Good afternoon, and welcome to the Second Quarter 2018 Earnings Discussion for PennyMac Financial Services, Inc. The slides that accompany this discussion are available from PennyMac Financial's Web site 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'd 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's second quarter results demonstrate the earnings power of our comprehensive mortgage banking platform against the backdrop of a rising interest rate environment and heightened competition among industry participants adjusting capacity to a smaller origination market. While the origination market environment continued to adjust to higher rates, the earnings contribution from our production segment increased from the prior quarter, driven by higher production volumes, while the servicing segment continued to deliver strong results this quarter. PennyMac Financial earned pretax income of $74.7 million and diluted earnings per share of $0.70. During the quarter, we repurchased approximately 236,000 shares of PFSI Class A common stock at a cost of $4.8 million at an average price of $20.41 per share. Book value per share increased to $21.19, from $20.74 per share at March 31 and $16.40 a year ago. Our production segment, pretax income was $19 million, up 11% from the prior quarter and down 71% from the second quarter of 2017. Acquisition and origination volume totaled $15.9 billion in UPB, up 11% from the prior quarter and down 9% from the second quarter of 2017. Total correspondent government and direct lending locks were $11.9 billion in UPB, up 9% from the prior quarter and down 12% from the second quarter of 2017. The Servicing segment recorded pretax income of $54.6 million, modestly down from $54.9 million in the prior quarter and significantly improved from a loss of $11.2 million in the second quarter of 2017. Excluding valuation related items, pretax income for the servicing segment was $35.8 million, down 1% from the prior quarter and up 134% from the second quarter of 2017. Valuation related items for the second quarter included a $42.3 million increase in MSR fair values, partially offset by…

Thank you, Stan. On Slide 7, let's begin with a review of market share and volume trends across PennyMac Financial's businesses. For the second quarter, PennyMac Financial remained the fourth largest producer of mortgage loans and the 8th largest servicer in the country according to Inside Mortgage Finance. Correspondent market share decreased in the second quarter, primarily because our origination volumes slightly under-indexed the total correspondent market growth. Our consumer direct market share dipped, resulting from a drop in volume this quarter, which I'll discuss in more detail later on in my presentation. We estimate that our servicing portfolio represents approximately 2.5% of all mortgage debt outstanding in The United States at quarter end, up from 2.4% last quarter. In our investment management business, net assets under management were $1.5 billion, essentially unchanged from the previous quarter. Now let's turn to Slide 8 and discuss correspondent production highlights. Correspondent acquisitions by PMT in the second quarter totaled $15 billion in UPB, up 15% from the prior quarter, while down 8% from the second quarter of 2017. Government loan acquisitions accounted for 64% of total correspondent acquisitions or $9.5 billion in UPB in the second quarter, up from $8.8 billion in UPB in the prior quarter and down from $10.4 billion in UPB in the second quarter of 2017. Conventional conforming acquisitions, for which PennyMac Financial performed fulfillment services for PMT, totaled $5.4 billion in UPB in the second quarter, up 28% from the prior quarter and down 9% year-over-year. The weighted average fulfillment fee in the second quarter was 27 basis points, down from 28 basis points for the previous quarter. Total lock volume for the second quarter was $16.2 billion in UPB, up 20% from the prior quarter, while down 11% year-over-year. Government locks totaled $10.1 billion in UPB…

Thank you, David. I'll highlight some of the key trends and factors in our financial results on the next couple slides. We encourage you to read our press release on second quarter earnings for further details. Slide 13 summarizes the impact of our hedging approach on second quarter earnings. Our hedging strategy is designed to moderate the impact of volatility in interest rates on the fair value of the MSR asset, while also considering the impact of production-related income. As Stan discussed earlier, mortgage rates rose during the second quarter and ended the quarter about 11 basis points higher than the end of the prior quarter. We recorded fair value gains in our MSR asset, totaling $42.3 million, which primarily resulted from expectations for lower prepayment activity in the future driven by the increase in mortgage rates. The MSR gains were partially offset by associated hedging activities and an increase in the fair value of the ESS liability, also due to the rise in mortgage rates and a reduction in expected prepayments. Now let's go to Slide 14 and review the profitability of our Servicing segment. The Servicing segment was a major contributor to the company's financial results for the second quarter, and pretax income benefited from the valuation-related gains I discussed on the previous slide. Excluding valuation-related changes, Servicing segment pretax income was $35.8 million versus $36.3 million in the prior quarter and $15.3 million in the second quarter of 2017. Operating revenue increased driven by portfolio growth and higher interest income from custodial deposits, partially offset by an increase in the realization of MSR cash flows. EBO related revenue decreased somewhat from the elevated levels of the first quarter, while EBO transaction-related expense increased due to a higher volume of buyouts from Ginnie Mae securities during the second quarter. Interest expense decreased during the second quarter due to the accelerated recognition of costs related to the refinancing of MSR backed term notes in the prior quarter. Overall, the financial performance of our servicing portfolio remained strong and we expect the segment to deliver greater earnings contributions as the servicing portfolio continues to grow. And with that, I would like to turn it back over to Stan for some closing remarks.

Thank you, Andy. We continue to invest and pursue the build-out of our business model into new mortgage market segments, products and channels. We believe, we are well positioned to expand our growth and earnings opportunities with the investments we are making in our production and servicing businesses. In consumer direct lending, we are seeing success in non-portfolio and purchase-money originations, both of which are important to growing volumes. Further, our investments in the broker direct channel are beginning to deliver results and demonstrate our ability to access this previously untapped market segment. We are making technology investments across our business, such as in-loan servicing where system enhancements will allow us to capture greater scale efficiencies. We also remain mindful of prudent expense management and are monitoring the deployment of our human resources and capital to ensure we continue to operate at high levels of efficiency and continue delivering attractive returns to stockholders. Lastly, we encourage investors with any questions to reach out to our Investor Relations team by e-mail or phone. Thank you.

This concludes PennyMac Financial Services, Inc.'s second quarter earnings discussion. For any questions, please visit our Web site at www.ir.pennymacfinancial.com, or call our Investor Relations Department at 818 264 4907. Thank you. End of Q&A: