PennyMac Mortgage (NYSE: PMT) Q2 2026 net income climbs to $30.9M
PennyMac Mortgage Investment Trust reported results for the quarter and six months ended June 30, 2026. The mortgage-focused REIT invests in residential mortgage loans, mortgage-backed securities, credit risk transfer arrangements and mortgage servicing rights and seeks to maintain REIT status, which requires distributing at least 90% of taxable income.
For the quarter, net investment income was $72,729 (in thousands) and net income was $30,919 (in thousands), up from $7,534 (in thousands) a year earlier. Net income attributable to common shareholders was $20,464 (in thousands), or $0.23 basic and diluted earnings per share, versus a loss of $(0.04) per share in 2025. For the first six months, net income totaled $55,535 (in thousands). Common shareholders received dividends of $0.80 per share year-to-date.
At June 30, 2026, total assets were $25,093,590 (in thousands), including loans held for investment at fair value of $12,458,249 (in thousands) and mortgage servicing rights of $3,575,603 (in thousands). Total liabilities were $23,240,216 (in thousands) and shareholders’ equity was $1,853,374 (in thousands). Net cash used in operating activities was $5,468,695 (in thousands) for the six months, while financing activities provided $3,830,871 (in thousands), reflecting active use of repurchase agreements and asset-backed financings.
Positive
- Net income sharply higher: Q2 2026 net income was $30,919 (in thousands), compared with $7,534 (in thousands) in Q2 2025, and six‑month net income rose to $55,535 (in thousands) from $17,214 (in thousands).
- Return to positive earnings for common: Net income attributable to common shareholders reached $20,464 (in thousands) in Q2 2026, or $0.23 per share, versus a loss of $(2,921) (in thousands), or $(0.04) per share, in Q2 2025.
Negative
- None.
Filing Explained
The June 30, 2026 balance sheet reports 87,202,362 common shares issued and outstanding, versus 87,016,604 at December 31, 2025; the equity statement records 186 thousand common shares from share-based compensation during the six months. That disclosed increase creates an issuance-related dilution mechanism: absent offsetting changes, existing holders’ percentage ownership is reduced.
Key Figures
Key Terms
credit risk transfer arrangements financial
mortgage servicing rights financial
variable interest entities financial
real estate investment trust financial
asset-backed financings financial
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
How did PennyMac Mortgage Investment Trust (PMT) perform financially in Q2 2026?
What was PMT’s Q2 2026 net income attributable to common shareholders?
How large was PennyMac Mortgage Investment Trust’s (PMT) balance sheet at June 30, 2026?
What dividends did PMT (PMT) pay to common shareholders in the first half of 2026?
What were PMT’s cash flows from operating and financing activities in the first half of 2026?
What key mortgage-related assets does PennyMac Mortgage Investment Trust (PMT) focus on?
`
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 |
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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, 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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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
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PENNYMAC MORTGAGE INVESTMENT TRUST
FORM 10-Q
June 30, 2026
TABLE OF CONTENTS
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Special Note Regarding Forward-Looking Statements |
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PART I. FINANCIAL INFORMATION |
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Financial Statements (Unaudited) |
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Consolidated Balance Sheets |
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Consolidated Statements of Changes in Shareholders’ Equity |
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Consolidated Statements of Cash Flows |
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Notes to Consolidated Financial Statements |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Our Company |
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Results of Operations |
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Net Investment Income |
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Expenses |
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Balance Sheet Analysis |
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Asset Acquisitions |
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Investment Portfolio Composition |
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Cash Flows |
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Liquidity and Capital Resources |
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Off-Balance Sheet Arrangements and Aggregate Contractual Obligations |
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Quantitative and Qualitative Disclosures About Market Risk |
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Controls and Procedures |
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PART II. OTHER INFORMATION |
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Legal Proceedings |
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Risk Factors |
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Unregistered Sales of Equity Securities and Use of Proceeds |
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Defaults Upon Senior Securities |
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Mine Safety Disclosures |
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Other Information |
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Exhibits |
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “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, describe future plans and strategies, contain financial and operating projections or state other forward-looking information. Examples of forward-looking statements include the following:
Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. There are a number of 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 Report and the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission (“SEC”) on February 18, 2026.
Factors that could cause actual results to differ materially from historical results or those anticipated include, but are not limited to:
1
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, income 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.
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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June 30, |
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Cash |
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Mortgage-backed securities at fair value pledged to creditors |
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Deposits securing credit risk transfer arrangements pledged to creditors |
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Mortgage servicing rights at fair value ($ |
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Servicing advances ($ |
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Due from PennyMac Financial Services, Inc. |
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Other |
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Total assets |
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LIABILITIES |
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Assets sold under agreements to repurchase |
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Notes payable secured by credit risk transfer and mortgage servicing assets |
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Asset-backed financings of variable interest entities at fair value |
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Derivative and credit risk transfer strip liabilities with nonaffiliates at fair value |
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Accounts payable and accrued liabilities |
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Due to PennyMac Financial Services, Inc. |
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Income taxes payable |
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Liability for losses under representations and warranties |
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Commitments and contingencies ─ Note 17 |
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SHAREHOLDERS’ EQUITY |
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The accompanying notes are an integral part of these consolidated financial statements.
3
PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Assets and liabilities of consolidated variable interest entities (“VIEs”) included in total assets and liabilities (the assets of each VIE can only be used to settle liabilities of that VIE) are summarized below:
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ASSETS |
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Deposits securing credit risk transfer arrangements |
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Other—interest receivable |
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LIABILITIES |
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Asset-backed financings of the variable interest entities at fair value |
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Interest-only security payable at fair value |
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Derivative and credit risk transfer strip liabilities at fair value |
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Accounts payable and accrued liabilities—interest payable |
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The accompanying notes are an integral part of these consolidated financial statements.
4
PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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Quarter ended June 30, |
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Six months ended June 30, |
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Net investment income |
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Net loan servicing fees: |
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From nonaffiliates |
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Contractually specified |
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Change in fair value of mortgage servicing rights |
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Mortgage servicing rights hedging results |
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From PennyMac Financial Services, Inc. |
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Net loan servicing fees |
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Net gains on loans held for sale at fair value: |
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From nonaffiliates |
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From PennyMac Financial Services, Inc. |
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Net gains on loans held for sale at fair value |
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Loan origination fees |
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Net gains (losses) on investments and financings |
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Net interest expense: |
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Interest income |
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Interest expense |
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Net interest expense |
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Results of real estate acquired in settlement of loans |
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Other |
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Net investment income |
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Expenses |
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Earned by PennyMac Financial Services, Inc.: |
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Loan servicing fees |
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Management fees |
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Loan fulfillment fees |
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Professional services |
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Compensation |
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Loan collection and liquidation |
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Safekeeping |
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Loan origination |
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Other |
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Total expenses |
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Net income |
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Dividends on preferred shares of beneficial interest |
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Net income (loss) attributable to common shareholders |
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Earnings (loss) per common share |
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Basic |
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Diluted |
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Weighted average common shares outstanding |
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The accompanying notes are an integral part of these consolidated financial statements.
5
PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
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Quarter ended June 30, 2026 |
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Preferred shares |
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Common shares |
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Additional paid-in capital |
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Total |
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Balance at March 31, 2026 |
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Net income |
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Share-based compensation |
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Dividends: |
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Preferred shares |
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Common shares ($ |
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Balance at June 30, 2026 |
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|
|
Quarter ended June 30, 2025 |
|
|||||||||||||||||||||||||
|
|
Preferred shares |
|
|
Common shares |
|
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|
|
|
|
|
||||||||||||||||
|
|
Number of |
|
|
Amount |
|
|
Number of |
|
|
Par |
|
|
Additional paid-in capital |
|
|
Accumulated |
|
|
Total |
|
|||||||
|
|
(in thousands, except per share amounts) |
|
|||||||||||||||||||||||||
Balance at March 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Share-based compensation |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Dividends: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Preferred shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||||
Common shares ($ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||||
Balance at June 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||
Statements continued on next page
6
|
|
Six months ended June 30, 2026 |
|
|||||||||||||||||||||||||
|
|
Preferred shares |
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Common shares |
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|
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|
||||||||||||||||
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|
Number of |
|
|
Amount |
|
|
Number of |
|
|
Par |
|
|
Additional paid-in capital |
|
|
Accumulated |
|
|
Total |
|
|||||||
|
|
(in thousands, except per share amounts) |
|
|||||||||||||||||||||||||
Balance at December 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Dividends: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Preferred shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||||
Common shares ($ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||||
Balance at June 30, 2026 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Six months ended June 30, 2025 |
|
|||||||||||||||||||||||||
|
|
Preferred shares |
|
|
Common shares |
|
|
|
|
|
|
|
||||||||||||||||
|
|
Number of |
|
|
Amount |
|
|
Number of |
|
|
Par |
|
|
Additional paid-in capital |
|
|
Accumulated |
|
|
Total |
|
|||||||
|
|
(in thousands, except per share amounts) |
|
|||||||||||||||||||||||||
Balance at December 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Dividends: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Preferred shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||||
Common shares ($ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||||
Balance at June 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||
The accompanying notes are an integral part of these consolidated financial statements.
7
PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
|
Six months ended June 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
|
|
(in thousands) |
|
|||||
Cash flows from operating activities |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash used in operating activities: |
|
|
|
|
|
|
||
Change in fair value of mortgage servicing rights |
|
|
|
|
|
|
||
Mortgage servicing rights hedging results |
|
|
|
|
|
|
||
Net gains on loans held for sale |
|
|
( |
) |
|
|
( |
) |
Net losses (gains) on investments and financings |
|
|
|
|
|
( |
) |
|
Accrual of unearned discounts and amortization of purchase premiums on |
|
|
|
|
|
( |
) |
|
Amortization of debt issuance costs |
|
|
|
|
|
|
||
Results of real estate acquired in settlement of loans |
|
|
|
|
|
|
||
Share-based compensation expense |
|
|
|
|
|
|
||
Purchase of loans held for sale from nonaffiliates |
|
|
( |
) |
|
|
( |
) |
Purchase of loans held for sale from PennyMac Financial Services, Inc. |
|
|
( |
) |
|
|
( |
) |
Sale to nonaffiliates and repayment of loans held for sale |
|
|
|
|
|
|
||
Sale of loans held for sale to PennyMac Financial Services, Inc. |
|
|
|
|
|
|
||
Repurchase of loans subject to representations and warranties |
|
|
( |
) |
|
|
( |
) |
Decrease in servicing advances |
|
|
|
|
|
|
||
Decrease in due from PennyMac Financial Services, Inc. |
|
|
|
|
|
|
||
Decrease in other assets |
|
|
|
|
|
|
||
(Decrease) increase in accounts payable and accrued liabilities |
|
|
( |
) |
|
|
|
|
Increase in due to PennyMac Financial Services, Inc. |
|
|
|
|
|
|
||
Decrease in income taxes payable |
|
|
( |
) |
|
|
( |
) |
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from investing activities |
|
|
|
|
|
|
||
Net increase in short-term investments |
|
|
( |
) |
|
|
( |
) |
Purchase of mortgage-backed securities |
|
|
( |
) |
|
|
( |
) |
Sale and repayment of mortgage-backed securities |
|
|
|
|
|
|
||
Repayment of loans held for investment |
|
|
|
|
|
|
||
Net settlement of derivative financial instruments |
|
|
( |
) |
|
|
|
|
Distribution from credit risk transfer arrangements |
|
|
|
|
|
|
||
Transfer of mortgage servicing rights relating to delinquent loans to Agency |
|
|
( |
) |
|
|
( |
) |
Sale of real estate acquired in settlement of loans |
|
|
|
|
|
|
||
Decrease (increase) in margin deposits |
|
|
|
|
|
( |
) |
|
Net cash provided by investing activities |
|
|
|
|
|
|
||
Statements continued on the next page
8
PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Continued)
|
|
Six months ended June 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
|
|
(in thousands) |
|
|||||
Cash flows 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 agreements |
|
|
|
|
|
|
||
Repayment of mortgage loan participation purchase and sale agreements |
|
|
|
|
|
( |
) |
|
Issuance of notes payable secured by credit risk transfer and mortgage servicing assets |
|
|
|
|
|
|
||
Repayment of notes payable secured by credit risk transfer and mortgage servicing assets |
|
|
( |
) |
|
|
( |
) |
Issuance of unsecured senior notes |
|
|
|
|
|
|
||
Repayment of unsecured senior notes |
|
|
( |
) |
|
|
|
|
Issuance of asset-backed financings of variable interest entities |
|
|
|
|
|
|
||
Repayment of asset-backed financings of variable interest entities |
|
|
( |
) |
|
|
( |
) |
Payment of debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Payment of dividends to preferred shareholders |
|
|
( |
) |
|
|
( |
) |
Payment of dividends to common shareholders |
|
|
( |
) |
|
|
( |
) |
Payment of vested share-based compensation tax withholdings |
|
|
( |
) |
|
|
( |
) |
Net cash provided by financing activities |
|
|
|
|
|
|
||
Net (decrease) increase in cash |
|
|
( |
) |
|
|
|
|
Cash at beginning of period |
|
|
|
|
|
|
||
Cash at end of period |
|
$ |
|
|
$ |
|
||
Supplemental cash flow information |
|
|
|
|
|
|
||
Payments, net: |
|
|
|
|
|
|
||
Income taxes |
|
$ |
|
|
$ |
|
||
Interest |
|
$ |
|
|
$ |
|
||
Non-cash investing activities: |
|
|
|
|
|
|
||
Reclassification of loans held for sale to loans held for investment resulting |
|
$ |
|
|
$ |
|
||
Receipt of mortgage servicing rights as proceeds from sales of loans |
|
$ |
|
|
$ |
|
||
Non-cash financing activities: |
|
|
|
|
|
|
||
Dividends declared, not paid |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these consolidated financial statements.
9
PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1—Organization
PennyMac Mortgage Investment Trust (“PMT” or the “Company”) is a specialty finance company, which invests in residential mortgage-related assets. The Company operates in
The Company sells the loans it acquires through its aggregation and securitization activities primarily to government-sponsored enterprises ("GSEs") such as the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and the Federal National Mortgage Association (“Fannie Mae”). Freddie Mac and Fannie Mae are each referred to as an “Agency” and, collectively, as the “Agencies.” The Company also finances certain of the loans it aggregates through its own securitizations and retains certain senior and subordinate MBS created in the securitizations.
The Company conducts substantially all of its operations and makes substantially all of its investments through its subsidiary, PennyMac Operating Partnership, L.P. (the “Operating Partnership”), and the Operating Partnership’s subsidiaries. A wholly-owned subsidiary of the Company is the sole general partner, and the Company is the sole limited partner, of the Operating Partnership.
The Company believes that it qualifies, and has elected to be taxed, as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). To maintain its tax status as a REIT, the Company is required to distribute at least
Note 2—Basis of Presentation
Basis of Presentation
The Company’s consolidated financial statements have been prepared in compliance with accounting principles generally accepted in the United States (“GAAP”) as codified in the Financial Accounting Standards Board’s Accounting Standards Codification for interim financial information and with the Securities and Exchange Commission’s instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these 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 fiscal year ended December 31, 2025.
These unaudited consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods presented, but are not necessarily indicative of the results of operations that may be anticipated for the full year. Intercompany accounts and transactions have been eliminated.
Preparation of financial statements in compliance with GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, 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.
The Company held
10
Note 3—Concentration of Risks
As discussed in Note 1 – Organization above, PMT’s operating and investing activities are centered in residential mortgage-related assets, including CRT arrangements, subordinate MBS, Agency and senior Non-Agency MBS, CMOs, loans and MSRs.
The Company is exposed to fair value risk and credit risk. As a result of prevailing market conditions, including changes in market interest rates, the Company may be required to recognize losses associated with adverse changes to the fair value of its investments in MBS, CMOs, loans, CRT arrangements and MSRs. The Company is exposed to credit losses arising from its investments in CRT arrangements and subordinate MBS.
Fair Value Risk
The Company carries its non-cash financial assets and MSRs at fair value with changes in fair value included in its results of operations:
Credit Risk
Note 6 – Variable Interest Entities details the Company’s investments in CRT arrangements whereby the Company sold pools of loans into Fannie Mae guaranteed loan securitizations which became reference pools underlying the CRT arrangements. Fannie Mae transferred interest-only (“IO”) ownership interests and recourse obligations based upon the securitized reference pools of loans subject to the CRT arrangements into trust entities, and the Company acquired the IO ownership interests and assumed the recourse obligations in the CRT arrangements through the acquisition of beneficial interests in the trust entities.
The Company also invests in subordinate MBS, which are among the first beneficial interests in the issuing trusts to absorb credit losses on the underlying loans.
The Company’s retention of credit risk through its investment in CRT arrangements and subordinate MBS subjects it to risks associated with delinquency and foreclosure similar to the risks of loss associated with owning the underlying loans, which is greater than the risk of loss associated with selling loans to the Agencies without the retention of credit risk in the case of CRT arrangements and investing in senior MBS in the case of subordinate MBS.
Certain of the Company's investments in CRT arrangements are structured such that loans that reach a specific number of days delinquent trigger losses chargeable to the CRT arrangements based on the sizes of the delinquent loans and a contractual schedule of loss severity. Therefore, the risks associated with delinquency and foreclosure may in some instances be greater than the risks associated with owning the related loans because the structure of those CRT arrangements provides that the Company may be required to absorb losses in the event of delinquency or foreclosure even when there is ultimately no loss realized with respect to such loans (e.g., as a result of a borrower’s re-performance). In contrast, the structure of the Company’s other investments in CRT arrangements requires PMT to absorb losses only when the reference loans realize losses.
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.
11
Note 4—Transactions with Related Parties
The Company enters into transactions with subsidiaries of PFSI in support of its operating, investing and financing activities as summarized below.
Operating Activities
Servicing Agreement
The Company has a loan servicing agreement with PLS (the “Servicing Agreement”) pursuant to which PLS provides subservicing for the Company's portfolio of MSRs and loans.
Under the Servicing Agreement, as amended, servicing fees for all subserviced MSRs and loans are established at a per-loan monthly amount based on the delinquency, bankruptcy and/or foreclosure status of the serviced loan or Real estate acquired in settlement of loans ("REO") as shown below:
The Servicing Agreement expires on
MSR Recapture Agreement
The Company has an MSR recapture agreement with PLS. Pursuant to the terms of the MSR recapture agreement, if PLS refinances (recaptures) mortgage loans for which the Company previously held the MSRs, PLS is generally required to pay cash to the Company in an amount equal to:
The “recapture rate” means, during each month, the ratio of (i) the aggregate unpaid principal balance ("UPB") of all refinance mortgage loans originated in such month, plus the aggregate UPB of all "preserved mortgage loans" originated in such month, to (ii) the aggregate UPB of all mortgage loans from the portfolio that PLS has determined in good faith were refinanced in such month, plus the aggregate UPB of all "preserved mortgage loans" originated in such month. For purposes of such calculation, “preserved mortgage loan” means a mortgage loan in PMT’s portfolio as to which PLS or its affiliates originated a new closed end second lien loan in a subordinate position to such mortgage loan. PFSI has further agreed to allocate sufficient resources to target a recapture rate of at least
The MSR recapture agreement expires on
12
Following is a summary of loan servicing and recapture fees earned by PLS:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Loan servicing fees: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans held for sale |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Loans held for investment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage servicing rights |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Average investment in loans: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Held for sale |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Held for investment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Average MSR portfolio unpaid principal balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage servicing rights recapture fees |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Unpaid principal balance of loans recaptured |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Aggregation and Securitization Activities
Mortgage Banking Services Agreement
The Company is provided fulfillment and other services for the operation of its aggregation and securitization activities under an amended and restated mortgage banking services agreement with PLS. These services include: provision of models and technology for the pricing of loans and MSRs; reviews of loan data, documentation and appraisals to assess loan quality and risk; hedging the fair value of the Company's mortgage loan inventory and commitments to purchase mortgage loans; sale of loans through secondary mortgage markets; and correspondent seller performance and credit monitoring on behalf of the Company.
PLS assumed the role of initial correspondent loan purchaser instead of the Company effective July 1, 2025. The Company has the right under a mortgage loan purchase agreement to purchase up to
Effective January 1, 2025, fulfillment fees in any quarter shall not exceed the following:
The Company does not hold the Ginnie Mae approval required to issue Ginnie Mae MBS and/or to act as a servicer for loans in Ginnie Mae MBS. Accordingly, under the mortgage banking services agreement, through June 30, 2025, PLS purchased mortgage loans underwritten in accordance with the Ginnie Mae MBS Guide “as is” and without recourse of any kind from the Company at its cost less an administrative fee plus accrued interest and a sourcing fee ranging from
While PLS purchased these mortgage loans “as is” and without recourse of any kind from the Company, where PLS 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 the Company.
The mortgage banking services agreement expires on
13
The Company may also purchase newly originated conforming balance non-government insured or guaranteed loans from PLS under the mortgage loan purchase agreement.
Following is a summary of aggregation and securitization activities between the Company and PLS:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Loan fulfillment fees earned by PLS |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Unpaid principal balance of loans fulfilled by PLS |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sourcing fees received from PLS included in |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Unpaid principal balance of loans sold to PLS: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Government guaranteed or insured |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Conventional conforming |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Purchases of loans held for sale from PLS (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Tax service fees paid to PLS |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Management Agreement
PMT has a management agreement with PCM, pursuant to which PMT pays PCM management fees as follows:
For the purpose of determining the amount of the performance incentive fee:
“Net income” is defined as net income or loss attributable to the Company’s common shares of beneficial interest (“Common Shares”) calculated in accordance with GAAP, and adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash charges after discussion between PCM and the Company’s independent trustees and after approval by a majority of the Company’s independent trustees.
“Common shareholders’ equity” is defined as the average shareholder’s equity less the average GAAP carrying 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 “common shareholders' equity”) in that year exceeds or falls short of the lesser of
14
performance incentive fee is earned, the high watermark is reset to zero. As a result, the threshold amount required for the PCM to earn a performance incentive fee is adjusted cumulatively based on the performance of the Company’s net income over (or under) the Target Yield, until the net income in excess of the Target Yield exceeds the then-current cumulative high watermark amount, and a performance incentive fee is earned. The high watermark is calculated based on the two years preceding the fiscal year for which the incentive fee is calculated, and will never be less than zero after including all high watermark increases and high watermark decreases over any such rolling two fiscal year period.
The base management fee is paid quarterly in arrears and the performance incentive fee is paid annually in arrears. The performance incentive fee may be paid in cash or a combination of cash and the Company’s Common Shares (subject to a limit of no more than
In the event of termination of the management agreement between the Company and PCM, PCM may be entitled to a termination fee in certain circumstances.
Following is a summary of management fee expenses:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Base management fee |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Performance incentive fee |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Average shareholders' equity amounts used to calculate |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The management agreement expires on
Expense Reimbursement
Under the management agreement, the Company reimburses PCM for its organizational and operating expenses, including third-party expenses, incurred on the Company’s behalf, it being understood that PCM 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 the Company. The Company is also required to pay a pro rata portion of the rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of PCM and its affiliates required for the Company’s and its subsidiaries’ operations. These expenses are based on the resources PCM and its affiliates dedicate to investment management activities for the Company, as determined by PCM in its reasonable and good faith discretion.
Following is a summary of the Company’s reimbursements to PCM and its affiliates for expenses:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Reimbursement of: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expenses incurred on the Company’s behalf, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Overhead |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Payments and settlements during the period (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
15
Financing Activities
PFSI Investment in the Company
PFSI held
Amounts Receivable from and Payable to PFSI
Amounts receivable from and payable to PFSI are summarized below:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
(in thousands) |
|
|||||
Due from PFSI-Miscellaneous receivables |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Due to PFSI: |
|
|
|
|
|
|
||
Management fees |
|
$ |
|
|
$ |
|
||
Loan servicing fees |
|
|
|
|
|
|
||
Allocated expenses and costs |
|
|
|
|
|
|
||
Aggregation and securitization costs |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
The Company has also transferred cash to PLS to fund loan servicing advances and REO property acquisition and preservation costs incurred on its behalf. Such amounts are included in various of the Company's balance sheet items as summarized below:
Balance sheet line including advance amount |
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
(in thousands) |
|
|||||
Servicing advances |
|
$ |
|
|
$ |
|
||
Other assets-Real estate acquired in settlement of loans |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Note 5—Loan Sales
The following table summarizes cash flows between the Company and transferees in transfers of loans that are accounted for as sales where the Company maintains continuing involvement with the loans:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Cash flows: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Proceeds from sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Loan servicing fees |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table summarizes for the dates presented collection status information for loans that are accounted for as sales where the Company maintains continuing involvement:
|
|
|
|
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
|
|
|
|
(in thousands) |
|
|||||
Unpaid principal balance of loans outstanding |
|
|
|
|
|
$ |
|
|
$ |
|
||
Collection status (unpaid principal balance) |
|
|
|
|
|
|
|
|
|
|
||
Delinquency: |
|
|
|
|
|
|
|
|
|
|
||
30-89 days delinquent |
|
|
|
|
|
$ |
|
|
$ |
|
||
90 or more days delinquent: |
|
|
|
|
|
|
|
|
|
|
||
Not in foreclosure |
|
|
|
|
|
$ |
|
|
$ |
|
||
In foreclosure |
|
|
|
|
|
$ |
|
|
$ |
|
||
Bankruptcy |
|
|
|
|
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Custodial funds managed by the Company (1) |
|
|
|
|
|
$ |
|
|
$ |
|
||
16
Note 6—Variable Interest Entities
The Company is a variable interest holder in various VIEs that relate to its investing and financing activities as discussed below.
Credit Risk Transfer Arrangements
The Company has previously entered into certain loan sales arrangements pursuant to which it accepted credit risk relating to the loans sold in exchange for a portion of the interest earned on such loans. These arrangements absorb scheduled or realized credit losses on those loans and comprise the Company’s investments in CRT arrangements.
The Company, through PennyMac Corp. ("PMC"), entered into CRT arrangements with Fannie Mae, pursuant to which the Company sold pools of loans into Fannie Mae-guaranteed securitizations while retaining recourse obligations as part of the retention of IO ownership interests in such loans. CRT arrangements include:
The Company placed Deposits securing credit risk transfer arrangements into subsidiary trust entities to secure its recourse obligations. The Deposits securing credit risk transfer arrangements represent the Company’s maximum contractual exposure to claims under its recourse obligations and are the sole source of settlement of losses under the CRT arrangements.
The Company’s exposure to losses under its recourse obligations was initially established at rates ranging from
The Company has concluded that the subsidiary trust entities holding its CRT arrangements are VIEs and the Company is the primary beneficiary of the VIEs as it is the holder of the primary beneficial interests which absorb the variability of the trusts’ income.
Gains and losses on the derivatives, strips and the IO ownership interest sold to a nonaffiliate included in the CRT arrangements are included in Net gains (losses) on investments and financings in the consolidated statements of operations.
17
Following is a summary of the CRT arrangements:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Net investment income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net gains (losses) on investments and financings |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit risk transfer derivatives and strips: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit risk transfer derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Realized |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Valuation changes |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit risk transfer strips |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Realized |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Valuation changes |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest-only security payable at fair value — |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income — Deposits securing credit risk transfer |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net payments made to settle losses on credit risk transfer |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
(in thousands) |
|
|||||
Carrying value of credit risk transfer arrangements: |
|
|
|
|
|
|
||
Derivative assets - credit risk transfer derivatives |
|
$ |
|
|
$ |
|
||
Derivative and credit risk transfer liabilities - credit risk transfer strips |
|
|
( |
) |
|
|
( |
) |
Deposits securing credit risk transfer arrangements |
|
|
|
|
|
|
||
Interest-only security payable at fair value |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Credit risk transfer arrangement assets pledged to secure borrowings: |
|
|
|
|
|
|
||
Derivative assets |
|
$ |
|
|
$ |
|
||
Deposits securing credit risk transfer arrangements (1) |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Unpaid principal balance of loans underlying credit risk transfer arrangements |
|
$ |
|
|
$ |
|
||
Collection status (unpaid principal balance): |
|
|
|
|
|
|
||
Delinquency |
|
|
|
|
|
|
||
Current |
|
$ |
|
|
$ |
|
||
30-89 days delinquent |
|
$ |
|
|
$ |
|
||
90-179 days delinquent |
|
$ |
|
|
$ |
|
||
180 or more days delinquent |
|
$ |
|
|
$ |
|
||
Foreclosure |
|
$ |
|
|
$ |
|
||
Bankruptcy |
|
$ |
|
|
$ |
|
||
Subordinate and Senior Non-Agency Mortgage-Backed Securities
The Company retains or purchases subordinate and senior non-agency MBS in transactions sponsored by PMC or a nonaffiliate. Cash inflows from the loans underlying these securities are distributed to investors and service providers in accordance with the respective securities' contractual priorities of payments and, as such, most of these inflows must be directed first to service and repay the senior securities.
The rights of holders of subordinate securities to receive distributions of principal and/or interest, as applicable, are subordinate to the rights of holders of senior securities. After the senior securities are repaid, substantially all cash inflows will be directed to the subordinate securities, including those held by the Company, until they are fully repaid.
18
The Company’s retention or purchase of subordinate MBS exposes PMT to the credit risk in the underlying loans because the Company’s subordinate MBS investments are among the first beneficial interests to absorb credit losses on those assets. The Company’s exposure to losses from its investments in subordinate MBS is limited to its recorded investment in such securities.
The Company has concluded that the trusts holding the assets underlying these transactions are VIEs. The Company also has concluded that it is the primary beneficiary of certain of the VIEs as it has the power, through PLS, in its role as the servicer or sub-servicer of the underlying loans, to direct the activities of the trusts that most significantly impact the trusts’ economic performance and, as a holder of subordinate securities, that PMT is exposed to losses that could potentially be significant to the VIEs. Therefore, PMT consolidates those VIEs.
The Company recognizes the interest earned on the loans owned by the VIEs as Interest income and the interest attributable to the asset-backed securities issued to nonaffiliates by the VIEs as Interest expense on its consolidated statements of operations.
Following is a summary of the Company’s investment in senior and subordinate MBS backed by assets held in consolidated VIEs:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Net investment income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net gains (losses) on investments and financings: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans held for investment at fair value |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Asset-backed financings of variable interest entities |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
|
|
|
|
(in thousands) |
|
|||||
Loans held for investment at fair value |
|
|
|
|
|
$ |
|
|
$ |
|
||
Asset-backed financings of variable interest entities at fair value |
|
$ |
|
|
$ |
|
||||||
Retained interests at fair value pledged to secure Assets sold under agreements to repurchase |
|
$ |
|
|
$ |
|
||||||
Financing of Mortgage Servicing Assets
The Company entered into financing transactions in which it pledged participation interests in its Fannie Mae MSRs to VIEs which issued variable funding notes, term notes and term loans backed by the participation interests. The Company holds the variable funding notes and acts as guarantor of the variable funding notes, term notes and term loans. The Company determined that it is the primary beneficiary of the VIEs because, as the holder of the variable funding notes and issuer of performance guarantees, it holds the variable interests in the VIEs. Therefore, the Company consolidates the VIEs.
For financial reporting purposes, the MSRs financed by the consolidated VIEs are included in Mortgage servicing rights at fair value, the variable funding notes sold under agreements to repurchase are included in Assets sold under agreements to repurchase and the term notes and term loans are included in Notes payable secured by credit risk transfer and mortgage servicing assets on the Company’s consolidated balance sheets. These financings are described in Note 15— Long-Term Debt.
Note 7— Fair Value
The Company’s consolidated financial statements include assets and liabilities that are measured at or based on their fair values. Measurement at or based on fair value may be on a recurring or nonrecurring basis depending on the accounting principles applicable to the specific asset or liability and whether the Company has elected to carry the item at its fair value, as discussed in the following paragraphs.
19
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 inputs used to determine fair value. These levels are:
As a result of the difficulty in observing certain significant valuation inputs affecting “Level 3” fair value assets and liabilities, the Company is required to make judgments regarding these items’ fair values. Different persons in possession of the same facts may reasonably arrive at different conclusions as to the inputs to be applied in valuing these assets and liabilities and their fair values. Such differences may result in significantly different fair value measurements. Likewise, due to the general illiquidity of some of these assets and liabilities, subsequent transactions may be at values significantly different from those reported.
The Company reclassifies its assets and liabilities between levels of the fair value hierarchy when the significant 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 significant inputs required to establish fair value at a higher level of the hierarchy become available.
Fair Value Accounting Elections
The Company identified all of PMT’s non-cash financial assets and MSRs to be accounted for at fair value. The Company has elected to account for these assets at fair value so such changes in fair value will be reflected in results of operations as they occur and more timely reflect the results of the Company’s performance.
The Company has also identified its Asset-backed financings of variable interest entities at fair value and Interest-only security payable at fair value to be accounted for at fair value to reflect the generally offsetting changes in fair value of these borrowings to changes in fair value of the assets at fair value collateralizing these financings. For other borrowings, the Company has determined that historical cost accounting is more appropriate because under that method debt issuance costs are amortized over the term of the debt facility, thereby matching the debt issuance cost to the periods benefiting from the availability of the debt.
20
Financial Statement Items Measured at Fair Value on a Recurring Basis
Following is a summary of financial statement items that are measured at fair value on a recurring basis:
|
|
June 30, 2026 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Short-term investments |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans held for investment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative assets with nonaffiliates: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Put options on interest rate futures purchase contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward purchase contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward sale contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Swaptions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit risk transfer derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total derivative assets with nonaffiliates before netting |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Netting |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Total derivative assets with nonaffiliates after netting |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative assets with PennyMac Financial Services, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward purchase contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate lock commitments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total derivative assets with |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Netting |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Total derivative assets with |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage servicing rights |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest-only security payable |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Asset-backed financings of variable interest entities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative and credit risk transfer strip liabilities with nonaffiliates: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward purchase contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward sale contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total derivative liabilities with nonaffiliates before netting |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Netting |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Total derivative liabilities with nonaffiliates after netting |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit risk transfer strips |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total derivative and credit risk transfer strip liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative liabilities with PennyMac Financial Services, Inc: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward purchase contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate lock commitments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total derivative liabilities with |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Netting |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Total derivative liabilities with |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
21
|
|
December 31, 2025 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Short-term investments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans held for investment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative assets with nonaffiliates: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Call options on interest rate futures purchase contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Put options on interest rate futures purchase contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward purchase contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward sale contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit risk transfer derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total derivative assets with nonaffiliates before netting |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Netting |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total derivative assets with nonaffiliates after netting |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative assets with PennyMac Financial Services, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate lock commitments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward purchase contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total derivative assets with |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Netting |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Total derivative assets with |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage servicing rights |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest-only security payable |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Asset-backed financings of variable interest entities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative and credit risk transfer strip liabilities with nonaffiliates: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward purchase contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward sale contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total derivative liabilities with nonaffiliates before netting |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Netting |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Total derivative liabilities with nonaffiliates after netting |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit risk transfer strips |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total derivative and credit risk transfer strip liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative liabilities with PennyMac Financial Services, Inc: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate lock commitments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward purchase contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total derivative liabilities with |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Netting |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Total derivative liabilities with |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
22
The following is a summary of changes in items measured at fair value on a recurring basis using Level 3 inputs that are significant to the estimation of the fair values of the assets and liabilities at either the beginning or end of the periods presented:
|
|
Quarter ended June 30, 2026 |
|
|||||||||||||||||||||||||||||
Assets (1) |
|
Interest-only stripped mortgage-backed securities |
|
|
Loans |
|
|
Loans |
|
|
CRT |
|
|
Interest |
|
|
CRT |
|
|
Mortgage |
|
|
Total |
|
||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||
Balance, March 31, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||||
Purchases and issuances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Repayments and sales |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Accrual of unearned discounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Amounts received pursuant to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Changes in fair value included in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Changes in instrument - specific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other factors |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||||
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||||
Transfers of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate lock commitments to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||||
Mortgage servicing rights relating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance, June 30, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
Changes in fair value recognized |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
||
Liabilities |
|
Quarter ended June 30, 2026 |
|
|
|
|
(in thousands) |
|
|
Interest-only security payable: |
|
|
|
|
Balance, March 31, 2026 |
|
$ |
|
|
Changes in fair value included in income arising from: |
|
|
|
|
Changes in instrument - specific credit risk |
|
|
|
|
Other factors |
|
|
|
|
|
|
|
|
|
Balance, June 30, 2026 |
|
$ |
|
|
Changes in fair value recognized during the quarter relating to |
|
$ |
|
|
23
|
|
Quarter ended June 30, 2025 |
|
|||||||||||||||||||||||||||||
Assets (1) |
|
Interest-only stripped mortgage-backed securities |
|
|
Loans |
|
|
Loans |
|
|
CRT |
|
|
Interest |
|
|
CRT |
|
|
Mortgage |
|
|
Total |
|
||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||
Balance, March 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
Purchases and issuances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Repayments and sales |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Accrual of unearned discounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Amounts received pursuant to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Changes in fair value included in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Changes in instrument - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other factors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||||||
Transfers of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate lock commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||||
Mortgage servicing rights relating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance, June 30, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
Changes in fair value recognized |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||||
Liabilities |
|
Quarter ended June 30, 2025 |
|
|
|
|
(in thousands) |
|
|
Interest-only security payable: |
|
|
|
|
Balance, March 31, 2025 |
|
$ |
|
|
Change in fair value included in income arising from: |
|
|
|
|
Change in instrument - specific credit risk |
|
|
|
|
Other factors |
|
|
|
|
|
|
|
|
|
Balance, June 30, 2025 |
|
$ |
|
|
Changes in fair value recognized during the quarter relating to |
|
$ |
|
|
24
|
|
Six months ended June 30, 2026 |
|
|||||||||||||||||||||||||||||
Assets (1) |
|
Interest-only stripped mortgage-backed securities |
|
|
Loans |
|
|
Loans |
|
|
CRT |
|
|
Interest |
|
|
CRT |
|
|
Mortgage |
|
|
Total |
|
||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||
Balance, December 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
Purchases and issuances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Repayments and sales |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Accrual of unearned discounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Amounts received pursuant to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Changes in fair value included in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Changes in instrument - specific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other factors |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
Transfers of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate lock commitments to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||||
Mortgage servicing rights relating to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance, June 30, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
Changes in fair value recognized |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||
Liabilities |
|
Six months ended June 30, 2026 |
|
|
|
|
(in thousands) |
|
|
Interest-only security payable: |
|
|
|
|
Balance, December 31, 2025 |
|
$ |
|
|
Change in fair value included in income arising from: |
|
|
|
|
Change in instrument - specific credit risk |
|
|
|
|
Other factors |
|
|
( |
) |
|
|
|
( |
) |
Balance, June 30, 2026 |
|
$ |
|
|
Change in fair value recognized during the period relating to |
|
$ |
( |
) |
25
|
|
Six months ended June 30, 2025 |
|
|||||||||||||||||||||||||||||
Assets (1) |
|
Interest-only stripped mortgage-backed securities |
|
|
Loans |
|
|
Loans |
|
|
CRT |
|
|
Interest |
|
|
CRT strips |
|
|
Mortgage |
|
|
Total |
|
||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||
Balance, December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
Purchases and issuances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Repayments and sales |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Accrual of unearned discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Amounts received pursuant to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Changes in fair value included in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Changes in instrument - specific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other factors |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||||
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||||
Transfers of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate lock commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||||
Mortgage servicing rights relating to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance, June 30, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
Changes in fair value recognized during |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|||
Liabilities |
|
Six months ended June 30, 2025 |
|
|
|
|
(in thousands) |
|
|
Interest-only security payable: |
|
|
|
|
Balance, December 31, 2024 |
|
$ |
|
|
Changes in fair value included in income arising from: |
|
|
|
|
Changes in instrument - specific credit risk |
|
|
|
|
Other factors |
|
|
|
|
|
|
|
|
|
Balance, June 30, 2025 |
|
$ |
|
|
Changes in fair value recognized during the period relating to |
|
$ |
|
|
26
Financial Statement Items Measured at Fair Value under the Fair Value Option
Following are the fair values and related principal amounts due upon maturity of loans accounted for under the fair value option:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||||||||||||||||||
|
|
Fair value |
|
|
Principal |
|
|
Difference |
|
|
Fair value |
|
|
Principal |
|
|
Difference |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Loans held for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Current through 89 days delinquent |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
90 or more days delinquent: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Not in foreclosure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
In foreclosure |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Loans held for investment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Held in consolidated VIEs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Current through 89 days delinquent |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
90 or more days delinquent: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Not in foreclosure |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||
In foreclosure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Distressed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Current through 89 days delinquent |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||
90 or more days delinquent: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Not in foreclosure |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||
In foreclosure |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Following are the changes in fair value included in current period results of operations by consolidated statements of operations line item, for financial statement items accounted for under the fair value option:
|
|
Quarter ended June 30, 2026 |
|
|||||||||||||||||
|
|
Net loan |
|
|
Net gains on loans held |
|
|
Net gains (losses) on investments and financings |
|
|
Net interest |
|
|
Total |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Mortgage-backed securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loans held for investment |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
||
Credit risk transfer strips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Mortgage servicing rights |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest-only security payable |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|||
Asset-backed financings of VIEs |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
27
|
|
Quarter ended June 30, 2025 |
|
|||||||||||||||||
|
|
Net loan |
|
|
Net gains on loans held |
|
|
Net gains (losses) on investments and financings |
|
|
Net interest |
|
|
Total |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Mortgage-backed securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loans held for investment |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Credit risk transfer strips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Mortgage servicing rights |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest-only security payable |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|||
Asset-backed financings of VIEs |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|||
|
|
Six months ended June 30, 2026 |
|
|||||||||||||||||
|
|
Net loan |
|
|
Net gains on loans held |
|
|
Net gains (losses) on investments and financings |
|
|
Net interest |
|
|
Total |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Mortgage-backed securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|||
Loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loans held for investment |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
||
Credit risk transfer strips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Mortgage servicing rights |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest-only security payable |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Asset-backed financings of VIEs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
Six months ended June 30, 2025 |
|
|||||||||||||||||
|
|
Net loan |
|
|
Net gains on loans held |
|
|
Net gains (losses) on investments and financings |
|
|
Net interest |
|
|
Total |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Mortgage-backed securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loans held for investment |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Credit risk transfer strips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Mortgage servicing rights |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest-only security payable |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|||
Asset-backed financings of VIEs |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|||
28
Financial Statement Item Measured at Fair Value on a Nonrecurring Basis
Following is a summary of the carrying value of assets that were remeasured during the period based on fair value on a nonrecurring basis:
Real estate acquired in settlement of loans |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
|
(in thousands) |
|
|||||||||||||
June 30, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
December 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table summarizes the fair value changes recognized during the period on assets held at period end that were remeasured at fair value on a nonrecurring basis:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Real estate acquired in settlement of loans |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The Company remeasures its REO based on fair value when it evaluates the properties for impairment. The Company evaluates its REO for impairment with reference to the respective properties’ fair values less costs to sell. REO may be revalued after acquisition due to the Company receiving greater access to the property, the property being held for an extended period or receiving indications that the property’s fair value may not be supported by developing market conditions. Any subsequent change in fair value to a level that is less than or equal to the property’s cost is recognized in Results of real estate acquired in settlement of loans in the Company’s consolidated statements of operations.
Fair Value of Financial Instruments Carried at Amortized Cost
Most of the Company’s borrowings are carried at amortized cost. The Company’s Assets sold under agreements to repurchase, Mortgage loan participation purchase and sale agreements, Notes payable secured by credit risk transfer and mortgage servicing assets and the exchangeable senior notes included in Unsecured senior notes are classified as “Level 3” fair value liabilities due to the Company’s reliance on unobservable inputs to estimate these instruments’ fair values. The Company classifies its senior notes as “Level 2” fair value liabilities.
The Company has concluded that the fair values of these borrowings other than term notes and term loans included in Notes payable secured by credit risk transfer and mortgage servicing assets and the Unsecured senior notes approximate the agreements’ carrying values due to the borrowing agreements’ variable interest rates and short maturities.
The Company estimates the fair values of the term notes and term loans included in Notes payable secured by credit risk transfer and mortgage servicing assets using indications of fair value provided by nonaffiliate brokers for the term notes and internal estimates of fair value for the term loans. The Company estimates the fair values of its Unsecured senior notes using a pricing service.
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||||||||||
Instrument |
|
Carrying value |
|
|
Fair value |
|
|
Carrying value |
|
|
Fair value |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Notes payable secured by credit risk transfer |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Unsecured senior notes |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Valuation Governance
Most of the Company’s assets, its Asset-backed financings of variable interest entities at fair value, Interest-only security payable at fair value and Derivative and credit risk transfer strip liabilities at fair value are carried at fair value with changes in fair value recognized in current period results of operations. A substantial portion of these items are “Level 3” fair value assets and liabilities which require the use of unobservable inputs that are significant to the estimation of the fair values of the assets and liabilities. 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 PFSI's capital markets group and subjects the valuation process to significant senior management oversight.
With respect to “Level 3” valuations other than IRLCs, the capital markets valuation staff reports to PFSI’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 other than IRLCs, including the models’ performance versus actual results, and
29
reports those results to PFSI’s senior management valuation subcommittee. PFSI’s senior management valuation subcommittee includes the Company’s chief financial and investment officers as well as other senior members of PFSI’s finance, risk management and capital markets staffs.
The capital markets valuation staff is responsible for reporting to PFSI’s senior management valuation subcommittee on the changes in the valuation of the non-IRLC “Level 3” fair value assets and liabilities, including major factors affecting the valuation and any changes in model methods and inputs. To assess the reasonableness of its valuations, the capital markets valuation staff presents an analysis of the effect on the valuation of changes to the significant inputs to the models and, for MSRs, comparisons of its estimates of fair value and key inputs to those procured from nonaffiliate brokers and published surveys.
The fair values of the Company’s IRLCs are developed by PFSI's capital markets risk management staff and are reviewed by its capital markets operations staff.
Valuation Techniques and Inputs
The 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:
Mortgage-Backed Securities
The Company’s categorization of its current holdings of MBS is based on whether the respective security is an IO stripped MBS:
The key inputs used in the estimation of the fair value of IO stripped MBS include option-adjusted spread ("OAS") (OAS is a component of discount rate) and prepayment speed. Significant changes to those inputs in isolation may result in significant changes in the IO stripped MBS' fair value measurements. Changes in these key inputs are not directly related.
Following are the key inputs used in determining the fair value of IO stripped MBS:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Fair value (in thousands) |
|
$ |
|
|
$ |
|
||
Key inputs (1) |
|
|
|
|
|
|
||
Option-adjusted spread (2) |
|
|
|
|
|
|
||
Range |
|
|
|
|
||||
Weighted average |
|
|
|
|
||||
Annual total prepayment speed (3) |
|
|
|
|
|
|
||
Range |
|
|
|
|
||||
Weighted average |
|
|
|
|
||||
Equivalent life (in years) |
|
|
|
|
|
|
||
Range |
|
|
|
|
||||
Weighted average |
|
|
|
|
||||
Changes in the fair value of MBS are included in Net gains (losses) on investments and financings in the consolidated statements of operations.
Loans
Fair value of loans is estimated based on whether the loans are saleable into active markets:
30
Changes in fair values of loans held for sale are included in Net gains on loans held for sale at fair value in the consolidated statements of operations. Changes in fair values of loans held for investment are included in Net gains (losses) on investments and financings in the consolidated statements of operations.
Derivative and Credit Risk Transfer Strip Assets and Liabilities
CRT Derivatives
The Company categorizes CRT derivatives as “Level 3” fair value assets. The fair values of CRT derivatives are based on indications of fair value provided to the Company by nonaffiliate brokers for the certificates representing the beneficial interests in the trusts holding the Deposits securing credit risk transfer arrangements pledged to creditors, the recourse obligations and the IO ownership interests. Together, the recourse obligation and the IO ownership interest comprise the CRT derivative. Fair values of the CRT derivatives are derived by deducting the balances of the Deposits securing credit risk transfer arrangements pledged to creditors from the fair values of the certificates representing the beneficial interests in the trusts.
The Company establishes fair value of its investment in CRT Arrangements based on indications of fair value provided by nonaffiliate brokers for the securities representing the beneficial interests in the trusts holding the Deposits securing credit risk transfer arrangements pledged to creditors, the IO ownership interest and the recourse obligations. The Company assesses the fair values it receives from nonaffiliate brokers using the discounted cash flow approach. The significant unobservable inputs used by the Company in its review and approval of the valuation of CRT derivatives are the discount rates, voluntary and involuntary prepayment speeds and the remaining loss expectations of the reference loans. Changes in fair value of CRT derivatives are included in Net gains (losses) on investments and financings in the consolidated statements of operations.
Following is a quantitative summary of key unobservable inputs used in the Company’s review and approval of broker-provided fair values for CRT derivatives:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
(dollars in thousands) |
|
|||||
Fair value |
|
$ |
|
|
$ |
|
||
UPB of loans in reference pools |
|
$ |
|
|
$ |
|
||
Key inputs (1) |
|
|
|
|
|
|
||
Discount rate |
|
|
|
|
|
|
||
Range |
|
|
|
|
||||
Weighted average |
|
|
|
|
||||
Voluntary prepayment speed (2) |
|
|
|
|
|
|
||
Range |
|
|
|
|
||||
Weighted average |
|
|
|
|
||||
Involuntary prepayment speed (3) |
|
|
|
|
|
|
||
Range |
|
|
|
|
||||
Weighted average |
|
|
|
|
||||
Remaining loss expectation |
|
|
|
|
|
|
||
Range |
|
|
|
|
||||
Weighted average |
|
|
|
|
||||
31
Interest Rate Lock Commitments
The Company categorizes IRLCs as “Level 3” fair value assets and liabilities. The Company estimates the fair values of IRLCs based on quoted Agency MBS prices, the probability that the loans will be purchased under the commitments (the “pull-through rate”) and the Company’s estimate of the fair values of the MSRs it expects to receive upon sale of the loans.
The significant unobservable inputs used in the fair value measurement of the Company’s IRLCs are the pull-through rates and the estimated MSRs attributed to the mortgage loans subject to the commitments. Significant changes in the pull-through rates or the MSR components of the IRLCs, in isolation, may result in a significant change in the IRLCs’ fair values. 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 an IRLC’s fair value, but also increase the pull-through rate for the loan principal and interest payment cash flow component that 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 consolidated statements of operations.
Following is a quantitative summary of key unobservable inputs used in the valuation of IRLCs:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Fair value of net (liabilities) assets (in thousands) (1) |
|
$ |
|
|
$ |
|
||
Committed amount (in thousands) |
|
$ |
|
|
$ |
|
||
Key inputs (2) |
|
|
|
|
|
|
||
Pull-through rate |
|
|
|
|
|
|
||
Range |
|
|
|
|
||||
Weighted average |
|
|
|
|
||||
MSR fair value expressed as |
|
|
|
|
|
|
||
Servicing fee multiple |
|
|
|
|
|
|
||
Range |
|
|
|
|
||||
Weighted average |
|
|
|
|
||||
Percentage of unpaid principal balance |
|
|
|
|
|
|
||
Range |
|
|
|
|
||||
Weighted average |
|
|
|
|
||||
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 value of hedging derivatives are included in Net loan servicing fees – from nonaffiliates – Mortgage servicing rights hedging results, Net gains on loans held for sale at fair value, or Net gains (losses) on investments and financings, as applicable, in the consolidated statements of operations.
Credit Risk Transfer Strips
The Company categorizes CRT strips as “Level 3” fair value liabilities. The fair values of CRT strips are based on indications of fair value provided to the Company by nonaffiliate brokers for the securities representing the beneficial interests in the trusts holding the Deposits securing credit risk transfer arrangements pledged to creditors, the IO ownership interests and the recourse obligations. Together, the IO ownership interest and the recourse obligation comprise the CRT strip.
Fair values of the CRT strips are derived by deducting the balance of the Deposits securing credit risk transfer arrangements pledged to creditors from the indications of fair value of the securities provided by the nonaffiliate brokers.
The Company assesses the indications of fair value it receives from nonaffiliate brokers using the discounted cash flow approach. The significant unobservable inputs used by the Company in its review and approval of the valuation of the CRT strips are the discount rates, voluntary and involuntary prepayment speeds and the remaining loss expectations of the reference loans. Changes in fair value of CRT strips are included in Net gains (losses) on investments and financings in the consolidated statements of operations.
32
Following is a quantitative summary of key unobservable inputs used in the Company’s review and approval of the broker-provided fair values used to derive the fair value of the CRT strip liabilities:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
(dollars in thousands) |
|
|||||
Fair value |
|
$ |
|
|
$ |
|
||
Unpaid principal balance of loans in the reference pools |
|
$ |
|
|
$ |
|
||
Key inputs (1) |
|
|
|
|
|
|
||
Discount rate |
|
|
|
|
|
|
||
Range |
|
|
|
|
||||
Weighted average |
|
|
|
|
||||
Voluntary prepayment speed (2) |
|
|
|
|
|
|
||
Range |
|
|
|
|
||||
Weighted average |
|
|
|
|
||||
Involuntary prepayment speed (3) |
|
|
|
|
|
|
||
Range |
|
|
|
|
||||
Weighted average |
|
|
|
|
||||
Remaining loss expectation |
|
|
|
|
|
|
||
Range |
|
|
|
|
||||
Weighted average |
|
|
|
|
||||
Mortgage Servicing Rights
The Company categorizes MSRs as “Level 3” fair value assets. The Company receives a servicing fee based on the remaining UPB of the loans subject to the servicing agreements and generally has the right to receive other remuneration including various mortgagor-contracted fees such as late charges and collateral reconveyance charges, and is generally entitled to retain any placement fees earned on certain custodial funds held pending remittance of mortgagor principal, interest, tax and insurance payments. The fair values of MSRs are derived from the net positive cash flows associated with the servicing agreements. The Company uses a discounted cash flow approach to estimate the fair values of its MSRs.
Beginning in the third quarter of 2025, the Company enhanced its discounted cash flow approach to estimate the period-end fair value of its MSRs with the adoption of an OAS model. The OAS model allows the Company to account for the likelihood of interest rates moving along different paths as economic conditions change in its assessment of the fair value of MSRs as opposed to a single assumed rate path. Adoption of the OAS model did not have a significant effect on 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), OAS or pricing spread (the OAS and pricing spread are components of the discount rate), and annual per-loan cost to service the underlying loans, all of which are unobservable. Significant changes to any of those inputs in isolation could result in a significant change in the MSR fair value measurement. Changes in these key inputs are not directly related. Changes in the fair value of MSRs are included in Net loan servicing fees – From nonaffiliates – Change in fair value of mortgage servicing rights in the consolidated statements of operations.
MSRs are generally subject to loss in fair value when prepayment speed expectations and experience increase, when returns required by market participants (expressed as OAS or pricing spread) increase, or when the annual per-loan cost of servicing increases. Reductions in the fair value of MSRs affect income primarily through recognition of the change in fair value.
33
Following are the key inputs used in determining the fair value of MSRs at the time of initial recognition:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
MSRs recognized (in thousands) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Unpaid principal balance of underlying loans (in thousands) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Weighted average annual servicing fee rate (in basis points) |
|
|
|
|
|
|
|
|
||||||||
Key inputs (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Prepayment speed (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Range |
|
|
|
|
|
|
|
|
||||||||
Weighted average |
|
|
|
|
|
|
|
|
||||||||
Equivalent average life (in years) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Range |
|
|
|
|
|
|
|
|
||||||||
Weighted average |
|
|
|
|
|
|
|
|
||||||||
Pricing spread (3) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Range |
|
|
|
|
|
|
|
|
||||||||
Weighted average |
|
|
|
|
|
|
|
|
||||||||
Annual per-loan cost of servicing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Range |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Weighted average |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Following is a quantitative summary of key inputs used in the valuation of MSRs as of the dates presented, and the effect on the fair value from adverse changes in those inputs:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Fair value (in thousands) |
|
$ |
|
|
$ |
|
||
Unpaid principal balance of underlying loans (in thousands) |
|
$ |
|
|
$ |
|
||
Weighted average annual servicing fee rate (in basis points) |
|
|
|
|
||||
Weighted average note interest rate |
|
|
|
|
||||
Key inputs (1) |
|
|
|
|
|
|
||
Prepayment speed (2) |
|
|
|
|
|
|
||
Range |
|
|
|
|
||||
Weighted average |
|
|
|
|
||||
Equivalent average life (in years) |
|
|
|
|
|
|
||
Range |
|
|
|
|
||||
Weighted average |
|
|
|
|
||||
Effect on fair value (in thousands) of (3): |
|
|
|
|
|
|
||
5% adverse change |
|
$( |
|
|
$( |
|
||
10% adverse change |
|
$( |
|
|
$( |
|
||
20% adverse change |
|
$( |
|
|
$( |
|
||
Option-adjusted spread (4) |
|
|
|
|
|
|
||
Range |
|
|
|
|
||||
Weighted average |
|
|
|
|
||||
Effect on fair value (in thousands) of (3): |
|
|
|
|
|
|
||
5% adverse change |
|
$( |
|
|
$( |
|
||
10% adverse change |
|
$( |
|
|
$( |
|
||
20% adverse change |
|
$( |
|
|
$( |
|
||
Annual per-loan cost of servicing |
|
|
|
|
|
|
||
Range |
|
$ |
|
|
$ |
|
||
Weighted average |
|
$ |
|
|
$ |
|
||
Effect on fair value (in thousands) of (3): |
|
|
|
|
|
|
||
5% adverse change |
|
$( |
|
|
$( |
|
||
10% adverse change |
|
$( |
|
|
$( |
|
||
20% adverse change |
|
$( |
|
|
$( |
|
||
34
Real Estate Acquired in Settlement of Loans
REO is categorized as a “Level 3” fair value asset. Fair value of REO is established by using a current estimate of fair value from either the price given in a pending contract of sale, a full appraisal, or a broker’s price opinion.
REO fair values are reviewed by PLS staff appraisers when the Company obtains multiple indications of fair value and there is a significant difference between the indications of fair value. PLS staff appraisers will attempt to resolve the difference between the indications of fair value. In circumstances where the staff appraisers are not able to generate adequate data to support a fair value conclusion, the staff appraisers obtain an additional appraisal to establish fair value. Recognized changes in the fair value of REO are included in Results of real estate acquired in settlement of loans in the consolidated statements of operations.
Note 8— Mortgage-Backed Securities
Following is a summary of activity in the Company’s holdings of MBS:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Balance at beginning of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Purchases |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Repayments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Changes in fair value included in income arising from: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization and accrual of net purchase premiums |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Valuation adjustments, net |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Balance at end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
|
|
|
|
(in thousands) |
|
|||||
Fair value of mortgage-backed securities pledged to secure |
|
$ |
|
|
$ |
|
||||||
Following is a summary of the Company’s investments in MBS:
|
|
June 30, 2026 |
|
|||||||||||||
Security type |
|
Principal |
|
|
Purchase premiums |
|
|
Cumulative |
|
|
Fair value |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Agency fixed-rate pass-through |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Floating rate collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Principal-only stripped |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Senior non-Agency |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Subordinate residential transition |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|||
Interest-only stripped |
|
$ |
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
35
Maturities of Mortgage-Backed Securities
MBS maturities (based on final maturity dates) are as follows:
|
|
June 30, 2026 |
|
|||||||||
Security type |
|
Total |
|
|
Maturing after one year through five years |
|
|
Maturing |
|
|||
|
|
(in thousands) |
|
|||||||||
Agency fixed-rate pass-through securities |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Floating rate collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|||
Principal-only stripped securities |
|
|
|
|
|
|
|
|
|
|||
Senior non-Agency securities |
|
|
|
|
|
|
|
|
|
|||
Subordinate residential transition |
|
|
|
|
|
|
|
|
|
|||
Interest-only stripped securities |
|
|
|
|
|
|
|
|
|
|||
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
December 31, 2025 |
|
|||||||||||||
Security type |
|
Principal |
|
|
Purchase premiums |
|
|
Cumulative |
|
|
Fair value |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Agency fixed-rate pass-through |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||
Floating rate collateralized mortgage obligations |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Principal-only stripped |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Senior non-Agency |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|||
Interest-only stripped |
|
$ |
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Note 9—Loans Held for Sale at Fair Value
Following is a summary of the distribution of the Company’s loans held for sale at fair value:
Loan type |
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
(in thousands) |
|
|||||
Held for sale to nonaffiliates—GSE eligible (1) |
|
$ |
|
|
$ |
|
||
Jumbo |
|
|
|
|
|
|
||
Non-qualified |
|
|
|
|
|
|
||
Home equity lines of credit |
|
|
|
|
|
|
||
Repurchased pursuant to representations and warranties |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Loans pledged to secure Assets sold under agreements to repurchase |
|
$ |
|
|
$ |
|
||
its GSE eligible loan production to other investors.
36
Note 10—Loans Held for Investment at Fair Value
Loans held for investment at fair value are comprised primarily of loans held in VIEs securing asset-backed financings as described in Note 6 –Variable Interest Entities – Subordinate and Senior Non-Agency Mortgage-Backed Securities.
Following is a summary of the distribution of the Company’s loans held for investment at fair value:
Loan type |
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
(in thousands) |
|
|||||
Loans in variable interest entities: |
|
|
|
|
|
|
||
Agency-conforming loans secured by: |
|
|
|
|
|
|
||
Non-owner occupied properties |
|
$ |
|
|
$ |
|
||
Owner occupied properties |
|
|
|
|
|
|
||
Fixed interest rate jumbo loans |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Distressed loans |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Loans held for investment pledged to secure Asset-backed |
|
$ |
|
|
$ |
|
||
Company holds a portion of the beneficial interests in the VIEs. At June 30, 2026 and December 31, 2025, $
Note 11—Derivative and Credit Risk Transfer Strip Assets and Liabilities
Derivative and credit risk transfer strip assets and liabilities are summarized below:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
(in thousands) |
|
|||||
Derivative assets with nonaffiliates |
|
$ |
|
|
$ |
|
||
Derivative assets with PennyMac Financial Services, Inc. |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Derivative liabilities with nonaffiliates |
|
$ |
|
|
$ |
|
||
Credit risk transfer strip liabilities |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Derivative liabilities with PennyMac Financial Services, Inc. |
|
$ |
|
|
$ |
|
||
The Company records all derivative and CRT strip assets and liabilities at fair value and records changes in fair value in current period results of operations.
Derivative Activities
The Company holds and issues derivative financial instruments in connection with its operating, investing and financing activities. Derivative financial instruments are created as a result of certain of the Company’s operations and the Company also enters into derivative transactions as part of its interest rate risk management activities.
Derivative financial instruments created as a result of the Company’s operations are IRLCs that are created when the Company commits to purchase loans held for sale.
The Company engages in interest rate risk management activities in an effort to reduce the variability of earnings caused by the effects of changes in interest rates on the fair values of certain of its assets and liabilities. The Company bears price risk related to its mortgage production, servicing assets and MBS financing activities due to changes in market interest rates as discussed below:
To manage the price risk resulting from these interest rate risks, the Company uses derivative financial instruments with the intention of moderating the risk that changes in market interest rates will result in unfavorable changes in the fair values of the Company’s MBS, inventory of loans held for sale, IRLCs and MSRs. The Company does not designate and qualify any of its derivative financial instruments for hedge accounting.
37
Cash flows from derivative financial instruments relating to hedging of IRLCs and loans held for sale are included in Cash flows from operating activities in Sale to nonaffiliates and repayment of loans held for sale at fair value. Cash flows from derivative financial instruments relating to hedging of MSRs are included in Cash flows from investing activities.
Derivative Notional Amounts and Fair Value of Derivatives
The Company had the following derivative assets and liabilities recorded within Derivative assets and Derivative and credit risk transfer strip liabilities at fair value and related margin deposits on the consolidated balance sheets:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||||||||||||||||||
|
|
|
|
|
Fair value |
|
|
|
|
|
Fair value |
|
||||||||||||
|
|
Notional |
|
|
Derivative |
|
|
Derivative |
|
|
Notional |
|
|
Derivative |
|
|
Derivative |
|
||||||
Instrument |
|
amount (1) |
|
|
assets |
|
|
liabilities |
|
|
amount (1) |
|
|
assets |
|
|
liabilities |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Nonaffiliates: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Hedging derivatives subject to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Call options on interest rate futures purchase contracts |
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
||||||
Put options on interest rate futures purchase contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Forward purchase contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Forward sale contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Bond futures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Swap futures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Swaptions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other derivatives not subject to master netting arrangements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
CRT derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total derivative instruments before netting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Netting |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
||||||
PennyMac Financial Services, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest rate lock commitments not subject to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Forward purchase contract subject to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total derivatives before netting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Netting |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
||
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
||||||
Margin deposits (received from) placed with derivative |
|
|
|
|
$ |
( |
) |
|
|
|
|
|
|
|
$ |
|
|
|
|
|||||
Derivative assets pledged to secure: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Assets sold under agreements to repurchase and Notes |
|
|
|
|
$ |
|
|
|
|
|
|
|
|
$ |
|
|
|
|
||||||
(1)
(2)
Netting of Financial Instruments
The Company has elected to net derivative asset and liability positions, and cash collateral placed with or received from its counterparties when such positions are subject to legally enforceable master netting arrangements and the Company intends to set off. The derivative financial instruments that are not subject to master netting arrangements are CRT derivatives and IRLCs. As of June 30, 2026 and December 31, 2025, the Company was not a party to any reverse repurchase agreements or securities lending transactions that are required to be disclosed in the following tables.
38
Derivative Assets, Financial Instruments and Collateral Held by Counterparty
The following table summarizes by significant counterparty the amounts of derivative asset positions after considering master netting arrangements and financial instruments or cash pledged that do not meet the accounting guidance qualifying for setoff accounting.
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||||||||||||||||||||||||||
|
|
Net amount |
|
|
Gross amounts |
|
|
|
|
|
Net amount |
|
|
Gross amounts |
|
|
|
|
||||||||||||||
|
|
of assets |
|
|
not offset in the |
|
|
|
|
|
of assets |
|
|
not offset in the |
|
|
|
|
||||||||||||||
|
|
presented |
|
|
consolidated |
|
|
|
|
|
presented |
|
|
consolidated |
|
|
|
|
||||||||||||||
|
|
in the |
|
|
balance sheet |
|
|
|
|
|
in the |
|
|
balance sheet |
|
|
|
|
||||||||||||||
|
|
consolidated |
|
|
|
|
|
Cash |
|
|
|
|
|
consolidated |
|
|
|
|
|
Cash |
|
|
|
|
||||||||
|
|
balance |
|
|
Financial |
|
|
collateral |
|
|
Net |
|
|
balance |
|
|
Financial |
|
|
collateral |
|
|
Net |
|
||||||||
Counterparty |
|
sheet |
|
|
instruments |
|
|
received |
|
|
amount |
|
|
sheet |
|
|
instruments |
|
|
received |
|
|
amount |
|
||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||
Non-affiliates: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
CRT derivatives |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
RJ O’Brien & Associates, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Morgan Stanley & Co. LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Barclays Capital Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Citigroup Global Markets Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Nomura |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
BNP Paribas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Mizuho Financial Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Bank of America, N.A. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Goldman Sachs & Co. LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Wells Fargo Securities, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ellington Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Metro Life Ins Co |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
J.P. Morgan Securities LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
PennyMac Financial Services, Inc. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Derivative Liabilities, Financial Liabilities and Collateral Pledged by Counterparty
The following table summarizes by significant counterparty the amounts 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 were backed by sufficient collateral with fair values that exceeded the liability amounts recorded on the consolidated balance sheets.
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||||||||||||||||||||||||||
|
|
Net amount |
|
|
Gross amounts |
|
|
|
|
|
Net amount |
|
|
Gross amounts |
|
|
|
|
||||||||||||||
|
|
of liabilities |
|
|
not offset in the |
|
|
|
|
|
of liabilities |
|
|
not offset in the |
|
|
|
|
||||||||||||||
|
|
presented |
|
|
consolidated |
|
|
|
|
|
presented |
|
|
consolidated |
|
|
|
|
||||||||||||||
|
|
in the |
|
|
balance sheet |
|
|
|
|
|
in the |
|
|
balance sheet |
|
|
|
|
||||||||||||||
|
|
consolidated |
|
|
Financial |
|
|
Cash |
|
|
|
|
|
consolidated |
|
|
Financial |
|
|
Cash |
|
|
|
|
||||||||
|
|
balance |
|
|
instruments |
|
|
collateral |
|
|
Net |
|
|
balance |
|
|
instruments |
|
|
collateral |
|
|
Net |
|
||||||||
Counterparty |
|
sheet |
|
|
(1) |
|
|
pledged |
|
|
amount |
|
|
sheet |
|
|
(1) |
|
|
pledged |
|
|
amount |
|
||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||
Non-affiliates: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Bank of America, N.A. |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||||
Santander US Capital |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||||
J.P. Morgan Securities LLC |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||||
Wells Fargo Securities, LLC |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||||
Atlas Securitized Products, L.P. |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||||
Barclays Capital Inc. |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||||
Citigroup Global Markets Inc. |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||||
RBC Capital Markets, L.P. |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||||
Nomura Holdings America, Inc |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||||
BNP Paribas |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||||
Goldman Sachs & Co. LLC |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||||
Bank of Montreal |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||||
Daiwa Capital Markets |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||||
Morgan Stanley & Co. LLC |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||||
Mizuho Financial Group |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||||
PennyMac Financial Services, Inc. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
39
Following are the net gains (losses) recognized by the Company on derivative financial instruments and the consolidated statements of operations line items where such gains and losses are included:
|
|
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
Derivative activity |
|
Consolidated statements of operations line |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
|
|
(in thousands) |
|
|||||||||||||
Interest rate lock commitments |
|
Net gains on loans held for sale (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
CRT derivatives |
|
Net gains (losses) on investments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Hedged item: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate lock commitments |
|
Net gains on loans held for sale at fair value |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Mortgage servicing rights |
|
Net loan servicing fees |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Note 12—Mortgage Servicing Rights
Following is a summary of MSRs:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|
||||
|
|
(in thousands) |
|
|
|||||||||||||
Balance at beginning of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
MSRs resulting from loan sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Transfers to Agency of mortgage servicing rights |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Changes in fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Due to changes in inputs used in valuation |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|||
Other changes in fair value (2) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance at end of period (3) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
|
|
|
|
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
|
|
|
|
(in thousands) |
|
|||||
Fair value of mortgage servicing rights pledged to secure |
|
|
|
$ |
|
|
$ |
|
||||
Servicing fees relating to MSRs are recorded in Net loan servicing fees – from nonaffiliates on the Company’s consolidated statements of operations and are summarized below:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|
||||
|
|
(in thousands) |
|||||||||||||||
Contractually specified servicing fees |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Ancillary and other fees: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Late charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Average UPB of underlying loans |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
40
Note 13— Other Assets
Other assets are summarized below:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
(dollars in thousands) |
|
|||||
Margin deposits |
|
$ |
|
|
$ |
|
||
Interest receivable |
|
|
|
|
|
|
||
Servicing fees receivable |
|
|
|
|
|
|
||
Aggregation and securitization receivables |
|
|
|
|
|
|
||
Other receivables |
|
|
|
|
|
|
||
Real estate acquired in settlement of loans |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Note 14— Short-Term Debt
The borrowing facilities described throughout these Notes 14 and 15 contain various covenants, including financial covenants relating to the Company and its subsidiaries’ net worth, debt-to-equity ratio, and liquidity. The Company believes that it was in
compliance with these covenants as of June 30, 2026.
Assets sold under agreements to repurchase
Following is a summary of financial information relating to assets sold under agreements to repurchase:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Weighted average interest rate (1) |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Average balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Maximum daily amount outstanding |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
|
|
|
|
(dollars in thousands) |
|
|||||
Carrying value: |
|
|
|
|
|
|
|
|
|
|
||
Unpaid principal balance |
|
|
|
|
|
$ |
|
|
$ |
|
||
Unamortized debt issuance costs |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
$ |
|
|
$ |
|
||
Weighted average interest rate |
|
|
|
|
|
|
% |
|
|
% |
||
Available borrowing capacity (1): |
|
|
|
|
|
|
|
|
|
|
||
Committed |
|
|
|
|
|
$ |
|
|
$ |
|
||
Uncommitted |
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
$ |
|
|
$ |
|
||
Margin deposits placed with counterparties included in Other assets, net |
|
|
|
$ |
|
|
$ |
|
||||
Assets securing agreements to repurchase: |
|
|
|
|
|
|
|
|
|
|
||
Mortgage-backed securities at fair value |
|
|
|
|
|
$ |
|
|
$ |
|
||
Loans held for sale at fair value |
|
|
|
|
|
$ |
|
|
$ |
|
||
Loans held for investment at fair value |
|
|
|
|
|
$ |
|
|
$ |
|
||
Credit risk transfer arrangements: |
|
|
|
|
|
|
|
|
|
|
||
Derivative assets |
|
|
|
|
|
$ |
|
|
$ |
|
||
Deposits securing credit risk transfer arrangements |
|
|
|
|
|
$ |
|
|
$ |
|
||
Mortgage servicing rights at fair value (2) |
|
|
|
|
|
$ |
|
|
$ |
|
||
Servicing advances (3) |
|
|
|
|
|
$ |
|
|
$ |
|
||
41
Maturities
Following is a summary of maturities of outstanding advances under repurchase agreements by maturity date:
Remaining maturity at June 30, 2026 (1) |
|
Unpaid |
|
|
|
|
(in thousands) |
|
|
Within 30 days |
|
$ |
|
|
Over 30 to 90 days |
|
|
|
|
Over 90 days to 180 days |
|
|
|
|
Over 180 days to 1 year |
|
|
|
|
Over 1 year to 2 years |
|
|
|
|
|
|
$ |
|
|
Weighted average maturity (in months) |
|
|
|
|
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) and maturity information relating to the Company’s assets sold under agreements to repurchase is summarized by pledged asset and counterparty below as of June 30, 2026:
Loans and MSRs
|
|
|
|
|
Weighted-average maturity |
|||
Counterparty |
|
Amounts at risk |
|
|
Advances |
|
Facility |
|
|
|
(in thousands) |
|
|
|
|
|
|
Atlas Securitized Products, L.P. |
|
$ |
|
|
|
|||
Santander US Capital |
|
$ |
|
|
|
|||
Bank of America, N.A. |
|
$ |
|
|
|
|||
Citibank, N.A. |
|
$ |
|
|
|
|||
Nomura Holdings America, Inc. |
|
$ |
|
|
|
|||
Goldman Sachs & Co. LLC |
|
$ |
|
|
|
|||
Wells Fargo Securities, LLC |
|
$ |
|
|
|
|||
RBC Capital Markets, L.P. |
|
$ |
|
|
|
|||
Barclays Capital Inc. |
|
$ |
|
|
|
|||
JPMorgan Chase & Co. |
|
$ |
|
|
|
|||
Morgan Stanley & Co. LLC |
|
$ |
|
|
|
|||
BNP Paribas |
|
$ |
|
|
|
|||
42
Securities
Counterparty |
|
Amounts at risk |
|
|
Weighted-average maturity |
|
|
|
(in thousands) |
|
|
|
|
Santander US Capital |
|
$ |
|
|
||
Bank of America, N.A. |
|
$ |
|
|
||
Citibank, N.A. |
|
$ |
|
|
||
Nomura Holdings America, Inc. |
|
$ |
|
|
||
Goldman Sachs & Co. LLC |
|
$ |
|
|
||
Wells Fargo Securities, LLC |
|
$ |
|
|
||
Barclays Capital Inc. |
|
$ |
|
|
||
JPMorgan Chase & Co. |
|
$ |
|
|
||
Bank of Montreal |
|
$ |
|
|
||
Daiwa Capital Markets America Inc. |
|
$ |
|
|
||
Mizuho Financial Group |
|
$ |
|
|
||
|
|
|
|
|
|
|
CRT arrangements
Counterparty |
|
Amounts at risk |
|
|
Weighted-average maturity |
|
|
|
(in thousands) |
|
|
|
|
RBC Capital Markets, L.P. |
|
$ |
|
|
||
Morgan Stanley & Co. LLC |
|
$ |
|
|
||
Mortgage Loan Participation Purchase and Sale Agreement
One of the borrowing facilities secured by loans held for sale is in the form of a mortgage loan participation purchase and sale
agreement. Participation certificates, each of which represents an undivided beneficial ownership interest in loans that have been pooled into a pending securitization with Freddie Mac or Fannie Mae, are sold to the lender pending the securitization of such loans and the sale of the resulting security. The commitment between the Company and a nonaffiliate to sell such security is also assigned to the lender at the time a participation certificate is sold.
The purchase price paid by the lender for each participation certificate is based on the trade price of the security, plus an amount of interest expected to accrue on the security to its anticipated delivery date, minus a present value adjustment, any related hedging costs and a holdback amount. The holdback amount is based on a percentage of the purchase price and 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 agreement is summarized below:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Average balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Weighted average interest rate (1) |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Total interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Maximum daily amount outstanding |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Note 15— Long-Term Debt
Notes Payable Secured By Credit Risk Transfer and Mortgage Servicing Assets
CRT Arrangement Financing
The Company, through various wholly-owned subsidiaries, issued secured term notes (the “CRT Term Notes”) to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”). All of the CRT Term Notes have equal priority in claims to the collateral.
43
Following is a summary of the CRT Term Notes outstanding:
CRT |
|
Issuance date |
|
Issuance amount |
|
|
Unpaid principal |
|
|
Annual interest rate spread (1) |
|
Maturity date |
||
|
|
|
|
(in thousands) |
|
|
|
|
|
|||||
2024 3R |
|
August 28, 2024 |
|
$ |
|
|
$ |
|
|
|
||||
2024 2R |
|
April 4, 2024 |
|
$ |
|
|
|
|
|
|
||||
2024 1R |
|
March 6, 2024 |
|
$ |
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
$ |
|
|
|
|
|
||
Fannie Mae MSR Financing
The Company, through two subsidiaries, PMT ISSUER TRUST-FMSR and PMT CO-ISSUER TRUST-FMSR (together, the "Issuer Trusts"), finances MSRs (comprised of the base MSRs owned by PMC and the related excess servicing spread ("ESS") owned by PennyMac Holdings, LLC (“PMH”), another subsidiary of PMT), relating to loans serviced for Fannie Mae guaranteed securities through a combination of repurchase agreements and term financing.
The repurchase agreement financings for Fannie Mae MSRs and ESS are effected through the issuance of variable funding notes ("VFNs") by the Issuer Trusts to PMC and PMH in exchange for participation certificates for MSRs and ESS. The VFNs are then sold by PMC and PMH to qualified institutional buyers under agreements to repurchase. The amounts outstanding under the VFNs are included in Assets sold under agreements to repurchase in the Company’s consolidated balance sheets. The VFNs have a combined committed borrowing capacity of $
The term financing for Fannie Mae MSRs is effected through the issuance of term notes (the “FT-1 Term Notes”) by the Issuer Trusts to qualified institutional buyers under Rule 144A of the Securities Act and a series of syndicated term loans with various lenders (the “FTL-1 Term Loans").
The FT-1 Term Notes, FTL-1 Term Loans and the VFNs are secured by participation certificates relating to Fannie Mae MSRs and ESS. Creditors to the assets sold under agreements to repurchase, the FT-1Term Notes and the FTL-1 Term Notes have equal priority in claims to the collateral held by the Issuer Trusts.
Following is a summary of the term financing of the Company’s Fannie Mae MSRs:
|
|
|
|
|
|
|
|
|
Maturity date |
|||
Issuance |
|
Issuance date |
|
Unpaid principal |
|
|
Annual interest |
|
Stated |
|
Optional extension (2) |
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
Term Loans |
|
|
|
|
|
|
|
|
|
|||
2023 |
|
May 25, 2023 |
|
$ |
|
|
|
|
||||
Term Notes |
|
|
|
|
|
|
|
|
|
|||
2024 |
|
June 27, 2024 |
|
|
|
|
|
|
||||
|
|
|
|
$ |
|
|
|
|
|
|
|
|
Freddie Mac MSR and Servicing Advance Receivables Financing
The Company, through PMC and PMH, finances certain MSRs (including any related ESS) relating to loans pooled into Freddie Mac securities through various credit agreements. The total loan amount available under the agreements is approximately $
The Company, through its indirect, wholly owned subsidiaries, PMT ISSUER TRUST - FHLMC SAF, PMT SAF Funding, LLC, and PMC, entered into a structured finance transaction that PMC may use to finance Freddie Mac servicing advance receivables through the issuance of a VFN. The maturity date of the VFN is
44
Following is a summary of financial information relating to notes payable secured by credit risk transfer and mortgage servicing assets:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Average balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Weighted average interest rate (1) |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Total interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
|
|
|
|
(dollars in thousands) |
|
|||||
Carrying value: |
|
|
|
|
|
|
|
|
|
|
||
Unpaid principal balance: |
|
|
|
|
|
|
|
|
|
|
||
Credit risk transfer arrangement financing |
|
|
|
|
|
$ |
|
|
$ |
|
||
Fannie Mae mortgage servicing rights financing |
|
|
|
|
|
|
|
|
|
|
||
Freddie Mac mortgage servicing rights and servicing advance receivable financing |
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
||
Unamortized debt issuance costs |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
$ |
|
|
$ |
|
||
Weighted average interest rate |
|
|
|
|
|
|
% |
|
|
% |
||
Assets securing notes payable: |
|
|
|
|
|
|
|
|
|
|
||
Mortgage servicing rights at fair value (1) |
|
|
|
|
|
$ |
|
|
$ |
|
||
Servicing advances (1) |
|
|
|
|
|
$ |
|
|
$ |
|
||
Credit risk transfer arrangements: |
|
|
|
|
|
|
|
|
|
|
||
Deposits securing credit risk transfer arrangements |
|
|
|
|
|
$ |
|
|
$ |
|
||
Derivative assets |
|
|
|
|
|
$ |
|
|
$ |
|
||
Unsecured Senior Notes
Exchangeable Senior Notes
The exchangeable senior notes are summarized below:
Initial issuance date |
|
Unpaid principal balance |
|
|
Annual interest rate |
|
Exchange rate (1) |
|
Maturity date (2) |
|
|
(in thousands) |
|
|
|
|
|
|
|
||
May 24, 2024 (3) |
|
$ |
|
|
|
|
||||
The exchangeable senior notes are exchangeable for: (1) cash for the principal amount of the notes to be exchanged; and (2) cash, Common Shares or a combination of cash and Common Shares, at the Company’s election, for the remainder, if any, of the exchange obligation in excess of the principal amount of the notes being exchanged, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.
The exchangeable senior notes are fully and unconditionally guaranteed by the Company.
Senior Notes
The senior notes are summarized below:
45
Issuance date |
|
Unpaid principal balance |
|
|
Annual interest |
|
Maturity date |
|
Redemption date (1) |
|
|
(in thousands) |
|
|
|
|
|
|
|
||
June 2025 |
|
$ |
|
|
|
|
||||
February 2025 |
|
|
|
|
|
|
||||
September 2023 |
|
|
|
|
|
|
||||
|
|
$ |
|
|
|
|
|
|
|
|
Interest on the senior notes is payable quarterly. PMT may redeem for cash all or any portion of the senior notes, at its option, at a redemption price equal to
The senior notes are fully and unconditionally guaranteed on a senior unsecured basis by PMC, including the due and punctual payment of principal and interest, whether at stated maturity, upon acceleration, call for redemption or otherwise.
Following is financial information relating to the unsecured senior notes:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Average balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Weighted average interest rate (1) |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||||
|
|
|
|
|
|
|
|
(in thousands) |
|
|||||||
Carrying value: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unpaid principal balance |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exchangeable senior notes |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unamortized debt issuance costs |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Asset-Backed Financing of Variable Interest Entities at Fair Value
Following is a summary of financial information relating to the asset-backed financings of VIEs at fair value described in Note 6 ‒ Variable Interest Entities ‒ Subordinate Mortgage-Backed Securities:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Average balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Weighted average interest rate (1) |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Total interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
|
|
|
|
(dollars in thousands) |
|
|||||
Fair value |
|
|
|
|
|
$ |
|
|
$ |
|
||
Unpaid principal balance |
|
|
|
|
|
$ |
|
|
$ |
|
||
Weighted average interest rate |
|
|
|
|
|
|
% |
|
|
% |
||
46
The asset-backed financings are non-recourse liabilities and are secured solely by the assets of consolidated VIEs and not by any other assets of the Company. The assets of the VIEs are the only source of funds for repayment of the securities.
Maturities of Long-Term Debt
Contractual maturities of long-term debt obligations (based on final maturity dates) are as follows:
|
|
|
|
Twelve months ending June 30, |
|
|
|
|
|||||||||||||||||||
|
Total |
|
|
2027 |
|
|
2028 |
|
|
2029 |
|
|
2030 |
|
|
2031 |
|
|
Thereafter |
|
|||||||
|
(in thousands) |
|
|||||||||||||||||||||||||
Notes payable secured by credit risk transfer |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Unsecured senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Interest-only security payable at fair value (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Asset-backed financings at fair value (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
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, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Balance, beginning of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision for losses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pursuant to loan sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reduction in liability due to change in estimate |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Losses incurred |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance, end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
UPB of loans subject to representations and warranties at end of period |
|
|
$ |
|
|
$ |
|
|||||||||
Note 17—Commitments and Contingencies
Commitments
The following table summarizes the Company’s outstanding contractual commitments:
|
|
June 30, 2026 |
|
|
|
|
(in thousands) |
|
|
Commitments to purchase loans held for sale from PLS |
|
$ |
|
|
Legal Proceedings
From time to time, the Company may be involved in various legal and regulatory proceedings, lawsuits and claims arising in the ordinary course of 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.
Litigation
On June 14, 2024, a purported shareholder of the Company’s Series A Preferred Shares and Series B Preferred Shares (each, as defined hereafter) filed a complaint in a putative class action in the United States District Court for the Central District of California (the "District Court”), captioned Roberto Verthelyi v. PennyMac Mortgage Investment Trust and PNMAC Capital Management, LLC, Case No. 2:24-cv-05028 (the “Verthelyi Action”). The Verthelyi Action alleges, among other things, that the Company (and its external investment advisor, PCM), committed unlawful and unfair acts in violation of California’s Unfair Competition Law by replacing its floating three-month London Inter-bank Offered Rate ("LIBOR") dividend rate for the Series A and Series B Preferred Shares with a fixed rate, in violation of the LIBOR Act, 12 U.S.C. § 5801 et seq., and the LIBOR Rule, 12 C.F.R. § 253 et seq.
The Verthelyi Action seeks injunctive relief requiring the Company to implement SOFR as a replacement to the three-month LIBOR rate and damages for the putative class in the form of restitution, interest, disgorgement and other relief. The Company believes
47
it has interpreted the Articles Supplementary to its Series A and Series B Preferred Shares consistent with their terms and, more specifically, the interest rate fallback provisions contained therein, as applied under the LIBOR Act and the LIBOR rules, and that the Verthelyi Action is without merit.
On August 20, 2024, the Company filed a Motion to Dismiss that was denied by the District Court in an order dated
February 26, 2025. The Company responded by filing a motion to certify the order denying the motion for interlocutory appeal, and on May 5, 2025, the District Court issued an Order Granting Certification for Interlocutory Appeal and Staying Action. The Company subsequently petitioned the United States Court of Appeals for the Ninth Circuit (the “Ninth Circuit”) for permission to appeal, and that petition was granted by the Ninth Circuit in an order dated July 17, 2025. The appeal is fully briefed, arguments were heard and it remains pending.
At this time, the Company does not believe that a loss related to this matter is probable or reasonably estimable. The specific factors that limit the Company’s ability to reasonably estimate a loss or range of losses are the novelty of the legal theories under California’s Unfair Competition Law, the various claims for relief, including injunctive relief, and the early stage of the proceedings and uncertainty of the outcome. Accordingly,
Pursuant to the terms of the Third Amended and Restated Management Agreement, dated as of June 30, 2020, by and between the Company and PCM, the Company has assumed the defense of PCM in the Verthelyi Action.
Note 18—Shareholders’ Equity
Preferred Shares of Beneficial Interest
Preferred shares of beneficial interest are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per share, period ended June 30, |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter |
|
|
Six months |
|
||||||||||||||
Series |
|
Description (1) |
|
Number of shares |
|
|
Liquidation preference |
|
|
Issuance discount |
|
|
Carrying value |
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||||||
|
|
(in thousands, except dividends per share) |
|
|||||||||||||||||||||||||||||||
A |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
B |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
C |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
In accordance with the Articles Supplementary for each of the Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series A Preferred Shares”) and the Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series B Preferred Shares”), and disregarding the polling provisions contained in the Articles Supplementary for the Series A Preferred Shares and the Series B Preferred Shares that is deemed null and void in accordance with Federal Reserve rules, the applicable dividend rate for dividend periods from and after March 15, 2024, in the case of the Series A Preferred Shares, or June 15, 2024, in the case of the Series B Preferred Shares, are and will continue being calculated at the dividend rate in effect for the immediately preceding dividend period and will not transition to floating reference rates.
The Series A Preferred Shares became redeemable on March 15, 2024 and the Series B Preferred Shares became redeemable on June 15, 2024. The Series C Cumulative Redeemable Preferred Shares will not be redeemable before August 24, 2026, except in connection with the Company’s qualification as a REIT for U.S. federal income tax purposes or upon the occurrence of a change of control. On or after the date the preferred shares become redeemable, or 120 days after the first date on which such change of control occurs, the Company may, at its option, redeem any or all of the preferred shares at $
The preferred shares have no stated maturity, are not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless redeemed or repurchased by the Company or converted into Common Shares in connection with a change of control by the holders of the preferred shares.
48
Common Shares of Beneficial Interest
“At-The-Market” (“ATM”) Equity Offering Program
On June 14, 2024, the Company filed a shelf registration statement and a prospectus supplement, and entered into separate equity distribution agreements to sell from time to time, through an ATM equity offering program under which the counterparties will act as sales agents and/or principals, the Company’s Common Shares having an aggregate offering price of up to $
Common Share Repurchase Program
The Company has a Common Share repurchase program with a repurchase authorization of $
The Company made
Note 19— Net Gains on Loans Held for Sale
Net gains on loans held for sale are summarized below:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
From nonaffiliates: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash losses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales of loans |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Hedging activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Non-cash gains: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Receipt of MSRs in mortgage loan sale transactions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Provision for losses relating to representations and warranties |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pursuant to loan sales |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Reduction of liability due to change in estimate |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Changes in fair value of loans and derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate lock commitments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Hedging derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total changes in fair value of loans and derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total non-cash gains |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total from nonaffiliates |
|
|
|
|
|
|
|
|
|
|
|
|
||||
From PFSI ‒ cash gains |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Note 20— Net Gains (Losses) on Investments and Financings
Net gains (losses) on investments and financings are summarized below:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Mortgage-backed securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Loans held for investment |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
CRT arrangements |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset-backed financings |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
49
Note 21—Net Interest Expense
Net interest expense is summarized below:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and short-term investments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans held for investment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deposits securing CRT arrangements |
|
|
|
|
|
|
|
|
|
|
|
|
||||
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 credit risk transfer and mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unsecured senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset-backed financings |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest shortfall on repayments of loans serviced for Agency |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest on loan impound deposits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Note 22—Share-Based Compensation
The Company’s equity incentive plan provides for the issuance of equity awards to the Company’s officers and trustees, as well as to employees and officers of PFSI and its affiliates and other entities or persons that provide services to the Company.
The equity incentive plan is administered by the Company’s compensation committee, pursuant to authority delegated by PMT’s board of trustees, which has the authority to make equity awards to the eligible participants referenced above, and to determine what form the equity awards will take, and the terms and conditions of the equity awards.
The Company’s equity incentive plan allows for the grant of time-based and performance-based restricted share unit equity awards.
The shares underlying equity award grants will again be available for award under the equity incentive plan if:
Restricted share units and performance-based unit equity awards have been awarded to officers and trustees of the Company and to other employees and officers of PFSI and its affiliates at no cost to the grantees. Such awards generally vest over a one- to three-year period.
50
The following table summarizes the Company’s share-based compensation activity:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Grants: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted share units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Performance share units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Grant date fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted share units |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Performance share units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Vestings: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted share units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Performance share units (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeitures: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted share units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Performance share units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Compensation expense relating to share-based grants |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
June 30, 2026 |
|
|||||
|
|
Restricted share units |
|
|
Performance share units |
|
||
Shares expected to vest: |
|
|
||||||
Number of restricted shares units (in thousands) |
|
|
|
|
|
|
||
Grant date average fair value per unit |
|
$ |
|
|
$ |
|
||
Note 23—Income Taxes
The Company’s effective tax rate was (
The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. On the basis of this evaluation, as of June 30, 2026, the valuation allowance remains zero. The TRS has a significant net deferred tax liability position, which indicates the TRS will utilize all of its deferred tax assets. The amount of deferred tax assets considered realizable could be adjusted in future periods based on future income.
In general, cash dividends declared by the Company will be considered ordinary income to the shareholders for income tax purposes. Some portion of the dividends may be characterized as capital gain distributions or a return of capital. The 2017 Tax Cuts and Jobs Act (subject to certain limitations) provides a
Note 24—Earnings (Loss) Per Common Share
The Company determines earnings (loss) per Common Share using the two-class method. Under the two-class method, all earnings (distributed and undistributed) are allocated to Common Shares and participating securities based on their respective rights to receive dividends. The Company’s participating securities are certain grants of restricted share units that provide the recipients the nonforfeitable right to receive dividend equivalents during the vesting period on a basis equivalent to the dividends paid to holders of Common Shares.
51
Basic earnings per share is determined by dividing net income available to common shareholders (net income reduced by preferred dividends and income attributable to the participating securities) by the weighted average Common Shares outstanding during the period.
Diluted earnings per share is determined by dividing net income by the weighted average number of Common Shares and dilutive securities. The Company’s potentially dilutive securities are share-based compensation awards and the exchangeable senior notes described in Note 15— Long-Term Debt. The number of dilutive securities included in diluted earnings per share is calculated using either the treasury stock or if-converted method (whichever is most dilutive) for share-based compensation awards and the if-converted method for the exchangeable senior notes. The number of potentially dilutive securities relating to the exchangeable senior notes is calculated based on the exchange obligation in excess of the principal amount of the exchangeable senior notes as described in Note 15— Long-Term Debt.
The following table summarizes the basic and diluted earnings per share calculations:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands except per share amounts) |
|
|||||||||||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Dividends on preferred shares |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Effect of participating securities—share-based compensation awards |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net income attributable to common shareholders |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Weighted average basic shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive securities - shares issuable under stock-based |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average diluted shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic earnings (losses) per share |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Diluted earnings (losses) per share |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Calculation of diluted earnings per share requires certain potentially dilutive shares to be excluded when the inclusion of such shares would be anti-dilutive.
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Shares issuable under share-based compensation plan |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Note 25—Segments
The Company operates in
The Company’s reportable segments are identified based on PMT’s investment strategies. 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 reportable segments are evaluated based on income or loss before benefit from income taxes.
52
Financial highlights by segment are summarized below:
Quarter ended June 30, 2026 |
|
Credit sensitive strategies |
|
|
Interest rate sensitive strategies |
|
|
Aggregation and securitization |
|
|
Reportable segment total |
|
|
Corporate |
|
|
Consolidated total |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Net investment income (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net loan servicing fees |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Net gains on loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net gains (losses) on investments and financings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Mortgage-backed securities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loans held for investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Credit risk transfer arrangements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Other |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Earned by PennyMac Financial Services, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loan servicing fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Management fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loan fulfillment fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Professional services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loan collection and liquidation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Safekeeping |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loan origination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Pretax income (loss) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Total assets at end of quarter |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
53
Quarter ended June 30, 2025 |
|
Credit sensitive strategies |
|
|
Interest rate sensitive strategies |
|
|
Aggregation and securitization |
|
|
Reportable segment total |
|
|
Corporate |
|
|
Consolidated |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Net investment income (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net loan servicing fees |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Net gains on loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net gains (losses) on investments and financings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loans held for investment |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Credit risk transfer arrangements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Earned by PennyMac Financial Services, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loan servicing fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Management fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loan fulfillment fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Professional services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loan collection and liquidation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Safekeeping |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loan origination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Pretax income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Total assets at end of quarter |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
54
Six months ended June 30, 2026 |
|
Credit sensitive strategies |
|
|
Interest rate sensitive strategies |
|
|
Aggregation and securitization |
|
|
Reportable segment total |
|
|
Corporate |
|
|
Consolidated total |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Net investment income (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net loan servicing fees |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Net gains on loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net gains (losses) on investments and financings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Mortgage-backed securities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Loans held for investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Credit risk transfer arrangements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Net interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Other |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Earned by PennyMac Financial Services, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loan servicing fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Management fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loan fulfillment fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Professional services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loan collection and liquidation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Safekeeping |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loan origination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Pretax income (loss) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Total assets at end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
55
Six months ended June 30, 2025 |
|
Credit sensitive strategies |
|
|
Interest rate sensitive strategies |
|
|
Aggregation and securitization |
|
|
Reportable segment total |
|
|
Corporate |
|
|
Consolidated total |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Net investment income (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net loan servicing fees |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|||
Net gains on loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net gains (losses) on investments and financings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Mortgage-backed securities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loans held for investment |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Credit risk transfer arrangements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Other |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Earned by PennyMac Financial Services, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loan servicing fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Management fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loan fulfillment fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Professional services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loan collection and liquidation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Safekeeping |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loan origination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Pretax income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Total assets at end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Note 26—Regulatory Capital and Liquidity Requirements
The Company, through PMC, is subject to financial eligibility requirements established by the Federal Housing Finance Agency for sellers/servicers eligible to sell or service mortgage loans with Fannie Mae and Freddie Mac.
The Agencies' capital and liquidity amounts and requirements are summarized below:
|
|
Net worth (1) |
|
|
Tangible net worth / |
|
|
Liquidity (1) |
|
|||||||||||||||
|
|
Actual |
|
|
Required |
|
|
Actual |
|
|
Required |
|
|
Actual |
|
|
Required |
|
||||||
|
|
(dollars in thousands) |
|
|||||||||||||||||||||
June 30, 2026 |
|
$ |
|
|
$ |
|
|
|
% |
|
|
% |
|
$ |
|
|
$ |
|
||||||
December 31, 2025 |
|
$ |
|
|
$ |
|
|
|
% |
|
|
% |
|
$ |
|
|
$ |
|
||||||
Noncompliance with the Agencies’ capital and liquidity requirements can result in the Agencies taking various remedial actions up to and including removing the Company’s ability to sell loans to and service loans on behalf of the Agencies.
Note 27—Subsequent Events
Management has evaluated all events and transactions through the date the Company issued these consolidated financial statements. During this period,
56
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of financial condition and results of operations should be read with the consolidated financial statements and the related notes of PennyMac Mortgage Investment Trust (“PMT”) included within this Quarterly Report on Form 10-Q (this “Report”).
Statements contained in this Report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to be materially different from those expressed or implied in such statements. You can identify these forward-looking statements by words such as “may,” “will,” “should,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan” and other similar expressions. You should consider our forward-looking statements in light of the risks discussed under the heading “Risk Factors,” as well as our consolidated financial statements, related notes, and the other financial information appearing elsewhere in this Report and our other filings with the United States Securities and Exchange Commission (“SEC”). The forward-looking statements contained in this Report are made as of the date hereof and we assume no obligation to update or supplement any forward-looking statements.
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 Report to the words “we,” “us,” “our” and the “Company” refer to PMT and its consolidated subsidiaries.
Our Company
We are a specialty finance company that invests in mortgage-related assets. Our objective is to provide attractive risk-adjusted returns to our investors over the long-term, primarily through dividends and secondarily through capital appreciation. A significant portion of our investment portfolio is comprised of mortgage-related assets that we have created through our aggregation and securitization activities, including mortgage servicing rights (“MSRs”), senior and subordinate mortgage-backed securities (“MBS”), and credit risk transfer (“CRT”) arrangements, which absorb credit losses on certain of the loans we have sold. We also invest in Agency and senior non-Agency MBS, subordinate MBS, interest-only ("IO") and principal-only ("PO") stripped MBS, and Agency floating rate collateralized mortgage obligations ("CMOs").
We are externally managed by Pennymac Capital Management, LLC (“PCM”), an investment adviser that specializes in and focuses on U.S. mortgage assets. Our loan acquisitions related to our acquisitions of correspondent loans for our aggregation and securitization activities are facilitated by PennyMac Loan Services, LLC (“PLS”) which also performs servicing activities for our loans and MSRs. PCM and PLS are both indirect controlled subsidiaries of PennyMac Financial Services, Inc. (“PFSI”), a publicly-traded mortgage banking and investment management company separately listed on the New York Stock Exchange.
A significant portion of our operations involves Government-Sponsored Enterprises ("GSEs"), specifically the Federal Home Loan Mortgage Corporation ("Freddie Mac") and the Federal National Mortgage Association ("Fannie Mae"). Freddie Mac and Fannie Mae are each referred to as an “Agency” and, collectively as the "Agencies".
We operate our business in three segments: credit sensitive strategies, interest rate sensitive strategies and aggregation and securitization (formerly referred to as correspondent production). Non-segment activities are included in our corporate operations.
Our segment and corporate activities are described below.
We sell the loans we acquire through our aggregation and securitization activities primarily to the Agencies and also sell loans to other non-affiliate entities. We also securitize certain of our loans directly and retain beneficial interests, such as senior and subordinate MBS, from these securitizations.
57
Business Trends
Recent macroeconomic trends and U.S. federal government administration actions with respect to trade, tariffs, government cost reduction efforts and foreign military action have led to significant volatility in financial markets and uncertainty regarding the economic outlook, including inflation and interest rates. Elevated interest rates in recent years have constrained the mortgage origination market, which is currently projected to increase from $1.9 trillion in 2025 to $2.2 trillion in 2026 according to mortgage industry economists, although recent increases in interest rates may lead to a reduction in origination estimates for 2026.
The opportunity for refinancing has been impacted 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 prior periods; however, market indicators currently suggest that the Federal Reserve could begin increasing short-term interest rates later in 2026. Furthermore, ongoing economic uncertainty and market volatility could lead to reduced economic activity and slowing home price growth or depreciation. These drivers could increase mortgage delinquencies or defaults, negatively affect the performance of our credit-sensitive assets—including CRT arrangements and subordinate MBS—and increase losses from representations and warranties in our loan sales transactions. However, many of the loans underlying our assets possess favorable credit characteristics such as low loan-to-value ratios, which are likely to moderate the impact of credit performance during an economic downturn.
Our current strategy includes decreasing our exposure to MSRs and increasing our exposure to subordinate MBS. To that end, in the second quarter of 2026, we agreed to sell portfolio of conventional MSRs with an aggregate UPB of approximately $13.0 billion, which we expect to settle in the third quarter of 2026, and we may sell additional MSR portfolios in future periods. We also expect to purchase all of PLS' non-Agency correspondent loans and none of PLS's conventional conforming correspondent loans during the third quarter of 2026. We expect to continue investing in subordinate MBS generated from non-Agency securitizations, which is expected to increase our asset-backed financing of VIEs.
Our Investment Activities
Credit Sensitive Investments
CRT Arrangements
We have previously entered into loan sales arrangements with Fannie Mae pursuant to which we accepted credit risk relating to the loans sold in exchange for a portion of the interest earned on such loans. These arrangements absorb scheduled or realized credit losses on those loans and comprise our investments in CRT arrangements.
We held net CRT-related investments (comprised of deposits securing CRT arrangements, CRT derivatives, CRT strips and an IO security payable) totaling approximately $0.9 billion at June 30, 2026.
Subordinate Mortgage-Backed Securities
Subordinate MBS provide us with a higher yield than senior MBS. However, we incur credit risk since subordinate MBS are the first securities to absorb credit losses relating to the underlying loans. We purchased $4.0 million of MBS backed by residential transition loans during the six months ended June 30, 2026.
As the result of the Company’s consolidation of the variable interest entities ("VIEs") that issued certain of our holdings of subordinate MBS as described in Note 6 – Variable Interest Entities – Subordinate and Senior Non-Agency Mortgage-Backed Securities to the consolidated financial statements included in this Report, we reflect our investments in those securities as loans held for investment and reflect the related securities that we sell to nonaffiliates as asset-backed financings. We invested approximately $309.3 million in such non-Agency subordinate MBS during the six months ended June 30, 2026 and we held approximately $861.0 million of such securities at June 30, 2026.
Interest Rate Sensitive Investments
Mortgage servicing rights
During the six months ended June 30, 2026, we received approximately $71.3 million of MSRs as proceeds from sales of loans held for sale. At June 30, 2026, we held MSRs at fair value of approximately $3.6 billion. During June 2026, the Company entered into an agreement to sell a portfolio of conventional MSRs with an aggregate UPB of approximately $13.0 billion. The transaction is expected to close in August 2026.
58
Agency, non-Agency and structured MBS
Our investment portfolio includes REIT-eligible Agency MBS and structured products (IO and PO stripped MBS and floating rate CMOs) and senior non-Agency MBS. During the six months ended June 30, 2026, we purchased approximately $486.4 million of CMOs and sold approximately $477.4 million of our fixed-rate pass-through Agency MBS. At June 30, 2026, the total fair value of our interest rate investments was approximately $4.1 billion.
During the six months ended June 30, 2026, we invested approximately $12.1 million in senior non-Agency MBS from our securitizations of loans secured by investment properties. We account for these investments as loans and reflect the securities we sold to nonaffiliates as asset-backed financings as described above. At June 30, 2026, we held senior non-Agency securities totaling approximately $83.8 million from our securitizations of loans secured by investment properties.
Aggregation and Securitization
Our aggregation and securitization activities involve the acquisition and sale of newly originated prime credit quality residential loans. We acquire loans on a flow basis from correspondent loan sellers facilitated by PLS, as well as through direct bulk purchases of loans from PLS or other nonaffiliate parties. Mortgage aggregation and securitization serves as the source of our investments in MSRs, non-Agency securitizations and, previously, CRT arrangements. Our sales of loans from our aggregation and securitization and investment activities are summarized below:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Sales of loans held for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
To nonaffiliates |
|
$ |
2,102,216 |
|
|
$ |
2,369,738 |
|
|
$ |
4,319,419 |
|
|
$ |
4,983,696 |
|
To PennyMac Financial Services, Inc. |
|
|
— |
|
|
|
26,944,559 |
|
|
|
— |
|
|
|
47,382,225 |
|
|
|
$ |
2,102,216 |
|
|
$ |
29,314,297 |
|
|
$ |
4,319,419 |
|
|
$ |
52,365,921 |
|
Net gains on loans held for sale |
|
$ |
15,292 |
|
|
$ |
17,806 |
|
|
$ |
38,202 |
|
|
$ |
30,150 |
|
Investments resulting from aggregation and securitization: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Retention of interests in securitizations of loans, net of associated |
|
$ |
120,054 |
|
|
$ |
114,564 |
|
|
$ |
321,355 |
|
|
$ |
208,585 |
|
Receipt of MSRs as proceeds from sales of loans |
|
|
30,981 |
|
|
|
44,030 |
|
|
|
71,262 |
|
|
|
91,039 |
|
Total investments resulting from aggregation and securitization activities |
|
$ |
151,035 |
|
|
$ |
158,594 |
|
|
$ |
392,617 |
|
|
$ |
299,624 |
|
Beginning in July 2025, PLS became the initial purchaser of loans from correspondent sellers and began transferring agreed-upon volumes of such loans to us. Accordingly, we no longer purchase government loans, and we have the right to purchase up to 100% of PLS's non-government delegated correspondent production. During the six months ended June 30, 2026, we purchased newly originated prime credit quality residential loans, primarily from PLS, with fair values totaling $10.0 billion as compared to $55.4 billion for the six months ended June 30, 2025, from our aggregation and securitization business.
Taxation
We believe that we qualify to be taxed as a REIT and as such will not be subject to federal income tax on that portion of our income that is distributed to shareholders as long as we meet applicable REIT asset, income and share ownership tests. If we fail to qualify as a REIT, and do not qualify for certain statutory relief provisions, our profits will be subject to income taxes and we may be precluded from qualifying as a REIT for the four tax years following the year we lose our REIT qualification.
A portion of our activities, including our aggregation and securitization business, is conducted in our taxable REIT subsidiary (“TRS”), which is subject to corporate federal and state income taxes. Accordingly, we make a provision for income taxes with respect to the operations of our TRS. We expect that the effective rate for the provision for income taxes may be volatile in future periods. Our goal is to manage the business to take full advantage of the tax benefits afforded to us as a REIT.
We evaluate our deferred tax assets quarterly to determine if valuation allowances are required based on the consideration of all available positive and negative evidence using a “more-likely-than-not” standard with respect to whether deferred tax assets will be realized. Our evaluation considers, among other factors, taxable loss carryback availability, expectations of sufficient future taxable income, trends in earnings, existence of taxable income in recent years, the future reversal of temporary differences, and available tax planning strategies that could be implemented, if required. The ultimate realization of our deferred tax assets depends primarily on our ability to generate future taxable income during the periods in which the related deferred tax assets become deductible.
59
Non-Cash Investment Income
A substantial portion of our net investment income is comprised of non-cash items, including fair value adjustments and recognition of the fair value of assets created and liabilities incurred in loan sales transactions. Because we have elected, or are required by accounting principles generally accepted in the United States (“GAAP”), to record certain of our financial assets (comprised of MBS, loans held for sale and loans held for investment), our derivatives and CRT strips, our MSRs, and our asset-backed financings and IO security payable at fair value, a substantial portion of the income or loss we record with respect to such assets and liabilities results from non-cash changes in fair value.
The amounts of net non-cash investment income items included in net investment income are as follows:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Net gains (losses) on investments and financings |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage-backed securities |
|
$ |
426 |
|
|
$ |
14,564 |
|
|
$ |
(32,981 |
) |
|
$ |
79,419 |
|
Loans held for investment |
|
|
(28,488 |
) |
|
|
13,659 |
|
|
|
(94,291 |
) |
|
|
42,340 |
|
CRT arrangements |
|
|
(910 |
) |
|
|
8,267 |
|
|
|
(1,520 |
) |
|
|
(4,381 |
) |
Interest-only security payable |
|
|
(67 |
) |
|
|
(599 |
) |
|
|
3,351 |
|
|
|
(2,331 |
) |
Asset-backed financings |
|
|
40,652 |
|
|
|
(14,793 |
) |
|
|
102,888 |
|
|
|
(44,216 |
) |
|
|
|
11,613 |
|
|
|
21,098 |
|
|
|
(22,553 |
) |
|
|
70,831 |
|
Net gains on loans held for sale (1) |
|
|
51,704 |
|
|
|
47,821 |
|
|
|
75,800 |
|
|
|
118,127 |
|
Net loan servicing fees‒MSR valuation adjustments (2) |
|
|
38,847 |
|
|
|
(23,666 |
) |
|
|
94,190 |
|
|
|
(104,745 |
) |
|
|
$ |
102,164 |
|
|
$ |
45,253 |
|
|
$ |
147,437 |
|
|
$ |
84,213 |
|
Net investment income |
|
$ |
72,729 |
|
|
$ |
70,201 |
|
|
$ |
154,863 |
|
|
$ |
114,666 |
|
Non-cash items as a percentage of net investment income |
|
|
140 |
% |
|
|
64 |
% |
|
|
95 |
% |
|
|
73 |
% |
We receive or pay cash relating to:
60
Results of Operations
The following is a summary of our key performance measures:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(dollar amounts in thousands, except per common share amounts) |
|
|||||||||||||
Net loan servicing fees |
|
$ |
40,041 |
|
|
$ |
23,947 |
|
|
$ |
123,627 |
|
|
$ |
(3,263 |
) |
Loan production income (1) |
|
|
17,498 |
|
|
|
21,191 |
|
|
|
42,783 |
|
|
|
36,687 |
|
Net gains (losses) on investments |
|
|
22,301 |
|
|
|
33,680 |
|
|
|
(762 |
) |
|
|
95,993 |
|
Net interest expense |
|
|
(7,095 |
) |
|
|
(8,668 |
) |
|
|
(10,754 |
) |
|
|
(14,714 |
) |
Other |
|
|
(16 |
) |
|
|
51 |
|
|
|
(31 |
) |
|
|
(37 |
) |
Net investment income |
|
|
72,729 |
|
|
|
70,201 |
|
|
|
154,863 |
|
|
|
114,666 |
|
Expenses |
|
|
55,909 |
|
|
|
53,195 |
|
|
|
111,148 |
|
|
|
103,959 |
|
Pretax income |
|
|
16,820 |
|
|
|
17,006 |
|
|
|
43,715 |
|
|
|
10,707 |
|
(Benefit from) provision for income taxes |
|
|
(14,099 |
) |
|
|
9,472 |
|
|
|
(11,820 |
) |
|
|
(6,507 |
) |
Net income |
|
|
30,919 |
|
|
|
7,534 |
|
|
|
55,535 |
|
|
|
17,214 |
|
Dividends on preferred shares |
|
|
10,455 |
|
|
|
10,455 |
|
|
|
20,910 |
|
|
|
20,910 |
|
Net income (loss) attributable to |
|
$ |
20,464 |
|
|
$ |
(2,921 |
) |
|
$ |
34,625 |
|
|
$ |
(3,696 |
) |
Pretax income by segment and corporate: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit sensitive strategies |
|
$ |
11,248 |
|
|
$ |
21,834 |
|
|
$ |
27,709 |
|
|
$ |
22,942 |
|
Interest rate sensitive strategies |
|
|
8,991 |
|
|
|
(4,888 |
) |
|
|
16,981 |
|
|
|
(10,363 |
) |
Aggregation and securitization |
|
|
11,129 |
|
|
|
13,721 |
|
|
|
27,546 |
|
|
|
23,850 |
|
Corporate operations |
|
|
(14,548 |
) |
|
|
(13,661 |
) |
|
|
(28,521 |
) |
|
|
(25,722 |
) |
|
|
$ |
16,820 |
|
|
$ |
17,006 |
|
|
$ |
43,715 |
|
|
$ |
10,707 |
|
Annualized return on average common |
|
|
6.2 |
% |
|
|
(0.9 |
)% |
|
|
6.7 |
% |
|
|
(0.5 |
)% |
Earnings (losses) per common share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
0.23 |
|
|
$ |
(0.04 |
) |
|
$ |
0.40 |
|
|
$ |
(0.05 |
) |
Diluted |
|
$ |
0.23 |
|
|
$ |
(0.04 |
) |
|
$ |
0.40 |
|
|
$ |
(0.05 |
) |
Dividends per common share |
|
$ |
0.40 |
|
|
$ |
0.40 |
|
|
$ |
0.80 |
|
|
$ |
0.80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||||
|
|
|
|
|
|
|
|
(dollar amounts in thousands, except per common share amounts) |
|
|||||||
Total assets |
|
|
|
|
|
|
|
$ |
25,093,590 |
|
|
$ |
21,346,882 |
|
||
Book value per common share |
|
|
|
|
|
|
|
$ |
14.83 |
|
|
$ |
15.25 |
|
||
Closing price per common share |
|
|
|
|
|
|
|
$ |
11.28 |
|
|
$ |
12.55 |
|
||
Our results of operations increased by $23.4 million during the quarter ended June 30, 2026, as compared to the quarter ended June 30, 2025, reflecting the effect of decreased income tax expense along with increased gains on our MSRs partially offset by increased losses on MBS and a decrease in gains on our CRT-related investments.
The increase in the quarterly pretax results is summarized below:
61
Our results of operations increased by $38.3 million during the six months ended June 30, 2026, as compared to the six months ended June 30, 2025, reflecting the effect of decreased hedging losses relating to our investment in MSRs partially offset by losses on our investments in MBS.
The increase in the six months pretax results is summarized below:
Net Investment Income
Our net investment income is summarized below:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Net loan servicing fees |
|
$ |
40,041 |
|
|
$ |
23,947 |
|
|
$ |
123,627 |
|
|
$ |
(3,263 |
) |
Net gains on loans held for sale |
|
|
15,292 |
|
|
|
17,806 |
|
|
|
38,202 |
|
|
|
30,150 |
|
Loan origination fees |
|
|
2,206 |
|
|
|
3,385 |
|
|
|
4,581 |
|
|
|
6,537 |
|
Net gains (losses) on investments and financings |
|
|
22,301 |
|
|
|
33,680 |
|
|
|
(762 |
) |
|
|
95,993 |
|
Net interest expense |
|
|
(7,095 |
) |
|
|
(8,668 |
) |
|
|
(10,754 |
) |
|
|
(14,714 |
) |
Other |
|
|
(16 |
) |
|
|
51 |
|
|
|
(31 |
) |
|
|
(37 |
) |
|
|
$ |
72,729 |
|
|
$ |
70,201 |
|
|
$ |
154,863 |
|
|
$ |
114,666 |
|
Net Loan Servicing Fees
Our net loan servicing fees have two primary components: fees earned for servicing loans and the effects of MSR valuation changes, net of hedging results, as summarized below:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Loan servicing fees |
|
$ |
149,479 |
|
|
$ |
158,238 |
|
|
$ |
300,438 |
|
|
$ |
314,354 |
|
Effect of mortgage servicing rights and hedging results |
|
|
(109,438 |
) |
|
|
(134,291 |
) |
|
|
(176,811 |
) |
|
|
(317,617 |
) |
Net loan servicing fees |
|
$ |
40,041 |
|
|
$ |
23,947 |
|
|
$ |
123,627 |
|
|
$ |
(3,263 |
) |
62
Loan Servicing Fees
Following is a summary of our loan servicing fees:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|
||||
|
|
(in thousands) |
|||||||||||||||
Contractually specified servicing fees |
|
$ |
144,403 |
|
|
$ |
153,111 |
|
|
$ |
291,995 |
|
|
$ |
305,310 |
|
|
Ancillary and other fees: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Late charges |
|
|
1,063 |
|
|
|
1,036 |
|
|
|
2,134 |
|
|
|
2,063 |
|
|
Other |
|
|
4,013 |
|
|
|
4,091 |
|
|
|
6,309 |
|
|
|
6,981 |
|
|
|
|
|
5,076 |
|
|
|
5,127 |
|
|
|
8,443 |
|
|
|
9,044 |
|
|
|
|
$ |
149,479 |
|
|
$ |
158,238 |
|
|
$ |
300,438 |
|
|
$ |
314,354 |
|
|
Average UPB of underlying loans |
|
$ |
210,239,293 |
|
|
$ |
222,991,951 |
|
|
$ |
212,214,382 |
|
|
$ |
224,208,538 |
|
|
Loan servicing fees are primarily related to servicing we provide for loans included in Agency securitizations. These fees are contractually established at an annualized percentage of the unpaid principal balance (“UPB”) of the loans serviced and we collect these fees from borrower payments. Other loan servicing fees are comprised primarily of borrower-contracted fees, such as late charges and reconveyance fees, as well as incentive fees we receive from the Agencies for loss mitigation activities and fees charged to correspondent lenders for loans repaid by the borrower shortly after purchase.
The change in contractually-specified fees during the quarter and six months ended June 30, 2026 is due primarily to the slight reduction in our MSR servicing portfolio.
Effect of Mortgage Servicing Rights and Hedging Results
We have elected to carry our MSRs at fair value. Changes in fair value have two components: changes due to realization of the expected servicing cash flows and changes due to changes in the inputs used to estimate fair value. We endeavor to moderate the effects of changes in fair value attributable to changes in fair value inputs (market conditions) primarily by entering into derivative transactions.
Changes in fair value of MSRs and hedging results are summarized below:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Change in fair value of MSRs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Changes in valuation inputs used in valuation model |
|
$ |
18,904 |
|
|
$ |
22,713 |
|
|
$ |
64,491 |
|
|
$ |
(33,118 |
) |
Recapture income from PFSI |
|
|
4,857 |
|
|
|
1,474 |
|
|
|
10,664 |
|
|
|
2,682 |
|
Hedging results |
|
|
(32,831 |
) |
|
|
(60,637 |
) |
|
|
(44,712 |
) |
|
|
(100,581 |
) |
|
|
|
(9,070 |
) |
|
|
(36,450 |
) |
|
|
30,443 |
|
|
|
(131,017 |
) |
Realization of expected cash flows |
|
|
(100,368 |
) |
|
|
(97,841 |
) |
|
|
(207,254 |
) |
|
|
(186,600 |
) |
|
|
$ |
(109,438 |
) |
|
$ |
(134,291 |
) |
|
$ |
(176,811 |
) |
|
$ |
(317,617 |
) |
Average balance of mortgage servicing rights |
|
$ |
3,612,522 |
|
|
$ |
3,766,521 |
|
|
$ |
3,609,341 |
|
|
$ |
3,794,673 |
|
Changes in fair value due to changes in valuation inputs used in our valuation model are affected by the magnitude of the interest rate changes and the interest rate and prepayment sensitivities of the MSRs, which are based on the relationship of the interest rates of the underlying mortgages to the level of market interest rates. During the six months ended June 30, 2026, valuation adjustments shifted positively compared to the same period in 2025, driven by rising interest rates that slowed expected prepayments and increased servicing cash flow expectations. For the quarter ended June 30, 2026, these same factors resulted in a favorable valuation adjustment of $18.9 million, though moderated compared to the $22.7 million adjustment in the second quarter of 2025.
We have an agreement with PFSI that requires that when PFSI refinances a loan for which we hold the MSRs, we receive a recapture fee. The MSR recapture agreement is summarized in Note 4 ‒ Transactions with Related Parties – Operating Activities to the consolidated financial statements included in this Report. The increase in loan recapture income from PFSI reflects elevated refinancing activity within our MSR portfolio due to the volatility in interest rates during the quarter and six months ended June 30, 2026, compared to the same periods in 2025.
Hedging results during the quarter and six months ended June 30, 2026 were primarily driven by the impact of increasing interest rates—which partially offset the positive valuation adjustments on our MSRs—as well as the embedded costs of maintaining our hedge positions. These losses decreased compared to the same periods in 2025. Our hedging activities are intended to manage our net exposure across all interest rate-sensitive strategies, including MSRs, MBS, and related tax effects.
63
Changes in realization of cash flows are influenced by changes in the level of servicing assets and liabilities and changes in estimates of remaining cash flows to be realized as well as realized prepayment performance.
Following is a summary of our loan servicing portfolio:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
(in thousands) |
|
|||||
UPB of loans outstanding |
|
$ |
208,426,764 |
|
|
$ |
215,781,639 |
|
Collection status (unpaid principal balance) |
|
|
|
|
|
|
||
Delinquency: |
|
|
|
|
|
|
||
30-89 days delinquent |
|
$ |
2,404,640 |
|
|
$ |
2,605,536 |
|
90 or more days delinquent: |
|
|
|
|
|
|
||
Not in foreclosure |
|
$ |
977,187 |
|
|
$ |
1,032,221 |
|
In foreclosure |
|
$ |
144,769 |
|
|
$ |
118,768 |
|
Bankruptcy |
|
$ |
386,808 |
|
|
$ |
355,808 |
|
Following is a summary of characteristics of our MSR servicing portfolio as of June 30, 2026:
|
|
|
|
|
|
|
|
Average |
|
|
||||||||||||||||||||||||||||||
Loan type |
|
Unpaid principal balance |
|
|
Loan count |
|
|
Note rate |
|
|
Seasoning (months) |
|
|
Remaining |
|
|
Loan size |
|
|
FICO credit score at origination |
|
|
Original LTV (1) |
|
|
Current LTV (1) |
|
|
60+ Delinquency (by UPB) |
|
||||||||||
|
|
(Dollars and loan count in thousands) |
|
|||||||||||||||||||||||||||||||||||||
Agency: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Freddie Mac |
|
$ |
102,678,170 |
|
|
|
375 |
|
|
|
3.9 |
% |
|
|
54 |
|
|
|
294 |
|
|
$ |
274 |
|
|
|
762 |
|
|
|
75 |
% |
|
|
54 |
% |
|
|
0.6 |
% |
Fannie Mae |
|
|
100,621,268 |
|
|
|
400 |
|
|
|
3.8 |
% |
|
|
65 |
|
|
|
286 |
|
|
$ |
251 |
|
|
|
757 |
|
|
|
76 |
% |
|
|
50 |
% |
|
|
0.9 |
% |
Other (2) |
|
|
5,127,327 |
|
|
|
16 |
|
|
|
5.3 |
% |
|
|
40 |
|
|
|
318 |
|
|
$ |
331 |
|
|
|
765 |
|
|
|
72 |
% |
|
|
59 |
% |
|
|
0.7 |
% |
|
|
$ |
208,426,764 |
|
|
|
791 |
|
|
|
3.9 |
% |
|
|
59 |
|
|
|
290 |
|
|
$ |
264 |
|
|
|
760 |
|
|
|
75 |
% |
|
|
52 |
% |
|
|
0.8 |
% |
64
Net Gains on Loans Held for Sale
Our net gains on loans held for sale are summarized below:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
From nonaffiliates: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash losses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales of loans |
|
$ |
303 |
|
|
$ |
(11,618 |
) |
|
$ |
(39,954 |
) |
|
$ |
(13,533 |
) |
Hedging activities |
|
|
(36,715 |
) |
|
|
(21,055 |
) |
|
|
2,356 |
|
|
|
(79,117 |
) |
|
|
|
(36,412 |
) |
|
|
(32,673 |
) |
|
|
(37,598 |
) |
|
|
(92,650 |
) |
Non-cash gains: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Receipt of MSRs in loan sale transactions |
|
|
30,981 |
|
|
|
44,030 |
|
|
|
71,262 |
|
|
|
91,039 |
|
Provision for losses relating to representations and |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pursuant to loan sales |
|
|
(348 |
) |
|
|
(227 |
) |
|
|
(658 |
) |
|
|
(531 |
) |
Reduction in liability due to change in estimate |
|
|
245 |
|
|
|
912 |
|
|
|
687 |
|
|
|
2,080 |
|
|
|
|
(103 |
) |
|
|
685 |
|
|
|
29 |
|
|
|
1,549 |
|
Changes in fair value of financial instruments held at end of period: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate lock commitments |
|
|
6,218 |
|
|
|
2,904 |
|
|
|
597 |
|
|
|
7,078 |
|
Loans |
|
|
(13,401 |
) |
|
|
(8,515 |
) |
|
|
(97 |
) |
|
|
(21,959 |
) |
Hedging derivatives |
|
|
28,009 |
|
|
|
8,717 |
|
|
|
4,009 |
|
|
|
40,420 |
|
|
|
|
20,826 |
|
|
|
3,106 |
|
|
|
4,509 |
|
|
|
25,539 |
|
|
|
|
51,704 |
|
|
|
47,821 |
|
|
|
75,800 |
|
|
|
118,127 |
|
Total from nonaffiliates |
|
|
15,292 |
|
|
|
15,148 |
|
|
|
38,202 |
|
|
|
25,477 |
|
From PFSI—cash |
|
|
— |
|
|
|
2,658 |
|
|
|
— |
|
|
|
4,673 |
|
|
|
$ |
15,292 |
|
|
$ |
17,806 |
|
|
$ |
38,202 |
|
|
$ |
30,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate lock commitments issued on loans held |
|
|
|
|
|
|
|
|
|
|
|
|
||||
To nonaffiliates |
|
$ |
3,177,280 |
|
|
$ |
3,538,623 |
|
|
$ |
6,883,658 |
|
|
$ |
6,273,979 |
|
To PFSI |
|
|
— |
|
|
|
28,657,935 |
|
|
|
— |
|
|
|
50,753,290 |
|
|
|
$ |
3,177,280 |
|
|
$ |
32,196,558 |
|
|
$ |
6,883,658 |
|
|
$ |
57,027,269 |
|
Acquisition of loans for sale (unpaid principal balance): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
From nonaffiliates |
|
$ |
166,540 |
|
|
$ |
3,085,840 |
|
|
$ |
611,966 |
|
|
$ |
5,867,562 |
|
From PFSI (1) |
|
|
4,923,148 |
|
|
|
26,755,571 |
|
|
|
9,219,926 |
|
|
|
46,979,204 |
|
|
|
$ |
5,089,688 |
|
|
$ |
29,841,411 |
|
|
$ |
9,831,892 |
|
|
$ |
52,846,766 |
|
The changes in Net gains on loans held for sale at fair value during the quarter and six months ended June 30, 2026, as compared to the same periods in 2025, were primarily driven by the reduction in our volume of sales to nonaffiliates during the quarter ended June 30, 2026 and higher interest rate lock volumes and margins during the six months ended June 30, 2026, including higher volumes of jumbo loans, as well as favorable non-Agency execution.
Non-cash elements of gain on sale of loans:
Interest Rate Lock Commitments
Our Net gains on loans held for sale include our estimates of gains or losses we expect to realize upon the sale of mortgage loans we have committed to purchase but have not yet purchased or sold. Therefore, we recognize a substantial portion of our net gains before we purchase the loans. These gains are reflected on our balance sheet as IRLC derivative assets and liabilities. We adjust the fair values of our IRLCs as the loan acquisition process progresses until we complete the acquisitions or the commitments are canceled. Such adjustments are included in our Net gains on loans held for sale at fair value. The fair values of our IRLCs become part of the carrying values of our loans when we complete the purchases of the loans. The methods and key inputs we use to measure the fair values of IRLCs are summarized in Note 7 – Fair value – Valuation Techniques and Inputs to the consolidated financial statements included in this Report.
The MSRs 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 change as circumstances change, and changes in these estimates are recognized in our consolidated statements of operations in subsequent periods. Subsequent changes in the fair value of our MSRs significantly affect our income.
65
Mortgage Servicing Rights
The methods we use to measure and update the measurements of our MSRs as well as the effect of changes in valuation inputs on MSR fair value are detailed in Note 7 – Fair Value – Valuation Techniques and Inputs to the consolidated financial statements included in this Report.
Liability for Losses Under Representations and Warranties
We recognize liabilities for losses we expect to incur relating to the representations and warranties we provide to purchasers in our loan sales transactions. The representations and warranties we provide 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 laws.
In the event of a breach of our representations and warranties, we may be required to either repurchase the loans with the identified defects, reimburse the investor for its loss or indemnify the investor or insurer against credit losses attributable to the loans with indemnified defects. In such cases, we bear any subsequent credit losses on the loans. Our credit losses may be reduced by any recourse we have to correspondent sellers that, in turn, had 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 those repurchase losses from that correspondent seller.
We recorded a provision for losses relating to representations and warranties relating to current period loan sales of $348,000 and $658,000 for the quarter and six months ended June 30, 2026, respectively, and $227,000 and $531,000 for the quarter and six months ended June 30, 2025, respectively.
Following is a summary of the indemnification, repurchase and loss activity and loans subject to representations and warranties:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Indemnification activity (unpaid principal balance): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans indemnified at beginning of period |
|
$ |
16,882 |
|
|
$ |
15,782 |
|
|
$ |
16,207 |
|
|
$ |
15,289 |
|
New indemnifications |
|
|
157 |
|
|
|
— |
|
|
|
832 |
|
|
|
493 |
|
Less: indemnified loans sold, repaid or refinanced |
|
|
— |
|
|
|
195 |
|
|
|
— |
|
|
|
195 |
|
Loans indemnified at end of period |
|
$ |
17,039 |
|
|
$ |
15,587 |
|
|
$ |
17,039 |
|
|
$ |
15,587 |
|
Indemnified loans indemnified by correspondent lenders at |
|
|
|
|
|
|
|
$ |
5,772 |
|
|
$ |
6,045 |
|
||
UPB of loans with deposits received from correspondent sellers |
|
|
|
|
|
|
|
$ |
6,108 |
|
|
$ |
5,488 |
|
||
Repurchase activity (unpaid principal balance): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans repurchased |
|
$ |
52,812 |
|
|
$ |
8,251 |
|
|
$ |
56,413 |
|
|
$ |
13,097 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans repurchased by correspondent sellers |
|
|
28,822 |
|
|
|
5,149 |
|
|
|
32,433 |
|
|
|
9,932 |
|
Loans resold or repaid by borrowers |
|
|
9,211 |
|
|
|
— |
|
|
|
10,497 |
|
|
|
2,703 |
|
Net loans (resolved) repurchased with losses chargeable |
|
$ |
14,779 |
|
|
$ |
3,102 |
|
|
$ |
13,483 |
|
|
$ |
462 |
|
Losses charged to liability for representations and warranties |
|
$ |
15 |
|
|
$ |
206 |
|
|
$ |
15 |
|
|
$ |
273 |
|
At end of period: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans subject to representations and warranties |
|
|
|
|
|
|
|
$ |
207,564,556 |
|
|
$ |
218,738,822 |
|
||
Liability for representations and warranties |
|
|
|
|
|
|
|
$ |
5,240 |
|
|
$ |
5,064 |
|
||
The losses on representations and warranties we have recorded to date have been moderated by our ability to recover most of the losses inherent in the repurchased loans from the correspondent sellers. As the outstanding balance of loans we purchase and sell subject to representations and warranties increases, as the loans outstanding season, as our investors’ and guarantors’ loss mitigation strategies change and as our correspondent sellers’ ability and willingness to repurchase loans change, we expect that the level of repurchase activity and associated losses may increase.
The method we use to estimate the liability for representations and warranties is a function of our estimates of future defaults, loan repurchase rates, severities of loss in the event of default and the probabilities of reimbursement by the correspondent loan sellers. We establish a liability at our estimate of its fair value at the time loans are sold and review the adequacy of our recorded liability on a periodic basis.
The amount of the liability for representations and warranties is difficult to estimate and requires considerable judgment. The level of loan repurchase losses is dependent on economic factors, investor and guarantor loss mitigation strategies, our ability to recover any losses inherent in the repurchased loan from the correspondent seller and other external conditions that change over the lives of the
66
underlying loans. We may be required to incur losses related to such representations and warranties for several periods after the loans are sold or liquidated.
We record adjustments to our liability for losses on representations and warranties as economic fundamentals change, as investor and Agency evaluations of their loss mitigation strategies (including claims under representations and warranties) change and as economic conditions affect our correspondent sellers’ ability or willingness to fulfill their recourse obligations to us. Such adjustments may be material to our financial position and results of operations in future periods.
Adjustments to our liability for representations and warranties are included as a component of our Net gains on loans held for sale at fair value. We recorded a $245,000 and $687,000 reduction in liability for the quarter and six months ended June 30, 2026, respectively, and a $912,000 and $2.1 million reduction in liability for representations and warranties during the quarter and six months ended June 30, 2025, respectively, due to the effects of certain loans reaching specified performance histories identified by the Agencies as sufficient to limit repurchase claims relating to such loans.
Loan Origination Fees
Loan origination fees represent fees we charge correspondent sellers relating to our purchase of loans from those sellers. Loan origination fees decreased during the quarter and six months ended June 30, 2026, reflecting an overall decrease in our purchase volume of loans for sale. The reduction is related to activity-based expenses, including tax service fees and boarding fees associated with loans held for sale.
Net gains (losses) on investments and financings
Net gains (losses) on investments and financings are summarized below:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Mortgage-backed securities |
|
$ |
426 |
|
|
$ |
14,564 |
|
|
$ |
(32,981 |
) |
|
$ |
79,419 |
|
Loans held for investment |
|
|
(28,488 |
) |
|
|
13,659 |
|
|
|
(94,291 |
) |
|
|
42,340 |
|
CRT arrangements |
|
|
9,711 |
|
|
|
20,250 |
|
|
|
23,622 |
|
|
|
18,450 |
|
Asset-backed financings |
|
|
40,652 |
|
|
|
(14,793 |
) |
|
|
102,888 |
|
|
|
(44,216 |
) |
|
|
$ |
22,301 |
|
|
$ |
33,680 |
|
|
$ |
(762 |
) |
|
$ |
95,993 |
|
The decrease in net gains on investments for the quarter and six months ended June 30, 2026, as compared to the same periods in 2025, was primarily due to losses from our investments in MBS as interest rates increased, partially offset by increased gains in our investments in interests we retained in our private label securitization activities as credit spreads tightened during the six months ended June 30, 2026 as compared to the same periods in 2025.
Mortgage-Backed Securities
During the quarter and six months ended June 30, 2026, we recognized net valuation gains of $0.4 million and losses of $33.0 million, respectively, as compared to valuation gains of $14.6 million and $79.4 million, respectively, for the same periods in 2025. The reduced performance reflects increasing interest rates during the quarter and six months ended June 30, 2026, as compared to decreasing interest rates during the same periods in 2025.
Loans Held for Investment at Fair Value – Held in VIEs and Asset-backed Financings at Fair Value
Loans held for investment held in VIEs and Asset-backed financings of variable interest entities at fair value recorded combined net valuation gains of $12.2 million and $8.6 million during the quarter and six months ended June 30, 2026, respectively, as compared to a net loss of $1.1 million and $1.9 million during the same periods in 2025, respectively. The net gains during the quarter and six
67
months ended June 30, 2026 are due to interest rate volatility during 2026, which reduced the fair value of the underlying loan assets held for investments to a lesser degree than the decline in the value of the issued asset-backed debt liabilities.
CRT Arrangements
The activity in and balances relating to our CRT arrangements are summarized below:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Net investment income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net gains (losses) on investments and financings |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit risk transfer derivatives and strips: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit risk transfer derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Realized |
|
$ |
2,044 |
|
|
$ |
2,632 |
|
|
$ |
4,592 |
|
|
$ |
5,435 |
|
Valuation changes |
|
|
215 |
|
|
|
2,743 |
|
|
|
(2,201 |
) |
|
|
1,920 |
|
|
|
|
2,259 |
|
|
|
5,375 |
|
|
|
2,391 |
|
|
|
7,355 |
|
Credit risk transfer strips |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Realized |
|
|
8,644 |
|
|
|
9,950 |
|
|
|
17,199 |
|
|
|
19,727 |
|
Valuation changes |
|
|
(1,125 |
) |
|
|
5,524 |
|
|
|
681 |
|
|
|
(6,301 |
) |
|
|
|
7,519 |
|
|
|
15,474 |
|
|
|
17,880 |
|
|
|
13,426 |
|
Interest-only security payable at fair value — |
|
|
(67 |
) |
|
|
(599 |
) |
|
|
3,351 |
|
|
|
(2,331 |
) |
|
|
|
9,711 |
|
|
|
20,250 |
|
|
|
23,622 |
|
|
|
18,450 |
|
Interest income — Deposits securing credit risk transfer |
|
|
8,481 |
|
|
|
11,401 |
|
|
|
17,373 |
|
|
|
23,076 |
|
|
|
$ |
18,192 |
|
|
$ |
31,651 |
|
|
$ |
40,995 |
|
|
$ |
41,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net payments made to settle losses on credit risk transfer |
|
$ |
1,159 |
|
|
$ |
1,225 |
|
|
$ |
2,527 |
|
|
$ |
2,468 |
|
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
(in thousands) |
|
|||||
Carrying value of credit risk transfer arrangements: |
|
|
|
|
|
|
||
Derivative assets - credit risk transfer derivatives |
|
$ |
30,301 |
|
|
$ |
32,659 |
|
Derivative and credit risk transfer liabilities - credit risk transfer strips |
|
|
(5,428 |
) |
|
|
(5,999 |
) |
Deposits securing credit risk transfer arrangements |
|
|
947,900 |
|
|
|
1,009,334 |
|
Interest-only security payable at fair value |
|
|
(34,299 |
) |
|
|
(37,650 |
) |
|
|
$ |
938,474 |
|
|
$ |
998,344 |
|
|
|
|
|
|
|
|
||
Credit risk transfer arrangement assets pledged to secure borrowings: |
|
|
|
|
|
|
||
Derivative assets |
|
$ |
30,301 |
|
|
$ |
32,659 |
|
Deposits securing credit risk transfer arrangements (1) |
|
$ |
947,900 |
|
|
$ |
1,009,334 |
|
|
|
|
|
|
|
|
||
Unpaid principal balance of loans underlying credit risk transfer arrangements |
|
$ |
18,089,855 |
|
|
$ |
19,517,530 |
|
Collection status (unpaid principal balance): |
|
|
|
|
|
|
||
Delinquency |
|
|
|
|
|
|
||
Current |
|
$ |
17,597,227 |
|
|
$ |
18,908,261 |
|
30-89 days delinquent |
|
$ |
340,562 |
|
|
$ |
413,295 |
|
90-179 days delinquent |
|
$ |
79,095 |
|
|
$ |
110,486 |
|
180 or more days delinquent |
|
$ |
51,370 |
|
|
$ |
57,798 |
|
Foreclosure |
|
$ |
21,601 |
|
|
$ |
27,690 |
|
Bankruptcy |
|
$ |
56,129 |
|
|
$ |
68,426 |
|
68
The performance of our investments in CRT arrangements for the quarter ended June 30, 2026 reflected a relatively more stable credit spread and a lower average investment volume compared to the same period in 2025. The performance for the six months ended June 30, 2026 benefited from credit spread tightening compared to the same period in 2025.
Net Interest Expense
Net interest expense is summarized below:
|
|
Quarter ended June 30, 2026 |
|
|
Quarter ended June 30, 2025 |
|
||||||||||||||||||
|
|
Interest |
|
|
|
|
|
Interest |
|
|
Interest |
|
|
|
|
|
Interest |
|
||||||
|
|
income/ |
|
|
Average |
|
|
yield/ |
|
|
income/ |
|
|
Average |
|
|
yield/ |
|
||||||
|
|
expense |
|
|
balance |
|
|
cost % |
|
|
expense |
|
|
balance |
|
|
cost % |
|
||||||
|
|
(dollars in thousands) |
|
|||||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash and short-term investments |
|
$ |
4,507 |
|
|
$ |
486,845 |
|
|
|
3.71 |
% |
|
$ |
5,575 |
|
|
$ |
477,506 |
|
|
|
4.70 |
% |
Mortgage-backed securities |
|
|
50,842 |
|
|
|
3,648,242 |
|
|
|
5.59 |
% |
|
|
54,761 |
|
|
|
3,984,945 |
|
|
|
5.53 |
% |
Loans held for sale |
|
|
43,501 |
|
|
|
2,666,049 |
|
|
|
6.54 |
% |
|
|
35,917 |
|
|
|
2,204,825 |
|
|
|
6.55 |
% |
Loans held for investment |
|
|
160,577 |
|
|
|
11,633,874 |
|
|
|
5.54 |
% |
|
|
50,694 |
|
|
|
3,766,027 |
|
|
|
5.41 |
% |
Deposits securing CRT arrangements |
|
|
8,481 |
|
|
|
961,496 |
|
|
|
3.54 |
% |
|
|
11,401 |
|
|
|
1,079,300 |
|
|
|
4.25 |
% |
|
|
|
267,908 |
|
|
|
19,396,506 |
|
|
|
5.54 |
% |
|
|
158,348 |
|
|
|
11,512,603 |
|
|
|
5.53 |
% |
Placement fees relating to custodial funds |
|
|
35,141 |
|
|
|
|
|
|
|
|
|
37,736 |
|
|
|
|
|
|
|
||||
Other |
|
|
1,201 |
|
|
|
|
|
|
|
|
|
397 |
|
|
|
|
|
|
|
||||
|
|
$ |
304,250 |
|
|
$ |
19,396,506 |
|
|
|
6.29 |
% |
|
$ |
196,481 |
|
|
$ |
11,512,603 |
|
|
|
6.86 |
% |
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Assets sold under agreements to repurchase |
|
$ |
88,076 |
|
|
$ |
7,487,136 |
|
|
|
4.72 |
% |
|
$ |
84,336 |
|
|
$ |
6,382,670 |
|
|
|
5.31 |
% |
Mortgage loan participation purchase and sale |
|
|
32 |
|
|
|
— |
|
|
|
— |
|
|
|
168 |
|
|
|
9,666 |
|
|
|
6.99 |
% |
Notes payable secured by credit risk transfer |
|
|
45,411 |
|
|
|
2,501,636 |
|
|
|
7.28 |
% |
|
|
53,804 |
|
|
|
2,714,608 |
|
|
|
7.97 |
% |
Unsecured senior notes |
|
|
15,991 |
|
|
|
697,500 |
|
|
|
9.20 |
% |
|
|
15,987 |
|
|
|
811,731 |
|
|
|
7.92 |
% |
Asset-backed financings |
|
|
155,854 |
|
|
|
10,625,848 |
|
|
|
5.88 |
% |
|
|
46,449 |
|
|
|
3,636,038 |
|
|
|
5.14 |
% |
|
|
|
305,364 |
|
|
|
21,312,120 |
|
|
|
5.75 |
% |
|
|
200,744 |
|
|
|
13,554,713 |
|
|
|
5.96 |
% |
Interest shortfall on repayments of loans serviced |
|
|
3,716 |
|
|
|
|
|
|
|
|
|
2,455 |
|
|
|
|
|
|
|
||||
Interest on loan impound deposits |
|
|
1,567 |
|
|
|
|
|
|
|
|
|
1,460 |
|
|
|
|
|
|
|
||||
Other |
|
|
698 |
|
|
|
|
|
|
|
|
|
490 |
|
|
|
|
|
|
|
||||
|
|
|
311,345 |
|
|
$ |
21,312,120 |
|
|
|
5.86 |
% |
|
|
205,149 |
|
|
$ |
13,554,713 |
|
|
|
6.09 |
% |
|
|
$ |
(7,095 |
) |
|
|
|
|
|
|
|
$ |
(8,668 |
) |
|
|
|
|
|
|
||||
69
|
|
Six months ended June 30, 2026 |
|
|
Six months ended June 30, 2025 |
|
||||||||||||||||||
|
|
Interest |
|
|
|
|
|
Interest |
|
|
Interest |
|
|
|
|
|
Interest |
|
||||||
|
|
income/ |
|
|
Average |
|
|
yield/ |
|
|
income/ |
|
|
Average |
|
|
yield/ |
|
||||||
|
|
expense |
|
|
balance |
|
|
cost % |
|
|
expense |
|
|
balance |
|
|
cost % |
|
||||||
|
|
(dollars in thousands) |
|
|||||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash and short-term investments |
|
$ |
9,483 |
|
|
$ |
529,460 |
|
|
|
3.61 |
% |
|
$ |
11,261 |
|
|
$ |
497,438 |
|
|
|
4.58 |
% |
Mortgage-backed securities |
|
|
107,091 |
|
|
|
3,956,749 |
|
|
|
5.46 |
% |
|
|
112,995 |
|
|
|
4,021,995 |
|
|
|
5.68 |
% |
Loans held for sale |
|
|
83,064 |
|
|
|
2,640,993 |
|
|
|
6.34 |
% |
|
|
69,152 |
|
|
|
2,101,729 |
|
|
|
6.65 |
% |
Loans held for investment |
|
|
294,336 |
|
|
|
10,670,256 |
|
|
|
5.56 |
% |
|
|
84,373 |
|
|
|
3,199,308 |
|
|
|
5.33 |
% |
Deposits securing CRT arrangements |
|
|
17,373 |
|
|
|
980,458 |
|
|
|
3.57 |
% |
|
|
23,076 |
|
|
|
1,090,340 |
|
|
|
4.28 |
% |
|
|
|
511,347 |
|
|
|
18,777,916 |
|
|
|
5.49 |
% |
|
|
300,857 |
|
|
|
10,910,810 |
|
|
|
5.58 |
% |
Placement fees relating to custodial funds |
|
|
66,589 |
|
|
|
|
|
|
|
|
|
69,765 |
|
|
|
|
|
|
|
||||
Other |
|
|
2,405 |
|
|
|
|
|
|
|
|
|
1,950 |
|
|
|
|
|
|
|
||||
|
|
$ |
580,341 |
|
|
$ |
18,777,916 |
|
|
|
6.23 |
% |
|
$ |
372,572 |
|
|
$ |
10,910,810 |
|
|
|
6.90 |
% |
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Assets sold under agreements to repurchase |
|
$ |
179,468 |
|
|
$ |
7,633,516 |
|
|
|
4.74 |
% |
|
$ |
165,484 |
|
|
$ |
6,282,348 |
|
|
|
5.33 |
% |
Mortgage loan participation purchase |
|
|
63 |
|
|
|
— |
|
|
|
— |
|
|
|
320 |
|
|
|
9,162 |
|
|
|
7.06 |
% |
Notes payable secured by credit risk |
|
|
86,671 |
|
|
|
2,409,401 |
|
|
|
7.25 |
% |
|
|
109,059 |
|
|
|
2,772,009 |
|
|
|
7.96 |
% |
Unsecured senior notes |
|
|
36,265 |
|
|
|
836,644 |
|
|
|
8.74 |
% |
|
|
29,600 |
|
|
|
760,608 |
|
|
|
7.87 |
% |
Asset-backed financings |
|
|
276,394 |
|
|
|
9,731,488 |
|
|
|
5.73 |
% |
|
|
75,164 |
|
|
|
3,137,311 |
|
|
|
4.84 |
% |
|
|
|
578,861 |
|
|
|
20,611,049 |
|
|
|
5.66 |
% |
|
|
379,627 |
|
|
|
12,961,438 |
|
|
|
5.92 |
% |
Interest shortfall on repayments of loans |
|
|
8,146 |
|
|
|
|
|
|
|
|
|
3,884 |
|
|
|
|
|
|
|
||||
Interest on loan impound deposits |
|
|
3,263 |
|
|
|
|
|
|
|
|
|
2,914 |
|
|
|
|
|
|
|
||||
Other |
|
|
825 |
|
|
|
|
|
|
|
|
|
861 |
|
|
|
|
|
|
|
||||
|
|
|
591,095 |
|
|
$ |
20,611,049 |
|
|
|
5.78 |
% |
|
|
387,286 |
|
|
$ |
12,961,438 |
|
|
|
6.04 |
% |
|
|
$ |
(10,754 |
) |
|
|
|
|
|
|
|
$ |
(14,714 |
) |
|
|
|
|
|
|
||||
The effects of changes in the yields and costs and composition of our investments on our net interest expense are summarized below:
|
|
Quarter ended June 30, 2026 |
|
|
Six months ended June 30, 2026 |
|
||||||||||||||||||
|
|
vs. |
|
|
vs. |
|
||||||||||||||||||
|
|
Quarter ended June 30, 2025 |
|
|
Six months ended June 30, 2025 |
|
||||||||||||||||||
|
|
Increase (decrease) |
|
|
Increase (decrease) |
|
||||||||||||||||||
|
|
Rate |
|
|
Volume |
|
|
Total |
|
|
Rate |
|
|
Volume |
|
|
Total |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash and short-term investments |
|
$ |
(1,176 |
) |
|
$ |
108 |
|
|
$ |
(1,068 |
) |
|
$ |
(2,473 |
) |
|
$ |
695 |
|
|
$ |
(1,778 |
) |
Mortgage-backed securities |
|
|
632 |
|
|
|
(4,551 |
) |
|
|
(3,919 |
) |
|
|
(4,178 |
) |
|
|
(1,726 |
) |
|
|
(5,904 |
) |
Loans held for sale |
|
|
(39 |
) |
|
|
7,623 |
|
|
|
7,584 |
|
|
|
(3,322 |
) |
|
|
17,234 |
|
|
|
13,912 |
|
Loans held for investment |
|
|
1,175 |
|
|
|
108,708 |
|
|
|
109,883 |
|
|
|
3,806 |
|
|
|
206,157 |
|
|
|
209,963 |
|
Deposits securing CRT arrangements |
|
|
(1,767 |
) |
|
|
(1,153 |
) |
|
|
(2,920 |
) |
|
|
(3,541 |
) |
|
|
(2,162 |
) |
|
|
(5,703 |
) |
|
|
|
(1,175 |
) |
|
|
110,735 |
|
|
|
109,560 |
|
|
|
(9,708 |
) |
|
|
220,198 |
|
|
|
210,490 |
|
Placement fees relating to custodial funds |
|
|
|
|
|
|
|
|
(2,595 |
) |
|
|
|
|
|
|
|
|
(3,176 |
) |
||||
Other |
|
|
|
|
|
|
|
|
804 |
|
|
|
|
|
|
|
|
|
455 |
|
||||
|
|
$ |
(1,175 |
) |
|
$ |
110,735 |
|
|
$ |
107,769 |
|
|
$ |
(9,708 |
) |
|
$ |
220,198 |
|
|
$ |
207,769 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Assets sold under agreements to repurchase |
|
$ |
(10,007 |
) |
|
$ |
13,747 |
|
|
$ |
3,740 |
|
|
$ |
(19,343 |
) |
|
$ |
33,327 |
|
|
$ |
13,984 |
|
Mortgage loan participation purchase |
|
|
(68 |
) |
|
|
(67 |
) |
|
|
(135 |
) |
|
|
(129 |
) |
|
|
(129 |
) |
|
|
(258 |
) |
Notes payable secured by credit risk |
|
|
(4,405 |
) |
|
|
(3,988 |
) |
|
|
(8,393 |
) |
|
|
(9,015 |
) |
|
|
(13,373 |
) |
|
|
(22,388 |
) |
Unsecured senior notes |
|
|
2,402 |
|
|
|
(2,398 |
) |
|
|
4 |
|
|
|
3,503 |
|
|
|
3,162 |
|
|
|
6,665 |
|
Asset-backed financings |
|
|
7,675 |
|
|
|
101,730 |
|
|
|
109,405 |
|
|
|
16,056 |
|
|
|
185,174 |
|
|
|
201,230 |
|
|
|
|
(4,403 |
) |
|
|
109,024 |
|
|
|
104,621 |
|
|
|
(8,928 |
) |
|
|
208,161 |
|
|
|
199,233 |
|
Interest shortfall on repayments of loans |
|
|
|
|
|
|
|
|
1,261 |
|
|
|
|
|
|
|
|
|
4,262 |
|
||||
Interest on loan impound deposits |
|
|
|
|
|
|
|
|
107 |
|
|
|
|
|
|
|
|
|
349 |
|
||||
Other |
|
|
|
|
|
|
|
|
208 |
|
|
|
|
|
|
|
|
|
(36 |
) |
||||
|
|
|
(4,403 |
) |
|
|
109,024 |
|
|
|
106,197 |
|
|
|
(8,928 |
) |
|
|
208,161 |
|
|
|
203,808 |
|
|
|
$ |
3,228 |
|
|
$ |
1,711 |
|
|
$ |
1,572 |
|
|
$ |
(780 |
) |
|
$ |
12,037 |
|
|
$ |
3,961 |
|
70
Expenses
Our expenses are summarized below:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Earned by PennyMac Financial Services, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loan servicing fees |
|
$ |
19,640 |
|
|
$ |
21,645 |
|
|
$ |
39,363 |
|
|
$ |
43,374 |
|
Management fees |
|
|
6,810 |
|
|
|
6,869 |
|
|
|
13,572 |
|
|
|
13,881 |
|
Loan fulfillment fees |
|
|
5,023 |
|
|
|
5,814 |
|
|
|
10,760 |
|
|
|
11,104 |
|
Professional services |
|
|
11,627 |
|
|
|
8,362 |
|
|
|
25,128 |
|
|
|
15,344 |
|
Compensation |
|
|
3,390 |
|
|
|
2,836 |
|
|
|
6,366 |
|
|
|
5,806 |
|
Loan collection and liquidation |
|
|
1,680 |
|
|
|
2,385 |
|
|
|
3,804 |
|
|
|
4,354 |
|
Safekeeping |
|
|
931 |
|
|
|
1,228 |
|
|
|
1,786 |
|
|
|
2,338 |
|
Loan origination |
|
|
14 |
|
|
|
666 |
|
|
|
227 |
|
|
|
1,352 |
|
Other |
|
|
6,794 |
|
|
|
3,390 |
|
|
|
10,142 |
|
|
|
6,406 |
|
|
|
$ |
55,909 |
|
|
$ |
53,195 |
|
|
$ |
111,148 |
|
|
$ |
103,959 |
|
Expenses increased $2.7 million and $7.2 million, or 5% and 7%, during the quarter and six months ended June 30, 2026, compared to the same periods in 2025, as discussed below.
Loan Servicing Fees
Loan servicing fees payable to PLS are summarized below:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Loan servicing fees: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans held for sale |
|
$ |
145 |
|
|
$ |
285 |
|
|
$ |
300 |
|
|
$ |
508 |
|
Loans held for investment |
|
|
1,118 |
|
|
|
226 |
|
|
|
1,634 |
|
|
|
394 |
|
Mortgage servicing rights |
|
|
18,377 |
|
|
|
21,134 |
|
|
|
37,429 |
|
|
|
42,472 |
|
|
|
$ |
19,640 |
|
|
$ |
21,645 |
|
|
$ |
39,363 |
|
|
$ |
43,374 |
|
Average investment in loans: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Held for sale |
|
$ |
2,666,049 |
|
|
$ |
2,204,825 |
|
|
$ |
2,640,993 |
|
|
$ |
2,101,729 |
|
Held for investment |
|
$ |
11,633,874 |
|
|
$ |
3,766,027 |
|
|
$ |
10,670,256 |
|
|
$ |
3,199,308 |
|
Average MSR portfolio unpaid principal balance |
|
$ |
210,239,293 |
|
|
$ |
222,991,951 |
|
|
$ |
212,214,382 |
|
|
$ |
224,208,538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage servicing rights recapture fees |
|
$ |
4,857 |
|
|
$ |
1,474 |
|
|
$ |
10,664 |
|
|
$ |
2,682 |
|
Unpaid principal balance of loans recaptured |
|
$ |
481,158 |
|
|
$ |
183,050 |
|
|
$ |
1,032,156 |
|
|
$ |
342,522 |
|
Loan servicing fees decreased by $2.0 million and $4.0 million during the quarter and six months ended June 30, 2026, respectively, as compared to the same periods in 2025, reflecting a decrease in the MSR portfolio as well as reduction in the subservicing fee rate implemented in October 2025, as described in Note 4—Transactions with Related Parties to the consolidated financial statements included in this Report.
Management Fees
Management fees payable to PCM are summarized below:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Base fee |
|
$ |
6,810 |
|
|
$ |
6,869 |
|
|
$ |
13,572 |
|
|
$ |
13,881 |
|
Average shareholders' equity amounts used |
|
$ |
1,820,944 |
|
|
$ |
1,836,690 |
|
|
$ |
1,824,591 |
|
|
$ |
1,866,238 |
|
71
Management fees decreased by $59,000 and $309,000 during the quarter and six months ended June 30, 2026, respectively, as compared to the same periods in 2025. This decrease reflects the effect of the decrease in our average shareholders’ equity on our base management fee.
Loan Fulfillment Fees
Loan fulfillment fees represent fees we pay to PLS for the services it performs on our behalf in connection with our acquisition, packaging and sale of loans. Fulfillment fees decreased by $0.8 million and $0.3 million during the quarter and six months ended June 30, 2026, respectively, as compared to the same periods in 2025. The decrease was due to the decrease in the volume of loans purchased for sale to nonaffiliates. Our loan fulfillment fee structure is described in Note 4 – Transactions with Related Parties to the consolidated financial statements included in this Report.
Professional services
Professional services expense increased by $3.3 million and $9.8 million during the quarter and six months ended June 30, 2026, respectively, as compared to the same periods in 2025, due to increased legal and consulting fees in support of the increase in our private label securitization activities.
Loan collection and liquidation
Loan collection and liquidation expenses decreased by $0.7 million and $0.6 million during the quarter and six months ended June 30, 2026, respectively, as compared to the same periods in 2025, due to decreased servicing costs related to delinquent loans serviced for the Agencies' foreclosure avoidance programs.
Other Expenses
Other expenses are summarized below:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Common overhead allocation from PFSI |
|
$ |
4,022 |
|
|
$ |
982 |
|
|
$ |
4,971 |
|
|
$ |
1,963 |
|
Bank service charges |
|
|
1,200 |
|
|
|
788 |
|
|
|
2,215 |
|
|
|
1,485 |
|
Insurance |
|
|
506 |
|
|
|
251 |
|
|
|
992 |
|
|
|
701 |
|
Technology |
|
|
318 |
|
|
|
545 |
|
|
|
807 |
|
|
|
960 |
|
Other |
|
|
748 |
|
|
|
824 |
|
|
|
1,157 |
|
|
|
1,297 |
|
|
|
$ |
6,794 |
|
|
$ |
3,390 |
|
|
$ |
10,142 |
|
|
$ |
6,406 |
|
Income Taxes
We have elected to treat PennyMac Corp. (“PMC”) as a taxable REIT subsidiary (“TRS”). Income from a TRS is only included as a component of REIT taxable income to the extent that the TRS makes dividend distributions of income to us. A TRS is subject to corporate federal and state income tax. Accordingly, a provision for income taxes for PMC is included in the accompanying consolidated statements of operations.
The Company’s effective tax rate was (83.9)% and (27.0)% with consolidated pretax income of $16.8 million and $43.7 million for the quarter and six months ended June 30, 2026, respectively. The Company’s TRS recognized a tax benefit of $14.1 million on a pretax loss of $55.3 million and tax benefit of $11.2 million on a pretax loss of $54.3 million for the quarter and six months ended June 30, 2026, respectively. For the same periods in 2025, the TRS recognized a tax expense of $9.7 million on a pretax loss of $11.9 million and a tax benefit of $7.5 million on a pretax loss of $87.2 million, respectively. The primary difference between the Company’s effective tax rate and the statutory tax rate is generally attributable to nontaxable REIT income resulting from the dividends paid deduction.
The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. On the basis of this evaluation, as of June 30, 2026, the valuation allowance remains zero. The TRS has a significant net deferred tax liability position, which indicates the TRS will utilize all of its deferred tax assets. The amount of deferred tax assets considered realizable could be adjusted in future periods based on future income.
In general, cash dividends declared by the Company will be considered ordinary income to the shareholders for income tax purposes. Some portion of the dividends may be characterized as capital gain distributions or a return of capital. The 2017 Tax Cuts and Jobs Act (subject to certain limitations) provides a 20% deduction from taxable income for ordinary REIT dividends which was made permanent under the One Big Beautiful Bill Act of 2025.
72
Balance Sheet Analysis
Following is a summary of key balance sheet items as of the dates presented:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
(in thousands) |
|
|||||
Assets |
|
|
|
|
|
|
||
Cash and short-term investments |
|
$ |
420,850 |
|
|
$ |
462,488 |
|
Mortgage-backed securities at fair value |
|
|
4,075,660 |
|
|
|
4,452,859 |
|
Loans held for sale |
|
|
3,195,343 |
|
|
|
2,699,398 |
|
Loans held for investment |
|
|
12,458,249 |
|
|
|
8,532,644 |
|
Derivative assets |
|
|
49,423 |
|
|
|
55,943 |
|
Deposits securing credit risk transfer arrangements |
|
|
947,900 |
|
|
|
1,009,334 |
|
Mortgage servicing rights and servicing advances |
|
|
3,639,921 |
|
|
|
3,741,532 |
|
|
|
|
24,787,346 |
|
|
|
20,954,198 |
|
Other |
|
|
306,244 |
|
|
|
392,684 |
|
Total assets |
|
$ |
25,093,590 |
|
|
$ |
21,346,882 |
|
Liabilities |
|
|
|
|
|
|
||
Debt: |
|
|
|
|
|
|
||
Short-term |
|
$ |
8,395,226 |
|
|
$ |
8,018,601 |
|
Long-term: |
|
|
|
|
|
|
||
Recourse |
|
|
3,166,407 |
|
|
|
3,286,428 |
|
Non-recourse |
|
|
11,392,901 |
|
|
|
7,826,953 |
|
|
|
|
14,559,308 |
|
|
|
11,113,381 |
|
|
|
|
22,954,534 |
|
|
|
19,131,982 |
|
Other |
|
|
285,682 |
|
|
|
327,569 |
|
Total liabilities |
|
|
23,240,216 |
|
|
|
19,459,551 |
|
Shareholders’ equity |
|
|
1,853,374 |
|
|
|
1,887,331 |
|
Total liabilities and shareholders’ equity |
|
$ |
25,093,590 |
|
|
$ |
21,346,882 |
|
Total assets increased by approximately $3.7 billion, or 18%, from December 31, 2025 to June 30, 2026, primarily due to an increase of $3.9 billion in Loans held for investment at fair value, and a $495.9 million increase in Loans held for sale at fair value offset by a reduction of $377.2 million in Mortgage-backed securities at fair value and a decrease of $101.6 million of Mortgage servicing rights and servicing advances.
The increase in Loans held for investments at fair value reflect the Company’s ongoing securitizations of loans in non-Agency securitizations. As described in Note 6 – Variable Interest Entities to the consolidated financial statements included in this Report, such transactions are accounted for as on-balance sheet financings, with the loans included in Loans held for investment at fair value and the securities sold treated as Asset-backed financings of variable interest entities at fair value.
Asset Acquisitions
Our asset acquisitions are summarized below:
Aggregation and Securitization
Following is a summary of our acquisitions of mortgage loans for our aggregation and securitization activities at fair value:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Aggregation and securitization loan purchases: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
GSE-eligible loans (1) |
|
$ |
3,753,566 |
|
|
$ |
17,537,832 |
|
|
$ |
7,410,148 |
|
|
$ |
29,731,942 |
|
Jumbo |
|
|
1,126,508 |
|
|
|
349,738 |
|
|
|
2,213,820 |
|
|
|
698,478 |
|
Non-qualified |
|
|
290,423 |
|
|
|
— |
|
|
|
380,038 |
|
|
|
— |
|
Government insured or guaranteed (2) |
|
|
— |
|
|
|
13,483,971 |
|
|
|
— |
|
|
|
24,933,006 |
|
|
|
$ |
5,170,497 |
|
|
$ |
31,371,541 |
|
|
$ |
10,004,006 |
|
|
$ |
55,363,426 |
|
73
During the quarter and six months ended June 30, 2026, we purchased for sale $5.2 billion and $10.0 billion in fair value of loans related to our aggregation and securitization activities, respectively, as compared to $31.4 billion and $55.4 billion during the same periods in 2025. The decrease in loan purchases relates to PFSI's assumption of the role of initial purchaser of correspondent loans starting July 1, 2025 as described in Note 4—Transactions with Related Parties to the consolidated financial statements included in this Report.
Other Investment Activities
Following is a summary of our net acquisitions (sales) of mortgage-related investments held in our credit sensitive strategies and interest rate sensitive strategies segments:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Credit sensitive assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest retained in securitization of mortgage loans, net of |
|
$ |
120,054 |
|
|
$ |
87,074 |
|
|
$ |
309,294 |
|
|
$ |
152,609 |
|
Subordinate bond secured by residential transition loans |
|
|
— |
|
|
|
— |
|
|
|
4,000 |
|
|
|
— |
|
|
|
|
120,054 |
|
|
|
87,074 |
|
|
|
313,294 |
|
|
|
152,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate sensitive assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage servicing rights received in loan sales |
|
|
30,981 |
|
|
|
44,030 |
|
|
|
71,262 |
|
|
|
91,039 |
|
Floating rate collateralized mortgage obligations |
|
|
486,407 |
|
|
|
— |
|
|
|
486,407 |
|
|
|
— |
|
Interest retained in securitization of mortgage loans, net |
|
|
— |
|
|
|
27,490 |
|
|
|
12,061 |
|
|
|
55,976 |
|
Agency fixed-rate pass-through securities |
|
|
— |
|
|
|
— |
|
|
|
(477,360 |
) |
|
|
— |
|
Senior non-Agency securities |
|
|
— |
|
|
|
37,082 |
|
|
|
— |
|
|
|
37,082 |
|
|
|
|
517,388 |
|
|
|
108,602 |
|
|
|
92,370 |
|
|
|
184,097 |
|
|
|
$ |
637,442 |
|
|
$ |
195,676 |
|
|
$ |
405,664 |
|
|
$ |
336,706 |
|
Our acquisitions during the quarter and six months ended June 30, 2026 and 2025 were financed through the use of a combination of proceeds from borrowings and liquidations of existing investments. We continue to identify additional means of increasing our investment portfolio through cash flow from our business activities, existing investments, borrowings, and transactions that minimize current cash outlays. However, we expect that, over time, our ability to continue our investment portfolio growth will depend on our ability to raise additional equity capital.
Investment Portfolio Composition
Mortgage-Backed Securities
Following is a summary of our MBS holdings:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
Average |
|
||||||||||||||
|
|
Fair value |
|
|
Principal/ |
|
|
Life (in years) |
|
|
Coupon |
|
|
Fair value |
|
|
Principal/ |
|
|
Life (in years) |
|
|
Coupon |
|
||||||||
|
|
(dollars in thousands) |
|
|||||||||||||||||||||||||||||
Agency pass-through |
|
$ |
2,178,595 |
|
|
$ |
2,159,819 |
|
|
|
7.2 |
|
|
|
5.4 |
% |
|
$ |
2,850,447 |
|
|
$ |
2,805,895 |
|
|
|
7.6 |
|
|
|
5.3 |
% |
Floating rate collateralized mortgage |
|
|
1,290,984 |
|
|
|
1,282,079 |
|
|
|
7.2 |
|
|
|
4.7 |
% |
|
|
855,997 |
|
|
|
850,172 |
|
|
|
6.8 |
|
|
|
5.0 |
% |
Principal-only stripped |
|
|
404,948 |
|
|
|
490,817 |
|
|
|
4.3 |
|
|
|
0.1 |
% |
|
|
521,129 |
|
|
|
610,256 |
|
|
|
4.1 |
|
|
|
0.1 |
% |
Senior non-Agency |
|
|
128,207 |
|
|
|
132,088 |
|
|
|
6.1 |
|
|
|
5.3 |
% |
|
|
152,784 |
|
|
|
155,369 |
|
|
|
5.4 |
|
|
|
5.4 |
% |
Subordinate residential transition |
|
|
3,992 |
|
|
|
4,000 |
|
|
|
3.7 |
|
|
|
9.1 |
% |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
4,006,726 |
|
|
$ |
4,068,803 |
|
|
|
|
|
|
|
|
|
4,380,357 |
|
|
$ |
4,421,692 |
|
|
|
|
|
|
|
||||
Interest-only stripped securities |
|
|
68,934 |
|
|
$ |
320,761 |
|
|
|
7.5 |
|
|
|
4.8 |
% |
|
|
72,502 |
|
|
$ |
344,592 |
|
|
|
7.7 |
|
|
|
4.8 |
% |
|
|
$ |
4,075,660 |
|
|
|
|
|
|
|
|
|
|
|
$ |
4,452,859 |
|
|
|
|
|
|
|
|
|
|
||||||
74
Our investment in Mortgage-backed securities at fair value does not include any mortgage-backed securities held from variable interest entities that we consolidate.
Credit Risk Transfer Arrangements
Following is a summary of our investment in CRT arrangements:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
(in thousands) |
|
|||||
Carrying value of CRT arrangements: |
|
|
|
|
|
|
||
Derivative assets – CRT derivatives |
|
$ |
30,301 |
|
|
$ |
32,659 |
|
Derivative and credit risk transfer strip liabilities- CRT strips |
|
|
(5,428 |
) |
|
|
(5,999 |
) |
Deposits securing CRT arrangements |
|
|
947,900 |
|
|
|
1,009,334 |
|
Interest-only security payable at fair value |
|
|
(34,299 |
) |
|
|
(37,650 |
) |
|
|
$ |
938,474 |
|
|
$ |
998,344 |
|
UPB of loans subject to credit guarantee obligations |
|
$ |
18,089,855 |
|
|
$ |
19,517,530 |
|
Following is a summary of the composition of the loans underlying our investment in CRT arrangements as of June 30, 2026:
|
|
Year of origination |
|
|||||||||||||||||||||||||
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|
Total |
|
|||||||
|
|
(dollars in millions) |
|
|||||||||||||||||||||||||
UPB: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Outstanding |
|
$ |
3,852 |
|
|
$ |
8,674 |
|
|
$ |
2,213 |
|
|
$ |
1,856 |
|
|
$ |
1,493 |
|
|
$ |
2 |
|
|
$ |
18,090 |
|
Liquidations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Balances |
|
$ |
2.3 |
|
|
$ |
13.9 |
|
|
$ |
68.5 |
|
|
$ |
180.4 |
|
|
$ |
130.2 |
|
|
$ |
63.2 |
|
|
$ |
458.5 |
|
Losses |
|
$ |
0.2 |
|
|
$ |
1.9 |
|
|
$ |
7.6 |
|
|
$ |
23.3 |
|
|
$ |
14.1 |
|
|
$ |
7.9 |
|
|
$ |
55.0 |
|
Modifications (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Balances |
|
$ |
131.6 |
|
|
$ |
980.8 |
|
|
$ |
321.8 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,434.2 |
|
Losses |
|
$ |
2.9 |
|
|
$ |
31.3 |
|
|
$ |
23.5 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
57.7 |
|
Weighted average: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Original debt-to income ratio |
|
|
33.5 |
% |
|
|
35.9 |
% |
|
|
39.1 |
% |
|
|
36.6 |
% |
|
|
35.0 |
% |
|
|
36.7 |
% |
|
|
35.8 |
% |
Origination: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
FICO credit score |
|
|
765 |
|
|
|
754 |
|
|
|
736 |
|
|
|
745 |
|
|
|
751 |
|
|
|
749 |
|
|
|
753 |
|
Loan-to value ratio |
|
|
80.6 |
% |
|
|
83.3 |
% |
|
|
83.6 |
% |
|
|
82.4 |
% |
|
|
80.6 |
% |
|
|
77.0 |
% |
|
|
82.4 |
% |
Current loan-to value ratio (2) |
|
|
47.2 |
% |
|
|
47.2 |
% |
|
|
45.5 |
% |
|
|
39.9 |
% |
|
|
36.1 |
% |
|
|
35.2 |
% |
|
|
45.4 |
% |
|
|
Year of origination |
|
|||||||||||||||||||||||||
Distribution by state |
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|
Total |
|
|||||||
|
|
(in millions) |
|
|||||||||||||||||||||||||
California |
|
$ |
419 |
|
|
$ |
885 |
|
|
$ |
287 |
|
|
$ |
202 |
|
|
$ |
301 |
|
|
$ |
1 |
|
|
$ |
2,095 |
|
Florida |
|
|
418 |
|
|
|
822 |
|
|
|
281 |
|
|
|
191 |
|
|
|
153 |
|
|
|
— |
|
|
|
1,865 |
|
Texas |
|
|
440 |
|
|
|
738 |
|
|
|
175 |
|
|
|
157 |
|
|
|
177 |
|
|
|
— |
|
|
|
1,687 |
|
Virginia |
|
|
210 |
|
|
|
388 |
|
|
|
82 |
|
|
|
84 |
|
|
|
103 |
|
|
|
— |
|
|
|
867 |
|
Maryland |
|
|
153 |
|
|
|
378 |
|
|
|
104 |
|
|
|
110 |
|
|
|
101 |
|
|
|
— |
|
|
|
846 |
|
Other |
|
|
2,212 |
|
|
|
5,463 |
|
|
|
1,284 |
|
|
|
1,112 |
|
|
|
658 |
|
|
|
1 |
|
|
|
10,730 |
|
|
|
$ |
3,852 |
|
|
$ |
8,674 |
|
|
$ |
2,213 |
|
|
$ |
1,856 |
|
|
$ |
1,493 |
|
|
$ |
2 |
|
|
$ |
18,090 |
|
|
|
Year of origination |
|
|||||||||||||||||||||||||
Regional geographic |
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|
Total |
|
|||||||
|
|
(in millions) |
|
|||||||||||||||||||||||||
Southeast |
|
$ |
1,304 |
|
|
$ |
2,940 |
|
|
$ |
789 |
|
|
$ |
634 |
|
|
$ |
461 |
|
|
$ |
— |
|
|
$ |
6,128 |
|
West |
|
|
841 |
|
|
|
1,837 |
|
|
|
565 |
|
|
|
413 |
|
|
|
437 |
|
|
|
1 |
|
|
|
4,094 |
|
Southwest |
|
|
980 |
|
|
|
1,889 |
|
|
|
410 |
|
|
|
365 |
|
|
|
268 |
|
|
|
— |
|
|
|
3,912 |
|
Northeast |
|
|
369 |
|
|
|
1,103 |
|
|
|
262 |
|
|
|
270 |
|
|
|
192 |
|
|
|
1 |
|
|
|
2,197 |
|
Midwest |
|
|
358 |
|
|
|
905 |
|
|
|
187 |
|
|
|
174 |
|
|
|
135 |
|
|
|
— |
|
|
|
1,759 |
|
|
|
$ |
3,852 |
|
|
$ |
8,674 |
|
|
$ |
2,213 |
|
|
$ |
1,856 |
|
|
$ |
1,493 |
|
|
$ |
2 |
|
|
$ |
18,090 |
|
75
|
|
Year of origination |
|
|||||||||||||||||||||||||
Collection status |
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|
Total |
|
|||||||
|
|
(in millions) |
|
|||||||||||||||||||||||||
Delinquency |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Current – 89 Days |
|
$ |
3,835 |
|
|
$ |
8,592 |
|
|
$ |
2,170 |
|
|
$ |
1,850 |
|
|
$ |
1,489 |
|
|
$ |
2 |
|
|
$ |
17,938 |
|
90 – 179 Days |
|
|
9 |
|
|
|
43 |
|
|
|
18 |
|
|
|
5 |
|
|
|
4 |
|
|
|
— |
|
|
|
79 |
|
180+ Days |
|
|
5 |
|
|
|
28 |
|
|
|
17 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
51 |
|
Foreclosure |
|
|
3 |
|
|
|
11 |
|
|
|
8 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
22 |
|
|
|
$ |
3,852 |
|
|
$ |
8,674 |
|
|
$ |
2,213 |
|
|
$ |
1,856 |
|
|
$ |
1,493 |
|
|
$ |
2 |
|
|
$ |
18,090 |
|
Bankruptcy |
|
$ |
3 |
|
|
$ |
34 |
|
|
$ |
12 |
|
|
$ |
4 |
|
|
$ |
3 |
|
|
$ |
— |
|
|
$ |
56 |
|
Cash Flows
Our cash flows for the six months ended June 30, 2026 and 2025 are summarized below:
|
|
Six months ended June 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
|
|
(in thousands) |
|
|||||
Operating activities |
|
$ |
(5,468,695 |
) |
|
$ |
(2,609,863 |
) |
Investing activities |
|
|
1,591,092 |
|
|
|
313,144 |
|
Financing activities |
|
|
3,830,871 |
|
|
|
2,321,925 |
|
Net cash flows |
|
$ |
(46,732 |
) |
|
$ |
25,206 |
|
Our cash flows resulted in a net decrease in cash of $46.7 million during the six months ended June 30, 2026, as discussed below.
Operating activities
Cash used in operating activities totaled $5.5 billion during the six months ended June 30, 2026, as compared to cash used in our operating activities of $2.6 billion during the six months ended June 30, 2025. Cash flows from operating activities are influenced by cash flows from loans held for sale as shown below:
|
|
Six months ended June 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
|
|
(in thousands) |
|
|||||
Operating cash flows from: |
|
|
|
|
|
|
||
Loans held for sale |
|
$ |
(5,693,481 |
) |
|
$ |
(3,010,602 |
) |
Other |
|
|
224,786 |
|
|
|
400,739 |
|
|
|
$ |
(5,468,695 |
) |
|
$ |
(2,609,863 |
) |
The primary source of negative operating cash flow from loans held for sale relates to the transfer of loans to held for investment pursuant to our securitization activities. The securitization of portions of our aggregation and securitization activities and cash received from such securitizations is accounted for as a financing activity. We may sell these loans based on market conditions before committing to securitize the loans.
Investing activities
Net cash provided by our investing activities was $1.6 billion for the six months ended June 30, 2026, driven by cash inflows generated by our investments, as compared to net cash provided by our investing activities of $313.1 million for the six months ended June 30, 2025.
Financing activities
Net cash provided by our financing activities was $3.8 billion for the six months ended June 30, 2026, as compared to net cash provided by our financing activities of $2.3 billion for the six months ended June 30, 2025. This change primarily reflects the increase in borrowings required to finance newly created investments from our ongoing securitization efforts during the six months ended June 30, 2026.
76
As discussed below in Liquidity and Capital Resources, we continually evaluate and pursue additional sources of financing to provide us with future investing capacity. We do not raise equity or enter into borrowings for the purpose of financing the payment of dividends. We believe that our cash earnings are adequate to fund our operating expenses and dividend payment requirements. However, we manage our liquidity in the aggregate and are reinvesting our cash flows in new investments as well as using such cash to fund our dividend requirements.
Liquidity and Capital Resources
Our liquidity reflects our ability to meet our current obligations (including the purchase of loans from PLS, our operating expenses and, when applicable, retirement of, and margin calls relating to, our debt and derivatives positions), make investments as our Manager identifies them, pursue our share repurchase program and make distributions to our shareholders. We generally need to distribute at least 90% of our taxable income each year (subject to certain adjustments) to our shareholders to qualify as a REIT under the Internal Revenue Code. This distribution requirement limits our ability to retain earnings and thereby replenish or increase capital to support our activities.
We expect our primary sources of liquidity to be cash flows from our investment portfolio, including cash earnings on our investments, cash flows from business activities, liquidation of existing investments and proceeds from borrowings and/or additional equity offerings. When we finance a particular asset, the amount borrowed is less than the asset’s fair value and we must provide the cash in the amount of such difference. Our ability to continue making investments is dependent on our ability to invest the cash representing such difference.
We expect to continue investing in subordinate MBS generated from non-Agency securitizations which are also expected to increase our VIEs' asset-backed financings.
Debt Financing
Our current debt financing strategy is to finance our assets where we believe such borrowing is prudent, appropriate and available. We make collateralized borrowings in the form of sales of assets under agreements to repurchase, loan participation purchase and sale agreements and notes payable, including secured term financing for our MSRs and our CRT arrangements that have allowed us to match the term of our borrowings more closely to the expected lives of the assets securing those borrowings. We have also borrowed money by issuing unsecured senior notes.
A substantial portion of our balance sheet includes assets that are shown as their underlying assets as opposed to the securitized form in which they are held. These assets and the reason for their accounting treatment are discussed in Note 6—Variable Interest Entities to the consolidated financial statements included in this Report. The following table adjusts the presentation of our balance sheet to provide investors with a more creditor-aligned view of the relationship of our debt to the assets in the securitized form those assets are financed. The adjusted balance sheet information should not be considered in isolation or as a substitute for an analysis of our results as presented in compliance with GAAP.
77
|
|
June 30, 2026 |
|
|||||||||||||||||||||
|
|
Assets (1) |
|
|
Financing |
|
||||||||||||||||||
|
|
Consolidated |
|
|
Adjustments for VIE Financing (2) |
|
|
Excluding VIE Financing |
|
|
Assets sold under agreements to |
|
|
Notes payable secured by CRT |
|
|
Total |
|
||||||
|
|
(in thousands except for debt-to equity amounts) |
|
|||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash and short-term investments |
|
$ |
420,850 |
|
|
$ |
— |
|
|
$ |
420,850 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Mortgage-backed securities at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Agency-backed securities |
|
|
3,943,461 |
|
|
|
— |
|
|
|
3,943,461 |
|
|
|
3,854,152 |
|
|
|
— |
|
|
|
3,854,152 |
|
Senior non-agency securities |
|
|
128,207 |
|
|
|
— |
|
|
|
128,207 |
|
|
|
120,863 |
|
|
|
— |
|
|
|
120,863 |
|
Subordinate residential transition |
|
|
3,992 |
|
|
|
— |
|
|
|
3,992 |
|
|
|
2,795 |
|
|
|
— |
|
|
|
2,795 |
|
Credit risk transfer securities relating to consolidated |
|
|
— |
|
|
|
938,474 |
|
|
|
938,474 |
|
|
|
112,217 |
|
|
|
582,475 |
|
|
|
694,692 |
|
Non-agency securities relating to consolidated variable |
|
|
— |
|
|
|
944,772 |
|
|
|
944,772 |
|
|
|
835,998 |
|
|
|
— |
|
|
|
835,998 |
|
|
|
|
4,075,660 |
|
|
|
1,883,246 |
|
|
|
5,958,906 |
|
|
|
4,926,025 |
|
|
|
582,475 |
|
|
|
5,508,500 |
|
Loans held for sale at fair value |
|
|
3,195,343 |
|
|
|
— |
|
|
|
3,195,343 |
|
|
|
2,966,705 |
|
|
|
— |
|
|
|
2,966,705 |
|
Loans held for investment at fair value |
|
|
12,458,249 |
|
|
|
(12,456,657 |
) |
|
|
1,592 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Derivative assets |
|
|
49,423 |
|
|
|
(30,301 |
) |
|
|
19,122 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Deposits securing credit risk transfer arrangements |
|
|
947,900 |
|
|
|
(947,900 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Mortgage servicing rights and servicing advances |
|
|
3,639,921 |
|
|
|
153,283 |
|
|
|
3,793,204 |
|
|
|
502,496 |
|
|
|
1,898,656 |
|
|
|
2,401,152 |
|
|
|
|
24,787,346 |
|
|
|
(11,398,329 |
) |
|
|
13,389,017 |
|
|
|
8,395,226 |
|
|
|
2,481,131 |
|
|
|
10,876,357 |
|
Other |
|
|
306,244 |
|
|
|
— |
|
|
|
306,244 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total assets and secured financing |
|
$ |
25,093,590 |
|
|
$ |
(11,398,329 |
) |
|
$ |
13,695,261 |
|
|
$ |
8,395,226 |
|
|
$ |
2,481,131 |
|
|
|
10,876,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Unsecured debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
685,276 |
|
|||||
Debt excluding non-recourse |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,561,633 |
|
|||||
Debt in consolidated variable interest entities (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,392,901 |
|
|||||
Total debt (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
22,954,534 |
|
|||||
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,853,374 |
|
|||||
Debt-to equity ratio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Excluding non-recourse debt (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.2:1 |
|
|||||
Total (5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.4:1 |
|
|||||
78
Sales of Assets Under Agreements to Repurchase
Our repurchase agreements represent the sales of assets together with agreements for us to buy back the assets at a later date. Following is a summary of the activities in our repurchase agreements financing:
|
|
Quarter ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
Assets sold under agreements to repurchase |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Average balance outstanding |
|
$ |
7,487,136 |
|
|
$ |
6,382,670 |
|
|
$ |
7,633,516 |
|
|
$ |
6,282,348 |
|
Maximum daily balance outstanding |
|
$ |
8,575,174 |
|
|
$ |
7,603,144 |
|
|
$ |
9,032,657 |
|
|
$ |
7,799,203 |
|
Ending balance (UPB) |
|
|
|
|
|
|
|
$ |
8,398,039 |
|
|
$ |
6,833,086 |
|
||
The difference between the maximum and average daily amounts outstanding is primarily due to timing of loan purchases and sales related to our aggregation and securitization activities. The total facility size of our Assets sold under agreements to repurchase was approximately $13.5 billion at June 30, 2026.
Because a significant portion of our current debt facilities consists of short-term borrowings, we expect to either 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.
As discussed above, all of our repurchase agreements, and mortgage loan participation purchase and sale agreements have short-term maturities:
All repurchase agreements that matured between June 30, 2026 and the date of this Report have been renewed, extended or replaced.
The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and accrued interest) relating to our Assets sold under agreements to repurchase is summarized by counterparty below as of June 30, 2026:
Counterparty |
|
Amount at risk |
|
|
|
|
(in thousands) |
|
|
Atlas Securitized Products, L.P. |
|
$ |
473,643 |
|
Santander US Capital |
|
|
116,326 |
|
Bank of America, N.A. |
|
|
113,420 |
|
Citibank, N.A. |
|
|
84,810 |
|
Nomura Holdings America, Inc. |
|
|
73,784 |
|
Goldman Sachs & Co. LLC |
|
|
61,534 |
|
Wells Fargo Securities, LLC |
|
|
43,335 |
|
RBC Capital Markets, L.P. |
|
|
39,348 |
|
Barclays Capital Inc. |
|
|
39,006 |
|
JPMorgan Chase & Co. |
|
|
35,596 |
|
Morgan Stanley & Co. LLC |
|
|
29,213 |
|
BNP Paribas |
|
|
20,785 |
|
Bank of Montreal |
|
|
11,163 |
|
Daiwa Capital Markets America Inc. |
|
|
4,319 |
|
Mizuho Financial Group |
|
|
3,092 |
|
|
|
$ |
1,149,374 |
|
Unsecured Senior Notes
Exchangeable Senior Notes
In May and June 2024, PMC issued $216.5 million aggregate principal amount of 8.5% Exchangeable Senior Notes due 2029 that mature on June 1, 2029 (the “exchangeable senior notes”). On December 15, 2025 and December 22, 2025, PMC separately issued $75 million principal amount (for a total of $150 million principal amount) of exchangeable senior notes. The exchangeable senior notes
79
issued in the December 2025 offerings were issued as further reopenings of, and are part of the same series with, the exchangeable senior notes that PMC previously issued in May and June 2024. Upon completion of the December 2025 offerings, the aggregate principal amount of outstanding exchangeable senior notes was $366.5 million.
Senior Notes
In September 2023, the Company issued $53.5 million principal amount of unsecured 8.50% senior notes due September 30, 2028 (the “2028 Senior Notes”). In February 2025, the Company issued $172.5 million principal amount of unsecured 9.00% senior notes due February 15, 2030 and in June 2025, the Company issued $105 million principal amount of unsecured 9.00% senior notes due June 15, 2030 (collectively, the “2030 Senior Notes”). The 2028 Senior Notes may be redeemed on or after September 30, 2025, the 2030 Senior Notes issued in February 2025 may be redeemed on or after February 15, 2027 and the 2030 Senior Notes issued in June 2025 may be redeemed on or after June 15, 2027, in each case at 100% of the principal amount plus accrued and unpaid interest up to, but excluding, the redemption date. The 2028 Senior Notes and the 2030 Senior Notes are referred to collectively as the “Senior Notes”. No “sinking fund” will be provided for the Senior Notes.
The Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by PMC, including the due and punctual payment of principal of and interest on the Senior Notes, whether at stated maturity, upon acceleration, call for redemption or otherwise (the “PMC Guarantee”). PMC’s operations and investing activities are centered in residential mortgage-related assets, including the creation of and investment in MSRs.
Under the terms of the PMC Guarantee, holders of the Senior Notes will not be required to exercise their remedies against us before they proceed directly against PMC. PMC’s obligations under the guarantee are limited to the maximum amount that will not, after giving effect to all other contingent and fixed liabilities of PMC, result in the guarantee constituting a fraudulent transfer or conveyance. The PMC Guarantee will:
The following summarized financial information for PMT and PMC is presented on a combined basis. Intercompany balances and transactions between PMT and PMC have been eliminated:
|
|
June 30, 2026 |
|
|
|
|
(in thousands) |
|
|
Loans held for sale at fair value |
|
$ |
3,195,343 |
|
Mortgage servicing rights at fair value |
|
|
3,728,574 |
|
Other assets |
|
|
|
|
From nonaffiliates |
|
|
610,678 |
|
From PFSI |
|
|
21,633 |
|
From non-issuer or non-guarantor subsidiaries (1) |
|
|
446,658 |
|
Total assets |
|
$ |
8,002,886 |
|
|
|
|
|
|
Total liabilities |
|
|
|
|
Payable to nonaffiliates |
|
$ |
2,025,765 |
|
Payable to PFSI |
|
|
5,973,125 |
|
Payable to non-issuer or non-guarantor subsidiaries |
|
|
8,502 |
|
|
|
$ |
8,007,392 |
|
|
|
|
|
|
80
|
Six months ended June 30, 2026 |
|
|
|
(in thousands) |
|
|
Net investment income |
|
|
|
From nonaffiliates |
$ |
223,378 |
|
From PFSI |
|
10,664 |
|
From non-issuer or non-guarantor subsidiaries (1) |
|
(230,070 |
) |
|
|
3,972 |
|
Expenses |
|
|
|
From nonaffiliates |
|
34,722 |
|
From PFSI |
|
56,342 |
|
|
|
91,064 |
|
Pre-tax income |
|
(87,092 |
) |
Provision for income taxes |
|
(22,513 |
) |
Net income |
$ |
(64,579 |
) |
Debt Covenants
Our debt financing agreements require us and certain of our subsidiaries to comply with various financial covenants. As of the filing of this Report, these financial covenants include the following:
Although these financial covenants limit the amount of indebtedness we may incur and impact 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.
PLS is also subject to various financial covenants, both as a borrower under its own financing arrangements and as our servicer under certain of our debt financing agreements. The most significant of these financial covenants currently include the following:
Many of our debt financing agreements contain a condition precedent to obtaining additional funding that requires us to maintain positive net income for at least one (1) of the previous two consecutive quarters, or other similar measures. For the most recent fiscal quarter, the Company is compliant with all such conditions. However, we may be required to obtain waivers from certain lenders in the future if this condition precedent is not met.
81
Our debt financing 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 decline in the market value (as determined by the applicable lender) of the assets subject to the related financing agreement, although in some instances we may agree with the lender upon certain thresholds (in dollar amounts or percentages based on the market value of the assets) that must be exceeded before a margin deficit will arise. 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.
Regulatory Capital and Liquidity Requirements
In addition to the financial covenants imposed upon us and PLS as our servicer under our debt financing agreements, we, through PMC and/or PLS, as applicable, 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 their approved single-family issuers, and Ginnie Mae has also issued risk-based capital requirements. We believe that we and our servicer, PLS, are in compliance with the applicable FHFA and Ginnie Mae requirements as of June 30, 2026.
We continue to explore a variety of additional means of financing our business, including debt financing through bank warehouse lines of credit, repurchase agreements, term financing, securitization transactions and unsecured debt and equity offerings. However, there can be no assurance as to how much additional financing capacity such efforts will produce, what form the financing will take or that such efforts will be successful.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
Off-Balance Sheet Arrangements
As of June 30, 2026, we have not entered into any off-balance sheet arrangements.
Our management, servicing, and loan fulfillment fee agreements are described in Note 4 – Transactions with Related Parties to the consolidated financial statements included in this Report.
Critical Accounting Estimates
Preparation of financial statements in compliance with GAAP requires us to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Certain of these estimates significantly influence the portrayal of our financial condition and results, and they require us to make difficult, subjective or complex judgments. Our critical accounting policies primarily relate to our fair value estimates.
Our Annual Report on Form 10-K for the year ended December 31, 2025 contains a discussion of our critical accounting policies, which utilize relevant critical accounting estimates.
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 real estate risk, credit risk, interest rate risk, prepayment risk, inflation risk and market value risk. Our primary trading asset is our inventory of loans held for sale. We believe that such assets’ fair values respond primarily to changes in the market interest rates for comparable recently-originated loans. Our other market-risk assets are a substantial portion of our investments and are primarily comprised of MSRs, CRT arrangements and MBS, including those consolidated on our balance sheet as loans held for investment and asset-backed financing. We believe that the fair values of MSRs and MBS also respond primarily to changes in the market interest rates for comparable loans or yields on MBS. Changes in interest rates are reflected in the prepayment speeds underlying these investments and in the pricing spread (an element of the discount rate) used in their valuation. We believe that the primary market risks to the fair values of our investment in CRT arrangements are changes in market credit spreads and the fair value of the real estate securing the loans underlying such arrangements.
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 assumptions 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.
82
Mortgage-backed securities at fair value
The following table summarizes the estimated change in fair value of our mortgage-backed securities as of June 30, 2026, given several hypothetical (instantaneous) changes in interest rates and parallel shifts in the yield curve:
Interest rate shift in basis points |
|
-200 |
|
|
-75 |
|
|
-50 |
|
|
50 |
|
|
75 |
|
|
200 |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Change in fair value |
|
$ |
207,055 |
|
|
$ |
137,137 |
|
|
$ |
96,666 |
|
|
$ |
(108,149 |
) |
|
$ |
(165,433 |
) |
|
$ |
(476,679 |
) |
Mortgage Servicing Rights
The following tables summarize the estimated change in fair value of MSRs as of June 30, 2026, given several shifts in pricing spread, prepayment speeds and annual per-loan cost of servicing:
Change in fair value attributable to shift in: |
|
-20% |
|
|
-10% |
|
|
-5% |
|
|
+5% |
|
|
+10% |
|
|
+20% |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Option-adjusted spread |
|
$ |
94,652 |
|
|
$ |
54,442 |
|
|
$ |
30,308 |
|
|
$ |
(33,357 |
) |
|
$ |
(67,581 |
) |
|
$ |
(134,995 |
) |
Prepayment speed |
|
$ |
142,648 |
|
|
$ |
78,797 |
|
|
$ |
41,490 |
|
|
$ |
(42,931 |
) |
|
$ |
(85,475 |
) |
|
$ |
(168,902 |
) |
Annual per-loan cost of servicing |
|
$ |
57,877 |
|
|
$ |
28,939 |
|
|
$ |
14,469 |
|
|
$ |
(14,469 |
) |
|
$ |
(28,939 |
) |
|
$ |
(57,877 |
) |
CRT Arrangements
Following is a summary of the effect on fair value of various changes to the pricing spread input used to estimate the fair value of our CRT arrangements given several shifts in pricing spread:
Pricing spread shift in basis points |
|
-100 |
|
|
-50 |
|
|
-25 |
|
|
25 |
|
|
50 |
|
|
100 |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Change in fair value |
|
$ |
29,894 |
|
|
$ |
14,752 |
|
|
$ |
7,330 |
|
|
$ |
(7,236 |
) |
|
$ |
(14,379 |
) |
|
$ |
(28,399 |
) |
Following is a summary of the effect on fair value of various instantaneous changes in home values from those used to estimate the fair value of our CRT arrangements given several shifts:
Property value shift in % |
|
-15% |
|
|
-10% |
|
|
-5% |
|
|
5% |
|
|
10% |
|
|
15% |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Change in fair value |
|
$ |
(8,410 |
) |
|
$ |
(5,104 |
) |
|
$ |
(2,331 |
) |
|
$ |
1,984 |
|
|
$ |
3,672 |
|
|
$ |
5,103 |
|
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 (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 Rules 13a-15 and 15d-15 under the Exchange Act. Based on our evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this Report, to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
83
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be involved in various legal actions, claims and proceedings arising in the ordinary course of business. See Note 17 — Commitments and Contingencies, to the consolidated financial statements included in this Report for a discussion of legal actions, claims and proceedings that are incorporated by reference into this Item 1.
Item 1A. Risk Factors
There are no material changes from the risk factors set forth under Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 18, 2026.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no sales of unregistered equity securities during the quarter and six months ended June 30, 2026.
The following table provides information about our repurchases of common shares of beneficial interest (“Common Shares”) during the quarter ended June 30, 2026:
Period |
|
Total |
|
|
Average |
|
|
Total number of |
|
|
Amount |
|
||||
|
|
(in thousands, except average price paid per share) |
|
|||||||||||||
April 1, 2026 – April 30, 2026 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
73,353 |
|
May 1, 2026 – May 31, 2026 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
73,353 |
|
June 1, 2026 – June 30, 2026 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
73,353 |
|
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, 2026, the following trustees or Section 16 officers adopted, modified or terminated the following Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K):
On
During the quarter ended June 30, 2026, none of our other trustees or Section 16 officers (as defined in Rule 16a-1(f)), informed us of the
84
Item 6. Exhibits
|
|
|
|
Incorporated by Reference from the Below-Listed Form (Each Filed under SEC File Number 001-34416) |
||
Exhibit No. |
|
Exhibit Description |
|
Form |
|
Filing Date |
|
|
|
|
|
|
|
3.1 |
|
Declaration of Trust of PennyMac Mortgage Investment Trust, as amended and restated. |
|
10-Q |
|
November 6, 2009 |
|
|
|
|
|
|
|
3.2 |
|
Second Amended and Restated Bylaws of PennyMac Mortgage Investment Trust |
|
8-K |
|
March 16, 2018 |
|
|
|
|
|
|
|
3.3 |
|
Articles Supplementary classifying and designating the 8.125% Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Shares of Beneficial Interest. |
|
8-A |
|
March 7, 2017 |
|
|
|
|
|
|
|
3.4 |
|
Articles Supplementary classifying and designating the 8.00% Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Shares of Beneficial Interest. |
|
8-A |
|
June 30, 2017 |
|
|
|
|
|
|
|
3.5 |
|
Articles Supplementary classifying and designating the 6.75% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest. |
|
8-A |
|
August 20, 2021 |
|
|
|
|
|
|
|
31.1 |
|
Certification of David A. Spector pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
* |
|
|
|
|
|
|
|
|
|
31.2 |
|
Certification of Daniel S. Perotti pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
* |
|
|
|
|
|
|
|
|
|
32.1** |
|
Certification of David A. Spector pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
** |
|
|
|
|
|
|
|
|
|
32.2** |
|
Certification of Daniel S. Perotti pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
** |
|
|
|
|
|
|
|
|
|
101 |
|
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025 (ii) the Consolidated Statements of Operations for the quarter ended June 30, 2026 and June 30, 2025, (iii) the Consolidated Statements of Changes in Shareholders' Equity for the quarter ended June 30, 2026 and June 30, 2025, (iv) the Consolidated Statements of Cash Flows for the quarter ended June 30, 2026 and June 30, 2025 and (v) the Notes to the Consolidated Financial Statements. |
|
* |
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
|
|
* Filed herewith.
** The certifications attached hereto as Exhibits 32.1 and 32.2 are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
85
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 Mortgage Investment Trust (Registrant) |
||
|
|
|
|
|
Dated: August 4, 2026 |
|
By: |
|
/s/ David A. Spector |
|
|
|
|
David A. Spector |
|
|
|
|
Chairman and Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
|
Dated: August 4, 2026 |
|
By: |
|
/s/ Daniel S. Perotti |
|
|
|
|
Daniel S. Perotti |
|
|
|
|
Senior Managing Director and Chief Financial Officer (Principal Financial Officer) |
86