200,000
Unamortized debt issuance costs and premiums, net
(64,988)
(35,968)
6.56%
6.15%
Maturities of Long-Term Debt
Maturities of long-term debt (based on stated maturity dates) are as follows:
Notes payable secured by mortgage servicing assets (1)
550,000
2,850,000
1,200,000
5,580,000
Note 16—Liability for Losses Under Representations and Warranties
Following is a summary of the Company’s liability for losses under representations and warranties:
30,774
29,976
30,788
Provision for losses:
Resulting from sales of loans
4,054
4,129
7,601
8,081
Resulting from change in estimate
(2,220)
(4,076)
(3,635)
(7,396)
Losses incurred
(845)
(1,341)
(1,332)
(2,785)
28,688
Unpaid principal balance of loans subject to representations and warranties at end of period
452,998,620
381,524,553
49
Note 17—Income Taxes
The Company’s effective income tax rates were (78.5)% and 26.6% for the quarters ended June 30, 2025 and 2024, respectively, and (17.8)% and 22.6% for the six months ended June 30, 2025 and 2024, respectively. The decreases in the effective income tax rates for the quarter and six months ended June 30, 2025 compared to the same periods in 2024 are primarily due to a non-recurring $81.6 million net income tax benefit primarily due to the repricing of deferred tax liabilities resulting from changes to California's apportionment rules with the enactment of California Senate Bill 132, signed into law June 27, 2025 and effective January 1, 2025. The law requires financial institutions to apportion their California income using a single sales factor instead of a factor equally weighted with property, payroll and sales.
Note 18—Commitments and Contingencies
Commitments to Purchase and Fund Mortgage Loans
The Company’s commitments to purchase and fund loans totaled $11.0 billion as of June 30, 2025.
Legal and Regulatory Proceedings
From time to time, the Company may be a party to legal and regulatory proceedings, lawsuits and other claims arising in the ordinary course of its business. The amount, if any, of ultimate liability with respect to such matters cannot be determined, but despite the inherent uncertainties of litigation, management believes that the ultimate disposition of any such proceedings and exposure will not have, individually or taken together, a material adverse effect on the financial condition, income, or cash flows of the Company.
Note 19—Stockholders’ Equity
The Company’s stock repurchase program provides for the repurchase of up to $2 billion of its common stock, before transaction costs and excise tax. From inception through June 30, 2025, the Company repurchased $1.8 billion of common stock, including $537,000 in transaction fees. No common stock was repurchased during the quarter and six months ended June 30, 2025 and 2024.
50
Note 20—Net Gains on Loans Held for Sale
Net gains on loans held for sale at fair value are summarized below:
From non-affiliates:
Cash losses:
Loans
(573,210)
(413,822)
(849,520)
(723,012)
Hedging activities
(105,772)
92,552
(416,471)
242,771
(678,982)
(321,270)
(1,265,991)
(480,241)
Non-cash gains:
Provisions for losses relating to representations and warranties:
Pursuant to loan sales
(4,054)
(4,129)
(7,601)
(8,081)
Reductions in liability due to changes in estimate
2,220
4,076
3,635
7,396
Changes in fair values of loans and derivatives held at end of period:
(15,268)
(2,695)
(102,307)
24,950
Hedging derivatives
76,919
(39,597)
242,572
(137,579)
From PennyMac Mortgage Investment Trust (1)
Note 21—Net Interest Expense
Net interest expense is summarized below:
Interest income:
Cash and short-term investments
10,919
13,172
20,926
27,754
6,948
9,074
18,543
9,344
105,725
86,283
193,119
151,704
Placement fees relating to custodial funds
97,975
92,230
177,770
168,363
362
52
1,442
72
Interest expense:
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations
14,058
7,902
23,832
14,023
Interest on mortgage loan impound deposits
2,263
2,962
4,844
4,949
503
411
1,482
722
51
Note 22—Stock-based Compensation
Following is a summary of the stock-based compensation activity:
Grants:
Units:
Performance-based restricted share units ("RSUs")
185
246
Stock options
187
188
Time-based RSUs
260
147
Grant date fair value:
Performance-based RSUs
18,788
20,915
8,138
6,935
145
26,484
12,478
53,410
40,328
Vesting and exercise:
Performance-based RSUs vested
309
Stock options exercised
96
138
427
Time-based RSUs vested
211
7,518
(2,212)
Note 23—Disaggregation of Certain Expense Captions
Following are the disaggregation of certain expense captions:
Expense line
Amortization of capitalized software
12,813
12,242
24,794
24,423
Other (1)
29,444
23,448
57,660
47,234
Total technology expense
Depreciation
1,918
1,998
3,833
3,981
Operating lease cost
3,687
7,280
7,293
Short-term lease cost
Other (2)
2,724
2,124
5,500
5,127
Total occupancy and equipment expense
Note 24—Earnings Per Share
Basic earnings per share is determined by dividing net income by the weighted average number of shares of common stock outstanding during the quarter. Diluted earnings per share is determined by dividing net income by the weighted average number of shares of common stock outstanding, assuming all dilutive securities were issued.
The Company’s potentially dilutive securities are stock-based compensation awards. The Company applies the treasury stock method to determine the diluted weighted average number of shares of common stock outstanding based on the outstanding stock-based compensation awards.
The following table summarizes the basic and diluted earnings per share calculations:
(in thousands, except per share amounts)
Weighted average shares of common stock outstanding
Effect of dilutive securities - shares issuable under stock-based compensation plan
1,968
2,249
2,039
2,389
Weighted average diluted shares of common stock outstanding
Basic earnings per share
Diluted earnings per share
Calculations of diluted earnings per share require certain potentially dilutive shares to be excluded when their inclusion in the diluted earnings per share calculation would be anti-dilutive. The following table summarizes the weighted-average number of anti-dilutive outstanding RSUs and stock options excluded from the calculation of diluted earnings per share:
(in thousands except for weighted average exercise price)
Performance-based RSUs (1)
827
368
754
190
98
Stock options (2)
237
191
126
Total anti-dilutive units and options
1,015
749
978
Weighted average exercise price of anti-dilutive stock options (2)
98.21
84.93
97.36
53
Note 25—Regulatory Capital and Liquidity Requirements
The Company, through PLS, is required to maintain specified levels of capital and liquidity to remain a seller/servicer in good standing with the Agencies. Such capital and liquidity requirements generally are tied to the size of the PLS’s loan servicing portfolio and loan origination volume.
The Agencies’ capital and liquidity levels and requirements, the calculations of which are specified by each Agency, are summarized below:
Requirement/Agency
Actual (1)
Requirement (1)
Capital
Fannie Mae & Freddie Mac
7,711,113
1,485,109
7,457,748
1,380,100
Ginnie Mae
7,630,194
1,618,448
6,952,347
1,526,074
HUD
2,500
Risk-based capital
%
Liquidity
839,203
676,887
870,243
630,698
1,037,175
495,140
1,208,755
460,200
Adjusted net worth / Total assets ratio
Tangible net worth / Total assets ratio
Noncompliance with an Agency’s requirements can result in such Agency taking various remedial actions up to and including terminating the Company’s ability to sell loans to and service loans on behalf of the respective Agency.
Note 26—Segments
The Company’s reportable segments are identified based on their unique business activities. The following disclosures about the Company’s business segments are presented consistent with the way the Company’s chief operating decision maker organizes and evaluates financial information for making operating decisions and assessing performance. The Company’s chief operating decision maker is its chief executive officer. The reportable segments are evaluated based on income or loss before provision for income taxes. The chief operating decision maker uses pre-tax segment results to assess segment performance and allocate operating and capital resources among the two reportable segments described below. The segments are separately evaluated because they represent different services.
During the year ended December 31, 2024, the Company adopted ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). Concurrent with the adoption of ASU 2023-07 management reassessed its segment definitions to those shown below. Prior period amounts have been recast to conform the prior quarter presentation to the current quarter presentation.
The Company conducts its business in two operating and reportable segments, “production” and “servicing”:
54
Financial performance and results by segment are as follows:
Production
Reportable segment total
Corporate and other
Consolidated total
Revenues: (1)
203,961
30,698
Loan origination fees
Net interest income (expense):
104,205
117,123
221,328
601
93,622
145,955
10,583
(28,832)
(18,249)
132
1,138
1,270
4,280
5,550
279,581
153,399
432,980
11,750
Expenses:
104,456
51,284
155,740
31,801
27,841
9,505
37,346
4,911
10,276
384
10,660
1,729
3,545
1,798
5,343
3,037
2,731
6,840
1,539
2,730
5,259
7,989
4,231
221,793
99,247
321,040
47,248
Income (loss) before provision for income taxes
57,788
54,152
111,940
(35,498)
Segment assets at end of quarter
7,161,516
16,994,006
24,155,522
66,382
Acquisition of:
Capitalized software
6,970
2,176
9,146
Furniture, fixtures, equipment and building improvements
617
340
957
348
1,305
11,175
1,535
12,710
103
Depreciation and amortization of furniture, fixtures, equipment and building improvements
976
652
290
55
154,317
21,747
84,645
115,706
200,351
460
83,376
124,495
1,269
(8,789)
(7,520)
155
194
349
15,535
15,884
202,243
180,756
382,999
23,128
70,900
49,460
120,360
21,596
22,977
9,774
32,751
2,422
1,598
4,020
5,384
3,754
2,753
6,507
1,386
4,793
4,814
631
1,958
3,528
5,486
3,209
147,074
90,054
237,128
35,145
55,169
90,702
145,871
(12,017)
6,454,411
15,034,649
21,489,060
88,505
21,577,565
3,884
775
4,659
4,797
109
264
373
401
9,772
2,013
11,785
457
925
741
1,666
332
56
391,106
64,590
189,493
221,257
410,750
1,050
170,148
277,511
19,345
(56,254)
(36,909)
263
1,228
9,200
10,428
Total net revenue
527,520
323,982
851,502
24,131
203,325
104,254
307,579
61,950
52,941
19,890
72,831
9,623
18,299
757
19,056
2,765
6,679
3,479
10,158
7,259
8,237
5,460
13,697
3,064
5,376
9,828
15,204
8,716
407,789
193,829
601,618
93,377
119,731
130,153
249,884
(69,246)
Segment assets at end of period
12,379
3,904
16,283
804
369
1,173
1,676
21,396
3,201
24,597
197
1,944
1,297
3,241
592
57
295,748
42,757
148,016
208,247
356,263
974
145,272
228,368
2,744
(20,121)
(17,377)
271
701
972
18,945
19,917
385,652
291,895
677,547
34,240
141,093
101,860
242,953
45,379
45,745
19,537
65,282
6,375
4,484
2,946
7,430
11,236
7,892
5,658
13,550
3,019
8,389
8,439
677
3,364
8,464
11,828
8,020
281,805
177,539
459,344
74,706
103,847
114,356
218,203
(40,466)
7,325
1,085
8,410
251
8,661
361
873
1,234
85
1,319
19,258
4,216
23,474
949
1,884
1,438
3,322
659
Note 27—Subsequent Events
Management has evaluated all events and transactions through the date the Company issued these consolidated financial statements. During this period:
59
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our consolidated results of operations and financial condition. Unless the context indicates otherwise, references in this Quarterly Report on Form 10-Q to the words “we,” “us,” “our” and the “Company” refer to PFSI and its subsidiaries.
Our Company
We are a specialty financial services firm primarily focused on the production and servicing of U.S. residential mortgage loans (activities which we refer to as mortgage banking) and the management of investments related to the U.S. mortgage market. We believe that our operating capabilities, specialized expertise, access to long-term investment capital, and the experience of our management team across all aspects of the mortgage business allow us to profitably engage in mortgage banking and investing activities and capitalize on other related opportunities as they arise in the future.
Our primary assets are equity interests in Private National Mortgage Acceptance Company, LLC (“PNMAC”). We are the managing member of PNMAC, and we operate and control all of the businesses and affairs of PNMAC, and consolidate the financial results of PNMAC and its subsidiaries. We conduct our business in two segments: production and servicing:
Our principal mortgage banking subsidiary, PennyMac Loan Services, LLC (“PLS”), is a non-bank producer and servicer of mortgage loans in the United States. PLS is a seller/servicer for the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), each of which is a government-sponsored entity. PLS is also an approved issuer of securities guaranteed by the Government National Mortgage Association (“Ginnie Mae”), a lender of the Federal Housing Administration (“FHA”), and a lender/servicer of the U.S. Department of Veterans Affairs (“VA”) and the U.S. Department of Agriculture (“USDA”). We refer to each of Fannie Mae, Freddie Mac, Ginnie Mae, FHA, VA and USDA as an “Agency” and collectively as the “Agencies.” PLS is able to service loans in all 50 states, the District of Columbia, Puerto Rico, Guam and the U.S. Virgin Islands, and originate loans in all 50 states and the District of Columbia, either because PLS is properly licensed in a particular jurisdiction or exempt or otherwise not required to be licensed in that jurisdiction.
Our investment management subsidiary is PNMAC Capital Management, LLC (“PCM”), a Delaware limited liability company registered with the Securities Exchange Commission (“SEC”) as an investment adviser under the Investment Advisers Act of 1940, as amended. PCM has an investment management contract with PMT.
Business Trends
Recent actions by the U.S. government administration with respect to trade, tariffs and government cost reduction initiatives have led to significant volatility in financial markets and uncertainty regarding the economic outlook, including inflation and interest rates. Elevated interest rates in recent years have constrained growth in the size of the mortgage origination market, which is currently projected to increase from $1.7 trillion in 2024 to $2.0 trillion in 2025 according to mortgage industry economists.
The opportunity for refinancing has increased in recent periods, driven by interest rate volatility and a greater proportion of outstanding mortgages with note rates near current market rates. If such interest rate volatility continues, it may drive greater mortgage production activity and higher prepayment speeds than we have experienced in recent years. Additionally, reductions in the Federal Reserve’s federal funds rate have reduced the costs of floating rate borrowings and placement fees we receive in relation to custodial funds that we manage as compared to the same periods in the prior year. The current period of economic uncertainty and market volatility may also lead to a reduction in economic activity and slowing home price growth or depreciation, which could lead to increasing mortgage delinquencies or defaults and increase losses from our representations and warranties.
We expect to sell a portion of the conventional loans and all of the jumbo loans from our correspondent channel to PMT in the third quarter of 2025.
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Results of Operations
Our results of operations are summarized below:
(dollars in thousands, except per share amounts)
Revenues:
Loan production revenues (1)
299,564
222,566
572,502
425,394
12,419
23,017
24,309
34,238
28,979
25,992
58,098
55,083
Annualized return on average stockholders' equity
13.9%
10.9%
7.7%
Dividends declared per share
0.30
0.20
0.60
0.40
Income before provision for income taxes by reportable segment and corporate and other:
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") (2)
262,021
249,718
550,054
477,446
During the period:
Interest rate lock commitments issued
39,597,584
27,998,822
71,054,404
50,584,454
Unpaid principal balance of loans produced or fulfilled for PMT
37,611,130
27,360,094
66,463,876
48,769,160
At end of period:
Interest rate lock commitments outstanding
7,596,114
Unpaid principal balance of loan servicing portfolio:
Owned:
Mortgage servicing rights and liabilities
396,451,017
6,108,082
402,559,099
Subserviced for:
PMT
230,179,513
U.S. Department of Veterans Affairs
822,525
Other non-affiliates
72,153
632,738,612
Book value per share
78.04
71.76
62
We define “Adjusted EBITDA” as net income plus provision for income taxes, depreciation and amortization, excluding decrease (increase) in fair value of mortgage servicing rights (“MSRs”) net of mortgage servicing liabilities (“MSLs”), due to changes in the valuation inputs we use in our valuation models, hedging (gains) losses associated with MSRs, stock-based compensation and interest expense on corporate debt or corporate revolving credit facilities and capital leases.
We believe that the presentation of Adjusted EBITDA provides useful information to investors regarding our results of operations because each measure assists both investors and management in analyzing and benchmarking the performance and value of our business. However, other companies may define Adjusted EBITDA differently, and as a result, our measures of Adjusted EBITDA may not be directly comparable to those of other companies.
Adjusted EBITDA measures have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
Because of these limitations, Adjusted EBITDA measures are not intended as alternatives to net income as an indicator of our operating performance and should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations.
The following table presents a reconciliation of Adjusted EBITDA to our net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, for the periods indicated:
14,731
14,240
(Increase) decrease in fair value of MSRs net of MSLs due to changes in valuation inputs used in valuation models
(15,929)
(99,425)
189,565
(269,404)
Hedging losses associated with MSRs
109,102
171,777
Stock‑based compensation
Interest expense on corporate debt or corporate revolving credit facilities and capital leases
Effect of non-recurring gain from joint venture and arbitration accrual
(12,484)
(10,884)
Adjusted EBITDA
Income Before (Benefit from) Provisions for Income Taxes
For the quarter ended June 30, 2025, income before income taxes decreased $57.4 million compared to the same quarter in 2024. The decrease was primarily due to a $96.0 million increase in total expenses, a $17.2 million decrease in Net loan servicing fees resulting from increases in net MSR valuation losses in excess of growth in servicing fees, a $10.6 million increase in Net interest expense and a $10.6 million decrease in other income, partially offset by
a $77.0 million increase in loan production revenue due to higher volume across all production channels.
63
For the six months ended June 30, 2025, income before income taxes increased $2.9 million compared to the same period in 2024. The increase was primarily due to a $147.1 million increase in loan production revenue due to higher volume across all production channels and a $46.1 million increase in Net loan servicing fees resulting from growth in our servicing portfolio, partially offset by a $19.5 million increase in Net interest expense, a $9.9 million decrease in other income and a $160.9 million increase in total expenses.
64
Net Gains on Loans Held for Sale at Fair Value
In our production segment, revenues reflect the effects of larger mortgage market volumes during the quarter and six months ended June 30, 2025 compared to the same periods in 2024. During the quarter and six months ended June 30, 2025, we recognized Net gains on loans held for sale at fair value totaling $234.7 million and $455.7 million, respectively, representing an increase of $58.6 million and $117.2 million, respectively, compared to the same periods in 2024.
Our net gains on loans held for sale are summarized below:
Total cash losses
Changes in fair values of loans and derivative financial instruments outstanding at end of period:
93,862
(43,347)
248,853
(133,470)
Total non-cash gains
906,566
497,807
1,709,774
819,572
Total gains on sale from non-affiliates
Interest rate lock commitments issued:
By loan type:
18,209,041
14,064,074
34,324,614
24,858,332
19,340,043
13,024,197
32,913,808
24,346,284
1,383,209
454,378
2,602,313
582,494
Closed-end second lien mortgage
665,291
456,173
1,213,669
797,344
By production channel:
Correspondent
28,657,935
21,013,818
50,753,289
38,094,674
Broker direct
7,151,449
4,286,680
12,629,818
7,639,087
Consumer direct
3,788,200
2,698,324
7,671,297
4,850,693
Loans held for sale at fair value
6,238,959
Commitments to fund and purchase loans
65
Non-Cash Elements of Gain on Sale of Loans Held for Sale
Our gains on loans held for sale include both cash and non-cash elements. We recognize a significant portion of our gains on loans held for sale when we make commitments to purchase or fund mortgage loans. We recognize this gain in the form of interest rate lock commitment (“IRLC”) derivatives. We adjust our initial gain amount as the loan purchase or origination process progresses until the loan is either funded or cancelled.
We also receive non-cash proceeds on sale that include our estimate of the fair value of MSRs and we incur MSLs (which represent the fair value of the costs we expect to incur in excess of the fees we receive for delinquent loans we have bought out of Ginnie Mae guaranteed securities and have resold to and service for investors) and we recognize the fair value of our estimate of the losses we expect to incur relating to the representations and warranties we provide in our loan sale transactions.
The MSRs, MSLs, and liabilities for representations and warranties we recognize represent our estimate of the fair value of future benefits and costs we will realize for years in the future. These estimates represented approximately 346% and 321% of our gains on sales of loans held for sale at fair value for the quarter and six months ended June 30, 2025, respectively, as compared to 307% and 282% for the same periods in 2024. These estimates change as circumstances change and changes in these estimates are recognized in income in subsequent periods. Subsequent changes in the fair value of our MSRs may significantly affect our income.
Interest Rate Lock Commitments, Mortgage Servicing Rights and Mortgage Servicing Liabilities
The methods and key inputs we use to measure and update our measurements of IRLCs, MSRs and MSLs are detailed in Note 7 – Fair Value – Valuation Techniques and Inputs to the consolidated financial statements included in this Quarterly Report.
Representations and Warranties
Our agreements with purchasers and insurers include representations and warranties related to the loans we sell. The representations and warranties require adherence to purchaser and insurer origination and underwriting guidelines, including but not limited to the validity of the lien securing the loan, property eligibility, borrower credit, income and asset requirements, and compliance with applicable federal, state and local law.
In the event of a breach of our representations and warranties, we may be required to either repurchase the loans with the identified defects or indemnify the purchaser or insurer. In such cases, we bear any subsequent credit loss on the loans. Our credit loss may be reduced by any recourse we have to correspondent originators that sold such loans to us and breached similar or other representations and warranties. In such event, we have the right to seek a recovery of related repurchase losses from that correspondent seller.
Our representations and warranties are generally not subject to stated limits of exposure. However, we believe that the current unpaid principal balance (“UPB”) of loans sold by us and subject to representation and warranty liability to date represents the maximum exposure to repurchases related to representations and warranties.
The level of the liability for losses under representations and warranties is difficult to estimate and requires considerable judgment. The level of loan repurchase losses is dependent on economic factors, purchaser or insurer loss mitigation strategies, and other external conditions that may change over the lives of the underlying loans. Our estimate of the liability for representations and warranties is developed by our credit risk administration staff and reviewed by our Management Risk Committee that includes our senior executives and senior management in our loan production, loan servicing, and credit risk management areas.
The method used to estimate our losses on representations and warranties is a function of our estimate of future defaults, loan repurchase rates, the severity of loss in the event of default, if applicable, and the probability of reimbursement by the correspondent loan seller. We establish a liability at the time loans are sold and periodically assess the adequacy of our recorded liability.
66
We recorded provisions for losses under representations and warranties relating to current loan sales as a component of Net gains on loans held for sale at fair value totaling $4.1 million and $7.6 million for the quarter and six months ended June 30, 2025, respectively, compared to $4.1 million and $8.1 million for the same periods in 2024. The slight decrease in the provision relating to current loan sales was primarily attributable to a lower expectation of future repurchases due to improved collateral quality for the quarter and six months ended June 30, 2025 compared to the same periods in 2024.
We also recorded reductions in the liability of $2.2 million and $3.6 million for the quarter and six months ended June 30, 2025 compared to $4.1 million and $7.4 million for the same periods in 2024. The reductions in the liability resulted from previously sold loans meeting performance criteria established by the Agencies which significantly limit the likelihood of certain repurchase or indemnification claims.
Following is a summary of loan repurchase activity and the UPB of loans subject to representations and warranties:
Indemnification activity:
Loans indemnified at beginning of period
112,547
81,689
101,867
75,724
New indemnifications
6,367
14,292
18,403
22,013
Less indemnified loans sold, repaid or refinanced
2,881
999
4,237
2,755
Loans indemnified at end of period
116,033
94,982
Repurchase activity:
Total loans repurchased
25,418
23,468
45,360
44,863
Less:
Loans repurchased by correspondent lenders
15,585
14,839
31,077
25,781
Loans repaid by borrowers or resold
952
4,908
8,653
11,735
Net loans repurchased with losses chargeable to liability for representations and warranties
8,881
3,721
5,630
7,347
Losses charged to liability for representations and warranties
845
1,341
1,332
2,785
Unpaid principal balance of loans subject to representations and warranties
Liability for representations and warranties
During the quarter and six months ended June 30, 2025, we repurchased loans totaling $25.4 million and $45.4 million, respectively. We charged losses of $845,000 and $1.3 million against the liability during the quarter and six months ended June 30, 2025. Our losses arising from representations and warranties have historically been minimized by our ability to either recover most of the losses from our correspondent sellers or from our ability to profitably refinance and resell repurchased loans.
Elevated interest rate levels may affect certain of our correspondent sellers’ ability to honor their obligations to repurchase defective loans, may increase the level of borrower defaults and may increase the level of repurchases we are required to make, thereby making it more difficult to minimize losses on repurchased loans. We expect these developments may increase the losses we incur in relation to our recorded liability for representations and warranties compared to our historical experience. However, we believe our recorded liability is presently adequate to absorb such losses.
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Loan Origination Fees
Loan origination fees increased $17.0 million and $27.3 million during the quarter and six months ended June 30, 2025, compared to the same periods in 2024 primarily due to an increase in production volume.
Fulfillment Fees from PennyMac Mortgage Investment Trust
Fulfillment fees from PMT represent fees we collect for services we perform on behalf of PMT in connection with the acquisition, packaging and sale of loans. The fulfillment fees are calculated based on the number of loans we fulfill for PMT.
Fulfillment fees increased $1.4 million and $2.7 million during the quarter and six months ended June 30, 2025, compared to the same periods in 2024; the increase was primarily due to an increase in the number of loans we fulfilled for PMT during the quarter and six months ended June 30, 2025 compared to the same periods in 2024.
Net Loan Servicing Fees
Our net loan servicing fee income has two primary components: fees earned for servicing the loans and the effects of MSR and MSL valuation changes, net of hedging results as summarized below:
Loan servicing fees
Effects of MSRs and MSLs net of hedging results
Loan Servicing Fees
Following is a summary of our loan servicing fees:
Other:
22,959
20,193
46,026
40,782
26,546
25,199
52,531
50,506
Average UPB of loans serviced:
MSRs and MSLs
452,077,317
388,760,891
443,765,594
382,559,187
230,362,073
230,254,779
230,771,395
231,235,514
Loan servicing fees from non-affiliates generally relate to our MSRs which are primarily related to servicing we provide for loans included in Agency securitizations. These fees are contractually established at an annualized percentage of the UPB of the loan serviced and we collect these fees from borrower payments. Loan servicing fees from PMT are primarily related to PMT’s MSRs and are established at monthly per-loan amounts based on whether the loan is a fixed-rate or adjustable-rate loan and the loan’s delinquency or foreclosure status as detailed in Note 5–Transactions with Related Parties to the consolidated financial statements included in this Quarterly Report. Other loan servicing fees are comprised primarily of borrower-contracted fees such as late charges and reconveyance fees.
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Loan servicing fees from non-affiliates and other fees increased during the quarter and six months ended June 30, 2025 compared to the same periods in 2024. The increases were primarily due to growth of our loan servicing portfolio. Other servicing fees increased due to growth in our MSR portfolio combined with increased incentives received for loss mitigation activities.
Effects of Mortgage Servicing Rights and Mortgage Servicing Liabilities
We have elected to carry our servicing assets and liabilities at fair value. Changes in fair value have two components: changes due to realization of the contractual servicing fees and changes due to changes in market inputs used to estimate the fair value of MSRs and MSLs. We endeavor to moderate the effects of changes in fair value by entering into derivatives transactions and holding principal-only stripped mortgage-backed securities.
Change in fair value of MSRs and MSLs and the related hedging results are summarized below:
MSR and MSL valuation changes and hedging results:
Changes in fair value attributable to changes in fair value inputs
15,929
99,425
(189,565)
269,404
Hedging results
(93,173)
(72,352)
(191,893)
(197,018)
Changes in fair value attributable to realization of cash flows
(263,099)
(200,740)
(488,561)
(399,304)
Total change in fair value of mortgage servicing rights and mortgage servicing liabilities net of hedging results
Average balances:
9,284,824
7,785,298
9,087,827
7,566,468
1,640
1,718
1,654
1,744
Changes in fair value of MSRs attributable to changes in fair value inputs decreased during the quarter and six months ended June 30, 2025 compared to the same periods in 2024 due to decreases in interest rates during the quarter and six months ended June 30, 2025 compared to increasing interest rates during the same periods in 2024. Increasing interest rates reduce the rate of prepayments of the underlying loans, which increases the cash flows expected from the servicing rights, while decreasing interest rates have the opposite effect.
Hedging results reflect valuation losses attributable to the effects of interest rate volatility and increased hedging costs on the fair value of the hedging instruments during the quarter and interest rate decreases over the six months ended June 30, 2025 compared with interest rate increases in the same periods in 2024.
Changes in fair value attributable to realization of cash flows are influenced by changes in the level of servicing assets and liabilities and changes in estimates of the remaining cash flows to be realized. During the quarter and six months ended June 30, 2025, realization of cash flows increased compared to the same periods in 2024, primarily due to the growth in our investment in MSRs.
69
Following is a summary of our loan servicing portfolio:
Purchased and assumed
U.S. Department of Veterans Affairs (1)
Total loans serviced
Delinquencies:
Owned servicing:
18,337,583
17,933,800
90 days or more
8,209,699
9,023,217
Subservicing:
2,817,227
2,673,329
1,212,604
1,319,190
Following is a summary of characteristics of our MSR and MSL servicing portfolio as of June 30, 2025:
Average
Loan type
Loan count
Note rate
Age (months)
Remainingmaturity (months)
Loan size
FICO credit score at origination
Original LTV (1)
Current LTV (1)
60+ Delinquency (by UPB)
(Dollars and loan count in thousands)
Government insured or guaranteed (2):
FHA
161,209,113
751
317
215
683
93%
70%
5.3%
VA
128,898,548
463
278
731
90%
1.8%
USDA
20,809,405
140
4.1%
302
700
98%
65%
Government-sponsored entities:
Fannie Mae
58,743,053
183
5.2%
318
321
763
75%
63%
0.6%
Freddie Mac
80,550,488
240
326
335
760
76%
67%
0.7%
Closed-end second lien mortgage loans
2,050,611
9.4%
250
744
19%
18%
0.2%
Other (3)
10,889,086
6.8%
413
774
74%
0.3%
1,830
253
723
86%
68%
2.8%
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Net Interest Expense
Following is a summary of net interest expense:
Cash and short-term investment
Short-term debt
116,853
110,696
214,886
185,208
Long-term debt
105,900
85,900
202,615
168,738
Net interest expense increased $10.6 million and $19.5 million during the quarter and six months ended June 30, 2025 compared to the same periods in 2024. The increases were primarily due to the Company financing a larger investment in MSRs as well as inventory of loans held for sale and principal-only stripped MBS during 2025 as compared to 2024 and a decrease in interest income from cash and short-term investment due to a decrease in average cash balances, partially offset by increases in interest income from loans held for sale and earnings from custodial funds.
Management Fees from PennyMac Mortgage Investment Trust
Management fees decreased $264,000 and $440,000 during the quarter and six months ended June 30, 2025 compared to the same periods in 2024, due to decreases in PMT’s average shareholders’ equity which is the basis for the base management fees.
Compensation expenses are summarized below:
Salaries and wages
111,446
92,364
220,094
185,148
Severance
420
745
Incentive compensation
46,079
32,935
84,150
59,100
Taxes and benefits
22,078
18,852
45,938
41,053
Stock and unit-based compensation
Head count:
4,589
3,951
4,524
3,937
Period end
4,779
4,012
Compensation expenses increased $45.6 million and $81.2 million during the quarter and six months ended
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June 30, 2025 compared to the same periods in 2024. The increases were primarily due to an increase in head count and increased incentive compensation during the quarter and six months ended June 30, 2025, reflecting higher loan production volume and higher return on equity.
Loan Origination
Loan origination expenses increased $28.6 million and $42.1 million for the quarter and six months ended June 30, 2025 compared to the same periods in 2024. The increases were primarily due to higher origination volumes.
Technology expenses increased $6.6 million and $10.8 million during the quarter and six months ended June 30, 2025 compared to the same quarter in 2024. The increases were primarily due to increases in virtual desktop and cloud-related expenses.
Servicing expenses increased $5.4 million and $11.1 million during the quarter and six months ended June 30, 2025 compared to the same periods in 2024. The increases were primarily due to increases in provision for losses on servicing advances resulting from higher delinquent loan balances during the quarter and six months ended June 30, 2025 compared to the same periods in 2024.
Marketing and advertising expenses increased $6.9 million and $12.7 million during the quarter and six months ended June 30, 2025 compared to the same periods in 2024. The increases were primarily due to additional marketing expenses incurred as an Official Supporter of Team USA and increased marketing expenses for consumer direct lending.
Provision for Income Taxes
Our effective income tax rates were (78.5)% and 26.6% for the quarters ended June 30, 2025 and 2024, respectively, and (17.8)% and 22.6% for the six months ended June 30, 2025 and 2024, respectively. The decreases in the effective income tax rates for the quarter and six months ended June 30, 2025 compared to the same periods in 2024 are primarily due to a non-recurring $81.6 million net income tax benefit primarily due to the repricing of deferred tax liabilities resulting from changes to California's apportionment rules with the enactment of California Senate Bill 132, signed into law June 27, 2025 and effective January 1, 2025. The law requires financial institutions to apportion their California income using a single sales factor instead of a factor equally weighted with property, payroll and sales.
Balance Sheet Analysis
Following is a summary of key balance sheet items as of the dates presented:
624,448
659,035
Servicing advances, net
Investments in and advances to affiliates
31,569
31,150
Mortgage servicing rights at fair value
LIABILITIES AND STOCKHOLDERS' EQUITY
8,044,550
9,181,719
5,512,155
5,213,004
13,556,705
14,394,723
572,712
574,341
Stockholders' equity
Leverage ratios:
Total debt / Stockholders' equity
3.4
3.8
Total debt / Tangible stockholders' equity (1)
Total assets decreased $1.9 billion from $26.1 billion at December 31, 2024 to $24.2 billion at June 30, 2025. The decrease was primarily due to a decrease of $1.3 billion in loans held for sale at fair value and a decrease of $1.2 billion of loans eligible for repurchase, partially offset by an increase of $786.7 million of mortgage servicing rights.
Total liabilities decreased $2.1 billion from $22.3 billion at December 31, 2024 to $20.2 billion at June 30, 2025. The decrease was primarily due to a decrease of $838.0 million in borrowings and a decrease of $1.2 billion in liability for loans eligible for repurchase. As a result of our decreased inventory financing requirements, our leverage ratios decreased during the quarter ended June 30, 2025 from December 31, 2024.
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Cash Flows
Our cash flows are summarized below:
Change
Operating
2,925,468
Investing
1,393,373
Financing
(4,052,102)
266,739
The net decrease in cash of $76.3 million during the six months ended June 30, 2025 is discussed below.
Operating activities
Net cash provided by operating activities totaled $934.6 million during the six months ended June 30, 2025 compared with net cash used in operating activities of $2.0 billion during the same period in 2024. Our cash flows from operating activities are primarily influenced by changes in the levels of our inventory of mortgage loans held for sale as shown below:
Cash flows from:
382,339
(2,414,187)
Other operating sources
552,303
423,361
Investing activities
Net cash used in investing activities during the six months ended June 30, 2025 totaled $127.0 million, primarily due to a $140.7 million increase in margin deposits. Net cash used in investing activities during the six months ended June 30, 2024 totaled $1.5 billion, primarily due to $935.4 million in purchase of principal-only stripped MBS, $391.5 million in net settlement of derivative financial instruments used to hedge our investment in MSRs and a $178.5 million increase in short-term investment.
Financing activities
Net cash used in financing activities totaled $883.9 million during the six months ended June 30, 2025, primarily due to a decrease of $811.5 million in borrowings. The decrease in borrowings primarily reflects the decrease in inventory of loans held for sale. Net cash provided by financing activities totaled $3.2 billion during the six months ended June 30, 2024, primarily due to an increase of $3.2 billion in borrowings. The increase in borrowings primarily reflects the increase in inventory of loans held for sale and our investment in MSRs.
Liquidity and Capital Resources
Our liquidity reflects our ability to meet our current obligations (including our operating expenses and, when applicable, the retirement of, and margin calls relating to, our debt, and margin calls relating to hedges on our commitments to purchase or originate mortgage loans and on our MSR investments), fund new originations and purchases, and make investments as we identify them. We expect our primary sources of liquidity to be through cash flows from business activities, proceeds from bank borrowings and proceeds from and issuance of equity or debt offerings. We believe that our liquidity is sufficient to meet our current liquidity needs.
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Our current borrowing strategy is to finance our assets where we believe such borrowing is prudent, appropriate and available. Our primary borrowing activities are in the form of sales of assets under agreements to repurchase, sales of mortgage loan participation purchase and sale certificates, notes payable secured by mortgage servicing rights and unsecured senior notes. A significant amount of our borrowings have short-term maturities and provide for advances with terms ranging from 30 days to 364 days. Because a significant portion of our current debt facilities consist of short-term debt, we expect to renew these facilities in advance of maturity in order to ensure our ongoing liquidity and access to capital or otherwise allow ourselves sufficient time to replace any necessary financing.
Secured debt facilities for MSRs and servicing advances take various forms. Fannie Mae MSRs, Ginnie Mae MSRs and servicing advances may be pledged to special purpose entities, each of which may issue variable funding notes (“VFNs”) and term notes and term loans that are secured by such Ginnie Mae or Fannie Mae assets. Term notes are issued to qualified institutional buyers under Rule 144A of Securities Act and term loans are syndicated to banking entities, while the VFNs are sold to bank partners under agreements to repurchase. Freddie Mac MSRs are pledged to lenders under a bi-lateral loan and security agreement.
On May 1, 2025, PFSI issued $850 million in 6.875% unsecured senior notes due in 2032 in a private placement to “qualified institutional buyers” under Rule 144A of the Securities Act. On May 12, 2025, PFSI redeemed $650 million in 5.375% unsecured senior notes due in October, 2025. On June 20, 2025, PFSI, through its wholly-owned subsidiaries PNMAC, PLS and the Issuer Trust, redeemed $500 million in 4.25% Term Notes due in May 2027.
Our repurchase agreements represent the sales of assets together with agreements for us to buy back the respective assets at a later date. The table below presents the average, maximum daily and ending balances:
Maximum daily balance
Balance at quarter end
6,414,295
The differences between the average and maximum daily balances on our repurchase agreements reflect both the effect of increasing loan inventory levels during the six months ended June 30, 2025 and the fluctuations throughout the periods of our inventory as we fund and pool mortgage loans for sale in guaranteed mortgage securitizations.
Our repurchase agreements also contain margin call provisions that, upon notice from the applicable lender at its option, require us to transfer cash or, in some instances, additional assets in an amount sufficient to eliminate any margin deficit. A margin deficit will generally result from any decrease in the market value (as determined by the applicable lender) of the assets subject to the related financing agreement. Upon notice from the applicable lender, we will generally be required to satisfy the margin call on the day of such notice or within one business day thereafter, depending on the timing of the notice.
Our secured financing agreements at PLS require us to comply with various financial and other restrictive covenants. The most significant financial covenants currently include the following:
With respect to servicing performed for PMT, PLS is also subject to certain covenants under PMT’s debt agreements. Covenants in PMT’s debt agreements are equally, or sometimes less, restrictive than the covenants described above.
PFSI has issued unsecured senior notes (the “Unsecured Notes”) to qualified institutional buyers under Rule 144A of the Securities Act. The Unsecured Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the Company’s existing and future wholly-owned domestic subsidiaries (other than certain excluded subsidiaries defined in the indentures under which the Unsecured Notes were issued).
Our Unsecured Notes’ indentures contain financial and other restrictive covenants that limit the Company and our restricted subsidiaries’ ability to engage in specified types of transactions, including, but not limited to the following:
Although financial and other covenants limit the amount of indebtedness that we may incur and affect our liquidity through minimum cash reserve requirements, we believe that these covenants currently provide us with sufficient flexibility to successfully operate our business and obtain the financing necessary to achieve that purpose.
We are also subject to liquidity and net worth requirements established by the Federal Housing Finance Agency (“FHFA”) for Agency seller/servicers and Ginnie Mae for single-family issuers. FHFA and Ginnie Mae have established minimum liquidity and net worth requirements for their approved non-depository single-family sellers/servicers in the case of Fannie Mae, Freddie Mac, and Ginnie Mae for its approved single-family issuers, and Ginnie Mae has issued risk-based capital requirements. We believe that we are in compliance with the Agency’s pending requirements as of June 30, 2025.
We have a common stock repurchase program which allows us to repurchase common shares of up to $2 billion. Share repurchases may be effected through open market purchases or privately negotiated transactions in accordance with applicable rules and regulations. The stock repurchase program does not have an expiration date and the authorization does not obligate us to acquire any particular amount of common stock. From inception through June 30, 2025, we have repurchased approximately $1.8 billion of common shares under our stock repurchase program.
We continue to explore a variety of means of financing our business, including debt financing through bank warehouse lines of credit, bank loans, repurchase agreements, securitization transactions and corporate debt. However, there can be no assurance as to how much additional financing capacity such efforts will produce, what form the financing will take or whether such efforts will be successful.
Debt Obligations
As described further above in “Liquidity and Capital Resources,” we currently finance certain of our assets through short-term borrowings with major financial institutions in the form of sales of assets under agreements to repurchase and mortgage loan participation purchase and sale agreements. We access the capital market for long-term debt through the issuance of secured term notes, term loans and Unsecured Notes. The issuer under our secured term note facilities is PLS or a wholly-owned issuer trust guaranteed by PNMAC. In addition, PFSI has issued Unsecured Notes guaranteed by certain of its restricted wholly-owned domestic subsidiaries.
PLS is required to comply with financial and other restrictive covenants in certain financing agreements, as
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described further above in “Liquidity and Capital Resources”. As of June 30, 2025, we believe PLS was in compliance in all material respects with these covenants.
Many of our debt financing agreements contain a condition precedent to obtaining additional funding that requires PLS to maintain positive net income for at least one of the previous two consecutive quarters, or other similar measures. PLS is compliant with all such conditions.
The financing agreements also contain margin call provisions that, upon notice from the applicable lender, require us to transfer cash or, in some instances, additional assets in an amount sufficient to eliminate any margin deficit. Upon notice from the applicable lender, we will generally be required to satisfy the margin call on the day of such notice or within one business day thereafter, depending on the timing of the notice.
In addition, the financing agreements contain events of default (subject to certain materiality thresholds and grace periods), including payment defaults, breaches of covenants and/or certain representations and warranties, cross-defaults, guarantor defaults, servicer termination events and defaults, material adverse changes, bankruptcy or insolvency proceedings and other events of default customary for these types of transactions. The remedies for such events of default are also customary for these types of transactions and include the acceleration of the principal amount outstanding under the agreements and the liquidation by our lenders of the mortgage loans or other collateral then subject to the agreements.
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Our debt obligations have the following sizes and maturities:
Outstanding
Facility
Lender
indebtedness (1)
facility size (2)
facility (2)
Maturity date (2)
(dollar amounts in thousands)
Loans sold under agreements to repurchase
1,584,762
300,000
1,230,023
1,525,000
800,000
1,000,000
519,934
June 28, 2026
345,257
600,000
250,000
321,627
320,396
47,950
200,000
80,434
JP Morgan Chase Bank, N.A. (EBO facility)
18,580
480,066
150,000
June 25, 2027
25,642
84,739
Servicing assets sold under agreements to repurchase
755,000
1,415,238
June 29, 2026
50,000
365,261
August 4, 2025
October 25, 2026
350,000
July 25, 2026
Mortgage-backed securities sold under agreements to repurchase
269,661
240,555
219,918
32,585
June 10, 2026
Notes payable
GMSR 2023-GTL1 Loans
GMSR 2023-GTL2 Loans
GMSR 2024-GT1 Notes
Citibank, N.A. FHLMC MSR Facility
Barclays FHLMC MSR Facility
Unsecured Notes - 4.25%
Unsecured Notes - 5.75%
Unsecured Notes - 7.875%
Unsecured Notes - 7.125%
Unsecured Notes - 6.875%
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The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and accrued interest) relating to our assets sold under agreements to repurchase is summarized by counterparty below as of June 30, 2025:
Critical Accounting Estimates
Preparation of financial statements in compliance with GAAP requires us to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Certain of these estimates significantly influence the portrayal of our financial condition and results, and they require us to make difficult, subjective or complex judgments. Our critical accounting policies primarily relate to our fair value estimates.
Our Annual Report on Form 10-K for the year ended December 31, 2024 contains a discussion of our critical accounting policies, which utilize relevant critical accounting estimates. There have been no significant changes in our critical accounting policies and estimates during the quarter ended June 30, 2025 as compared to the critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices, real estate values and other market-based risks. The primary market risks that we are exposed to are fair value risk, interest rate risk and prepayment risk.
Fair Value Risk
Our IRLCs, mortgage loans held for sale, principal-only stripped MBS, MSRs and MSLs are reported at their fair values. The fair value of these assets fluctuates primarily due to changes in interest rates. The fair value risk we face is primarily attributable to interest rate risk and prepayment risk.
Interest Rate Risk
Interest rate risk is highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control. Changes in interest rates affect both the fair value of, and interest income we earn from, our mortgage-related investments and our derivative financial instruments. This effect is most pronounced with fixed-rate mortgage assets.
In general, rising interest rates negatively affect the fair value of our IRLCs, inventory of mortgage loans held for sale, and principal-only stripped MBS and positively affect the fair value of our MSRs. Changes in interest rates significantly influence the prepayment speeds of the loans underlying our investments in MSRs, which can have a significant effect on their fair values. Changes in interest rate are most prominently reflected in the prepayment speeds of the loans underlying our investments in MSRs and the discount rate used in their valuation.
Our operating results will depend, in part, on differences between the income from our investments and our financing costs. Presently most of our secured debt financing is based on a floating rate of interest calculated on a fixed spread over the relevant index, as determined by the particular financing arrangement.
Prepayment Risk
To the extent that the actual prepayment rate on the mortgage loans underlying our MSRs differs from what we projected when we initially recognized these assets and liabilities when we measure fair value as of the end of each reporting period, the carrying value of these assets and liabilities will be affected. In general, a decrease in the principal balances of the mortgage loans underlying our MSRs or an increase in prepayment expectations will decrease our estimates of the fair value of the MSRs, thereby reducing net servicing income, partially offset by the beneficial effect on net servicing income of a corresponding reduction in the fair value of our MSLs and an increase in the fair value of our principal-only stripped MBS.
Risk Management Activities
We engage in risk management activities primarily in an effort to mitigate the effect of changes in interest rates on the fair value of our assets. To manage this price risk, we use derivative financial instruments acquired with the intention of moderating the risk that changes in market interest rates will result in unfavorable changes in the fair value of our assets, primarily prepayment exposure on our MSR investments as well as IRLCs and our inventory of loans held for sale. Our objective is to minimize our hedging expense and maximize our loss coverage based on a given hedge expense target. We do not use derivative financial instruments other than IRLCs for purposes other than in support of our risk management activities.
Our strategies are reviewed daily within a disciplined risk management framework. We use a variety of interest rate and spread shifts and scenarios and define target limits for market value and liquidity loss in those scenarios. With respect to our IRLCs and inventory of loans held for sale, we use MBS forward sale contracts to lock in the price at which we will sell the mortgage loans or resulting MBS, and further use MBS put options to mitigate the risk of our IRLCs not closing at the rate we expect. With respect to our MSRs, we seek to mitigate mortgage-based loss exposure utilizing MBS forward purchase and sale contracts and principal-only stripped MBS, address exposures to smaller interest rate shifts with Treasury and interest rate swap futures, and use options and swaptions to achieve target coverage levels for larger interest rate shocks.
Fair Value Sensitivities
The following sensitivity analyses are limited in that they were performed at a particular point in time; only contemplate the movements in the indicated variables; do not incorporate changes to other variables; are subject to the accuracy of various models and inputs used; and do not incorporate other factors that would affect our overall financial performance in such scenarios, including operational adjustments made by management to account for changing circumstances. For these reasons, the following estimates should not be viewed as earnings forecasts.
The following tables summarize the estimated change in fair value of MSRs as of June 30, 2025, given several shifts in pricing spreads, prepayment speed and annual per loan cost of servicing:
Change in fair value attributable to shift in:
-20%
-10%
-5%
+5%
+10%
+20%
Prepayment speed
683,239
328,959
161,490
(155,827)
(306,286)
(592,174)
Pricing spread
519,194
252,869
124,812
(121,678)
(240,330)
(468,962)
Annual per-loan cost of servicing
206,097
103,048
51,524
(51,524)
(103,048)
(206,097)
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. However, no matter how well a control system is designed and operated, it can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in our periodic reports.
Our management has conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report as required by paragraph (b) of Rule 13a-15 under the Exchange Act. Based on our evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this Report, to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 1. Legal Proceedings
From time to time, the Company may be involved in various legal and regulatory proceedings, lawsuits and other claims arising in the ordinary course of its business. The amount, if any, of ultimate liability with respect to such matters cannot be determined, but despite the inherent uncertainties of litigation, management believes that the ultimate disposition of any such proceedings and exposure will not have, individually or taken together, a material adverse effect on the financial condition, results of operations, or cash flows of the Company.
Item 1A. Risk Factors
There have been no material changes from the risk factors set forth under Item 1A. For a discussion of our risk factors refer to our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 19, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no sales of unregistered equity securities during the quarter ended June 30, 2025.
Stock Repurchase Program
Total numberof sharespurchased
Average pricepaid per share
Total number of shares purchasedas part of publicly announced plans or program (1)
Approximate dollarvalue of shares thatmay yet bepurchased under the plans or program (1)
April 1, 2025 – April 30, 2025
212,338,815
May 1, 2025 – May 31, 2025
June 1, 2025 – June 30, 2025
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
(c) Trading Plans
As of June 30, 2025, the following directors or Section 16 officers adopted, modified or terminated the following Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K):
On June 2, 2025, Daniel Perotti, Senior Managing Director and Chief Financial Officer, adopted a trading plan to sell up to 35,100 shares of the Company’s common stock and up to 39,121 shares of the Company’s common stock underlying unexercised stock options. The trading plan will expire on August 14, 2026. Mr. Perotti’s trading plan was entered into during an open insider trading window and is intended to satisfy Rule 10b5-1(c) under the Exchange Act and the Company’s policies regarding insider transactions.
During the quarter ended June 30, 2025, none of our directors or executive officers (as defined in Rule 16a-1(f)), other than Mr. Perotti, informed us of the adoption, modification, or termination of any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (in each case, as defined in Item 408(a) of Regulation S-K).
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Item 6. Exhibits
Incorporated by Referencefrom the Below-Listed Form(Each Filed under SEC FileNumber 001-35916 or001-38727)
Exhibit No.
Exhibit Description
Form
Filing Date
2.1
Contribution Agreement and Plan of Merger, dated as of August 2, 2018, by and among PennyMac Financial Services, Inc., New PennyMac Financial Services, Inc., New PennyMac Merger Sub, LLC, Private National Mortgage Acceptance Company, LLC, and the Contributors.
8-K12B
November 1, 2018
3.1
Amended and Restated Certificate of Incorporation of New PennyMac Financial Services, Inc.
3.1.1
Certificate of Amendment to Amended and Restated Certificate of Incorporation of New PennyMac Financial Services, Inc.
3.2
Amended and Restated Bylaws of New PennyMac Financial Services, Inc.
3.2.1
Amendment to Amended and Restated Bylaws of PennyMac Financial Services, Inc. (formerly known as New PennyMac Financial Services, Inc.).
10-Q
November 4, 2019
Amendment to the Amended and Restated Bylaws of PennyMac Financial Services, Inc.
8-K
September 6, 2024
Third Amendment to the Amended and Restated Bylaws of PennyMac Financial Services, Inc.
January 3,
4.1
Indenture, dated as of May 8, 2025, among PennyMac Financial Services, Inc., the guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee, relating to the 6.875% Senior Notes due 2032.
May 8,
4.2
Form of Global Note for 6.875% Senior Notes due 2032 (included in Exhibit 4.1).
10.1
Amendment No. 1 to Fourth Amended and Restated Management Agreement, by and among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC, dated as of June 23, 2025.
*
10.2
Amendment No. 1 to Third Amended and Restated Mortgage Banking Services Agreement, between PennyMac Loan Services, LLC and PennyMac Corp., dated as of June 23, 2025.
31.1
Certification of David A. Spector pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Daniel S. Perotti pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of David A. Spector pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
**
32.2
Certification of Daniel S. Perotti pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024, (ii) the Consolidated Statements of Income for the quarter and six months ended June 30, 2025 and June 30, 2024, (iii) the Consolidated Statements of Changes in Stockholders’ Equity for the quarter and six months ended June 30, 2025 and June 30, 2024, (iv) the Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and June 30, 2024, and (v) the Notes to the Consolidated Financial Statements.
101.INS
XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).
*Filed herewith
† Indicates management contract or compensatory plan or arrangement.
**The certifications attached hereto as Exhibits 32.1 and 32.2 are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: July 29, 2025
By:
/s/ DAVID A. SPECTOR
David A. Spector
Chairman and Chief Executive Officer
(Principal Executive Officer)
/s/ DANIEL S. PEROTTI
Daniel S. Perotti
Senior Managing Director and
Chief Financial Officer
(Principal Financial Officer)
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