PennyMac Financial Services, Inc. Income Taxes Disclosure
Note 18—Income Taxes
The Company files U.S. federal and state corporate income tax returns for PFSI and partnership returns for PNMAC. The Company’s federal tax returns are subject to examination for 2022 and forward and its state tax returns are generally subject to examination for 2021 and forward. PNMAC’s federal partnership returns are subject to examination for 2022 and forward, and its state tax returns are generally subject to examination for 2021 and forward.
The following table details the Company’s provision for income taxes:
Year ended December 31, | ||||||||||
| 2025 | | 2024 | | 2023 |
| ||||
(in thousands) | ||||||||||
Current (benefit) expense: | ||||||||||
Federal | $ | — | $ | (44) | $ | 1,436 | ||||
State | (2,558) | 258 | 620 | |||||||
Total current expense (benefit) | (2,558) | 214 | 2,056 | |||||||
Deferred expense: | ||||||||||
Federal | 141,114 | 70,877 | 31,375 | |||||||
State | (88,216) | 18,512 | 5,544 | |||||||
Total deferred expense | 52,898 | 89,389 | 36,919 | |||||||
Total provision for income taxes | $ | 50,340 | $ | 89,603 | $ | 38,975 | ||||
The following table is a reconciliation of the Company’s provision for income taxes at statutory rates to the provision for income taxes at the Company’s effective income tax rate:
Year ended December 31, | ||||||||||||||||
| 2025 | | 2024 | | 2023 |
| ||||||||||
Amount | Percentage | Amount | Percentage | Amount | Percentage | |||||||||||
(amounts in thousands) | ||||||||||||||||
Federal income tax at statutory rate | $ | 115,798 | 21.0% | $ | 84,215 | 21.0% | $ | 38,563 | 21.0% | |||||||
State income taxes, net of federal benefit (1) | (72,345) | (13.1)% | 12,907 | 3.2% | 4,668 | 2.5% | ||||||||||
Nontaxable and nondeductible items: | ||||||||||||||||
Compensation adjustment (2) | (5,814) | (1.1)% | (7,861) | (2.0)% | (5,187) | (2.8)% | ||||||||||
Other | 1,697 | 0.3% | 342 | 0.1% | 931 | 0.5% | ||||||||||
Other: | ||||||||||||||||
Deferred tax adjustment | 11,004 | 2.0% | — | 0.0% | — | 0.0% | ||||||||||
$ | 50,340 | 9.1% | $ | 89,603 | 22.3% | $ | 38,975 | 21.2% | ||||||||
| (1) | The states that contributed to the majority (more than 50%) of the tax effect in this category include California for the years ended December 31, 2025 and 2023 and California and Florida for the year ended December 31, 2024. The impact of state rate revaluation is reflected in this line. |
| (2) | Includes tax benefit from exercise/vesting of stock awards with tax expense in excess of book expense and non-deductible compensation for covered employees. |
The components of the Company’s provision for deferred income taxes are as follows:
Year ended December 31, | ||||||||||
| 2025 | | 2024 | | 2023 |
| ||||
(in thousands) | ||||||||||
Mortgage servicing rights | $ | 151,861 | $ | 231,892 | $ | 186,628 | ||||
Net operating loss | (95,779) | (181,759) | (111,496) | |||||||
Reserves and losses | (5,028) | 39,071 | (41,641) | |||||||
Additional tax basis in partnership from exchanges of partnership units into the Company's common stock | 4,782 | 3,841 | 3,803 | |||||||
Compensation accruals | (4,608) | (451) | 7,403 | |||||||
Other | 1,670 | (3,205) | (7,778) | |||||||
Total provision for deferred income taxes | $ | 52,898 | $ | 89,389 | $ | 36,919 | ||||
Income taxes paid (refunds received) are summarized below:
Year ended December 31, | |||||||||
| 2025 | | 2024 |
| 2023 | ||||
(in thousands) | |||||||||
US federal | $ | — | $ | — | $ | — | |||
US state and local: | |||||||||
New York | (3,888) | 180 | 486 | ||||||
New York City | 790 | 5 | (5) | ||||||
Oregon | 420 | 183 | 159 | ||||||
North Carolina | (57) | 16 | (73) | ||||||
Louisiana | (42) | (32) | (67) | ||||||
Hawaii | (4) | 4 | (80) | ||||||
South Carolina | 2 | 1,177 | — | ||||||
Maryland | — | — | (1,045) | ||||||
Kentucky | — | — | (184) | ||||||
Tennessee | — | — | (74) | ||||||
Idaho | — | (59) | |||||||
Other | 99 | (45) | (225) | ||||||
Total state and local | (2,680) | 1,488 | (1,167) | ||||||
Total income taxes (refunds received) paid | $ | (2,680) | $ | 1,488 | $ | (1,167) | |||
The components of Income taxes payable are as follows:
December 31, | ||||||
| 2025 | | 2024 | |||
(in thousands) | ||||||
Current income tax payable (receivable) | $ | 77 | $ | (45) | ||
Deferred income tax liability, net | 1,183,943 | 1,131,045 | ||||
Income taxes payable | $ | 1,184,020 | $ | 1,131,000 | ||
The tax effects of temporary differences that gave rise to deferred income tax assets and liabilities are presented below:
December 31, | |||||||
| 2025 | | 2024 |
| |||
(in thousands) | |||||||
Deferred income tax assets: | |||||||
Net operating loss carryforward | $ | 550,715 | $ | 454,936 | |||
Reserves and losses | 41,393 | 36,365 | |||||
Compensation accruals | 40,326 | 35,718 | |||||
Additional tax basis in partnership from exchanges of partnership units into the Company's common stock | 13,334 | 18,116 | |||||
Other | 13,219 | 8,588 | |||||
Gross deferred income tax assets | 658,987 | 553,723 | |||||
Deferred income tax liabilities: | |||||||
Mortgage servicing rights | 1,830,563 | 1,678,702 | |||||
Other | 12,367 | 6,066 | |||||
Gross deferred income tax liabilities | 1,842,930 | 1,684,768 | |||||
Net deferred income tax liability | $ | 1,183,943 | $ | 1,131,045 | |||
The Company recorded a deferred tax asset of $550.7 million for net operating losses, of which the $436.0 million related to federal net operating loss carry forward has no expiration date but is subject to an annual utilization limitation of up to 80% of taxable income. Of the remaining $114.7 million in deferred tax assets, relating to state net operating losses, $12.1 million expires between 2027 and 2037, $82.2 million expires in 2042 and $20.4 million has no expiration date. The Company expects to fully utilize these net operating losses before their expiration dates.
At December 31, 2025 and 2024, the Company had no unrecognized tax benefits and does not anticipate any unrecognized tax benefits. Should the recognition of any interest or penalties relative to unrecognized tax benefits be necessary, it is the Company’s policy to record such expenses in the Company’s income tax accounts. No such accruals existed at December 31, 2025 and 2024.
The Company made dividend payments of $62.6 million to holders of common stock in 2025. For tax purposes, the entire distribution is a return of capital to the stockholders.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 19, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Mar 5, 2019 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.