Good afternoon, and welcome to the first quarter earnings discussion for PennyMac Financial Services, Inc. The slides that accompany this discussion are available from PennyMac Financial's website at www.ir.pennymacfinancial.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, PennyMac Financial's Executive Chairman.

Thank you, Chris. Let's begin with Slide 3. PennyMac Financial's first quarter results reflects a higher mortgage rate environment and a seasonally slow period for home-buying activity. For the first quarter, PennyMac Financial earned pretax income of $62 million and diluted earnings per share of $0.47. This compares with earnings per share of $1 in the prior quarter, and $0.23 per share in the first quarter of 2016. Book value increased to $16.01 per share, up from $15.49 at December 31, and from $12.59 at March 31, 2016. Looking at earnings contributions by segment. The Production segment pretax income was $47.5 million, down 49% from the prior quarter and down 31% from the first quarter of 2016. The quarter-over-quarter performance was driven by lower volumes and margins in both Correspondent and Consumer Direct production channels. Total production volume was $14.9 billion in unpaid principal balance for the first quarter, a decrease of 32% from the prior quarter and up 37% from the first quarter of 2016. Total interest rate lock volume was $16.3 billion in UPB, down 24% from the fourth quarter and up 29% from the first quarter of 2016. The Servicing segment generated pretax income of $13.4 million compared to pretax gain of $35.1 million in the prior quarter, and a loss of $39.5 million in the first quarter of 2016. Excluding valuation-related changes, pretax income for the Servicing segment was $22.3 million, down 9% from the previous quarter and up 36% from the prior year period. Our Servicing portfolio grew to $202.9 billion in UPB, up 4% from December 31, 2016, and up 23% from March 31, 2016. Continuing with our highlights on Slide 4. The Investment Management segment recorded pretax income of $1.1 million compared with pretax income of $0.4 million in the prior quarter and…

Thank you, Stan. On Slide 10, I would like to begin my remarks by reviewing market share and volume trends across PennyMac Financial's businesses. PennyMac Financial was the fourth largest producer of mortgage loans in The United States during the first quarter according to Inside Mortgage Finance, and we estimate that we remained the 11th largest servicer. Correspondent production market share grew to 11.3% in the first quarter, up from almost 10.8% in the prior quarter. In our Consumer Direct business, the rapid onset of a higher interest rate environment in November and heightened competition drove a reduction in market share to levels in line with the second and third quarters of 2016. We estimate that the market share of our loan servicing portfolio grew to almost 2% of all mortgage debt outstanding in The United States. And lastly, assets under management by our Investment Management segment were $1.56 billion, up modestly from $1.55 billion in the prior quarter, driven by a preferred share issuance by PMT this quarter. Now let's turn to Slide 11, and discuss correspondent production. Correspondent acquisitions by PMT in the first quarter totaled $13.9 billion in UPB, a 31% decrease from the fourth quarter and up 44% year-over-year. Government loan acquisitions accounted for 67% of total correspondent acquisitions were $9.3 billion in the first quarter, down 26% from the prior quarter and up 44% from the first quarter of 2016. Conventional conforming acquisitions, whereby PennyMac Financial performed fulfillment services for PMT, totaled $4.6 billion in the first quarter, down 38% from the prior quarter and up 42% from the first quarter of 2016. Total lock volumes $14.5 billion, down 25% from the prior quarter and up 39% from the first quarter of 2016. The decline in our acquisition volumes this quarter primarily resulted from the…

Thank you, David. Slide 15 is an overview of PennyMac Financial's results by operating segment. Stan reviewed these figures for the first quarter earlier, and the table shows trends for the last 5 quarters. Let's turn to Slide 16 and take a closer look at the results of our Production segment. Production segment revenues were $110 million for the first quarter, down 37% from the prior quarter. The decrease was primarily the result of a 39% decrease in net gains on mortgage loans held-for-sale, reflecting lower total lock volumes and margins in both the correspondent and Consumer Direct production channels. Gross margins, which represent the revenue per lock commitment, were 84 basis points in the first quarter, down from 101 basis points in the prior quarter. Revenue per consumer direct lock decreased to 218 basis points from 292 in the prior quarter, while revenue per correspondent lock decreased to 53 basis points from 61 in the prior quarter. These margins are at the low end of the ranges that we've seen over the past several quarters. Fulfillment fee revenue was $16.6 million in the first quarter, down 39% from the prior quarter, driven by a 38% quarter-over-quarter decrease in acquisition volumes by PMT. The weighted average fulfillment fee rate during the quarter was 36 basis points, unchanged from the prior quarter. Production segment expenses were $62.5 million, a 23% decrease from the prior quarter, driven by the lower volumes of activity. Let's turn to Slide 17 and review the financial performance of the Servicing segment. Servicing segment revenues were $89 million in the first quarter, a decrease of 18% from the prior quarter. Net loan servicing fees totaled $74.2 million for the first quarter compared with $95.5 million in the prior quarter. Net loan servicing fees included $129.3 million in…

Thank you, Andy. PennyMac Financial's first quarter results reflect a mortgage market that is transitioning from a period of historically elevated margins to a period of more normal margins. We have consistently demonstrated an ability to operate through market volatility of various kinds and continue to invest in initiatives that we believe will drive our company forward. These include our consumer direct production channel, non-delegated correspondent initiatives, the future launch of our wholesale mortgage origination platform and the completion of our structure to expand financing for our largest asset, our Ginnie Mae mortgage servicing rights. We are confident that such investments and innovations will help ensure our company's long-term financial and operational success. Lastly, 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 first quarter earnings discussion. For any questions, please visit our website at www.ir.pennymacfinancial.com, or call our Investor Relations Department at (818) 264-4907. Thank you.