[10-Q] PennyMac Financial Services, Inc. Quarterly Earnings Report
On 29 Jul 2025, Transcat, Inc. (TRNS) executed a new five-year $150 million secured revolving credit facility with a three-bank syndicate led by M&T Bank, replacing and terminating its prior $80 million line. The facility provides committed revolving loans, swingline loans and letters of credit and matures on 29 Jul 2030, allowing amounts to be re-borrowed subject to availability.
Pricing & fees: Base-rate borrowings carry 0.00%–0.75% margin, and SOFR loans carry 1.00%–1.75% margin—both lower than the superseded facility. Unused commitments are charged a quarterly fee of 0.10%–0.20%. Overdue amounts accrue an additional 300 bp.
Covenants: leverage ratio ≤3.0× EBITDA (with temporary step-up for “Material Permitted Acquisitions”) and fixed-charge coverage ≥1.20×. Customary negative covenants and default triggers apply; all U.S. subsidiaries guarantee the debt.
Use of proceeds: refinancing the old facility, funding acquisitions, working capital and general corporate purposes. The enlarged, lower-cost facility enhances liquidity, extends tenor by five years and adds structural flexibility for strategic growth.
Il 29 luglio 2025, Transcat, Inc. (TRNS) ha stipulato una nuova linea di credito revolving garantita quinquennale da 150 milioni di dollari con un sindacato di tre banche guidato da M&T Bank, sostituendo e cancellando la precedente linea da 80 milioni di dollari. La linea prevede prestiti revolving impegnati, prestiti swingline e lettere di credito e scade il 29 luglio 2030, consentendo riutilizzi dei fondi in base alla disponibilità.
Prezzi e commissioni: i prestiti a tasso base hanno un margine tra 0,00% e 0,75%, mentre i prestiti SOFR hanno un margine tra 1,00% e 1,75% — entrambi inferiori alla linea precedente. Le linee non utilizzate prevedono una commissione trimestrale tra 0,10% e 0,20%. Gli importi scaduti maturano un interesse aggiuntivo di 300 punti base.
Vincoli: rapporto di leva finanziaria ≤3,0× EBITDA (con aumento temporaneo per “Acquisizioni Materiali Consentite”) e copertura delle spese fisse ≥1,20×. Si applicano consueti vincoli negativi e clausole di default; tutte le controllate statunitensi garantiscono il debito.
Utilizzo dei proventi: rifinanziamento della vecchia linea, finanziamento di acquisizioni, capitale circolante e scopi societari generali. La linea ampliata e a costi inferiori migliora la liquidità, estende la durata di cinque anni e offre maggiore flessibilità strutturale per la crescita strategica.
El 29 de julio de 2025, Transcat, Inc. (TRNS) firmó una nueva línea de crédito renovable garantizada por cinco años por 150 millones de dólares con un sindicato bancario de tres entidades liderado por M&T Bank, reemplazando y cancelando su línea anterior de 80 millones. La línea ofrece préstamos renovables comprometidos, préstamos swingline y cartas de crédito, y vence el 29 de julio de 2030, permitiendo volver a utilizar los montos según disponibilidad.
Precios y comisiones: los préstamos a tasa base tienen un margen de 0,00% a 0,75%, y los préstamos SOFR un margen de 1,00% a 1,75%, ambos inferiores a la línea anterior. Las líneas no utilizadas tienen una comisión trimestral de 0,10% a 0,20%. Los montos vencidos generan un interés adicional de 300 puntos básicos.
Convenios: ratio de apalancamiento ≤3,0× EBITDA (con aumento temporal para “Adquisiciones Materiales Permitidas”) y cobertura de cargos fijos ≥1,20×. Se aplican convenios negativos habituales y cláusulas de incumplimiento; todas las subsidiarias estadounidenses garantizan la deuda.
Uso de los fondos: refinanciar la línea antigua, financiar adquisiciones, capital de trabajo y propósitos corporativos generales. La línea ampliada y de menor costo mejora la liquidez, extiende el plazo cinco años y añade flexibilidad estructural para el crecimiento estratégico.
2025년 7월 29일, Transcat, Inc. (TRNS)는 M&T Bank가 주도하는 3개 은행 컨소시엄과 함께 1억 5천만 달러 규모의 5년 만기 담보 회전 신용 시설을 체결하여 기존 8천만 달러 라인을 대체하고 종료했습니다. 이 시설은 약정된 회전 대출, 스윙라인 대출 및 신용장을 제공하며, 2030년 7월 29일에 만기되어 이용 가능 금액 내에서 재차 차입이 가능합니다.
금리 및 수수료: 기준금리 대출의 마진은 0.00%~0.75%, SOFR 대출의 마진은 1.00%~1.75%로, 모두 기존 시설보다 낮습니다. 미사용 약정에는 분기별 0.10%~0.20%의 수수료가 부과됩니다. 연체 금액에는 추가로 300bp가 적용됩니다.
약정 조건: 레버리지 비율은 EBITDA 대비 ≤3.0배(“중요 허용 인수”에 대해 일시적 상향 조정 가능), 고정 비용 커버리지 비율은 ≥1.20배입니다. 일반적인 부정적 약정 및 기본 위반 조건이 적용되며, 모든 미국 자회사가 부채를 보증합니다.
자금 용도: 기존 시설의 재융자, 인수 자금 조달, 운전자본 및 일반 기업 목적. 확대되고 비용이 낮아진 이 시설은 유동성을 강화하고 만기를 5년 연장하며 전략적 성장을 위한 구조적 유연성을 제공합니다.
Le 29 juillet 2025, Transcat, Inc. (TRNS) a conclu une nouvelle facilité de crédit renouvelable garantie de cinq ans de 150 millions de dollars avec un syndicat de trois banques dirigé par M&T Bank, remplaçant et annulant sa ligne précédente de 80 millions. La facilité offre des prêts renouvelables engagés, des prêts swingline et des lettres de crédit, et arrive à échéance le 29 juillet 2030, permettant de réemprunter les montants selon disponibilité.
Tarification et frais : les emprunts au taux de base portent une marge de 0,00 % à 0,75 %, et les prêts SOFR une marge de 1,00 % à 1,75 % — toutes deux inférieures à la facilité remplacée. Les engagements non utilisés sont facturés trimestriellement entre 0,10 % et 0,20 %. Les montants en retard accumulent un taux additionnel de 300 points de base.
Engagements : ratio d'endettement ≤3,0× EBITDA (avec augmentation temporaire pour les « acquisitions matérielles autorisées ») et couverture des charges fixes ≥1,20×. Les clauses négatives habituelles et les déclencheurs de défaut s’appliquent ; toutes les filiales américaines garantissent la dette.
Utilisation des fonds : refinancement de l'ancienne facilité, financement d'acquisitions, fonds de roulement et fins générales de l'entreprise. La facilité élargie et moins coûteuse améliore la liquidité, prolonge la durée de cinq ans et ajoute une flexibilité structurelle pour la croissance stratégique.
Am 29. Juli 2025 hat Transcat, Inc. (TRNS) eine neue fünfjährige gesicherte revolvierende Kreditfazilität über 150 Millionen US-Dollar mit einem von M&T Bank geführten Dreier-Banken-Syndikat abgeschlossen, die vorherige 80-Millionen-Linie ersetzend und beendend. Die Fazilität bietet zugesagte revolvierende Kredite, Swingline-Kredite und Akkreditive und läuft am 29. Juli 2030 ab, wobei Beträge je nach Verfügbarkeit erneut aufgenommen werden können.
Preisgestaltung & Gebühren: Kredite zum Basiszinssatz haben eine Marge von 0,00 %–0,75 %, SOFR-Kredite eine Marge von 1,00 %–1,75 % — beide niedriger als bei der vorherigen Fazilität. Nicht genutzte Zusagen werden vierteljährlich mit 0,10 %–0,20 % berechnet. Überfällige Beträge verursachen einen zusätzlichen Zinssatz von 300 Basispunkten.
Klauseln: Verschuldungsgrad ≤3,0× EBITDA (mit vorübergehendem Anstieg bei „wesentlichen zulässigen Akquisitionen“) und Deckung der Fixkosten ≥1,20×. Übliche Negativklauseln und Auslösebedingungen gelten; alle US-Tochtergesellschaften garantieren die Schulden.
Verwendung der Mittel: Refinanzierung der alten Fazilität, Finanzierung von Akquisitionen, Betriebskapital und allgemeine Unternehmenszwecke. Die erweiterte, kostengünstigere Fazilität verbessert die Liquidität, verlängert die Laufzeit um fünf Jahre und bietet strukturelle Flexibilität für strategisches Wachstum.
- Liquidity doubled: Facility size rises to $150 m from $80 m, strengthening available cash resources.
- Extended tenor: Maturity pushed to 2030, eliminating near-term refinancing risk.
- Lower pricing: Applicable margins cut across most leverage tiers, reducing funding cost.
- Strategic flexibility: Covenant holiday for Material Permitted Acquisitions supports growth strategy.
- Variable-rate exposure: SOFR-based borrowing could raise interest expense if rates increase.
- Higher potential leverage: Larger facility may lead to greater debt load and covenant step-up allowances.
Insights
TL;DR: Bigger, cheaper, longer facility improves liquidity while maintaining conservative covenants; modest rise in leverage risk.
The $150 m revolver nearly doubles capacity and extends maturity to 2030, materially improving TRNS’s liquidity profile. Margin reductions of up to 50 bp versus the prior agreement lower potential interest expense. Covenant headroom remains at 3.0× EBITDA, signalling ongoing balance-sheet discipline, yet management gained flexibility to temporarily exceed this post-acquisition—supportive for M&A strategy but introduces some leverage creep. Overall credit quality is stable to slightly improved.
TL;DR: Facility supports inorganic growth optionality; positive for equity holders if deployed accretively.
The enlarged revolver equips TRNS to pursue bolt-on deals without immediate equity dilution. Lower spreads and modest fees protect margins in a rising-rate environment. However, variable-rate debt ties financing cost to SOFR movements, so future interest expense could rise if rates stay elevated. Equity impact is favourable provided acquisition returns exceed weighted cost of capital.
Il 29 luglio 2025, Transcat, Inc. (TRNS) ha stipulato una nuova linea di credito revolving garantita quinquennale da 150 milioni di dollari con un sindacato di tre banche guidato da M&T Bank, sostituendo e cancellando la precedente linea da 80 milioni di dollari. La linea prevede prestiti revolving impegnati, prestiti swingline e lettere di credito e scade il 29 luglio 2030, consentendo riutilizzi dei fondi in base alla disponibilità.
Prezzi e commissioni: i prestiti a tasso base hanno un margine tra 0,00% e 0,75%, mentre i prestiti SOFR hanno un margine tra 1,00% e 1,75% — entrambi inferiori alla linea precedente. Le linee non utilizzate prevedono una commissione trimestrale tra 0,10% e 0,20%. Gli importi scaduti maturano un interesse aggiuntivo di 300 punti base.
Vincoli: rapporto di leva finanziaria ≤3,0× EBITDA (con aumento temporaneo per “Acquisizioni Materiali Consentite”) e copertura delle spese fisse ≥1,20×. Si applicano consueti vincoli negativi e clausole di default; tutte le controllate statunitensi garantiscono il debito.
Utilizzo dei proventi: rifinanziamento della vecchia linea, finanziamento di acquisizioni, capitale circolante e scopi societari generali. La linea ampliata e a costi inferiori migliora la liquidità, estende la durata di cinque anni e offre maggiore flessibilità strutturale per la crescita strategica.
El 29 de julio de 2025, Transcat, Inc. (TRNS) firmó una nueva línea de crédito renovable garantizada por cinco años por 150 millones de dólares con un sindicato bancario de tres entidades liderado por M&T Bank, reemplazando y cancelando su línea anterior de 80 millones. La línea ofrece préstamos renovables comprometidos, préstamos swingline y cartas de crédito, y vence el 29 de julio de 2030, permitiendo volver a utilizar los montos según disponibilidad.
Precios y comisiones: los préstamos a tasa base tienen un margen de 0,00% a 0,75%, y los préstamos SOFR un margen de 1,00% a 1,75%, ambos inferiores a la línea anterior. Las líneas no utilizadas tienen una comisión trimestral de 0,10% a 0,20%. Los montos vencidos generan un interés adicional de 300 puntos básicos.
Convenios: ratio de apalancamiento ≤3,0× EBITDA (con aumento temporal para “Adquisiciones Materiales Permitidas”) y cobertura de cargos fijos ≥1,20×. Se aplican convenios negativos habituales y cláusulas de incumplimiento; todas las subsidiarias estadounidenses garantizan la deuda.
Uso de los fondos: refinanciar la línea antigua, financiar adquisiciones, capital de trabajo y propósitos corporativos generales. La línea ampliada y de menor costo mejora la liquidez, extiende el plazo cinco años y añade flexibilidad estructural para el crecimiento estratégico.
2025년 7월 29일, Transcat, Inc. (TRNS)는 M&T Bank가 주도하는 3개 은행 컨소시엄과 함께 1억 5천만 달러 규모의 5년 만기 담보 회전 신용 시설을 체결하여 기존 8천만 달러 라인을 대체하고 종료했습니다. 이 시설은 약정된 회전 대출, 스윙라인 대출 및 신용장을 제공하며, 2030년 7월 29일에 만기되어 이용 가능 금액 내에서 재차 차입이 가능합니다.
금리 및 수수료: 기준금리 대출의 마진은 0.00%~0.75%, SOFR 대출의 마진은 1.00%~1.75%로, 모두 기존 시설보다 낮습니다. 미사용 약정에는 분기별 0.10%~0.20%의 수수료가 부과됩니다. 연체 금액에는 추가로 300bp가 적용됩니다.
약정 조건: 레버리지 비율은 EBITDA 대비 ≤3.0배(“중요 허용 인수”에 대해 일시적 상향 조정 가능), 고정 비용 커버리지 비율은 ≥1.20배입니다. 일반적인 부정적 약정 및 기본 위반 조건이 적용되며, 모든 미국 자회사가 부채를 보증합니다.
자금 용도: 기존 시설의 재융자, 인수 자금 조달, 운전자본 및 일반 기업 목적. 확대되고 비용이 낮아진 이 시설은 유동성을 강화하고 만기를 5년 연장하며 전략적 성장을 위한 구조적 유연성을 제공합니다.
Le 29 juillet 2025, Transcat, Inc. (TRNS) a conclu une nouvelle facilité de crédit renouvelable garantie de cinq ans de 150 millions de dollars avec un syndicat de trois banques dirigé par M&T Bank, remplaçant et annulant sa ligne précédente de 80 millions. La facilité offre des prêts renouvelables engagés, des prêts swingline et des lettres de crédit, et arrive à échéance le 29 juillet 2030, permettant de réemprunter les montants selon disponibilité.
Tarification et frais : les emprunts au taux de base portent une marge de 0,00 % à 0,75 %, et les prêts SOFR une marge de 1,00 % à 1,75 % — toutes deux inférieures à la facilité remplacée. Les engagements non utilisés sont facturés trimestriellement entre 0,10 % et 0,20 %. Les montants en retard accumulent un taux additionnel de 300 points de base.
Engagements : ratio d'endettement ≤3,0× EBITDA (avec augmentation temporaire pour les « acquisitions matérielles autorisées ») et couverture des charges fixes ≥1,20×. Les clauses négatives habituelles et les déclencheurs de défaut s’appliquent ; toutes les filiales américaines garantissent la dette.
Utilisation des fonds : refinancement de l'ancienne facilité, financement d'acquisitions, fonds de roulement et fins générales de l'entreprise. La facilité élargie et moins coûteuse améliore la liquidité, prolonge la durée de cinq ans et ajoute une flexibilité structurelle pour la croissance stratégique.
Am 29. Juli 2025 hat Transcat, Inc. (TRNS) eine neue fünfjährige gesicherte revolvierende Kreditfazilität über 150 Millionen US-Dollar mit einem von M&T Bank geführten Dreier-Banken-Syndikat abgeschlossen, die vorherige 80-Millionen-Linie ersetzend und beendend. Die Fazilität bietet zugesagte revolvierende Kredite, Swingline-Kredite und Akkreditive und läuft am 29. Juli 2030 ab, wobei Beträge je nach Verfügbarkeit erneut aufgenommen werden können.
Preisgestaltung & Gebühren: Kredite zum Basiszinssatz haben eine Marge von 0,00 %–0,75 %, SOFR-Kredite eine Marge von 1,00 %–1,75 % — beide niedriger als bei der vorherigen Fazilität. Nicht genutzte Zusagen werden vierteljährlich mit 0,10 %–0,20 % berechnet. Überfällige Beträge verursachen einen zusätzlichen Zinssatz von 300 Basispunkten.
Klauseln: Verschuldungsgrad ≤3,0× EBITDA (mit vorübergehendem Anstieg bei „wesentlichen zulässigen Akquisitionen“) und Deckung der Fixkosten ≥1,20×. Übliche Negativklauseln und Auslösebedingungen gelten; alle US-Tochtergesellschaften garantieren die Schulden.
Verwendung der Mittel: Refinanzierung der alten Fazilität, Finanzierung von Akquisitionen, Betriebskapital und allgemeine Unternehmenszwecke. Die erweiterte, kostengünstigere Fazilität verbessert die Liquidität, verlängert die Laufzeit um fünf Jahre und bietet strukturelle Flexibilität für strategisches Wachstum.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of | | (IRS Employer |
incorporation or organization) | | Identification No.) |
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(Address of principal executive offices) | | (Zip Code) |
(
(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 |
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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.
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).
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.
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| Accelerated filer ☐ | |
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Non-accelerated filer ☐ | | Smaller reporting company |
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| | 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
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
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Class | | Outstanding at July 25, 2025 |
Common Stock, $0.0001 par value | |
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PENNYMAC FINANCIAL SERVICES, INC.
FORM 10-Q
June 30, 2025
TABLE OF CONTENTS
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| Page | |
| Special Note Regarding Forward-Looking Statements | 3 |
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PART I. FINANCIAL INFORMATION | 6 | |
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Item 1. | Financial Statements (Unaudited): | 6 |
| Consolidated Balance Sheets | 6 |
| Consolidated Statements of Income | 7 |
| Consolidated Statements of Changes in Stockholders’ Equity | 8 |
| Consolidated Statements of Cash Flows | 9 |
| Notes to Consolidated Financial Statements | 11 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 60 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 79 |
Item 4. | Controls and Procedures | 81 |
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PART II. OTHER INFORMATION | 82 | |
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Item 1. | Legal Proceedings | 82 |
Item 1A. | Risk Factors | 82 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 82 |
Item 3. | Defaults Upon Senior Securities | 82 |
Item 4. | Mine Safety Disclosures | 82 |
Item 5. | Other Information | 82 |
Item 6. | Exhibits | 84 |
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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:
| ● | projections of our revenues, income, earnings per share, capital structure or other financial items; |
| ● | descriptions of our plans or objectives for future operations, products or services; |
| ● | forecasts of our future economic performance, interest rates, profit margins and prepayment rates; |
| ● | discussions of our expectations regarding various macroeconomic factors, including variability in the economy or the impact of current and future regulations and legislation on our business; and |
| ● | descriptions of assumptions underlying or relating to any of the foregoing expectations regarding the timing of generating any revenues. |
Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. There are several factors, many of which are beyond our control that could cause actual results to differ significantly from management’s expectations. Some of these factors are discussed below.
You should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties discussed elsewhere in this Quarterly Report on Form 10-Q (this “Report”), the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (“SEC”) on February 19, 2025 and in our other SEC filings.
Factors that could cause actual results to differ materially from historical results or those anticipated include, but are not limited to:
| ● | interest rate changes; |
| ● | changes in real estate values, housing prices and housing sales; |
| ● | changes in macroeconomic, consumer and real estate market conditions; |
| ● | the continually changing federal, state and local laws and regulations applicable to the highly regulated industry in which we operate; |
| ● | lawsuits or governmental actions that may result from any noncompliance with the laws and regulations applicable to our business; |
| ● | the mortgage lending and servicing-related regulations promulgated by the Consumer Financial Protection Bureau and its enforcement of these regulations; |
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| ● | the licensing and operational requirements of states and other jurisdictions applicable to our business, to which our bank competitors are not subject; |
| ● | changes to government modification programs; |
| ● | foreclosure delays and changes in foreclosure practices; |
| ● | difficulties inherent in adjusting the size of our operations to reflect changes in business levels; |
| ● | purchase opportunities for mortgage servicing rights; |
| ● | our substantial amount of indebtedness; |
| ● | increases in loan delinquencies, defaults and forbearances; |
| ● | our dependence on U.S. government-sponsored entities and changes in their current roles or their guarantees or guidelines; |
| ● | our ability to manage third party vendors and mortgage investor requirements; |
| ● | our exposure to counterparties that do not fulfill contractual obligations, including their obligation to indemnify us or repurchase defective mortgage loans; |
| ● | our reliance on PennyMac Mortgage Investment Trust (NYSE: PMT) as a significant contributor to our mortgage banking business; |
| ● | maintaining sufficient capital and liquidity and compliance with financial covenants; |
| ● | our obligation to indemnify third-party purchasers or repurchase loans if loans that we originate, acquire, service or assist in the fulfillment of fail to meet certain criteria; |
| ● | our obligation to indemnify PMT if our services fail to meet certain criteria or characteristics or under other circumstances; |
| ● | changes in investment management and incentive fees; |
| ● | conflicts of interest in allocating our services and investment opportunities among us and our advised entity; |
| ● | our ability to mitigate cybersecurity risks, cyber incidents and technology disruptions; |
| ● | the effect of public opinion on our reputation; |
| ● | our exposure to risks of loss and disruptions in operations resulting from severe weather events, man-made or other natural conditions, including climate change and pandemics; |
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| ● | our ability to effectively identify, manage and hedge our credit, interest rate, prepayment, liquidity and climate risks; |
| ● | our initiation or expansion of new business activities or strategies; |
| ● | our ability to detect misconduct and fraud; |
| ● | our ability to pay dividends to our stockholders; and |
| ● | our organizational structure and certain requirements in our charter documents. |
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.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| | | | | | |
|
| June 30, | | December 31, | ||
|
| 2025 |
| 2024 | ||
| | (in thousands, except share amounts) | ||||
ASSETS | | | | | | |
Cash | | $ | | | $ | |
Short-term investment at fair value | | | | | | |
Principal-only stripped mortgage-backed securities at fair value pledged to creditors | | | | | | |
Loans held for sale at fair value (includes $ | | | | | | |
Derivative assets | | | | | | |
Servicing advances, net (includes valuation allowance of $ | | | | | | |
Mortgage servicing rights at fair value (includes $ | | | | | | |
Investment in PennyMac Mortgage Investment Trust at fair value | | | | | | |
Receivable from PennyMac Mortgage Investment Trust | | | | | | |
Loans eligible for repurchase | | | | | | |
Other (includes $ | | | | | | |
Total assets | | $ | | | $ | |
LIABILITIES | | | | | | |
Assets sold under agreements to repurchase | | $ | | | $ | |
Mortgage loan participation purchase and sale agreements | | | | | | |
Notes payable secured by mortgage servicing assets | | | | | | |
Unsecured senior notes | | | | | | |
Derivative liabilities to non-affiliates | | | | | | |
Derivative liability to PMT | | | | | | — |
Mortgage servicing liabilities at fair value | | | | | | |
Accounts payable and accrued expenses | | | | | | |
Payable to PennyMac Mortgage Investment Trust | | | | | | |
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement | | | | | | |
Income taxes payable | | | | | | |
Liability for loans eligible for repurchase | | | | | | |
Liability for losses under representations and warranties | | | | | | |
Total liabilities | | | | | | |
| | | | | | |
Commitments and contingencies – Note 18 | | | | | | |
| | | | | | |
STOCKHOLDERS’ EQUITY | | | | | | |
Common stock—authorized | | | | | | |
Additional paid-in capital | | | | | | |
Retained earnings | | | | | | |
Total stockholders' equity | | | | | | |
Total liabilities and stockholders' equity | | $ | | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
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PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| | | | | | | | | | | | |
| | Quarter ended June 30, |
| Six months ended June 30, | ||||||||
| | 2025 | | 2024 |
| 2025 | | 2024 | ||||
| | (in thousands, except earnings per share) | ||||||||||
Revenues | | | | | | | | | | | | |
Net gains on loans held for sale at fair value: | | | | | | | | | | | | |
From non-affiliates | | $ | | | $ | | | $ | | | $ | |
From PennyMac Mortgage Investment Trust | | | | | | ( | | | | | | ( |
| | | | | | | | | | | | |
Loan origination fees: | | | | | | | | | | | | |
From non-affiliates | | | | | | | | | | | | |
From PennyMac Mortgage Investment Trust | | | | | | | | | | | | |
| | | | | | | | | | | | |
Fulfillment fees from PennyMac Mortgage Investment Trust | | | | | | | | | | | | |
Net loan servicing fees: | | | | | | | | | | | | |
Loan servicing fees: | | | | | | | | | | | | |
From non-affiliates | | | | | | | | | | | | |
From PennyMac Mortgage Investment Trust | | | | | | | | | | | | |
Other | | | | | | | | | | | | |
| | | | | | | | | | | | |
Change in fair value of mortgage servicing rights and mortgage servicing liabilities | | | ( | | | ( | | | ( | | | ( |
Mortgage servicing rights hedging results | | | ( | | | ( | | | ( | | | ( |
| | | ( | | | ( | | | ( | | | ( |
Net loan servicing fees | | | | | | | | | | | | |
Management fees from PennyMac Mortgage Investment Trust | | | | | | | | | | | | |
Net interest expense: | | | | | | | | | | | | |
Interest income | | | | | | | | | | | | |
Interest expense | | | | | | | | | | | | |
Net interest expense | | | ( | | | ( | | | ( | | | ( |
Change in fair value of investment in and dividends received from | | | ( | | | ( | | | | | | ( |
Results of real estate acquired in settlement of loans | | | | | | | | | ( | | | |
Repricing of payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement | | | | | | — | | | | | | — |
Other | | | | | | | | | | | | |
Total net revenues | | | | | | | | | | | | |
Expenses | | | | | | | | | | | | |
Compensation | | | | | | | | | | | | |
Loan origination | | | | | | | | | | | | |
Technology | | | | | | | | | | | | |
Servicing | | | | | | | | | | | | |
Marketing and advertising | | | | | | | | | | | | |
Professional services | | | | | | | | | | | | |
Occupancy and equipment | | | | | | | | | | | | |
Other | | | | | | | | | | | | |
Total expenses | | | | | | | | | | | | |
Income before (benefit from) provision for income taxes | | | | | | | | | | | | |
(Benefit from) provision for income taxes | | | ( | | | | | | ( | | | |
Net income | | $ | | | $ | | | $ | | | $ | |
Earnings per share | | | | | | | | | | | | |
Basic | | $ | | | $ | | | $ | | | $ | |
Diluted | | $ | | | $ | | | $ | | | $ | |
Weighted average shares outstanding | | | | | | | | | | | | |
Basic | | | | | | | | | | | | |
Diluted | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
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PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
| | | | | | | | | | | | | | |
| | Quarter ended June 30, 2025 | ||||||||||||
| | | | | | Additional | | | | Total | ||||
| | Number of | | Par | | paid-in | | Retained | | stockholders' | ||||
|
| shares |
| value |
| capital |
| earnings |
| equity | ||||
| | (in thousands) | ||||||||||||
Balance, March 31, 2025 | | | | $ | | | $ | | | $ | | | $ | |
Net income | | — | | | — | | | — | | | | | | |
Stock-based compensation | | | | | — | | | | | | — | | | |
Issuance of common stock in settlement of directors' fees | | | | | — | | | | | | — | | | |
Common stock dividend ($ | | | | | | | | | | | ( | | | ( |
Balance, June 30, 2025 | | | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | |
| | Quarter ended June 30, 2024 | ||||||||||||
| | | | | | Additional | | | | Total | ||||
| | Number of | | Par | | paid-in | | Retained | | stockholders' | ||||
|
| shares |
| value |
| capital |
| earnings |
| equity | ||||
| | (in thousands) | ||||||||||||
Balance, March 31, 2024 | | | | $ | | | $ | | | $ | | | $ | |
Net income | | — | | | — | | | — | | | | | | |
Stock-based compensation | | | | | — | | | | | | — | | | |
Issuance of common stock in settlement of directors' fees | | | | | — | | | | | | — | | | |
Common stock dividend ($ | | — | | | — | | | — | | | ( | | | ( |
Balance, June 30, 2024 | | | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | |
| | Six months ended June 30, 2025 | ||||||||||||
| | | | | | Additional | | | | Total | ||||
| | Number of | | Par | | paid-in | | Retained | | stockholders' | ||||
|
| shares |
| value |
| capital |
| earnings |
| equity | ||||
| | (in thousands) | ||||||||||||
Balance, December 31, 2024 | | | | $ | | | $ | | | $ | | | $ | |
Net income | | — | | | — | | | — | | | | | | |
Stock-based compensation | | | | | — | | | | | | — | | | |
Issuance of common stock in settlement of directors' fees | | | | | — | | | | | | — | | | |
Common stock dividends ($ | | — | | | — | | | — | | | ( | | | ( |
Balance, June 30, 2025 | | | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | |
| | Six months ended June 30, 2024 | ||||||||||||
| | | | | | Additional | | | | Total | ||||
| | Number of | | Par | | paid-in | | Retained | | stockholders' | ||||
|
| shares |
| value |
| capital |
| earnings |
| equity | ||||
| | (in thousands) | ||||||||||||
Balance, December 31, 2023 | | | | $ | | | $ | | | $ | | | $ | |
Net income | | — | | | — | | | — | | | | | | |
Stock-based compensation | | | | | — | | | | | | — | | | |
Issuance of common stock in settlement of directors' fees | | | | | — | | | | | | — | | | |
Common stock dividends ($ | | — | | | — | | | — | | | ( | | | ( |
Balance, June 30, 2024 | | | | $ | | | $ | | | $ | | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
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PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| | | | | | |
| | Six months ended June 30, | ||||
|
| 2025 |
| 2024 | ||
| | (in thousands) | ||||
Cash flow from operating activities | | | | | | |
Net income | | $ | | | $ | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | | | | |
Net gains on loans held for sale at fair value | | | ( | | | ( |
Change in fair value of mortgage servicing rights and mortgage servicing liabilities | | | | | | |
Mortgage servicing rights hedging results | | | | | | |
Accrual of unearned discounts on principal-only stripped mortgage-backed securities | | | ( | | | ( |
Capitalization of interest on loans held for sale | | | ( | | | ( |
Amortization of debt issuance costs | | | | | | |
Change in fair value of investment in common shares of | | | ( | | | |
Results of real estate acquired in settlement in loans | | | | | | ( |
Repricing of payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement | | | ( | | | — |
Stock-based compensation expense | | | | | | |
Provision for servicing advance losses | | | | | | |
Depreciation and amortization | | | | | | |
Amortization of operating lease right-of-use assets | | | | | | |
Purchase of loans held for sale from PennyMac Mortgage Investment Trust | | | ( | | | ( |
Origination of loans held for sale | | | ( | | | ( |
Purchase of loans held for sale from non-affiliates | | | ( | | | ( |
Purchase of loans from Ginnie Mae securities and early buyout investors | | | ( | | | ( |
Sale to non-affiliates and principal payment of loans held for sale | | | | | | |
Sale of loans held for sale to PennyMac Mortgage Investment Trust | | | | | | — |
Repurchase of loans subject to representations and warranties | | | ( | | | ( |
Decrease in servicing advances | | | | | | |
Increase in receivable from PennyMac Mortgage Investment Trust | | | ( | | | ( |
Sale of real estate acquired in settlement of loans | | | | | | |
Decrease (increase) in other assets | | | | | | ( |
Increase (decrease) in accounts payable and accrued expenses | | | | | | ( |
Decrease in operating lease liabilities | | | ( | | | ( |
Decrease in payable to PennyMac Mortgage Investment Trust | | | ( | | | ( |
(Decrease) increase in income taxes payable | | | ( | | | |
Net cash provided by (used in) operating activities | | | | | | ( |
Statements continue on the next page
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PENNYMAC FINANCIAL SERVICES, INC.
(Continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| | | | | | |
| | Six months ended June 30, | ||||
|
| 2025 |
| 2024 | ||
| | (in thousands) | ||||
Cash flow from investing activities | | | | | | |
Increase in short-term investment | | | ( | | | ( |
Purchase of principal-only stripped mortgage-backed securities | | | — | | | ( |
Repayment of principal-only stripped mortgage-backed securities | | | | | | |
Net settlement of derivative financial instruments used for hedging of mortgage servicing rights | | | ( | | | ( |
Acquisition of capitalized software | | | ( | | | ( |
Purchase of furniture, fixtures, equipment and leasehold improvements | | | ( | | | ( |
Increase in margin deposits | | | ( | | | ( |
Net cash used in investing activities | | | ( | | | ( |
Cash flow from financing activities | | | | | | |
Sale of assets under agreements to repurchase | | | | | | |
Repurchase of assets sold under agreements to repurchase | | | ( | | | ( |
Issuance of mortgage loan participation purchase and sale certificates | | | | | | |
Repayment of mortgage loan participation purchase and sale certificates | | | ( | | | ( |
Issuance of notes payable secured by mortgage servicing assets | | | | | | |
Repayment of notes payable secured by mortgage servicing assets | | | ( | | | ( |
Issuance of unsecured senior notes | | | | | | |
Repayment of unsecured senior notes | | | ( | | | — |
Payment of debt issuance costs | | | ( | | | ( |
Issuance of common stock by exercise of stock options | | | | | | |
Payment of withholding taxes relating to stock-based compensation | | | ( | | | ( |
Payment of dividends to holders of common stock | | | ( | | | ( |
Net cash (used in) provided by financing activities | | | ( | | | |
Net decrease in cash | | | ( | | | ( |
Cash at beginning of period | | | | | | |
Cash at end of period | | $ | | | $ | |
Supplemental cash flow information: | | | | | | |
Cash paid for interest | | $ | | | $ | |
Cash paid for income taxes, net | | $ | | | $ | |
Non-cash investing activities: | | | | | | |
Mortgage servicing rights received from loan sales | | $ | | | $ | |
Operating right-of-use assets recognized | | $ | | | $ | — |
Non-cash financing activities: | | | | | | |
Issuance of common stock in settlement of directors' fees | | $ | | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
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PENNYMAC FINANCIAL SERVICES, INC.
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:
| ● | PennyMac Loan Services, LLC (“PLS”) — a Delaware limited liability company that services portfolios of residential mortgage loans on behalf of non-affiliates and PMT, purchases, originates and sells new prime credit quality residential mortgage loans and engages in other mortgage banking activities for its own account and the account of PMT. PLS has mortgage banking services, loan servicing, mortgage loan purchase and mortgage servicing rights (“MSRs”) recapture agreements with PMT. |
PLS is approved as a seller/servicer of mortgage loans by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and as an issuer of securities guaranteed by the Government National Mortgage Association (“Ginnie Mae”). PLS is a licensed Federal Housing Administration Nonsupervised Title II Lender with the U.S. Department of Housing and Urban Development (“HUD”) and a lender/servicer with the U.S. Department of Veterans Affairs and U.S. Department of Agriculture (each of the above an “Agency” and collectively the “Agencies”).
| ● | PNMAC Capital Management, LLC (“PCM”) — a Delaware limited liability company registered with the Securities and Exchange Commission (“SEC”) as an investment adviser under the Investment Advisers Act of 1940, as amended. PCM has a management agreement with PMT. |
Note 2—Basis of Presentation and Recently Issued Accounting Pronouncements
Basis of Presentation
The accompanying consolidated financial statements have been prepared in compliance with accounting principles generally accepted in the United States (“GAAP”) as codified in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification for interim financial information and with the SEC’s instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these consolidated financial statements and notes do not include all of the information required by GAAP for complete financial statements. This interim consolidated information should be read together with the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
The accompanying consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, income, and cash flows for the interim periods presented, but are not necessarily indicative of income that may be expected for the full year ending December 31, 2025. Intercompany accounts and transactions have been eliminated.
Preparation of financial statements in compliance with GAAP requires the Company to make judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Actual results will likely differ from those estimates.
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Recently Issued Accounting Pronouncement
Income Tax Disclosures
The FASB issued Accounting Standards Update 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), that is intended to enhance the level of detail and decision usefulness of income tax disclosures. ASU 2023-09 requires disclosures of:
| ● | Reconciliation of the expected tax at the applicable statutory federal income tax rate to the reported tax in a tabular format, using both percentages and amounts, broken out into specific categories with certain reconciling items of five percent or greater of the expected tax further broken out by nature and/or jurisdiction; and |
| ● | Income taxes paid, net of refunds received, broken out between federal and state and local income taxes. Payments to individual jurisdictions representing five percent or more of the total income tax payments must also be separately disclosed. |
The disclosures specified by ASU 2023-09 are required in the Company’s annual financial statements beginning with the year ended December 31, 2025, with early adoption permitted. The Company is evaluating the effect of ASU 2023-09 on its future disclosures.
Note 3—Concentration of Risk
A portion of the Company’s activities relate to PMT. Revenues generated from PMT (generally comprised of gains on loans held for sale, loan origination and fulfillment fees, loan servicing fees, management fees, change in fair value of investment in and dividends received from PMT, and expense allocations charged to PMT) totaled
The Company maintains cash and short-term investment balances at financial institutions in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. Should one or more of the financial institutions at which the Company’s deposits are maintained fail, there is no guarantee as to the extent that the Company would recover the funds deposited, whether through FDIC coverage or otherwise, or the timing of any recovery.
Note 4—Variable Interest Entities
The Company entered into securitization transactions in which PLS transfers participation certificates in its Ginnie Mae and Fannie Mae MSRs to variable interest entities (“VIEs”) that issue variable funding notes (“VFNs”) to PLS and term debt backed by the participation certificates. PLS finances the VFNs by selling them under agreements to repurchase. The Company acts as guarantor of the VFNs and term debt. The Company determined that it is the primary beneficiary of the VIEs because as the holder of the VFNs and guarantor of the VFNs and term debt, it holds the variable interests in the VIEs. Therefore, PFSI consolidates the VIEs.
For financial reporting purposes, the MSRs financed by the consolidated VIEs are included in Mortgage servicing rights at fair value, the financing of VFNs is included in Assets sold under agreements to repurchase and the term debt is included in Notes payable secured by mortgage servicing assets on the Company’s consolidated balance sheets. This financing is detailed in Note 14 – Short-Term Debt and Note 15 – Long-Term Debt.
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Note 5—Related Party Transactions
PennyMac Mortgage Investment Trust
Operating Activities
Mortgage Loan Production Activities and MSR Recapture
Mortgage Loan Purchase Agreement
The Company sells newly originated loans to PMT under a mortgage loan purchase agreement. The Company has typically utilized the mortgage loan purchase agreement for the purpose of selling to PMT conforming balance non-government insured or guaranteed loans, as well as prime jumbo residential mortgage loans.
MSR Recapture Agreement
Pursuant to the terms of an MSR recapture agreement by and between the Company and PMT, if the Company refinances (recaptures) mortgage loans for which PMT holds the MSRs, the Company is generally required to transfer and convey to PMT cash in an amount equal to:
| ● |
| ● |
| ● |
| ● | a recapture fee of $ |
The “recapture rate” means, during each month, the ratio of (i) the aggregate unpaid principal balance of all refinance mortgage loans originated in such month, plus the aggregate unpaid principal balance of all “preserved mortgage loans” relating to closed end second lien loans originated in such month, to (ii) the aggregate unpaid principal balance of all mortgage loans from the portfolio that PLS has determined in good faith were refinanced in such month, plus the aggregate unpaid principal balance of all “preserved mortgage loans” in such month. For purposes of such calculation, “preserved mortgage loan” means a mortgage loan in PMT’s portfolio as to which PLS or its affiliates originated a new closed end second lien loan in a subordinate position to such mortgage loan. The company has further agreed to allocate resources sufficient to target a recapture rate of at least
Through 2024, the MSR recapture agreement required the Company to transfer cash to PMT in an amount equal to:
| ● |
| ● |
| ● |
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The “recapture rate” meant, during each month, the ratio of (i) the aggregate unpaid principal balance of all recaptured mortgage loans, to (ii) the aggregate unpaid principal balance of all mortgage loans for which the Company held the MSRs and that were refinanced or otherwise paid off in such month.
The MSR recapture agreement expires on December 31, 2029, subject to automatic renewal for an additional 18-month period unless terminated in accordance with the terms of the agreement.
Mortgage Banking Services Agreement
Fulfillment Fees
The Company provides PMT with certain mortgage banking services, including fulfillment and disposition-related services, for which it receives a monthly fulfillment fee. Pursuant to the terms of a mortgage banking services agreement, the fulfillment fees shall not exceed the following:
| ● | the number of non-Ginnie Mae loan commitments issued during the quarter after applying a pull-through factor of either |
| ● | $ |
| ● | $ |
Through 2024, the mortgage banking services agreement provided for a quarterly fulfillment fee not to exceed the following:
| ● | the number of loan commitments issued multiplied by a pull-through factor of either |
| ● | $ |
| ● | $ |
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Sourcing Fees
PMT does not hold the Ginnie Mae approval required to issue Ginnie Mae mortgage-backed securities (“MBS”) and act as a servicer. Accordingly, under the agreement, the Company purchases mortgage loans underwritten in accordance with the Ginnie Mae MBS Guide “as is” and without recourse of any kind from PMT at PMT’s cost less an administrative fee plus accrued interest and sourcing fee ranging from
While the Company purchases these mortgage loans “as is” and without recourse of any kind from PMT, where the Company has a claim for repurchase, indemnity or otherwise against a correspondent seller, it is entitled, at its sole expense, to pursue any such claim through or in the name of PMT.
In December 2024, the mortgage banking services agreement was renewed and amended to provide for the Company to assume the role of initial correspondent loan purchaser in place of PMT effective July 1, 2025. Under this agreement, PMT retains the right to purchase up to 100% of the non-government insured or guaranteed loans purchased by the Company through its correspondent operations at the Company’s cost plus accrued interest, less any loan administrative fees paid to the Company by the correspondent sellers and subject to quarterly fulfillment fee charges as previously described. The Company may hold or otherwise sell correspondent lending loans to other investors if PMT chooses not to purchase such loans. Accordingly, the sourcing fee arrangement will no longer have any effect for correspondent loans locked on July 1, 2025 and after.
The mortgage banking services agreement expires on December 31, 2029, subject to automatic renewal for an additional 18-month period unless terminated in accordance with the terms of the agreement.
Following is a summary of loan production and MSR recapture activities, between the Company and PMT:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
Net gains (losses) on loans held for sale at fair value: | | | | | | | | | | | | |
Net gains on loans sold to PMT (primarily cash) | | $ | | | $ | — | | $ | | | $ | — |
Mortgage servicing rights recapture incurred | | | ( | | | ( | | | ( | | | ( |
| | $ | | | $ | ( | | $ | | | $ | ( |
Sale of loans held for sale to PMT | | $ | | | $ | — | | $ | | | $ | — |
UPB of loans recaptured | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Tax service fees earned from PMT included in Loan origination fees | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Fulfillment fee revenue |
| $ | |
| $ | |
| $ | | | $ | |
Unpaid principal balance of loans fulfilled for PMT subject to fulfillment fees | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Sourcing fees included in cost of loans purchased from PMT | | $ | | | $ | | | $ | | | $ | |
Unpaid principal balance of loans purchased from PMT: | | | | | | | | | | | | |
Government guaranteed or insured | | $ | | | $ | | | $ | | | $ | |
Conventional conforming | | | | | | | | | | | | |
| | $ | | | $ | | | $ | | | $ | |
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Servicing Agreement
The Company and PMT have entered into a loan servicing agreement (the “Servicing Agreement”), pursuant to which the Company provides subservicing for PMT’s MSRs and servicing for its portfolio of residential mortgage loans.
| ● | The base servicing fees for mortgage loans are calculated through a monthly per-loan dollar amount. The base servicing fee rates are $ |
| ● | To the extent that mortgage loans become delinquent, the Company is entitled to an additional servicing fee per loan ranging from $ |
Following is a summary of loan servicing fees earned from PMT:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
Base fees | | $ | | | $ | | | $ | | | $ | |
Other fees | | | | | | | | | | | | |
| | $ | | | $ | | | $ | | | $ | |
Through 2024, the loan servicing fees were established based on whether the serviced loans were “prime” loans (loans included in PMT’s MSRs, private label securitization portfolios and its inventory of loans held for sale) or “special servicing” loans (loans purchased by PMT with credit deterioration) as follows:
Prime Servicing
| ● | The base servicing fees for prime loans were calculated through a monthly per-loan dollar amount, with the actual dollar amount for each loan based on whether the loan was a fixed-rate or adjustable-rate loan. The base servicing fee rates were $ |
| ● | To the extent that prime loans became delinquent, the Company was entitled to an additional servicing fee per loan ranging from $ |
Special Servicing
| ● | The base servicing fee rates for special servicing loans ranged from $ |
| ● | The Company received activity-based fees for modifications, foreclosures and liquidations that it facilitated with respect to special servicing loans, as well as other market-based refinancing and loan disposition fees. |
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.
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Management Agreement
The Company has a management agreement with PMT (the “Management Agreement”), pursuant to which the Company oversees PMT’s business affairs in conformity with PMT’s investment policies for which the Company collects a base management fee and may collect a performance incentive fee. The Management Agreement provides that:
| ● | The base management fee is calculated and collected quarterly in arrears and is equal to the sum of (i) |
| ● | The performance incentive fee is calculated and collected annually in arrears and is a specified percentage of the amount by which PMT’s “net income,” over the fiscal year and before deducting the incentive fee, exceeds certain levels of return on “common shareholders’ equity.” |
| ● | The performance incentive fee is equal to the sum of: |
| ● |
| ● |
| ● |
For the purpose of determining the amount of the performance incentive fee:
“Net income” is defined as net income or loss attributable to PMT’s common shares of beneficial interest computed in accordance with GAAP adjusted for certain other non-cash charges determined after discussions between the Company and PMT’s independent trustees and approval by a majority of PMT’s independent trustees.
“Common shareholders’ equity” is defined as “shareholder’s equity” less the average GAAP accounting value of the Company’s preferred equity.
“High watermark” is the annual adjustment that reflects the amount by which the “net income” (stated as a percentage of return on “equity”) in that year exceeds or falls short of the lesser of
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
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Table of Contents
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:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
| | 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
Base management fees | | $ | | | $ | | | $ | |
| $ | |
Performance incentive fees | | | — | | | — | | | — | | | — |
| | $ | | | $ | | | $ | | | $ | |
Average PMT's shareholders' equity used to calculate base management and performance incentive fees | | $ | | | $ | | | $ | | | $ | |
Through 2024, under the Management Agreement, both base management and performance incentive fees were paid quarterly and the high watermark was measured on a cumulative basis since inception.
The Management Agreement expires on December 31, 2029, subject to automatic renewal for an additional 18-month period unless terminated in accordance with the terms of the agreement.
Expense Reimbursement
Under the Management Agreement, PMT reimburses the Company for its organizational and operating expenses, including third-party expenses, incurred on PMT’s behalf, it being understood that the Company and its affiliates shall allocate a portion of their personnel’s time to provide certain legal, tax, accounting, internal audit and investor relations services for the direct benefit of PMT. PMT is also required to pay its pro rata portion of the rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the Company and its affiliates required for PMT’s and its subsidiaries’ operations. These expenses are based on the resources the Company dedicates to investment management activities for PMT, as determined by the Company in its sole discretion.
Through 2024, PMT reimbursed the Company for its organizational and operating expenses, including third-party expenses, incurred on PMT’s behalf, it being understood that the Company and its affiliates would allocate a portion of their personnel’s time to provide certain legal, tax and investor relations services for the direct benefit of PMT. With respect to the allocation of the Company’s and its affiliates’ personnel compensation, the Company was reimbursed $
The Company received reimbursements from PMT for expenses as follows:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
Reimbursement of: |
| |
|
| |
|
| |
| | | |
Expenses incurred on PMT's behalf, net | | $ | | | $ | | | $ | | | $ | |
Compensation | | | | | | | | | | | | |
Common overhead incurred by the Company | | | | | | | | | | | | |
| | $ | | | $ | | | $ | | | $ | |
Payments and settlements during the period (1) | | $ | | | $ | | | $ | | | $ | |
| (1) | Payments and settlements include payments for the operating, investing and financing activities itemized in this Note. |
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Table of Contents
Investing Activities
Following is a summary of investing activities between the Company and PMT:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust shares | | $ | ( | | $ | ( | | $ | | | $ | ( |
| | | | | | |
| | June 30, | | December 31, | ||
|
| 2025 |
| 2024 | ||
| | (in thousands) | ||||
Common shares of beneficial interest of PennyMac Mortgage Investment Trust: | | | | | | |
Fair value | | $ | | | $ | |
Number of shares | | | | | | |
Receivable from and Payable to PMT
Amounts receivable from and payable to PMT are summarized below:
| | | | | | |
| | June 30, | | December 31, | ||
|
| 2025 |
| 2024 | ||
| | (in thousands) | ||||
Receivable from PMT: | | | | | | |
Correspondent production fees | | $ | | | $ | |
Servicing fees | | | | | | |
Management fees | | | | | | |
Allocated expenses and expenses incurred on PMT's behalf | | | | | | |
Fulfillment fees | | | — | | | |
| | $ | | | $ | |
Payable to PMT: | | | | | | |
Amounts advanced by PMT to fund its servicing advances | | $ | | | $ | |
Other | | | | | | |
| | $ | | | $ | |
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
.
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Table of Contents
Note 6—Loan Sales and Servicing Activities
The Company originates, purchases and sells loans in the secondary mortgage market without recourse for credit losses. However, the Company maintains continuing involvement with the loans in the form of servicing arrangements and the liability under representations and warranties it makes to purchasers and insurers of the loans.
The following table summarizes cash flows between the Company and transferees as a result of the sale of loans in transactions where the Company maintains continuing involvement with the loans as servicer:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
Cash flows: |
| | |
| | | | | |
| | |
Sales proceeds | | $ | | | $ | | | $ | | | $ | |
Servicing fees received | | $ | | | $ | | | $ | | | $ | |
The Company is contractually responsible for making the payments required to protect the loans’ beneficial interest holders’ interests in the properties collateralizing their loans and may, therefore, be required to advance amounts in excess of insurer or guarantor reimbursement limits. Therefore, the Company provides a valuation allowance on the servicing advances for these amounts to adjust their carrying values to amounts that are expected to ultimately be recovered from the loans’ insurers, guarantors, or beneficial interest holders.
The servicing advance valuation allowance is estimated based on relevant qualitative and quantitative information about past events, including historical collection and loss experience, current conditions, and reasonable and supportable forecasts that affect collectable amounts. The provision for losses on servicing advances is included in Servicing expense in the consolidated statements of income. Servicing advances are written off when they are deemed unrecoverable.
The following is a summary of the allowance for losses on servicing advances:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
| | 2025 | | 2024 |
| 2025 | | 2024 | ||||
| | (in thousands) | ||||||||||
Balance at beginning of period | | $ | | | $ | | | $ | | | $ | |
Provision for losses | | | | | | | | | | | | |
Charge-offs, net | | | ( | | | ( | | | ( | | | ( |
Balance at end of period | | $ | | | $ | | | $ | | | $ | |
The following table summarizes the UPB of the loans sold by the Company in transactions where it maintains continuing involvement with the loans as servicer:
| | | | | | | | | | | | |
| | | | | | | | June 30, | | December 31, | ||
|
| | | | | |
| 2025 |
| 2024 | ||
| | | | | | | | (in thousands) | ||||
Unpaid principal balance of loans outstanding | | | | | | | | $ | | | $ | |
Delinquent loans: | | | | | | | | | | | | |
30-89 days | | | | | | | | $ | | | $ | |
90 days or more: | | | | | | | | | | | | |
Not in foreclosure | | | | | | | | $ | | | $ | |
In foreclosure | | | | | | | | $ | | | $ | |
Foreclosed | | | | | | | | $ | | | $ | |
Loans in bankruptcy | | | | | | | | $ | | | $ | |
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The following tables summarize the Company’s loan servicing portfolio as measured by UPB:
| | | | | | | | | |
| | June 30, 2025 | |||||||
| | Servicing | | | | Total | |||
|
| rights owned |
| Subservicing |
| loans serviced | |||
| | (in thousands) | |||||||
Investor: | | | | | | | | | |
Non-affiliated entities: |
| | | | | | | | |
Originated | | $ | |
| $ | — |
| $ | |
Purchased | | | | | | — | | | |
Subserviced | | | — | | | | | | |
| | | | | | | | | |
PennyMac Mortgage Investment Trust | | | — | | | | | | |
Loans held for sale | | | | | | — | | | |
| | $ | | | $ | | | $ | |
Delinquent loans: | | | | | | | | | |
30 days | | $ | | | $ | | | $ | |
60 days | | | | | | | | | |
90 days or more: | | | | | | | | | |
Not in foreclosure | | | | | | | | | |
In foreclosure | | | | | | | | | |
Foreclosed | | | | | | | | | |
| | $ | | | $ | | | $ | |
Loans in bankruptcy | | $ | | | $ | | | $ | |
Custodial funds managed by the Company (1) | | $ | | | $ | | | $ | |
| (1) | Custodial funds include cash accounts holding funds on behalf of borrowers and investors relating to loans serviced under servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns placement fees on certain of these custodial funds where it owns the MSRs and these fees are included in Interest income in the Company’s consolidated statements of income. |
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| | | | | | | | | |
| | December 31, 2024 | |||||||
| | Servicing | | | | Total | |||
|
| rights owned |
| Subservicing |
| loans serviced | |||
| | (in thousands) | |||||||
Investor: | | | | | | | | | |
Non-affiliated entities: | | | | | | | | | |
Originated | | $ | |
| $ | — |
| $ | |
Purchased | | | | | | — | | | |
Subserviced | | | — | | | | | | |
| | | | | | | | | |
PennyMac Mortgage Investment Trust | | | — | | | | | | |
Loans held for sale | | | | | | — | | | |
| | $ | | | $ | | | $ | |
Delinquent loans: | | | | | | | | | |
30 days | | $ | | | $ | | | $ | |
60 days | | | | | | | | | |
90 days or more: | | | | | | | | | |
Not in foreclosure | | | | | | | | | |
In foreclosure | | | | | | | | | |
Foreclosed | | | | | | | | | |
| | $ | | | $ | | | $ | |
Loans in bankruptcy | | $ | | | $ | | | $ | |
Custodial funds managed by the Company (1) | | $ | | | $ | | | $ | |
| (1) | Custodial funds include cash accounts holding funds on behalf of borrowers and investors relating to loans serviced under servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns placement fees on certain of these custodial funds where it owns the MSRs and these fees are included in Interest income in the Company’s consolidated statements of income. |
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:
| | | | | | | |
| | June 30, | | December 31, | | ||
State |
| 2025 |
| 2024 |
| ||
| | (in thousands) | | ||||
California | | $ | | | $ | |
|
Texas | | | | | | | |
Florida | | | | | | | |
Virginia | | | | | | | |
Georgia | | | | | | | |
All other states | | | | | | | |
| | $ | | | $ | | |
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Table of Contents
Note 7—Fair Value
Most of the Company’s assets and certain of its liabilities are measured at or based on their fair values. The Company groups its assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the observability of the significant inputs used to determine the fair values. These levels are:
| ● | Level 1—Quoted prices in active markets for identical assets or liabilities. |
| ● | Level 2—Prices determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing an asset or liability and are developed based on market data obtained from sources independent of the Company. |
| ● | Level 3— Prices determined using significant unobservable inputs. In situations where observable inputs are unavailable, unobservable inputs may be used. 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 in the circumstances. |
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.
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Table of Contents
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:
| | | | | | | | | | | | |
| | June 30, 2025 | ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
| | (in thousands) | ||||||||||
Assets: | | | | | | | | | | | | |
Short-term investment | | $ | | | $ | — | | $ | — | | $ | |
Principal-only stripped mortgage-backed securities | | | — | | | | | | — | | | |
Loans held for sale | | | — | | | | | | | | | |
Derivative assets: | | | | | | | | | | | | |
Interest rate lock commitments | | | — | | | — | | | | | | |
Forward purchase contracts | | | — | | | | | | — | | | |
Forward sales contracts | | | — | | | | | | — | | | |
Put options on interest rate futures purchase contracts | | | | | | — | | | — | | | |
Call options on interest rate futures purchase contracts | | | | | | — | | | — | | | |
Total derivative assets before netting | | | | | | | | | | | | |
Netting | | | — | | | — | | | — | | | ( |
Total derivative assets | | | | | | | | | | | | |
Mortgage servicing rights | | | — | | | — | | | | | | |
Investment in PennyMac Mortgage Investment Trust | | | | | | — | | | — | | | |
| | $ | | | $ | | | $ | | | $ | |
Liabilities: | | | | | | | | | | | | |
Derivative liabilities: | | | | | | | | | | | | |
Interest rate lock commitments | | $ | — | | $ | — | | $ | | | $ | |
Forward purchase contracts | | | — | | | | | | — | | | |
Forward sales contracts | | | — | | | | | | — | | | |
Call options on interest rate futures sale contracts | | | | | | — | | | — | | | |
Total derivative liabilities before netting | | | | | | | | | | | | |
Netting | | | — | | | — | | | — | | | ( |
Total derivative liabilities | | | | | | | | | | | | |
Derivative liability to PMT | | | — | | | | | | — | | | |
Mortgage servicing liabilities | | | — | | | — | | | | | | |
| | $ | | | $ | | | $ | | | $ | |
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Table of Contents
| | | | | | | | | | | | |
| | December 31, 2024 | ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
| | (in thousands) | ||||||||||
Assets: | | | | | | | | | | | | |
Short-term investment | | $ | | | $ | — | | $ | — | | $ | |
Principal-only stripped mortgage-backed securities | | | — | | | | | | — | | | |
Loans held for sale | | | — | | | | | | | | | |
Derivative assets: | | | | | | | | | | | | |
Interest rate lock commitments | | | — | | | — | | | | | | |
Forward purchase contracts | | | — | | | | | | — | | | |
Forward sales contracts | | | — | | | | | | — | | | |
MBS put options | | | — | | | | | | — | | | |
Put options on interest rate futures purchase contracts | | | | | | — | | | — | | | |
Call options on interest rate futures purchase contracts | | | | | | — | | | — | | | |
Total derivative assets before netting | | | | | | | | | | | | |
Netting | | | — | | | — | | | — | | | ( |
Total derivative assets | | | | | | | | | | | | |
Mortgage servicing rights | | | — | | | — | | | | | | |
Investment in PennyMac Mortgage Investment Trust | | | | | | — | | | — | | | |
| | $ | | | $ | | | $ | | | $ | |
Liabilities: | | | | | | | | | | | | |
Derivative liabilities: | | | | | | | | | | | | |
Interest rate lock commitments | | $ | — | | $ | — | | $ | | | $ | |
Forward purchase contracts | | | — | | | | | | — | | | |
Forward sales contracts | | | — | | | | | | — | | | |
Total derivative liabilities before netting | | | — | | | | | | | | | |
Netting | | | — | | | — | | | — | | | ( |
Total derivative liabilities | | | — | | | | | | | | | |
Mortgage servicing liabilities | | | — | | | — | | | | | | |
| | $ | — | | $ | | | $ | | | $ | |
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Table of Contents
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:
| | | | | | | | | | | | |
| | Quarter ended June 30, 2025 | ||||||||||
| | | | Interest | | Mortgage | | | | |||
| | Loans held | | rate lock | | servicing | | | | |||
Assets |
| for sale |
| commitments, net (1) |
| rights |
| Total | ||||
| | (in thousands) | ||||||||||
Balance, March 31, 2025 | | $ | | | $ | | | $ | | | $ | |
Purchases and issuances, net | | | | | | | | | — | | | |
Capitalization of interest and servicing advances | | | | | | — | | | — | | | |
Sales and repayments | | | ( | | | — | | | — | | | ( |
Mortgage servicing rights resulting from loan sales | | | — | | | — | | | | | | |
Changes in fair value included in income arising from: | | | | | | | | | | | | |
Changes in instrument-specific credit risk | | | | | | — | | | — | | | |
Other factors | | | | | | | | | ( | | | ( |
| | | | | | | | | ( | | | ( |
Transfers: | | | | | | | | | | | | |
From Level 3 to Level 2 | | | ( | | | — | | | — | | | ( |
To loans held for sale | | | — | | | ( | | | — | | | ( |
Balance, June 30, 2025 | | $ | | | $ | | | $ | | | $ | |
Changes in fair value recognized during the quarter relating to assets still held at June 30, 2025 | | $ | | | $ | | | $ | ( | | $ | ( |
| (1) | For the purpose of this table, the IRLC asset and liability positions are shown net. |
| | | |
| | Quarter ended | |
Liabilities |
| June 30, 2025 | |
| | (in thousands) | |
Mortgage servicing liabilities: | | | |
Balance, March 31, 2025 | | $ | |
Changes in fair value included in income | | | ( |
Balance, June 30, 2025 | | $ | |
Changes in fair value recognized during the quarter relating to liabilities still outstanding at June 30, 2025 | | $ | ( |
| | | |
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Table of Contents
| | | | | | | | | | | | |
| | Quarter ended June 30, 2024 | ||||||||||
| | | | Interest | | Mortgage | | | | |||
| | Loans held | | rate lock | | servicing | | | | |||
Assets | | for sale |
| commitments, net (1) |
| rights |
| | Total | |||
|
| (in thousands) | ||||||||||
Balance, March 31, 2024 | | $ | | | $ | | | $ | | | $ | |
Purchases and issuances, net | | | | | | | | | — | | | |
Capitalization of interest and servicing advances | | | | | | — | | | — | | | |
Sales and repayments | | | ( | | | — | | | — | | | ( |
Mortgage servicing rights resulting from loan sales | | | — | | | — | | | | | | |
Changes in fair value included in income arising from: | | | | | | | | | | | | |
Changes in instrument-specific credit risk | | | | | | — | | | — | | | |
Other factors | | | ( | | | | | | ( | | | ( |
| | | | | | | | | ( | | | ( |
Transfers from Level 3 to Level 2 | | | ( | | | — | | | — | | | ( |
Transfers to loans held for sale | | | — | | | ( | | | — | | | ( |
Balance, June 30, 2024 | | $ | | | $ | | | $ | | | $ | |
Changes in fair value recognized during the quarter relating to assets still held at June 30, 2024 | | $ | | | $ | | | $ | ( | | $ | ( |
| (1) | For the purpose of this table, the IRLC asset and liability positions are shown net. |
| | | |
Liabilities | | Quarter ended June 30, 2024 | |
| | (in thousands) | |
Mortgage servicing liabilities: | | | |
Balance, March 31, 2024 | | $ | |
Changes in fair value included in income | | | ( |
Balance, June 30, 2024 | | $ | |
Changes in fair value recognized during the quarter relating to liabilities still outstanding at June 30, 2024 | | $ | ( |
| | | | | | | | | | | | |
| | Six months ended June 30, 2025 | ||||||||||
| | | | Interest | | Mortgage | | | | |||
| | Loans held | | rate lock | | servicing | | | | |||
Assets | | for sale |
| commitments, net (1) |
| rights |
| Total | ||||
|
| (in thousands) | ||||||||||
Balance, December 31, 2024 | | $ | | | $ | | | $ | | | $ | |
Purchases and issuances, net | | | | | | | | | — | | | |
Capitalization of interest and servicing advances | | | | | | — | | | — | | | |
Sales and repayments | | | ( | | | — | | | — | | | ( |
Mortgage servicing rights resulting from loan sales | | | — | | | — | | | | | | |
Changes in fair value included in income arising from: | | | | | | | | | | | | |
Changes in instrument-specific credit risk | | | | | | — | | | — | | | |
Other factors | | | | | | | | | ( | | | ( |
| | | | | | | | | ( | | | ( |
Transfers: | | | | | | | | | | | | |
From Level 3 to Level 2 | | | ( | | | — | | | — | | | ( |
To loans held for sale | | | — | | | ( | | | — | | | ( |
Balance, June 30, 2025 | | $ | | | $ | | | $ | | | $ | |
Changes in fair value recognized during the period relating to assets still held at June 30, 2025 | | $ | | | $ | | | $ | ( | | $ | ( |
| (1) | For the purpose of this table, the IRLC asset and liability positions are shown net. |
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Table of Contents
| | | |
| | Six months ended | |
Liabilities | | June 30, 2025 | |
| | (in thousands) | |
Mortgage servicing liabilities: | | | |
Balance, December 31, 2024 |
| $ | |
Changes in fair value included in income | | | ( |
Balance, June 30, 2025 | | $ | |
Changes in fair value recognized during the period relating to liabilities still outstanding at June 30, 2025 | | $ | ( |
| | | | | | | | | | | | |
| | Six months ended June 30, 2024 | ||||||||||
| | | | Interest | | Mortgage | | | ||||
| | Loans held | | rate lock | | servicing | | | ||||
Assets |
| for sale |
| commitments, net (1) |
| rights |
| Total | ||||
| | (in thousands) | ||||||||||
Balance, December 31, 2023 | | $ | | | $ | | | $ | | | $ | |
Purchases and issuances, net | | | | | | | | | — | | | |
Capitalization of interest and servicing advances | | | | | | — | | | — | | | |
Sales and repayments | | | ( | | | — | | | — | | | ( |
Mortgage servicing rights resulting from loan sales | | | — | | | — | | | | | | |
Changes in fair value included in income arising from: | | | | | | | | | | | | |
Changes in instrument-specific credit risk | | | | | | — | | | — | | | |
Other factors | | | ( | | | | | | ( | | | ( |
| | | | | | | | | ( | | | ( |
Transfers: | | | | | | | | | | | | |
From Level 3 to Level 2 | | | ( | | | — | | | — | | | ( |
To loans held for sale | | | — | | | ( | | | — | | | ( |
Balance, June 30, 2024 | | $ | | | $ | | | $ | | | $ | |
Changes in fair value recognized during the period relating to assets still held at June 30, 2024 | | $ | | | $ | | | $ | ( | | $ | ( |
| (1) | For purpose of this table, the IRLC asset and liability positions are shown net. |
| | | |
Liabilities | | Six months ended June 30, 2024 | |
| | (in thousands) | |
Mortgage servicing liabilities: | | | |
Balance, December 31, 2023 | | $ | |
Changes in fair value included in income | | | ( |
Balance, June 30, 2024 | | $ | |
Changes in fair value recognized during the period relating to liabilities still outstanding at June 30, 2024 | | $ | ( |
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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:
| | | | | | | | | | | | | | | | | | |
| | Quarter ended June 30, | ||||||||||||||||
| | 2025 | | 2024 | ||||||||||||||
| | Net gains on | | Net | | | | Net gains on | | Net | | | ||||||
| | loans held | | loan | | | | loans held | | loan | | | ||||||
| | for sale at | | servicing | | | | for sale at | | servicing | | | ||||||
|
| fair value |
| fees |
| Total |
| fair value |
| fees |
| Total | ||||||
| | (in thousands) | ||||||||||||||||
Assets: | | | | | | | | | | | | | | | | | | |
Principal-only stripped mortgage-backed securities | | $ | — | | $ | | | $ | | | $ | — | | $ | ( | | $ | ( |
Loans held for sale | | | | | | — | | | | | | | | | — | | | |
Mortgage servicing rights | | | — | | | ( | | | ( | | | — | | | ( | | | ( |
| | $ | | | $ | ( | | $ | ( | | $ | | | $ | ( | | $ | |
Liabilities: | | | | | | | | | | | | | | | | | | |
Mortgage servicing liabilities | | $ | — | | $ | | | $ | | | $ | — | | $ | | | $ | |
| | | | | | | | | | | | | | | | | | |
| | Six months ended June 30, | ||||||||||||||||
| | 2025 | | 2024 | ||||||||||||||
| | Net gains on | | Net | | | | | Net gains on | | Net | | | | ||||
| | loans held | | loan | | | | | loans held | | loan | | | | ||||
| | for sale at | | servicing | | | | | for sale at | | servicing | | | | ||||
| | fair value |
| fees |
| Total |
| fair value |
| fees |
| Total | ||||||
| | (in thousands) | ||||||||||||||||
Assets: | | | | | | | | | | | | | | | | | | |
Principal-only stripped mortgage-backed securities | | $ | — | | $ | | | $ | | | $ | — | | $ | ( | | $ | ( |
Loans held for sale | | | | | | — | | | | | | | | | — | | | |
Mortgage servicing rights | | | — | | | ( | | | ( | | | — | | | ( | | | ( |
| | $ | | | $ | ( | | $ | ( | | $ | | | $ | ( | | $ | |
Liabilities: | | | | | | | | | | | | | | | | | | |
Mortgage servicing liabilities | | $ | — | | $ | | | $ | | | $ | — | | $ | | | $ | |
Following are the fair value and related principal amounts due upon maturity of loans held for sale:
| | | | | | | | | | | | | | | | | | |
| | June 30, 2025 | | December 31, 2024 | ||||||||||||||
| | | | Principal | | | | | | Principal | | | ||||||
| | | | amount | | | | | | amount | | | ||||||
| | Fair | | due upon | | | | Fair | | due upon | | | ||||||
Loans held for sale |
| value |
| maturity |
| Difference |
| value |
| maturity |
| Difference | ||||||
| | (in thousands) | ||||||||||||||||
Current through 89 days delinquent | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
90 days or more delinquent: | | | | | | | | | | | | | | | | | | |
Not in foreclosure | | | | | | | | | ( | | | | | | | | | ( |
In foreclosure | | | | | | | | | ( | | | | | | | | | ( |
| | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | | | | | |
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Assets Measured at Fair Value on a Nonrecurring Basis
Following is a summary of assets that were measured at fair value on a nonrecurring basis:
| | | | | | | | | | | | |
Real estate acquired in settlement of loans | | Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
|
| (in thousands) | ||||||||||
June 30, 2025 | | $ | — | | $ | — | | $ | | | $ | |
December 31, 2024 | | $ | — | | $ | — | | $ | | | $ | |
The following table summarizes the losses recognized on assets when they were remeasured at fair value on a nonrecurring basis:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
Real estate acquired in settlement of loans | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
Fair Value of Financial Instruments Carried at Amortized Cost
The Company’s Assets sold under agreements to repurchase, Mortgage loan participation purchase and sale agreements, Notes payable secured by mortgage servicing assets and Unsecured senior notes are carried at amortized cost.
These liabilities are classified as “Level 3” fair value items due to the Company’s reliance on unobservable inputs to estimate their fair values. The Company has concluded that the fair values of these liabilities other than the term notes and term loans included in Notes payable secured by mortgage servicing assets and the Unsecured senior notes approximate their carrying values due to their short terms and/or variable interest rates.
The Company estimates the fair value of the term notes, term loans and the Unsecured senior notes using indications of fair value provided by non-affiliate brokers, pricing services and internal estimates of fair value. The fair values and carrying values of these liabilities are summarized below:
| | | | | | | | | | | | |
|
| June 30, 2025 |
| December 31, 2024 | ||||||||
| | Fair value | | Carrying value | | Fair value | | Carrying value | ||||
| | (in thousands) | ||||||||||
Term notes and term loans | | $ | | | $ | | | $ | | | $ | |
Unsecured senior notes | | $ | | | $ | | | $ | | | $ | |
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.
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With respect to “Level 3” valuations other than IRLCs, the capital markets valuation staff reports to the Company’s senior management valuation subcommittee, which oversees the valuations. The capital markets valuation staff monitors the models used for valuation of the Company’s “Level 3” fair value assets and liabilities, including the models’ performance versus actual results, and reports those results as well as changes in the valuation of the non-IRLC “Level 3” fair value assets and liabilities, including major factors affecting the valuations and any changes in model methods and inputs, to the Company’s senior management valuation subcommittee. The Company’s senior management valuation subcommittee includes the Company’s chief financial, credit, and capital markets officers as well as other senior members of the Company’s finance, risk management and capital markets staffs.
To assess the reasonableness of its valuations, the capital markets valuation staff presents an analysis of the effect on the valuations of changes to the significant inputs to the models and, for MSRs, comparisons of its estimates of fair value and of key inputs to those procured from non-affiliate brokers and published surveys.
The fair value of the Company’s IRLCs is developed by its capital markets risk management staff and is reviewed by its capital markets operations staff.
Valuation Techniques and Inputs
Following is a description of the techniques and inputs used in estimating the fair values of “Level 2” and “Level 3” fair value assets and liabilities:
Principal-Only Stripped Mortgage-Backed Securities
The Company categorizes principal-only stripped MBS as “Level 2” fair value financial instruments. Fair values of these securities are established based on quoted market prices for these or similar securities.
Loans Held for Sale
Most of the Company’s loans held for sale at fair value are saleable into active markets and are therefore categorized as “Level 2” fair value assets. The fair values of “Level 2” fair value loans are determined using their contracted selling prices or quoted market prices or market price equivalents.
Certain of the Company’s loans held for sale are not saleable into active markets and are therefore categorized as “Level 3” fair value assets. Loans held for sale categorized as “Level 3” fair value assets include:
| ● | Closed-end second lien mortgage loans. At present, there is no active market with significant observable inputs to the estimation of fair value of the closed-end second lien mortgage loans the Company produces. |
| ● | Early buy out (“EBO”) loans. EBO loans are government guaranteed or insured loans purchased by the Company from Ginnie Mae guaranteed securities in its loan servicing portfolio. The Company’s right to purchase a government guaranteed or insured loan from a Ginnie Mae security arises as the result of the loan being at least three months delinquent on the date of purchase by the Company and provides an alternative to the Company’s obligation to continue advancing principal and interest at the coupon rate of the related Ginnie Mae security. Such a loan may be resold to an investor and thereafter may be repurchased to the extent it becomes eligible for resale into a new Ginnie Mae guaranteed security. |
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.
| ● | Loans with identified defects. Loans that are not saleable into active markets due to identification of a defect by the Company or to the repurchase by the Company of a loan with an identified defect. |
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The Company uses a discounted cash flow model to estimate the fair value of its “Level 3” fair value loans held for sale. The significant unobservable inputs used in the fair value measurement of the Company’s “Level 3” fair value loans held for sale are discount rates, home price projections, voluntary prepayment/resale and total prepayment/resale speeds. Significant changes in any of those inputs in isolation could result in a significant change to the loans’ fair value measurement. Increases in home price projections are generally accompanied by an increase in voluntary prepayment speeds.
Following is a quantitative summary of key “Level 3” fair value inputs used in the valuation of loans held for sale:
| | | | | | |
| | | | | | |
|
| June 30, 2025 |
| December 31, 2024 | ||
Fair value (in thousands) | | $ | | $ | ||
Key inputs (1): | | | | | | |
Discount rate: | | | | | | |
Range | | | | | ||
Weighted average | | | | | ||
Twelve-month projected housing price index change: | | | | | | |
Range | | | | | ||
Weighted average | | | | | ||
Voluntary prepayment/resale speed (2): | | | | | | |
Range | | | | | ||
Weighted average | | | | | ||
Total prepayment/resale speed (3): | | | | | | |
Range | | | | | ||
Weighted average | | | | | ||
| (1) | Weighted average inputs are based on the fair values of the “Level 3” fair value loans. |
| (2) | Voluntary prepayment/resale speed is measured using life voluntary Conditional Prepayment Rate (“CPR”). |
| (3) | Total prepayment/resale speed is measured using life total CPR, which includes both voluntary and involuntary prepayment/resale speeds. |
Changes in fair value of loans held for sale attributable to changes in a loan’s instrument-specific credit risk are measured with reference to the change in the respective loan’s delinquency status and performance history at period end from the later of the beginning of the period or acquisition date. Changes in fair value of loans held for sale are included in Net gains on loans held for sale at fair value in the Company’s consolidated statements of income.
Derivative Financial Instruments
Interest Rate Lock Commitments
The Company categorizes IRLCs as “Level 3” fair value assets or liabilities. The Company estimates the fair values of IRLCs based on quoted Agency MBS prices, the probability that the loans will be funded or purchased (the “pull-through rate”) and its estimate of the fair value of the MSRs it expects to receive in the sale of the loans.
The significant unobservable inputs used in the fair value measurement of the Company’s IRLCs are the pull-through rate and the estimated fair values of MSRs attributable to the mortgage loans it has committed to originate or purchase. Significant changes in the pull-through rate or the MSR components of the IRLCs, in isolation, could result in significant changes in the IRLCs’ fair value measurements. The financial effects of changes in these inputs are generally inversely correlated as increasing interest rates have a positive effect on the fair value of the MSR component of IRLC fair value, but increase the pull-through rate for the loan principal and interest payment cash flow component, which has decreased in fair value. Changes in fair value of IRLCs are included in Net gains on loans held for sale at fair value in the Company’s consolidated statements of income.
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Table of Contents
Following is a quantitative summary of key unobservable inputs used in the valuation of IRLCs:
| | | | | | |
| | | | | | |
|
| June 30, 2025 |
| December 31, 2024 | ||
Fair value (in thousands) (1) |
| $ | | $ | ||
Committed amount (in thousands) | | $ | | $ | ||
Key inputs (2): | | | | | | |
Pull-through rate: | | | | | | |
Range | | | | | ||
Weighted average | | | | | ||
Mortgage servicing rights fair value expressed as: | | | | | | |
Servicing fee multiple: | | | | | | |
Range | | | | | ||
Weighted average | | | | | ||
Percentage of loan commitment amount: | | | | | | |
Range | | | | | ||
Weighted average | | | | | ||
| (1) | For purpose of this table, IRLC asset and liability positions are shown net. |
| (2) | Weighted average inputs are based on the committed amounts. |
Hedging Derivatives
Fair values of derivative financial instruments actively traded on exchanges are categorized by the Company as “Level 1” fair value assets and liabilities; fair values of derivative financial instruments based on observable interest rates, volatilities and prices in the MBS or other markets are categorized by the Company as “Level 2” fair value assets and liabilities.
Changes in the fair values of hedging derivatives are included in Net gains on loans held for sale at fair value, or Net loan servicing fees – Mortgage servicing rights hedging results, as applicable, in the Company’s consolidated statements of income.
Mortgage Servicing Rights
MSRs are categorized as “Level 3” fair value assets. The Company uses a discounted cash flow approach to estimate the fair value of MSRs. The key inputs used in the estimation of the fair value of MSRs include the applicable prepayment rate (prepayment speed), pricing spread (a component of discount rate), and annual per-loan cost to service the underlying loans, all of which are unobservable. Significant changes to any of those inputs in isolation could result in a significant change in the MSR fair value measurement. Changes in these key inputs are not directly related. Changes in the fair value of MSRs are included in Net loan servicing fees—Change in fair value of mortgage servicing rights and mortgage servicing liabilities in the Company’s consolidated statements of income.
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Table of Contents
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:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
| | 2025 | | 2024 |
| 2025 | | 2024 | ||||
| | (Amount recognized and unpaid principal balance of underlying loans in thousands) | ||||||||||
MSR and underlying loan characteristics: | | | |
| | | | | |
| | |
Amount recognized | | $ | | | $ | | | $ | | | $ | |
Unpaid principal balance | | $ | | | $ | | | $ | | | $ | |
Weighted average servicing fee rate (in basis points) | | | | | | | | | ||||
Key inputs (1): | | | | | | | | | | | | |
Annual total prepayment speed (2): | | | | | | | | | | | | |
Range | | | | | | | | | ||||
Weighted average | | | | | | | | | ||||
Equivalent average life (in years): | | | | | | | | | | | | |
Range | | | | | | | | | ||||
Weighted average | | | | | | | | | ||||
Pricing spread (3): | | | | | | | | | | | | |
Range | | | | | | | | | ||||
Weighted average | | | | | | | | | ||||
Per-loan annual cost of servicing: | | | | | | | | | | | | |
Range | | | $ | | | $ | | | $ | | | $ |
Weighted average | | | $ | | | $ | | | $ | | | $ |
| (1) | Weighted average inputs are based on the UPB of the underlying loans. |
| (2) | Annual total prepayment speed is measured using life total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided as supplementary information. |
| (3) | Pricing spread represents a margin that is applied to a reference interest rate’s forward rate curve to develop periodic discount rates. The Company applies a pricing spread to a derived United State Treasury Securities (“Treasury”) yield curve for purposes of discounting cash flows relating to MSRs. |
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Table of Contents
Following is a quantitative summary of key inputs used in the valuation of the Company’s MSRs and the effect on the fair value from adverse changes in those inputs:
| | | | |
| | June 30, 2025 | | December 31, 2024 |
| | (Fair value, unpaid principal balance of underlying | ||
| | loans and effect on fair value amounts in thousands) | ||
Fair value | | $ | | $ |
Underlying loan characteristics: | | | | |
Unpaid principal balance | | $ | | $ |
Weighted average note interest rate | | | ||
Weighted average servicing fee rate (in basis points) | | | ||
Key inputs (1): | | | | |
Annual total prepayment speed (2): | | | | |
Range | | | ||
Weighted average | | | ||
Equivalent average life (in years): | | | | |
Range | | | ||
Weighted average | | | ||
Effect on fair value of (3): | | | | |
5% adverse change | | ($ | | ($ |
10% adverse change | | ($ | | ($ |
20% adverse change | | ($ | | ($ |
Pricing spread (4): | | | | |
Range | | | ||
Weighted average | | | ||
Effect on fair value of (3): | | | | |
5% adverse change | | ($ | | ($ |
10% adverse change | | ($ | | ($ |
20% adverse change | | ($ | | ($ |
Per-loan annual cost of servicing: | | | | |
Range | | $ | | $ |
Weighted average | | $ | | $ |
Effect on fair value of (3): | | | | |
5% adverse change | | ($ | | ($ |
10% adverse change | | ($ | | ($ |
20% adverse change | | ($ | | ($ |
| (1) | Weighted average inputs are based on the UPB of the underlying loans. |
| (2) | Annual total prepayment speed is measured using life total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided as supplementary information. |
| (3) | These sensitivity analyses are limited in that they were performed as of a particular date; only contemplate the movements in the indicated inputs; do not incorporate changes to other inputs; are subject to the accuracy of the models and inputs used; and do not incorporate other factors that would affect the Company’s overall financial performance in such events, including operational adjustments made to account for changing circumstances. For these reasons, these analyses should not be viewed as earnings forecasts. |
| (4) | The Company applies a pricing spread to a derived Treasury yield curve for purposes of discounting cash flows relating to MSRs. |
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Table of Contents
Mortgage Servicing Liabilities
MSLs are categorized as “Level 3” fair value liabilities. The Company uses a discounted cash flow approach to estimate the fair value of MSLs. The key inputs used in the estimation of the fair value of MSLs include the applicable annual total prepayment speed, pricing spread, and the per-loan annual cost of servicing the underlying loans. Changes in the fair value of MSLs are included in Net servicing fees—Change in fair value of mortgage servicing rights and mortgage servicing liabilities in the Company’s consolidated statements of income.
Following are the key inputs used in estimating the fair value of MSLs:
| | | | | | |
| | | June 30, | | | December 31, |
| | | 2025 | | | 2024 |
Fair value (in thousands) | | $ | | $ | ||
Underlying loan characteristics: | |
| | |
| |
Unpaid principal balance of underlying loans (in thousands) | | $ | | $ | ||
Servicing fee rate (in basis points) | | | | | ||
Key inputs (1): | | | | | | |
Annual total prepayment speed (2) | | | | | ||
Equivalent average life (in years) | | | | | ||
Pricing spread (3) | | | | | ||
Per-loan annual cost of servicing | | $ | | $ |
| (1) | Weighted average inputs are based on UPB of the underlying mortgage loans. |
| (2) | Annual total prepayment speed is measured using life total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided as supplementary information. |
| (3) | The Company applies a pricing spread to a derived Treasury yield curve for purposes of discounting cash flows relating to MSLs. |
Note 8— Principal-Only Stripped Mortgage-Backed Securities
Following is a summary of activity in the Company’s investment in principal-only stripped MBS:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
| | 2025 | | 2024 | | 2025 | | 2024 | ||||
| | (in thousands) | ||||||||||
Balance at beginning of period | | $ | | | $ | | | $ | | | $ | — |
Purchases | | | — | | | | | | — | | | |
Repayments | | | ( | | | ( | | | ( | | | ( |
Changes in fair value included in income arising from: | | | | | | | | | | | | |
Accrual of purchase discounts | | | | | | | | | | | | |
Valuation adjustments | | | | | | ( | | | | | | ( |
| | | | | | ( | | | | | | ( |
Balance at end of period | | $ | | | $ | | | $ | | | $ | |
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Table of Contents
Following is a summary of the Company’s investment in principal-only stripped MBS:
| | | | | | |
| | June 30, | | December 31, | ||
| | 2025 | | 2024 | ||
| | (in thousands) | ||||
Principal balance | | $ | | | $ | |
Unearned discounts | | | ( | | | ( |
Cumulative valuation changes | | | ( | | | ( |
Fair value | | $ | | | $ | |
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
Note 9—Loans Held for Sale at Fair Value
Following is a summary of loans held for sale at fair value:
| | | | | | |
| | June 30, | | December 31, | ||
Mortgage type |
| 2025 |
| 2024 | ||
| | (in thousands) | ||||
Government-insured or guaranteed | | $ | | | $ | |
Conventional conforming | | | | | | |
Jumbo | | | | | | |
Closed-end second lien | | | | | | |
Purchased from Ginnie Mae securities serviced by the Company | | | | | | |
Repurchased pursuant to representations and warranties | | | | | | |
| | $ | | | $ | |
Fair value of loans pledged to secure: | | | | | | |
Assets sold under agreements to repurchase | | $ | | | $ | |
Mortgage loan participation purchase and sale agreements | | | | | | |
| | $ | | | $ | |
Note 10—Derivative Financial Instruments
The Company holds and issues derivative financial instruments in connection with its operating and investing activities. Derivative financial instruments are created in the Company’s loan production activities and when the Company enters into derivative transactions as part of its interest rate risk management activities. Derivative financial instruments created in the Company’s operating activities are IRLCs that are created when the Company commits to purchase or originate a loan for sale.
The Company engages in interest rate risk management activities in an effort to moderate the effect of changes in market interest rates on the fair value of certain of its assets. To manage this fair value risk resulting from interest rate risk, the Company uses derivative financial instruments acquired with the intention of reducing the risk that changes in market interest rates will result in unfavorable changes in the fair value of the Company’s IRLCs, inventory of loans held for sale and its MSRs.
The Company does not designate and qualify any of its derivatives for hedge accounting. The Company records all derivative financial instruments at fair value and records changes in fair value in current period income.
The Company has elected to present net derivative asset and liability positions, and cash collateral obtained from or posted to its counterparties when subject to a master netting arrangement that is legally enforceable on all counterparties in the event of default. The derivatives that are not subject to a master netting arrangement are IRLCs.
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Table of Contents
Derivative Notional Amounts and Fair Value of Derivatives
The Company had the following derivative financial instruments recorded on its consolidated balance sheets:
| | | | | | | | | | | | | | | | |
| | June 30, 2025 | | December 31, 2024 | ||||||||||||
| | | | Fair value | | | | Fair value | ||||||||
| | Notional | | Derivative | | Derivative | | Notional | | Derivative | | Derivative | ||||
Derivative instrument |
| amount (1) |
| assets |
| liabilities |
| amount (1) |
| assets |
| liabilities | ||||
| | (in thousands) | ||||||||||||||
Not subject to master netting arrangements: | | | | | | | | | | | | | | | | |
Interest rate lock commitments | | | | $ | | | $ | | | | | $ | | | $ | |
Subject to master netting arrangements (2): | | | | | | | | | | | | | | | | |
Forward purchase contracts | | | | | | | | | | | | | | | | |
Forward sales contracts | | | | | | | | | | | | | | | | |
MBS put options | | | | | — | | | — | | | | | | | | — |
Put options on interest rate futures purchase contracts | | | | | | | | — | | | | | | | | — |
Call options on interest rate futures purchase contracts | | | | | | | | — | | | | | | | | — |
Call options on interest rate futures sale contracts | | | | | — | | | | | — | | | — | | | — |
Treasury futures purchase contracts | | | | | — | | | — | | | | | — | | | — |
Treasury futures sale contracts | | | | | — | | | — | | | | | — | | | — |
Total derivatives before netting | | | | | | | | | | | | | | | | |
Netting | | | | | ( | | | ( | | | | | ( | | | ( |
| | | | $ | | | $ | | | | | $ | | | $ | |
Forward sale contract with PennyMac Mortgage Investment Trust | | | | $ | — | | $ | | | — | | $ | — | | $ | — |
Deposits placed with (received from) derivative counterparties included in the derivative balances above, net | | | | $ | | | | | | | | $ | ( | | | |
| (1) | Notional amounts provide an indication of the volume of the Company’s derivative activity. |
| (2) | All derivatives subject to master netting agreements are interest rate derivatives that are used as economic hedges. |
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Table of Contents
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.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2025 | | December 31, 2024 | ||||||||||||||||||||
| | | | Gross amount not | | | | | | Gross amount not | | | ||||||||||||
| | | | offset in the | | | | | | offset in the | | | ||||||||||||
| | | | consolidated | | | | | | consolidated | | | ||||||||||||
| | Net amount | | balance sheet | | | | Net amount | | balance sheet | | | ||||||||||||
| | of assets in the | | | | Cash | | | | of assets in the | | | | Cash | | | ||||||||
| | consolidated | | Financial | | collateral | | Net | | consolidated | | Financial | | collateral | | Net | ||||||||
Counterparty |
| balance sheet |
| instruments |
| received |
| amount |
| balance sheet |
| instruments |
| received |
| amount | ||||||||
| | (in thousands) | ||||||||||||||||||||||
Interest rate lock commitments | | $ | | | $ | — | | $ | — | | $ | | | $ | | | $ | — | | $ | — | | $ | |
RJ O' Brien | | | | | | — | | | — | | | | | | | | | — | | | — | | | |
Morgan Stanley Bank, N.A. | | | | | | — | | | — | | | | | | | | | — | | | — | | | |
Mizuho Bank, Ltd. | | | | | | — | | | — | | | | | | | | | — | | | — | | | |
South Street Securities | | | | | | — | | | — | | | | | | — | | | — | | | — | | | — |
Bank of America, N.A. | | | — | | | — | | | — | | | — | | | | | | — | | | — | | | |
Bank of Montreal | | | — | | | — | | | — | | | — | | | | | | — | | | — | | | |
Athene Annuity & Life Assurance Company | | | — | | | — | | | — | | | — | | | | | | — | | | — | | | |
BNP Paribas | | | — | | | — | | | — | | | — | | | | | | — | | | — | | | |
Others | | | | | | — | | | — | | | | | | | | | — | | | — | | | |
| | $ | | | $ | — | | $ | — | | $ | | | $ | | | $ | — | | $ | — | | $ | |
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Table of Contents
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.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2025 | | December 31, 2024 | ||||||||||||||||||||
| | | | Gross amounts | | | | | | Gross amounts | | | ||||||||||||
| | | | not offset in the | | | | | | not offset in the | | | ||||||||||||
| | Net amount | | consolidated | | | | Net amount | | consolidated | | | ||||||||||||
| | of liabilities | | balance sheet | | | | of liabilities | | balance sheet | | | ||||||||||||
| | in the | | | | Cash | | | | in the | | | | Cash | | | ||||||||
| | consolidated | | Financial | | collateral | | Net | | consolidated | | Financial | | collateral | | Net | ||||||||
Counterparty |
| balance sheet |
| instruments (1) |
| pledged |
| amount |
| balance sheet |
| instruments (1) |
| pledged |
| amount | ||||||||
| | (in thousands) | ||||||||||||||||||||||
Interest rate lock commitments | | $ | | | $ | — | | $ | — | | $ | | | $ | | | $ | — | | $ | — | | $ | |
Atlas Securitized Products, L.P. | | | | | | ( | | | — | | | — | | | | | | ( | | | — | | | — |
Bank of America, N.A. | | | | | | ( | | | — | | | | | | | | | ( | | | — | | | — |
JPMorgan Chase Bank, N.A. | | | | | | ( | | | — | | | | | | | | | ( | | | — | | | |
Royal Bank of Canada | | | | | | ( | | | — | | | — | | | | | | ( | | | — | | | — |
Wells Fargo Bank, N.A. | | | | | | ( | | | — | | | | | | | | | ( | | | — | | | |
Citibank, N.A. | | | | | | ( | | | — | | | — | | | | | | ( | | | — | | | — |
BNP Paribas | | | | | | ( | | | — | | | | | | | | | ( | | | — | | | — |
Morgan Stanley Bank, N.A. | | | | | | ( | | | — | | | | | | | | | ( | | | — | | | — |
Santander US Capital Markets LLC | | | | | | ( | | | — | | | | | | | | | ( | | | — | | | — |
Nomura Corporate Funding Americas | | | | | | ( | | | — | | | — | | | | | | ( | | | — | | | — |
Goldman Sachs | | | | | | ( | | | — | | | | | | | | | ( | | | — | | | |
Barclays Capital | | | | | | ( | | | — | | | | | | | | | ( | | | — | | | |
Mizuho Bank, Ltd. | | | | | | ( | | | — | | | — | | | | | | ( | | | — | | | — |
Federal National Mortgage Association | | | | | | — | | | — | | | | | | — | | | — | | | — | | | — |
PennyMac Mortgage Investment Trust | | | | | | — | | | — | | | | | | — | | | — | | | — | | | — |
Others | | | | | | — | | | — | | | | | | | | | — | | | — | | | |
| | $ | | | $ | ( | | $ | — | | $ | | | $ | | | $ | ( | | $ | — | | $ | |
| (1) | Amounts represent the UPB of Assets sold under agreements to repurchase. |
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:
| | | | | | | | | | | | | | |
| | | | Quarter ended June 30, | | Six months ended June 30, | ||||||||
Derivative activity |
| Consolidated statement of income line |
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | | | (in thousands) | ||||||||||
Interest rate lock commitments | | Net gains on loans held for sale at fair value (1) | | $ | | | $ | ( | | $ | | | $ | ( |
Hedged item: | | | | | | | | | | | | | | |
Interest rate lock commitments and loans held for sale | | Net gains on loans held for sale at fair value | | $ | ( | | $ | | | $ | ( | | $ | |
Mortgage servicing rights | | Net loan servicing fees–Mortgage servicing rights hedging results | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
| (1) | Represents net change in fair value of IRLCs from the beginning to the end of the period. Amounts recognized at the date of commitment and fair value changes recognized during the period until purchase of the underlying loans or the cancellation of the commitment are shown in the rollforward of IRLCs for the quarter in Note 7 – Fair Value – Assets and Liabilities Measured at Fair Value on a Recurring Basis. |
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Note 11—Mortgage Servicing Rights and Mortgage Servicing Liabilities
Mortgage Servicing Rights at Fair Value
The activity in MSRs is as follows:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
Balance at beginning of period | | $ | | | $ | | | $ | | | $ | |
MSRs resulting from loan sales | | | | | | | | | | | | |
Change in fair value due to: | | | | | | | | | | | | |
Changes in inputs used in valuation model (1) | | | | | | | | | ( | | | |
Other changes in fair value (2) | | | ( | | | ( | | | ( | | | ( |
Total change in fair value | | | ( | | | ( | | | ( | | | ( |
Balance at end of period | | $ | | | $ | | | $ | | | $ | |
Unpaid principal balance of underlying loans at end of period | | | | | | | | $ | | | $ | |
| | | | | | | | | | | | |
| | | | | | | | June 30, | | December 31, | ||
| | | | | | | | 2025 | | 2024 | ||
| | | | | | | | (in thousands) | ||||
Fair value of mortgage servicing rights pledged to secure Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets | | | | | | | | $ | | | $ | |
| (1) | Principally reflects changes in annual total prepayment speed, pricing spread, per loan annual cost of servicing and UPB of underlying loan inputs. |
| (2) | Represents changes due to realization of cash flows. |
Mortgage Servicing Liabilities at Fair Value
The activity in MSLs is summarized below:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
Balance at beginning of period | | $ | | | $ | | | $ | | | $ | |
Changes in fair value due to: | | | | | | | | | | | | |
Changes in inputs used in valuation model (1) | | | | | | | | | | | | ( |
Other changes in fair value (2) | | | ( | | | ( | | | ( | | | ( |
Total change in fair value | | | ( | | | ( | | | ( | | | ( |
Balance at end of period | | $ | | | $ | | | $ | | | $ | |
Unpaid principal balance of underlying loans at end of period | | | | | | | | $ | | | $ | |
| (1) | Principally reflects changes in annual total prepayment speed, pricing spread and per loan annual cost of servicing. |
| (2) | Represents changes due to realization of cash flows. |
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Table of Contents
Contractual servicing fees relating to MSRs and MSLs are recorded in Net loan servicing fees—Loan servicing fees—From non-affiliates on the Company’s consolidated statements of income; other fees relating to MSRs and MSLs are recorded in Net loan servicing fees—Loan servicing fees—Other on the Company’s consolidated statements of income. Such amounts are summarized below:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
Contractual servicing fees | | $ | | | $ | | | $ | | | $ | |
Other fees: | | | | | | | | | | | |
|
Late charges | | | | | | | | | | | | |
Other | | | | | | | | | | | | |
| | $ | | | $ | | | $ | | | $ | |
Note 12—Other Assets
Other assets are summarized below:
| | | | | | |
| | | June 30, | | | December 31, |
| | 2025 |
| 2024 | ||
| | (in thousands) | ||||
Margin deposits | | $ | | | $ | |
Capitalized software, net | | | | | | |
Servicing fees receivable, net | | | | | | |
Other servicing receivables | | | | | | |
Interest receivable | | | | | | |
Prepaid expenses | | | | | | |
Real estate acquired in settlement of loans | | | | | | |
Operating lease right-of-use assets | | | | | | |
Deposits securing Assets sold under agreements to repurchase and | | | | | | |
Furniture, fixtures, equipment and building improvements, net | | | | | | |
Other | | | | | | |
| | $ | | | $ | |
Deposits securing Assets sold under agreements to repurchase or Notes payable secured by mortgage servicing assets | | $ | | | $ | |
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Table of Contents
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
The Company’s lease agreements are summarized below:
| | | | | | | | | | | | |
| | | | | | | | | ||||
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
| | 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (dollars in thousands) | ||||||||||
Lease expense: | | | | | | | | | | | | |
Operating leases | | $ | | | $ | | | $ | | | $ | |
Short-term leases | | | | | | | | | | | | |
Sublease income | | | ( | | | ( | | | ( | | | ( |
Net lease expense included in Occupancy and equipment expense | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Other information: | | | | | | | | | | | | |
Payments for operating leases | | $ | | | $ | | | $ | | | $ | |
Operating lease right-of-use assets recognized | | $ | | | $ | — | | $ | | | $ | — |
Period end weighted averages: | | | | | | | | | | | | |
Remaining lease term (in years) | | | | | | | | | | | ||
Discount rate | | | | | | | | | | | ||
Lease payment obligations attributable to the Company’s operating lease liabilities are summarized below:
| | | |
Twelve months ended June 30, | | Operating leases | |
| | (in thousands) | |
2026 | | $ | |
2027 | | | |
2028 | | | |
2029 | | | |
2030 | | | |
Thereafter | | | |
Total lease payments | | | |
Less imputed interest | | | ( |
Operating lease liability included in Accounts payable and accrued expenses | | $ | |
Note 14—Short-Term Debt
The borrowing facilities described throughout these Notes 14 and 15 contain various covenants, including financial covenants governing the Company’s net worth, debt-to-equity ratio and liquidity. Management believes that the Company was in compliance with these covenants as of June 30, 2025.
Assets Sold Under Agreements to Repurchase
The Company has multiple borrowing facilities in the form of asset sales under agreements to repurchase. These borrowing facilities are secured by principal-only stripped MBS, loans held for sale, participation certificates backed by mortgage servicing assets or margin deposits. Eligible assets are sold at advance rates based on the fair value (as determined by the lender) of the assets sold. Interest is charged at a rate based on the Secured Overnight Financing Rate (“SOFR”). Principal-only stripped MBS, mortgage servicing assets, loans and participation certificates backed by mortgage servicing assets financed under these agreements may be re-pledged by the lenders.
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Table of Contents
Assets sold under agreements to repurchase are summarized below:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (dollars in thousands) | ||||||||||
Average balance of assets sold under agreements to repurchase | | $ | | | $ | | | $ | | | $ | |
Weighted average interest rate (1) | | | | | | | | | ||||
Total interest expense | | $ | | | $ | | | $ | | | $ | |
Maximum daily amount outstanding | | $ | | | $ | | | $ | | | $ | |
| (1) | Excludes the effect of amortization of debt issuance costs and non-utilization fees of $ |
| | | | | | | | | | | | |
| | | | | | | | June 30, | | December 31, | ||
|
| | | | | | | 2025 |
| 2024 | ||
| | | | | | | | (dollars in thousands) | ||||
Carrying value: | | | | | | | | | | | | |
Unpaid principal balance | | | | | | | | $ | | | $ | |
Unamortized debt issuance costs | | | | | | | | | ( | | | ( |
| | | | | | | | $ | | | $ | |
Weighted average interest rate | | | | | | | | | | | ||
Available borrowing capacity (1): | | | | | | | | | | | | |
Committed | | | | | | | | $ | | | $ | |
Uncommitted | | | | | | | | | | | | |
| | | | | | | | $ | | | $ | |
Assets securing repurchase agreements: | | | | | | | | | | | | |
Principal-only stripped mortgage-backed securities | | | | | | | | $ | | | $ | |
Loans held for sale | | | | | | | | $ | | | $ | |
Servicing advances (2) | | | | | | | | $ | | | $ | |
Mortgage servicing rights (2) | | | | | | | | $ | | | $ | |
Deposits (2) | | | | | | | | $ | | | $ | |
| (1) | The amount the Company is able to borrow under asset repurchase agreements is tied to the fair value of unencumbered assets eligible to secure those agreements and the Company’s ability to fund the agreements’ margin requirements relating to the assets financed. |
| (2) | Beneficial interests in the Ginnie Mae MSRs, Fannie Mae MSRs, servicing advances and deposits together serve as the collateral backing servicing asset financing facilities that are included in Assets sold under agreements to repurchase and the term notes and term loans included in Notes payable secured by mortgage servicing assets. The term notes and term loans are described in Note 15–Long-Term Debt - Notes payable secured by mortgage servicing assets. |
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Table of Contents
Maturities
Following is a summary of maturities of outstanding advances under asset repurchase agreements by maturity date:
| | | |
Remaining maturity at June 30, 2025 (1) |
| Unpaid principal balance | |
| | (dollars in thousands) | |
Within 30 days | | $ | |
Over 30 to 90 days | | | |
Over 90 to 180 days | | | |
Over 180 days to one year | | | |
Over one year to two years | | | |
Total assets sold under agreements to repurchase | | $ | |
Weighted average maturity (in months) | | | |
| (1) | The Company is subject to margin calls during the periods the agreements are outstanding and therefore may be required to repay a portion of the borrowings before the respective agreements mature if the fair values (as determined by the applicable lender) of the assets securing those agreements decrease. |
Amounts at Risk
The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and interest payable) relating to the Company’s assets sold under agreements to repurchase is summarized by asset type and counterparty below as of June 30, 2025:
Loans held for sale and MSRs
| | | | | | | |
| | | | | | | |
| | | | | Weighted average | | |
Counterparty |
| Amount at risk |
| maturity of advances |
| Facility maturity | |
| | (in thousands) | | | | | |
Atlas Securitized Products, L.P., Goldman Sachs Bank USA, Nomura Corporate Funding Americas and Mizuho Bank, Ltd. (1) | | $ | | | June 18, 2026 | | June 18, 2026 |
Atlas Securitized Products, L.P. | | $ | | | November 19, 2025 | | June 26, 2026 |
Bank of America, N.A. | | $ | | | August 6, 2025 | | June 9, 2027 |
JP Morgan Chase Bank, N.A. | | $ | | | October 21, 2025 | | July 10, 2026 |
Royal Bank of Canada | | $ | | | July 30, 2025 | | May 8, 2026 |
Citibank, N.A. | | $ | | | September 4, 2025 |
| June 11, 2026 |
Nomura Corporate Funding Americas | | $ | | | July 14, 2025 | | January 22, 2026 |
Morgan Stanley Bank, N.A. | | $ | | | September 10, 2025 | | May 22, 2026 |
Wells Fargo Bank, N.A. | | $ | | | September 14, 2025 | | June 11, 2027 |
Barclays Bank PLC | | $ | | | November 6, 2025 | | March 6, 2026 |
BNP Paribas | | $ | | | September 14, 2025 | | September 30, 2026 |
Mizuho Bank, Ltd. | | $ | | | February 19, 2026 | | March 14, 2026 |
Goldman Sachs Bank USA | | $ | | | September 5, 2025 | | February 13, 2027 |
| (1) | The amount at risk includes the beneficial interests in Ginnie Mae MSRs, Fannie Mae MSRs and servicing advances pledged to serve as the collateral backing servicing asset facilities included in Assets sold under agreements to repurchase and the term notes and term loans included in Notes payable secured by mortgage servicing assets. The facilities mature on various dates through October 25, 2026 and the facility maturity date shown in this table represents a weighted average of those dates. |
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Table of Contents
Principal-only stripped MBS
| | | | | |
Counterparty |
| Amount at risk |
| Maturity | |
| | (in thousands) | | | |
Bank of America, N.A. | | $ | | | July 25, 2025 |
JP Morgan Chase Bank, N.A. | | $ | | | July 7, 2025 |
Wells Fargo Bank, N.A. | | $ | | | July 23, 2025 |
Santander US Capital Markets LLC | | $ | | | July 15, 2025 |
Mortgage Loan Participation Purchase and Sale Agreements
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:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (dollars in thousands) | ||||||||||
Average balance | | $ | | | $ | | | $ | | | $ | |
Weighted average interest rate (1) | | | | | | | | | ||||
Total interest expense | | $ | | | $ | | | $ | | | $ | |
Maximum daily amount outstanding | | $ | | | $ | | | $ | | | $ | |
| (1) | Excludes the effect of amortization of debt issuance costs totaling $ |
| | | | | | | | | | | | |
|
| | | | | | | June 30, | | December 31, | ||
| | | | | | | | 2025 |
| 2024 | ||
| | | | | | | | (dollars in thousands) | ||||
Carrying value: | | | | | | | | | | | | |
Unpaid principal balance | | | | | | | | $ | | | $ | |
Unamortized debt issuance costs | | | | | | | | | ( | | | ( |
| | | | | | | | $ | |
| $ | |
Weighted average interest rate | | | | | | | | | | | ||
Fair value of loans pledged to secure mortgage loan participation purchase and sale agreements | | | | | | | | $ | | | $ | |
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Table of Contents
Note 15—Long-Term Debt
Notes Payable Secured by Mortgage Servicing Assets
Term Notes and Term Loans
The Company, through its wholly-owned subsidiaries PNMAC, PLS and the PNMAC GMSR ISSUER TRUST (“Issuer Trust”) has entered into a structured finance transaction, in which PLS pledges and/or sells to the Issuer Trust participation certificates representing beneficial interests in Ginnie Mae mortgage servicing assets pursuant to a repurchase agreement. The Issuer Trust has issued VFNs to PLS, has issued secured term notes (the “Term Notes”) to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”), and has entered into a series of syndicated term loans with various lenders (the “Term Loans”). The Term Notes and Term Loans are secured by the participation certificates relating to Ginnie Mae mortgage servicing assets financed pursuant to the servicing asset repurchase facilities, and rank pari passu with the mortgage servicing asset VFNs.
Following is a summary of the issued and outstanding Term Notes and Term Loans:
| | | | | | | | | |
| | | | | | | Maturity date | ||
Issuance date |
| Principal balance |
| Annual interest rate spread (1) |
| Stated |
| Optional extension (2) | |
| | (in thousands) | | | | | | | |
Term Notes: | | | | | | | | | |
February 29, 2024 | | $ | | | | March 26, 2029 | | March 25, 2031 | |
Term Loans: | | | | | | | | | |
February 28, 2023 | | | | | | February 25, 2028 | | February 25, 2029 | |
October 25, 2023 | | | | | | October 25, 2028 | | | |
| | $ | | | | | | | |
| (1) | Interest is charged at a rate of SOFR plus a spread. |
| (2) | The Term Notes and Term Loans’ indentures provide the Company with the option to extend the maturity of certain of the Term Notes or Term Loans as specified in the respective agreements. |
Freddie Mac MSR Notes Payable
The Company has notes payable facilities with
Notes payable secured by mortgage servicing assets are summarized below:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (dollars in thousands) | ||||||||||
Average balance | | $ | | | $ | | | $ | | | $ | |
Weighted average interest rate (1) | | | | | | | | | ||||
Total interest expense | | $ | | | $ | | | $ | | | $ | |
| (1) | Excludes the effect of amortization of debt issuance costs totaling $ |
| | | | | | | | | | | | |
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Table of Contents
| | | | | | | | June 30, | | December 31, | ||
|
| | | | | | | 2025 |
| 2024 | ||
| | | | | | | | (dollars in thousands) | ||||
Carrying value: | | | | | | | | | | | | |
Unpaid principal balance: | | | | | | | | | | | | |
Term Notes and Term Loans | | | | | | | | $ | |
| $ | |
Freddie Mac MSR Notes Payable | | | | | | | | | | | | |
| | | | | | | | | | | | |
Unamortized debt issuance costs | | | | | | | | | ( | | | ( |
| | | | | | | | $ | | | $ | |
Weighted average interest rate | | | | | | | | | | | ||
Assets pledged to secure notes payable (1): | | | | | | | | | | | | |
Servicing advances | | | | | | | | $ | | | $ | |
Mortgage servicing rights | | | | | | | | $ | | | $ | |
Deposits | | | | | | | | $ | | | $ | |
| (1) | Beneficial interests in the Ginnie Mae MSRs, Fannie Mae MSRs, servicing advances and deposits together serve as the collateral backing servicing asset facilities that include Assets sold under agreements to repurchase and the Term Notes and Term Loans included in Notes payable secured by mortgage servicing assets. |
Unsecured Senior Notes
The Company has issued unsecured senior notes (the “Unsecured Notes”) to qualified institutional buyers under Rule 144A of the Securities Act. The Unsecured Notes are senior unsecured obligations of the Company and will rank senior in right of payment to any future subordinate indebtedness of the Company, equally in right of payment with all existing and future senior indebtedness of the Company and effectively subordinate to any existing and future secured indebtedness of the Company to the extent of the fair value of collateral securing such indebtedness.
The Unsecured Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the Company’s existing and future wholly-owned domestic subsidiaries (other than certain excluded subsidiaries defined in the indenture under which the Unsecured Notes were issued). The guarantees are senior unsecured obligations of the guarantors and will rank senior in right of payment to any future subordinate indebtedness of the guarantors, equally in right of payment with all existing and future senior indebtedness of the guarantors and effectively subordinate to any existing and future secured indebtedness of the guarantors to the extent of the fair value of collateral securing such indebtedness. The Unsecured Notes and the guarantees are structurally subordinate to the indebtedness and liabilities of the Company’s subsidiaries that do not guarantee the Unsecured Notes.
Following is a summary of the Company’s outstanding Unsecured Notes:
| | | | | | | | | |
Issuance date | | Principal balance | | Note interest rate | | Maturity date | | Optional redemption date (1) | |
| | (in thousands) | | (annual) | | | | | |
February 11, 2021 | | $ | | | | February 15, 2029 | | February 15, 2024 | |
September 16, 2021 | | | | | | September 15, 2031 | | September 15, 2026 | |
December 11, 2023 | | | | | | December 15, 2029 | | December 15, 2026 | |
May 23, 2024 | | | | | | November 15, 2030 | | November 15, 2026 | |
February 6, 2025 | | | | | | February 15, 2033 | | February 15, 2028 | |
May 1, 2025 | | | | | | May 15, 2032 | | May 15, 2028 | |
| | $ | | | | | | | |
| (1) | Before the optional redemption date, the Company may redeem some or all of the Unsecured Notes for that issuance at a price equal to |
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| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (dollars in thousands) | ||||||||||
Average balance | | $ | | | $ | | | $ | | | $ | |
Weighted average interest rate (1) | | | | | | | | | ||||
Total interest expense | | $ | | | $ | | | $ | | | $ | |
| (1) | Excludes the effect of amortization of debt issuance costs of $ |
| | | | | | | | | | | | |
| | | | | | | | June 30, | | December 31, | ||
|
| | | | | | | 2025 |
| 2024 | ||
| | | | | | | | (dollars in thousands) | ||||
Carrying value: | | | | | | | | | | | | |
Unpaid principal balance | | | | | | | | $ | | | $ | |
Unamortized debt issuance costs and premiums, net | | | | | | | | | ( | | | ( |
| | | | | | | | $ | | | $ | |
Weighted average interest rate | | | | | | | | | | | ||
Maturities of Long-Term Debt
Maturities of long-term debt (based on stated maturity dates) are as follows:
| | | | | | | | | | | | | | | | | | | | | |
| | Twelve months ended June 30, | | | | ||||||||||||||||
|
| 2026 |
| 2027 |
| 2028 |
| 2029 |
| 2030 |
| Thereafter |
| Total | |||||||
| | (in thousands) | |||||||||||||||||||
Notes payable secured by mortgage servicing assets (1) | | $ | | | $ | — | | $ | | | $ | | | $ | — | | $ | — | | $ | |
Unsecured senior notes | | | — | | | — | | | — | | | | | | | | | | | | |
Total | | $ | | | $ | — | | $ | | | $ | | | $ | | | $ | | | $ | |
| (1) | The Term Notes and Term Loans’ indentures provide the Company with the option to extend the maturity of the Term Notes and Term Loans as specified in the respective agreements. |
Note 16—Liability for Losses Under Representations and Warranties
Following is a summary of the Company’s liability for losses under representations and warranties:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
Balance at beginning of period | | $ | | | $ | | | $ | | | $ | |
Provision for losses: | | | | | | | | | | | | |
Resulting from sales of loans | | | | | | | | | | | | |
Resulting from change in estimate | | | ( | | | ( | | | ( | | | ( |
Losses incurred | | | ( | | | ( | | | ( | | | ( |
Balance at end of period | | $ | | | $ | | | $ | | | $ | |
Unpaid principal balance of loans subject to | | | | | | | | $ | | | $ | |
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Note 17—Income Taxes
The Company’s effective income tax rates were (
Note 18—Commitments and Contingencies
Commitments to Purchase and Fund Mortgage Loans
The Company’s commitments to purchase and fund loans totaled $
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 $
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Note 20—Net Gains on Loans Held for Sale
Net gains on loans held for sale at fair value are summarized below:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
From non-affiliates: | | | | | | | | | | | | |
Cash losses: | | | | | | | | | | | | |
Loans | | $ | ( | | $ | ( | | $ | ( |
| $ | ( |
Hedging activities | | | ( | | | | | | ( | | | |
| | | ( | | | ( | | | ( | | | ( |
Non-cash gains: | | | | | | | | | | | | |
Mortgage servicing rights resulting from loan sales | | | | | | | | | | | | |
Provisions for losses relating to representations and warranties: | | | | | | | | | | | | |
Pursuant to loan sales | | | ( | | | ( | | | ( | | | ( |
Reductions in liability due to changes in estimate | | | | | | | | | | | | |
Changes in fair values of loans and derivatives held at end of period: | | | | | | | | | | | | |
Interest rate lock commitments | | | | | | ( | | | | | | ( |
Loans | | | ( | | | ( | | | ( | | | |
Hedging derivatives | | | | | | ( | | | | | | ( |
| | | | | | | | | | | | |
From PennyMac Mortgage Investment Trust (1) | | | | | | ( | | | | | | ( |
| | $ | | | $ | | | $ | | | $ | |
| (1) | The terms of loan sales to PMT are described in Note 5–Related Party Transactions–PennyMac Mortgage Investment Trust–Operating Activities. |
Note 21—Net Interest Expense
Net interest expense is summarized below:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
Interest income: | | | | | | | | | | | | |
Cash and short-term investments | | $ | | | $ | | | $ | | | $ | |
Principal-only stripped mortgage-backed securities | | | | | | | | | | | | |
Loans held for sale | | | | | | | | | | | | |
Placement fees relating to custodial funds | | | | | | | | | | | | |
Other | | | | | | | | | | | | |
| | | | | | | | | | | | |
Interest expense: | | | | | | | | | | | | |
Assets sold under agreements to repurchase | | | | | | | | | | | | |
Mortgage loan participation purchase and sale agreements | | | | | | | | | | | | |
Notes payable secured by mortgage servicing assets | | | | | | | | | | | | |
Unsecured senior notes | | | | | | | | | | | | |
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations | | | | | | | | | | | | |
Interest on mortgage loan impound deposits | | | | | | | | | | | | |
Other | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | $ | ( | | $ | ( | | $ | ( | | $ | ( |
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Note 22—Stock-based Compensation
Following is a summary of the stock-based compensation activity:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
Grants: | | | | | | | | | | | | |
Units: | | | | | | | | | | | | |
Performance-based restricted share units ("RSUs") | | | — | | | — | | | | | | |
Stock options | | | — | | | — | | | | | | |
Time-based RSUs | | | — | | | | | | | | | |
Grant date fair value: | | | | | | | | | | | | |
Performance-based RSUs | | $ | — | | $ | — | | $ | | | $ | |
Stock options | | | — | | | — | | | | | | |
Time-based RSUs | | | — | | | | | | | | | |
Total | | $ | — | | $ | | | $ | | | $ | |
Vesting and exercise: | | | | | | | | | | | | |
Performance-based RSUs vested | | | — | | | — | | | — | | | |
Stock options exercised | | | | | | | | | | | | |
Time-based RSUs vested | | | | | | | | | | | | |
Stock-based compensation expense | | $ | | | $ | ( | | $ | | | $ | |
Note 23—Disaggregation of Certain Expense Captions
Following are the disaggregation of certain expense captions:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
Expense line |
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
Technology | | | | | | | | | | | | |
Amortization of capitalized software | | $ | | | $ | | | $ | | | $ | |
Other (1) | | | | | | | | | | | | |
Total technology expense | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Occupancy and equipment | | | | | | | | | | | | |
Depreciation | | $ | | | $ | | | $ | | | $ | |
Operating lease cost | | | |
| | | | | |
| | |
Short-term lease cost | | | | | | | | | | | | |
Other (2) | | | | | | | | | | | | |
Total occupancy and equipment expense | | $ | | | $ | | | $ | | | $ | |
| (1) | Other technology expenses primarily consist of software licensing and maintenance and data center expenses. |
| (2) | Other occupancy and equipment expenses primarily consist of common area maintenance charges, repair and security expenses. |
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Note 24—Earnings Per Share
Basic earnings per share is determined by dividing net income by the weighted average number of shares of common stock outstanding during the quarter. Diluted earnings per share is determined by dividing net income by the weighted average number of shares of common stock outstanding, assuming all dilutive securities were issued.
The Company’s potentially dilutive securities are stock-based compensation awards. The Company applies the treasury stock method to determine the diluted weighted average number of shares of common stock outstanding based on the outstanding stock-based compensation awards.
The following table summarizes the basic and diluted earnings per share calculations:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands, except per share amounts) | ||||||||||
Net income | | $ | |
| $ | | | $ | |
| $ | |
| | | | | | | | | | | | |
Weighted average shares of common stock outstanding | | | | | | | | | | | | |
Effect of dilutive securities - shares issuable under stock-based compensation plan | | | | | | | | | | | | |
Weighted average diluted shares of common stock outstanding | | | | | | | | | | | | |
Basic earnings per share | | $ | | | $ | | | $ | | | $ | |
Diluted earnings per share | | $ | | | $ | | | $ | | | $ | |
Calculations of diluted earnings per share require certain potentially dilutive shares to be excluded when their inclusion in the diluted earnings per share calculation would be anti-dilutive. The following table summarizes the weighted-average number of anti-dilutive outstanding RSUs and stock options excluded from the calculation of diluted earnings per share:
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands except for weighted average exercise price) | ||||||||||
Performance-based RSUs (1) | | | | | | | | | | | | |
Time-based RSUs | | | — | | | | | | | | | |
Stock options (2) | | | | | | | | | | | | |
Total anti-dilutive units and options | | | | | | | | | | | | |
Weighted average exercise price of anti-dilutive stock options (2) | | $ | | | $ | | | $ | | | $ | |
| (1) | Certain performance-based RSUs were outstanding but not included in the computation of earnings per share because the performance thresholds included in such RSUs have not been achieved. |
| (2) | Certain stock options were outstanding but not included in the computation of diluted earnings per share because the combination of the weighted-average exercise prices and average unamortized stock compensation cost exceeded the average market price of the outstanding stock options for the period. |
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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:
| | | | | | | | | | | | | |
| | June 30, 2025 | | December 31, 2024 | | ||||||||
Requirement/Agency |
| Actual (1) |
| Requirement (1) |
| Actual (1) |
| Requirement (1) |
| ||||
| | (dollars in thousands) | | ||||||||||
Capital | | | | | | | | | | | | | |
Fannie Mae & Freddie Mac | | $ | | | $ | | | $ | | | $ | | |
Ginnie Mae | | $ | | | $ | | | $ | | | $ | | |
HUD | | $ | | | $ | | | $ | | | $ | | |
Risk-based capital | | | | | | | | | | | | | |
Ginnie Mae | | | | % | | | % | | | % | | | % |
Liquidity | | | | | | | | | | | | | |
Fannie Mae & Freddie Mac | | $ | | | $ | | | $ | | | $ | | |
Ginnie Mae | | $ | | | $ | | | $ | | | $ | | |
Adjusted net worth / Total assets ratio | | | | | | | | | | | | | |
Ginnie Mae | | | | % | | | % | | | % | | | % |
Tangible net worth / Total assets ratio | | | | | | | | | | | | | |
Fannie Mae & Freddie Mac | | | | % | | | % | | | % | | | % |
| (1) | Calculated in accordance with the respective Agency’s requirements. |
Noncompliance with an Agency’s requirements can result in such Agency taking various remedial actions up to and including terminating the Company’s ability to sell loans to and service loans on behalf of the respective Agency.
Note 26—Segments
The Company’s reportable segments are identified based on their unique business activities. The following disclosures about the Company’s business segments are presented consistent with the way the Company’s chief operating decision maker organizes and evaluates financial information for making operating decisions and assessing performance. The Company’s chief operating decision maker is its chief executive officer. The reportable segments are evaluated based on income or loss before provision for income taxes. The chief operating decision maker uses pre-tax segment results to assess segment performance and allocate operating and capital resources among the
During the year ended December 31, 2024, the Company adopted ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). Concurrent with the adoption of ASU 2023-07 management reassessed its segment definitions to those shown below. Prior period amounts have been recast to conform the prior quarter presentation to the current quarter presentation.
The Company conducts its business in
| ● | The production segment performs loan origination, acquisition and sale activities, including the fulfillment of correspondent production activities for PMT. |
| ● | The servicing segment performs servicing of loans on behalf of non-affiliate investors, execution and management of early buyout transactions, and servicing of loans and MSRs sourced and managed for PMT. |
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Table of Contents
| ● | Non-segment activities are included under the heading “Corporate and other” and include amounts attributable to corporate activities that are not directly attributable to the production and servicing segments as well as investment management fees earned from PMT. None of the corporate and other items meet the quantitative threshold to be classified as a reportable segment. |
Financial performance and results by segment are as follows:
| | | | | | | | | | | | | | | | |
| | Quarter ended June 30, 2025 | | |||||||||||||
|
| Production |
| Servicing |
| Reportable segment total |
| Corporate |
| Consolidated |
| |||||
| | (in thousands) | | |||||||||||||
Revenues: (1) | | | | | | | | |
| | |
| | | | |
Net gains on loans held for sale at fair value | | $ | | | $ | | | $ | | | $ | — | | $ | | |
Loan origination fees | | | | | | — | | | | | | — | | | | |
Fulfillment fees from PennyMac Mortgage Investment Trust | | | | | | — | | | | | | — | | | | |
Net loan servicing fees | | | — | | | | | | | | | — | | | | |
Management fees | | | — | | | — | | | — | | | | | | | |
Net interest income (expense): | | | | | | | | | | | | | | | | |
Interest income | | | | | | | | | | | | | | | | |
Interest expense | | | | | | | | | | | | — | | | | |
| | | | | | ( | | | ( | | | | | | ( | |
Other | | | | | | | | | | | | | | | | |
Total net revenues | | | | | | | | | | | | | | | | |
Expenses: | | | | | | | | | | | | | | | | |
Compensation | | | | | | | | | | | | | | | | |
Loan origination | | | | | | — | | | | | | — | | | | |
Technology | | | | | | | | | | | | | | | | |
Servicing | | | — | | | | | | | | | — | | | | |
Marketing and advertising | | | | | | | | | | | | | | | | |
Professional services | | | | | | | | | | | | | | | | |
Occupancy and equipment | | | | | | | | | | | | | | | | |
Other (2) | | | | | | | | | | | | | | | | |
Total expenses | | | | | | | | | | | | | | | | |
Income (loss) before provision for income taxes | | $ | | | $ | | | $ | | | $ | ( | | $ | | |
Segment assets at end of quarter | | $ | | | $ | | | $ | | | $ | | | $ | | |
Acquisition of: | | | | | | | | | | | | | | | | |
Capitalized software | | $ | | | $ | | | $ | | | $ | — | | $ | | |
Furniture, fixtures, equipment and building improvements | | $ | | | $ | | | $ | | | $ | | | $ | | |
Amortization of capitalized software | | $ | | | $ | | | $ | | | $ | | | $ | | |
Depreciation and amortization of furniture, fixtures, equipment and building improvements | | $ | | | $ | | | $ | | | $ | | | $ | | |
| (1) | All revenues are from external customers. The segments do not recognize intersegment revenues. |
| (2) | Other expense includes smaller balance expense categories not separately provided to the chief operating decision maker such as safekeeping, travel, postage and corporate insurance. |
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Table of Contents
| | | | | | | | | | | | | | | | |
| | Quarter ended June 30, 2024 | | |||||||||||||
|
| Production |
| Servicing |
| Reportable segment total |
| Corporate |
| Consolidated |
| |||||
| | (in thousands) | | |||||||||||||
Revenues: (1) | | | | | | | | | | | | | | | | |
Net gains on loans held for sale at fair value | | $ | | | $ | | | $ | | | $ | — | | $ | | |
Loan origination fees | | | | | | — | | | | | | — | | | | |
Fulfillment fees from PennyMac Mortgage Investment Trust | | | | | | — | | | | | | — | | | | |
Net loan servicing fees | | | — | | | | | | | | | — | | | | |
Management fees | | | — | | | — | | | — | | | | | | | |
Net interest income (expense): | | | | | | | | | | | | | | | | |
Interest income | | | | | | | | | | | | | | | | |
Interest expense | | | | | | | | | | | | — | | | | |
| | | | | | ( | | | ( | | | | | | ( | |
Other | | | | | | | | | | | | | | | | |
Total net revenues | | | | | | | | | | | | | | | | |
Expenses: | | | | | | | | | | | | | | | | |
Compensation | | | | | | | | | | | | | | | | |
Loan origination | | | | | | — | | | | | | — | | | | |
Technology | | | | | | | | | | | | | | | | |
Servicing | | | — | | | | | | | | | — | | | | |
Professional services | | | | | | | | | | | | | | | | |
Occupancy and equipment | | | | | | | | | | | | | | | | |
Marketing and advertising | | | | | | | | | | | | | | | | |
Other (2) | | | | | | | | | | | | | | | | |
Total expenses | | | | | | | | | | | | | | | | |
Income (loss) before provision for income taxes | | $ | | | $ | | | $ | | | $ | ( | | $ | | |
Segment assets at end of quarter | | $ | | | $ | | | $ | | | $ | | | $ | | |
Acquisition of: | | | | | | | | | | | | | | | | |
Capitalized software | | $ | | | $ | | | $ | | | $ | | | $ | | |
Furniture, fixtures, equipment and building improvements | | $ | | | $ | | | $ | | | $ | | | $ | | |
Amortization of capitalized software | | $ | | | $ | | | $ | | | $ | | | $ | | |
Depreciation and amortization of furniture, fixtures, equipment and building improvements | | $ | | | $ | | | $ | | | $ | | | $ | | |
| (1) | All revenues are from external customers. The segments do not recognize intersegment revenues. |
| (2) | Other expense includes smaller balance expense categories not separately provided to the chief operating decision maker such as safekeeping, travel, postage and corporate insurance. |
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Table of Contents
| | | | | | | | | | | | | | | | |
| | Six months ended June 30, 2025 | | |||||||||||||
|
| Production |
| Servicing |
| Reportable segment total |
| Corporate |
| Consolidated |
| |||||
| | (in thousands) | | |||||||||||||
Revenues: (1) | | | | | | | | |
| | |
| | | | |
Net gains on loans held for sale at fair value | | $ | | | $ | | | $ | | | $ | — | | $ | | |
Loan origination fees | | | | | | — | | | | | | — | | | | |
Fulfillment fees from PennyMac Mortgage Investment Trust | | | | | | — | | | | | | — | | | | |
Net loan servicing fees | | | — | | | | | | | | | — | | | | |
Management fees | | | — | | | — | | | — | | | | | | | |
Net interest income (expense): | | | | | | | | | | | | | | | | |
Interest income | | | | | | | | | | | | | | | | |
Interest expense | | | | | | | | | | | | — | | | | |
| | | | | | ( | | | ( | | | | | | ( | |
Other | | | | | | | | | | | | | | | | |
Total net revenue | | | | | | | | | | | | | | | | |
Expenses: | | | | | | | | | | | | | | | | |
Compensation | | | | | | | | | | | | | | | | |
Loan origination | | | | | | — | | | | | | — | | | | |
Technology | | | | | | | | | | | | | | | | |
Servicing | | | — | | | | | | | | | — | | | | |
Marketing and advertising | | | | | | | | | | | | | | | | |
Professional services | | | | | | | | | | | | | | | | |
Occupancy and equipment | | | | | | | | | | | | | | | | |
Other (2) | | | | | | | | | | | | | | | | |
Total expenses | | | | | | | | | | | | | | | | |
Income (loss) before provision for income taxes | | $ | | | $ | | | $ | | | $ | ( | | $ | | |
Segment assets at end of period | | $ | | | $ | | | $ | | | $ | | | $ | | |
Acquisition of: | | | | | | | | | | | | | | | | |
Capitalized software | | $ | | | $ | | | $ | | | $ | — | | $ | | |
Furniture, fixtures, equipment and building improvements | | $ | | | $ | | | $ | | | $ | | | $ | | |
Amortization of capitalized software | | $ | | | $ | | | $ | | | $ | | | $ | | |
Depreciation and amortization of furniture, fixtures, equipment and building improvements | | $ | | | $ | | | $ | | | $ | | | $ | | |
| (1) | All revenues are from external customers. The segments do not recognize intersegment revenues. |
| (2) | Other expense includes smaller balance expense categories not separately provided to the chief operating decision maker such as safekeeping, travel, postage and corporate insurance. |
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Table of Contents
| | | | | | | | | | | | | | | | |
| | Six months ended June 30, 2024 | | |||||||||||||
|
| Production |
| Servicing |
| Reportable segment total |
| Corporate |
| Consolidated |
| |||||
| | (in thousands) | | |||||||||||||
Revenues: (1) | | | | | | | | | | | | | | | | |
Net gains on loans held for sale at fair value | | $ | | | $ | | | $ | | | $ | — | | $ | | |
Loan origination fees | | | | | | — | | | | | | — | | | | |
Fulfillment fees from PennyMac Mortgage Investment Trust | | | | | | — | | | | | | — | | | | |
Net loan servicing fees | | | — | | | | | | | | | — | | | | |
Management fees | | | — | | | — | | | — | | | | | | | |
Net interest income (expense): | | | | | | | | | | | | | | | | |
Interest income | | | | | | | | | | | | | | | | |
Interest expense | | | | | | | | | | | | — | | | | |
| | | | | | ( | | | ( | | | | | | ( | |
Other | | | | | | | | | | | | | | | | |
Total net revenue | | | | | | | | | | | | | | | | |
Expenses: | | | | | | | | | | | | | | | | |
Compensation | | | | | | | | | | | | | | | | |
Loan origination | | | | | | — | | | | | | — | | | | |
Technology | | | | | | | | | | | | | | | | |
Servicing | | | — | | | | | | | | | — | | | | |
Professional services | | | | | | | | | | | | | | | | |
Occupancy and equipment | | | | | | | | | | | | | | | | |
Marketing and advertising | | | | | | | | | | | | | | | | |
Other (2) | | | | | | | | | | | | | | | | |
Total expenses | | | | | | | | | | | | | | | | |
Income (loss) before provision for income taxes | | $ | | | $ | | | $ | | | $ | ( | | $ | | |
Segment assets at end of period | | $ | | | $ | | | $ | | | $ | | | $ | | |
Acquisition of: | | | | | | | | | | | | | | | | |
Capitalized software | | $ | | | $ | | | $ | | | $ | | | $ | | |
Furniture, fixtures, equipment and building improvements | | $ | | | $ | | | $ | | | $ | | | $ | | |
Amortization of capitalized software | | $ | | | $ | | | $ | | | $ | | | $ | | |
Depreciation and amortization of furniture, fixtures, equipment and building improvements | | $ | | | $ | | | $ | | | $ | | | $ | | |
| (1) | All revenues are from external customers. The segments do not recognize intersegment revenues. |
| (2) | Other expense includes smaller balance expense categories not separately provided to the chief operating decision maker such as safekeeping, travel, postage and corporate insurance. |
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Note 27—Subsequent Events
Management has evaluated all events and transactions through the date the Company issued these consolidated financial statements. During this period:
| ● | On |
| ● | All agreements to sell assets under agreements to repurchase assets that matured before the date of this Report were extended or renewed. |
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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:
| ● | The production segment performs loan origination, acquisition and sale activities. |
| ● | The servicing segment performs loan servicing for both newly originated loans we are holding for sale and loans we service for others, including for PennyMac Mortgage Investment Trust, a mortgage real estate investment trust separately listed on the New York Stock Exchange under the ticker symbol “PMT”. |
Our principal mortgage banking subsidiary, PennyMac Loan Services, LLC (“PLS”), is a non-bank producer and servicer of mortgage loans in the United States. PLS is a seller/servicer for the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), each of which is a government-sponsored entity. PLS is also an approved issuer of securities guaranteed by the Government National Mortgage Association (“Ginnie Mae”), a lender of the Federal Housing Administration (“FHA”), and a lender/servicer of the U.S. Department of Veterans Affairs (“VA”) and the U.S. Department of Agriculture (“USDA”). We refer to each of Fannie Mae, Freddie Mac, Ginnie Mae, FHA, VA and USDA as an “Agency” and collectively as the “Agencies.” PLS is able to service loans in all 50 states, the District of Columbia, Puerto Rico, Guam and the U.S. Virgin Islands, and originate loans in all 50 states and the District of Columbia, either because PLS is properly licensed in a particular jurisdiction or exempt or otherwise not required to be licensed in that jurisdiction.
Our investment management subsidiary is PNMAC Capital Management, LLC (“PCM”), a Delaware limited liability company registered with the Securities Exchange Commission (“SEC”) as an investment adviser under the Investment Advisers Act of 1940, as amended. PCM has an investment management contract with PMT.
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Business Trends
Recent actions by the U.S. government administration with respect to trade, tariffs and government cost reduction initiatives have led to significant volatility in financial markets and uncertainty regarding the economic outlook, including inflation and interest rates. Elevated interest rates in recent years have constrained growth in the size of the mortgage origination market, which is currently projected to increase from $1.7 trillion in 2024 to $2.0 trillion in 2025 according to mortgage industry economists.
The opportunity for refinancing has increased in recent periods, driven by interest rate volatility and a greater proportion of outstanding mortgages with note rates near current market rates. If such interest rate volatility continues, it may drive greater mortgage production activity and higher prepayment speeds than we have experienced in recent years. Additionally, reductions in the Federal Reserve’s federal funds rate have reduced the costs of floating rate borrowings and placement fees we receive in relation to custodial funds that we manage as compared to the same periods in the prior year. The current period of economic uncertainty and market volatility may also lead to a reduction in economic activity and slowing home price growth or depreciation, which could lead to increasing mortgage delinquencies or defaults and increase losses from our representations and warranties.
We expect to sell a portion of the conventional loans and all of the jumbo loans from our correspondent channel to PMT in the third quarter of 2025.
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Results of Operations
Our results of operations are summarized below:
| | | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 |
| ||||
| | (dollars in thousands, except per share amounts) | | ||||||||||
Revenues: | | | | | | | | | | | | | |
Loan production revenues (1) | | $ | 299,564 | | $ | 222,566 | | $ | 572,502 | | $ | 425,394 | |
Net loan servicing fees | | | 150,395 | | | 167,604 | | | 314,681 | | | 268,558 | |
Net interest expense | | | (17,648) | | | (7,060) | | | (35,859) | | | (16,403) | |
Other | | | 12,419 | | | 23,017 | | | 24,309 | | | 34,238 | |
Total net revenues | | | 444,730 | | | 406,127 | | | 875,633 | | | 711,787 | |
Expenses: | | | | | | | | | | | | | |
Compensation | | | 187,541 | | | 141,956 | | | 369,529 | | | 288,332 | |
Loan origination | | | 68,836 | | | 40,270 | | | 112,932 | | | 70,838 | |
Technology | | | 42,257 | | | 35,690 | | | 82,454 | | | 71,657 | |
Servicing | | | 28,286 | | | 22,920 | | | 50,161 | | | 39,024 | |
Marketing and advertising | | | 12,389 | | | 5,445 | | | 21,821 | | | 9,116 | |
Other | | | 28,979 | | | 25,992 | | | 58,098 | | | 55,083 | |
Total expenses | | | 368,288 | | | 272,273 | | | 694,995 | | | 534,050 | |
Income before (benefit from) provision for income taxes | | | 76,442 | | | 133,854 | | | 180,638 | | | 177,737 | |
(Benefit from) provision for income taxes | | | (60,021) | | | 35,596 | | | (32,105) | | | 40,171 | |
Net income | | $ | 136,463 | | $ | 98,258 | | $ | 212,743 | | $ | 137,566 | |
Earnings per share | | | | | | | | | | | | | |
Basic | | $ | 2.64 | | $ | 1.93 | | $ | 4.12 | | $ | 2.71 | |
Diluted | | $ | 2.54 | | $ | 1.85 | | $ | 3.97 | | $ | 2.59 | |
Annualized return on average stockholders' equity | | | 13.9% | | | 10.9% | | | 10.9% | | | 7.7% | |
Dividends declared per share | | $ | 0.30 | | $ | 0.20 | | $ | 0.60 | | $ | 0.40 | |
Income before provision for income taxes by reportable segment and corporate and other: | | | | | | | | | | | | | |
Production | | $ | 57,788 | | $ | 55,169 | | $ | 119,731 | | $ | 103,847 | |
Servicing | | | 54,152 | | | 90,702 | | | 130,153 | | | 114,356 | |
Corporate and other | | | (35,498) | | | (12,017) | | | (69,246) | | | (40,466) | |
| | $ | 76,442 | | $ | 133,854 | | $ | 180,638 | | $ | 177,737 | |
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization | | $ | 262,021 | | $ | 249,718 | | $ | 550,054 | | $ | 477,446 | |
During the period: | | | | | | | | | | | | | |
Interest rate lock commitments issued | | $ | 39,597,584 | | $ | 27,998,822 | | $ | 71,054,404 | | $ | 50,584,454 | |
Unpaid principal balance of loans produced or fulfilled for PMT | | $ | 37,611,130 | | $ | 27,360,094 | | $ | 66,463,876 | | $ | 48,769,160 | |
At end of period: | | | | | | | | | | | | | |
Interest rate lock commitments outstanding | | | | | | | | $ | 10,998,207 | | $ | 7,596,114 | |
Unpaid principal balance of loan servicing portfolio: | | | | | | | | | | | | | |
Owned: | | | | | | | | | | | | | |
Mortgage servicing rights and liabilities | | | | | | | | $ | 463,150,304 | | $ | 396,451,017 | |
Loans held for sale | | | | | | | | | 6,783,240 | | | 6,108,082 | |
| | | | | | | | | 469,933,544 | | | 402,559,099 | |
Subserviced for: | | | | | | | | | | | | | |
PMT | | | | | | | | | 228,838,699 | | | 230,179,513 | |
U.S. Department of Veterans Affairs | | | | | | | | | 822,525 | | | — | |
Other non-affiliates | | | | | | | | | 72,153 | | | — | |
| | | | | | | | | 229,733,377 | | | 230,179,513 | |
| | | | | | | | $ | 699,666,921 | | $ | 632,738,612 | |
| | | | | | | | | | | | | |
Book value per share | | | | | | | | $ | 78.04 | | $ | 71.76 | |
| (1) | Includes Net gains on loans held for sale at fair value, Loan origination fees and Fulfillment fees from PennyMac Mortgage Investment Trust. |
| (2) | To provide investors with information in addition to our results as determined by accounting principles generally accepted in the United States (“GAAP”), we disclose Adjusted EBITDA as a non-GAAP measure. Adjusted EBITDA is a measure that is frequently used in our industry to measure performance and we believe that this measure provides supplemental information that is useful to investors. Adjusted EBITDA is not a financial measure calculated in accordance with GAAP and should not be considered as a substitute for net income, or any other performance measure calculated in accordance with GAAP. |
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We define “Adjusted EBITDA” as net income plus provision for income taxes, depreciation and amortization, excluding decrease (increase) in fair value of mortgage servicing rights (“MSRs”) net of mortgage servicing liabilities (“MSLs”), due to changes in the valuation inputs we use in our valuation models, hedging (gains) losses associated with MSRs, stock-based compensation and interest expense on corporate debt or corporate revolving credit facilities and capital leases.
We believe that the presentation of Adjusted EBITDA provides useful information to investors regarding our results of operations because each measure assists both investors and management in analyzing and benchmarking the performance and value of our business. However, other companies may define Adjusted EBITDA differently, and as a result, our measures of Adjusted EBITDA may not be directly comparable to those of other companies.
Adjusted EBITDA measures have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
| a) | they do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments; |
| b) | they do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payment on our debt; and |
| c) | they are not adjusted for all non-cash income or expense items that are reflected in our consolidated statements of cash flows. |
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:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
Net income | | $ | 136,463 | | $ | 98,258 | | $ | 212,743 | | $ | 137,566 |
(Benefit from) provision for income taxes | | | (60,021) | | | 35,596 | | | (32,105) | | | 40,171 |
Income before (benefit from) provision for income taxes | | | 76,442 | | | 133,854 | | | 180,638 | | | 177,737 |
Depreciation and amortization | | | 14,731 | | | 14,240 | | | 28,627 | | | 28,404 |
(Increase) decrease in fair value of MSRs net of MSLs due to changes in valuation inputs used in valuation models | | | (15,929) | | | (99,425) | | | 189,565 | | | (269,404) |
Hedging losses associated with MSRs | | | 109,102 | | | 171,777 | | | 2,328 | | | 466,422 |
Stock‑based compensation | | | 7,518 | | | (2,212) | | | 18,602 | | | 2,371 |
Interest expense on corporate debt or corporate revolving credit facilities and capital leases | | | 70,157 | | | 43,968 | | | 130,294 | | | 82,800 |
Effect of non-recurring gain from joint venture and arbitration accrual | | | — | | | (12,484) | | | — | | | (10,884) |
Adjusted EBITDA | | $ | 262,021 | | $ | 249,718 | | $ | 550,054 | | $ | 477,446 |
Income Before (Benefit from) Provisions for Income Taxes
For the quarter ended June 30, 2025, income before income taxes decreased $57.4 million compared to the same quarter in 2024. The decrease was primarily due to a $96.0 million increase in total expenses, a $17.2 million decrease in Net loan servicing fees resulting from increases in net MSR valuation losses in excess of growth in servicing fees, a $10.6 million increase in Net interest expense and a $10.6 million decrease in other income, partially offset by
a $77.0 million increase in loan production revenue due to higher volume across all production channels.
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For the six months ended June 30, 2025, income before income taxes increased $2.9 million compared to the same period in 2024. The increase was primarily due to a $147.1 million increase in loan production revenue due to higher volume across all production channels and a $46.1 million increase in Net loan servicing fees resulting from growth in our servicing portfolio, partially offset by a $19.5 million increase in Net interest expense, a $9.9 million decrease in other income and a $160.9 million increase in total expenses.
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Net Gains on Loans Held for Sale at Fair Value
In our production segment, revenues reflect the effects of larger mortgage market volumes during the quarter and six months ended June 30, 2025 compared to the same periods in 2024. During the quarter and six months ended June 30, 2025, we recognized Net gains on loans held for sale at fair value totaling $234.7 million and $455.7 million, respectively, representing an increase of $58.6 million and $117.2 million, respectively, compared to the same periods in 2024.
Our net gains on loans held for sale are summarized below:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
From non-affiliates: | | | | | | | | | | | | |
Cash losses: | | |
| | |
| | |
| | |
|
Loans | | $ | (573,210) | | $ | (413,822) | | $ | (849,520) | | $ | (723,012) |
Hedging activities | | | (105,772) | | | 92,552 | | | (416,471) | | | 242,771 |
Total cash losses | | | (678,982) | | | (321,270) | | | (1,265,991) | | | (480,241) |
Non-cash gains: | | | | | | | | | | | | |
Changes in fair values of loans and derivative financial instruments outstanding at end of period: | | | | | | | | | | | | |
Interest rate lock commitments | | | 32,211 | | | (1,055) | | | 108,588 | | | (20,841) |
Loans | | | (15,268) | | | (2,695) | | | (102,307) | | | 24,950 |
Hedging derivatives | | | 76,919 | | | (39,597) | | | 242,572 | | | (137,579) |
| | | 93,862 | | | (43,347) | | | 248,853 | | | (133,470) |
Mortgage servicing rights resulting from loan sales | | | 814,538 | | | 541,207 | | | 1,464,887 | | | 953,727 |
Provisions for losses relating to representations and warranties: | | | | | | | | | | | | |
Pursuant to loan sales | | | (4,054) | | | (4,129) | | | (7,601) | | | (8,081) |
Reductions in liability due to changes in estimate | | | 2,220 | | | 4,076 | | | 3,635 | | | 7,396 |
Total non-cash gains | | | 906,566 | | | 497,807 | | | 1,709,774 | | | 819,572 |
Total gains on sale from non-affiliates | | | 227,584 | | | 176,537 | | | 443,783 | | | 339,331 |
From PennyMac Mortgage Investment Trust | | | 7,075 | | | (473) | | | 11,913 | | | (826) |
| | $ | 234,659 | | $ | 176,064 | | $ | 455,696 | | $ | 338,505 |
During the period: | | | | | | | | | | | | |
Interest rate lock commitments issued: | | | | | | | | | | | | |
By loan type: | | | | | | | | | | | | |
Government-insured or guaranteed | | $ | 18,209,041 | | $ | 14,064,074 | | $ | 34,324,614 | | $ | 24,858,332 |
Conventional conforming | | | 19,340,043 | | | 13,024,197 | | | 32,913,808 | | | 24,346,284 |
Jumbo | | | 1,383,209 | | | 454,378 | | | 2,602,313 | | | 582,494 |
Closed-end second lien mortgage | | | 665,291 | | | 456,173 | | | 1,213,669 | | | 797,344 |
| | $ | 39,597,584 | | $ | 27,998,822 | | $ | 71,054,404 | | $ | 50,584,454 |
By production channel: | | | | | | | | | | | | |
Correspondent | | $ | 28,657,935 | | $ | 21,013,818 | | $ | 50,753,289 | | $ | 38,094,674 |
Broker direct | | | 7,151,449 | | | 4,286,680 | | | 12,629,818 | | | 7,639,087 |
Consumer direct | | | 3,788,200 | | | 2,698,324 | | | 7,671,297 | | | 4,850,693 |
| | $ | 39,597,584 | | $ | 27,998,822 | | $ | 71,054,404 | | $ | 50,584,454 |
At end of period: | | | | | | | | | | | | |
Loans held for sale at fair value | | | | | | | | $ | 6,961,224 | | $ | 6,238,959 |
Commitments to fund and purchase loans | | | | | | | | $ | 10,998,207 | | $ | 7,596,114 |
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Non-Cash Elements of Gain on Sale of Loans Held for Sale
Our gains on loans held for sale include both cash and non-cash elements. We recognize a significant portion of our gains on loans held for sale when we make commitments to purchase or fund mortgage loans. We recognize this gain in the form of interest rate lock commitment (“IRLC”) derivatives. We adjust our initial gain amount as the loan purchase or origination process progresses until the loan is either funded or cancelled.
We also receive non-cash proceeds on sale that include our estimate of the fair value of MSRs and we incur MSLs (which represent the fair value of the costs we expect to incur in excess of the fees we receive for delinquent loans we have bought out of Ginnie Mae guaranteed securities and have resold to and service for investors) and we recognize the fair value of our estimate of the losses we expect to incur relating to the representations and warranties we provide in our loan sale transactions.
The MSRs, MSLs, and liabilities for representations and warranties we recognize represent our estimate of the fair value of future benefits and costs we will realize for years in the future. These estimates represented approximately 346% and 321% of our gains on sales of loans held for sale at fair value for the quarter and six months ended June 30, 2025, respectively, as compared to 307% and 282% for the same periods in 2024. These estimates change as circumstances change and changes in these estimates are recognized in income in subsequent periods. Subsequent changes in the fair value of our MSRs may significantly affect our income.
Interest Rate Lock Commitments, Mortgage Servicing Rights and Mortgage Servicing Liabilities
The methods and key inputs we use to measure and update our measurements of IRLCs, MSRs and MSLs are detailed in Note 7 – Fair Value – Valuation Techniques and Inputs to the consolidated financial statements included in this Quarterly Report.
Representations and Warranties
Our agreements with purchasers and insurers include representations and warranties related to the loans we sell. The representations and warranties require adherence to purchaser and insurer origination and underwriting guidelines, including but not limited to the validity of the lien securing the loan, property eligibility, borrower credit, income and asset requirements, and compliance with applicable federal, state and local law.
In the event of a breach of our representations and warranties, we may be required to either repurchase the loans with the identified defects or indemnify the purchaser or insurer. In such cases, we bear any subsequent credit loss on the loans. Our credit loss may be reduced by any recourse we have to correspondent originators that sold such loans to us and breached similar or other representations and warranties. In such event, we have the right to seek a recovery of related repurchase losses from that correspondent seller.
Our representations and warranties are generally not subject to stated limits of exposure. However, we believe that the current unpaid principal balance (“UPB”) of loans sold by us and subject to representation and warranty liability to date represents the maximum exposure to repurchases related to representations and warranties.
The level of the liability for losses under representations and warranties is difficult to estimate and requires considerable judgment. The level of loan repurchase losses is dependent on economic factors, purchaser or insurer loss mitigation strategies, and other external conditions that may change over the lives of the underlying loans. Our estimate of the liability for representations and warranties is developed by our credit risk administration staff and reviewed by our Management Risk Committee that includes our senior executives and senior management in our loan production, loan servicing, and credit risk management areas.
The method used to estimate our losses on representations and warranties is a function of our estimate of future defaults, loan repurchase rates, the severity of loss in the event of default, if applicable, and the probability of reimbursement by the correspondent loan seller. We establish a liability at the time loans are sold and periodically assess the adequacy of our recorded liability.
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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 $4.1 million and $7.6 million for the quarter and six months ended June 30, 2025, respectively, compared to $4.1 million and $8.1 million for the same periods in 2024. The slight decrease in the provision relating to current loan sales was primarily attributable to a lower expectation of future repurchases due to improved collateral quality for the quarter and six months ended June 30, 2025 compared to the same periods in 2024.
We also recorded reductions in the liability of $2.2 million and $3.6 million for the quarter and six months ended June 30, 2025 compared to $4.1 million and $7.4 million for the same periods in 2024. The reductions in the liability resulted from previously sold loans meeting performance criteria established by the Agencies which significantly limit the likelihood of certain repurchase or indemnification claims.
Following is a summary of loan repurchase activity and the UPB of loans subject to representations and warranties:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | | (in thousands) | ||||||||
During the period: | | |
| | |
| | |
| | |
|
Indemnification activity: | | | | | | | | | | | | |
Loans indemnified at beginning of period | | $ | 112,547 | | $ | 81,689 | | $ | 101,867 | | $ | 75,724 |
New indemnifications | | | 6,367 | | | 14,292 | | | 18,403 | | | 22,013 |
Less indemnified loans sold, repaid or refinanced | | | 2,881 | | | 999 | | | 4,237 | | | 2,755 |
Loans indemnified at end of period | | $ | 116,033 | | $ | 94,982 | | $ | 116,033 | | $ | 94,982 |
Repurchase activity: | | | | | | | | | | | | |
Total loans repurchased | | $ | 25,418 | | $ | 23,468 | | $ | 45,360 | | $ | 44,863 |
Less: | | | | | | | | | | | | |
Loans repurchased by correspondent lenders | | | 15,585 | | | 14,839 | | | 31,077 | | | 25,781 |
Loans repaid by borrowers or resold | | | 952 | | | 4,908 | | | 8,653 | | | 11,735 |
Net loans repurchased with losses chargeable to liability for representations and warranties | | $ | 8,881 | | $ | 3,721 | | $ | 5,630 | | $ | 7,347 |
Losses charged to liability for representations and warranties | | $ | 845 | | $ | 1,341 | | $ | 1,332 | | $ | 2,785 |
At end of period: | | | | | | | | | | | ||
Unpaid principal balance of loans subject to representations and warranties | | | | | | | | $ | 452,998,620 | | $ | 381,524,553 |
Liability for representations and warranties | | | | | | | | $ | 31,763 | | $ | 28,688 |
During the quarter and six months ended June 30, 2025, we repurchased loans totaling $25.4 million and $45.4 million, respectively. We charged losses of $845,000 and $1.3 million against the liability during the quarter and six months ended June 30, 2025. Our losses arising from representations and warranties have historically been minimized by our ability to either recover most of the losses from our correspondent sellers or from our ability to profitably refinance and resell repurchased loans.
Elevated interest rate levels may affect certain of our correspondent sellers’ ability to honor their obligations to repurchase defective loans, may increase the level of borrower defaults and may increase the level of repurchases we are required to make, thereby making it more difficult to minimize losses on repurchased loans. We expect these developments may increase the losses we incur in relation to our recorded liability for representations and warranties compared to our historical experience. However, we believe our recorded liability is presently adequate to absorb such losses.
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Loan Origination Fees
Loan origination fees increased $17.0 million and $27.3 million during the quarter and six months ended June 30, 2025, compared to the same periods in 2024 primarily due to an increase in production volume.
Fulfillment Fees from PennyMac Mortgage Investment Trust
Fulfillment fees from PMT represent fees we collect for services we perform on behalf of PMT in connection with the acquisition, packaging and sale of loans. The fulfillment fees are calculated based on the number of loans we fulfill for PMT.
Fulfillment fees increased $1.4 million and $2.7 million during the quarter and six months ended June 30, 2025, compared to the same periods in 2024; the increase was primarily due to an increase in the number of loans we fulfilled for PMT during the quarter and six months ended June 30, 2025 compared to the same periods in 2024.
Net Loan Servicing Fees
Our net loan servicing fee income has two primary components: fees earned for servicing the loans and the effects of MSR and MSL valuation changes, net of hedging results as summarized below:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
Loan servicing fees | | $ | 506,667 | | $ | 440,696 | | $ | 995,135 | | $ | 864,880 |
Effects of MSRs and MSLs net of hedging results | | | (356,272) | | | (273,092) | | | (680,454) | | | (596,322) |
Net loan servicing fees | | $ | 150,395 | | $ | 167,604 | | $ | 314,681 | | $ | 268,558 |
Loan Servicing Fees
Following is a summary of our loan servicing fees:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
From non-affiliates | | $ | 435,517 | | $ | 375,040 | | $ | 853,204 | | $ | 733,066 |
From PennyMac Mortgage Investment Trust | | | 21,645 | | | 20,264 | | | 43,374 | | | 40,526 |
Other: | | | | | | | | | | | | |
Late charges | | | 22,959 | | | 20,193 | | | 46,026 | | | 40,782 |
Other | | | 26,546 | | | 25,199 | | | 52,531 | | | 50,506 |
| | | 49,505 | | | 45,392 | | | 98,557 | | | 91,288 |
| | $ | 506,667 | | $ | 440,696 | | $ | 995,135 | | $ | 864,880 |
Average UPB of loans serviced: | | | | | | | | | | | | |
MSRs and MSLs | | $ | 452,077,317 | | $ | 388,760,891 | | $ | 443,765,594 | | $ | 382,559,187 |
Subservicing | | $ | 230,362,073 | | $ | 230,254,779 | | $ | 230,771,395 | | $ | 231,235,514 |
Loan servicing fees from non-affiliates generally relate to our MSRs which are primarily related to servicing we provide for loans included in Agency securitizations. These fees are contractually established at an annualized percentage of the UPB of the loan serviced and we collect these fees from borrower payments. Loan servicing fees from PMT are primarily related to PMT’s MSRs and are established at monthly per-loan amounts based on whether the loan is a fixed-rate or adjustable-rate loan and the loan’s delinquency or foreclosure status as detailed in Note 5–Transactions with Related Parties to the consolidated financial statements included in this Quarterly Report. Other loan servicing fees are comprised primarily of borrower-contracted fees such as late charges and reconveyance fees.
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Loan servicing fees from non-affiliates and other fees increased during the quarter and six months ended June 30, 2025 compared to the same periods in 2024. The increases were primarily due to growth of our loan servicing portfolio. Other servicing fees increased due to growth in our MSR portfolio combined with increased incentives received for loss mitigation activities.
Effects of Mortgage Servicing Rights and Mortgage Servicing Liabilities
We have elected to carry our servicing assets and liabilities at fair value. Changes in fair value have two components: changes due to realization of the contractual servicing fees and changes due to changes in market inputs used to estimate the fair value of MSRs and MSLs. We endeavor to moderate the effects of changes in fair value by entering into derivatives transactions and holding principal-only stripped mortgage-backed securities.
Change in fair value of MSRs and MSLs and the related hedging results are summarized below:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
MSR and MSL valuation changes and hedging results: | | | | | | | | | | | | |
Changes in fair value attributable to | | $ | 15,929 | | $ | 99,425 | | $ | (189,565) | | $ | 269,404 |
Hedging results | | | (109,102) | | | (171,777) | | | (2,328) | | | (466,422) |
| | | (93,173) | | | (72,352) | | | (191,893) | | | (197,018) |
Changes in fair value attributable to realization of cash flows | | | (263,099) | | | (200,740) | | | (488,561) | | | (399,304) |
Total change in fair value of mortgage servicing rights and mortgage servicing liabilities net of hedging results | | $ | (356,272) | | $ | (273,092) | | $ | (680,454) | | $ | (596,322) |
Average balances: | | | | | | | | | | | | |
Mortgage servicing rights | | $ | 9,284,824 | | $ | 7,785,298 | | $ | 9,087,827 | | $ | 7,566,468 |
Mortgage servicing liabilities | | $ | 1,640 | | $ | 1,718 | | $ | 1,654 | | $ | 1,744 |
At end of period: | | | | | | | | | | | | |
Mortgage servicing rights | | | | | | | | $ | 9,531,249 | | $ | 7,923,078 |
Mortgage servicing liabilities | | | | | | | | $ | 1,643 | | $ | 1,708 |
Changes in fair value of MSRs attributable to changes in fair value inputs decreased during the quarter and six months ended June 30, 2025 compared to the same periods in 2024 due to decreases in interest rates during the quarter and six months ended June 30, 2025 compared to increasing interest rates during the same periods in 2024. Increasing interest rates reduce the rate of prepayments of the underlying loans, which increases the cash flows expected from the servicing rights, while decreasing interest rates have the opposite effect.
Hedging results reflect valuation losses attributable to the effects of interest rate volatility and increased hedging costs on the fair value of the hedging instruments during the quarter and interest rate decreases over the six months ended June 30, 2025 compared with interest rate increases in the same periods in 2024.
Changes in fair value attributable to realization of cash flows are influenced by changes in the level of servicing assets and liabilities and changes in estimates of the remaining cash flows to be realized. During the quarter and six months ended June 30, 2025, realization of cash flows increased compared to the same periods in 2024, primarily due to the growth in our investment in MSRs.
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Following is a summary of our loan servicing portfolio:
| | | | | | |
| | | | | | |
| | June 30, | | December 31, | ||
|
| 2025 |
| 2024 | ||
| | (in thousands) | ||||
Owned: | | | | | | |
Mortgage servicing rights and liabilities | | | | | | |
Originated | | $ | 448,312,667 | | $ | 410,393,342 |
Purchased and assumed | | | 14,837,637 | | | 15,681,406 |
| | | 463,150,304 | | | 426,074,748 |
Loans held for sale | | | 6,783,240 | | | 8,128,914 |
| | | 469,933,544 | | | 434,203,662 |
Subserviced for: | | | | | | |
PMT | | | 228,838,699 | | | 230,753,581 |
U.S. Department of Veterans Affairs (1) | | | 822,525 | | | 806,584 |
Other non-affiliates | | | 72,153 | | | — |
| | | 229,733,377 | | | 231,560,165 |
Total loans serviced | | $ | 699,666,921 | | $ | 665,763,827 |
Delinquencies: | | | | | | |
Owned servicing: | | | | | | |
30-89 days | | $ | 18,337,583 | | $ | 17,933,800 |
90 days or more | | | 8,209,699 | | | 9,023,217 |
| | $ | 26,547,282 | | $ | 26,957,017 |
Subservicing: | | | | | | |
30-89 days | | $ | 2,817,227 | | $ | 2,673,329 |
90 days or more | | | 1,212,604 | | | 1,319,190 |
| | $ | 4,029,831 | | $ | 3,992,519 |
| (1) | Represents previously delinquent loans that have been purchased by the VA pursuant to the Veterans Affairs Servicing Purchase program where servicing is expected to be transferred to a servicer selected by the VA. |
Following is a summary of characteristics of our MSR and MSL servicing portfolio as of June 30, 2025:
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Average | | | |||||||||||||
Loan type |
| Unpaid |
| Loan count |
| Note rate |
| Age |
| Remaining |
| | Loan size |
| FICO credit score at origination |
| Original LTV (1) |
| Current LTV (1) |
| 60+ Delinquency (by UPB) | |
| | (Dollars and loan count in thousands) | ||||||||||||||||||||
Government insured or guaranteed (2): | | | | | | | | | | | | | | | | | | | | | | |
FHA | | $ | 161,209,113 | | 751 | | 4.7% | | 46 | | 317 | | $ | 215 | | 683 | | 93% | | 70% | | 5.3% |
VA | | | 128,898,548 | | 463 | | 4.0% | | 42 | | 317 | | $ | 278 | | 731 | | 90% | | 70% | | 1.8% |
USDA | | | 20,809,405 | | 140 | | 4.1% | | 61 | | 302 | | $ | 148 | | 700 | | 98% | | 65% | | 5.3% |
Government-sponsored entities: | | | | | | | | | | | | | | | | | | | | | | |
Fannie Mae | | | 58,743,053 | | 183 | | 5.2% | | 29 | | 318 | | $ | 321 | | 763 | | 75% | | 63% | | 0.6% |
Freddie Mac | | | 80,550,488 | | 240 | | 5.5% | | 22 | | 326 | | $ | 335 | | 760 | | 76% | | 67% | | 0.7% |
Closed-end second lien mortgage loans | | | 2,050,611 | | 26 | | 9.4% | | 11 | | 250 | | $ | 80 | | 744 | | 19% | | 18% | | 0.2% |
Other (3) | | | 10,889,086 | | 27 | | 6.8% | | 12 | | 348 | | $ | 413 | | 774 | | 74% | | 70% | | 0.3% |
| | $ | 463,150,304 | | 1,830 | | 4.7% | | 38 | | 318 | | $ | 253 | | 723 | | 86% | | 68% | | 2.8% |
| (1) | Loan-to-Value. |
| (2) | Government loans include loans securitized in Ginnie Mae pools as well as loans sold to private investors. |
| (3) | Represents conventional loans sold to private investors. |
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Net Interest Expense
Following is a summary of net interest expense:
| | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | (in thousands) | ||||||||||
Interest income: | | | | | | | | | | | | |
Cash and short-term investment | | $ | 10,919 | | $ | 13,172 | | $ | 20,926 | | $ | 27,754 |
Principal-only stripped mortgage-backed securities | | | 6,948 | | | 9,074 | | | 18,543 | | | 9,344 |
Loans held for sale at fair value | | | 105,725 | | | 86,283 | | | 193,119 | | | 151,704 |
Placement fees relating to custodial funds | | | 97,975 | | | 92,230 | | | 177,770 | | | 168,363 |
Other | | | 362 | | | 52 | | | 1,442 | | | 72 |
| | | 221,929 | | | 200,811 | | | 411,800 | | | 357,237 |
Interest expense: | | | | | | | | | | | | |
Short-term debt | | | 116,853 | | | 110,696 | | | 214,886 | | | 185,208 |
Long-term debt | | | 105,900 | | | 85,900 | | | 202,615 | | | 168,738 |
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations | | | 14,058 | | | 7,902 | | | 23,832 | | | 14,023 |
Interest on mortgage loan impound deposits | | | 2,263 | | | 2,962 | | | 4,844 | | | 4,949 |
Other | | | 503 | | | 411 | | | 1,482 | | | 722 |
| | | 239,577 | | | 207,871 | | | 447,659 | | | 373,640 |
| | $ | (17,648) | | $ | (7,060) | | $ | (35,859) | | $ | (16,403) |
| | | | | | | | | | | | |
Net interest expense increased $10.6 million and $19.5 million during the quarter and six months ended June 30, 2025 compared to the same periods in 2024. The increases were primarily due to the Company financing a larger investment in MSRs as well as inventory of loans held for sale and principal-only stripped MBS during 2025 as compared to 2024 and a decrease in interest income from cash and short-term investment due to a decrease in average cash balances, partially offset by increases in interest income from loans held for sale and earnings from custodial funds.
Management Fees from PennyMac Mortgage Investment Trust
Management fees decreased $264,000 and $440,000 during the quarter and six months ended June 30, 2025 compared to the same periods in 2024, due to decreases in PMT’s average shareholders’ equity which is the basis for the base management fees.
Expenses
Compensation
Compensation expenses are summarized below:
| | | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, | | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 |
| ||||
| | (in thousands) | | ||||||||||
Salaries and wages | | $ | 111,446 | | $ | 92,364 | | $ | 220,094 | | $ | 185,148 | |
Severance | | | 420 | | | 17 | | | 745 | | | 660 | |
Incentive compensation | | | 46,079 | | | 32,935 | | | 84,150 | | | 59,100 | |
Taxes and benefits | | | 22,078 | | | 18,852 | | | 45,938 | | | 41,053 | |
Stock and unit-based compensation | | | 7,518 | | | (2,212) | | | 18,602 | | | 2,371 | |
| | $ | 187,541 | | $ | 141,956 | | $ | 369,529 | | $ | 288,332 | |
Head count: | | | | | | | | | | | | | |
Average | | | 4,589 | | | 3,951 | | | 4,524 | | | 3,937 | |
Period end | | | | | | | | | 4,779 | | | 4,012 | |
Compensation expenses increased $45.6 million and $81.2 million during the quarter and six months ended
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June 30, 2025 compared to the same periods in 2024. The increases were primarily due to an increase in head count and increased incentive compensation during the quarter and six months ended June 30, 2025, reflecting higher loan production volume and higher return on equity.
Loan Origination
Loan origination expenses increased $28.6 million and $42.1 million for the quarter and six months ended June 30, 2025 compared to the same periods in 2024. The increases were primarily due to higher origination volumes.
Technology
Technology expenses increased $6.6 million and $10.8 million during the quarter and six months ended June 30, 2025 compared to the same quarter in 2024. The increases were primarily due to increases in virtual desktop and cloud-related expenses.
Servicing
Servicing expenses increased $5.4 million and $11.1 million during the quarter and six months ended June 30, 2025 compared to the same periods in 2024. The increases were primarily due to increases in provision for losses on servicing advances resulting from higher delinquent loan balances during the quarter and six months ended June 30, 2025 compared to the same periods in 2024.
Marketing and advertising
Marketing and advertising expenses increased $6.9 million and $12.7 million during the quarter and six months ended June 30, 2025 compared to the same periods in 2024. The increases were primarily due to additional marketing expenses incurred as an Official Supporter of Team USA and increased marketing expenses for consumer direct lending.
Provision for Income Taxes
Our effective income tax rates were (78.5)% and 26.6% for the quarters ended June 30, 2025 and 2024, respectively, and (17.8)% and 22.6% for the six months ended June 30, 2025 and 2024, respectively. The decreases in the effective income tax rates for the quarter and six months ended June 30, 2025 compared to the same periods in 2024 are primarily due to a non-recurring $81.6 million net income tax benefit primarily due to the repricing of deferred tax liabilities resulting from changes to California's apportionment rules with the enactment of California Senate Bill 132, signed into law June 27, 2025 and effective January 1, 2025. The law requires financial institutions to apportion their California income using a single sales factor instead of a factor equally weighted with property, payroll and sales.
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Balance Sheet Analysis
Following is a summary of key balance sheet items as of the dates presented:
| | | | | | |
| | June 30, | | December 31, | ||
|
| 2025 |
| 2024 | ||
| | (in thousands) | ||||
ASSETS | | | | | | |
Cash and short-term investment | | $ | 624,448 | | $ | 659,035 |
Principal-only stripped mortgage-backed securities | | | 784,958 | | | 825,865 |
Loans held for sale at fair value | | | 6,961,224 | | | 8,217,468 |
Derivative assets | | | 180,642 | | | 113,076 |
Servicing advances, net | | | 430,602 | | | 568,512 |
Investments in and advances to affiliates | | | 31,569 | | | 31,150 |
Mortgage servicing rights at fair value | | | 9,531,249 | | | 8,744,528 |
Loans eligible for repurchase | | | 4,962,535 | | | 6,157,172 |
Other | | | 714,677 | | | 770,081 |
Total assets | | $ | 24,221,904 | | $ | 26,086,887 |
| | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | |
Short-term debt | | $ | 8,044,550 | | $ | 9,181,719 |
Long-term debt | | | 5,512,155 | | | 5,213,004 |
| | | 13,556,705 | | | 14,394,723 |
Liability for loans eligible for repurchase | | | 4,962,535 | | | 6,157,172 |
Income taxes payable | | | 1,097,452 | | | 1,131,000 |
Other | | | 572,712 | | | 574,341 |
Total liabilities | | | 20,189,404 | | | 22,257,236 |
Stockholders' equity | | | 4,032,500 | | | 3,829,651 |
Total liabilities and stockholders' equity | | $ | 24,221,904 | | $ | 26,086,887 |
Leverage ratios: | | | | | | |
Total debt / Stockholders' equity | | | 3.4 | | | 3.8 |
Total debt / Tangible stockholders' equity (1) | | | 3.5 | | | 3.9 |
| (1) | Tangible stockholders’ equity represents total stockholders’ equity reduced by intangible assets, comprised of capitalized software, for the dates presented. |
Total assets decreased $1.9 billion from $26.1 billion at December 31, 2024 to $24.2 billion at June 30, 2025. The decrease was primarily due to a decrease of $1.3 billion in loans held for sale at fair value and a decrease of $1.2 billion of loans eligible for repurchase, partially offset by an increase of $786.7 million of mortgage servicing rights.
Total liabilities decreased $2.1 billion from $22.3 billion at December 31, 2024 to $20.2 billion at June 30, 2025. The decrease was primarily due to a decrease of $838.0 million in borrowings and a decrease of $1.2 billion in liability for loans eligible for repurchase. As a result of our decreased inventory financing requirements, our leverage ratios decreased during the quarter ended June 30, 2025 from December 31, 2024.
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Cash Flows
Our cash flows are summarized below:
| | | | | | | | | | |
|
| Six months ended June 30, | | | |
| ||||
| | 2025 |
| 2024 |
| Change |
| |||
| | (in thousands) | | |||||||
Operating | | $ | 934,642 | | $ | (1,990,826) | | $ | 2,925,468 | |
Investing | | | (127,033) | |
| (1,520,406) | |
| 1,393,373 | |
Financing | | | (883,905) | |
| 3,168,197 | |
| (4,052,102) | |
Net decrease in cash | | $ | (76,296) | | $ | (343,035) | | $ | 266,739 | |
The net decrease in cash of $76.3 million during the six months ended June 30, 2025 is discussed below.
Operating activities
Net cash provided by operating activities totaled $934.6 million during the six months ended June 30, 2025 compared with net cash used in operating activities of $2.0 billion during the same period in 2024. Our cash flows from operating activities are primarily influenced by changes in the levels of our inventory of mortgage loans held for sale as shown below:
| | | | | | |
|
| Six months ended June 30, | ||||
| | 2025 | | 2024 | ||
| | (in thousands) | ||||
Cash flows from: | | | | | | |
Loans held for sale | | $ | 382,339 | | $ | (2,414,187) |
Other operating sources | | | 552,303 | | | 423,361 |
| | $ | 934,642 | | $ | (1,990,826) |
Investing activities
Net cash used in investing activities during the six months ended June 30, 2025 totaled $127.0 million, primarily due to a $140.7 million increase in margin deposits. Net cash used in investing activities during the six months ended June 30, 2024 totaled $1.5 billion, primarily due to $935.4 million in purchase of principal-only stripped MBS, $391.5 million in net settlement of derivative financial instruments used to hedge our investment in MSRs and a $178.5 million increase in short-term investment.
Financing activities
Net cash used in financing activities totaled $883.9 million during the six months ended June 30, 2025, primarily due to a decrease of $811.5 million in borrowings. The decrease in borrowings primarily reflects the decrease in inventory of loans held for sale. Net cash provided by financing activities totaled $3.2 billion during the six months ended June 30, 2024, primarily due to an increase of $3.2 billion in borrowings. The increase in borrowings primarily reflects the increase in inventory of loans held for sale and our investment in MSRs.
Liquidity and Capital Resources
Our liquidity reflects our ability to meet our current obligations (including our operating expenses and, when applicable, the retirement of, and margin calls relating to, our debt, and margin calls relating to hedges on our commitments to purchase or originate mortgage loans and on our MSR investments), fund new originations and purchases, and make investments as we identify them. We expect our primary sources of liquidity to be through cash flows from business activities, proceeds from bank borrowings and proceeds from and issuance of equity or debt offerings. We believe that our liquidity is sufficient to meet our current liquidity needs.
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Our current borrowing strategy is to finance our assets where we believe such borrowing is prudent, appropriate and available. Our primary borrowing activities are in the form of sales of assets under agreements to repurchase, sales of mortgage loan participation purchase and sale certificates, notes payable secured by mortgage servicing rights and unsecured senior notes. A significant amount of our borrowings have short-term maturities and provide for advances with terms ranging from 30 days to 364 days. Because a significant portion of our current debt facilities consist of short-term debt, we expect to renew these facilities in advance of maturity in order to ensure our ongoing liquidity and access to capital or otherwise allow ourselves sufficient time to replace any necessary financing.
Secured debt facilities for MSRs and servicing advances take various forms. Fannie Mae MSRs, Ginnie Mae MSRs and servicing advances may be pledged to special purpose entities, each of which may issue variable funding notes (“VFNs”) and term notes and term loans that are secured by such Ginnie Mae or Fannie Mae assets. Term notes are issued to qualified institutional buyers under Rule 144A of Securities Act and term loans are syndicated to banking entities, while the VFNs are sold to bank partners under agreements to repurchase. Freddie Mac MSRs are pledged to lenders under a bi-lateral loan and security agreement.
On May 1, 2025, PFSI issued $850 million in 6.875% unsecured senior notes due in 2032 in a private placement to “qualified institutional buyers” under Rule 144A of the Securities Act. On May 12, 2025, PFSI redeemed $650 million in 5.375% unsecured senior notes due in October, 2025. On June 20, 2025, PFSI, through its wholly-owned subsidiaries PNMAC, PLS and the Issuer Trust, redeemed $500 million in 4.25% Term Notes due in May 2027.
Our repurchase agreements represent the sales of assets together with agreements for us to buy back the respective assets at a later date. The table below presents the average, maximum daily and ending balances:
| | | | | | | | | | | | | |
| | Quarter ended June 30, | | Six months ended June 30, |
| ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | | ||||
| | (in thousands) | | (in thousands) | | ||||||||
Average balance | | $ | 7,183,987 | | $ | 5,761,107 | | $ | 6,649,802 | | $ | 4,651,823 | |
Maximum daily balance | | $ | 8,581,781 | | $ | 7,122,796 | | $ | 8,690,936 | | $ | 7,122,796 | |
Balance at quarter end | | | | | | | | $ | 7,351,846 | | $ | 6,414,295 | |
The differences between the average and maximum daily balances on our repurchase agreements reflect both the effect of increasing loan inventory levels during the six months ended June 30, 2025 and the fluctuations throughout the periods of our inventory as we fund and pool mortgage loans for sale in guaranteed mortgage securitizations.
Our repurchase agreements also contain margin call provisions that, upon notice from the applicable lender at its option, require us to transfer cash or, in some instances, additional assets in an amount sufficient to eliminate any margin deficit. A margin deficit will generally result from any decrease in the market value (as determined by the applicable lender) of the assets subject to the related financing agreement. Upon notice from the applicable lender, we will generally be required to satisfy the margin call on the day of such notice or within one business day thereafter, depending on the timing of the notice.
Our secured financing agreements at PLS require us to comply with various financial and other restrictive covenants. The most significant financial covenants currently include the following:
| ● | a minimum in unrestricted cash and cash equivalents of $100 million; |
| ● | a minimum tangible net worth of $1.25 billion; |
| ● | a maximum ratio of total indebtedness to tangible net worth of 10:1; and |
| ● | at least one other warehouse or repurchase facility that finances amounts and assets that are similar to those being financed under certain of our existing secured financing agreements. |
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.
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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:
| ● | pay dividends or distributions, redeem or repurchase equity, prepay subordinated debt and make certain loans or investments; |
| ● | incur, assume or guarantee additional debt or issue preferred stock; |
| ● | incur liens on assets; |
| ● | merge or consolidate with another person or sell all or substantially all of our assets to another person; |
| ● | transfer, sell or otherwise dispose of certain assets including capital stock of subsidiaries; |
| ● | enter into transactions with affiliates; and |
| ● | allow to exist certain restrictions on the ability of our non-guarantor restricted subsidiaries to pay dividends or make other payments to us. |
Although financial and other covenants limit the amount of indebtedness that we may incur and affect our liquidity through minimum cash reserve requirements, we believe that these covenants currently provide us with sufficient flexibility to successfully operate our business and obtain the financing necessary to achieve that purpose.
We are also subject to liquidity and net worth requirements established by the Federal Housing Finance Agency (“FHFA”) for Agency seller/servicers and Ginnie Mae for single-family issuers. FHFA and Ginnie Mae have established minimum liquidity and net worth requirements for their approved non-depository single-family sellers/servicers in the case of Fannie Mae, Freddie Mac, and Ginnie Mae for its approved single-family issuers, and Ginnie Mae has issued risk-based capital requirements. We believe that we are in compliance with the Agency’s pending requirements as of June 30, 2025.
We have a common stock repurchase program which allows us to repurchase common shares of up to $2 billion. Share repurchases may be effected through open market purchases or privately negotiated transactions in accordance with applicable rules and regulations. The stock repurchase program does not have an expiration date and the authorization does not obligate us to acquire any particular amount of common stock. From inception through June 30, 2025, we have repurchased approximately $1.8 billion of common shares under our stock repurchase program.
We continue to explore a variety of means of financing our business, including debt financing through bank warehouse lines of credit, bank loans, repurchase agreements, securitization transactions and corporate debt. However, there can be no assurance as to how much additional financing capacity such efforts will produce, what form the financing will take or whether such efforts will be successful.
Debt Obligations
As described further above in “Liquidity and Capital Resources,” we currently finance certain of our assets through short-term borrowings with major financial institutions in the form of sales of assets under agreements to repurchase and mortgage loan participation purchase and sale agreements. We access the capital market for long-term debt through the issuance of secured term notes, term loans and Unsecured Notes. The issuer under our secured term note facilities is PLS or a wholly-owned issuer trust guaranteed by PNMAC. In addition, PFSI has issued Unsecured Notes guaranteed by certain of its restricted wholly-owned domestic subsidiaries.
PLS is required to comply with financial and other restrictive covenants in certain financing agreements, as
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described further above in “Liquidity and Capital Resources”. As of June 30, 2025, we believe PLS was in compliance in all material respects with these covenants.
Many of our debt financing agreements contain a condition precedent to obtaining additional funding that requires PLS to maintain positive net income for at least one of the previous two consecutive quarters, or other similar measures. PLS is compliant with all such conditions.
The financing agreements also contain margin call provisions that, upon notice from the applicable lender, require us to transfer cash or, in some instances, additional assets in an amount sufficient to eliminate any margin deficit. Upon notice from the applicable lender, we will generally be required to satisfy the margin call on the day of such notice or within one business day thereafter, depending on the timing of the notice.
In addition, the financing agreements contain events of default (subject to certain materiality thresholds and grace periods), including payment defaults, breaches of covenants and/or certain representations and warranties, cross-defaults, guarantor defaults, servicer termination events and defaults, material adverse changes, bankruptcy or insolvency proceedings and other events of default customary for these types of transactions. The remedies for such events of default are also customary for these types of transactions and include the acceleration of the principal amount outstanding under the agreements and the liquidation by our lenders of the mortgage loans or other collateral then subject to the agreements.
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Our debt obligations have the following sizes and maturities:
| | | | | | | | | | | |
| | Outstanding | | Total | | Committed | | Facility | |||
Lender |
| indebtedness (1) |
| facility size (2) |
| facility (2) |
| Maturity date (2) | |||
| | (dollar amounts in thousands) | |
| |||||||
Loans sold under agreements to repurchase | | | | | | | | | | | |
Atlas Securitized Products, L.P. | | $ | 1,584,762 | | $ | 1,584,762 | | $ | 300,000 | | June 26, 2026 |
Bank of America, N.A. | | $ | 1,230,023 | | $ | 1,525,000 | | $ | 800,000 | | June 9, 2027 |
Royal Bank of Canada | | $ | 633,971 | | $ | 1,000,000 | | $ | 325,000 | | May 8, 2026 |
JP Morgan Chase Bank, N.A. | | $ | 519,934 | | $ | 519,934 | | $ | — | | June 28, 2026 |
Citibank, N.A. | | $ | 470,812 | | $ | 800,000 | | $ | 450,000 | | June 11, 2026 |
BNP Paribas | | $ | 345,257 | | $ | 600,000 | | $ | 250,000 | | September 30, 2026 |
Wells Fargo Bank, N.A. | | $ | 321,627 | | $ | 600,000 | | $ | 300,000 | | June 11, 2027 |
Morgan Stanley Bank, N.A. | | $ | 320,396 | | $ | 600,000 | | $ | 250,000 | | May 22, 2026 |
Goldman Sachs Bank USA | | $ | 47,950 | | $ | 200,000 | | $ | 100,000 | | February 13, 2027 |
Barclays Bank PLC | | $ | 80,434 | | $ | 300,000 | | $ | 250,000 | | March 6, 2026 |
JP Morgan Chase Bank, N.A. (EBO facility) | | $ | 18,580 | | $ | 480,066 | | $ | 150,000 | | June 25, 2027 |
Mizuho Bank, Ltd. | | $ | 25,642 | | $ | 250,000 | | $ | 125,000 | | March 14, 2026 |
Nomura Corporate Funding Americas | | $ | 84,739 | | $ | 84,739 | | $ | 84,739 | | January 22, 2026 |
Servicing assets sold under agreements to repurchase | | | | | | | | | | | |
Atlas Securitized Products, L.P. | | $ | 755,000 | | $ | 1,415,238 | | $ | 200,000 | | June 29, 2026 |
Nomura Corporate Funding Americas | | $ | 50,000 | | $ | 365,261 | | $ | 365,261 | | August 4, 2025 |
Goldman Sachs Bank USA | | $ | 50,000 | | $ | 550,000 | | $ | 200,000 | | October 25, 2026 |
Mizuho Bank, Ltd. | | $ | 50,000 | | $ | 350,000 | | $ | 50,000 | | July 25, 2026 |
Mortgage-backed securities sold under agreements to repurchase | | | | | | | | | | | |
JP Morgan Chase Bank, N.A. | | $ | 269,661 | | | | | | | | |
Santander US Capital Markets LLC | | $ | 240,555 | | | | | | | | |
Wells Fargo Bank, N.A. | | $ | 219,918 | | | | | | | | |
Bank of America, N.A. | | $ | 32,585 | | | | | | | | |
Mortgage loan participation purchase and sale agreements | | | | | | | | | | | |
Bank of America, N.A. | | $ | 701,233 | | $ | 750,000 | | $ | — | | June 10, 2026 |
Notes payable | | | | | | | | | | | |
GMSR 2023-GTL1 Loans | | $ | 680,000 | | $ | 680,000 | | | | | February 25, 2028 |
GMSR 2023-GTL2 Loans | | $ | 125,000 | | $ | 125,000 | | | | | October 25, 2028 |
GMSR 2024-GT1 Notes | | $ | 425,000 | | $ | 425,000 | | | | | March 26, 2029 |
Citibank, N.A. FHLMC MSR Facility | | $ | 100,000 | | $ | 200,000 | | $ | 100,000 | | June 11, 2026 |
Barclays FHLMC MSR Facility | | $ | — | | $ | 200,000 | | $ | 100,000 | | March 6, 2026 |
Unsecured senior notes | | | | | | | | | | | |
Unsecured Notes - 4.25% | | $ | 650,000 | | | | | | | | February 15, 2029 |
Unsecured Notes - 5.75% | | $ | 500,000 | | | | | | | | September 15, 2031 |
Unsecured Notes - 7.875% | | $ | 750,000 | | | | | | | | December 15, 2029 |
Unsecured Notes - 7.125% | | $ | 650,000 | | | | | | | | November 15, 2030 |
Unsecured Notes - 6.875% | | $ | 850,000 | | | | | | | | February 15, 2033 |
Unsecured Notes - 6.875% | | $ | 850,000 | | | | | | | | May 15, 2032 |
| (1) | Outstanding indebtedness as of June 30, 2025. |
| (2) | Total facility size, committed facility and maturity date include contractual changes through the date of this Report. |
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The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and accrued interest) relating to our assets sold under agreements to repurchase is summarized by counterparty below as of June 30, 2025:
Loans held for sale and MSRs
| | | | | | | |
| | | | | | | |
| | | | | Weighted average | | |
Counterparty |
| Amount at risk |
| maturity of advances |
| Facility maturity | |
| | (in thousands) | | | | | |
Atlas Securitized Products, L.P., Goldman Sachs Bank USA, Nomura Corporate Funding Americas and Mizuho Bank, Ltd. (1) | | $ | 6,174,715 | | June 18, 2026 | | June 18, 2026 |
Atlas Securitized Products, L.P. | | $ | 158,877 | | November 19, 2025 | | June 26, 2026 |
Bank of America, N.A. | | $ | 92,204 | | August 6, 2025 | | June 9, 2027 |
JP Morgan Chase Bank, N.A. | | $ | 38,981 | | October 21, 2025 | | July 10, 2026 |
Royal Bank of Canada | | $ | 33,779 | | July 30, 2025 | | May 8, 2026 |
Citibank, N.A. | | $ | 29,756 | | September 4, 2025 |
| June 11, 2026 |
Nomura Corporate Funding Americas | | $ | 19,151 | | July 14, 2025 | | January 22, 2026 |
Morgan Stanley Bank, N.A. | | $ | 18,275 | | September 10, 2025 | | May 22, 2026 |
Wells Fargo Bank, N.A. | | $ | 15,359 | | September 14, 2025 | | June 11, 2027 |
Barclays Bank PLC | | $ | 14,165 | | November 6, 2025 | | March 6, 2026 |
BNP Paribas | | $ | 13,186 | | September 14, 2025 | | September 30, 2026 |
Mizuho Bank, Ltd. | | $ | 8,733 | | February 19, 2026 | | March 14, 2026 |
Goldman Sachs Bank USA | | $ | 2,222 | | September 5, 2025 | | February 13, 2027 |
| (1) | The borrowing facilities are in the form of a sale of a variable funding note under an agreement to repurchase. The facility maturity date represents a weighted average with maturity dates ranging from August 4, 2025 through October 28, 2026. |
Principal-only stripped MBS
| | | | | |
Counterparty |
| Amount at risk |
| Maturity | |
| | (in thousands) | | | |
Bank of America, N.A. | | $ | 2,846 | | July 25, 2025 |
JP Morgan Chase Bank, N.A. | | $ | 22,094 | | July 7, 2025 |
Wells Fargo Bank, N.A. | | $ | 17,963 | | July 23, 2025 |
Santander US Capital Markets LLC | | $ | 15,227 | | July 15, 2025 |
Critical Accounting Estimates
Preparation of financial statements in compliance with GAAP requires us to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Certain of these estimates significantly influence the portrayal of our financial condition and results, and they require us to make difficult, subjective or complex judgments. Our critical accounting policies primarily relate to our fair value estimates.
Our Annual Report on Form 10-K for the year ended December 31, 2024 contains a discussion of our critical accounting policies, which utilize relevant critical accounting estimates. There have been no significant changes in our critical accounting policies and estimates during the quarter ended June 30, 2025 as compared to the critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices, real estate values and other market-based risks. The primary market risks that we are exposed to are fair value risk, interest rate risk and prepayment risk.
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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.
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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.
Mortgage Servicing Rights
The following tables summarize the estimated change in fair value of MSRs as of June 30, 2025, given several shifts in pricing spreads, prepayment speed and annual per loan cost of servicing:
| | | | | | | | | | | | | | | | | | | |
Change in fair value attributable to shift in: |
| -20% |
| -10% |
| -5% |
| +5% |
| +10% |
| +20% |
| ||||||
| | (in thousands) | | ||||||||||||||||
Prepayment speed | | $ | 683,239 | | $ | 328,959 | | $ | 161,490 | | $ | (155,827) | | $ | (306,286) | | $ | (592,174) | |
Pricing spread | | $ | 519,194 | | $ | 252,869 | | $ | 124,812 | | $ | (121,678) | | $ | (240,330) | | $ | (468,962) | |
Annual per-loan cost of servicing | | $ | 206,097 | | $ | 103,048 | | $ | 51,524 | | $ | (51,524) | | $ | (103,048) | | $ | (206,097) | |
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. However, no matter how well a control system is designed and operated, it can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in our periodic reports.
Our management has conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report as required by paragraph (b) of Rule 13a-15 under the Exchange Act. Based on our evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this Report, to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company may be involved in various legal and regulatory proceedings, lawsuits and other claims arising in the ordinary course of its business. The amount, if any, of ultimate liability with respect to such matters cannot be determined, but despite the inherent uncertainties of litigation, management believes that the ultimate disposition of any such proceedings and exposure will not have, individually or taken together, a material adverse effect on the financial condition, results of operations, or cash flows of the Company.
Item 1A. Risk Factors
There have been no material changes from the risk factors set forth under Item 1A. For a discussion of our risk factors refer to our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 19, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no sales of unregistered equity securities during the quarter ended June 30, 2025.
Stock Repurchase Program
| | | | | | | | | | | | |
|
| Total number |
| |
| Total number of | | Approximate dollar | ||||
April 1, 2025 – April 30, 2025 | | | — | | $ | — | | | — | | $ | 212,338,815 |
May 1, 2025 – May 31, 2025 | | | — | | $ | — | | | — | | $ | 212,338,815 |
June 1, 2025 – June 30, 2025 | | | — | | $ | — | | | — | | $ | 212,338,815 |
Total | | | — | | $ | — | | | — | | $ | 212,338,815 |
| (1) | In August 2021, the Company’s board of directors approved an increase to the Company’s common stock repurchase program from $1 billion to $2 billion. The stock repurchase program does not require the Company to purchase a specific number of shares, and the timing and amount of any shares repurchased are based on market conditions and other factors, including price, regulatory requirements and capital availability. Stock repurchases may be affected through privately negotiated transactions or open market purchases, including pursuant to a trading plan implemented pursuant to Rule 10b5-1 of the Exchange Act. The stock repurchase program does not have an expiration date but may be suspended, modified or discontinued at any time without prior notice. |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
(c) Trading Plans
As of June 30, 2025, the following directors or Section 16 officers adopted, modified or terminated the following Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K):
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On
During the quarter ended June 30, 2025, none of our directors or executive officers (as defined in Rule 16a-1(f)), other than Mr. Perotti, informed us of the
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Item 6. Exhibits
| | Incorporated by Reference | |
|---|---|---|---|
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. | 8-K12B | November 1, 2018 |
| | | |
3.1.1 | Certificate of Amendment to Amended and Restated Certificate of Incorporation of New PennyMac Financial Services, Inc. | 8-K12B | November 1, 2018 |
| | | |
3.2 | Amended and Restated Bylaws of New PennyMac Financial Services, Inc. | 8-K12B | November 1, 2018 |
| | | |
3.2.1 | Amendment to Amended and Restated Bylaws of PennyMac Financial Services, Inc. (formerly known as New PennyMac Financial Services, Inc.). | 10-Q | November 4, 2019 |
| | | |
3.3 | Amendment to the Amended and Restated Bylaws of PennyMac Financial Services, Inc. | 8-K | September 6, 2024 |
3.4 | Third Amendment to the Amended and Restated Bylaws of PennyMac Financial Services, Inc. | 8-K | January 3, 2025 |
| | | |
4.1 | Indenture, dated as of May 8, 2025, among PennyMac Financial Services, Inc., the guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee, relating to the 6.875% Senior Notes due 2032. | 8-K | May 8, 2025 |
| | | |
4.2 | Form of Global Note for 6.875% Senior Notes due 2032 (included in Exhibit 4.1). | 8-K | May 8, 2025 |
| | | |
10.1 | Amendment No. 1 to Fourth Amended and Restated Management Agreement, by and among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC, dated as of June 23, 2025. | * | |
| | | |
10.2 | Amendment No. 1 to Third Amended and Restated Mortgage Banking Services Agreement, between PennyMac Loan Services, LLC and PennyMac Corp., dated as of June 23, 2025. | * | |
| | | |
31.1 | Certification of David A. Spector pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | * | |
| | | |
31.2 | Certification of Daniel S. Perotti pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | * | |
| | | |
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| | Incorporated by Reference | |
|---|---|---|---|
Exhibit No. | Exhibit Description | Form | Filing Date |
| | | |
32.1 | Certification of David A. Spector pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ** | |
| | | |
32.2 | Certification of Daniel S. Perotti pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ** | |
| | | |
101 | Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024, (ii) the Consolidated Statements of Income for the quarter and six months ended June 30, 2025 and June 30, 2024, (iii) the Consolidated Statements of Changes in Stockholders’ Equity for the quarter and six months ended June 30, 2025 and June 30, 2024, (iv) the Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and June 30, 2024, and (v) the Notes to the Consolidated Financial Statements. | * | |
101.INS | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | | |
| | | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | | |
| | | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | |
| | | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | | |
| | | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | | |
| | | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | |
| | | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101). | | |
*Filed herewith
† Indicates management contract or compensatory plan or arrangement.
**The certifications attached hereto as Exhibits 32.1 and 32.2 are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
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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.
| PENNYMAC FINANCIAL SERVICES, INC. | |
| ||
| | |
Dated: July 29, 2025 | By: | /s/ DAVID A. SPECTOR |
| | David A. Spector |
| | Chairman and Chief Executive Officer (Principal Executive Officer) |
| | |
Dated: July 29, 2025 | By: | /s/ DANIEL S. PEROTTI |
| | Daniel S. Perotti |
| | Senior Managing Director and Chief Financial Officer (Principal Financial Officer) |
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FAQ
How much larger is Transcat's new credit facility compared to the prior one?
When does the new TRNS credit facility mature?
What are the interest rate spreads on the new facility?
What leverage covenant does Transcat have to maintain?
What can Transcat use the new credit facility for?
