# Dear Fellow Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/real-estate-reit-mortgage/NYSE_PMT_2020/NYSE_PMT_2020.mmd` · pages 2-8_

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Dear Fellow Shareholders,

2020 proved to be a challenging year for mortgage REITs. As the global pandemic emerged early in the year we experienced asset value volatility, an accelerated decrease in mortgage rates and governmental policy changes all which significantly impacted the mortgage industry. Given this backdrop, I am incredibly proud of PMT's results and the resolve shown by our management team to navigate this difficult market. PMT's investment performance in 2020 reflected the significant risk management disciplines and corporate governance infrastructure developed over our 11 years as a publicly traded company. As a result, we delivered positive net income to shareholders in this challenging environment. These foundational practices were critical to PMT's performance in 2020, a year that proved to be incredibly challenging for all mortgage REITs, many of which, unlike PMT, were forced to sell assets at discounted values to raise liquidity at the heights of the market volatility related to the onset of COVID-19.

Unlike many other mortgage REITs, PMT not did not have to sell any assets to raise liquidity. Specific to its CRT Investments, dislocations in the credit markets as a result of the COVID-19 pandemic resulted in a non-cash fair value write down of over $1 billion in the first quarter. In spite of this, our focus on liquidity and capital management allowed PMT to not have any margin calls related to its credit assets and we did not sell any of these assets. In addition, PMT's interest-rate risk hedge disciplines successfully mitigated the decline in fair value of its mortgage servicing rights (MSRs) caused by the substantial reduction in mortgage interest rates. In our market-leading correspondent production business, these practices provided a competitive advantage for PMT and, as others curtailed or halted mortgage operations entirely, PMT locked, funded and closed loans every day in 2020. This activity provided much needed liquidity to our correspondent partners in order to help their borrowers to take advantage of historically low rates and refinance their mortgages or purchase new homes. Finally, because

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PMT did not sell long-term assets, the company was able to benefit from the recovery in the credit markets and improvement in the values of its assets throughout the remainder of the year.

For the full year, PMT earned \(27.4 million in net income attributable to common shareholders, or \)0.27 per common share and declared dividends of \(1.52 per common share. Importantly, by the fourth quarter, PMT's quarterly dividend fully returned to its pre-COVID level of \)0.47 per common share, something few other mortgage REITs can state. Similarly, PMT's book value per share of \(20.30 almost returned to its pre-COVID level, a testament to PMT's disciplined approach in managing interest rate, credit and operational risk.

As a result of the Federal Housing Finance Agency's decision to end front-end lender risk share programs, PMT ceased new CRT investments in 2020. However, PMT was able to complete the purchase of its sixth, final and largest front-end lender risk share transaction with Fannie Mae in the fourth quarter, acquiring \(1.7 billion in floating-rate CRT bonds. Following the settlement, PMT again financed the asset through the issuance of secured term notes that do not contain mark-to-market margin call provisions, providing PMT with stable financing throughout much of its expected life. While the performance of PMT's CRT and MSR investments ultimately depend on fundamentals over the long term, we remain optimistic in the potential for these investments to deliver strong, long-term returns on equity. We believe significant home price appreciation and strong credit profiles of underlying borrowers, stable financing and our role as the servicer of the underlying loans, combined with the servicing expertise of our manager and service provider, PennyMac Financial Services, Inc. (NYSE: PFSI), will help support the performance of our investments.

PMT continues to benefit from its synergistic partnership with PFSI, which continues to make substantial investments in its technology and operating platform. For example, PennyMac's new correspondent lending portal, P3, introduced in 2020, seamlessly integrated with our proprietary loan bidding system to provide our correspondents with a new and improved customer experience. Additionally, PFSI's low cost and efficient operating platform enabled PMT to achieve record correspondent production volumes in 2020. In fact, PMT has been the

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largest correspondent aggregator in the U.S. for the past year and a half and we estimate our correspondent market share in the fourth quarter to be 20 percent. Related to servicing technology, PennyMac's proprietary loan servicing system enabled our manager's ability to effectively and efficiently assist borrowers with COVID-related hardships, with approximately 90% of forbearance requests being processed through its automated system.

In the near-term, we expect to continue leveraging PMT's leadership position in conventional correspondent production to source attractive investments in high-quality MSRs at these near-record low mortgage rates. Over time, we believe the role of correspondent aggregators will be increasingly more important given the adoption of the new PSPAs which placed limitations on the GSEs and our expectation that these limitations will create a heightened need for private capital in the changing mortgage market. PMT remains well-positioned as a source of that capital, with expertise in correspondent loan acquisition, private-label securitizations and managing investments related to the U.S. housing market. This positioning gives us confidence in our ability to continue delivering attractive risk-adjusted returns to our shareholders.

Finally, I am extremely grateful for the outreach from our many shareholders and business partners, and for their many kind words and condolences with respect to the sad passing of Stan Kurland, our founder and Chairman, in January of 2021. While Stan had retired from day-to-day responsibilities at PennyMac, he remained a trusted advisor and dear friend. His leadership helped lay the foundation for PennyMac's long-term success, which included building and developing a deep management team that carries on his legacy. I thank you for your continued trust and confidence in PMT.

Sincerely,

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David A. Spector

Chairman and Chief Executive Officer

April 1, 2021