Dan Perotti, PennyMac’s chief financial officer, said during the company’s earnings results that the revenue results included a $1 million net fair value gain on mortgage repurchase rights (MSRs), net hedges and expenses.
“We leveraged higher lock volumes resulting from lower interest rates initially to generate an annualized return of 18% of revenue,” chairman and CEO David Spector said during the call.
“While we generally expect manufacturing revenue to act as a natural hedge against this flow, profits in the fourth quarter were impacted by competitive forces,” added Spector. “Many industry participants have also added large volumes in anticipation of lower prices, and this excess volume has created a competitive initial market, reducing the rate of increase in production and income normally associated with interest rates.”
Service revenue is down significantly
PennyMac’s pretax income fell to $134.4 million, down from $236.4 million in the previous quarter but up slightly from $129.4 million in Q4 2024. The manufacturing segment reported pretax income of $127.3 million, up from $122.9 million in Q3 2025 and $7202 million in Q4.
Total loan acquisitions and originations, including completed loans PennyMac Mortgage Investment Trust (PMT), increased 16% from the previous quarter to $42.2 billion in unpaid principal balance (UPB).
Higher volumes in PennyMac’s direct-to-consumer and social media channels supported production results, although margins declined. Total rate locks increased to $46.8 billion, up 8% from the prior quarter and 29% from last year.
Reporter acquisitions realized in PMT reached $3.7 billion in UPB, and higher than Q3 2025 and Q4 2024.
The utility segment posted net income of $37.3 million, down significantly from $157.4 million in Q3 2025, reflecting increased flows of MSRs as lower mortgage rates drive prepayments.
Excluding valuation-related items, operating tax revenue fell 70% from the previous quarter.
Total loan disbursements decreased to $149.8 million, compared to $241.2 million in Q3 2025. PennyMac said the increase in prepayments led to higher realization of MSR cash flows, partially offset by fair value gains and hedging losses.
But PennyMac’s service portfolio grew to $733.6 billion in outstanding principal balances, up 2% from the prior quarter and 10% from last year.
Benefits of working a full year
For the full year, PennyMac reported revenue of $501.1 million, up from $311.4 million in 2024, representing a return of 12%. Total loan production increased by 25% from the previous year to $145.5 billion, and the loan portfolio grew to $733.6 billion in UPB by the end of 2025, which is 10% year-on-year.
Pretax income rose to $551.4 million, up from $401 million in 2024, and total revenue rose to $2 billion, up from $1.6 billion in 2024.
During the year, the company issued $2.35 billion in senior unsecured notes maturing from 2032 to 2034, and $300 million Ginnie Mae The MSR term notes are due August 2030. It also redeemed $650 million of unsecured notes and $700 million of Ginnie Mae MSR term notes.
Spector said the company’s manufacturing and service model supported strong year-round performance despite market volatility.
“PFSI finished the year with a strong fourth quarter, generating a 10% annualized return on equity with strong productivity results driven by increased flow of our MSR assets as prepayment speeds increased,” said Spector. “For the full year 2025 … we achieved double-digit earnings growth in both operating segments, delivering a 58% increase in pre-tax income and a 19% increase in production tax income.
Spector said the results were bolstered by “significant operational momentum,” including a 25% increase in production volume and a 10% increase in the company’s portfolio of services provided by UPB.
