Good afternoon, and welcome to the Third 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 two of the presentation. Thank you. Now, I'd like to turn the discussion over to Stan Kurland, PennyMac Financial's Executive Chairman.

Thank you, Isaac. PennyMac Financial's third quarter earnings reflected another exceptional quarter of operating performance as we achieved quarterly records for the company's pretax income and operating earnings. Our results were driven by outstanding performance in our production segment and continued discipline in the execution of our interest rate risk, hedging strategy that effectively offset the majority of the fair value losses on our mortgage servicing rights as a result of declining mortgage rates. PennyMac Financial earned net income of $121.5 million or diluted earnings per share of $1.51 for the third quarter. Book value per share increased to $24.37 from $22.72 per share at the end of last quarter. Notably, the company has initiated a quarterly cash dividend and its Board of Directors has declared a third quarter cash dividend of $0.12 per share. I will discuss this in further detail later in my presentation. Production segment pretax income was $179.3 million, up 82% from the prior quarter and 599% from the third quarter of 2018, driven by record quarterly production volumes and higher margins across all of our production channels. Total production volume for the quarter was $34.9 million in unpaid principal balance, up 44% from the prior quarter and 94% from the third quarter of 2018. PFSI's lock volume in the correspondent channel, consisting of correspondent government and non-delegated locks was $16.8 billion in UPB, up 33% from the prior quarter and 80% from the third quarter of 2018. Direct lending locks were a record $5.6 billion in UPB, up 39% from the prior quarter and 184% from the third quarter of 2018. And finally, correspondent acquisitions of conventional loans fulfilled for PMT totaled $16.6 billion in UPB, up 55% from the prior quarter and 122% from the third quarter of 2018. Let's continue on slide four,…

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 was the fourth largest producer of mortgage loans in the country during the third quarter. We increased our correspondent acquisitions by 45% in the quarter, driving our market share up to 14.5% in the third quarter, up from 13.5% in the prior quarter and up 11.6% a year ago. We believe our commitment to consistently high service levels and fast turn times is key to our success in winning business from our correspondent seller network. And we expect this to continue to drive further growth in our market share over time. We estimate that this quarter, PennyMac's market share in consumer direct reached 0.7%, up from 0.6% last quarter and 0.5% a year ago, as we successfully leveraged our infrastructure to address the larger refinance opportunity provided by lower interest rates in our servicing portfolio. Our broker direct channel market position grew significantly quarter-over-quarter, driven by an increase in the brokers approved to offer our products and higher levels of engagement. Our servicing portfolio continued its growth in the third quarter as Stan mentioned, and we estimate that we now service 3.2% of all mortgage debt outstanding in the United States, up from 3.1% at June 30th and 2.6% at September 30th of last year. Now, let's turn to slide nine and discuss correspondent production highlights. Correspondent acquisitions by PMT totaled $31.5 billion in UPB in the third quarter, up 45% from the prior quarter and 90% from the third quarter of 2018. The mix of our acquisition activity was 54% conventional loans and 46% government loans. Government loan acquisitions in the quarter for which PMT earns a sourcing fee from PennyMac Financial,…

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 14 summarizes the impact of our hedging results on earnings for the third 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 third quarter, we recorded fair value losses on our MSR asset totaling $295.5 million or approximately 11% of the fair value at June 30th. These fair value losses were driven primarily 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 of $254 million, net of ongoing hedge costs, which have been elevated due to market volatility. As Stan mentioned earlier, our consistent profitability and book value growth across varying market environments could not be achieved without the successful execution of our interest rate risk management strategy. Now, let's turn to slide 15 and discuss the profitability of our servicing segment. Pretax income, excluding valuation-related changes was $25.2 million in the third quarter, down from $47.1 million in the prior quarter and $29.9 million in the third quarter of 2018. Driven by our servicing portfolio growth, operating revenues continued to increase. The increased revenue in the third quarter was largely offset by higher realization of cash flows due to higher expected prepayments from lower interest rates. We incurred additional technology-related expenses of $7 million quarter-over-quarter for the development and completion of our servicing system modules. With the completion of this initiative, we expect servicing technology-related expenses in 2020 to be $15 million to $20 million lower than in 2019. We also incurred $9 million of additional expenses related to the increased Ginnie Mae buyout volumes that Stan and David discussed earlier. We expect this elevated activity to drive increased future period income as loans are modified or re-performed and become eligible for redelivery. And with that, I would like to turn it back over to Stan, for some closing remarks.

Thank you, Andy. Now in our 12th year of operations, PennyMac Financial has established itself as a leading independent mortgage banking enterprise, with the demonstrated ability to profitably navigate and grow through varying market environments. We are positioned for continued growth as we evolve our loan production and servicing platforms to provide sustainable, long-term competitive advantage. In addition to our record financial results, we achieved two notable milestones this quarter; the successful completion of our servicing system environment, and the initiation of a quarterly cash dividend. The forefront of our strategic mission is to deliver superior returns and value to our stockholders. And we believe the establishment of a quarterly cash dividend is an important component in the structure of providing long-term sustainable stockholder returns. Lastly, we encourage investors with any questions to reach out to our Investor Relations team by e-mail or phone. Thank you. End of Q&A: This concludes PennyMac Financial Services, Inc.'s third 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.