Good afternoon and welcome to the Second Quarter 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 two that could cause our actual results to differ materially as well as non-GAAP measures that have been reconciled to their GAAP equivalent in our earnings presentation. Now, I'd like to begin by introducing David Spector, PennyMac Financial's Chairman and Chief Executive Officer who will review the company's second quarter 2020 results.

Thank you, Isaac. PFSI continues to distinguish itself as a best-in-class mortgage company, delivering strong financial results in the second quarter with an annualized return on equity of 15%. Improved margins across all three channels, combined with the quick decisive and meaningful actions taken earlier this year to align our expenses with lower expected levels of activity, led to continued profitability in our production segment, despite higher interest rates, increased volatility, and industry overcapacity. We also saw strong contributions from our servicing business, which continues to grow organically driven by production from all three origination channels. This quarter total loan acquisition and origination volume of $27 billion, more than offset $18 billion in runoff and we ended the quarter with a servicing portfolio of 2.2 million customers, representing nearly $530 billion in unpaid principal balance, up from $519 billion at March 31st and $473 billion at June 30th, 2021. As demonstrated by this quarter's strong results, the growth of our servicing portfolio will continue to differentiate PFSI and serve as an important asset while the origination landscape remains competitive and challenging. In PFSI's Investment Management segment, net assets under management were $2.1 billion at quarter end, down from the prior quarter due to PMT's financial performance, which has been under pressure given the impact of widening credit spreads on its investments. In total, this strong financial performance drove continued growth in book value per share, which was up 5% from March 31st to $65.38 at June 30th. We continue to prudently manage capital across the company and in the second quarter, we repurchased 2.4 million shares of PFSI common stock at an average price of $46.81 for an approximate cost of $114 million, significantly below current book value per share. In July, we repurchased an additional 478,000 shares at an…

Thanks, David. Overall production was solid with margins improving across all three of our production channels. PennyMac maintained its leadership position in the correspondent channel and we estimate that over the past 12 months we represented approximately 14.7% of the channel overall. Total correspondent loan acquisition volume was $21 billion in the second quarter. 51% or $10.6 billion were government loans and 49% or $10.3 billion were conventional conforming loans for which PFSI earns a fulfillment fee from PMT. Government acquisition volumes declined consistently with industry volumes, while conventional correspondent acquisitions were up, as our correspondent partners are increasingly looking to sell loan servicing released to high-quality aggregators such as PennyMac. Our reputation in the industry and consistent commitment in the channel have provided our partners the stability and support they need to navigate the current environment. Government correspondent lock volume was $11.3 billion, down 9% from the prior quarter. Revenue per fallout adjusted government lock in the second quarter was 27 basis points, up from 23 basis points in the prior quarter. The scale we have achieved in our correspondent business, combined with our low-cost structure and operational excellence in the channel allowed us to operate efficiently through the volatile market environments. In July, correspondent acquisitions were $7 billion and locks were $6.8 billion. Turning to Consumer Direct. Our market share has nearly doubled since 2020 and we accounted for approximately 1.6% of total originations in the channel over the last 12 months. Origination volumes for the second quarter were $3.7 billion and interest rate lock commitments were $4.3 billion, reflecting a steep decline in refinances. We introduced several new products aimed at growing our share of the purchase money loans including Lock and Shop, which allows for borrowers to lock in at current mortgage rates for up to…

Thanks, Doug. As David mentioned earlier, PFSI's net income was $129 million or diluted earnings per share of $2.28. Production segment pre-tax income was $9.7 million. As you will see on Slide 10, we provide a breakdown of the revenue contribution from each of PFSI's loan production channels, net of loan origination expenses including the fulfillment fees received from PMT for conventional correspondent loans. Production revenue margins were higher in all three channels compared to the prior quarter. Revenue per fallout adjusted lock for PFSI's own account was 99 basis points in the second quarter, down slightly from 102 basis points in the prior quarter due to a higher percentage of our volume in the correspondent channel. This includes $6.7 million in gains realized related to the timing of revenue and loan origination expense recognition, hedging, pricing and execution changes and other items. Expenses in our production segment have declined from the prior quarter. And as David mentioned, we currently expect them to be reduced further from current levels in the second half of 2022. The servicing segment recorded pretax income of $167.6 million down from pretax income of $225.2 million in the prior quarter, and up from $30.9 million in the second quarter of 2021. Pretax income excluding valuation related items for the servicing segment was $88 million, up slightly from the prior quarter as higher loan servicing revenue and lower expenses were largely offset by higher realization of MSR cash flows and lower EBO-related income. Operating revenues increased from the prior quarter as loan servicing fees grew by $11 million, primarily due to growth in our servicing portfolio and earnings on custodial balances and deposits increased by $8 million due to higher short-term interest rates. Operating expenses as a percentage of average servicing portfolio UPB decreased. Payoff-related expenses,…

Thank you Dan. While, it was another strong quarter for PFSI, we remain diligent in identifying and implementing additional efficiencies across the company, while also simultaneously making investments in transformational technology projects, which we believe will position PFSI for continued success. Though PFSI's returns are projected to trend lower over the next few quarters due to volatility in the current market environment, I remain confident in our positioning over the long-term given our balanced business model with a large and growing servicing portfolio and this management team's long history of executing through various markets. 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 website at ir.pennymacfinancial.com, or call our Investor Relations department at 818-264-4907. Thank you. End of Q&A: