PennyMac Mortgage Investment Trust (PMT)

CIK: 0001464423. SIC: 6798 Real Estate Investment Trusts. Latest 10-K as of: 2026-02-18.

SIC breadcrumb: Finance, Insurance, And Real Estate > Holding And Other Investment Offices > SIC 6798 Real Estate Investment Trusts

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1464423. Latest filing source: 0001193125-26-057041.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-18. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001464423.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-05. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001464423.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001193125-26-206572.

Extracted between Part I Item 2 and the next Item 3/4 or Part II heading after HTML sanitization. Confidence: high. Filing date: 2026-05-05. Report date: 2026-03-31.

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 and credit-linked 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, subordinate and credit-linked 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 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 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.

53

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 the Company’s 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 $1.0 billion at March 31, 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 quarter ended March 31, 2026. We sold our holdings of the credit-linked securities that we account for as MBS that we purchased from nonaffiliates during the year ended 2025.

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 $189.2 million in such non-Agency subordinate MBS during the quarter ended March 31, 2026 and we held approximately $844.1 million of such securities at March 31, 2026.

Interest Rate Sensitive Investments

Mortgage servicing rights

During the quarter ended March 31, 2026, we received approximately $40.3 million of MSRs as proceeds from sales of loans held for sale. At March 31, 2026, we held MSRs at fair value of approximately $3.6 billion.

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 quarter ended March 31, 2026, we sold approximately $477.4 million of our fixed-rate pass-through Agency MBS. At March 31, 2026, the total fair value of these investments was approximately $3.8 billion.

During the quarter ended March 31, 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 March 31, 2026, we held senior non-Agency securities totaling approximately $93.6 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 March 31,

2026

2025

(in thousands)

Sales of loans held for sale:

To nonaffiliates

$

2,217,203

$

2,613,958

To PennyMac Financial Services, Inc.

—

20,437,666

$

2,217,203

$

23,051,624

Net gains on loans held for sale

$

22,910

$

12,344

Investments resulting from aggregation and securitization:

Retention of interests in securitizations of loans, net of associated

    asset-backed financings (1)

$

201,301

$

94,021

Receipt of MSRs as proceeds from sales of loans

40,281

47,009

Total investments resulting from aggregation and securitization activities

$

241,582

$

141,030

54

(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 quarter ended March 31, 2026, we purchased newly originated prime credit quality residential loans with fair values totaling $4.8 billion as compared to $24.0 billion for the quarter ended March 31, 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 asset

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2026-02-18. Report date: 2025-12-31.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 correspondent production 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 and credit-linked 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 correspondent production loan acquisitions 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 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 own correspondent production and subordinate and credit-linked 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 correspondent production segment represents our operations aimed at serving as an intermediary between lenders and the capital markets by purchasing, pooling and reselling newly originated prime credit quality loans either directly or in the form of MBS, using the services of PCM and PLS.

We primarily sell the loans we acquire through our correspondent production activities to the Agencies and also sell loans to other non-affiliate entities. We also securitize certain of our loans directly and may retain 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.

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 the Company’s 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 $1.0 billion at December 31, 2025.

Subordinate and credit-linked Mortgage-Backed Securities

Subordinate and credit-linked MBS provide us with a higher yield than senior MBS. However, we incur credit risk in the subordinate and credit-linked MBS since they are the first securities to absorb credit losses relating to the underlying loans. We sold our holdings of the credit-linked securities that we account for as MBS that we purchased from nonaffiliates during the year ended December 31, 2025.

53

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 $420.2 million in non-Agency subordinate bonds during the year ended December 31, 2025 and held approximately $554.9 million in non-Agency subordinate bonds at December 31, 2025.

Interest Rate Sensitive Investments

Our interest rate sensitive investments include:

•
Mortgage servicing rights. During the year ended December 31, 2025, we received approximately $190.1 million of MSRs as proceeds from sales of loans held for sale. We held approximately $3.6 billion of MSRs at fair value at December 31, 2025.

•
REIT-eligible Agency MBS and structured products (IO and PO stripped MBS and floating rate CMOs) and senior non-Agency MBS. During the year ended December 31, 2025, we purchased approximately $66.1 million and $876.4 million of senior non-Agency fixed-rate MBS and Agency floating rate CMOs, respectively, issued by nonaffiliates, and we held Agency fixed-rate pass-through, senior non-Agency, IO and PO stripped MBS and Agency floating rate CMOs with fair values totaling approximately $4.5 billion at December 31, 2025.

•
During the year ended December 31, 2025, we invested approximately $107.6 million in senior non-Agency bonds 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 December 31, 2025, we held senior non-Agency securities totaling approximately $152.78 million from our securitizations of loans secured by investment properties.

Correspondent Production

Our correspondent production activities involve the acquisition and sale of newly originated prime credit quality residential loans. Correspondent production has served as the source of our investments in MSRs, non-Agency securitizations and, previously, CRT arrangements. Our sales of loans from correspondent production and resulting investment activity are summarized below:

Year ended December 31,

2025

2024

2023

(in thousands)

Sales of loans held for sale:

To nonaffiliates

$

10,292,463

$

12,414,391

$

15,936,124

To PennyMac Financial Services, Inc.

52,895,921

81,997,773

72,441,699

$

63,188,384

$

94,412,164

$

88,377,823

Net gains on loans held for sale

$

52,194

$

73,124

$

39,857

Investments resulting from correspondent production:

Retention of interests in securitizations of loans, net of

    associated asset-backed financings (1)

$

527,752

$

64,253

$

—

Receipt of MSRs as proceeds from sales of loans

190,141

219,001

292,527

Total investments resulting from correspondent production

    activities

$

717,893

$

283,254

$

292,527

(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.

During the year ended December 31, 2025, we purchased newly originated prime credit quality residential loans with fair values totaling $70.8 billion as compared to $96.8 billion and $87.5 billion for the years ended December 31, 2024 and December 31, 2023, respectively, in our correspondent production business. Our loan sales included $52.9 billion, $82.0 billion and $72.4 billion of loans we sold to PLS during the years ended December 31, 2025, 2024 and 2023, respectively. We received a sourcing fee from PLS based on the unpaid principal balance (“UPB”) of each loan that we sold to PLS under such arrangement, and earned interest income on the

54

loan for the period we held it before the sale to PLS. During the years ended December 31, 2025, 2024 and 2023, we received sourcing fees totaling $5.2 million, $8.1 million and $7.2 million, respectively.

To the extent that we purchased loans that were insured by the U.S. Department of Housing and Urban Development through the Federal Housing Administration, or guaranteed by the U.S. Department of Veterans Affairs or U.S. Department of Agriculture, we and PLS previously agreed that PLS would fulfill and purchase such loans, as PLS is a Government National Mortgage Association-approved issuer and we are not. This arrangement enabled us to compete with other correspondent aggregators that purchase both government and conventional loans. We also sold conventional loans that we purchased to PLS subject to our and PLS's mutual agreement. During the year ended December 31, 2025, our sales of loans to PLS also included $27.1 billion and $25.0 billion in UPB of conventional loans in order to optimize our use and allocation of capital. 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 retain the right to purchase up to 100% of PLS's non-government correspondent production.

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 that we lose our REIT qualification.

A portion of our activities, including our correspondent production 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.

Critical Accounting Policies

Preparation of financial statements in compliance with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and judgments 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 income, and they require us to make difficult, subjective or complex judgments. Our critical accounting policies primarily relate to our fair value estimates.

Fair value

Our consolidated balance sheet is substantially comprised of assets that are measured at or based on their fair values. Measurement at fair value may be on a recurring or nonrecurring basis depending on the accounting principles applicable to the specific asset or liability and whether we have elected to carry it at fair value. We group financial statement items measured at or based on fair value in three levels based on the markets in which the assets are traded and the observability of the inputs used to determine fair value.

55

The fair value level assigned to an asset or liability is identified based on the lowest level of inputs used that are significant to determining the respective asset's or liability’s fair value. These levels are:

December 31, 2025

Percentage of

Level

Description

Carrying value

of assets

measured (1)

Total

assets

Total

shareholders'

equity

(in thousands)

1

Prices determined using quoted prices in active markets for identical assets or liabilities.

$

195,916

1

%

10

%

2

Prices determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing an asset or liability and are developed based on market data obtained from sources independent of the Company.

15,615,391

73

%

827

%

3

Prices determined using significant unobservable inputs. Unobservable inputs reflect our 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. (2)

4,770,509

22

%

253

%

Total assets measured at or based on fair value (3)

$

20,581,816

96

%

1,090

%

Total assets

$

21,346,882

Total shareholders’ equity

$

1,887,331

(1)
Includes assets measured on both a recurring and nonrecurring basis based on the accounting principles applicable to the specific asset or liability and whether we have elected to carry the item at its fair value.

(2)
For purposes of this discussion, includes Deposits securing credit risk transfer arrangements which are carried at amortized cost. These deposits along with the related CRT derivatives and CRT strips are held in the form of securities whose values are the basis for valuation of the CRT derivatives and strips.

(3)
Percentages may not sum to total due to rounding.

At December 31, 2025, $20.6 billion, or 96%, of our total assets were carried at fair value on a recurring basis and $1.4 million, or less than 1% (consisting of real estate acquired in settlement of loans), were carried based on fair value on a non-recurring basis. Of these assets, $4.8 billion, or 22%, of total assets are measured using “Level 3” fair value inputs-significant inputs where there is difficulty observing the inputs used by other market participants to establish fair value. Different approaches to valuing or changes in inputs used to measure these assets can have a significant effect on the amounts reported for these items and their effects on our income.

Changes in inputs to measurement of Level 3 fair value financial statement items have a significant effect on the amounts reported for these items including their reported balances and their effects on our pre-tax income as summarized below:

Change in fair value

Year ended

December 31,

Loans (1)

IO stripped

 MBS

Interest

rate lock

commitments

CRT net

 assets (2)

Mortgage

servicing

rights (3)

Total

Pre-tax income

(in thousands)

2025

$

583

$

(4,633

)

$

29,718

$

(1,583

)

$

(33,846

)

$

(9,761

)

$

93,818

2024

$

(461

)

$

2,624

$

(10,882

)

$

54,606

$

217,182

$

263,069

$

142,648

2023

$

(191

)

$

(8,572

)

$

15,205

$

117,779

$

87,811

$

212,032

$

244,395

(1)
Includes loans held for sale and loans at fair value.

(2)
Includes Deposits securing CRT arrangements, CRT derivatives, CRT strips and IO security payable.

(3)
Excluding changes in fair value attributable to realization of cash flows.

As a result of the difficulty in observing certain significant valuation inputs affecting “Level 3” fair value assets and liabilities, we are 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 estimating the fair value of these assets and liabilities. Such differences may result in significantly different fair value measurements. Likewise, due to the general illiquidity of some of these fair value assets and liabilities, subsequent transactions may be at values significantly different from those reported.

56

Because the fair value of “Level 3” fair value assets and liabilities is difficult to estimate, our valuation process is conducted by specialized staff and receives significant management oversight. We have assigned the responsibility for estimating the fair values of our “Level 3” fair value assets and liabilities, except for interest rate lock commitments (“IRLCs”), to specialized staff within PFSI's capital markets group. With respect to those valuations, PFSI’s capital markets valuation staff reports to PFSI’s management valuation subcommittee, which oversees the valuations. PFSI’s management valuation subcommittee includes the Company’s chief financial and investment officers as well as other senior members of PFSI’s finance, capital markets and risk management staffs.

The fair value of our IRLCs is developed by PFSI's capital markets risk management staff and is reviewed by PFSI's capital markets operations group in the exercise of their internal control responsibilities.

Following is a discussion relating to our approach to measuring the assets and liabilities that are most affected by “Level 3” fair value inputs.

Loans

We carry loans at their fair values. We recognize changes in the fair value of loans in current period income as a component of either Net gains on loans held for sale at fair value or Net gains on investments and financings. We estimate fair value of loans based on whether the loans are saleable into active markets with observable pricing:

•
We categorize loans that are saleable into active markets with observable pricing inputs as “Level 2” fair value assets. Such loans include substantially all of our loans held for sale and our loans held in consolidated VIEs. We estimate the fair value of loans held for sale using their quoted market price or market price equivalent. We estimate the fair values of loans held for investment in VIE using quoted indications of fair value of all of the securities issued by the securitization trusts holding the loans. We held $11.2 billion of such loans at fair value at December 31, 2025.

•
We categorize loans that are not saleable into active markets with observable pricing inputs as “Level 3” fair value assets. Such loans include our investments in distressed loans, home equity loans held for sale and certain of the loans held for sale which we subsequently repurchased pursuant to representations and warranties or that we identified as non-salable to the Agencies. We estimate the fair value of our “Level 3” fair value loans based on the fair values of the real estate collateralizing individual loans for distressed loans and using a discounted cash flow valuation model for loans held for sale. Inputs to the discounted cash flow model include current interest rates, loan amount, payment status and property type, and forecasts of future interest rates, home prices, prepayment speeds, defaults and loss severities. We held $5.3 million of such loans at fair value at December 31, 2025.

Derivative Assets

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 loans we have committed to purchase but have not yet purchased or sold. Therefore, we recognize a substantial portion of our net gains on loans held for sale at fair value before we purchase the loans.

In the course of our correspondent production activities, we make contractual commitments to correspondent sellers to purchase loans at specified terms. We call these commitments IRLCs. We recognize the fair values of IRLCs at the time we make the commitment to the correspondent seller and adjust the fair value of such IRLCs during the time the commitment is outstanding.

We carry IRLCs as either derivative assets or derivative liabilities on our consolidated balance sheet. The fair value of an IRLC is transferred to the fair value of Loans held for sale at fair value when the loan is funded.

An active, observable market for IRLCs does not exist. Therefore, we measure the fair value of IRLCs using methods and inputs we believe that market participants use in pricing IRLCs. We estimate the fair value of an IRLC based on quoted Agency MBS prices, our estimate of the fair value of the MSRs we expect to receive in the sale of the loan and the probability that the loan will be purchased (the “pull-through rate”).

Pull-through rates and MSR fair values are based on our estimates as these inputs are difficult to observe in the mortgage marketplace. Changes in our estimate of the probability that a loan will fund and changes in mortgage market interest rates are recognized as IRLCs move through the purchase process and may result in significant changes in the estimates of the fair value of the IRLCs. Such changes are reflected in the change in fair value of IRLCs which is a component of our Net gains on loans held for sale and may be included in Net loan servicing fees – From nonaffiliates – Mortgage servicing rights hedging results when we include the IRLCs in our MSR hedging activities in the period of the change. The financial effects of changes in the pull-through rates and MSR fair values generally move in different directions. Increasing interest rates have a positive effect on the fair value of the MSR component of IRLC fair value but increase the pull-through rate for the principal and interest payment portion of the loans that decrease in fair value.

57

A shift in the market for IRLCs or a change in our assessment of an input to the valuation of IRLCs can have an effect on the amount of Net gains on loans held for sale for the period. We believe that the fair value of IRLCs is most sensitive to changes in pull-through rate inputs. We held $2.3 million of net IRLC assets at December 31, 2025. Following is a quantitative summary of the effect of changes in pull-through inputs on the fair value of IRLCs at December 31, 2025:

Effect on fair value of a change in pull-through rate

Change in input (1)

Effect on fair value

(in thousands)

(20%)

$

(941

)

(10%)

$

(470

)

(5%)

$

(235

)

5%

$

147

10%

$

266

20%

$

451

(1)
Pull-through rate adjustments for individual loans are limited to adjustments that will increase the individual loan’s pull-through rate to 100%.

Credit Risk Transfer Arrangements

We hold CRT arrangements with Fannie Mae, pursuant to which we sold pools of loans into Fannie Mae-guaranteed securitizations while retaining recourse obligations as part of the retention of an interest-only ownership interest in such loans. We carry the strips or derivative assets or liabilities relating to these transactions at fair value and recognize changes in the respective asset's or liability’s fair values in Net gains on investments and financings in the consolidated statements of income.

A shift in the market for CRT arrangements or a change in our assessment of an input to the valuation of CRT arrangements can have a significant effect on the fair value of CRT arrangements and in our income for the period. We believe that the most significant “Level 3” fair value inputs to the valuation of CRT arrangements are the pricing spread (discount rate) and the remaining loss expectation, which is influenced by the changes in the fair value of the properties securing the loans in the reference pool.

We held approximately $1.0 billion of net CRT arrangement assets at December 31, 2025. Following is a summary of the effect on fair value of various changes to the pricing spread and property value shifts (which is used in the determination of estimated remaining credit losses) inputs used to estimate the fair value of our CRT arrangements as of December 31, 2025:

Effect on fair value of a change in pricing spread input

Effect on fair value of a change in property value

Change in input

Effect on fair value

Change in input

Effect on fair value

(in basis points)

(in thousands)

(in thousands)

(100)

$

33,617

(15%)

$

(9,422

)

(50)

$

16,579

(10%)

$

(5,706

)

(25)

$

8,234

(5%)

$

(2,596

)

25

$

(8,123

)

5%

$

2,215

50

$

(16,138

)

10%

$

4,077

100

$

(31,847

)

15%

$

5,639

Mortgage Servicing Rights

MSRs represent the value of a contract that obligates us to service the loans on behalf of the owner of the loan in exchange for servicing fees and the right to collect certain ancillary income. We carry all of our investments in MSRs at fair value and recognize changes in fair value in current period income. Changes in fair value of MSRs are recognized in Net loan servicing fees – From nonaffiliates – Change in fair value of mortgage servicing rights in our consolidated statements of income.

Beginning in the third quarter of 2025, the Company enhanced its discounted cash flow approach to estimate the period-end fair value of its MSRs with the adoption of an Option-Adjusted Spread (“OAS”) discounted cashflow 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.

We believe the most significant “Level 3” fair value inputs to the valuation of MSRs are the prepayment speed, OAS or pricing spread (the OAS and pricing spread are components of the discount rate) and annual per-loan cost of servicing. A shift in the market for MSRs or a change in our assessment of an input to the valuation of MSRs can have a significant effect on the fair value of MSRs and in our income for the period. We believe the most significant “Level 3” fair value inputs to the valuation of MSRs are the pricing

58

spread (a component of the discount rate), prepayment speed and annual per-loan cost of servicing. We held $3.6 billion of MSRs at December 31, 2025.

Following is a summary of the effect on fair value of various changes to these key inputs that we use in making our fair value estimates as of December 31, 2025:

Effect on fair value of a change in input

Change in input

Option-adjusted spread

Prepayment speed

Servicing cost

(in thousands)

(20%)

$

126,432

$

270,324

$

63,918

(10%)

$

62,141

$

130,088

$

31,959

(5%)

$

30,808

$

63,843

$

15,979

5%

$

(30,295

)

$

(61,563

)

$

(15,979

)

10%

$

(60,089

)

$

(120,960

)

$

(31,959

)

20%

$

(118,218

)

$

(233,683

)

$

(63,918

)

The preceding asset analyses hold constant all of the inputs other than the input that is being changed to show an estimate of the effect on fair value of a change in a specific input. We expect that in a market shock event, multiple inputs would be affected and the effects of these changes may compound or counteract each other. Therefore, the preceding analyses are not projections of the effects of a shock event or a change in our estimate of an input and should not be relied upon as earnings projections.

Critical Accounting Policies Not Tied to Fair Value

Consolidation—Variable Interest Entities

We enter into various types of transactions with special purpose entities (“SPEs”), which are trusts that are established for limited purposes. Generally, SPEs are formed in connection with securitization transactions. In a securitization transaction, we transfer assets on our balance sheet to an SPE, which then issues various forms of interests in those assets to investors. In a securitization transaction, we typically receive cash and/or beneficial interests in the SPE in exchange for the assets we transfer.

SPEs are generally considered VIEs. A VIE is an entity having either a total equity investment that is insufficient to finance its activities without additional subordinated financial support or whose equity investors lack the ability to control the activities that most significantly impact the economic performance of the VIE. Variable interests are investments or other interests that will absorb portions of a VIE’s expected losses or receive portions of the VIE’s expected residual returns. Expected residual returns represent the expected positive variability in the fair value of a VIE’s net assets.

When an SPE is a VIE, holders of variable interests in that entity must evaluate whether they are the VIE’s primary beneficiary. The primary beneficiary of a VIE is the party that has both the power to direct the activities that most significantly impact the VIE and a variable interest that could potentially be significant to the VIE. The primary beneficiary of a VIE must include the assets and liabilities of the VIE on its consolidated balance sheet. Therefore, our evaluation of a securitization as a VIE and our status as the VIE’s primary beneficiary can have a significant effect on our consolidated balance sheet.

We evaluate the securitization trust into which assets are transferred to determine whether the entity is a VIE. To determine whether a variable interest we hold could potentially be significant to the VIE, we consider both qualitative and quantitative factors regarding the nature, size and form of our involvement with the VIE. We assess whether we are the primary beneficiary of a VIE on an ongoing basis.

For our financial reporting purposes, the underlying assets owned by the securitization VIEs that we presently consolidate are shown under Loans held for investment at fair value, Derivative assets, Mortgage servicing rights, Deposits securing credit risk transfer agreements and Derivative and credit risk transfer strip liabilities on our consolidated balance sheets:

•
The VIEs that hold loans we have securitized are shown as their constituent assets and liabilities- Loans held for investment at fair value, and the securities issued to third parties by the consolidated VIE are shown as Asset-backed financings of variable interest entities at fair value on our consolidated balance sheets. We include the interest earned on the loans held by the VIEs in Interest income and interest attributable to the asset-backed securities issued by the VIEs in Interest expense in our consolidated statements of income. Changes in the fair value of loans held in the VIEs and the associated asset-backed financings are included in Net gains on investments and financings in our consolidated statements of income.

•
The VIEs that hold assets relating to our CRT arrangements are shown as their constituent assets and liabilities – the Deposits securing credit risk transfer agreements, Derivative assets and Derivative and credit risk liabilities which represent our IO ownership interest and obligation to absorb credit losses arising from the reference loans, and Interest-only security payable at

59

fair value. We include the income we receive from the IO ownership interests and changes in fair value of the Derivative assets, Derivative and credit risk liabilities and Interest-only security payable at fair value in Net gains on investments and financings in our consolidated statements of income.

The assets of the VIEs that hold participation certificates relating to our financing of MSRs are shown as the MSRs underlying the participation certificates, and the liabilities financing the MSRs are shown as Assets sold under agreements to repurchase and Notes payable secured by credit risk transfer and mortgage servicing assets. We include the interest expense incurred in these financings in Interest expense in our consolidated statements of income.

Income Taxes

We have elected to be taxed as a REIT and believe we comply with the provisions of the Internal Revenue Code of 1986 (the “Internal Revenue Code”) applicable to REITs. Accordingly, we believe that we will not be subject to federal income tax on that portion of our REIT taxable income that is distributed to shareholders as long as we meet the requirements of certain asset, income and share ownership tests. If we fail to qualify as a REIT, and do not qualify for certain statutory relief provisions, we will be subject to income taxes and may be precluded from qualifying as a REIT for the four tax years following the year of loss of our REIT qualification.

Our TRS is subject to federal and state income taxes. We provide for income taxes using the asset and liability method. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted rates expected to apply to taxable income in the years in which we expect those temporary differences to be recovered or settled.

We recognize the effect on deferred taxes of a change in tax rates in income in the period in which the change occurs. We establish a valuation allowance if, in our judgment, realization of deferred tax assets is not more likely than not.

We recognize tax benefits relating to tax positions we take only if it is more likely than not that the position will be sustained upon examination by the appropriate taxing authority. We recognize a tax position that meets this standard as the largest amount that in our judgment exceeds 50 percent likelihood of being realized upon settlement. We will classify any penalties and interest as a component of income tax expense.

Accounting Developments

Refer to Note 3 – Significant Accounting Policies – Recently Adopted Accounting Pronouncement to our consolidated financial statements for a discussion of recent accounting developments and the effect of these developments on us.

60

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 GAAP, to record certain of our financial assets (comprised of MBS, loans held for sale at fair value and loans held for investment at fair value), 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:

Year ended December 31,

2025

2024

2023

(dollars in thousands)

Net gains on investments and financings:

Mortgage-backed securities

$

148,344

$

(80,838

)

$

74,984

Loans held for investment

112,838

15,516

17,439

CRT arrangements

1,845

56,161

128,521

Interest-only security payable

(3,428

)

(1,555

)

(10,742

)

Asset-backed financings

(96,439

)

(7,396

)

(13,678

)

163,160

(18,112

)

196,524

Net gains on loans held for sale (1)

209,657

309,113

248,742

Net loan servicing fees‒MSR valuation adjustments (2)

(115,721

)

353,763

(36,504

)

$

257,096

$

644,764

$

408,762

Net investment income

$

307,461

$

334,194

$

429,020

Non-cash items as a percentage of net investment income

84

%

193

%

95

%

(1)
Amount represents MSRs received, liability for representations and warranties incurred in loan sales transactions and changes in fair value of loans, IRLCs and hedging derivatives held at the end of the period.

(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 year.

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 arrangement 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.

Business Trends

Recent macroeconomic and federal government actions related to trade, tariffs, government cost reduction initiatives, inflation, and interest rates have contributed to volatility in financial markets and uncertainty regarding the economic outlook. Elevated interest rates in recent years have constrained growth in the mortgage origination market, which mortgage industry economists currently project will increase from $1.9 trillion in 2025 to $2.3 trillion in 2026.

61

The opportunity for refinancing has increased, driven by interest rate volatility and a greater proportion of outstanding mortgages with note rates near current market rates. If such volatility continues, it may lead to higher mortgage production activity and increased prepayment speeds compared to recent years.

The ongoing economic uncertainty and market volatility could result in reduced economic activity and slowing home price growth or depreciation, which may increase mortgage delinquencies or defaults and negatively affect the performance of our credit-sensitive assets, including CRT arrangements and subordinate MBS, as well as increase losses from our representations and warranties.

We have acquired a portion of the conventional loans and all of the jumbo loans produced in the correspondent channel from PFSI in the fourth quarter of 2025. We expect to continue investing in subordinate MBS generated from the non-Agency securitization of Agency eligible non-owner-occupied loans, Agency eligible owner-occupied loans and jumbo loans. This investment activity is also expected to increase our asset-back financing of VIEs.

Results of Operations

The following is a summary of our key performance measures:

Year ended December 31,

2025

2024

2023

(dollar amounts in thousands, except per common share amounts)

Net gains on investments and financings

$

213,113

$

61,050

$

178,099

Loan production income (1)

64,719

88,209

58,088

Net loan servicing fees

48,932

264,540

288,608

Net interest expense

(19,482

)

(79,396

)

(96,061

)

Other

179

(209

)

286

Net investment income

307,461

334,194

429,020

Expenses

213,643

191,546

184,625

Pretax income

93,818

142,648

244,395

(Benefit from) provision for income taxes

(34,054

)

(18,336

)

44,741

Net income

127,872

160,984

199,654

Dividends on preferred shares

41,819

41,819

41,819

Net income attributable to common shareholders

$

86,053

$

119,165

$

157,835

Pretax income by segment and corporate:

Credit sensitive strategies

$

65,203

$

123,112

$

230,304

Interest rate sensitive strategies

50,453

15,588

44,593

Correspondent production

32,079

56,981

23,285

Corporate operations

(53,917

)

(53,033

)

(53,787

)

$

93,818

$

142,648

$

244,395

Annualized return on average common shareholders' equity

6.3

%

8.4

%

11.1

%

Earnings per common share

Basic

$

0.99

$

1.37

$

1.80

Diluted

$

0.99

$

1.37

$

1.63

Dividends per common share

$

1.60

$

1.60

$

1.60

December 31, 2025

December 31, 2024

Total assets

$

21,346,882

$

14,408,706

Book value per common share

$

15.25

$

15.87

Closing price per common share

$

12.55

$

12.59

(1)
Include net gains on sales of loans and loan origination fees.

62

Our net income decreased by $33.1 million during the year ended December 31, 2025, as compared to the year ended December 31, 2024, reflecting the effect of the increased fair value losses from our MSRs and reduced gains on our CRT-related investments, partially offset by increased gains on MBS and loans held for investment.

The decrease in pretax results is summarized below:

•
Our credit sensitive strategies segment recognized a $65.3 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”) did not tighten as significantly during the year ended December 31, 2025 compared to the year ended December 31, 2024.

•
Our interest rate sensitive strategies segment recognized a $215.6 million decrease in net servicing fees resulting from increased net MSR valuation losses due to more significant decreases in interest rates during the year ended December 31, 2025 compared to the year ended December 31, 2024. These decreases were partially offset by a $217.4 million increase in valuation gains on MBS as well as a $38.7 million decrease in net interest expense compared to the year ended December 31, 2024.

•
Our correspondent production segment recognized a $20.9 million decrease in gains on sales of loans during the year ended December 31, 2025, reflecting a reduction in our volume of sales to nonaffiliates and an increasing portion of our loans held for sale that are being aggregated for non-Agency securitizations and are subject to additional spread volatility.

Our net income decreased by $38.7 million during the year ended December 31, 2024, as compared to the year ended December 31, 2023, reflecting the fair value performance of our MBS and MSRs and CRT-related investments, partially offset by increased loan production income and benefits from income taxes.

The decrease in pretax results is summarized below:

•
Our credit sensitive strategies segment recognized a $68.9 million decrease in net gains on our CRT arrangements as market credit spreads tightened less during the year ended December 31, 2024, compared to the year ended December 31, 2023.

•
Our interest rate sensitive strategies segment recognized a $24.1 million decrease in net servicing fees as well as a $23.9 million decrease in fair value of MBS caused by an increase in market interest rates during the year ended December 31, 2024, offset by a $24.1 million decrease in net interest expense compared to the year ended December 31, 2023.

•
Our correspondent production segment recognized a $33.3 million increase in gains on sales of loans during the year ended December 31, 2024, reflecting increased gain on sale margins for mortgage loans and a larger reduction of our liability for representations and warranties 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.

Net Investment Income

Our net investment income is summarized below:

Year ended December 31,

2025

2024

2023

(in thousands)

Net gains on investments and financings

$

213,113

$

61,050

$

178,099

Net gains on loans held for sale

52,194

73,124

39,857

Loan origination fees

12,525

15,085

18,231

Net loan servicing fees

48,932

264,540

288,608

Net interest expense

(19,482

)

(79,396

)

(96,061

)

Other

179

(209

)

286

$

307,461

$

334,194

$

429,020

63

Net gains on investments and financings

Net gains on investments and financings are summarized below:

Year ended December 31,

2025

2024

2023

(in thousands)

Mortgage-backed securities

$

148,344

$

(80,838

)

$

74,984

Loans held for investment

112,838

15,516

17,439

CRT arrangements

48,370

113,670

182,555

Asset-backed financings

(96,439

)

(7,396

)

(13,678

)

Hedging derivatives

—

20,098

(83,201

)

$

213,113

$

61,050

$

178,099

The increase in net gains on investments for the year ended December 31, 2025, as compared to the year ended December 31, 2024, was primarily due to gains from our investments in MBS as interest rates decreased, partially offset by reduced gains in our CRT arrangements as credit spreads did not tighten to the same degree during the year ended December 31, 2025 as compared to the year ended December 31, 2024.

The decrease in net gains on investments for the year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily due to losses from our investments in MBS as interest rates increased and gains in our CRT arrangements decreased as credit spreads did not tighten to the same degree during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

Mortgage-Backed Securities

During the year ended December 31, 2025, we recognized net valuation gains of $148.3 million compared to valuation losses of $80.8 million for the year ended December 31, 2024. The 2025 gains were primarily driven by reductions in interest rates as well as improved market conditions and credit spreads, while the $80.8 million losses recognized during the year ended December 31, 2024 reflect increases in interest and mortgage rates during the period.

Loans Held for Investment – Held in VIEs and Asset-backed Financings at Fair Value

Loans held for investment in VIEs and Asset-backed financings of variable interest entities at fair value recorded combined net valuation gains of $16.4 million, $8.1 million and $3.8 million during the years ended December 31, 2025, 2024 and 2023, respectively. The net gain during the year ended December 31, 2025 reflects the gains on the underlying assets exceeding the losses on the asset-backed financing as the result of declining interest rates and improved market conditions and credit spreads, which favorably impacted the fair value of our net investments secured by jumbo loans and investment properties.

64

CRT Arrangements

The activity in and balances relating to our CRT arrangements are summarized below:

Year ended December 31,

2025

2024

2023

(in thousands)

Net investment income:

Net gains on investments and financings

Credit risk transfer derivatives and strips:

Credit risk transfer derivatives

Realized

$

10,764

$

13,491

$

18,524

Valuation changes

3,572

13,529

38,020

14,336

27,020

56,544

Credit risk transfer strips

Realized

39,189

45,573

46,252

Valuation changes

(1,727

)

42,632

90,501

37,462

88,205

136,753

Interest-only security payable at fair value — valuation changes

(3,428

)

(1,555

)

(10,742

)

48,370

113,670

182,555

Interest income — Deposits securing credit risk transfer

    arrangements

44,269

59,304

62,713

$

92,639

$

172,974

$

245,268

Net payments made to settle losses on credit risk transfer arrangements

$

4,466

$

1,633

$

3,523

December 31, 2025

December 31, 2024

(in thousands)

Carrying value of credit risk transfer arrangements:

Derivative assets - credit risk transfer derivatives

$

32,659

$

29,377

Derivative and credit risk transfer liabilities - credit risk transfer strips

(5,999

)

(4,060

)

Deposits securing credit risk transfer arrangements

1,009,334

1,110,708

Interest-only security payable at fair value

(37,650

)

(34,222

)

$

998,344

$

1,101,803

Credit risk transfer arrangement assets pledged to secure borrowings:

Derivative assets

$

32,659

$

29,377

Deposits securing credit risk transfer arrangements (1)

$

1,009,334

$

1,110,708

Unpaid principal balance of loans underlying credit risk transfer arrangements

$

19,517,530

$

21,249,304

Collection status (unpaid principal balance):

Delinquency

Current

$

18,908,261

$

20,628,148

30-89 days delinquent

$

413,295

$

414,605

90-179 days delinquent

$

110,486

$

131,191

180 or more days delinquent

$

57,798

$

51,343

Foreclosure

$

27,690

$

24,017

Bankruptcy

$

68,426

$

63,697

(1)
Deposits securing credit risk transfer strip liabilities also secure $6.0 million and $4.1 million in CRT strip liabilities at December 31, 2025 and December 31, 2024, respectively.

The performance of our investments in CRT arrangements during the years ended December 31, 2025 and 2024 reflects market-based assessments of the expected credit performance of the underlying mortgage collateral and overall credit spread tightening during 2025 and 2024.

65

Net Gains on Loans held for Sale

Our net gains on loans held for sale are summarized below:

Year ended December 31,

2025

2024

2023

(in thousands)

From nonaffiliates:

Cash losses:

Sales of loans

$

(43,149

)

$

(198,613

)

$

(278,128

)

Hedging activities

(119,478

)

(45,445

)

62,081

(162,627

)

(244,058

)

(216,047

)

Non-cash gains:

Receipt of MSRs in loan sale transactions

190,141

219,001

292,527

Provision for losses relating to representations and

   warranties provided in loan sales:

Pursuant to loan sales

(1,070

)

(1,246

)

(2,449

)

Reduction in liability due to change in estimate

2,193

20,269

15,228

1,123

19,023

12,779

Changes in fair value of financial instruments held at end of year:

Interest rate lock commitments

1,904

(7,089

)

8,010

Loans

(12,881

)

12,837

(7,129

)

Hedging derivatives

29,370

65,341

(57,445

)

18,393

71,089

(56,564

)

209,657

309,113

248,742

Total from nonaffiliates

47,030

65,055

32,695

From PFSI—cash

5,164

8,069

7,162

$

52,194

$

73,124

$

39,857

Interest rate lock commitments issued on loans acquired

   for sale (unpaid principal balance):

To nonaffiliates

$

14,761,740

$

15,995,449

$

17,146,686

To PFSI

50,753,290

83,669,855

73,949,658

$

65,515,030

$

99,665,304

$

91,096,344

Acquisition of loans for sale (unpaid principal balance):

To nonaffiliates

$

9,713,869

$

13,446,484

$

14,898,301

To PFSI

48,947,748

81,129,331

71,601,391

$

58,661,617

$

94,575,815

$

86,499,692

The changes in Net gains on loans held for sale at fair value during the year ended December 31, 2025, as compared to the same period in 2024, reflect decreased interest rate lock commitments and increased sensitivity to changes in spreads for loans held for sale being aggregated for non-Agency securitizations. The changes in Net gains on loans held for sale at fair value during the year ended December 31, 2024, as compared to the same periods in 2023, reflect increased gain on sale margins for mortgage loans supplemented by the effect of a reduction in our liability for representations and warranties.

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.

66

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 income in subsequent periods. Subsequent changes in the fair value of our MSRs significantly affect our income.

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 loan sales of $1.1 million, $1.2 million and $2.4 million as part of our loan sales in each of the years ended December 31, 2025, 2024 and 2023, respectively. The decrease in the provision relating to current loan sales reflects the decrease of our loan sales volume to nonaffiliates and reduced default and loss-given default assumptions. Following is a summary of the indemnification, repurchase and loss activity and balances of loans subject to representations and warranties:

Year ended December 31,

2025

2024

2023

(in thousands)

Indemnification activity (unpaid principal balance):

Loans indemnified at beginning of year

$

15,289

$

12,123

$

8,108

New indemnifications

1,113

3,706

7,062

Less: indemnified loans sold, repaid or refinanced

195

540

3,047

Loans indemnified at end of period

$

16,207

$

15,289

$

12,123

Indemnified loans indemnified by correspondent lenders at end of year

$

6,045

$

5,772

$

4,521

UPB of loans with deposits received from correspondent sellers

  collateralizing prospective indemnification losses at end of year

$

6,108

$

5,488

$

4,190

Repurchase activity (unpaid principal balance):

Loans repurchased

$

25,970

$

35,493

$

59,068

Less:

Loans repurchased by correspondent sellers

22,568

26,913

51,369

Loans resold or repaid by borrowers

7,885

6,068

12,596

Net loans repurchased (resolved) with losses chargeable

    to liability to representations and warranties

$

(4,483

)

$

2,512

$

(4,897

)

Losses charged to liability for representations and warranties

$

479

$

234

$

549

At end of year:

Loans subject to representations and warranties

$

214,182,746

$

222,063,618

$

227,456,712

Liability for representations and warranties

$

5,284

$

6,886

$

26,143

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.

67

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 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 income 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 $2.2 million, $20.3 million and $15.2 million reductions in liability for representations and warranties during the years ended December 31, 2025, 2024 and 2023, 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 year ended December 31, 2025, as compared to the years ended December 31, 2024 and 2023, reflecting the overall decrease in our purchase volume of loans for sale to nonaffiliates.

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:

Year ended December 31,

2025

2024

2023

(in thousands)

Loan servicing fees

$

625,455

$

659,364

$

676,446

Effect of mortgage servicing rights and hedging results

(576,523

)

(394,824

)

(387,838

)

Net loan servicing fees

$

48,932

$

264,540

$

288,608

Loan Servicing Fees

Following is a summary of our loan servicing fees:

Year ended December 31,

2025

2024

2023

(in thousands)

Contractually specified servicing fees

$

608,025

$

644,642

$

659,438

Ancillary and other fees:

Late charges

4,244

4,056

3,352

Other

13,186

10,666

13,656

17,430

14,722

17,008

$

625,455

$

659,364

$

676,446

Average UPB of underlying loans

$

221,436,947

$

228,705,758

$

231,203,032

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 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 we charge to correspondent lenders for loans repaid by the borrower shortly after purchase.

68

The change in contractually-specified fees during the year ended December 31, 2025 is due primarily to the slight reduction in our MSR servicing portfolio, reflecting a reduction in the volume of loans we acquire for sale, as well as a decline in the weighted average servicing fee of the MSRs.

Mortgage Servicing Rights and Hedging

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:

Year ended December 31,

2025

2024

2023

(in thousands)

Change in fair value of MSRs

Changes in valuation inputs used in valuation model

$

(33,846

)

$

217,182

$

87,811

Recapture income from PFSI

10,117

2,193

1,784

Hedging results

(172,931

)

(226,608

)

(92,775

)

(196,660

)

(7,233

)

(3,180

)

Realization of expected cash flows

(379,863

)

(387,591

)

(384,658

)

$

(576,523

)

$

(394,824

)

$

(387,838

)

Average balance of mortgage servicing rights

$

3,736,224

$

3,911,440

$

4,022,008

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 changes are based on the relationship of the interest rates of the underlying mortgages to the level of market interest rates. Changes in fair value due to changes in valuation inputs used in our valuation model during the year ended December 31, 2025 reflect the effects of expectations for faster future repayments of the underlying loans as a result of interest rates decreasing during the year ended December 31, 2025 compared to the increasing rate environments in 2024 and 2023.

The increase in loan recapture income from PFSI reflects the increase in refinancing activity in our MSR portfolio during the year ended December 31, 2025, as compared to the year ended December 31, 2024. We have an agreement with PFSI that requires that when PFSI refinances a loan for which we held 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.

Hedging results during the year ended December 31, 2025 were primarily attributable to the impact of volatile interest rates and MBS prices as well as the embedded costs of maintaining the hedge positions, which were partially offset by fair value gains in MBS. Our hedging activities are intended to manage our net exposure across all interest rate sensitive strategies, which include MSRs, MBS and related tax effects.

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:

December 31, 2025

December 31, 2024

(in thousands)

UPB of loans outstanding

$

215,781,639

$

226,237,613

Collection status (unpaid principal balance)

Delinquency:

30-89 days delinquent

$

2,605,536

$

2,645,952

90 or more days delinquent:

Not in foreclosure

$

1,032,221

$

1,084,587

In foreclosure

$

118,768

$

106,092

Bankruptcy

$

355,808

$

285,163

Following is a summary of characteristics of our MSR servicing portfolio as of December 31, 2025:

69

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

$

106,441,091

384

3.9

%

49

298

$

277

762

75

%

55

%

0.7

%

Fannie Mae

104,886,326

412

3.8

%

60

290

$

255

757

76

%

51

%

1.0

%

Other (2)

4,454,222

15

5.2

%

42

315

$

293

763

72

%

58

%

0.7

%

$

215,781,639

811

3.9

%

54

295

$

266

760

75

%

53

%

0.8

%

(1)
Loan-to-value.

(2)
Represents MSRs on conventional loans sold to private investors.

Net Interest Expense

Net interest expense is summarized below:

Year ended December 31, 2025

Year ended December 31, 2024

Year ended December 31, 2023

Interest

Interest

Interest

Interest

Interest

Interest

income/

Average

yield/

income/

Average

yield/

income/

Average

yield/

expense

balance

cost %

expense

balance

cost %

expense

balance

cost %

(dollars in thousands)

Assets:

Cash and short-term investments

$

22,008

$

500,688

4.40

%

$

29,323

$

489,669

5.99

%

$

25,046

$

497,167

5.05

%

Mortgage-backed securities

247,783

4,197,657

5.90

%

237,758

4,107,100

5.79

%

248,713

4,620,715

5.40

%

Loans held for sale

141,707

2,206,958

6.42

%

83,326

1,249,423

6.67

%

93,988

1,439,373

6.55

%

Loans held for investment

242,721

4,724,217

5.14

%

58,715

1,468,687

4.00

%

56,874

1,451,632

3.93

%

Deposits securing CRT arrangements

44,269

1,063,745

4.16

%

59,304

1,163,970

5.09

%

62,713

1,270,298

4.95

%

698,488

12,693,265

5.50

%

468,426

8,478,849

5.52

%

487,334

9,279,185

5.27

%

Placement fees relating to custodial

  funds

148,890

163,891

149,484

Other

3,534

2,946

3,089

$

850,912

$

12,693,265

6.70

%

$

635,263

$

8,478,849

7.49

%

$

639,907

$

9,279,185

6.92

%

Liabilities:

Assets sold under agreements to

   repurchase

$

352,660

$

6,776,255

5.20

%

$

331,800

$

5,478,037

6.06

%

$

378,367

$

6,306,627

6.02

%

Mortgage loan participation purchase

  and sale agreements

407

4,937

8.24

%

1,292

17,852

7.24

%

1,365

19,079

7.17

%

Notes payable secured by credit risk

  transfer and mortgage servicing

  assets

205,517

2,598,600

7.91

%

261,008

2,883,379

9.05

%

257,601

2,969,174

8.70

%

Unsecured senior notes

66,071

832,644

7.94

%

48,000

704,279

6.82

%

34,969

561,877

6.24

%

Asset-backed financings

226,918

4,456,128

5.09

%

55,763

1,612,065

3.46

%

49,988

1,354,803

3.70

%

851,573

14,668,564

5.81

%

697,863

10,695,612

6.52

%

722,290

11,211,560

6.46

%

Interest shortfall on repayments of loans

  serviced for Agency securitizations

10,303

7,144

5,477

Interest on loan impound deposits

6,946

7,099

6,353

Other

1,572

2,553

1,848

870,394

$

14,668,564

5.93

%

714,659

$

10,695,612

6.68

%

735,968

$

11,211,560

6.58

%

$

(19,482

)

$

(79,396

)

$

(96,061

)

70

The effects of changes in the yields and costs and composition of our investments on our net interest expense are summarized below:

Year ended December 31, 2025

Year ended December 31, 2024

vs.

vs.

Year ended December 31, 2024

Year ended December 31, 2023

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

$

(7,961

)

$

646

$

(7,315

)

$

4,656

$

(379

)

$

4,277

Mortgage-backed securities

4,728

5,297

10,025

17,571

(28,526

)

(10,955

)

Loans held for sale

(3,212

)

61,593

58,381

1,752

(12,414

)

(10,662

)

Loans held for investment

20,974

163,032

184,006

1,104

737

1,841

Deposits securing CRT arrangements

(10,228

)

(4,807

)

(15,035

)

1,841

(5,250

)

(3,409

)

4,301

225,761

230,062

26,924

(45,832

)

(18,908

)

Placement fees relating to custodial funds

(15,001

)

14,407

Other

588

(143

)

$

4,301

$

225,761

$

215,649

$

26,924

$

(45,832

)

$

(4,644

)

Liabilities:

Assets sold under agreements to repurchase

$

(50,828

)

$

71,688

$

20,860

$

2,618

$

(49,185

)

$

(46,567

)

Mortgage loan participation purchase

   and sale agreements

159

(1,044

)

(885

)

12

(85

)

(73

)

Notes payable secured by credit risk

   transfer and mortgage servicing assets

(31,141

)

(24,350

)

(55,491

)

10,703

(7,296

)

3,407

Unsecured senior notes

8,566

9,505

18,071

3,474

9,557

13,031

Asset-backed financings

36,134

135,021

171,155

(3,384

)

9,159

5,775

(37,110

)

190,820

153,710

13,423

(37,850

)

(24,427

)

Interest shortfall on repayments of loans

   serviced for Agency securitizations

3,159

1,667

Interest on loan impound deposits

(153

)

746

Other

(981

)

705

(37,110

)

190,820

155,735

13,423

(37,850

)

(21,309

)

$

41,411

$

34,941

$

59,914

$

13,501

$

(7,982

)

$

16,665

The decrease in net interest expense during the year ended December 31, 2025, as compared to the same period in 2024, is due to an increased volume of interest earning assets and decreased costs of repurchase agreement financing in relation to the long-lived assets they finance, along with reduced note payable financing of MSRs and CRT arrangements.

The decrease in net interest expense during the year ended December 31, 2024, as compared to the same period in 2023, is due to yields on our interest-earning assets which increased faster than the cost of our interest-bearing liabilities and the increase in earnings from placement fees relating to custodial funds managed for borrowers and investors.

Expenses

Our expenses are summarized below:

Year ended December 31,

2025

2024

2023

(in thousands)

Earned by PennyMac Financial Services, Inc.:

Loan servicing fees

$

84,432

$

83,252

$

81,347

Management fees

27,649

28,623

28,762

Loan fulfillment fees

23,804

26,291

27,826

Professional services

37,774

12,779

7,621

Compensation

11,886

5,608

7,106

Loan collection and liquidation

8,285

6,834

4,562

Safekeeping

4,630

4,403

3,766

Loan origination

2,278

3,328

4,602

Other

12,905

20,428

19,033

$

213,643

$

191,546

$

184,625

71

Expenses increased by $22.1 million, or 12%, during the year ended December 31, 2025, as compared to the year ended December 31, 2024, and increased $6.9 million, or 4%, during the year ended December 31, 2024, as compared to the year ended December 31, 2023, as discussed below.

Loan Servicing Fees

Loan servicing fees payable to PLS are summarized below:

Year ended December 31,

2025

2024

2023

(in thousands)

Loan servicing fees:

Loans held for sale

$

313

$

525

$

680

Loans held for investment

1,311

591

208

Mortgage servicing rights

82,808

82,136

80,459

$

84,432

$

83,252

$

81,347

Average investment in loans:

Held for sale

$

2,206,958

$

1,249,423

$

1,439,373

Held for investment

$

4,724,217

$

1,468,687

$

1,451,632

Average MSR portfolio unpaid principal balance

$

221,436,947

$

228,705,758

$

231,203,032

Mortgage servicing rights recapture fees

$

10,117

$

2,193

$

1,784

Unpaid principal balance of loans recaptured

$

932,444

$

353,710

$

315,412

Loan servicing fees increased by $1.2 million during the year ended December 31, 2025, as compared to the year ended December 31, 2024, and increased by $1.9 million during the year ended December 31, 2024, as compared to the year ended December 31, 2023, reflecting an increase in supplemental fees relating to loan modifications and servicing of delinquent loans in our MSR portfolio.

Management Fees

Management fees payable to PCM are summarized below:

Year ended December 31,

2025

2024

2023

(in thousands)

Base fee

$

27,649

$

28,623

$

28,762

Average shareholders' equity amounts used

   to calculate base management fee expense

$

1,843,549

$

1,908,287

$

1,917,642

Management fees decreased by $974,000 during the year ended December 31, 2025, compared to the year ended 2024, and $139,000 during the year ended December 31,2024, compared to the year ended December 31, 2023. 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 $2.5 million during the year ended December 31, 2025, compared to the year ended December 31, 2024, and by $1.5 million during the year ended 2024 as compared to the same period in 2023. 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 expenses increased by $25.0 million during the year ended December 31, 2025, as compared to the year ended December 31, 2024, and $5.2 million during the year ended December 31, 2024, as compared to the year ended December 31, 2023, due to increased legal and consulting fees relating to our securitization activities.

72

Compensation

Compensation expense increased $6.3 million during the year ended December 31, 2025, as compared to the year ended December 31, 2024, and decreased $1.5 million during the year ended December 31, 2024, as compared to the year ended December 31, 2023. The increase in the year ended December 31, 2025 was due to an increased allocation of compensation reimbursements based on the updated terms of the management agreement as described in Note 4 – Transactions with Related Parties to the consolidated financial statements included in this Report. This increase was partially offset by a $4.0 million decrease in common overhead allocation from PFSI, which is included in Other expense.

Loan collection and liquidation

Loan collection and liquidation expenses increased by $1.5 million during the year ended December 31, 2025, as compared to the year ended December 31, 2024, and increased $2.3 million during the year ended December 31, 2024, as compared to the year ended December 31, 2023, due to increased servicing cost related to delinquent loans serviced for the Agencies' foreclosure avoidance programs.

Loan origination

Loan origination expenses decreased by $1.1 million during the year ended December 31, 2025, as compared to the year ended December 31, 2024, and $1.3 million during the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily reflecting a decrease in our loan originations purchased for sale to nonaffiliates across the three-year period.

Other Expenses

Other expenses are summarized below:

Year ended December 31,

2025

2024

2023

(in thousands)

Common overhead allocation from PFSI

$

3,926

$

7,909

$

7,492

Bank service charges

2,942

2,339

2,024

Technology

2,071

2,158

2,046

Insurance

1,651

1,957

1,935

Other

2,315

6,065

5,536

$

12,905

$

20,428

$

19,033

Common overhead allocation from PFSI decreased by $4.0 million during the year ended December 31, 2025, as compared to the year ended December 31, 2024, and increased by $400,000 during the year ended December 31, 2024, as compared to the year ended December 31, 2023. The decrease in the year ended December 31, 2025 was due to changes to the allocation method included in the management agreement, described in Note 4 – Transactions with Related Parties to the consolidated financial statements included in this Report.

Income Taxes

We have elected to treat our subsidiary, 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 income.

The Company’s effective tax rate was (36.3)% for the year ended December 31, 2025 and (12.9)% for the year ended December 31, 2024. The Company’s TRS recognized a tax benefit of $34.6 million on a pretax loss of $197.1 million while the Company’s consolidated pretax income was $93.8 million for the year ended December 31, 2025. For 2024, the TRS recognized tax benefit of $18.6 million on pretax loss of $57.9 million while the Company’s reported consolidated pretax income was $142.6 million. 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.

73

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 December 31, 2025, 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. Subject to certain limitations, domestic non-corporate shareholders may be allowed a 20% deduction from taxable income for ordinary REIT dividends.

Below is a reconciliation of GAAP year to date income to taxable income (loss) and the allocation of taxable income (loss) between the TRS and the REIT:

Taxable income (loss)

GAAP

net income

GAAP/tax

differences

Total taxable

income (loss)

Taxable

subsidiaries

REIT

Year ended December 31, 2025

(in thousands)

Net investment income

Net loan servicing fees

$

48,932

$

456,078

$

505,010

$

505,010

$

—

Net gains on loans acquired for sale

52,194

(284,923

)

(232,729

)

(232,729

)

—

Loan origination fees

12,525

—

12,525

12,525

—

Net gains on investments and financings

213,113

(201,637

)

11,476

(10,387

)

21,863

Net interest expense

(19,482

)

12,649

(6,833

)

(200,142

)

193,309

Results of real estate acquired in settlement of loans

(64

)

(222

)

(286

)

(286

)

—

Other

243

—

243

243

—

Net investment income

307,461

(18,055

)

289,406

74,234

215,172

Expenses

213,643

(2,313

)

211,330

181,029

30,301

REIT dividend deduction

—

184,871

184,871

—

184,871

Total expenses and dividend deduction

213,643

182,558

396,201

181,029

215,172

Income before (benefit from) provision for income taxes

93,818

(200,613

)

(106,795

)

(106,795

)

—

(Benefit from) provision for income taxes

(34,054

)

34,054

—

—

—

Net income

$

127,872

$

(234,667

)

$

(106,795

)

$

(106,795

)

$

—

74

Balance Sheet Analysis

Following is a summary of key balance sheet items as of the dates presented:

December 31,

December 31,

2025

2024

(in thousands)

Assets

Cash and short-term investments

$

462,488

$

440,892

Mortgage-backed securities at fair value

4,452,859

4,063,706

Loans held for sale

2,699,398

2,116,318

Loans held for investment

8,532,644

2,193,575

Derivative assets

55,943

56,840

Deposits securing credit risk transfer arrangements

1,009,334

1,110,708

Mortgage servicing rights and servicing advances

3,741,532

3,972,431

20,954,198

13,954,470

Other

392,684

454,236

Total assets

$

21,346,882

$

14,408,706

Liabilities

Debt:

Short-term

$

8,018,601

$

6,512,531

Long-term:

Recourse

3,286,428

3,535,650

Non-recourse

7,826,953

2,074,597

11,113,381

5,610,247

19,131,982

12,122,778

Other

327,569

347,428

Total liabilities

19,459,551

12,470,206

Shareholders’ equity

1,887,331

1,938,500

Total liabilities and shareholders’ equity

$

21,346,882

$

14,408,706

Total assets increased by approximately $6.9 billion, or 48%, from December 31, 2024 to December 31, 2025, primarily due to an increase of $6.3 billion in Loans held for investment at fair value and $583.1 million in Loans held for sale at fair value, offset by a decrease of $230.9 million in 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.

Correspondent Production

Following is a summary of our correspondent production acquisitions at fair value:

Year ended December 31,

2025

2024

2023

(in thousands)

Correspondent loan purchases:

GSE-eligible loans (1)

$

40,976,218

$

54,294,006

$

46,395,294

Government insured or guaranteed (2)

27,128,340

42,066,828

41,103,974

Jumbo

2,636,524

393,222

4,234

Non-qualified

29,638

—

—

Advances to home equity lines of credit

—

10

102

$

70,770,720

$

96,754,066

$

87,503,604

75

(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.

(2)
The Company sells 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 earns a sourcing fee for all loans that it purchases from correspondent sellers and subsequently sells to PLS as described in Note 4 – Transactions with Related Parties – Operating Activities – Correspondent Production Activities.

During the year ended December 31, 2025, we purchased for sale $70.8 billion in fair value of correspondent production loans as compared to $96.8 billion and $87.5 billion during the same periods in 2024 and 2023, respectively. 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:

Year ended December 31,

2025

2024

2023

(in thousands)

Credit sensitive assets:

Subordinate credit-linked securities

$

(194,513

)

$

(111,044

)

$

87,346

Loans secured by non-owner occupied properties and

   jumbo loans, net of associated asset-backed

   financing (subordinate MBS)

420,187

51,812

—

225,674

(59,232

)

87,346

Interest rate sensitive assets:

Agency fixed-rate pass-through securities

—

(830,296

)

308,742

Principal-only stripped mortgage-backed securities

—

638,098

46,763

Floating rate collateralized mortgage

   obligations

876,394

—

—

Senior non-Agency securities

66,069

—

99,803

Interest-only stripped mortgage-backed securities

—

—

103,547

Loans secured by non-owner occupied properties and

   jumbo loans, net of associated asset-backed

   financing (senior MBS)

107,565

12,441

—

Mortgage servicing rights:

Received in loan sales (1)

190,141

88,706

187,431

Purchases

—

29,429

16,258

1,240,169

(61,622

)

762,544

$

1,465,843

$

(120,854

)

$

849,890

(1)
Net of exchange of mortgage servicing spread for IO stripped MBS in 2024 and 2023.

Our acquisitions during the years ended December 31, 2025, 2024 and 2023 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.

76

Investment Portfolio Composition

Mortgage-Backed Securities

Following is a summary of our MBS holdings:

December 31, 2025

December 31, 2024

Average

Average

Fair value

Principal/

notional

Life (in years)

Coupon

Fair value

Principal/

notional

Life (in years)

Coupon

(dollars in thousands)

Agency pass-through securities

$

2,850,447

$

2,805,895

7.6

5.3

%

$

3,079,492

$

3,132,005

8.7

5.4

%

Floating rate collateralized mortgage

    obligations

855,997

850,172

6.8

5.0

%

—

—

—

—

Principal-only stripped securities

521,129

610,256

4.1

0.1

%

596,300

776,455

6.7

0.1

%

Senior non-Agency securities

152,784

155,369

5.4

5.4

%

105,182

111,479

9.2

5.1

%

Interest-only stripped securities

72,502

344,592

7.7

4.8

%

86,260

386,040

8.0

4.8

%

Subordinate credit-linked securities

—

—

196,472

174,813

3.6

12.4

%

$

4,452,859

$

4,766,284

$

4,063,706

$

4,580,792

Credit Risk Transfer Arrangements

Following is a summary of our investment in CRT arrangements:

December 31, 2025

December 31, 2024

(in thousands)

Carrying value of CRT arrangements:

Derivative assets - CRT derivatives

$

32,659

$

29,377

Derivative and credit risk transfer strip liabilities- CRT strips

(5,999

)

(4,060

)

Deposits securing CRT arrangements

1,009,334

1,110,708

Interest-only security payable at fair value

(37,650

)

(34,222

)

$

998,344

$

1,101,803

UPB of loans subject to credit guarantee obligations

$

19,517,530

$

21,249,304

Following is a summary of the composition of the loans underlying our investment in CRT arrangements as of December 31, 2025:

Year of origination

2020

2019

2018

2017

2016

2015

Total

(in millions)

UPB:

Outstanding

$

4,023

$

9,075

$

2,352

$

2,055

$

1,634

$

379

$

19,518

Liquidations:

Balances

$

2.1

$

12.7

$

65.4

$

175.2

$

127.8

$

63.2

$

446.4

Losses

$

—

$

1.7

$

6.8

$

22.3

$

13.8

$

7.8

$

52.4

Modifications (1):

Balances

$

71.8

$

580.9

$

316.1

$

—

$

—

$

—

$

968.8

Losses

$

2.6

$

27.9

$

21.1

$

—

$

—

$

—

$

51.6

Weighted average:

Original debt-to

   income ratio

33.5

%

35.9

%

39.1

%

36.8

%

35.1

%

35.8

%

35.8

%

Origination FICO

  credit score

765

754

735

743

750

743

752

Origination loan-to

  value ratio

80.6

%

83.3

%

83.5

%

82.6

%

80.6

%

80.9

%

82.4

%

Current loan-to

  value ratio (2)

48.5

%

48.3

%

46.5

%

41.6

%

37.3

%

34.9

%

46.2

%

77

(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

$

431

$

918

$

304

$

228

$

327

$

69

$

2,277

Florida

439

862

299

214

169

31

2,014

Texas

466

777

186

175

194

59

1,857

Virginia

218

406

86

92

115

39

956

Maryland

159

392

108

118

108

22

907

Other

2,310

5,720

1,369

1,228

721

159

11,507

$

4,023

$

9,075

$

2,352

$

2,055

$

1,634

$

379

$

19,518

Year of origination

Regional geographic

   distribution (1)

2020

2019

2018

2017

2016

2015

Total

(in millions)

Southeast

$

1,365

$

3,085

$

833

$

698

$

508

$

115

$

6,604

Southwest

1,032

1,982

439

403

293

81

4,230

West

871

1,911

602

461

473

98

4,416

Northeast

381

1,149

278

301

212

59

2,380

Midwest

374

948

200

192

148

26

1,888

$

4,023

$

9,075

$

2,352

$

2,055

$

1,634

$

379

$

19,518

(1)
Southeast consists of AL, DC, FL, GA, KY, MD, MS, NC, SC, TN, VA, WV; Southwest consists of AZ, AR, CO, KS, LA, MO, NM, OK, TX, UT; West consists of AK, CA, GU, HI, ID, MT, NV, OR, WA and WY; 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

$

4,003

$

8,985

$

2,300

$

2,030

$

1,627

$

378

$

19,323

90 - 179 Days

12

52

25

16

5

1

111

180+ Days

5

29

17

5

1

—

57

Foreclosure

3

9

10

4

1

—

27

$

4,023

$

9,075

$

2,352

$

2,055

$

1,634

$

379

$

19,518

Bankruptcy

$

4

$

35

$

16

$

8

$

6

$

—

$

69

Cash Flows

Our cash flows for the years ended December 31, 2025, 2024 and 2023 are summarized below:

Year ended December 31,

2025

2024

2023

(in thousands)

Operating activities

$

(7,213,231

)

$

(2,702,883

)

$

1,340,173

Investing activities

429,666

1,360,396

(21,726

)

Financing activities

6,717,841

1,399,096

(1,149,228

)

Net cash flows

$

(65,724

)

$

56,609

$

169,219

Our cash flows resulted in a net decrease in cash of $65.7 million during the year ended December 31, 2025, as discussed below.

78

Operating activities

Cash used in operating activities totaled $7.2 billion during the year ended December 31, 2025, as compared to cash used in our operating activities of $2.7 billion and $1.3 billion during the years ended December 31, 2024 and 2023, respectively. Cash flows from operating activities are most influenced by cash flows from loans held for sale as shown below:

Year ended December 31,

2025

2024

2023

(in thousands)

Operating cash flows from:

Loans held for sale

$

(7,608,227

)

$

(2,377,330

)

$

815,464

Other

394,996

(325,553

)

524,709

$

(7,213,231

)

$

(2,702,883

)

$

1,340,173

Cash flows from loans held for sale primarily reflect changes in the level of production inventory as well as cash flows relating to associated hedging activities from the beginning to end of the years presented. Our inventory of loans held for sale increased during the year ended December 31, 2025 compared to decreases in the years ended December 31, 2024 and 2023, respectively. 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 correspondent loan production 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 $429.7 million and $1.4 billion for the years ended December 31, 2025 and December 31, 2024, respectively, compared to net cash used in our investing activities of $21.7 million for the year ended December 31, 2023, primarily due to our net sale of MBS.

Financing activities

Net cash provided by our financing activities was $6.7 billion and $1.4 billion for the years ended December 31, 2025 and December 31, 2024, respectively, as compared to net cash used in our financing activities of $1.1 billion for the year ended December 31, 2023. This change primarily reflects the increase in asset-backed financing related to our increased securitization activity.

As discussed below in Liquidity and Capital Resources, our Manager continually evaluates and pursues 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 the private label securitization which is also expected to increase our VIEs' asset-backed financings.

On August 20, 2025, the Company, PMT ISSUER TRUST—FMSR, PMC., and PennyMac Holdings, LLC (“PMH”) redeemed $350 million of secured term notes (the “Series 2021-FT1 Term Notes”).

79

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.

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:

Year ended December 31,

Assets sold under agreements to repurchase

2025

2024

2023

(in thousands)

Average balance outstanding

$

6,776,255

$

5,478,037

$

6,306,627

Maximum daily balance outstanding

$

9,009,673

$

7,865,435

$

9,460,676

Ending balance (UPB)

$

8,023,156

$

6,509,415

$

5,627,807

The difference between the maximum and average daily amounts outstanding is primarily due to timing of loan purchases and sales in our correspondent production business. The total facility size of our assets sold under agreements to repurchase was approximately $13.6 billion at December 31, 2025.

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 December 31, 2025 and the date of this Report have been renewed, extended or replaced.

80

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 December 31, 2025:

Counterparty

Amount at risk

(in thousands)

Atlas Securitized Products, L.P.

$

466,207

Bank of America, N.A.

88,937

Santander US Capital

70,680

Morgan Stanley & Co. LLC

66,165

Citibank, N.A.

64,728

Nomura Holdings America, Inc.

61,526

Goldman Sachs & Co. LLC

56,306

JPMorgan Chase & Co.

55,560

RBC Capital Markets, L.P.

51,129

Wells Fargo Securities, LLC

32,754

Barclays Capital Inc.

20,222

Bank of Montreal

9,886

Daiwa Capital Markets America Inc.

5,374

BNP Paribas

5,207

Mizuho Financial Group

4,168

$

1,058,849

Senior Notes

On December 15, 2025 and December 22, 2025, respectively, PMC separately issued $75 million principal amount (for a total of $150 million principal amount) of 8.50% Exchangeable Senior Notes due 2029 (the “2029 Exchangeable Notes”) that mature on June 1, 2029. The 2029 Exchangeable Notes issued in the December 2025 offerings were issued as further reopenings of, and are part of the same series with, the 2029 Exchangeable Notes that PMC previously issued in May and June 2024. Upon completion of the December 2025 offerings, the aggregate principal amount of outstanding 2029 Exchangeable Notes was $366.5 million.

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”). 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”). The 2030 Senior Notes and the 2028 Senior Notes are referred to collectively as the “Senior Notes”.

We may redeem for cash all or any portion of the Senior Notes, at our 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. No “sinking fund” will be provided for the 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.

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,

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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:

December 31, 2025

(in thousands)

Loans held for sale at fair value

$

2,699,398

Mortgage servicing rights at fair value

3,737,854

Other assets

From nonaffiliates

686,664

From non-issuer or non-guarantor subsidiaries (1)

552,908

From PFSI

23,669

Total assets

$

7,700,493

Total liabilities

Payable to nonaffiliates

$

2,323,616

Payable to PFSI

5,314,505

Payable to non-issuer or non-guarantor subsidiaries

10,886

$

7,649,007

Year ended December 31, 2025

(in thousands)

Net investment income

From nonaffiliates

$

230,144

From PFSI

15,281

From non-issuer or non-guarantor subsidiaries (1)

(324,427

)

(79,002

)

Expenses

From nonaffiliates

55,903

From PFSI

125,088

180,991

Pre-tax income

(259,993

)

Provision for income taxes

(66,558

)

Net income

$

(193,435

)

(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;

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•
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.

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 December 31, 2025.

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 December 31, 2025, 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.

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