PennyMac projects operating ROE to reach mid- to high teens in 2026 with full Vesta deployment

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• Many industry participants have added significant capacity in anticipation of lower rates, creating excess capacity and more competitive origination market, limiting expected production margin increases and revenues

  80% confidence

• PennyMac expects operating return on equity to move into the mid- to high teens later in 2026

  80% confidence

• Vesta operational velocity has led to direct financial impact with corresponding 25% decrease in operational cost to originate

  80% confidence

• Potential for PennyMac to issue additional unsecured debt moving through 2026 and beyond, related to servicing portfolio build and maintaining prudent leverage ratios

  80% confidence

• The competitive environment for refinances was stronger than historically seen in interest rate declines

  80% confidence

• Vesta has delivered efficiency gains of approximately 50% for loan officers and reduction in average end-to-end loan processing time by approximately 25%

  80% confidence

• PennyMac finished the year with a solid fourth quarter, generating net income of $107 million or $1.97 per share

  80% confidence

• Vesta implementation on track for full deployment across consumer direct channel in Q1 2026, which is key driver of 2026 outlook

  80% confidence

• Rise in FHA delinquencies attributed to FHA policy change requiring trial payments; trend expected to be temporary

  80% confidence

• PennyMac wants enough capacity to withstand a ferocious rally

  80% confidence

• Not ready to declare structural change in industry from technology; expects net income per loan to ultimately increase

  80% confidence

• Sustained rally continued into Q4 and drove market prepayment speeds significantly higher than expected, leading to meaningful increase in realization of MSR cash flows and accelerated runoff of servicing asset

  80% confidence

• Company anticipates continued efficiency gains in servicing and scale benefits from Vesta, with margin levels in line with Q4 and potential upside from margin expansion

  80% confidence

• Market generally has been surprised by increased prepayment speeds; PennyMac is getting expected market share on VA refinances despite competition

  80% confidence

• Production segment income in Q1 2026 expected to be higher driven by shift toward higher-margin direct lending channels with channel margins remaining at similar levels

  80% confidence

• By accelerating deployment of Vesta and enhancing efficiencies, PennyMac is positioning to better capture opportunities from lower mortgage rates and increase production income versus MSR runoff

  80% confidence

• PennyMac increased its hedge ratio to nearly 100%

  80% confidence

• PFSI reported net income of $107 million in Q4 or $1.97 EPS for annualized ROE of 10%, including $1 million of fair value gains on MSRs net of hedges

  80% confidence

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