Good afternoon, and welcome to the Fourth Quarter 2016 earnings discussion for PennyMac Mortgage Investment Trust. The slides that accompany this discussion are available from 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 Executive Chairman.

Thank you, Chris. For the fourth quarter, PMT reported net income of $31.2 million or $0.44 per diluted share, representing an annualized return on equity of 9%. PMT paid a dividend of $0.47 per share for the quarter, and the book value per share increased to $20.26 at quarter end from $20.21 for the prior quarter. PMT's fourth quarter results were driven by strong contributions from our GSE credit risk transfer investments, or CRT, Correspondent Production and an income tax benefit. The income tax benefit was primarily driven by the performance of interest rate hedges held in the taxable REIT subsidiary, which produced a loss, offset by gains on other interest-rate sensitive assets. PMT reports results through 2 segments: Investment Activities and Correspondent Production. The Investment Activity segment reported pretax income of $2.1 million in the fourth quarter. The correspondent segment reported pretax income of $11.7 million for the quarter. Our distressed loan investments underperformed expectations. The decrease in value was primarily driven by recidivism of previously performing loans and reduced expectation for future loan performance and recoveries. Our fourth quarter activities included continued investments in GSE credit risk transfers and mortgage servicing rights resulting from PMT's Correspondent Production business. Conventional correspondent loan production totaled $7.5 billion in unpaid principal balance, up 3% from the third quarter, resulting in the addition of $101 million in new mortgage servicing rights. CRT-eligible deliveries for the fourth quarter totaled $2.6 billion in UPB, resulting in $24.1 million in new CRT investments, which will increase to approximately $92 million upon completion of the aggregation period. Cash proceeds from the liquidation and pay down of distressed mortgage loans and real estate owned were $92 million. After quarter end, we entered into an agreement to sell $89 million in UPB of performing loans, reflecting the continued…

Thank you, Stan. Let's turn to Slide 10 and discuss the resolution activity on PMT's distressed home loan investments. Here, we show the 5-quarter trend for distressed loan resolutions, which include liquidation and modification activities and totaled $237 million in UPB during the fourth quarter. Quarterly resolution activity was robust and increased as a percentage of the nonperforming loan portfolio to 23% in the fourth quarter of 2016 from 15% in the fourth quarter of 2015. Modifications totaled $114 million in UPB during the quarter and comprised 48% of total resolution activity compared to 52% in the third quarter and 39% in the fourth quarter a year ago. Our focus on driving REIT performance through loss mitigation programs results in positive outcomes for both the homeowner and PMT, generally allowing homeowners to remain in their homes with improved mortgage terms and helping to expedite PMT's transition out of distressed loan investments. For the fourth quarter, streamline modifications totaled $82 million in UPB, up from $78 million in the prior quarter. Streamline modification programs are helpful because they eliminate income documentation requirements and move borrowers into a trial modification once they make their first modified payment. Liquidation activities totaled $118 million in UPB, up from $105 million in the third quarter and comprised 50% of total resolutions. Liquidation activities include payoffs, foreclosure sales to third parties, short sales and sale of REO properties to third parties. In the fourth quarter, REO property sales were $84 million, up from $76 million in the prior quarter and comprised 35% of total resolution activity. REO inventory declined to $274 million at December 31, down from $288 million at September 30. In addition, new REO rentals totaled $6 million in the fourth quarter, down from $7 million in the prior quarter, while the REO rental…

Thank you, David. On Slide 15, we show the pretax income contributions from each of PMT's segments over the last 5 quarters. As Stan mentioned earlier, PMT's fourth quarter pretax income totaled $13.9 million, comprised of $2.1 million in pretax income from Investment Activities and $11.7 million of pretax income from Correspondent Production. Now let's turn to Slide 16 and review the results of the Investment Activities segment. The Investment Activities segment income is derived from the performance of PMT's investment portfolio. In the fourth quarter, segment revenues totaled $26.3 million, a decrease of $15 million from the third quarter. The quarter-over-quarter decrease in revenues was driven primarily by an $8 million decrease in net loan servicing fees, a $4.3 million increase in other losses and a $2 million decrease in net gain on investments. Net gain on investments was $12.3 million in the fourth quarter compared with $14.3 million in the third quarter. Net gain on investments for this quarter was primarily driven by $18.9 million in ESS gains and recapture income, a $10.4 million gain on CRT, and $7.5 million of gains from hedging derivatives, partially offset by a $23.1 million valuation loss on mortgage-backed securities due to higher interest rates. Net loan servicing fees, which represents revenue associated with PMT's investments in MSRs and the related hedging derivatives, were $7.8 million in the fourth quarter, down from $15.8 million in the third quarter. Net interest income decreased $800,000 quarter-over-quarter, which I will discuss in greater detail on the following slide. Other investment losses were $5.4 million compared with losses of $1.1 million in the third quarter, driven by REO valuation losses and higher REO-related advances due to a seasonal increase in real estate tax payments. Segment expenses were $24.1 million in the fourth quarter, a decrease from…

Thank you, Andy. While earnings from PMT's investments in the fourth quarter were lower, largely driven by underperformance of the distressed loan portfolio, the cash flows from PMT's existing investments remained strong. As we enter what appears to be a period of higher interest rates, we expect the mortgage market will normalize from the elevated margins and volumes seen in 2016. However, robust macroeconomic trends bode well for home purchase demand and PMT's purchase money-oriented Correspondent Production. In addition, higher rates and a vibrant economy are expected to positively impact the performance of the company's CRT, MSRs, ESS and distressed loan investments. We will continue to transition our capital away from distressed loan investments and into organically generated investments that result from our Correspondent Production activities, including GSE credit risk transfers, MSRs and ESS. We believe that these strategies have the potential to produce earnings over time, in line with our current dividend level. Lastly, we encourage investors with any questions to reach out to our Investor Relations team by email or phone. Thank you.

This concludes PennyMac Mortgage Investment Trust's fourth quarter 2016 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.