Quantifying PAA Accretion Sensitivity to Prepayment Speed Changes in Q1 2026

Quantifying the expected quarterly PAA accretion run-rate sensitivity to prepayment speed (basis points or $ per 100 bps)

1) What the filings do (and don’t) provide

Across the provided Q1’26 earnings transcript excerpts, management explains that PAA / accretion income fluctuates primarily with prepayment activity timing and that it’s “very difficult to predict.” ¹²³ The excerpt also gives a baseline “excluding accelerated/prepayments” accretion range and characterizes accelerated prepayment accretion as a smaller “wildcard.” ¹

However, the excerpts do not quantify how much accretion changes when prepayment speed changes by a defined magnitude (e.g., “+100 bps” change in prepayment speed) and therefore do not provide a direct basis-point or $-per-100-bps sensitivity that could be computed from the text alone. ¹²³

2) Extractable baseline run-rate context (for anchoring an order-of-magnitude, not sensitivity)

From management’s baseline commentary:

• Base level (excluding early/prepayments accelerated accretion): about $10 million to $11 million per quarter on the “loan accretion side.” ¹
• Accelerated prepayment contribution: described as running “more in the $3 million a month kind of thing.” ¹
  • That implies roughly $9 million per quarter (i.e., $3M/month × ~3 months), assuming the monthly characterization remains stable through the quarter. ¹

So, total quarterly accretion could be thought of as:

• Baseline: ~$10–$11M/quarter ¹
• Prepayment acceleration “wildcard”: ~$9M/quarter (implied by ~$3M/month) ¹
• Total implied run-rate: roughly ~$19–$20M/quarter, before considering one-time adjustments and quarter-to-quarter variability. ¹²

Management also highlights quarter-to-quarter fluctuation (“could be more higher, it could be lower”) depending on what prepayments occur, and notes they were “high in the fourth quarter” and “lower this quarter” excluding a $3.5 million nonrecurring adjustment. ²

3) Sensitivity to a “prepayment speed change” (what we cannot precisely quantify from this text)

To answer the question as asked—“expected quarterly accretion run-rate (PAA) sensitivity to prepayment speed changes in basis points or $ per 100 bps change”—we would need, at minimum:

• A stated mapping from prepayment speed metric change (e.g., +100 bps in CPR/SMM or similar) to incremental accelerated prepayment cashflows, and then to incremental accretion income; or
• A model/output showing that PAA accretion varies by X dollars when prepayment speed changes by Y.

None of the excerpts provide:

• The definition/scale of “prepayment speed” (CPR/SMM? cohort? portfolio-specific metric?), ¹²
• Any per-100 bps change scenario analysis, ¹²
• Any expressed derivative like “each 100 bps of prepayment speed changes accretion by $Z per quarter.” ¹²³

Instead, management emphasizes volatility and unpredictability of prepayments and refers to general run-rate observations (“normalized… more in the $3 million a month kind of thing”). ¹²³

4) Best possible quantitative framing using only what’s disclosed (range decomposition, not derivative)

While we cannot produce a true “$/100 bps” sensitivity from the excerpt, we can quantify how much of the quarterly run-rate is exposed to prepayment volatility:

• The portion tied to accelerated prepayments is the “wildcard,” described at ~$3M/month ≈ ~$9M/quarter. ¹
• The portion that is more stable accounting/tailwind is $10M–$11M/quarter excluding accelerated prepayments. ¹

So, the maximum disclosed volatility exposure (within the disclosed decomposition) is on the order of $9M/quarter attributable to prepayment-driven acceleration, relative to a total baseline of ~$10–$11M/quarter. ¹

But translating that into sensitivity per +100 bps prepayment speed is not possible without an explicit change-in-speed scenario. ¹²³

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Conclusion (direct answer)

• A precise expected quarterly PAA accretion sensitivity to prepayment speed changes (e.g., $ per +100 bps prepayment speed) cannot be quantified from the provided excerpts, because management does not disclose any per-100 bps scenario or derivative relationship linking prepayment speed deltas to accretion deltas. ¹²³
• The excerpts only support a decomposition of the quarterly accretion run-rate into:
  • Stable baseline accretion: ~$10M–$11M per quarter (excluding accelerated prepayments), ¹
  • Prepayment-accelerated component (“wildcard”): ~$3M per month ≈ ~$9M per quarter, ¹
  • With quarter-to-quarter variability driven by actual prepayment timing and magnitude. ²³

If you want, you can provide the specific prepayment-speed metric definition and any “+100 bps speed → accretion impact” disclosures from the same filing (or model appendix). Without that, a true “$/100 bps” sensitivity would be fabricated rather than analytically derived—something this excerpt set does not permit. ¹²³