Mr. Kinsella serves as an “audit committee financial expert,” as that term is defined by the SEC. Each of Deloitte will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions. If the appointmentmembers of Deloitte is not ratified, the Audit Committee will reconsideris “financially literate” under the appointment. OUR BOARD OF DIRECTORS AND OUR AUDIT COMMITTEE UNANIMOUSLY RECOMMEND A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2019.rules of the NYSE.
| | | 24Our Board has determined that all of the directors serving on the Audit Committee are independent under the applicable rules of the NYSE and SEC. For additional information on the Audit Committee, please see the section below entitled “Report of the Audit Committee.” | | |  | 2019 Proxy Statement |
| | | | | SECURITY OWNERSHIP INFORMATION |
| | | | |  | 2023 Proxy Statement | | | 9 | |
| | | | | Security Ownership Information
| | CORPORATE GOVERNANCE |
| | | | | | | | Security OwnershipCompensation Committee
| | | | Primary Responsibilities | Members: | | | | The principal functions of the Compensation Committee are to: • evaluate the performance of our Chief Executive OfficersOfficer and Directorsother executive officers; • review and/or recommend to the Board the compensation of our Chief Executive Officer and other executive officers; • adopt and administer compensation policies, plans and benefit programs for our executive officers and all other members of our executive team; • review and recommend to our Board compensation plans, policies and programs; • prepare the compensation committee report on executive compensation to be included in our annual proxy statement; • review and discuss our compensation discussion and analysis to be included in our annual proxy statement; • recommend to our Board the compensation for our non-management directors; • collaborate with the Board’s Nominating and Corporate Governance Committee on succession plans; and • administer the issuance of any securities under the PennyMac Financial Services, Inc. 2013 and 2022 Equity Incentive Plans and future equity incentive plans adopted by stockholders (collectively the “Equity Plans”). The Compensation Committee may form, and delegate authority to, subcommittees when it deems appropriate to the extent permitted under applicable law. | Farhad Nanji, Chair James K. Hunt Jeffrey A. Perlowitz | | | Meetings in 2022: 4 | | | Our Board has determined that all of the directors serving on the Compensation Committee are independent under the applicable rules of the NYSE and SEC. For additional information on the Compensation Committee, please see the section below entitled “Report of the Compensation Committee.” | | |
| | | | | | | | Finance Committee | | | | Primary Responsibilities | Members: | | | | The following table sets forth certain information regardingFinance Committee is responsible for overseeing the beneficial ownershipfinancial objectives, policies, procedures and activities of sharesour Company, including a review of common stock by (1)our capital structure, sources of funds, liquidity and financial position. In connection with these responsibilities of the Finance Committee, its principal functions are to: • review, assess and monitor our capital structure, liquidity, capital adequacy and reserves; • review and assess any policies we may establish from time to time that relate to our liquidity management, capital structure and dividend approvals; • review our short- and long-term investment strategy, investment policies and the performance of our investments; • monitor our capital budget; and • review our policies and procedures on hedges, swaps and other derivative transactions. | Emily Youssouf, Chair Jonathon S. Jacobson Anne D. McCallion Jeffrey A. Perlowitz | | | Meetings in 2022: 4 | | | Our Board has determined that all of the directors serving on the Finance Committee are independent under the applicable rules of the NYSE. | | |
| | | | 10 | | | 2023 Proxy Statement |
| | | | | | | | Nominating and Corporate
Governance Committee | | | | Primary Responsibilities | Members: | | | | The principal functions of the Nominating and Corporate Governance Committee are to: • seek, consider and recommend to the full Board qualified candidates for election as directors and then recommend nominees for election as directors at the annual meeting of stockholders; • review periodically with the Board and Compensation Committee the succession plans relating to the Chief Executive Officer and the Company’s other executive officers; • periodically prepare and submit to our Board for adoption the Nominating and Corporate Governance Committee’s selection criteria for director nominees; • review and make recommendations to our Board on matters involving the general operation of our Board and our corporate governance guidelines; • annually recommend to our Board nominees for each of its committees; • annually assess our namedstock ownership guidelines; • annually facilitate the assessment of the performance of the individual committees and our Board as a whole and reporting thereon to our Board; and • regularly oversee our environmental, social and governance criteria and policies, practices and initiatives regarding corporate sustainability. | James K. Hunt, Chair Jonathon S. Jacobson Joseph Mazzella Lisa M. Shalett | | | Meetings in 2022: 4 | | | Our Board has determined that all of the directors serving on the Nominating and Corporate Governance Committee are independent under the applicable rules of the NYSE. | | |
| | | | | | | | Related Party Matters Committee | | | | Primary Responsibilities | Members: | | | | The principal functions of the Related Party Matters Committee are to: • establish policies and procedures related to the identification and management of certain transactions, and resolve other potential conflicts of interest, between our Company and any of our subsidiaries, on the one hand, and PennyMac Mortgage Investment Trust, or PMT, and its subsidiaries and any other non-wholly-owned entity that we manage or over which we have control (whether through ownership, voting power, contract or otherwise), on the other hand; • establish policies and procedures related to the identification of any other transactions in which certain related parties, including our directors, executive officers (2) eachand their family members, have a direct or indirect interest; • oversee and administer all such policies; and • review and, if necessary, approve and/or make recommendations to the Board regarding all such transactions, including, but not limited to, our management agreement, servicing agreement, mortgage banking services agreement, MSR recapture agreement, and mortgage loan purchase agreement with PMT, and any amendments of or extensions to such agreements. | Joseph Mazzella, Chair Patrick Kinsella Theodore W. Tozer | | | Meetings in 2022: 4 | | | Our Board has determined that all of the directors serving on the Related Party Matters Committee are independent under the applicable rules of the NYSE. | | |
| | | | | | | 2023 Proxy Statement | | | 11 | |
| | | | | | | | Risk Committee | | | | Primary Responsibilities | Members: | | | | The principal function of the Risk Committee is to assist our Board in fulfilling its oversight responsibilities relating to: (i) our Company’s aggregate risk profile; (ii) specific risks expressly delegated to the Risk Committee, including credit risk, mortgage compliance risk, and operational risk; and (iii) management’s approach for assessing, monitoring and controlling such aggregate and specific risks. In carrying out its duties, the responsibilities of the Risk Committee include, but are not limited to, the following: • reviewing, discussing and overseeing our management’s establishment and operation of our current directorsCompany’s enterprise risk management (and any significant changes thereto); • reviewing annually a schedule of all identified risks facing our Company and director nominees,the alignment of such risks with our management committees and (3)committees of our Board; • reviewing annually our enterprise risk management policy; • reviewing and overseeing credit risk, mortgage compliance risk, environmental and climate risk, and operational risk (including regular reviews of risks arising from cybersecurity and data privacy), as well as the establishment and operation of policies and procedures and remediation for any deficiencies with respect to such specific risks; and • directing management to evaluate the effectiveness of our risk management. | Theodore W. Tozer, Chair Patrick Kinsella Anne D. McCallion Jeffrey A. Perlowitz | | | Meetings in 2022: 4 | | | Our Board has determined that all of our currentthe directors and executive officers as a group. Unless otherwise indicated, all sharesserving on the Risk Committee are owned directly andindependent under the indicated person has sole voting and investment power.applicable rules of the NYSE. | | | | | | | | | | | | | | Common Stock
Beneficially Owned(1) | | | | Number | | Percentage | Executive Officers and Directors | | | | | | | | | | | Stanford L. Kurland (2) | | | | 9,467,543 | | | | | 12.09 | % | David A. Spector (3) | | | | 2,048,799 | | | | | 2.62 | % | Anne D. McCallion (4) | | | | 540,356 | | | | | * | | Doug Jones (5) | | | | 859,804 | | | | | 1.10 | % | Vandad Fartaj (6) | | | | 1,006,907 | | | | | 1.29 | % | Andrew S. Chang | | | | 1,035,445 | | | | | 1.32 | % | David M. Walker (7) | | | | 605,284 | | | | | * | | Matthew Botein | | | | 705,687 | | | | | * | | James K. Hunt | | | | 67,937 | | | | | * | | Patrick Kinsella | | | | 22,444 | | | | | * | | Joseph Mazzella (8) | | | | 792,673 | | | | | 1.01 | % | Farhad Nanji | | | | 180,563 | | | | | * | | Jeffrey A. Perlowitz | | | | — | | | | | * | | Theodore W. Tozer | | | | 2,407 | | | | | * | | Emily Youssouf | | | | 24,401 | | | | | * | | Directors and executive officers as a group (15 persons) | | | | 17,360,250 | | | | | 22.17 | % |
| | |
Board of Directors and Committee Meetings * | Represents less than 1.0%.
During Fiscal 2022, our full Board held eight meetings. All directors are expected to make every effort to attend all meetings of the Board and meetings of the committees of which they are members. Each of our incumbent directors attended at least 75% of the aggregate number of meetings held in Fiscal 2022 for the period during which such director served with respect to meetings of our Board and each committee on which such director served. Executive Sessions of the Independent Directors Our Corporate Governance Guidelines require that our Board hold at least four regularly scheduled meetings each year and that our independent directors meet in executive session without management on a regularly scheduled basis. These executive sessions, which are designed to promote unfettered discussions among our independent directors, are presided over by the independent lead director. Board Member Attendance at the 2022 Annual Meeting of Stockholders We expect each member of the Board to attend our annual meetings of stockholders except for absences due to causes beyond the reasonable control of the director. Each incumbent director serving during the 2022 annual meeting of stockholders attended the meeting. | | | | 12 | | | 2023 Proxy Statement |
| (1) | Based on 78,317,843 shares of common stock outstanding as of the record date. Beneficial ownership is determined in accordance with Rule13d-3 under the Exchange Act. A person is deemed to be the beneficial owner of any shares of common stock if that person has or shares voting power or investment power with respect to those shares or has the right to acquire beneficial ownership at any time within 60 days of the record date. As used herein, “voting power” is the power to vote or direct the voting of shares and “investment power” is the power to dispose or direct the disposition of shares. None of the shares have been pledged as security.
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(2) | Includes 8,314,990 shares of common stock owned by Kurland Family Investments, LLC and 93,347 shares of common stock owned by the 1998 Kurland Revocable Trust.
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(3) | Includes 465,604 shares of common stock owned by ST Family Investment Company LLC.
|
(4) | Includes 423,920 shares of common stock held in a family trust.
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(5) | Includes 712,767 shares of common stock held in a family trust.
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(6) | Includes 845,254 shares of common stock held in a family trust.
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(7) | Includes 463,085 shares of common stock held in a family trust.
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(8) | Includes 407,031 shares of common stock owned by the Mazzella Family Irrevocable Trust. Mr. Mazzella is not a trustee of that entity, however, and disclaims beneficial ownership of the common stock held by that entity.
| | | CORPORATE GOVERNANCE |
| | | | | | 2019 Proxy StatementBoard Evaluations The charters of each of the Audit Committee, Compensation Committee, Finance Committee, Nominating and Corporate Governance Committee, Related Party Matters Committee and Risk Committee require an annual performance evaluation. The Nominating and Corporate Governance Committee oversees the annual board assessment process and the implementation of the annual committee assessments. The Nominating and Corporate Governance Committee typically engages an external evaluator to facilitate the board and committee assessment process. The key areas of focus for the evaluation are Board operations, Board accountability and committee performance. The results of the evaluation are reviewed with the Nominating and Corporate Governance Committee and the full Board. Below is an example of a typical external evaluator led board evaluation. | Commencement
| | Evaluation | | Analysis | | Findings | | Follow-Up | The Nominating and Corporate Governance Committee Chair engages an outside law firm and they jointly develop a comprehensive questionnaire to serve as the basis for the interview with each director. | | Questionnaires are distributed and the outside law firm interviews each director, soliciting feedback on the effectiveness of the Board and the directors individually including on board size, compositions, board and committee structure and overall performance. | | The outside law firm synthesizes the interview discussions and prepares a summary of findings and themes for the Nominating and Corporate Governance Committee, working with the Chair. | | The outside law firm and Chair present their findings and themes to the Nominating and Corporate Governance Committee, which discuss the findings. The Nominating and Corporate Governance Committee Chair then presents the findings to the Board. | | Results requiring additional considerations are addressed at subsequent meetings and reported back to the Board, where appropriate. |
Codes of Business Conduct and Ethics We have adopted a Code of Business Conduct and Ethics, which sets forth the basic principles and guidelines for resolving various legal and ethical questions that may arise in the workplace and in the conduct of our business. This code is applicable to all of our officers, employees and directors. In addition, we have adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers, which sets forth specific policies to guide these individuals in the performance of their duties. The Code of Business Conduct and Ethics and the Code of Ethics for the Chairman, Chief Executive Officer and Senior Financial Officers are available on our website at pfsi.pennymac.com. Our directors, officers and employees are also encouraged to anonymously report suspected violations of the Code of Business Conduct and Ethics through various means, including a toll-free hotline available 24 hours a day, 7 days a week. Corporate Governance Guidelines We have adopted Corporate Governance Guidelines, available on our website at pfsi.pennymac.com, which, in conjunction with the charters and key practices of the committees of our Board, provide the framework for the governance of our Company. Pursuant to the majority voting standard in our Amended and Restated Bylaws, our Corporate Governance Guidelines provide that if any incumbent nominee for director fails to receive a majority vote for election or re-election, if so required, the director will promptly tender to the Board for its consideration his or her offer to resign from the Board. | | | | | | | 2023 Proxy Statement | | | 13 | |
| | | | | | | SECURITY OWNERSHIP INFORMATION |
Security Ownership of Other Beneficial Owners
| | CORPORATE SUSTAINABILITY |
Corporate Sustainability and ESG Overview and Goals Stakeholder Engagement Our corporate sustainability and ESG approach starts with acknowledging that our stakeholders are the beneficiaries of our growth and success as an enterprise. 
| | | The following table sets forth certain information relating to the beneficial ownership of shares of our common stock by each person or entity known to our Company to be the beneficial owner of more than five percent of our shares of our common stock, based on our review of publicly available statements of beneficial ownership filed with the SEC on Schedules 13DCorporate Sustainability and 13G as of the record date. Beneficial ownership reflected in the table below is based on 78,317,843 shares of common stock outstanding as of the record date and review of publicly available statements of beneficial ownership filed with the SEC on Schedules 13D and 13G through February 14, 2019.ESG
As a Foundational Discipline | | | | | | | | | | | | | | Common Stock
Beneficially Owned | | | | Number | | Percentage | 5% Stockholders | | | | | | | | | | | HC Partners LLC (1) 200 Clarendon Street, 59th Floor Boston, Massachusetts 02116 | | | | 20,169,732 | | | | | 25.75 | % | BlackRock, Inc. (2) 55 East 52nd Street New York, New York 10022 | | | | 16,030,399 | | | | | 20.47 | % | The Vanguard Group (3) 100 Vanguard Boulevard Malvern, Pennsylvania 19355 | | | | 5,153,474 | | | | | 6.58 | % | T. Rowe Price Associates, Inc. (4) 100 E. Pratt Street Baltimore, Maryland 212025 | | | | 4,897,731 | | | | | 6.25 | % | Kurland Family Investments, LLC 3043 Townsgate Road Westlake Village, California 91361 | | | | 8,314,990 | | | | | 10.62 | % |
Board and Management Oversight – Policies and Procedures (1) | As reported in Amendment No. 1 to Schedule 13G filed with the SEC on February 14, 2019 by HC Partners, LLC, or HCP. In the Schedule 13G amendment, HCP disclosed that it has the sole voting power and sole dispositive power over 20,169,732 shares of common stock as of December 31, 2018.
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(2) | As reported in Amendment No. 2 to Schedule 13D filed with the SEC on November 5, 2018 by BlackRock, Inc., or BlackRock. In the Schedule 13D amendment, BlackRock disclosed that its holdings consist of 469,752 shares of common stock acquired in its role as an investment adviser for certain client accounts and 15,560,647 shares of common stock held by BlackRock Mortgage Ventures, LLC, or BMV. BMV is indirectly wholly-owned by BlackRock, Inc. who controls the voting and investment power with respect to the securities held by BMV and, therefore, may be deemed to be the beneficial owner of the shares of common stock beneficially owned by that entity. BlackRock also reported that it has the sole voting power over 16,026,090 shares of common stock and sole dispositive power over 16,030,399 shares of common stock as of December 31, 2018.
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(3) | As reported in a Schedule 13G filed with the SEC on February 11, 2019 by The Vanguard Group, or Vanguard. In the Schedule 13G, Vanguard disclosed that it has the sole voting power over 25,866 shares of common stock, sole dispositive power over 5,128,493 shares of common stock, and shared dispositive power over 24,981 shares of common stock as of December 31, 2018.
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(4) | As reported in a Schedule 13G filed with the SEC on February 14, 2019 by T. Rowe Price Associates, Inc., or T. Rowe Price. In the Schedule 13G, T. Rowe Price disclosed that it has the sole voting power over 1,127,025 shares of common stock and sole dispositive power over 4,897,731 shares of common stock as of December 31, 2018.
Monitoring and Evaluation – Sustainability Reporting | |  |
Core Values 
| 26 | | | 2019 Proxy Statement |
| 14 | | | 2023 Proxy Statement | |
Corporate Sustainability Priorities Aligned with our Strategic Objectives With oversight from our Board and its various committees, we are committed to being responsive to our stakeholders as it relates to managing the environmental, social, and governance impacts of our business activities and continuously improving our corporate sustainability and ESG related disclosures. Our Board believes that it is important to establish a robust corporate sustainability and ESG program and framework that will support our corporate initiatives. This year, as part of our ongoing corporate sustainability and ESG program, we will publish another corporate sustainability report on our website with additional goals and industry-specific standards relevant to the mortgage finance industry. Our corporate sustainability report is prepared by our Senior Managing Director and Chief Human Resources Officer and our Managing Director, Corporate Sustainability. We maintain a Corporate Sustainability and ESG Policy, which defines the framework requirements and governing platform for how we identify and manage the ESG impacts of our operations in furtherance of our strategic plans. 
We maintain a pay-for-performance culture but we also acknowledge that our core business centered on the essential public good of homeownership serves a greater corporate purpose. Mortgage banking allows us to serve our customers throughout the country by facilitating home purchases, refinancings that make homes more affordable, and, when necessary, loss mitigation alternatives designed to avoid foreclosure and keep our customers and their families in their homes. We also encourage and support our corporate sustainability objectives through our Board governance, our employees and operations and through our community commitments. Corporate sustainability goals are included in our annual corporate strategic plan and are used to determine overall compensation, including variable pay, where applicable. Our corporate sustainability priorities promote our long-term growth that benefits all of our investors, employees, housing industry customers and other stakeholders. We hold ourselves accountable for managing the ESG impact of our business activities through a number of operational initiatives. | | | | | | | 2023 Proxy Statement | | | 15 | |
| | | | | | | | EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION |
Corporate Sustainability and Board Committee Oversight Our Board has established a set of principles, guidelines and practices that support sustainable financial performance and long-term value creation for our stakeholders supported by Board Committee oversight: | | | | | Nominating and Corporate Governance Committee | | Review of our overall corporate sustainability and ESG policies and practices, including human capital management, community involvement, corporate governance and stakeholder reports. | | | Audit Committee | | Review of our financial disclosures, as well as human capital disclosures in our Form 10-K, and monitoring of regulatory developments pertaining to best practices in environmental and sustainability policies and disclosures. | | | Compensation Committee | | Review of our proxy statement compensation disclosures, our corporate sustainability and human capital performance in determining compensation and managing talent and our Say-On-Pay voting results. | | | Risk Committee | | Review of the physical environmental risks as well as risks related to transitioning to a low carbon economy that may impact properties that we own or that collateralize loans we own or service, or locations where we conduct operations. |
Environmental Sustainability We seek to operate our facilities in an environmentally sustainable manner that manages our impact on the environment by investing in sustainable products and services, committing to increased waste recycling, focusing on energy efficiency and engaging in conservative water consumption practices. We are committed to environmental sustainability and energy conservation and recognize the importance of being a responsible steward of the environment. Board Diversity Currently, three women serve on our Board representing 25% of our Board members. In addition, three directors self-identify as representing underrepresented communities, including one director of Indian/South Asian heritage, one director of Middle-Eastern/North African heritage and one director of gay, lesbian, bisexual or transgender orientation. Our Board believes that diversity factors are important in promoting our long-term sustainable growth. Our Board maintains a policy regarding the evaluation of director candidates which states that the Board in its selection of director candidates will consider the overall Board balance of diversity of viewpoints, backgrounds and experiences. Our Board has also established director selection criteria which provides that the Board in its selection of director candidates will consider factors that contribute to Board diversity in the broadest sense, including gender, ethnicity, geography, education, and personal and professional experiences. Workforce Our long-term growth and success is highly dependent upon our employees and our ability to maintain a diverse, equitable and inclusive workplace representing a broad spectrum of backgrounds, ideas and perspectives. As part of these efforts, we strive to offer competitive compensation and benefits, foster a community where everyone feels a sense of belonging and purpose, and provide employees with the opportunity to give back and make an impact in the communities where we live and serve. We had over 4,000 domestic employees as of the end of fiscal year 2022. In addition, as of the end of fiscal year 2022, our workforce was 49.9% female and 50.1% male, and the ethnicity of our workforce was 44.4% White, 22.6% Hispanic or Latino, 14.3% Black or African American, 14.2% Asian and 4.5% other (which includes American Indian or Alaska Native, Native Hawaiian or Other Pacific Islander, and “Two or More Races” as defined in our EEO-1 Report filed with the Department Labor). | | | | 16 | | | 2023 Proxy Statement |
Our Workforce Diversity 
Employee Retention and Development We believe in attracting, developing and engaging the best talent, while providing a supportive work environment that prioritizes the health and safety of our employees. Talent development is a critical component of the employee experience and ensures that all employees have career growth opportunities, including establishing development networks and relationships and fostering continued growth and learning. Employees receive regular business and compliance training to help further enhance their career development objectives. We also actively manage enterprise-wide and divisional mentoring programs and have partnered with an external vendor to establish a comprehensive, fully integrated wellness program designed to enhance the productivity of our employees. Compensation and Succession Planning Our compensation programs are designed to motivate and reward employees who possess the necessary skills to support our business strategy and create long-term value for our stockholders and other stakeholders. Employee compensation may include base salary, annual cash incentives, and long-term equity incentives, as well as life insurance and 401(k) plan matching contributions. We also offer a comprehensive selection of health and welfare benefits to our employees including emotional well-being support and paid parental leave programs. Succession planning is also critical to our operations and we have established ongoing evaluations of our leadership depth and succession capabilities, including Board review. Diversity, Equity and Inclusion We believe that building a diverse, equitable and inclusive, high-performing workforce where our employees bring varied perspectives and experiences to work every day creates a positive influence in our workplace, community and business operations. Our Board and our Board Committees provide regular oversight of our corporate sustainability program, including our diversity, equity and inclusion programs and initiatives. We have also taken proactive measures to strategically and sustainably advance equity in the workplace through our Business Resource Groups (“BRG”), a diversity hiring initiative, mentorship programs, and external partnerships with organizations such as the Mortgage Bankers Association and the National Association of Minority Mortgage Bankers of America. We also established leadership goals and created customized initiatives that focus on our continued effort to increase the number of women and underrepresented communities in management positions throughout our company and its business divisions. As it relates to our inclusive culture, we established the following BRGs to emphasize career growth, networking, and learning opportunities for employees and allies with shared backgrounds and experiences: the BOLD BRG (for Black and African American employees and allies), the HOLA BRG (for Hispanic, Latino and Latinx employees and allies), the InspirASIAN BRG (for our Asian American and Pacific Islander employees and allies), the Pennymac PRIDE BRG (for our LGBTQIA employees and allies), the SERVE BRG (for our veteran and military family employees and allies), and the wEMRG BRG (for our women employees and allies). We also foster a more inclusive culture through a variety of initiatives, including corporate training, special events, community outreach and corporate philanthropy. | | | | | | | 2023 Proxy Statement | | | 17 | |
Community Involvement We have a corporate philanthropy program that is governed by a philosophy of giving that prioritizes the support of causes and issues that are important in our local communities, and drives a culture of employee engagement and collaboration throughout our organization. We are committed to empowering our employees to be a positive influence in the communities where we live and serve, and believe that this commitment supports our efforts to attract and engage employees and improve retention. Our philanthropy program consists of three key components: an employee matching gift program, a charitable grants program and a corporate sponsorship program. Our five philanthropic focus areas are: community development and equitable housing, financial literacy and economic inclusion, human and social services, health and medical research, and environmental sustainability. We have established a separate donor advised fund to facilitate donations to various local and national charitable organizations and have provided funding to several charitable organizations located near our office sites and national organizations that support missions such as sustainable homeownership, mortgage and rental assistance, food insecurity, disaster recovery, family and child advocacy, and community empowerment. We also manage our environmental impact by focusing on improving our waste reduction, energy efficiency and water conservation. Communications with our Board of Directors Our stockholders and other interested persons may send written communications to the Board, committees of the Board and individual directors (including our independent lead director or the independent/non-management directors as a group) by mailing those communications to: [Specified Addressee] c/o PennyMac Financial Services, Inc. 3043 Townsgate Road Westlake Village, California 91361 Email: PFSI_IR@pnmac.com Attention: Investor Relations Generally, these communications are sent by us directly to the specified addressee. Any communication that is primarily commercial, offensive, illegal or otherwise inappropriate, or does not substantively relate to the duties and responsibilities of our Board may not be forwarded. | | | | 18 | | | 2023 Proxy Statement |
| | | | | | | PROPOSAL I – ELECTION OF DIRECTORS |
PROPOSAL I – ELECTION OF DIRECTORS We have twelve directors. The Board has nominated David A. Spector, James K. Hunt, Jonathon S. Jacobson, Doug Jones, Patrick Kinsella, Joseph Mazzella, Anne D. McCallion, Farhad Nanji, Jeffrey A. Perlowitz, Lisa M. Shalett, Theodore W. Tozer and Emily Youssouf for election as directors, and each nominee has consented to being named in this Proxy Statement and has agreed to serve if elected. If our director nominees are elected at this year’s Annual Meeting, they will serve until our 2024 annual meeting of stockholders and until their successors have been duly elected and qualified. Because this is considered an uncontested election under our Amended and Restated Bylaws, a nominee for director is elected to the Board if he or she receives a majority of the votes cast for his or her election, meaning the number of shares voted “FOR” such nominee’s election exceeds the number of shares voted “AGAINST” such nominee’s election. Abstentions and broker non-votes will not affect the election of directors. In tabulating the voting results for the election of directors, only “FOR” and “AGAINST” votes are counted. If an incumbent nominee for director receives a greater number of votes against his or her election than votes for such election, such director shall tender his or her resignation as provided in our Corporate Governance Guidelines. The Nominating and Corporate Governance Committee of the Board will then act on an expedited basis to determine whether to accept the director’s tendered resignation and will submit such recommendation for prompt consideration by the Board. In considering whether to accept or reject the tendered resignation, the Nominating and Corporate Governance Committee and the Board will consider any factors they deem relevant. After the Board’s determination, we will promptly publicly disclose in a document filed or furnished with the SEC the Board’s decision regarding the action to be taken with respect to such incumbent director’s resignation. If the Board’s decision is to not accept the resignation, such disclosure will include the reasons for not accepting the resignation. If the director’s resignation is accepted, then the Board may fill the resulting vacancy in accordance with our bylaws. For additional information on voting, see the section of this Proxy Statement titled “Information Concerning Voting and Solicitation” including the section therein titled “—What stockholder approvals are required to approve the proposals?” OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR DAVID A. SPECTOR, JAMES K. HUNT, JONATHON S. JACOBSON, DOUG JONES, PATRICK KINSELLA, JOSEPH MAZZELLA, ANNE D. MCCALLION, FARHAD NANJI, JEFFREY A. PERLOWITZ, LISA M. SHALETT, THEODORE W. TOZER AND EMILY YOUSSOUF AS DIRECTORS TO SERVE UNTIL OUR 2024 ANNUAL MEETING OF STOCKHOLDERS AND UNTIL THEIR RESPECTIVE SUCCESSORS ARE DULY ELECTED AND QUALIFIED. The following paragraphs provide the name and age of each director, as well as each director’s business experience over the last five years or more. Immediately following the description of each director’s business experience is a description of the particular experience, skills and qualifications that were instrumental in the Nominating and Corporate Governance Committee’s determination that the director should serve on our Board. | | | | | | | | Name | | Age | | Position | | | | David A. Spector | | 60 | | Chairman | | | | James K. Hunt | | 71 | | Director | | | | Jonathon S. Jacobson | | 61 | | Director | | | | Doug Jones | | 66 | | Director | | | | Patrick Kinsella | | 69 | | Director | | | | Joseph Mazzella | | 70 | | Director | | | | Anne D. McCallion | | 68 | | Director | | | | Farhad Nanji | | 44 | | Director | | | | Jeffrey A. Perlowitz | | 66 | | Independent Lead Director | | | | Lisa M. Shalett | | 56 | | Director | | | | Theodore W. Tozer | | 66 | | Director | | | | Emily Youssouf | | 71 | | Director |
| | | | | | | 2023 Proxy Statement | | | 19 | |
| | | | | Executive Officers and Executive Compensation
Our Executive Officers
| | PROPOSAL I – ELECTION OF DIRECTORS |
Director Nominees | | | The following sets forth certain information with respect to our current executive officers:
DAVID A. SPECTOR | | | | | Name
| | Age
| | Position Held with the Company
| Stanford L. Kurland
| | 66
| | Director, Executive Chairman of the Board of Directors
| David A. Spector
| | 56
| | Director,
| | Mr. Spector has been a member of our Board since December 2012 and has been our Chairman and Chief Executive Officer since February 2021 and, prior thereto, as our President and Chief Executive Officer | Anne D. McCallion
| | 64
| | Director, Senior Managing Director and Chief Enterprise Operations Officer
| Andrew S. Chang
| | 41
| | Senior Managing Director and Chief Financial Officer
| Vandad Fartaj
| | 44
| | Senior Managing Director and Chief Investment Officer
| Doug Jones
| | 62
| | Senior Managing Director and Chief Mortgage Banking Officer
| David M. Walker
| | 63
| | Senior Managing Director and Chief Risk Officer
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Biographical information for Messrs. Kurland and Spector and Ms. McCallion is provided above under the caption “Proposal I - Election of Directors.” Certain biographical information for the other executive officers is set forth below.
Andrew S. Chang. Mr. Chang has been our Senior Managing Director and Chief Financial Officer since January 2017. Prior thereto, heHe served as our seniorexecutive managing director, president and chief business developmentoperating officer from February 2016 through December 2016 and, prior thereto, as ourpresident and chief business developmentoperating officer from February 2013 to February 2016. Mr. ChangSpector has also has served in a variety of similar executive positions at PNMAC since its founding in January 2008. In addition, Mr. Spector has been a member of the board of PMT since its formation in May 2008. Mr. Chang is responsible for overseeing our financial management, reporting2009 and controls and tax management,has served as well as our corporate development and investor relations activities.its chairman since February 2021. Prior to joining PNMAC, from June 2005 to May 2008, Mr. ChangSpector was co-head of global residential mortgages for Morgan Stanley, a global financial services firm, based in London. Before joining Morgan Stanley in September 2006, Mr. Spector was the senior managing director, secondary marketing, at Countrywide, where he was employed from May 1990 to August 2006. Mr. Spector holds a B.A. from the University of California, Los Angeles. We believe Mr. Spector is qualified to serve on our Board because of his experience as a member of our executive management team and as an experienced executive with broad mortgage banking expertise in portfolio investments, interest rate and credit risk management, and capital markets activity that includes pricing, trading and hedging.
|  | Board Member Since: 2012 Age: 60 | |
| | | JAMES K. HUNT | | Mr. Hunt has been a member of our Board since April 2013 and served as our independent lead director from April 2014 until February 2021. Mr. Hunt is currently retired. From November 2015 until his retirement in August 2016, Mr. Hunt served as the managing partner and Chief Executive Officer, middle market credit at BlackRockKayne Anderson Capital Advisors LLC, a leading alternative investment firm in the areas of energy, real estate, credit and specialty growth capital. From August 2014 to November 2015, Mr. Hunt served as non-executive chairman of the board of THL Credit, Inc., an externally-managed, non-diversified closed-end management investment company. Mr. Hunt served as chief executive officer and chief investment officer of THL Credit, Inc. and of THL Credit Advisors, a registered investment advisor that provides administrative services to THL Credit, Inc., from April 2010 to July 2014 and, prior thereto, held similar executive positions with predecessor entities since May 2007. Previously, Mr. Hunt was chief executive officer and managing partner of Bison Capital Asset Management, LLC, a private equity firm, from 2001 to 2007. Prior to co-founding Bison Capital, Mr. Hunt was the president of SunAmerica Corporate Finance and executive vice president of SunAmerica Investments (subsequently, AIG SunAmerica). Mr. Hunt currently serves on the board of the Hunt Companies, Inc., Aspida Holdings and Cartiga, LLC. Mr. Hunt formerly served on the boards of THL Credit, Inc., THL Credit Advisors, Primus Guaranty, Ltd., Fidelity National Information Services, Inc., Lender Processing Services, Inc. and Hunt Companies Acquisition Corp. I. Mr. Hunt received a B.B.A. from the University of Texas at El Paso and an M.B.A. from the Wharton School of the University of Pennsylvania. We believe Mr. Hunt is qualified to serve on our Board because of his experience in capital markets and in managing financial services companies. | 
| Board Member Since: 2013 Age: 71 Independent Director | Committees: • Compensation • Nominating and Corporate Governance (Chair) |
| | | | 20 | | | 2023 Proxy Statement |
| | | | | | | PROPOSAL I – ELECTION OF DIRECTORS |
| | | JONATHON S. JACOBSON | | Mr. Jacobson has been a member of our Board since February 2021. Mr. Jacobson is currently the Assistant Head Coach of and Senior Advisor to UNC Charlotte Football and the Founder and non-executive Chairman of HighSage Ventures, a private investment firm formed in 2019 to exclusively manage his family’s assets and those of the One8 Foundation. Mr. Jacobson was the Co-Founder, Chief Investment Officer and Chief Executive Officer of Highfields Capital Management from 1998 until 2021, when it returned all remaining capital to investors. Prior to founding Highfields, he was a senior memberportfolio manager at Harvard Management Company. Mr. Jacobson serves on the Lone Pine Capital Advisory Board and the Novo Capital Investors International Advisory Committee and is a co-trustee of the One8 Foundation. He is a Lifetime Trustee of the Gilman School in its advisory services practice, specializingBaltimore, Maryland, where he serves on the Investment Committee. Mr. Jacobson is a former director of iHeartMedia and iHeartCommunications. He is a past Vice Chairman of the Board of Trustees of Brandeis University and formerly chaired the International Board of Trustees of Israel’s Institute for National Security Studies. He also formerly served on the Investment Committee of the Weizmann Global Endowment Management Trust and the Board of Dean’s Advisors at Harvard Business School. Mr. Jacobson received an M.B.A. from Harvard Business School and a B.S. in financial strategyEconomics from the University of Pennsylvania. We believe Mr. Jacobson is qualified to serve on our Board because of his expertise in investing and risk management for banks and mortgage companies. Mr. Chang is an experienced financial services executive with substantial experience in corporate financebusinesses as well as his prior public company board experience. |  | Board Member Since: 2021 Age: 61 Independent Director | Committees: • Finance • Nominating and mortgage banking.Corporate Governance Vandad Fartaj.
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| | | DOUG JONES | | Mr. FartajJones has been a member of our Board since March 2023 and has been our Senior Managing DirectorPresident and Chief InvestmentMortgage Banking Officer since September 2018.March 2021. Prior thereto, he served as senior managing director and chief capital markets officer from February 2016 to September 2018 and as chief capital markets officer from February 2013 to February 2016. Mr. Fartaj also has served in a variety of similar executive positions at PNMAC since April 2008. Mr. Fartaj is responsible for all capital markets and investment-related activities, including the development and execution of investment strategies, secondary marketing, hedging activities and capital markets strategies with government-sponsored enterprises. In addition, Mr. Fartaj is responsible for developing and managing relationships with Wall Street broker-dealers and fixed income investors. Prior to joining PNMAC, from November 1999 to April 2008, Mr. Fartaj was employed in a variety of positions at Countrywide Securities Corporation, including managing the strategy and execution of the whole loan conduit. Mr. Fartaj is an experienced mortgage banking executive with substantial experience in capital markets, mortgage-related investments, and interest rate and credit risk management. Doug Jones. Mr. Jones has been ourCompany’s Senior Managing Director and Chief Mortgage Banking Officer as well as in a number of other key executive positions since January 2017 and the president of PLS since March 2017. Prior thereto, he served as our senior managing director and chief institutional mortgage banking officer from February 2016 through December 2016, as our chief institutional mortgage banking officer from March 2015 to February 2016, and as our chief correspondent lending officer from February 2013 to March 2015.2012. Mr. Jones also has served in a varietyserves as Trustee, President and Chief Mortgage Banking Officer of similar executive positions at PNMAC since June 2011.PMT. Mr. Jones is responsible for all business activities relating to our loan production and loan servicing and application development operations. Prior to joining PNMAC,PFSI and its affiliates, Mr. Jones worked in several executive positions, including senior managing director, correspondent lending, at Countrywide (and Bank of America Corporation, as its successor) from 1997 until 2011, where he was responsible for managing and overseeing correspondent and warehouse lending operations. Mr. Jones earned a B.A. in economics from California State University, Sacramento. We believe Mr. Jones is qualified to serve on our Board because he is an experienced mortgage banking executive with significant experience in the correspondent production and warehouse lending businesses.businesses.
|  | David M. Walker.
Board Member Since: 2023 Age: 66 |
| | | PATRICK KINSELLA | | Mr. WalkerKinsella has been a member of our Board since July 2014. Prior to his retirement as a senior audit partner with KPMG LLP, or KPMG, in May 2013, Mr. Kinsella spent over 35 years at KPMG serving clients generally concentrated in the financial services sector, including banks, thrifts, mortgage companies, automotive finance companies, alternative investment companies and real estate companies. Mr. Kinsella served as an adjunct professor at the USC Marshall School of Business from August 2011 to May 2020, and previously Mr. Kinsella served on the board of directors of Wrap Technologies, Inc. Mr. Kinsella received a B.S. from California State University, Northridge and is a licensed certified public accountant in the State of California. We believe Mr. Kinsella is qualified to serve on our Board because of his extensive experience in providing professional accounting and auditing services to the financial services industry. |  | Board Member Since: 2014 Age: 69 Independent Director | Committees: • Audit (Chair) • Related Party Matters • Risk |
| | | | | | | 2023 Proxy Statement | | | 21 | |
| | | | | | | PROPOSAL I – ELECTION OF DIRECTORS |
| | | JOSEPH MAZZELLA | | Mr. Mazzella has been a member of our Board since our formation in December 2012. Mr. Mazzella retired in March 2017 after serving as the managing director and the general counsel of Highfields, which he joined in 2002. Prior to joining Highfields, Mr. Mazzella was a partner at the law firm of Nutter, McClennen & Fish, L.L.P., in Boston, Massachusetts. Prior to private practice, he was an attorney at the Securities and Exchange Commission from 1978 to 1980, and previously served as a law clerk in the Superior Court of the District of Columbia. Mr. Mazzella has served on multiple public company boards of directors, including Alliant Techsystems, Inc. and Data Transmission Networks Corporation, and he served as chairman of the board of Insurance Auto Auctions, Inc. Mr. Mazzella received a B.A. from City College of New York and a J.D. from Rutgers University School of Law. We believe Mr. Mazzella is qualified to serve on our Board because of his broad experience and strong business and legal backgrounds in the financial services industry. |  | Board Member Since: 2012 Age: 70 Independent Director | Committees: • Nominating and Corporate Governance • Related Party Matters (Chair) |
| | | ANNE D. MCCALLION | | Ms. McCallion has been a member of our Board since February 2018. Ms. McCallion served as our Senior Managing Director and Chief RiskEnterprise Operations Officer since February 2016.from January 2017 until her retirement in June 2019. Prior thereto, heshe served as our senior managing director and chief riskfinancial officer from July 2015 to February 2016 as chief credit and enterprise risk officer from May 2013 to July 2015,through December 2016 and as our chief creditfinancial officer from FebruaryJanuary 2013 to May 2013. Mr. WalkerFebruary 2016. Ms. McCallion also has served in a variety of similar executive positions at PNMAC since January 2008. Mr. Walker is responsible for enterprise risk management, credit risk management, mortgage compliance management and internal audit. From June 2002 to April 2007, Mr. Walkerfrom May 2009 onward until her retirement. Ms. McCallion served in a variety of executive positions at Countrywide Bank, N.A., including chief credit officer and chief lending officer. From October 1992 to June 2002, Mr. Walker served in a variety of executive positions at Countrywide, including executive vice president of secondary marketing andas senior managing director and chief credit officer. Mr. Walkerenterprise operations officer of PMT from January 2017 until her retirement in June 2019. Prior thereto, she served as its chief financial officer from its formation in 2009 through December 2016. She also was a member of the technical staff at the Financial Accounting Standards Board and Ms. McCallion served as a director at Pacific Mercantile Bancorp and Pacific Mercantile Bank. Ms. McCallion holds a B.S. degree from Gannon University and an M.B.A. degree from Ashland University. She is also a Certified Public Accountant (inactive). We believe Ms. McCallion is qualified to serve on our Board because of her prior experience as a seasoned financial services executive with significant experiencefinancial expertise and considerable knowledge in credit risk management.the financial and operational aspects of the mortgage banking business. |  | | | | | Board Member Since: 2018 Age: 68 Independent Director | | 2019 Proxy Statement | | | 27 | |
| | | | | REPORT OF THE COMPENSATION COMMITTEE |
Report of the Compensation Committee
Our Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of RegulationS-K and, based on such review and discussions, the Compensation Committee recommended that our Board of Directors include the Compensation Discussion and Analysis in this Proxy Statement and our 2018 Annual Report on Form10-K.
The Compensation Committee
Matthew Botein,Chair
James K. Hunt
Farhad Nanji
| | | 28 | | | 2019 Proxy Statement |
| | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Compensation Discussion and Analysis
Table of Contents
Committees: • Finance • Risk |
| | | FARHAD NANJI | | Mr. Nanji has been a member of our Board since our formation in December 2012. In December 2016, Mr. Nanji co-founded MFN Partners Management, L.P., a value-oriented investment management firm based in Boston, Massachusetts. Prior thereto, until December 2015, Mr. Nanji served as a managing director of Highfields, where he focused on portfolio investments in distressed securities, restructurings, structured credit and global financial services from 2006. Mr. Nanji received an MBA from Harvard Business School and a B.Com. from McGill University. We believe Mr. Nanji is qualified to serve on our Board because of his expertise in the mortgage and financial services businesses. |  | Board Member Since: 2012 Age: 44 Independent Director | Committees: • Compensation (Chair) |
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| | | | | | | PROPOSAL I – ELECTION OF DIRECTORS |
2018 Named Executive Officers
| | | JEFFREY A. PERLOWITZ Independent Lead Director | | Mr. Perlowitz has been a member of our Board since February 2019 and our independent lead director since February 2021. He is currently retired. From 1998 until his retirement in 2016, Mr. Perlowitz served as managing director and co-head of global securitized markets at Citigroup and predecessor entities, where he was responsible for sales and trading of residential mortgage loans, commercial mortgages and consumer products. Mr. Perlowitz also currently serves as a director at the CION Ares Diversified Credit Fund. Mr. Perlowitz holds a B.S. in economics and accounting from The State University of New York at Albany. We believe Mr. Perlowitz is qualified to serve on our Board because of his extensive mortgage finance background and expertise in the securitization of residential mortgage loans. |  | Board Member Since: 2019 Age: 66 Independent Director | Committees: • Compensation • Finance • Risk |
| | | LISA M. SHALETT | | Ms. Shalett has been a member of our Board since October 2020. Ms. Shalett is a former Goldman Sachs Partner and former Managing Partner at Brookfield Asset Management. Over her 20 years at Goldman Sachs, she held leadership roles in Equities, Global Compliance, Legal and Internal Audit, and Brand Marketing and Digital Strategy. At Brookfield, she was the firm’s first Head of Strategic Innovation. Currently, Ms. Shalett advises growth companies, serves on the boards of AccuWeather, MPower Partners, and FTA C Emerald Acquisition Corp., and is the founder of Extraordinary Women on Boards, a community of women board directors focused on board excellence. Ms. Shalett served on the boards of Brookfield Property Partners from 2015 to 2018, and Bully Pulpit Interactive from 2017 to 2022. She holds a Masters of Business Administration from Harvard Business School and a B.A., summa cum laude, in East Asian Studies from Harvard University. We believe Ms. Shalett is qualified to serve on our Board because of her broad experience in finance, compliance, marketing and strategy in the financial services industry. |  | Board Member Since: 2020 Age: 56 Independent Director | Committees: • Audit • Nominating and Corporate Governance |
| | | | | | | 2023 Proxy Statement | | | 23 | |
| | | | | | | PROPOSAL I – ELECTION OF DIRECTORS |
| | | THEODORE W. TOZER | | Mr. Tozer has been a member of our Board since August 2017. Mr. Tozer currently serves as a non-resident fellow at the Urban Institute where he works on housing issues. Prior thereto, Mr. Tozer served as the president of the Government National Mortgage Association, or Ginnie Mae, from February 2010 to January 2017 as well as a senior fellow at the Milken Institute’s Center for Financial Markets from June 2017 until January 2022. Before joining Ginnie Mae, Mr. Tozer served as senior vice president of capital markets at National City Mortgage Company. He also has served as a charter member of the National Lender Advisory Boards of both Fannie Mae and Freddie Mac, chairman of the Capital Markets Committee of the Mortgage Bankers Association of America (MBA), and as a member of the Residential Board of Governors of the MBA. Mr. Tozer received a B.S. degree in Accounting and Finance from Indiana University in 1979, and is a Certified Public Accountant (inactive) and a Certified Management Accountant. We believe Mr. Tozer is qualified to serve on our Board because of his numerous years of experience in the mortgage and financial services businesses and his deep understanding of mortgage banking and agency relations. |  | Board Member Since: 2017 Age: 66 Independent Director | Committees: • Audit • Related Party Matters • Risk (Chair) |
| | | EMILY YOUSSOUF | | Ms. Youssouf has been a member of our Board since November 2013. Ms. Youssouf has served as a clinical professor at the NYU Schack Institute of Real Estate since 2009. Ms. Youssouf served as vice chair of the New York City Housing Development Corporation from 2011 to 2013 and as a member of its board from 2013 to 2014. Previously, she served as an independent consultant from 2008 to 2011, during which time her clients included Rockefeller Foundation, Washington Square Partners and various real estate investors. Prior thereto, she was a managing director with JPMorgan Securities, Inc., a broker-dealer, from 2007 to 2008, and the president of the NYC Housing Development Corporation from 2003 to 2007. Ms. Youssouf has also held various senior positions at Natlis Settlements, LLC, Credit Suisse First Boston, Daiwa Securities America, Prudential Securities, Merrill Lynch and Standard & Poor’s. Ms. Youssouf currently serves as a board member of numerous organizations, including the Unified JP Morgan Funds where she is a board member of the ETF and the Fixed Income Committees, the NYC Health and Hospitals Corporation, the NYC School Construction Authority, the NYS Job Development Authority and the TransitCenter. Ms. Youssouf is a graduate of Wagner College and holds an M.A. in Urban Affairs and Policy Analysis from The New School for Social Research. We believe Ms. Youssouf is qualified to serve on our Board because of her numerous years of experience in the investment banking, finance and real estate industries and deep understanding of the housing market. |  | Board Member Since: 2013 Age: 71 Independent Director | Committees: • Audit • Finance (Chair) |
| | | | 24 | | | 2023 Proxy Statement |
| | | | | | | PROPOSAL I – ELECTION OF DIRECTORS |
Non-Management Director Compensation The Compensation Committee reviews and recommends to our Board the form and level of director compensation and seeks outside advice from our independent compensation consultants on market practices when changes are contemplated. Director compensation was reviewed in Fiscal 2022 by our independent compensation consultant relative to peer companies and selected companies within the S&P 500 and Russell 3000 indexes and, in connection with such review, our independent compensation consultant recommended that an increase in compensation may be warranted based on market studies, however, our Compensation Committee recommended no changes in non-management director compensation from the prior year. The compensation program for our non-management directors is intended to be competitive and fair so that we can attract the best talent to our Board, and recognize the time and effort required of a director given the size and complexity of our operations. In addition to cash compensation, we provide equity grants and have stock ownership guidelines to align our directors’ interests with our stockholders’ interests and to motivate our directors to focus on our long-term growth and success. Mr. Spector, our Chairman and Chief Executive Officer, and Mr. Jones, our President and Chief Mortgage Banking Officer, are not paid any fees for serving on our Board or for attending Board meetings. The following table summarizes the annual retainer fees of our non-management directors as of the end of Fiscal 2022: | | | | | | | | Base Annual Retainer, all non-management directors | | $ | 80,000 | | | | Additional Base Annual Retainer, independent lead director | | $ | 30,000 | | | | Base Annual Retainer, all non-management committee members: | | | | | | | Audit Committee | | $ | 10,000 | | | | Compensation Committee | | $ | 7,750 | | | | Finance Committee | | $ | 7,750 | | | | Nominating and Corporate Governance Committee | | $ | 7,750 | | | | Related Party Matters Committee | | $ | 7,750 | | | | Risk Committee | | $ | 10,000 | | | | Additional Annual Retainer, all committee chairs: | | | | | | | Audit Committee | | $ | 12,000 | | | | Compensation Committee | | $ | 10,750 | | | | Finance Committee | | $ | 10,750 | | | | Nominating and Corporate Governance Committee | | $ | 10,750 | | | | Related Party Matters Committee | | $ | 10,750 | | | | Risk Committee | | $ | 12,000 | |
Our non-management directors are also eligible to receive certain types of equity-based awards under our Equity Plans that vest on the first anniversary of the grant date. The non-management director annual RSU grant in Fiscal 2022 was $145,000. Grants to newly elected or appointed non-management directors are prorated for the remaining portion of the annual equity award cycle. During Fiscal 2022, each of Messrs. Hunt, Jacobson, Kinsella, Mazzella, Nanji, Perlowitz, and Tozer and Mmes. McCallion, Shalett and Youssouf received a grant of 2,539 time-based restricted stock units, or RSUs, for their annual grant, in each case with a grant date fair value of $145,000. All members of our Board will also be reimbursed for their reasonable out of pocket costs and expenses in attending all meetings of our Board and its committees and certain other Company-related functions. Policy Regarding Receipt of Shares in Lieu of Cash Director Fees. During 2014, the Board adopted a policy whereby non-management director fees may be paid in cash or fully vested shares of common stock at the election of each non-management director. The number of shares of common stock delivered in lieu of any cash payment of director fees shall be equivalent in value to the amount of forgone director fees divided by the market value (as defined in our Equity Plans) of the common stock on the last market trading day preceding the day on which the director fees otherwise would have been paid in cash to the non-management director, rounded down to the nearest whole share. Change of Control. Upon a change of control (as defined in our Equity Plans), all outstanding equity awards granted to non-management directors will be assumed, or substantially equivalent rights will be substituted, or the awards otherwise will be continued in a manner satisfactory to the Compensation Committee, by the acquiring or succeeding entity or its affiliate. | | 29
| | | | | | | 2023 Proxy Statement | | | 25 | |
| | | | | | | PROPOSAL I – ELECTION OF DIRECTORS |
2022 Director Compensation Table The table below summarizes the compensation earned by each non-management director who served on our Board for Fiscal 2022. | | | | | | | | | | | | | | | | | | | | | | Name(1) | | Fees Earned
or Paid
in Cash
($)(2) | | | Stock
Awards
($)(2)(3) | | | Other
($) | | | Total
($) | | | | | | | James K. Hunt | | | 106,250 | | | | 145,000 | | | | — | | | | 251,250 | | | | | | | Jonathon S. Jacobson | | | 95,500 | | | | 145,000 | | | | — | | | | 240,500 | | | | | | | Patrick Kinsella | | | 119,750 | | | | 145,000 | | | | — | | | | 264,750 | | | | | | | Joseph Mazzella | | | 106,250 | | | | 145,000 | | | | — | | | | 251,250 | | | | | | | Anne D. McCallion | | | 97,750 | | | | 145,000 | | | | — | | | | 242,750 | | | | | | | Farhad Nanji | | | 98,500 | | | | 145,000 | | | | — | | | | 243,500 | | | | | | | Jeffrey A. Perlowitz | | | 135,500 | | | | 145,000 | | | | — | | | | 280,500 | | | | | | | Lisa M. Shalett | | | 97,750 | | | | 145,000 | | | | — | | | | 242,750 | | | | | | | Theodore W. Tozer | | | 119,750 | | | | 145,000 | | | | 458 | | | | 265,208 | | | | | | | Emily Youssouf | | | 108,500 | | | | 145,000 | | | | — | | | | 253,500 | |
| (1) | Mr. Spector, our Chairman and Chief Executive Officer, and Mr. Jones, our President and Chief Mortgage Banking Officer, are not included in this table as they are executive officers of our Company and do not receive any additional compensation for their board services. The compensation that was paid to, or earned by, Messrs. Spector and Jones in Fiscal 2022 is discussed below under “—2022 Summary Compensation Table” and “—Narrative to 2022 Summary Compensation Table.” | Executive Summary of 2018 Compensation
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| (2) | Reflects fees earned by the director in Fiscal 2022, whether or not paid in such year. During all or part of Fiscal 2022, each of Messrs. Mazzella and Nanji elected to receive their respective director fees, in the amount of $106,250 and $98,500 in fully vested shares of common stock in lieu of cash. |
| (3) | Reflects the grant date fair value, as determined in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718, Compensation—Stock Compensation, or ASC 718, of RSUs granted to Messrs. Hunt, Jacobson, Kinsella, Mazzella, Nanji, Perlowitz, Tozer and Mmes. McCallion, Shalett and Youssouf on February 23, 2022. Such aggregate grant date fair values do not take into account any estimated forfeitures related to service vesting conditions. For more information on the assumptions used in our estimates of value, please refer to Note 20—Stock-based Compensation in our Annual Report on Form 10-K filed on February 22, 2023. The amounts reported in this column reflect the accounting cost for these RSUs and do not correspond to the actual economic value that may be received by the directors upon vesting and/or settlement of the RSUs. As of December 31, 2022, each of our non-management directors held an aggregate number of RSUs in the following amounts: Messrs. Hunt, Jacobson, Kinsella, Mazzella, Nanji, Perlowitz, Tozer and Mmes. McCallion, Shalett and Youssouf – 2,539. |
Non-Management Director Stock Ownership Guidelines Non-management directors are subject to robust stock ownership guidelines whereby each such director is expected to hold common stock and unvested RSUs with an aggregate market value equal to at least five times the base annual retainer. Non-management directors are expected to meet the ownership guidelines within five years from the date of appointment or election to the Board. Each non-management director who has been a member of our Board for five years or more is in compliance with our stock ownership guidelines. The Nominating and Corporate Governance Committee will annually review each director’s progress toward meeting the stock ownership guidelines based on share ownership calculated as of the average closing share price over the prior year. | | | | 26 | | | 2023 Proxy Statement |
Audit Matters Report of the Audit Committee The Board of Directors has determined that all of the members of the Audit Committee meet the independence and experience requirements of The New York Stock Exchange, or the NYSE, and that Mr. Kinsella is an “audit committee financial expert” within the meaning of the applicable rules of the Securities and Exchange Commission, or the SEC, and the NYSE. The Audit Committee met nine times in 2022. The Audit Committee’s agenda is established by the Chair of the Audit Committee. The Audit Committee engaged Deloitte & Touche LLP, or Deloitte, as the Company’s independent registered public accounting firm and reviewed with the Company’s Chief Financial Officer and Deloitte the overall audit scope and plans, the results of the external audit examination, evaluations by the independent registered public accounting firm of the Company’s internal controls and the quality of its financial reporting. The Audit Committee has reviewed and discussed the audited financial statements with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The Audit Committee also discussed with Deloitte other matters required to be discussed by a registered public accounting firm with the Audit Committee under applicable standards of the Public Company Accounting Oversight Board, or the PCAOB. The Audit Committee received and discussed with Deloitte its annual written report on its independence from the Company’s and its management, which is made pursuant to applicable requirements of the PCAOB and considered with Deloitte whether the provision of non-audit services is compatible with its independence. In performing all of these functions, the Audit Committee acts only in an oversight capacity and, necessarily, in its oversight role, the Audit Committee relies on the work and assurances of the Company’s management, which has the primary responsibility for financial statements and reports, and of Deloitte, which, in its reports, expresses an opinion on the conformity of the Company’s annual financial statements to generally accepted accounting principles and on the effectiveness of its internal control over financial reporting as of year-end. In reliance on these reviews and discussions, and the reports of Deloitte, the Audit Committee recommended to the Board of Directors, and the Board of Directors approved, the inclusion of the Company’s audited financial statements in its Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 22, 2023. The foregoing report has been furnished by the current members of the Audit Committee: Patrick Kinsella, Chair Lisa M. Shalett Theodore W. Tozer Emily Youssouf | | 31
| | | | | | | 2023 Proxy Statement | | | 27 | |
Relationship with Independent Registered Public Accounting Firm In addition to performing the audits of our financial statements in Fiscal 2022 and Fiscal 2021, Deloitte provided other audit-related and non-audit-related services for us during these years. Fees to Registered Public Accounting Firm for 2022 and 2021 The following table shows the fees billed by Deloitte for the audit and other services it provided to us in respect of Fiscal 2022 and Fiscal 2021. | | | | | | | | | | | | | | | 2022 | | | 2021 | | | | | Audit Fees(1) | | $ | 2,345,241 | | | $ | 2,243,063 | | | | | Audit-Related Fees(2) | | | 666,526 | | | | 891,760 | | | | | Tax Fees(3) | | | — | | | | 32,240 | | | | | All Other Fees(4) | | | 180,000 | | | | 300,000 | | | | | | | | | | | | | | Total | | $ | 3,191,767 | | | $ | 3,467,063 | |
| (1) | Audit Fees consist of fees for professional services rendered for the annual audit and reviews of the consolidated financial statements included in our quarterly reports on Form 10-Q and the audit of the annual financial statements of certain of our subsidiaries. | Performance-Based Compensation Mix
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| (2) | Audit-Related Fees consist of fees for professional services provided in connection with the issuance of comfort letters and consents in connection with SEC filings and other compliance related testing. |
| (3) | Tax Fees consist of fees for professional services rendered for tax advisory services. |
| (4) | All Other Fees consist of certain agreed upon procedures related to certain of our financing transactions. |
Pre-Approval Policies and Procedures The Audit Committee approved all services performed by Deloitte during Fiscal 2022 in accordance with applicable SEC requirements. The Audit Committee has also pre-approved the use of Deloitte for certain audit-related and non-audit-related services, setting a specific limit on the amount of such services that we may obtain from Deloitte before additional approval is necessary. In addition, the Audit Committee has delegated to the chair of the Audit Committee the authority to approve both audit-related and non-audit-related services provided by Deloitte, provided that the chair will present any decision to the full Audit Committee for ratification at its next scheduled meeting. | | | | 28 | | | 2023 Proxy Statement |
| | | | | | | PROPOSAL II – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
PROPOSAL II – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Audit Committee is responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit our financial statements. The Audit Committee conducts a comprehensive annual evaluation of the independent registered public accounting firm’s qualifications, performance and independence, and takes into account the insight provided to the Audit Committee and the quality of information provided on accounting issues, auditing issues and regulatory developments. The Audit Committee also considers whether, in order to ensure continuing auditor independence, there should be periodic rotation of the independent registered public accounting firm, taking into consideration the advisability and potential costs and impact of selecting a different firm. The Audit Committee appointed Deloitte to serve as our independent registered public accounting firm for the 2023 fiscal year. Deloitte has served as our independent registered public accounting firm since 2008. The Audit Committee exercises sole authority to approve all audit engagement fees and terms associated with the retention of Deloitte. In addition to ensuring the regular rotation of the lead audit partner as required by law, the Audit Committee is involved in the selection of, and reviews and evaluates, the lead audit partner. The Audit Committee evaluated Deloitte’s institutional knowledge and experience, quality of service, sufficiency of resources and quality of the team’s communications and interactions as well as the team’s objectivity and professionalism. As a result, the Audit Committee believes that the continued retention of Deloitte to serve as our independent registered public accounting firm is in the best interests of the Company and its stockholders. Accordingly, we are asking stockholders to ratify the appointment of Deloitte. The Board is submitting the appointment of Deloitte to our stockholders for ratification because we value our stockholders’ views on this appointment and as a matter of good corporate governance. In the event that stockholders fail to ratify the appointment, it will be considered a recommendation to the Board and the Audit Committee to consider the selection of a different firm. Even if the appointment is ratified, the Audit Committee may in its discretion select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders. Representatives of Deloitte are expected to be present at the Annual Meeting and will have an opportunity to make a statement, if they so desire, and will be available to respond to appropriate questions. Ratification of the appointment of Deloitte as our independent registered public accounting firm requires the affirmative vote of a majority of the votes cast on this proposal. Abstentions and broker non-votes, if any, will not affect the approval of this proposal. For additional information on voting, see the section of this Proxy Statement titled “Information Concerning Voting and Solicitation” including the section therein titled “—What stockholder approvals are required to approve the proposals?” OUR BOARD OF DIRECTORS AND OUR AUDIT COMMITTEE UNANIMOUSLY RECOMMEND A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2023. | | 32
| | | | | | | 2023 Proxy Statement | | | 29 | |
| | | | | | | SECURITY OWNERSHIP INFORMATION |
Security Ownership Information Security Ownership of Executive Officers and Directors The following table sets forth certain information regarding the beneficial ownership of shares of common stock by (1) each of our named executive officers, (2) each of our current directors and director nominees, and (3) all of our current directors and executive officers as a group as of March 31, 2023. Unless otherwise indicated, all shares are owned directly and the indicated person has sole voting and investment power. | | | | | | | | | | | | | | | | Common Stock
Beneficially Owned(1) | | | | | | | Number | | Percentage | | | | Executive Officers and Directors | | | | | | | | | | | | | | David A. Spector(2) | | | | 1,693,456 | | | | | 3.3 | % | | | | Doug Jones(3) | | | | 893,070 | | | | | 1.8 | % | | | | Vandad Fartaj(4) | | | | 1,191,774 | | | | | 2.4 | % | | | | James Follette(5) | | | | 59,838 | | | | | * | | | | | Daniel S. Perotti(6) | | | | 469,225 | | | | | * | | | | | James K. Hunt(7) | | | | 64,402 | | | | | * | | | | | Jonathon S. Jacobson(8) | | | | 224,442 | | | | | * | | | | | Patrick Kinsella | | | | 34,209 | | | | | * | | | | | Joseph Mazzella(9) | | | | 312,931 | | | | | * | | | | | Anne D. McCallion(10) | | | | 270,241 | | | | | * | | | | | Farhad Nanji(11) | | | | 4,707,969 | | | | | 9.4 | % | | | | Jeffrey A. Perlowitz | | | | 12,219 | | | | | * | | | | | Lisa M. Shalett | | | | 5,354 | | | | | * | | | | | Theodore W. Tozer | | | | 19,247 | | | | | * | | | | | Emily Youssouf | | | | 30,866 | | | | | * | | | | | Current Executive Officers and Directors as a group (18 persons) | | | | 8,979,596 | | | | | 17.4 | % |
| (1) | This compensation discussion and analysis provides a detailed descriptionBased on 50,147,288 shares of our executive compensation programs and policies,common stock outstanding as of March 31, 2023. Beneficial ownership is determined in accordance with Rule 13d-3 under the material compensation decisions made under such programs and policiesSecurities Exchange Act of 1934, as amended, or the Exchange Act. A person is deemed to be the beneficial owner of any shares of common stock if that person has or shares voting power or investment power with respect to our named executive officers,those shares or has the right to acquire beneficial ownership at any time within 60 days. As used herein, “voting power” is the power to vote or direct the voting of shares and “investment power” is the material factorspower to dispose or direct the disposition of shares. None of the shares have been pledged as security.
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| (2) | Includes 435,604 shares of common stock owned by ST Family Investment Company LLC and 657,822 shares underlying stock options that were consideredare exercisable on or before May 30, 2023. |
| (3) | Includes 505,000 shares of common stock held by GR Family Investments, 30,000 shares of common stock held by Jones A LLC, 30,000 shares of common stock held by Jones B LLC, 17,477 shares held by the Jones Family Trust and 290,773 shares underlying stock options that are exercisable on or before May 30, 2023. |
| (4) | Includes 828,906 shares of common stock held by the Fartaj Family Trust and 253,548 shares underlying stock options that are exercisable on or before May 30, 2023. Mr. Fartaj ceased serving as the Company’s Senior Managing Director and Chief Investment Officer on March 3, 2023. |
| (5) | Includes 59,339 shares underlying stock options that are exercisable on or before May 30, 2023. |
| (6) | Includes 288,297 shares of common stock held by the Perotti Family Trust and 164,949 shares underlying stock options that are exercisable on or before May 30, 2023. |
| (7) | Includes 36,821 shares of common stock held by the Hunt Living Trust 1994. |
| (8) | Includes 219,760 shares of common stock owned by Highline Investments LLC. |
| (9) | Includes 177,031 shares of common stock owned by the Mazzella Family Irrevocable Trust. Mr. Mazzella is not a trustee of that entity, however, and disclaims beneficial ownership of the common stock held by that entity. |
| (10) | Includes 148,176 shares of common stock held by the McCallion Family Trust and 119,526 shares underlying stock options that are exercisable on or before May 30, 2023. |
| (11) | Includes 4,531,792 shares of common stock held by MFN Partners, LP, or MFN Partners. MFN Partners GP, LLC, or MFN GP, is the general partner of MFN Partners. MFN Partners Management, LP, or MFN Management, is the investment adviser to MFN Partners. MFN Partners Management, LLC, or MFN LLC, is the general partner of MFN Management. Mr. Nanji is a managing member of MFN GP and MFN LLC but disclaims beneficial ownership of the securities held by MFN Partners, except to the extent of his pecuniary interest, if any, therein. |
| | | | 30 | | | 2023 Proxy Statement |
| | | | | | | SECURITY OWNERSHIP INFORMATION |
Security Ownership of Other Beneficial Owners The following table sets forth certain information relating to the beneficial ownership of shares of our common stock by each person or entity known to our Company to be the beneficial owner of more than five percent of our shares of our common stock, based on our review of publicly available statements of beneficial ownership filed with the SEC. Beneficial ownership reflected in the table below is based on 50,147,288 shares of common stock outstanding as of March 31, 2023 and review of publicly available statements of beneficial ownership filed with the SEC. | | | | | | | | | | | | | | | | Common Stock
Beneficially Owned | | | | | | | Number | | Percentage | | | | 5% Stockholders | | | | | | | | | | | | | | HC Partners LLC(1) 200 Clarendon Street, 59th Floor Boston, Massachusetts 02116 | | | | 15,741,237 | | | | | 31.4 | % | | | | T. Rowe Price Investment Management, Inc.(2) 101 E. Pratt Street Baltimore, Maryland 21201 | | | | 4,992,531 | | | | | 10.0 | % | | | | MFN Partners, LP(3) 222 Berkeley Street, 13th Floor Boston, Massachusetts 02116 | | | | 4,531,791 | | | | | 9.0 | % | | | | Senvest Management, LLC(4) 540 Madison Avenue, 32nd Floor New York, New York 10022 | | | | 2,524,675 | | | | | 5.0 | % |
| (1) | As reported in making those decisions. This narrative discussion should be read togetherAmendment No. 2 to Schedule 13G filed with the compensation tablesSEC on February 14, 2020, HC Partners, LLC disclosed that it has the sole voting power and related disclosures set forth below.sole dispositive power over 15,741,237 shares of common stock as of December 31, 2019. |
| (2) | 2018 Named Executive OfficersAs reported in Schedule 13G filed with the SEC on February 14, 2023, T. Rowe Price Investment Management, Inc. disclosed that it has sole voting power over 2,871,510 shares of common stock and sole dispositive power over 4,992,531 shares of common stock as of December 31, 2022.
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| (3) | As reported in Amendment No. 3 to Schedule 13D filed with the SEC on August 8, 2022, MFN Partners, LP disclosed that it had shared voting power and shared dispositive power over 4,531,791 shares of common stock. MFN Partners GP, LLC, or MFN GP, is the general partner of MFN Partners. MFN Partners Management, LP, or MFN Management, is the investment adviser to MFN Partners. MFN Partners Management, LLC, or MFN LLC, is the general partner of MFN Management. Mr. Nanji is a managing member of MFN GP and MFN LLC but disclaims beneficial ownership of the securities held by MFN Partners, except to the extent of his pecuniary interest, if any, therein. |
| (4) | As reported in Schedule 13G filed with the SEC on January 7, 2023, Senvest Management, LLC disclosed that it has shared voting power and shared dispositive power over 2,524,675 shares of common stock as of December 31, 2022. The reported securities are held in the account of Senvest Master Fund, LP, of which Senvest Management, LLC is the investment manager. |
| | | | | | | 2023 Proxy Statement | | | 31 | |
| | | | | | | EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION |
Executive Officers and Executive Compensation Our Executive Officers The following sets forth certain information with respect to our current executive officers: | | | | | | | | Name Our “named executive officers,” consisting of our Chief Executive Officer, our Chief Financial Officer and our next three most highly compensated executives during Fiscal 2018, were:
Stanford L. Kurland, Executive Chairman of
| | Age | | Position Held with the Board of Directors;Company | | | | David A. Spector President | | 60 | | Chairman and Chief Executive Officer;Officer | | | | Steven R. Bailey | | 62 | | Senior Managing Director and Chief Servicing Officer | | | | William Chang | | 45 | | Senior Managing Director and Chief Capital Markets Officer | | | | Doug Jones, James Follette
| | 51 | | Senior Managing Director and Chief Mortgage Operations Officer | | | | Doug Jones | | 66 | | Director, President and Chief Mortgage Banking Officer | | | | Daniel S. Perotti | | 42 | | Senior Managing Director and Chief Financial Officer | | | | Derek W. Stark | | 55 | | Senior Managing Director, Chief Legal Officer and Secretary | | | | Don White | | 53 | | Senior Managing Director and Chief Risk Officer |
Biographical information for Mr. Spector and Mr. Jones is provided above under the caption “Proposal I - Election of Directors.” Certain biographical information for or other executive officers is set forth below. Steven R. Bailey. Mr. Bailey, age 62, has been Senior Managing Director and Chief Servicing Officer since March 2022. Mr. Bailey previously served as our Chief Mortgage Operations Officer from February 2016 to March 2022 among other executive positions at PNMAC since 2010. Mr. Bailey is responsible for directing loan servicing operations, setting and managing performance goals for all aspects of the servicing and loan administration functions and oversight of our portfolio strategy groups. Prior to joining PNMAC, Mr. Bailey served in a variety of executive and leadership positions within Countrywide Financial Corporation (and Bank of America Corporation, as its successor) from 1985 until 2010. Mr. Bailey earned a bachelor’s degree in Music from the University of Southern California. Mr. Bailey is an experienced mortgage banking executive with significant experience in loan servicing and mortgage administration. William Chang. Mr. Chang, age 45, has been our Senior Managing Director and Chief Capital Markets Officer since March 2023. Prior thereto, he served as our Senior Managing Director and Deputy Chief Investment Officer from January 2021 to March 2023 and as Managing Director, Capital Markets from June 2018 to January 2021. Mr. Chang also has served in a variety of similar executive positions at PNMAC since September 2012. Mr. Chang is responsible for all capital markets and investment-related activities, including the development and execution of investment strategies, secondary marketing, hedging activities and capital markets strategies with government-sponsored enterprises. In addition, Mr. Chang is responsible for developing and managing relationships with Wall Street broker-dealers and fixed income investors. Prior to joining PNMAC, Mr. Chang served in the Mergers & Acquisitions Group at Credit Suisse. Mr. Chang earned a B.A. in Political Economy from Williams College. Mr. Chang is an experienced mortgage banking executive with substantial experience in capital markets, mortgage-related investments and risk management. James Follette. Mr. Follette, age 51, has been Senior Managing Director and Chief Mortgage Operations Officer since October 2022. Mr. Follette previously served as Senior Managing Director and Chief Mortgage Fulfillment Officer from February 2018 to October 2022 and Managing Director, Mortgage Fulfillment from February 2016 to February 2018 among other executive positions at PNMAC since 2011. Mr. Follette is responsible for mortgage fulfillment and servicing operations as well as the advancement of risk mitigation and technology strategies for the Company’s mortgage production channels. Prior to joining PFSI and its affiliates, Mr. Follette worked in several executive positions, including managing director, risk management, at Countrywide Financial Corporation (and Bank of America Corporation, as its successor) from 2003 until 2011, where he led operations and risk management and was responsible for all aspects of operational management, transactional risk management and business development. Mr. Follette earned a B.B.A. in Accounting from the University of Notre Dame and an M.B.A. in Finance from the University of Chicago. Mr. Follette is an experienced mortgage banking executive with significant experience in risk mitigation and technology strategies across various mortgage lending channels. Daniel S. Perotti. Mr. Perotti, age 42, has been our Senior Managing Director and Chief Financial Officer since January 1, 2021. Prior thereto, he served as the Company’s Deputy Chief Financial Officer from January 2017 to December 2020, and served as the Company’s Chief Asset and Liability Management Officer among other positions at the Company and PNMAC since 2008. Mr. Perotti is responsible for | | | | 32 | | | 2023 Proxy Statement |
| | | | | | | EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION |
overseeing the Company’s accounting and financial reporting, treasury operations, investor relations, financial planning and analysis, valuation of investment assets, tax analysis, and Sarbanes-Oxley program. Prior to joining PNMAC, Mr. Perotti was employed at BlackRock, Inc. and served as the head of the quantitative research team within its BlackRock Solutions business as well as in various other roles at BlackRock, Inc. from 2002 to 2008. Mr. Perotti earned a B.A. in economics and computer science from Columbia University. Mr. Perotti is an experienced financial services executive with substantial experience in corporate finance and mortgage banking. Derek W. Stark. Mr. Stark, age 55, has been our Senior Managing Director, Chief Legal Officer and Secretary since February 2018. Mr. Stark previously served as our Managing Director, General Counsel and Secretary among other executive positions at PNMAC since September 2009. Mr. Stark is responsible for overseeing all of the company’s legal management, including securities, corporate governance, corporate transactions, litigation and regulatory compliance, and he serves as the primary legal contact for the Company’s Board. Prior to joining PNMAC, and after leaving private practice, Mr. Stark served in a variety of executive positions, including Executive Vice President and Deputy General Counsel, from 1999 to 2008, at Countrywide Financial Corporation. Mr. Stark earned a B.A. in Political Science from the University of California, Berkeley, and a J.D. from Loyola Law School, Los Angeles. Mr. Stark is an experienced legal executive with significant experience in corporate and securities law and mortgage banking. Don White. Mr. White, age 53 has been our Senior Managing Director and Chief Risk Officer since January 2022. Mr. White previously served as our Senior Managing Director and Chief Credit Officer among other executive positions at PNMAC since 2013. Mr. White is responsible for enterprise risk management, credit risk management, and mortgage compliance and administratively responsible for internal audit. Prior to joining PNMAC, Mr. White served as SVP of Mortgage Risk Management at JP Morgan Chase from 2008 to 2013 and Executive Vice President of Portfolio Credit Risk Management at Countrywide Financial Corporation from 2004 to 2008. Mr. White earned a B.A. in Mathematics from the University of Virginia, and an M.B.A. from the University of Maryland, Smith School of Business. Mr. White is an experienced mortgage banking executive with significant experience in risk and credit management and compliance. | | | | | | | 2023 Proxy Statement | | | 33 | |
| | | | | | | COMPENSATION COMMITTEE REPORT |
Compensation Committee Report Our Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and, based on such review and discussions, the Compensation Committee recommended that our Board of Directors include the Compensation Discussion and Analysis in this Proxy Statement and our 2022 Annual Report on Form 10-K. The Compensation Committee Farhad Nanji, Chair James K. Hunt Jeffrey A. Perlowitz | | | | 34 | | | 2023 Proxy Statement |
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Compensation Discussion and Analysis Table of Contents This compensation discussion and analysis provides a detailed description of our executive compensation programs and policies, the material compensation decisions made under such programs and policies with respect to our named executive officers, and the material factors that were considered in making those decisions. This narrative discussion should be read together with the compensation tables and related disclosures set forth below. 2022 Named Executive Officers Our “named executive officers” consisting of our Chief Executive Officer, our Chief Financial Officer and our next three most highly compensated executive officers during Fiscal 2022, were: | • | | David A. Spector, Chairman and Chief Executive Officer; |
| • | | Doug Jones, Director, President and Chief Mortgage Banking Officer; |
| • | | Vandad Fartaj, Former Senior Managing Director and Chief Investment Officer; andOfficer (ceased serving position in March 2023); |
| • | | AndrewDaniel S. Chang,Perotti, Senior Managing Director and Chief Financial Officer; and
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| • | | James Follette, Senior Managing Director and Chief Mortgage Operations Officer. |
| | | | | | | 2023 Proxy Statement | | | 35 | |
| | | | | Executive Summary of 2018 Compensation
| | COMPENSATION DISCUSSION AND ANALYSIS |
Executive Summary of 2022 Compensation |
Our Executive Compensation Program The goals of our executive compensation program are to:Goals
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| | | | | | | Create
•Pay For Performance - Maintain apay-for-performance culture that rewardswhere total compensation for our executives for high Company and individual performance;is performance based •Stockholder Alignment - Align the interests of our executives with those of our stockholders;stockholders with a significant emphasis on equity incentives and performance based compensation •Market Competitive - Assess executive compensation against market compensation benchmarks prepared by our independent board consultant •Employee Retention - Facilitate the attraction, motivation and retention of highly talented executive leadersexecutives who will be crucial to our long-term success and ultimate sustainability; andsustainability •Support Strategy - Encourage our executives to focus on the achievement ofachieving our annual and long-term business goals.goals | | | | | | 2019 Proxy Statement | | | 29 | |
| | | | | COMPENSATION DISCUSSION AND ANALYSIS |
| How
Fiscal 2022 Financial Results We Paydelivered strong financial performance in a rising interest rate environment: |
| | | | | | | • Net income of $476 million, return on equity of 14%, net revenue of $2.0 billion • Total loan production volume of $109 billion in unpaid principal balance (UPB) and total servicing portfolio UPB of $552 billion at year end • Repurchased approximately 7.8 million shares of PFSI’s common stock, or more than 14 percent of the total outstanding at the beginning of the year, at an approximate cost of $406 million • Dividends of $55 million | | |
| Fiscal 2022 Compensation Program Highlights |
| | | | | | | • CEO and other named executive officers total compensation was down 29% in 2022 as compared to 2021 primarily due to lower annual performance-based incentive awards • Our Named Executive Officersannual performance-based incentives continued to objectively link potential payouts with pre-established return on equity goals (70% of target incentive) with the remaining opportunity tied to strategic goals and objectives (30% of target incentive) without any GAAP adjustments In order
• We executed new four year employment agreements with Messrs. Spector and Jones, effective January 1, 2023 • Our stockholders approved our 2022 Equity Incentive Plan • We consider corporate sustainability and human capital performance in determining named executive officer compensation | | |
| | | | 36 | | | 2023 Proxy Statement |
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Performance-Based Compensation and Incentives We have three primary elements of total compensation: base salary, annual performance-based incentives and long-term equity awards. CEO and other named executive officers total compensation was down 29% in 2022 as compared to 2021 primarily due to lower annual performance-based incentive awards. The Compensation Committee’s goal has been to increase equity as a percentage of each named executive officer’s total compensation. This is consistent with the Compensation Committee’s long term goal of increasing equity as a percentage of total compensation to align with its stockholders. As a result, the overall target equity percentage in Fiscal 2022 has increased for our CEO and other named executive officers as compared to the prior years. Fiscal 2022 CEO performance-based compensation was 89% and equity incentive compensation was 48%, in each case as a percentage of total compensation: Fiscal 2022 performance-based compensation was 86% and equity incentive compensation was 41%, in each case as a percentage of total compensation for our other named executive officers: | | | | | | | 2023 Proxy Statement | | | 37 | |
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Executive Compensation Best Practices Our compensation governance best practices are summarized as follows: | | | | | | | | | What We Do | | | | What We Don’t Do | ✔ | | Heavy bias toward performance-based equity: Our Board seeks to achieve these objectives,ensure that our long-term equity incentive awards are significantly weighted toward performance-based equity vehicles. | | | | û | | No minimum level of total compensation: We do not provide for guaranteed minimum levels of annual performance-based incentives or long-term equity awards in our employment agreements. | ✔ | | Multiple financial performance metrics: Our annual performance-based incentive and long-term equity incentives plans include investor-supported financial performance metrics such as return on equity and leverage ratio based on total recourse debt. | | | | û | | No automatic salary increases: Our named executive officers are not entitled to automatic base salary increases and none of the executive compensation program foremployment agreements with our named executive officers consists of the following primary elements:contain such provisions. | Annual Performance-Based Cash Bonus Incentives; and
Long-Term Equity Awards comprised of performance-contingent and time-based awards.
Our named executive officers also participate in our broad-based retirement and benefit programs generally available to all other employees and receive certain perquisites.
Pay-for-Performance Philosophy and Total Versus Realized Pay
Consistent with ourpay-for-performance philosophy, a significant portion of our named executive officers’ 2018 compensation consisted of variable performance-based annual and long-term incentives. As an illustration of our commitment to pay for performance, below is our CEO’s total compensation over the last three years as set forth in the “2018 Summary Compensation Table” of this Proxy Statement and our past annual proxy statements, compared to the total amount of compensation actually realized by our CEO for each year. The 2018 and 2017 compensation amounts provided below were in connection with Mr. Spector’s role as our President and Chief Executive Officer, whereas the 2016 compensation amounts were in connection with his role as our President and Chief Operating Officer.✔
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year | | Salary ($) | | | Bonus ($) | | | Total Cash ($) | | | All Other
Compensation ($) | | | Total
Grant Date
Fair Value of
Long-Term
Equity Incentive
Opportunity ($)(1) | | | Total
Realized
Value of
Long-Term
Equity
Incentive
Opportunity ($)(2) | | | Total
Grant Date
Compensation ($) | | | Total Realized
Compensation ($) | | 2018 | | | 750,000 | | | | 2,900,000 | | | | 3,650,000 | | | | 76,271 | | | | 2,051,348 | | | | 1,986,072 | | | | 5,777,619 | | | | 5,712,343 | | 2017 | | | 741,667 | | | | 3,000,000 | | | | 3,741,667 | | | | 174,603 | | | | 2,061,729 | | | | 430,962 | | | | 5,977,999 | | | | 4,347,232 | | 2016 | | | 550,000 | | | | 3,750,000 | | | | 4,300,000 | | | | 114,518 | | | | 1,031,441 | | | | — | | | | 5,445,959 | | | | 4,414,518 | |
(1) | | This amount includes the grant date fair value, as determined in accordance with ASC 718, of RSUs and performance-based RSUs, or PSUs, awarded on March 9, 2018, March 6, 2017 and March 7, 2016. The performance-based RSUs included in this column are reported at target payout levels. See the “2018 Grants of Plan-Based Awards” table for additional details.
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(2) | For Fiscal 2018, this amount includes the vesting of 9,233 RSUs on March 6, 2018 and 77,902 PSUs on April 2, 2018 based on the fair market value of our common stock on the respective vesting dates.
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| | | | Note: Total Realized Compensation is not a substitute for Total Compensation. Total Compensation is as set forth in the Summary Compensation Table in this and prior Proxy Statements. Total Realized Compensation includes long-term incentive awards (e.g., nonstatutory stock options and time-based and performance-based RSUs), only to the extent they were “realized,” i.e., to the extent they were exercised or vested during the years described.
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| | | 30 | | | 2019 Proxy Statement |
| | | | �� | COMPENSATION DISCUSSION AND ANALYSIS |
Executive Compensation Objectives and Philosophyû
| | The overall objectives ofNo “single trigger” payments: We do not provide for single trigger equity vesting upon a Change in Control, if assumed. We also do not provide for excise tax gross-ups upon a Change in Control.
| ✔ | | Balanced risk-taking approach to our executivecompensation program: Our compensation program are to attract, motivate, reward and retain high-quality talent. We believe that in order to achieve these objectives, our compensation and benefits programs must be competitive with executive compensation arrangements generally provided to similarly situated executive officers in our business markets, as well as at other companies in our industry where we compete for talent. The various components of our executive compensation program areis designed to create apay-for-performance culture that rewards executives for high companydiscourage excessive risk taking and individual performance, alignsencourage long-term decision making in alignment with the interests of our executivesstockholders. We consult with our independent compensation consultant in this regard. | | | | û | | No excessive perks: Our perquisites are limited to those with a clear business-related rationale. | ✔ | | Robust stock ownership guidelines: We impose robust stock ownership guidelines on our directors and executive officers to ensure that their interests are aligned with those of our stockholders. | | | | û | | No gross-ups for perks: We do not provide excise tax gross-ups of perquisites for our executive officers. | ✔ | | Stockholder engagement: We value the perspectives of our stockholders facilitatesand interact with stockholders through a variety of engagement activities. | | | | û | | No re-pricing: Our equity incentive plan prohibits the re-pricing of stock options and stock appreciation rights without stockholder approval. | ✔ | | Consideration of stockholder feedback: We engage in careful consideration of stockholder feedback regarding compensation. | | | | û | | No speculative or short-term trading: We prohibit our officers, employees and directors from engaging in speculative and short-term trading of our securities. | ✔ | | Comprehensive review of peer group: On an annual basis, we engage in a comprehensive review to assess and identify a relevant peer group of companies in our or a related industry. | | | | û | | No hedging, pledging, short sales, or margin trading: We restrict our officers, employees and directors from engaging in hedging, pledging, short sales, trading in publicly traded put or call options or trading on margin involving our securities. | ✔ | | Independent compensation consultant: We utilize the services of Pearl Meyer, which is engaged directly by the Compensation Committee as an outside independent compensation consultant to advise on executive compensation matters. | | | | û | | No supplemental executive retirement plans: We do not maintain any supplemental executive retirement plans for named executive officers. |
| | | | 38 | | | 2023 Proxy Statement |
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
2022 Compensation Program Overview Our executive compensation program consists of three primary elements: annual base salary, annual performance-based incentives and long-term equity awards. The following table provides a snapshot of those primary elements and describes why each element is provided. | | | | | | | | | Compensation Element | | Characteristics | | | | Performance Based? | | Primary Purpose | | | | | | Annual Base Salary | | Competitive fixed compensation | | | | No | | • Provides a competitive fixed amount of cash compensation based on individual performance, level of responsibility, experience, internal equity and reasonable pay levels • Supports attraction motivation and retention of highly talented executive leaders, and encourages our executives to focus | | | | | | Annual Performance- Based Incentives | | Variable compensation opportunity contingent on the achievement of financial and strategic goals | | | | Yes | | • Aligns executive compensation with annual performance • Provides reasonable short-term incentive opportunity for achieving financial, operational and strategic objectives • Supports attraction and retention of talented executives | | | | | | Long-Term Equity Awards (performance-based and time-based RSUs and nonstatutory stock options) | | Variable compensation opportunity contingent on measurable and objective performance criteria established at the beginning of the measurement period, stock price performance and individual performance | | | | Yes | | • Creates incentives for long-term performance • Provides reasonable long-term incentive opportunity for achieving financial, operational and strategic objectives • Aligns our annualexecutives’ long-term interests with those of our stockholders • Recognizes executive’s individual performance and long-term business goals.future contributions Our Compensation Committee aims to position the• Supports attraction and retention of talented executives
• Provides a total compensation opportunity with payouts varying based on our operating, financial and stock price performance |
Our named executive officers also receive other benefits, which may include health, dental and vision insurance; vacation, holidays and sick days; life, accidental death and dismemberment and long-term disability insurance; and 401(k) plan matching. In addition, certain of our named executive officers receive minimal perquisites including an automobile allowance and payment for tax advice and financial counseling. We tailor our executive compensation program each year to provide what we consider to be a proper balance of these basic elements. The executive compensation program is weighted towards annual performance-based incentives and long-term equity awards, rather than toward annual base salaries, in order to ensure that a significant portion of compensation is tied to Company and stock performance and to maximize retention. We continue to assess the compensation elements for our executive officers, including our named executive officers, and are committed to ensuring that our executive compensation program remains generally consistent with market practices and focused on long-term performance. | | | | | | | 2023 Proxy Statement | | | 39 | |
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Stakeholder Engagement and Executive Compensation Design At our 2022 annual meeting of stockholders approximately 98.7% of the total stockholder votes cast voted “For” our Say-On-Pay proposal. By contrast, at our 2019, 2020 and 2021 annual meeting of stockholders, our Say-On-Pay proposal only received the affirmative vote of approximately 77.7%, 65.8% and 92.8% of the total stockholder votes cast, respectively. Positive Say-On-Pay voting trends in the below table reflects our past compensation enhancements to address investor concerns, including adopting an annual performance-based incentive plan with objective payouts, increasing the proportion of equity incentives to total compensation as well as our commitment to maintain a pay-for-performance culture that aligns with our stockholder interests. Following our 2022 stockholder meeting, the Compensation Committee and Board closely reviewed the stockholder vote on our Say-On-Pay proposal and the differences in voting results between our 2022 annual meeting results and prior years, including the recommendations made by certain proxy advisory firms. 
2022 Stakeholder Interactions We have established and maintained a robust investor relations program that includes constant and proactive outreach to and dialogue with our stockholders, bondholders, the rating agencies, and other stakeholders. Members of our executive management team and members of our investor relations team constantly meet with current and prospective investors in person at office meetings, conferences and non-deal roadshows, and virtually via fireside chats or virtual meetings. Not only do these meetings enable investors to better understand our businesses and the mortgage industry in general, but they provide us with valuable feedback and insights, which are in turn, presented to and considered by the Company’s Board. 
| | | | 40 | | | 2023 Proxy Statement |
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
| (1) | Includes stockholders required to report their ownership of PFSI common stock on Form 13F or others as of December 31, 2022 and excludes passively managed owners. |
Transparency is important: In addition to required SEC filings, earnings webcasts and press releases, we strive to publish in a timely fashion materials that effectively illustrate the drivers of our financial performance. This includes earnings presentations and supplemental financial schedules, which can be found on our corporate website at pfsi.pennymac.com. Consistent messaging: Regardless of whether the stakeholder is a prospective or current bondholder or stockholder, rating agency or ESG-focused institution, we strive to tell a consistent story, adhering to our founding principles of being Accountable, Reliable and Ethical (A.R.E.). What We Heard From Stakeholders | | | | | | | What We Heard from
Stakeholders | | Our Response | | | | | Annual Performance-Based Incentives | | Annual performance-based incentives should continue to be based on multiple objective performance criteria. | | Our Fiscal 2022 annual performance-based incentives continued to objectively link potential payouts with pre-established return on equity goals (70% of target incentive) with the remaining opportunity tied to strategic objectives (30% of target incentive) ) without any GAAP adjustments. See pages 42-44. CEO and other named executive officer total compensation was down 29% in 2022 as compared to 2021 primarily due to lower annual performance-based incentives. See pages 42-44. | | | | | Increase the Equity Percentage of Total Compensation | | Equity incentives should be a significant percentage of each named executive officer’s total compensation. | | Equity as a percentage of total compensation was 48% for our CEO and 41% for our other named executive officers in Fiscal 2022. See page 37 and 54. | | | | Performance-Based RSUs
Performance Metrics | | Performance-based RSUs should include multiple financial performance measures. | | Performance-based RSUs include multiple financial metrics: (1) return on equity and (2) a leverage ratio modifier based on total recourse debt. See pages 44-46. | | | | | Performance Goal Setting | | Performance goals and targets should be objectively aligned with stockholders to reward pay for performance. | | The Fiscal 2022 performance-based return on equity, or ROE, target was set at a level commensurate withexceeding the total compensation paidlong-term historical performance of large public banks and financial companies. We maintained the same ROE target as in prior years since our recent outperformance was impacted by the unusually low interest rate environment resulting from the COVID pandemic, which was not expected to other executives holding comparable positions at companies similarcontinue in industry, size, structure, scopeFiscal 2022 and sophistication with which we compete for executive talent. Ourbeyond. See pages 44-46. | | | | | Corporate Sustainability | | Corporate sustainability and human capital management should be considered in determining compensation. | | The Compensation Committee has structured ourreviewed the Company’s positive corporate sustainability and human capital performance when considering named executive compensation program to meet these objectives. Performance-Based Compensation Mixofficer compensation. See pages 42-44.
|
| | | | | | | 2023 Proxy Statement | | | 41 | |
| | | | | We have three primary elements of total compensation: base salary, annual performance-based cash bonus incentives, and long-term equity awards. As illustrated by the segments in the following graphs, 87% of our CEO’s target total compensation opportunity was performance-based and aligned with our stockholders in the form of annual performance-based cash bonus incentives and long-term equity compensation. For our other Named Executive Officers as a group, 87% of their total compensation opportunity also was performance-based.
| | COMPENSATION DISCUSSION AND ANALYSIS |
Compensation Decisions Made in Fiscal 2022 In making compensation decisions for Fiscal 2022, the Compensation Committee considered the 2022 Say-On-Paynon-binding advisory vote. With the assistance of its independent compensation consultant, the Compensation Committee also considers additional factors, which are summarized below. 2022 Annual Base Salaries In setting annual base salaries, the Compensation Committee generally considers benchmarking data derived from a review of the proxy statement disclosures of our peer group, and various survey sources. The Compensation Committee uses the data from these market surveys to ensure that it establishes reliable points of reference to determine whether and to what extent it is establishing competitive levels of compensation for our named executive officers. In connection with the annual compensation review in February 2022, the Compensation Committee reviewed and approved the following annual base salaries of our named executive officers: | | | | | | 2019 Proxy Statement | | | 31 | |
| | | | | | | | | | | | Name | | 2021
Annual
Base
Salary | | | 2022
Annual
Base
Salary | | | | | David A. Spector | | $ | 1,000,000 | | | $ | 1,000,000 | | | | | Doug Jones | | $ | 600,000 | | | $ | 600,000 | | | | | Vandad Fartaj | | $ | 425,000 | | | $ | 425,000 | | | | | Daniel S. Perotti | | $ | 400,000 | | | $ | 400,000 | | | | | James Follette | | $ | 350,000 | | | $ | 375,000 | |
The Compensation Committee believed that these annual base salaries were appropriate given the competitive market for their services, as well as their individual performances and strong leadership skills. | • | |
| | | | | COMPENSATION DISCUSSION AND ANALYSIS The annual base salary for Mr. Spector remained the same and ranked near the 75th percentile of annual base salaries paid for comparable positions at peer companies. |
| • | | 2018 Compensation Program Overview
Our executive compensation program consists of three primary elements:The annual base salary annual performance-based cash bonusesfor Mr. Jones remained the same and long-term equity awards. The following table provides a snapshotranked near the median of those primary elements and describes why each element is provided.
| | | | | | | | | Compensation
Element
| | Characteristics
| | | | Performance
Based?
| | Primary Purpose
| | | | | | Annual Base Salary
| | Competitive fixed
compensation
| | | | No
| | • Provides a competitive fixed amount of cash compensation based on individual performance, level of responsibility, experience, internal equity and reasonable pay levels
• Supports attraction and retention of talented executives
| | | | | | Annual Performance-
Based Cash Bonuses
| | Variable compensation
opportunity contingent on achievement of corporate financial, operational and strategic goals and individual performance
| | | | Yes
| | • Aligns executive compensation with annual performance
• Provides reasonable short-term incentive opportunity for achieving financial, operational and strategic objectives
• Supports attraction and retention of talented executives
| | | | | | Long-Term Equity
Awards
(nonstatutory stock options and performance-based and time-based RSUs)
| | Variable compensation
opportunity contingent on measurable and objective performance criteria established at the beginning of the measurement period, stock price performance and individual performance
| | | | Yes | | • Creates incentives for long-term performance
• Provides reasonable long-term incentive opportunity for achieving financial, operational and strategic objectives
• Aligns our executives’ long-term interests with those of our stockholders
• Recognizes executive’s individual performance and future contributions
• Supports attraction and retention of talented executives
• Provides a direct correlation of realized pay to operating and stock price performance
• Provides a total compensation opportunity with payouts varying based on our operating, financial and stock price performance
|
Our named executive officers also receive other benefits, which may include health, dental and vision insurance; vacation, holidays and sick days; life, accidental death and dismemberment and long-term disability insurance; 401(k) plan matching; andgross-ups related to payment of self-employment tax liabilities. In addition, certain of our named executive officers receive minimal perquisites including an automobile allowance and payment for tax advice and financial counseling.
We tailor our executive compensation program each year to provide what we consider to be a proper balance of these basic elements. In recent years, the executive compensation program has been weighted toward long-term equity awards and performance-based cash bonuses, rather than toward annual base salaries in order to ensure that a significant portion of compensation is tied to company and stock performance and to maximize retention. We continue to assess the compensation elementspaid for our executive officers, including our named executive officers, and are committed to ensuring that our executive compensation program remains generally consistent with market practices and focused on long-term performance.
Compensation Decisions Made in Fiscal 2018
In making compensation decisions during Fiscal 2018, the Compensation Committee considered the 2018say-on-pay advisory vote. The Compensation Committee also considers additional factors, which are summarized below.
Annual Base Salaries
In setting annual base salaries, the Compensation Committee generally considers benchmarking data derived from a review of the proxy statement disclosures of ourcomparable positions at peer group, various survey sources, and, in the case of the named executive officers other than Mr. Kurland, recommendations and assessments by the Executive Chairman regarding the performance of the other named executive officers. Thecompanies.
| | | 32 | | | 2019 Proxy Statement |
| | | | | COMPENSATION DISCUSSION AND ANALYSIS |
| • | | Compensation Committee usesThe annual base salary for Mr. Fartaj remained the data from these market surveys to ensure that it establishes reliable pointssame and ranked below the median of reference to determine whether and to what extent it is establishing competitive levels of compensation for our named executive officers.
The Compensation Committee conducted an annual compensation review in February 2018 and did not approve any increases to the annual base salaries of our named executive officers. A summarypaid for comparable positions at peer companies.
|
The annual base salary for Mr. Perotti remained the same and ranked below the median of the annual base salaries paid for comparable positions at peer companies. | • | | The annual base salary for Mr. Follette ranked below the median of the 2018 annual base salaries is provided below:paid for comparable positions at peer companies. The Compensation Committee increased Mr. Follette’s base salary from $350,000 to $375,000 in October 2022 after becoming our Senior Managing Director and Chief Mortgage Operations Officer. |
2022 Annual Performance-Based Incentives Fiscal 2022 Performance-Based Targets We believe that our executive compensation program objectives have resulted in decisions regarding executive compensation that have appropriately encouraged growth in our businesses and the achievement of financial goals, thus benefiting our stockholders and generating long-term stockholder value. To determine annual performance-based incentive amounts, the Compensation Committee first sets a target level of performance-based incentive for each named executive officer for the fiscal year based on competitive market data. Each named executive officer’s potential performance-based incentive payout varies based on such individual’s level of responsibility and position within our organization. | | | | 42 | | | 2023 Proxy Statement |
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
The Fiscal 2022 performance-based incentive program has a performance component equal to 70% of the annual target incentive based on achieving ROE and a strategic award component equal to 30% of the annual target incentive based on individual strategic objectives established by the Compensation Committee in consultation with senior management. For Fiscal 2022, the Compensation Committee approved the following annual target incentives for the named executive officers: Name
| | | | | | | Fiscal 2022
Annual Target Incentive | | | David A. Spector | | 2018
Annual
Base
Salary
| | Stanford L. Kurland
| | $
| 1,000,000
| $3,625,000 | | | Doug Jones | | $2,500,000 | | | Vandad Fartaj | | $1,500,000 | | | Daniel S. Perotti | | $1,250,000 | | | James Follette | | $ 925,000 | |
Each named executive officer’s target annual incentive was contingent on meeting the financial goals in the below table. The failure to meet the minimum ROE financial performance threshold would result in no ROE incentive payout, while exceeding the ROE financial performance target would result in incentive payouts over target, subject to a maximum payout cap of 300% for the financial performance component. The total maximum annual incentive payable in Fiscal 2022 was 255% of target assuming all goals were achieved at maximum. | | | | | | | | | | | | | | | | | | | | | | Annual Incentive Objective | | Annual Incentive
Weighting% | | At or Below
Threshold | | Between Threshold and
Target | | Target Performance | | Between Target
And Maximum | | Maximum | | | | | | | | | | ROE | | 70% | | ROE = ≤ 5% Payout = 0% | | ROE = 7.5% Payout = 37.5% | | ROE = 10% Payout = 75% | | ROE = 15% Payout = 100% | | ROE = 20% Payout = 200% | | ROE = 30% Payout = 300% | | | | | | | | | Strategic* | | 30% | | 0% | | 37.5% | | 75% | | 100% | | 125% | | 150% | | | | | | | | | Payout Percentage | | 100% | | 0% | | 37.5% | | 75% | | 100% | | 177.5% | | 255% |
David A. Spector
| * | Actual results could vary as the two goals are determined independently. Payout levels interpolated between defined performance levels. |
Fiscal 2022 Performance-Based Actual Results In Fiscal 2022 management delivered strong financial performance in a rising interest rate environment including net income of $476 million and a ROE of 13.8%. The Fiscal 2022 annual performance-based incentives were earned based on the following actual performance: | | | | | | | | | Performance Component | | Performance Target | | % of
Targeted
Award | | Actual
Performance | | Actual Payout Percentage | | | | | | | ROE | | ROE = 15% Payout = 100% | | 70% | | 13.8% | | 93% | | | | | | | Strategic | | 100% | | 30% | | See following paragraph | | 28% - 150% | | | | | | | Payout Percentage | | 100% | | 100% | | See following paragraph | | 73% - 110% |
| | | | | | | 2023 Proxy Statement | | | 43 | |
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
With respect to the portion of the annual target incentive subject to individual strategic objectives, our Compensation Committee considered a variety of factors when determining whether such objectives were achieved, including, but not limited to: (1) the delivery of strong financial and operational results during an increasing interest rate and lower loan production environment, (2) successfully navigating the continuing impact of the COVID-19 pandemic and ongoing regulatory requirements such as the CARES Act, (3) the implementation of initiatives to reduce operational expenses for a smaller loan origination and refinancing market, (4) production and servicing innovations and internal measures to increase operational efficiency, (5) the identification and development of new investment opportunities through the Company’s investment management business, and (6) positive corporate sustainability and human capital performance. The following summarizes the actual Fiscal 2022 annual performance-based incentives: | | | | | | | | | | | Name | | Actual
Performance-Based
Incentive (%) | | Actual
Performance-Based
Incentives ($)(1) | | | | David A. Spector | | 110% | | $3,980,000 | | | | Doug Jones | | 110% | | $2,750,000 | | | | Vandad Fartaj(2) | | 73% | | $1,100,000 | | | | Daniel S. Perotti | | 110% | | $1,375,000 | | | | James Follette | | 105% | | $ 975,000 |
| (1) | Amounts may not recalculate exactly from the performance based actual results due to rounding. |
| (2) | With respect to Mr. Fartaj, the amount represents the annual performance-based incentive earned by Mr. Fartaj based on our financial performance and individual objectives achieved during Fiscal 2022, in advance of his separation date, and which represents a portion of the payment paid under his Separation Agreement dated as of March 21, 2023. See “—Officer Departure” below in this proxy statement for more information. |
Based on the overall assessment of annual performance and the Chairman’s recommendations, the Compensation Committee approved the performance-based incentive amounts for Messrs. Jones, Fartaj, Perotti and Follette. In addition, based on the factors above, the Compensation Committee also approved the annual performance-based incentives for Mr. Spector. 2022 Long-Term Equity Awards For Fiscal 2022, the Compensation Committee sought to balance the long term equity incentive percentage of each named executive officers’ total compensation with a mix of performance-based RSUs, time-based RSUs and stock options. In determining the equity awards granted in Fiscal 2022, the Compensation Committee considered, among other factors, the recommendations of management and various reports provided by our independent compensation consultant. The Compensation Committee also considered (i) the value of the proposed equity awards; (ii) the historical equity awards previously granted to each named executive officer and the corresponding values at the time of the consideration of the 2022 grants; (iii) the value of share grants to our named executive officers providing comparable services at our industry and sector peers; (iv) the anticipated contribution by the named executive officer in future fiscal years, taking into account the role, responsibility and scope of each position and the Compensation Committee’s perception regarding the quality of the services provided by each named executive officer in carrying out those responsibilities; (v) our financial and operating performance in the past year and our perceived future prospects; (vi) the mix of equity awards to total compensation; and (vii) general market practices. The Compensation Committee considered these multiple factors in determining whether to increase or decrease the target amounts from the prior year’s equity award grants. There was no formulaic approach in the use of these various factors in determining the number of shares to award to each named executive officer. The share amounts were determined on a subjective basis, using the various factors, in the Compensation Committee’s sole discretion. 2022 Long-Term Equity Target Mix The Compensation Committee provided long-term equity incentives for fiscal 2022 to the named executive officers through a target value mix of performance-based restricted stock units (50%), time-based restricted stock units (25%) and stock options (25%). | | $
| | | | 44 | | | 2023 Proxy Statement |
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
2022 Performance-Based Restricted Stock Units Fiscal 2022 performance-based RSU vesting remained contingent upon the achievement of two performance goal components: ROE and a leverage ratio modifier component based on total recourse debt to equity, as further summarized below: 2022 Performance Metrics | | | | | 750,000
PSUs | | Fiscal 2022 | | Rational | Performance Metrics | | • ROE • Leverage Ratio | | • Aligns with stockholder feedback supporting the use of having multiple performance goals • ROE measures a company’s profitability by revealing how much profit a company generates with the money equity holders have invested, including retained profits • Leverage ratio mitigates risk taking to achieve our ROE and is based on total recourse debt to equity ensuring prudent risk taking and capital discipline | Performance Period | | Three year performance period | | • Cumulative three year performance period provides a measure of long-term performance and achievement against long-term financial objectives | Performance Target | | • ROE Target = 15% • Leverage Ratio Target = 3.5x | | • Fiscal 2022 ROE Target has a minimum threshold requirement with a 50% payout • Fiscal 2022 ROE Target is higher than the 10 year trailing ROE of large public banks and financial institutions • Fiscal 2022 ROE Target is the same ROE target as in prior years since our recent outperformance was impacted by the unusually low interest rate environment resulting from the COVID pandemic, which was not expected to continue in Fiscal 2022 and beyond. • Fiscal 2022 Leverage Ratio Target based on a what we believe is a prudent level of debt for a non-bank financial companies and allows for increases in direct lending production and continued return of capital | Doug Jones
|
The performance-based RSU awards granted in February 2022 provide for the performance-based RSUs to obtain, upon the vesting of each RSU, a variable number of shares of our common stock. The number of shares received upon vesting of performance-based RSUs is determined based on the attainment of the performance goals, subject to conditions including continued employment throughout the performance period. Vesting of the ROE performance metric is tied to the achievement of cumulative, annualized ROE metrics during the performance period, with 50% of the target amount earned if the threshold performance level is met, 100% of the target amount earned if the target performance level is met and 150% of the target amount earned if the highest performance level is met. The payout that is determined based on the above ROE performance metric is then multiplied by a factor of 66.7% to 125% for named executive officers depending on the actual achievement of the leverage ratio target during the performance period, for a maximum award payable of 187.5% of target shares. In addition, the payout is further multiplied by a factor of 0% to 100% for each named executive officer based on an individual effectiveness rating ranging from unsatisfactory to exceed expectations. | | $
| 500,000
| | Vandad Fartaj
| | $
| 325,000
| | Andrew S. Chang
| | $
| 325,000
| |
The Compensation Committee believes that these annual base salaries are appropriate given the competitive market for the services provided by the named executive officers, as well as their individual performances and strong leadership skills.
Annual Performance-Based Cash Incentives
We believe that our executive compensation program objectives have resulted in decisions regarding executive compensation that have appropriately encouraged growth in our businesses and the achievement of financial goals, thus benefiting our stockholders and generating long-term stockholder value. To determine annual bonus amounts, the Compensation Committee first sets a target level of bonus for each named executive officer for the fiscal year based on competitive market data. Each named executive officer’s potential bonus payout varies based on such individual’s level of responsibility and position within our organization.
The annual performance-based cash incentives paid to our named executive officers are based on the achievement of actual earnings per share, or EPS, and pretax income as compared to EPS and pretax income targets set at the beginning of each year as well as the individual performance of each named executive officer. We believe that EPS and pretax income are appropriate measures for annual performance-based cash incentive bonuses because they provide our named executive officers with an incentive to achieve favorable current results, while also producing sustainable long-term stockholder value. In setting EPS and pretax income targets, we consider our current and historical performance, the performance of companies in industries in which we compete, and current and anticipated market conditions.
Actual bonuses are determined based on actual EPS and pretax income achieved relative to targets for EPS and pretax income, as well as target bonus amounts set for each named executive officer; however, adjustments to the bonus amounts are sometimes made by the Compensation Committee based on market factors, the named executive officer’s individual performance as compared to such named executive officer’s key performance indicators, and the named executive officer’s contribution to the execution of our strategic initiatives during the fiscal year.
Based on the overall assessment of these factors and recommendations made by the Executive Chairman, the Compensation Committee approved the annual performance-based cash incentive amounts for Messrs. Spector, Jones, Fartaj and Chang. The Compensation Committee then reviewed and approved management’s recommendation regarding annual performance-based cash incentive amounts. Based on the factors above, the Compensation Committee also approved the annual performance-based cash incentive paid to Mr. Kurland.
The table below summarizes the actual annual performance-based cash bonuses earned during Fiscal 2018:
| | | | | | | 2023 Proxy Statement | | | 45 | |
| | | Name
| | Actual
Bonus
| | Stanford L. Kurland
| | $
| 3,825,000
| | David A. Spector
| | $
| 2,900,000
| | Doug Jones
| | $
| 1,500,000
| | Vandad Fartaj
| | $
| 1,050,000
| | Andrew S. Chang
| | $
| 832,500
| | | COMPENSATION DISCUSSION AND ANALYSIS |
| | | | | | 2019 Proxy Statement | | | 33 | |
| | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Long-Term Equity Awards
In determining the equity awards granted in Fiscal 2018, the Compensation Committee considered, among other factors, the recommendations of management and various reports provided by our independent compensation consultant. The Compensation Committee also considered (i) the value of the proposed equity awards; (ii) the historical equity awards previously granted to each named executive officer and the corresponding values at the time of the consideration of the 2018 grants; (iii) the value of share grants to our named executive officers providing comparable services at our industry and sector peers; (iv) the anticipated contribution by the named executive officer in future fiscal years, taking into account the role, responsibility and scope of each position and the Compensation Committee’s perception regarding the quality of the services provided by each named executive officer in carrying out those responsibilities; (v) our financial and operating performance in the past year and our perceived future prospects; and (vi) general market practices. The Compensation Committee considered these multiple factors in determining whether to increase or decrease the target amounts from the prior year’s equity award grants. There was no formulaic approach in the use of these various factors in determining the number of shares to award to each named executive officer. The share amounts were determined on a subjective basis, using the various factors, in the Compensation Committee’s sole discretion.
For Fiscal 2018, the Compensation Committee approved the following mix of long-term incentive elements, generally consistent with approvals made in Fiscal Year 2017, with a continued emphasis on performance-based equity awards. An illustration of the mix of long-term incentive elements is provided below:
A summary of the performance measures and targets contained in the performance-based RSUs granted to our named executive officers during Fiscal 2022 is provided below and each of these awards is further described in the “2022 Grants of Plan-Based Awards” table: | | | | | | | | | | | | | Fiscal 2022 PSU Awards | | | | | | | | | Performance-Based
Restricted
Stock Units | | Performance Component | | Threshold | | Target | | Maximum | | % of Target | | % of
Maximum | | | ROE (1) | | 10.0% - Cumulative Annualized ROE Payout = 50% | | 15.0% - Cumulative Annualized ROE Payout = 100% | | 20.0% - Cumulative Annualized ROE Payout = 150% | | 100% | | 150% | | | Leverage Ratio (2) | | >=5x Multiplier = 66.7% | | 3.5x Multiplier = 100% | | <=1x Multiplier = 125% | | 100% (Multiplier) | | 125% (Multiplier) | | | | Individual Effectiveness (3) | | Multiplier = 60% | | Multiplier = 100% | | Multiplier = 100% | | 100% (Multiplier) | | 100% (Multiplier) | | | | | | | | | | | | 100% | | 187.5% |
| (1) | ROE = Net Income ÷ Average Month-End Equity ÷ Years in Measurement Period (1/1/2022 – 12/31/2024). |
| (2) | Leverage Ratio is the average of the ratio at the end of each month of the performance measurement period of the amount of total recourse indebtedness outstanding to total equity. |
| (3) | Based on individual overall achievement of goals over the three-year performance period. |
2022 Time-Based Restricted Stock Units In February 2022, our named executive officers were awarded time-based RSUs. These time-based RSUs, which vest in three equal installments beginning on the first anniversary of the grant date, are to be settled in an equal number of shares of common stock upon vesting subject to the recipient’s continued service through each anniversary (with certain exceptions as specified under the applicable award agreement or the provisions of our Equity Plans). The time-based RSUs are also reflected in the “2022 Grants of Plan Based Awards” table. 2022 Stock Option Awards In February 2022, our named executive officers were awarded non-statutory stock options. The stock option award agreement provides for the award of stock options to purchase the optioned shares. In general, and except as otherwise provided by the Compensation Committee, one-third (1/3) of the optioned shares will vest on each of the first, second, and third anniversaries of the vesting commencement date, subject to the recipient’s continued service through each anniversary (with certain exceptions as specified under the award agreement or the provisions of our Equity Plans), and each stock option will have a term of ten years from the date of grant. The table below summarizes the grant date fair value of the long-term incentive equity awards awarded in Fiscal 2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Grant Date
Fair Value of
Performance-
Based PSUs | | | Number of
Performance-
Based PSUs | | | Grant Date
Fair Value of
Time-Based
RSUs | | | Number of
Time-Based
RSUs | | | Grant Date
Fair Value
of Stock
Options | | | Number of
Stock
Options | | | Total Grant
Date Fair Value
of Long-Term
Equity Incentive
Opportunity | | | | | | | | | | David A. Spector | | | $2,249,968 | | | | 39,404 | | | | $1,124,984 | | | | 19,702 | | | | $1,214,140 | | | | 57,136 | | | | $4,589,092 | | | | | | | | | | Doug Jones | | | $1,249,976 | | | | 21,891 | | | | $ 624,960 | | | | 10,945 | | | | $ 674,518 | | | | 31,742 | | | | $2,549,454 | | | | | | | | | | Vandad Fartaj | | | $ 574,997 | | | | 10,070 | | | | $ 287,499 | | | | 5,035 | | | | $ 310,271 | | | | 14,601 | | | | $1,172,767 | | | | | | | | | | Daniel S. Perotti | | | $ 499,968 | | | | 8,756 | | | | $ 249,984 | | | | 4,378 | | | | $ 269,811 | | | | 12,697 | | | | $1,019,763 | | | | | | | | | | James Follette | | | $ 412,490 | | | | 7,224 | | | | $ 206,245 | | | | 3,612 | | | | $ 222,594 | | | | 10,475 | | | | $ 841,329 | |
Each of the performance-based and time-based RSUs has a grant date fair value of $57.10 per share, which is based on our closing stock price on the NYSE on February 23, 2022. The stock options granted on February 23, 2022 have an exercise price of $57.10 and a Black-Scholes value of $21.25 per share, respectively, at the date of grant. | | | | 46 | | | 2023 Proxy Statement |
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
2020 Performance-Based Restricted Share Unit – Actual Results The below table summarizes the target and actual results of performance-based RSUs granted to our named executive officers on February 26, 2020 for the performance period of January 1, 2020 through December 31, 2022. The payout of shares of common stock pursuant to the performance-based RSU was determined based on ROE and a Leverage Ratio Multiplier for the period as measured against the target performance goal set by the Compensation Committee when the performance-based RSU was granted in 2020. The payout percentage for the performance-based RSU was 161.5%. | | | | | | | | | | | | | | | | | Fiscal 2020 PSU Awards | | | Performance-
Based
Restricted
Stock Units | | Performance Component | | Performance Target | | % of
Targeted
Award | | Actual
Performance | | Actual Payout | | | ROE (1) | | 15% - Cumulative Annualized ROE | | 100% | | 32.6% | | 150% | | | Leverage Ratio (2) | | 3.5x | | 100% (Multiplier) | | 2.7x | | 107.7% (Multiplier) | | | | | | | | | | Individual Effectiveness (3) | | 4 - Exceeds Expectations | | 100% (Multiplier) | | 100% | | 100% (Multiplier) | | | | | | | | | | | | | | | | | 161.5% |
| (1) | ROE = Net Income ÷ Average Month End Equity ÷ Years in Measurement Period (January 1, 2020 through December 31, 2022). The payout scale for the ROE component was 0% to 150%. |
| (2) | Non-Statutory Stock OptionsLeverage Ratio is the average of the ratio at the end of each month of the performance measurement period of the amount of total recourse indebtedness outstanding to total equity. The range of the multiplier was 67% to 125%.
|
| (3) | Based on individual overall achievement of goals over the three-year performance period. The range of the multiplier was 0% to 100%. |
Executive Compensation Objectives and Philosophy The overall objectives of our executive compensation program are to attract, motivate, reward and retain high-quality talent. We believe that in order to achieve these objectives, our compensation and benefits programs must be competitive with executive compensation arrangements generally provided to similarly situated executive officers in our business markets, as well as at other companies in our industry where we compete for talent. The various components of our executive compensation program are designed to create a pay-for-performance culture that rewards executives for exceptional Company and individual performance, aligns the interests of our executives with those of our stockholders, facilitates the attraction, motivation and retention of highly talented executive leaders, and encourages our executives to focus on the achievement of our annual and long-term business goals. Our Compensation Committee aims to position the total compensation of our named executive officers at a level commensurate with the total compensation paid to other executives holding comparable positions at companies similar in industry, size, structure, scope and sophistication with which we compete for executive talent. Our Compensation Committee has structured our executive compensation program to meet these objectives. Executive Compensation Decision Making Process Annual Compensation Process Compensation decisions are generally made as part of a year-long review process: | | | | | | | | | | | | Step 1 | | Step 2 | | Step 3 | | Step 4 | | Step 5 | | Step 6 | | | | | | | During Fiscal 2018, ourManagement engages with investors and reviews feedback on named executive officers were awardednon-statutory stock options. The stock option award agreement provides for the award of stock options to purchase the optioned shares. In general, and except as otherwise provided by the Compensation Committee,one-third (1/3) of the optioned shares will vest in a lump sum on each of the first, second, and third anniversaries of the vesting commencement date, subject to the recipient’s continued service through each anniversary (with certain exceptions as specified under the award agreement or the provisions of our 2013 Plan), and each stock option will have a term of ten years from the date of grant. Additionally, the stock options expire (1) immediately upon termination of the holder’s employment or other association with us for cause, (2) one year after the holder’s employment or other association is terminated due to death or disability, and (3) three months after the holder’s employment or other association is terminated for any other reason.compensation
Performance-Based Restricted Stock Units
During Fiscal 2018, our named executive officers also were awarded performance-based RSUs. The performance-based RSU award agreement provides for the award of performance-based RSUs to obtain, upon the vesting of each RSU, a variable number of shares of our common stock. The number of shares received upon vesting of performance-based RSUs is determined based on the attainment of the performance goals, subject to conditions including continued employment throughout the performance period.
Return on equity, or ROE, was the sole measure of company performance for the performance-based RSUs granted during Fiscal 2018. Vesting of the target award amount is tied to the achievement of certain ROE metrics during the performance period, with 80% of the target amount earned if the threshold performance level is met, 100% of the target amount earned if the target performance level is met and 130% of the target amount earned if the highest performance level is met. The payout that is determined based on the ROE component is
| | | 34 | | | 2019 Proxy Statement |
| | | | | COMPENSATION DISCUSSION AND ANALYSIS |
then multiplied byManagement reviews the Company’s compensation programs following a factor of 0% to 100% for named executive officers based on an individual effectiveness rating ranging from unsatisfactory to outstanding. Holders of performance-based RSUs do not have any voting rights or dividend rights with respect to those units. A summary of the performance measures contained in the performance-based RSUs granted to our named executive officers during Fiscal 2018 is provided below:
| | | | | | | 2018 PSU Awards
| Performance-
Based
Restricted
Stock Unitsrigorous financial planning process
| | Performance Component
| | Performance Target | | % of
Targeted
Award
| | 1. PNMAC ROE (1)
| | 16.4% - Cumulative Annualized ROE
| | 100%
| | 2. Individual Effectiveness (2)
| | 5 - Outstanding
| | 0% to 100%
|
(1) | Calculated by dividing GAAPpre-tax income by average stockholders’ equity for the period, as reported by the company. The payout scale for component 1 is 0% to 130%.
|
(2) | Based on individual overall achievement of goals over the three-year performance period. The range of the multiplier is 0% to 100%.
|
Time-Based Restricted Stock Units
During Fiscal 2018, all of our named executive officers other than our Executive Chairman were awarded time-based RSUs. These time-based RSUs, which vest in three equal installments beginning on the first anniversary of the grant date, are to be settled in an equal number of shares of common stock upon vesting.
The table below summarizes the grant date fair value of the annual long-term equity awards made on March 9, 2018:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Grant Date
Fair Value of
Performance-
Based PSUs | | | Number of
Performance-
Based PSUs | | | Grant Date
Fair Value of
Time-Based
RSUs | | | Number of
Time-Based
RSUs | | | Grant Date
Fair Value
of Stock
Options | | | Number of
Stock
Options | | | Total Grant
Date Fair Value
of Long-Term
Equity Incentive
Opportunity | | S. Kurland | | $ | 2,999,980 | | | | 122,950 | | | | — | | | | — | | | $ | 970,512 | | | | 102,459 | | | | $3,970,492 | | D. Spector | | $ | 1,033,291 | | | | 42,348 | | | | $ 516,646 | | | | 21,174 | | | | $501,411 | | | | 52,935 | | | | $2,051,348 | | D. Jones | | $ | 516,646 | | | | 21,174 | | | | $ 258,323 | | | | 10,587 | | | | $250,701 | | | | 26,467 | | | | $1,025,669 | | V. Fartaj | | $ | 413,312 | | | | 16,939 | | | | $ 206,644 | | | | 8,469 | | | | $200,564 | | | | 21,174 | | | | $ 820,520 | | A. Chang | | $ | 413,312 | | | | 16,939 | | | | $ 206,644 | | | | 8,469 | | | | $200,564 | | | | 21,174 | | | | $ 820,520 | |
Each of the stock options has an exercise price of $24.40 and a Black-Scholes Value of $9.47 at the date of grant. Each of the performance-based and time-based RSUs has a grant date fair value of $24.40, which is based on our closing stock price on the NYSE on the date of grant.
Executive Compensation Decision Making Process
Role of the Compensation Committee. The Compensation Committee has overall responsibilityCEO conducts performance reviews for recommending to our Board the compensation of our Executive Chairman and our CEO and determining the compensation of our other named executive officers. Members of the Compensation Committee are appointed by the Board. During Fiscal 2018, the Compensation Committee consisted of three members of the Board, Messrs. Botein, Hunt and Nanji, none of whom served as our executive officers. Each of Messrs. Botein, Hunt and Nanji qualified as an “independent director” under the rules of the NYSE. Each of Messrs. Hunt and Nanji also qualified as an “outside director” under Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, and served as a member of a subcommittee of the Compensation Committee that was formed to approve the grant of awards to certain individuals for purposes of Section 162(m) of the Code. See the section entitled “CORPORATE GOVERNANCE—Committees of the Board of Directors.” Each year, the Compensation Committee conducts an evaluation of each named executive officer to determine if changes in such officer’s compensation are appropriate based on the considerations described below. At the Compensation Committee’s request, the Executive Chairman and the CEO provide input for the Compensation Committee regarding the performance and appropriate compensation of the other named executive officers. The Compensation Committee gives considerable weight to their evaluation of the other named executive officers because of their direct knowledge of each such officer’s performance and contributions.recommends compensation to the Compensation Committee after considering market practice
| | | | | | 2019 Proxy Statement | | | 35 | |
| |
| | | | | COMPENSATION DISCUSSION AND ANALYSIS Compensation Committee evaluates the CEO’s performance | | Pearl Meyer advises the Compensation Committee on the overall appropriateness of named executive officer compensation and the compensation programs relative to market practice | | Compensation Committee reviews and approves named executive officer compensation and compensation programs |
| | | | | | | 2023 Proxy Statement | | | 47 | |
| | | | | The Role of the Outside Independent Compensation Consultant.Our Compensation Committee has the sole authority to retain, compensate and terminate any independent compensation consultant of its choosing in assessing our compensation program and determining the appropriate, competitive levels of compensation for our executive officers. Pursuant to such authority, the Compensation Committee utilized Pearl Meyer & Partners, or Pearl Meyer, as its independent compensation consultant during Fiscal 2018. Pearl Meyer provided the following services to the Compensation Committee:
| | COMPENSATION DISCUSSION AND ANALYSIS |
Role of the Compensation Committee. The Compensation Committee has overall responsibility for recommending to our Board the compensation of our CEO and determining the compensation of our other named executive officers. Members of the Compensation Committee are appointed by the Board. The Compensation Committee consists of three members of the Board, Messrs. Nanji, Hunt and Perlowitz, none of whom served as our executive officers. Each of Messrs. Nanji, Hunt and Perlowitz qualified as an “independent director” under the rules of the NYSE. Each of Messrs. Nanji, Hunt and Perlowitz also qualified as an “outside director” under Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, and served as a member of a subcommittee of the Compensation Committee that was formed to approve the grant of awards to certain individuals for purposes of Section 162(m) of the Code. See the section entitled “CORPORATE GOVERNANCE—Committees of the Board of Directors.” Each year, the Compensation Committee conducts an evaluation of each named executive officer to determine if changes in such officer’s compensation are appropriate based on the considerations described below. The Chairman and CEO provides input for the Compensation Committee regarding the performance and appropriate compensation of the other named executive officers (other than himself). The Role of the Outside Independent Compensation Consultant. Our Compensation Committee has the sole authority to retain, compensate and terminate any independent compensation consultant of its choosing in assessing our compensation program and determining the appropriate, competitive levels of compensation for our executive officers. Pursuant to such authority, the Compensation Committee utilized Pearl Meyer & Partners, or Pearl Meyer, as its independent compensation consultant during Fiscal 2022. Pearl Meyer has provided various services to the Compensation Committee since its engagement including the following: | • | | Attended Compensation Committee meetings and prepared certain meeting materials in connection with such meetings; |
| • | | Reviewed the Company’s peer group for executive compensation purposes for Fiscal 2018 and provided recommendations for changes to such peer group; |
| • | | Evaluated the competitive positioning of our named executive officers’ base salaries, annual performance-based incentive and long-term incentive compensation relative to our peer companies to support Fiscal 2018 decision-making; |
| • | | Advised on Fiscal 2018 target award levels within the annual and long-term incentive program and, as needed, on actual compensation actions; |
| • | | Conducted a review of the competitive market data (including base salary, annual performance-based incentive and long-term incentive targets) for our named executive officers; |
| • | | Assessed our executive compensation peer group and recommended changes, as necessary; |
| • | | Assessed compensation levels within our peer group for named executive officers and other executive officers;officers as necessary; |
| • | | Reviewed historical financial performance for peer group companies under metrics used in our long-term incentive plan;companies; |
| • | | Provided market research on various issues as requested by our Company; Prepared materials for and participated in Compensation Committee meetings, as requested;
|
| • | | Consulted with our Compensation Committee regarding compensation strategy, internal communications related to equity compensation and compensation best practices; |
| • | | Assisted in compensation plan designs and modifications, as requested; |
| • | | Assessed whether our executive compensation programs might encourage inappropriate risk taking that could have a material adverse effect on us; and |
| • | | Assisted with the preparation of this Compensation Discussion and Analysis for this Proxy Statement. Assessment of Outside Independent Compensation Consultant Conflicts of Interest.
|
Assessment of Outside Independent Compensation Consultant Conflicts of Interest. Under rules promulgated by the SEC, the Compensation Committee must determine, after taking into account six independence-related factors, whether any work completed by a compensation consultant raised any conflict of interest. Factors considered by the Compensation Committee include the following six factors specified by the NYSE rules: (1) other services provided to us by the compensation consultant; (2) what percentage of the compensation consultant’s total revenue is made up of fees from us; (3) policies or procedures of the compensation consultant that are designed to prevent a conflict of interest; (4) any business or personal relationships between individual consultants involved in the engagement and Compensation Committee members; (5) any shares of our common stock owned by individual consultants involved in the engagement; and (6) any business or personal relationships between our executive officers and the compensation consultant or the individual consultants involved in the engagement. For Fiscal 2022, the Compensation Committee did not identify any conflict of interest with respect to Pearl Meyer. Peer Group and Benchmarking The Use of Peer Group and Competitive Market Data. On an annual basis we engage in a comprehensive review of peer companies with our independent compensation consultant. To assist in decision-making regarding our compensation and benefits program, our management and the Compensation Committee review competitive market data from a “peer group” of publicly traded companies in specific industries in which we compete for executive talent, among other factors, to assist in decision-making regarding our compensation and benefits programs. The market data reviewed includes both peer proxy data and survey data of companies similar in industry, size, structure, scope and sophistication. Proxy data was gathered from proxy statements and other publicly filed documents. | | | | 48 | | | 2023 Proxy Statement |
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Since our peer group was initially established in 2013, we have undertaken comprehensive annual reviews of the appropriateness of such peer group. The Compensation Committee reviews other public companies similar in industry, size, structure, scope and sophistication. How We Establish our Peer Group. The Compensation Committee updated its peer group used for evaluating compensation decisions based on objective criteria as presented in the table and discussion below. | | | | | | | | | | | | | Objective Criteria Considered | | Former Peer Group | | Revised Peer Group | | | • Companies in financial services, data processing & outsourcing services, property & casualty insurance, research & consulting services and specialty finance industries • Companies with market capitalizations within a reasonable range of our common stock owned by individual consultants involved in the engagement;capitalization • Companies with pretax income and (6) any business or personal relationships between our executive officers and the compensation consultant or the individual consultants involved in the engagement. For Fiscal 2018, the Compensation Committee did not identify any conflict of interestassets within a reasonable range • Companies with respect to Pearl Meyer.revenue within a reasonable range Peer Group and Benchmarking
The Use of Peer Group and Competitive Market Data.On an annual basis we engage in a comprehensive review of peer companies with our independent compensation consultant. To assist in decision-making regarding our compensation and benefits program, our management and the Compensation Committee review competitive market data from a “peer group” of publicly traded companies in specific industries in which we compete• Competitors for executive talent among other factors, to assist in decision-making regarding our compensation and benefits programs. The market data reviewed includes both peer proxy data and survey data
• Companies of companies similar in industry, size, structure,comparable scope and sophistication. Proxy data was gathered from proxy statements and other publicly filed documents.complexity Since our• Companies that identify us as their direct peer group was initially established in 2013, we have undertaken comprehensive annual reviews of the appropriateness of such peer group. The Compensation Committee reviews other public companies
• Companies with similar in industry, size, structure, scope and sophistication.pay practices | | | 36 | | | 2019 Proxy Statement |
| | • Black Knight, Inc.
| | | | | COMPENSATION DISCUSSION AND ANALYSIS •Blend Labs, Inc.*• Essent Group Ltd. • Fidelity National Financial, Inc. • First American Financial Corporation • LendingTree, Inc.* • LoanDepot, Inc.* • MGIC Investment Corp. • Mr. Cooper Group, Inc. • OneMain Holdings, Inc. • Radian Group Inc. • Redwood Trust, Inc. • Rocket Companies, Inc. • SLM Corporation • UWM Holdings Corporation • Zillow Group, Inc. | | • Black Knight, Inc. • Essent Group Ltd. • Fidelity National Financial, Inc. • First American Financial Corporation • MGIC Investment Corp. • Mr. Cooper Group, Inc. • OneMain Holdings, Inc. • Radian Group Inc. • Redwood Trust, Inc. • Rocket Companies, Inc. • SLM Corporation • UWM Holdings Corporation •Walker & Dunlop + • Zillow Group, Inc. |
| * | How We Establish ourRemoved from Peer Group.The Compensation Committee updated its peer group used for evaluating Fiscal 2018 compensation decisions based on objective criteria as presented in the table below:
| | | | | | | | Objective Criteria Considered
| | | | Fiscal 2018 Peer Group
| • Companies in the financial services and specialty finance industries
• Companies with market capitalizations within a reasonable range of our pro forma capitalization
• Companies with pretax income within a reasonable range
• Companies with revenue within a reasonable range
• Competitors for executive talent
• Companies of comparable scope and complexity
• Competitors for equity investor capital
• Companies that identify us as their direct peer
• Companies with similar pay practices
| | | | • Black Knight, Inc.
• CoreLogic, Inc.
• Essent Group Ltd.
• Flagstar Bancorp, Inc.
• iStar Financial Inc.
• Ladder Capital Corp.
• MGIC Investment Corp.
• Mr. Cooper Group, Inc.
• Ocwen Financial Corporation
• OneMain Holdings, Inc.
• Radian Group Inc.
• Redwood Trust, Inc.
• Walker & Dunlop Inc.
Group |
| + | Compensation Policies and Practices As They RelateAdded to Our Risk Management. We have designed our executive compensation program to reward strong Company and individual performance. Company performance objectives are based on our overall performance rather than on only a few discrete performance measures related to a particular aspect of our Company’s business. We believe that this structure, as further explained below, minimizes risks resulting from compensation practices.Peer Group
Our Compensation Committee believes that its compensation policies and practices for all employees of PNMAC, including our named executive officers, do not create risks that are reasonably likely to have a material adverse effect on us. We believe that appropriate safeguards are in place with respect to our compensation programs and policies that assist in mitigating excessive risk-taking that could harm the value of our Company or reward poor judgment by executives and employees.
|
Given the Company’s market share and the fact that many of our true business competitors are either private or subsidiaries of large banks, the process for developing a peer group for us is challenging. Our goal was to identify more peers that are industry relevant, publicly-traded of similar size and complexity, and involved in related markets. The revised peer group was developed by screening potential peers for business comparability – measured by industry similarity (operating in real estate and investment management, preferably focused on the residential mortgage market), complexity (top 10 mortgage lender in the U.S.) and financial characteristics (profitable companies with meaningful balance sheet) – and size comparability and public company status. The selection criteria also included companies in: financial services, consumer finance, real estate services and software and property & casualty insurance. As part of this expanded selection criteria, we also focused on companies that have 0.25x to 3x the combined market capitalization, revenue and assets of the Company and PennyMac Mortgage Investment Trust (NYSE: PMT), the real estate investment trust that the Company’s management team is responsible for externally managing through our investment management subsidiary. Accordingly, the Compensation Committee, after reviewing with senior management and our independent outside compensation consultant, decided that Blend Labs, Inc., Lending Tree, Inc. and LoanDepot, Inc. should be removed and Walker & Dunlop added to the revised peer group primarily due to changes in market size and business competition considerations. The Compensation Committee believes that this revised peer group better reflects our competitors in the industry that currently conduct similar businesses and have comparable scales of operations. Compensation Policies and Practices As They Relate to Our Risk Management. We have designed our executive compensation program to reward strong Company and individual performance. We believe that this structure, as further explained below, minimizes risks resulting from compensation practices. Our Compensation Committee believes that its compensation policies and practices for all employees, including our named executive officers, do not create risks that are reasonably likely to have a material adverse effect on us. We believe that appropriate safeguards are in place with respect to our compensation programs and policies that assist in mitigating excessive risk-taking that could harm the value of our Company or reward poor judgment by executives and employees. In that regard, the Compensation Committee requested assistance from our independent compensation consultant in reviewing our compensation policies and practices. Based on its review, the Compensation Committee concluded that our compensation policies and practices as they apply to our named executive officers are designed with an appropriate balance of risk and reward in relation to our overall business strategy and do not create risks that are reasonably likely to have a material adverse effect on our Company. | | | | | | | 2023 Proxy Statement | | | 49 | |
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
As part of the review, numerous factors were noted that reduce the likelihood of excessive risk-taking, which include, but are not limited to, the following: | • | | Our compensation mix is balanced among fixed components such as salary and benefits, variable components such as annual performance-based cash bonuses,incentives, and long-term equity awards including time-based and performance-based RSUs and stock options; |
| • | | Our Compensation Committee has ultimate authority to determine, and adjust, if appropriate, compensation provided to our executive officers, including each of the named executive officers; |
| • | | Incentive compensation paid to named executive officers and other senior managers is subject to clawback upon a material accounting restatement as a result of erroneous data in our financial statements; |
| • | | Our named executive officers are subject to stock ownership guidelines that require a certain minimum level of stock ownership; and |
| • | | Our Compensation Committee has the authority to retain any advisor it deems necessary to fulfill its obligations.
|
Executive Stock Ownership Guidelines Our executive stock ownership guidelines, which are approved by our Nominating and Corporate Governance Committee, are intended to further the objective of aligning the interests of our executives with those of our stockholders. These stock ownership guidelines provide that our named executive officers and other executive officers should accumulate a minimum number of shares equal in value to a multiple of their base salary within five years from becoming an executive officer. A summary of the stock ownership guidelines (as a multiple of base salary) is set forth in the following table: | | | Executive Officer Title | | Stock Ownership Guidelines Guideline | Our executive stock ownership guidelines, which are approved by our Compensation Committee, are intended to further the objective of aligning the interests of our executives with those of our stockholders. These stock ownership guidelines provide that our named executive officers and other executive officers should accumulate a minimum number of shares equal in value to a multiple of their base salary over a specified time frame.
Chief Executive Officer | | | | | | 2019 Proxy Statement | | | 37 | |
| | | | | COMPENSATION DISCUSSION AND ANALYSIS |
A summary of the stock ownership guidelines (as a multiple of base salary) are set forth in the following table:5x
| | | | | | Executive Officer Title
| | Stock Ownership
Guideline
| | Compliant
Other Executive Officers | | 3x | Executive Chairman of the Board of Directors
|
For purposes of the guidelines, stock ownership includes common stock owned directly and unvested time-based RSUs. The types and amounts of stock-based awards are intended, in part, to facilitate the accumulation of sufficient shares by our executives to allow them to meet the stock ownership guidelines within the applicable timeline. Each executive officer is expected to meet the respective level of stock ownership within five years of becoming subject to such guidelines. The Nominating and Corporate Governance Committee will annually review each executive officer’s compliance with or progress toward meeting the stock ownership guidelines based on share ownership calculated as of the average closing share price over the prior year. Each named executive officer who has been an executive officer for five years or more is in compliance with our stock ownership guidelines. Clawback Provisions In 2018, we instituted a clawback policy allowing for the recoupment of incentive compensation if we issue a material accounting restatement as a result of erroneous data in our financial statements. In case of a material accounting restatement, our Board or an authorized Board committee will have the authority, in its sole discretion, to recover any incentive compensation that (i) is received by any current or former executive officer or any other officer with a title of senior managing director or higher during the two fiscal years immediately preceding the date of such accounting restatement issuance, and (ii) exceeds the amount that would have been paid to such individual(s) under the accounting restatement, calculated on a pre-tax basis. We intend to amend our clawback policy or adopt a new clawback policy consistent with the requirements of Exchange Act Rule 10D-1 prior to the effectiveness of final NYSE listing standards implementing such rule. Trading Controls and Anti-Pledging and Anti-Hedging Policies Our named executive officers, directors and certain other employees are required to obtain preclearance prior to entering into any transaction involving our securities. Trading is generally permitted only during open trading windows. Any such individuals who are subject to preclearance restrictions may enter into trading plans under Rule 10b5-1 of the Exchange Act, but these trading plans may be entered into only during an open trading window and must be pre-approved as well. | | 5x
| | | | 50 | | | 2023 Proxy Statement |
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Our named executive officers, directors and other employees are restricted from pledging any of our securities or entering into margin accounts involving our securities. We restrict these transactions because of the potential that sales of our securities could occur outside trading periods and without the required preclearance approval. In addition, our named executive officers, directors and other employees are restricted from entering into hedging transactions involving our securities. Employment and Change-in-Control Arrangements Employment Agreements On December 13, 2022, we entered into employment agreements by and among us, PNMAC and each of Mr. Spector, or the Spector Agreement, and Mr. Jones, or the Jones Agreement, for terms commencing on January 1, 2023 and expiring on December 31, 2026, unless earlier terminated in accordance with the provisions set forth in each such agreement. The terms of the employment agreements are described below. Mr. Spector shall continue to serve as a member of our Board and as our Chairman and Chief Executive Officer and the Chief Executive Officer of PNMAC throughout the term of the Spector Agreement. Mr. Jones shall continue to serve as our President and Chief Mortgage Banking Officer and as the President and Chief Mortgage Banking Officer of PNMAC throughout the term of the Jones Agreement. Base Salary and Incentive Compensation During the terms of their employment agreements, Mr. Spector and Mr. Jones shall each receive an annual base salary as determined by the Company’s Board at least as favorable as base salaries paid to other similarly situated senior executives and shall be entitled to receive annual cash and equity incentive compensation, with such compensation awarded at levels based on annual performance targets determined by our Board and the compensation committee of our Board. Pursuant to the Spector Agreement and the Jones Agreement, any unvested awards shall immediately vest upon the death or disability of the executive, a termination by us or PNMAC other than for cause (as defined in the employment agreements), or a termination by the executive for good reason (as defined in the employment agreements) unless such termination is the result of the expiration of the term of the Spector Agreement or the Jones Agreement. If such termination is the result of the expiration of term of the Spector Agreement or the Jones Agreement, any such unvested awards shall continue to vest, if applicable, in accordance with their terms, and the termination date of each of the Spector Agreement or the Jones Agreement shall be deemed to be the retirement date as defined in the related award document; provided, however, that if the related award document does not contain any reference to retirement or a retirement date, then the affected unvested awards shall immediately become fully vested and non-forfeitable. All nonstatutory stock options granted pursuant to our Equity Plans are exercisable, subject only to vesting provisions, for a period of ten years from the date of grant, and are eligible for cashless exercise in all circumstances. Other Benefits The employment agreements provide for medical benefits and reimbursement for expenses related to tax advice and financial counseling not to exceed $50,000. The employment agreements also provide for the annual accrual of twenty days of paid time off for Mr. Spector and Mr. Jones, in each case at the executive’s regular base pay rate during each year of the term, reimbursement of reasonable business expenses (including reimbursement for ordinary and necessary business expenses relating to chartered flights), and participation in such other benefits programs as are provided to our executives generally. Payments Upon Specific Termination Events Pursuant to the employment agreements, upon a termination due to death or disability, a termination by us or PNMAC other than for cause, a termination by the executive for good reason, or a termination by us or PNMAC as a result of or in connection with a change of control, in addition to any other amounts required by law to be paid to him, the executive would be entitled to any bonus earned but unpaid for the year prior to the year in which the termination date occurs and the pro rata portion of any bonus earned but unpaid for the year during which the termination date occurs. In any such termination event, any unvested equity awards granted pursuant to the Equity Plans shall vest immediately, and any outstanding stock option will not expire until the tenth anniversary of the grant date. We will also generally reimburse the executive or his estate for any amounts paid by him or his estate for coverage of him and his family under our group health medical benefits plan pursuant to the Consolidated Omnibus Budget Reconciliation Act, or COBRA, for as long as the executive or his family is eligible to receive such benefits under COBRA. Upon a termination due to death, the executive’s estate will also receive a continuing payment of executive’s annual base salary as of the termination date for a period of six months following such termination. Upon a termination of Mr. Spector’s or Mr. Jones’ employment as a result of or in connection with a change of control or by us or PNMAC other than for cause, or upon a termination by Mr. Spector or Mr. Jones for good reason, the executive shall also receive a severance payment equal to two and one-half years of executive’s annual base salary plus two and one-half years of the executive’s incentive compensation (based on the average incentive bonus received in the most recent two years), with such amounts to be paid in 24 monthly installments. | | ✓
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Upon termination of Mr. Spector’s or Mr. Jones’ employment by us or PNMAC for cause, the executive shall receive his annual base salary through the termination date, any accrued but unused paid time off and reimbursement of any unreimbursed incurred expenses. Pursuant to each of the Spector Agreement and the Jones Agreement, each executive is subject to a non-solicitation covenant for a period of 18 months following a termination of employment. If any termination payments would be subject to excise taxes under Section 4999 of the Code, then the payments actually paid to Mr. Spector and Mr. Jones, as applicable, will be reduced to avoid the excise tax if and to the extent such reduction produces the best after-tax result. Consulting Services Upon the expiration of the term of the Spector Agreement, Mr. Spector shall serve as a consultant to us for an 18-month period commencing on the termination date. During the consulting period, Mr. Spector will receive a consulting fee of $2.0 million, with approximately $1.35 million of such amount paid in 18 monthly installments of $75,000 and the remainder paid upon the completion of the consulting period; provided, however, that such compensation will cease if the executive engages in services for a business that competes with us. Upon the expiration of the term of the Jones Agreement, Mr. Jones shall serve as a consultant to us for an 18-month period commencing on the termination date. During the consulting period, Mr. Jones will receive a consulting fee of $1.5 million, with approximately $1.0 million of such amount paid in 18 monthly installments of $55,555 and the remainder paid upon the completion of the consulting period; provided, however, that such compensation will cease if the executive engages in services for a business that competes with us. For purposes of the employment agreement, each of Mr. Spector and Mr. Jones will have “good reason” to terminate his employment agreement, as applicable, if we (or any resulting or surviving entity in the event of certain transactions) or PNMAC fail to cure any of the following events within 30 days of receipt of notice of such event(s) by Mr. Spector or Mr. Jones, as applicable, (such notice must be delivered within 90 days of the occurrence of the events constituting “good reason”): (1) materially breaches the Spector Agreement or Jones Agreement; (2) requires Mr. Spector to report to anyone other than our Board or Mr. Jones to report to anyone other than the Chief Executive Officer; (3) requires Mr. Spector and Mr. Jones to be based anywhere more than fifteen (15) miles from the office where he is located; (4) takes any other action which results in a material diminution or adverse change in Mr. Spector’s or Mr. Jones’ status, title, position, compensation, or responsibilities, other than an insubstantial action not taken in bad faith and remedied promptly after receipt of notice by Mr. Spector or Mr. Jones; or (5) fails to indemnify and advance all expenses to Mr. Spector or Mr. Jones in response to a proper request for indemnity and advancement. Change of Control Severance Plan We adopted a Change of Control Severance Plan, or the Severance Plan, on September 22, 2021, that covers named executive officers who do not have separately negotiated employment agreements. Under the Severance Plan a named executive officer who incurs a qualifying termination in connection with a change of control under the Severance Plan will be entitled to receive (i) a severance payment equal to two years of base salary plus 200% of bonus, (ii) acceleration of outstanding and unvested time-based equity awards and acceleration at target of any unvested performance-based equity awards that remain outstanding after the application of the change of control provisions in the Company’s 2013 Equity Incentive Plan and any successor equity incentive plans, (iii) continued group health and dental plan participation for 18 months, and (iv) outplacement services for 18 months. A “qualifying termination” under the Severance Plan means a termination of an employment that occurs on or during the two year period following a change of control by reason of either (i) the Company’s or any of its subsidiaries’, as applicable, termination of such individual’s employment other than for cause or such employee’s death or disability or (ii) the employee’s resignation for “good reason.” Furthermore, if any Severance Plan or employment agreement payments would be subject to excise taxes under Section 4999 of the Internal Revenue Code, then the payments will be reduced to avoid the excise tax if and to the extent such reduction produces the best after-tax result for the severed employee. The receipt of any Severance Plan payments will be conditioned on the execution of an irrevocable general release of claims by the employee. | President and Chief Executive Officer
| | 5x
| | ✓
| Other Executive Officers
| | 3x
| | ✓
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For purposes of the guidelines, stock ownership includes common stock owned directly,in-the-money value of exercisable stock options and unvested time-based RSUs. The types and amounts of stock-based awards are intended, in part, to facilitate the accumulation of sufficient shares by our executives to allow them to meet the stock ownership guidelines within the applicable timeline. Each executive officer is expected to meet the respective level of stock ownership within five years of becoming subject to such guidelines. The Compensation Committee will annually review each executive officer’s compliance with or progress toward meeting the stock ownership guidelines. Each of our executive officers is presently in compliance with our stock ownership guidelines.
Clawback Provisions
During 2018, we adopted a policy regarding the recoupment of incentive compensation which provides that if we issue a material accounting restatement as a result of erroneous data in our financial statements, our Board or an authorized Board committee will have the authority, in its sole discretion, to recover any incentive compensation that (i) is received by any executive officer or any other officer with a title of senior managing director or higher during the two fiscal years immediately preceding the date of such accounting restatement issuance, and (ii) exceeds the amount that would have been paid to such individual(s) under the accounting restatement, calculated on apre-tax basis.
Trading Controls and Anti-Pledging and Anti-Hedging Policies
Our named executive officers, directors and certain other employees are required to obtain preclearance prior to entering into any transaction involving company securities. Trading is generally permitted only during open trading windows. Any such individuals who are subject to preclearance restrictions may enter into trading plans under Rule10b5-1 of the Exchange Act, but these trading plans may be entered into only during an open trading window and must bepre-approved as well.
We also prohibit our named executive officers, directors and other employees from pledging any company securities or entering into margin accounts involving company securities. We prohibit these transactions because of the potential that sales of company securities could occur outside trading periods and without the required preclearance approval.
In addition, our named executive officers, directors and other employees are prohibited from entering into hedging transactions involving company securities.
Employment andChange-in-Control Arrangements with Named Executive Officers
Employment Agreements. On December 28, 2018, we entered into employment agreements by and among us, PNMAC and each of Mr. Kurland (the “Kurland Agreement”), Mr. Spector (the “Spector Agreement”) and Mr. Jones (the “Jones Agreement”) for terms commencing on January 1, 2019 and expiring on December 31, 2022, unless earlier terminated in accordance with the provisions set forth in each such agreement. The terms of the employment agreements are described below.
Pursuant to the Kurland Agreement, Mr. Kurland shall continue to serve as the Executive Chairman of our Board through December 31, 2019, and, beginning on January 1, 2020 and continuing through the end of the term, shall serve as theNon-Executive Chairman of our Board, assuming he isre-elected to that post through the end of such term. Mr. Spector shall continue to serve as a member of our Board and as our President and Chief Executive Officer and the President and Chief Executive Officer of PNMAC throughout the term of the Spector Agreement. Mr. Jones shall continue to serve as our Senior Managing Director and Chief Mortgage Banking Officer and the Senior Managing Director and Chief Mortgage Banking Officer of PNMAC throughout the term of the Jones Agreement.
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| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Base Salary and Incentive Compensation
The Kurland Agreement provides Mr. Kurland with an annual base salary of no less than $900,000 from January 1, 2019 through and including December 31, 2019. During that time, Mr. Kurland is also entitled to receive cash and equity incentive compensation, with such compensation awarded at levels based on annual performance targets determined by our Board and the Compensation Committee of our Board. From January 1, 2020 and for so long as Mr. Kurland remains on our Board asNon-Executive Chairman, Mr. Kurland will also be entitled to receive (i) annual director fees in cash in amount equal to 2.5 times the annual retainer fees of the highest paidnon-employee Board member, and (ii) annual equity awards in an amount equal to 2.5 times the amount granted to any othernon-employee Board member.
The Spector Agreement provides Mr. Spector with an annual base salary of no less than $900,000, which amount will increase to $1,000,000 on January 1, 2020. The Jones Agreement provides Mr. Jones with an annual base salary of no less than $550,000, which amount shall increase to $600,000 on January 1, 2020. During the terms of their employment agreements, each of Mr. Spector and Mr. Jones is also entitled to receive annual cash and equity incentive compensation, with such compensation awarded at levels based on annual performance targets determined by our Board and the compensation committee of our Board.
All equity awards are granted pursuant to our 2013 Plan and are subject to vesting requirements as specified in the relevant award agreement. Pursuant to the Kurland Agreement, any unvested awards shall immediately vest upon the death or disability of the executive, a termination by us other than for cause (as defined in the employment agreement), or a termination by the executive for good reason (as defined in the employment agreement) unless such termination is the result of the expiration of the term of the Kurland Agreement or Mr. Kurland’s termination for good reason at his option at any time on or after January 1, 2020.
Pursuant to the Spector Agreement and the Jones Agreement, any unvested awards shall immediately vest upon the death or disability of the executive, a termination by us other than for cause (as defined in the employment agreements), or a termination by the executive for good reason (as defined in the employment agreements) unless such termination is the result of the expiration of the term of the Spector Agreement or the Jones Agreement. If such termination is the result of the expiration of term of the Spector Agreement or the Jones Agreement, any such unvested awards shall continue to vest, if applicable, in accordance with their terms, and the termination date of each of the Spector Agreement or the Jones Agreement shall be deemed to be the retirement date as defined in the related award document; provided, however, that if the related award document does not contain any reference to retirement or a retirement date, then the affected unvested awards shall become immediately and fully vested.
All nonstatutory stock options granted pursuant to our 2013 Plan are exercisable, subject only to vesting provisions, for a period of ten years from the date of grant, and are eligible for cashless exercise in all circumstances.
Other Benefits
The employment agreements provide for the annual accrual of forty days of paid time off for Mr. Kurland and twenty days of paid time off for Mr. Spector and Mr. Jones, in each case at the executive’s regular base pay rate during each year of the term. The agreements also provide for medical benefits, reimbursement for expenses related to tax advice and financial counseling not to exceed $25,000, an automobile allowance of up to $1,500 per month for Mr. Kurland and Mr. Spector, reimbursement of reasonable business expenses, and participation in such other benefits programs as are provided to our executives generally.
Payments Upon Specific Termination Events
Pursuant to the employment agreements, upon a termination due to death or disability, a termination by us other than for cause, a termination by the executive for good reason, or a termination as a result of change of control, in addition to any other amounts required by law to be paid to him, the executive would be entitled to any cash bonus earned but unpaid for the year prior to the year in which the termination date occurs and the pro rata portion of any cash bonus earned but unpaid for the year during which the termination date occurs. In any such termination event, any unvested equity awards granted pursuant to the 2013 Plan shall vest immediately. We will also generally reimburse the executive or his estate for any amounts paid by him or his estate for coverage of him and his family under our group health medical benefits plan pursuant to the Consolidated Omnibus Budget Reconciliation Act, or COBRA, for as long as the executive or his family is eligible to receive such benefits under COBRA. Upon a termination due to death, the executive’s estate will also receive a continuing payment of executive’s annual base salary as of the termination date for a period of six months following such termination.
Upon a termination of Mr. Spector’s or Mr. Jones’ employment as a result of a change of control or by us other than for cause, or upon a termination by Mr. Spector or Mr. Jones for good reason, the executive shall also receive a severance payment equal to two years of
| | COMPENSATION DISCUSSION AND ANALYSIS |
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Equity Incentive Plans
| | | | | COMPENSATION DISCUSSION AND ANALYSIS |
executive’s annual base salary plus two years of executive’s cash incentive compensation (based on the average cash incentive bonus received in the most recent two years), with such amounts to be paid in 24 monthly installments. Upon termination of Mr. Spector’s or Mr. Jones’ employment by us or PNMAC for cause, the executive shall receive his annual base salary through the termination date, any accrued but unused paid time off and reimbursement of any unreimbursed incurred expenses.
Consulting Services
Upon the expiration of the term of the Kurland Agreement or upon a termination of Mr. Kurland’s employment by us other than for cause or a termination by Mr. Kurland for good reason, Mr. Kurland shall serve as a consultant to us for an18-month period commencing on the termination date. During the consulting period, Mr. Kurland will receive a consulting fee of $1.5 million, with approximately $1 million of such amount paid in 18 monthly installments of $55,555 and the remainder paid upon the completion of the consulting period; provided, however, that such compensation will cease if the executive engages in services for a business that competes with us.
Upon the expiration of the term of the Spector Agreement, Mr. Spector shall serve as a consultant to us for an18-month period commencing on the termination date. During the consulting period, Mr. Spector will receive a consulting fee of $1.5 million, with approximately $1 million of such amount paid in 18 monthly installments $55,555 and the remainder paid upon the completion of the consulting period; provided, however, that such compensation will cease if the executive engages in services for a business that competes with us.
Upon the expiration of the term of the Jones Agreement, Mr. Jones shall serve as a consultant to us for an18-month period commencing on the termination date. During the consulting period, Mr. Jones will receive a consulting fee of $1 million, with approximately $750,000 of such amount paid in 18 monthly installments of $41,666 and the remainder paid upon the completion of the consulting period; provided, however, that such compensation will cease if the executive engages in services for a business that competes with us.
For purposes of the employment agreement, Mr. Kurland will have “good reason” to terminate the Kurland Agreement (a) at his option at any time on or after January 1, 2020, or (b) if we (or any resulting or surviving entity in the event of certain transactions) or PNMAC (1) materially breaches the Kurland Agreement; (2) requires Mr. Kurland to report to anyone other than our Board; (3) requires Mr. Kurland to be based anywhere more than fifty (50) miles from the office where he is located as of the effective date of the Kurland Agreement; (4) takes any other action which results in a material diminution or adverse change in Mr. Kurland’s status, title, position, compensation, or responsibilities, other than an insubstantial action not taken in bad faith and remedied promptly after receipt of notice by Mr. Kurland; or (5) fails to indemnify and advance all expenses to Mr. Kurland in response to a proper request for indemnity and advancement.
For purposes of the employment agreement, each of Mr. Spector and Mr. Jones will have “good reason” to terminate his employment agreement, as applicable, if we (or any resulting or surviving entity in the event of certain transactions) or PNMAC (1) materially breaches the Spector Agreement or Jones Agreement; (2) requires Mr. Spector to report to anyone other than our Board or Mr. Jones to report to anyone other than the President and Chief Executive Officer; (3) requires Mr. Spector to be based anywhere more than fifty (50) miles from the office where he is located as of the effective date of the Spector Agreement or requires Mr. Jones to be based anywhere more than fifteen (15) miles from the office where he is located as of the effective date of the Jones Agreement; (4) takes any other action which results in a material diminution or adverse change in Mr. Spector’s or Mr. Jones’ status, title, position, compensation, or responsibilities, other than an insubstantial action not taken in bad faith and remedied promptly after receipt of notice by Mr. Spector or Mr. Jones; or (5) fails to indemnify and advance all expenses to Mr. Spector or Mr. Jones in response to a proper request for indemnity and advancement.
Potential Payments Upon Termination or Change in Control. Pursuant to our 2013 Equity Incentive Plan and our 2022 Equity Incentive Plan and subject to any contrary provisions in any applicable award agreement or employment agreement, upon the occurrence of a change of control:
| • | | all outstanding unvested awards and awards subject to a risk of forfeiture, other than awards conditioned on the achievement of performance goals, will immediately become vested in full and no longer be subject to any risk of forfeiture unless they are assumed or otherwise continued in a manner satisfactory to the Compensation Committee, or substantially equivalent rights are provided in substitution for such awards, in each case by the acquiring or succeeding entity or one of its affiliates; and |
| • | | if a pro rata portion of the performance goals under awards conditioned on the achievement of performance goals or other business objectives has been achieved as of the effective date of the change of control, then such performance goals or other business objectives shall be deemed satisfied as of such change of control with respect to a pro rata portion of the number of shares subject to the original award. The pro rata portion of the performance goals or other business objectives and the number of shares subject to the original awards shall each be based on the length of time within the performance period which has elapsed prior to the change of control. The pro rata portion of any award deemed earned in this manner will be paid out within 30 days following the change of control. The remaining portion of such an award that is not eligible to be deemed earned as of the change of control will be deemed to have been satisfied, earned, or forfeited as of the change of control in such amounts as the Compensation Committee shall determine in its sole discretion unless that remaining portion is assumed by the acquiring or succeeding entity or one of its affiliates, which will be deemed to occur if that remaining portion is subjected to (i) comparable performance goals based on the post-change of control business of the acquirer or succeeding entity or one of its affiliates, and (ii) a measurement period using a comparable period of time to the original award, each in a manner satisfactory to the Compensation Committee. |
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| | | | | COMPENSATION DISCUSSION AND ANALYSIS | | COMPENSATION TABLES |
| 30 days following the change of control. The remaining portion of such an award that is not eligible to be deemed earned as of the change of control will be deemed to have been satisfied, earned, or forfeited as of the change of control in such amounts as the Committee shall determine in its sole discretion unless that remaining portion is assumed by the acquiring or succeeding entity or one of its affiliates, which will be deemed to occur if that remaining portion is subjected to (i) comparable performance goals based on the post-change of control business of the acquiror or succeeding entity or one of its affiliates, and (ii) a measurement period using a comparable period of time to the original award, each in a manner satisfactory to the Committee.
Compensation Tables 2022 Summary Compensation Table The following “2022 Summary Compensation Table” presents compensation earned by our principal executive officer, our principal financial officer and our next three most highly compensated persons serving as executive officers as of the end of Fiscal 2022. We refer to these executive officers as our “named executive officers.” | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position(1) | | Year | | | Salary ($) | | | Bonus ($) | | | Stock
Awards ($)(2) | | | Option Awards ($)(3) | | | Non-equity
incentive plan
compensation
($)(4) | | | All Other Compensation ($) | | | Total ($) | | | | | | | | | | | David A. Spector | | | 2022 | | | | 1,000,000 | | | | — | | | | 3,374,952 | | | | 1,214,140 | | | | 3,980,000 | | | | 101,959 | (5) | | | 9,671,051 | | Chairman and | | | 2021 | | | | 1,000,000 | | | | — | | | | 2,537,435 | | | | 1,101,254 | | | | 8,864,938 | | | | 71,597 | | | | 13,575,224 | | Chief Executive Officer | | | 2020 | | | | 1,000,000 | | | | 6,400,000 | | | | 1,688,936 | | | | 3,204,163 | | | | — | | | | 82,229 | | | | 12,375,328 | | | | | | | | | | | Doug Jones | | | 2022 | | | | 600,000 | | | | — | | | | 1,874,936 | | | | 674,518 | | | | 2,750,000 | | | | 67,751 | (5) | | | 5,967,205 | | | | | | | | | | | Director, President and Chief | | | 2021 | | | | 600,000 | | | | — | | | | 1,399,924 | | | | 607,581 | | | | 4,879,000 | | | | 58,407 | | | | 7,544,912 | | Mortgage Banking Officer | | | 2020 | | | | 600,000 | | | | 4,000,000 | | | | 862,473 | | | | 1,308,503 | | | | — | | | | 277,687 | | | | 7,048,663 | | | | | | | | | | | Vandad Fartaj | | | 2022 | | | | 425,000 | | | | — | | | | 862,496 | | | | 310,271 | | | | 1,100,000 | | | | 57,003 | (5) | | | 2,754,770 | | Senior Managing Director and | | | 2021 | | | | 425,000 | | | | — | | | | 804,951 | | | | 349,350 | | | | 3,389,250 | | | | 64,697 | | | | 5,033,248 | | Chief Investment Officer | | | 2020 | | | | 400,000 | | | | 2,400,000 | | | | 674,993 | | | | 1,241,437 | | | | — | | | | 362,128 | | | | 5,078,558 | | | | | | | | | | | Daniel S. Perotti | | | 2022 | | | | 400,000 | | | | — | | | | 749,952 | | | | 269,811 | | | | 1,375,000 | | | | 58,878 | (5) | | | 2,853,641 | | | | | | | | | | | Senior Managing Director and | | | 2021 | | | | 400,000 | | | | — | | | | 612,452 | | | | 265,814 | | | | 2,409,500 | | | | 66,888 | | | | 3,754,654 | | Chief Financial Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | James Follette | | | 2022 | | | | 355,208 | | | | — | | | | 618,735 | | | | 222,594 | | | | 975,000 | | | | 34,397 | (5) | | | 2,205,934 | | Senior Managing Director and | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Chief Mortgage Operations Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Reflects the named executive officer’s title as of December 31, 2022. Mr. Fartaj ceased serving as the Company’s Senior Managing Director and Chief Investment Officer on March 3, 2023. In addition, while previously employed by us, Mr. Follette first became a named executive officer in Fiscal 2022. |
| (2) | A changeThe amounts shown in this column in respect of control is defined2022, 2021 and 2020 represent the grant date fair value, as determined in accordance with ASC 718, of time-based RSUs awarded on February 23, 2022, February 25, 2021, and February 26, 2020 in the occurrence of anyamounts of: 19,702, 12,319, and 16,071 for Mr. Spector; 10,945, 6,796, and 8,207 for Mr. Jones; and 5,035, 3,908, and 6,423 for Mr. Fartaj respectively; 4,378 and 2,973 for Mr. Perotti on February 23, 2022 and February 25, 2021; and 3,612 for Mr. Follette on February 23, 2022. Also includes the grant date fair value, as determined in accordance with ASC 718, of the following: (1) a transaction, as described above, unless securities possessing more than 50%(a) performance-based RSUs awarded based on the probable outcome of the total combined voting powerperformance conditions on February 23, 2022, February 25, 2021, and February 26, 2020 in the amounts of the resulting entity or ultimate parent entity are held by one or more persons who held securities possessing more than 50% of the total combined voting power of our Company immediately prior to the transaction; (2) any person or group of persons, excluding us39,404, 30,798, and certain other related entities, directly or indirectly acquires beneficial ownership of securities possessing more than 20% of the total combined voting power of our Company, unless32,143 for Mr. Spector; 21,891, 16,992, and 16,414 for Mr. Jones; 10,070, 9,770, and 12,846 for Mr. Fartaj; 8,756 and 7,434 for Mr. Perotti on February 23, 2022 and February 25, 2021; and 7,224 for Mr. Follette, respectively, pursuant to a tender or exchange offer that our Board recommends stockholders accept; (3) over a period of no more than 36 consecutive months there is a change in the composition of our Board such that a majority of our directors ceases to be composed of individuals who either (i) have been directors continuously since the beginning of that period, or (ii) have been elected or nominated for election as members of our Board during such period by at least a majority of the remaining members of our Board who have been directors continuously since the beginning of that period; or (4) a majority of the members of our Board vote in favor of a decision that a change of control has occurred.
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Compensation Tables
2018 Summary Compensation Table
The following “2018 Summary Compensation Table” presents compensation earned by our principal executive officer, our principal financial officer and our next three most highly compensated persons serving as executive officers as of the end of Fiscal 2018. We refer to these executive officers as our “named executive officers.”
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position(1) | | Year | | | Salary ($) | | | Bonus ($)(2) | | | Stock
Awards ($)(3) | | | Option Awards ($)(4) | | | All Other Compensation ($)(5) | | | Total ($) | | Stanford L. Kurland Executive Chairman of the Board of Directors | | | 2018 | | | | 1,000,000 | | | | 3,825,000 | | | | 2,999,980 | | | | 970,512 | | | | 73,828 | | | | 8,869,320 | | | | | 2017 | | | | 1,000,000 | | | | 4,250,000 | | | | 2,999,982 | | | | 990,304 | | | | 218,055 | | | | 9,458,341 | | | | | 2016 | | | | 1,000,000 | | | | 5,250,000 | | | | 1,964,445 | | | | 761,748 | | | | 142,509 | | | | 9,118,702 | | | | | | | | | | David A. Spector President and Chief Executive Officer | | | 2018 | | | | 750,000 | | | | 2,900,000 | | | | 1,549,937 | | | | 501,411 | | | | 76,271 | | | | 5,777,619 | | | | | 2017 | | | | 741,667 | | | | 3,000,000 | | | | 1,566,578 | | | | 495,152 | | | | 174,603 | | | | 5,977,999 | | | | | 2016 | | | | 550,000 | | | | 3,750,000 | | | | 743,239 | | | | 288,202 | | | | 114,518 | | | | 5,445,959 | | | | | | | | | | Doug Jones | | | 2018 | | | | 500,000 | | | | 1,500,000 | | | | 774,968 | | | | 250,701 | | | | 291,726 | | | | 3,317,395 | | Senior Managing Director and | | | 2017 | | | | 448,958 | | | | 1,500,000 | | | | 783,280 | | | | 247,576 | | | | 327,210 | | | | 3,307,024 | | Chief Mortgage Banking Officer | | | 2016 | | | | 325,000 | | | | 2,000,000 | | | | 290,053 | | | | 112,472 | | | | 252,140 | | | | 2,979,665 | | | | | | | | | | Vandad Fartaj | | | 2018 | | | | 325,000 | | | | 1,050,000 | | | | 619,955 | | | | 200,564 | | | | 311,626 | | | | 2,507,146 | | | | | | | | | | Senior Managing Director and | | | 2017 | | | | 325,000 | | | | 925,000 | | | | 626,624 | | | | 198,055 | | | | 340,101 | | | | 2,414,780 | | Chief Investment Officer | | | 2016 | | | | 325,000 | | | | 1,200,000 | | | | 290,053 | | | | 200,518 | | | | 266,748 | | | | 2,194,273 | | | | | | | | | | Andrew S. Chang | | | 2018 | | | | 325,000 | | | | 832,500 | | | | 619,955 | | | | 200,564 | | | | 285,406 | | | | 2,263,426 | | Senior Managing Director and | | | 2017 | | | | 325,000 | | | | 925,000 | | | | 626,624 | | | | 198,055 | | | | 333,390 | | | | 2,408,069 | | Chief Financial Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Mr. Chang was not a named executive officer in Fiscal 2016.
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(2) | The amounts in this column represent the total amount of bonus earned by the named executive officers for Fiscal 2018, Fiscal 2017 and Fiscal 2016, whether or not paid in such years.
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(3) | The amounts shown in this column in respect of 2018, 2017 and 2016 represent the grant date fair value, as determined in accordance with ASC 718, of time-based RSUs awarded on March 9, 2018 and March 6, 2017 in the amounts of: (i) 21,174 and 27,700 for Mr. Spector; 10,587 and 13,850 for Mr. Jones; 8,469 and 11,080 for Mr. Fartaj; and 8,469 and 11,080 for Mr. Chang, respectively. Also includes the grant date fair value, as determined in accordance with ASC 718, of the (a) performance-based RSUs awarded on March 9, 2018, March 6, 2017 and March 7, 2016 in the amounts of (i) 122,950, 166,204 and 174,153 for Mr. Kurland; (ii) 42,348, 59,091 and 65,890 for Mr. Spector; (iii) 21,174, 29,545 and 25,714 for Mr. Jones; and (iv) 16,939, 23,636 and 25,714 for Mr. Fartaj, respectively; and (b) performance-based RSUs awarded on March 9, 2018 and March 6, 2017 in the amounts of 16,939 and 23,636 for Mr. Chang, pursuant to our 2013 Plan. See “—2018 Outstanding Equity Awards at FiscalYear-End” below. The value of the performance-based RSUs awarded on March 9, 2018, March 6, 2017 and March 7, 2016, assuming that the highest level of performance conditions will be achieved and based on a grant date fair value per share of $24.40, $18.05 and $11.28, is $3,899,974, $3,899,977, and $2,553,780 for Mr. Kurland; $1,343,269, $1,386,570, and $966,211 for Mr. Spector; $671,634, $693,273, and $377,070 for Mr. Jones; and $537,288, $554,619 and $377,070 for Mr. Fartaj, respectively. The value of the performance-based RSUs awarded on March 9, 2018 and March 6, 2017, assuming that the highest level of performance conditions will be achieved and based on a grant date fair value per share of $24.40 and $18.05, is $537,288 and $554,619 for Mr. Chang.
|
(4) | The amounts shown in this column represent the grant date fair value, as determined in accordance with ASC 718, of the nonstatutory stock options awarded on March 9, 2018, March 6, 2017 and March 7, 2016 in the amounts of 102,459, 138,504 and 188,086 for Mr. Kurland; 52,935, 69,252 and 71,161 for Mr. Spector; 26,467, 27,771 and 23,829 for Mr. Jones; and 21,174, 27,700 and 27,771 for Mr. Fartaj, respectively; and awarded on March 9, 2018 and March 6, 2017 in the amounts of 21,174 and 27,700 for Mr. Chang, respectively, pursuant to our 2013 Plan. See “—2018 Outstanding Equity Awards at FiscalYear-End” below.
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(5) | All Other Compensation for all five named executive officers consists of insurance premiums,gross-up payments for the payment of self-employment tax liabilities by each named executive officer, financial counseling and other payments. We paidgross-up payments to the named executive officers in the following amounts: $20,648 for Mr. Kurland, $17,477 for Mr. Spector, $14,305 for Mr. Jones, $12,084 for Mr. Fartaj and $12,084 for Mr. Chang during Fiscal 2018; $160,136 for Mr. Kurland, $116,516 for Mr. Spector, $65,146 for Mr. Jones, $43,411 for Mr. Fartaj and $43,411 for Mr. Chang during Fiscal 2017; and $83,488 for Mr. Kurland, $58,838 for Mr. Spector, $33,809 for Mr. Jones and $25,472 for Mr. Fartaj during Fiscal 2016. PNMAC paid insurance premiums on behalf of the named executive officers in the following amounts: $16,459 for Mr. Kurland, $22,490 for Mr. Spector, $8,921 for Mr. Jones, $22,888 for Mr. Fartaj and $7,811 for Mr. Chang during Fiscal 2018; $14,919 for Mr. Kurland, $20,323 for Mr. Spector, $7,378 for Mr. Jones, $20,596 for Mr. Fartaj and $7,055 for Mr. Chang during Fiscal 2017; and $11,565 for Mr. Kurland, $15,222 for Mr. Spector, $15,573 for Mr. Jones, and $15,744 for Mr. Fartaj during Fiscal 2016. PNMAC paid an automobile allowance to the named executive officers in the following amounts: $15,750 for each of Mr. Kurland and Mr. Spector during Fiscal 2018, and $18,000 for each of Mr. Kurland and Mr. Spector during Fiscal 2017 and Fiscal 2016. PNMAC made payments related to company paid spousal travel in the amounts of $4,456 for Mr. Kurland and $3,453 for Mr. Spector during Fiscal 2016.
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| We paid or provided reimbursement for expenses related to tax advice and financial counseling to the named executive officers in the following amounts: $20,970 for Mr. Kurland, $20,555 for Mr. Spector, $14,760 for Mr. Fartaj and $11,685 for Mr. Chang during Fiscal 2018; $25,000 for Mr. Kurland, $19,765 for
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| | | 42 | | | 2019 Proxy Statement |
| Mr. Spector, and $14,400 for each of Mr. Fartaj and Mr. Chang during Fiscal 2017; and $25,000 for Mr. Kurland, $19,005 for Mr. Spector and $14,000 for Mr. Fartaj during Fiscal 2016.
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| With respect to Mr. Jones, All Other Compensation also includes a $17,607 contribution paid by PNMAC to his 401(k) plan (a portion of which includes missed matching contributions for Fiscal 2017), $900 for mobile phone expenses, and $249,993 in time-based and performance-based restricted share units awarded by PMT to Mr. Jones for Fiscal 2018, consistent with its compensation program and philosophy, and recorded by PNMAC as a portion of its compensation expense; a $3,792 contribution paid by PNMAC to his 401(k) plan, $900 for mobile phone expenses, and $249,994 in time-based and performance-based restricted share units awarded by PMT to Mr. Jones for Fiscal 2017, consistent with its compensation program and philosophy, and recorded by PNMAC as a portion of its compensation expense; and a $10,800 contribution paid by PNMAC to his 401(k) plan (a portion of which includes missed matching contributions for Fiscal 2015), $900 for mobile phone expenses, and $191,057 in restricted share units awarded by PMT to Mr. Jones for Fiscal 2016.
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| With respect to Mr. Fartaj, All Other Compensation also includes an $11,000 contribution paid by PNMAC to his 401(k) plan, $900 for mobile phone expenses, and $249,993 in time-based and performance-based restricted share units awarded by PMT to Mr. Fartaj for Fiscal 2018, consistent with its compensation program and philosophy, and recorded by PNMAC as a portion of its compensation expense; a $10,800 contribution paid by PNMAC to his 401(k) plan, $900 for mobile phone expenses, and $249,994 in time-based and performance-based restricted share units awarded by PMT to Mr. Fartaj for Fiscal 2017, consistent with its compensation program and philosophy, and recorded by PNMAC as a portion of its compensation expense; and a $19,575 contribution paid by PNMAC to his 401(k) plan (a portion of which includes missed matching contributions for Fiscal 2015), $900 for mobile phone expenses, and $191,057 in restricted share units awarded by PMT to Mr. Fartaj for Fiscal 2016, consistent with its compensation program and philosophy, and recorded by PNMAC as a portion of its compensation expense.
|
| With respect to Mr. Chang, All Other Compensation also includes a $3,833 contribution paid by PNMAC to his 401(k) plan and $249,993 in time-based and performance-based restricted share units awarded by PMT to Mr. Chang for Fiscal 2018, consistent with its compensation program and philosophy, and recorded by PNMAC as a portion of its compensation expense; and a $17,629 contribution paid by PNMAC to his 401(k) plan (a portion of which includes missed matching contributions for Fiscal 2016), $900 for mobile phone expenses, and $249,994 in time-based and performance-based restricted share units awarded by PMT to Mr. Chang for Fiscal 2017, consistent with its compensation program and philosophy, and recorded by PNMAC as a portion of its compensation expense.
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| In addition, time-based and performance-based restricted share units were awarded by PMT to Mr. Kurland and Mr. Spector during Fiscal 2018, Fiscal 2017 and Fiscal 2016, consistent with its compensation program and philosophy. These restricted share units were granted on March 12, 2018, February 23, 2017 and February 24, 2016, and have grant date fair values, as determined in accordance with ASC 718, of $1,091,967, $1,091,991 and $1,028,252 for Mr. Kurland, and $747,988, $747,988 and $704,897 for Mr. Spector, respectively. These grant date fair values are not included in All Other Compensation for Mr. Kurland and Mr. Spector.
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| | | | | | 2019 Proxy Statement | | | 43 | |
2018 Grants of Plan-Based Awards
The following table provides information about plan-based awards granted under our 2013 Plan to our named executive officers in Fiscal 2018:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts
Under Equity Incentive Plan Awards(1) | | | All Other Stock
Awards:
Number of
Shares of
Stock or Units
(#) | | | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(2) | | | Exercise
Price of
Option
Awards
($/sh) | | | Grant
Date Fair
Value of
Stock and
Option
Awards
($)(3) | | Name | | Grant
Date | | | Threshold
(#) | | | Target
(#) | | | Maximum
(#) | | Stanford L. Kurland | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PSUs | | | 03/09/18 | | | | 98,360 | | | | 122,950 | | | | 159,835 | | | | | | | | | | | | | | | | 2,999,980 | | RSUs | | | 03/09/18 | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | Stock Options | | | 03/09/18 | | | | | | | | | | | | | | | | | | | | 102,459 | | | | 24.40 | | | | 970,512 | | David A. Spector | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PSUs | | | 03/09/18 | | | | 33,878 | | | | 42,348 | | | | 55,052 | | | | | | | | | | | | | | | | 1,033,291 | | RSUs | | | 03/09/18 | | | | | | | | | | | | | | | | 21,174 | | | | | | | | | | | | 516,646 | | Stock Options | | | 03/09/18 | | | | | | | | | | | | | | | | | | | | 52,935 | | | | 24.40 | | | | 501,411 | | Doug Jones | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PSUs | | | 03/09/18 | | | | 16,939 | | | | 21,174 | | | | 27,526 | | | | | | | | | | | | | | | | 516,646 | | RSUs | | | 03/09/18 | | | | | | | | | | | | | | | | 10,587 | | | | | | | | | | | | 258,323 | | Stock Options | | | 03/09/18 | | | | | | | | | | | | | | | | | | | | 26,467 | | | | 24.40 | | | | 250,701 | | Vandad Fartaj | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PSUs | | | 03/09/18 | | | | 13,551 | | | | 16,939 | | | | 22,020 | | | | | | | | | | | | | | | | 413,312 | | RSUs | | | 03/09/18 | | | | | | | | | | | | | | | | 8,469 | | | | | | | | | | | | 206,644 | | Stock Options | | | 03/09/18 | | | | | | | | | | | | | | | | | | | | 21,174 | | | | 24.40 | | | | 200,564 | | Andrew S. Chang | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PSUs | | | 03/09/18 | | | | 13,551 | | | | 16,939 | | | | 22,020 | | | | | | | | | | | | | | | | 413,312 | | RSUs | | | 03/09/18 | | | | | | | | | | | | | | | | 8,469 | | | | | | | | | | | | 206,644 | | Stock Options | | | 03/09/18 | | | | | | | | | | | | | | | | | | | | 21,174 | | | | 24.40 | | | | 200,564 | |
(1) | Represents the potential payout range of performance-based RSUs granted in Fiscal 2018. Awards vest based on thepre-tax ROE of PNMAC for fiscal years 2018-2020. The combined maximum payout under the performance goals is 130% of the target award. If ROE for a fiscal year is less than the threshold ROE, no portion of the granted RSUs will become vested. In addition to the performance conditions, the named executive officers must satisfy a service condition in order for the award to vest.
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(2) | One-third (1/3) of the nonstatutory stock options will vest in a lump sum on each of the first, second, and third anniversaries of the vesting commencement date, subject to the recipient’s continued service through each anniversary.
|
(3) | Represents the grant date fair value, as determined in accordance with ASC 718, of time-based RSUs, performance-based RSUs and nonstatutory stock options awarded during Fiscal 2018.
|
| | | 44 | | | 2019 Proxy Statement |
2018Equity Plans. See “—2022 Outstanding Equity Awards at FiscalYear-EndYear-End” below. Such aggregate grant date fair values do not take into account any estimated forfeitures related to service vesting conditions. For more information on the assumptions used in our estimates of value, please refer to Note 20—Stock-based Compensation in our Annual Report on Form 10-K filed on February 22, 2023. The value of the performance-based RSUs awarded on February 23, 2022, February 25, 2021, and February 26, 2020, assuming that the highest level of performance conditions will be achieved and based on a grant date fair value per share of $57.10, $58.85, and $35.03, is $4,218,662, $3,398,352, and $2,111,188, for Mr. Spector; $2,343,670, $1,874,961, and $1,078,083 for Mr. Jones; $1,078,105, $1,078,014, and $843,733 for Mr. Fartaj, and $937,411 and $820,251 for Mr. Perotti, and $773,420 for Mr. Follette, respectively. The amounts reported in this column reflect the accounting cost for these RSUs and do not correspond to the actual economic value that may be received by upon vesting and/or settlement of the RSUs.
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| (3) | The following table providesamounts shown in this column represent the grant date fair value, as determined in accordance with ASC 718, of the nonstatutory stock options awarded on February 23, 2022, February 25, 2021, December 14, 2020, and February 26, 2020 in the amounts of 57,136, 53,589, 140,464, and 59,466 for Mr. Spector; 31,742, 29,566, 54,024, and 30,366 for Mr. Jones; and 14,601, 17,000, 54,024, and 23,765 for Mr. Fartaj, respectively, pursuant to our Equity Plans. See “—2022 Outstanding Equity Awards at Fiscal Year-End” below. Such aggregate grant date fair values do not take into account any estimated forfeitures related to service vesting conditions. For more information about outstanding equity awardson the assumptions used in our estimates of value, please refer to Note 20—Stock-based Compensation in our Annual Report on Form 10-K filed on February 22, 2023. In addition, the amounts shown in this column represent the grant date fair value, as determined in accordance with ASC 718, of the nonstatutory stock options awarded on February 23, 2022 and February 25, 2021 in the amount of 12,697 and 12,935 for Mr. Perotti pursuant to our Equity Plans. See “—2022 Outstanding Equity Awards at Fiscal Year-End” below. In addition, the amounts shown in this column represent the grant date fair value, as determined in accordance with ASC 718, of the nonstatutory stock options awarded on February 23, 2022 in the amount of 10,475 for Mr. Follette pursuant to our Equity Plans. See “—2022 Outstanding Equity Awards at Fiscal Year-End” below. The amounts reported in this column reflect the accounting cost for these stock options and do not correspond to the actual economic value that may be received by the directors upon vesting and/or settlement of the stock options. |
| (4) | The amounts in this column represent the Fiscal 2022 performance-based incentive earned by the named executive officers, assee “Compensation Discussion and Analysis – 2022 Annual Performance-Based Incentives.” With respect to Mr. Fartaj, the amount represents the annual performance-based incentive earned by Mr. Fartaj based on our financial performance and individual objectives achieved during Fiscal 2022, in advance of his separation date, and which represents a |
| | | | 54 | | | 2023 Proxy Statement |
| portion of the end of Fiscal 2018: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards(1) | | | Stock Awards | | Name | | Grant Date | | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Option Exercise Price ($/sh) | | | Option Expiration Date | | | Number
of Unearned Shares or Units of Stock Granted That Have Not
Vested
(#) | | | Market
Value of
Unearned Shares
or Units
of Stock Granted That Have Not
Vested
($)(2) | | Stanford L. Kurland | | | 03/09/2018 | | | | — | | | | 102,459 | | | | 24.40 | | | | 03/08/2028 | | | | 122,950 | (3) | | | 2,613,917 | | | | | 03/06/2017 | | | | 46,168 | | | | 92,336 | | | | 18.05 | | | | 03/05/2027 | | | | 166,204 | (4) | | | 3,533,497 | | | | | 03/07/2016 | | | | 125,390 | | | | 62,696 | | | | 11.28 | | | | 03/06/2026 | | | | 174,153 | (5) | | | 3,702,493 | | | | | 03/03/2015 | | | | 161,529 | | | | — | | | | 17.52 | | | | 03/02/2025 | | | | — | | | | — | | | | | 02/26/2014 | | | | 191,098 | | | | — | | | | 17.26 | | | | 02/25/2024 | | | | — | | | | — | | | | | 06/13/2013 | | | | 107,656 | | | | — | | | | 21.03 | | | | 06/12/2023 | | | | — | | | | — | | David A. Spector | | | 03/09/2018 | | | | — | | | | 52,935 | | | | 24.40 | | | | 03/08/2028 | | | | 63,522 | (3) | | | 1,350,478 | | | | | 03/06/2017 | | | | 23,084 | | | | 46,168 | | | | 18.05 | | | | 03/05/2027 | | | | 77,558 | (4) | | | 1,648,883 | | | | | 03/07/2016 | | | | 47,440 | | | | 23,721 | | | | 11.28 | | | | 03/06/2026 | | | | 65,890 | (5) | | | 1,400,821 | | | | | 03/03/2015 | | | | 61,120 | | | | — | | | | 17.52 | | | | 03/02/2025 | | | | — | | | | — | | | | | 02/26/2014 | | | | 72,301 | | | | — | | | | 17.26 | | | | 02/25/2024 | | | | — | | | | — | | | | | 06/13/2013 | | | | 40,735 | | | | — | | | | 21.03 | | | | 06/12/2023 | | | | — | | | | — | | Doug Jones | | | 03/09/2018 | | | | — | | | | 26,467 | | | | 24.40 | | | | 03/08/2028 | | | | 31,761 | (3) | | | 675,239 | | | | | 03/06/2017 | | | | 11,542 | | | | 23,084 | | | | 18.05 | | | | 03/05/2027 | | | | 38,779 | (4) | | | 824,442 | | | | | 03/07/2016 | | | | 18,514 | | | | 9,257 | | | | 11.28 | | | | 03/06/2026 | | | | 25,714 | (5) | | | 546,680 | | | | | 03/03/2015 | | | | 23,829 | | | | — | | | | 17.52 | | | | 03/02/2025 | | | | — | | | | — | | | | | 02/26/2014 | | | | 28,216 | | | | — | | | | 17.26 | | | | 02/25/2024 | | | | — | | | | — | | | | | 06/13/2013 | | | | 15,882 | | | | — | | | | 21.03 | | | | 06/12/2023 | | | | — | | | | — | | Vandad Fartaj | | | 03/09/2018 | | | | — | | | | 21,174 | | | | 24.40 | | | | 03/08/2028 | | | | 25,408 | (3) | | | 540,174 | | | | | 03/06/2017 | | | | 9,233 | | | | 18,467 | | | | 18.05 | | | | 03/05/2027 | | | | 31,023 | (4) | | | 659,549 | | | | | 03/07/2016 | | | | 18,514 | | | | 9,257 | | | | 11.28 | | | | 03/06/2026 | | | | 25,714 | (5) | | | 546,680 | | | | | 03/03/2015 | | | | 23,829 | | | | — | | | | 17.52 | | | | 03/02/2025 | | | | — | | | | — | | | | | 02/26/2014 | | | | 28,216 | | | | — | | | | 17.26 | | | | 02/25/2024 | | | | — | | | | — | | | | | 06/13/2013 | | | | 15,882 | | | | — | | | | 21.03 | | | | 06/12/2023 | | | | — | | | | — | | Andrew S. Chang | | | 03/09/2018 | | | | — | | | | 21,174 | | | | 24.40 | | | | 03/08/2028 | | | | 25,408 | (3) | | | 540,174 | | | | | 03/06/2017 | | | | 9,233 | | | | 18,467 | | | | 18.05 | | | | 03/05/2027 | | | | 31,023 | (4) | | | 659,549 | | | | | 03/07/2016 | | | | 18,514 | | | | 9,257 | | | | 11.28 | | | | 03/06/2026 | | | | 25,714 | (5) | | | 546,680 | | | | | 03/03/2015 | | | | 23,829 | | | | — | | | | 17.52 | | | | 03/02/2025 | | | | — | | | | — | | | | | 02/26/2014 | | | | 28,216 | | | | — | | | | 17.26 | | | | 02/25/2024 | | | | — | | | | — | | | | | | 06/13/2013 | | | | 15,882 | | | | — | | | | 21.03 | | | | 06/12/2023 | | | | | | | | — | |
(1) | One-third (1/3) of the optioned shares will vest in a lump sum on each of the first, second, and third anniversaries of the vesting commencement date, subject to the recipient’s continued service through each anniversary.payment paid under his Separation Agreement dated March 21, 2023. See “—Officer Departure” below in this proxy statement for more information.
|
(2) | Per share value of stock awards is $21.26 based on the closing price of our common stock on the NYSE on December 31, 2018.
| (5) | With respect to Mr. Spector, All Other Compensation includes $19,217 in insurance premiums, $18,000 in automobile allowance, $25,000 for tax and financial counseling advice, $15,290 for legal fees, $12,200 in 401(k) plan employer contributions and $8,000 one-time payment for healthcare costs. In addition, time-based and performance-based restricted share units were awarded by PMT to Mr. Spector during Fiscal 2022 consistent with its compensation program and philosophy. These restricted share units were granted on February 25, 2022 by PMT and have grant date fair values, as determined in accordance with ASC 718, of $999,985 and are not included in All Other Compensation for Mr. Spector. |
| With respect to Mr. Jones, All Other Compensation includes $14,174 in insurance premiums, $12,200 in 401(k) plan employer contributions, $25,000 for tax and financial counseling advice and $15,290 for legal fees. In addition, time-based and performance-based restricted share units were awarded by PMT to Mr. Jones during Fiscal 2022 consistent with its compensation program and philosophy. These restricted share units were granted on February 25, 2022 by PMT and have grant date fair values, as determined in accordance with ASC 718, of $499,977 and are not included in All Other Compensation for Mr. Jones. |
| With respect to Mr. Fartaj, All Other Compensation includes $15,987 in insurance premiums, $12,200 in 401(k) plan employer contributions, $15,728 for tax and financial counseling advice and $12,000 one-time payment for healthcare costs. In addition, time-based and performance-based restricted share units were awarded by PMT to Mr. Fartaj during Fiscal 2022 consistent with its compensation program and philosophy. These restricted share units were granted on February 25, 2022 by PMT and have grant date fair values, as determined in accordance with ASC 718, of $499,977 and are not included in All Other Compensation for Mr. Fartaj. |
| With respect to Mr. Perotti, All Other Compensation includes $15,987 in insurance premiums, $12,200 in 401(k) plan employer contributions, $15,728 for tax and financial counseling advice, $12,000 one-time payment for healthcare costs and $2,000 for a charitable match. In addition, time-based and performance-based restricted share units were awarded by PMT to Mr. Perotti during Fiscal 2022 consistent with its compensation program and philosophy. These restricted share units were granted on February 25, 2022 by PMT and have grant date fair values, as determined in accordance with ASC 718, of $399,988 and are not included in All Other Compensation for Mr. Perotti. |
| With respect to Mr. Follette, All Other Compensation includes $19,259 in insurance premiums, $12,200 in 401(k) plan employer contributions and $2,000 for a charitable match. In addition, performance-based restricted share units were awarded by PMT to Mr. Follette during Fiscal 2022 consistent with its compensation program and philosophy. These restricted share units were granted on May, 19, 2022 by PMT and have a grant date fair value, as determined in accordance with ASC 718, of $99,991 and are not included in All Other Compensation for Mr. Follette. |
| | | | | | | 2023 Proxy Statement | | | 55 | |
2022 Grants of Plan-Based Awards The following table provides information about plan-based awards granted to our named executive officers in Fiscal 2022: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated future payouts
under non-equity incentive
plan awards(1) | | | Estimated Future Payouts
Under Equity Incentive Plan Awards(2) | | | All Other Stock
Awards:
Number of
Shares of
Stock or Units
(#) | | | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(3) | | | Exercise
Price of
Option
Awards
($/sh) | | | Grant
Date Fair
Value of
Stock and
Option
Awards
($)(4)(5) | | Name | | Grant
Date | | | Threshold
($) | | | Target
($) | | | Maximum
($) | | | Threshold
(#) | | | Target
(#) | | | Maximum
(#) | | | | | | | | | | | | | | David A. Spector | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Annual Incentive | | | | | | | 0 | | | | 3,625,000 | | | | 9,243,750 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PSUs | | | 02/23/22 | | | | | | | | | | | | | | | | 13,135 | | | | 39,404 | | | | 73,882 | | | | | | | | | | | | | | | | 2,249,968 | | RSUs | | | 02/23/22 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 19,702 | | | | | | | | | | | | 1,124,984 | | Stock Options | | | 02/23/22 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 57,136 | | | | 57.10 | | | | 1,214,140 | | | | | | | | | | | | | | Doug Jones | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Annual Incentive | | | | | | | 0 | | | | 2,500,000 | | | | 6,375,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PSUs | | | 02/23/22 | | | | | | | | | | | | | | | | 7,297 | | | | 21,891 | | | | 41,045 | | | | | | | | | | | | | | | | 1,249,976 | | RSUs | | | 02/23/22 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 10,945 | | | | | | | | | | | | 624,960 | | Stock Options | | | 02/23/22 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 31,742 | | | | 57.10 | | | | 674,518 | | | | | | | | | | | | | | Vandad Fartaj | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Annual Incentive | | | | | | | 0 | | | | 1,500,000 | | | | 3,825,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PSUs | | | 02/23/22 | | | | | | | | | | | | | | | | 3,356 | | | | 10,070 | | | | 18,881 | | | | | | | | | | | | | | | | 574,997 | | RSUs | | | 02/23/22 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5,035 | | | | | | | | | | | | 287,499 | | Stock Options | | | 02/23/22 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 14,601 | | | | 57.10 | | | | 310,271 | | | | | | | | | | | | | | Daniel S. Perotti | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Annual Incentive | | | | | | | 0 | | | | 1,250,000 | | | | 3,187,500 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PSUs | | | 02/23/22 | | | | | | | | | | | | | | | | 2,918 | | | | 8,756 | | | | 16,417 | | | | | | | | | | | | | | | | 499,968 | | RSUs | | | 02/23/22 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,378 | | | | | | | | | | | | 249,984 | | Stock Options | | | 02/23/22 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 12,697 | | | | 57.10 | | | | 269,811 | | | | | | | | | | | | | | James Follette | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Annual Incentive | | | | | | | 0 | | | | 925,000 | | | | 2,358,750 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PSUs | | | 02/23/22 | | | | | | | | | | | | | | | | 2,408 | | | | 7,224 | | | | 13,545 | | | | | | | | | | | | | | | | 412,490 | | RSUs | | | 02/23/22 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,612 | | | | | | | | | | | | 206,245 | | Stock Options | | | 02/23/22 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 10,475 | | | | 57.10 | | | | 222,594 | |
| (1) | Represents the threshold, target and maximum award amounts for Fiscal 2022 pursuant to the annual performance-based incentive plan that may include a cash and equity component. The actual amounts earned by each named executive officer pursuant to such plan are set forth in the Non-Equity Incentive Compensation Column of the Summary Compensation Table. |
| (2) | Represents the potential payout range of performance-based RSUs granted in Fiscal 2022. Awards vest based on achieving ROE and leverage ratio goals in fiscal years 2022 through 2024. The combined maximum payout under the performance goals is 187.5% of the target award. If ROE for a fiscal year is less than the threshold ROE, no portion of the granted RSUs will become vested. In addition to the performance conditions, the named executive officers must satisfy a service condition in order for the award to vest. |
| (3) | One-third (1/3) of the nonstatutory stock options granted on February 23, 2022 will vest on each of the first, second, and third anniversaries of the vesting commencement date, subject to the recipient’s continued service through each anniversary. |
| (4) | Represents the grant date fair value, as determined in accordance with ASC 718, of time-based RSUs, performance-based RSUs and nonstatutory stock options awarded during Fiscal 2022. There is no estimation of forfeitures included in the grant date fair value of the stock options. |
| (5) | The Fiscal 2021 performance-based incentive payout included a cash and an equity component. The Fiscal 2021 performance-based incentive equity component was granted on February 23, 2022 in the form of RSUs and stock options to each named executive officer along with their Fiscal 2022 annual long-term equity awards. The portion granted in equity was reflected within the columns for non-equity incentive plan awards in the 2021 grants of plan based awards table. Each named executive officer received the following equity amounts that were a part of the 2021 performance-based incentive payout: 21,584 RSUs and 62,594 stock options for Mr. Spector; 7,697 RSUs and 22,321 stock options for Mr. Jones; 8,662 RSUs and 25,121 stock options for Mr. Fartaj; and 7,964 RSUs and 23,095 in stock options for Mr. Perotti. For more information see “Compensation Discussion and Analysis – Annual Performance-Based Incentive” in the definitive proxy filed on April 13, 2022. |
| | | | 56 | | | 2023 Proxy Statement |
2022 Outstanding Equity Awards at Fiscal Year-End The following table provides information about outstanding equity awards of our named executive officers as of the end of Fiscal 2022: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards(1) | | | Stock Awards | | Name | | Grant Date | | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Option Exercise Price ($/sh) | | | Option Expiration Date | | | Number
of
shares or
units of
stock
that have
not
vested
(#) | | | Market
value of
shares
or units
of stock
that
have not
vested
($) | | | Number
of
Unearned
Shares or
Units of
Stock
Granted
That Have
Not
Vested
(#) | | | Market
Value of
Unearned Shares
or Units
of Stock Granted That Have Not
Vested
($)(2) | | David A. Spector | | | 02/23/2022 | | | | — | | | | 119,730 | | | | 57.10 | | | | 02/22/2032 | | | | 41,286 | | | | 2,339,265 | | | | 39,404 | (3) | | | 2,232,631 | | | | | 02/25/2021 | | | | 17,863 | | | | 35,726 | | | | 58.85 | | | | 02/24/2031 | | | | 8,213 | | | | 465,349 | | | | 57,746 | (4) | | | 3,271,903 | | | | | 12/14/2020 | | | | 140,464 | | | | — | | | | 59.68 | | | | 12/13/2030 | | | | — | | | | — | | | | — | | | | — | | | | | 02/26/2020 | | | | 39,644 | | | | 19,822 | | | | 35.03 | | | | 02/25/2030 | | | | 5,357 | | | | 303,528 | | | | 51,903 | (5) | | | 2,940,824 | | | | | 03/15/2019 | | | | 55,488 | | | | — | | | | 22.92 | | | | 03/14/2029 | | | | | | | | | | | | — | | | | — | | | | | 03/09/2018 | | | | 52,935 | | | | — | | | | 24.40 | | | | 03/08/2028 | | | | | | | | | | | | — | | | | — | | | | | 03/06/2017 | | | | 69,252 | | | | — | | | | 18.05 | | | | 03/05/2027 | | | | | | | | | | | | — | | | | — | | | | | 03/07/2016 | | | | 71,161 | | | | — | | | | 11.28 | | | | 03/06/2026 | | | | | | | | | | | | — | | | | — | | | | | 03/03/2015 | | | | 61,120 | | | | — | | | | 17.52 | | | | 03/02/2025 | | | | | | | | | | | | — | | | | — | | | | | 02/26/2014 | | | | 72,301 | | | | — | | | | 17.26 | | | | 02/25/2024 | | | | | | | | | | | | — | | | | — | | Doug Jones | | | 02/23/2022 | | | | — | | | | 54,063 | | | | 57.10 | | | | 02/22/2032 | | | | 18,642 | | | | 1,056,256 | | | | 21,891 | (3) | | | 1,240,344 | | | | | 02/25/2021 | | | | 9,855 | | | | 19,711 | | | | 58.85 | | | | 2/24/2031 | | | | 4,531 | | | | 256,726 | | | | 31,860 | (4) | | | 1,805,188 | | | | | 12/14/2020 | | | | 54,024 | | | | — | | | | 59.68 | | | | 12/13/2030 | | | | | | | | | | | | — | | | | — | | | | | 02/26/2020 | | | | 20,244 | | | | 10,122 | | | | 35.03 | | | | 02/25/2030 | | | | 2,736 | | | | 155,022 | | | | 26,504 | (5) | | | 1,501,717 | | | | | 03/15/2019 | | | | 27,744 | | | | — | | | | 22.92 | | | | 03/14/2029 | | | | | | | | | | | | — | | | | — | | | | | 03/09/2018 | | | | 26,467 | | | | — | | | | 24.40 | | | | 03/08/2028 | | | | | | | | | | | | — | | | | — | | | | | 03/06/2017 | | | | 34,626 | | | | — | | | | 18.05 | | | | 03/05/2027 | | | | | | | | | | | | — | | | | — | | | | | 03/07/2016 | | | | 27,771 | | | | — | | | | 11.28 | | | | 03/06/2026 | | | | | | | | | | | | — | | | | — | | | | | 03/03/2015 | | | | 23,829 | | | | — | | | | 17.52 | | | | 03/02/2025 | | | | | | | | | | | | — | | | | — | | | | | 02/26/2014 | | | | 28,216 | | | | — | | | | 17.26 | | | | 02/25/2024 | | | | | | | | | | | | — | | | | — | | | | | 06/13/2013 | | | | 15,882 | | | | — | | | | 21.03 | | | | 06/12/2023 | | | | | | | | | | | | — | | | | — | | Vandad Fartaj | | | 02/23/2022 | | | | — | | | | 39,722 | | | | 57.10 | | | | 02/22/2032 | | | | 13,697 | | | | 776,072 | | | | 10,070 | (3) | | | 570,566 | | | | | 02/25/2021 | | | | 5,666 | | | | 11,334 | | | | 58.85 | | | | 02/24/2031 | | | | 2,606 | | | | 147,656 | | | | 18,319 | (4) | | | 1,037,940 | | | | | 12/14/2020 | | | | 54,024 | | | | — | | | | 59.68 | | | | 12/13/2030 | | | | | | | | | | | | — | | | | — | | | | | 02/26/2020 | | | | 15,843 | | | | 7,922 | | | | 35.03 | | | | 02/25/2030 | | | | 2,141 | | | | 121,309 | | | | 20,743 | (5) | | | 1,175,298 | | | | | 03/15/2019 | | | | 22,496 | | | | — | | | | 22.92 | | | | 03/14/2029 | | | | | | | | | | | | — | | | | — | | | | | 03/09/2018 | | | | 21,174 | | | | — | | | | 24.40 | | | | 03/08/2028 | | | | | | | | | | | | — | | | | — | | | | | 03/06/2017 | | | | 27,700 | | | | — | | | | 18.05 | | | | 03/05/2027 | | | | | | | | | | | | — | | | | — | | | | | 03/07/2016 | | | | 27,771 | | | | — | | | | 11.28 | | | | 03/06/2026 | | | | | | | | | | | | — | | | | — | | | | | 03/03/2015 | | | | 23,829 | | | | — | | | | 17.52 | | | | 03/02/2025 | | | | | | | | | | | | — | | | | — | | | | | 02/26/2014 | | | | 28,216 | | | | — | | | | 17.26 | | | | 02/25/2024 | | | | | | | | | | | | — | | | | — | | Daniel S. Perotti | | | 02/23/2022 | | | | — | | | | 35,792 | | | | 57.10 | | | | 02/22/2032 | | | | 12,342 | | | | 699,298 | | | | 8,756 | (3) | | | 479,117 | | | | | 02/25/2021 | | | | 4,311 | | | | 8,624 | | | | 58.85 | | | | 02/24/2031 | | | | 1,982 | | | | 112,300 | | | | 13,939 | (4) | | | 789,770 | | | | | 12/14/2020 | | | | 13,506 | | | | — | | | | 59.68 | | | | 12/13/2030 | | | | | | | | | | | | — | | | | — | | | | | 02/26/2020 | | | | 15,403 | | | | 7,702 | | | | 35.03 | | | | 02/25/2030 | | | | 2,082 | | | | 117,966 | | | | 20,166 | (5) | | | 1,142,606 | | | | | 03/15/2019 | | | | 18,098 | | | | — | | | | 22.92 | | | | 03/14/2029 | | | | | | | | | | | | — | | | | — | | | | | 03/09/2018 | | | | 17,204 | | | | — | | | | 24.40 | | | | 03/08/2028 | | | | | | | | | | | | — | | | | — | | | | | 03/06/2017 | | | | 22,506 | | | | — | | | | 18.05 | | | | 03/05/2027 | | | | | | | | | | | | — | | | | — | | | | | 03/07/2016 | | | | 16,615 | | | | — | | | | 11.28 | | | | 03/06/2026 | | | | | | | | | | | | — | | | | — | | | | | 03/03/2015 | | | | 16,481 | | | | — | | | | 17.52 | | | | 03/02/2025 | | | | | | | | | | | | — | | | | — | | | | | 02/26/2014 | | | | 16,881 | | | | — | | | | 17.26 | | | | 02/25/2024 | | | | | | | | | | | | — | | | | — | | | | | | 06/13/2013 | | | | 2,523 | | | | — | | | | 21.03 | | | | 06/12/2023 | | | | | | | | | | | | — | | | | — | |
| | | | | | | 2023 Proxy Statement | | | 57 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards(1) | | | Stock Awards | | Name | | Grant Date | | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Option Exercise Price ($/sh) | | | Option Expiration Date | | | Number
of
shares or
units of
stock
that have
not
vested
(#) | | | Market
value of
shares
or units
of stock
that
have not
vested
($) | | | Number
of
Unearned
Shares or
Units of
Stock
Granted
That Have
Not
Vested
(#) | | | Market
Value of
Unearned Shares
or Units
of Stock Granted That Have Not
Vested
($)(2) | | James Follette | | | 02/23/2022 | | | | — | | | | 27,645 | | | | 57.10 | | | | 02/22/2032 | | | | 9,532 | | | | 540,083 | | | | 7,224 | (3) | | | 409,312 | | | | | 02/25/2021 | | | | 4,311 | | | | 8,624 | | | | 58.85 | | | | 02/24/2031 | | | | 1,982 | | | | 112,300 | | | | 13,939 | (4) | | | 789,770 | | | | | 12/14/2020 | | | | 20,259 | | | | — | | | | 59.68 | | | | 12/13/2030 | | | | | | | | | | | | — | | | | — | | | | | 02/26/2020 | | | | 7,702 | | | | 7,702 | | | | 35.03 | | | | 02/25/2030 | | | | 2,082 | | | | 117,966 | | | | 20,166 | (5) | | | 1,142,606 | | | | | | 03/15/2019 | | | | 5,839 | | | | — | | | | 22.92 | | | | 03/14/2029 | | | | | | | | | | | | — | | | | — | |
| (1) | One-third (1/3) of the nonstatutory stock options granted on February 23, 2022, February 25, 2021 and February 26, 2020 will vest on each of the first, second, and third anniversaries of the vesting commencement date, subject to the recipient’s continued service through each anniversary. The stock option award granted on December 14, 2020 was fully vested at grant but subject to certain transfer restrictions that will lapse in one-third increments on each of December 14, 2021, 2022 and 2023, subject to the recipient’s continued service through each lapse date. |
| (2) | Per share value of stock awards is $56.66 based on the closing price of our common stock on the NYSE on December 30, 2022. |
| (3) | The indicated number of unearned units consists of performance-based RSUs with a performance period that ends on December 31, 2024 and is described above under the heading “—Elements of our Executive Compensation Program—Annual Long-Term Equity Awards.” The indicated number of unearned units consists of time-based RSUs (for all named executive officers other than Mr. Kurland) and performance-based RSUs with a performance period that ends on December 31, 2020 and is described above under the heading “—Elements of our Executive Compensation Program—Annual Long-Term Equity Awards.” Based on current performance levels, the performance-based RSUs are reported at the target payout level. |
(4) | The indicated number of unearned units consists of time-based RSUs (for all named executive officers other than Mr. Kurland) and performance-based RSUs with a performance period that ends on December 31, 2019 and is described above under the heading “—Elements of our Executive Compensation Program—Annual Long-Term Equity Awards.” Based on current performance levels, these RSUs are reported at the target payout level.
|
(5) | The indicated number of unearned units consists entirely of the performance-based RSUs with a performance period that ends on December 31, 2018 and is described above under the heading “—Elements of our Executive Compensation Program—Annual Long-Term Equity Awards.” Based on current performance levels, these RSUs are reported at the target payout level.
|
| (4) | The indicated number of unearned units consists of performance-based RSUs with a performance period that ends on December 31, 2023 and is described above under the heading “—Elements of our Executive Compensation Program—Annual Long-Term Equity Awards.” The performance-based RSUs are reported at maximum payout level. | | | | | | 2019 Proxy Statement | | | 45 | |
| (5) | The indicated number of unearned units consists of performance-based RSUs with a performance period that ends on December 31, 2022 and is described above under the heading “—Elements of our Executive Compensation Program—Annual Long-Term Equity Awards.” The performance-based RSUs are shown here at the actual attainment of 161.5% for the award which lapsed in February 2023. | | | COMPENSATION TABLES |
| (6) | The Fiscal 2021 performance-based incentive payout included a cash and an equity component. The Fiscal 2021 performance-based incentive equity component was granted on February 23, 2022 in the form of RSUs and stock options to each named executive officer along with their Fiscal 2022 annual long-term equity awards. The portion granted in equity was reflected within the columns for non-equity incentive plan awards in the 2021 grants of plan based awards table. Each named executive officer received the following equity amounts that were a part of the 2021 performance-based incentive payout: 21,584 RSUs and 62,594 stock options for Mr. Spector; 7,697 RSUs and 22,321 stock options for Mr. Jones; 8,662 RSUs and 25,121 stock options for Mr. Fartaj; and 7,964 RSUs and 23,095 in stock options for Mr. Perotti. For more information see “Compensation Discussion and Analysis – Annual Performance-Based Incentive” in the definitive proxy filed on April 13, 2022. |
| | | | 58 | | | 2023 Proxy Statement |
| | | | | 2018 Option Exercises and Stock Vested
| | COMPENSATION TABLES |
2022 Option Exercises and Stock Vested The following table provides information regarding exercises of options to purchase shares of common stock and stock awards (RSUs and PSUs) that vested for our named executive officers during Fiscal 2022: | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards(1) | | Name | | Number of
Shares Acquired
on Exercise (#) | | | Value Realized
on Exercise ($) | | | Number of
Shares Acquired
on Vesting (#) | | | Value Realized
on Vesting
($)(2) | | | | | | | David A. Spector | | | 40,735 | | | | 1,352,810 | | | | 68,765 | | | | 4,157,182 | | | | | | | Doug Jones | | | — | | | | — | | | | 35,204 | | | | 2,128,183 | | | | | | | Vandad Fartaj | | | 15,882 | | | | 566,764 | | | | 27,186 | | | | 1,644,407 | | | | | | | Daniel S. Perotti | | | — | | | | — | | | | 25,651 | | | | 1,555,697 | | | | | | | James Follette | | | — | | | | — | | | | 25,574 | | | | 1,551,528 | |
| (1) | Amounts reported in these columns consist of vested RSUs and PSUs. If the named executive officer sold a portion of the common stock acquired upon vesting of RSUs or PSUs to satisfy the tax obligation with respect to such vesting, the number of shares of common stock acquired is less than the amount shown. The number of shares of common stock acquired and the value realized on vesting as reflected in this column have not been reduced to reflect the sale of common stock awards (RSUsto satisfy any tax obligations. The allocation of RSUs and PSUs) for our named executive officers during Fiscal 2018:PSUs is as follows: |
| | | | | | | | | | | | | | | | | | | | RSUs | | | PSUs | | Name | | Number of
Shares Acquired
on Vesting (#)(a) | | | Value Realized
on Vesting ($) | | | Number of
Shares Acquired
on Vesting (#)(b) | | | Value Realized
on Vesting ($) | | | | | | | David A. Spector | | | 16,862 | | | | 949,058 | | | | 51,903 | | | | 3,208,124 | | | | | | | Doug Jones | | | 8,700 | | | | 489,971 | | | | 26,504 | | | | 1,638,212 | | | | | | | Vandad Fartaj | | | 6,443 | | | | 362,282 | | | | 20,743 | | | | 1,282,125 | | | | | | | Daniel S Perotti | | | 5,485 | | | | 309,237 | | | | 20,166 | | | | 1,246,460 | | | | | | | James Follette | | | 5,408 | | | | 305,068 | | | | 20,166 | | | | 1,246,460 | |
| | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards(1) | | Name | | Number of
Shares Acquired
on Exercise (#) | | | Value Realized
on Exercise ($) | | | Number of
Shares Acquired
on Vesting (#) | | | Value Realized
on Vesting
($)(2) | | Stanford L. Kurland | | | — | | | | — | | | | 153,653 | | | | 3,520,190 | | David A. Spector | | | — | | | | — | | | | 67,367 | | | | 1,553,442 | | Doug Jones | | | — | | | | — | | | | 27,303 | | | | 630,543 | | Vandad Fartaj | | | — | | | | — | | | | 26,380 | | | | 608,391 | | Andrew S. Chang | | | — | | | | — | | | | 26,380 | | | | 608,391 | |
| (a) | Amounts reported in this column represent RSU awards that vested on March 15, 2022, February 26, 2022 and February 25, 2022. | |
| (b) | Amounts reported in this column represent PSU awards that vested on February 24, 2023, and the payout of shares of common stock pursuant to the award was determined based on ROE and a Leverage Ratio Multiplier for the period of January 1, 2020 through December 31, 2022 as measured against the target performance goal set by the Compensation Committee of the Board when the award was granted in 2020. The payout percentage for the award was 161.5%. | |
| (2) | The value realized on vesting is calculated by multiplying the number of shares of common stock received upon vesting of RSUs and PSUs by the fair market value of our common stock on the respective vesting dates. |
| | | | | | | 2023 Proxy Statement | | | 59 | |
Potential Payments Upon Termination of Employment or Change in Control The information below describes and estimates certain compensation that would become payable under existing plans and arrangements assuming the named executive officer’s employment had terminated or a “change in control” had occurred on December 31, 2022. These benefits are in addition to benefits available generally to salaried employees. Potential Payments Pursuant to Employment Agreements As described in “Compensation Discussion and Analysis—Employment Agreements”, two of our named executive officers, Mr. Spector and Mr. Jones, currently have employment agreements providing for severance payments, accelerated vesting of equity awards, and other benefits in the event the executive’s employment is terminated due to disability or death, terminated by us or PNMAC for “cause,” terminated by us or PNMAC “other than for cause,” or terminated by the executive for “good reason.” The table below reflects the potential payments due to Mr. Spector and Mr. Jones had the separation occurred on December 31, 2022. Both Mr. Spector and Mr. Jones have entered into new employment agreements effective January 1, 2023, see “Compensation Discussion and Analysis – Employment and Change-in-Control Arrangements” for additional information. | | | | | | | | | | | | | | | | | Name | | Benefit | | Disability | | | Death | | | Termination For Cause or Voluntary Resignation | | Termination Other than For Cause or Resignation For Good Reason | | | | | | | | David A. Spector | | Consulting Fees(1) | | | — | | | | — | | | — | | | — | | | | | | | | | | Base Salary | | | — | | | $ | 500,000 | | | — | | | $ 2,000,000 | | | | | | | | | | COBRA Benefits Continuation | | $ | 60,592 | | | $ | 75,218 | | | — | | | $ 37,609 | | | | | | | | | | Incentive-Based Compensation | | $ | 3,980,000 | | | $ | 3,980,000 | | | — | | | $12,844,938 | | | | | | | | | | Accelerated Vesting – Stock Options(2) | | $ | 428,750 | | | $ | 428,750 | | | — | | | $ 428,750 | | | | | | | | | | Accelerated Vesting – Performance-Based RSUs(3) | | $ | 5,798,868 | | | $ | 5,798,868 | | | — | | | $ 5,798,868 | | | | | | | | | | Accelerated Vesting – Time-Based RSUs(4) | | $ | 3,108,141 | | | $ | 3,108,141 | | | — | | | $ 3,108,141 | | | | | | | | | | Aggregate Payment Amount | | $ | 13,376,351 | | | $ | 13,890,977 | | | — | | | $24,218,306 | | | | | | | | Doug Jones | | Consulting Fees(1) | | | — | | | | — | | | — | | | — | | | | | | | | | | Base Salary | | | — | | | $ | 300,000 | | | — | | | $ 1,200,000 | | | | | | | | | | COBRA Benefits Continuation | | $ | 42,576 | | | $ | 52,853 | | | — | | | $ 26,427 | | | | | | | | | | Incentive-Based Compensation | | $ | 2,750,000 | | | $ | 2,750,000 | | | — | | | $ 7,629,000 | | | | | | | | | | Accelerated Vesting – Stock Options(2) | | $ | 218,939 | | | $ | 218,939 | | | — | | | $ 218,939 | | | | | | | | | | Accelerated Vesting – Performance-Based RSUs(3) | | $ | 3,133,128 | | | $ | 3,133,128 | | | — | | | $ 3,133,128 | | | | | | | | | | Accelerated Vesting – Time-Based RSUs(4) | | $ | 1,468,004 | | | $ | 1,468,004 | | | — | | | $ 1,468,004 | | | | | | | | | | | Aggregate Payment Amount | | $ | 7,612,647 | | | $ | 7,922,924 | | | — | | | $13,675,498 | |
| (1) | Amounts reported in these columns consist of vested RSUs and PSUs. If the named executive officer sold a portion of the common stock acquired upon vesting of RSUs or PSUs to satisfy the tax obligation with respect to such vesting, the number of shares of common stock acquired is less than the amount shown. The number of shares of common stock acquired and the value realized on vesting as reflected in this column have not been reduced to reflect the sale of common stock to satisfy any tax obligations. The allocation of RSUs and PSUs is as follows:
|
| | | | | | | | | | | | | | | | | | | | RSUs | | | PSUs | | Name | | Number of
Shares Acquired
on Vesting (#)(1) | | | Value Realized
on Vesting ($) | | | Number of
Shares Acquired
on Vesting (#)(2) | | | Value Realized
on Vesting ($) | | Stanford L. Kurland | | | — | | | | — | | | | 153,653 | | | | 3,520,190 | | David A. Spector | | | 9,233 | | | | 221,592 | | | | 58,134 | | | | 1,331,850 | | Doug Jones | | | 4,616 | | | | 110,784 | | | | 22,687 | | | | 519,759 | | Vandad Fartaj | | | 3,693 | | | | 88,632 | | | | 22,687 | | | | 519,759 | | Andrew S. Chang | | | 3,693 | | | | 88,632 | | | | 22,687 | | | | 519,759 | |
| (1) | Amounts reported in this column represent an RSU award that vested on March 6, 2018.
| |
| (2) | Amounts reported in this column represent a PSU award that vested on March 15, 2019 and the payout of shares of common stock pursuant to the award was determined based on our return on equity (ROE) (100% of the award) for the period of January 1, 2016 through December 31, 2018 as measured against the target performance goal set by the Compensation Committee of the Board when the award was granted in 2016. The payout percentage for the award was 88.23%.
| |
(2) | The value realized on vesting is calculated by multiplying the number of shares of common stock received upon vesting of RSUs and PSUs by the fair market value of our common stock on the respective vesting dates.
|
| | | 46 | | | 2019 Proxy Statement |
Potential Payments Upon Termination of Employment or Change in Control
The information below describes and estimates certain compensation that would become payable under existing plans and arrangements assuming the named executive officer’s employment had terminated or a “change in control” had occurred on December 31, 2018. These benefits are in addition to benefits available generally to salaried employees.
Potential Payments Pursuant to Employment Agreements
As described in the “Employment Agreements” in the Compensation Discussion and Analysis section of this Proxy Statement, three of our named executive officers, Mr. Kurland, Mr. Spector and Mr. Jones currently haveare entitled to consulting fees only upon the expiration of the terms of their respective employment agreementsagreements.
|
| (2) | Represents the vesting in place with PNMAC. These employment agreements provide for severance payments, vestingfull of equity awards, and other benefits inall outstanding unvested stock options. Calculated as the eventdifference between the executive’s employment is terminated due to disability or death, terminated for “cause,” terminated “other than for cause,” or terminated for “good reason” byclosing price of our common stock on the executive. | | | | | | | | | | | | | | | | | | | Name | | Benefit | | Disability | | | Death | | | Termination For Cause or Voluntary Resignation | | | Termination Other than For Cause or For Good Reason | | Stanford L. Kurland | | Consulting Fees(1) | | | — | | | | — | | | | — | | | | $ 1,500,000 | | | | Base Salary | | | — | | | $ | 500,000 | | | | — | | | | — | | | | COBRA Benefits Continuation | | $ | 36,957 | | | $ | 45,878 | | | | — | | | | $ 22,939 | | | | Cash Incentive-Based Compensation | | $ | 3,825,000 | | | $ | 3,825,000 | | | | — | | | | $ 3,825,000 | | | | Accelerated Vesting – Stock Options(2) | | $ | 922,105 | | | $ | 922,105 | | | | — | | | | $ 922,105 | | | | Accelerated Vesting – Performance-Based RSUs(3) | | $ | 9,849,907 | | | $ | 9,849,907 | | | | — | | | | $ 9,849,907 | | | | Aggregate Payment Amount | | $ | 14,633,968 | | | $ | 15,142,889 | | | | — | | | | $16,119,950 | | David A. Spector | | Consulting Fees(1) | | | — | | | | — | | | | — | | | | — | | | | Base Salary | | | — | | | $ | 375,000 | | | | — | | | | $ 1,500,000 | | | | COBRA Benefits Continuation | | $ | 52,786 | | | $ | 65,528 | | | | — | | | | $ 32,764 | | | | Cash Incentive-Based Compensation | | $ | 2,900,000 | | | $ | 2,900,000 | | | | — | | | | $ 6,750,000 | | | | Accelerated Vesting – Stock Options(2) | | $ | 384,935 | | | $ | 384,935 | | | | — | | | | $ 384,935 | | | | Accelerated Vesting – Performance-Based RSUs(3) | | $ | 3,557,415 | | | $ | 3,557,415 | | | | — | | | | $ 3,557,415 | | | | Accelerated Vesting – Time-Based RSUs(4) | | $ | $842,768 | | | $ | $842,768 | | | | — | | | | $ 842,768 | | | | Aggregate Payment Amount | | $ | 7,737,903 | | | $ | 8,125,645 | | | | — | | | | $13,067,881 | | Doug Jones | | Consulting Fees(1) | | | — | | | | — | | | | — | | | | — | | | | Base Salary | | | — | | | $ | 250,000 | | | | — | | | | $ 1,000,000 | | | | COBRA Benefits Continuation | | $ | 41,210 | | | $ | 51,158 | | | | — | | | | $ 25,579 | | | | Cash Incentive-Based Compensation | | $ | 1,500,000 | | | $ | 1,500,000 | | | | — | | | | $ 3,500,000 | | | | Accelerated Vesting – Stock Options(2) | | $ | 166,485 | | | $ | 166,485 | | | | — | | | | $ 166,485 | | | | Accelerated Vesting – Performance-Based RSUs(3) | | $ | 1,624,966 | | | $ | 1,624,966 | | | | — | | | | $ 1,624,966 | | | | Accelerated Vesting – Time-Based RSUs(4) | | $ | 421,394 | | | $ | 421,394 | | | | — | | | | $ 421,394 | | | | | Aggregate Payment Amount | | $ | 3,754,055 | | | $ | 4,014,002 | | | | — | | | | $ 6,738,423 | |
(1) | Represents consulting fees for Mr. Kurland in the amount of $1.5 million, with approximately $1 million of such amount paid in 18 monthly installments of $55,555 during the consulting period and the remainder paid upon the completion of the consulting period. Mr. Spector and Mr. Jones are entitled to consulting fees only upon the expiration of the terms of their respective employment agreements.
|
(2) | Represents the vesting in full of all outstanding unvested stock options. Calculated as the difference between the closing price of our common stock on the NYSE on December 31, 2018NYSE on December 30, 2022 and the exercise or strike price of the stock options multiplied by the number of underlying shares of common stock.
|
| (3) | Represents the vesting in full of all unvested performance-based RSUs based on the achievement of target level performance. Calculated based on the closing price of our common stock on the NYSE on December 30, 2022 multiplied by the number of underlying shares of common stock. | | | | | | 2019 Proxy Statement | | | 47 | |
| (4) |
(3) | Represents the vesting in full of all unvested performance-based RSUs based on the achievement of target level performance. Calculated based on the closing price of our common stock on the NYSE on December 31, 2018Represents the vesting in full of all unvested time-based RSUs. Calculated based on the closing price of our common stock on the NYSE on December 30, 2022 multiplied by the number of underlying shares of common stock.
|
(4) | Represents the vesting in full of all unvested time-based RSUs. Calculated based on the closing price of our common stock on the NYSE on December 31, 2018 multiplied by the number of underlying shares of common stock.
|
Potential Payments Pursuant to the 2013 Plan
Pursuant to the 2013 Plan, all of our named executive officers are also entitled to certain rights in connection with a termination of employment upon the occurrence of a “change of control.” Provided below is a summary of such rights:
| | | | 60 | | | 2023 Proxy Statement |
| | | Name
| | Benefit
| | Acceleration Upon a Change of Control
| Stanford L. Kurland
| | Vested Stock Options Spread Value(1)
| | $2,792,863
| | | Performance-Based RSU Value(2)
| | $6,929,463
| David A. Spector
| | Vested Stock Options Spread Value(1)
| | $1,074,713
| | | Performance-Based RSU Value(2)
| | $2,538,444
| | | Time-Based RSU Value(3)
| | $ 842,768
| Doug Jones
| | Vested Stock Options Spread Value(1)
| | $ 427,457
| | | Performance-Based RSU Value(2)
| | $1,115,484
| | | Time-Based RSU Value(3)
| | $ 421,394
| Vandad Fartaj
| | Vested Stock Options Spread Value(1)
| | $ 420,045
| | | Performance-Based RSU Value(2)
| | $1,001,722
| | | Time-Based RSU Value(3)
| | $ 337,099
| Andrew S. Chang
| | Vested Stock Options Spread Value(1)
| | $ 420,045
| | | Performance-Based RSU Value(2)
| | $1,001,722
| | | Time-Based RSU Value(3)
| | $ 337,099
| | COMPENSATION TABLES |
(1) | Calculated as the difference between the closing price of our common stock on the NYSE on December 31, 2018 and the exercise or strike price of the stock options multiplied by the number of underlying shares of common stock.
Potential Payments Pursuant to Change of Control Severance Plan As described in “Compensation Discussion and Analysis—Change of Control Severance Plan”, we adopted a Severance Plan on September 22, 2021 that covers named executive officers who do not have separately negotiated employment agreements. This plan provides for severance payments and accelerated vesting of equity awards in the event the executive’s employment is terminated in connection with a change in control. | | | | | | | | | | | | | | | | | | | | | | Name | | Base(1) | | | Bonus(2) | | | Equity Vesting(3) | | | Change of Control | | | | | | | Vandad Fartaj | | | $850,000 | | | | $4,489,250 | | | | $3,068,379 | | | | $8,407,629 | | | | | | | Daniel S. Perotti | | | $800,000 | | | | $3,784,500 | | | | $2,704,112 | | | | $7,288,612 | | | | | | | James Follette | | | $750,000 | | | | $3,038,675 | | | | $2,475,092 | | | | $6,263,767 | |
| (1) | Represents two times the named executive officer’s base salary as of December 31, 2022. |
| (2) | Represents two times the greater of (x) the average aggregate bonus paid to the named executive officer for each of the two fiscal years preceding December 31, 2022, and (y) the bonus paid for the fiscal year immediately preceding December 31, 2022. |
| (3) | Represents the value of equity that would vest upon a change in control. |
(2) | Represents the vesting of a pro rata portion of all unvested performance-based RSUs as of December 31, 2018, assuming achievement of target level performance. The pro rata portion is based on the length of time within the performance period which has elapsed prior to December 31, 2018.
|
(3) | Represents the vesting of all unvested time-based RSUs as of December 31, 2018. Calculated based on the closing price of our common stock on the NYSE on December 31, 2018.
|
Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed above, any actual amounts paid or distributed may be different. Factors that could affect these amounts include the timing during the year of any such event and our Company’s stock price. There can be no assurance that a termination or “change in control” would produce the same or similar results as those described if occurring on another date or at another price, or if any assumption used to prepare this information is not correct in fact.
2018 Pension Benefits
Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed above, any actual amounts paid or distributed may be different. Factors that could affect these amounts include the timing during the year of any such event and our Company’s stock price. There can be no assurance that a termination or “change in control” would produce the same or similar results as those described if occurring on another date or at another price, or if any assumption used to prepare this information is not correct in fact. Officer Departure On March 3, 2023, the Company announced that Mr. Fartaj ceased serving as its Senior Managing Director and Chief Investment Officer. On March 21, 2023, the Company and Mr. Fartaj entered into a separation agreement and general release (the “Separation Agreement”) providing that in exchange for Mr. Fartaj’s release of claims and other terms the Company will provide Mr. Fartaj: (1) cash severance of $1,525,000, (2) the right to exercise all outstanding vested stock options for the remainder of their original terms, (3) continued vesting of certain unvested stock options and restricted stock units granted in 2021 and 2022 and (4) continued eligibility to vest in certain performance stock units granted in 2021 and 2022 based on Company performance during the performance period but not to exceed 100%. Pursuant to the Separation Agreement, the parties agreed that the amounts paid under the Separation Agreement included and exceeded any bonus amounts that were earned or could have been earned. All other Company equity awards and incentive payments were forfeited under the Separation Agreement, including entitlement to any future annual bonus or equity awards. The payments and benefits to Mr. Fartaj under the Separation Agreement are subject to Mr. Fartaj complying with other obligations under the Separation Agreement, including a non-disparagement clause. 2022 Pension Benefits The table for “Pension Benefits” has been omitted because it is not applicable. We do not provide any of our named executive officers with any pension plans or benefits. 2022 Nonqualified Deferred Compensation The table for “Nonqualified Deferred Compensation” has been omitted because it is not applicable. We do not provide any of our named executive officers with any nonqualified deferred compensation plans or benefits. 401(k) Plan PNMAC maintains a tax-qualified 401(k) retirement plan for all employees who satisfy certain eligibility requirements. Under our 401(k) plan, employees may elect to defer a portion of their eligible compensation subject to applicable annual Code limits. Under the 401(k) plan, PNMAC makes matching contributions to participants equal to 100% of the participant’s elective deferrals, up to a maximum of $12,200 with respect to Fiscal 2022. We intend for the 401(k) plan to qualify under Section 401(a) and 501(a) of the Code so that contributions by employees to the 401(k) plan, and income earned on those contributions, are not taxable to employees until withdrawn from the 401(k) plan. | | | | | | | 2023 Proxy Statement | | | 61 | |
| | | | | The table for “Pension Benefits” has been omitted because it is not applicable. We do not provide any of our named executive officers with any pension plans or benefits.
2018 Nonqualified Deferred Compensation
| | COMPENSATION TABLES |
Compensation Committee Interlocks and Insider Participation Our Compensation Committee is comprised of three directors: Mr. Nanji, the chair of the Compensation Committee, and Messrs. Hunt and Perlowitz. None of them has ever served as an officer or employee of our Company or any of our affiliates or has any other business relationship or affiliation with our Company, except his or her service as a director. During Fiscal 2022, none of our executive officers served as a director or a member of the compensation committee of another entity, one of whose executive officers was a director or a member of our Compensation Committee. | | | | 62 | | | 2023 Proxy Statement |
| | | | | The table for “Nonqualified Deferred Compensation” has been omitted because it is not applicable. We do not provide any of our named executive officers with any nonqualified deferred compensation plans or benefits.
| | CEO PAY RATIO |
CEO Pay Ratio | | | 48As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. David A. Spector, our Chairman and Chief Executive Officer. For Fiscal 2022: | • | | | 2019 Proxy Statement |
401(k) Plan
PNMAC maintains atax-qualified 401(k) retirement plan for all employees who satisfy certain eligibility requirements. Under our 401(k) plan, employees may elect to defer a portion of their eligible compensation subject to applicable annual Code limits. Under the 401(k) plan, PNMAC makes matching contributions to participants equal to 100% of the participant’s elective deferrals, up to a maximum of $11,000 with respect to Fiscal 2018. We intend for the 401(k) plan to qualify under Section 401(a) and 501(a) of the Code so that contributions by employees to the 401(k) plan, and income earned on those contributions, are not taxable to employees until withdrawn from the 401(k) plan.
Compensation Committee Interlocks and Insider Participation
Our Compensation Committee is comprised of three director: Mr. Botein, the chair of the Compensation Committee, and Messrs. Hunt and Nanji. None of them has ever served as an officer or employee of our Company or any of our affiliates or has any other business relationship or affiliation with our Company, except his or her service as a director. During Fiscal 2018, none of our executive officers served as a director or a member of the compensation committee of another entity, one of whose executive officers was a director or a member of our Compensation Committee.
| | | | | | 2019 Proxy Statement | | | 49 | |
CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of RegulationS-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. David Spector, our President and Chief Executive Officer, or our CEO:
For 2018, our last completed fiscal year:
the median of the annual total compensation of all employees of our companyCompany (other than our CEO) was $67,076;$84,036; and consists of W-2 taxable compensation plus other non-taxable compensation such as 401K match and insurance premiums paid by the Company. |
| • | | the annual total compensation of our CEO, as reported in the “2018“2022 Summary Compensation Table” included in this Proxy Statement, was $5,777,619.$9,671,051. |
|
Based on this information, for 2018 theour Fiscal 2022 ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 86115 to 1. |
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee, we took the following steps: | 1. | We determined that, as of December 31, 2022, our employee population consisted of 4,066 individuals with all of these individuals located in the United States. This population consisted of our full-time, part-time, and temporary employees. In determining whether our workers are employees, we applied widely recognized employment and tax laws. |
| 2. | In order to identify the median employee during Fiscal 2022, we compared the amount of salary, annual performance-based incentives, wages, overtime and other compensation of our employees as reflected in our payroll records. In making that determination, we did not annualize the compensation of any employee. |
| 3. | Once we confirmed our median employee, we combined all of the elements of such employee’s compensation for our Fiscal 2022 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $84,036. |
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. Therefore, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. | | | | | | | 2023 Proxy Statement | | | 63 | |
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of RegulationS-K, we are providing the following information about the relationship between executive “CompensationActually Paid” and the financial performance of our Company. This disclosure does not necessarily align with how we view the relationship between the Company’s performance and named executive officer compensation. The below table show Compensation Actually Paid to our CEO and other named executive officers as calculated by adjusting the Summary Compensation Table total amounts for the applicable year. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Summary
Compensation
for CEO (1) | | | Compensation
Actually Paid to
CEO (2) | | | Average
Summary
Compensation
for Other
Named
Executive
Officers (3) | | | Average
Compensation
Actually Paid to Other
Named
Executive
Officer s(4) | | |
| | | | | | | | | | PFSI Total
Stockholder
Return (5) | | | Peer Group
Total
Stockholder
Return (5) | | | | | | | | | | | | | 2022 | | $ | 9,671,051 | | | $ | 6,517,122 | | | $ | 3,445,387 | | | $ | 2,243,109 | | | $ | 173.29 | | | $ | 98.60 | | | $ | 476 Million | | | | 14 | % | | | | | | | | | | | | 2021 | | $ | 13,575,224 | | | $ | 17,262,152 | | | $ | 5,473,525 | | | $ | 6,931,492 | | | $ | 210.33 | | | $ | 121.70 | | | $ | 1.0 Billion | | | | 29 | % | | | | | | | | | | | | 2020 | | $ | 12,375,328 | | | $ | 20,796,560 | | | $ | 4,887,892 | | | $ | 8,302,467 | | | $ | 195.34 | | | $ | 95.21 | | | $ | 1.6 Billion | | | | 61 | % |
| (1) | Mr. Spector was our principal executive officer (“CEO”) for all our employees, as well as to determineyears shown. The amounts reported are the annualamounts of total compensation of our median employee andreported for our CEO we tookfor each corresponding year in the “Total” column of the Summary Compensation Table in each applicable year. |
| (2) | The amount reported represent the Compensation Actually Paid to our CEO, computed in accordance with Item 402(v) of RegulationS-K, but do not reflect the actual amount of compensation earned by or paid to our CEO in the applicable year. Compensation Actually Paid is calculated by making the following steps: | 1. | We determined that, as of December 31, 2018, our employee population consisted of 3,463 individuals with all of these individuals located in the United States. This population consisted of our full-time, part-time, and temporary employees. In determining whether our workers are employees, we applied widely recognized employment and tax laws and classified approximately 67 individuals as independent contractors who were therefore excluded from our employee population.
|
| 2. | For Fiscal 2018, we did not perform are-evaluation to identify a new “median employee.” There were no changes in the employee population or employee compensation that would significantly impact the pay ratio disclosure and require any suchre-evaluation. In order to identify the median employee during Fiscal 2017, we compared the amount of salary, bonus, wages, overtime and other cash compensation of our employees as reflected in our payroll records. In making that determination, we did not annualize the compensation of any employees.
|
| 3. | Once we confirmed our median employee, we combined all of the elements of such employee’s compensation for Fiscal 2018 in accordance with the requirements of Item 402(c)(2)(x) of RegulationS-K, resulting in annual total compensation of $67,076.
|
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. Therefore, the pay ratio reported by other companies may not be comparableadjustments to the pay ratioSummary Compensation Table amounts for our CEO:
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Adjustments to Determine Compensation “Actually Paid” for the CEO(7) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | SUMMARY COMPENSATION – CEO | | | | | | | | | | | | | | | | | | • Deduction for Equity Amounts Reported under the “Stock Awards” and “Option Awards” Columns in the Summary Compensation Table | | ($ | 4,589,093 | ) | | ($ | 3,638,689 | ) | | ($ | 4,893,099 | ) | | | | | | • Deduction for Equity Amounts Reported under the “Non-Equity Incentive Compensation” Column in the Summary Compensation Table | | | | | | | (2,464,938 | ) (8) | | | | | | | | | | • Fair Value of Equity Awards Granted during the year that Remain Unvested as of Year End | | | 4,607,972 | | | | 8,312,535 | (8) | | | 5,518,724 | | | | | | | • Fair Value of Equity Awards Granted during year that Vested during the year | | | — | | | | — | | | | 2,599,989 | | | | | | | • Change in Fair Value of Prior Year-End Equity Awards that were Unvested as of Year-End | | | (1,816,266 | ) | | | 1,736,646 | | | | 5,799,780 | | | | | | | • Change in Fair Value of Prior Year-End Equity Awards that Vested during year | | | (1,500,521 | ) | | | (383,570 | ) | | | (692,179 | ) | | | | | | • Dividends paid during year before Vesting Date of Equity Awards | | | 143,979 | | | | 124,945 | | | | 88,017 | | | | | | | COMPENSATION ACTUALLY PAID - CEO | | | | | | | | | | | | | | | | | | ADJUSTMENTS FROM SUMMARY COMPENSATION | | | | | | | | | | | | |
| (3) | The amounts reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. | | | 50 | | | 2019 Proxy Statement |
| | | | | PROPOSAL III – ADVISORY (NON-BINDING) VOTE TO APPROVE EXECUTIVE COMPENSATION
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Proposal III – Advisory(Non-Binding) Vote to Approve Executive Compensation
As required pursuant to Section 14Arepresent the average of the Exchange Act, we are presenting a proposal that gives stockholdersamounts reported for the opportunity to cast an advisory(non-binding) vote on our executive compensation for named executive officers by voting for or against it. We currently present such proposals annually, and we expect the next proposal to be presented in 2020. At our 2018 annual meeting of stockholders, 80.6% of the stockholders voting on our “say on pay” proposal (constituting 73.7% of our total outstanding shares entitled to vote at the annual meeting) voted for that proposal. We recognize that our stockholders’ ability to provide input with respect to our executive compensation practices and disclosure is an important element of good corporate governance, and we carefully considered the results of the 2018say-on-pay vote in making our 2018 compensation decisions.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS AN ADVISORY(NON-BINDING) VOTE “FOR” THE FOLLOWING RESOLUTION APPROVING OUR EXECUTIVE COMPENSATION:
“RESOLVED, that the compensation paid to PennyMac Financial Services, Inc.’sCompany’s named executive officers as disclosed pursuanta group (excluding our CEO), in the “Total” column of the Summary Compensation Table in each applicable year. The Executive Officers used to calculate the Other NEOs average in each year include Messrs. Chang, Fartaj, Grogin and Jones for 2020; Messrs. Chang, Fartaj, Jones and Perotti for 2021; and Messrs. Fartaj, Follette, Jones and Perotti for 2022.
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| (4) | The amounts reported represent the average Compensation Actually Paid to the compensation disclosure rules of the SEC, including the compensation discussion and analysis, the compensation tables and any narrative discussion in this Proxy Statement, is hereby APPROVED.”Supporting Statement
We aim to create apay-for-performance culture that rewards ourother named executive officers for high Company and individual performance, alignsother than our CEO as a group, computed in accordance with Item 402(v) of Regulation
S-K. The amounts do not reflect the interests of ouractual average amount in compensation earned by or paid to such other named executive officers as a group in the applicable year. Compensation Actually Paid is calculated by making the following adjustments to the Summary Compensation Table amounts for the Other Named Executive Officers: |
Adjustments to Determine Average Compensation “Actually Paid” for the Other Named Executive Officers(7) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | SUMMARY COMPENSATION – Other NEOs | | | | | | | | | | | | | | | | | | • Deduction for Amounts Reported under the “Stock Awards” and “Option Awards” Columns in the Summary Compensation Table | | ($ | 1,395,828 | ) | | ($ | 1,373,872 | ) | | ($ | 1,685,290 | ) | | | | | | • Deduction for Equity Amounts Reported under the “Non-Equity Incentive Compensation” Column in the Summary Compensation Table | | | | | | | (986,750 | ) (8) | | | | | | | | | | • Fair Value of Equity Awards Granted during the year that Remain Unvested as of Year End | | | 1,401,571 | | | | 3,194,643 | (8) | | | 2,220,848 | | | | | | | • Fair Value of Equity Awards Granted during year that Vested during the year | | | — | | | | — | | | | 762,492 | | | | | | | • Change in Fair Value of Prior Year-End Equity Awards that were Unvested as of Year-End | | | (680,439 | ) | | | 731,980 | | | | 2,362,198 | | | | | | | • Change in Fair Value of Prior Year-End Equity Awards that Vested during year | | | (579,393 | ) | | | (158,787 | ) | | | (281,411 | ) | | | | | | • Dividends paid during year before Vesting Date of Equity Awards | | | 51,811 | | | | 50,752 | | | | 35,738 | | | | | | | COMPENSATION ACTUALLY PAID – Other NEOs | | | | | | | | | | | | | | | | | | ADJUSTMENTS FROM SUMMARY COMPENSATION | | | | | | | | | | | | |
| (5) | Based on initial investment of $100 and a cumulative Total Shareholder Return (PFSI Fiscal Year 2020 = 95.3%, Fiscal Year 2021 = 7.7%, Fiscal Year 2022 =-17.6%) & (S&P 600 Thrift & Mortgage Index Fiscal Year 2020 =-4.8%, Fiscal Year 2021 = 27.8%, Fiscal Year 2022 =-19.0%). |
| (6) | Our Company Selected Measure is Return on Equity, which is calculated as Net Income attributable to common shareholders for a fiscal year divided by average monthly common shareholders’ equity. |
| (7) | The fair values in the tables above have been computed in accordance with those of our stockholders, facilitates the attraction, motivationmethodology used for financial reporting purposes and, retention of highly talented executive leaders, supports our long-term success and sustainability, and encourages our named executive officersas applicable for awards subject to focusperformance-based vesting conditions, based on the achievementprobable outcome of our annualsuch performance-based vesting conditions as of the last day of the fiscal year. |
| (8) | The Fiscal 2021 performance-based incentive payout included a cash and long-term business goals.We have three primary elements of total compensation – base salary, annual performance-based cash bonuses, and long-terman equity awards – and this compensationcomponent reflected in the Fiscal Year 2021
“Non-Equity Incentive Compensation” Column in the Summary Compensation Table, which is heavily weighted toward performance-based compensation. Approximately 87% of our CEO’s target total compensation opportunityreflected as Compensation Actually Paid in 2021. The equity component was performance-based and aligned with our stockholdersgranted on February 23, 2022 in the form of annual performance-based cash bonusesRSUs and long-term equity compensation, and approximately 87% of our otherstock options to each named executive officers’ total compensation opportunity was performance-based.We believe that this performance-based pay culture supports our efforts to motivate and reward our named executive officers for achieving company performance and strategic accomplishments that drive long-term stockholder value.
We encourage our stockholders to read the section in this Proxy Statement entitledofficer. For more information see “Compensation Discussion and Analysis” – Annual Performance-Based Incentive” in which we describe in greater detail our compensation program, objectives and policies for our named executive officers. For the reasons described therein and above, we recommend that our stockholders endorse our compensation program for our named executive officers. While our Board intends to carefully consider the stockholder vote resulting from this proposal, the final vote will not be bindingdefinitive proxy file on us and is advisory in nature.
April 13, 2022. |
Most Important Financial Performance Measures: The Compensation Committee reviews a variety of Company and individual factors used to determine executive compensation with performance, not all of which are presented in the Pay Versus Performance table above. In addition, the Compensation Committee seeks to incentive long term pay for performance and therefore does not specifically align the Company’s performance with Compensation Actually Paid. In our assessment, the most important financial performance measures used to determine Compensation Actually Paid to our CEO and other NEOs in 2022 to Company performance were: | | | | | | | | Return on Equity | | Net Income | | Leverage Ratio | | Strategic Factors |
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The graphs demonstrate a strong relationship betweenCompensation Actually Paid compared to the following measures: The Company’s cumulative Total Stockholder Return (“TSR”) and the Peer Group’s cumulative TSR | | | | 2019 Proxy Statement | | | 51 | |
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The Company Selected Measure, which for PFSI isReturn on Equity | | | | | | | | | | |
| | | | | | | PROPOSAL III – ADVISORY (NON-BINDING) VOTE TO APPROVE EXECUTIVE COMPENSATION |
Proposal III – Advisory (Non-Binding) Vote to Approve Executive Compensation As required pursuant to Section 14A of the Exchange Act, we are presenting a proposal that gives stockholders the opportunity to cast an advisory (non-binding) vote on our executive compensation for named executive officers (also referred to as a Say-On-Pay proposal). Based on the previous feedback of our stockholders, we currently present such proposals annually, and we expect the next proposal to be presented in 2024 pending the results of our advisory (non-binding) vote on the frequency of the executive compensation vote being presented at the Annual Meeting. At our 2022 annual meeting of stockholders, approximately 98.7% of the total stockholder votes cast voted “For” our Say-On-Pay proposal. By contrast, at our 2019, 2020 and 2021 annual meeting of stockholders, our Say-On-Pay proposal only received the affirmative vote of approximately 77.7%, 65.8% and 92.8% of the total stockholder votes cast, respectively. We believe the positive Say-On-Pay voting trends shown in the below table reflect our past compensation enhancements to address investor concerns, including adopting an annual performance-based incentive plan with objective payouts, increasing the proportion of equity incentives to total compensation as well as our commitment to maintain a pay for performance culture that aligns with our stockholder interests.
Advisory (non-binding) approval of our executive compensation requires the affirmative vote of a majority of the votes cast on this proposal. Abstentions and broker non-votes will not affect this advisory vote. For additional information on voting, see the section of this Proxy Statement titled “Information Concerning Voting and Solicitation” including the section therein titled “—What stockholder approvals are required to approve the proposals?” OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS AN ADVISORY (NON-BINDING) VOTE “FOR” THE FOLLOWING RESOLUTION APPROVING OUR EXECUTIVE COMPENSATION: “RESOLVED, that the compensation paid to PennyMac Financial Services, Inc.’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the SEC, including the compensation discussion and analysis, the compensation tables and any narrative discussion in this Proxy Statement, is hereby APPROVED.” Supporting Statement We aim to create a pay-for-performance culture that rewards our named executive officers for exceptional Company and individual performance, aligns the interests of our named executive officers with those of our stockholders, facilitates the attraction, motivation and retention of highly talented executives, supports our long-term success and sustainability, and encourages our named executive officers to focus on the achievement of our annual and long-term business goals. We have three primary elements of total compensation – base salary, annual performance-based incentives, and long-term equity awards – and this compensation is heavily weighted toward performance-based compensation. 89% of our CEO’s Fiscal 2022 compensation and 86% of our other named executive officers’ compensation was performance-based and aligned with our stockholders in the form of annual performance-based incentives and long-term equity compensation. | | | | | | | | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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| | | | | | | PROPOSAL III – ADVISORY (NON-BINDING) VOTE TO APPROVE EXECUTIVE COMPENSATION |
We believe that this performance-based pay culture supports our efforts to motivate and reward our named executive officers for achieving Company performance and strategic accomplishments that drive long-term stockholder value. We encourage our stockholders to read the section in this Proxy Statement entitled “Compensation Discussion and Analysis,” in which we describe in greater detail our compensation program, objectives and policies for our named executive officers. For the reasons described therein and above, we recommend that our stockholders endorse our compensation program for our named executive officers. | | | | | | | 2023 Proxy Statement | | | 69 | |
| | | | | | | PROPOSAL IV – ADVISORY (NON-BINDING) VOTE ON THE FREQUENCY OF THE EXECUTIVE COMPENSATION VOTE |
Proposal IV – Advisory (Non-Binding) Vote On The Frequency Of The Executive Compensation Vote We are presenting the following proposal, which gives stockholders the opportunity to advise us how often to include a proposal similar to Proposal III in our Proxy Statement. Specifically, we are providing stockholders the option of selecting a frequency of one, two or three years, or abstaining. This proposal is required pursuant to Section 14A of the Exchange Act. An advisory (non-binding) vote on executive compensation is very important, as it will provide a clear, simple means for us to obtain information on stockholder sentiment about our executive compensation and our executive compensation philosophy. We believe that an advisory (non-binding) executive compensation vote every year will be the most effective timeframe for our stockholders to judge performance and for us to assess the voting results, engage with stockholders to understand their sentiment and implement any changes to our compensation practices that we consider necessary and appropriate. In addition, we believe an annual vote generally aligns more closely with our executive compensation program, which is limited in terms of the type of executive compensation we award and has been designed to support stockholder value creation by rewarding high company performance with equity-based awards that vest over time. As described in greater detail above in the section entitled “Compensation Discussion and Analysis,” we believe our executive compensation program serves to align the interests of named executive officers with the interests of our stockholders. We also want to provide a consistent and clear communication channel for any stockholder concerns regarding our executive compensation. For the reasons described therein and above, we recommend that our stockholders select a frequency of one year, or an annual vote. While our Board intends to carefully consider the stockholder votes resulting from this proposal and take them into consideration when making future decisions regarding our executive compensation vote, the final vote will not be binding on us and is advisory in nature. The frequency of the non-binding executive compensation vote (i.e., every one, two or three years) that receives the highest number of votes cast on this proposal will be treated as the option recommended by our stockholders. Abstentions and broker non-votes will not affect this advisory vote. For additional information on voting, see the section of this Proxy Statement titled “Information Concerning Voting and Solicitation” including the section therein titled “—What stockholder approvals are required to approve the proposals?” OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR “ONE YEAR” AS THE FREQUENCY FOR HOLDING THE ADVISORY (NON-BINDING) EXECUTIVE COMPENSATION VOTE. Certain Relationships and Related Transactions
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| | | | | | | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
Certain Relationships and Related Transactions Each of our executive officers is also an executive officer of PMT and an officer of one or more of its subsidiaries. In addition, certain of our executive officers serve on the boards of one or more of these entities and/or hold an ownership interest in PMT. We describe below certain related transactions, during and since our last fiscal year, to which we were a party or will be a party, in which: | • | | the amounts involved exceeded or will exceed $120,000; and |
| • | | any of the directors, executive officers or holders of more than 5% of the membership interests of PNMAC, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest. Compensation arrangements for our directors and named executive officers are described elsewhere in this Proxy Statement.
Exchange Agreement
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Compensation arrangements for our directors and named executive officers are described elsewhere in this Proxy Statement. Amended and Restated Stockholder Agreements On November 1, 2018, we entered into an amended and restated stockholder agreement with HCP which provides that HCP will have the right to nominate two individuals for election to our Board as long as it, together with its affiliates, holds at least 15% of the voting power of our outstanding common stock, and the right to nominate one individual for election to our Board as long as it, together with its affiliates, holds at least 10% of the voting power of our outstanding common stock. We, in turn, are obligated to use our best efforts to ensure that these nominees are elected. In addition, this agreement provides that HCP, as long as it, together with its affiliates, holds at least 10% of the voting power of our outstanding common stock, will have the right to nominate one member of each committee of our Board. As long as those nominees meet the independence standards applicable to those committees, we will appoint them as members of those committees. In addition, the agreement provides that neither our certificate of incorporation nor our bylaws, as in effect from time to time, may be amended in any manner that is adverse to HCP or their respective affiliates without the consent of HCP, as applicable, as long as it, together with its affiliates, holds at least 5% of the voting power of our outstanding common stock. Amended and Restated Registration Rights Agreement On November 1, 2018, we entered into an amended and restated registration rights agreement with HCP and the other owners of PNMAC other than us pursuant to which HCP and certain permitted transferees have the right, under certain circumstances and subject to certain restrictions, to require us to register for resale the shares of our common stock received by them in exchange for their ownership interests in PNMAC in connection with the closing of our corporate reorganization. In November 2018, we filed a post-effective amendment to a registration statement to register for resale such shares of our common stock held by HCP and certain other selling stockholders. The post-effective amendment to the registration statement was declared effective on November 19, 2018. All securities registered under this registration statement are available for sale in the open market unless restrictions apply. Demand Registration Rights. HCP and certain permitted transferees each have the right to demand that we register their common stock for resale, subject to the conditions set forth in the registration rights agreement, no more than three times in any 12-month period. HCP and certain permitted transferees have the right under the registration rights agreement to require that we register their common stock for resale. Such registration demand must reasonably be expected to result in aggregate gross cash proceeds to such demanding stockholder in excess of $25 million. HCP and certain permitted transferees will have the right to participate in any such demand registrations. We will not be obligated to effect a demand registration within 120 days of the effective date of a registration statement filed by us. We may postpone the filing of a registration statement for up to 60 days once in any 12-month period if our Board determines in good faith that the filing would reasonably be expected to materially adversely affect any material financing or acquisition of ours or require premature disclosure of information that would reasonably be expected to be materially adverse to us. The underwriters of any underwritten offering have the right to limit the number of shares to be included in a registration statement filed in response to the exercise of these demand registration rights. We must pay all expenses, except for underwriters’ discounts and commissions, incurred in connection with these demand registration rights. Piggyback Registration Rights. HCP, certain of their permitted transferees and the minority stockholders which are parties to the agreement will each have the right to “piggyback” on any registration statements that we file on an unlimited basis, subject to the conditions set forth in the registration rights agreement. If we register any securities for public sale, stockholders with piggyback registration rights under the registration rights agreement have the right to include their shares in the registration for resale by them, subject to specified limitations and exceptions. On May 8, 2013, we entered into an exchange agreement with certain former owners of PNMAC that entitled those owners to exchange their ownership interests in PNMAC for shares of our common stock on aone-for-one basis. On November 1, 2018, in connection with the closing of our corporate reorganization, the exchange agreement with each of our former owners was terminated.
Amended and Restated Stockholder Agreements
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| | | | | | | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
S-3 Registration Rights. If we are eligible to file a registration statement on Form S-3, the stockholders with S-3 registration rights under the registration rights agreement and certain permitted transferees can request that we register their shares for resale. Any registration must be reasonably expected by the demanding stockholder to result in aggregate gross cash proceeds to such demanding stockholder in excess of $10 million, and no more than three demands for an S-3 registration may be made in any 12-month period. If we are eligible as a Well Known Seasoned Issuer, or WKSI, the requesting stockholders may request that the shelf registration statement utilize the automatic shelf registration process under Rule 415 promulgated under the Securities Act. If we are not eligible as a WKSI or are otherwise ineligible to utilize the automatic shelf registration process, then we are required to use our reasonable efforts to have the shelf registration statement declared effective. Tax Receivable Agreement On May 8, 2013, we entered into a tax receivable agreement with the former owners of PNMAC that provides for the payment from time to time by the corporate taxpayer to those owners of 85% of the amount of the net tax benefits, if any, that the corporate taxpayer is deemed to realize under certain circumstances as a result of (i) increases in tax basis resulting from exchanges of ownership interests in PNMAC and (ii) certain other tax benefits related to our entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. These payment obligations are obligations of the corporate taxpayer and not of PNMAC. For purposes of the tax receivable agreement, the tax benefit deemed realized by the corporate taxpayer will be computed by comparing the actual income tax liability of the corporate taxpayer (calculated with certain assumptions) to the taxes that the corporate taxpayer would have been required to pay had there been no increase to the tax basis of the assets of PNMAC as a result of the exchanges, and had the corporate taxpayer not entered into the tax receivable agreement. The term of the tax receivable agreement will continue until all such tax benefits have been utilized or expired, unless we exercise our right to terminate the tax receivable agreement. Following the closing of the corporate reorganization on November 1, 2018, we succeeded to certain obligations under the tax receivable agreement and, therefore, are the top-level parent entity and the corporate taxpayer who will make payments, if any, under the tax receivable agreement to those certain prior owners of PNMAC who effected exchanges of ownership interests in PNMAC for our common stock prior to the closing of the corporate reorganization. Any prior owners of PNMAC who did not complete such exchanges prior to the closing of the corporate reorganization, or prior owners that only completed such exchanges with respect to some but not all of their interests in PNMAC, will not be entitled to any future payments under the tax receivable agreement in respect of any ownership interests not exchanged prior to the closing. In the event of termination of the tax receivable agreement, we would be required to make an immediate payment equal to the present value of the anticipated future net tax benefits, which upfront payment may be made years in advance of the actual realization of such future benefits. Estimating the amount of payments that may be made under the tax receivable agreement is by its nature imprecise, insofar as the calculation of amounts payable depends on a variety of factors. The primary factor is the amount and timing of our income. The corporate taxpayer will be required to pay 85% of the net tax benefits as and when those benefits are treated as realized under the terms of the tax receivable agreement. If the corporate taxpayer does not have taxable income, the corporate taxpayer generally is not required (absent a change of control or circumstances requiring an early termination payment) to make payments under the tax receivable agreement for that taxable year because no benefit will have been actually realized. However, any tax benefits that do not result in realized benefits in a given tax year will likely generate tax attributes that may be utilized to generate benefits in previous or future tax years. The utilization of such tax attributes will result in payments under the tax receivable agreement. The payments under the tax receivable agreement are not conditioned upon the continued ownership of us by the exchanging owners of PNMAC. In Fiscal 2022, we made tax receivable agreement payments in the aggregate amount of $228,700 to certain of our named executive officers and directors. The tax receivable agreement provides that upon certain mergers, asset sales, other forms of business combinations or other changes of control, the corporate taxpayer’s (or its successor’s) obligations with respect to exchanged or acquired ownership interests in PNMAC (whether exchanged or acquired before or after such transaction) would be based on certain assumptions, including that the corporate taxpayer would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement. As a result, (i) we could be required to make payments under the tax receivable agreement that are greater than or less than the specified percentage of the actual net tax benefits we realize in respect of the tax attributes subject to the tax receivable agreement and (ii) if we elect to terminate the tax receivable agreement early, we would be required to make an immediate payment equal to the present value of the anticipated future net tax benefits, which upfront payment may be made years in advance of the actual realization of such future benefits. On November 1, 2018, in connection with the closing of our corporate reorganization, we entered into separate amended and restated stockholder agreements with BlackRock and Highfields which provide that each of BlackRock and Highfields will have the right to nominate two individuals for election to our Board as long as it, together with its affiliates, holds at least 15% of the voting power of our outstanding common stock, and the right to nominate one individual for election to our Board as long as it, together with its affiliates, holds at least 10% of the voting power of our outstanding common stock. We, in turn, are obligated to use our best efforts to ensure that these nominees are elected. In addition, those agreements provide that each of BlackRock and Highfields, as long as it, together with its affiliates, holds at least 10% of the voting power of our outstanding common stock, will have the right to nominate one member of each committee of our Board. As long as those nominees meet the independence standards applicable to those committees, we will appoint them as members of those committees. Those agreements also provide that neither our certificate of incorporation nor our bylaws, as in effect from time to time, may be amended in any manner that is adverse to BlackRock, Highfields or their respective affiliates without the consent of BlackRock or Highfields, as applicable, as long as it, together with its affiliates, holds at least 5% of the voting power of our outstanding common stock.
Amended and Restated Registration Rights Agreement
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| | | | | | | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
Decisions made by certain prior owners of PNMAC in the course of running our business, such as with respect to mergers, asset sales, other forms of business combinations or other changes in control, may influence the timing and amount of payments that are received by an exchanging or selling owner under the tax receivable agreement. For example, the earlier disposition of assets following an exchange or acquisition transaction will generally accelerate payments under the tax receivable agreement and increase the present value of such payments. Payments are generally due under the tax receivable agreement within a specified period of time following the filing of our tax return for the taxable year with respect to which the payment obligation arises, although interest on such payments will begin to accrue at a rate of LIBOR plus 100 basis points from the due date (without extensions) of such tax return. Payments not made when due under the tax receivable agreement generally would accrue interest at a rate of LIBOR plus 500 basis points. However, in the event that we do not have sufficient cash available to make a payment under the tax receivable agreement when that payment is due, under certain circumstances we may elect to defer that payment for up to two years. Payments that are deferred pursuant to this election would accrue interest at a rate of LIBOR plus 350 basis points. Payments under the tax receivable agreement will be based on the tax reporting positions that we will determine. Although we are not aware of any issue that would cause the IRS to challenge a tax basis increase, the corporate taxpayer will not be reimbursed for any payments previously made under the tax receivable agreement (except to the extent such amounts can be applied against future amounts that would otherwise be due under the tax receivable agreement). As a result, in certain circumstances, payments could be made under the tax receivable agreement in excess of the benefits that the corporate taxpayer actually realizes in respect of the tax attributes subject to the tax receivable agreement. PNMAC Limited Liability Company Agreement On November 1, 2018, we and PNMAC Holdings, Inc. entered into the fifth amended and restated limited liability company agreement of PNMAC. We are the managing member of PNMAC. Accordingly, we operate and control all of the business and affairs of PNMAC and, through PNMAC and its operating entity subsidiaries, conduct our business. Pursuant to the limited liability company agreement of PNMAC, we have the right to determine when distributions will be made to the members of PNMAC and the amount of any such distributions, other than with respect to tax distributions as described below. If a distribution is authorized; such distribution will be made to the members of PNMAC pro rata in accordance with the percentages of their respective limited liability company interests. The unit holders of PNMAC, including us, will incur U.S. federal, state and local income taxes on their proportionate share of any taxable income of PNMAC. Except as otherwise required under Section 704(c) of the Code, net profits and net losses of PNMAC will generally be allocated to its members (including us) pro rata in accordance with their respective limited liability company interests. The limited liability company agreement of PNMAC will provide for quarterly cash distributions, which we refer to as “tax distributions,” to the members of PNMAC if we, as the managing member of PNMAC, determine that the taxable income of PNMAC gives rise to taxable income for such holders. Generally, these quarterly tax distributions will be computed based on the taxable income of PNMAC multiplied by an assumed tax rate determined by us. Tax distributions will be made only to the extent that all distributions from PNMAC for the relevant year were insufficient to cover such tax liabilities. The limited liability company agreement of PNMAC also provides that substantially all expenses incurred by or attributable to us, but not including our obligations incurred under the tax receivable agreement and our income tax expenses, will be borne by PNMAC. Other than us, in our capacity as managing member, no member of PNMAC will have voting rights with respect to PNMAC. Management Agreements Our subsidiary, PCM, may enter into investment management agreements with investment companies or funds that invest in residential mortgage assets. Presently, PCM is party to a management agreement with PMT. This management agreement requires us to oversee the business affairs of PMT in conformity with the investment policies that are approved and monitored by PMT’s board or management. We are responsible for PMT’s day-to-day management and perform such services and activities related to PMT’s assets and operations as may be appropriate. | | | | | | | 2023 Proxy Statement | | | 73 | |
| | | | | | | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
We externally manage and advise PMT pursuant to a management agreement, or the PMT Management Agreement, which was amended and restated effective June 30, 2020. The PMT Management Agreement requires us to oversee PMT’s business affairs in conformity with the investment policies that are approved and monitored by its board of trustees. We are responsible for PMT’s day-to-day management and will perform such services and activities related to its assets and operations as may be appropriate. Pursuant to the PMT Management Agreement, we collect a base management fee and may collect a performance incentive fee, both payable quarterly and in arrears. The PMT Management Agreement expires on June 30, 2025, subject to automatic renewal for additional 18-month periods, unless terminated earlier in accordance with the terms of the agreement. The base management fee is calculated at a defined annualized percentage of “shareholders’ equity.” PMT’s “shareholders’ equity” is defined as the sum of the net proceeds from any issuances of its equity securities since its inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance); plus its retained earnings at the end of the quarter; less any amount that PMT pays for repurchases or redemptions of its equity securities (allocated on a pro rata daily basis for such repurchases and redemptions during the fiscal quarter of any such repurchases or redemptions); and excluding one-time events pursuant to changes in GAAP and certain other non-cash charges as agreed between PMT and PCM. Pursuant to the terms of the PMT Management Agreement, the base management fee is equal to the sum of (i) 1.5% per year of shareholders’ equity up to $2 billion, (ii) 1.375% per year of shareholders’ equity in excess of $2 billion and up to $5 billion, and (iii) 1.25% per year of shareholders’ equity in excess of $5 billion. The base management fee is paid in cash. The performance incentive fee is calculated at a defined annualized percentage of the amount by which “net income,” on a rolling four-quarter basis and before deducting the incentive fee, exceeds certain levels of annualized return on PMT’s “equity.” For the purpose of determining the amount of the performance incentive fee, “net income” is defined as net income or loss attributable to PMT’s common shareholders, computed in accordance with GAAP and adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash charges determined as agreed between PMT and PCM. For this purpose, “equity” is the weighted average of the issue price per common share of all of PMT’s public offerings of common shares, multiplied by the weighted average number of common shares outstanding (including restricted share units issued under PMT’s equity incentive plans) in the four-quarter period. The performance incentive fee is calculated quarterly and escalates as net income (stated as a percentage of return on equity) increases over certain thresholds. On each calculation date, the threshold amount represents a stated return on equity, plus or minus a “high watermark” adjustment. The performance fee payable for any quarter is equal to: (a) 10% of the amount by which net income for the quarter exceeds (i) an 8% return on equity plus the high watermark, up to (ii) a 12% return on equity; plus (b) 15% of the amount by which net income for the quarter exceeds (i) a 12% return on equity plus the high watermark, up to (ii) a 16% return on equity; plus (c) 20% of the amount by which net income for the quarter exceeds a 16% return on equity plus the high watermark. The “high watermark” is the quarterly adjustment that reflects the amount by which the net income (stated as a percentage of return on equity) in that quarter exceeds or falls short of the lesser of 8% and the average Fannie Mae MBS Yield (the target yield) for such quarter. If the net income is lower than the target yield, the high watermark is increased by the difference. If the net income is higher than the target yield, the high watermark is reduced by the difference. Each time a performance incentive fee is earned, the high watermark returns to zero. As a result, the threshold amount required for us to earn a performance incentive fee is adjusted cumulatively based on the performance of PMT’s net income over (or under) the target yield, until the net income in excess of the target yield exceeds the then-current cumulative high watermark amount, and a performance incentive fee is earned. The performance incentive fee may be paid to us in cash or in PMT’s common shares (subject to a limit of no more than 50% paid in common shares), at PMT’s option. We are entitled to reimbursement of our organizational and operating expenses, including third-party expenses, incurred on PMT’s behalf, it being understood that we and our affiliates shall allocate a portion of our personnel’s time to provide certain legal, tax and investor relations services for our direct benefit and for which we shall be reimbursed $165,000 per fiscal quarter, such amount to be reviewed annually and not preclude reimbursement for any other services performed by us or our affiliates. PMT is required to pay its and its subsidiaries’ pro rata portion of our and our affiliates’ rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses required for PMT’s and its subsidiaries’ operations. These expenses are allocated based on the ratio of PMT’s and its subsidiaries’ proportion of gross assets compared to all remaining gross assets managed by us as calculated at each fiscal quarter end. On November 1, 2018, in connection with the closing
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We may also be entitled to a termination fee under certain circumstances. Specifically, the termination fee is payable for (1) PMT’s termination of the PMT Management Agreement without cause, (2) our termination of the PMT Management Agreement upon a default by PMT in the performance of our corporate reorganization, we entered into an amended and restated registration rights agreement with BlackRock, Highfields and the other owners of PNMAC other than us pursuant to which BlackRock, Highfields and certain permitted transferees have the right, under certain circumstances and subject to certain restrictions, to require us to register for resale the shares of our common stock received by them in exchange for their ownership interests in PNMAC in connection with the closing of our corporate reorganization. In November 2018, we filed a post-effective amendment to a registration statement to register for resale such shares of our common stock held by each of BlackRock, Highfields and certain other selling stockholders. The post-effective amendment to the registration statement was declared effective on November 19, 2018. All securities registered under this registration statement are available for sale in the open market unless restrictions apply. Demand Registration Rights. BlackRock and Highfields and certain permitted transferees each have the right to demand that we register their common stock for resale, subject to the conditions set forth in the registration rights agreement, no more than three times in any12-month period. BlackRock and Highfields and certain permitted transferees have the right under the registration rights agreement to require that we register their common stock for resale. Such registration demand must reasonably be expected to result in aggregate gross cash proceeds to such demanding stockholder in excess of $25 million. Each of BlackRock and Highfields and certain permitted transferees will have the right to participate in any such demand registrations. We will not be obligated to effect a demand registration within 120 days of the effective date of a registration statement filed by us. We may postpone the filing of a registration statement for up to 60 days once in any12-month period if our Board determines in good faith that the filing would reasonably be expected to materially adversely affect any material term of the agreement that has continued uncured for a period of 30 days after receipt of written notice thereof, or (3) our termination of the agreement after the termination by PMT without cause (excluding a non-renewal) of the MBS agreement, the MSR recapture agreement or the PMT Servicing Agreement (each as described and/or defined below). The termination fee is equal to three times the sum of (a) the average annual base management fee and (b) the average annual (or, if the period is less than 24 months, annualized) performance incentive fee earned by us during the 24-month period immediately preceding the date of termination.
PMT may terminate the PMT Management Agreement without the payment of any termination fee under certain circumstances, including, among other circumstances, uncured material breaches of the PMT Management Agreement by us, upon a change in control of us (defined to include a 50% change in our shareholding in a single transaction or related series of transactions or upon the termination of the MBS agreement, the MSR recapture agreement or the PMT Servicing Agreement by PLS without cause). The PMT Management Agreement also provides that, prior to the undertaking by us or our affiliates of any new investment opportunity or any other business opportunity requiring a source of capital with respect to which we or our affiliates will earn a management, advisory, consulting or similar fee, we shall present to PMT such new opportunity and the material terms on which we propose to provide services to PMT before pursuing such opportunity with third parties. We earned approximately $31.1 million in base management fees and zero in performance incentive fees in Fiscal 2022 in connection with work performed under the PMT Management Agreement. Servicing Agreements Through our subsidiary, PLS, we enter into servicing agreements with investment companies or funds that invest in residential mortgage loans pursuant to which we provide servicing for our clients’ portfolio of residential mortgage loans. Presently, PLS is party to a servicing agreement with PMT. The loan servicing to be provided by us under the servicing agreements includes collecting principal, interest and escrow account payments, if any, with respect to mortgage loans, as well as managing loss mitigation, which may include, among other things, collection activities, loan workouts, modifications, foreclosures and short sales. We may also engage in certain loan origination activities that include refinancing mortgage loans and financings that facilitate sales of real estate acquired upon settlement of loans, or REOs. We and PMT have entered into a loan servicing agreement, or the PMT Servicing Agreement, which was amended and restated effective June 30, 2020 and pursuant to which we provide servicing for PMT’s portfolio of residential mortgage loans and subservicing for its portfolio of mortgage servicing rights, or MSRs. The term of the PMT Servicing Agreement expires on June 30, 2025, subject to automatic renewal for additional 18-month periods, unless terminated earlier in accordance with the terms of the agreement. The base servicing fee rates for non-distressed mortgage loans subserviced on behalf of PMT are calculated through a monthly per-loan dollar amount, with the actual dollar amount for each mortgage loan based on whether the mortgage loan is a fixed-rate or adjustable-rate loan. The base servicing fee rates for mortgage loans subserviced on behalf of PMT are $7.50 per month for fixed-rate mortgage loans and $8.50 per month for adjustable-rate mortgage loans. To the extent that these mortgage loans become delinquent, we are entitled to an additional servicing fee per mortgage loan falling within a range of $10 to $55 per month and based on the delinquency, bankruptcy and foreclosure status of the mortgage loan or $75 per month if the underlying mortgaged property becomes REO. We are also entitled to customary ancillary income and certain market-based fees and charges, including boarding and deboarding fees, liquidation and disposition fees, and assumption, modification and origination fees. In addition, we are entitled to fees required as a result of the COVID-19 pandemic such as a one-time forbearance set up fee of $10, a $3 per month forbearance monitoring fee and certain modification fees ranging from $125 to $675. The base servicing fee rates for distressed whole mortgage loans are charged based on a monthly per-loan dollar amount, with the actual dollar amount for each loan based on the delinquency, bankruptcy and/or foreclosure status of such loan or whether the underlying mortgage property has become REO. The base servicing fee rates for distressed whole mortgage loans range from $30 per month for current loans up to $95 per month for loans where foreclosure proceedings have commenced. The base servicing fee rate for REO is $75 per month. To the extent that PMT rents its REO under its REO rental program, we are entitled to an REO rental fee of $30 per month per REO, an REO property lease renewal fee of $100 per lease renewal, and a property management fee in an amount equal to PLS’ cost if | | | | | | | 2023 Proxy Statement | | | 75 | |
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property management services and/or any related software costs are outsourced to a third-party property management firm or 9% of gross rental income if we provide property management services directly. We are also entitled to retain any tenant paid application fees and late rent fees and seek reimbursement for certain third-party vendor fees. We are also entitled to certain activity-based fees for distressed whole mortgage loans that are charged based on the achievement of certain events. These fees range from $750 for a streamline modification to $1,750 for a liquidation or reperformance and $500 for a deed-in-lieu of foreclosure. We are not entitled to earn more than one liquidation fee, reperformance fee or modification fee in any 18-month period. Because PMT has limited employees and infrastructure, we are required to provide a range of services and activities significantly greater in scope than the services provided in connection with a customary servicing arrangement. For these services, we receive a supplemental servicing fee of $25 per month for each distressed loan. Except as otherwise provided in the MSR recapture agreement, when we effect a refinancing of a loan on PMT’s behalf and not through a third-party lender and the resulting loan is readily saleable, or we originate a loan to facilitate the disposition of the real estate acquired by PMT in settlement of a loan, we are entitled to receive from PMT market-based fees and compensation consistent with pricing and terms we offer unaffiliated third parties on a retail basis. We are entitled to reimbursement for all customary, bona fide reasonable and necessary out-of-pocket expenses we incur in connection with the performance of our servicing obligations. We earned approximately $81.9 million in loan servicing fees in Fiscal 2022 in connection with work performed for PMT under the PMT Servicing Agreement. Mortgage Banking Services Agreement Pursuant to a mortgage banking services agreement, or the MBS agreement, which was amended and restated effective June 30, 2020, we provide PMT with certain mortgage banking services, including fulfillment and disposition-related services, with respect to loans acquired by PMT from correspondent sellers. Pursuant to the MBS agreement, we have agreed to provide such services exclusively for PMT’s benefit, and we and our affiliates are prohibited from providing such services for any other third party. However, such exclusivity and prohibition shall not apply, and certain other duties instead will be imposed upon us, if PMT is unable to purchase or finance mortgage loans as contemplated under our MBS agreement for any reason. The MBS agreement expires, unless terminated earlier in accordance with the terms of the agreement, on June 30, 2025, subject to automatic renewal for additional 18-month periods, unless terminated earlier in accordance with the terms of the agreement. In consideration for the mortgage banking services we provided with respect to the acquisition of mortgage loans by PennyMac Corp., a subsidiary of PMT, we are entitled to aggregate quarterly fulfillment fees not to exceed the following: (i) the number of loan commitments multiplied by a pull-through factor of either .99 or .80 depending on whether the loan commitments are subject to a “mandatory trade confirmation” or a “best efforts lock confirmation” and then multiplied by $585 for each pull-through adjusted loan commitment up to and including 16,500 per quarter and $355 for each pull-through adjusted loan commitment in excess of 16,500 per quarter, plus (ii) $315 multiplied by the number of purchased loans up to the and including 16,500 per quarter and $195 multiplied by the number of purchased loans exceeding 16,500 per quarter, plus (iii) $750 multiplied by the number of all purchased loans other than Fannie Mae and Freddie Mac loans that are sold and securitized; provided, however, that no fulfillment fee shall be due or payable to PLS with respect to any Ginnie Mae loans, and as of October 1, 2022, designated Fannie Mae or Freddie Mac loans acquired by PLS. PMT does not hold the Ginnie Mae approval required to issue Ginnie Mae MBS and act as a servicer. Accordingly, under the MBS agreement, we currently purchase loans underwritten in accordance with the Ginnie Mae Mortgage-Backed Securities Guide “as is” and without recourse of any kind from PMT at its cost less an administrative fee plus accrued interest and a sourcing fee ranging from one to two basis points. We may also acquire conventional loans from PMT on the same terms upon mutual agreement between PMT and the Company. In consideration for the mortgage banking services we provide with respect to PMT’s acquisition of mortgage loans under our early purchase program, we are entitled to fees accruing (i) at a rate equal to $1,500 per year per early purchase facility administered by us, and (ii) in the amount of $35 for each mortgage loan that PMT acquires thereunder. | | | | | | | | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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Notwithstanding any provision of the MBS agreement to the contrary, if it becomes reasonably necessary or advisable for us to engage in additional services in connection with post-breach or post-default resolution activities for the purposes of a correspondent agreement, then PMT has generally agreed with us to negotiate in good faith for additional compensation and reimbursement of expenses to be paid to us for the performance of such additional services. We earned approximately $68.0 million in fulfillment fees and we paid to PMT approximately $5.0 million in sourcing fees in Fiscal 2022. MSR Recapture Agreement Pursuant to the terms of the MSR Recapture Agreement, which was entered into by and between us and PMT and amended and restated effective June 30, 2020, if we originate any mortgage loans the proceeds of which are used to refinance mortgage loans for which PMT previously held the MSRs (the “recaptured loans”), we are generally required to transfer and convey to PMT, without cost, on a monthly basis a tiered recapture fee. Such fee shall be equal to 40% of the fair market value of the MSRs relating to the recaptured loans subject to the first 15% of the “recapture rate,” 35% of the fair market value of the MSRs relating to the recaptured loans subject to the recapture rate in excess of 15% and up to 30%, and 30% of the fair market value of the MSRs relating to the recaptured loans subject to the recapture rate in excess of 30%. The “recapture rate” means, during each month, the ratio of (i) the aggregate unpaid principal balance of all recaptured loans, to (ii) the aggregate unpaid principal balance of all mortgage loans for which PMT held the MSRs and that were refinanced or otherwise paid off in such month. We have further agreed to allocate sufficient resources to achieve a recapture rate of at least 15%. The MSR recapture agreement expires, unless terminated earlier in accordance with the terms of the agreement, on June 30, 2025, subject to automatic renewal for additional 18-month periods, unless terminated earlier in accordance with the terms of the agreement. PMT recognized $13.7 million in recapture income pursuant to the terms of the MSR recapture agreement during Fiscal 2022. Loan Purchase Agreement We have entered into a mortgage loan purchase agreement with PMT. Currently, we use the mortgage loan purchase agreement for the purpose of selling to PMT residential mortgage loans originated by us. The loan purchase agreement contains customary terms and provisions, including representations and warranties, covenants, repurchase remedies and indemnities. The purchase prices paid to us by PMT for such loans are market-based. During Fiscal 2022, PMT purchased $298.9 million of residential loans from us under the mortgage loan purchase agreement. Investments in PMT Our Investment in PMT We received dividends of $136,000 in Fiscal 2022 as a result of our investment in common shares of PMT. Other Transactions With Related Persons Related Party Employment Relationships We employ Mr. Vandad Fartaj’s brother, Vala Fartaj. We established Mr. Vala Fartaj’s compensation in accordance with our employment and compensation practices applicable to employees with equivalent qualifications and responsibilities holding similar positions. None of the executive officers has a material interest in this employment relationship nor do any of them share a home with Mr. Vala Fartaj. We have employed Mr. Vala Fartaj since 2008, and his current title is Managing Director, Portfolio Investments. In this capacity, he received the following approximate amounts in Fiscal 2022: $186,560 in base salary, an annual performance-based cash incentive of $367,000, insurance premium payments in the amount of $7,995, a $12,200 contribution to his 401(k) plan, a $938 payment for mobile phone expenses and a $50 reimbursement for COVID related expenses. During Fiscal 2022, we granted Mr. Vala Fartaj time-based and performance-based RSUs and stock options with a total grant date fair value of $132,949. Mr. Vala Fartaj has also been entitled to receive employee benefits generally available to all employees. | | | | | | | 2023 Proxy Statement | | | 77 | |
material financing or acquisition of ours or require premature disclosure of information that would reasonably be expected to be materially adverse to us. The underwriters of any underwritten offering have the right to limit the number of shares to be included in a registration statement filed in response to the exercise of these demand registration rights. We must pay all expenses, except for underwriters’ discounts and commissions, incurred in connection with these demand registration rights.
Piggyback Registration Rights. BlackRock, Highfields, certain of their permitted transferees and the minority stockholders which are parties to the agreement will each have the right to “piggyback” on any registration statements that we file on an unlimited basis, subject to the conditions set forth in the registration rights agreement. If we register any securities for public sale, stockholders with piggyback registration rights under the registration rights agreement have the right to include their shares in the registration for resale by them, subject to specified limitations and exceptions.
S-3 Registration Rights. If we are eligible to file a registration statement on FormS-3, the stockholders withS-3 registration rights under the registration rights agreement and certain permitted transferees can request that we register their shares for resale. Any registration must be reasonably expected by the demanding stockholder to result in aggregate gross cash proceeds to such demanding stockholder in excess of $10 million, and no more than three demands for anS-3 registration may be made in any12-month period. If we are eligible as a Well Known Seasoned Issuer, or WKSI, the requesting stockholders may request that the shelf registration statement utilize the automatic shelf registration process under Rule 415 promulgated under the Securities Act. If we are not eligible as a WKSI or are otherwise ineligible to utilize the automatic shelf registration process, then we are required to use our reasonable efforts to have the shelf registration statement declared effective.
Tax Receivable Agreement
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Indemnification of Directors and Officers Our Amended and Restated Bylaws provide that we will indemnify and advance expenses to our directors and officers to the fullest extent permitted by the Delaware General Corporation Law, or DGCL. In addition, our certificate of incorporation provides that our directors will not be liable for monetary damages for breach of fiduciary duty, except as otherwise prohibited under the DGCL. We have entered into indemnification agreements with each of our executive officers and directors. The indemnification agreements provide the executive officers and directors with contractual rights to indemnification, expense advancement and reimbursement, to the fullest extent permitted under the DGCL. In addition, our indemnification agreements also provide that we are required to advance expenses to our directors and officers as incurred in connection with legal proceedings against them for which they may be indemnified and that the rights conferred in the indemnification agreements are not exclusive. The limited liability company agreement of PNMAC also requires PNMAC to indemnify its officers, members, managers and other affiliates to the fullest extent permitted by Delaware law, and advance expenses to its officers, members, managers and other affiliates as incurred in connection with legal proceedings against them for which they may be indemnified. The rights conferred in the limited liability company agreement of PNMAC are not exclusive. There is no pending litigation or proceeding naming any of our directors or officers to which indemnification is being sought, and we are not aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer. Approval of Related Party Transactions Our Code of Business Conduct and Ethics requires everyone subject to the code to be scrupulous in avoiding a conflict of interest as it relates to our interests and the interests of our employees, officers and directors when such individuals are acting for or on our behalf. The code prohibits us from, among other things, entering into a transaction or a business relationship with a related party or an immediate family member of such related person or with a company in which such a related party or such immediate family member has a substantial financial interest, unless such transaction and relationship are disclosed to and approved in advance by our Board. We have also adopted a written policy that specifically governs related party transactions. The related party transactions policy generally prohibits any related party transaction unless it is reviewed and approved by our Related Party Matters Committee and/or a majority of our independent directors in accordance with the policy. With certain exceptions, a related party transaction is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we (including any of our subsidiaries) were, are or will be a participant and the amount involved exceeds $120,000 in the aggregate in any calendar year, and in which any related party has, had or will have a direct or indirect interest. A related party is any person who is, or at any time since the beginning of our last fiscal year was, an employee, director or executive officer of our Company or a nominee to become a director of our Company; any person who is known to be the beneficial owner of more than 5% of any class of our voting securities; any immediate family member of any of the foregoing persons (which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law,father-in-law,son-in-law,daughter-in-law,brother-in-law, or sister-in-law of any of the foregoing persons); and any firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest. In determining whether to approve a related party transaction, the Related Party Matters Committee and/or independent directors consider all facts and circumstances that they deem relevant to the transaction, including, among other things, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party’s interest in the transaction. The related party transactions policy governs the process for identifying potential related party transactions and seeking review, approval and/or ratification of such transactions. In addition, each of our employees, directors and executive officers is required to complete an annual disclosure questionnaire and report all transactions with us in which they and their immediate family members had or will have a direct or indirect material interest with respect to us. We review these questionnaires and, if we determine that it is necessary, discuss any reported transactions with our Related Party Matters Committee and/or our Board in accordance with the related party transactions policy. On May 8, 2013, we entered into a tax receivable agreement with the former owners of PNMAC that provides for the payment from time to time by the corporate taxpayer to those owners of 85% of the amount of the net tax benefits, if any, that the corporate taxpayer is deemed to realize under certain circumstances as a result of (i) increases in tax basis resulting from exchanges of ownership interests in PNMAC and (ii) certain other tax benefits related to our entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. These payment obligations are obligations of the corporate taxpayer and not of PNMAC. For purposes of the tax receivable agreement, the tax benefit deemed realized by the corporate taxpayer will be computed by comparing the actual income tax liability of the corporate taxpayer (calculated with certain assumptions) to the taxes that the corporate taxpayer would have been required to pay had there been no increase to the tax basis of the assets of PNMAC as a result of the exchanges, and had the corporate taxpayer not entered into the tax receivable agreement. The term of the tax receivable agreement will continue until all such tax benefits have been utilized or expired, unless we exercise our right to terminate the tax receivable agreement. Following the closing of the corporate reorganization on November 1, 2018, we succeeded to certain obligations under the tax receivable agreement and, therefore, are thetop-level parent entity and the corporate taxpayer who will make payments, if any, under the tax receivable agreement to those certain prior owners of PNMAC who effected exchanges of ownership interests in PNMAC for our common stock prior to the closing of the corporate reorganization. Any prior owners of PNMAC who did not complete such exchanges prior to the closing of the corporate reorganization, or prior owners that only completed such exchanges with respect to some but not all of their interests in PNMAC, will not be entitled to any future payments under the tax receivable agreement in respect of any ownership interests not exchanged prior to the closing.
In the event of termination of the tax receivable agreement, we would be required to make an immediate payment equal to the present value of the anticipated future net tax benefits, which upfront payment may be made years in advance of the actual realization of such future benefits. Estimating the amount of payments that may be made under the tax receivable agreement is by its nature imprecise, insofar as the calculation of amounts payable depends on a variety of factors. The actual increase in tax basis, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including:
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| | | | | | | ANNUAL REPORT ON FORM 10-K |
Annual Report on Form 10-K Our Annual Report on Form 10-K for Fiscal 2022, which contains our consolidated financial statements for Fiscal 2022, accompanies this Proxy Statement, but is not a part of our soliciting materials. Stockholders of record as of the record date may obtain, without charge, a paper copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 as filed with the SEC, including the financial statements and schedules thereto, without the accompanying exhibits, upon written request to Investor Relations, PennyMac Financial Services, Inc., 3043 Townsgate Road, Westlake Village, California 91361. A list of exhibits is included in our Annual Report on Form 10-K and exhibits are available from us upon the payment to us of the cost of furnishing them. Our Annual Report on Form 10-K is also available on our website, pfsi.pennymac.com, under “SEC Filings,” Other Matters Delinquent Section 16(a) Reports We believe that based solely upon our review of copies of forms we have received or written representations from reporting persons, during Fiscal 2022, all filing requirements under Section 16(a) of the Exchange Act applicable to our officers, directors and beneficial owners of more than ten percent of our common stock were complied with on a timely basis. Other Matters for Consideration at the Annual Meeting As of the date of this Proxy Statement, our Board does not know of any matter that will be presented for consideration at the Annual Meeting other than as described in this Proxy Statement. If any other matters are properly presented at the Annual Meeting, your signed proxy card authorizes David A. Spector, our Chairman and Chief Executive Officer, and Derek W. Stark, our Secretary, to vote on those matters according to their best judgment. Householding of Proxy Materials As permitted by the SEC, we will deliver a single copy of the notice, proxy statement and annual report to stockholders who have the same address and last name, unless we have received contrary instructions from such stockholders. Each stockholder will continue to receive a separate proxy card. This procedure, called “householding,” will reduce the volume of duplicate information you receive and reduce our printing and postage costs, which is consistent with our corporate sustainability efforts. We will promptly deliver a separate copy of the proxy statement and annual report to any such stockholder upon written or oral request. A stockholder wishing to receive a separate proxy statement or annual report can notify us at Investor Relations, PennyMac Financial Services, Inc., 3043 Townsgate Road, Westlake Village, California 91361, telephone: (818) 264-4907. Similarly, stockholders currently receiving multiple copies of these documents can request the elimination of duplicate documents by contacting us as described above. the timing of prior exchanges—for instance, the increase in any tax deductions will vary depending on the fair value, which may fluctuate over time, of the depreciable or amortizable assets of PNMAC at the time of each exchange;
the price of shares of our common stock at the time of the exchange—the tax basis increase in assets of PNMAC for the corporate taxpayer, as well as any related increase in allocations of tax deductions to the corporate taxpayer, is directly proportional to the price of shares of our common stock at the time of the exchange;
the extent to which such exchanges are taxable—if an exchange is not taxable for any reason, increased deductions will not be available; and
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the amount and timing of our income—the corporate taxpayer will be required to pay 85% of the net tax benefits as and when those benefits are treated as realized under the terms of the tax receivable agreement. If the corporate taxpayer does not have taxable income, the corporate taxpayer generally is not required (absent a change of control or circumstances requiring an early termination payment) to make payments under the tax receivable agreement for that taxable year because no benefit will have been actually realized. However, any tax benefits that do not result in realized benefits in a given tax year will likely generate tax attributes that may be utilized to generate benefits in previous or future tax years. The utilization of such tax attributes will result in payments under the tax receivable agreement.
We expect that the payments that we may make under the tax receivable agreement will be substantial. There may be a material negative effect on our liquidity if, as a result of timing discrepancies or otherwise, the payments under the tax receivable agreement exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement and/or distributions to us by PNMAC are not sufficient to permit us to make payments under the tax receivable agreement after we have paid taxes. Furthermore, our obligations to make payments under the tax receivable agreement could make us a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that are deemed realized under the tax receivable agreement. The payments under the tax receivable agreement are not conditioned upon the continued ownership of us by the exchanging owners of PNMAC.
In addition, the tax receivable agreement provides that upon certain mergers, asset sales, other forms of business combinations or other changes of control, the corporate taxpayer’s (or its successor’s) obligations with respect to exchanged or acquired ownership interests in PNMAC (whether exchanged or acquired before or after such transaction) would be based on certain assumptions, including that the corporate taxpayer would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement. As a result, (i) we could be required to make payments under the tax receivable agreement that are greater than or less than the specified percentage of the actual net tax benefits we realize in respect of the tax attributes subject to the tax receivable agreement and (ii) if we elect to terminate the tax receivable agreement early, we would be required to make an immediate payment equal to the present value of the anticipated future net tax benefits, which upfront payment may be made years in advance of the actual realization of such future benefits. In these situations, our obligations under the tax receivable agreement could have a substantial negative impact on our liquidity, as well as our attractiveness as a target for an acquisition.
Decisions made by certain prior owners of PNMAC in the course of running our business, such as with respect to mergers, asset sales, other forms of business combinations or other changes in control, may influence the timing and amount of payments that are received by an exchanging or selling owner under the tax receivable agreement. For example, the earlier disposition of assets following an exchange or acquisition transaction will generally accelerate payments under the tax receivable agreement and increase the present value of such payments.
Payments are generally due under the tax receivable agreement within a specified period of time following the filing of our tax return for the taxable year with respect to which the payment obligation arises, although interest on such payments will begin to accrue at a rate of LIBOR plus 100 basis points from the due date (without extensions) of such tax return. Payments not made when due under the tax receivable agreement generally would accrue interest at a rate of LIBOR plus 500 basis points. However, in the event that we do not have sufficient cash available to make a payment under the tax receivable agreement when that payment is due, under certain circumstances we may elect to defer that payment for up to two years. Payments that are deferred pursuant to this election would accrue interest at a rate of LIBOR plus 350 basis points.
Payments under the tax receivable agreement will be based on the tax reporting positions that we will determine. Although we are not aware of any issue that would cause the IRS to challenge a tax basis increase, the corporate taxpayer will not be reimbursed for any payments previously made under the tax receivable agreement (except to the extent such amounts can be applied against future amounts that would otherwise be due under the tax receivable agreement). As a result, in certain circumstances, payments could be made under the tax receivable agreement in excess of the benefits that the corporate taxpayer actually realizes in respect of the tax attributes subject to the tax receivable agreement.
PNMAC Limited Liability Company Agreement
On November 1, 2018, in connection with the closing of the corporate reorganization, we and PNMAC Holdings, Inc. entered into the fifth amended and restated limited liability company agreement of PNMAC. We are the managing member of PNMAC. Accordingly, we operate and control all of the business and affairs of PNMAC and, through PNMAC and its operating entity subsidiaries, conduct our business.
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Pursuant to the limited liability company agreement of PNMAC, we have the right to determine when distributions will be made to the members of PNMAC and the amount of any such distributions, other than with respect to tax distributions as described below. If a distribution is authorized; such distribution will be made to the members of PNMAC pro rata in accordance with the percentages of their respective limited liability company interests.
The unit holders of PNMAC, including us, will incur U.S. federal, state and local income taxes on their proportionate share of any taxable income of PNMAC. Except as otherwise required under Section 704(c) of the Code, net profits and net losses of PNMAC will generally be allocated to its members (including us) pro rata in accordance with their respective limited liability company interests. The limited liability company agreement of PNMAC will provide for quarterly cash distributions, which we refer to as “tax distributions,” to the members of PNMAC if we, as the managing member of PNMAC, determine that the taxable income of PNMAC gives rise to taxable income for such holders. Generally, these quarterly tax distributions will be computed based on the taxable income of PNMAC multiplied by an assumed tax rate determined by us. Tax distributions will be made only to the extent that all distributions from PNMAC for the relevant year were insufficient to cover such tax liabilities.
The limited liability company agreement of PNMAC also provides that substantially all expenses incurred by or attributable to us, but not including our obligations incurred under the tax receivable agreement and our income tax expenses, will be borne by PNMAC.
Other than us, in our capacity as managing member, no member of PNMAC will have voting rights with respect to PNMAC.
Management Agreements
Our subsidiary, PCM, may enter into investment management agreements with investment companies or funds that invest in residential mortgage assets. Presently, PCM is party to a management agreement with PMT.
This management agreement requires us to oversee the business affairs of PMT in conformity with the investment policies that are approved and monitored by PMT’s board or management. We are responsible for PMT’sday-to-day management and perform such services and activities related to PMT’s assets and operations as may be appropriate.
PMT Management Agreement
We externally manage and advise PMT pursuant to a management agreement, or the PMT Management Agreement, which was amended and restated effective September 12, 2016. The PMT Management Agreement requires us to oversee PMT’s business affairs in conformity with the investment policies that are approved and monitored by its board of trustees. We are responsible for PMT’sday-to-day management and will perform such services and activities related to its assets and operations as may be appropriate.
Pursuant to the PMT Management Agreement, we collect a base management fee and may collect a performance incentive fee, both payable quarterly and in arrears. The PMT Management Agreement expires on September 12, 2020, subject to automatic renewal for additional18-month periods, unless terminated earlier in accordance with the terms of the agreement.
The base management fee is calculated at a defined annualized percentage of “shareholders’ equity.” PMT’s “shareholders’ equity” is defined as the sum of the net proceeds from any issuances of its equity securities since its inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance); plus its retained earnings at the end of the quarter; less any amount that PMT pays for repurchases or redemptions of its equity securities (allocated on a pro rata daily basis for such repurchases and redemptions during the fiscal quarter of any such repurchases or redemptions); and excludingone-time events pursuant to changes in GAAP and certain othernon-cash charges as agreed between PMT and us.
Pursuant to the terms of the PMT Management Agreement, the base management fee is equal to the sum of (i) 1.5% per year of shareholders’ equity up to $2 billion, (ii) 1.375% per year of shareholders’ equity in excess of $2 billion and up to $5 billion, and (iii) 1.25% per year of shareholders’ equity in excess of $5 billion. The base management fee is paid in cash.
The performance incentive fee is calculated at a defined annualized percentage of the amount by which “net income,” on a rolling four-quarter basis and before deducting the incentive fee, exceeds certain levels of annualized return on PMT’s “equity.” For the purpose of determining the amount of the performance incentive fee, “net income” is defined as net income or loss attributable to PMT’s common shareholders, computed in accordance with GAAP and adjusted to excludeone-time events pursuant to changes in GAAP and certain othernon-cash charges determined as agreed between PMT and us. For this purpose, “equity” is the weighted average of the issue price per common share of all of PMT’s public offerings of common shares, multiplied by the weighted average number of common shares outstanding (including restricted share units issued under PMT’s equity incentive plans) in the four-quarter period.
The 2023 Annual Meeting will be conducted online via live webcast at www.virtualshareholdermeeting.com/PFSI2023 on Tuesday, June 13, 2023 at 11:00 a.m. Pacific Time, subject to any postponements or adjournments thereof. The Board is soliciting proxies to be voted at our Annual Meeting. Pursuant to rules adopted by the SEC, we have elected to provide access to the below listed proxy materials primarily via the Internet, rather than mailing paper copies of these materials to each stockholder. On or about April 21, 2023, we began mailing a Notice of Internet Availability of Proxy Materials, which contains instructions on how to access the proxy materials, vote, and request paper copies of the proxy materials. Access to the proxy materials and online voting will be available at www.proxyvote.com. We believe this process expedites stockholders’ receipt of the proxy materials, lowers the cost of printing and distribution, and reduces the environmental impact associated with the Annual Meeting. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on June 13, 2023 This Notice of 2023 Annual Meeting of Stockholders, Proxy Statement and 2022 Annual Report to Stockholders, which includes our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, are available at www.proxyvote.com. At this website, you will find a complete set of the following proxy materials: Notice of 2023 Annual Meeting of Stockholders, Proxy Statement and 2022 Annual Report and form proxy card. You are encouraged to access and review all of the important information contained in the proxy materials before submitting a proxy or voting at the Annual Meeting. | | | | | | 2019 Proxy Statement | | | 55 | |
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The performance incentive fee is calculated quarterly and escalates as net income (stated as a percentage of return on equity) increases over certain thresholds. On each calculation date, the threshold amount represents a stated return on equity, plus or minus a “high watermark” adjustment. The performance fee payable for any quarter is equal to: (a) 10% of the amount by which net income for the quarter exceeds (i) an 8% return on equity plus the high watermark, up to (ii) a 12% return on equity; plus (b) 15% of the amount by which net income for the quarter exceeds (i) a 12% return on equity plus the high watermark, up to (ii) a 16% return on equity; plus (c) 20% of the amount by which net income for the quarter exceeds a 16% return on equity plus the high watermark.
The “high watermark” is the quarterly adjustment that reflects the amount by which the net income (stated as a percentage of return on equity) in that quarter exceeds or falls short of the lesser of 8% and the Fannie Mae MBS Yield (the target yield) for such quarter. If the net income is lower than the target yield, the high watermark is increased by the difference. If the net income is higher than the target yield, the high watermark is reduced by the difference. Each time a performance incentive fee is earned, the high watermark returns to zero. As a result, the threshold amount required for us to earn a performance incentive fee is adjusted cumulatively based on the performance of PMT’s net income over (or under) the target yield, until the net income in excess of the target yield exceeds the then-current cumulative high watermark amount, and a performance incentive fee is earned. The performance incentive fee may be paid to us in cash or in PMT’s common shares (subject to a limit of no more than 50% paid in common shares), at PMT’s option.
We are entitled to reimbursement of our organizational and operating expenses, including third-party expenses, incurred on PMT’s behalf, it being understood that we and our affiliates shall allocate a portion of our personnel’s time to provide certain legal, tax and investor relations services for our direct benefit and for which we shall be reimbursed $120,000 per fiscal quarter, such amount to be reviewed annually and not preclude reimbursement for any other services performed by us or our affiliates.
In addition, PMT is required to pay its and its subsidiaries’ pro rata portion of our and our affiliates’ rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses required for PMT’s and its subsidiaries’ operations. These expenses will be allocated based on the ratio of PMT’s and its subsidiaries’ proportion of gross assets compared to all remaining gross assets managed by us as calculated at each fiscal quarter end.
We may also be entitled to a termination fee under certain circumstances. Specifically, the termination fee is payable for (1) PMT’s termination of the PMT Management Agreement without cause, (2) our termination of the PMT Management Agreement upon a default by PMT in the performance of any material term of the agreement that has continued uncured for a period of 30 days after receipt of written notice thereof, or (3) our termination of the agreement after the termination by PMT without cause (excluding anon-renewal) of the MBS agreement, the MSR recapture agreement or the PMT Servicing Agreement (each as described and/or defined below). The termination fee is equal to three times the sum of (a) the average annual base management fee and (b) the average annual (or, if the period is less than 24 months, annualized) performance incentive fee earned by us during the24-month period immediately preceding the date of termination.
PMT may terminate the PMT Management Agreement without the payment of any termination fee under certain circumstances, including, among other circumstances, uncured material breaches of the PMT Management Agreement by us, upon a change in control of us (defined to include a 50% change in our shareholding in a single transaction or related series of transactions or Mr. Stanford L. Kurland’s failure to continue as our chief executive officer to the extent we have not retained his suitable replacement (in PMT’s discretion) within six months thereof) or upon our termination of the MBS agreement, the MSR recapture agreement or the PMT Servicing Agreement without cause. In December 2016, we announced that Mr. David A. Spector would succeed Mr. Kurland as our Chief Executive Officer, effective as of January 1, 2017, and that Mr. Kurland would continue to serve in a new capacity as our Executive Chairman. PMT determined that Mr. Spector, who previously served as its Executive Managing Director, President and Chief Operating Officer, was a suitable replacement for Mr. Kurland. Accordingly, in December 2016, PMT also announced changes to the roles of Mr. Spector and Mr. Kurland, electing Mr. Spector as its President and Chief Executive Officer and Mr. Kurland as its Executive Chairman, effective as of January 1, 2017.
The PMT Management Agreement also provides that, prior to the undertaking by us or our affiliates of any new investment opportunity or any other business opportunity requiring a source of capital with respect to which we or our affiliates will earn a management, advisory, consulting or similar fee, we shall present to PMT such new opportunity and the material terms on which we propose to provide services to PMT before pursuing such opportunity with third parties.
We earned approximately $23.0 million in base management fees and $1.4 million in performance incentive fees in Fiscal 2018 in connection with work performed under the PMT Management Agreement.
Investment Funds Management Agreements
Three investment funds, or the Investment Funds, that we previously managed were dissolved during 2018. Before their dissolution, we had investment management agreements with these Investment Funds pursuant to which we received management fees consisting of base
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management fees and carried interest determined by the Investment Funds’ performance and our contractual rights to share in the Investment Funds’ returns in excess of the preferred returns, if any, accruing to the Investment Funds’ investors. The management fees were based on the lesser of the funds’ net asset values or aggregate capital contributions. The base management fees accrued at annual rates ranging from 1.5% to 2.0% of the applicable amounts on which they were based.
Servicing Agreements
Through our subsidiary, PLS, we enter into servicing agreements with investment companies or funds that invest in residential mortgage loans pursuant to which we provide servicing for our clients’ portfolio of residential mortgage loans. Presently, PLS is party to servicing agreements with PMT and the Investment Funds.
The loan servicing to be provided by us under the servicing agreements includes collecting principal, interest and escrow account payments, if any, with respect to mortgage loans, as well as managing loss mitigation, which may include, among other things, collection activities, loan workouts, modifications, foreclosures and short sales. We may also engage in certain loan origination activities that include refinancing mortgage loans and financings that facilitate sales of real estate acquired upon settlement of loans, or REOs.
PMT Servicing Agreement
We and PMT have entered into a loan servicing agreement, or the PMT Servicing Agreement, which was amended and restated effective September 12, 2016 and pursuant to which we provide servicing for PMT’s portfolio of residential mortgage loans and subservicing for its portfolio of mortgage servicing rights, or MSRs. The term of the PMT Servicing Agreement expires on September 12, 2020, subject to automatic renewal for additional18-month periods, unless terminated earlier in accordance with the terms of the agreement.
The base servicing fee rates for distressed whole mortgage loans are charged based on a monthlyper-loan dollar amount, with the actual dollar amount for each loan based on the delinquency, bankruptcy and/or foreclosure status of such loan or whether the underlying mortgage property has become REO. The base servicing fee rates for distressed whole mortgage loans range from $30 per month for current loans up to $85 per month for loans where the Borrower has declared bankruptcy. The base servicing fee rate for REO is $75 per month. To the extent that PMT rents its REO under its REO rental program, we collect an REO rental fee of $30 per month per REO, an REO property lease renewal fee of $100 per lease renewal, and a property management fee in an amount equal to our cost if property management services and/or any related software costs are outsourced to a third-party property management firm or 9% of gross rental income if we provide property management services directly. We are also entitled to retain any tenant paid application fees and late rent fees and seek reimbursement for certain third-party vendor fees.
We are also entitled to certain activity-based fees for distressed whole mortgage loans that are charged based on the achievement of certain events. These fees range from $750 for a streamline modification to $1,750 for a liquidation and $500 for adeed-in-lieu of foreclosure. We are not entitled to earn more than one liquidation fee,re-performance fee or modification fee per loan in any18-month period.
The base servicing fee rates fornon-distressed mortgage loans we subservice on PMT’s behalf are also calculated through a monthlyper-loan dollar amount, with the actual dollar amount for each loan based on whether the mortgage loan is a fixed-rate or adjustable-rate loan. The base servicing fee rates for mortgage loans we subservice on PMT’s behalf are $7.50 per month for fixed-rate mortgage loans and $8.50 per month for adjustable-rate mortgage loans. To the extent that these mortgage loans become delinquent, we are entitled to an additional servicing fee per mortgage loan falling within a range of $10 to $55 per month and based on the delinquency, bankruptcy and foreclosure status of the loan or $75 per month if the underlying mortgaged property becomes REO. We are also entitled to customary ancillary income and certain market-based fees and charges, including boarding and deboarding fees, liquidation and disposition fees, and assumption, modification and origination fees.
In addition, because PMT has limited employees and infrastructure, we are required to provide a range of services and activities significantly greater in scope than the services provided in connection with a customary servicing arrangement. For these services, we receive a supplemental servicing fee of $25 per month for each distressed whole loan.
Except as otherwise provided in the MSR recapture agreement, when we effect a refinancing of a loan on PMT’s behalf and not through a third-party lender and the resulting loan is readily saleable, or we originate a loan to facilitate the disposition of the real estate acquired by PMT in settlement of a loan, we are entitled to receive from PMT market-based fees and compensation consistent with pricing and terms we offer unaffiliated third parties on a retail basis.
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PMT currently participates in the Home Affordable Modification Program, or HAMP (or other similar mortgage loan modification programs). HAMP establishes standard loan modification guidelines for “at risk” homeowners and provides incentive payments to certain participants, including mortgage loan servicers, for achieving modifications and successfully remaining in the program. The PMT Servicing Agreement entitles us to retain any incentive payments made to us and to which we are entitled under HAMP; provided, however, that with respect to any such incentive payments paid to us in connection with a mortgage loan modification for which PMT previously paid us a modification fee, we are required to reimburse PMT an amount equal to the incentive payments.
We are entitled to reimbursement for all customary, bona fide reasonable and necessaryout-of-pocket expenses incurred by us in connection with the performance of our servicing obligations.
We earned approximately $42.0 million in loan servicing fees in Fiscal 2018 in connection with work performed for PMT under the PMT Servicing Agreement.
Investment Funds Servicing Agreements
The Investment Funds were dissolved during Fiscal 2018. Before their dissolution, our servicing agreements with the Investment Funds generally provided for fee revenue, which varied depending on the type and quality of the loans being serviced. We were also entitled to certain customary market-based fees and charges.
We earned approximately $3,000 in loan servicing fees in Fiscal 2018 in connection with work performed for the Investment Funds.
Other Agreements with PMT
PMT Mortgage Banking Services Agreement
Pursuant to a mortgage banking services agreement, or the MBS agreement, which was amended and restated effective September 12, 2016, we provide PMT with certain mortgage banking services, including fulfillment and disposition-related services, with respect to loans acquired by PMT from correspondent sellers.
Pursuant to the MBS agreement, we have agreed to provide such services exclusively for PMT’s benefit, and we and our affiliates are prohibited from providing such services for any other third party. However, such exclusivity and prohibition shall not apply, and certain other duties instead will be imposed upon us, if PMT is unable to purchase or finance mortgage loans as contemplated under our MBS agreement for any reason. The MBS agreement expires, unless terminated earlier in accordance with the terms of the agreement, on September 12, 2020, subject to automatic renewal for additional18-month periods, unless terminated earlier in accordance with the terms of the agreement.
In consideration for the mortgage banking services we provide with respect to PMT’s acquisition of mortgage loans, we are entitled to a monthly fulfillment fee in an amount that shall equal (a) no greater than the product of (i) 0.35% and (ii) the unpaid principal balance, or the Initial UPB, of all mortgage loans purchased in such month, plus (b) in the case of all mortgage loans other than mortgage loans sold to or securitized through Fannie Mae or Freddie Mac, no greater than the product of (i) 0.50% and (ii) the aggregate Initial UPB of all such mortgage loans sold and securitized in such month; provided however, that no fulfillment fee shall be due or payable to us with respect to any Ginnie Mae mortgage loans. PMT does not hold the Ginnie Mae approval required to issue Ginnie Mae MBS and act as a servicer. Accordingly, under the MBS agreement, we currently purchase loans underwritten in accordance with the Ginnie Mae Mortgage-Backed Securities Guide “as is” and without recourse of any kind from PMT at its cost less an administrative fee plus accrued interest and a sourcing fee ranging from two to three andone-half basis points, generally based on the average number of calendar days that mortgage loans are held by PMT prior to purchase by us.
In consideration for the mortgage banking services we provide with respect to PMT’s acquisition of mortgage loans under our early purchase program, we are entitled to fees accruing (i) at a rate equal to $1,500 per year per early purchase facility administered by us, and (ii) in the amount of $35 for each mortgage loan that PMT acquires thereunder.
Notwithstanding any provision of the MBS agreement to the contrary, if it becomes reasonably necessary or advisable for us to engage in additional services in connection with post-breach or post-default resolution activities for the purposes of a correspondent agreement, then PMT has generally agreed with us to negotiate in good faith for additional compensation and reimbursement of expenses to be paid to us for the performance of such additional services.
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We earned approximately $81.4 million in fulfillment fees in Fiscal 2018 under our mortgage banking services agreement with PMT, and we paid to PMT approximately $10.9 million in sourcing fees in Fiscal 2018.
MSR Recapture Agreement
Pursuant to the terms of an MSR recapture agreement, or the MSR recapture agreement, which was entered into by and between us and PMT and amended and restated effective September 12, 2016, if we refinance through our consumer direct lending business mortgage loans for which PMT previously held the MSRs, we are generally required to transfer and convey to PMT cash in an amount equal to 30% of the fair market value of the MSRs relating to all such mortgage loans so originated. The MSR recapture agreement expires, unless terminated earlier in accordance with the terms of the agreement, on September 12, 2020, subject to automatic renewal for additional18-month periods, unless terminated earlier in accordance with the terms of the agreement.
PMT recognized $2.2 million in recapture income pursuant to the terms of the MSR recapture agreement during Fiscal 2018.
Spread Acquisition and MSR Servicing Agreements
On December 19, 2016, we amended and restated a master spread acquisition and MSR servicing agreement, or the Spread Acquisition Agreement, with PMT, pursuant to which we may sell to PMT, from time to time, the right to receive participation certificates representing beneficial ownership in ESS arising from Ginnie Mae MSRs acquired by us, in which case we generally would be required to service or subservice the related mortgage loans for Ginnie Mae. The primary purpose of the amendment and restatement was to facilitate the continued financing of the ESS owned by PMT in connection with the parties’ participation in the GNMA MSR Facility (as defined below).
To the extent we refinance any of the mortgage loans relating to the ESS PMT has acquired, the Spread Acquisition Agreement also contains recapture provisions requiring that we transfer to PMT, at no cost, the ESS relating to a certain percentage of the unpaid principal balance of the newly originated mortgage loans. However, under the Spread Acquisition Agreement, in any month where the transferred ESS relating to newly originated Ginnie Mae mortgage loans is not equivalent to at least 90% of the product of the excess servicing fee rate and the unpaid principal balance of the refinanced mortgage loans, we are also required to transfer additional ESS or cash in the amount of such shortfall. Similarly, in any month where the transferred ESS relating to modified Ginnie Mae mortgage loans is not equivalent to at least 90% of the product of the excess servicing fee rate and the unpaid principal balance of the modified mortgage loans, the Spread Acquisition Agreement contains provisions that require us to transfer additional ESS or cash in the amount of such shortfall. To the extent the fair market value of the aggregate ESS to be transferred for the applicable month is less than $200,000, we may, at our option, wire cash to PMT in an amount equal to such fair market value in lieu of transferring such ESS.
During Fiscal 2018, we made ESS repayments to PMT totaling $46.8 million. During Fiscal 2018, we also incurred $2.6 million in ESS recapture expense payable to PMT.
Master Repurchase Agreement with the Issuer Trust
On December 19, 2016, through PLS, we entered into a master repurchase agreement, or the PMH Repurchase Agreement, with one of PMT’s wholly-owned subsidiaries, PennyMac Holdings, LLC, or PMH, pursuant to which PMH may borrow from us for the purpose of financing PMH’s participation certificates representing beneficial ownership in ESS. PLS thenre-pledges such participation certificates to PNMAC GMSR ISSUER TRUST, or the Issuer Trust, under a master repurchase agreement, or the PC Repurchase Agreement, by and among PLS, the Issuer Trust and PNMAC, as guarantor. The Issuer Trust was formed for the purpose of allowing PLS to finance MSRs and ESS relating to such MSRs in a structured financing transaction referred to as the “GNMA MSR Facility.”
In connection with the GNMA MSR Facility, PLS pledges and/or sells to the Issuer Trust participation certificates representing beneficial interests in MSRs and ESS pursuant to the terms of the PC Repurchase Agreement. In return, the Issuer Trust (a) has issued to PLS, pursuant to the terms of an indenture, the Series 2016-MSRVF1 Variable Funding Note, dated December 19, 2016, known as the “PNMAC GMSR ISSUER TRUST MSR Collateralized Notes, Series 2016-MSRVF1,” or the VFN, and (b) has issued and may, from time to time pursuant to the terms of any supplemental indenture, issue to institutional investors additional term notes, or the Term Notes, in each case secured on a pari passu basis by the participation certificates relating to the MSRs and ESS. The maximum principal balance of the VFN is $1 billion.
The principal amount paid by PLS for the participation certificates under the PMH Repurchase Agreement is based upon a percentage of the market value of the underlying ESS. Upon PMH’s repurchase of the participation certificates, PMH is required to repay PLS the principal amount relating thereto plus accrued interest (at a rate reflective of the current market and consistent with the weighted average note rate of the VFN and any outstanding Term Notes) to the date of such repurchase. PLS is then required to repay the Issuer Trust the corresponding amount under the PC Repurchase Agreement.
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During Fiscal 2018, PMT paid us $7.5 million in interest to finance ESS under the PMH Repurchase Agreement and we, in turn, paid an identical amount to the Issuer Trust under the PC Repurchase Agreement.
Loan Purchase Agreement
We have entered into a mortgage loan purchase agreement with PMT. Currently, we use the mortgage loan purchase agreement for the purpose of selling to PMT residential mortgage loans originated by us. The loan purchase agreement contains customary terms and provisions, including representations and warranties, covenants, repurchase remedies and indemnities. The purchase prices paid to us by PMT for such loans are market-based.
During Fiscal 2018, PMT purchased from us under the mortgage loan purchase agreement residential mortgage loans with an unpaid principal balance of $3.3 billion at an aggregate purchase price of $3.3 billion.
Reimbursement Agreement
In connection with the initial public offering of PMT’s common shares on August 4, 2009, or the IPO, we entered into a reimbursement agreement with PMT pursuant to which PMT agreed to reimburse us for the $2.9 million payment, or the Conditional Reimbursement, that we made to the underwriters for the IPO if we satisfied certain performance measures over a specified period of time. Effective February 1, 2013, we amended the terms of the reimbursement agreement to provide for PMT’s payment of the Conditional Reimbursement if PMT is required to pay us performance incentive fees under the PMT Management Agreement at a rate of $10 in reimbursement for every $100 of performance incentive fees earned. The payment of the Conditional Reimbursement is subject to a maximum reimbursement in any particular12-month period of approximately $1.0 million and the maximum amount that may be reimbursed under the reimbursement agreement is approximately $2.9 million. The term of the reimbursement agreement was extended and now expires on February 1, 2023.
We received $69,000 in reimbursement payments from PMT during Fiscal 2018.
Investments in PMT
Our Investment in PMT
We received dividends of $140,000 in Fiscal 2018 as a result of our investment in common shares of PMT.
Other Transactions With Related Persons
Related Party Employment Relationships
Presently, we employ Mr. Kurland’sbrother-in-law, Robert Schreibman. We established Mr. Schreibman’s compensation in accordance with our employment and compensation practices applicable to employees with equivalent qualifications and responsibilities holding similar positions. None of the executive officers has a material interest in this employment relationship nor do any of them share a home with Mr. Schreibman. Mr. Schreibman does not report directly to any of our executive officers.
We have employed Mr. Schreibman since 2008, and his current title is Senior Vice President, Asset Management. In this capacity, he received the following approximate amounts in Fiscal 2018: $255,000 in base salary and bonus, agross-up for payment of self-employment tax liabilities in the amount of $11,292, insurance premium payments in the amount of $16,696, a $11,001 contribution to his 401(k) plan and a $900 payment for mobile phone expenses. During Fiscal 2018, we granted Mr. Schreibman time-based and performance-based RSUs and nonstatutory stock options with a total grant date fair value of $48,449. Mr. Schreibman has also been entitled to receive employee benefits generally available to all employees.
Presently, we also employ Mr. Vandad Fartaj’s brother, Vala Fartaj. We established Mr. Vala Fartaj’s compensation in accordance with our employment and compensation practices applicable to employees with equivalent qualifications and responsibilities holding similar positions. None of the executive officers has a material interest in this employment relationship nor do any of them share a home with Mr. Vala Fartaj. Mr. Vala Fartaj does not report directly to any of our executive officers.
We have employed Mr. Vala Fartaj since 2008, and his current title is Executive Vice President, Portfolio Investments. In this capacity, he received the following approximate amounts in Fiscal 2018: $344,250 in base salary and bonus, agross-up for payment of self-
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employment tax liabilities in the amount of $14,078, insurance premium payments in the amount of $6,100, a $12,372 contribution to his 401(k) plan and a $900 payment for mobile phone expenses. During Fiscal 2018, we granted Mr. Vala Fartaj time-based and performance-based RSUs and nonstatutory stock options with a total grant date fair value of $93,225. Mr. Vala Fartaj has also been entitled to receive employee benefits generally available to all employees.
Presently, we also employ Mr. Kurland’sson-in-law, Oliver Rubinstein. We established Mr. Rubinstein’s compensation in accordance with our employment and compensation practices applicable to employees with equivalent qualifications and responsibilities holding similar positions. None of the executive officers has a material interest in this employment relationship nor do any of them share a home with Mr. Rubinstein. Mr. Rubinstein does not report directly to any of our executive officers.
We have employed Mr. Rubinstein since 2011, and his current title is Senior Vice President, Products and Pricing Strategy. In this capacity, he received the following approximate amounts in Fiscal 2018: $182,110 in base salary and bonus, insurance premium payments in the amount of $14,950, a $6,788 contribution to his 401(k) plan and a $300 payment for mobile phone expenses. During Fiscal 2018, we granted Mr. Rubinstein time-based and performance-based RSUs and nonstatutory stock options with a total grant date fair value of $13,472. Mr. Rubinstein has also been entitled to receive employee benefits generally available to all employees.
PNMAC Foodservice Agreement with Me N U Kitchen, Inc.
PNMAC offers its employees a cafeteria and dining area in several of its locations for the purpose of providing the employees access to breakfast and lunch onsite, as well as catering services for special company events. PNMAC bears all costs and expenses associated with managing and operating the cafeteria and kitchen facilities, including food, labor, rent, owned and leased equipment and utilities (including telephone and internet availability). Such costs and expenses are partially offset by revenues generated through food sales, with the remainder subsidized by PNMAC.
The cafeterias are managed and operated under a foodservice agreement with Me N U Kitchen, Inc., or MNU. Marci Grogin, who owns 100% of MNU, is the wife of Jeffrey P. Grogin, who served as one of our executive officers during Fiscal 2018. Pursuant to the terms of the foodservice agreement, MNU provides onsite foodservice (including cafeteria and catering services) to PNMAC and its employees on a contract basis. MNU also facilitates PNMAC’s payment of certain of the costs and expenses described, and PNMAC reimburses or otherwise advances to MNU the amounts necessary to pass through such costs and expenses. For these services, PNMAC pays MNU a monthly management fee of $10,000. For its services in 2018, PNMAC paid MNU management fees of $120,000. We believe that the management fees paid to MNU are fair and reasonable.
Indemnification of Directors and Officers
Our Amended and Restated Bylaws provide that we will indemnify and advance expenses to our directors and officers to the fullest extent permitted by the Delaware General Corporation Law, or DGCL. In addition, our certificate of incorporation provides that our directors will not be liable for monetary damages for breach of fiduciary duty, except as otherwise prohibited under the DGCL.
We have entered into indemnification agreements with each of our executive officers and directors. The indemnification agreements provide the executive officers and directors with contractual rights to indemnification, expense advancement and reimbursement, to the fullest extent permitted under the DGCL. In addition, our indemnification agreements also provide that we are required to advance expenses to our directors and officers as incurred in connection with legal proceedings against them for which they may be indemnified and that the rights conferred in the indemnification agreements are not exclusive.
The limited liability company agreement of PNMAC also requires PNMAC to indemnify its officers, members, managers and other affiliates to the fullest extent permitted by Delaware law, and advance expenses to its officers, members, managers and other affiliates as incurred in connection with legal proceedings against them for which they may be indemnified. The rights conferred in the limited liability company agreement of PNMAC are not exclusive.
There is no pending litigation or proceeding naming any of our directors or officers to which indemnification is being sought, and we are not aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.
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Approval of Related Party Transactions
Our Code of Business Conduct and Ethics requires everyone subject to the code to be scrupulous in avoiding a conflict of interest as it relates to our interests and the interests of our employees, officers and directors when such individuals are acting for or on our behalf. The code prohibits us from, among other things, entering into a transaction or a business relationship with a related party or an immediate family member of such related person or with a company in which such a related party or such immediate family member has a substantial financial interest, unless such transaction and relationship are disclosed to and approved in advance by our Board.
We have also adopted a written policy that specifically governs related party transactions. The related party transactions policy generally prohibits any related party transaction unless it is reviewed and approved by our Related-Party Matters Committee and/or a majority of our independent directors in accordance with the policy. With certain exceptions, a related party transaction is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we (including any of our subsidiaries) were, are or will be a participant and the amount involved exceeds $120,000 in the aggregate in any calendar year, and in which any related party has, had or will have a direct or indirect interest. A related party is any person who is, or at any time since the beginning of our last fiscal year was, an employee, director or executive officer of our Company or a nominee to become a director of our Company; any person who is known to be the beneficial owner of more than 5% of any class of our voting securities; any immediate family member of any of the foregoing persons (which means any child, stepchild, parent, stepparent, spouse, sibling,mother-in-law,father-in-law,son-in-law,daughter-in-law,brother-in-law, orsister-in-law of any of the foregoing persons); and any firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest. In determining whether to approve a related party transaction, the Related-Party Matters Committee and/or independent directors consider all facts and circumstances that they deem relevant to the transaction, including, among other things, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party’s interest in the transaction.
The related party transactions policy governs the process for identifying potential related party transactions and seeking review, approval and/or ratification of such transactions. In addition, each of our employees, directors and executive officers is required to complete an annual disclosure questionnaire and report all transactions with us in which they and their immediate family members had or will have a direct or indirect material interest with respect to us. We review these questionnaires and, if we determine that it is necessary, discuss any reported transactions with our Related-Party Matters Committee and/or our Board in accordance with the related party transactions policy.
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| | | | | ANNUAL REPORT ON FORM 10-K
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Annual Report on Form10-K
Our Annual Report on Form10-K for Fiscal 2018, which contains our consolidated financial statements for Fiscal 2018, accompanies this Proxy Statement, but is not a part of our soliciting materials. Stockholders of record as of the record date may obtain, without charge, a paper copy of our Annual Report on Form10-K for the fiscal year ended December 31, 2018 as filed with the SEC, including the financial statements and schedules thereto, without the accompanying exhibits, upon written request to Investor Relations, PennyMac Financial Services, Inc., 3043 Townsgate Road, Westlake Village, California 91361. A list of exhibits is included in our Annual Report on Form10-K and exhibits are available from us upon the payment to us of the cost of furnishing them. Our Annual Report on Form10-K is also available on our website, www.ir.pennymacfinancial.com, under “SEC Filings,” A list of exhibits is included in the Form10-K and exhibits are available from us upon payment to us of the cost of furnishing them.
Other Matters
Section 16(a) Beneficial Ownership Reporting Compliance
We believe that based solely upon our review of copies of forms we have received or written representations from reporting persons, during Fiscal 2018, all filing requirements under Section 16(a) of the Exchange Act applicable to our officers, directors and beneficial owners of more than ten percent of our common stock were complied with on a timely basis.
Other Matters for Consideration at the Annual Meeting
As of the date of this Proxy Statement, our Board does not know of any matter that will be presented for consideration at the Annual Meeting other than as described in this Proxy Statement. If any other matters are properly presented at the Annual Meeting, your signed proxy card authorizes Stanford L. Kurland, our Executive Chairman, and Derek W. Stark, our Secretary, to vote on those matters according to their best judgment.
Householding of Proxy Materials
As permitted by the SEC, we will deliver a single copy of the notice, proxy statement and annual report to stockholders who have the same address and last name, unless we have received contrary instructions from such stockholders. Each stockholder will continue to receive a separate proxy card. This procedure, called “householding,” will reduce the volume of duplicate information you receive and reduce our printing and postage costs, which is consistent with our corporate sustainability efforts. We will promptly deliver a separate copy of the proxy statement and annual report to any such stockholder upon written or oral request. A stockholder wishing to receive a separate proxy statement or annual report can notify us at Investor Relations, PennyMac Financial Services, Inc., 3043 Townsgate Road, Westlake Village, California 91361, telephone: (818)264-4907. Similarly, stockholders currently receiving multiple copies of these documents can request the elimination of duplicate documents by contacting us as described above.
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Information Concerning Voting and Solicitation
General Meeting Information
Our Annual Meeting will be held at our corporate offices located at 3043 Townsgate Road, Westlake Village, California 91361, on Thursday, May 30, 2019 at 11:00 a.m. Pacific Time, subject to any postponements or adjournments thereof. The Board is soliciting proxies to be voted at our Annual Meeting. Pursuant to rules adopted by the Securities and Exchange Commission, or the SEC, we have elected to provide access to our proxy materials primarily via the Internet, rather than mailing paper copies of these materials to each stockholder. On or about April 17, 2019, we began mailing a Notice of Internet Availability of Proxy Materials, which contains instructions on how to access the proxy materials, vote, and request paper copies of the proxy materials. Access to the proxy materials and online voting will be available at www.proxyvote.com. We believe this process expedites stockholders’ receipt of the proxy materials, lowers the cost of printing and distribution, and reduces the environmental impact associated with the Annual Meeting.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 30, 2019
This Notice of 2019 Annual Meeting of Stockholders, Proxy Statement and 2018 Annual Report to Stockholders, which includes our Annual Report on Form10-K for the fiscal year ended December 31, 2018, are available atwww.proxyvote.com. At this website, you will find a complete set of the following proxy materials: Notice of 2019 Annual Meeting of Stockholders, Proxy Statement and 2018 Annual Report and form proxy card. You are encouraged to access and review all of the important information contained in the proxy materials before submitting a proxy or voting at the Annual Meeting.
What am I voting on?
What am I voting on? You will be entitled to vote on the following scheduled proposals at the Annual Meeting: | • | | The election of eleven (11)twelve (12) directors, Stanford L. Kurland, David A. Spector, Anne D. McCallion, Matthew Botein, James K. Hunt, Jonathon S. Jacobson, Doug Jones, Patrick Kinsella, Joseph Mazzella, Anne D. McCallion, Farhad Nanji, Jeffrey A. Perlowitz, Lisa M. Shalett, Theodore W. Tozer, and Emily Youssouf, each for aone-year one year term expiring at the 20202024 annual meeting of stockholders; |
| • | | The ratification of the appointment of Deloitte as our independent registered public accounting firm for the fiscal year ending December 31, 2019; and2023; |
| • | | The approval, bynon-binding vote, of our executive compensation.compensation; and |
| • | | How does our BoardThe recommendation, by non-binding vote, of Directors recommend that I vote on these proposals?
Our Boardthe frequency of Directors, or the Board, recommends that you vote“FOR” the approval of all proposals set forth herein.executive compensation vote.
Who can attend the Annual Meeting?
Our Board has set April 1, 2019
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How does our Board of Directors recommend that I vote on these proposals? Our Board of Directors, or the Board, recommends that you vote “FOR” the approval of Proposals I, II and III and for “ONE YEAR” on Proposal IV. Who can attend the Annual Meeting? Our Board has set April 19, 2023 as the record date for the Annual Meeting. The 2023 Annual Meeting will be conducted online via live webcast at www.virtualshareholdermeeting.com/PFSI2023 on Tuesday, June 13, 2023 at 11:00 a.m. Pacific Time, subject to any postponements or adjournments thereof. To be admitted to the Annual Meeting virtually, you will need to log-in to www.virtualshareholdermeeting.com/PFSI2023 using the 16-digit control number found on the proxy card, voting instruction form, notice of internet availability of proxy materials or email, as applicable, previously sent or made available to stockholders entitled to vote at the Annual Meeting. The live audio webcast of the Annual Meeting will begin promptly at 11:00 a.m. Pacific Time. Online access to the audio webcast will open 15 minutes prior to the start of the Annual Meeting to allow time for you to log-in and test your device’s audio system. We encourage you to access the meeting in advance of the designated start time. If you encounter any difficulties accessing the 2023 Annual Meeting or during the meeting time, please call the technical support number on the virtual meeting site. Stockholders may submit questions related to the items of business set forth on the agenda in advance of the Annual Meeting by sending an email to PFSI_IR@pnmac.com (stockholders are asked to include the full name of the account holder so we can confirm your status as a stockholder). Questions must be received by 5:00 PM PT on June 12, 2023. Who is entitled to vote at the Annual Meeting? If you were a stockholder of record of our common stock as of the close of business on the record date, you are entitled to notice of, and to vote at, the Annual Meeting and any postponement or adjournment thereof. As of the record date, 49,967,783 shares of common stock were issued and outstanding. You are entitled to one vote on each proposal for each share of common stock you held on the record date. | | | | 80 | | | 2023 Proxy Statement |
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How many shares must be present to hold the Annual Meeting? The presence in person (virtually via live webcast) or by proxy of stockholders entitled to cast a majority of all votes entitled to be cast at the Annual Meeting on any matter constitutes a quorum, which is required in order to hold the Annual Meeting and conduct business. There were 49,967,783 shares of our common stock outstanding and entitled to vote on the record date. Therefore, a quorum will be present if 24,983,892 shares of our common stock are present in person or represented by executed proxies timely received by us at the Annual Meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If a quorum is not present at the Annual Meeting, we expect that the Annual Meeting will be adjourned to solicit additional proxies. What stockholder approvals are required to approve the proposals? Proposal I. Our Amended and Restated Bylaws provide for a majority voting standard for the election of directors in an uncontested election. Under this voting standard, directors will be elected at the annual meeting by a majority of votes cast by holders of our common stock, meaning that the number of shares voted “FOR” a director must exceed the number of shares voted “AGAINST” that director. Abstentions and broker non-votes will have no effect on the outcome of the election of directors. If any incumbent nominee for director fails to receive the required majority vote for election or re-election, the director will promptly tender to the Board for its consideration his or her offer to resign from the Board. Proposals II & III. Approval of our proposals to ratify the appointment of Deloitte & Touche LLP and to approve our executive compensation requires the affirmative vote of a majority of votes cast by holders of our common stock, meaning that the number of shares voted “FOR” such proposal must exceed the number of shares voted “AGAINST” that proposal. Abstentions and broker non-votes will have no effect on the proposals. Proposal IV. The frequency of the non-binding executive compensation vote (i.e., every one, two or three years) that receives the highest number of votes cast will be treated as the option recommended by our stockholders. You may vote “ONE YEAR,” “TWO YEARS,” or “THREE YEARS” on the proposal to recommend, by non-binding vote, the frequency of the executive compensation vote and you may also “ABSTAIN.” Abstentions and broker non-votes will have no effect on this proposal. Please note, however, that the vote on Proposals II, III and IV will be advisory only and will not be binding. The results of the votes on these proposals will be taken into consideration by our Board or the appropriate committee of our Board, as applicable, when making future decisions regarding these matters. How will voting on any other business be conducted? Other than the proposals described in this Proxy Statement, we know of no other business to be considered at the Annual Meeting. If any other matters are properly presented at the Annual Meeting, your signed proxy card or Internet or telephonic voting instructions will authorize our designated proxies, David A. Spector, our Chairman and Chief Executive Officer, and Derek W. Stark, our Secretary, to vote on those matters according to their best judgment. How do I vote my shares as a stockholder of record? If you were a stockholder of record of our common stock as of the close of business on the record date, you may vote as instructed on the proxy card by using one of the following methods: | | | 
| | By Mail. If you werereceived a stockholder of record of our common stock asprinted copy of the close of businessproxy materials, please mark your selections on, and sign and date, the record date, you are entitled to attend the Annual Meeting, although seating is limited. If you plan to attend, please check the appropriate box on yourprinted proxy card, and return it as directed on the proxy card. If you hold your common stock through a brokerage firm or bank and you would like to attend, please either (1) write us at Investor Relations, PennyMac Financial Services, Inc., 3043 Townsgate Road, Westlake Village, California 91361, (2) email us atPFSI_IR@pnmac.com, or (3) bring to the Annual Meeting a copy of your brokerage account statement or an omnibus proxy (which you can get from your broker).
In addition, you must bring valid, government-issued photo identification, such as a driver’s license or a passport. No cameras or recording devices of any kind, or signs, placards, banners or similar materials, may be brought into the Annual Meeting. Anyone who refuses to comply with these requirements will not be admitted.
Who is entitled to vote at the Annual Meeting?
If you were a stockholder of record of our common stock as of the close of business on the record date, you are entitled to notice of, and to vote at, the Annual Meeting and any postponement or adjournment thereof. As of the record date, 78,317,843 shares of common stock were issued and outstanding. You are entitled to one vote on each proposal for each share of common stock you held on the record date.
How many shares must be present to hold the Annual Meeting?
The presence in person or by proxy of stockholders entitled to cast a majority of all votes entitled to be cast at the Annual Meeting on any matter constitutes a quorum, which is required in order to hold
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the Annual Meeting and conduct business. Since there were 78,317,843 eligible votes as of the record date, we will need at least 39,158,922 votes present in person or by proxy at the Annual Meeting for a quorum to exist. If a quorum is not present at the Annual Meeting, we expect that the Annual Meeting will be adjourned to solicit additional proxies.
What stockholder approvals are required to approve the proposals?
Election of Directors. Our Amended and Restated Bylaws provide for a majority voting standard for the election of directors in an uncontested election. Under this voting standard, directors will be elected at the annual meeting by a majority of votes cast by holders of our common stock, meaning that the number of shares voted “FOR” a director must exceed the number of shares voted “AGAINST” that director. Abstentions and brokernon-votes will have no effect on the outcome of the election of directors.
If any nominee for director fails to receive the required majority vote for election orre-election, the director will promptly tender to the Board for its consideration his or her offer to resign from the Board.
Other Proposals. Approval of each of the other proposals (namely, our proposals to ratify the appointment of Deloitte & Touche LLP and to approve our executive compensation) also requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote on the proposal. While brokernon-votes will have no effect on the outcome of the approval of these proposals, abstentions will be treated as votes against Proposals II and III.
Please note, however, that the vote on our proposals to approve our executive compensation and to ratify the appointment of Deloitte & Touche LLP will be advisory only and will not be binding. The results of the votes on these proposals will be taken into consideration by our Board or the appropriate committee of our Board, as applicable, when making future decisions regarding these matters.
How will voting on any other business be conducted?
Other than the three proposals described in this Proxy Statement, we know of no other business to be considered at the Annual Meeting. If any other matters are properly presented at the Annual Meeting, your signed proxy card or Internet or telephonic voting instructions will authorize Stanford L. Kurland, our Executive Chairman and Derek W. Stark, our Secretary, to vote on those matters according to their best judgment.
How do I vote my shares as a stockholder of record?
If you were a stockholder of record of our common stock as of the close of business on the record date, you may vote as instructed on the proxy card by using one ofmail in the following methods:postage-paid envelope provided.
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| | By Mail. If you received a printed copy of the proxy materials, please mark your selections on, and sign and date, the printed proxy card, and return the proxy card by mail in the postage-paid envelope provided.
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| | By Internet.
| | By Internet. To vote by Internet, go to www.proxyvote.com and follow the instructions at that website. Internet voting is available 24 hours a day, although your vote by Internet must be received by 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. If you vote by Internet, do not return your proxy card or voting instruction card. If you are a registered stockholder, you will need to have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. If you hold your shares in “street name,” please refer to the Notice or voting instruction card provided to you by your broker, bank or other holder of record for Internet voting instructions. | | | 
| | By Telephone. To vote by telephone, registered stockholders should dial800-690-6903 and follow the recorded instructions. Telephone voting is available 24 hours a day, although your vote by phone must be received by 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. You will need the control number found either on the Notice or on the proxy card if you are receiving a printed copy of these materials. If you vote by telephone, do not return your proxy card or voting instruction card. If you are a registered stockholder, you will need to have your proxy card in hand when you call and then follow the instructions. If you hold your shares in “street name,” please refer to the Notice or voting instruction card provided to you by your broker, bank or other holder of record for telephone voting instructions.
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| | In Person. If you attend the Annual Meeting and plan to vote in person, you will be provided with a ballot at the Annual Meeting. If your shares are registered directly in your name, you are considered the stockholder of record and you have the right to vote in person at the Annual Meeting. If your shares are held in “street name” and you wish to vote at the Annual Meeting, you must request a legal proxy by following the instructions atwww.proxyvote.com. Whether you are a stockholder of record or your shares are held in “street name,” you must bring valid, government-issued photo identification to gain admission to the Annual Meeting.
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If you vote prior to the Annual Meeting, it will assure that your vote is counted. Even if you plan to attend the Annual Meeting, we encourage you to vote in advance of the Annual Meeting, so your vote will be counted if you later decide not to attend the Annual Meeting. Whether you vote by mail, by Internet, by telephone or in person at the Annual Meeting, the proxies identified will vote the shares as to which you are the stockholder of record in accordance with your instructions. If a printed proxy card is signed and returned and no instructions are marked, the shares will be voted as recommended by our Board in this Proxy Statement.
What is the difference between a stockholder of record and a “street name” holder?
If your shares of common stock are registered directly in your name, you are considered the stockholder of record with respect to those shares. If your shares of common stock are held in a stock brokerage account or by a bank, trust or other nominee, then the broker, bank, trust or other nominee is considered to be the stockholder of record with respect to those shares. However, you still are considered the beneficial owner of those shares, and your shares are said to be held in “street name.” Street name holders generally cannot vote their shares directly and must instead instruct the broker, bank, trust or other nominee how to vote their shares.
If my broker holds my shares in “street name,” how do Iplease refer to the Notice or voting instruction card provided to you by your broker, bank or other holder of record for Internet voting instructions.
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| | By Telephone. To vote my shares? by telephone, registered stockholders should dial 800-690-6903 and follow the recorded instructions. Telephone voting is available 24 hours a day, although your vote by phone must be received by 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. You will need the control number found either on the Notice or on the proxy card if you are receiving a printed copy of these materials. If you ownvote by telephone, do not return your proxy card or voting instruction card. If you are a registered stockholder, you will need to have your proxy card in hand when you call and then follow the instructions. If you hold your shares of common stock in “street name,” please refer to the Notice or voting instruction card provided to you mustby your broker, bank or other holder of record for telephone voting instructions. | | | 
| | Online Annual Meeting. You may vote your shares induring the manner prescribedAnnual Meeting (up until the closing of the polls) by your broker or other nominee. Your broker or other nominee has provided a voting instruction form for you to use in directing the broker or nominee how to vote your shares. Please followfollowing the instructions provided on such voting instruction form.available at www.virtualshareholdermeeting.com/PFSI2023 during the meeting. What if I do not specify how I want my shares voted?
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If you vote prior to the Annual Meeting, it will assure that your vote is counted. Even if you plan to attend the online Annual Meeting, we encourage you to vote in advance of the Annual Meeting, so your vote will be counted if you later decide not to attend the Annual Meeting. Whether you vote by mail, by Internet, by telephone or at the online Annual Meeting, the proxies identified will vote the shares as to which you are the stockholder of record in accordance with your instructions. If a printed proxy card is signed and returned and no instructions are marked, the shares will be voted as recommended by our Board in this Proxy Statement. What is the difference between a stockholder of record and a “street name” holder? If your shares of common stock are registered directly in your name, you are considered the stockholder of record with respect to those shares. If your shares of common stock are held in a stock brokerage account or by a bank, trust or other nominee, then the broker, bank, trust or other nominee is considered to be the stockholder of record with respect to those shares. However, you still are considered the beneficial owner of those shares, and your shares are said to be held in “street name.” Street name holders generally cannot vote their shares directly and must instead instruct the broker, bank, trust or other nominee how to vote their shares. If my broker holds my shares in “street name,” how do I vote my shares? If you own your shares of common stock in “street name,” you must vote your shares in the manner prescribed by your broker or other nominee. Your broker or other nominee has provided a voting instruction form for you to use in directing the broker or nominee how to vote your shares. Please follow the instructions provided on such voting instruction form. What if I do not specify how I want my shares voted? If you submit a signed proxy card and do not specify how you want to vote your shares, we will vote your shares in accordance with the Board’s recommendations as follows: | • | | FOR the election of the director nominees identified in this Proxy Statement to serve on our Board of Directors, each for a term expiring at the 20202024 annual meeting of stockholders; |
| • | | FOR the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019; and2023; |
| • | | FOR the approval, bynon-binding vote, of our executive compensation. May I revoke my proxycompensation; and change my vote after submitting my proxy?
Yes. You may revoke your proxy and change your vote before it is taken at the Annual Meeting by (1) delivering a written notice of
revocation to the attention of our Secretary at 3043 Townsgate Road, Westlake Village, California 91361, (2) delivering a duly executed proxy bearing a later date, or (3) attending the Annual Meeting and voting in person. As noted above, if you own your shares through a brokerage account or in another nominee form, you cannot vote in person at the Annual Meeting unless you obtain a proxy from your broker or nominee and bring that proxy to the Annual Meeting.
What does it mean if I receive more than one proxy card?
It means that your shares may be registered differently and in more than one account. Sign and return all proxy cards to ensure that all your shares are voted.
How are votes counted?
You may vote “FOR,” “AGAINST” or “ABSTAIN” on the election of each nominee for the Board identified in this Proxy Statement. You may vote “FOR,” “AGAINST” or “ABSTAIN” on the proposal to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019 and the proposal to approve, bynon-binding vote, our executive compensation. An abstention is the voluntary act of not voting by a shareholder who is present at a meeting in person or by proxy and entitled to vote.
Abstentions and brokernon-votes with respect to any matter will be counted as present and entitled to vote on that matter for purposes of establishing a quorum. A brokernon-vote will not have any effect on a proposal where the requirement for approval is the affirmative vote of the majority of votes cast by the holders of vote of a majority of the shares present in person or represented by proxy and entitled to vote on the proposal, while abstentions will be treated as a vote against such proposal. Accordingly, brokernon-votes will not have any effect on Proposals II and III, while abstentions will be treated as votes against Proposals II and III. Neither abstentions nor brokernon-votes will have any effect on Proposal I.
If you hold your shares in “street name” and do not provide voting instructions to your broker or other nominee, your shares will not be voted on any proposal on which your broker or other nominee does not have discretionary authority to vote under the rules of The New York Stock Exchange, or the NYSE. Under NYSE rules, brokers that hold our common stock in street name for customers that are the beneficial owners of those shares may not give a proxy to vote those shares on certain matters, including the election of directors and our executive compensation program, without specific instructions from those customers. When a broker lacks authority to vote under these circumstances, this is referred to as a “brokernon-vote.” Brokernon-votes will be counted as present at the Annual Meeting for the purpose of determining a quorum but will not be considered votes cast and, accordingly, will have no effect on any proposal to be considered at the Annual Meeting.
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| | | | | INFORMATION CONCERNING VOTING AND SOLICITATION
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| • | | Who will count the vote?
Representatives of Broadridge Financial Solutions, Inc. will count the votes for shares held in “street name” and the votes of stockholders of record. Representatives of our Company will serveFor “One Year” as the Inspector of Elections.
How will we solicit proxiesfrequency for holding the Annual Meeting?advisory (non-binding) executive compensation vote.
We are soliciting proxies from our stockholders by mailing
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May I revoke my proxy and change my vote after submitting my proxy? Yes. You may revoke your proxy and change your vote before it is taken at the Annual Meeting by delivering a written notice of revocation to the attention of our Secretary at 3043 Townsgate Road, Westlake Village, California 91361, or delivering a duly executed proxy bearing a later date. What does it mean if I receive more than one proxy card? It means that your shares may be registered differently and in more than one account. Sign and return all proxy cards to ensure that all your shares are voted. How are votes counted? You may vote “FOR,” “AGAINST” or “ABSTAIN” on the election of each nominee for the Board identified in this Proxy Statement. You may vote “FOR,” “AGAINST” or “ABSTAIN” on the proposal to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023 and the proposal to approve, by non-binding vote, our executive compensation. You may vote “ONE YEAR,” “TWO YEARS,” or “THREE YEARS” on the proposal to recommend, by non-binding vote, the frequency of the executive compensation vote and you may also “ABSTAIN.” An abstention is the voluntary act of not voting by a stockholder who is present at a meeting in person or by proxy and entitled to vote. Abstentions and broker non-votes will not have any effect on a proposal where the requirement for approval is the affirmative vote of the majority of votes cast. Accordingly, abstentions and broker non-votes will not have any effect on Proposals I, II, III and IV. If you hold your shares in “street name” and do not provide voting instructions to your broker or other nominee, your shares will not be voted on any proposal on which your broker or other nominee does not have discretionary authority to vote under the rules of the NYSE. Under NYSE rules, brokers, banks and other securities intermediaries that are subject to the NYSE rules and that hold our common stock in street name for customers that are the beneficial owners of those shares may use their discretion to vote your “uninstructed” shares on matters that are considered to be “routine” under NYSE rules, but not with respect to “non-routine” matters, including the election of directors and our executive compensation program, without specific instructions from those customers. When a broker, bank or other agent lacks authority to vote under these circumstances because they have not received voting instructions from the beneficial owner of the shares, this is referred to as a “broker non-vote.” Broker non-votes will be counted as present at the Annual Meeting for the purpose of determining a quorum but will not be considered votes cast and, accordingly, will have no effect on any proposal to be considered at the Annual Meeting. Proposals I, III and IV are considered to be “non-routine” under NYSE rules such that your broker, bank or other agent may not vote your shares on those proposals in the Notice and providing internet access, atwww.proxyvote.com, to our Notice of 2019 Annual Meeting of Stockholders, Proxy Statement, 2018 Annual Report to Stockholders, and proxy card or voting instruction form. In addition, some of our directors and officers may make additional solicitations by telephone or in person. Who bears the cost of soliciting proxies?
We will pay the cost of the solicitation of proxies, including preparing and mailing the Notice. To the extent any of our directors or officers solicit proxies by telephone, facsimile transmission or other personal contact, such persons will receive no additional compensation. Brokerage houses and other nominees, fiduciaries and custodians who are holders of record of our common stock will be requested to forward proxy soliciting materials to the beneficial owners of such shares and will be reimbursed by us for their charges and expenses in connection therewith at customary and reasonable rates.
Can I access the Company’s proxy materials and Annual Report to Stockholders electronically?
This Proxy Statement and our 2018 Annual Report to Stockholders, which includes our Annual Report on Form10-K for the fiscal year
ended December 31, 2018, or Fiscal 2018, are available at www.proxyvote.com and on our Investor Relations website, www.ir.pennymacfinancial.com/2019AnnMtg.
When are stockholder proposals due for the 2020 Annual Meeting of Stockholders?
No stockholder proposals were received by us to be presented at the Annual Meeting. We intend to hold next year’s annual meeting of stockholders on approximately the same date as the Annual Meeting. Accordingly, if you are submitting a proposal for possible inclusion in next year’s proxy statement pursuant to Rule14a-8 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, we must receive the proposal no later than December 19, 2019. If you are submitting a proposal or nomination for consideration at next year’s annual meeting other than pursuant to Rule14a-8 of the Exchange Act, we must receive the proposal or nomination no earlier than January 31, 2020 and no later than March 1, 2020.
Who can help answer my questions?
If you have any questions or need assistance voting your shares or if you need additional copies of this Proxy Statement or the proxy card, you should contact:
PennyMac Financial Services, Inc.
Attention: Investor Relations
3043 Townsgate Road
Westlake Village, California 91361
Phone: (818)264-4907
Email:PFSI_IR@pnmac.com
| | | | | | | | 2019 Proxy Statement | | | 67 |
| | | | 82 | | | 2023 Proxy Statement |
| | | | | | | INFORMATION CONCERNING VOTING AND SOLICITATION |
absence of your voting instructions. Conversely, Proposal II is considered to be “routine” under NYSE rules and thus if you do not return voting instructions to your broker, your shares may be voted by your broker in its discretion on Proposal II. Who will count the vote? Representatives of Broadridge Financial Solutions, Inc. will count the votes for shares held in “street name” and the votes of stockholders of record. Representatives of our Company will serve as the Inspector of Elections. How will we solicit proxies for the Annual Meeting? We are soliciting proxies from our stockholders by mailing the Notice and providing internet access, at www.proxyvote.com, to our Notice of 2023 Annual Meeting of Stockholders, Proxy Statement, 2022 Annual Report to Stockholders, and proxy card or voting instruction form. In addition, some of our directors and officers may make additional solicitations by telephone or in person. Who bears the cost of soliciting proxies? We will pay the cost of the solicitation of proxies, including preparing and mailing the Notice. To the extent any of our directors or officers solicit proxies by telephone, facsimile transmission or other personal contact, such persons will receive no additional compensation. Brokerage houses and other nominees, fiduciaries and custodians who are holders of record of our common stock will be requested to forward proxy soliciting materials to the beneficial owners of such shares and will be reimbursed by us for their charges and expenses in connection therewith at customary and reasonable rates. Can I access the Company’s proxy materials and Annual Report to Stockholders electronically? This Proxy Statement and our 2022 Annual Report to Stockholders, which includes our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, or Fiscal 2022, are available at www.proxyvote.com and on the Company’s Investor Relations website, www.pfsi.pennymac.com/2023AnnMtg. When are stockholder proposals due for the 2024 Annual Meeting of Stockholders? No stockholder proposals were received by us to be presented at the Annual Meeting. We intend to hold next year’s annual meeting of stockholders on approximately the same date as the Annual Meeting. Accordingly, if you are submitting a proposal for possible inclusion in next year’s proxy statement pursuant to Rule 14a-8 under the Exchange Act, we must receive the proposal no later than December 23, 2023. If you are submitting a proposal or nomination for consideration at next year’s annual meeting other than pursuant to Rule 14a-8 of the Exchange Act, we must receive the proposal or nomination no earlier than February 14, 2024 and no later than March 15, 2024. To comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice by the same deadline noted herein to submit a notice of nomination for consideration at next year’s annual meeting. Such notice must comply with the additional requirements of Rule 14a-19(b). Who can help answer my questions? If you have any questions or need assistance voting your shares or if you need additional copies of this Proxy Statement or the proxy card, you should contact: PennyMac Financial Services, Inc. Attention: Investor Relations 3043 Townsgate Road Westlake Village, California 91361 Phone: (818) 264-4907 Email: PFSI_IR@pnmac.com | | | | | | | 2023 Proxy Statement | | | 83 | |
PENNYMAC FINANCIAL SERVICES, INC.
3043 TOWNSGATE ROAD
WESTLAKE VILLAGE, CA 91361
VOTE BY INTERNET -www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically viae-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE -1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time the day before the cut-off date or meeting date.
Pennymac financial services
PENNYMAC FINANCIAL SERVICES, INC. 3043 TOWNSGATE ROAD WESTLAKE VILLAGE, CA 91361 
VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on June 12, 2023. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/PFSI2023 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on June 12, 2023. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. | | | | | TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
| | E74711-P23934 | | | | | | TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | | | | | | V12425-P86990 | | KEEP THIS PORTION FOR YOUR RECORDS |
| —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— — — — —— —— | | — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — |
| | | | | | PLEASE SIGN AND DATE THIS PROXY CARD
| | DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. PENNYMAC FINANCIAL SERVICES, INC. The Board of Directors recommends you vote FOR the following: | | | | | | | PENNYMAC FINANCIAL SERVICES, INC. | | | The Board of Directors recommends you vote FOR
the following:
| | | 1. Election of Directors
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| | | | | | | | | | | | | | | | | Nominees: | | For | | Against | | Abstain | | | | | | | | | | | | 1a.
| 1. To elect the twelve (12) director nominees identified in the enclosed Proxy Statement to serve on our Board of Directors, each for a one-year term expiring at the 2024 Annual Meeting of Stockholders. | | Stanford L. Kurland | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | 1b.
| | David A. Spector | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | 1c.
| | Anne D. McCallion | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | 1d.
| | Matthew Botein | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | 1e.
| | James K. Hunt | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | 1f.
| | Patrick Kinsella | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | 1g.
| | Joseph Mazzella | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | 1h.
| | Farhad Nanji | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | 1i.
| | Jeffrey A. Perlowitz | | ☐ | | ☐ | | ☐ | | | | | | | For address changes and/or comments, please check this box and write them on the back where indicated.
| | | | ☐ | | | | | | | | Please indicate if you plan to attend this meeting.
| | ☐ | | ☐ | | | | | | | | | | | | Yes | | No | | | | | | | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
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Nominees: | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | | | 1j. Theodore W. Tozer
| | For | | Against | | Abstain | | | | | 1a. David A. Spector | | ☐ | | ☐ | | ☐ | | | | | 1b. James K. Hunt | | ☐ | | ☐ | | ☐ | | | | | 1c. Jonathon S. Jacobson | | ☐ | | ☐ | | ☐ | | | | | 1d. Doug Jones | | ☐ | | ☐ | | ☐ | | | | | 1e. Patrick Kinsella | | ☐ | | ☐ | | ☐ | | | | | 1f. Anne D. McCallion | | ☐ | | ☐ | | ☐ | | | | | 1g. Joseph Mazzella | | ☐ | | ☐ | | ☐ | | | | | 1h. Farhad Nanji | | ☐ | | ☐ | | ☐ | | | | | 1i. Jeffrey A. Perlowitz | | ☐ | | ☐ | | ☐ | | | | | 1j. Lisa M. Shalett | | ☐ | | ☐ | | ☐ |
| The Board of Directors recommends you vote FOR proposals 2 and 3. | | | | | | | | | | | | 2. | | To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019.
| | ☐ | | ☐ | | ☐ | | | | | | 3. | | | | For | | Against | | Abstain | | | | | 1k. Theodore W. Tozer | | ☐ | | ☐ | | ☐ | | | | | 1l. Emily Youssouf | | ☐ | | ☐ | | ☐ | | | | | | The Board of Directors recommends you vote FOR proposals 2 and 3: | | For | | Against | | Abstain | | | | | 2. To ratify the appointment of our independent registered public accounting firm for the fiscal year ending December 31, 2023. | | ☐ | | ☐ | | ☐ | | | | | 3. To approve, by non-binding vote, our executive compensation. | | ☐ | | ☐ | | ☐ | | | | | NOTE:Such other business as may properly come before the meeting
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| | | | | | | | | | | | | | | | | The Board of Directors recommends you vote One Year on proposal 4: | | 1 Year | | 2 Year | | 3 Year | | Abstain | | | | | | 4. Advisory vote on the frequency with which we hold advisory votes on our executive compensation. | | ☐ | | ☐ | | ☐ | | ☐ | | | | | NOTE: To transact such other business as may properly come before the Annual Meeting and any postponement or any adjournment thereof. | | | | | | |
| | | | | | | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] Date |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Signature (Joint Owners) Date | | |
Important Notice Regarding the Availability of Proxy Materials for the 2019 Annual Meeting:
The Notice of 2019 Annual Meeting of Stockholders, Proxy Statement and 2018 Annual Report to
Stockholders are available at www.proxyvote.com.
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — | E74712-P23934
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| | | | | | | | | | | | | | | | | | | PENNYMAC FINANCIAL SERVICES, INC.
Annual Meeting of Stockholders
May 30, 2019 11:00 AM PDT
THE PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Stanford L. Kurland and Derek W. Stark, and each of them, with the power to act without the other and with power of substitution, as proxies andattorneys-in-fact, and hereby authorizes them to represent and vote, as provided on the other side, all of the shares of PennyMac Financial Services, Inc. the undersigned is entitled to vote, and, in their discretion, to vote upon other such business as may properly come before the 2019 Annual Meeting of Stockholders of the Company to be held May 30, 2019, or at any adjournment or postponement thereof, with all the powers the undersigned would possess if present at the meeting.
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the recommendations of the Board of Directors.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | | Date | | Signature (Joint Owners) | | Date | | | | | | | | | | | |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice of Annual Meeting of Stockholders, Proxy Statement and Annual Report are available at www.proxyvote.com. — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — V12426-P86990 Address Changes/Comments:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
| | | | | Continued and to be signed on reverse side
| | | | | | | | | | | | | | | | | | | | | | | | | | | | PENNYMAC FINANCIAL SERVICES, INC. Annual Meeting of Stockholders June 13, 2023 11:00 AM PDT THE PROXY IS SOLICITED BY THE BOARD OF DIRECTORS | | | | | | | | | | The undersigned hereby appoints David A. Spector and Derek W. Stark, and each of them, with the power to act without the other and with power of substitution, as proxies and attorneys-in-fact, and hereby authorizes them to represent and vote, as provided on the other side, all of the shares of PennyMac Financial Services, Inc. the undersigned is entitled to vote, and, in their discretion, to vote upon other such business as may properly come before the 2023 Annual Meeting of Stockholders of the Company to be held June 13, 2023, or at any adjournments or postponements thereof, with all the powers the undersigned would possess if present at the meeting. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the recommendations of the Board of Directors. Continued and to be signed on reverse side | | |
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