PMT-A PennyMac Mortgage Investment Trust

Proxy Statement Summary

This summary contains highlights about our Board of Trustees and our upcoming 2022 Annual Meeting of Shareholders, or Annual Meeting. This summary does not contain all of the information that you should consider in advance of the Annual Meeting and we encourage you to read the entire Proxy Statement before voting.

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We believe our Board possesses deep and broad skill sets and specific experience and expertise that facilitate strong oversight and strategic direction for us as a leading residential mortgage real estate investment trust, or REIT.

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2021 Business Highlights^(a)

PennyMac Mortgage Investment Trust

Full Year 2021 Financial and Operational Highlights

Significant organic creation of attractive investment assets driven by record conventional correspondent production volumes

Strong returns to shareholders compared to the broader mREIT Industry

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COVID-19 Pandemic

PNMAC Capital Management, LLC, (our “Manager”) devoted substantial attention to responding to the human and business impact of the COVID-19 pandemic, while expanding its workforce and maintaining successful operational focus. Throughout the COVID-19 pandemic, our Manager acted to support its employees, customers and communities during these challenging times, responded to the associated business impact and developed protocols both for determining whether its businesses could remain open and for responsible operations when they could.

Our Manager’s COVID-19 Response included:

Executive Compensation Highlights

 

What We Do				What We Don’t Do
✓  Bias toward performance-based equity: Our Board seeks to ensure that our long-term incentive awards are weighted toward performance-based equity vehicles. We design our compensation program in a manner that is biased toward performance-based compensation with multiple performance metrics.				û   No minimum levels of annual equity awards: Our executive officers are not guaranteed any minimum levels of annual equity award grants.
✓  Clawback Policy: Our Board maintains a clawback policy that allows us to recoup certain incentive compensation paid on the basis of erroneous financial statements that result in a material accounting restatement.				û   No compensation from us other than equity awards for our named executive officers: Our named executive officers do not receive annual base salaries or cash bonuses from us.
✓  Double-trigger vesting: We require that our equity awards have a “double trigger” to initiate accelerated vesting upon a change in control.				û   No severance provisions: We do not provide cash severance to our executives.
✓  Minimum vesting periods: Our equity incentive plan provides that our equity awards are subject to a minimum vesting period of no less than one year on 95% of equity awards granted and our grants generally vest over three years, with approximately equal annual installments on the first, second and third anniversaries of the grant date.				û   No excessive risk taking: We do not encourage our officers and employees to engage in excessive risk taking. Our compensation program is designed to encourage long-term decision making in alignment with the interests of our shareholders.
✓  Robust share ownership guidelines: We impose robust share ownership guidelines on our trustees and executive officers to ensure that their interests are aligned with those of our shareholders.				û   No perquisites or excise tax gross-ups: We do not provide perquisites or related excise tax gross-ups to our executive officers.
✓  Consideration of Say-on-Pay Vote and proxy advisory and shareholder feedback: We engage in careful consideration of the annual say-on-pay results and feedback from shareholders and proxy advisory firms.				û   No stock option re-pricing: Our equity incentive plan prohibits the re-pricing of stock options.
✓  Shareholder engagement: We engage in active discussions with our shareholders on a variety of topics throughout the year to ensure that we are addressing their concerns.				û   No speculative or short-term trading: We prohibit our officers, employees and trustees 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 trustees 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.

 

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Corporate Governance

Trustee Qualification, Board Refreshment and Selection Criteria

The Nominating and Corporate Governance Committee is responsible for developing the general criteria, subject to approval by the full Board, for use in identifying, evaluating and selecting qualified candidates for election or re-election to our Board. The Nominating and Corporate Governance Committee periodically reviews with our Board the appropriate skills and characteristics required of Board members in the context of the current composition of our Board. Final approval of trustee candidates is determined by the full Board, and invitations to join our Board are extended by our Chairman on behalf of the entire Board.

The Nominating and Corporate Governance Committee, in accordance with our Corporate Governance Guidelines, seeks to create a board that is strong in its collective knowledge and has skills and experience with respect to accounting and finance, management and leadership, vision and strategy, business operations, business judgment, risk management, corporate governance, and knowledge of the mortgage and REIT sectors and the global markets. The Nominating and Corporate Governance Committee also focuses on issues of diversity, such as diversity of gender, race and national origin, education, professional experience, and differences in viewpoints and skills. We do not have a formal policy with respect to diversity; however, our Board and Nominating and Corporate Governance Committee believe that it is essential that our trustees represent diverse viewpoints and backgrounds. In considering candidates for our Board, the Nominating and Corporate Governance Committee considers the entirety of each candidate’s credentials in the context of these standards and in light of the needs of our Board and our Company at that time, given the then current mix of trustee attributes. The Nominating and Corporate Governance Committee also considers a candidate’s accessibility and availability to serve effectively on our Board, and it conducts inquiries into the background and qualifications of potential candidates. With respect to the nomination of continuing trustees for re-election, the individual’s past contributions to our Board are also considered.

The Nominating and Corporate Governance Committee uses a variety of methods for identifying and evaluating nominees for trustee. The Nominating and Corporate Governance Committee assesses the appropriate size of our Board and whether any vacancies on our Board are expected due to retirement or otherwise. In the event that a vacancy is anticipated, or otherwise arises, the Nominating and Corporate Governance Committee considers whether to fill any such vacancy and, if so, identifies various potential candidates for trustee. These candidates are evaluated at regular or special meetings of the Nominating and Corporate Governance Committee, and may be considered at any point during the year.

Candidates may come to the attention of the Nominating and Corporate Governance Committee through current members of our Board, professional search firms or other persons. The Nominating and Corporate Governance Committee did not retain an independent third party to assist in identifying Ms. Lynch who was identified and recommended to the Nominating and Corporate Governance Committee by a PennyMac Financial Services, Inc. (“PFSI”) board member as a result of their membership in Extraordinary Women on Boards. The Nominating and Corporate Governance Committee will also consider recommendations for nominees properly submitted by our shareholders. These recommendations should be submitted in writing to our Secretary at our principal executive offices located at 3043 Townsgate Road, Westlake Village, California 91361. If any materials are provided by a shareholder in connection with a recommendation for a trustee nominee, such materials are forwarded to the Nominating and Corporate Governance Committee. Following verification of the shareholder status of persons proposing candidates, recommendations are aggregated and considered by the Nominating and Corporate Governance Committee, in the same manner as other recommendations, at its next regularly scheduled or special meeting.

Independence of Our Trustees

The New York Stock Exchange, or NYSE, rules require that at least a majority of our trustees be independent of our Company and management. The rules also require that our Board affirmatively determine that there are no material relationships between a trustee and us (either directly or as a partner, shareholder or officer of an organization that has a relationship with us) before such trustee can be deemed independent. We have adopted independence standards consistent with NYSE rules and the rules of the Securities and Exchange Commission, or the SEC. Our Board has reviewed both direct and indirect transactions and relationships that each of our trustees has or had with us and our management.

As a result of this review, our Board, based upon the fact that none of our non-management trustees have any material relationships with us other than as trustees and holders of our common shares, affirmatively determined that 89% of our trustees are independent trustees under NYSE rules. Our independent trustees are Messrs. Carnahan, DuFauchard and Hadley and Mmes. Lynch, McAllister, Schultz, Stewart and Sullivan.

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Board of Trustees Leadership and Independent Lead Trustee

Our Chairman and the independent lead trustee provide leadership to and work with our Board to define its structure and activities in the fulfillment of its responsibilities. The Board determined in March 2022 that the position of Chairman of the Board should continue to be held by David A. Spector. Mr. Spector has served as a key executive since our formation in 2009 and through its growth into one of the leading public mortgage REITs. The Board believes Mr. Spector’s past experience has made him uniquely positioned to lead and oversee the Board and identify and execute our future strategic initiatives. In addition, Mr. Spector has proven himself capable of leading Board discussions on new initiatives and strategic priorities, facilitating internal Board communication and ensuring proper Board oversight of key issues.

This determination is based, in part, on our belief that independent trustees and management have different perspectives and roles in strategy development. Our independent trustees bring experience, oversight and expertise from outside our Company and industry, while the Chief Executive Officer brings company-specific experience and expertise. We believe our Chief Executive Officer is thus better situated to serve as Chairman of the Board because he is able to utilize the in-depth focus and perspective gained in running our Company to effectively and efficiently lead our Board. As the trustee most familiar with our business and industry, he is capable of identifying new initiatives and businesses, strategic priorities and other critical and/or topical agenda items for discussion by our Board and then leading the discussion to ensure our Board’s proper oversight of these issues. Our Board believes that the combined role of Chairman of the Board and Chief Executive Officer promotes strategy development and execution, and facilitates information flow between management and our Board, all of which are essential to effective governance.

This determination is also based on what we consider to be a strong governance structure already in place, including the appointment of an influential independent lead trustee with a strong voice. The independent lead trustee works with our Chairman of the Board and other trustees to provide informed, independent oversight of our management and affairs. Among other things, the independent lead trustee reviews and provides input on Board meeting agendas and materials, coordinates with committee chairs to ensure the committees are fulfilling the responsibilities set forth in their respective charters, serves as the principal liaison between our Chairman of the Board and the independent trustees, and chairs an executive session of the independent trustees at each regularly scheduled Board meeting. On February 24, 2021, the independent trustees of our Board re-elected Preston DuFauchard as our independent lead trustee for an additional three year term.

Trustee Education

New trustees receive an orientation upon joining the Board, including the opportunity to meet with members of management, which is designed to familiarize new trustees with the Company’s purpose, business, operations, strategic direction, financial matters, risk management, corporate governance practices and other key policies and practices. The Board also believes in the importance of continuing trustee education to enhance the performance of the Board and its committees. All trustees are offered membership with the National Association of Corporate Directors, a nationally recognized organization providing corporate governance and director education. In addition, trustees receive ongoing internal education from management and the Company’s advisors on matters relevant to the Company’s business, industry trends and developments, corporate governance and other appropriate subjects to assist the trustees in discharging their duties.

Succession Planning

Our Board oversees management’s succession plan for the Chairman and Chief Executive Officer and other key positions at the executive officer level. Our Board annually reviews succession plans for the Chairman and Chief Executive Officer and executive management. In addition, the Chairman and Chief Executive Officer annually provides his assessment to our Board of executive leaders and their potential to succeed at key executive management positions.

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The Role of the Board in Risk Oversight

Our Board and each of its committees, and in particular the Audit and Risk Committees, have an active role in overseeing our risk management process, while supporting organizational objectives, improving long-term organizational performance and creating shareholder value. Our senior management is responsible for designing, implementing and maintaining an effective and appropriate approach for managing enterprise risk. A fundamental part of risk management oversight is not only understanding the risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for our Company. The involvement of the full Board in determining our business strategy is a key part of its assessment of management’s appetite for risk and determination of what constitutes an appropriate level of risk for our Company. The Board also encourages senior management to promote a culture incorporating risk management into the Company’s corporate strategy and day-to-day business operations. The Board also continually works, with the input of the Company’s senior management, to assess and analyze the most likely areas of future risk. While our Board has the ultimate oversight responsibility for the risk management process, particularly with respect to those risks inherent in the operation of our businesses and the implementation of our strategic plan, the committees of our Board also share responsibility for overseeing specific areas of risk management as follows:

While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through committee reports about the nature of all such risks.

Committees of the Board of Trustees

Our Board has established six principal committees: the Audit Committee, the Compensation Committee, the Finance Committee, the Nominating and Corporate Governance Committee, the Related Party Matters Committee and the Risk Committee. In addition to the standing committees described above, our Board may also establish ad hoc committees for limited periods of time in order to address particular matters. Our Board committees have also adopted written charters that govern their conduct, each of which is available on our website at www.pennymac-reit.com.

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† – Chairman

* – Independent Lead Trustee

CC – Committee Chair

The primary responsibilities, membership and meeting information for the committees of our Board during 2021 are summarized below:

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Board of Trustees and Committee Meetings

During Fiscal 2021, our Board held seven meetings. All trustees are expected to make every effort to attend all meetings of the Board and meetings of the committees of which they are members. Each incumbent trustee attended at least 75% of the aggregate number of meetings held in Fiscal 2021 for the period during which such trustee served with respect to meetings of our Board and each committee on which such trustee served.

Executive Sessions of the Independent Trustees

Our Corporate Governance Guidelines require that our Board hold at least four regularly scheduled meetings each year and that our independent trustees meet in executive session without management on a regularly scheduled basis. These executive sessions, which are designed to promote unfettered discussions among our independent trustees, are presided over by the independent lead trustee, Mr. DuFauchard.

Attendance by Members of our Board of Trustees at the 2021 Annual Meeting of Shareholders

We expect each member of the Board to attend our annual meetings of shareholders except for absences due to causes beyond the reasonable control of the trustee. All incumbent trustees attended the 2021 annual meeting of shareholders.

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Board 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 performance evaluations are sometimes conducted by the Chair of the Nominating and Corporate Governance Committee; however, the Nominating and Corporate Governance Committee will engage an external evaluator no less frequently than every three years. The key areas of focus for the evaluation are Board operations, Board accountability and committee performance. The results of the evaluation are reviewed with each respective committee and the full Board. Below is an example of a typical external evaluator-led board evaluation.

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 employees, officers and trustees.

In addition, we have adopted a Code of Ethics for the Chairman, 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 www.pennymac-reit.com. Our employees, officers and trustees 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 hour, 7 days a week.

Corporate Governance Guidelines

We have adopted Corporate Governance Guidelines, available on our website at www.pennymac-reit.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. In connection with the change to a majority voting standard in our Second Amended and Restated Bylaws, our Board also amended and restated our Corporate Governance Guidelines to provide that if any nominee for trustee fails to receive a majority vote for election or re-election, if so required, the trustee will promptly tender to the Board for its consideration his or her offer to resign from the Board.

Corporate Sustainability and ESG Overview and Goals

Commitment to Advancing Corporate Sustainability and ESG Priorities in Alignment with our Strategic Objectives. With oversight from our Board, the Nominating and Corporate Governance Committee and the Risk Committee, we are committed to being responsive to our stakeholders as it relates to managing the environmental, social, and governance (ESG) 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

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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 and ESG report on our website with additional goals and Sustainability Accounting Standards Board industry-specific standards relevant to the mortgage finance industry. Our corporate sustainability and ESG report is prepared by our Senior Managing Director, Chief Strategic Planning and Corporate Sustainability Officer and our Managing Director, Corporate Sustainability. We maintain a Corporate Sustainability Subcommittee and 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 strive not only to drive high operational and financial performance but also to serve a greater social purpose through our core businesses, which are centered on the essential public good of homeownership. 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 principles of corporate sustainability through Board governance best practices, in our operations and throughout our communities. Corporate sustainability goals are included in our Manager’s annual corporate strategic plan and are linked to compensation, including variable pay, where applicable. We believe these principles promote the sustainable, long-term growth of our organization for the benefit of our shareholders and the housing industry for the benefit of our customers, improving the environment in which we live. We hold ourselves and our Manager accountable for managing the ESG impact of our business activities through a number of initiatives.

Corporate Sustainability and ESG Governance. Our Nominating and Corporate Governance Committee has specific oversight responsibility relating to our corporate sustainability and ESG practices, including environmental stewardship, human capital management (including diversity, equity and inclusion, talent management and employee engagement), community involvement and corporate governance, and, as appropriate, will make recommendations to our full Board. In addition, our Compensation Committee has oversight of talent management and our compensation programs and our Risk Committee has oversight of our enterprise risk management framework. Our Board has established a set of principles, guidelines and practices that support sustainable financial performance and long-term value creation for our shareholders.

Environmental Sustainability. We and our Manager 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 and our Manager are committed to environmental sustainability and energy conservation and recognize the importance of being a responsible steward of the environment.

Board Diversity. Currently, five women serve as trustees representing 55% of our total Board members. In addition, we have four trustees who self-identify as representing underrepresented communities, including two trustees of African-American heritage and two trustees of gay, lesbian, bisexual or transgender orientation. Our Board believes that these sorts of diversity factors are essential in promoting our long-term sustainable growth. Our Board maintains a policy regarding the evaluation of trustee candidates which states that the Board in its selection of trustee candidates will consider the overall Board balance of diversity of viewpoints, backgrounds and experiences. Our Board has also established trustee selection criteria which provides that the Board in its selection of trustee candidates will consider factors that contribute to Board diversity in the broadest sense, including gender, ethnicity, geography, education, and personal and professional experiences. In addition, we believe we are in compliance with California’s board diversity requirements.

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OUR MANAGER’S WORKFORCE DIVERSITY

Workforce

We have one employee. All named executive officers are employees of PFSI and its affiliates, including its Manager and Servicer. Our long-term growth and success is highly dependent upon PFSI’s employees and PFSI’s ability to maintain a diverse, equitable and inclusive workplace representing a broad spectrum of backgrounds, ideas and perspectives. As part of these efforts, PFSI strives to offer competitive compensation and benefits, foster a community where everyone feels a greater 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. PFSI had over 6,900 domestic employees as of the end of Fiscal 2021. In addition, as of the end of Fiscal 2021, PFSI’s workforce was 51.7% female and 48.3% male, and the ethnicity of PFSI’s workforce was 42.9% White, 22.3% Hispanic or Latino, 17.2% Black or African American, 11.5% Asian and 6.1% other (which includes American Indian or Alaska Native, Native Hawaiian or Other Pacific Islander, and “Two or More Races”).

Recruiting and Employee Retention

We and PFSI believe in attracting, developing and engaging the best talent, while providing a supportive work environment that prioritizes the health and safety of PFSI’s and our employees. PFSI’s and our compensation programs are designed to motivate and reward those who possess the necessary skills to support business strategy and create long-term shareholder value. PFSI employee compensation may include base salary, annual cash incentives, long-term equity incentives as well as life and health insurance and 401(k) plan matching contributions.

PFSI employees receive regular business and compliance training to help further enhance their career development objectives. For example, the average PFSI employee business and compliance training completion rate was 97% company-wide in 2021. PFSI also actively manages enterprise-wide and divisional mentoring programs and has partnered with an external vendor to establish a comprehensive, fully integrated wellness program designed to enhance productivity. PFSI also supports the U.S. military through its continued focus on recruiting and creating opportunities for veterans. For example, PFSI maintains the SERVE (Support & Engagement for Reservist & Veteran Employees) Business Resource Group (“BRG”) to further its efforts to attract, develop and engage an inclusive community of veterans and veteran families.

Diversity, Equity and Inclusion

We and PFSI believe that building a diverse, equitable and inclusive, high-performing workforce where PFSI’s employees bring varied perspectives and experiences to work every day creates a positive influence in PFSI’s workplace, community and business operations. Our Board of Trustees, our Nominating and Corporate Governance Committee, our Compensation Committee, and our Risk Committee provide regular oversight on our and PFSI’s corporate sustainability program, including our diversity, equity and inclusion programs and initiatives. We and PFSI are also taking proactive measures to strategically and sustainably advance equity in the workplace through the establishment

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of several BRGs, 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. PFSI established leadership goals and created customized initiatives that focused on PFSI’s continued effort to increase the number of women and underrepresented minorities in management positions throughout PFSI and its business divisions. As it relates to our inclusive culture, PFSI established the following BRGs to emphasize career growth, networking, and learning opportunities for PFSI employees and allies with shared backgrounds and experiences: the BOLD BRG (for Black and African American employees and allies), the HOLA BRG (for Hispanic or Latino employees and allies), the InspirASIAN BRG (for Asian American and Pacific Islander employees and allies), the Pennymac PRIDE BRG (for LGBTQ employees and allies), the SERVE BRG (for veteran and military family employees and allies), and the wEMRG BRG (for women employees and allies). We and PFSI also foster a more inclusive culture through a variety of initiatives, including corporate training, special events, community outreach and corporate philanthropy.

Community Involvement

PFSI has 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 and PFSI’s organization. We and PFSI 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. PFSI’s philanthropy program consists of three key components: an employee matching gift program, a charitable grants program and a corporate sponsorship program. PFSI’s 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. PFSI has established a separate donor advised fund to facilitate donations to various local and national charitable organizations and has 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.

Communications with our Board of Trustees

Our shareholders and other interested persons may send written communications to the Board, committees of the Board and individual trustees (including our independent lead trustee or the independent/non-management trustees as a group) by mailing those communications to:

[Specified Addressee]

c/o PennyMac Mortgage Investment Trust

3043 Townsgate Road

Westlake Village, California 91361

Email: investorrelations@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.

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Proposal I – Election of Trustees

We have nine trustees. Mr. Kurland, our founder and non-executive Chairman died on January 23, 2021 and we are grateful to Mr. Kurland for his past services to the Company. Catherine A. Lynch joined the Company as a new trustee on April 1, 2022. We have three classes of trustees. The Board has nominated Scott W. Carnahan, Renee R. Schultz, and Marianne Sullivan for election as Class I trustees, and each nominee has consented to being named in this Proxy Statement and has agreed to serve if elected. If our Class I trustees are elected at this year’s Annual Meeting, they will serve until our annual meeting of shareholders in 2025 and until their successors have been duly elected and qualified. Our Class II trustees will serve until our annual meeting of shareholders in 2023 and until their successors have been duly elected and qualified. Our Class III trustees will serve until our annual meeting of shareholders in 2024 and until their successors have been duly elected and qualified.

Because this is considered an uncontested election under our Company’s Second Amended and Restated Bylaws, a nominee for trustee 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 trustees. In tabulating the voting results for the election of trustees, only “FOR” and “AGAINST” votes are counted. If an incumbent trustee receives a greater number of votes against his or her election than votes for such election, such trustee shall tender his or her resignation as provided in our Company’s 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 trustee’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.

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Non-Management Trustee Compensation

The Compensation Committee reviews and recommends to our Board the form and level of trustee compensation and seeks outside advice from our independent compensation consultants on market practices when changes are contemplated. Trustee compensation was reviewed during September 2021 by our independent compensation consultant relative to certain 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 changes. Based on this review and Compensation Committee recommendation, the Board approved a $3,000 increase in the non-management trustee annual RSU grant awards, a $2,000 retainer fee increase for Nominating and Corporate Governance Committee and Related Party Matters Committee members, a $1,250 retainer fee increase for the Audit and Risk Committee Chairs, a $3,000 retainer fee increase for the Nominating and Corporate Governance Committee and Related Party Matters Committee Chairs, and a $10,000 increase for the independent lead trustee’s additional base annual retainer as described below. The compensation program for our non-management trustees 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 trustee given the size and complexity of our operations. In addition to cash compensation, we provide equity grants and have share ownership guidelines to align the trustees’ interests with our shareholders’ interests and to motivate our trustees to focus on our long-term growth and success. Any management trustee who is an executive officer of our Manager or its affiliates is 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 trustees as of the end of Fiscal 2021.

In addition, our trustees are eligible to receive certain types of equity-based awards under our 2019 Equity Incentive Plan, or 2019 Plan. During Fiscal 2021, each of Messrs. Carnahan, DuFauchard and Hadley and Mmes. McAllister, Stewart and Sullivan received a grant of 5,357 time-based restricted share units, or RSUs, on February 17, 2021 with a grant date fair value of approximately $102,000. Ms. Schultz received a grant, prorated for her time in service to the Board during the year, of 3,917 time-based RSUs, on May, 25, 2021 with a grant date fair value of approximately $74,893.

Non-management trustee RSUs granted in Fiscal 2021 vested in three equal installments beginning on the first anniversary of the grant date and entitle the recipient thereof to receive dividend equivalents during the vesting period. Non-management trustee RSUs granted in Fiscal 2022 and beyond will vest on the first anniversary of the grant date. Prior to the vesting of an RSU, such RSU is generally subject to forfeiture upon termination of service to us. In addition, each independent trustee newly elected or appointed to our Board generally is entitled to receive a one-time initial RSU grant with a grant date fair value of approximately $105,000 in RSUs prorated for the portion of the annual equity award cycle for which the trustee served on the Board. The non-management trustee annual RSU grant was increased from $102,000 to $105,000 effective in Fiscal 2022. Further, all members of our Board will 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.

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Policy Regarding Receipt of Shares in Lieu of Cash Trustee Fees. During 2014, our Board adopted a policy whereby non-management trustee fees may be paid in cash or common shares at the election of each non-management trustee. The number of common shares delivered in lieu of any cash payment of trustee fees shall be equivalent in value to the amount of forgone trustee fees divided by the fair market value (as defined in our 2019 Plan) of a common share on the day on which the trustee fees otherwise would have been paid in cash to the non-management trustee, rounded down to the nearest whole share. None of our trustees have elected to be paid in common shares.

Accelerated Vesting. Prior to vesting, an RSU granted to a non-management trustee is generally subject to forfeiture upon termination of service to us if such termination is for cause. Upon a termination of service to us other than for cause, a change in control or the termination of our management agreement other than for cause (as defined in our management agreement), any RSU held by non-management trustees not previously vested shall become fully vested and will be settled in our common shares. The term of our 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.

Non-Management Trustee Share Ownership Guidelines

Non-management trustees are subject to robust share ownership guidelines that require each such trustee to hold common shares and unvested RSUs with an aggregate market value equal to at least five times the base annual retainer. Non-management trustees are expected to meet the ownership guidelines within five years from the date of appointment or election to our Board. Each non-management trustee is in compliance with our share ownership guidelines. The Nominating and Corporate Governance Committee will annually review each trustee’s progress toward meeting the share ownership guidelines.

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Audit Matters

Report of the Audit Committee

 

 

The Board of Trustees 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 Messrs. Hadley and Carnahan are “audit committee financial experts” within the meaning of the applicable rules of the Securities and Exchange Commission, or the SEC, and the NYSE.

The Audit Committee met eight times in 2021. The Audit Committee’s agenda is established by the Chairman 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 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 the Company’s independent registered public accounting firm, 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 Trustees, and the Board of Trustees 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, 2021, filed with the SEC on February 25, 2022.

The foregoing report has been furnished by the following current and former members of the Audit Committee:

Randall D. Hadley, Chair

Scott W. Carnahan

Marianne Sullivan

 

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Relationship with Independent Registered Public Accounting Firm

In addition to performing the audits of our financial statements in Fiscal 2021 and Fiscal 2020, Deloitte provided other audit-related and non-audit-related services for us during these years.

Pre-Approval Policies and Procedures

The Audit Committee approved all services performed by Deloitte during Fiscal 2021 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.

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Proposal II—Ratification of Appointment of

Independent Registered Public Accounting Firm

The Audit Committee is presenting a proposal to ratify its appointment of our independent registered public accounting firm, Deloitte & Touche LLP and its affiliated entities, or Deloitte, which has served as our independent registered public accounting firm since our formation in May 2009. During this time, Deloitte has performed accounting and auditing services for us. We expect that representatives 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 appointment of Deloitte is not ratified, the Audit Committee will reconsider the appointment.

OUR BOARD OF TRUSTEES 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, 2022.

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Security Ownership Information

Security Ownership of Officers and Trustees

 

 

 

 

The following table sets forth certain information as of April 5, 2022 relating to the beneficial ownership of our common shares by (1) each of our named executive officers, (2) each of our current trustees and trustee nominees, and (3) all of our current trustees and executive officers as a group. Unless otherwise indicated, all shares are owned directly and the indicated person has sole voting and investment power.

 

Common Shares Beneficially Owned(1)

Executive Officers and Trustees

Number

Percentage

David A. Spector

162,888

*

Scott W. Carnahan(2)

103,488

*

Preston DuFauchard

29,489

*

Randall D. Hadley(3)

51,157

*

Catherine A. Lynch

0

*

Nancy McAllister(4)

52,773

*

Stacey D. Stewart

26,720

*

Renee R. Schultz

0

*

Marianne Sullivan(5)

54,999

*

Doug Jones

62,087

*

Vandad Fartaj

100,236

*

Andrew S. Chang

88,050

*

Daniel S. Perotti

56,753

*

Current trustees and executive officers as a group (14 persons)

721,054

.78

%

 

*	Represents less than 1.0% of the common shares outstanding as of the record date.

(1)

Based on 92,986,076 common shares outstanding as of the record date. Beneficial ownership is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, or the Exchange Act. A person is deemed to be the beneficial owner of any common shares 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.

(2)	Includes 16,212 common shares owned by the Carnahan Black Pearl Partnership and 87,276 shares owned by various retirement accounts.

(3)	Includes 18,000 common shares owned by the Randall and Maureen Hadley Family 2001 Trust.

(4)	Includes 12,366 common shares owned by Nancy McAllister and Richard M. Card as JTWROS.

(5)	Includes 40,550 common shares owned by the Marianne E. Sullivan Revocable Trust and 9,750 shares owned by various retirement accounts.

 

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Security Ownership of Other Beneficial Owners

The following table sets forth certain information relating to the beneficial ownership of our common shares by each person or entity known to our Company to be the beneficial owner of more than five percent of our common shares, based on our review of publicly available statements of beneficial ownership filed with the SEC.

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Biographical information for Mr. Spector is provided above under the caption “Proposal I—Election of Trustees.” Certain biographical information for the other executive officers is set forth below.

Vandad Fartaj. Mr. Fartaj, age 47, has been our Senior Managing Director and Chief Investment Officer since September 2018. 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 PFSI and its affiliates 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, research, 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 securitization investors. Prior to joining PFSI and its affiliates, 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.

James Follette. Mr. Follette, age 50, has been Senior Managing Director and Chief Mortgage Fulfillment Officer since February 2018. Mr. Follette previously served as Managing Director, Mortgage Fulfillment from February 2016 to February 2018 among other executive positions at the Company since 2011. Mr. Follette has also served in a variety of similar executive positions at PFSI and its affiliates since 2011. Mr. Follette is responsible for mortgage fulfillment operations as well as the advancement of risk mitigation and technology strategies for the Company’s correspondent lending channel. Prior to joining PFSI and its affiliates, Mr. Follette worked in several executive positions, including managing director, risk management, at Countrywide (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 BBA in Accounting from the University of Notre Dame and an MBA 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.

Doug Jones. Mr. Jones, age 65, has been our President and Chief Mortgage Banking Officer since March 2021. Prior thereto, he served as the Company’s Senior Managing Director and Chief Mortgage Banking Officer since January 2017, the Senior Managing Director and Chief Institutional Mortgage Banking Officer from February 2016 through December 2016, the Chief Institutional Mortgage Banking Officer from March 2015 to February 2016, and the Chief Correspondent Lending Officer from February 2013 to March 2015. He has also served on the Company’s executive management team since 2012. Mr. Jones also has served in a variety of similar executive positions at PFSI and its affiliates since June 2011. Mr. Jones is responsible for all business activities relating to our loan production and loan servicing operations. Prior to joining 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 is an experienced mortgage banking executive with significant experience in the correspondent production and warehouse lending businesses.

Daniel S. Perotti. Mr. Perotti, age 41, 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 since 2009. Mr. Perotti has also served in a variety of similar executive positions at PFSI and its affiliates since 2009. Mr. Perotti is responsible for overseeing the Company’s accounting and financial reporting, treasury operations, investor relations, financial planning and analysis, valuation of investment assets, tax analysis, and

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Sarbanes-Oxley program. Prior to joining PFSI and its affiliates, Mr. Perotti was employed at BlackRock and served as the head of the quantitative research team within its BlackRock Solutions business as well as in various other roles at BlackRock 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 54, has been our Senior Managing Director, Chief Legal Officer and Secretary since February 2018. Mr. Stark previously served as the Managing Director, General Counsel and Secretary among other executive positions at the Company since September 2009. Mr. Stark has also served in a variety of similar executive positions at PFSI and its affiliates since 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 PFSI and its affiliates, 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. 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.

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