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PennyMac Financial Services, Inc.

3043 Townsgate Road

Westlake Village, California 91361

STANFORD L. KURLAND

DAVID A. SPECTOR

Executive Chairman

President and Chief Executive Officer

PennyMac Financial Services, Inc.

3043 Townsgate Road

Westlake Village, California 91361

Date and Time:

Thursday, May 31, 2018 at 11:00 a.m., Pacific Time

Location:

Record Date:

April 2, 2018. Only stockholders of record at the close of business on the record date are entitled to receive notice of, and vote at, the 2018 Annual Meeting of Stockholders, or Annual Meeting, and any continuation, postponement or adjournment thereof.

Mailing Date:

We intend to mail the Notice Regarding the Availability of Proxy Materials, or the Proxy Statement and proxy card, as applicable, on or about April 17, 2018 to our stockholders of record on the record date.

•     To elect the eleven (11) director nominees identified in the enclosed Proxy Statement to serve on our Board of Directors, each for a one-year term expiring at the 2019 annual meeting of stockholders;

•     To ratify the appointment of our independent registered public accounting firm for the fiscal year ending December 31, 2018;

•     To approve, by non-binding vote, our executive compensation;

•     To approve an amendment to the PennyMac Financial Services, Inc. 2013 Equity Incentive Plan; and

•     To transact such other business as may properly come before the Annual Meeting and any postponement or adjournment thereof.

Attendance:

If you plan to attend the Annual Meeting, you will need to bring proof of ownership in order to be granted admission. Please read “INFORMATION CONCERNING VOTING AND SOLICITATION—Who can attend the Annual Meeting?” in the accompanying Proxy Statement.

Voting:

Whether or not you plan to attend the Annual Meeting, we encourage you to vote your shares by proxy by mail, by Internet or by telephone as soon as possible to make sure that your shares are represented at the Annual Meeting. You may also cast your vote in person at the Annual Meeting. If your shares are held in an account at a brokerage firm or bank, you must instruct that firm or bank as to how to vote your shares.

PROXY STATEMENT SUMMARY

CORPORATE GOVERNANCE

PROPOSAL I — ELECTION OF DIRECTORS

Director Nominees

Non-Management Director Compensation

2017 Director Compensation Table

Non-Management Director Stock Ownership Guidelines

AUDIT MATTERS

Report of the Audit Committee

Relationship with Independent Registered Public Accounting Firm

Fees to Registered Public Accounting Firm for 2017 and 2016

Pre-Approval Policies and Procedures

PROPOSAL II —  RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

SECURITY OWNERSHIP INFORMATION

Security Ownership of Executive Officers and Directors

Security Ownership of Other Beneficial Owners

EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION

Our Executive Officers

Report of the Compensation Committee

Compensation Discussion and Analysis

Compensation Tables

CEO Pay Ratio

PROPOSAL III —  ADVISORY (NON-BINDING) VOTE TO APPROVE EXECUTIVE COMPENSATION

Supporting Statement

PROPOSAL IV — APPROVAL OF AN AMENDMENT TO THE PENNYMAC FINANCIAL SERVICES, INC. 2013 EQUITY INCENTIVE PLAN

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ANNUAL REPORT ON FORM 10-K

OTHER MATTERS

INFORMATION CONCERNING VOTING AND SOLICITATION

ANNEX A

  PROXY STATEMENT SUMMARY  

  Date and Time:

Thursday, May 31, 2018, at 11:00 a.m. Pacific Time

  Location:

3043 Townsgate Road, Westlake Village, California 91361

  Record Date:

April 2, 2018

  Mail Date:

April 17, 2018

  Matter

    Our Board Vote Recommendation    

Proposal I:

Election of eleven (11) directors to our Board of Directors

FOR each Director Nominee
identified in this Proxy Statement

Proposal II:

Ratification of the appointment of our independent registered public accounting firm

FOR

Proposal III:

Approval, by non-binding vote, of our executive compensation

FOR

Proposal IV:

Approval of an amendment to the PennyMac Financial Services, Inc. 2013 Equity Incentive Plan

FOR

Committee

Membership

Stanford L. Kurland

65

2012

Executive Chairman of PennyMac Financial Services, Inc.

None

David A. Spector

55

2012

President and Chief Executive Officer of PennyMac Financial Services, Inc.

None

Anne D. McCallion

63

2018

Senior Managing Director and Chief Enterprise Operations Officer of PennyMac Financial Services, Inc.

None

Matthew Botein

45

2012

Managing Partner, Gallatin Point LLC

Compensation

Finance

James K. Hunt*

66

2013

Former Managing Partner and CEO, Middle Market Credit at Kayne Anderson Capital Advisors LLC

Compensation

Finance

Governance and Nominating

Patrick Kinsella †

64

2014

Adjunct Professor at USC Marshall School of Business and Retired Senior Audit Partner with KPMG, LLP

Audit

Related-Party Matters

Risk

  PROXY STATEMENT SUMMARY  

  Director Nominees

Age

Director
Since

Principal Occupation /
Key Experience

Committee

Membership

Joseph Mazzella

65

2012

Retired Managing Director and General Counsel of Highfields Capital Management LP

Governance and Nominating

Related-Party Matters

Farhad Nanji

39

2012

Co-Founder of MFN Partners Management, L.P.

Compensation

Finance

Theodore W. Tozer

61

2017

Former President of Government National Mortgage Association

Audit

Risk

Mark Wiedman

47

2012

Global Head of BlackRock, Inc.’s iShares Business

Governance and Nominating

Related-Party Matters

Risk

Emily Youssouf

66

2013

Clinical Professor at NYU Schack Institute of Real Estate

Audit

Related-Party Matters

Risk

  PROXY STATEMENT SUMMARY  

✓  

Majority Voting Standard in the Election of Directors and Director Resignation Policy. Our Second Amended and Restated Bylaws provide for a majority voting standard for uncontested director elections and plurality voting standard for contested director elections.

  ✓  

Independent Lead Director. The independent directors of our Board elected James K. Hunt as our independent lead director for a three-year term that expires in February 2020.

✓  

Director Resignation Policy. Our Corporate Governance Guidelines include a requirement that any director nominee who fails to receive a majority vote, if required, for election or re-election will promptly tender his or her resignation to the Board.

  ✓  

Retirement Age. It is our general policy that no director having attained the age of 75 years shall be nominated for re-election or re-appointment to the Board.

✓  

Director Limitations on Number of Boards. A director who is currently serving as a chief executive officer of a public company, including our Chief Executive Officer, is not permitted to serve on more than two outside public company boards. No other director is permitted to serve on more than five outside public company boards.

  ✓  

Regular Executive Sessions. Our independent directors meet privately on a regular basis. Our independent lead director presides at such meetings.

✓  

Robust Stock Ownership Guidelines. We have robust stock ownership guidelines for our non-management directors (five times the base annual retainer) and executive officers (five times base salary for our Executive Chairman and our President and Chief Executive Officer; three times base salary for all other executive officers).

  ✓  

Regular Board Evaluation. The Governance and Nominating Committee sponsors an annual self-assessment of the Board’s performance as well as the performance of each committee of the Board.

✓  

Stockholder Engagement. We value the perspectives of our stockholders and interact with stockholders through a variety of engagement activities.

  ✓  

Annual Elections. Our Board is not classified and, therefore, we conduct annual elections for all directors who serve on our Board.

Total net revenue of $955.5 million, up 3 percent from the prior year

Pretax income was $335.9 million; includes $32.9 million benefit related to remeasurement of tax-related items

Diluted earnings per share of $4.03 includes a benefit of $1.83 resulting from the remeasurement of tax-related items

Loan production totaled $68.5 billion in unpaid principal balance, or UPB, a decrease of 2 percent from record levels in the prior year; we were the 4^th largest mortgage producer in the U.S. in 2017, according to Inside Mortgage Finance

Servicing portfolio reached $245.8 billion in UPB, up 27 percent from December 31, 2016; we were the 8^th largest servicer in the U.S. as of December 31, 2017, according to Inside Mortgage Finance

Investment management had $1.6 billion of assets under management at year end, up 2% from December 31, 2016

Pretax return on equity for Private National Mortgage Acceptance Company, LLC, or PNMAC, was 18.6%

For complete information regarding our Fiscal 2017 performance, stockholders should read “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements and accompanying notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, which was filed with the Securities and Exchange Commission, or the SEC, on March 9, 2018 and is being made available to stockholders with this Proxy Statement as a part of our 2017 Annual Report to Stockholders.

  PROXY STATEMENT SUMMARY  

Represents partial year.

For more information regarding the impact of the new tax law, please refer to the slide presentation used in connection with our recorded presentation of financial results, which was furnished as Exhibit 99.2 to our Current Report on Form 8-K as filed with the SEC on February 9, 2018.

What We Do

What We Don’t Do

✓  

Heavy bias toward performance-based equity: Our Board seeks to 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 performance-based cash bonuses or long-term equity awards in our employment agreements.

✓  

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 automatic salary increases: Our named executive officers are not entitled to automatic base salary increases and none of the employment agreements with our named executive officers contain such provisions.

✓  

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 “single trigger” cash severance and equity or excise tax gross-ups. We do not provide for single trigger cash severance and 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 compensation program: Our compensation program is designed to discourage excessive risk taking and encourage long-term decision making in alignment with the interests of our stockholders. 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.

✓

Consideration of stockholder feedback: We engage in careful consideration of stockholder feedback regarding compensation.

û  

No re-pricing: Our equity incentive plan prohibits the re-pricing of stock options and stock appreciation rights without stockholder approval.

✓  

Stockholder engagement. We value the perspectives of our stockholders and interact with stockholders through a variety of engagement activities.

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 prohibit 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.

  CORPORATE GOVERNANCE  

  CORPORATE GOVERNANCE  

  CORPORATE GOVERNANCE  

Committee

Primary Risk Oversight Responsibility

Audit

The Audit Committee focuses on risks associated with internal controls and securities, financial and accounting compliance, and receives an annual risk assessment report from our internal auditors.

Compensation

The Compensation Committee focuses on oversight of our compensation policies and practices, including whether such policies and practices balance risk taking and rewards in an appropriate manner so as not to encourage excessive risk taking.

Finance

The Finance Committee focuses on risks relating to our Company’s liquidity and capital resources and our investment policies and strategies.

Governance and Nominating

The Governance and Nominating Committee focuses on risks associated with proper board governance, including the independence of our directors and the assessment of the performance and effectiveness of each member and Committee of our Board.

Related-Party Matters

The Related-Party Matters Committee focuses on risks arising out of potential conflicts of interest between us or any of our subsidiaries, on the one hand, and (i) PMT and its subsidiaries, (ii) PNMAC Mortgage Opportunity Fund Investors, LLC and two investment funds registered under the Investment Company Act of 1940, PNMAC Mortgage Opportunity Fund, LLC and PNMAC Mortgage Opportunity Fund, L.P., as well as an affiliate of the registered funds, or collectively, the Investment Funds, (iii) any other non-wholly-owned entity that we manage or over which we have control (whether through ownership, voting power, contract or otherwise), and (iv) any other identified related party, on the other hand.

Risk

The Risk Committee oversees our enterprise risk management function in relation to our business activities and focuses on credit risk, mortgage compliance risk and operational risk, including cybersecurity risk.

  CORPORATE GOVERNANCE  

  Directors

Audit

Compensation

Finance

Governance
and
Nominating

Related-
Party
Matters

  Risk  

  Non-Management Directors

  Matthew Botein

CC

X

  James K. Hunt*

X

X

CC

  Patrick Kinsella

CC

X

X

  Joseph Mazzella

X

CC

  Farhad Nanji

X

CC

  Theodore W. Tozer

X

X

  Mark Wiedman

X

X

CC

  Emily Youssouf

X

X

X

  Management Directors

  Stanford L. Kurland^†

  David A. Spector

  Anne D. McCallion

  CORPORATE GOVERNANCE  

Audit Committee

Primary Responsibilities

Members:

The Audit Committee assists our Board in overseeing:

•  our accounting and financial reporting processes;

•  the integrity and audits of our financial statements;

•  our internal control function;

•  our compliance with related legal and regulatory requirements;

•  the effectiveness of our compliance programs as they relate to applicable laws and regulations governing securities, financial and accounting matters;

•  the qualifications and independence of our independent registered public accounting firm; and

•  the performance of our independent registered public accounting firm and our internal auditors.

The Audit Committee is also responsible for preparing an audit committee report to be included in our annual proxy statement, reviewing and discussing management’s discussion and analysis of financial condition and results of operation to be included in our SEC filings, the engagement, retention and compensation of our independent registered public accounting firm, reviewing with our independent registered public accounting firm the plans and results of the audit engagement, approving professional services provided by our independent registered public accounting firm, considering the range of audit and permissible non-audit fees, and reviewing the adequacy of our internal accounting controls.

Patrick Kinsella

Theodore W. Tozer

Emily Youssouf

Meetings in 2017: 10

Mr. Kinsella serves as an “audit committee financial expert,” as that term is defined by the SEC. Each of the members of the Audit Committee is “financially literate” under the rules of the NYSE.

Our 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.”

Compensation Committee

Primary Responsibilities

Members:

The principal functions of the Compensation Committee are to:

•  evaluate the performance of our Chief Executive Officer and other executive officers;

•  adopt and administer the 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 independent directors; and

•  administer the issuance of any securities under the PennyMac Financial Services, Inc. 2013 Equity Incentive Plan, or the 2013 Plan.

The Compensation Committee may form, and delegate authority to, subcommittees when it deems appropriate to the extent permitted under applicable law.

Matthew Botein

James K. Hunt

Farhad Nanji

Meetings in 2017: 7

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.”

  CORPORATE GOVERNANCE  

Finance Committee

Primary Responsibilities

Members:

The Finance Committee is responsible for overseeing the financial objectives, policies, procedures and activities of our Company, including a review of 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 derivatives transactions.

Matthew Botein

James K. Hunt

Farhad Nanji

Meetings in 2017: 4

Our Board has determined that all of the directors serving on the Finance Committee are independent under the applicable rules of the NYSE.

Governance and Nominating Committee

Primary Responsibilities

Members:

The principal functions of the Governance and Nominating 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;

•  recommend to our Board individuals qualified to be appointed as our executive officers;

•  periodically prepare and submit to our Board for adoption the Governance and Nominating 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; and

•  annually facilitate the assessment of the performance of the individual committees and our Board as a whole and reporting thereon to our Board.

James K. Hunt

Joseph Mazzella

Mark Wiedman

Meetings in 2017: 6

Our Board has determined that all of the directors serving on the Governance and Nominating Committee are independent under the applicable rules of the NYSE.

  CORPORATE GOVERNANCE  

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 PMT and its subsidiaries, the Investment Funds 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 and 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, flow servicing agreement, mortgage banking services agreement, MSR recapture agreement, and master spread acquisition and MSR servicing agreements with PMT, and any amendments of or extensions to such agreements.

Patrick Kinsella

Joseph Mazzella

Mark Wiedman

Emily Youssouf

Meetings in 2017: 5

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.

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 enterprise risk management (and any significant changes thereto);

•  reviewing annually a schedule of all identified risks facing our Company and the alignment of such risks with our management committees and committees of our Board;

•  reviewing annually our enterprise risk management policy;

•  reviewing and overseeing credit risk, mortgage compliance risk, and operational risk, including 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.

Patrick Kinsella

Theodore W. Tozer

Mark Wiedman

Emily Youssouf

Meetings in 2017: 4

Our Board has determined that all of the directors serving on the Risk Committee are independent under the applicable rules of the NYSE.

  CORPORATE GOVERNANCE  

  CORPORATE GOVERNANCE  

  PROPOSAL I – ELECTION OF DIRECTORS  

Name

Age

Position

Stanford L. Kurland

65

Director, Executive Chairman

David A. Spector

55

Director

Anne D. McCallion

63

Director

Matthew Botein

45

Director

James K. Hunt

66

Independent Lead Director

Patrick Kinsella

64

Director

Joseph Mazzella

65

Director

Farhad Nanji

39

Director

Theodore W. Tozer

61

Director

Mark Wiedman

47

Director

Emily Youssouf

66

Director

  PROPOSAL I – ELECTION OF DIRECTORS  

STANFORD L. KURLAND

Mr. Kurland has been a member of our Board since our formation in December 2012 and has been our Executive Chairman since January 2017. Prior thereto, he had been our chairman of the board and chief executive officer from February 2013 through December 2016. Mr. Kurland also served as the chief executive officer of PNMAC from May 2013 through December 2016 and, prior thereto, served as chairman of the board and chief executive officer from its formation in January 2008 to May 2013. In addition, Mr. Kurland has been the executive chairman of PennyMac Mortgage Investment Trust, or PMT, since January 2017 and, prior thereto, had been the chairman of the board and chief executive officer of PMT from its formation in May 2009 through December 2016. He has also served as the chairman of PNMAC Capital Management, LLC, or PCM, since its formation in March 2008, and the chairman of PennyMac Loan Services, LLC, or PLS, since its formation in February 2008. Prior to PNMAC’s formation, Mr. Kurland served as a director and, from January 1979 to September 2006, held several executive positions, including president, chief financial officer and chief operating officer, at Countrywide Financial Corporation, or Countrywide, a diversified financial services company. Mr. Kurland holds a BS from California State University, Northridge. We believe Mr. Kurland is qualified to serve on our Board because of his experience as our previous chief executive officer and as an accomplished financial services executive with more than 37 years of experience in the mortgage banking arena.

 Board Member Since: 2012

 Age: 65

DAVID A. SPECTOR

Mr. Spector has been a member of our Board since our formation in December 2012 and has been our President and Chief Executive Officer since January 2017. He served as our executive managing director, president and chief operating officer from February 2016 through December 2016 and, prior thereto, as president and chief operating officer from February 2013 to February 2016. Mr. Spector also has been president and chief executive officer of PNMAC since January 2017 and, prior thereto, served in a variety of similar executive positions at PNMAC from January 2008 through December 2016. In addition, Mr. Spector has been a member of the board of PMT since its formation in May 2009 and chairman of the board of directors of PNMAC Mortgage Opportunity Fund, L.P. and PNMAC Mortgage Opportunity Fund, LLC since May 2008. Prior to joining PNMAC, Mr. Spector 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 BA 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: 55

ANNE D. MCCALLION

Ms. McCallion has been a member of our Board since February 2018. She has been our Senior Managing Director and Chief Enterprise Operations Officer since January 2017. Prior thereto, she served as our senior managing director and chief financial officer from February 2016 through December 2016 and as our chief financial officer from January 2013 to February 2016. Ms. McCallion also has served in a variety of similar executive positions at PNMAC since May 2009. Ms. McCallion is responsible for overseeing our enterprise operations function and has management responsibility for legal, regulatory relations, human resources, technology infrastructure and corporate administration. Prior to joining PNMAC, Ms. McCallion was employed by Countrywide (and Bank of America Corporation, as its successor), where she worked in a variety of executive positions, including deputy chief financial officer and senior managing director, finance, from 1991 to 2008. She also was a member of the technical staff at the Financial Accounting Standards Board. Ms. McCallion holds a BS degree from Gannon University and an MBA degree from Ashland University. She is also a Certified Public Accountant (inactive). We believe Ms. McCallion is qualified to serve on our Board because she is a seasoned executive with significant financial expertise and considerable experience in the financial and operational aspects of the mortgage banking business.

 Board Member Since: 2018

 Age: 63

  PROPOSAL I – ELECTION OF DIRECTORS  

MATTHEW BOTEIN

Mr. Botein has been a member of our Board since our formation in December 2012. Since January 2017, Mr. Botein has served as managing partner at Gallatin Point LLC, a private investment and advisory firm. Since January 2017, he also has served as a consultant to BlackRock, Inc., or BlackRock, a global investment management firm, as part of a two year initial term during which he will advise BlackRock on certain aspects of its alternative investment business. Prior thereto, from November 2009 to January 2017, he was employed at BlackRock and held the position of managing director and co-head of BlackRock Alternative Investors and the title of chief investment officer for alternative investments. He previously served as chairman of Botein & Co., LLC, a private investment and advisory firm, from July 2009 through November 2009 and as a managing director of Highfields Capital Management LP, or Highfields, an investment management firm, from 2003 through June 2009. Mr. Botein currently serves on the boards of Northeast Bancorp, a bank holding company, and Aspen Insurance Holdings Limited, a specialty insurance and reinsurance provider. He formerly served on the boards of First American Corporation, PennyMac Mortgage Investment Trust and CoreLogic, Inc. Mr. Botein holds an AB from Harvard College and an MBA from the Harvard Business School. We believe Mr. Botein is qualified to serve on our Board because of his considerable experience in the financial services industry, where he has managed portfolio investments in the banking, insurance, asset management, capital markets and financial processing sectors.

 Board Member Since: 2012

 Age: 45

 Committees:

•  Compensation (Chair)

•  Finance

JAMES K. HUNT

Independent Lead Director

Mr. Hunt has been a member of our Board since April 2013 and has been appointed to serve as our independent lead director. Mr. Hunt is currently retired. From November 2015 until his retirement in August 2016, Mr. Hunt served as the managing partner and CEO, middle market credit at Kayne 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 CION Ares Diversified Credit Fund, a diversified, closed-end management investment company. Mr. Hunt formerly served on the boards of THL Credit, Inc., THL Credit Advisors, Primus Guaranty, Ltd., Fidelity National Information Services, Inc. and Lender Processing Services, Inc. Mr. Hunt received a BBA from the University of Texas at El Paso and an MBA 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: 66

 Committees:

•  Compensation

•  Finance

•  Governance and Nominating (Chair)

PATRICK KINSELLA

Mr. Kinsella has been a member of our Board since July 2014. Mr. Kinsella has served as an adjunct professor at the USC Marshall School of Business since August 2011. 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 received a BS 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: 64

 Committees:

•  Audit (Chair)

•  Related-Party Matters

•  Risk

  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 BA from City College of New York and a JD 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: 65

 Committees:

•  Governance and Nominating

•  Related-Party Matters (Chair)

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. Prior to joining Highfields, Mr. Nanji was an associate with HighVista Strategies, an investment management firm, and he also served as an engagement manager in the financial institutions group at McKinsey & Company, a global consulting firm. Mr. Nanji received an MBA from Harvard Business School and a B.Com. degree 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: 39

 Committees:

•  Compensation

•  Finance (Chair)

THEODORE W. TOZER

Mr. Tozer has been a member of our Board since August 2017. Mr. Tozer served as the president of the Government National Mortgage Association, or Ginnie Mae, from February 2010 to January 2017. 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: 61

 Committees:

•  Audit

•  Risk

  PROPOSAL I – ELECTION OF DIRECTORS  

MARK WIEDMAN

Mr. Wiedman has been a member of our Board since our formation in December 2012. Mr. Wiedman has been the global head of BlackRock’s iShares business since September 2011 and is a member of BlackRock’s global operating committee. Previously, Mr. Wiedman was the head of corporate strategy for BlackRock and led the clients and advisory team within the financial markets advisory group in BlackRock Solutions, a group which advises financial institutions and governments on managing their capital markets exposures and businesses. Prior to joining BlackRock in 2004, Mr. Wiedman, as executive director, led the global product development and strategy group at Morgan Stanley Investment Management. He previously was a management consultant at McKinsey & Company, advising financial institutions in the United States, Europe and Japan. He also served as senior advisor and chief of staff for the Under Secretary for Domestic Finance at the U.S. Treasury Department. He has taught as an adjunct associate professor of law at Fordham University in New York and Renmin University in Beijing. Mr. Wiedman earned an AB degree from Harvard College and a JD degree from Yale Law School. We believe Mr. Wiedman is qualified to serve on our Board because of his numerous years of experience in the financial industry and deep understanding of our business.

 Board Member Since: 2012

 Age: 47

 Committees:

•  Governance and Nominating

•  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 NYC Health and Hospitals Corporation, the NYC School Construction Authority, the NYS Job Development Authority, the TransitCenter, and JP Morgan Exchange-Traded Funds Trust. Ms. Youssouf is a graduate of Wagner College and holds an MA 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: 66

 Committees:

•  Audit

•  Related-Party Matters

•  Risk

  PROPOSAL I – ELECTION OF DIRECTORS  

Base Annual Retainer, all non-management directors

$

75,000  

Base Annual Retainer, independent lead director

$

20,000  

Base Annual Retainer, all non-management committee members:

Audit Committee

$

10,000  

Compensation Committee

$

7,750  

Finance Committee

$

7,750  

Governance and Nominating Committee

$

5,750  

Related-Party Matters Committee

$

5,750  

Risk Committee

$

10,000  

Additional Annual Retainer, all committee chairs:

Audit Committee

$

12,000  

Compensation Committee

$

10,750  

Finance Committee

$

10,750  

Governance and Nominating Committee

$

7,750  

Related-Party Matters Committee

$

7,750  

Risk Committee

$

12,000  

  PROPOSAL I – ELECTION OF DIRECTORS  

Name⁽¹⁾

Fees Earned
or Paid
in Cash
($)⁽²⁾

Stock
Awards
($)⁽³⁾⁽⁴⁾

Total  
($)  

Matthew Botein

        101,250

97,000

198,250  

James K. Hunt

—

221,000

221,000  

Patrick Kinsella

112,750

97,000

209,750  

Joseph Mazzella

—

198,451

198,451  

Farhad Nanji

—

205,451

205,451  

Theodore W. Tozer ⁽⁵⁾

39,429

57,652

97,081  

Mark Wiedman

108,500

97,000

205,500  

Emily Youssouf

100,750

97,000

197,750  

Mr. Kurland, our Executive Chairman, and Mr. Spector, a director and our President and Chief Executive Officer, are not included in this table as they are officers of our Company and thus receive no additional compensation for their services as directors. Messrs. Kurland and Spector received compensation as officers of our Company for Fiscal 2017 as shown in the “2017 Summary Compensation Table.”

Reflects fees earned by the director in Fiscal 2017, whether or not paid in such year. During Fiscal 2017, each of Messrs. Hunt, Mazzella and Nanji elected to receive his director fees in shares of common stock in lieu of cash.

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. Botein, Hunt, Kinsella, Nanji, Mazzella and Wiedman and Ms. Youssouf on March 6, 2017 and to Mr. Tozer on August 1, 2017. For more information on the assumptions used in our estimates of value, please refer to Note 21—Stock-based Compensation in our Annual Report on Form 10-K filed on March 9, 2018. As of December 31, 2017, each of our directors held an aggregate number of RSUs in the following amounts: Messrs. Botein, Hunt, Kinsella, Mazzella, Nanji and Wiedman and Ms. Youssouf—12,030, and Mr. Tozer—3,248.

Each of Messrs. Hunt, Mazzella and Nanji elected to receive shares of our Class A common stock in lieu of cash retainer fees during Fiscal 2017.

Reflects a pro rata portion of the one-time initial RSU grant to Mr. Tozer when he joined our Board, effective August 1, 2017.

  AUDIT MATTERS  

  AUDIT MATTERS  

2017

2016

Audit Fees ⁽¹⁾

$

1,773,496

$

1,611,181

Audit-Related Fees ⁽²⁾

308,750

345,550

Tax Fees

—

—

All Other Fees ⁽³⁾

60,000

30,000

Total

$

2,142,246

$

1,986,731

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.

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.

All Other Fees consist of certain agreed upon procedures related to certain of our financing transactions.

  PROPOSAL II – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED  PUBLIC ACCOUNTING FIRM  

  SECURITY OWNERSHIP INFORMATION  

Class A Common Stock
Beneficially Owned⁽¹⁾⁽²⁾

Number

Percentage

% of Total Voting  
Power and Total  
Economic Interest  
in PNMAC⁽³⁾  

  Executive Officers and Directors

  Stanford L. Kurland ⁽⁴⁾

9,437,061

27.99

%

12.26

%

  David A. Spector ⁽⁵⁾

2,022,311

7.69

%

2.64

%

  Anne D. McCallion ⁽⁶⁾

698,035

2.79

%

*

  Andrew S. Chang ⁽⁷⁾

991,288

3.92

%

1.30

%

  Vandad Fartaj ⁽⁸⁾

978,843

3.88

%

1.28

%

  Doug Jones ⁽⁹⁾

841,122

3.35

%

1.10

%

  Matthew Botein ⁽¹⁰⁾

833,529

3.32

%

1.09

%

  James K. Hunt

53,955

*

*

  Patrick Kinsella

15,241

*

*

  Joseph Mazzella ⁽¹¹⁾

780,790

3.12

%

1.02

%

  Farhad Nanji ⁽¹²⁾

168,337

*

*

  Theodore W. Tozer

—

*

*

  Mark Wiedman ⁽¹³⁾

74,469

*

*

  Emily Youssouf

17,199

*

*

  Directors and executive officers as a group (15 persons)

17,590,318

42.06

%

22.64

%

Represents less than 1.0%.

Subject to the terms of the exchange agreement, Class A Units of PNMAC not held by us are exchangeable at any time and from time to time for shares of our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends, reclassifications and certain other transactions that would cause the number of outstanding shares of Class A common stock to be different than the number of Class A Units of PNMAC owned by PennyMac Financial Services, Inc. The number of shares of Class A common stock listed in this table as being beneficially owned as a result of Class A Units of PNMAC held by any entity or individual assumes an exchange of such Class A Units for shares of Class A common stock on a one-for-one basis. As of the record date, a total of 52,543,925 Class A Units were exchangeable for shares of Class A common stock.

Based on 24,277,730 shares of Class A common stock outstanding as of the record date. Beneficial ownership is determined in accordance with Rule 13d-3 under the Exchange Act. A person is deemed to be the beneficial owner of any shares of Class A 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. Includes shares of Class A common stock received upon vesting of performance-based RSUs on April 2, 2018 by each named executive officer; however, such shares did not settle until a later date and, therefore, do not constitute eligible votes as of the record date.

Represents the percentage of voting power of the Class A common stock and Class B common stock of PennyMac Financial Services, Inc. voting together as a single class. Each holder of Class A Units of PNMAC other than us also holds one share of our Class B common stock. The shares of Class B common stock have no economic rights but entitle the holder, without regard to the number of shares of Class B common stock held, to a number of votes on matters presented to our stockholders that is equal to the aggregate number of Class A Units of PNMAC held by such holder. As a holder exchanges Class A Units of PNMAC for shares of our Class A common stock pursuant to the exchange agreement, the voting power afforded to the holder by its share of Class B common stock will be automatically and correspondingly reduced. Total economic interest in PNMAC is calculated as the percentage of all outstanding Class A Units of PNMAC beneficially held by the stockholder, directly or indirectly through PennyMac Financial Services, Inc., assuming that each share of Class A common stock held is equivalent to one Class A Unit of PNMAC.

  SECURITY OWNERSHIP INFORMATION