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, 2026
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 31, 2026
51,951,572
PENNYMAC FINANCIAL SERVICES, INC.
FORM 10-Q
June 30, 2026
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
80
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
83
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, 2025, filed with the Securities and Exchange Commission (“SEC”) on February 20, 2026 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,
2026
2025
(in thousands, except share amounts)
ASSETS
Cash
$
214,273
301,680
Short-term investments at fair value
534,348
410,037
Principal-only stripped mortgage-backed securities at fair value pledged to creditors
609,103
722,528
Loans held for sale at fair value ($7,686,901 and $8,983,503 pledged to creditors)
7,819,890
9,123,410
Derivative assets with non-affiliates
200,447
185,518
Derivative assets with PennyMac Mortgage Investment Trust
1,234
2,257
Servicing advances, net (valuation allowance of $128,904 and $103,574; $390,814 and $406,825 pledged to creditors)
589,386
589,542
Mortgage servicing rights at fair value ($10,306,189 and $9,367,851 pledged to creditors)
10,586,794
9,598,941
Investment in PennyMac Mortgage Investment Trust at fair value
846
941
Receivable from PennyMac Mortgage Investment Trust
18,929
17,122
Loans eligible for repurchase
8,290,697
7,409,800
Other ($13,976 and $10,393 pledged to creditors)
993,504
1,026,913
Total assets
29,859,451
29,388,689
LIABILITIES
Assets sold under agreements to repurchase
8,435,392
8,794,002
Mortgage loan participation purchase and sale agreements
696,475
696,618
Notes payable secured by mortgage servicing assets
1,425,888
1,326,021
Unsecured senior notes
4,837,096
4,831,742
Derivative liabilities with non-affiliates
34,563
9,559
Derivative liabilities with PennyMac Mortgage Investment Trust
5,239
6,247
Accounts payable and accrued expenses
437,012
645,468
Payable to PennyMac Mortgage Investment Trust
82,517
116,585
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement
24,757
Income taxes payable
1,215,638
1,184,020
Liability for loans eligible for repurchase
Liability for losses under representations and warranties
37,291
34,894
Total liabilities
25,522,565
25,079,713
Commitments and contingencies – Note 18
STOCKHOLDERS’ EQUITY
Common stock—authorized 200,000,000 shares of $0.0001 par value; issued and outstanding, 51,943,691 and 52,061,346 shares, respectively
Additional paid-in capital
52,210
96,870
Retained earnings
4,284,671
4,212,101
Total stockholders' equity
4,336,886
4,308,976
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
266,222
227,584
603,458
443,783
From PennyMac Mortgage Investment Trust
14,097
7,075
21,846
11,913
280,319
234,659
625,304
455,696
Loan origination fees:
69,518
58,589
141,964
104,723
—
502
979
59,091
105,702
Fulfillment fees from PennyMac Mortgage Investment Trust
5,023
5,814
10,760
11,104
Net loan servicing fees:
Owned servicing:
Loan servicing fees
470,775
435,517
940,141
853,204
Other fees
44,518
49,505
86,312
98,557
515,293
485,022
1,026,453
951,761
Change in fair value of mortgage servicing rights and mortgage servicing liabilities
(204,507)
(247,170)
(376,500)
(678,126)
Mortgage servicing rights hedging results
(185,581)
(109,102)
(392,868)
(2,328)
(390,088)
(356,272)
(769,368)
(680,454)
Net loan servicing fees - owned servicing
125,205
128,750
257,085
271,307
Subservicing:
19,640
21,645
39,363
43,374
976
2,203
Total subservicing fees
20,616
41,566
Net loan servicing fees
145,821
150,395
298,651
314,681
Net interest expense:
Interest income
242,452
221,929
450,631
411,800
Interest expense
270,710
239,577
520,432
447,659
Net interest expense
(28,258)
(17,648)
(69,801)
(35,859)
Management fees from PennyMac Mortgage Investment Trust
6,810
6,869
13,572
13,881
Results of real estate acquired in settlement of loans
(1,766)
47
(4,082)
(178)
Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust
(105)
(35)
Repricing of payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement
1,092
Other
19,496
4,516
25,616
9,434
Total net revenues
496,965
444,730
1,041,949
875,633
Expenses
Compensation
222,820
187,541
439,213
369,529
Loan origination
93,855
68,836
173,551
112,932
Technology
44,442
42,257
90,574
82,454
Servicing
42,505
28,286
80,738
50,161
Marketing and advertising
16,881
12,389
37,975
21,821
Professional services
15,891
8,380
30,290
17,417
Occupancy and equipment
10,698
8,379
20,689
16,761
18,348
12,220
32,703
23,920
Total expenses
465,440
368,288
905,733
694,995
Income before provision for income taxes
31,525
76,442
136,216
180,638
Provision for income taxes
9,799
(60,021)
32,168
(32,105)
Net income
21,726
136,463
104,048
212,743
Earnings per share
Basic
0.42
2.64
2.00
4.12
Diluted
0.41
2.54
1.94
3.97
Weighted average shares outstanding
51,932
51,667
52,031
51,587
53,251
53,635
53,549
53,626
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
Quarter ended June 30, 2026
Additional
Total
Number of
Par
paid-in
Retained
stockholders'
shares
value
capital
earnings
equity
(in thousands)
Balance, March 31, 2026
51,923
46,926
4,278,828
4,325,759
Stock-based compensation
20
5,187
Issuance of common stock in settlement of directors' fees
1
97
Common stock dividend ($0.30 per share)
(15,883)
Balance, June 30, 2026
51,944
Quarter ended June 30, 2025
Balance, March 31, 2025
51,659
68,902
3,834,849
3,903,756
12
8,031
58
(15,808)
Balance, June 30, 2025
51,672
76,991
3,955,504
4,032,500
Six months ended June 30, 2026
Balance, December 31, 2025
52,061
441
5,158
193
Common stock dividends ($0.60 per share)
(31,478)
Repurchase of common stock
(560)
(50,011)
Six months ended June 30, 2025
Balance, December 31, 2024
51,377
56,072
3,773,574
3,829,651
294
20,804
115
(30,813)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Cash flow from operating activities
Adjustments to reconcile net income to net cash provided by operating activities:
Net gains on loans held for sale at fair value
(625,304)
(455,696)
376,500
678,126
392,868
2,328
Accrual of unearned discounts on principal-only stripped mortgage-backed securities
(3,527)
(18,034)
Capitalization of interest on loans held for sale
(3,938)
(1,598)
Amortization of debt issuance costs
18,113
17,277
Results of real estate acquired in settlement in loans
4,082
178
Change in fair value of investment in common shares of PennyMac Mortgage Investment Trust
95
(21)
(1,092)
Stock-based compensation expense
6,911
18,602
Provision for servicing advance losses
45,021
11,970
Depreciation and amortization
27,932
28,627
Impairment of capitalized software
1,535
Amortization of operating lease right-of-use assets
8,639
7,036
Purchase of loans held for sale from non-affiliates
(51,722,435)
(2,202,139)
Origination of loans held for sale
(21,020,089)
(11,725,361)
Purchase of loans held for sale from PennyMac Mortgage Investment Trust
(47,382,225)
Purchase of loans from Ginnie Mae securities and early buyout investors
(1,922,199)
(2,195,739)
Sale to non-affiliates and principal payment of loans held for sale
65,991,372
62,243,471
Sale of loans held for sale to PennyMac Mortgage Investment Trust
9,378,680
1,689,692
Repurchase of loans subject to representations and warranties
(56,418)
(45,360)
(Increase) decrease in servicing advances
(142,311)
35,809
Increase in receivable from PennyMac Mortgage Investment Trust
(9,585)
(3,897)
Sale of real estate acquired in settlement of loans
45,235
37,325
Decrease in other assets
152,878
9,541
(Decrease) increase in accounts payable and accrued expenses
(234,755)
48,838
Decrease in operating lease liabilities
(8,058)
(9,563)
Decrease in payable to PennyMac Mortgage Investment Trust
(35,811)
(32,648)
Increase (decrease) in income taxes payable
31,618
(33,548)
Net cash provided by operating activities
801,097
934,642
Statements continue on the next page
(Continued)
Cash flow from investing activities
Increase in short-term investment
(124,311)
(41,709)
Repayment of principal-only stripped mortgage-backed securities
113,827
84,267
Net settlement of derivative financial instruments used for hedging of mortgage servicing rights
(262,863)
(10,913)
Adjustment to sales of mortgage servicing rights to non-affiliates
(6,429)
Sale of mortgage servicing rights to PennyMac Mortgage Investment Trust
10,292
Acquisition of capitalized software
(28,708)
(16,283)
Purchase of furniture, fixtures, equipment and leasehold improvements
(5,625)
(1,676)
Increase in margin deposits
(229,801)
(140,719)
Net cash used in investing activities
(533,618)
(127,033)
Cash flow from financing activities
Sale of assets under agreements to repurchase
75,108,474
63,703,978
Repurchase of assets sold under agreements to repurchase
(75,469,624)
(65,044,887)
Issuance of mortgage loan participation purchase and sale certificates
13,595,723
12,277,214
Repayment of mortgage loan participation purchase and sale certificates
(13,596,335)
(12,072,836)
Issuance of notes payable secured by mortgage servicing assets
475,000
100,000
Repayment of notes payable secured by mortgage servicing assets
(375,000)
(825,000)
Issuance of unsecured senior notes
1,700,000
Repayment of unsecured senior notes
(650,000)
Payment of debt issuance costs
(9,882)
(43,763)
Issuance of common stock by exercise of stock options
4,433
5,965
Payment of withholding taxes relating to stock-based compensation
(6,186)
(3,763)
Payment of dividends to holders of common stock
Net cash used in financing activities
(354,886)
(883,905)
Net decrease in cash
(87,407)
(76,296)
Cash at beginning of period
238,482
Cash at end of period
162,186
Supplemental cash flow information:
Cash paid for interest
517,133
457,513
Cash paid for income taxes, net
550
1,443
Non-cash investing activities:
Mortgage servicing rights received from loan sales
1,368,267
1,464,887
Operating right-of-use assets recognized
32,218
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 an issuer of securities guaranteed by the Government National Mortgage Association (“Ginnie Mae”) and as a seller/servicer of mortgage loans by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”). 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”).
Pending Acquisition
On February 11, 2026, the Company entered into an agreement to acquire the subservicing business of Cenlar Capital Corporation (“Cenlar”) in an all-cash transaction for an upfront purchase price of $172.5 million plus or minus the difference between Cenlar’s shareholders’ equity and $25 million and up to $85 million of contingent consideration payable over three years. Cenlar’s subservicing business consists primarily of subservicing contracts for approximately 100 institutional clients. The transaction is expected to close in the second half of 2026, subject to customary closing conditions, including required regulatory approvals. There can be no assurance that the transaction will close as expected or at all.
Note 2—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 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, 2025.
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, 2026. 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.
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% of total net revenues for the quarters ended June 30, 2026 and 2025, and 9% and 10% for the six months ended June 30, 2026 and 2025, 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 described 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 may sell 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.
Under the mortgage loan purchase agreement, PMT has the right to purchase up to 100% of the non-government insured or guaranteed loans purchased by the Company through its correspondent channel 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 fees as described below. The Company may hold or otherwise sell correspondent loans to other investors, or to PMT at a later date, if PMT chooses not to initially purchase such loans through the correspondent channel.
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 pay PMT cash in an amount equal to:
The “recapture rate” means, during each month, the ratio of (i) the aggregate unpaid principal balance (“UPB”) of all refinance mortgage loans originated in such month, plus the aggregate UPB of all “preserved mortgage loans” originated in such month, to (ii) the aggregate UPB of all mortgage loans from the portfolio that PLS has determined in good faith were refinanced in such month, plus the aggregate UPB of all “preserved mortgage loans” originated 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%.
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
The Company has a mortgage banking services agreement with PMT. Under the mortgage banking services agreement, the Company provides PMT with certain mortgage banking services, including fulfillment and disposition-related services, for which it receives a monthly fulfillment fee. 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. As a result of the new structure, the sourcing fee arrangement described below no longer has any effect for commitments to purchase correspondent loans made on or after July 1, 2025.
Fulfillment Services
Pursuant to the terms of a mortgage banking services agreement, the fulfillment fees shall not exceed the following:
13
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, through June 30, 2025, under the agreement, the Company purchased 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 UPB of the loan, generally based on the average number of calendar days the loan was held by PMT before purchase by the Company.
While the Company purchased 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.
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 on loans sold to PMT (primarily cash)
18,954
8,549
32,510
14,595
Mortgage servicing rights recapture incurred
(4,857)
(1,474)
(10,664)
(2,682)
Sale of loans held for sale to PMT
4,998,391
1,034,884
UPB of loans recaptured
481,158
183,051
1,032,156
342,523
Tax service fees earned from PMT included in Loan origination fees
Fulfillment fee revenue
UPB of loans sold to and fulfilled for PMT subject to fulfillment fees
2,564,511
3,085,840
5,361,055
5,867,562
Sourcing fees included in cost of loans purchased from PMT
2,658
4,673
Unpaid principal balance of loans purchased from PMT:
Government guaranteed or insured
12,966,563
24,158,443
Conventional conforming
13,520,693
22,481,489
26,487,256
46,639,932
14
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 its portfolio of residential mortgage loans in exchange for servicing fees as described below:
Following is a summary of loan servicing fees earned from PMT:
Base fees
17,499
19,151
35,123
38,354
2,141
2,494
4,240
5,020
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.
Management Agreement
The Company has a management agreement with PMT (“Management Agreement”), pursuant to which the Company oversees PMT’s business affairs and for which PFSI collects a base management fee and may collect a performance incentive fee. The Management Agreement provides that:
15
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 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 “shareholders’ equity” less the average value of the Company’s preferred equity determined in accordance with GAAP.
“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.
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 fees
1,820,944
1,836,690
1,824,591
1,866,238
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.
16
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 reasonable and good faith discretion.
The Company received reimbursements from PMT for expenses as follows:
Reimbursement of:
Expenses incurred on PMT's behalf, net
4,257
4,963
10,398
9,564
Overhead incurred by the Company
4,022
982
4,971
1,963
1,599
1,628
3,198
3,257
9,878
7,573
18,567
14,784
Payments and settlements during the period (1)
13,014
32,628
31,344
60,676
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
Sale of mortgage servicing rights to PMT
6,370
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Fair value
Number of shares
75
17
Receivable from and Payable to PMT
Amounts receivable from and payable to PMT are summarized below:
Receivable from PMT:
Management fees
6,856
Servicing fees
6,536
6,669
Allocated expenses and expenses incurred on PMT's behalf
5,583
3,161
Correspondent production activities
436
Payable to PMT:
Amounts advanced by PMT to fund its servicing advances
65,061
97,485
17,456
19,100
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 Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement as of June 30, 2026 and December 31, 2025. The Company did not make payments under the tax receivable agreement during the six months ended June 30, 2026 and 2025.
.
Note 6—Loan Sales and Servicing Activities
Loan Sales
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:
Cash flows:
Sales proceeds
33,380,053
34,656,042
Servicing fees received
441,411
411,531
869,648
807,763
18
The following table summarizes the UPB of the loans sold by the Company in transactions where it maintains continuing involvement:
Unpaid principal balance of loans outstanding
474,869,927
448,035,447
Delinquent loans:
30-89 days
16,250,037
18,000,680
90 days or more:
Not in foreclosure
11,405,544
9,759,483
In foreclosure
1,688,442
1,372,545
Foreclosed
4,261
4,076
Loans in bankruptcy
2,243,332
1,968,188
Loan Servicing
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
13,227,690
Subserviced
11,496,726
488,097,617
499,594,343
223,817,562
Loans held for sale
7,656,960
495,754,577
235,314,288
731,068,865
30 days
12,441,803
2,041,966
14,483,769
60 days
4,312,123
532,843
4,844,966
11,597,418
1,014,276
12,611,694
1,735,539
150,461
1,886,000
6,514
2,334
8,848
30,093,397
3,741,880
33,835,277
2,315,299
405,233
2,720,532
Custodial funds managed by the Company (1)
9,023,091
3,287,288
12,310,379
19
December 31, 2025
13,999,998
Subserviced (1)
35,873,833
462,035,445
497,909,278
226,774,067
8,930,477
470,965,922
262,647,900
733,613,822
13,205,704
3,056,477
16,262,181
5,357,188
962,007
6,319,195
9,944,189
1,734,551
11,678,740
1,414,544
184,343
1,598,887
6,229
3,121
9,350
29,927,854
5,940,499
35,868,353
2,039,686
566,890
2,606,576
Custodial funds managed by the Company (2)
8,429,523
2,758,179
11,187,702
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
83,269,801
83,261,751
Texas
74,356,693
73,599,588
Florida
69,506,106
69,872,447
Virginia
36,773,044
38,282,502
Georgia
30,106,991
30,528,228
All other states
437,056,230
438,069,306
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 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
116,052
82,155
103,574
85,788
Provision for losses
25,059
7,786
Charge-offs, net
(12,207)
(7,916)
(19,691)
(15,733)
Balance at end of period
128,904
82,025
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. The fair value level assigned to an asset or liability is based on the lowest level of input that is significant to its fair value measurement. 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.
21
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
7,222,729
597,161
Derivative assets from non-affiliates:
Interest rate lock commitments
145,095
Forward purchase contracts
10,230
Forward sales contracts
15,879
Swaptions
65,152
Total return swap
136
Put options on interest rate futures purchase contracts
21,453
Total derivative assets before netting
91,397
257,945
Netting
(57,498)
Total derivative assets from non-affiliates
Derivative assets from PennyMac Mortgage Investment Trust:
28
Total before netting
1,262
(28)
Total derivative assets from PennyMac Mortgage Investment Trust
Mortgage servicing rights
Investment in PennyMac Mortgage Investment Trust
556,647
7,923,257
11,330,284
19,752,662
Liabilities:
Derivative liabilities to non-affiliates:
3,887
9,736
46,426
17,175
Total derivative liabilities before netting
73,337
77,224
(42,661)
Total derivative liabilities to non-affiliates
Derivative liabilities to PennyMac Mortgage Investment Trust:
4,179
1,088
Total derivative liabilities to PennyMac Mortgage Investment Trust before netting
5,267
Total derivative liabilities to PennyMac Mortgage Investment Trust
Mortgage servicing liabilities
1,522
74,425
9,588
41,324
22
8,815,699
307,711
131,536
49,499
16,399
22,769
Call options on interest rate futures purchase contracts
2,086
24,855
65,906
222,297
(36,779)
142
2,399
(142)
435,833
9,604,275
10,040,445
20,043,632
4,260
2,845
47,692
50,537
54,797
(45,238)
4,605
1,784
6,389
1,572
52,321
10,437
17,378
23
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 rate lock
Mortgage
Loans held
commitments to
servicing
Assets
for sale
non-affiliates, net (1)
PMT, net (1)
rights
428,957
102,663
3,273
10,149,036
10,683,929
Purchases and issuances, net
1,709,010
203,079
(8,958)
1,903,131
Capitalization of interest and servicing advances
28,449
Sales and repayments, net
(505,947)
(6,370)
(512,317)
Mortgage servicing rights resulting from loan sales
648,681
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk
477
Other factors
51,073
109,573
(490)
(204,553)
(44,397)
51,550
(43,920)
Transfers:
From Level 3 to Level 2
(1,114,273)
To real estate acquired in settlement of loans
(585)
To loans held for sale
(274,107)
3,230
(270,877)
141,208
(2,945)
11,322,218
Changes in fair value recognized during the quarter relating to assets still held at June 30, 2026
28,826
(204,605)
(37,516)
Quarter ended
Liabilities
Mortgage servicing liabilities:
1,568
Changes in fair value included in income
(46)
Changes in fair value recognized during the quarter relating to liabilities still outstanding at June 30, 2026
24
Interest
rate lock
commitments, net (1)
441,621
109,942
8,963,889
9,515,452
1,513,042
172,987
1,686,029
27,315
Sales and repayments
(537,122)
814,538
38,010
4,853
67,548
(247,178)
(174,777)
42,863
(136,767)
(976,806)
(208,324)
510,913
142,153
9,531,249
10,184,315
Changes in fair value recognized during the quarter relating to assets still held at June 30, 2025
25,494
(79,531)
1,651
(8)
1,643
Changes in fair value recognized during the quarter relating to liabilities still outstanding at June 30, 2025
25
127,276
(2,348)
10,031,580
2,656,566
457,416
(14,228)
3,099,754
45,951
(848,551)
(3,864)
(852,415)
341
75,990
128,920
3,446
(376,550)
(168,194)
76,331
(167,853)
(1,639,414)
(1,433)
(572,404)
10,185
(562,219)
Changes in fair value recognized during the period relating to assets still held at June 30, 2026
27,917
(376,466)
(210,286)
Six months ended
(50)
Changes in fair value recognized during the period relating to liabilities still outstanding at June 30, 2026
26
434,053
33,565
8,744,528
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)
1,683
(40)
Changes in fair value recognized during the period relating to liabilities still outstanding at June 30, 2025
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
interest
fair value
fees
expense
(3,086)
8,712
5,626
7,192
293,514
223,741
(207,639)
94,587
(239,986)
(16,245)
46
27
(3,125)
3,527
402
25,326
545,838
508,531
(379,675)
169,690
(652,840)
(144,309)
50
40
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
7,773,957
7,593,268
180,689
9,080,781
8,874,884
205,897
90 days or more delinquent:
33,456
36,385
(2,929)
32,364
35,669
(3,305)
12,477
27,307
(14,830)
10,265
19,924
(9,659)
162,930
192,933
Assets Measured at Fair Value on a Nonrecurring Basis
Following is a summary of assets that were remeasured based on fair value on a nonrecurring basis:
Other assets:
Real estate acquired in settlement of loans
39,290
Investments in closely-held entities
22,806
62,096
8,731
The following table summarizes the gains (losses) recognized on assets when they were remeasured based on fair value on a nonrecurring basis:
(3,255)
(367)
(5,991)
(1,272)
8,506
5,251
2,515
The Company remeasures its real estate acquired in settlement of loans (“REO”) based on fair value when it evaluates the properties for impairment. The Company evaluates its REO for impairment with reference to the property’s fair value less cost to sell. REO may be revalued after acquisition if the Company obtains greater access to the property, holds the property for an extended period, or receives indications that the property’s fair value no longer supported by developing market conditions. Any subsequent change in fair value to a level that is less than or equal to the property’s cost is recognized in Results of real estate acquired in settlement of loans in the Company’s consolidated statements of income.
The Company carries certain of its private investments in closely-held entities at their cost basis because such entities are nonpublic and do not have readily observable fair values for their outstanding equity. Such holdings are carried at cost adjusted for impairment and observed price changes in orderly transactions for identical or similar investments. During the quarter ended June 30, 2026, one of the Company’s investees issued additional private equity that provided an indication of fair value of its shares. During the quarter ended June 30, 2026, a portion of a warrant issued to the Company by that investee also vested. Accordingly, the Company recognized the change in fair value of its investment. Fair value was estimated using an option pricing method based on the implied valuation from the private equity issuance. Key inputs included time-to-liquidity, equity volatility, a risk-free discount rate and a discount for lack of marketability.
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 the 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 and term loans included in Notes payable secured by mortgage servicing assets 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 value and carrying value of these liabilities are summarized below:
Carrying value
Term notes and term loans
1,331,479
1,325,888
1,334,248
4,821,114
5,075,675
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.
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
29
“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, investment 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 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.
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.
30
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
5.6% – 9.3%
Weighted average
6.6%
6.3%
Twelve-month projected housing price index change:
1.9% – 2.3%
0.8% – 1.3%
2.0%
1.0%
Voluntary prepayment/resale speed (2):
6.3% – 20.0%
6.9% – 22.7%
14.9%
18.9%
Total prepayment/resale speed (3):
6.4% – 32.6%
7.0% – 37.5%
18.3%
24.1%
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, its estimate of the fair value of the MSRs it expects to receive in the sale of the loans and its estimate of the probability that the loans will be funded or purchased (the “pull-through rate”).
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.
31
Following is a quantitative summary of key unobservable inputs used in the valuation of IRLCs:
Fair value (in thousands) (1)
138,263
Committed amount (in thousands)
12,053,063
13,474,638
Key inputs (2):
Pull-through rate:
7.9% – 100%
14.1% – 100%
79.0%
81.0%
Mortgage servicing rights fair value expressed as:
Servicing fee multiple:
0.0 – 8.2
1.0 – 8.7
5.2
5.4
Percentage of loan commitment amount:
0.0% – 4.6%
0.3% – 4.6%
2.2%
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—Owned servicing—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. Beginning in the third quarter of 2025, the Company enhanced its discounted cash flow approach to estimate the period-end fair value of its MSRs with the adoption of an Option-Adjusted Spread (“OAS”) model. The OAS model allows the Company to account for the likelihood of interest rates moving along different paths as economic conditions change in its assessment of the fair value of MSRs as opposed to a single assumed rate path.
The key inputs used in the estimation of the fair value of MSRs include the applicable prepayment rate (prepayment speed), OAS or pricing spread (the OAS and pricing spread are components of the 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—Owned servicing— Change in fair value of mortgage servicing rights and mortgage servicing liabilities in the Company’s consolidated statements of income.
32
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
33,080,179
34,697,004
65,557,425
62,361,980
Weighted average servicing fee rate (in basis points)
35
43
38
Annual total prepayment speed (2):
5.9% – 15.0%
6.7% – 15.5%
5.9% – 16.0%
6.6% – 15.5%
7.8%
8.6%
8.0%
8.7%
Equivalent average life (in years):
3.6 – 10.7
3.8 – 10.1
3.8 – 10.2
9.2
8.8
9.1
8.7
Pricing spread (3):
4.8% – 12.6%
4.9% – 12.6%
5.7%
5.5%
Per-loan annual cost of servicing:
$70 – $128
$70 – $127
$103
$100
$101
33
Following is a quantitative summary of key inputs used in the valuation of the Company’s MSRs at period end 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)
$ 10,586,794
$ 9,598,941
Underlying loan characteristics:
$ 488,083,247
$ 462,020,147
Weighted average note interest rate
5.1%
4.7%
39
5.0% – 25.5%
6.0% – 22.7%
8.1%
9.0%
2.5 – 9.7
2.5 – 9.0
8.0
Effect on fair value of (3):
5% adverse change
($118,629)
($168,856)
10% adverse change
($237,122)
($331,359)
20% adverse change
($474,686)
($638,689)
Option-adjusted spread (4):
1.7% – 13.7%
2.6% – 13.2%
4.2%
($75,196)
($95,530)
($150,795)
($189,008)
($305,110)
($370,059)
$108
$106
($56,323)
($50,531)
($112,645)
($101,061)
($225,291)
($202,122)
34
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, OAS, and the per-loan annual cost of servicing the underlying loans. Beginning in the third quarter of 2025, the Company enhanced its period-end discounted cash flow valuation of MSLs by utilizing an OAS model, which utilizes an OAS rather than a pricing spread. Changes in the fair value of MSLs are included in Net servicing fees— Owned servicing—Change in fair value of mortgage servicing rights and mortgage servicing liabilities in the 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)
14,370
15,298
Servicing fee rate (in basis points)
Annual total prepayment speed (2)
13.8%
14.2%
Equivalent average life (in years)
5.6
5.5
Option-adjusted spread (3)
9.3%
9.1%
Per-loan annual cost of servicing
804
853
Real Estate Acquired in Settlement of Loans
REO is categorized as a “Level 3” fair value asset. Fair value of REO is established by using a current estimate of fair value from either the price given in a pending contract of sale, a full appraisal or a broker’s price opinion.
REO fair values are reviewed by PLS staff appraisers when the Company obtains multiple indications of fair value and there is a significant difference between the indications of fair value. PLS staff appraisers will attempt to resolve the difference between the indications of fair value. In circumstances where the staff appraisers are not able to generate adequate data to support a fair value conclusion, the staff appraisers obtain an additional appraisal to establish fair value. Recognized changes in the fair value of REO are included in Results of real estate acquired in settlement of loans in the consolidated statements of income.
Note 8— Principal-Only Stripped Mortgage-Backed Securities
Following is a summary of activity in the Company’s investment in principal-only stripped MBS:
659,235
817,596
825,865
Repayments
(55,758)
(46,529)
(113,827)
(84,267)
Accrual of purchase discounts
6,699
18,034
Valuation adjustments
13,891
43,360
784,958
Following is a summary of the Company’s investment in principal-only stripped MBS:
Principal balance
754,523
868,350
Unearned discount
(147,856)
(151,382)
Cumulative valuation change
2,436
5,560
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
3,600,761
5,140,921
2,323,027
2,972,372
Jumbo
1,092,889
699,309
Non-qualified
206,052
3,097
Closed-end second lien
263,631
156,003
Purchased from Ginnie Mae securities serviced by the Company
298,704
127,920
Repurchased pursuant to representations and warranties
34,826
23,788
Fair value of loans pledged to secure:
6,953,878
8,245,256
733,023
738,247
7,686,901
8,983,503
36
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:
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
amounts (1)
assets
liabilities
amount (1)
Non-affiliates:
Not subject to master netting arrangements:
Subject to master netting arrangements (2):
10,704,164
14,311,234
17,273,500
22,291,811
MBS put options
500,000
11,250,000
12,625,000
7,750,000
5,000,000
39,998
Treasury futures purchase contracts
20,226,500
11,841,400
Treasury futures sale contracts
20,165,000
8,607,100
Total derivatives before netting
PennyMac Mortgage Investment Trust:
1,049,341
1,207,859
125,582
250,638
Deposits (received from) placed with derivative counterparties included in the derivative balances above, net
(14,837)
8,459
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
Citibank, N.A.
13,471
638
JPMorgan Chase Bank, N.A.
9,406
933
Barclays Capital
3,448
3,919
Goldman Sachs
1,836
1,769
Bank of Montreal
1,469
2,676
Morgan Stanley Bank, N.A.
10,673
Santander US Capital Markets LLC
1,723
Others
4,269
6,796
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.
1,660,310
(1,660,310)
3,151,222
(3,151,222)
Bank of America, N.A.
1,618,294
(1,616,385)
1,909
1,121,585
(1,120,457)
1,128
Nomura Corporate Funding Americas
833,017
(833,012)
596,608
(596,608)
Wells Fargo Bank, N.A.
737,949
(731,513)
6,436
650,094
(650,094)
572,548
(572,076)
472
767,903
(767,903)
Royal Bank of Canada
550,025
(550,025)
534,163
(534,163)
471,712
(471,712)
168,428
(168,428)
459,332
(459,332)
229,055
(229,055)
BNP Paribas
452,424
(452,424)
342,500
(342,500)
449,599
(437,266)
12,333
407,678
(407,678)
Mizuho Bank, Ltd.
238,970
(238,970)
149,588
(149,588)
215,499
(215,499)
444,851
(444,851)
203,060
(201,540)
1,520
238,668
(238,668)
8,001
4,171
8,474,627
(8,440,064)
8,810,774
(8,801,215)
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)
32,326
32,211
13,335
108,588
Hedged item:
Interest rate lock commitments and loans held for sale
(59,010)
(28,853)
42,460
(173,899)
Net loan servicing fees–Owned servicing–Mortgage servicing rights hedging results
(182,495)
(116,294)
(389,743)
(27,654)
Note 11—Mortgage Servicing Rights and Mortgage Servicing Liabilities
Mortgage Servicing Rights at Fair Value
The activity in MSRs is as follows:
Additions (deductions):
MSRs resulting from loan sales
Sales adjustments (sales) to:
Non-affiliates
6,428
(10,292)
642,311
1,364,403
Change in fair value due to:
Changes in inputs used in valuation model (1)
118,281
15,950
301,328
(189,539)
Other changes in fair value (2)
(322,834)
(263,128)
(677,878)
(488,627)
Total change in fair value
Unpaid principal balance of underlying loans at end of period
488,083,247
463,132,127
Fair value of mortgage servicing rights pledged to secure Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets
10,306,189
9,367,851
Mortgage Servicing Liabilities at Fair Value
The activity in MSLs is summarized below:
Changes in fair value due to:
(26)
(20)
(29)
(42)
(66)
18,177
41
Contractual servicing fees relating to MSRs and MSLs are recorded in Net loan servicing fees—Owned servicing—Loan servicing fees on the Company’s consolidated statements of income; other fees relating to MSRs and MSLs are recorded in Net loan servicing fees—Owned servicing—Other fees on the Company’s consolidated statements of income. Such amounts are summarized below:
Contractual servicing fees
Other fees:
Late charges
20,047
19,855
40,840
39,906
3,942
4,060
8,148
7,539
494,764
459,432
989,129
900,649
Note 12—Other Assets
Other assets are summarized below:
Margin deposits
368,350
407,978
Capitalized software, net
111,010
108,145
Operating lease right-of-use assets
85,302
61,757
Servicing fees receivable, net
53,399
48,279
Other servicing receivables
61,291
36,296
Prepaid expenses
45,762
50,062
44,937
37,675
Interest receivable
44,636
40,173
Furniture, fixtures, equipment and building improvements, net
19,790
17,789
Margin deposits securing Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets
13,976
10,393
145,051
208,366
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 eight 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
5,692
4,033
10,899
8,035
Short-term leases
125
225
148
Sublease income
(378)
(755)
Net lease expense included in Occupancy and equipment expense
5,439
3,737
10,369
7,428
Other information:
Payments for operating leases
5,404
5,335
10,318
10,412
Operating lease right-of-use assets recognized
31,049
648
Period end weighted averages:
Remaining lease term (in years)
6.1
3.3
Discount rate
5.4%
3.9%
Lease payment obligations attributable to the Company’s operating lease liabilities are summarized below:
Twelve months ended June 30,
2027
10,559
2028
17,051
2029
17,980
2030
19,485
2031
21,449
Thereafter
35,201
Total lease payments
121,725
Less imputed interest
(20,078)
Operating lease liability included in Accounts payable and accrued expenses
101,647
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, 2026.
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 and 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, loans, mortgage servicing assets 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
9,378,290
7,183,987
8,679,015
6,649,802
Weighted average interest rate (1)
5.42%
6.00%
5.36%
5.97%
Total interest expense
132,070
112,685
242,088
206,914
Maximum daily amount outstanding
10,648,718
8,581,781
8,690,936
Carrying value:
8,440,064
8,801,215
Unamortized debt issuance costs
(4,672)
(7,213)
Weighted average interest rate
5.24%
5.18%
Available borrowing capacity (1):
Committed
994,475
1,486,344
Uncommitted
6,480,488
3,367,758
7,474,963
4,854,102
Assets securing repurchase agreements:
Servicing advances (2)
390,814
406,825
Mortgage servicing rights (2)
9,837,309
7,968,105
Margin deposits (2)
44
Maturities
Following is a summary of maturities of outstanding advances under asset repurchase agreements by maturity date:
Remaining maturity at June 30, 2026 (1)
Within 30 days
1,895,397
Over 30 to 90 days
4,439,828
Over 90 to 180 days
837,097
Over 180 days to one year
632,742
Over one year to two years
635,000
Total assets sold under agreements to repurchase
Weighted average maturity (in months)
3.6
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, 2026:
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)
6,587,150
June 1, 2027
Barclays Bank PLC (2)
986,064
January 26, 2027
October 12, 2027
119,545
August 21, 2026
June 7, 2028
103,365
December 16, 2026
December 10, 2027
57,828
July 25, 2026
August 4, 2026
33,415
May 10, 2027
29,039
September 17, 2026
October 22, 2027
28,711
August 5, 2026
May 19, 2028
21,631
September 13, 2026
September 30, 2027
JP Morgan Chase Bank, N.A.
21,034
September 24, 2026
June 25, 2027
17,884
October 4, 2026
October 14, 2026
Goldman Sachs Bank USA
11,993
September 11, 2026
March 15, 2028
9,314
August 24, 2026
August 21, 2027
45
Principal-only stripped MBS
Maturity
2,553
July 28, 2026
14,143
July 6, 2026
13,990
July 23, 2026
11,663
July 15, 2026
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 Ginnie Mae, Freddie Mac, or Fannie 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 issued.
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
292,650
283,853
307,111
272,512
4.95%
5.65%
4.97%
5.64%
3,847
4,168
8,041
7,972
699,793
701,233
697,087
(469)
4.90%
4.94%
Fair value of loans pledged to secure mortgage loan participation purchase and sale agreements
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”) 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 issued VFNs to PLS (which PLS, in turn, sells under agreements to repurchase), 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”).
Beneficial interests in the Agency MSR, servicing advance and margin deposit assets collectively serve as the collateral securing servicing asset facilities that issue the VFNs that are financed as Assets sold under agreements to repurchase and the Term Notes and Term Loans included in Notes payable secured by mortgage servicing assets. Creditors to the Assets sold under agreements to repurchase and the Term Notes and Term Loans have equal priority in claims to the collateral held by the Issuer Trust.
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
125,000
3.20%
March 26, 2029
March 25, 2031
August 14, 2025
300,000
2.45%
August 26, 2030
August 25, 2032
May 27, 2026
2.25%
May 25, 2031
May 25, 2033
Term Loans:
February 28, 2023
480,000
3.00%
February 25, 2028
February 25, 2029
October 25, 2023
October 25, 2028
1,330,000
Freddie Mac MSR Note Payable
The Company has a note payable facility with a lender that is secured by Freddie Mac MSRs. Interest is charged at a rate of SOFR plus a spread that is specified in the agreement. The facility expires on August 21, 2027. The maximum amount that the Company may borrow under the notes payable is $650 million, all of which is committed, and may be reduced by other debt outstanding with the lender.
Notes payable secured by mortgage servicing assets are summarized below:
1,425,330
1,698,132
1,379,033
1,780,415
6.62%
7.81%
6.67%
7.83%
24,566
35,743
46,955
72,321
Unpaid principal balance:
Freddie Mac MSR notes payable
1,430,000
(4,112)
(3,979)
6.43%
6.69%
Assets pledged to secure notes payable (1):
Servicing advances
9,128,904
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.
48
Following is a summary of the Company’s outstanding Unsecured Notes:
Note interest rate
Optional redemption date (1)
(annual)
February 11, 2021
650,000
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
August 7, 2025
6.750%
February 15, 2034
August 15, 2028
4,900,000
4,197,253
3,954,973
6.58%
6.41%
6.34%
83,325
70,157
166,604
130,294
Unamortized debt issuance costs and premiums, net
(62,904)
(68,258)
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)
580,000
250,000
600,000
2,850,000
900,000
1,250,000
6,330,000
49
Note 16—Liability for Losses Under Representations and Warranties
Following is a summary of the Company’s liability for losses under representations and warranties:
35,805
30,774
29,129
Provision for losses:
Resulting from sales of loans
5,807
4,054
10,275
7,601
Resulting from change in estimate
(3,662)
(2,220)
(6,652)
(3,635)
Losses incurred
(659)
(845)
(1,226)
(1,332)
31,763
Unpaid principal balance of loans subject to representations and warranties at end of period
521,743,590
452,998,620
Note 17—Income Taxes
The Company’s effective income tax rates were 31.1% and (78.5)% for the quarters ended June 30, 2026 and 2025, respectively, and 23.6% and (17.8)% for the six months ended June 30, 2026 and 2025, respectively. The increase in the effective income tax rates for the quarter and six months ended June 30, 2026 compared to the same periods ended in 2025 is primarily due to the non-recurrence of a $81.6 million net income tax benefit recognized in the prior year period, due to the repricing of deferred tax liabilities resulting from changes to California’s apportionment rules enacted into law in June 2025 requiring the Company to apportion income to California using a single sales factor instead of a factor equally weighted among 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 $12.1 billion as of June 30, 2026.
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.
Following is a summary of activity under the stock repurchase program:
Cumulative
total (1)
Shares of common stock repurchased
560
34,674
Cost of shares of common stock repurchased
50,011
1,842,948
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
(279,801)
(573,210)
(808,152)
(849,520)
Hedging activities
(307,618)
(105,772)
16,421
(416,471)
(587,419)
(678,982)
(791,731)
(1,265,991)
Non-cash gains:
Provisions for losses relating to representations and warranties:
Pursuant to loan sales
(5,807)
(4,054)
(10,275)
(7,601)
Reductions in liability due to changes in estimate
3,662
2,220
6,652
3,635
Changes in fair values of loans and derivatives held at end of period:
(73,829)
(15,268)
(8,829)
(102,307)
Hedging derivatives
248,608
76,919
26,039
242,572
From PennyMac Mortgage Investment Trust (1)
51
Note 21—Net Interest Expense
Net interest expense is summarized below:
Interest income:
Cash and short-term investments
10,993
10,919
20,562
20,926
8,905
6,948
3,929
18,543
120,822
105,725
234,004
193,119
Placement fees relating to custodial funds
101,258
97,975
191,197
177,770
474
362
939
1,442
Interest expense:
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations
23,364
14,058
49,495
23,832
Interest on mortgage loan impound deposits
2,686
2,263
5,423
4,844
852
503
1,826
1,482
Note 22—Stock-based Compensation
Following is a summary of the stock-based compensation activity:
Grants:
Units:
Performance-based restricted share units ("RSUs")
260
185
Time-based RSUs
243
Stock options
270
187
Grant date fair value:
Performance-based RSUs
23,681
18,788
182
22,178
26,484
10,591
8,138
222
56,450
53,410
Vesting and exercise:
Performance-based RSUs vested
Time-based RSUs vested
Stock options exercised
240
138
4,464
7,518
52
Note 23—Disaggregation of Certain Expense Captions
Following are the disaggregation of certain expense captions:
Expense line
Amortization of capitalized software
12,606
12,813
24,307
24,794
1,218
Other (1)
30,618
29,444
64,732
57,660
Total technology expense
Depreciation
1,816
1,918
3,625
3,833
Operating lease cost
5,314
3,655
10,144
7,280
Short-term lease cost
Other (2)
3,443
2,724
6,695
5,500
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 period. 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
1,319
1,968
1,518
2,039
Weighted average diluted shares of common stock outstanding
Basic earnings per share
Diluted earnings per share
53
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)
118
190
Performance-based RSUs (1)
452
411
390
368
Stock options (2)
496
237
407
191
Total anti-dilutive RSUs and stock options
952
915
749
Weighted average exercise price of anti-dilutive stock options (2)
95.75
98.21
97.28
97.36
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
8,325,354
1,552,585
8,212,718
1,475,719
Ginnie Mae
8,188,521
1,705,190
8,002,181
1,616,380
HUD
2,500
Risk-based capital
%
Liquidity
992,460
705,416
1,095,507
689,782
1,326,846
519,158
1,285,660
512,613
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.
54
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.
The Company conducts its business in two operating and reportable segments, production and servicing:
55
Financial performance and results by segment are as follows:
Production
Reportable segment total
Corporate and other
Consolidated total
Revenues: (1)
245,030
35,289
Loan origination fees
Net interest income (expense):
119,095
123,126
242,221
231
104,821
165,889
14,274
(42,763)
(28,489)
3,239
1,473
16,259
17,732
337,084
136,581
473,665
23,300
Expenses:
145,940
51,634
197,574
25,246
30,089
8,480
38,569
5,873
12,075
133
12,208
2,359
7,382
8,509
6,160
2,567
8,727
1,971
5,503
7,177
12,680
5,668
298,645
114,855
413,500
51,940
Income (loss) before provision for income taxes
38,439
60,165
(28,640)
Segment assets at end of quarter
8,035,988
21,716,901
29,752,889
106,562
Acquisition of:
Capitalized software
1,476
2,103
3,579
9,204
12,783
Furniture, fixtures, equipment and building improvements
283
1,911
1,464
3,375
10,724
1,335
12,059
547
Depreciation and amortization of furniture, fixtures, equipment and building improvements
1,129
405
1,534
282
56
203,961
30,698
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
104,456
51,284
155,740
31,801
27,841
9,505
37,346
4,911
3,545
1,798
5,343
3,037
4,109
2,731
6,840
1,539
10,276
384
10,660
1,729
2,730
5,259
7,989
4,231
221,793
99,247
321,040
47,248
57,788
54,152
111,940
(35,498)
7,161,516
16,994,006
24,155,522
66,382
24,221,904
6,970
2,176
9,146
617
340
957
348
1,305
11,175
12,710
103
652
290
57
556,231
69,073
232,094
218,048
450,142
489
200,409
320,023
31,685
(101,975)
(70,290)
3,364
(718)
22,217
21,499
Total net revenue
744,004
261,667
1,005,671
36,278
282,204
104,171
386,375
52,838
60,143
19,597
79,740
10,834
24,026
647
24,673
13,302
10,672
4,439
15,111
15,179
11,492
5,069
16,561
4,128
9,902
12,629
22,531
10,172
571,990
227,290
799,280
106,453
172,014
34,377
206,391
(70,175)
Segment assets at end of period
8,213
2,387
10,600
18,108
28,708
3,086
789
3,875
1,750
5,625
20,489
2,865
23,354
953
2,122
839
2,961
664
391,106
64,590
Net interest (expense) income:
189,493
221,257
410,750
1,050
170,148
277,511
19,345
(56,254)
(36,909)
263
965
1,228
9,200
10,428
527,520
323,982
851,502
24,131
203,325
104,254
307,579
61,950
52,941
19,890
72,831
9,623
6,679
3,479
10,158
7,259
8,237
5,460
13,697
3,064
18,299
757
19,056
2,765
5,376
9,828
15,204
8,716
407,789
193,829
601,618
93,377
119,731
130,153
249,884
(69,246)
12,379
3,904
16,283
369
1,173
1,676
21,396
3,201
24,597
197
1,944
1,297
3,241
592
Note 27—Subsequent Events
Management has evaluated all events and transactions through the date the Company issued these consolidated financial statements. During this period:
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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 Pennymac 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 macroeconomic trend and U.S. federal government administration actions with respect to trade, tariffs, government cost reduction efforts and foreign military action 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 the mortgage origination market, which is currently projected to increase from $1.9 trillion in 2025 to $2.2 trillion in 2026 according to mortgage industry economists, although recent increases in interest rates may lead to a reduction in origination estimates for 2026.
Recent increases in interest and mortgage rates have limited consumers’ opportunity for refinancing. If mortgage rates remain at recent levels or continue to increase, mortgage production activity and prepayment speeds will decrease from levels observed in late 2025 and early 2026. 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 prior periods; however, market indicators currently suggest that the Federal Reserve could begin increasing short-term interest rates later in 2026. 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 the representations and warranties we provide in our loan sales transactions.
Due to declining mortgage production volumes and improving technology, we implemented cost reduction measures in the third quarter of 2026 to reduce expenses. However, despite our expectation that mortgage production volumes will decline, we expect our volumes of non-qualified mortgage production to increase as we continue to expand our presence in that market. We also expect to sell all of our non-agency correspondent loans and none of our conventional conforming correspondent loans to PMT in the third quarter of 2026.
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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)
354,860
299,564
778,028
572,502
24,542
12,419
35,071
24,309
28,979
83,682
58,098
Annualized return on average stockholders' equity
13.9%
4.8%
10.9%
Dividends declared per share
0.30
0.60
Income before provision for income taxes by reportable segment and corporate and other:
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") (3)
203,787
260,976
454,989
542,357
During the period:
Interest rate lock commitments issued (2)
33,288,987
39,597,584
74,400,098
71,054,404
Unpaid principal balance of loans originated and purchased by PFSI and fulfilled for PMT
34,891,440
37,611,130
71,930,184
66,463,876
At end of period:
Interest rate lock commitments outstanding
10,998,207
Unpaid principal balance of loan servicing portfolio:
Owned:
Mortgage servicing rights and liabilities
463,150,304
6,783,240
469,933,544
Subserviced for:
PMT
228,838,699
822,525
Interim servicing
72,153
229,733,377
699,666,921
Book value per share
83.49
78.04
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, principal-only stripped mortgage-backed securities (“MBS”) valuation-related accretion changes, provision for (reversal of) losses on active loans, stock-based compensation, interest expense on corporate debt or corporate revolving credit facilities and capital lease and certain unusual or non-recurring items.
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:
Provision for (benefit from) income taxes
14,422
14,731
Principal-only stripped MBS valuation-related accretion changes
1,704
2,539
15,518
(902)
(Increase) decrease in fair value of MSRs net of MSLs due to changes in valuation inputs used in valuation models
(118,307)
(15,929)
(301,336)
189,565
Hedging losses associated with MSRs
185,581
109,102
Valuation gains relating to investment in closely held entities
(8,506)
Provision for (reversal of) losses on active loans
8,381
(3,584)
14,372
(6,795)
Stock‑based compensation
Interest expense on corporate debt
Cenlar acquisition related expenses
1,198
4,410
Adjusted EBITDA
63
Income Before Provisions for Income Taxes
For the quarter ended June 30, 2026, income before income taxes decreased $44.9 million compared to the same quarter in 2025. The decrease was primarily due to increases in compensation expense of $35.3 million, origination expense of $25.0 million, servicing expense of $14.2 million and other expense of $16.0 million, partially offset by a $55.3 million increase in loan production revenue due to higher volume in the broker and consumer direct channels and a $12.1 million increase in other income.
For the six months ended June 30, 2026, income before income taxes decreased $44.4 million compared to the same period in 2025. The decrease was primarily due to increases in compensation expense of $69.7 million, origination expense of $60.6 million, servicing expense of $30.6 million and other expense of $25.6 million, partially offset by a $205.5 million increase in loan production revenue due to higher volume in the broker and consumer direct channels and a $10.8 million increase in other income.
Net Gains on Loans Held for Sale at Fair Value
In our production segment, revenues reflect the effects of larger mortgage market volumes and increased share in our broker and consumer direct lending channels during the quarter and six months ended June 30, 2026 compared to the same periods in 2025. During the quarter and six months ended June 30, 2026, we recognized Net gains on loans held for sale at fair value totaling $280.3 million and $625.3 million, respectively, representing an increase of $45.7 million and $169.6 million, respectively, compared to the same periods in 2025.
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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:
207,105
93,862
30,545
248,853
Total non-cash gains
853,641
906,566
1,395,189
1,709,774
Total gains on sale from non-affiliates
Interest rate lock commitments issued (1):
By loan type:
16,788,600
18,209,041
37,002,027
34,324,614
13,185,900
19,340,043
31,267,227
32,913,808
2,178,215
1,383,209
4,374,951
2,602,313
515,289
666,218
620,983
665,291
1,089,675
1,213,669
By production channel:
Correspondent
18,634,455
28,657,935
41,001,782
50,753,289
Broker direct
8,519,394
7,151,449
18,058,576
12,629,818
Consumer direct
6,135,138
3,788,200
15,339,740
7,671,297
Loans held for sale at fair value
6,961,224
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. Therefore, we recognize a substantial portion of our net gains before we fund or purchase the 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 231% and 218% of our gains on sales of loans held for sale at fair value for the quarter and six months ended June 30, 2026, respectively, as compared to 346% and 321% for the same periods in 2025. 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.
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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 $5.8 million and $10.3 million for the quarter and six months ended June 30, 2026, respectively, compared to $4.1 million and $7.6 million for the same periods in 2025. The increases in the provision relating to current loan sales was primarily attributable to a change in the mix of loans sold for the quarter and six months ended June 30, 2026 compared to the same periods in 2025
We also recorded reductions in the liability of $3.7 million and $6.7 million for the quarter and six months ended June 30, 2026, respectively, compared to $2.2 million and $3.6 million for the same periods in 2025. 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 and loss activity:
Indemnification activity:
Loans indemnified at beginning of period
122,706
112,547
120,130
101,867
New indemnifications
8,753
6,367
13,334
18,403
Less indemnified loans sold, repaid or refinanced
10,748
2,881
12,753
4,237
Loans indemnified at end of period
120,711
116,033
Repurchase activity:
Total loans repurchased
31,491
25,418
56,413
45,360
Less:
Loans repurchased by correspondent lenders
18,858
15,585
32,433
31,077
Loans repaid by borrowers or resold
3,723
10,738
8,653
Net loans repurchased with losses chargeable to liability for representations and warranties
8,910
8,881
13,242
5,630
Losses charged to liability for representations and warranties
659
845
1,226
1,332
Unpaid principal balance of loans subject to representations and warranties
Liability for representations and warranties
During the quarter and six months ended June 30, 2026, we repurchased loans totaling $31.5 million and $56.4 million, respectively. We charged losses of $659,000 and $1.2 million against the liability during the quarter and six months ended June 30, 2026, respectively. 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. 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.
Loan Origination Fees
Loan origination fees increased $10.4 million and $36.2 million during the quarter and six months ended June 30, 2026, respectively, compared to the same periods in 2025 primarily due to an increase in production volumes in the broker and consumer direct lending channels.
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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, sale and securitization of loans. The fulfillment fees are calculated based on the number of loans we fulfill for PMT and an increase in the number of loans included in PMT’s non-Agency securitization and loan sales.
Fulfillment fees decreased $791,000 and $344,000 during the quarter and six months ended June 30, 2026, respectively, compared to the same periods in 2025; the decrease was primarily due to a decrease in correspondent loan production volumes for PMT’s account.
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:
Subservicing fees
Effects of MSRs and MSLs net of hedging results
Loan Servicing Fees
Following is a summary of our loan servicing fees:
Other:
23,239
22,959
48,122
46,026
21,279
26,546
38,190
52,531
535,909
506,667
1,068,019
995,135
Average UPB of loans serviced:
MSRs and MSLs
481,276,109
452,077,317
475,375,868
443,765,594
235,785,275
230,362,073
240,225,945
230,771,395
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. Subservicing fees from non-affiliates are based upon rates negotiated between the Company and the owner of the servicing rights at the time a subservicing agreement is entered into. 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 increased during the quarter and six months ended June 30, 2026 compared to the same periods in 2025. The increases were primarily due to growth of our loan servicing portfolio. Other servicing fees decreased primarily due to decreased 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 cash flows of the MSRs and MSLs 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 arising from changes in market inputs by entering into derivatives transactions and holding principal-only stripped MBS.
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
118,307
15,929
301,336
(189,565)
Hedging results
(67,274)
(93,173)
(91,532)
(191,893)
Changes in fair value attributable to realization of cash flows
(322,814)
(263,099)
(677,836)
(488,561)
Total change in fair value of mortgage servicing rights and mortgage servicing liabilities net of hedging results
Average balances:
10,419,488
9,284,824
10,090,215
9,087,827
1,640
1,556
1,654
Changes in fair value of MSRs attributable to changes in fair value inputs increased during the quarter and six months ended June 30, 2026 compared to the same periods in 2025 due to increases in interest rates during the quarter and six months ended June 30, 2026 as compared to flat to decreasing interest rates during the same periods in 2025. 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 offsetting the valuation gains from increasing interest rates in the quarter and six months ended June 30, 2026 and in the same periods in 2025.
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, 2026, realization of cash flows increased compared to the same periods in 2025, primarily due to higher prepayment speeds in the 2026 periods and the growth in our investment in MSRs.
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Following is a summary of our loan servicing portfolio:
Purchased and assumed
11,616,738
24,257,095
Total loans serviced
Delinquencies:
16,753,926
18,562,892
90 days or more
13,339,471
11,364,962
2,574,809
4,018,484
1,167,071
1,922,015
Following is a summary of characteristics of our MSR and MSL servicing portfolio as of June 30, 2026:
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
170,495,110
769
4.9%
316
687
92%
73%
VA
122,588,947
427
4.4%
317
287
734
91%
1.7%
USDA
20,591,849
137
298
150
702
98%
67%
5.2%
Government-sponsored entities:
Freddie Mac
88,016,991
6.0%
330
762
77%
71%
0.7%
Fannie Mae
66,524,921
201
5.3%
763
76%
65%
Closed-end second lien mortgage loans
3,197,832
248
79
745
20%
19%
0.3%
Other (3)
16,681,967
345
775
75%
1,857
318
727
86%
3.6%
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Net Interest Expense
Following is a summary of net interest expense:
Cash and short-term investment
Short-term debt
135,917
116,853
250,129
214,886
Long-term debt
107,891
105,900
213,559
202,615
Net interest expense increased $10.6 million and $33.9 million during the quarter and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increases were primarily due to an increase in interest expense on borrowings attributable to the Company financing a larger investment in MSRs and increased interest shortfalls on repayments of loans serviced for Agency securitizations during 2026, partially offset by an increase in interest income from loans held for sale and placement fees.
Management Fees from PennyMac Mortgage Investment Trust
Management fees decreased $59,000 and $309,000 during the quarter and six months ended June 30, 2026, respectively, compared to the same periods in 2025, 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
142,303
111,866
278,219
220,839
Incentive compensation
48,575
46,079
97,046
84,150
Taxes and benefits
27,478
22,078
57,037
45,938
Stock and unit-based compensation
Head count:
5,633
4,589
5,518
4,524
Period end
5,543
4,779
71
Compensation expenses increased $35.2 million and $69.7 million during the quarter and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increases were primarily due to an increase in head count and increased incentive compensation reflecting higher loan production volume.
Loan Origination
Loan origination expenses increased $25.0 million and $60.6 million for the quarter and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increases were primarily due to higher origination volumes in the broker and consumer direct lending channels.
Technology expenses increased $2.2 million and $8.1 million during the quarter and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increases were primarily due to an increase in software license expenses and a $1.2 million and $1.5 million impairment of capitalized software recorded during the quarter and six months ended June 30, 2026, respectively.
Servicing expenses increased $14.2 million and $30.6 million during the quarter and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increase was primarily due to increases in provision for losses on servicing advances resulting from higher delinquent loan balances reflecting a larger servicing portfolio and a larger proportion of delinquencies of 90 days or greater.
Marketing and advertising expenses increased $4.5 million and $16.2 million during the quarter and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increases were primarily due to additional marketing expenses incurred as an Official Supporter of Team USA, including marketing during the 2026 winter Olympics.
Provision for Income Taxes
Our effective income tax rates were 31.1% and (78.5)% for the quarters ended June 30, 2026 and 2025, respectively, and 23.6% and (17.8)% for the six months ended June 30, 2026 and 2025, respectively. The increase in the effective income tax rates for the quarter and six months ended June 30, 2026 compared to the same periods ended in 2025 is primarily due the non-recurrence of a $81.6 million net income tax benefit recognized in the prior year period, due to the repricing of deferred tax liabilities resulting from changes to California’s apportionment rules enacted into law in June 2025 requiring the Company to apportion income to California using a single sales factor instead of a factor equally weighted among property, payroll and sales.
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Balance Sheet Analysis
Following is a summary of key balance sheet items as of the dates presented:
748,621
711,717
Derivative assets
201,681
187,775
Servicing advances, net
Mortgage servicing rights at fair value
Investments in and advances to affiliates
19,775
18,063
LIABILITIES AND STOCKHOLDERS' EQUITY
9,131,867
9,490,620
6,262,984
6,157,763
15,394,851
15,648,383
621,379
837,510
Stockholders' equity
Leverage ratios:
Total debt / Stockholders' equity
3.5
Total debt / Tangible stockholders' equity (1)
3.7
Total assets increased $470.8 million from $29.4 billion at December 31, 2025 to $29.9 billion at June 30, 2026. The increase was primarily due to an increase of $987.9 million of mortgage servicing rights and an increase of $880.9 million of loans eligible for repurchase, partially offset by a decrease of $1.3 billion in loans held for sale at fair value.
Total liabilities increased $442.9 million from $25.1 billion at December 31, 2025 to $25.5 billion at June 30, 2026. The increase was primarily due to an increase of $880.9 million in liability for loans eligible for repurchase, partially offset by a decrease of $358.8 million in short-term borrowings due to a decrease in loans held for sale. As a result of our decreased inventory financing requirements, our leverage ratios slightly decreased during the period ended June 30, 2026 from December 31, 2025.
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Cash Flows
Our cash flows are summarized below:
Change
Operating
(133,545)
Investing
(406,585)
Financing
529,019
(11,111)
The net decrease in cash of $87.4 million during the six months ended June 30, 2026 is discussed below.
Operating activities
Net cash provided by operating activities totaled $801.1 million during the six months ended June 30, 2026 compared with net cash provided by operating activities of $934.6 million during the same period in 2025. 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:
648,911
382,339
Other operating sources
152,186
552,303
The decrease in cash flows from other operating sources was primarily driven by an increase in servicing advances and the payment of several large accrued liabilities during the six months ended June 30, 2026, compared to the same period in 2025
Investing activities
Net cash used in investing activities during the six months ended June 30, 2026 totaled $533.6 million, primarily due to $262.9 million in net settlement of derivative financial instruments used to hedge our investment in MSRs, a $229.8 million increase in margin deposit and a $124.3 million increase in short-term investment. 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.
Financing activities
Net cash used in financing activities totaled $354.9 million during the six months ended June 30, 2026, primarily due to a decrease of $261.7 million in borrowings and a $50.0 million repurchase of common shares. The decrease in borrowings primarily reflects the decrease in inventory of loans held for sale. 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 during the six months ended June 30, 2026 and 2025.
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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 capital resources are sufficient to meet our current liquidity requirements.
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 the 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 27, 2026, the Company, through its wholly-owned subsidiaries PNMAC, PLS and the Issuer Trust, issued $300 million in Term Notes with a spread of 2.25% due in May 2031 and partially redeemed $300 million Term Notes in with a spread of 3.20% due in March 2029.
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 period end
7,351,846
The differences between the average and maximum daily balances on our repurchase agreements reflect both the effect of increasing loan inventory levels during the quarter ended June 30, 2026 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 each Agency’s requirements as of June 30, 2026.
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, 2026, 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.
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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 described further above in “Liquidity and Capital Resources”. As of June 30, 2026, 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.
77
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
1,589,125
2,500,000
1,500,000
1,080,310
560,255
1,000,000
548,012
700,000
August 4, 2027
437,266
350,000
June 9, 2028
357,106
150,000
June 25, 2028
Barclays Bank PLC
249,332
440,000
246,712
550,000
183,970
Servicing assets sold under agreements to repurchase
2,169,690
285,000
225,000
200,000
October 28, 2026
210,000
January 29, 2027
55,000
October 14, 2027
Mortgage-backed securities sold under agreements to repurchase
214,970
201,540
171,258
27,260
June 9, 2027
Notes payable
GMSR 2023-GTL1 Loans
GMSR 2023-GTL2 Loans
GMSR 2024-GT1 Notes
GMSR 2025-GT1 Notes
GMSR 2026-GT Note
May 27, 2031
Citibank, N.A. FHLMC MSR Facility
Unsecured Notes - 4.25%
Unsecured Notes - 5.75%
Unsecured Notes - 7.875%
Unsecured Notes - 7.125%
Unsecured Notes - 6.875%
Unsecured Notes - 6.75%
78
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, 2026:
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, 2025 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, 2026 as compared to the critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.
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, 2026, given several shifts in prepayment speeds, option adjusted spreads and annual per loan cost of servicing:
Change in fair value attributable to shift in:
-20%
-10%
-5%
+5%
+10%
+20%
Prepayment speed
443,608
231,496
117,709
(118,629)
(237,122)
(474,686)
Option adjusted spread
270,334
145,299
74,158
(75,196)
(150,795)
(305,110)
Annual per-loan cost of servicing
225,291
112,645
56,323
(56,323)
(112,645)
(225,291)
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, 2026 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, 2025, filed with the SEC on February 20, 2026.
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, 2026.
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, 2026 – April 30, 2026
157,600,979
May 1, 2026 – May 31, 2026
June 1, 2026 – June 30, 2026
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
(c) Trading Plans
During the quarter ended June 30, 2026, none of our directors or executive officers (as defined in Rule 16a-1(f)), 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 of Regulation S-K).
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 PennyMac Financial Services, Inc.
8-K
March 18,
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
The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, formatted in Inline XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Changes in Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to the Consolidated Financial Statements.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).
*Filed herewith
**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: August 4, 2026
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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