Q3 2021 Home Capital Group Inc Earnings Call
[music].
Good morning, My name is Chris and I'll be your conference operator today at this.
I'd like to welcome everyone to the home capital group's third quarter financial results Conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press Star then the number one on your telephone keypad.
Or withdraw your question. Please press star one again.
Thank you Joe Mccreery VP of Investor Relations you may begin.
Thank you Chris Good morning, everyone and thank you for joining us today and apologies for the slight delay in this day of true alright.
Our agenda for today's presentation is installer will begin the call with the Brexit mutually decided who's president and CEO.
Brad <unk> CFO will then review our financial performance, which will be followed by the question and answer period participants we have members of our senior management team with us on the call to help answer your questions.
On behalf of those speaking today I note that this call may contain forward looking statements and that actual results could differ materially from forecasts projections or conclusions in these statements.
Please refer to our advisory on forward looking statements on page two of the presentation.
I would also remind listeners that homes as non-GAAP financial measures to arrive at adjusted results and announced that we'll be referring to both reported and adjusted results in their remarks, and now I'd like to turn the call over to <unk>.
Good morning, and thanks for joining.
I'm pleased to be speaking to you today about our third quarter results.
Once a quarter of good progress along the road back to Union multiple working and living conditions.
Conditions that we all missed and wanted to get back to.
I am pleased and confident with the prudent and measured approach to opening up that governments. We here at home capital and other businesses are taking to ensure that any progress is sustainable and enduring.
We're seeing the benefits of this approach not just in the form of higher GDP unemployment figures, but also in the ability of people to gather safely again.
Here at home capital this was a quarter of progress as we move forward in all areas of our operation.
Executing on our plans for our core business technology, and our deposit operations.
Today I'll be discussing.
The current state of the housing affordability.
Our activities during the quarter.
Our outlook for the balance of the year.
And our capital structure.
After a bit of a breather earlier this summer.
<unk> volume in September and October seems to be picking up across all housing types in our major markets.
<unk> had to move steadily higher as the growth in new listings is not keeping pace with the growth in sales.
Attention is turning to the supply side of the equation to address the affordability gap.
Here at home, we're happy to see this.
Canadians have repeatedly demonstrated their passion and commitment to homeownership and we share their view that everyone deserves the comfort and security of a home.
While it will require years of commitment and the coordination from all levels of governance as well as developers lenders and investors to create sustainable solutions. The current level of attention to this subject is a good first step.
Turning to our third quarter earnings.
We are reporting net income of $1 <unk> per share we.
We delivered strong growth in our book value and return on equity.
Our teams also did a lot of work to setup to set us up for future growth and I'm pleased with the progress in a number of key areas this quarter.
First in originations.
Our residential sales and underwriting teams followed up a strong Q2 with an even better Q3.
The processes and strategies, we have put in place to drive growth are functioning the way we intended.
For instance, working with our broker partners to become more efficient at processing applications.
And using the capability of our new CRM system to increase broker engagements.
On the commercial side originations picked up over Q2, and we're adding good business in attractive segments of the market.
While we have started to benefit from a return to pre pandemic underwriting guidelines during the quarter. We delivered this growth without compromising the prudent underwriting standards that we are known for.
Our healthy credit experienced this quarter and for the year to date reflects the underwriting discipline.
Not only were our credit loss was minimal, but the percentage of nonperforming loans as a share of gross loans has declined to below pre pandemic levels.
Further the continuing upward revision to economic outlook led to an additional release of our credit allowance.
Brad will discuss more specifics on this portion of his presentation.
Turning to our funding side.
Customer deposits through our Oaken channel grew to $4 3 billion.
And I am happy to announce that our oaken branch launch the <unk> App in early October for both iOS and Android devices.
The launch call of extensive testing and feedback and one of our agile working groups.
It offers flexibility.
Intuitive navigation and an excellent user experience.
As well as the ability for our customers' customers to review their accounts with US 24 seven.
Our launch of the <unk> apps aligns with our strategy of serving customers the way they want to be served.
We are working to increase engagement with the app across all our oaken customers.
Over time, we will be adding more features to enable broader range of transaction options.
I look forward to sharing our progress with you all.
Beyond <unk>, we continue to move forward with our funding diversification plan.
We closed our third <unk> transaction in October.
The attractive terms make this a competitive option for funding our growth.
Earlier this week, we participated in a bank sponsored securitization conduit.
Together these instruments added an additional $675 million of liquidity to our funding mix.
We will continue to expand these and other funding sources in the future.
Having more options ensure we're reliable source for growth and competitive pricing.
Okay.
Our ignite program is moving forward.
We are focused on the development and testing required to support the next wave of upgrades that will focus on the efficiency of our deposit operations.
Our teams have been hard at work to give us the tools and resources, we need to build an organization that is ready to meet the challenges of the future.
Now looking at our plans for opening up here at home.
I'm happy to say, we have begun to welcome back.
People into our office.
We took the step of requiring proof of vaccination for returning employees.
We want our employees and our customers to feel comfortable when they are dealing with people from <unk> and.
And we are taking steps to make them safe.
At this stage nearly all employees are back in the office one to two days per week as we shape. What is the right mix of hybrid working model will look like for us.
It is great to see the faces of the home team in your conversations fill the office environments.
People are excited to be together again and learning to thrive in a hybrid meeting.
It's no surprise that in addition to being a great place to work almost named two best workplaces in financial services and insurance for 2021.
I want to say a word about our capital plans, which Brad will discuss in more detail later on.
We are pleased with the announcement biography updating regulatory expectations around capital return.
Accordingly, we have announced plans for $300 million substantial issuer bid or <unk>.
This is consistent with our earlier communication that we would move swiftly to achieve our target CET one ratio.
We understand one of our most important responsibilities to our shareholders is effective management of capital.
And we recognize that the excess capital we're holding is a drag on ROE and Thats a profitability, we're able to deliver.
The HIV is the first step towards achieving our ROE that reflects the true profitability of discrete brick business. We're in.
Looking ahead, we still believe the conditions are in place for a healthy housing market.
Our broker partners report robust demand in our major markets with sales gains in all categories of homes, including renewed strength and condominium sales.
Employment numbers are increasing so people are going back to work.
The data on the deposit balances show that consumers have a lot of savings.
We continue to follow the bank of Canada on the timing and magnitude of rate increases and the potential effect on the market.
However, we're not yet seeing costs were concerned about credit.
Our economic indicators are strong and the <unk> stress test provides some affordability cushion against higher rates.
In addition, the shorter duration of alternative mortgage book provides an up to date view on borrower's ability to pay.
We will continue to drive value for our <unk> customers can take advantage of opportunities to diversify our funding.
And we will work to improve our return on equity for shareholders by optimizing our capital structure.
Now I would like to turn it over to Brad for a financial review.
Thank you <unk> and good morning, everyone.
This segment of the presentation begins on slide six.
Net income for the quarter was $54 8 million a decrease of six 3% compared with the $58 5 million in Q3 2020.
Adjusted net income was $56 million.
Q3, net income per share was $1 <unk> for the quarter compared with $1 <unk> in Q3 2020.
Adjusted net income per share was $1 <unk> after adjustments related to our ignite program.
Book value increased by 16, 4% year over year to $36 40 per share and return on equity was 12, 2% for the quarter or 12, 5% on an adjusted basis.
Once again, we generated double digit return on equity, while holding substantial levels of excess CET one capital.
Slide seven shows the sources of the change in earnings per share compared with Q3 2020.
<unk> was down by four or three 6%.
Last year's earnings had the benefit of a higher reversal of credit provisions, partially offset by increases in EPS as a result of the lower number of shares.
Average shares outstanding were lower due to normal course issuer bids during the year.
Our net interest margin was $2 five 8% for the quarter compared with $2, 61% in Q2, and 251% one year ago.
The year over year increase in NIM is mainly due to lower funding costs and contributed <unk> <unk> to the change in net income.
Our expectation based on our current outlook for interest rates asset mix and competition with other lenders is that there may be modest volatility in our net interest margin for the balance of 2021.
Pre tax pre provision net income was consistent with Q3 2020.
On a sequential basis adjusted EPS was down from $1 44 to $1 10, primarily due to lower reversals of provisions and higher noninterest expenses.
Those expenses were up primarily from an increase in employee compensation, including employee incentives and severance costs.
Our efficiency ratio was 47, 3% similar to one year ago.
Slide eight shows originations and loans outstanding in our single family residential portfolio originations.
Originations grew by 34% over the same quarter last year with particular strength in our classic portfolio.
Classic single family on balance sheet as of the end of Q3 grew 4% year over year.
Originations in our commercial business declined in the third quarter compared with Q3 of 2020.
Q3 of 2020 was an unusually active quarter for us due to favorable competitive dynamics in place at that time.
Originations picked up over Q2 with emphasis on land and construction rather than restaurants and hotels.
On a year over year basis commercial loans on balance sheet at the end of the quarter decreased by 10%, resulting from payoffs of securitized product as well as loans to retail stores and stores and apartments in particular.
Our oaken channel experienced good inflows this quarter and now makes up 31% of our total funding.
The percentage of oaken deposits held in savings rather than Gic's increased to 23, 5% from 18% as depositors are less inclined to lock in their clients in a period where rates may rise.
Our overall cash balances increased by $82 million or 10% year over year.
For the year to date inflows through our oaken channel have accounted for all of our deposit growth as we've used a variety of other funding options to provide liquidity.
As history said subsequent to the end of the quarter. We went live on our digital banking at.
Everyone here at home is excited about the potential of this new platform.
Okay.
Following the end of the quarter, we announced the successful completion of our secondary offering of 2021 at an effective yield of one 5% to 8% on the class a notes.
We are pleased that the pricing spread over government of Canada bonds has narrowed with each issuance.
Subject to market conditions, we will continue to be a programmatic issuer of RBS.
We also participated in a bank sponsored securitization conduit.
Slide 11 shows the details of our credit provisioning this quarter, we booked a reversal of $3 8 million compared with <unk> 7 million in Q3 2020.
The inputs to our third party economic models continue to trend upward, particularly the data on employment.
The $3 8 million reversal is split roughly evenly between our stage, one two and stage three loans.
Looking at lines of business. The most significant contributor to the provision reversal was our commercial portfolio driven by both changes in risk parameters and actual repayments in this portfolio.
For the year to date provision reversals have totaled $34 7 million compared with provisions of $41 8 million in 2020.
Commercial loans have accounted for 62% of all year to date reversals of credit provisions.
As a percentage of gross loans as shown on slide 12 reversals of credit provisions were nine basis points for the quarter on an annualized basis, and 26 basis points for the year to date.
Net write offs for the year were <unk> 2 million across all lines of business for the quarter or approximately one basis point.
For the year to date net write offs totaled <unk> 4 million or less than one basis point of gross loans.
For the first three quarters of 2020 net write offs were $26 2 million.
20 basis points of gross loans of which the majority was attributable to our retail consumer lending portfolio.
The inputs to our economic models improved for levels of unemployment as shown on slide 13, while the outlook for housing prices showed minor decreases across all scenarios that.
The total probability weighted loan loss allowance was 34 $35 7 million at the end of the quarter, while the allowance using just the base case decline from Q2 to $27 7 million.
The probability weighted allowance was approximately $8 million higher than the allowance would have been using just the base case.
The next slide shows the breakdown of our $35 7 million allowance for credit losses as of the end of Q3.
Chart on the right shows at 79% of our loan loss allowance is attributable to our stage, one and two loans.
The allowance is decrease at all of our lending categories due to general improvements in Soi. In addition to repayments and releases a reclassification of loans previously categorized as stage three.
Nonperforming loans have declined significantly as shown on slide 15, net nonperforming loans now make up only 15 basis points of our total gross loans.
Meanwhile, our allowance coverage has increased to 22, 1% of total stage three loans.
Slide 16 shows our CET, one capital ratio of $22 five 7% at the end of the quarter, an increase of 30 basis points from the end of Q2 for.
For the year to date, we have spent approximately $70 million to buyback over two 1 million shares at an average price of $32 73.
This represents a discount of 10% to our quarter end book value.
Because we were able to use cash at the holding company level year to date and CIB activity has had no impact on our regulatory capital.
As <unk> mentioned, we plan to achieve a CET one ratio within our stated target range of 14% to 15% by the end of next year.
Today's announcement of our $300 million substantial issuer bid marks a significant first step towards achieving our target CET one ratio.
And now I will turn the call back to <unk> for closing remarks.
Well. Thank you Brad now I'll ask Chris to poll for questions.
Thank you.
At this time I'll, just remind everyone. If you would like to ask a question. Please press star one on your telephone keypad.
And our first question is from Tien Ricard with BMO capital markets. Your line is open.
Thank you and good morning.
Morning, Andrew.
Congrats on the quarter and the return of capital.
I'm just talking.
Prior conference calls, we talked about expectations for.
Your capital.
So the client deposit levels within an 18 to 24 months period.
The new plan of reaching that target.
2014 or 15%.
The tier one ratio by the end of 2022.
So looking even better.
So what else is on your roadmap.
Return more capital by the end of 2022.
And in addition to the substantial shortly.
Yes, thanks, Thanks again.
<unk>.
<unk> been consistent in focusing on share repurchases and mechanisms to reap.
Purchase shares we think.
As our valuation is.
Where we view it attractive for us to repurchase shares. So that's been our focus we do plan on renewing our and CIB and further to our previous commentary, we would contemplate the resumption of a quarterly dividend after we've completed those.
Share repurchase activity. So you are right we have accelerated the timeframe.
Since we talked last August.
So.
It's just a matter of utilizing those facilities. So as I said, we're going to do the or we've announced the $300 million SIV, which we expect to close by the end of Q4, and we will renew our NCIC EBIT expires.
January 'twenty one.
And then he will review once the <unk> has closed will then review our overall plan and the mix. So one of the key determinants there will be what happens with the SIV.
And we will be reporting back with our Q4 results on what we're going to do next in terms of capital return.
Okay great.
Waits to funding.
This is IV.
You have about $300 million in cash 490 <unk> securities.
How do you plan to balance on one hand funding Dx IV.
On the other maintaining.
Appropriate liquidity levels.
We're extremely confident in our ability to manage our liquidity one of the things that we've been doing and have demonstrated over previous quarters is our access to the.
Yes.
Deposit boards, but in addition to that we just recently completed our third RMB S transaction. We have just recently started to participate in the bank sponsored.
Securitization conduit, we also have the capability to utilize whole loan sales securitization.
And.
Frankly, we only need a modest increase on a daily basis on our deposit funding to be able to.
Work through.
The funding requirements for this SIV so.
We're extremely confident in being able to manage our liquidity and post quarter. Once we were able to solidify our plans.
We.
Participated in.
The.
Thanks, securitization conduit as well as the.
RBS transaction, which collectively brought in over $500 million.
Okay and looking into 2022.
How confident are you in a potential credit rating upgrades.
How would that help home.
Funding from.
You think you've been more funding sources.
I think it would be very helpful.
Our view is.
That we should receive a rating but upgrade but thats.
That's beyond our control other than the continued performance and how we can demonstrate that to the relevant agencies, but clearly an upgrade would open up the deposit market on a on a competitive basis.
<unk>.
That will probably be the first thing that you would turn to with.
Once we reach investment grade from both our credit rating agencies.
So that would be extremely helpful. But it is not incorporated in any of our.
Quiddity plans and as I said earlier, we're highly confident that we will continue to be a programmatic issuer of Rds.
And that we will continue to work in opening other lines and perhaps be able to participate in further.
Securitization activities.
Great. Thank you for your comments.
Youre welcome.
Our next question is from Nigel D'souza with Veritas investment Research your line is open.
Thank you good morning, I first wanted to ask the granular question on your PCL reversals this quarter and when I look at loan category, specifically single family residential.
Residential mortgages I see that there was a reversal in your stage III loans.
Loans, there and I wanted to maybe tackle this a different way.
I'm just trying to understand what caused these wants to migrate into phase III to begin with and I ask that given a backdrop of deferrals and substantial fiscal support programs.
You share with us what the impairment trigger.
Was in the first place to classify these loans as phase III.
Well typically it would be mis mis.
<unk> payments.
And some behavior.
They would be over 90 days would generally automatically put them into.
States, sorry, 60 days would automatically put them into stage three.
<unk>.
So as we went through.
Our current delinquency rate is better than it was pre pandemic and we've just seen a decline in those those stage threes as they're either brought current or.
Otherwise yes.
Within by our collections team.
Got it and from what I understand if they see reversals are reflective of workouts.
When these forwards resume their payments are there assuming the payments at the original contracted.
Mortgage rates are they resume the payments at the current.
Mortgage rates.
It depends on our situationally we may.
Restructuring of the loan and then that becomes a refinancing gets re underwritten.
Okay. So okay got it.
Alright.
EBIT product to date, we will continue as is.
Okay. So the reason I ask that is if we do have an environment of rising interest rates does that at all.
Impact.
The potential proceeds through reversal that we currently see.
Single family residential.
Well.
A lot of that movement in and out of touch stage III is typically related to their payment are bringing current.
And we're comfortable alright.
Sorry, just to expand on that in anticipation of further comments so.
We're comfortable with affordability because as you may recall.
With this introduction of the stress test in 2018, all the mortgages are stressed to 2% increase.
So that that's something that gives us a lot of comfort.
Okay, that's really helpful and if I could and on a broader question.
I want to understand if interest rates move up and mortgage rates are higher that benefits the near prime space Youre, probably higher retention rates and maybe in the migration from prime to the near Prime does.
Is it possible for you to quantify the benefit in any sense in terms of incremental mortgage growth how much.
Incremental mortgage market share do you think you could gain for the first 100 basis points increase in interest rates and the second 100 basis points increase.
And interest rates.
Well there is probably two things that are going to happen.
One is that.
You need to keep in mind in the.
In the near Prime space, There is typically a lag in mortgage rates and were being with deposit rates.
So it doesn't happen immediately we saw some of that in <unk>.
2018, when the rates rose.
It took some time.
The rate increases that take effect across the market.
And we.
We do think that we could get more volumes.
<unk>.
As he said more we probably get more deals as they can't qualify at majors.
Banks and Youre right the book would be stickier.
Okay I appreciate that color. Thank you.
Youre welcome.
Our next question is from Jamie <unk> with MBS. Your line is open.
Yeah. Thanks first question just.
On the on the credit side on the stage two loans noticed an increase in single family stage, two loans increasing quarter over quarter.
Or is there anything that.
You can draw.
From that movement.
Yes.
Okay.
I think it's really just ordinary land as we go through I don't think Theres anything that you would take away thats talking about overall deterioration in the portfolio.
Okay.
With respect to the bank sponsored securitization conduit.
Like how did the how did the loans that you are placing into that conduit compared to the RMB has long.
And also compared to the broader portfolio.
Okay.
They're probably closer to that.
We have similar covenant quality there they are classic loans that we're putting in there. So I'd say, it's pretty similar to the rvs.
Hi.
And would that be similar or higher or weaker.
Credit quality of our loan quality compared to the broader portfolio.
Similar.
Okay.
In terms of the credit recoveries today and looking at the.
The ACL as versus the base case scenario at $8 million.
What's a reasonable expectation to think about in terms of how much that one back in Dolby.
Be released or over time.
Our view right now referring to the residential portfolio.
Is that.
<unk> from stage migration.
We're probably not going to see.
Subject to any improvements in cigna.
Significant improvements in the forward looking information, we're probably not going to see any.
Significant.
Coverage in the single family ECL.
The portfolio growth as we continue to originate more loans is going to presumably generate.
<unk>.
We're going to generate the provisions as opposed to reversals and as you saw.
The results commercial is a little more volatile they have.
The loans are typically much larger size.
That's something that.
We'll move.
Separately from our overall expectation related to our residential portfolio and the other two portfolios I think are relatively stable. So.
Another way of summarizing it is we do think that as residential grows we'll probably be booking provisions instead of recoveries and the commercial depends on on volume and staging.
Got it and last one for me just.
In terms of the <unk>.
Non securitized net interest margin decline.
Declining for a couple of quarters in a row here.
Hi, historically been declining for a couple of closing.
What are you seeing on the.
On the portfolio evolution early here in Q4.
Is this a trend that looks like it could continue.
As Maury.
Mortgages continue to renew offset slightly lower rates and deposit pricing starts to back up a little bit it was something we should expect.
So a couple of quarters here at least.
Yes is the short answer Jamie.
So it's a competitive market, we're having seeing strong covenants.
The overall impact obviously, we're striving, but it's competitive and one thing that's happening and so we're really pleased with the originations and as we build out.
Sure.
Our prime book up we're going to want to be keeping more of a our goal is to keep more of these mortgages on our balance sheet so that.
Any marginal declines in demand will be more than made up for increases in volume.
Okay.
On that same theme.
<unk>.
We've.
I heard one of your competitors talk about.
Maybe leaving interest rates.
A little bit lower through the initial rate hike cycle.
Is this something you've given thought to.
To maintain a little bit more.
Brad.
The deposit costs increase generally.
Sorry.
Are you talking about the mortgage rates or deposit rates.
<unk> rates, so holding deposit rate.
Stable, while prime rate.
The bank of Canada has heightened interest rates in that environment is that something you've.
Given thought to resume.
As a strategy to maintain margin.
<unk>.
Jamie Q3 here the main driver is competitive forces.
Can you can want to not change your rates today to widespread but competitive forces May force you to move because we compete with a lot of different financial institutions on the deposit side as we do on the lender side. So it's you can manage it as best you can but you've got to get the volumes you're looking for.
Okay, great. Thank you very much.
Thanks, Jamie.
Our next question is from Graham Ryding with TD Securities. Your line is open.
Hi, good morning.
Any details on the timeline.
Excuse me.
The timeline of the process for the substantial issuer bid.
Yes, well we announced.
Today, Graham as you know and.
We're tending to close by the end of <unk>.
Q4.
Thats, probably as specific as we're going to be as we work through <unk>.
Seasoning process to determine the price range related to the offer.
Okay.
Good morning.
That's right.
We will come out with the Dutch terms from industrial Dutch auction.
At some point.
Yes in the near future I guess.
Yes, sorry.
I've got a bit ahead of myself there yes.
Okay.
Yes.
Jumping to you made a comment just volatility.
Around NIM potential that it was more of a near term comment, but what was driving that such a reflection of competition or.
I missed your message there.
Certainly competition on.
On the asset side as well as on the liability side. So we have.
We're very much focused on.
Our book to origination and so to a certain extent we are ERP.
Perhaps more competitive on rates than we had been previously and particularly.
Through the pandemic so.
I think I'd refer back to remarks that history.
On our last call in terms of.
We went we had more conservative underwriting criteria the print MF, we relax that sorry, not relaxed we've gone back to our old stringent underwriting standards and we're also expanding some of our geographies, where we want to.
Look at increasing our exposure so we're very much focused on growth well.
Being very prudent with our NIM.
Understood what would some of those new geographies do that internally.
Well, it's more of an expansion of some of the.
The postal codes, we get very granular with where we're focused as well as we may now be.
Working with higher loan to values.
We adapt our pricing towards that so you have a great underwriting team, who takes a look and more.
Most of it will still be focused in our Ontario DC markets.
Okay.
As you.
As you are exiting 2022, and hopefully your capital has been right sized into that targeted 14% to 15%.
CET one ratio what sort of ROE are you targeting.
And beyond that.
Ladies and gentlemen, please standby resolving any small technical difficulty conference will resume momentarily.
Okay.
Okay.
Again this is the operator, sorry for the delay please standby.
Just waiting for the line to reconnect. Thank you.
Okay.
Okay.
Again, sorry for the delay you should have our presenters back on the line in just a moment please.
Standby.
Hello, Sir delay, ladies and gentlemen.
And how have the speaker line reconnected.
Sorry for the delay.
Hey, Joe Macquarie Graeme I believe you are in the middle of the question I apologize for being cut off could you. Please repeat your question.
Yeah. Thanks, Joe what sort of ROE are you targeting once you sort of exiting 2022, and we've right sized here.
Your capital level.
Yes.
Well.
We will be.
Mid mid teens is our target.
Okay perfect. That's it for me thank you.
Okay.
Again, if you'd like to ask a question. Please press Star then one on your telephone keypad.
It appears we have no further questions at this time I will turn the call over to <unk> disorder for any closing remarks.
Thank you Chris.
Got a lot accomplished this quarter with progress in our lending business are funding, our technology and our capital strategy.
Thank the team at <unk> for their efforts and look forward to seeing them all in person again.
As a reminder, we have an investor day coming up on the 20 <unk> of November.
You should all have received an invitation and for those who didn't please contact investor relations.
I hope that many of you will join us either in person or virtually.
Thank you for your interest in home capital and I wish you all a good day and a good weekend.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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Hi, Matt.
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