Derek W. Stark
PennyMac Financial ServicesAbout Derek W. Stark
Senior Managing Director, Chief Legal Officer and Secretary of PennyMac Financial Services, Inc. since February 2018; with the company since September 2009. Age 57. Education: B.A. in Political Science (UC Berkeley) and J.D. (Loyola Law School, Los Angeles). Responsible for securities, corporate governance, transactions, litigation and regulatory compliance; primary legal contact for the Board . Company performance context for pay: FY2024 net income was $311.4 million (vs. $144.7 million in FY2023), with ROE of 8.5% (vs. 4.1% in FY2023); production volume was $116.3B UPB (+17% YoY) and servicing portfolio was $665.8B UPB (+10% YoY); quarterly dividend raised to $0.30 from $0.20 .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| PFSI/PNMAC | Senior Managing Director, Chief Legal Officer & Secretary | 2018–present | Oversees all legal management including securities, corporate governance, transactions, litigation and regulatory compliance; Board’s primary legal contact . |
| PFSI/PNMAC | Managing Director, General Counsel & Secretary (and other executive positions) | 2009–2018 | Built corporate legal function post-founding; supported growth across mortgage banking businesses . |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Countrywide Financial Corporation | Executive Vice President & Deputy General Counsel | 1999–2008 | Led legal matters during expansion; experience in mortgage banking legal, corporate and securities domains . |
Fixed Compensation
| Element | FY2023 | FY2024 | Notes |
|---|---|---|---|
| Base Salary ($) | $400,000 | $400,000 | Base remained unchanged; below 25th percentile among peers per Compensation Committee benchmarking . |
| Target Annual Incentive ($) | — | $1,000,000 | 70% ROE; 30% strategic objectives . |
| Actual Annual Incentive ($) | — | $817,955 | 81.8% of target based on FY2024 outcomes . |
Performance Compensation
Annual Incentive Design and FY2024 Outcome
| Component | Weight | Threshold | Target | Maximum | FY2024 Actual | FY2024 Payout |
|---|---|---|---|---|---|---|
| ROE | 70% | 7.5% ROE = 37.5% payout | 15% ROE = 100% payout | 30% ROE = 300% payout | 8.5% ROE | 52.6% component payout |
| Strategic Objectives | 30% | 0% | 100% | 150% | Achieved 150% (see Strategic Performance table) | 150% component payout |
| Total Annual Incentive | 100% | — | — | Max 255% | N/A | 81.8% of target; $817,955 |
Selected FY2024 strategic outcomes supporting the 150% payout included: book value per share growth to $74.54 (+6% YoY), increased dividend to $0.30, #1 correspondent channel share (19.0%), and servicing UPB growth to $666B (+10% YoY) .
Long-Term Equity Program (Grants on Feb 29, 2024)
| Award Type | Target Mix | Grant-Date FV ($) | Units/Options | Key Terms |
|---|---|---|---|---|
| PSUs | 50% | $467,455 | 5,504 PSUs | 3-year performance (2024–2026); payout based on ROE with leverage ratio multiplier and individual multiplier; max 300% of target . |
| RSUs (time-based) | 25% | $233,727 | 2,752 RSUs | Vest ratably over 3 years (annual installments) . |
| Stock Options | 25% | $257,106 | 6,880 options | 10-year term; vest 1/3 annually over 3 years; exercise price $84.93 (grant-date stock price) . |
PSU performance framework (2024–2026): ROE target 15% (threshold <5% = 0%; ≥30% = 250%), leverage ratio multiplier 50% (≥5x) to 120% (≤1.5x), individual effectiveness 60%–100%; maximum total PSU payout equals 300% of target .
2022 PSU cohort outcome: 0% payout for the 2022–2024 cycle (actual cumulative annualized ROE 8.8% below threshold); leverage multiplier 108.9% but did not apply due to ROE shortfall .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Beneficial Ownership | 95,871 shares; includes 75,871 options exercisable within 60 days of May 30, 2025; <1% of outstanding shares . |
| Shares Pledged | None of the reported shares were pledged as security . |
| Ownership Guidelines | Executives (other than CEO) must hold ≥3x base salary; executives with ≥5 years in role are in compliance; Stark has served since 2018 . |
| Hedging/Pledging Policy | Hedging, pledging, short sales, options trading, and margin accounts are prohibited; 10b5-1 plans permitted during open windows with preclearance . |
Vesting and potential selling pressure:
- RSUs vest in equal annual tranches over 3 years from grant date (Feb 29, 2024 → anticipated vesting around 2025/2026/2027 anniversaries) .
- Options vest 1/3 annually over 3 years; 10-year expiration from Feb 29, 2024; strike $84.93 .
- PSUs cliff-vest after the 3-year performance period (2024–2026) subject to metric attainment .
- Company imposes trading windows and preclearance, mitigating opportunistic selling .
Employment Terms
| Topic | Terms for Derek W. Stark |
|---|---|
| Employment Agreement | No individual employment agreement; covered by the Change of Control Severance Plan (executives without individual contracts) . |
| Severance – Change in Control (Double Trigger) | Upon qualifying termination within 2 years post-CoC: 2x base salary + 200% of bonus; accelerate unvested time-based equity and PSUs at target (after applying plan CoC rules); 18 months health/dental continuation and outplacement; excise tax cutback if beneficial; release required . |
| Estimated CoC Benefits (as of 12/31/2024) | Base $800,000; Bonus $1,635,910; Equity Vesting $3,042,847; Total $5,478,757 (based on 12/31/2024 stock price) . |
| Severance – Non-CoC | Not specifically quantified for Stark in proxy (Severance Plan focuses on CoC-related terminations) . |
| Clawback | Company-wide SEC-compliant policy: recover erroneously awarded incentive-based comp from current/former Section 16 officers for 3 fiscal years preceding a required accounting restatement; extends to Senior Managing Directors via separate policy . |
| Non-Compete/Non-Solicit | Not disclosed for Stark; note: Spector/Jones agreements include 18-month non-solicit; Stark is not party to those agreements . |
| Anti-Hedging/Pledging | Prohibited for officers and directors . |
Say-on-Pay and Shareholder Feedback
| Year | Approval (%) |
|---|---|
| 2022 | 98.7% |
| 2023 | 82.6% |
| 2024 | 99.0% |
Company engaged investors; maintained ROE-centric incentives with enhanced disclosure of strategic objectives; increased equity share of CEO pay; adopted Executive Deferred Compensation Plan (Stark did not defer FY2024 comp) .
Compensation Structure Analysis
- Strong pay-for-performance linkage: 2024 annual incentive tied 70% to ROE and 30% to strategic goals; 2022 PSUs forfeited fully for all NEOs, including Stark, due to sub-threshold ROE—evidence of downside risk in equity .
- FY2024 long-term mix: 50% PSUs, 25% RSUs, 25% options—balanced retention and performance orientation; PSU framework tightened with wider ROE max band and leverage multiplier capped at 120% to discourage over-levering .
- Market positioning: Stark’s base salary remained $400k in 2024, below the 25th percentile for role peers, with at-risk components driving total compensation variability .
Investment Implications
- Alignment and retention: Robust stock ownership guidelines (3x salary), anti-hedging/pledging policy, clawback, and a significant portion of equity in PSUs support long-term alignment; forfeiture of 2022 PSUs underscores rigor in targets .
- Event risk economics: Double-trigger CoC severance is moderate for a non-CEO NEO (2x base and 2x bonus plus equity acceleration at target), with estimated $5.48M package as of 12/31/2024—notably without excise tax gross-up (cutback if beneficial) .
- Selling pressure: Structured vesting (annual RSU/option vesting; PSU cliff in 2027) creates periodic liquidity windows, but trading windows and preclearance reduce opportunistic sales; no pledging reduces forced-sale risk .
- Execution risk: Annual incentive underperformed target (81.8%) due to ROE shortfall vs. 15% target; long-term PSU hurdle remains demanding (15% ROE target through cycle), aligning realized pay with performance in a higher-rate mortgage market .
Net: Stark’s incentive design (heavy PSUs with stringent ROE target), ownership policies, and no pledging create a generally shareholder-aligned profile; severance terms are standard double trigger. Watch for FY2024–2026 PSU trajectory vs. 15% ROE target and annual vesting-driven selling windows amid market conditions .