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spk04: All locations on hold. Please stand by. We'll begin in approximately one minute. Thank you. Please stand by. Your program is about to begin. If you need assistance on today's call, please press star zero. Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Ellington Residential Mortgage REIT 2021 Third Quarter Financial Results Conference Call. Today's call is being recorded. At this time, all participants have been placed on a listen-only mode. and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your telephone keypad. At any time, if your question has been answered, you may remove yourself from the queue by pressing the pound key. Lastly, if you should require operator assistance, please press star 1, star 0 actually, star 0. It is now my pleasure to turn the floor over to Jason Frank, Deputy General Counsel and Secretary. Sir, you may begin.
spk02: Thank you, and welcome to Ellington Residential's third quarter 2021 earnings conference call. Before we begin, I would like to remind everyone that certain statements made during this conference call may constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical in nature. As described under item 1A of our annual report on Form 10-K filed on March 16, 2021, forward-looking statements are subject to a variety of risks and uncertainties that could cause the company's actual results to differ from its beliefs, expectations, estimates, and projections. Consequently, you should not rely on these forward-looking statements as predictions of future events. Statements made during this conference call are made as of the date of this call, and the company undertakes no obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise. Joining me on the call today are Larry Penn, Chief Executive Officer of Ellington Residential, Mark Takosky, our Co-Chief Investment Officer, and Chris Smirnoff, our Chief Financial Officer. As described in our earnings press release, our third quarter earnings conference call presentation is available on our website, earnread.com. Our comments this morning will track the presentation. Please note that any references to figures in this presentation are qualified in their entirety by the end notes at the back of the presentations. With that, I will now turn the call over to Larry.
spk03: Thanks, Jay, and good morning, everyone. We appreciate your time and interest in Ellington Residential. To begin, please turn to slide four. In the third quarter, Ellington Residential generated core earnings of 31 cents per share, which continued to cover our dividend, and we had a modestly positive economic return during the quarter, in which performance of agency RMBS was mixed. Turning back to slide three, In the first shaded green column, you can see that interest rates ended the third quarter not far from where they started, but that comparison masks what were significant intra-quarter movements. In July, interest rates continued to decline, as they had done during the second quarter, as investor concerns increased around the Delta variant, economic growth outlook, and potential Fed tapering. Between June 30th and August 3rd, the yield on the 10-year U.S. Treasury declined by 30 basis points to 1.17%, and interest rate volatility picked up. In response, agency MBS yield spreads widened during July, particularly for lower coupon MBS. Moving into the latter half of the quarter, interest rates began to rise while volatility declined, and agency yield spreads tightened as the market got more clarity on the Federal Reserve's tapering plan. Following its September meeting, the Fed signaled that it could begin asset tapering late this year, with new purchases decreasing incrementally through mid-year 2022. Even though this timeline was a bit more accelerated than some market participants had previously anticipated, this was mitigated by the lack of signaling of any change to the Fed's policy of reinvesting all paydowns on its existing portfolio. Overall, the market welcomed the update, and most agency MBS yield spreads tightened in response. Clearly, the Federal Reserve is trying hard to avoid another market taper tantrum such as was seen in 2013. The late quarter agency MBS spread tightening was not uniform across all coupons and was most pronounced for higher coupon MBS, which also benefited from reduced prepayment expectations driven by incrementally higher mortgage rates. Meanwhile, lower coupon MBS lagged around concerns that the anticipated withdrawal of Federal Reserve purchases would disproportionately impact the current coupon agency MBS that the Fed exclusively buys. All in all, higher coupons significantly outperformed lower coupons over the course of the third quarter in a sharp reversal of second quarter performance. This is illustrated in multiple ways on slide three. Fannie Mae 3.5 and 4.5 prices increased nicely, in contrast to the modest price declines of Fannie Mae 2.5s. And you can see that OASs and Z spreads of Fannie Mae 3.5s and 4.5s tightened far more than those of Fannie Mae 2.5s. For Ellington Residential, net interest income on our portfolio more than offset net realized and unrealized losses, which came mostly from our lower coupon holdings. On the hedging side, net gains on interest rate swaps and U.S. Treasury hedges roughly offset net losses on our TBA short positions, which were concentrated in higher coupons. Meanwhile, our debt-to-equity ratio declined slightly to 6.7 times from 7.0 times at the end of the prior quarter. Finally, in October, we announced our shift from a quarterly dividend to a monthly dividend. We believe that this shift will further enhance our appeal to income-oriented investors and increase the breadth of our investor base. I'll now pass it over to Chris to review our financial results for the third quarter in more detail.
spk05: Chris? Thank you, Larry, and good morning, everyone. Please turn to slide five where you can see a summary of earned third quarter financial results. For the quarter ended September 30th, we reported net income of $860,000, or 7 cents per share, and core earnings of $4 million, or $0.31 per share. These results compare to a net loss of $4.5 million, or $0.36 per share, and core earnings of $4.6 million, or $0.37 per share in the second quarter. Core earnings exclude the catch-up premium amortization adjustment, which was a negative $1.2 million in the third quarter compared to positive $2.6 million in the prior quarter. During the third quarter, as Larry mentioned, net interest income more than offset net realized and unrealized losses, which were concentrated in our lower coupon holdings. Also during the quarter, we had positive results from our interest-only securities and non-agency RMBS portfolio, and negative results from our reverse mortgage portfolio, driven by widening yield spreads in that sector. And in the interest rate hedging portfolio, net gains on interest rate swaps, U.S. Treasury hedges, roughly offset net losses on our TBA short positions. You can also see towards the bottom of that slide that our net interest margin decreased quarter-over-quarter to 1.88 percent from 2.04 percent, largely driven by lower average asset yields. In addition, average pay-ups on our specified pools decreased to 1.44 percent from 1.55 percent, primarily because new purchases during the quarter consisted mainly of lower pay-up pools. Please turn next to our balance sheet on slide six. Book value per share was $12.28 at September 30th compared to $12.53 at June 30th. Including the 30-cent third quarter dividend, our economic return for the quarter was positive 40 basis points. Our debt-to-equity ratio decreased to 6.7 times as of September 30th as compared to 7 times as of June 30th. We continue to maintain higher liquidity and lower leverage as compared to periods prior to 2020 and the onset of the COVID-19 pandemic. Next, please turn to slide 7, which shows a summary of our portfolio holdings. In the third quarter, our agency RMBS holdings increased slightly to $1.2 billion as of September 30th, and our non-agency RMBS holdings decreased slightly to $9.1 million. Turnover in the agency portfolio was 23% for the quarter. Please turn now to slide eight for details on our interest rate hedging portfolio. During the quarter, we continued to hedge interest rate risk through the use of interest rate swaps and short positions in TBAs US Treasury securities and futures. Similar to recent quarters, we ended their third quarter with a net short overall TBA position on a notional basis, but a small net long overall TBA position as measured by 10-year equivalents. On slide 9, you can see that our net long exposure to RMBS was 6.4 times at September 30th, down from 6.7 times at June 30th. primarily due to a larger net short notional TBA position quarter over quarter. I will now turn the presentation over to Mark. Thanks, Chris.
spk01: For the third quarter, if you only consider the starting and ending points of interest rates, it doesn't look like much happened. It was actually a fairly volatile quarter for interest rates in the yield curve. The market oscillated between fears of a spreading delta variant slowing down the economy and concerns that inflation would prove both larger and more persistent than the Fed's assessment that higher inflation will likely be transitory. So, even though the 10-year only changed by two basis points quarter over quarter, it hit a high and a low of 1.54 and 1.17 intra-quarter, which is a much wider 37 basis point range. During the third quarter, we also got significantly more clarity from the Fed on its plan for tapering. Of course, the Fed meeting is today, and so we'll be getting an additional update soon. The tapering plan that the Fed articulated following its September meeting is very similar in structure to the previous taper in 2013, although this taper is going to happen at a faster pace than the previous one. And unlike 2013, it's coming at a time when the mortgage market has been growing rapidly. I think there are a few ways to think about the upcoming taper. On the one hand, the Fed is expected to continue to be net buying agency MBS through the summer of 2022. What net buying means is that they are buying agency MBS in addition to reinvesting paydowns. So the portfolio of agency MBS will continue growth for the next several months, even as tapering ramps up. Right now, it looks like taper is scheduled to end sometime in Q3 2022. So between now and the end of taper, the Fed should still net buy approximately $180 billion more MBS. The word net is important because the Fed will probably buy two to three times that amount just reinvesting paydowns, but that reinvestment size is a function of prepayment speed. So their portfolio is going to grow by another $180 billion, and that's obviously a lot of projected growth on an absolute basis. On the other hand, however, that projected growth is not so big on a relative basis. For example, the Fed's MBS portfolio has grown by approximately $400 billion so far just this year. And meanwhile, the agency MBS market is still growing at its fastest pace ever. Home prices are up, cash-out refi activity is strong, and agency-conforming loan limits are about to increase significantly. In 2021 alone, the residential mortgage market is expected to grow by about $860 billion. For 2022, estimates are for about $635 billion in net growth, so that still leaves plenty of incoming mortgage supply that will need to find a home in private hands. The MBS sector had mixed performance in the third quarter. Prepayments for higher coupons slowed from the elevated levels that we saw during the first half of the year. This prepayment news was encouraging for higher coupon season vintages, and a gradual slowing of speeds, and as a result, price performance of higher coupon MBS was better than production coupons. High coupon outperformance has reversed so far into Q4, however, as a flattening of the yield curve has pressured high coupon MBS prices with their shorter duration. In the month of October, the spread between the 2-year and the 10-year swap rates narrowed by 26 basis points. We continue to be cautious on our outlook for higher coupon MBS, as we remain concerned about the rise in prominence of large public non-bank mortgage lenders, which bring increased efficiencies to the mortgage market, which should continue to keep prepayment speeds elevated relative to historical patterns. Rolls in production coupon TBAs were strong during the third quarter, so these positions effectively generated much more positive carry. Production coupon rolls in both 15 and 30 remain quite strong today, and the Fed will continue to buy a lot of production coupon MBS should they stick with their taper schedule. In addition, as you can see on slide 10, the agency MBS sector continues to look attractive on a relative basis versus other sectors of fixed income. QE has been a rising tide that has lifted the valuation of almost all fixed income sectors, MBS included. But despite agency MBS being the direct recipient of Fed buying, by most measures they don't look expensive relative to investment grade corporates. and MBS investors can get the direct benefit of very high TBA roll levels the Fed buying has created. There is no analogous Fed benefit in the corporate market. At Ellington Residential, we were actively trading in the third quarter, but on a net basis, we only grew the portfolio slightly quarter over quarter. We had a drop in portfolio CPR consistent with the overall decline in MBS prepayment speed. We also switched to a monthly dividend in October. which we believe is generally preferred by investors. Our core earnings continue to cover our dividend. We have ample room to grow our leverage and net mortgage exposure, which could be even more supportive of core earnings going forward. While we did mention on our previous earnings call that we did not expect clarity on taper to cause a big MBS spread widening, we do expect to see pockets of spread volatility. And given current MBS valuations, we prefer to set up our portfolio with lower leverage and higher liquidity, which enables us to be opportunistic should that spread volatility occur. Looking forward to the final months of the year, Fed support is still large and ongoing. We continue to expect production coupon TBA roll levels to be strong, but then to diminish gradually over time. That incremental 25 to 50 basis points of roll benefit, when added to the current yield on production coupon, makes them relatively attractive compared to other asset classes. but we see two headwinds. The first headwind comes from the technology-driven non-bank mortgage lenders. The brick-and-mortar operations of traditional banks are being supplanted by call centers, email, and text message marketing, and increasingly online underwriting and loan processing, all of which can be much more efficient and effective. This is creating heightened prepayment sensitivity as a function of refi incentives. As long as the Fed is actively buying, it is still gobbling up the worst pools via the TBA market. And so TBA pricing does not need to fully reflect clearing levels where private investors see value. That can still be the case even after tapering is over if, as expected, the Fed continues to reinvest paydowns. But this dynamic is going to be greatly impacted by the level of mortgage rates. The most recent Freddie Mac survey mortgage rate was 315. We believe that an increase in mortgage rates Just to 3.5 may materially slow down refi-generated supply. On the other hand, if mortgage rates drop back below 290, refi supply will continue and it may produce an increase in net mortgage supply at a time of diminished Fed support. The second headwind is the shape of the yield curve. Agency MBS typically have stronger performance in the steeper yield curve environment. A flatter curve typically leads to diminished agency MBS demand from CMO issuance and exacerbates negative convexity. So far in the fourth quarter, there has been a big curve flattening, which has weighed most heavily on higher coupons. So we have kept our net mortgage exposure relatively low and have lots of room to add mortgage exposure should we see spread widening in the last two months of the year. That would not be uncommon at all. Market liquidity has gotten worse as many participants have diminished risk appetite coming into year end. Slightly diminished Fed support when properly managed can be a great thing for EARN. This year, we have been in a market dominated by one giant investor, the Fed, whose objective is not motivated by investment returns. As the Fed's footprint shrinks, however, and return-seeking investors gradually become the marginal buyers of agency MBS, we believe potential investment returns will increase. We don't necessarily expect a large widening event, but we do expect some investment opportunities to emerge at attractive entry points. So far, we're off to a good start in Q4. Now back to Larry.
spk03: Thanks, Mark. As we move into the final weeks of 2021, I think Ellington Residential is well positioned to capitalize on pricing dislocations that Fed tapering, or even just fear of Fed tapering, could generate. We finished the quarter with a debt-to-equity ratio of 6.7 times, which is significantly lower than pre-COVID periods, such as 2018 and 2019. when our debt-to-equity ratio averaged around nine times. With this lower leverage, we've also maintained higher liquidity. So moving forward, we have plenty of room to add assets and be opportunistic should spreads widen and pockets of volatility return. Our smaller size also enables us to move nimbly in and out of positions and redirect capital opportunistically, as we did in the spring of 2020 when we rotated aggressively into non-agency RMBS in response to the COVID-related market sell-off. Time and time again, we have demonstrated our ability to protect book value through diligent hedging and liquidity management, but we've also demonstrated our ability to capitalize quickly on investment opportunities, such as by dialing up or down our mortgage exposure based on changing market conditions. The day finally seems to be coming when the agency RMBS market will have to reckon with the impact of Fed tapering. and we expect our portfolio of specified pools, long TBAs and short TBAs, to outperform. The Fed's constant buying of current coupon TBAs has put steady pressure on pay-ups for many specified pool sectors. Since TBA short positions represent a significant component of our hedging portfolio, we believe that a rise in pay-ups will flow right through to our bottom line. We are positioned this way not because we're making a bet on interest rates or Fed policy, but because we believe that this strategy will outperform in a wide range of possible near and medium-term outcomes. Finally, the repayment landscape continues to evolve as we see more signs of repayment burnout, and I believe that this is a competitive advantage for Ellington Residential as we draw on Ellington's 26-plus years of experience modeling prepayments and trading these markets. As the Fed withdraws support, even while mortgage rates remain very low by historical standards, We think that there will be compelling opportunities in the agency MBS sector for those who can successfully navigate the cross-currents of prepayment risk and extension risk. We believe that we are best in class when it comes to agency MBS asset selection and portfolio construction. We view Ellington Residential as an all-weather REIT, able to thrive in a diversity of market environments. And with that, we'll now open the call to questions. Operator, please go ahead.
spk04: At this time, if you would like to ask a question, press star 1 on your touchtone phone. Again, that is star 1 on your telephone keypad. We'll take a question from Doug Harder of Credit Suisse.
spk06: Thank you. This is John Kilachowski. I'm for Doug Harder. Just going back to your comments on leverage, I understand that you've You brought it down a little bit last quarter. And from some of your agency peers, we've seen the appetite to take it up a bit this quarter. And I wanted to see what yours was or what you sort of need to see in the market in order for you to bring leverage up this quarter.
spk01: Yes. So, look, we get big news today from the Fed. The market has performed reasonably well. in front of that we sort of that was consistent with our expectations but i guess a quarter ago you know if we had said what's more likely under performance or out performance right in front of the fed would have said we think performance will be steady but out of those two scenarios probably under performance is more likely so you know i think you're coming into year end balance sheets are generally um reduced you see a pullback in liquidity You're going to get news today. So I think you're going to get pockets of volatility. You're also going to get a big increase in projected mortgage supply when the Fannie Freddie loan limits are updated for the really extraordinary HPA we saw. So I think, you know, a modest pullback would increase our leverage.
spk06: Got it. Thank you. And I guess my second question would be, just some color around TVA performance versus spec pools this quarter and what we've seen as being more attractive so far in the quarter and where you're thinking about spending incremental dollars.
spk01: So, you know, it's a great question. A lot depends on the coupon. I would say this quarter so far you've probably seen a little bit of spec pool weakness relative to TVA. We've You know, when I think about what we've done in the last couple weeks, it's been adding on both sides. It's been adding some pools in production coupons, some pools in higher coupons, but also actively trading TBAs. So I think our view is at least for the next three months or so, sort of the trends in place you saw in the third quarter are likely to persist, specifically high – high values for production coupon rolls, which were a real tailwind to performance, weakness in higher coupon rolls, and continued sort of heightened mortgage responsiveness to prepay incentives. And we referenced it in the call, but I think what's kind of been interesting is that You know, many of the non-banks have been growing market share, and they're really growing market share at the expense of traditional bricks-and-mortar banks. And so that change in prepayment responsiveness we think is something that's going to be with us for a while. You know, if you have a big sell-off in rates, and a big chunk of the market doesn't have refinance opportunities, then that difference in sensitivities is going to be more latent. You won't necessarily see it in prepayment reports. But I think that to us is sort of a permanent, there's a permanent shift in mortgage responsiveness that's occurred over the last two years that we think is unlikely to reverse.
spk06: Got it. Thank you so much. Just a quick last question. Do we have a book value update forward today?
spk01: You know, we typically don't give specific estimates intra-quarter, but I can just tell you the quarter is off to a good start for us.
spk06: Got it. Thank you so much.
spk01: Sure.
spk04: And we'll take our next question from Crispin Love of Piper Sandler.
spk00: Thanks. Good morning, and thanks for taking my questions. First on the yield side, so can you speak to what drove the lower yields in the quarter and then just some of your expectations over the near to intermediate term? I guess over the next, in the fourth quarter and the next couple of quarters, would you expect kind of yields to kind of move closer to what we saw in the second quarter or kind of stick around where the kind of the lower that we saw in the third?
spk03: Yeah, I think the, hey Christmas, Larry, I think, you know, we saw, you know, a drop in yields. But a lot of that is, I think, you know, due to a couple different factors. So first of all, just portfolio turnover, right? I think Mark mentioned your portfolio turnover was a little higher this quarter. And we're not afraid, you know, we have some maybe higher yielding assets. And if we think that they've run their course. We're not afraid certainly to replace them with assets that we think we have more upside, even if they have a slightly lower NIM. I mean, our NIM, if you look at our NIM, yes, it dropped quarter over quarter, but it's still really quite high historically. So, you know, and we're still comfortably covering our dividend even with this low leverage. So, If you think about what Mark said, you know, we're going into year end. We think there's going to be pockets of opportunity and volatility that we're going to be able to increase our leverage back to more, whatever historically been more normal levels for us. You can see that we've got a lot of room to increase core, even with NIMS, you know, contracting on a, you know, on a dollar for dollar basis, let's just say. So, yeah, so I wouldn't be too concerned about, you know, just having the overall asset yield drop a bit.
spk00: Okay, thanks. That's helpful. Just one more from me. So looking at the interest rate sensitivity slide, slide 19 in the deck, it looks like there were some changes in the quarter, and I'm especially focused on the 50-bits increase in rates side compared to last quarter's deck. So can you walk through some of the changes and what caused the changes relative to last quarter, if there's anything important to really point out there, whether it's changes that you saw in your portfolio or the assumptions that go into the interest rate sensitivity?
spk03: Yeah, I think if you're right, it is a little different than it was the prior quarter but I wouldn't read too much into it frankly you know where it was you know if you look at the overall duration remember this is on a on a leveraged basis still still quite low so I wouldn't read like that we had some sort of market call in mind or anything like that and I would imagine that if you look at it today or next week or whatever, it might have reverted back to the levels where it was, you know, even before in terms of, you know, closure to zero duration. So I wouldn't read much into it.
spk00: Okay. Thank you for taking my question, Blair. Yeah, of course.
spk04: And once again, that is star one on your telephone keypad. We'll move next to Mikhail Goberman of JMP Securities. Your line is open.
spk07: Good morning, gentlemen. Thanks for taking the questions. So the agency MBS portfolio has been pretty steady over the last few quarters. I'm wondering what sort of spread widening would you need to see to begin to meaningfully add to the MBS portfolio, assuming we start to see that in the near future?
spk01: Hey, it's Mark. Thank you for the question. So I would say that it depends, it certainly depends on where interest rates are, right? That you've had this, in the past year and change, you have really changed the composition of the agency mortgage market, and you have created lots and lots of Fannie Twos, lots and lots of Fannie Two and a half. So you've, a lot of borrowers have taken advantage of refinance opportunities. So If you bring mortgage rates up to, say, a 3.5% mortgage rate now, we think you're going to really slow down supply, right? You're really going to cut off supply. So in that scenario, I think sort of spreads where they are are maybe five basis points wider. We'd want to increase our leverage. If you were to get, though, a rally, and I think we mentioned 290 is sort of an important mortgage rate level. If you get a rally to there and then you're going to have more borrowers take advantage of refinance opportunities at a time when Fed support is diminished, then we'd look for a bigger widening. So I think what you're going to see is a shift. What's interesting is that most of the big non-banks are now public companies, Rocket, Loan Depot, UWM. And they've been growing market share, not really at the expense of each other, but growing market share at the expense of sort of traditional brick-and-mortar bank mortgage origination platforms. And so I think what you'll see is if you have an increase in mortgage rates, you're going to see a reduction in supply rates. But a lot of the focus on refinance is going to be focused on these higher coupons, where there still are borrowers that can really benefit from taking advantage of today's lower mortgage rates. So where we think it makes sense to increase the net mortgage exposure is going to be really two factors, right? What are the spread levels and also what interest rate regime are we in now, which is going to inform how much supply we're going to get relative to sort of this diminished Fed net buying we're going to see. The other thing I would say is that even within a quarter, we'll move around our mortgage exposure, right? So, you know, what you get on these earnings calls and earnings presentations are sort of snapshots at the end of the quarter, but sometimes things can be fairly dynamic within a quarter.
spk03: And if I could, if I could just point you to slide 20, which shows you where we have our, you know, where we're positioned in TBAs. So you can see there that we're still, as Mark's saying, we're still defensive on higher coupons. And for exactly the reasons that Mark said, even in the current environment, obviously, you've got these non-banks that are getting more and more efficient in terms of refining higher coupons. But then if rates go up, which certainly is a possibility, those higher coupons are going to be even more focused on by those companies in terms of where they're they're concentrating, you know, their marketing and all the other things. So that's, you know, so I think that's something to, you know, to keep in mind in terms of where, you know, where we're focusing.
spk07: Great. I appreciate that. And just one more. It is a small part of the portfolio, but what's the sort of strategy on reverse mortgages going forward?
spk03: Well, reverse mortgages widened, actually have widened quite a bit recently. So we think that now they're less liquid than other agency MBS that we, you know, that we trade more actively, but they actually provide much more, you know, much more yield, much more NIM. They have much less negative convexity. So I think at current levels, you know, we really like them. So, you know, if anything... I think we could see an increase there, but it's never going to be a huge portion of what we do.
spk07: Great. If I could, one more. You mentioned that there's quite a lot of activity within the quarter. We, as analysts, don't usually get a lot of insight into what goes on in the three months in between quarters, but
spk01: was there a shift um in your hedging strategy perhaps during those days when rates fell um to the lows of well i guess early august um i guess yeah sorry no i was going to say no that's a good point and um i talked about the interest rate volatility in the script but i didn't really connect the dots so what we do is we look at our interest rate exposure every day right And mortgages are negatively convex relative to Treasury. So when you get a decline in interest rates, to mitigate interest rate risk, we have to buy back some of our hedges or add the duration to the portfolio. And then if interest rates make a U-turn and go back to where they started, you have to unwind that. And there's a toll in that round trip. And that expected toll is built into mortgage spreads, right? So mortgages have this yield advantage versus treasuries because there's this expectation that there's some delta hedging costs associated with it. Now, in some quarters, the delta hedging costs are sort of more than what's implied by market levels of volatility. In some quarters, they're less. So, yeah, that was certainly – There was a cost to that this quarter. Our strategy, though, didn't deviate at all from how it's always been, that when you get a material move in interest rates that has had a significant change in portfolio duration, You need to take – you take portfolio steps to mitigate that and to bring things sort of back into the guardrails. So that was certainly a component this quarter, but the way we approached it is the way we've always approached it.
spk07: Great. I appreciate the answers. Thank you.
spk04: And this does conclude our question and answer session as well as our conference for today. You may now disconnect your lines, and everyone have a great day.
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