Good afternoon and welcome to the Third Quarter 2018 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’s third quarter results demonstrate the earnings power of our comprehensive mortgage banking platform against the backdrop of a rising rate environment and heightened competition among industry participants adjusting capacity to a smaller origination market. I am also pleased to announce today that we completed our corporate reorganization, simplifying our corporate structure with the conversion of all equity ownership to a single class of publicly traded common stock. I will expand on the benefits and key implications a bit later in my presentation. For the third quarter, our production segment results increased from the prior quarter, along with solid earnings contributions from servicing and investment management. PennyMac Financial earned pre-tax income of $61.7 million and diluted earnings per share of $0.57. Book value per share increased to $21.47 from $21.19 per share at June 30. Pro forma for the company’s reorganization, book value was $20.65 per share. Our production segment pre-tax income was $25.7 million, up 35% from the prior quarter and down 63% from the third quarter of 2017. Acquisition and origination volume totaled $17.9 billion in UPB, up 12% from the prior quarter and down 6% from the third quarter of 2017. Total correspondent government and direct lending locks were $11.1 billion in UPB, down 6% from the prior quarter and 16% from the third quarter of 2017. The servicing segment recorded pre-tax income of $33.6 million, down $54.6 million in the prior quarter and up from $24.5 million in the third quarter of 2017. Excluding valuation-related items, pre-tax income for the servicing segment was $29.9 million, down 17% from the prior quarter and 19% from the third quarter of 2017. Valuation-related items for the third quarter included $60.9 million of increase in MSR fair values, partially offset by…

Thank you, Stan. On Slide 11, let’s begin with the review of market share and volume trends across PennyMac Financial’s businesses. As Stan mentioned, PennyMac Financial remained the fourth largest producer of mortgage loans and the eighth largest servicer in the country according to Inside Mortgage Finance. PennyMac increased its correspondent market share to an all-time high with channel volume up 10% as we profitably grew volume in a smaller market. Our consumer direct market share rebounded this quarter as we increased volume 41% from the prior quarter. We estimate that our servicing portfolio now represents over 2.6% of all mortgage debt outstanding in the United States at quarter-end, up from 2.4% at June 30. Again, in our Investment Management business, net assets under management were $1.6 billion, up slightly from the prior quarter. Now let’s turn to Slide 12 and discuss correspondent production highlights. Correspondent acquisitions by PMT in the third quarter totaled $16.5 billion in UPB, up 10% from the prior quarter and down 5% from the third quarter of 2017. Government loan acquisitions accounted for 54% of total correspondent acquisitions or $9 billion in UPB in the third quarter, down from $9.5 billion in UPB in the prior quarter and $10.9 billion in UPB in the third quarter of 2017. Conventional conforming acquisitions, for which PennyMac Financial performed fulfillment services for PMT, totaled $7.5 billion in UPB, up 39% from the prior quarter and 15% year-over-year, reflecting our unique execution capabilities and improved market conditions during the quarter. The weighted average fulfillment fee in the third quarter was 35 basis points, up from 27 basis points for the previous quarter. Total lock volume for the third quarter was $17.7 billion in UPB, up 9% from the prior quarter and 2% year-over-year. Government locks totaled $9.1 billion in…

Thank you, David. I will highlight some of the key trends and factors in our financial results on the next couple of slides. We encourage you to read our press release on third quarter earnings for further details. Slide 17 summarizes the impact of our hedging approach on third quarter earnings. Our hedging strategy is designed to moderate the impact of volatility and interest rates on the fair value of the MSR asset while also considering the impact of production-related income. In the third quarter, we recorded fair value gains on our MSR asset totaling $60.9 million, which primarily resulted from expectations for lower prepayment activity in the future, driven by the increase in mortgage rates during the quarter. The MSR gains were largely offset by $53 million in associated hedging activities and a $1.1 million increase in the fair value of the ESS liability, also driven by higher mortgage rates and a reduction in expected prepayments. Now let’s go to Slide 18 and review the profitability of our servicing segment. The servicing segment continues to be a major contributor to the company’s financial results. For the third quarter, pre-tax income, excluding valuation-related changes, was $29.9 million versus $35.8 million in the prior quarter and $37.1 million in the third quarter of 2017. The results this quarter were adversely affected by $4.6 million in interest expense recognized due to the refinancing of term notes in August. As Stan mentioned earlier, the refinancing of the term notes will result in an annual interest savings of approximately $7 million going forward. Operating revenue increased, driven by a larger servicing portfolio and higher interest income from custodial deposits. The increase in revenue was partially offset by increased realization of MSR cash flows and lower EBO-related revenue, resulting from a reduced modification pipeline and lower redelivery margins due to higher interest rates. EBO-related expenses also increased due to a higher volume of loan buyouts from Ginnie Mae securities during the quarter. Overall, the core financial performance of our servicing business remains strong, and we expect this segment to deliver a greater contribution to PennyMac Financial’s earnings as the servicing portfolio continues to grow and as we capture greater efficiencies in our operations. And with that, I would like to turn it back over to Stan for some closing remarks.

Thank you, Andy. As the mortgage market continues to adjust to higher rates, PennyMac Financial stands out from the competition by continuing to deliver strong production results and servicing portfolio growth. The earnings contributions from our growth initiatives focused on product and channel development will become increasingly meaningful over time. Underlying our success has been the strength of our management team and the development of new technologies across our business to drive greater operational capacity and efficiency. We expect to see consolidation in the mortgage market, and successful firms will be the ones that have the size, scale and technological capabilities to compete. We continue to make investments in technologies to further solidify our position as a leading, cost-efficient producer of residential mortgages and are confident that we are well positioned to benefit from the changes taking place in the mortgage market. 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 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.