Q1 2021 Two Harbors Investment Corp Earnings Call
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I'd like to mention that this call is being webcast and may be accessed in the Investor Relations section of our website.
I'd also like to remind you that remarks made by management. During this conference call and the supporting slides may include forward looking statements.
These statements are based on the current beliefs and expectations of management.
The actual results may be materially different because of a variety of risks and the other factors.
The caution investors not to rely unduly on forward looking statements.
<unk> may be required by law two harbors does not update forward looking statements and expressly disclaims any obligation to do so.
I will now turn of the call over two bill.
Thank you probably the.
Good morning, everyone and welcome to our first quarter earnings call.
Today I will go over our quarterly results in the high level of <unk> thoughts on the market environment, including the meaningful shifting the interest rates during the quarter.
Mary will give more details on our financial results as well as our company structure and financing activities and finally met will discuss our portfolio of composition activity and risk profile as well as our outlook.
The surgery slide three.
A quarter and book value of $7 and 29 per share representing the negative 222% total economic quarterly return.
The first quarter performance is largely driven by roughly flat portfolio returns with the significant increase in MSR values hedging the decrease in the Rmb's prices.
Lower coupons underperformed higher coupons specified poor performance was mixed at our high coupon Securities, where we are mostly positioned outperformed or hedges.
This quarterly performance also includes the impact of the actions retook to optimize our liability in capital structure as we execute on our long term strategy.
Two five year for with 10 year rates planning all the way to two 5%.
During this period the mortgage current coupon rose 66 basis points from 138% to 2.0% to 4%.
Looking at the bottom left chart the spread between primary and secondary mortgage rates continue to compress to more historical levels, especially over the last two quarters, meaning that the gain on sale of profit for originators has also come down to more normalized levels and any further increase in the interest rates will likely be passed onto borrowers as higher mortgage.
The rates.
The chart on the top right shows the distribution by mortgage rate of spending of mortgages in the blue bars, which we believe is a good proxy for the agency universe as a whole.
At the end of December roughly 85% of all of mortgages had at least 25 basis points of refinance incentives as shown by the Gray circle.
With the rise in interest rates and mortgage rates now hovering around three 7% the.
The percentage of mortgages that are refinanced the ball with at least 25 basis points of incentives and has declined to about 64% as shown by the green circles in the chart.
Additionally, those 64% of of borrowers and for some reason not taken advantage of refinancing when rates have been lower so the sensitivity to refinancing is not precisely known.
Nevertheless, higher interest rates higher mortgage rates tighter primary secondary spreads and lower numbers of mortgages of being refinanced Apple will inevitably lead to slower prepayment speeds, which should be beneficial to our agency plus MSR strategy.
Although rates have shifted higher and prepayment expectations have moderated our MBS valuations continue to be very rich.
We acknowledged that there are a powerful technical factors at play such as continued roll specialness in the two 5% coupon and not Unrelatedly large scale purchase demand from the federal reserve as well as large banks as those entities added $380 billion and $180 billion of RBS, respectively in the first quarter alone.
Looking at the chart on the bottom right of slide for the option adjusted spread on an index of agency MBS currently sits at six basis points as of the end of the quarter.
Although you cannot see from the chart current spread levels are the types of they have been since 2006.
However, we do not expect these favorable technical force us to last forever.
With the virus receding and the economy, gaining strength the federal reserve the one day begin to moderate the asset purchases.
Most of market participants expect that the fed taper will occur sometime in early 2022 and.
And Chairman Powell has said that he will be careful to telegraph those intentions for the market well in advance and sort of that communication could come this year.
Given the pace of economic rebound it is our view that the risk to that conventional forecast is the shorter timelines not longer.
Furthermore of the fed has been clear that they will wait until they see the results of quickening economic growth the large banks with in all likelihood act sooner to divert capital from investment to making loans and so of bank paper could occur even sooner.
As we discussed on our fourth quarter earnings call data analysis of historical spreads suggest that spreads are typically mean reverting once they reach extreme levels.
As a result, we view the risk of spread widening to be significantly higher than the likelihood of spread tightening.
For the long term mean of 35 basis points over the last 10 years spreads have room to materially widened.
Without the benefit of roll Specialness, the fundamentals of owning our MBS are not very attractive today.
With spreads being where they are the hedge adjusted carry on the asset owned leads to mid to high single digit gross returns.
Given these rich valuations and higher price volatility that we've seen recently the investment thesis of buying of rich asset and expecting that the fed and the banks will keep buying at higher prices does not seem sustainable for us.
Indeed, as Matt will discuss later the.
Total quarterly performance on the TBA coupons of the fed and banks have been buying was essentially zero.
Meaning that we did not give up any economic performance by being under weighted those coupons.
We intend to be patient and deliberate in executing our strategy.
We are continuing to add MSR at attractive levels, which when paired with our MBS keeps our exposure to mortgage spreads low.
One benefit of the agency puts MSR strategy is that it allows us to keep exposure to spreads low when spreads are tight and to increase exposure when spreads are attractive.
This is what we intend to do over time.
I'll now turn the call over to Mary to discuss the details of our financial results.
Thank you Bill and good morning, everyone.
Please turn to slide five to review our financial results for the first quarter comp.
Comprehensive income was negative $48 5 million, representing an annualized return on average common equity of negative nine 3%.
And our book value was $7 29 per share.
Compared to 763 at December 31st.
<unk> and of total economic return of.
The negative two 2%.
Book value decline was mainly a function of flat portfolio of performance net of core operating expenses.
That redeemed.
And also due to increased usage of revolving credit facilities to fund the MSR.
Okay, and another derivatives declined from $43 $5 million to $18 9 million Jeff.
Even by lower TVA dollar roll income as we reduced our positions.
We also saw of smaller benefit from roles Specialness, which.
Which contributed two cents decor earnings compared to six cents in queue for.
As we discussed last quarter, we're taking actions to optimize our capital and liability structure.
And as part of that are adding funding capacity in the form of of revolvers for MSR.
As we utilize the capacity in these facilities.
We expect interest expense to increase months again in the second quarter.
All of it may not be intuitive to draw of MSR facilities, while we are in a strong cash position.
It's important to note that these revolving structures take a significant amount of time to setup compared to standard recall facilities.
They are multiyear funding and they typically have minimum use requirements.
It is essential two are MSR strategy that.
That we consider our long term funding needs and long term expectations for portfolio assets in construction and plan ahead accordingly.
As a reminder, the liability in capital actions taken this quarter.
Inclusive of the convertible debt issuance optimization of MSR financing and redemption of preferred stock.
Is expected to deliver an annual net benefit of force per share beginning in 2022.
Turning to the table on the lower right or.
Our portfolio yield in the quarter was relatively flat at 225%.
And our net spread decreased by 11 basis points 216, 5% to the higher cost of funds related to increased convertible debt and MSR financing.
Net spread as of March 31, which reflects our estimate for the near term is expected to increase driven primarily by of higher yield due to lower prepayment expectations.
And the higher proportion of MSR in the portfolio.
Turning to slide seven we continue to maintain a strong liquidity and capital position.
Are unrestricted cash balance totaled 122 billion at quarter and.
The weighted average maturity of our agency repo positions increased two 100 days as of March 31.
Reflected in the flat term structure market and the attractiveness of of longer dated repose.
We increase the unused capacity in our MSR asset financing facilities to $392 million with the closing of an additional revolver in the quarter.
And we also have $180 million and committed capacity for servicing advances.
Should for balances are defaults rise as the for bands programs and foreclosure moratoriums wind down in the future.
Finally, turning to leverage.
The economic debt to equity at quarter and declined to $6 for times from six eight times at December 31.
And our quarterly average economic debt to equity with six five times in Q1 compared to seven five times in the fourth quarter.
I will now turn the call over to Matt for a market overview and portfolio update.
Thank you Mary and thank you all for joining today.
Turning to slide eight let's discuss our quarterly portfolio of activity in composition.
Is bill noted volatility picked up and both of the right and mortgage markets with rates moving sharply higher and mortgages experiencing several bouts of spread widening during the quarter.
The only looked at the quarter over quarter performance of current coupon Rbis, you might assume that was the quiet period.
However that was far from true and I will spend some time discussing the volatility during the quarter shortly.
Ultimately Rmb's performance was driven by very strong and continued demand for both of the federal reserve and the banking system.
Is Mary discussed we continued to decrease balances during the quarter reflected by lower economic debt to equity of six four times.
This was in part from sales and Paydowns in our specified pool portfolio, where evaluations and some stories and coupons have become less attractive.
We also reduced our overall TBA exposure of from five 5 billion to 5 billion.
Part of our TBA activity was rotating into higher coupons and reducing exposure to the 2% coupon due to both of non attracted valuation and of significant decrease enroll specialness.
We continue the source substantial volumes of new MSR assets two are flow program at attractive levels and of largely maintained the size of our portfolio in this fast prepay environment.
Additionally, we opportunistically added around 130 million market value of interest only securities or I'll during the quarter.
As for highlighted last quarter I owe positions provide portfolio of benefits that are similar to MSR when paired with RMB us in reducing mortgage spread exposure.
Moving to slide nine I'd like to take a moment to provide some color on the positioning and current coupon TBA mortgages in today's environment, where in our view.
Duration hedged carry no longer provides adequate compensation for elevated risk.
Starting with the upper graph, we showed the duration hedge Kerry index for TBA choose and two in the house.
Notably carry on the two coupon has decreased significantly from over six six per month two around 2526 at the end of March.
Caused mostly by the decrease enroll specialness.
The graph on the lower left shows the monthly price volatility of the same instruments also measured six per month.
During the quarter, we witness significantly higher spread volatility been absorbed in the prior two quarters.
Monthly volatility in the two coupon nearly tripled from around 10 texts two around 2008 six.
Putting these ideas together.
Investors can risk 28, six per months and of one standard deviation move for the opportunity to earn two and a half of <unk> per month.
The final graph shows this in terms of how many months of Kerry are at risk and you can see that for two's 11 months of Kerry are at risk each month, assuming the observed first quarter volatility.
This is significantly longer than we typically observe in the mortgage market by a factor of two.
[noise] with current coupon mortgages at or near all time tight spreads we believe the value proposition is quite challenging in the near term.
Please turn to slide 10, as we discuss all of our specified pool positioning and prepayments.
In the lower left hand chart, you can see that performance was of mixed bag.
With lower coupon specified generally underperforming TBA and higher coupons outperforming somewhat.
In general the performance across the stack wasn't particularly notable quarter over quarter.
But as discussed that doesn't speak to the inter quarter volatility.
Today with regards to the specified pools, we remained position largely in lone balance in geography stories.
In the lower right hand chart, we show of comparison by coupon of observed prepayment speeds from pools delivered into TVA contracts two observed prepayment speeds in our specified portfolio.
The slower prepayment speeds as compared to deliberate TBA pools highlights the reason the command of significant price premium over TBA.
Moving to slide 11, you can see that are MSR portfolio was valued at 2.1 billion as of March 31.
Based on 187 billion UTV and with the gross coupon of three 6%.
That translates into of price of about 110 cents or right around for two multiple.
The balance is from the end of 2020 are also shown here and I would highlight the significant increase in value during the quarter as.
Is the yield curve steepened with the rise in long term rates the value of the servicing portfolio increased by over 30% of the multiple increased from 32242.
Multiple expansion is of natural consequence of rising rate environments as forward of interest rates and mortgage rates increase and prepayment expectations slow increasing future cash flow of to the servicing strep.
We settled 20 123 billion.
Of new MSR through our flow program during the quarter.
Which was enough to offset run off in the period.
The activity and the bulk market continues the pace and we continue to find valuations to be situational.
With some packages trading at pre crisis yields while some are clearing at wider spreads.
Around 50 billion <unk> in bulk transactions came to market during the quarter, which is a fairly average volume and we committed to purchasing 13 billion UTV here today.
In the lower right hand chart, we compare our servicing prepayments speeds in blue versus TBA collateral and gray.
Currently a majority of the underlying loans and are servicing portfolio have some form of seasoning or prepayment protection, which is why our speeds are somewhat slower than the through the box speeds.
Over the next two slides, we display our effective coupon positioning and risk profile.
And the chart on the top of Slide 12, we showed the combined exposures of agency P&I bonds MSR, an io as of March 31.
As compared to our positioning at the end of 2020 as indicated by the Diamond bullets.
There are two main differences.
One is the significant reduction in exposure to the 2% coupon as discussed earlier.
While increasing exposure to the two and a half and three couponing TVA.
The second item of interest is that the current coupon equivalents displayed on the Middle chart shifted up from the one and a half of 2% coupons to become mostly concentrated in the two and a half coupon.
On net you can see that were slightly short the current coupons, while maintaining long positions and the three coupons it up.
The lower left hand chart shows are common book value of exposure to 25 basis points spread widening are tightening.
And it indicates that book value would decrease by for 2% in an instantaneous 25 basis points spread widening.
For 2% represents an increase in exposure from the prior quarter, despite our reduction in specified pools and TBA.
It is due to the extension and mortgage durations that comes along with higher rates and steeper curves.
We still believe this ah low and manageable risk and it's certainly lower than the book value of risks that would accompany rmb's portfolio without the presence of MSR.
Moving to slide 13 here, we see our interest rate incur of exposure both are low and in line with our historical positioning of.
Would call out again at the agency plus MSR strategy provide significant interest rate offsets, which you can see by comparing the gray bars to the blue bars and both charts.
Finally, I'd like to take a look at our outlook for two harbors on our return expectations for new investments on slide 14.
Working from the bottom up we believe gross returns for specified rmb's paired with swaps are less attractive than they were and expect returns to be in the range of mid to high single digits, depending on coupon and story.
TBA returns and the two and a half coupon or enhanced by roles Specialness, which is likely to continue for the near future, albeit at less attractive levels.
New investments and flow MSR paired with RMB us today can also drive returns in the high single digits or low teens, and if you assume roles specialness on the Rmb's component can be even higher.
As Bill mentioned, we're focusing our efforts on adding new servicing paired with RMB, yes.
The continued to focus on our strong partnerships with MSR sellers and internal platform, which gives us the ability to sort of significant volumes.
Rmb's valuations of rich in the near term technical of fed and bank demand are formidable.
Nevertheless, it is our expectation that we are near to the end of QE for then the beginning in our portfolio as well constructed for eventual future mortgage spread widening.
Our cash position is strong and we look forward to the normalization of of mortgage spreads and the opportunity to deploy that cash into more attractive spreads.
Despite this quarter challenges, we continue to believe that longer term returns are attractive for our agency plus MSR portfolio of construction.
And now I'll turn it back to Bill.
Thanks for that discussion of that.
We continue to be excited about our unique portfolio of construction and the benefits that MSR bring to the pair to agency plus MSR strategy.
In particular for the agency mortgages, having reached decade low tight spreads, we think that our portfolio with low exposure to widen the mortgage spreads is especially attractive.
Thank you very much for joining us today, and then we will now be happy to take any questions you might have.
Ladies and gentlemen, if you ask a question of at this time, please signal by pressing star one on your telephone keypads.
Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment again. Please press the star one to ask a question.
Our first question today comes from Doug Carter.
Thanks.
Some clarity Mad on what you were just talking about you know the continuing to work the pair pool.
Cool the pool agency with with the month or two does that mean you continue to grow servicing you would look good kind of add that to the agency portfolio or kind of waiting for the opportunity there and just two engineering the grow the servicing portfolio today.
[noise] good morning, Doug Thanks for that question and thanks for the wedding today.
I think the answer is largely yes actually so we are very focused like you said on adding to the servicing huh I think.
The reasons to believe that that will see increased slows here in the coming months given the.
Uhm shift higher in.
Right for everything there would be more for sale, let me see increased bulk sales and with respect to how we would hedge it I think at the moment.
We would likely hedges with TVA, probably TVA two in the house in particular.
Given the attractive bold, especially with the.
This there and that would as you know the the herd construction will.
Will will continue to keep our mortgage spend duration low in the aggregate but.
Quit interesting income into the of Luckily.
Okay, and then just on the on the large you know the.
You talked about the the the Morgan today.
You know higher than the the core reach you just talked about what are the assumptions of kind of.
Go into the prepaid for for the.
Or quarter and the margin versus kind of of what you are currently.
HM HM HM HM.
Oh I'm sorry on the dog.
All of which margin are you referring to exactly the net or the net interest Morgan.
The.
The Florida six the the the the the or the net interest groups are.
The where you show the 190 for spread out of the March 31 versus the 165 realized.
Yeah.
Mary do you Wanna, maybe take that one.
Sure I mean, the the ads of yields as of as of March 31st which of course is based on the static portfolio.
We do expect yields to go up and that is primarily do two lower prepayment X assumptions and of greater proportion of Amazon the portfolio of you asking specifically what the prepayment assumptions are.
I guess, just just curious if if that's the using prepay speed that you're currently.
Or the stone.
I'm pretty good the speed declining further sent your like using a lot of times assumption just get rid of the understanding.
If the bill is gonna come through.
Two two words, the two take longer two two of cheese.
Oh, Yeah, I missed I would go ahead man.
Well I was just gonna say that does include that.
Yo does include expected future prepayments days and weeks that that right. So the.
The.
The increase in the rate hasn't quite made its way through into the prepayment, but it will E Q2.
We expect the from April coming through this must be done of 20% day the.
15% from the months, calling that all from.
All from the range of fact and that is what is the the yield assumptions that you see in that calculation.
Alright, thanks for it.
The next question comes from Ricocheting.
Hi, Good morning, guys. This is Charlie on for rent today. Thanks for taking the questions first I was wondering if we could just get a update on where book value is trended through I guess the end of April and then kind of more broadly how the question on sourcing MSR is going forward you know as you mentioned.
You've you've continued to grow that portfolio even.
In a pretty fast prepayment environment.
You know as we look ahead and consider the possibility of rising rates and slower prepayments.
I'm wondering if the way that you you know source MSR is just gonna change in any way or I guess of differently, how should we think about.
The mix between flow arrangements, which I assume is a big part of kind of replacing that run off.
And also the bulk purchases as prepayments begin the slow down and and in that environment changes. It seems like you've you've kind of already laid the foundation here with the additional capacity, but I'm just curious to think about how that rate of change my evolved over time and of growth can really accelerate from here.
Mhm.
Sure I'll start with that one Charlie Thanks for the question and and I'll I'll hand, it off the bill for the second part, but in terms of April we haven't quite close the books altogether on April the at the moment. We are estimated of the total return through the end of the month of about down 1%.
And I will let bill comment on on and the sauce sourcing.
Yep, Thanks, Matt and thanks for the question the trolley good to have you on the call today.
Oh, you're you're 100% of right. The the a lot of our our Amazon acquisitions in recent months have come from our flow channels in relationships as a result of fast Prepays and fast the best current production as as rates rise, we do expect that two decline.
But we do also expect the number of and volume of bulk packages available in the market to increase to offset that does some of that you often see when rates rise and and origination profit declines that many small.
The mid size originators.
Need two or want to sell servicing in order to generate cash true to form their businesses and so that's the dynamic that we think is in play and we think our platform is really well suited two to switch opportunistically between Ah Ah Ah Ah the acquisition channel of of flow and bulk of.
As Margaret conditions change and so we feel pretty good about our ability to be able to continue to source the amount of of servicing that we like.
Makes sense. Thanks, so much guys appreciate the color.
Thank you.
We can I move onto Bose George.
Everyone just learning [laughter] uhm actually just pull up on the left or did you just give the book value update has been done 1% for.
The date and then just when you think about two okay. Thanks, and then just the positioning on the book.
Did you say spread don't tightened from here your book values, probably has limited downside.
Positioning of it spreads widened then that's where you kind of blood essentially outperformed.
Yeah, I I I I would say in general at the moment as as as Mat discussed and his and his prepared remarks, we're currently keeping our mortgage spread low in general right and so I would expect that no matter what spreads do here at the moment, we would have.
Uhm low book value volatility.
As a result of mortgage spreads one of the nice things about and then I think we said this is the prepared remarks also one of the nice things about about the strategy is is for the presence of MSR in the portfolio allows us to flex the amount of of mortgage spread risk that we have so that when spreads are tight like they are today, we can keep our mortgage spreads very low and.
Wind spreads become more attractive, which we believe they will in the future. One day, we can increase of that somewhat and still have low mortgage rate compared to a portfolio without MSR, but greater than we do today in order to take advantage of those more attractive Mary Smith.
Okay, Great. Thanks, and then let me just remind us why some of the MSR needs to be held in the T. R. S.
Does that change the return profile.
I'll, let Mary take that one.
Sure it's like the morning pause the name.
Oh did she you know, we we purchase or MSR into our servicing entity, which is the tax will read subsidiary.
That's the name of service there with the G. S is and then they.
Kind of dictate how much they allow the excess servicing to be sold into the right now both Friday and Fanny have.
Quired amounts that need to be held in the actual servicing entity, which is the tax will read subsidiary.
Okay, Okay, great that makes sense.
We can go two Eric Hagen.
Thanks for good morning, how are you guys. So you've got the the MSR of what you notice the essentially the morning, you got the MSR what she you notice essentially the equivalent of being a short lower coupon Tva's, which I think seems to make sense and then you also long some lower coupon. The T V is the.
Quarter, and which I think you noted aren't really as attractive for macquarrie of standpoint anymore can you.
Maybe just discuss what you flip for it looks like there now and.
And if you still long those coupons, what you're picking up by being long when you're basically short the MSR.
For the long the MSR short for the T V of.
[laughter].
Okay. Thanks for the question Eric.
So when we were talking about the the physician rotation, we're mostly talking a balance of the two per cent of coupons that was the one that the really in particular had much.
Much less attractive hundreds of security and.
The specialist quite a bit during the quarter.
The two and a half coupon actually still is rolling pretty special I think the dynamics could last was that the one for some time.
Recently, it's.
Loads of cleared in the a 40 basis point negative for 40 basis points range or so so that 50 255 through we.
People funny, which is still pretty attractive so like we said earlier I.
I can see us adding to that position against the new servicing purchases as we go forward here.
Got it. Thank you for clarifying that and then the swap portfolio. It looks like it is pretty short duration of I think that also makes sense of paydowns or are still all of it in for specified pools and the MSR duration of thing because that the longer end of the curve, but how do you think about beefing up the the swap portfolio of afraid to pick up a little further or do you think about the Steelers.
And a little bit more.
Yeah.
Well I think I mean are swap portfolio is pretty.
Small in general I would say.
Some duration had you on the short side of the front end and where we need to be more of a little bit of duration in the longer and you can see that on slide 13 actually of the presentation that most of the most of the exposure it handled.
<unk>.
By the servicing assets and.
The the swap book is quite small as you know.
The tend to keep the very Nissan duration and curb so.
We would expect two two.
See that going forward as well.
I could have had a little bit more color to that Eric if I can.
As Matt said on page 13, the the parallel shift duration as you see in the in the lower left charges is largely offset between the MSR in the army us, but if you look at the what the what the curve of exposure is.
When you pair of those two it's generally a curve steepened or and Matt said this debt most of our swap book is is is receiving in the long run in order to offset that but the natural position of the of the paired construction is two is to have a curve steepened are on and sort of hedges are most of the men's offset that.
First of all got it figured out of it.
Thank you.
As a reminder of ladies and gentlemen of if you would like to ask a question. Please press the star one.
Our next question comes from Trevor credit.
[laughter] alright. Thanks.
The question on Prepays they are related to the the slide you guys showed with the percentage of the Mark of the three financeable.
And I think you made the point the.
Still something like 60 per cent, but there's a lot of borrowers who for whatever reason oven referred so far.
So I was curious to get your thoughts on the program. The upgrade your for your announced last week to try and help lower income borrowers have more access to refinancing.
How how how impactful you think that could be to prepay speeds and the sparkle market and if you think there's no of risk of the more of programs like the come out uhm over the course of your thanks.
Sure. That's a good question Trevor thanks for that one.
Okay. The stab at it I think.
That's a fairly new announcements the amount last week. So so I don't think we.
No or a process of all of the the impact for them it but as you mentioned the idea of course of that low income borrowers haven't been able to two.
Take advantage of of.
Low mortgage rates here. So a couple of things I can say is that I think.
Early estimates of that it could affect to say I don't know, 10% to 20% of of GST borrowers I think you would expect that impact two b.
Fairly small for for lower coupon ambiance, maybe some of the impact of an additional CPR for some period of time.
It could be more impactful for for higher coupons.
We could maybe estimated.
Is being as much as of five CPR increase for for some time period, but.
That would require a very hi implementation and a very high pull through right. So it remains to be seen how how aggressively sort of pushed through the original of your community and also how it's received by borrowers.
Okay got it that makes sense thanks for the comments.
Thank you.
There are no further questions I'd like the having to call over two bill for any additional are closing remarks.
I want to thank everyone for joining us today and thank you as always for the sport two harbors.
Ladies and gentlemen that concludes today's conference call. We thank you for your participation you may of that'll disconnect.
[music].