James Follette

About James Follette

Senior Managing Director and Chief Digital Officer at PennyMac Mortgage Investment Trust (PMT) since November 2023; previously Chief Mortgage Operations Officer (Oct 2022–Nov 2023) and Chief Mortgage Fulfillment Officer (Feb 2018–Oct 2022). He has 20+ years in mortgage banking and risk management, including Managing Director, Risk Management at Countrywide/Bank of America (2003–2011), and holds a B.B.A. (Notre Dame) and M.B.A. (Chicago Booth) . Age 53 as disclosed in PMT’s proxy . Company performance context: PMT reported ROE of 11.1% and net income of $157.8 million in 2023, and highlighted strong returns versus the broader mortgage REIT industry into 2024; PFSI (manager/affiliate) delivered 2024 ROE of 8.5%, which drove incentive payouts to PMT’s named executives at PFSI, including Follette .

Past Roles

External Roles

Fixed Compensation

PMT is externally managed; named executive officers receive cash compensation from PennyMac Financial Services, Inc. (PFSI). PMT grants equity awards (RSUs/PSUs) under its 2019 Equity Incentive Plan.

• Cash compensation paid by PFSI (2024): | Component | Amount ($) | |---|---| | Base Salary | 375,000 | | Non-Equity Incentive Plan Compensation | 797,506 | | Stock Awards | 899,918 | | Option Awards | 329,977 | | All Other Compensation | 36,043 | | Total | 2,438,444 |

• PMT equity awards granted (2024): | Award Type | Grant Date | Shares/Units (#) | Grant Date Fair Value ($) | |---|---|---:|---:| | RSU | 3/12/2024 | 3,133 | 44,990 | | PSU (target) | 3/12/2024 | 3,830 | 54,999 | | PMT 2024 Stock Awards (total) | — | — | 99,989 |

Notes:

• PMT pays no base salary/bonus; compensation is via equity awards only .
• No perquisites or excise tax gross-ups; no severance provisions from PMT .

Performance Compensation

PMT PSUs are tied to Return on Equity (ROE) and Relative TSR; PFSI annual incentives are tied 70% to ROE and 30% to strategic objectives.

• PMT PSU design (2024 grants): | Metric | Weighting | Target | Max Payout | Structure | |---|---:|---|---:|---| | ROE | 50% | 8% cumulative annualized (three one-year periods) | 200% | Linear: <6% = 0%; 6%=50%; 12%≥=200%; cumulative lookback rules . | | Relative TSR (vs peer group) | 50% | 40–60th percentile | 200% | <20th=0%; 20–40th=50%; 40–60th=100%; 60–80th=150%; ≥80th=200% . |

• PMT PSU actual 2024 performance (for 2022–2024, 2023–2025, 2024–2026 cycles measured for FY2024): | PSU Award | FY 2024 Target | FY 2024 Actual | FY 2024 Payout | |---|---|---|---| | 2022 PSU (FY 2022–2024) | ROE=8%; TSR ≤50% | ROE=8.4%; TSR=33.3% | 110.2% | | 2023 PSU (FY 2023–2025) | ROE=8%; TSR=40–60% | ROE=8.4%; TSR=33.3% | 80.1% | | 2024 PSU (FY 2024–2026) | ROE=8%; TSR=40–60% | ROE=8.4%; TSR=33.3% | 80.1% |

• PMT RSU vesting: ratable over three years beginning on the one-year anniversary of grant; dividend equivalents accrue during vesting .

• PFSI annual incentive outcome (2024): ROE 8.5% drove 52.6% payout on financial component; strategic objectives at 150%; overall payout 81.8% .

Equity Ownership & Alignment

• Beneficial ownership: 10,344 PMT common shares as of March 31, 2025; none pledged .

• Executive share ownership guidelines: $500,000 minimum for non-CEO executive officers; RSUs count toward compliance; execs 5+ years are in compliance .

• Anti-pledging/hedging: prohibited; preclearance and trading windows required; 10b5-1 plans allowed only during open windows and require pre-approval .

• Outstanding equity awards (as of Dec 31, 2024; per-share value $12.59): | Grant Date | Instrument | Units (#) | Market Value ($) | |---|---|---:|---:| | 3/12/2024 | RSU | 3,133 | 39,444 | | 3/12/2024 | PSU (target) | 3,830 | 48,220 | | 2/28/2023 | RSU | 2,302 | 28,982 | | 2/28/2023 | PSU (target) | 2,814 | 35,428 |

• 2024 vesting and realized value: | Type | Shares Acquired on Vesting (#) | Value Realized ($) | |---|---:|---:| | PSUs (aggregate across cycles) | 2,148 | 30,222 | | RSUs | 1,151 | 15,895 | | Total | 3,299 | 46,118 |

Employment Terms

• No PMT cash severance; no cash payments upon change-in-control (CoC) .
• Equity acceleration:
  • RSUs: full vesting upon termination other than for cause, death/disability, or termination of PMT’s management agreement other than for cause; retirement allows pro rata continued vesting if outstanding >9 months .
  • PSUs: full vesting upon termination other than for cause or termination of management agreement other than for cause (performance deemed achieved); retirement/death/disability provide pro rata vesting with caps; CoC uses double-trigger (termination other than for cause) unless PMT shares cease to be publicly traded, in which case vesting occurs at CoC; remaining PSUs may convert to RSUs or be re-based on new comparable goals post-CoC .
• Clawbacks: SEC-compliant clawback adopted Sept 2023 for Section 16 officers (three-year lookback on restatements); additional clawback for Senior Managing Directors .
• Management agreement term: expires Dec 31, 2029; auto-renew for 18-month periods unless terminated earlier per agreement .

Compensation Structure Analysis

• Strong pay-for-performance bias: PMT awards primarily PSUs (55%) with ROE and Relative TSR; RSUs (45%) for retention; design tightened in 2024—raising ROE maximum from 10% to 12% and increasing max vesting to 200% to incent outperformance in a challenging macro backdrop .
• PFSI annual incentives linked 70% to ROE and 30% to strategic goals; 2024 ROE recovery (8.5%) supported higher payouts (81.8%) versus 2023 (45%) when ROE was below threshold (4%) .
• Governance safeguards: no perquisites/gross-ups, no option re-pricing, robust ownership guidelines, anti-hedging/pledging, and clawbacks mitigate misalignment risk .

Say-On-Pay & Shareholder Feedback

• Say-on-pay support ~98% in 2022–2024; program enhancements include explicit ROE and Relative TSR PSU metrics, governance improvements, and enhanced disclosure of PFSI-paid compensation .

Data Summary Tables

• PMT grants to Follette (2024): | Metric | 2024 | |---|---| | RSUs Granted (#) | 3,133 | | RSU Grant Date Fair Value ($) | 44,990 | | PSUs Granted at Target (#) | 3,830 | | PSU Grant Date Fair Value ($) | 54,999 | | PMT Stock Awards Total ($) | 99,989 |

• PMT PSU metrics (design and FY2024 actual): | Metric | Weight | Target | Actual | FY2024 Payout | |---|---:|---|---|---| | ROE | 50% | 8% | 8.4% | Included in overall PSU payout 80.1% | | Relative TSR | 50% | 40–60th percentile | 33.3% | Included in overall PSU payout 80.1% |

Investment Implications

• Alignment: High share-based mix (PSUs/RSUs) with ROE and Relative TSR promotes alignment; robust anti-pledging/hedging and clawbacks reduce governance risk .
• Retention and selling pressure: Multi-year vesting with documented FY2024 vesting activity ($46,118 realized) suggests ongoing cadence of equity delivery; absence of pledged shares lowers forced-sale risk .
• Pay-for-performance sensitivity: PFSI incentive outcomes tied to ROE/strategic delivery (81.8% in 2024) and PMT PSU payouts (80.1% for FY2024 measurement on 2023–2026 cycles) indicate compensation is responsive to performance momentum; monitor ROE trajectory and relative TSR vs peer group for forward payout risk/opportunity .
• Change-in-control economics: Double-trigger vesting design minimizes windfall risk while preserving retention in transaction scenarios; equity accelerators on termination outside cause sharpen downside protection for executives .