Good afternoon, and welcome to the Second Quarter 2014 Earnings Discussion for PennyMac Mortgage Investment Trust. The slides that accompany this discussion are available from the PennyMac Mortgage Investment Trust website at www.pennymac-reit.com Before we begin, please take a few moments to read the disclaimer on Slide 2 of the presentation. Thank you. Now I'd like to turn the discussion over to Stan Kurland, PMT's Chairman and Chief Executive Officer.

Thank you, Chris. I would like to begin with the highlights of PMT's second quarter performance on Slide 3. PMT earned $75.2 million in net income or $0.93 per diluted share, which represents an annualized return on equity of over 19%. PMT paid a dividend of $0.59 in the second quarter and book value rose to $21.27 per share, up from $20.88 per share at the end of the first quarter. This quarter's results continued our track record of regular dividend distributions and growing book value. The Investment Activities segment earned $70.9 million in pretax income as a result of strong performance from PMT's investment portfolio, driven by gains on distressed mortgage loans resulting from both an improving outlook for home prices and continued progress towards loan resolutions supported by higher market prices for performing loans. The Correspondent Production segment earned $2.4 million in pretax income, profitably generating attractive new MSR investments on newly originated conventional conforming and jumbo loans. PMT generated $191 million in cash proceeds from the liquidation of mortgage loans and REO from its distressed mortgage loan portfolio during the quarter, $70 million of which came from selling a pool of performing loans with an unpaid principal balance of $81 million. We continued to focus on maximizing the returns from our existing investments while continuing to make both investments in MSRs, sourced through the Correspondent Production business and excess servicing spread, in addition to selective new investments in distressed whole loans. MSR and ESS investments grew to $506 million during the second quarter, representing $56 billion in UPB at June 30. For the quarter, direct investments in MSRs from conventional Correspondent Production activities totaled $29 million, representing $2.7 billion in UPB. Investments in excess servicing spread from many bulk and flow acquisitions of Agency, mortgage servicing rights…

Thank you, Stan. I'd like to begin my comments on Slide 10 and review our investments in distressed whole loans during the quarter. During the second quarter, we acquired $38 million in unpaid principal balance of nonperforming whole loans. Distressed whole loans have seen strong investor demand this year, which continues to drive prices higher. As Stan mentioned in his remarks, we believe that the increase in prices for nonperforming and re-performing loans in today's market is incenting more sellers to the market and the supply of distressed whole loans that could come to market is expected to increase. The higher prices for nonperforming loans appear to be driven by a combination of factors, including more optimistic investor expectations for future home price appreciation and their ability to monetize loans that ultimately re-perform. Similarly, re-performing loans have seen strong demand as investors seek yield, with particularly strong demand for loans with clean pay histories. You can see the impact of the strong market for distressed assets reflected in PMT's gains on mortgage loans this quarter, which I will discuss in more detail in the next slide. We also continue to manage our existing portfolio of nonperforming and re-performing loans to their optimal resolution and see bulk sales of performing loans as one of several means we can utilize to achieve that outcome. Let's now move to Slide 11 and discuss in greater detail the factors driving the valuation gains in the distressed loan portfolio. During the second quarter, PMT recorded $63.7 million in net gains on mortgage loans in the distressed portfolio. Contributing significantly to these gains during the quarter was the strong demand in the market for re-performing loans. Observed increase in market prices results in an adjustment to the weighted average discount rate, which drove a significant portion…

Thank you, David. On Slide 16, we show the pretax earnings contribution from each of PMT's segments over the last 5 quarters. In the second quarter, pretax earnings totaled $73.3 million, $70.9 million from Investment Activities and $2.4 million from Correspondent Production. Now let's turn to Slide 17 and look at the results of the Investment Activities segment. The Investment Activities segment income is derived from the performance of PMT's investment portfolio, including distressed mortgage loans, mortgage servicing rights, excess servicing spread, mortgage-backed securities and retained interest from private-label securitizations. In the second quarter, segment revenues totaled $105.1 million, up 64% from the first quarter. Net gain on investments, which includes valuation gains on our investment portfolio, increased 72% from the first quarter. The increase resulted from valuation gains on distressed loans totaling $63.7 million, a 92% increase from the first quarter, and payoffs and sales gains on distressed loans totaling $9.9 million, an increase of 47% from the prior quarter. Valuation gains on MBS and retained interest were largely offset by losses on excess servicing spread as a result of their inverse relationships to interest rate changes. The Investment Activities segment revenue also benefited from a $6.4 million quarter-over-quarter increase in net interest income and a $1.3 million increase in net servicing fee revenue. Segment expenses increased 10% quarter-over-quarter to $34.2 million in the second quarter, primarily driven by higher professional services expenses and an increase in incentive fees paid to PennyMac Financial due to PMT's improved performance. Now I'd like to turn to Slide 18 and dive a little deeper into the performance of the distressed loan portfolio in the second quarter. PMT's distressed mortgage loan portfolio generated realized and unrealized gains on mortgage loans, totaling $73.6 million in the second quarter, compared to $39.9 million in the…

Thank you, Anne. Our investment portfolio continues to perform well and deliver attractive returns on equity. Across the market, a variety of opportunities exist in residential mortgage-related assets. We remain focused on continuing to invest in MSRs resulting from our Correspondent Production activities, pursuing new ESS acquisitions in partnership with PFSI and working diligently to develop opportunities in prime non-Agency loans, while remaining patient in deploying new capital in distressed mortgage loans. Finally, we encourage investors with any questions to reach out to our Investor Relations team by e-mail or phone. Thank you.

This concludes the PennyMac Mortgage Investment Trust's second quarter earnings discussion. For any questions, please visit our website at www.pennymac-reit.com or call our Investor Relations Department at (818) 224-7028. Thank you.