Good afternoon and welcome to the Second Quarter 2019 Earnings Discussion for PennyMac Financial Services, Inc. The slides that accompany this discussion are available on PennyMac Financial’s website at 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 second quarter earnings reflect exceptional operating performance across all of our business segments, driven by increased profitability in our production segment and a continued focus on disciplined execution of hedging the interest rate risk inherent in our mortgage servicing rights. PennyMac Financial earned net income of $72.7 million or diluted earnings per share of $0.92 for the second quarter. During the quarter we repurchased approximately 50,000 shares of PFSI common stock at a weighted average price of $20.77, which reflects our strategy to support our stock when it is trading at levels we see is below the intrinsic value of the company. Book value per share increased to $22.72 from $21.72 per share at the end of last quarter. Production segment pre-tax income was $98.2 million, up 109% from the prior quarter and 417% from the second quarter of 2018, driven by record quarterly production volumes and higher margins in our direct lending channels. Production volumes totaled $24.1 billion in unpaid principal balance, up 45% from the prior quarter and 51% from the second quarter of 2018.PFSIs lock volume in the correspondent channel, consisting of correspondent, government and non-delegated locks was $12.7 billion in UPB, up 64% from the prior quarter and 24% from the second quarter of 2018. Direct lending locks totaled $4.1 billion in UPB, up 53% from the prior quarter and 129% from the second quarter of 2018. And finally correspondent conventional loan acquisition volume totaled $10.7 billion in UPB, up 32% from the prior quarter and nearly double the volume in the second quarter of 2018 resulting in $29.6 million of fulfillment fee revenue. Continuing the quarters highlights on Page 4, the servicing segment recorded a pre-tax loss of $2.7 million, down from pre-tax income of…

Thank you, Stan. Let's start with a review of market share trends across PennyMac Financial’s businesses. According to industry data reported by Inside Mortgage Finance, PennyMac Financial’s grown its market share in both production and servicing businesses over the last two years. We remain the number one producer of government insured mortgages, a market position that we maintained over the last three years. In the conventional market we've increased our market share substantially. We estimate that PennyMac’s correspondent and consumer direct market share grew year-over-year, although down somewhat from the first quarter, given the significant market expansion as mortgage rates decline. Market share in our broker direct channel grew significantly as we continued to build out our capabilities in this channel. As Stan mentioned earlier, our servicing portfolio continue to grow in the second quarter and we estimate that we now service over 3% of our mortgage debt outstanding in the United States, up from 2.9% at March 31 and 2.4% a year ago. Now let's turn to Slide 9 and discuss correspondent production highlights. Correspondent acquisitions by PMT in the second quarter totaled $21.7 billion in UPB, up 44% from the prior quarter and 45% from the second quarter of 2018, split almost evenly between government insured and conventional loan acquisitions. Government insured loan acquisitions totaled $10.6 billion in UPB, up from $6.8 billion in the prior quarter and $9.5 billion in the second quarter of 2018.conventionalconforming acquisitions totaled $10.7 billion in UPB, up 32% from the prior quarter and 99% from the second quarter of 2018. Our non-delegated correspondent business also continued to grow in the quarter with volume totaling $402 million in UPB, up 132% from the prior quarter. Total government and non-delegated lock volume was $12.7 billion in UPB, up 64% from the prior quarter and…

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 second quarter earnings for further details. Slide 14 summarizes the impact of our successful hedging results on earnings for the second quarter. Our comprehensive hedging strategy is designed to moderate the impact of interest rate changes on the fair value of our MSR asset, while also taking into account production related income. In the second quarter, we recorded fair value losses on our MSR asset, totaling $259.2 million or 9% of the fair value at March 31.These fair value losses were driven by expectations for elevated prepayment activity in the future due to lower mortgage rates. MSR fair value losses were largely offset by hedging and other gains which were reduced by ongoing hedge costs and added to a total of $206.8 million. As Stan mentioned earlier our consistent profitability and book value growth across different interest rate environments cannot be achieved without the successful focus on an execution of our comprehensive interest rate risk management approach. Now let's turn to Slide 15 and discuss the profitability of our servicing segment. Pre-tax income excluding valuation related changes was $47.1 million in the second quarter, up from $35.3 million in the prior quarter and $35.8 million in the second quarter of 2018.Record operating results this quarter were driven by portfolio growth combined with effective expense management. As a percentage of the average servicing portfolio UPB, operating expenses continued to decline, demonstrating the economies of scale we continued to achieve in our servicing operations. Our pre-tax income excluding valuation related changes included EBO related earnings that were $3 million higher than in the prior quarter. The increase was driven by the expanded opportunities in the current interest rate environment to buyout eligible loans profitably and for consumer loan modifications that David discussed previously. And with that, I would like to turn it back over to Stan for some closing remarks.

Thank you, Andy. PennyMac Financial has built an operating platform that we believe is unmatched in the mortgage industry to handle large growing volumes of loans at the highest standards of quality and to deliver strong performance across different market environments. Our ability to react swiftly to the increased opportunity in the loan production market reflects the significant and ongoing investments in technology and operational enhancements, such as in our mortgage fulfillment division over the past several years. Given the present market environment, we anticipate exceptional performance for PennyMac Financial to persist throughout the second half of this year while the continued growth of our servicing portfolio is anticipated to drive long-term earnings performance. 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 second quarter earnings discussion. For any questions, please visit our website at ir.pennymacfinancial.com or call our Investor Relations department at 818-264-4907. Thank you.