QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2026
Or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-34416
PennyMac Mortgage Investment Trust
(Exact name of registrant as specified in its charter)
Maryland
27-0186273
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
3043 Townsgate Road, Westlake Village, California
91361
(Address of principal executive offices)
(Zip Code)
(818) 224-7442
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol (s)
Name of Each Exchange on Which Registered
Common Shares of Beneficial Interest, $0.01 Par Value
PMT
New York Stock Exchange
8.125% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01 Par Value
PMT/PRA
New York Stock Exchange
8.00% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01 Par Value
6.75% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01 Par Value
PMT/PRB
PMT/PRC
New York Stock Exchange
New York Stock Exchange
8.50% Senior Notes Due September 2028
PMTU
New York Stock Exchange
9.00% Senior Notes Due February 2030
PMTV
New York Stock Exchange
9.00% Senior Notes Due June 2030
PMTW
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Class
Outstanding at July 31, 2026
Common Shares of Beneficial Interest, $0.01 par value
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:
•
projections of our revenues, results of operations, earnings per share, capital structure or other financial items;
•
descriptions of our plans or objectives for future operations, products or services;
•
forecasts of our future economic performance, interest rates, profit margins and our share of future markets; and
•
descriptions of assumptions underlying or relating to any of the foregoing expectations regarding the timing of generating any revenues.
Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. There are 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:
•
changes in interest rates;
•
changes in macroeconomic, consumer and real estate market conditions;
•
changes in real estate values, housing prices and housing sales;
our ability to comply with various federal, state and local laws and regulations that govern our business;
•
volatility in our industry, the debt or equity markets, the general economy or the real estate finance and real estate markets;
•
events or circumstances which undermine confidence in the financial and housing markets or otherwise have a broad impact on financial and housing markets;
•
the degree and nature of our competition;
•
the availability of, and level of competition for, attractive risk-adjusted investment opportunities in mortgage loans and mortgage-related assets that satisfy our investment objectives;
•
the concentration of credit risks to which we are exposed;
•
our dependence on our manager and servicer, potential conflicts of interest with such entities and their affiliates, and the performance of such entities;
•
changes in personnel and lack of availability of qualified personnel at our manager, servicer or their affiliates;
•
our ability to mitigate cybersecurity risks, cybersecurity incidents and technology disruptions;
•
the availability, terms and deployment of short-term and long-term capital;
•
the adequacy of our cash reserves and working capital;
•
our ability to maintain the desired relationship between our financing and the interest rates and maturities of our assets;
•
the timing and amount of cash flows, if any, from our investments;
•
our substantial amount of indebtedness;
1
•
the performance, financial condition and liquidity of borrowers;
•
our exposure to risks of loss and disruptions in operations resulting from severe weather events, man-made or other natural conditions, including climate change and pandemics;
•
the ability of our servicer to approve and monitor correspondent sellers and underwrite loans to investor standards;
•
incomplete or inaccurate information or documentation provided by customers or counterparties, or adverse changes in the financial condition of our customers and counterparties;
•
our indemnification and repurchase obligations in connection with mortgage loans we may purchase, sell or securitize;
•
the quality and enforceability of the collateral documentation evidencing our ownership rights in our investments;
•
increased rates of delinquency, defaults and forbearances and/or decreased recovery rates on our investments;
•
the performance of mortgage loans underlying mortgage-backed securities in which we retain credit risk;
•
our ability to foreclose on our investments in a timely manner or at all;
•
increased prepayments of the mortgages and other loans underlying our mortgage-backed securities or relating to our mortgage servicing rights and other investments;
•
the degree to which our hedging strategies may or may not protect us from interest rate volatility;
•
the effect of the accuracy of or changes in the estimates we make about uncertainties, contingencies and asset and liability valuations;
•
our ability to maintain appropriate internal control over financial reporting;
•
our ability to detect misconduct and fraud;
•
developments in the secondary markets for our mortgage loan products;
•
legislative and regulatory changes that impact the mortgage loan industry or housing market;
•
regulatory or other changes that impact government agencies or government-sponsored entities, or such changes that increase the cost of doing business with such agencies or entities;
•
the Consumer Financial Protection Bureau and its issued and future rules and the enforcement thereof;
•
changes in government support of home ownership and home affordability programs;
•
changes in our investment objectives or investment or operational strategies, including any new lines of business or new products and services that may subject us to additional risks;
•
limitations imposed on our business and our ability to satisfy complex rules for us to qualify as a real estate investment trust (a “REIT”) for U.S. federal income tax purposes and qualify for an exclusion from the Investment Company Act of 1940 and the ability of certain of our subsidiaries to qualify as REITs or as taxable REIT subsidiaries for U.S. federal income tax purposes;
•
changes in governmental regulations, accounting treatment, tax rates and similar matters;
•
our ability to make distributions to our shareholders in the future;
•
our failure to deal appropriately with issues that may give rise to reputational risk;
•
and our organizational structure and certain requirements in our charter documents.
Other factors that could also cause results to differ from our expectations may not be described in this Report or any other document. Each of these factors could by itself, or together with one or more other factors, adversely affect our business, 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)
June 30,
December 31,
2026
2025
(in thousands, except share information)
ASSETS
Cash
$
225,238
$
271,970
Short-term investments at fair value
195,612
190,518
Mortgage-backed securities at fair value pledged to creditors
4,075,660
4,452,859
Loans held for sale at fair value ($3,171,272 and $2,676,700 pledged to creditors, respectively)
3,195,343
2,699,398
Loans held for investment at fair value ($12,456,657 and $8,530,939 pledged to creditors, respectively)
12,458,249
8,532,644
Derivative assets with nonaffiliates ($30,301 and $32,659 pledged to creditors, respectively)
44,184
49,696
Derivative assets with PennyMac Financial Services, Inc.
5,239
6,247
Deposits securing credit risk transfer arrangements pledged to creditors
947,900
1,009,334
Mortgage servicing rights at fair value ($3,503,566 and $3,582,211 pledged to creditors, respectively)
3,575,603
3,644,702
Servicing advances ($51,147 and $78,430 pledged to creditors, respectively)
64,318
96,830
Due from PennyMac Financial Services, Inc.
17,456
19,100
Other
288,788
373,584
Total assets
$
25,093,590
$
21,346,882
LIABILITIES
Assets sold under agreements to repurchase
$
8,395,226
$
8,018,601
Notes payable secured by credit risk transfer and mortgage servicing assets
2,481,131
2,258,128
Unsecured senior notes
685,276
1,028,300
Interest-only security payable at fair value
34,299
37,650
Asset-backed financings of variable interest entities at fair value
11,358,602
7,789,303
Derivative and credit risk transfer strip liabilities with nonaffiliates at fair value
9,047
6,932
Derivative liabilities with PennyMac Financial Services, Inc.
1,234
2,257
Accounts payable and accrued liabilities
135,742
168,498
Due to PennyMac Financial Services, Inc.
18,929
17,122
Income taxes payable
115,490
127,476
Liability for losses under representations and warranties
5,240
5,284
Total liabilities
23,240,216
19,459,551
Commitments and contingencies ─ Note 17
SHAREHOLDERS’ EQUITY
Preferred shares of beneficial interest, $0.01 par value per share—authorized 100,000,000 shares, issued and outstanding 22,400,000, liquidation preference $560,000,000
541,482
541,482
Common shares of beneficial interest, $0.01 par value—authorized, 500,000,000 issued and outstanding, 87,202,362 and 87,016,604 shares, respectively
872
870
Additional paid-in capital
1,929,303
1,927,804
Accumulated deficit
(618,283
)
(582,825
)
Total shareholders’ equity
1,853,374
1,887,331
Total liabilities and shareholders’ equity
$
25,093,590
$
21,346,882
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:
June 30,
December 31,
2026
2025
(in thousands)
ASSETS
Loans held for investment at fair value
$
12,456,657
$
8,530,939
Derivative assets
30,301
32,659
Deposits securing credit risk transfer arrangements
947,900
1,009,334
Other—interest receivable
44,183
35,675
$
13,479,041
$
9,608,607
LIABILITIES
Asset-backed financings of the variable interest entities at fair value
$
11,358,602
$
7,789,303
Interest-only security payable at fair value
34,299
37,650
Derivative and credit risk transfer strip liabilities at fair value
5,428
5,999
Accounts payable and accrued liabilities—interest payable
44,183
35,675
$
11,442,512
$
7,868,627
The accompanying notes are an integral part of these consolidated financial statements.
4
PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Quarter ended June 30,
Six months ended June 30,
2026
2025
2026
2025
(in thousands, except earnings (loss) per common share)
Net investment income
Net loan servicing fees:
From nonaffiliates
Contractually specified
$
144,403
$
153,111
$
291,995
$
305,310
Other
5,076
5,127
8,443
9,044
149,479
158,238
300,438
314,354
Change in fair value of mortgage servicing rights
(81,464
)
(75,128
)
(142,763
)
(219,718
)
Mortgage servicing rights hedging results
(32,831
)
(60,637
)
(44,712
)
(100,581
)
35,184
22,473
112,963
(5,945
)
From PennyMac Financial Services, Inc.
4,857
1,474
10,664
2,682
Net loan servicing fees
40,041
23,947
123,627
(3,263
)
Net gains on loans held for sale at fair value:
From nonaffiliates
15,292
15,148
38,202
25,477
From PennyMac Financial Services, Inc.
—
2,658
—
4,673
Net gains on loans held for sale at fair value
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:
Interest income
304,250
196,481
580,341
372,572
Interest expense
311,345
205,149
591,095
387,286
Net interest expense
(7,095
)
(8,668
)
(10,754
)
(14,714
)
Results of real estate acquired in settlement of loans
(61
)
—
(109
)
(142
)
Other
45
51
78
105
Net investment income
72,729
70,201
154,863
114,666
Expenses
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
Total expenses
55,909
53,195
111,148
103,959
Income before (benefit from) provision for income taxes
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 of beneficial interest
10,455
10,455
20,910
20,910
Net income (loss) attributable to common shareholders
$
20,464
$
(2,921
)
$
34,625
$
(3,696
)
Earnings (loss) per common share
Basic
$
0.23
$
(0.04
)
$
0.40
$
(0.05
)
Diluted
$
0.23
$
(0.04
)
$
0.40
$
(0.05
)
Weighted average common shares outstanding
Basic
87,202
87,012
87,142
86,960
Diluted
87,290
87,012
87,283
86,960
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)
Quarter ended June 30, 2026
Preferred shares
Common shares
Number of shares
Amount
Number of shares
Par value
Additional paid-in capital
Accumulated deficit
Total
(in thousands, except per share amounts)
Balance at March 31, 2026
22,400
$
541,482
87,192
$
872
$
1,927,759
$
(603,557
)
$
1,866,556
Net income
—
—
—
—
—
30,919
30,919
Share-based compensation
—
—
11
—
1,544
—
1,544
Dividends:
Preferred shares
—
—
—
—
—
(10,455
)
(10,455
)
Common shares ($0.40 per share)
—
—
—
—
—
(35,190
)
(35,190
)
Balance at June 30, 2026
22,400
$
541,482
87,203
$
872
$
1,929,303
$
(618,283
)
$
1,853,374
Quarter ended June 30, 2025
Preferred shares
Common shares
Number of shares
Amount
Number of shares
Par value
Additional paid-in capital
Accumulated deficit
Total
(in thousands, except per share amounts)
Balance at March 31, 2025
22,400
$
541,482
87,011
$
870
$
1,924,902
$
(564,536
)
$
1,902,718
Net income
—
—
—
—
—
7,534
7,534
Share-based compensation
—
—
6
—
838
—
838
Dividends:
Preferred shares
—
—
—
—
—
(10,455
)
(10,455
)
Common shares ($0.40 per share)
—
—
—
—
—
(34,990
)
(34,990
)
Balance at June 30, 2025
22,400
$
541,482
87,017
$
870
$
1,925,740
$
(602,447
)
$
1,865,645
Statements continued on next page
6
Six months ended June 30, 2026
Preferred shares
Common shares
Number of shares
Amount
Number of shares
Par value
Additional paid-in capital
Accumulated deficit
Total
(in thousands, except per share amounts)
Balance at December 31, 2025
22,400
$
541,482
87,017
$
870
$
1,927,804
$
(582,825
)
$
1,887,331
Net income
—
—
—
—
—
55,535
55,535
Share-based compensation
—
—
186
2
1,499
—
1,501
Dividends:
Preferred shares
—
—
—
—
—
(20,910
)
(20,910
)
Common shares ($0.80 per share)
—
—
—
—
—
(70,083
)
(70,083
)
Balance at June 30, 2026
22,400
$
541,482
87,203
$
872
$
1,929,303
$
(618,283
)
$
1,853,374
Six months ended June 30, 2025
Preferred shares
Common shares
Number of shares
Amount
Number of shares
Par value
Additional paid-in capital
Accumulated deficit
Total
(in thousands, except per share amounts)
Balance at December 31, 2024
22,400
$
541,482
86,861
$
869
$
1,925,067
$
(528,918
)
$
1,938,500
Net income
—
—
—
—
—
17,214
17,214
Share-based compensation
—
—
156
1
673
—
674
Dividends:
Preferred shares
—
—
—
—
—
(20,910
)
(20,910
)
Common shares ($0.80 per share)
—
—
—
—
—
(69,833
)
(69,833
)
Balance at June 30, 2025
22,400
$
541,482
87,017
$
870
$
1,925,740
$
(602,447
)
$
1,865,645
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
$
55,535
$
17,214
Adjustments to reconcile net income to net cash used in operating activities:
Change in fair value of mortgage servicing rights
142,763
219,718
Mortgage servicing rights hedging results
44,712
100,581
Net gains on loans held for sale
(38,202
)
(30,150
)
Net losses (gains) on investments and financings
762
(95,993
)
Accrual of unearned discounts and amortization of purchase premiums on mortgage-backed securities, loans held for investment, and asset-backed financings, net
4,677
(15,350
)
Amortization of debt issuance costs
9,244
8,212
Results of real estate acquired in settlement of loans
109
142
Share-based compensation expense
2,643
1,801
Purchase of loans held for sale from nonaffiliates
(625,326
)
(53,673,734
)
Purchase of loans held for sale from PennyMac Financial Services, Inc.
(9,378,680
)
(1,689,692
)
Sale to nonaffiliates and repayment of loans held for sale
4,319,419
4,983,696
Sale of loans held for sale to PennyMac Financial Services, Inc.
—
47,382,225
Repurchase of loans subject to representations and warranties
(8,894
)
(13,097
)
Decrease in servicing advances
32,424
34,464
Decrease in due from PennyMac Financial Services, Inc.
1,644
1,121
Decrease in other assets
11,757
164,693
(Decrease) increase in accounts payable and accrued liabilities
(33,103
)
2,423
Increase in due to PennyMac Financial Services, Inc.
1,807
398
Decrease in income taxes payable
(11,986
)
(8,535
)
Net cash used in operating activities
(5,468,695
)
(2,609,863
)
Cash flows from investing activities
Net increase in short-term investments
(5,094
)
(5,388
)
Purchase of mortgage-backed securities
(490,407
)
(37,082
)
Sale and repayment of mortgage-backed securities
852,629
230,814
Repayment of loans held for investment
1,124,601
145,907
Net settlement of derivative financial instruments
(2,617
)
2,581
Distribution from credit risk transfer arrangements
83,334
71,269
Transfer of mortgage servicing rights relating to delinquent loans to Agency
(2,402
)
(391
)
Sale of real estate acquired in settlement of loans
117
686
Decrease (increase) in margin deposits
30,931
(95,252
)
Net cash provided by investing activities
1,591,092
313,144
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
27,866,274
71,996,262
Repurchase of assets sold under agreements to repurchase
(27,491,390
)
(71,672,592
)
Issuance of mortgage loan participation purchase and sale agreements
—
608,627
Repayment of mortgage loan participation purchase and sale agreements
—
(611,745
)
Issuance of notes payable secured by credit risk transfer and mortgage servicing assets
351,693
50,000
Repayment of notes payable secured by credit risk transfer and mortgage servicing assets
(128,331
)
(316,594
)
Issuance of unsecured senior notes
—
277,500
Repayment of unsecured senior notes
(345,000
)
—
Issuance of asset-backed financings of variable interest entities
4,773,912
2,236,766
Repayment of asset-backed financings of variable interest entities
(1,098,613
)
(143,356
)
Payment of debt issuance costs
(5,886
)
(11,225
)
Payment of dividends to preferred shareholders
(20,910
)
(20,910
)
Payment of dividends to common shareholders
(69,736
)
(69,681
)
Payment of vested share-based compensation tax withholdings
(1,142
)
(1,127
)
Net cash provided by financing activities
3,830,871
2,321,925
Net (decrease) increase in cash
(46,732
)
25,206
Cash at beginning of period
271,970
337,694
Cash at end of period
$
225,238
$
362,900
Supplemental cash flow information
Payments, net:
Income taxes
$
165
$
2,028
Interest
$
601,424
$
398,397
Non-cash investing activities:
Reclassification of loans held for sale to loans held for investment resulting from securitization activities
$
5,170,290
$
2,480,700
Receipt of mortgage servicing rights as proceeds from sales of loans
$
71,262
$
91,039
Non-cash financing activities:
Dividends declared, not paid
$
35,190
$
34,990
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 three reportable segments: credit sensitive strategies, interest rate sensitive strategies and aggregation and securitization (formerly referred to as correspondent production); all other activities are included in corporate. The segments’ investment activities are summarized below:
•
The credit sensitive strategies segment represents the Company’s investments in credit risk transfer (“CRT”) arrangements referencing loans from its own aggregation and securitization (“CRT arrangements”) and subordinate residential mortgage-backed securities (“MBS”).
•
The interest rate sensitive strategies segment represents the Company’s investments in mortgage servicing rights (“MSRs”), Agency and senior non-Agency MBS, and collateralized mortgage obligations ("CMOs") and the related interest rate hedging activities.
•
The aggregation and securitization segment represents the Company’s purchasing, pooling and reselling or financing newly originated prime credit quality loans either directly or in the form of MBS, using the services of Pennymac Capital Management, LLC (“PCM”) and PennyMac Loan Services, LLC (“PLS”), both wholly-owned subsidiaries of PennyMac Financial Services, Inc. (“PFSI”), a publicly-traded mortgage banking and investment management company separately listed on the New York Stock Exchange.
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.
•
Corporate activities include management fees, corporate expense amounts and certain interest income and expense. None of the corporate activities qualify as reportable segments.
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 90% of its taxable income in the form of qualifying distributions to shareholders.
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 no restricted cash during the periods presented. Therefore, the consolidated statements of cash flows do not include references to restricted cash.
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:
•
The fair value of MSRs is sensitive to changes in prepayment speed expectations and experience, the returns demanded by market participants and estimates of cost to service the underlying loans;
•
The fair values of Agency and senior non-Agency MBS are sensitive to changes in market interest rates; and
•
The fair values of CRT arrangements and subordinate MBS are sensitive to market perceptions of future credit performance of the underlying loans as well as the actual credit performance of such loans and the returns required by market participants to hold such investments.
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:
•
Through September 30, 2025, the per-loan base servicing fees for loans subserviced by PLS on the Company’s behalf were $7.50 per month for fixed-rate loans and $8.50 per month for adjustable-rate loans. Effective October 1, 2025, the per loan base servicing fees for mortgage loans are $7.00 per month for fixed-rate loans and $8.00 per month for adjustable-rate loans.
•
To the extent that loans become delinquent, PLS is entitled to an additional servicing fee per loan ranging from $18 to $80 per month based on the delinquency, bankruptcy and foreclosure status of the loan or $75 per month if the underlying mortgaged property becomes REO.
•
PLS is also entitled to customary ancillary income and certain market-based fees and charges, including boarding and deboarding fees, liquidation and disposition fees, assumption, modification and origination fees, pass through of Agency incentive fees for loss mitigation activities and fees for processing insurance and guarantee claims on defaulted loans.
The Servicing Agreement expires on December 31, 2029, subject to automatic renewal for an additional 18-month period unless terminated in accordance with the terms of the agreement.
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:
•
70% of the fair market value of the MSRs relating to the recaptured loans subject to the first 30% of the “recapture rate”;
•
50% of the fair market value of the MSRs relating to the recaptured loans subject to the “recapture rate” in excess of 30% and up to 50%;
•
40% of the fair market value of the MSRs relating to the recaptured loans subject to the “recapture rate” in excess of 50%; and
•
a recapture fee of $900 per loan if PLS originates a mortgage loan for the purpose of purchasing a property where the customer has or had a mortgage loan for which PMT holds or held the MSR.
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 30%.
The MSR recapture agreement expires on December 31, 2029, subject to automatic renewal for an additional 18-month period unless terminated in accordance with the terms of the agreement.
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
$
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
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 100% of the non-government insured or guaranteed delegated correspondent loans purchased by PLS at its cost plus accrued interest, less any loan administrative fee paid to PLS by the correspondent seller, and subject to quarterly fulfillment fees as described below. PLS may hold or otherwise sell correspondent loans to other investors if the Company chooses not to purchase such loans. As a result of the revised agreement, the sourcing fee arrangement described below no longer has any effect for correspondent loan commitments entered into beginning on July 1, 2025.
Effective January 1, 2025, fulfillment fees in any quarter shall not exceed the following:
•
the product of (i) the sum of $585 for each pull-through adjusted loan commitment up to and including 16,500 per quarter and $355 for each pull-through adjusted loan commitment in excess of 16,500 per quarter, and (ii) the number of loan commitments relating to loans intended to be purchased by PMT during the quarter and thereafter retained by PMT before sale or securitization, divided by the total number of non-Ginnie Mae loan commitments issued during the quarter (in each case as determined after applying the applicable pull-through factor) plus
•
the product of (i) the sum of $315 for each purchased loan up to and including 16,500 per quarter and $195 for each purchased loan in excess of 16,500 per quarter, and (ii) the number of loans purchased by PMT during the quarter and thereafter retained by PMT prior to sale or securitization, divided by the total number of non-Ginnie Mae loans purchased during the quarter, plus
•
$500 multiplied by the number of all purchased loans that are securitized or sold to parties other than Fannie Mae or Freddie Mac.
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 one to two basis points of the UPB of the loan, generally based on the average number of calendar days the loans were held by the Company before purchase by PLS. PLS could also acquire conventional loans from the Company on the same terms upon mutual agreement between the Company and PLS.
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 December 31, 2029, subject to automatic renewal for an additional 18 month period unless terminated in accordance with the terms of the agreement.
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
$
5,023
$
5,814
$
10,760
$
11,104
Unpaid principal balance of loans fulfilled by PLS
$
2,564,511
$
3,085,840
$
5,361,055
$
5,867,562
Sourcing fees received from PLS included in Net gains on loans held for sale
$
2,658
$
4,673
Unpaid principal balance of loans sold to PLS:
Government guaranteed or insured
$
12,966,563
$
24,158,443
Conventional conforming
13,520,693
22,481,489
$
26,487,256
$
46,639,932
Purchases of loans held for sale from PLS (1)
$
4,998,391
$
1,034,884
$
9,378,680
$
1,689,692
Tax service fees paid to PLS
$
502
$
979
(1)
Amount includes loans purchased from PLS subject to the fulfillment agreement as well as other loans purchased from PLS.
Management Agreement
PMT has a management agreement with PCM, pursuant to which PMT pays PCM management fees as follows:
•
A base management fee that is calculated quarterly and is equal to the sum of (i) 1.5% per year of average shareholders’ equity up to $2 billion, (ii) 1.375% per year of average shareholders’ equity in excess of $2 billion and up to $5 billion, and (iii) 1.25% per year of average shareholders’ equity in excess of $5 billion. “Shareholders’ equity” is defined as the sum of net proceeds from issuances and repurchases of equity securities since inception, plus retained earnings or reduced by accumulated deficit.
•
A performance incentive fee that is calculated annually at a defined annualized percentage of the amount by which “net income,” for a fiscal year and before deducting the incentive fee, exceeds certain levels of return on “common shareholders’ equity.”
The performance incentive fee is equal to the sum of:
•
10% of the amount by which “net income” for the year exceeds (i) an 8% return on the average “common shareholders’ equity” plus the “high watermark”, up to (ii) a 12% return on “common shareholders’ equity” during the fiscal year; plus
•
15% of the amount by which “net income” for the year exceeds (i) a 12% return on the average “common shareholders’ equity” plus the “high watermark”, up to (ii) a 16% return on “common shareholders’ equity” during the fiscal year; plus
•
20% of the amount by which “net income” for the year exceeds a 16% return on the average “common shareholders’ equity” during the fiscal year plus the “high watermark.”
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 8% and the average Fannie Mae 30-year MBS Yield (the “Target Yield”) for the year then ended. If the “net income” is lower than the Target Yield, the high watermark is increased by the difference. If the “net income” is higher than the Target Yield, the high watermark is reduced by the difference. Each time a
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 50% paid in Common Shares), at the Company’s option.
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. The termination fee is equal to three times the sum of (a) the average annual base management fee, and (b) the average annual performance incentive fee earned by PCM, in each case during the 24-month period before termination of the management agreement.
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
$
6,810
$
6,869
$
13,572
$
13,881
Performance incentive fee
—
—
—
—
$
6,810
$
6,869
$
13,572
$
13,881
Average shareholders' equity amounts used to calculate base management fee expense
$
1,820,944
$
1,836,690
$
1,824,591
$
1,866,238
The management agreement expires on December 31, 2029, subject to automatic renewal for an additional 18-month period unless terminated in accordance with the terms of the agreement.
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
$
4,257
$
4,963
$
10,398
$
9,564
Overhead
4,022
982
4,971
1,963
Compensation
1,599
1,628
3,198
3,257
$
9,878
$
7,573
$
18,567
$
14,784
Payments and settlements during the period (1)
$
13,014
$
32,628
$
31,344
$
60,676
(1)
Payments and settlements include payments and netting settlements made pursuant to master netting agreements between the Company and PFSI for the operating, investing and financing activities itemized in this Note.
15
Financing Activities
PFSI Investment in the Company
PFSI held 75,000 of the Company’s Common Shares during the six months ended June 30, 2026 and 2025.
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
$
17,456
$
19,100
Due to PFSI:
Management fees
$
6,810
$
6,856
Loan servicing fees
6,536
6,669
Allocated expenses and costs
5,583
3,161
Aggregation and securitization costs
—
436
$
18,929
$
17,122
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
$
64,318
$
96,830
Other assets-Real estate acquired in settlement of loans
743
655
$
65,061
$
97,485
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
$
2,102,216
$
2,369,738
$
4,319,419
$
4,983,696
Loan servicing fees
$
137,838
$
153,111
$
277,741
$
305,310
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
$
205,356,694
$
212,581,934
Collection status (unpaid principal balance)
Delinquency:
30-89 days delinquent
$
2,379,599
$
2,583,158
90 or more days delinquent:
Not in foreclosure
$
970,934
$
1,025,111
In foreclosure
$
144,185
$
118,503
Bankruptcy
$
380,266
$
351,890
Custodial funds managed by the Company (1)
$
3,287,288
$
2,758,142
16
(1)
Custodial funds represent borrower and investor custodial cash accounts relating to loans serviced under mortgage servicing agreements and are not included on the Company’s consolidated balance sheets. The Company earns placement fees on certain of the custodial funds it manages on behalf of the loans’ borrowers and investors, and these fees are included in Interest income in the Company’s consolidated statements of operations.
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:
•
securities that are structured such that loans that reach a specific number of days delinquent (including loans in forbearance) trigger losses chargeable to the CRT arrangement based on the sizes of the delinquent loans and a contractual schedule of loss severity; and
•
securities that require the Company to absorb losses only when the reference loans realize credit losses.
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 3.5% to 4.0% of the UPB of the loans sold under the CRT arrangements. As the UPB of the underlying loans subject to each CRT arrangement decreased through repayments, the percentage exposure to losses of each CRT arrangement increased to maximums ranging from 4.5% to 5.0% of outstanding UPB, although the total dollar amount of exposure to losses did not increase.
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.
•
For CRT arrangements where losses are triggered based on the loans’ delinquency status, the Company recognizes its IO ownership interests and recourse obligations on the consolidated balance sheets as CRT derivativesin Derivative assets and Derivative and credit risk transfer strip liabilities.
•
For CRT arrangements where losses are absorbed when the reference loans realize credit losses,the Company recognizes its IO ownership interests and recourse obligations as CRT strips which are included on the consolidated balance sheets in Derivative and credit risk transfer strip liabilities.
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
$
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 — valuation changes
(67
)
(599
)
3,351
(2,331
)
9,711
20,250
23,622
18,450
Interest income — Deposits securing credit risk transfer arrangements
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 arrangements
$
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
(1)
Deposits securing credit risk transfer arrangementsalso secure $5.4 million and $6.0 million in CRT strip liabilitiesat June 30, 2026 and December 31, 2025, respectively.
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
$
(28,484
)
$
13,600
$
(94,248
)
$
42,312
Asset-backed financings of variable interest entities at fair value
40,652
(14,793
)
102,888
(44,216
)
Interest income
160,571
50,687
294,325
84,360
Interest expense
155,854
46,449
276,394
75,164
$
16,885
$
3,045
$
26,571
$
7,292
June 30, 2026
December 31, 2025
(in thousands)
Loans held for investment at fair value
$
12,456,657
$
8,530,939
Asset-backed financings of variable interest entities at fair value
$
11,358,602
$
7,789,303
Retained interests at fair value pledged to secure Assets sold under agreements to repurchase
$
1,077,164
$
648,159
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 fairvalue, 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:
•
Level 1—Quoted prices in active markets for identical assets or liabilities.
•
Level 2—Prices determined or determinable using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing an asset or liability and are developed based on market data obtained from sources independent of the Company.
•
Level 3—Prices determined using significant unobservable inputs. In situations where significant observable inputs are unavailable, unobservable inputs may be used. Unobservable inputs reflect the Company’s own judgments about the factors that market participants use in pricing an asset or liability, and are based on the best information available in the circumstances.
As a result of the difficulty in observing certain significant valuation inputs affecting “Level 3” fair value assets and liabilities, the Company is required to make judgments regarding these items’ fair values. Different persons in possession of the same facts may reasonably arrive at different conclusions as to the inputs to be applied in valuing these assets and liabilities and their fair values. Such differences may result in significantly different fair value measurements. Likewise, due to the general illiquidity of some of these assets and liabilities, subsequent transactions may be at values significantly different from those reported.
The Company reclassifies its assets and liabilities between levels of the fair value hierarchy when the 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
$
195,612
$
—
$
—
$
195,612
Mortgage-backed securities
—
4,006,726
68,934
4,075,660
Loans held for sale
—
3,193,032
2,311
3,195,343
Loans held for investment
—
12,456,657
1,592
12,458,249
Derivative assets with nonaffiliates:
Put options on interest rate futures purchase contracts
6,410
—
—
6,410
Forward purchase contracts
—
500
—
500
Forward sale contracts
—
3,769
—
3,769
Swaptions
—
14,091
—
14,091
Credit risk transfer derivatives
—
—
30,301
30,301
Total derivative assets with nonaffiliates before netting
6,410
18,360
30,301
55,071
Netting
—
—
—
(10,887
)
Total derivative assets with nonaffiliates after netting
6,410
18,360
30,301
44,184
Derivative assets with PennyMac Financial Services, Inc.:
Forward purchase contracts
—
1,088
—
1,088
Interest rate lock commitments
—
—
4,179
4,179
Total derivative assets with PennyMac Financial Services, Inc. before netting
—
1,088
4,179
5,267
Netting
—
—
—
(28
)
Total derivative assets with PennyMac Financial Services, Inc. after netting
—
1,088
4,179
5,239
Mortgage servicing rights
—
—
3,575,603
3,575,603
$
202,022
$
19,675,863
$
3,682,920
$
23,549,890
Liabilities:
Interest-only security payable
$
—
$
—
$
34,299
$
34,299
Asset-backed financings of variable interest entities
—
11,358,602
—
11,358,602
Derivative and credit risk transfer strip liabilities with nonaffiliates:
Forward purchase contracts
—
42
—
42
Forward sale contracts
—
14,435
—
14,435
Total derivative liabilities with nonaffiliates before netting
—
14,477
—
14,477
Netting
—
—
—
(10,858
)
Total derivative liabilities with nonaffiliates after netting
—
14,477
—
3,619
Credit risk transfer strips
—
—
5,428
5,428
Total derivative and credit risk transfer strip liabilities with nonaffiliates
—
14,477
5,428
9,047
Derivative liabilities with PennyMac Financial Services, Inc:
Forward purchase contracts
—
28
—
28
Interest rate lock commitments
—
—
1,234
1,234
Total derivative liabilities with PennyMac Financial Services, Inc before netting
—
28
1,234
1,262
Netting
—
—
—
(28
)
Total derivative liabilities with PennyMac Financial Services, Inc after netting:
—
28
1,234
1,234
$
—
$
11,373,107
$
40,961
$
11,403,182
21
December 31, 2025
Level 1
Level 2
Level 3
Total
(in thousands)
Assets:
Short-term investments
$
190,518
$
—
$
—
$
190,518
Mortgage-backed securities
—
4,380,357
72,502
4,452,859
Loans held for sale
—
2,695,817
3,581
2,699,398
Loans held for investment
—
8,530,939
1,705
8,532,644
Derivative assets with nonaffiliates:
Call options on interest rate futures purchase contracts
1,289
—
—
1,289
Put options on interest rate futures purchase contracts
4,109
—
—
4,109
Forward purchase contracts
—
4,113
—
4,113
Forward sale contracts
—
2,381
—
2,381
Credit risk transfer derivatives
—
—
32,659
32,659
Total derivative assets with nonaffiliates before netting
5,398
6,494
32,659
44,551
Netting
—
—
—
5,145
Total derivative assets with nonaffiliates after netting
5,398
6,494
32,659
49,696
Derivative assets with PennyMac Financial Services, Inc.:
Interest rate lock commitments
—
—
4,605
4,605
Forward purchase contracts
—
1,784
—
1,784
Total derivative assets with PennyMac Financial Services, Inc. before netting
—
1,784
4,605
6,389
Netting
—
—
—
(142
)
Total derivative assets with PennyMac Financial Services, Inc. after netting
—
1,784
4,605
6,247
Mortgage servicing rights
—
—
3,644,702
3,644,702
$
195,916
$
15,615,391
$
3,759,754
$
19,576,064
Liabilities:
Interest-only security payable
$
—
$
—
$
37,650
$
37,650
Asset-backed financings of variable interest entities
—
7,789,303
—
7,789,303
Derivative and credit risk transfer strip liabilities with nonaffiliates:
Forward purchase contracts
—
158
—
158
Forward sale contracts
—
17,340
—
17,340
Total derivative liabilities with nonaffiliates before netting
—
17,498
—
17,498
Netting
—
—
—
(16,565
)
Total derivative liabilities with nonaffiliates after netting
—
17,498
—
933
Credit risk transfer strips
—
—
5,999
5,999
Total derivative and credit risk transfer strip liabilities with nonaffiliates
—
17,498
5,999
6,932
Derivative liabilities with PennyMac Financial Services, Inc:
Interest rate lock commitments
—
—
2,257
2,257
Forward purchase contracts
—
142
—
142
Total derivative liabilities with PennyMac Financial Services, Inc before netting
—
142
2,257
2,399
Netting
—
—
—
(142
)
Total derivative liabilities with PennyMac Financial Services, Inc after netting:
—
142
2,257
2,257
$
—
$
7,806,943
$
45,906
$
7,836,142
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 held for sale
Loans held for investment
CRT derivatives
Interest rate lock commitments with PFSI
CRT strips
Mortgage servicing rights
Total
(in thousands)
Balance, March 31, 2026
$
71,429
$
2,084
$
1,650
$
30,174
$
(3,273
)
$
(4,062
)
$
3,623,979
$
3,721,981
Purchases and issuances
—
5,293
—
—
8,958
—
—
14,251
Repayments and sales
(3,954
)
(5,075
)
(54
)
(2,132
)
—
(8,885
)
—
(20,100
)
Accrual of unearned discounts
1,845
—
—
—
—
—
—
1,845
Amounts received pursuant to sales of loans
—
—
—
—
—
—
30,981
30,981
Changes in fair value included in income arising from:
Changes in instrument - specific credit risk
—
—
—
—
—
—
—
—
Other factors
(386
)
9
(4
)
2,259
490
7,519
(81,464
)
(71,577
)
(386
)
9
(4
)
2,259
490
7,519
(81,464
)
(71,577
)
Transfers of:
Interest rate lock commitments to loans held for sale (2)
—
—
—
—
(3,230
)
—
—
(3,230
)
Mortgage servicing rights relating to delinquent loans to Agency
—
—
—
—
—
—
2,107
2,107
Balance, June 30, 2026
$
68,934
$
2,311
$
1,592
$
30,301
$
2,945
$
(5,428
)
$
3,575,603
$
3,676,258
Changes in fair value recognized during the quarter relating to assets still held at June 30, 2026
$
(386
)
$
(4
)
$
(7
)
$
215
$
2,945
$
(1,125
)
$
(81,464
)
$
(79,826
)
(1)
For the purpose of this table, CRT derivative, interest rate lock commitment (“IRLC”), and CRT strip asset and liability positions are shown net.
(2)
The Company had transfers among the fair value levels arising from transfers of IRLCs to Loans held for sale at fair value upon purchase of the respective loans.
Liabilities
Quarter ended June 30, 2026
(in thousands)
Interest-only security payable:
Balance, March 31, 2026
$
34,232
Changes in fair value included in income arising from:
Changes in instrument - specific credit risk
—
Other factors
67
67
Balance, June 30, 2026
$
34,299
Changes in fair value recognized during the quarter relating to liability outstanding at June 30, 2026
$
67
23
Quarter ended June 30, 2025
Assets (1)
Interest-only stripped mortgage-backed securities
Loans held for sale
Loans held for investment
CRT derivatives
Interest rate lock commitments
CRT strips
Mortgage servicing rights
Total
(in thousands)
Balance, March 31, 2025
$
81,043
$
5,451
$
1,815
$
28,474
$
4,619
$
(15,885
)
$
3,770,034
$
3,875,551
Purchases and issuances
—
3,103
—
—
3,553
—
—
6,656
Repayments and sales
(4,524
)
(1,540
)
(20
)
(2,702
)
—
(10,068
)
—
(18,854
)
Accrual of unearned discounts
2,165
—
—
—
—
—
—
2,165
Amounts received pursuant to sales of loans
—
—
—
—
—
—
44,030
44,030
Changes in fair value included in income arising from:
Changes in instrument - specific credit risk
—
—
—
—
—
—
—
—
Other factors
368
151
59
5,375
4,529
15,474
(75,128
)
(49,172
)
368
151
59
5,375
4,529
15,474
(75,128
)
(49,172
)
Transfers of:
Interest rate lock commitments to loans held for sale (2)
—
—
—
—
(6,216
)
—
—
(6,216
)
Mortgage servicing rights relating to delinquent loans to Agency
—
—
—
—
—
—
170
170
Balance, June 30, 2025
$
79,052
$
7,165
$
1,854
$
31,147
$
6,485
$
(10,479
)
$
3,739,106
$
3,854,330
Changes in fair value recognized during the quarter relating to assets still held at June 30, 2025
$
368
$
(96
)
$
58
$
2,743
$
6,485
$
5,524
$
(75,128
)
$
(60,046
)
(1)
For the purpose of this table, CRT derivative, IRLC, and CRT strip asset and liability positions are shown net.
(2)
The Company had transfers among the fair value levels arising from transfers of IRLCs to Loans held for sale at fair value upon purchase of the respective loans.
Liabilities
Quarter ended June 30, 2025
(in thousands)
Interest-only security payable:
Balance, March 31, 2025
$
35,954
Change in fair value included in income arising from:
Change in instrument - specific credit risk
—
Other factors
599
599
Balance, June 30, 2025
$
36,553
Changes in fair value recognized during the quarter relating to liability outstanding at June 30, 2025
$
599
24
Six months ended June 30, 2026
Assets (1)
Interest-only stripped mortgage-backed securities
Loans held for sale
Loans held for investment
CRT derivatives
Interest rate lock commitments with PFSI
CRT strips
Mortgage servicing rights
Total
(in thousands)
Balance, December 31, 2025
$
72,502
$
3,581
$
1,705
$
32,659
$
2,348
$
(5,999
)
$
3,644,702
$
3,751,498
Purchases and issuances
—
8,894
—
—
14,228
—
—
23,122
Repayments and sales
(8,061
)
(10,025
)
(70
)
(4,749
)
—
(17,309
)
—
(40,214
)
Accrual of unearned discounts
3,810
—
—
—
—
—
—
3,810
Amounts received pursuant to sales of loans
—
—
—
—
—
—
71,262
71,262
Changes in fair value included in income arising from:
Changes in instrument - specific credit risk
—
—
—
—
—
—
—
—
Other factors
683
(139
)
(43
)
2,391
(3,446
)
17,880
(142,763
)
(125,437
)
683
(139
)
(43
)
2,391
(3,446
)
17,880
(142,763
)
(125,437
)
Transfers of:
Interest rate lock commitments to loans held for sale (2)
—
—
—
—
(10,185
)
—
—
(10,185
)
Mortgage servicing rights relating to delinquent loans to Agency
—
—
—
—
—
—
2,402
2,402
Balance, June 30, 2026
$
68,934
$
2,311
$
1,592
$
30,301
$
2,945
$
(5,428
)
$
3,575,603
$
3,676,258
Changes in fair value recognized during the period relating to assets still held at June 30, 2026
$
683
$
(150
)
$
(47
)
$
(2,201
)
$
2,945
$
681
$
(142,763
)
$
(140,852
)
(1)
For the purpose of this table, CRT derivative, IRLC, and CRT strip asset and liability positions are shown net.
(2)
The Company had transfers among the fair value levels arising from transfers of IRLCs to Loans held for sale at fair value upon purchase of the respective loans.
Liabilities
Six months ended June 30, 2026
(in thousands)
Interest-only security payable:
Balance, December 31, 2025
$
37,650
Change in fair value included in income arising from:
Change in instrument - specific credit risk
—
Other factors
(3,351
)
(3,351
)
Balance, June 30, 2026
$
34,299
Change in fair value recognized during the period relating to liability outstanding at June 30, 2026
$
(3,351
)
25
Six months ended June 30, 2025
Assets (1)
Interest-only stripped mortgage-backed securities
Loans held for sale
Loans held for investment
CRT derivatives
Interest rate lock commitments
CRT strips
Mortgage servicing rights
Total
(in thousands)
Balance, December 31, 2024
$
86,260
$
7,971
$
1,866
$
29,377
$
444
$
(4,060
)
$
3,867,394
$
3,989,252
Purchases and issuances
—
3,131
—
—
8,152
—
—
11,283
Repayments and sales
(9,160
)
(4,218
)
(40
)
(5,585
)
—
(19,845
)
—
(38,848
)
Accrual of unearned discount
4,450
—
—
—
—
—
—
4,450
Amounts received pursuant to sales of loans
—
—
—
—
—
—
91,039
91,039
Changes in fair value included in income arising from:
Changes in instrument - specific credit risk
—
—
—
—
—
—
—
—
Other factors
(2,498
)
281
28
7,355
11,920
13,426
(219,718
)
(189,206
)
(2,498
)
281
28
7,355
11,920
13,426
(219,718
)
(189,206
)
Transfers of:
Interest rate lock commitments to loans held for sale (2)
—
—
—
—
(14,031
)
—
—
(14,031
)
Mortgage servicing rights relating to delinquent loans to Agency
—
—
—
—
—
—
391
391
Balance, June 30, 2025
$
79,052
$
7,165
$
1,854
$
31,147
$
6,485
$
(10,479
)
$
3,739,106
$
3,854,330
Changes in fair value recognized during the period relating to assets still held at June 30, 2025
$
(2,498
)
$
(56
)
$
27
$
1,920
$
6,485
$
(6,301
)
$
(219,718
)
$
(220,141
)
(1)
For the purpose of this table, CRT derivative, IRLC, and CRT strip asset and liability positions are shown net.
(2)
The Company had transfers among the fair value levels arising from transfers of IRLCs to Loans held for sale at fair value upon purchase of the respective loans.
Liabilities
Six months ended June 30, 2025
(in thousands)
Interest-only security payable:
Balance, December 31, 2024
$
34,222
Changes in fair value included in income arising from:
Changes in instrument - specific credit risk
—
Other factors
2,331
2,331
Balance, June 30, 2025
$
36,553
Changes in fair value recognized during the period relating to liability outstanding at June 30, 2025
$
2,331
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 amount due upon maturity
Difference
Fair value
Principal amount due upon maturity
Difference
(in thousands)
Loans held for sale:
Current through 89 days delinquent
$
3,193,864
$
3,131,455
$
62,409
$
2,696,128
$
2,627,441
$
68,687
90 or more days delinquent:
Not in foreclosure
134
134
—
1,273
1,271
2
In foreclosure
1,345
1,653
(308
)
1,997
2,289
(292
)
1,479
1,787
(308
)
3,270
3,560
(290
)
$
3,195,343
$
3,133,242
$
62,101
$
2,699,398
$
2,631,001
$
68,397
Loans held for investment:
Held in consolidated VIEs:
Current through 89 days delinquent
$
12,452,163
$
12,246,747
$
205,416
$
8,529,906
$
8,353,814
$
176,092
90 or more days delinquent:
Not in foreclosure
4,494
5,255
(761
)
700
844
(144
)
In foreclosure
—
—
—
333
428
(95
)
4,494
5,255
(761
)
1,033
1,272
(239
)
12,456,657
12,252,002
204,655
8,530,939
8,355,086
175,853
Distressed:
Current through 89 days delinquent
315
407
(92
)
371
476
(105
)
90 or more days delinquent:
Not in foreclosure
1,072
2,949
(1,877
)
942
2,553
(1,611
)
In foreclosure
205
725
(520
)
392
1,120
(728
)
1,277
3,674
(2,397
)
1,334
3,673
(2,339
)
1,592
4,081
(2,489
)
1,705
4,149
(2,444
)
$
12,458,249
$
12,256,083
$
202,166
$
8,532,644
$
8,359,235
$
173,409
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 servicing fees
Net gains on loans held for sale
Net gains (losses) on investments and financings
Net interest expense
Total
(in thousands)
Assets:
Mortgage-backed securities
$
—
$
—
$
426
$
9,604
$
10,030
Loans held for sale
—
29,400
—
—
29,400
Loans held for investment
—
—
(28,488
)
(16,569
)
(45,057
)
Credit risk transfer strips
—
—
7,519
—
7,519
Mortgage servicing rights
(81,464
)
—
—
—
(81,464
)
$
(81,464
)
$
29,400
$
(20,543
)
$
(6,965
)
$
(79,572
)
Liabilities:
Interest-only security payable
$
—
$
—
$
(67
)
$
—
$
(67
)
Asset-backed financings of VIEs
—
—
40,652
(819
)
39,833
$
—
$
—
$
40,585
$
(819
)
$
39,766
27
Quarter ended June 30, 2025
Net loan servicing fees
Net gains on loans held for sale
Net gains (losses) on investments and financings
Net interest expense
Total
(in thousands)
Assets:
Mortgage-backed securities
$
—
$
—
$
14,564
$
7,582
$
22,146
Loans held for sale
—
34,080
—
—
34,080
Loans held for investment
—
—
13,659
(3,488
)
10,171
Credit risk transfer strips
—
—
15,474
—
15,474
Mortgage servicing rights
(75,128
)
—
—
—
(75,128
)
$
(75,128
)
$
34,080
$
43,697
$
4,094
$
6,743
Liabilities:
Interest-only security payable
$
—
$
—
$
(599
)
$
—
$
(599
)
Asset-backed financings of VIEs
—
—
(14,793
)
505
(14,288
)
$
—
$
—
$
(15,392
)
$
505
$
(14,887
)
Six months ended June 30, 2026
Net loan servicing fees
Net gains on loans held for sale
Net gains (losses) on investments and financings
Net interest expense
Total
(in thousands)
Assets:
Mortgage-backed securities
$
—
$
—
$
(32,981
)
$
18,004
$
(14,977
)
Loans held for sale
—
28,981
—
—
28,981
Loans held for investment
—
—
(94,291
)
(25,793
)
(120,084
)
Credit risk transfer strips
—
—
17,880
—
17,880
Mortgage servicing rights
(142,763
)
—
—
—
(142,763
)
$
(142,763
)
$
28,981
$
(109,392
)
$
(7,789
)
$
(230,963
)
Liabilities:
Interest-only security payable
$
—
$
—
$
3,351
$
—
$
3,351
Asset-backed financings of VIEs
—
—
102,888
3,112
106,000
$
—
$
—
$
106,239
$
3,112
$
109,351
Six months ended June 30, 2025
Net loan servicing fees
Net gains on loans held for sale
Net gains (losses) on investments and financings
Net interest expense
Total
(in thousands)
Assets:
Mortgage-backed securities
$
—
$
—
$
79,419
$
17,652
$
97,071
Loans held for sale
—
80,591
—
—
80,591
Loans held for investment
—
—
42,340
(4,175
)
38,165
Credit risk transfer strips
—
—
13,426
—
13,426
Mortgage servicing rights
(219,718
)
—
—
—
(219,718
)
$
(219,718
)
$
80,591
$
135,185
$
13,477
$
9,535
Liabilities:
Interest-only security payable
$
—
$
—
$
(2,331
)
$
—
$
(2,331
)
Asset-backed financings of VIEs
—
—
(44,216
)
1,873
(42,343
)
$
—
$
—
$
(46,547
)
$
1,873
$
(44,674
)
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
$
—
$
—
$
164
$
164
December 31, 2025
$
—
$
—
$
30
$
30
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
$
(61
)
$
(14
)
$
(65
)
$
(50
)
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.The fair values and carrying values of these liabilities are summarized below:
June 30, 2026
December 31, 2025
Instrument
Carrying value
Fair value
Carrying value
Fair value
(in thousands)
Notes payable secured by credit risk transfer and mortgage servicing assets
$
2,481,131
$
2,490,007
$
2,258,128
$
2,268,438
Unsecured senior notes
$
685,276
$
706,427
$
1,028,300
$
1,073,341
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 liabilitiesat 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 Company categorizes its current holdings of MBS other than IO stripped MBS as “Level 2” fair value assets. Fair value of these securities is established based on quoted market prices for the Company’s MBS holdings or similar securities.
•
The Company categorizes its current holdings of IO stripped MBS as “Level 3” fair value assets. The Company uses a discounted cash flow approach to estimate the fair values of its 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)
$
68,934
$
72,502
Key inputs (1)
Option-adjusted spread (2)
Range
3.8% – 4.2%
4.7% – 4.7%
Weighted average
3.8%
4.7%
Annual total prepayment speed (3)
Range
10.6% – 12.6%
11.0% – 13.6%
Weighted average
10.6%
11.0%
Equivalent life (in years)
Range
4.0 – 7.4
4.0 – 7.7
Weighted average
7.4
7.6
(1)
Weighted-average inputs are based on the UPB of the underlying loans.
(2)
The Company applies an OAS to multiple simulated paths of a derived United States Treasury securities (“Treasury") yield curve for purposes of discounting cash flows relating to IO stripped MBS.
(3)
Prepayment speed is measured using life total Conditional Prepayment Rate (“CPR”). Equivalent life is provided as supplementary information.
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:
•
Loans that are saleable into active markets, comprised of most of the Company’s loans held for sale and all of the loans held for investment in VIEs, are categorized as “Level 2” fair value assets:
•
Fair values of loans held for sale categorized as “level 2” fair value assets are established using the loans’ contracted selling prices, quoted market prices or market price equivalents.
30
•
Fair values of loans held for investment in VIEs are developed using the quoted indications of fair value of all of the individual securities issued by the securitization trusts holding the loans. The Company obtains indications of fair value from nonaffiliate brokers based on comparable securities and/or pricing services and validates the brokers’ or pricing services’ indications of fair value using pricing models and inputs the Company believes are similar to the pricing models and inputs used by other market participants. The Company adjusts the fair values received from brokers and/or pricing services to include the fair value of MSRs attributable to the loans included in the VIEs.
•
Loans that are not saleable into active markets, comprised of home equity lines of credit, previously sold loans that the Company repurchased pursuant to the representation and warranties it provided to the purchaser and distressed loans, are categorized as “Level 3” fair value assets:
•
Fair values of loans held for sale categorized as “Level 3” fair value assets (home equity lines of credit and previously sold loans repurchased pursuant to representations and warranties) are estimated using a discounted cash flow approach or the loans' contracted selling prices when applicable. Inputs to the discounted cash flow model include current interest rates, payment statuses, property types, discount rates and forecasts of future interest rates, home prices, prepayment speeds, default speeds and loss severities.
•
Fair values of distressed loans are estimated based on the fair values of the real estate collateralizing the loans.
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
$
30,301
$
32,659
UPB of loans in reference pools
$
3,783,818
$
4,555,682
Key inputs (1)
Discount rate
Range
9.3% – 10.4%
8.6% – 14.1%
Weighted average
9.3%
8.8%
Voluntary prepayment speed (2)
Range
7.3% – 8.3%
6.3% – 7.6%
Weighted average
7.4%
7.3%
Involuntary prepayment speed (3)
Range
0.1% – 0.2%
0.1% – 0.3%
Weighted average
0.2%
0.1%
Remaining loss expectation
Range
0.0% – 0.1%
0.0% – 0.1%
Weighted average
0.1%
0.1%
31
(1)
Weighted average inputs are based on fair value amounts of the CRT arrangements, except for remaining loss expectation which is based on the UPB of the loans in the reference pools.
(2)
Voluntary prepayment speed is measured using life voluntary CPR.
(3)
Involuntary prepayment speed is measured using life involuntary CPR.
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)
$
2,945
$
2,348
Committed amount (in thousands)
$
1,049,341
$
1,207,859
Key inputs (2)
Pull-through rate
Range
48.5% – 100%
50.5% – 100%
Weighted average
80.9%
90.9%
MSR fair value expressed as
Servicing fee multiple
Range
2.9 – 7.9
1.7 – 8.4
Weighted average
4.8
5.4
Percentage of unpaid principal balance
Range
0.7% – 2.9%
0.4% – 3.2%
Weighted average
1.3%
1.9%
(1)
For purposes of this table, IRLC asset and liability positions are shown net.
(2)
Weighted-average inputs are based on the committed amounts.
Hedging Derivatives
Fair values of derivative financial instruments actively traded on exchanges are categorized by the Company as “Level 1” fair value assets and liabilities. Fair values of derivative financial instruments based on observable interest rates, volatilities and prices in the MBS or other markets are categorized by the Company as “Level 2” fair value assets and liabilities. Changes in the fair 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
$
5,428
$
5,999
Unpaid principal balance of loans in the reference pools
$
14,306,037
$
14,961,848
Key inputs (1)
Discount rate
Range
5.3% – 8.9%
5.0% – 8.6%
Weighted average
8.4%
8.1%
Voluntary prepayment speed (2)
Range
7.1% – 7.5%
7.0% – 7.5%
Weighted average
7.2%
7.1%
Involuntary prepayment speed (3)
Range
0.1% – 0.3%
0.1% – 0.3%
Weighted average
0.2%
0.1%
Remaining loss expectation
Range
0.4% – 1.4%
0.4% – 1.4%
Weighted average
0.5%
0.5%
(1)
Weighted average inputs are based on fair value amounts of the CRT arrangements, except for remaining loss expectation which is based on the UPB of the loans in the reference pools.
(2)
Voluntary prepayment speed is measured using life voluntary CPR.
(3)
Involuntary prepayment speed is measured using life involuntary CPR.
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)
$
30,981
$
44,030
$
71,262
$
91,039
Unpaid principal balance of underlying loans (in thousands)
$
1,890,845
$
2,350,978
$
4,088,510
$
4,945,616
Weighted average annual servicing fee rate (in basis points)
29
32
31
32
Key inputs (1)
Prepayment speed (2)
Range
8.1% – 14.6%
9.4% – 15.5%
8.1% – 14.9%
9.4% – 15.5%
Weighted average
9.7%
9.6%
9.5%
9.7%
Equivalent average life (in years)
Range
5.5 – 9.0
3.8 – 8.2
3.7 – 9.0
3.7 – 8.2
Weighted average
8.1
8.1
8.1
8.0
Pricing spread (3)
Range
4.7% – 9.7%
5.2% – 7.3%
4.7% – 10.0%
5.2% – 7.3%
Weighted average
6.9%
5.3%
6.6%
5.4%
Annual per-loan cost of servicing
Range
$69 – $122
$69 – $87
$69 – $122
$68 – $87
Weighted average
$78
$69
$75
$69
(1)
Weighted-average inputs are based on the UPB of the underlying loans.
(2)
Annual total prepayment speed is measured using life total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided as supplementary information.
(3)
Pricing spread represents a margin that is applied to a reference interest rate’s forward rate curve to develop periodic discount rates. The Company applies a pricing spread to a derived Treasury yield curve for purposes of discounting cash flows in its initial recognition of MSRs.
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)
$
3,575,603
$
3,644,702
Unpaid principal balance of underlying loans (in thousands)
$
208,426,764
$
215,781,639
Weighted average annual servicing fee rate (in basis points)
28
28
Weighted average note interest rate
3.9%
3.9%
Key inputs (1)
Prepayment speed (2)
Range
6.9% – 26.8%
7.0% – 21.5%
Weighted average
7.1%
8.4%
Equivalent average life (in years)
Range
2.0 – 8.9
2.1 – 7.9
Weighted average
8.5
7.7
Effect on fair value (in thousands) of (3):
5% adverse change
$(42,931)
$(61,563)
10% adverse change
$(85,475)
$(120,960)
20% adverse change
$(168,902)
$(233,683)
Option-adjusted spread (4)
Range
3.2% – 6.3%
3.6% – 6.2%
Weighted average
4.6%
3.6%
Effect on fair value (in thousands) of (3):
5% adverse change
$(33,357)
$(30,295)
10% adverse change
$(67,581)
$(60,089)
20% adverse change
$(134,995)
$(118,218)
Annual per-loan cost of servicing
Range
$69 – $100
$68 – $90
Weighted average
$69
$68
Effect on fair value (in thousands) of (3):
5% adverse change
$(14,469)
$(15,979)
10% adverse change
$(28,939)
$(31,959)
20% adverse change
$(57,877)
$(63,918)
(1)
Weighted-average inputs are based on the UPB of the underlying loans.
34
(2)
Prepayment speed is measured using life total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided as supplementary information.
(3)
These sensitivity analyses are limited in that they were performed as of a particular date; only contemplate the movements in the indicated inputs; do not incorporate changes to other inputs; are subject to the accuracy of the models and inputs used; and do not incorporate other factors that would affect the Company’s overall financial performance in such events, including operational adjustments made to account for changing circumstances. For these reasons, these analyses should not be viewed as projections of the effect of shock events or as earnings forecasts.
(4)
The OAS is a margin that is applied to a reference interest rate’s projected curve to develop periodic discount rates. The Company applies an OAS to multiple simulated paths of a derived Treasury yield curve for purposes of discounting cash flows relating to period-end MSRs.
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
$
3,765,539
$
4,035,862
$
4,452,859
$
4,063,706
Purchases
486,407
37,082
490,407
37,082
Sales
—
—
(477,360
)
—
Repayments
(186,316
)
(128,045
)
(375,269
)
(230,814
)
Changes in fair value included in income arising from:
Amortization and accrual of net purchase premiums and discounts, net
9,604
7,582
18,004
17,652
Valuation adjustments, net
426
14,564
(32,981
)
79,419
10,030
22,146
(14,977
)
97,071
Balance at end of period
$
4,075,660
$
3,967,045
$
4,075,660
$
3,967,045
June 30, 2026
December 31, 2025
(in thousands)
Fair value of mortgage-backed securities pledged to secure Assets sold under agreements to repurchase
$
4,075,660
$
4,452,859
Following is a summary of the Company’s investments in MBS:
June 30, 2026
Security type
Principal balance or notional amount
Purchase premiums (discounts), net
Cumulative valuation changes
Fair value
(in thousands)
Agency fixed-rate pass-through
$
2,159,819
$
399
$
18,377
$
2,178,595
Floating rate collateralized mortgage obligations
1,282,079
418
8,487
1,290,984
Principal-only stripped
490,817
(102,044
)
16,175
404,948
Senior non-Agency
132,088
(2,853
)
(1,028
)
128,207
Subordinate residential transition
4,000
—
(8
)
3,992
$
4,068,803
$
(104,080
)
$
42,003
4,006,726
Interest-only stripped
$
320,761
68,934
$
4,075,660
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 after ten years
(in thousands)
Agency fixed-rate pass-through securities
$
2,178,595
$
—
$
2,178,595
Floating rate collateralized mortgage obligations
1,290,984
—
1,290,984
Principal-only stripped securities
404,948
—
404,948
Senior non-Agency securities
128,207
—
128,207
Subordinate residential transition
3,992
3,992
—
Interest-only stripped securities
68,934
—
68,934
$
4,075,660
$
3,992
$
4,071,668
December 31, 2025
Security type
Principal balance or notional amount
Purchase premiums (discounts), net
Cumulative valuation changes
Fair value
(in thousands)
Agency fixed-rate pass-through
$
2,805,895
$
(2,125
)
$
46,677
$
2,850,447
Floating rate collateralized mortgage obligations
850,172
(1,249
)
7,074
855,997
Principal-only stripped
610,256
(115,385
)
26,258
521,129
Senior non-Agency
155,369
(3,039
)
454
152,784
$
4,421,692
$
(121,798
)
$
80,463
4,380,357
Interest-only stripped
$
344,592
72,502
$
4,452,859
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)
$
2,297,827
$
2,232,706
Jumbo
658,169
433,027
Non-qualified
237,036
30,084
Home equity lines of credit
780
942
Repurchased pursuant to representations and warranties
1,531
2,639
$
3,195,343
$
2,699,398
Loans pledged to secure Assets sold under agreements to repurchase
$
3,171,272
$
2,676,700
(1)
GSE eligibility refers to the eligibility of loans for sale to Fannie Mae or Freddie Mac. The Company sells or finances a portion of 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
$
8,132,529
$
6,332,497
Owner occupied properties
2,052,064
588,788
Fixed interest rate jumbo loans
2,272,064
1,609,654
12,456,657
8,530,939
Distressed loans
1,592
1,705
$
12,458,249
$
8,532,644
Loans held for investment pledged to secure Asset-backed financings at fair value (1)
$
12,456,657
$
8,530,939
(1)
As discussed in Note 6 ‒ Variable Interest Entities ‒ Subordinate and Senior Non-Agency Mortgage-Backed Securities, the Company holds a portion of the beneficial interests in the VIEs. At June 30, 2026 and December 31, 2025, $1.1 billion and $648.2 million, respectively, of such retained interests were pledged to secure Assets sold under agreements to repurchase.
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
$
44,184
$
49,696
Derivative assets with PennyMac Financial Services, Inc.
$
5,239
$
6,247
Derivative liabilities with nonaffiliates
$
3,619
$
933
Credit risk transfer strip liabilities
5,428
5,999
$
9,047
$
6,932
Derivative liabilities with PennyMac Financial Services, Inc.
$
1,234
$
2,257
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:
•
The Company is exposed to losses if market mortgage interest rates increase, because market interest rate increases generally cause the fair values of MBS, IRLCs and loans held for sale to decrease.
•
The Company is exposed to losses if market mortgage interest rates decrease, because market interest rate decreases generally encourage increased mortgage refinancing activities, which causes the fair values of MSRs to decrease.
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 ofMSRs 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 master netting arrangements (2):
Call options on interest rate futures purchase contracts
—
$
—
$
—
3,250,000
$
1,289
$
—
Put options on interest rate futures purchase contracts
1,975,000
6,410
—
2,500,000
4,109
—
Forward purchase contracts
1,612,960
500
42
3,703,628
4,113
158
Forward sale contracts
4,885,626
3,769
14,435
7,933,760
2,381
17,340
Bond futures
2,833,500
—
—
1,896,100
—
—
Swap futures
1,137,200
—
—
751,200
—
—
Swaptions
1,000,000
14,091
—
—
—
—
Other derivatives not subject to master netting arrangements:
CRT derivatives
3,783,818
30,301
—
455,682
32,659
—
Total derivative instruments before netting
55,071
14,477
44,551
17,498
Netting
(10,887
)
(10,858
)
5,145
(16,565
)
$
44,184
$
3,619
$
49,696
$
933
PennyMac Financial Services, Inc.:
Interest rate lock commitments not subject to master netting arrangements
1,049,341
4,179
1,234
1,207,859
4,605
2,257
Forward purchase contract subject to master netting arrangement
125,582
1,088
28
250,638
1,784
142
Total derivatives before netting
5,267
1,262
6,389
2,399
Netting
(28
)
(28
)
(142
)
(142
)
$
5,239
$
1,234
$
6,247
$
2,257
Margin deposits (received from) placed with derivative counterparties included in derivative balances above, net
$
(29
)
$
21,710
Derivative assets pledged to secure:
Assets sold under agreements to repurchase and Notes payable secured by credit risk transfer and mortgage servicing assets
$
30,301
$
32,659
(1) Notional amounts provide an indication of the volume of the Company’s derivative activity.
(2) All hedging derivatives are interest rate derivatives that are used as economic hedges.
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
$
30,301
$
—
$
—
$
30,301
$
32,659
$
—
$
—
$
32,659
RJ O’Brien & Associates, LLC
6,410
—
—
6,410
5,398
—
—
5,398
Morgan Stanley & Co. LLC
6,293
—
—
6,293
3,500
—
—
3,500
Barclays Capital Inc.
506
—
—
506
103
—
—
103
Citigroup Global Markets Inc.
374
—
—
374
217
—
—
217
Nomura
135
—
—
135
137
—
—
137
BNP Paribas
19
—
—
19
236
—
—
236
Mizuho Financial Group
12
—
—
12
442
—
—
442
Bank of America, N.A.
—
—
—
—
4,745
—
—
4,745
Goldman Sachs & Co. LLC
—
—
—
—
950
—
—
950
Wells Fargo Securities, LLC
—
—
—
—
603
—
—
603
Ellington Management
—
—
—
—
198
—
—
198
Metro Life Ins Co
—
—
—
—
151
—
—
151
J.P. Morgan Securities LLC
—
—
—
—
102
—
—
102
Other
134
—
—
134
255
—
—
255
$
44,184
$
—
$
—
$
44,184
$
49,696
$
—
$
—
$
49,696
PennyMac Financial Services, Inc.
$
5,239
$
—
$
—
$
5,239
$
6,247
$
—
$
—
$
6,247
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.
$
1,697,771
$
(1,697,583
)
$
—
$
188
$
1,074,334
$
(1,074,334
)
$
—
$
—
Santander US Capital
1,327,157
(1,327,157
)
—
—
952,951
(952,933
)
—
18
J.P. Morgan Securities LLC
1,007,543
(1,007,388
)
—
155
1,536,038
(1,536,038
)
—
—
Wells Fargo Securities, LLC
874,547
(874,297
)
—
250
782,547
(782,547
)
—
—
Atlas Securitized Products, L.P.
707,813
(707,813
)
—
—
1,216,779
(1,216,779
)
—
—
Barclays Capital Inc.
582,733
(582,733
)
—
—
431,016
(431,016
)
—
—
Citigroup Global Markets Inc.
512,479
(512,479
)
—
—
397,162
(397,162
)
—
—
RBC Capital Markets, L.P.
316,744
(316,744
)
—
—
438,781
(438,781
)
—
—
Nomura Holdings America, Inc
271,832
(271,832
)
—
—
231,308
(231,308
)
—
—
BNP Paribas
266,030
(266,030
)
—
—
54,191
(54,191
)
—
—
Goldman Sachs & Co. LLC
255,065
(254,477
)
—
588
151,274
(151,274
)
—
—
Bank of Montreal
209,904
(209,834
)
—
70
160,388
(160,324
)
—
64
Daiwa Capital Markets
176,124
(176,064
)
—
60
195,268
(195,268
)
—
—
Morgan Stanley & Co. LLC
124,569
(123,904
)
—
665
319,500
(319,500
)
—
—
Mizuho Financial Group
69,704
(69,704
)
—
—
81,701
(81,701
)
—
—
Other
1,643
—
—
1,643
851
—
—
851
$
8,401,658
$
(8,398,039
)
$
—
$
3,619
$
8,024,089
$
(8,023,156
)
$
—
$
933
PennyMac Financial Services, Inc.
$
1,234
$
—
$
—
$
1,234
$
2,257
$
—
$
—
$
2,257
39
(1)
Amounts represent the UPB of Assets sold under agreements to repurchase.
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)
$
6,218
$
2,904
$
597
$
7,078
CRT derivatives
Net gains (losses) on investments and financings
$
2,259
$
5,375
$
2,391
$
7,355
Hedged item:
Interest rate lock commitments and loans held for sale
Net gains on loans held for sale at fair value
$
(8,706
)
$
(12,338
)
$
6,365
$
(38,697
)
Mortgage servicing rights
Net loan servicing fees
$
(32,831
)
$
(60,637
)
$
(44,712
)
$
(100,581
)
(1)
Represents net change in fair value of IRLCs from the beginning to the end of the period. Amounts recognized at the date of commitment and fair value changes recognized during the period until purchase of the underlying loan or cancellation of the commitment are shown in the rollforwards of IRLCs for the period in Note 7 – Fair Value – Financial Statement Items Measured at Fair Value on a Recurring Basis.
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
$
3,623,979
$
3,770,034
$
3,644,702
$
3,867,394
MSRs resulting from loan sales
30,981
44,030
71,262
91,039
Transfers to Agency of mortgage servicing rights relating to delinquent loans
2,107
170
2,402
391
Changes in fair value:
Due to changes in inputs used in valuation model (1)
18,904
22,713
64,491
(33,118
)
Other changes in fair value (2)
(100,368
)
(97,841
)
(207,254
)
(186,600
)
(81,464
)
(75,128
)
(142,763
)
(219,718
)
Balance at end of period (3)
$
3,575,603
$
3,739,106
$
3,575,603
$
3,739,106
(1)
Primarily reflects changes in prepayment speed, OAS, or pricing spread, servicing cost, and UPB of underlying loan inputs.
(2)
Represents changes due to realization of expected cash flows.
(3)
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.
June 30, 2026
December 31, 2025
(in thousands)
Fair value of mortgage servicing rights pledged to secure Assets sold under agreements to repurchase and Notes payable secured by credit risk transfer and mortgage servicing assets
$
3,503,566
$
3,582,211
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
$
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
40
Note 13—Other Assets
Other assets are summarized below:
June 30, 2026
December 31, 2025
(dollars in thousands)
Margin deposits
$
137,476
$
221,310
Interest receivable
83,631
72,684
Servicing fees receivable
10,719
9,586
Aggregation and securitization receivables
5,047
7,083
Other receivables
28,628
25,458
Real estate acquired in settlement of loans
1,366
1,421
Other
21,921
36,042
$
288,788
$
373,584
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)
4.62
%
5.19
%
4.64
%
5.20
%
Average balance
$
7,487,136
$
6,382,670
$
7,633,516
$
6,282,348
Total interest expense
$
88,076
$
84,336
$
179,468
$
165,484
Maximum daily amount outstanding
$
8,575,174
$
7,603,144
$
9,032,657
$
7,799,203
(1)
Excludes the effect of amortization of debt issuance costs of $1.8 million and $3.7 million for the quarter and six months ended June 30, 2026, respectively, and $1.8 million and $3.6 million for the quarter and six months ended June 30, 2025, respectively.
June 30, 2026
December 31, 2025
(dollars in thousands)
Carrying value:
Unpaid principal balance
$
8,398,039
$
8,023,156
Unamortized debt issuance costs
(2,813
)
(4,555
)
$
8,395,226
$
8,018,601
Weighted average interest rate
4.49
%
4.71
%
Available borrowing capacity (1):
Committed
$
244,347
$
595,085
Uncommitted
4,872,848
5,032,598
$
5,117,195
$
5,627,683
Margin deposits placed with counterparties included in Other assets, net
$
93,009
$
174,598
Assets securing agreements to repurchase:
Mortgage-backed securities at fair value
$
4,075,660
$
4,452,859
Loans held for sale at fair value
$
3,171,272
$
2,676,700
Loans held for investment at fair value
$
1,077,164
$
648,159
Credit risk transfer arrangements:
Derivative assets
$
9,213
$
12,622
Deposits securing credit risk transfer arrangements
$
150,338
$
176,694
Mortgage servicing rights at fair value (2)
$
1,713,210
$
1,765,572
Servicing advances (3)
$
30,347
$
44,653
(1)
The amount of available borrowing capacity the Company is able to borrow under asset repurchase agreements is tied to the fair value of unencumbered assets eligible to secure those agreements and the Company’s ability to fund the agreements’ margin requirements relating to the assets financed.
41
(2)
Beneficial interests in Fannie Mae MSRs are pledged to secure both Assets sold under agreements to repurchase and Notes payable secured by credit risk transfer and mortgage servicing assets.
(3)
Beneficial interests in Fannie Mae servicing advances are pledged to secure Assets sold under agreements to repurchase.
Maturities
Following is a summary of maturities of outstanding advances under repurchase agreements by maturity date:
Remaining maturity at June 30, 2026 (1)
Unpaid principal balance
(in thousands)
Within 30 days
$
3,324,424
Over 30 to 90 days
4,505,401
Over 90 days to 180 days
56,795
Over 180 days to 1 year
—
Over 1 year to 2 years
511,419
$
8,398,039
Weighted average maturity (in months)
2.2
(1)
The Company is subject to margin calls during the period the repurchase agreements are outstanding and therefore may be required to repay a portion of the borrowings before the respective repurchase agreements mature if the fair values (as determined by the applicable lender) of the assets securing those repurchase agreements decrease.
Amounts at Risk
The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and interest payable) 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
Amountsat risk
Advances
Facility
(in thousands)
Atlas Securitized Products, L.P.
$
473,643
August 20, 2026
December 10, 2027
Santander US Capital
$
70,914
August 26, 2026
August 26, 2026
Bank of America, N.A.
$
97,352
July 31, 2026
April 28, 2027
Citibank, N.A.
$
77,861
September 8, 2026
July 5, 2027
Nomura Holdings America, Inc.
$
72,588
July 29, 2026
July 29, 2026
Goldman Sachs & Co. LLC
$
50,836
August 26, 2026
March 12, 2028
Wells Fargo Securities, LLC
$
26,222
August 22, 2026
March 24, 2027
RBC Capital Markets, L.P.
$
16,996
September 21, 2026
April 15, 2027
Barclays Capital Inc.
$
28,494
August 25, 2026
May 15, 2028
JPMorgan Chase & Co.
$
3,149
August 31, 2026
June 25, 2027
Morgan Stanley & Co. LLC
$
11,683
August 6, 2026
May 6, 2027
BNP Paribas
$
20,785
August 14, 2026
July 22, 2027
42
Securities
Counterparty
Amounts at risk
Weighted-average maturity
(in thousands)
Santander US Capital
$
45,412
August 19, 2026
Bank of America, N.A.
$
16,068
July 29, 2026
Citibank, N.A.
$
6,949
July 23, 2026
Nomura Holdings America, Inc.
$
1,196
September 30, 2026
Goldman Sachs & Co. LLC
$
10,698
August 6, 2026
Wells Fargo Securities, LLC
$
17,113
July 10, 2026
Barclays Capital Inc.
$
10,512
July 11, 2026
JPMorgan Chase & Co.
$
32,447
July 18, 2026
Bank of Montreal
$
11,163
August 28, 2026
Daiwa Capital Markets America Inc.
$
4,319
July 6, 2026
Mizuho Financial Group
$
3,092
July 24, 2026
CRT arrangements
Counterparty
Amounts at risk
Weighted-average maturity
(in thousands)
RBC Capital Markets, L.P.
$
22,352
July 22, 2026
Morgan Stanley & Co. LLC
$
17,530
July 30, 2026
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
$
—
$
9,666
$
—
$
9,162
Weighted average interest rate (1)
—
5.66
%
—
5.67
%
Total interest expense
$
32
$
168
$
63
$
320
Maximum daily amount outstanding
$
—
$
25,809
$
—
$
49,266
(1)
Excludes the effect of amortization of debt issuance costs of $32,000 and $63,000for the quarter and six months ended June 30, 2026 and 2025, respectively.
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 Term Notes
Issuance date
Issuance amount
Unpaid principal balance
Annual interest rate spread (1)
Maturity date
(in thousands)
2024 3R
August 28, 2024
$
158,500
$
130,407
3.10%
September 27, 2028
2024 2R
April 4, 2024
$
247,000
203,019
3.35%
March 29, 2027
2024 1R
March 6, 2024
$
306,000
250,105
3.50%
March 1, 2027
$
583,531
(1)
Interest rates are charged at a spread to the Secured Overnight Financing Rate ("SOFR").
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 $1.1 billion under two-year repurchase agreement facilities.
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 balance
Annual interest rate spread (1)
Stated
Optional extension (2)
(in thousands)
Term Loans
2023
May 25, 2023
$
370,000
3.00%
May 25, 2028
May 25, 2029
Term Notes
2024
June 27, 2024
355,000
2.75%
December 27, 2027
June 26, 2028
$
725,000
(1)
Interest rates are charged at a spread to SOFR.
(2)
The indentures relating to these issuances provide the Company with the option of extending the maturity dates of the FTL-1 Term Loans and FT-1 Term Notes under conditions specified in the respective agreements.
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 $2.0 billion, bearing interest at an annual rate equal to SOFR plus a spread as defined in each agreement. The agreements have maturities on various dates through August 2026. The total loan amount available under the agreements may be reduced by other debt outstanding with the counterparties. Advances under the credit agreements are secured by MSRs relating to loans serviced for Freddie Mac guaranteed securities.
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 March 5, 2027, and the VFN has a maximum principal amount of $175 million.
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
$
2,501,636
$
2,714,608
$
2,409,401
$
2,772,009
Weighted average interest rate (1)
6.97
%
7.63
%
6.94
%
7.61
%
Total interest expense
$
45,411
$
53,804
$
86,671
$
109,059
(1)
Excludes the effect of amortization of debt issuance costs of $2.0 million and $3.7 million for the quarter and six months ended June 30, 2026, respectively, and $2.2 million and $4.4 million for the quarter and six months ended June 30, 2025, respectively.
June 30, 2026
December 31, 2025
(dollars in thousands)
Carrying value:
Unpaid principal balance:
Credit risk transfer arrangement financing
$
583,531
$
608,903
Fannie Mae mortgage servicing rights financing
725,000
725,000
Freddie Mac mortgage servicing rights and servicing advance receivable financing
1,176,676
927,943
2,485,207
2,261,846
Unamortized debt issuance costs
(4,076
)
(3,718
)
$
2,481,131
$
2,258,128
Weighted average interest rate
6.84
%
6.91
%
Assets securing notes payable:
Mortgage servicing rights at fair value (1)
$
3,503,566
$
3,582,211
Servicing advances (1)
$
20,800
$
33,777
Credit risk transfer arrangements:
Deposits securing credit risk transfer arrangements
$
797,562
$
832,640
Derivative assets
$
21,088
$
20,037
(1)
Beneficial interests in Freddie Mac MSRs and related servicing advances are pledged as collateral for the Notes payable secured by credit risk transfer and mortgage servicing assets. Beneficial interests in Fannie Mae MSRs are pledged for both Assets sold under agreements to repurchase and Notes payable secured by credit risk transfer and mortgage servicing 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)
$
366,500
8.50%
63.3332
June 1, 2029
(1)
Common Shares per $1,000 principal amount.
(2)
Unless repurchased or exchanged in accordance with their terms before such date.
(3)
Balance includes $16.5 million issued on June 4, 2024, $75 million issued on December 15, 2025 and $75 million issued on December 22, 2025.
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 rate spread
Maturity date
Redemption date (1)
(in thousands)
June 2025
$
105,000
9.00%
June 15, 2030
June 15, 2027
February 2025
172,500
9.00%
February 15, 2030
February 15, 2027
September 2023
53,500
8.50%
September 30, 2028
September 30, 2025
$
331,000
(1)
Redemptions may be made on or after the dates indicated.
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 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the applicable redemption date.
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
$
697,500
$
811,731
$
836,644
$
760,608
Weighted average interest rate (1)
8.75
%
7.34
%
8.27
%
7.29
%
Interest expense
$
15,991
$
15,987
$
36,265
$
29,600
June 30, 2026
December 31, 2025
(in thousands)
Carrying value:
Unpaid principal balance
Exchangeable senior notes
$
366,500
$
711,500
Senior notes
331,000
331,000
697,500
1,042,500
Unamortized debt issuance costs
(12,224
)
(14,200
)
$
685,276
$
1,028,300
(1)
Excludes the effect of amortization of debt issuance costs of $0.8 million and $2.0 million for the quarter and six months ended June 30, 2026, respectively, and $1.1 million and $2.1 million for the quarter and six months ended June 30, 2025, respectively.
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
$
10,625,848
$
3,636,038
$
9,731,488
$
3,137,311
Weighted average interest rate (1)
5.85
%
5.18
%
5.79
%
4.95
%
Total interest expense
$
155,854
$
46,449
$
276,394
$
75,164
(1)
Excludes the effect of amortization of net issuance costs (premiums) of $0.8 million and $(3.1) million for the quarter and six months ended June 30, 2026, respectively, and $(506,000) and $(1.8) million for the quarter and six months ended June 30, 2025, respectively.
June 30, 2026
December 31, 2025
(dollars in thousands)
Fair value
$
11,358,602
$
7,789,303
Unpaid principal balance
$
11,346,561
$
7,763,364
Weighted average interest rate
5.72
%
6.03
%
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 and mortgage servicing assets (1)
$
2,485,207
$
904,800
$
1,450,000
$
130,407
$
—
$
—
$
—
Unsecured senior notes
697,500
—
—
420,000
277,500
—
—
Interest-only security payable at fair value (2)
34,299
—
—
—
—
—
34,299
Asset-backed financings at fair value (2)
11,346,561
—
—
—
—
—
11,346,561
Total
$
14,563,567
$
904,800
$
1,450,000
$
550,407
$
277,500
$
—
$
11,380,860
(1)
Based on stated maturity. As discussed above, the terms of certain of the Notes payable secured by credit risk transfer and mortgage servicing assets allow the Company to exercise optional extensions.
(2)
Contractual maturity does not reflect expected repayment as borrowers of the underlying loans generally have the right to repay their loans at any time.
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
$
5,152
$
5,955
$
5,284
$
6,886
Provision for losses:
Pursuant to loan sales
348
227
658
531
Reduction in liability due to change in estimate
(245
)
(912
)
(687
)
(2,080
)
Losses incurred
(15
)
(206
)
(15
)
(273
)
Balance, end of period
$
5,240
$
5,064
$
5,240
$
5,064
UPB of loans subject to representations and warranties at end of period
$
207,564,556
$
218,738,822
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
$
1,049,341
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, no accrual has been recorded in the Company’s consolidated financial statements for this matter. While no assurance can be provided as to the ultimate outcome of this claim, the Company and PCM plan to vigorously defend the matter.
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
8.125% Issued March 2017
4,600
$
115,000
$
3,828
$
111,172
$
0.51
$
0.51
$
1.02
$
1.02
B
8.00% Issued July 2017
7,800
195,000
6,465
188,535
$
0.50
$
0.50
$
1.00
$
1.00
C
6.75% Issued August 2021
10,000
250,000
8,225
241,775
$
0.42
$
0.42
$
0.84
$
0.84
22,400
$
560,000
$
18,518
$
541,482
(1)
Par value is $0.01 per share.
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 $25.00 per share plus any accumulated and unpaid dividends to, but not including, the redemption date. No preferred shares were redeemed during the quarter and six months ended June 30, 2026.
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 $200 million. As of June 30, 2026, the Company had not sold any Common Shares under the ATM equity offering program.
Common Share Repurchase Program
The Company has a Common Share repurchase program with a repurchase authorization of $500 million before transaction fees and $73.4 million available for further share repurchases as of June 30, 2026.
The Company made no share repurchases during the quarter and six months ended June 30, 2026 and has made cumulative repurchases under the Common Share repurchase program totaling $427.2 million, which includes $582,000 of transaction fees.
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
$
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 mortgage loan sale transactions
30,981
44,030
71,262
91,039
Provision for losses relating to representations and warranties provided in loan sales:
Pursuant to loan sales
(348
)
(227
)
(658
)
(531
)
Reduction of liability due to change in estimate
245
912
687
2,080
(103
)
685
29
1,549
Changes in fair value of loans and derivatives
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
Total changes in fair value of loans and derivatives
20,826
3,106
4,509
25,539
Total non-cash gains
51,704
47,821
75,800
118,127
Total from nonaffiliates
15,292
15,148
38,202
25,477
From PFSI ‒ cash gains
—
2,658
—
4,673
$
15,292
$
17,806
$
38,202
$
30,150
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
$
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
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
$
4,507
$
5,575
$
9,483
$
11,261
Mortgage-backed securities
50,842
54,761
107,091
112,995
Loans held for sale
43,501
35,917
83,064
69,152
Loans held for investment
160,577
50,694
294,336
84,373
Deposits securing CRT arrangements
8,481
11,401
17,373
23,076
Placement fees relating to custodial funds
35,141
37,736
66,589
69,765
Other
1,201
397
2,405
1,950
304,250
196,481
580,341
372,572
Interest expense:
Assets sold under agreements to repurchase
88,076
84,336
179,468
165,484
Mortgage loan participation purchase and sale agreements
32
168
63
320
Notes payable secured by credit risk transfer and mortgage servicing assets
45,411
53,804
86,671
109,059
Unsecured senior notes
15,991
15,987
36,265
29,600
Asset-backed financings
155,854
46,449
276,394
75,164
Interest shortfall on repayments of loans serviced for Agency securitizations
3,716
2,455
8,146
3,884
Interest on loan impound deposits
1,567
1,460
3,263
2,914
Other
698
490
825
861
311,345
205,149
591,095
387,286
$
(7,095
)
$
(8,668
)
$
(10,754
)
$
(14,714
)
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:
•
any shares subject to an equity award granted under the equity incentive plan are forfeited, canceled, exchanged or surrendered;
•
an equity award terminates or expires without a distribution of shares to the participant; or
•
shares are surrendered or withheld by PMT as payment of withholding taxes for an equity award.
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
9
—
330
199
Performance share units
—
—
287
168
9
—
617
367
Grant date fair value:
Restricted share units
$
90
$
—
$
3,987
$
2,815
Performance share units
—
—
3,492
2,365
$
90
$
—
$
7,479
$
5,180
Vestings:
Restricted share units
—
6
178
144
Performance share units (1)
—
—
101
91
—
6
279
235
Forfeitures:
Restricted share units
—
—
1
—
Performance share units
—
—
1
—
—
—
2
—
Compensation expense relating to share-based grants
$
1,544
$
838
$
2,643
$
1,801
(1)
The actual number of performance-based restricted share units (“RSUs”) that vested during the six months ended June 30, 2026 was approximately 79% of the 128,212 originally granted performance-based RSUs.
June 30, 2026
Restricted share units
Performance share units
Shares expected to vest:
Number of restricted shares units (in thousands)
441
437
Grant date average fair value per unit
$
12.67
$
12.84
Note 23—Income Taxes
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 taxable REIT subsidiary (“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.
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
$
30,919
$
7,534
$
55,535
$
17,214
Dividends on preferred shares
(10,455
)
(10,455
)
(20,910
)
(20,910
)
Effect of participating securities—share-based compensation awards
(13
)
(183
)
(25
)
(222
)
Net income attributable to common shareholders
$
20,451
$
(3,104
)
$
34,600
$
(3,918
)
Weighted average basic shares outstanding
87,202
87,012
87,142
86,960
Effect of dilutive securities - shares issuable under stock-based compensation plan
88
—
141
—
Weighted average diluted shares outstanding
87,290
87,012
87,283
86,960
Basic earnings (losses) per share
$
0.23
$
(0.04
)
$
0.40
$
(0.05
)
Diluted earnings (losses) per share
$
0.23
$
(0.04
)
$
0.40
$
(0.05
)
Calculation of diluted earnings per share requires certain potentially dilutive shares to be excluded when the inclusion of such shares would be anti-dilutive. The following table summarizes the potentially dilutive shares excluded from the diluted earnings per share calculation:
Quarter ended June 30,
Six months ended June 30,
2026
2025
2026
2025
(in thousands)
Shares issuable under share-based compensation plan
80
162
222
306
Note 25—Segments
The Company operates in three segments as described in Note 1 ‒ Organization.
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. The chief operating decision maker uses pre-tax segments results to assess segment performance and allocate operating and capital resources among the segments. The Company’s chief operating decision maker is its chief executive officer.
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
$
—
$
40,041
$
—
$
40,041
$
—
$
40,041
Net gains on loans held for sale
—
—
15,292
15,292
—
15,292
Net gains (losses) on investments and financings
Mortgage-backed securities
(8
)
434
—
426
—
426
Loans held for investment
211
11,953
—
12,164
—
12,164
Credit risk transfer arrangements
9,711
—
—
9,711
—
9,711
9,914
12,387
—
22,301
—
22,301
Net interest expense:
Interest income
21,547
236,693
43,481
301,721
2,529
304,250
Interest expense
20,086
256,741
32,461
309,288
2,057
311,345
1,461
(20,048
)
11,020
(7,567
)
472
(7,095
)
Other
(61
)
—
2,251
2,190
—
2,190
11,314
32,380
28,563
72,257
472
72,729
Expenses:
Earned by PennyMac Financial Services, Inc.:
Loan servicing fees
1
19,639
—
19,640
—
19,640
Management fees
—
—
—
—
6,810
6,810
Loan fulfillment fees
—
—
5,023
5,023
—
5,023
Professional services
—
—
9,249
9,249
2,378
11,627
Compensation
—
—
—
—
3,390
3,390
Loan collection and liquidation
2
1,678
—
1,680
—
1,680
Safekeeping
—
891
40
931
—
931
Loan origination
—
—
14
14
—
14
Other (2)
63
1,181
3,108
4,352
2,442
6,794
66
23,389
17,434
40,889
15,020
55,909
Pretax income (loss)
$
11,248
$
8,991
$
11,129
$
31,368
$
(14,548
)
$
16,820
Total assets at end of quarter
$
1,852,215
$
19,556,028
$
3,261,534
$
24,669,777
$
423,813
$
25,093,590
(1)
All investment income is from external customers. The segments do not recognize intersegment income.
(2)
Other expense includes smaller balance expense categories not separately provided to the chief operating decision maker such as insurance and technology.
53
Quarter 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
$
—
$
23,947
$
—
$
23,947
$
—
$
23,947
Net gains on loans held for sale
—
—
17,806
17,806
—
17,806
Net gains (losses) on investments and financings
Mortgage-backed securities
506
14,058
—
14,564
—
14,564
Loans held for investment
(958
)
(176
)
—
(1,134
)
—
(1,134
)
Credit risk transfer arrangements
20,250
—
—
20,250
—
20,250
19,798
13,882
—
33,680
—
33,680
Net interest expense:
Interest income
20,971
137,493
35,886
194,350
2,131
196,481
Interest expense
18,824
154,614
30,273
203,711
1,438
205,149
2,147
(17,121
)
5,613
(9,361
)
693
(8,668
)
Other
—
—
3,436
3,436
—
3,436
21,945
20,708
26,855
69,508
693
70,201
Expenses:
Earned by PennyMac Financial Services, Inc.:
Loan servicing fees
2
21,643
—
21,645
—
21,645
Management fees
—
—
—
—
6,869
6,869
Loan fulfillment fees
—
—
5,814
5,814
—
5,814
Professional services
—
—
6,381
6,381
1,981
8,362
Compensation
—
—
—
—
2,836
2,836
Loan collection and liquidation
20
2,365
—
2,385
—
2,385
Safekeeping
—
1,144
84
1,228
—
1,228
Loan origination
—
—
666
666
—
666
Other (2)
89
444
189
722
2,668
3,390
111
25,596
13,134
38,841
14,354
53,195
Pretax income (loss)
$
21,834
$
(4,888
)
$
13,721
$
30,667
$
(13,661
)
$
17,006
Total assets at end of quarter
$
1,581,220
$
12,082,858
$
2,665,396
$
16,329,474
$
471,645
$
16,801,119
(1)
All investment income is from external customers. The segments do not recognize intersegment income.
(2)
Other expense includes smaller balance expense categories not separately provided to the chief operating decision maker such as insurance and technology.
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
$
—
$
123,627
$
—
$
123,627
$
—
$
123,627
Net gains on loans held for sale
—
—
38,202
38,202
—
38,202
Net gains (losses) on investments and financings
Mortgage-backed securities
(8
)
(32,973
)
—
(32,981
)
—
(32,981
)
Loans held for investment
2,401
6,196
—
8,597
—
8,597
Credit risk transfer arrangements
23,622
—
—
23,622
—
23,622
26,015
(26,777
)
—
(762
)
—
(762
)
Net interest expense:
Interest income
40,777
451,323
83,011
575,111
5,230
580,341
Interest expense
38,813
484,298
64,015
587,126
3,969
591,095
1,964
(32,975
)
18,996
(12,015
)
1,261
(10,754
)
Other
(109
)
—
4,659
4,550
—
4,550
27,870
63,875
61,857
153,602
1,261
154,863
Expenses:
Earned by PennyMac Financial Services, Inc.:
Loan servicing fees
2
39,361
—
39,363
—
39,363
Management fees
—
—
—
—
13,572
13,572
Loan fulfillment fees
—
—
10,760
10,760
—
10,760
Professional services
—
—
20,093
20,093
5,035
25,128
Compensation
—
—
—
—
6,366
6,366
Loan collection and liquidation
19
3,785
—
3,804
—
3,804
Safekeeping
—
1,693
93
1,786
—
1,786
Loan origination
—
—
227
227
—
227
Other (2)
140
2,055
3,138
5,333
4,809
10,142
161
46,894
34,311
81,366
29,782
111,148
Pretax income (loss)
$
27,709
$
16,981
$
27,546
$
72,236
$
(28,521
)
$
43,715
Total assets at end of period
$
1,852,215
$
19,556,028
$
3,261,534
$
24,669,777
$
423,813
$
25,093,590
(1)
All investment income is from external customers. The segments do not recognize intersegment income.
(2)
Other expense includes smaller balance expense categories not separately provided to the chief operating decision maker such as insurance and technology.
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
$
—
$
(3,263
)
$
—
$
(3,263
)
$
—
$
(3,263
)
Net gains on loans held for sale
—
—
30,150
30,150
—
30,150
Net gains (losses) on investments and financings
Mortgage-backed securities
(504
)
79,923
—
79,419
—
79,419
Loans held for investment
1,809
(3,685
)
—
(1,876
)
—
(1,876
)
Credit risk transfer arrangements
18,450
—
—
18,450
—
18,450
19,755
76,238
—
95,993
—
95,993
Net interest expense:
Interest income
40,520
257,389
69,084
366,993
5,579
372,572
Interest expense
36,942
289,945
57,795
384,682
2,604
387,286
3,578
(32,556
)
11,289
(17,689
)
2,975
(14,714
)
Other
(142
)
—
6,642
6,500
—
6,500
23,191
40,419
48,081
111,691
2,975
114,666
Expenses:
Earned by PennyMac Financial Services, Inc.:
Loan servicing fees
4
43,370
—
43,374
—
43,374
Management fees
—
—
—
—
13,881
13,881
Loan fulfillment fees
—
—
11,104
11,104
—
11,104
Professional services
—
—
11,261
11,261
4,083
15,344
Compensation
—
—
—
—
5,806
5,806
Loan collection and liquidation
63
4,291
—
4,354
—
4,354
Safekeeping
—
2,178
160
2,338
—
2,338
Loan origination
—
—
1,352
1,352
—
1,352
Other (2)
182
943
354
1,479
4,927
6,406
249
50,782
24,231
75,262
28,697
103,959
Pretax income (loss)
$
22,942
$
(10,363
)
$
23,850
$
36,429
$
(25,722
)
$
10,707
Total assets at end of period
$
1,581,220
$
12,082,858
$
2,665,396
$
16,329,474
$
471,645
$
16,801,119
(1)
All investment income is from external customers. The segments do not recognize intersegment income.
(2)
Other expense includes smaller balance expense categories not separately provided to the chief operating decision maker such as insurance and technology.
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 / total assets ratio (1)
Liquidity (1)
Actual
Required
Actual
Required
Actual
Required
(dollars in thousands)
June 30, 2026
$
678,928
$
562,043
9
%
6
%
$
469,795
$
207,632
December 31, 2025
$
682,481
$
569,435
9
%
6
%
$
514,626
$
211,818
(1)
Calculated in accordance with the Agencies’ requirements.
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,
•
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.
•
All agreements to repurchase assets that matured before the date of this Report were extended or renewed.
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.
•
The credit sensitive strategies segment represents our investments in CRT arrangements referencing loans from our aggregation and securitization activities and subordinate MBS.
•
The interest rate sensitive strategies segment represents our investments in MSRs, Agency pass through MBS and structured products (including IO and PO MBS and floating rate CMOs), senior non-Agency MBS and the related interest rate hedging activities.
•
The aggregation and securitization segment represents our operations in purchasing, pooling and reselling, or financing through our private-label securitization activities, newly originated prime credit quality loans either directly or in the form of MBS, using the services of PCM and PLS.
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.
•
Our corporate operations include management fees, compensation, professional services, and other amounts attributable to the Company’s corporate operations and certain interest income and expense.
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 asset-backed financings (1)
$
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
(1)
The trusts issuing these securities are consolidated on our consolidated balance sheets. Therefore, our investments in these securities are shown as their underlying assets, Loans held for investment at fair value, with the securities held by nonaffiliates being shown as Asset-backed financings of variable interest entities at fair value.
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
%
(1)
Amount represents MSRs received, liability for representations and warranties incurred in loan sales transactions and changes in fair value of loans, interest rate lock commitments (“IRLCs") and hedging derivatives held at the end of the quarter.
(2)
Includes fair value changes due to changes in fair value inputs and fair value changes related to MSR derivative hedging instruments held at the end of the period.
We receive or pay cash relating to:
•
MBS through monthly principal and interest payments from the issuer of such securities or from the sale of the investments;
•
Loan investments when the loans are paid down, paid off or sold, when payments of principal and interest occur on such loans or when the properties acquired in settlement of loans are sold;
•
CRT arrangements through a portion of the interest payments collected on loans in the CRT arrangements’ reference pools, interest payments from the investment of the deposits securing the arrangements in short-term investments and the release to us of the deposits securing the arrangements as principal on such loans is repaid;
•
MSRs in the form of loan servicing fees (including both base servicing and excess servicing spread), ancillary fees and placement fees on the deposits we manage on behalf of the borrowers and investors in the loans we service;
•
Hedging instruments when we receive or make margin deposits as the fair value of respective instruments change, when the instruments mature or when we effectively cancel the transactions through offsetting trades; and
•
Our liability for representations and warranties when we repurchase loans or settle loss claims from investors.
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 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
)
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 common shareholders
$
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 shareholders' equity
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
(1)
Includes net gains on sales of loans and loan origination fees.
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:
•
Our credit sensitive strategies segment recognized a $10.5 million decrease in net gains on our CRT arrangements as market credit spreads (which represent the interest rate premium demanded by investors for instruments over those that are considered “risk free”) tightened to a lesser extent during the quarter ended June 30, 2026, compared to the quarter ended June 30, 2025.
•
Our interest rate sensitive strategies segment recognized a $16.1 million increase in net servicing fees primarily driven by a reduction in net MSR valuation losses due to a decrease in hedging losses during the quarter ended June 30, 2026 compared to the quarter ended June 30, 2025. These favorable effects were partially offset by a $13.6 million decrease in valuation gains on MBS and $2.9 million increase in net interest expense.
•
Our aggregation and securitization segment recognized a $2.5 million decrease in gain on sale during the quarter ended June 30, 2026, reflecting a reduction in our volume of sales to nonaffiliates.
61
•
Our benefit from income taxes was $14.1 million during the quarter ended June 30, 2026, compared to a $9.5 million tax provision during the quarter ended June 30, 2025, reflecting the effect of reduced profitability in the Company’s taxable REIT subsidiary.
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:
•
Our credit sensitive strategies segment recognized a $5.2 million increase in net gains on our CRT arrangements as market credit spreads tightened, which resulted in higher fair values during the six months ended June 30, 2026 compared to the same period in 2025.
•
Our interest rate sensitive strategies segment recognized a $126.9 million increase in net servicing fees primarily driven by a reduction in net MSR valuation losses due to increases in interest rates and improved net hedging performance during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. These benefits were partially offset by a $112.9 million increase in valuation losses on MBS.
•
Our aggregation and securitization segment recognized an $8.1 million increase in gain on sale during the six months ended June 30, 2026, primarily driven by increased gain on sale margins along with higher interest rate lock volumes, including higher volumes of jumbo loans, as well as favorable non-Agency execution.
•
Our benefit from income taxes was an $11.8 million benefit during the six months ended June 30, 2026, compared to a $6.5 million benefit from income taxes during the six months ended June 30, 2025, reflecting the effect of reduced profitability in the Company’s taxable REIT subsidiary.
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 maturity (months)
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
%
(1)
Loan-to-value.
(2)
Represents MSRs on conventional loans sold to private investors.
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 warranties provided in loan sales:
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 for sale (unpaid principal balance):
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
(1)
Acquisition of loans for sale includes unpaid principal balances of loans to PFSI during the periods presented in 2025.
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 end of period
$
5,772
$
6,045
UPB of loans with deposits received from correspondent sellers collateralizing prospective indemnification losses at end of period
$
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 to liability to representations and warranties
$
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 — valuation changes
(67
)
(599
)
3,351
(2,331
)
9,711
20,250
23,622
18,450
Interest income — Deposits securing credit risk transfer arrangements
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 arrangements
$
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
(1)
Deposits securing credit risk transfer arrangements also secure $5.4 million and $6.0 million in CRT strip and CRT derivative liabilitiesat June 30, 2026 and December 31, 2025, respectively.
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 agreements
32
—
—
168
9,666
6.99
%
Notes payable secured by credit risk transfer and mortgage servicing assets
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 for Agency securitizations
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 and sale agreements
63
—
—
320
9,162
7.06
%
Notes payable secured by credit risk transfer and mortgage servicing assets
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 serviced for Agency securitizations
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) due to changes in
Increase (decrease) due to changes in
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 and sale agreements
(68
)
(67
)
(135
)
(129
)
(129
)
(258
)
Notes payable secured by credit risk transfer and mortgage servicing assets
(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 serviced for Agency securitizations
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 to calculate base management fee expense
$
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
(1)
GSE eligibility refers to the eligibility of loans for sale to Fannie Mae or Freddie Mac. The Company sells or finances a portion of its GSE eligible loan production to or with other investors, including PLS.
73
(2)
Through June 30, 2025, the Company sold all of its loans eligible for inclusion in Ginnie Mae securities to PLS. The Company is not approved by Ginnie Mae as an issuer of Ginnie Mae-guaranteed securities which are backed by government-insured or guaranteed loans. The Company earned a sourcing fee for all loans that it purchased from correspondent sellers and subsequently sold to PLS as described in Note 4 – Transactions with Related Parties – Operating Activities – Aggregation and Securitization Activities.
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 associated asset-backed financing (subordinate MBS)
$
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 of associated asset-backed financing (senior MBS)
—
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/ notional
Life (in years)
Coupon
Fair value
Principal/ notional
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 obligations
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 fairvalue 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
%
(1)
Includes only modifications that generate losses according to the terms of the CRT arrangements.
(2)
Based on current UPB compared to estimated fair value of the property securing the loan.
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 distribution (1)
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
(1)
Southeast consists of AL, DC, FL, GA, KY, MD, MS, NC, SC, TN, VA, WV; West consists of AK, CA, GU, HI, ID, MT, NV, OR, WA and WY; Southwest consists of AZ, AR, CO, KS, LA, MO, NM, OK, TX, UT; Northeast consists of CT, DE, ME, MA, NH, NJ, NY, PA, PR, RI, VT, VI and Midwest consists of IL, IN, IA, MI, MN, NE, ND, OH, SD, WI.
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 repurchase
Notes payable secured by CRT arrangements and MSRs
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 variable interest entities
—
938,474
938,474
112,217
582,475
694,692
Non-agency securities relating to consolidated variable interest entities
—
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
(1)
The balance sheet information depicted under the column captioned “Consolidated” represents information prepared in compliance with GAAP. The subsequent columns reflect non-GAAP adjustments to deconsolidate the assets held in the trusts issuing beneficial interests in those assets and to provide investors with a more creditor-aligned view of how our debt relates to the assets we finance. After adjustment, the assets are shown in the securitized form in which they are financed which excludes non-recourse debt which we refer to as Asset-backed financings of variable interest entities at fair value on our consolidated balance sheet. 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.
(2)
Does not include adjustments for credit risk transfer strip liabilities of $5.4 million.
(3)
Excludes non-debt liabilities of $285.7 million included in total liabilities on our consolidated balance sheet.
(4)
Total debt reduced by asset-backed financings and interest-only security payable, divided by shareholders’ equity.
(5)
Total debt divided by shareholders’ equity.
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:
•
The transactions relating to loans and real estate acquired in settlement of loans under agreements to repurchase generally provide for terms of approximately one to two years;
•
The transactions relating to loans under mortgage loan participation purchase and sale agreements provide for terms of approximately one year;
•
The transactions relating to assets under notes payable provide for terms ranging from two to five years; and
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:
•
rank equal in right of payment to any of PMC’s existing and future unsecured and unsubordinated indebtedness and guarantees of PMC;
•
be effectively subordinated in right of payment to any of PMC’s existing and future secured indebtedness and secured guarantees to the extent of the value of the assets securing such indebtedness or guarantees; and
•
be structurally subordinated to all existing and future indebtedness and other liabilities (including trade payables) and (to the extent not held by PMC) preferred stock, if any, of PMC’s subsidiaries and of any entity PMC accounts for using the equity method of accounting.
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
)
(1)
Excludes equity in earnings of non-guarantor subsidiaries.
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:
•
a minimum of $75 million in unrestricted cash and cash equivalents among the Company and/or our subsidiaries; a minimum of $75 million in unrestricted cash and cash equivalents among our Operating Partnership and its consolidated subsidiaries; a minimum of $25 million in unrestricted cash and cash equivalents between PMC and PMH; a minimum of $25 million in unrestricted cash and cash equivalents at PMC; and a minimum of $10 million in unrestricted cash and cash equivalents at PMH;
•
a minimum tangible net worth for the Company of $1.25 billion; a minimum tangible net worth for our Operating Partnership of $1.25 billion; a minimum tangible net worth for PMH of $250 million; and a minimum tangible net worth for PMC of $300 million;
•
a maximum ratio of total indebtedness to tangible net worth of less than 10:1 for PMC and PMH and 10:1 for the Company and our Operating Partnership; and
•
at least two warehouse or repurchase facilities that finance amounts and assets similar to those being financed under our existing debt financing agreements.
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:
•
a minimum in unrestricted cash and cash equivalents of $100 million;
•
a minimum tangible net worth of $1.25 billion;
•
a maximum ratio of total indebtedness to tangible net worth of 10:1; and
•
at least one other warehouse or repurchase facility that finances amounts and assets that are similar to those being financed under certain of our existing secured financing agreements.
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 number of shares purchased
Average price paid per share
Total number of shares purchased as part of publicly announced plans or programs (1)
Amount available for future share repurchases under the plans or programs (1)
(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
(1)
On October 24, 2022, the Company’s board of trustees approved an increase to the Company’s Common Share repurchase authorization from $400 million to $500 million (the “share repurchase program”). The share repurchase program does not require the Company to purchase a specific number of Common Shares, and the timing and amount of any Common Shares repurchased are based on market conditions and other factors, including price, regulatory requirements and capital availability. Common Share repurchases may be effected through privately negotiated transactions or open market purchases, including pursuant to a trading plan implemented pursuant to Rule 10b5-1 of the Exchange Act. The share repurchase program does not have an expiration date but may be suspended, modified or discontinued at any time without prior notice.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
(c) Trading Plans
As of June 30, 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 June 22, 2026, Scott Carnahan, a member of the Company’s board of trustees, adopted a trading plan to sell the Company’s Common Shares received upon the vesting of 10,699 time-based restricted stock units. The trading plan will expire on December 31, 2027. Mr. Carnahan’s trading plan was entered into during an open insider trading window and is intended to satisfy Rule 10b5-1(c) under the Exchange Act and the Company’s policies regarding insider transactions.
During the quarter ended June 30, 2026, none of our other trustees or Section 16 officers (as defined in Rule 16a-1(f)), informed us of the adoption, modification, or termination of any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (in each case, as defined in Item 408(a) of Regulation S-K).
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