Dynex Capital, Inc. (DX) Q3 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to Dynex Capital, Inc. Third Quarter 2020 Earnings Results and Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Alison Griffin, Vice President of Investor Relations. Please go ahead, ma'am.

Thank you. Good morning, everyone, and thank you for joining us. With me on the call today, I have Byron Boston, President and CEO; Smriti Popenoe, Executive Vice President, CIO; and Steve Benedetti, Executive Vice President, CFO and COO. The press release associated with today's call was issued and filed with the SEC this morning, October 28, 2020. You may view the press release on the homepage of the Dynex website at dynexcapital.com as well as on the SEC's website at sec.gov. Before we begin, we wish to remind you that this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words believe, expect, forecast, anticipate, estimate, project, plan and similar expressions identify forward-looking statements that are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. The company's actual results and timing of certain events could differ considerably from those projected and/or contemplated by those forward-looking statements as a result of unforeseen external factors or risks. For additional information on these factors or risks, please refer to our disclosures filed with the SEC, which may be found on the Dynex website under Investor Center as well as on the SEC's website. This conference call is being broadcast live over the Internet with a streaming slide presentation, which can be found through a webcast link on the homepage of our website. The slide presentation may also be referenced under quarterly reports on the Investor Center page. I now have the pleasure of turning the call over to our CEO, Byron Boston.

Good morning and thank you very much for joining our call today. As a fellow shareholder and the CEO of Dynex Capital, I am extremely pleased with our exceptional performance. We continue to build book value, which ended the quarter at $18.25 per share, up over 1% for the year. Economic return year-to-date is now 8.4% and economic return for the third quarter was a strong 11.7%. This performance is especially remarkable, given the unprecedented events of 2020 for financial markets. In addition, we generated income that firmly exceeded our monthly dividend payment. It continues to be an exceptional environment to generate attractive cash flow for our shareholders. Financing rates are low and the liquid assets we're investing in offer attractive risk-adjusted returns, while generating strong net interest income. Our balance sheet gives us flexibility to navigate this complex environment. Our philosophy and behaviors remain disciplined. The world is in a major period of transition and this would be the case for some time. We have aligned our investment strategy across major relevant elements, such as Federal Reserve and government policy, and the housing finance system, which offers a great opportunity to earn income for our shareholders. We believe this is one of the safest places to invest money versus all other asset classes at this time. As such, Dynex Capital stock offers a unique opportunity in a world where global yields are low and cash income from high-quality assets is difficult to source, specifically the stock is trading at a significant discount to book value on a balance sheet that is 97% Agency guaranteed with easy-to-value liquid securities. A monthly dividend of $0.13 translates to a yield of over 900 basis points above the yield of 10-year treasuries. The risk position is being managed by a skilled team of professionals with extensive experience running leveraged portfolios across many asset classes. There is significant earning power in this balance sheet to make accretive investments as the environment continues to provide attractive investment opportunities in liquid assets, to drive earnings above the current level of the dividend. With that, I'm going to turn the call over to Steve Benedetti to give you more specifics regarding the quarter.

Thanks, Byron, and good morning to everyone listening. Book value per common share increased 9.3% to $18.25 and core net operating income per share increased 69% to $0.61 per common share from $0.36 last quarter. Net interest spread was flat quarter-over-quarter, while adjusted net interest spread increased 4 basis points to 200 basis points for the quarter, the widest level for the company in 7 seven years. Over the next few quarters, we expect our net interest spread to modestly decline, given the portfolio adjustments in the third quarter and as our recently purchased Agency RMBS ramp up the seasoning curve, but the earnings impact could be offset by higher balance sheet leverage. Total economic return of 11.7% for the third quarter can be broadly explained by 3 primary reasons: first, book value grew as investments purchased post the first quarter of this year materially outperformed related hedges; second, a higher balance sheet of average earning assets including TBA securities; and third, the low funding cost environment in TBA dollar rolls in particular, with implied funding costs at negative levels for the quarter. The latter 2 points were the predominant reasons for the strong improvement in core earnings versus last quarter. In an environment where interest rates are low and the mortgage refinance index is closing in on its highs for the year, our Agency RMBS prepayment speeds were only 12.4 CPR versus 10.4 CPR last quarter. While overall portfolio CPRs inclusive of the CMBS portfolio were approximately 11 CPR. Our solid prepayment performance reflects the benefits of our active portfolio management earlier in the year and our diversified investment strategy. Furthermore, prepayments only minimally impacted earnings given the lower coupon emphasis in the portfolio and the lower cost basis at which we own these assets. In addition, any impact on book value from the 2 CPR increase during the quarter was more than offset by the increase in payups and higher dollar prices on these assets. As a reminder, our prepayment amortizations reflect the true prepayment performance of the assets; do not include any catch-up amortization or similar adjustments. Toward the very end of the quarter, we sold approximately $382 million in recent issued DUS securities. We recorded a gain of approximately $20.8 million on the sale and listed corresponding hedges at an economic loss of $2.1 million. The sale had the effect of reducing our investment assets and leverage at the end of the quarter to approximately $4.2 billion and 6.2 times shareholders' equity respectively. Smriti will be giving more details and an outlook for our near-term investment plans in her comments. Average interest earning assets including TBA securities were approximately $4.4 billion for the quarter versus $3.2 billion last, driven largely by increases in TBA securities funded through the dollar roll market. As it relates to our hedges, we continue to utilize a treasury based options and future strategy, in this quarter, we added $500 million in swaptions. At the end of the quarter, we had approximately $2.8 billion in interest rate hedges versus $3.8 billion in borrowings and TBA dollar rolls are approximately 75% coverage on a notional basis. With that, I'll turn the call over to Smriti for her comments on the quarter.

Good morning, everyone, and thank you, Steve. I'll cover the factors driving third quarter performance, discuss the current environment, how we're positioned specifically with respect to our risk profile, dollar rolls and prepayments, and how we expect to manage the position in the near-term. Regarding third quarter performance, our strong book value gains reflected the tighter spreads on investments that we had made early in the second quarter across the agency market in both CMBS and RMBS. They also reflect the tighter spreads on existing positions in Agency and non-Agency CMBS IOs. Towards the end of the quarter, we further reduced our allocation to Agency CMBS does, the spreads tightened in to all-time lows in that sector. We have not yet redeployed the gain or the original capital, it remains as dry powder. A second factor driving book value was the investment in specified pool payups. These improved for less popular stories. Payups for state-specific in FICO and LTV pools increased in lower coupons as mortgage rates hit new lows. This is shown on Slide 27 in the appendix. Quarter-to-date book value is about 1% lower than our reported number at the end of the third quarter given wider MBS spreads in the last few days. Turning to the environment. Our macroeconomic focus top down process remains an important cornerstone of our investment strategy. We are highly respectful of the environment, which we still assess as an evolving health and economic situation. While central banks have cushioned the near-term impacts, medium- and long-term consequences of the pandemic are yet to be fully discernible, and they may not be readily apparent for several more months. Our view is that the injection of liquidity by central banks may actually be masking the true underlying picture. And we find this a particular issue in lower rated credits. Add to this the current domestic political uncertainty with many of the future economic paths highly dependent on government policy and what you have is a very large number of scenarios to plan for as an investor. We, therefore, see capital preservation and liquidity as key to navigating this environment. We are approaching the situation with lots of scenario planning, which leads us to maintain a high level of liquidity, a high allocations of very liquid positions on both the asset and the hedging side. And this gives us the flexibility to respond to any event as it unfolds. In terms of earnings and economic return, due to our sales of DUS at the end of the quarter, our portfolio balance and leverage are lower versus June 30. Even at this lower leverage level of assets and leverage with the current level of mortgage rates, unexpected prepayment speeds, we expect to be able to comfortably out on the dividend in the fourth quarter. As a result, we also have significant earnings power in the balance sheet. We have the flexibility and liquidity, and we stand ready to redeploy capital rapidly in the Agency RMBS sector which continues to offer attractive returns. We fully expect to take leverage up. We are currently respecting the U.S. election and Brexit as notable events on the horizon. The earnings and economic power from 1 additional turn of leverage is significant versus the current level of the dividend, which stands at $0.39 per quarter. One times leverage at 11% total economic return generates $0.07 a quarter or $0.28 additional value per year. This would be an additional tailwind to book value and total economic return in the coming quarters. Turning now to how we are positioned and how we expect to manage the portfolio. I'd like to emphasize the need for flexibility in this environment as well as active management. In Agency RMBS, we have been and continue to be active in hedge and asset selection, specifically to address prepayments and duration extension, both of which we believe can be actively managed. We're addressing prepayments with a down in coupon position that is hedged with treasury futures and options to protect duration extension. This type of portfolio hedge positioning is respectful of the many possible outcomes and the high dependence on the issuance of U.S. government debt or economic stabilization stimulus and recovery. Our hedge portfolio is currently composed of treasury futures, treasury options and swaptions on longer-dated tenors. As you can see on Slide 12, the portfolio profile shows the impact of rising rate scenarios and steepeners as well as lower rates, the modeled equity at risk is fairly contained. We use treasury futures because of their liquidity, flexibility, and we use treasury options and swaptions to hedge convexity. Treasury futures give us 24/7 trading capability with liquid and transparent markets for options. We currently view that the benefit of options greatly outweighs the cost the total economic return, especially when interest rates rise. Options also have less liquidity draw and impact your book value less compared to swaps or futures hedges when interest rates fall. Turning now to dollar rolls. On dollar rolls versus specified pools, our current assessment is that the incremental return for specialness in the TBA 30-year 2% coupon is far superior to owning high payups specified pools. We see several scenarios where the specialness remains in the 2% coupon, at least into the first few quarters of 2021 and some scenarios were left much further into 2021. It's important to know the specialness in 2%s takes what is currently in 11% return asset to a 16% to 18% return asset, all else being equal, if the specialness fades, you can choose to remain in the TBA at whatever return they offer at that point, or switch to specified pools. Finally, a word on prepayments. Our view is that prepayments are in manageable risk, and we actively manage them using asset selection, premium management, timing of reinvestments and options hedges. I want to make the point that the greatest prepayment risk in the market is in the cheapest to deliver securities, and in the loans backing those securities. These bonds and loans are not on Dynex's balance sheet. As Steve mentioned, our portfolio average speed was 12 CPR for the quarter versus the average in the universe of 33% CPR. The bonds of greatest concern mostly sit on the Fed's balance sheet, as well as on the balance sheets of mortgage servicers in the form of MSRs. At Dynex 90% of our pools have some form of prepayment protection, so we are not exposed to the cheapest to deliver prepayment experience that you read about and hear about in the broad press. So what does this all mean for Dynex shareholders? The environment remains extremely favorable to earn returns from high quality liquid assets. With the portfolio at 6.2 times leverage, we still expect that out on the dividend for the fourth quarter 2020. We believe the target leverage is higher 1.5 to 2 times higher than today's levels. That gives us significant upside potential versus the dividend. Our posture of flexibility and liquidity enables us to rapidly deploy capital to add the earnings and to drive outperformance versus the current level of the dividend. One times leverage at 11% ROE is $0.28 in core EPS annually. The portfolio is currently positioned with hedges to protect book value in a variety of scenarios. The return environment supports accretive investments in TBAs that will likely exceed hurdle rates even as implied financing from dollar rolls was closer to repo rates. We continue to believe that active management of the portfolio is essential in an environment with many known and unknown unknowns. As we are co-investors with you, we remain highly attuned to market developments and attractive opportunities for value creation. I'll now turn it over to Byron.

Thank you, Ms. Smriti. Let me close our comments by emphasizing a few key points. We believe the key to successful long-term strategy of managing a mortgage REIT is risk management first, followed by effective capital allocation across multiple asset classes. We have been consistent in our approach to the market, and we want to be as transparent as possible for you, our shareholders, so you will have confidence and leaving your money with Dynex. We are really excited about our prospects, but we take most comfort in our discipline process of scenario planning and preparation. We continue to believe surprises are highly probable. As we settle into the fact that global central banks and other government policymakers are now the undisputed kingpins in determining the winners and losers in our economy and financial markets. We think Dynex Capital stock offers tangible value in that regard. I will repeat what I said at the beginning of this call. Our stock is trading at a substantial discount to book value for liquid balance sheet. The monthly dividend offers compelling yield in a low interest rate environment. And you have an experienced team of professionals running a balance sheet with significant upside earnings power versus the current level of the dividend. If you want cash income plus total return over the long term, we believe Dynex Capital is a great place to invest your money. My teammates and I have managed leveraged portfolios through every crisis since 1986. We're internally managed and a material amount of our personal network is invested in Dynex Capital stock. We're all shareholders here. Dynex Capital is not just one of many funds that we manage. Dynex is the only fund that we manage. So please join us on this journey. We remain committed to our long-term vision in being good stewards of your capital. And with that, operator, we will open up the lines up for questions.

[Operator Instructions] Your first question comes from the line of Doug Harter of Credit Suisse. Your line is open.

Thanks, Byron and Smriti. Can you talk about how you are thinking about the dividend level, given that you expect to continue to cover that with the lower leverage and then have that upside potential from getting leverage back up?

Sure. This revolves again back to our process. It all starts with a macroeconomic view. It's a month to month issue for us, regarding how we manage our dividend especially in this environment. We have multiple events in front of us, U.S. election, we've got a Brexit situation in Europe. So we're navigating through a period of time where we need to be month to month in terms of how we think about the dividend. What we're excited about is we've got the earnings power, we've got flexibility, and we've got options. And that's what I'm really trying to convey to our shareholders, is that we do have options. And - but I tell you, we're month - I like to hand a monthly dividend to our shareholders, I think it's important. But it is a month to month decision. What you do know when you look at the numbers, you can always say, look, these guys have the ability to raise dividends if they want, but we're trying to be smart. We can give you that - you don't want us rushing on a dividend and then putting ourselves in a worse risk position. We're respectful of the environment. We always start with a macroeconomic view. And so, likewise, in terms of how we allocate capital, between keeping the capital internal versus distributing to shareholders. Smriti, you want to throw in anything…

Yeah, I mean, I think the only other thing I would say is in the meantime the dividend is a tailwind to book value, and is it positive to total economic return? I mean, the stock already yields close to 10%. So, at this point, we feel like having the capital is also a nice option to have.

And, Doug, you've…

Yeah.

Doug, you've known us a while. We've always been respectful of the overall environment.

Yeah. Smriti, just to follow up on one of the comments you made about the different scenarios for TBA specialness. Wondering if you could just kind of go in and kind of what you - go into a little more detail there and kind of what you see as kind of the key factors as to kind of how long that specialness lasts.

Sure, yeah, I think that's the question on everybody's mind. First off, I think one of the things if you just go back and look over history, in any given environment, there's always 1 or 2 coupons that end up being special, i.e., their implied financing rate is lower than the repo market. And that's true in all markets. So if you go back to 2012, 2013, 2011, that was the 3.5% coupon, the 3% coupon. So in every given environment, there's always one of these coupons out there. Now, there are certain factors in today's environment that make it unique. And the number 1 factor to that is the demand from investors. The biggest investor right now with demand is the fed. The second biggest group of investors are banks. So bank demand and fed demand is driving a big piece of this. We don't think the fed demand is going away. We don't think bank demand is going away. And that's going to be persistent over the next 4, 6, 8, 12 months, as long as we are sitting here at these levels of interest rate. The second piece is production. So interestingly production in the 2% coupon, it is being - it is the largest coupon that's being produced, but the demand for that coupon has outweighed the production. And that continues to be the case looking into December, January, and well into early 2021. The third piece is just this dynamic between the 2.5% coupon and the 1.5% coupon. So you've got - the fed was big in buying 2%s and 2.5%s. There's a big speculation out there, whether they're going to get out of 2.5%s and buy 1.5%. Either way, they still have to buy 2%s. And so that persistent demand is going to continue for some time. So one of the things - when we think about markets, we think about fundamental technical psychology. The fundamentals are driving the production of 2%s. The technicals are saying that the demand for 2%s is greater than the production. And these 2 factors make it a more persistent phenomenon, especially in this type of interest rate environment than at previous times. Scenarios where you don't have - again, like if rates go up from here, you're still going to have Fannie 2%s being produced and they're still going to be in the production mix. You'd have to see rates go significantly above 1.5% for Fannie 2%s to stop being created.

Great. I appreciate that, Smriti.

Sure.

Your next question comes from line of Bose George of KBW. Your line is open.

Hi, everyone. Good morning. Actually, first, I just wanted to ask about the - where things are now in terms of the effective spread on the TBA position, where's that in October just compared to what we did last quarter?

Sure, yeah, the implied - what we're seeing today for November/December, December/January is implied funding rates between minus 50 and minus 60 basis points, with repos trading in the positive 25-ish area. So it's a significant benefit.

Okay. Okay, great. Thanks. And then, actually, just a question on the leverage, so [expense down] [ph] quarter-over-quarter. But is there a way to just think about the average leverage in the quarter, just given the timing of the sales?

Hey, Bose. It's Steve.

Hey, Steve.

Yeah, if you - our average assets, earnings assets for the quarter, we're a little over or right around $4.4 billion. So I would think of it in that sense that we generated the earnings this quarter based on a $4.4 billion balance sheet size, which is really just a hair higher. It's not too much higher than where we are right now in terms of leverage.

Okay. Okay, great. And then actually just want a question just on the hedging. They're doing it with treasury futures and swaptions. Can you just talk sort of conceptually about the benefits of that versus swaps?

Yeah. So futures, they're extremely liquid, you have the ability to trade them, I said, 24/7, but really, you can't trade them on Saturdays, but starting Sunday night, all the way through Friday. So it is a 24-hour trading platform. The options are also quoted, and able to be traded 24 hours, so that that makes, because we wanted liquidity and flexibility. We like the idea of having to do that. At some point, it will make sense for us to get back into swaps, it's not something that we're ruling out. This is just what it feels like the right thing in terms of liquidity and flexibility at the moment. The reason we have options, though, that's a big. If you look at our futures position, the swaptions' positions plus the treasury options position. Our hedge percentage is about 75% of the portfolio. So we - our hedge ratio is actually pretty high. But the nice thing about it, is that keeping that a big portion of that in options, makes it so that when interest rates fall, you don't have the liquidity drain from that swap position that's going against you, and that's hitting your book value. That's the really nice thing about having options in the position, option prices were actually dipped fairly significantly in the third quarter. And so we were active buying options in that period. They've obviously appreciated since then. So that's the benefit of having the options versus the actual swap hedges. But in general, we don't really see a huge difference in futures and swaps. We're trying to use instruments that will help us hedge and generate the economic return. Most of the market is now sort of thinking about hedging mortgages with treasury. So that is the correlations are slightly better. But we expect that we'll have all of these instruments in the quiver if you will, as we think the liquidity and the other factors that we want to have in flexibility in those structures. At the right time, we'll be back in those.

Okay, great. Thanks.

Sure.

Your next question comes from the line of Trevor Cranston of JMP Securities. Your line is open.

Hey, thanks. Another question on the TBAs and the dollar rolls. It sounds from your comments like that's where your bias to deploying dollars incrementally. I was curious, if you do get the opportunity to move your leverage higher at some point in the near term. How we should think about the sort of practical limit in terms of how large the TBA position gets relative to the overall portfolio and what the considerations are there? Thanks.

Yeah. So there's really 2 things. I think in the near-term, where there's value that's where the capital goes, and I think we have significant room from a taxable income perspective to be able to do that, so that that ends up being the binding constraint. At this point, so we feel pretty good about our ability to take that position up to 35%, 40% of the full balance sheet to the extent the opportunity is there. We obviously have that as a guidepost or a governor, for the full year, Trevor, so it ends up being a full year type of thing that you have to manage. But at this point, we don't see that as a real binding constraint.

Okay. Got it. And then thinking about prepay risk, I guess the coupon that stands out, I mean, in your portfolio is the 2.5. So I was wondering, how you guys think about the sensitivity of prepay speeds there, for example, if we receive like a modest rally in rates and continued compression in primary, secondary spreads, just curious about that coupon specifically.

Yeah. I mean, that coupon is a vulnerable coupon. We do have prepay protection in that coupon, so the bonds we own have some form of prepayment protection. The other piece in there is the basis at which we own those assets. It's fairly low, so that that protects us to some extent in terms of degradation to core earnings, if you will. But we are expecting prepay speeds to rise. And one of the interesting things that happens is we forecast prepayment speeds and we're actually actively pre-investing that capital, when we see wider spreads are better returns, right. So that's another way to manage that risk. So we know that that prepayment speeds could rise, we've got low bases in these assets. And the way to generate value in an era of rising payments is making sure that as the prepayments are coming in, or even before they come in, you're making that accretive investment when spreads are wider and managing your leverage so that you're making back some of that return by pre-investing that capital. So yes, we do own 2.5s. We own 2.5s, we own 2s. We think it gives us a very good base from which to work in a range of interest rates. We accept that there's prepayment risk in those and we're managing that risk.

Okay. Make sense. I appreciate the comment. Thank you.

Sure.

Your next question comes from the line of Christopher Nolan of Ladenburg Thalmann. Your line is open.

Hey, guys. Most of my questions have been answered. Smri, can you provide any update in terms of CPRs quarter-to-date for the fourth quarter?

I believe we are - I need to get back to you on that give you the exact number. Okay.

Great. And my follow up question is, previously, you guys had a core ROE target of 8% to 10%, I mean, any update to that?

In general, let's talk about that, because over the long-term, you think about long-term returns, 8% to 10% over the long-term is great, especially with a vehicle where our goal is, we have a lot of shareholders who need cash income. And what they don't need us trying to do is swing for the fences, and trying to generate 30%, 40%, 50%, because in a business model like this, that takes a lot of risk. So we keep in our mind, they tend to we know when we're above 8% to 10%, we're happy we're in that type of environment. So this is a good environment right now. But over the long-term, we keep that as an anchor, because generating cash income and having a focus on 8% to 10% is a smart move. You want to try to, say, I'm going to try to generate cash income, and my goal is going to be 15% to 20%. Fine, you do that. That's fine. That's not Dynex Capital business. When we can take 15% we'll take it, but we've got a fear. We got a principle here to shop and we start with risk management first and foremost. We know first - we also know our shareholders, most are looking for cash income, many are retirees. First thing I want them to do is be comfortable, we are disciplined risk managers. So having an 8% to 10% target is a good thing, Chris, over the long-term. Does it make sense for you?

No, I'm totally good. It's I'm just trying to see what the thinking was on it.

Yes.

That's it for me. Thank you.

[Operator Instructions] Your next question comes from the line Jason Stewart of JonesTrading. Your line is open.

Good morning. Thanks. Back on prepayments. I was wondering if you could elaborate or talk about your view on the additional capacity in origination, I guess, what's come online in the last 6 months and how you view that more broadly, and then specifically as it relates to spec pools?

Yeah, I think that most originators have been behind in terms of capacity, but that that is changing rapidly. You're seeing a lot of people add capacity, you're seeing a lot of people put technology to work, I think, in the cheapest to deliver loans and securities, Jason, you do see the impact of that, the timelines - at the moment, so the timelines are still 45 to 60 days out there. So it's not like the capacities come online and more loans are going through the pike, than before in the large quantities. I do think it's there, I think it comes online over the next 6 to 12 months. So it's going to be a slow grind rather than a fast big spike, and you can see that in the refi and this is kind of reflecting a little bit of that, as well. So capacity, it's been added, it's going to continue to be added, I feel like the work-from-home situation is making it harder for some of that capacity to come online. But that just means it's just a matter of time. In terms of the primary secondary rate, that's what's keeping the primary secondary kind of sitting out there at this point. But that also, I think, over time, makes a slow grind, come back in. And I agree with you on the higher coupons, the specified pools start to become a little bit more of dangerous or tricky territory, as you start to see the lowest hanging fruit, get taken out of the game and then the originators focus on the next block of the in-the-money loans, that's when you start to see the spec pool, speed - start to speed up. And you got to be careful in the higher coupons. So I think that's - in general, if you ask us about what our view is on prepayments, we tell you that with mortgage rates being between 2.5% to 3% prepay speeds are going to go up. They're going to go up, because of 2 reasons. There is incentive in the market, because 90% of the loans are in the money. And the originators are going to methodically find their way through all the bonds - all the loans that are in the money. The ones that are left behind will be credit impaired borrowers, those - there's value in all of those things as an investor. But by and large, we need to be ready for higher prepay speeds in general.

Got it, make sense. Thanks for the color. I appreciate it.

Sure.

There are no further questions over the phone lines at this time. I turn the call back over to the presenters.

Okay. Let me make just a couple of closing remarks here based on the questions. Chris Nolan, thank you so much for that question on 8% to 10%, because you gave me an opportunity to just emphasize at Dynex Capital we are long-term investors. And we're looking to shepherd your capital as our shareholders over the long term. Hence, when we can get above average dividend - above average returns, we want to be very thoughtful and represent you as our shareholders and taking that above average return. But over the long term, risk management is first. Now, the next point is on the dollar roll. We've gotten a ton of questions about dollar rolls over the last few months. At the risk of revealing my age, I started trading mortgage backed securities in 1986. We were in the middle of a big refi wave at that time. We were refinancing 18% coupon 17%, 16%. And for the last 34 years, we've had multiple refi waves. There's nothing unusual here. Mortgage originators create a lot of product in a refi wave and they sell them in the back month. That means 30 days out the future, 60 days, 90 days in the future. The demand for the product as being driven by the fed this year is in the front month. It creates this dollar roll opportunity. It was there in the '80s. It was there in our '90s. It was there 10 years ago. So it's not a new phenomenon that has come along regarding the dollar rolls. When we say we're an experienced management team, we've traded and managed portfolios through those prior events. There is not a lot of new or different here. What big difference is the fed is the largest buyer? To go back in history, that buyer might have been Freddie Mac, might have been Fannie Mae. If you go back to the '80s, it might have been the thrifts, it may have been banks. But there were large buyers in the front month while mortgage originators sold a ton of products in the back month. That creates a great opportunity in terms of dollar rolls. Now, let's contrast to what did Dynex Capital do 10 years ago. Were you been long-term shareholders, we shepherded your capital through the old '08 crisis, similar to March 2020? But let me tell you what the difference was 10 years ago. We didn't run to the dollar roll, there must have been a smorgasbord of opportunities. CMBS was probably trading 500 basis points off the curve. Non-performing loans provided great opportunity. There was a smorgasbord of opportunities presented to us. The difference this year is that Federal Reserve stepped into the market in March and basically took away all of those opportunities. So we have wisely in a disciplined fashion found ourselves in what I consider to be a phenomenal opportunity now to generate cash flow for our shareholders. So with that, Smriti, Steve, I'm not sure if you want to make any other points. But with that, we'll end the call. And I appreciate you all tuning in and we're looking forward to our yearend call. So [indiscernible]. Thank you.

This concludes today's conference call. You may now disconnect.