PennyMac Financial Services, Inc.

Good afternoon and welcome to the first quarter 2021 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, as well as non-GAAP measures that have been reconciled to their GAAP equivalent in our earnings presentation. Thank you. Now I'd like to begin by introducing David Spector, PennyMac Financial's Chairman and Chief Executive Officer, who will review the company's first quarter 2021 results.

Thank you, Isaac. PennyMac Financial again delivered exceptional financial performance in the first quarter. driven by continued strong production and core servicing results partially offset by the performance of our hedge mortgage servicing rights. Net income was $377 million or diluted earnings per share of $5.15 generating book value growth per share of 8% to $51.78. Importantly, we repurchased approximately 4.7 million shares of PFSI's common stock during the quarter for an approximate cost of $288 million. And through April, we repurchased an additional 270,000 shares for an approximate cost of $16 million. This brings the total repurchases year to date to over $300 million. And since the beginning of 2020, we have now repurchased approximately 18% of PFSI's common shares. We also issued $650 million of eight-year senior unsecured notes. taking our total unsecured notes outstanding to $1.3 billion. Additionally, PFSI's Board of Directors declared a first quarter cash dividend of 20 cents per share. Dan Perotti, PFSI's Senior Managing Director and Chief Financial Officer, will discuss our financial performance in more detail later on in this discussion. Operating results across loan production and servicing remain strong, and we continue to see the strength of our balanced business model reflected in our results. We also continue to see strong market share growth across our direct lending businesses with another quarter of record lock-in funding volumes despite higher mortgage rates and increased competition. In total, loan acquisition and origination volumes were $67 billion in the first quarter. These strong production volumes again led to servicing portfolio growth despite continued elevated prepayment activity. Pettimac Financial's servicing portfolio totaled $449 billion in unpaid principal balance at March 31st, up 5% from the end of 2020 and up 17% from March 31st, 2020. Finally, PMT, the investment vehicle that PFSI manages, delivered another strong quarter of investment performance and net assets under management were $2.4 billion, up 3% from year-end 2020. With that, I will now turn the call over to Andy Chang, Senior Managing Director and Chief Operating Officer, who will review the mortgage origination landscape and the foundation we have in place to drive continued success into the future.

Thank you, David. The origination market continues to be historically strong as mortgage rates remain near record lows despite the increase in the 10-year Treasury yield since the start of the year. Recent economic forecasts for 2021 originations range from $3.3 trillion to $4 trillion, while average forecasts for 2022 originations remain strong at $2.6 trillion. It is worth noting that in each of 2021 and 2022, purchase originations are expected to total $1.7 trillion, almost 40% higher than 2019 levels. So while refinance origination volumes are expected to decline significantly over time as a result of higher interest rates, we believe PennyMac Financial is very well positioned for continued market share growth, especially as we are one of the largest producers of purchase money loans in the U.S. As Doug will expand upon later, Production margins across the industry have decreased as a result of excess capacity in the industry relative to the current origination market. While affected by these pressures, margins for PennyMac Financial's production segment stand to benefit from a continued shift and mix towards our higher margin consumer direct lending channel, where we have been investing heavily and where there remains much opportunity for continued growth. Consumer and Broker Direct have an outsized impact on production segment earnings, as you can see on slide 7 of the earnings presentation. In fact, only 22% of Fallout adjusted lock volume in the first quarter was from the Consumer and Broker Direct channels, but they contributed approximately 80% to the segment's pre-tax income. Servicing becomes an increasingly important component of our earnings as interest rates increase, and we believe that mortgage companies without a balanced business model like PennyMax will be challenged when origination volumes return to more normalized levels. Additionally, the investments we have made in technology, such as our cloud-based proprietary servicing system we call SSE, are driving efficiencies across our platform as it continues to grow. Not only are we seeing scale and workflow benefits from SSC, but it also enables PennyMac to effectively address COVID-19 hardships and implement loss mitigation programs for borrowers, which has contributed to elevated levels of core profitability in the servicing segment. Over nearly eight years as a public company, PennyMac Financial has generated an average annualized return on equity of 26%. In the first quarter, PennyMac Financial recorded a 43% annualized return on equity, further adding to our long track record of strong financial performance. For the remainder of 2021, we project PFSI to achieve a return on equity closer to our pre-COVID historical returns. Now I'll turn it over to Doug Jones, PFSI's President and Chief Mortgage Banking Officer, to discuss our mortgage banking businesses.