Good afternoon, and welcome to the Second Quarter 2020 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, let me remind you that our discussion contains forward-looking statements that are subject to risks identified on Slide 2 that could cause our actual results to differ materially. Thank you. Now I'd like to begin by introducing David Spector, PennyMac Financial's President and Chief Executive Officer, who will review the company's second quarter 2020 results.

Thank you, Isaac. PennyMac Financial reported record earnings in the second quarter, driven by core Production and Servicing results, partially offset by fair value losses on mortgage servicing rights and associated hedging and other losses. Net income was $352.7 million or diluted earnings per share of $4.39. Book value per share increased 15% to $34.26 from $29.85 at the end of the prior quarter. In June, we purchased in the BlackRock foundation approximately 7 million shares of PFSI's common stock or approximately 9% of our total shares outstanding. The shares were purchased at a price of $34 per share. Finally, I'm pleased to note that PFSI's Board of Directors increased the quarterly cash dividend to $0.15 per share, a 25% increase from the prior quarter. Production segment pretax income was a record $538.1 million, up 124% from the prior quarter and up 448% from the second quarter of 2019, driven by record volumes in the direct lending channels and record margins across all of our channels. Direct lending locks were a record $13 billion in unpaid principal balance, up 31% from the prior quarter and 177% from the second quarter of 2019. Of these, $8.9 billion were in the Consumer Direct channel, while $4.1 billion were in the Broker Direct channel. Government correspondent lock volume was $12.9 billion in UPB, down 13% from the prior quarter, reflecting a temporary slowdown in the origination market for government loans early in the quarter from the impact of COVID-19. Government correspondent lock volume was up 7% from the second quarter of 2019. Total production volume for the quarter was $37.6 billion in UPB, up 6% from the prior quarter and up 56% from the second quarter of 2019. And finally, correspondent acquisitions of conventional loans fulfilled for PMT totaled $18.9 billion in UPB,…

Thank you, David. Our correspondent acquisition volumes increased slightly during the quarter, and we estimate our market share in the channel was 16.7%, essentially unchanged from 16.6% in the prior quarter, and up from 13.2% a year ago. We also estimate that this quarter, PennyMac's market share in Consumer Direct was 1%, essentially unchanged from the prior quarter and up from 0.61% a year ago. The year-over-year increase reflects our success in growing the Consumer Direct channel, and we are confident in our ability to continue growing this channel. Our Broker Direct channel market position grew quarter-over-quarter, reaching an estimated 1.8% market share, up from 1.5% in the first quarter and 1% in the second quarter of 2019. PennyMac entered the broker channel early in 2018, and I'm happy to announce we are already among the top 10 in the channel. As David mentioned, our Servicing portfolio grew slightly in the second quarter, and we estimate that we service over 3.4% of all mortgage debt outstanding in the U.S., unchanged from March 31, and up from 3.1% at June 30, 2019. Now let's turn to Slide 11 and discuss correspondent production highlights. Correspondent acquisitions by PMT totaled $29.9 billion in UPB in the second quarter, up slightly from the prior quarter and up 40% from the second quarter of 2019. 37% of PMT's acquisitions were government loans and 63% were conventional loans. Government loan acquisitions in the quarter totaled $11 billion in UPB, down 19% from the prior quarter as a result of a temporary slowdown in the origination market for government loans, which has since recovered. Conventional correspondent acquisitions for which PFSI earns a fulfillment fee, totaled $18.9 billion in UPB, up 17% from the prior quarter and 76% from the second quarter of 2019. Fulfillment fees paid by…

Thank you, Doug. I will discuss our investment management segment, then highlight some of the key trends and factors in PFSI's financial results. We encourage you to read our press release for more detailed information. Net assets under management totaled $2.2 billion at June 30th, up 23% from March 31st due to the increase in PMT's book value. PMT's earnings in the second quarter were primarily driven by record results in its correspondent production segment and a significant recovery in the fair value of its CRT investments from March 31st. Investment Management revenues were $10.5 million, up 7% from the prior quarter and 2% from the second quarter of 2019. PFSI did not recognize incentive fees in the second quarter and does not expect to for some time. PMT's current investment focus is conventional correspondent production and the resulting MSRs. Slide 17 summarizes the impact of our 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 and also considers production-related income, which totaled $538.1 million in the second quarter. In the second quarter, the fair value of our MSR decreased, resulting from expectations for increased prepayment activity in the future related to lower interest rates and higher-than-modeled actual prepayments. We maintained our hedge discipline throughout the market turmoil. However, elevated volatility early in the second quarter drove option costs to near record highs. The subsequent decrease in volatility by June 30th resulted in fair value losses on the options. Year-to-date, through June 30th, our MSR fair value losses have totaled $1.03 billion, offset by hedging and other gains totaling $1.04 billion. This is a reflection of PennyMac's disciplined focus on capital preservation and risk management to protect the value…

Thank you, Andy. During this period of historically low interest rates and disruption in the economy, PennyMac Financial was, and remains, a consistent and constructive source of new capital for consumers seeking to purchase a home or refinance their existing home throughout the COVID-19 crisis. I'm very proud of the hard work and investments we have made in our platform leading up to this period, which have established PennyMac as an industry leader with strong capabilities to best serve our customers while delivering record financial performance to our shareholders. We reported record Production segment results and strong operating earnings in our loan servicing segment, which drove 15% book value growth from the prior quarter. We continue to invest in our platform and are pleased to note a new milestone in the development of our production technology, with the launch of P3 for our correspondent customers as part of our vision to have a single cloud-based platform for all production channels. The new portal is designed to drive operational efficiencies and an improved customer experience across all channels while increasing the speed of system enhancements. Additionally, we continue to be a positive force in the economy as we hired over 1,000 new PennyMac-ers in the quarter to enable us to address the planned growth in our direct lending platforms and assist our borrowers with hardships. PennyMac's substantial investments in people, systems and infrastructure throughout its history have positioned us uniquely to address the very large opportunity in the mortgage markets. I am proud of the role this company continues to play in the economic recovery. And while prospects for the U.S. economy remain uncertain, given the present market environment, we expect PFSI's exceptional financial performance to persist into 2021. Lastly, we encourage investors with any questions to reach out to our Investor Relations team by e-mail or phone. If any such questions are received, we will post a Q&A to our website. 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.