PennyMac Financial Services, Inc.
For the period ended Jun 30, 2026. Filed Aug 4, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 4, 2026
PFSI$65.59-2.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-05.
0001104659-26-055690
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-04.
0001104659-26-090486
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 121 previous paragraphs and 124 current paragraphs.
88 unchanged; 32 reworded; 4 added; 1 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 46 previous and 46 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
Due to declining mortgage production volumes and improving technology, we implemented cost reduction measures in the third quarter of 2026 to reduce expenses. However, despite our expectation that mortgage production volumes will decline, we expect our volumes of non-qualified mortgage production to increase as we continue to expand our presence in that market. We also expect to sell all of our non-agency correspondent loans and none of our conventional conforming correspondent loans to PMT in the third quarter of 2026.
Current report
calculated in accordance with GAAP and should not be considered as a substitute for net income, or any other performance measure calculated in accordance with GAAP.
Current report
For the six months ended June 30, 2026, income before income taxes decreased $44.4 million compared to the same period in 2025. The decrease was primarily due to increases in compensation expense of $69.7 million, origination expense of $60.6 million, servicing expense of $30.6 million and other expense of $25.6 million, partially offset by a $205.5 million increase in loan production revenue due to higher volume in the broker and consumer direct channels and a $10.8 million increase in other income.
Current report
On May 27, 2026, the Company, through its wholly-owned subsidiaries PNMAC, PLS and the Issuer Trust, issued $300 million in Term Notes with a spread of 2.25% due in May 2031 and partially redeemed $300 million Term Notes in with a spread of 3.20% due in March 2029.
Removed paragraphs (1)
Previous report
We expect to sell a portion of our conventional conforming correspondent loan production and all of our nonagency correspondent loan production to PMT in the second quarter of 2026.
Reworded paragraphs (32)
Previous wording
Recent macroeconomic trend and U.S. federal government administration actions with respect to trade, tariffs, government cost reduction efforts and foreign military action have led to significant volatility in financial markets and uncertainty regarding the economic outlook, including inflation and interest rates. Elevated interest rates in recent years have also constrained the mortgage origination market, which is currently projected to increase from $1.9 trillion in 2025 to $2.3 trillion in 2026 according to mortgage industry economists.
Current wording
Recent macroeconomic trend and U.S. federal government administration actions with respect to trade, tariffs, government cost reduction efforts and foreign military action have led to significant volatility in financial markets and uncertainty regarding the economic outlook, including inflation and interest rates. Elevated interest rates in recent years have constrained the mortgage origination market, which is currently projected to increase from $1.9 trillion in 2025 to $2.2 trillion in 2026 according to mortgage industry economists, although recent increases in interest rates may lead to a reduction in origination estimates for 2026.
Previous wording
The opportunity for refinancing has increased in recent periods, driven by interest rate volatility and a greater proportion of outstanding mortgages with note rates near current market rates. If such interest rate volatility continues, it may drive greater mortgage production activity and higher prepayment speeds than we have experienced in recent years. Additionally, reductions in the Federal Reserve’s federal funds rate have reduced the costs of floating rate borrowings and placement fees we receive in relation to custodial funds that we manage as compared to the same periods in the prior year. The current period of economic uncertainty and market volatility may also lead to a reduction in economic activity and slowing home price growth or depreciation, which could lead to increasing mortgage delinquencies or defaults and increase losses from the representations and warranties we provide in our loan sales transactions.
Current wording
Recent increases in interest and mortgage rates have limited consumers’ opportunity for refinancing. If mortgage rates remain at recent levels or continue to increase, mortgage production activity and prepayment speeds will decrease from levels observed in late 2025 and early 2026. Additionally, reductions in the Federal Reserve’s federal funds rate have reduced the costs of floating rate borrowings and placement fees we receive in relation to custodial funds that we manage as compared to prior periods; however, market indicators currently suggest that the Federal Reserve could begin increasing short-term interest rates later in 2026. The current period of economic uncertainty and market volatility may also lead to a reduction in economic activity and slowing home price growth or depreciation, which could lead to increasing mortgage delinquencies or defaults and increase losses from the representations and warranties we provide in our loan sales transactions.
Previous wording
We define “Adjusted EBITDA” as net income plus provision for income taxes, depreciation and amortization, excluding decrease (increase) in fair value of mortgage servicing rights (“MSRs”) net of mortgage servicing liabilities (“MSLs”), due to changes in the valuation inputs we use in our valuation models, hedging (gains) losses associated with MSRs, principal-only stripped MBS valuation-related accretion changes, provision for (reversal of) losses on active loans, stock-based compensation, interest expense on corporate debt or corporate revolving credit facilities and capital lease and certain unusual or non-recurring items.
Current wording
We define “Adjusted EBITDA” as net income plus provision for income taxes, depreciation and amortization, excluding decrease (increase) in fair value of mortgage servicing rights (“MSRs”) net of mortgage servicing liabilities (“MSLs”) due to changes in the valuation inputs we use in our valuation models, hedging (gains) losses associated with MSRs, principal-only stripped mortgage-backed securities (“MBS”) valuation-related accretion changes, provision for (reversal of) losses on active loans, stock-based compensation, interest expense on corporate debt or corporate revolving credit facilities and capital lease and certain unusual or non-recurring items.
Previous wording
For the quarter ended March 31, 2026, income before income taxes increased $495,000 compared to the same quarter in 2025. The increase was primarily due to a $150.2 million increase in loan production revenue due to higher volume across all production channels, partially offset by a $11.5 million decrease inNet loan servicing fees resulting from increases in net MSR valuation losses in excess of growth in servicing fees, a $23.3 million increase inNet interest expense and a $113.6 million increase in total expenses.
Current wording
For the quarter ended June 30, 2026, income before income taxes decreased $44.9 million compared to the same quarter in 2025. The decrease was primarily due to increases in compensation expense of $35.3 million, origination expense of $25.0 million, servicing expense of $14.2 million and other expense of $16.0 million, partially offset by a $55.3 million increase in loan production revenue due to higher volume in the broker and consumer direct channels and a $12.1 million increase in other income.
Previous wording
In our production segment, revenues reflect the effects of larger mortgage market volumes and increased share in our broker and consumer direct lending channels during the quarter ended March 31, 2026 compared to the same quarter in 2025. During the quarter ended March 31, 2026, we recognizedNet gains on loans held for sale at fair value totaling $345.0 million representing an increase of $123.9 million compared to the same quarter in 2025.
Current wording
In our production segment, revenues reflect the effects of larger mortgage market volumes and increased share in our broker and consumer direct lending channels during the quarter and six months ended June 30, 2026 compared to the same periods in 2025. During the quarter and six months ended June 30, 2026, we recognizedNet gains on loans held for sale at fair value totaling $280.3 million and $625.3 million, respectively, representing an increase of $45.7 million and $169.6 million, respectively, compared to the same periods in 2025.
Previous wording
The MSRs, MSLs, 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 represented approximately 208% of our gains on sales of loans held for sale at fair value for the quarter ended March 31, 2026, as compared to 293% for the same quarter in 2025. These estimates change as circumstances change and changes in these estimates are recognized in income in subsequent periods. Subsequent changes in the fair value of our MSRs may significantly affect our income.
Current wording
The MSRs, MSLs, 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 represented approximately 231% and 218% of our gains on sales of loans held for sale at fair value for the quarter and six months ended June 30, 2026, respectively, as compared to 346% and 321% for the same periods in 2025. These estimates change as circumstances change and changes in these estimates are recognized in income in subsequent periods. Subsequent changes in the fair value of our MSRs may significantly affect our income.
Previous wording
We recorded provisions for losses under representations and warranties relating to current loan sales as a component ofNet gains on loans held for sale at fair value totaling $4.5 million for the quarter ended March 31, 2026 compared to $3.5 million for the same quarter in 2025. The increases in the provision relating to current loan sales was primarily attributable to an increase in production volume for the quarter ended March 31, 2026 compared to the same quarter in 2025.
Current wording
We recorded provisions for losses under representations and warranties relating to current loan sales as a component ofNet gains on loans held for sale at fair value totaling $5.8 million and $10.3 million for the quarter and six months ended June 30, 2026, respectively, compared to $4.1 million and $7.6 million for the same periods in 2025. The increases in the provision relating to current loan sales was primarily attributable to a change in the mix of loans sold for the quarter and six months ended June 30, 2026 compared to the same periods in 2025
Previous wording
We also recorded reductions in the liability of $3.0 million for the quarter ended March 31, 2026 compared to $1.4 million for the same quarter in 2025. The reductions in the liability resulted from previously sold loans meeting performance criteria established by the Agencies which significantly limit the likelihood of certain repurchase or indemnification claims.
Current wording
We also recorded reductions in the liability of $3.7 million and $6.7 million for the quarter and six months ended June 30, 2026, respectively, compared to $2.2 million and $3.6 million for the same periods in 2025. The reductions in the liability resulted from previously sold loans meeting performance criteria established by the Agencies which significantly limit the likelihood of certain repurchase or indemnification claims.
Previous wording
During the quarter ended March 31, 2026, we repurchased loans totaling $24.9 million. We charged losses of $567,000 against the liability during the quarter ended March 31, 2026. Our losses arising from representations and warranties have historically been minimized by our ability to either recover most of the losses from our correspondent sellers or from our ability to profitably refinance and resell repurchased loans.
Current wording
During the quarter and six months ended June 30, 2026, we repurchased loans totaling $31.5 million and $56.4 million, respectively. We charged losses of $659,000 and $1.2 million against the liability during the quarter and six months ended June 30, 2026, respectively. Our losses arising from representations and warranties have historically been minimized by our ability to either recover most of the losses from our correspondent sellers or from our ability to profitably refinance and resell repurchased loans.
Previous wording
Loan origination fees increased $25.8 million during the quarter ended March 31, 2026, compared to the same quarter in 2025 primarily due to an increase in production volume.
Current wording
Loan origination fees increased $10.4 million and $36.2 million during the quarter and six months ended June 30, 2026, respectively, compared to the same periods in 2025 primarily due to an increase in production volumes in the broker and consumer direct lending channels.
Previous wording
Fulfillment fees from PMT represent fees we collect for services we perform on behalf of PMT in connection with the acquisition, packaging and sale of loans. The fulfillment fees are calculated based on the number of loans we fulfill for PMT and an increase in the number of loans included in PMT’s non-Agency securitization and loan sales.
Current wording
Fulfillment fees from PMT represent fees we collect for services we perform on behalf of PMT in connection with the acquisition, packaging, sale and securitization of loans. The fulfillment fees are calculated based on the number of loans we fulfill for PMT and an increase in the number of loans included in PMT’s non-Agency securitization and loan sales.
Previous wording
Fulfillment fees increased $447,000 during the quarter ended March 31, 2026, compared to the same quarter in 2025; the increase was primarily due to an increase in correspondent loan production volumes for PMT’s account and an increase in non-Agency securitization and loan sales.
Current wording
Fulfillment fees decreased $791,000 and $344,000 during the quarter and six months ended June 30, 2026, respectively, compared to the same periods in 2025; the decrease was primarily due to a decrease in correspondent loan production volumes for PMT’s account.
Previous wording
Loan servicing fees from non-affiliates and other fees increased during the quarter ended March 31, 2026 compared to the same quarter in 2025. The increases were primarily due to growth of our loan servicing portfolio. Other servicing fees decreased primarily due to decreased incentives received for loss mitigation activities.
Current wording
Loan servicing fees from non-affiliates increased during the quarter and six months ended June 30, 2026 compared to the same periods in 2025. The increases were primarily due to growth of our loan servicing portfolio. Other servicing fees decreased primarily due to decreased incentives received for loss mitigation activities.
Previous wording
We have elected to carry our servicing assets and liabilities at fair value. Changes in fair value have two components: changes due to realization of cash flows of the MSRs and MSLs and changes due to changes in market inputs used to estimate the fair value of MSRs and MSLs. We endeavor to moderate the effects of changes in fair value arising from changes in market inputs by entering into derivatives transactions and holding principal-only stripped mortgage-backed securities (“MBS”).
Current wording
We have elected to carry our servicing assets and liabilities at fair value. Changes in fair value have two components: changes due to realization of cash flows of the MSRs and MSLs and changes due to changes in market inputs used to estimate the fair value of MSRs and MSLs. We endeavor to moderate the effects of changes in fair value arising from changes in market inputs by entering into derivatives transactions and holding principal-only stripped MBS.
Previous wording
Changes in fair value of MSRs attributable to changes in fair value inputs increased during the quarter ended March 31, 2026 compared to the same quarter in 2025 due to increases in interest rates during the quarter ended March 31, 2026 compared to decreasing interest rates during the same quarter in 2025. Increasing interest rates reduce the rate of prepayments of the underlying loans, which increases the cash flows expected from the servicing rights, while decreasing interest rates have the opposite effect.
Current wording
Changes in fair value of MSRs attributable to changes in fair value inputs increased during the quarter and six months ended June 30, 2026 compared to the same periods in 2025 due to increases in interest rates during the quarter and six months ended June 30, 2026 as compared to flat to decreasing interest rates during the same periods in 2025. Increasing interest rates reduce the rate of prepayments of the underlying loans, which increases the cash flows expected from the servicing rights, while decreasing interest rates have the opposite effect.
Previous wording
Hedging results reflect valuation losses offsetting the valuation gains from increasing interest rates in the quarters ended March 31, 2026 compared to the opposite circumstances and effects in the same quarter in 2025.
Current wording
Hedging results reflect valuation losses offsetting the valuation gains from increasing interest rates in the quarter and six months ended June 30, 2026 and in the same periods in 2025.
Previous wording
Changes in fair value attributable to realization of cash flows are influenced by changes in the level of servicing assets and liabilities and changes in estimates of the remaining cash flows to be realized. During the quarter ended March 31, 2026, realization of cash flows increased compared to the same quarter in 2025, primarily due to expectations for faster loan prepayments in the first quarter of 2026 as opposed to the same period in 2025.
Current wording
Changes in fair value attributable to realization of cash flows are influenced by changes in the level of servicing assets and liabilities and changes in estimates of the remaining cash flows to be realized. During the quarter and six months ended June 30, 2026, realization of cash flows increased compared to the same periods in 2025, primarily due to higher prepayment speeds in the 2026 periods and the growth in our investment in MSRs.
Previous wording
Net interest expense increased $23.3 million during the quarter ended March 31, 2026 compared to the same quarter in 2025. The increases were primarily due to an increase in interest expense on borrowings attributable to reductions in yield on principal-only stripped MBS, reflecting slower prepayment expectations combined with the Company financing a larger investment in MSRs and increased interest shortfalls on repayments of loans serviced for Agency securitizations during 2026, partially offset by an increase in interest income from loans held for sale and placement fees.
Current wording
Net interest expense increased $10.6 million and $33.9 million during the quarter and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increases were primarily due to an increase in interest expense on borrowings attributable to the Company financing a larger investment in MSRs and increased interest shortfalls on repayments of loans serviced for Agency securitizations during 2026, partially offset by an increase in interest income from loans held for sale and placement fees.
Previous wording
Management fees decreased $250,000 during the quarter ended March 31, 2026 compared to the same quarter in 2025, due to decreases in PMT’s average shareholders’ equity which is the basis for the base management fees.
Current wording
Management fees decreased $59,000 and $309,000 during the quarter and six months ended June 30, 2026, respectively, compared to the same periods in 2025, due to decreases in PMT’s average shareholders’ equity which is the basis for the base management fees.
Previous wording
Compensation expenses increased $34.4 million during the quarter ended March 31, 2026 compared to the same quarter in 2025. The increase was primarily due to an increase in head count and increased incentive compensation reflecting higher loan production volume.
Current wording
Compensation expenses increased $35.2 million and $69.7 million during the quarter and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increases were primarily due to an increase in head count and increased incentive compensation reflecting higher loan production volume.
Previous wording
Loan origination expenses increased $35.6 million for the quarter ended March 31, 2026 compared to the same quarter in 2025. The increases were primarily due to higher origination volumes.
Current wording
Loan origination expenses increased $25.0 million and $60.6 million for the quarter and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increases were primarily due to higher origination volumes in the broker and consumer direct lending channels.
Previous wording
Technology expenses increased $5.9 million during the quarter ended March 31, 2026 compared to the same quarter in 2025. The increases were primarily due to an increase in software license expenses and a $371,000 impairment of capitalized software recorded during the quarter ended March 31, 2026.
Current wording
Technology expenses increased $2.2 million and $8.1 million during the quarter and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increases were primarily due to an increase in software license expenses and a $1.2 million and $1.5 million impairment of capitalized software recorded during the quarter and six months ended June 30, 2026, respectively.
Previous wording
Servicing expenses increased $16.4 million during the quarter ended March 31, 2026 compared to the same quarter in 2025. The increase was primarily due to increases in provision for losses on servicing advances resulting from higher delinquent loan balances resulting from a larger servicing portfolio and a larger proportion of delinquencies of 90 days of greater.
Current wording
Servicing expenses increased $14.2 million and $30.6 million during the quarter and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increase was primarily due to increases in provision for losses on servicing advances resulting from higher delinquent loan balances reflecting a larger servicing portfolio and a larger proportion of delinquencies of 90 days or greater.
Previous wording
Marketing and advertising expenses increased $11.7 million during the quarter ended March 31, 2026 compared to the same quarter in 2025. The increase was primarily due to additional marketing expenses incurred as an Official Supporter of Team USA, including marketing during the 2026 winter Olympics and increased marketing expenses for consumer direct lending.
Current wording
Marketing and advertising expenses increased $4.5 million and $16.2 million during the quarter and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increases were primarily due to additional marketing expenses incurred as an Official Supporter of Team USA, including marketing during the 2026 winter Olympics.
Previous wording
Our effective income tax rates were 21.4% and 26.8% for the quarters ended March 31, 2026 and 2025, respectively. The decrease in the effective income tax rate for the quarter ended March 31, 2026 compared to the same quarter in 2025 is due to the effet of an increase in deductible compensation, as well as a favorable change in California apportionment rules enacted into law in June 2025 allowing us to apportion income to California using a single sales factor instead of a factor equally weighed with property, payroll and sales.
Current wording
Our effective income tax rates were 31.1% and (78.5)% for the quarters ended June 30, 2026 and 2025, respectively, and 23.6% and (17.8)% for the six months ended June 30, 2026 and 2025, respectively. The increase in the effective income tax rates for the quarter and six months ended June 30, 2026 compared to the same periods ended in 2025 is primarily due the non-recurrence of a $81.6 million net income tax benefit recognized in the prior year period, due to the repricing of deferred tax liabilities resulting from changes to California’s apportionment rules enacted into law in June 2025 requiring the Company to apportion income to California using a single sales factor instead of a factor equally weighted among property, payroll and sales.
Previous wording
Total assets increased $2.5 billion from $29.4 billion at December 31, 2025 to $31.9 billion at March 31, 2026. The increase was primarily due to an increase of $1.2 billion of loans eligible for repurchase, an increase of $831.1 million in loans held for sale at fair value and an increase of $550.1 million of mortgage servicing rights.
Current wording
Total assets increased $470.8 million from $29.4 billion at December 31, 2025 to $29.9 billion at June 30, 2026. The increase was primarily due to an increase of $987.9 million of mortgage servicing rights and an increase of $880.9 million of loans eligible for repurchase, partially offset by a decrease of $1.3 billion in loans held for sale at fair value.
Previous wording
Total liabilities increased $2.5 billion from $25.1 billion at December 31, 2025 to $27.6 billion at March 31, 2026. The increase was primarily due to an increase of $1.2 billion in liability for loans eligible for repurchase and an increase of $1.5 billion in borrowings to finance increases in loans held for sale and MSRs. As a result of our increased inventory financing requirements, our leverage ratios increased during the quarter ended March 31, 2026 from December 31, 2025.
Current wording
Total liabilities increased $442.9 million from $25.1 billion at December 31, 2025 to $25.5 billion at June 30, 2026. The increase was primarily due to an increase of $880.9 million in liability for loans eligible for repurchase, partially offset by a decrease of $358.8 million in short-term borrowings due to a decrease in loans held for sale. As a result of our decreased inventory financing requirements, our leverage ratios slightly decreased during the period ended June 30, 2026 from December 31, 2025.
Previous wording
The net decrease in cash of $82.2 million during the quarter ended March 31, 2026 is discussed below.
Current wording
The net decrease in cash of $87.4 million during the six months ended June 30, 2026 is discussed below.
Previous wording
Net cash used in operating activities totaled $1.3 billion during the quarter ended March 31, 2026 compared with net cash provided by operating activities of $1.1 billion during the same quarter in 2025. Our cash flows from operating activities are primarily influenced by changes in the levels of our inventory of mortgage loans held for sale as shown below:
Current wording
Net cash provided by operating activities totaled $801.1 million during the six months ended June 30, 2026 compared with net cash provided by operating activities of $934.6 million during the same period in 2025. Our cash flows from operating activities are primarily influenced by changes in the levels of our inventory of mortgage loans held for sale as shown below:
Previous wording
The decrease in cashflows from other operating sources relates to the payments of several large accrued liabilities during the quarter ended March 31, 2026, as compared to the same quarter in 2025.
Current wording
The decrease in cash flows from other operating sources was primarily driven by an increase in servicing advances and the payment of several large accrued liabilities during the six months ended June 30, 2026, compared to the same period in 2025
Previous wording
Net cash used in investing activities during the quarter ended March 31, 2026 totaled $144.5 million, primarily due to $171.6 million in net settlement of derivative financial instruments used to hedge our investment in MSRs and an increase of $24.2 million in short-term investment, partially offset by $58.1 million in proceeds from the repayment of principal-only stripped mortgage-backed securities. Net cash provided by investing activities during the quarter ended March 31, 2025 totaled $30.4 million, primarily due to $74.6 million in net settlement of derivative financial instruments used to hedge our investment in MSRs and $37.8 million in repayment of principal-only stripped mortgage-backed securities, partially offset by increases of $22.8 million in short-term investment and $51.6 million in margin deposits.
Current wording
Net cash used in investing activities during the six months ended June 30, 2026 totaled $533.6 million, primarily due to $262.9 million in net settlement of derivative financial instruments used to hedge our investment in MSRs, a $229.8 million increase in margin deposit and a $124.3 million increase in short-term investment. Net cash used in investing activities during the six months ended June 30, 2025 totaled $127.0 million, primarily due to a $140.7 million increase in margin deposits.
Previous wording
Net cash provided by financing activities totaled $1.4 billion during the quarter ended March 31, 2026, primarily due to an increase of $1.5 billion in borrowings. The increase in borrowings primarily reflects the increase in inventory of loans held for sale. Net cash used in financing activities totaled $1.1 billion during the quarter ended March 31, 2025, primarily due to a decrease of $1.1 billion in borrowings. The decrease in borrowings primarily reflects the decrease in inventory of loans held for sale.
Current wording
Net cash used in financing activities totaled $354.9 million during the six months ended June 30, 2026, primarily due to a decrease of $261.7 million in borrowings and a $50.0 million repurchase of common shares. The decrease in borrowings primarily reflects the decrease in inventory of loans held for sale. Net cash used in financing activities totaled $883.9 million during the six months ended June 30, 2025, primarily due to a decrease of $811.5 million in borrowings. The decrease in borrowings primarily reflects the decrease in inventory of loans held for sale during the six months ended June 30, 2026 and 2025.