Good afternoon, and welcome to the Third Quarter 2017 Earnings Discussion for PennyMac Financial Services, Inc. The slides that accompany this discussion are available from PennyMac Financial's website at www.ir.pennymacfinancial.com. Before we begin, please take a few moments to read the disclaimer on slide 2 of the presentation. Thank you. Now I would like to turn the discussion over to Stan Kurland, PennyMac Financial's Executive Chairman.

Thank you, Chris. Let's begin with slide 3. PennyMac Financial delivered strong results for the third quarter, driven by solid contributions from our Production and Servicing segments, reflecting the ongoing strength of our market-leading mortgage franchise. For the third quarter, PennyMac Financial earned pretax income of $94.1 million and diluted earnings per share of $0.71. Book value increased to $17.20 per share, up from $16.40 per share at June 30 and from $14.41 a year ago. During the quarter, we repurchased approximately 500,000 shares of PFSI Class A common stock at a cost of $8.6 million and an average price of $17.01 per share. Our Production segment pretax income was $69 million, up 3% from the prior quarter and down 54% from the third quarter of 2016. These results reflect the continued strong contributions from both the correspondent and consumer direct channel this quarter. Total production volume for the quarter was $18.9 billion in UPB, up 8% from the prior period, and down 8% from the third quarter of 2016. Total correspondent, government and consumer direct locks were $13.2 billion in UPB, down 2% from the prior quarter and 19% from the third quarter of 2016. The Servicing segment recorded pretax income of $24.5 million compared to pretax losses of $11.2 million in the prior quarter and $10.7 million in the third quarter of 2016. These results were primarily driven by growth in our Servicing portfolio, which totaled $238.4 billion in UPB, up 4% from June 30 and up 31% from September 30 a year ago. During the quarter, we successfully transferred $11.9 billion in UPB of MSRs from previously settled acquisitions. We also successfully issued a second-term note from our Ginnie Mae MSR financing facility. This transaction was a $500 million 5-year note, and we are pleased with the…

Thank you, Stan. On slide 13, let's begin with a review of market share and volume trends across PennyMac Financial's businesses. PennyMac Financial was the fourth largest producer of mortgage loans in the United States during the third quarter, according to Inside Mortgage Finance. And we estimate that we ended the quarter as the 8th largest servicer. Correspondent and consumer direct market shares for the third quarter were both up modestly. Additionally, market estimates indicate that we serviced 2.3% of all mortgage debt outstanding in the United States. And our Investment Management business, net assets under management were $1.6 billion, essentially unchanged from the prior quarter. Now let's turn to slide 14 and discuss correspondent production. Correspondent acquisitions by PMT in the third quarter totaled $17.4 billion in UPB, up 7% from the second quarter, while down 8% year-over-year. Government loan acquisitions accounted for 62% of total correspondent acquisitions or $10.9 billion in UPB in the third quarter, up from $10.4 billion in UPB in the prior quarter, while down from $11.7 billion in UPB in the third quarter of 2016. Conventional conforming acquisitions for which PennyMac Financial perform fulfillment services for PMT totaled $6.5 billion in UPB in the third quarter, up 10% from the prior quarter, while down 10% year-over-year. Total lock volume for the quarter was $17.4 billion in UPB, down 5% from the prior quarter and 19% year-over-year. Government locks totaled $11 billion in UPB in the third quarter, down 2% from the previous quarter and 15% year-over-year. Continued strong purchase-money demand was the primary driver of this quarter's correspondent production volume growth. Purchase-money loans accounted for 83% of total correspondent production during the third quarter, up slightly from 82% in the prior quarter. The purchase-money orientation of our correspondent production volume continues to be an…

Thank you, David. Slide 19 is an overview of PennyMac Financial's results by operating segment. Stan reviewed these figures for the third quarter earlier, and the table shows trends for the last 5 quarters. Let's turn to slide 20 and take a look at the impact of our hedging approach on third quarter earnings. PennyMac Financial seeks to moderate the impact of interest rate changes through a comprehensive hedge strategy that also considers production-related income. Our strategy is designed to partially offset MSR fair value changes associated with significant interest rate movements using hedge instruments. As Stan mentioned earlier, mortgage rates declined during the quarter to their lowest levels of 2017, but ultimately rebounded to within a few basis points of where they were at the beginning of the quarter. This contributed to fair value losses and impairment charges on the MSR asset totaling $22 million, which were due to a combination of yield curve flattening, tighter mortgage spreads and higher-than-expected prepayment activity during the quarter. The change in fair value of the ESS liability and hedge activity contributed fair value gains of $12 million, partially offsetting the MSR valuation losses. Now let's go to slide 21 and take a closer look at the results of our Production segment. Production segment revenues were $142 million for the third quarter, up 9% from the prior quarter. Production revenue for PFSI's own account, which includes net gains on mortgage loans held for sale, loan origination fees, net interest income and other revenue, increased 9% from the prior quarter, primarily driven by increased pull through on interest rate lock commitments and the consumer direct channel. Total revenue per lock commitment was 90 basis points in the third quarter, up from 81 basis points in the prior quarter. The gross consumer direct margin for…

Thank you, Andy. We continue to make progress in pursuing long-term growth initiatives to ensure PennyMac Financial's success. This year, we have made significant strides on a number of capital initiatives, including our term note issuances, which represent a paradigm shift in our access to capital that significantly enhances our growth potential, the sale of substantially all of the assets in the Investment Funds and raising significant new capital for PMT and the opportunity to buy back PFSI's common stock. As in our other mortgage banking businesses, where we have developed significant technology solutions, we are now introducing our unique broker POWER platform, enabling our entry into the broker direct channel and allowing us to access an additional 10% of the mortgage origination market. We believe all of these initiatives should contribute to our long-term success and help ensure that PennyMac Financial continues to be a leader in the dynamic and highly competitive U.S. mortgage market. Lastly, we encourage investors with any questions to reach out to our Investor Relations team by email or phone. Thank you.

This concludes PennyMac Financial Services, Inc.'s third quarter earnings discussion. For any questions, please visit our website at www.ir.pennymacfinancial.com or call our Investor Relations department at 818-264-4907. Thank you.