Core Insights - The company reported strong third quarter results, demonstrating effective strategy execution and a balanced business model that adapts well to changing market conditions [5][30]. - Adjusted pretax income reached $31 million, with an annualized adjusted return on equity (ROE) of 25%, exceeding guidance for the quarter and year to date [6][22]. - The company experienced record origination volume and steady servicing profitability, contributing to book value growth, which increased to $62 per share, up 5% year over year [7][29]. Financial Performance - Revenue grew by double digits year over year and over the trailing quarter, driven by both servicing and origination units [22]. - The adjusted ROE for the year-to-date was 20%, above the upper end of guidance, with expectations to exceed the full year adjusted ROE guidance of 16% to 18% [23][28]. - GAAP net income was reported at $2.03 per share, reflecting a tax provision expense of $4 million related to tax planning strategies [6][22]. Business Segments - The origination segment saw a significant increase in adjusted pretax income, driven by strong recapture execution and improved performance in the B2B channel [24]. - The servicing segment contributed $31 million to adjusted pretax income, with growth in average UPB and revenue, although offset by higher runoff [25]. - The company’s Consumer Direct team achieved a recapture performance rate of 85%, indicating strong customer retention and growth potential [13][24]. Market Conditions and Strategy - The company is well-positioned to capitalize on both high and low interest rate environments, with a focus on maintaining agility in asset management [8][30]. - The servicing portfolio grew by $17 billion or 6% year over year, driven by double-digit origination growth [9]. - The company anticipates continued interest in subservicing options, with expectations for subservicing additions in the second half of the year to exceed $32 billion [14]. Technology and Innovation - The company has invested in AI and technology to enhance operational efficiency, customer experience, and competitive positioning [19][21]. - The focus on integrating robotics and machine learning aims to optimize processes and improve decision-making across operations [20][21]. - The technology investments have resulted in improved cycle times, processing costs, and customer access, contributing to overall business performance [20].

Financial Data and Key Metrics Changes - The company recorded a comprehensive loss of $80.2 million, or $0.77 per share, including a litigation settlement expense of $175.1 million, which equates to $1.68 per share [16][17] - The return on book value was -0.63% including the litigation expense, while it would have been +7.6% excluding the expense [16] - Total economic return for the third quarter was -6.3%, and +7.6% without the litigation expense [9] Business Line Data and Key Metrics Changes - The RMBS portfolio decreased from $11.4 billion to $10.9 billion due to agency securities sales [6] - The company funded $49 million of UPB in first and second liens during the third quarter, with an additional $52 million UPB in the origination pipeline at quarter-end [12] - The company brokered $60 million UPB in second liens, a significant increase from $44 million in Q2 [12] Market Data and Key Metrics Changes - The Fed cut rates by 25 basis points in September, marking the first cut since November 2024, which positively impacted equity markets, with the S&P 500 up almost 8% by quarter-end [10] - The nominal spread for current coupon RMBS tightened by 26 basis points to 145 basis points to the swap curve [22] Company Strategy and Development Direction - The company aims to enhance and grow its servicing and origination activities while focusing on a MSR-focused investment strategy [9] - The company plans to redeem $262 million of outstanding convertible notes to reduce structural leverage to historical levels [8] - The company is optimistic about the investment opportunities available in the market, particularly in the MSR and MBS portfolio [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's liquidity and risk metrics following the litigation settlement [5] - The company sees no reason for its stock to trade at an 11% discount to book value, given the quality of its assets and the uncertainty created by the litigation now resolved [13] - Management highlighted the importance of technology investments to maintain growth in the direct-to-consumer origination platform [69] Other Important Information - The company has established a significant relationship with a new sub-servicing client, bringing the total sub-servicing UPB to approximately $40 billion [11] - The company is focused on improving efficiencies and lowering costs in light of the recent settlement payments [9] Q&A Session Summary Question: What are the key drivers of the increase in the EAD in the third quarter relative to the second quarter? - The increase in EAD is attributed to the decrease in financing costs, allowing asset yields to remain constant [34] Question: Can you give us an update on your book value quarter to date? - The book value was up about 1% as of last Friday [37] Question: Can you talk about the various risk metrics as you think about the size of the portfolio? - The company considers multiple risk metrics, including returns available on asset classes and the ideal mix in the current market context [41][43] Question: Does the return potential slide factor in potential cost savings? - The return potential slide reflects current costs, and there is potential upside as cost savings are realized [44][46] Question: Can you help us understand the strategy behind the coupon positioning? - The coupon exposure is managed based on how rates move and the current coupon's position relative to risk exposures [51][52] Question: Can you give us color on growth opportunities in the sub-servicing business? - The company is focused on developing relationships and attracting clients dissatisfied with their current sub-servicers [60] Question: How do you see MSR valuations responding to a further drop in interest rates? - MSR valuations are expected to remain stable, with strong demand for low gross WAC MSR despite potential declines in prices [87][88] Question: What is the valuation of the flow MSRs that you're originating versus your existing portfolio? - The price multiple for the entire portfolio is 5.8x, with variations based on coupon rates [99]

Financial Data and Key Metrics Changes - The company recorded a comprehensive loss of $80.2 million, or $0.77 per share, including a litigation settlement expense of $175.1 million, which was $1.68 per share [16][17] - The return on book value was negative 0.63% including the litigation expense, while it would have been positive 7.6% excluding the expense [16][17] - Total economic return for the third quarter was negative 6.3%, and positive 7.6% without the litigation expense [9][10] Business Line Data and Key Metrics Changes - The RMBS portfolio decreased to $10.9 billion from $11.4 billion due to agency securities sales [6] - The company sold $19.1 billion UPB of MSR and an additional $10 billion UPB expected to settle soon, both slightly above marks [6][8] - The direct-to-consumer originations platform funded $49 million of UPB in first and second liens, with a record high of $60 million UPB in second liens brokered during the quarter [12][24] Market Data and Key Metrics Changes - The Fed cut rates by 25 basis points in September, marking the first cut since November 2024, which positively impacted equity markets, with the S&P 500 up almost 8% by quarter-end [10][11] - The nominal spread for current coupon RMBS tightened by 26 basis points to 145 basis points to the swap curve [22] Company Strategy and Development Direction - The company aims to enhance its MSR-focused investment strategy and grow its servicing and origination activities [9][13] - The company plans to redeem $262 million UPB of outstanding convertible notes to reduce structural leverage to historical levels [8] - The company is optimistic about the investment opportunities available in the market, particularly in the MSR and MBS portfolio [15][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's liquidity and risk metrics post-litigation settlement, indicating a clear path forward [5][9] - The company sees mortgage spreads as attractive despite recent tightening and believes its strategy is well-positioned to capitalize on market conditions [14][31] - Management highlighted the importance of technology investments to improve customer experiences and reduce costs [13][69] Other Important Information - The company has established a significant relationship with a new sub-servicing client, bringing the total sub-servicing UPB to approximately $40 billion [8] - The company is focused on improving efficiencies and lowering costs in light of the recent settlement payments [9] Q&A Session Summary Question: What are the key drivers of the increase in the EAD in the third quarter relative to the second quarter? - The increase in EAD is attributed to the decrease in financing costs, allowing asset yields to remain constant [34] Question: Can you give us an update on your book value quarter to date? - The book value was up about 1% as of last Friday [37] Question: Can you talk about the various risk metrics as you think about the size of the portfolio following the settlement? - The company looks at multiple risk metrics, including returns available on asset classes and overall leverage [41][43] Question: Does the return potential slide factor in potential cost savings? - The return potential slide reflects current costs, with potential upside as cost savings are realized [44][46] Question: Can you help us understand the coupon positioning strategy? - The coupon exposure is managed based on how rates move and the current coupon risk in the MSR portfolio [51][52] Question: Can you provide insight into growth opportunities in the sub-servicing business? - The company is focused on building relationships and attracting clients dissatisfied with their current sub-servicers [60][61] Question: How do you see MSR valuations responding to a further drop in interest rates? - MSR valuations are expected to remain stable, with strong demand for low gross WAC MSR [87][88] Question: What is the valuation of the flow MSRs that you're originating versus your existing portfolio? - The price multiple for the entire portfolio is 5.8 times, with variations based on coupon rates [99][100]

Financial Data and Key Metrics Changes - The company recorded a comprehensive loss of $80.2 million, or $0.77 per share, including a litigation settlement expense of $175.1 million, which equates to $1.68 per share [14][15] - Excluding the litigation expense, the company would have generated comprehensive income of $94.9 million, or $0.91 per share [14] - The total economic return for the third quarter was negative 6.3%, while it would have been positive 7.6% without the litigation expense [8][14] - For the first nine months of the year, the total economic return on book value was negative 15.6% and positive 9.3% excluding the expense [9] Business Line Data and Key Metrics Changes - The RMBS portfolio decreased from $11.4 billion to $10.9 billion due to sales of agency securities [5] - The company sold $19.1 billion UPB of MSR and an additional $10 billion UPB expected to settle soon, both slightly above marks [5] - The direct-to-consumer originations platform funded $49 million of UPB in first and second liens, with an additional $52 million UPB in the origination pipeline at quarter-end [11] Market Data and Key Metrics Changes - The Fed cut rates by 25 basis points in September, marking the first cut since November 2024, which positively impacted equity markets, with the S&P 500 up almost 8% by quarter-end [9][10] - The nominal spread for current coupon RMBS tightened by 26 basis points to 145 basis points to the swap curve [21] - The market for MSR remains competitive, with only about 3% of the MSR portfolio considered in the money at current mortgage rates [24] Company Strategy and Development Direction - The company aims to enhance and grow its servicing and origination activities, focusing on a MSR-focused investment strategy [7][12] - The company plans to redeem $262 million UPB of outstanding convertible notes to reduce structural leverage to historical levels [6] - The company is optimistic about the growth of its sub-servicing business, establishing significant relationships with third-party clients [5][56] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio adjustments and the ability to capitalize on opportunities in the MSR and MBS portfolio [12][30] - The company views mortgage spreads as attractive despite recent tightening and believes risks to MBS performance are symmetric, supporting their strategy [13] - Management highlighted the importance of technology investments to maintain growth in the direct-to-consumer origination business [63] Other Important Information - The company has approximately $770.5 million in cash on the balance sheet after the litigation settlement payment [17] - The weighted average days to maturity for agency RMBS repo was 88 days at quarter-end [18] - The company is focused on improving efficiencies and lowering costs, with significant savings already identified [7] Q&A Session Summary Question: Key drivers of the increase in EAD in Q3 - The increase in EAD was driven by a decrease in financing costs, allowing asset yields to remain constant [32][34] Question: Update on book value quarter to date - The book value was up about 1% as of the last Friday [36] Question: Discussion on various risk metrics post-settlement - The company looks at multiple risk metrics, balancing returns available on asset classes with overall leverage and liquidity [40][42] Question: Cost savings impact on return potential - Current return potential estimates do not factor in potential cost savings, indicating upside potential as those savings are realized [43] Question: Strategy behind coupon exposure - The coupon exposure is managed based on how rates move and the current coupon's risk relative to the MSR portfolio [47][50] Question: Growth opportunities in the sub-servicing business - The company is focused on developing relationships and attracting clients dissatisfied with their current sub-servicers [54][56] Question: Valuation of flow MSRs versus existing portfolio - The valuation of flow MSRs is marked to market prices, and recapture cash flows do not impact the mark but affect yield [82]

Financial Performance - The company reported a comprehensive loss of $(0.77) per share [6] - The economic return on book value was (6.3)% [6] - Excluding litigation settlement expense, the economic return on book value was 7.6% [6] - A common stock dividend of $0.34 per share was declared [6, 13] Portfolio Composition - The investment portfolio totaled $13.5 billion [6] - The portfolio composition included Agency RMBS of $6.5 billion, MSR of $2.6 billion, and cash & cash equivalents of $0.8 billion [18] - The company's economic debt-to-equity ratio was 7.2x [6] MSR Portfolio - The fair value of the MSR portfolio was $2.627 billion [41] - The UPB (Unpaid Principal Balance) of the MSR portfolio was $177.216 billion [41] - The weighted average 3-month CPR (Conditional Prepayment Rate) for the MSR portfolio was 6.0% [41]

Financial Data and Key Metrics Changes - The company's book value per share increased by 4.3% from $18.45 in the prior quarter to $19.25 [20] - Economic return for Q3 was 8.1%, bringing the year-to-date economic return to 11.5% [20][21] - Earnings available for distribution per share remained consistent at $0.73, exceeding the dividend for the quarter [22] - Average yields improved to 5.46% from 5.41% in the prior quarter, with net interest spread ex-PAA increasing to 1.5% [22][23] Business Line Data and Key Metrics Changes - The agency portfolio's market value increased to over $87 billion, up 10% quarter-over-quarter, with total growth of $7.8 billion [9] - Residential credit portfolio increased to $6.9 billion in economic market value, with average yields rising to 6.29% [11][22] - The mortgage servicing rights (MSR) portfolio increased by $215 million to $3.5 billion [15] Market Data and Key Metrics Changes - The U.S. economy showed resilience with GDP growth supported by consumer spending and AI-driven business investment [5] - Inflation remained elevated near 3%, with a modest impact from higher tariffs on goods inflation [6] - Labor market conditions weakened, with hiring slowing to 30,000 jobs per month [7] Company Strategy and Development Direction - The company maintains a diversified housing finance strategy, generating a 13% annualized economic return over the past three years [18] - Focus on maintaining high credit quality in residential credit and leveraging proprietary assets through the correspondent channel [15] - The company is positioned to benefit from expected Fed cuts and healthy fixed income demand [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the agency sector despite tighter spreads, citing improved fundamentals and technicals [26] - The outlook for the residential credit business is positive, with expectations for continued growth in the private label market [18] - Management remains cautious about taking on additional rate risk given current market uncertainties [56] Other Important Information - The company raised $1.1 billion of equity in Q3, including $800 million through its ATM program [8] - The MSR valuation multiple decreased slightly due to lower mortgage rates, but cash flows remain stable [16] - The company has $7.4 billion in unencumbered assets, including $5.9 billion in cash and Agency MBS [24] Q&A Session Summary Question: Agency returns and investment preferences - Management indicated that agency investments remain attractive despite tighter spreads, with expectations for increased demand from banks and REITs [26][27] Question: MSR bulk supply and pricing - Management noted that bulk supply has increased from large participants, with stable pricing throughout the year [29] Question: Breakdown of agency returns - Management provided insights on the spread to swaps versus treasuries, indicating a blended yield of about 160 basis points [33] Question: Book value performance - Management reported a 1% increase in book value pre-dividend accrual, translating to a 1.5% to 2% economic return [35] Question: Prepayment protection in the OBX portfolio - Management highlighted that the OBX portfolio has shown slower prepayment speeds than anticipated, benefiting from prepayment penalties [82]

Financial Data and Key Metrics Changes - The company's book value per share increased by 4.3% from $18.45 in the prior quarter to $19.25, achieving an economic return of 8.1% for Q3 and 11.5% year-to-date [20][21] - Earnings available for distribution per share remained consistent at $0.73, exceeding the dividend for the quarter [22] - The average yield improved to 5.46% from 5.41% in the prior quarter, while the average repo rate improved by three basis points to 4.5% [22][23] Business Line Data and Key Metrics Changes - The agency portfolio's market value increased to over $87 billion, up 10% quarter-over-quarter, with total growth of $7.8 billion [9][10] - The residential credit portfolio increased to $6.9 billion in economic market value, with significant contributions from securitization and loan purchases [11][12] - The mortgage servicing rights (MSR) portfolio increased by $215 million to $3.5 billion, with stable cash flows and low delinquency rates [15][16] Market Data and Key Metrics Changes - The U.S. economy showed resilience with GDP growth supported by consumer spending and AI-driven business investment, despite elevated inflation near 3% [5][6] - Labor market conditions weakened, with hiring slowing to 30,000 jobs per month, leading to a slight increase in the unemployment rate [7] - Interest rate volatility declined, benefiting the company's portfolio by lowering convexity costs [8] Company Strategy and Development Direction - The company maintains a diversified housing finance strategy, generating a 13% annualized economic return over the past three years [19] - The investment strategies are positioned for the balance of the year, with expectations of declining macro volatility and additional Fed cuts [18] - The company aims to increase its residential credit and MSR weightings to a combined 40% [27][28] Management's Comments on Operating Environment and Future Outlook - Management expressed a positive outlook for the agency sector, citing improved demand dynamics and expectations for regulatory reform [17][18] - The company remains cautious about taking on additional rate risk, preferring to maintain a stable duration profile amid market uncertainties [56][59] - The management highlighted the importance of maintaining high credit quality in the residential credit portfolio, especially in light of softer housing market conditions [15] Other Important Information - The company raised $1.1 billion of equity in Q3, including $800 million through its ATM program [8] - The MSR valuation multiple decreased modestly due to lower mortgage rates, but the portfolio remains well insulated [16] Q&A Session Summary Question: Agency returns and investment preferences - Management noted that despite tighter spreads, the agency sector remains attractive due to improved fundamentals and technicals [26] Question: Bulk supply and pricing for MSR - The bulk supply has increased from large participants, with stable pricing encouraging future bulk supply [29] Question: Breakdown of agency returns - The spread to swaps versus treasuries is around 35 to 40 basis points, with low realized volatility aiding hedging costs [33] Question: Outlook for mortgage spreads and securitization - Non-QM issuance is expected to grow, with the market penetration of non-QM loans increasing significantly [47][49] Question: Duration risk and portfolio management - The company is currently maintaining a close-to-zero duration gap due to market uncertainties, with a cautious approach to taking on additional rate risk [56][59]

Financial Data and Key Metrics Changes - The company's book value per share increased by 4.3% from $18.45 in the prior quarter to $19.25, achieving an economic return of 8.1% for Q3 and 11.5% year to date [19][20] - Earnings available for distribution per share remained consistent at $0.73, exceeding the dividend for the quarter [20] - The average yield improved to 5.46% compared to 5.41% in the prior quarter, while the average repo rate improved by three basis points to 4.5% [20][21] Business Line Data and Key Metrics Changes - The agency portfolio's market value increased to over $87 billion, up 10% quarter over quarter, with total growth of $7.8 billion [10] - The residential credit portfolio increased to $6.9 billion in economic market value, with new origination non-QM AAA spreads tightening by 15 basis points [12] - The mortgage servicing rights (MSR) portfolio increased by $215 million to $3.5 billion, with stable cash flows and unchanged serious delinquencies at 50 basis points [15] Market Data and Key Metrics Changes - The U.S. economy showed resilience with GDP growth likely on pace with Q2, supported by consumer spending and AI-driven business investment [6] - Labor market conditions weakened, with hiring slowing to 30,000 jobs per month, while inflation remained elevated near 3% [6][7] - The agency MBS market saw improved supply and demand dynamics, with fixed income fund inflows more than 50% higher than the average over the past few quarters [10] Company Strategy and Development Direction - The company maintains a diversified housing finance strategy, which has generated a 13% annualized economic return over the past three years [17] - The focus remains on maintaining a high credit quality portfolio and leveraging proprietary assets through the correspondent channel [14] - The company is positioned to benefit from expected Fed cuts and a healthy fixed income demand, with plans to increase allocations to residential credit and MSR [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed a positive outlook, highlighting the benefits of declining macro volatility and anticipated Fed cuts [16] - The company remains flexible in the current investing climate with historically low leverage and significant liquidity [18] - Concerns about the housing market were noted, with expectations of modest cumulative depreciation due to elevated mortgage rates [14] Other Important Information - The company raised $1.1 billion of accretive equity in Q3, including $800 million through its ATM program [9] - The MSR valuation multiple decreased modestly due to lower mortgage rates, but the portfolio remains well insulated [15] Q&A Session Summary Question: Agency returns and investment preferences - Management indicated that agency investments remain attractive despite tighter spreads, with expectations for increased demand from banks and overseas participants [26][27] Question: MSR bulk supply and pricing - The bulk supply has increased from large participants, with stable pricing throughout the year, encouraging future bulk supply [29][30] Question: Agency returns breakdown - The spread to swaps versus treasuries is around 35 to 40 basis points, with low realized volatility aiding hedging costs [35][36] Question: MSR purchase strategy - The company prefers lower note rate MSRs to mitigate negative convexity risk, with a focus on maintaining a diversified portfolio [46][48] Question: Outlook for mortgage spreads and securitization - Management expects stable mortgage spreads to support continued market activity, with NonQM market penetration increasing [51][54] Question: Duration risk and portfolio management - The company is currently maintaining a close to zero duration gap due to market uncertainty, with plans to manage risks carefully [62][66] Question: GSEs' potential impact on the market - Speculation exists regarding GSEs becoming more active buyers, but the market has strong demand from REITs and fixed income funds [70][71]

Financial Data and Key Metrics Changes - The book value per share increased by 4.3% from $18.45 in the prior quarter to $19.25, achieving an economic return of 8.1% for Q3 2025 and 11.5% year-to-date [19][20] - Earnings available for distribution per share remained consistent at $0.73, exceeding the dividend for the quarter [20] - The average yield improved to 5.46% from 5.41% in the prior quarter, while the average repo rate improved by three basis points to 4.5% [20] Business Line Data and Key Metrics Changes - The agency portfolio's market value increased to over $87 billion, up 10% quarter-over-quarter, with a total growth of $7.8 billion [8][19] - The residential credit portfolio increased to $6.9 billion in economic market value, with significant contributions from new securitizations [10][11] - The mortgage servicing rights (MSR) portfolio increased by $215 million to $3.5 billion, with stable cash flows and low delinquency rates [13][14] Market Data and Key Metrics Changes - The U.S. economy showed resilience with GDP growth supported by consumer spending and AI-driven business investment, despite elevated inflation near 3% [4][5] - Labor market conditions weakened, with hiring slowing to 30,000 jobs per month, leading to a slight increase in the unemployment rate [5] - The agency MBS market saw improved supply and demand dynamics, with fixed income fund inflows over 50% higher than average [9] Company Strategy and Development Direction - The company maintains a diversified housing finance strategy, focusing on agency MBS, residential credit, and MSR, which has generated a 13% annualized economic return over the past three years [16][18] - The outlook remains positive, with expectations of additional Fed cuts and healthy fixed income demand supporting investment strategies [17][18] - The company aims to increase its residential credit and MSR weightings to a combined 40% in the near term [26] Management's Comments on Operating Environment and Future Outlook - Management noted that the macro environment is expected to remain stable, with declining volatility and a favorable technical backdrop for agency MBS [16][17] - The company is cautious about taking on additional rate risk, preferring to maintain a close-to-zero duration gap due to market uncertainties [50][52] - The management expressed confidence in the stability of earnings available for distribution, supported by a strong swap portfolio and low leverage [60][67] Other Important Information - The company raised $1.1 billion of equity in Q3, including $800 million through its ATM program, and reopened the mortgage REIT preferred market [6][7] - The MSR valuation multiple decreased slightly due to lower mortgage rates, but the portfolio remains well insulated with stable cash flows [14][15] - A new partnership with PennyMac Financial Services was announced, enhancing the company's servicing capabilities [16] Q&A Session Summary Question: Agency returns and investment preferences - Management indicated that agency investments remain attractive despite tighter spreads, with expectations for increased demand from banks and REITs as the Fed continues to cut rates [25][26] Question: Bulk supply and pricing of MSR - The bulk supply of MSR has increased by 50%, primarily from large participants, with stable pricing throughout the year [27] Question: Breakdown of agency returns - The spread to swaps versus treasuries is around 35 to 40 basis points, with a blended yield of about 160 basis points, indicating a favorable risk-return profile [30] Question: Prepayment protection in specified pools - Management discussed the advantages of specified pools for prepayment protection, emphasizing their long-term options and favorable convexity profiles [34][35] Question: Outlook for mortgage spreads and securitization - The company expects continued activity in the non-QM market, with stable mortgage spreads allowing for growth despite seasonal pressures [42][43] Question: Duration risk and leverage - Management confirmed a cautious approach to duration risk, maintaining a close-to-zero duration gap while evaluating opportunities for future leverage [50][52] Question: Stability of NII and dividend coverage - The company expressed confidence in maintaining stable NII levels and ensuring dividend coverage, supported by a strong hedge ratio [58][67]

Financial Data and Key Metrics Changes - PennyMac Financial Services, Inc. reported net income of $182 million for Q3 2025, translating to earnings per share of $3.37 and an annualized return on equity (ROE) of 18% [12] - The operating ROE for the quarter was 18%, with a significant contribution from the servicing business, which provided the majority of mortgage banking operating pre-tax income [2][3] - The company declared a third-quarter common share dividend of $0.30 per share [12] Business Line Data and Key Metrics Changes - The production segment reported pre-tax income of $123 million, more than double the $58 million from the previous quarter, with total acquisition and origination volumes at $36 billion, down 4% from the prior quarter [12][13] - The correspondent lending channel maintained a dominant position with total acquisitions of $28 billion, down 7% from the prior quarter, while correspondent channel margins increased to 30 basis points from 25 basis points [13] - The broker direct channel saw a 6% increase in originations and an 11% increase in locks from the prior quarter, with nearly 5,200 approved brokers, up 17% year-over-year [14][15] Market Data and Key Metrics Changes - As of September 30, $291 billion in unpaid principal balance (UPB), or 41% of the servicing portfolio, had a note rate above 5%, with $201 billion, or 28%, above 6% [10] - The company generated over $100 billion in UPB of correspondent production over the last 12 months, achieving an estimated market share of approximately 20% in the first nine months of 2025 [7] Company Strategy and Development Direction - The company completed a strategic transaction selling mortgage servicing rights (MSRs) with an unpaid principal balance of $12 billion to Annaly Capital Management, which is expected to accelerate the growth of its capital-light subservicing business [4][5] - The focus remains on optimizing the balance sheet and enhancing long-term value for customers and stockholders, with a goal to grow capital-light revenue streams leveraging servicing expertise and technology [6][7] Management's Comments on Operating Environment and Future Outlook - Management expects annualized operating returns on equity to average in the high teens to low 20s through 2026, contingent on stable mortgage rates and delinquency rates [4] - The company is confident in its ability to address refinance demand and anticipates continued improvement in recapture rates as market rates decline [11][10] Other Important Information - The servicing portfolio grew to $717 billion in UPB, with pre-tax income from servicing recorded at $158 million, nearly three times that of the prior quarter [16] - The company ended the quarter with nearly $5 billion in total liquidity, providing significant resources for opportunistic deployment [22] Q&A Session Summary Question: Expectations for fourth quarter ROEs given recent mortgage rate changes - Management indicated that if current rates persist, fourth quarter ROEs could trend towards the low 20s, but seasonality may impact results [23] Question: Implications of government shutdown on FHA business - Management is prepared for various outcomes and has sufficient commitment authority to continue operations, though some borrowers are in forbearance due to the shutdown [24][25] Question: Trends in the broker direct channel post-consolidation - Management noted that their growth in the broker direct channel is due to technology and a clear alternative to top competitors, with expectations to reach 10% market share by the end of 2026 [63] Question: Opportunities for share repurchases and MSR sale impact - Management expressed a willingness to repurchase shares if attractive opportunities arise, while also focusing on deploying capital into higher rate MSRs with better recapture potential [39][40] Question: Sustainability of the lower tax rate observed this quarter - Management indicated that the current tax rate is lower than expected going forward, with a slight increase anticipated [42][43] Question: Responsiveness of borrowers to refinancing opportunities - Management observed a quicker response from borrowers looking to refinance compared to historical trends, with recapture rates improving [48][49]