MFA Financial, Inc. (MFA) Q3 2017 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the MFA Financial Inc. Third Quarter Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Harold Schwartz.

Thank you, operator. Good morning, everyone. The information discussed on this conference call today may contain or refer to forward-looking statements, regarding MFA Financial Inc, which reflect management's beliefs, expectations and assumptions as the MFA's future performance and operations. When used, statements that are not historical in nature, including those containing words such as well, believe, expect, anticipate, estimate, should, could, would or similar expressions are intended to identify forward-looking statements. All forward-looking statements speak only as of the date on which they are made. These types of statements are subject to various known and unknown risks, uncertainties, assumptions and other factors, including those described in MFA's annual report on Form 10-K for the year ended December 31, 2016, and other reports that it may file from time-to-time with the securities and exchange commission. These risks, uncertainties and other factors could cause MFA's actual results to differ materially from those projected, expressed or implied in any forward-looking statements it makes. For additional information regarding MFA's use of forward-looking statements, please see the relevant disclosure in the press release announcing MFA's third quarter 2017 financial results. Thank you for your time. I would now like to turn this call over to MFA's Chief Executive Officer, Craig Knutson.

Thank you, Harold. Good morning, everyone. I'd like to welcome you to MFA's Third Quarter 2017 Financial Results Webcast. With me today are Steve Yarad, CFO; Gudmundur Kristjansson, Senior Vice President; Brian Wolfson, Senior Vice President; Hal Schwartz, Senior Vice President and General Counsel; and other members of Senior Management. Before we begin, I'd like to acknowledge the comfort and kind suspended to us by investors, shareholders, equity analyst and other monetary management team. After the Fed passing the Bill Gorin in August. Bill's absence is a big loss to MFA and to all of us personally, and we're grateful to the support you provided to us. We can now move to the presentation. MFA had an active third quarter of 2017, as our team successfully transacted on multiple fronts within the residential mortgage universe. With continued strong pricing and mortgage and credit assets, it is challenging to find attractively priced assets. Our investment team has worked tirelessly to find opportunities, while maintaining price and discipline. Our third quarter earnings was $0.15 per share, down from $0.20 in the second quarter, due primarily to 2 factors. The first is CRP prices, which were negatively impacted in August, and again in September, largely due to concerns about possible property damage caused by hurricane Harvey, and Irma. This price decline was modest, approximately $5 million. But since the account for these assets under the fair value option, this $5 million price decline is reflected as a loss in our income statement. Furthermore, this compares to a significant price increase of nearly $14 million for these same assets in the second quarter, which was reflected as a game in our income statement in the second quarter. The second factors that negatively impacted third quarter earnings was the one-time expense incurred pursuant to contractual obligation of the company in connection with that depth of Mr. Gorin. Book value declines slightly to $7.70 from $7.76 in the second quarter, due primarily to the declaration of a $0.20 dividend, which exceeds earnings by $0.05. This was the 16th consecutive quarter in which we have paid $0.20 dividend. MFA's book value has been remarkably stable, for the last 5 quarters, book value has ranged from a low of $7.62 to a high of $7.76. This range is less than 2% from low to high. This is due to our asset selection process, coupled with very modest leverage levels. We remain very active in the investment market in a third quarter, investing or committing to purchase nearly $600 million of assets. Our portfolio runoff was again high in the third quarter, approximately $1 billion, but was down from the unprecedented level of $1.75 billion in the second quarter. And we expected our portfolio runoff will continue to trend lower in the fourth quarter. Finally, our estimated undistributed taxable income as of September 30, 2017, was $0.15 per share. If we could turn to Page 4, please. MFA began operations nearly 20 years ago. And the company has generated strong and consistent long-term returns to investors through volatile markets and through various interest rates in credit cycles. Since January of 2000, we've generated annualized shareholder returns of approximately 15%. As we have over the last 5 and 10-year periods. And over the last 12 months, our total shareholder return has exceeded 25%. We can turn to page 5, please. On Page 5, we summarized our current investment strategy. In 2017, we focused primarily on credit-sensitive residential mortgage assets. The credit assets we've acquired continued to perform well, tend to be short-term in nature and therefore have less interest-rate sensitivity. Many of our assets were purchased at a discount, so they actually benefit from increases in prepayment rates. Investor expectations of improved economic growth have positively impacted credit sensitive assets, as have continued home-price appreciation and repaired borrower credit profiles. While these trends are positive for the assets that we own, they result in higher mortgage pricing makes new invest in more challenging by altering risk return profiles. We have maintained price and discipline, which means sometimes we don't lend bids. While continuously be evaluating our existing asset classes, as well as exploring new opportunities. One such opportunity has been MFA's related investments, which will talk about shortly. Our strategy does require staying power, which gives us the ability to invest in and hold long-term distressed less liquid assets, and positions us to take advantage quickly in a meaningful way, should market disruptions create attractive investment opportunities. We are permitted equity capital, our debt-to-equity ratio has loan up to accommodate potential declines in marks. And our liquidity combined with portfolio runoff from short assets gives us the ability to invest significant amount as we identify attractive investment opportunities. And we invest with a focus on long-term performance. Turning to Page 6. The supply of credit sensitive residential hold is sporadic. That is we can only buy them when they are for sale. As opposed to agency MBS, which can be bought or sold every day. This is quite a challenging investment environment, we purchased or committed to purchase nearly $600 million of assets in the third quarter. Portfolio runoff while still high, slowed from $1.75 billion in the second quarter through $1 billion in the third quarter. We did see some spread widening in CRT securities due to concerns of our 2 hurricanes that made land falls in August and September. But as more data becomes available, it appears that much of this concern was likely an overreaction and spreads marketably recovered. Now I'm going to turn the call over to Steve Yarad, who will provide further details on the results for the third quarter.

Thanks, Craig. As Craig has outlined earlier in this presentation. MFA's financial results for the third quarter and through year-to-date were hired by book value and dividend's ability. However,, our Q3 earnings were lower than prior quarters. Please turn to Page 7, where we present the summary analysis of the key items impacting net income this quarter. In reviewing our results during March, we've continue to see increasing contribution of other income irons to overall net income. The call that we discussed in the second quarter presentation has continues to be primarily attributable to the following 3 factors. One, runoff in assets and the so shared liability to generate net interest income, including agency MBS, legacy nonagency MBS and RPO, MPO MBS. Two, acquisition of assets that we account for you in the fair value option, such as MP whole-ones and CRT securities. When we elect the fair value optional asset, we present the changes in the fair value of the asset each period directly in other income. For MPO whole loans, this includes that in cash queue from payments we see during the period and gains had typically occurred liquidated rather wise payoff. And three, higher funding costs, primarily reflecting recent Federal Reserve and the increases, which has impacted net interest spread. Further, as just noted, while income from MPO whole-on is reported in other income, we are required to present the funding costs for this portfolio as interest expense which reduces net interest income due to the mismatch in reporting of income and humming cost for this asset. Consequently, as our NPL whole on portfolio continues to grow, we would expect that the contribution of other income to overall net income would increase or else remaining equal. During the third quarter of 2017, we continued to see the impact of this shift, as net interest income declined compared to the second quarter. In addition, as Craig has discussed. Other income also declined, principally due to decreases in unrealized gain from CRT securities, which exhibited price volatility this quarter, primarily due to market concerns show hurricanes in August and late September. Overall in the quarter, we recorded unrealized losses on a CRT securities and can afford the fair value option of $5.2 million. This compares to unrealized gains on this portfolio, a $13.8 million in the second quarter. If EPS terms, this represents a sequential quarter decline in earnings, approximately $0.05 per common share. On our second quarter's earnings call, we noted that the increased contribution of other income in MFA's overall earnings, including from accounted for fair value option. The result in fluctuations in the overall level of MFA's net income in future quarters. Having said that, it should be noted that at September 30, 2017, our CRT portfolio is in an overall unrealized gains of approximately $41 million. In addition, since quarter-end, CRT prices have exhibited less volatility, have again tightened in the fact are approaching previous tight levels. In addition to the impacted other - lower other income, earnings were also impacted by higher than usual G&A expenses this quarter, due to the aforementioned non-recurring impact that the company's contractual obligation to the state of Bill Gorin. The net impact of the additional expenses recorded, reduced EPS by approximately $0.01 per common share. And now I'd like to turn the call over to presenter Chris Jensen, who will provide more details of our investment activity and portfolio performance with the quarter.

Thank you, Steve. Turning to Page 8. Where we show our third quarter investments loss. We're less than approximately $600 million in the quarter, and found opportunities in nearly all of our asset classes. With most activity in RPL/NPL whole loan, RPL/NPL MBS and MSR related assets. Assets runoff declined from the second quarter and remained elevated of approximately $1 billion in the third quarter. We expect run-off to continue to decline in the fourth quarter. We've added MSR related asset so asset table and REIT reinvestment in growing to an excess of $400 million. REIT investment, our securities and loans backed by mortgage service and rates. Their performance is dependent on the performance on the underlying servicing rights. But importantly, due to structural features and over collateralization, the price volatility of these assets is substantially lower than the underlying servicing rights. Turning to Page 9. MFA view on interest earning assets and net spread remain attractive and relatively stable, despite recent satisfying increases and a persistent lower interest rate environment. Our leverage was a bit of changed for the last quarter or is lower than a year ago, due to large penthouse in the second quarter. And the fact that we have been replacing higher levered assets, so just AB CMBS, with assets of this whole loans that utilize the less leverage. Turning to Page 10. Here we show the yield, cost of funds and spreads for more significant holdings. Given occurred in yield of our assets, and the yield we're seeing in the marketplace, we believe that with the appropriate amount of leverage in each of our asset classes, we will continue to generate attractive returns for our shareholders. Turning to Page 11. Here we will review MFA's interest's sensitivity. Our asset duration tames a little in the third quarter, declining 2 basis points to 131 basis points, as our asset allocation was relatively unchanged. Besides of our interphase soft portfolio was unchanged from the quarter at $2.55 billion. While the heads duration declined approximately 20 basis points, to minus 230 basis points at our swap, short and naturally over time. In addition to market value protection, our interphase swaps currently hatched about 1/3 of our repurchase agreement. And this net duration was unchanged during the third quarter at 76 basis points. In addition to low net duration, it is important to emphasize that due to the company's emphasis on credit sensitive assets. And the seasonal nature of our portfolio, we have very limited exposure to long-term interest rates. Turning to Page 12. MFA strategy of limiting interest rate risk has consistently delivered book value stability. Limiting the quarter-over-quarter change shift in book value we have experienced. In fact in the last few years, the largest quarter-over-quarter change in book value of 4% with the average change being less than 2%. In addition to book value stability, our portfolio continues to exhibit low sensitivity to change in prepayment rates. As the discount accretion in our legacy non-agency MBS portfolio continues to dramatically outpace the premium amortization our ABP MBS portfolio and the impact of agency MBS amortization on MBS's earnings has diminished over time. This is primarily due to the fact, that the 29 point average purchase discount on a legacy non-agency MBS is much larger than the 4 point average purchase premium on our agency MBS portfolio. In addition, strong home price appreciation and better access to credit for legacy non-agency borrowers continue to support prepayments on our legacy non-agency MBS. While seasoning of our agency MBS portfolio and lower long-terms for our 15-year fixed agency MBS continues to limit prepayment volatility on our agency MBS holdings. Due to these factors, we believe MFA's earnings will continue to develop to the insensitive rapid change as in prepayment rates. With that, I'll turn the turn the call over to Bryan Wulfsohn, who will discuss our credit sensitive assets in more detail.

Thank you, Gudmundur. Turning to Page 13. The residential mortgage credit market continues to enjoy both fundamental and technical support. Interest rates and mortgage rates remain low by historical standards. The unemployment rate is down to 4.2% from 4.9% a year-ago. And the number of homes with negative equity continues to fall. Estimated at 5.4% in September versus 7.1% a year ago. Now people of equity in their home that are employed, they tend to make the mortgage payments. According to the CoreLogic nonperformance insight report released in October, the rate has supported MFA delinquencies drop 0.9% to 4.6% versus a year-ago. Turning to Page 14. We continue to ask access acquiring packages of nonperforming and reperforming residential assets adding over $200 billion in the third quarter. Returns continue to be in line with our expectations of 5% to 7%. We believe our over settled servicing decision and active management of portfolio produces better economic outcomes. Again, as a reminder our credit sensitive whole loans, if you are on a balance sheet on 2 lines, loans held in caring value, $639 million and loans held at fair value, $1.1 billion. This election is permanent and is made at the time of acquisition. Typically, we elect to carrying value for reperforming loans and fair value for nonperforming loans. Turning to Page 15. This slide show the outcomes for loans that we purchased prior to the September month-end of 2016, therefore owned for more than 1 year. 1/3 of the loans that were delinquent at purchases are now either performing or paid in full. And third have either liquidated or REO to be liquidated and another fair stone in market phone inflation [ph]. We're pleased with our performance since modification, as over 80% of our modifications are out of performing or paid in full. These results have outperformed our initial expectation for reperformance. Turning to Page 16. The scaled-back, our purchases of RPL/NPL MBS in the third quarter. The current market yields for A1 to approximately 3% and around 5% for A2. With asset classes in the strong demand leading to existing yields getting reissued once callable at lower yields and tighter spreads. The appetite from unlevered buyers continue to be the driver for the spread tightening. Turning to Page 17. The credit metrics on our loans underlying our legacy nonagency portfolio continue to improve. 100% of the loans, underlying our legacy nonagency portfolio, are now amortizing. This principal amortization, together with home price depreciation continues to reduce LTV. Delinquencies are curing. 60-plus day delinquencies as of September 30 for the portfolio were under 12%. On this page, we illustrate the LTV distribution of current loans in our portfolio. The red bars on the right-hand side represent the at-risk loans, where the homeowner's owes more on a mortgage than the property is worth. These are the loans we worry most about, transitioning to delinquent and defaulting in the future because the borrowers are underwater. As you can see, these red bars are disappearing and almost gone entirely. Please also note, the increasingly large black bars on the left side. Loans with LTV below 80% are attractive refinancing candidates, and 80% - 86% of the current loans have LTVs at 80% or lower. A combination of low rates available today and a 30-year amortization term versus the 20-year remaining term on even loans today can offer homeowner substantially lower monthly payments. Of course, given our deeply discounted purchase price of these assets, we're very happy when the underlying loans prepay. And now I'd like to turn the call back over to Craig.

Thank you, Bryan. So in summary, we've remain active in the investment market. We have maintained our discipline pricing approach, which sometimes means we don't lend bids. We're investing for the long-term, so we are keenly aware that reaching too much for investments can lock in years of suboptimal returns. Our investment team is working harder than ever to reevaluate various asset classes and diligence new opportunities. We cannot always predict what the next attractive investment opportunity will be. But we're quite confident that we will have the feed at the table, the expertise to understand and structure the transaction, an ample capital to able to invest in meaningful size. This concludes our presentation. Operator, could you please open up the call for questions.

[Operator Instructions]. Your first question comes from the line of Douglas Harter from Crédit Suisse.

This is actually Sam Choe filling in for Doug Harter. So you guys mentioned that there was a reduction in credit reserves, I believe wheels on the legacy nonagency assets. I was wondering, if you can walk through that decision? And kind of elaborate more on how you see credit quality trending into next quarter and into 2018?

Sure, Sam. So I know, I think we probably can - it is on the legacy book to answer your question. But I think we probably had a similar credit reserve reduction in every quarter for the last, I don't know, 3,4 maybe 5 years or so. So evaluation process is basically to take a subset of all those legacy bonds. So every bond gets looked at approximately at least once per year. And so that analysis will include such thing as updating the mark-to-market LTV. Looking at delinquency trend that we've seen in the past, look at prepayment rates, and again, we are just - we're evaluating those initial assumptions are the most recent assumptions on each of those bonds. And then the $15 million, basically comes out of that process of bottom to top review of those assets, and our expectation of future cash flow has improved. And the way that impacts us is increases the yield perspectively on those bonds, so it has no effect on book value or no effect on earnings. But if we were creating to, let's say, 91%, and we changed the credit reserve amount begin accreting for 92%, that will increase the yield on that bond.

Got it. So looking at it from your perspective instead of earnings, I guess?

To clarify this, as Craig has said. As it increases the yield, it will result in increased future, interest income on that. Okay. It doesn't impact the period in which we make the credit reserve change.

Got it, the current. Okay. And then from a modelling perspective, I mean, there are a lot of one-time items on the operating expenses. How should we be thinking about the normalized expense level?

Choe, this is Steve Yarad. If you look at G&A of past 7 or 8 quarters as the business has changed and grown a little bit, we've sort of been in G&A to equity even the set of 1.5% to 1.6% range, which equates to $1 value of G&A include in compensation if somewhere around $11 million to $12 million in the quarter. And I think that's kind of the way you should be thinking about it as we move forward.

Your next question comes from the line of Jessica Levi-Ribner from FBR.

The first one on CRTs. The spreads out this quarter, I guess, we would've expected you to be more active in the market, especially, if the hurricanes fears were overblown. So how did you think about that? And how do we think about this marks in the fourth quarter given maybe some spread normalization?

So as far as opportunistically buying these spreads widens. Unfortunately, there were very few trades, the spread widened but most of the holders were reluctant to sell at those levels. So the marks were lower but truthfully there was very little volume that transacted. They probably widened by 30 basis points from the tights. And much of that was just - we're going to overreaction. What happened since then is you have seen a little bit of analysis. So for instance, if you look delinquencies after Katrina, delinquencies spikes immediately but we're gone a few months and come down significantly. In those areas, delinquencies could have been tight 30%, initially. But ultimately, I think we're less than 1.5%, for less than 1.5% of those borrowers, ultimately defaulted. It had estimate sales come out from the GSEs about how affected the value areas were and even though as initial estimates changed a lot as well. So initially, I think the made of the use data projected 2.3% exposure to Harvey. They then revised with the 0.4%. And initially, they expected 5.3% exposure to Irma, which they revised down to 1.8%. So which is a lot of excitement and sort of irrational and very little trading. What happened since then is as you've seen some of these estimates come out of street firms and the GSEs is the price that have largely recovered. So very wide numbers, and we don't have final numbers for October, yet. But I would say that the $5 million that our CRT prices were down in the third quarter we have probably made that back in October.

Okay. So almost a full reversal?

Correct.

The shifting over the whole loan acquisition. Can you talk a little bit about the competition in that market? And how you think about NPL versus RPL? How many - are they - are you looking at earlier clean page like 7 on 7? And how do you think about that market in the competition?

We have seen over time the competition continues to grow, especially on the reperforming space. where we've seen a little bit less competition in just sort of a static pool of buyers is in the - on the nonperforming side, just because of all the sort of the work and infrastructure that needs to be in place, be able to handle those types of assets. So I think you can assume where we have than more active. There's on the nonperforming side. And it's because that where we tend to see a little bit better returns and better perspective returns than spreads.

The next question comes from the line of Steven Delaney from JMP Securities.

If I could, can we start with the undistributed taxable income on Slide 3. I'm just curious, Steve if there's - would the timing requirements might be with the IRS? Or you're going to be able to carry that into 2018?

Thanks, Steve. Yes, delay of access that you have until approximately 9 months into 2018, just the 4 distributed taxable income. So we would expect that, that balance would be substantially use a little bit. And then we carried in 2018.

Okay. So just largely stems from maybe 2017 tax, your items bid, the distribution can be delayed as late as September of '18? Is that the way to think about it?

Pretty much, Steve, yes.

Okay. I must apologize, I had not focused last quarter on the MSR-related investment that appeared to be related to some the MSR, obviously, being the collateral for some term loans. And I'm just curious how you found that opportunity? Obviously, if it's some proprietary, don't want to - I'm not asking you to disclose that but that - is there a market there that could be a repeat opportunity because obviously, the coupons at 6%, and the leverage would suggest the very high ROE for you on that asset class. We just like to hear that a little more about that opportunity?

Steve Del, I'll talk to a little bit generally. And then if you want to get into more details, we can have [indiscernible] address that. By the way, you didn't miss anything last quarter because it would have been exceedingly difficult to figure out that we have any MSR related investor.

Yes, you buried it? It was kind of buried last quarter?

So we broke it out for the first time this quarter. But these - they are actually our first such in-depth in almost a year-ago. We didn't have a lot of size, we didn't frankly from a competitive standpoint, want to publicize this initially. This is the market that we've actually been involved in for a little bit over a year. Over the years, we've been asked about MSR, as a possible asset class. And while we've looked pretty hard at these, we never bought MSRs because we don't own 30-year fixed-rate agencies. We choose it to be complementary as they might have had we own 30-year fixed rate agencies. In addition, we would've encountered some operational complication because we're not licensed to own MSRs. And then finally, we also discovered in the process that it's very difficult to obtain leverage on MSRs. But ultimately, our work on MSRs paid off, because we had the seed at the table as a somewhat innovative structure would develop to obtain leverage on MSRs. It is [indiscernible], said before, the [indiscernible] that we own is structure such that, that we can also borrow against it in the repo market. So our investors vehicles backed by MSR cash flows. With over collateralized, it is also backed by the issuer. But our cash flow is our floating rate LIBOR-based. So the value of our investment is much more stable than the value of the underlying MSRs. And maybe, if you want to talk a little bit about future opportunities and the files of that market?

Yes, Steve. So it's an interesting opportunity. And as Craig played out, we've spent time around the MSR space. And then, we kind of learned it. It was complicated and somewhat illiquid finance MSR assets at the end of last year. And so we got involved in some creative transactions there. And the reason why this is a bit complicated because it's - you have the underlying MSR asset, as you know which is volatile in nature. And you have to actually idolize a few payments and understand the underlying asset as well. But it's all you have some structure in creativity. And then, you really have to look to the partner within this case as a servicer and figure out how they're doing from a company point of view. So there's definitely some creative work being done there and there's numerous transactions that have happened where the structure is idly loan or a note where the MSRs threads in some nature as collateral to the asset. And there's probably going forward as you think about that. Maybe there's 1 or 2 transactions per quarter. It's definitely not a large space at the moment but it definitely is interesting and provide attractive opportunity as you know it's based upon the high coupon rates for the sea. Interest also importantly, just to understand and so be clear, the interest rate sensitivity of our instrument is low because it has a floating-rate coupon. And it has a fixed maturity of post to the underlying MSR, which is obviously as you understand quite sensitive to the change in interest rates.

That's very helpful background. Or maybe we'll follow up offline on that just to get a little more, a better understanding about the opportunity. I think, we actually saw a believe earlier this year, a securitization, transaction backed by MSRs, I think that was Genie Mae MSRs. But glad to hear that MFA is plugged in. Not surprised but pleased to hear that you've identified that opportunity. And just 1 last thing, just looking at your capital structure. We're all kind of wondering where rates are going to go on the longer-end. And given the tightness in the corporate debt market that we've - we're seeing still. Just wondering when you look at your balance sheet, and you look at your 8% baby bonds, and you're 7.5% per. When you look at those coupons versus investment returns, do you see any opportunity for partial redemption there to, maybe, to lower your blended cost of capital, that's my last question?

Sure, Steve. So yes, we do look at that. Understand that whether it's preferred or the baby bond structure. Those are structured as retail securities. So typically they're pretty expensive to issue. They cost over 3% to issue. So it's not quite as simple as just comparing the coupons but we're very much aware of where the corporate bonds and even your jump-ons for light companies have been done as we well as the preferred space.

Your next question comes from the line of Bose George from KBW.

Can you guys just give a little bit more detail about how you envision deploying? I mean, your excess capital and runoff going forward? And then, how big would you actually like to see the MSR portfolio grow over time?

Sure. So I think our growth of asset class is still credit-sensitive loans. I think as Bryan said, it will weep for the moment. I think it's probable more skewed to nonperforming then reperforming loans. But obviously, that can change. Said in my prepared remarks, as market spreads change across all of our asset classes, I think we tried to continually sort of re-examine all the asset classes. So as an example, we really haven't been active in the agency market for some period of time, probably 4 years or so. And spread in agencies are very tight at the moment. But relative to some of the tightening that we've seen in the legacy or in RPL/NPL securities, agencies probably on a relative would better now than they did 3 or 6 months ago. So I'm not suggesting that we're going to run out by agencies. But we do undertake that process to cross all of our asset classes. There are some possibly new loan-related opportunities that we can look at as well. So we're pretty active. It is a tough market environment that find cheap asset. But I think, where - we have sown in the past that we have been somewhat innovated in our ability to analyze differently creative structures that commit significant capital. So the good news is, when something new does come up, we typically get the first call, or the first - one of the first 3 calls. And as far as the MSR awaited asset, I think we'd love to be able to grow that asset classes. Maybe more 2 deals a quarter. So it's not the type of assets that we could see having billions invested in but certainly hundreds of millions. But it's over 400 now. We actually had a deal that first deal that we bought actually was cold a year later. So remember it was actually over 500, now down 400 and changed. But that could grow by maybe 100 a quarter, 150 a quarter, it's been going goal very well.

Yes. That's helpful answer. Thanks, Craig. And then I feel like this is an always a question that we were turned back to every couple of quarters. But just monetizing more of your unrealized gains and just the pace that we should think about that going forward, particularly from a modeling perspective, of course?

So yes. Fortunately, I think your paying was the modeling perspective. But all I see, I'll give you some of the details. Typically, we don't really discuss specifics of our legacy nonagency portfolio management but I'll share some details of these third quarter sales. And I characterize these as very opportunistic. But also part of a consistent strategy of managing of the chart portfolio. So we sold about $45 million market value advance this quarter, was just comprised of 12 different positions. 8 of those 12 positions were position sized below $3 million. So I'm sure you know our I have had positions often trade at a discount to round up. So we can achieve round our pricing on our lot position, we think these are prudent sales. 7 of the 12 bonds, obviously some of these hit multiple categories. 7 of the 12 bonds are low loan bonds. So that few of them 100 loans in the pool. And what happens with low loan curve bonds is there is the factor down and have fewer loans. We also traded a concession because your monthly prepayment or the fall percentages can be very idiosyncratic. And again, for the ex-extent that we can execute a sale with our price concession. We think those approved the sales. 5 of the bond that we sold traded over part and 1 of the price of the only 102. To leave the bonds, of which we have obviously realized significant price depreciation, in most cases we see very limited further upside. And then finally, the [indiscernible] positionally sold this quarter which was a $17 million current base position, was the bond that we sold slightly over 101.5 and this bond is currently callable at part. Again, these are very opportunistic type sales. And it's part of just managing on the short portfolio. But round hopefully, that will give you a little bit of color as sort if what goes into the process as we do monetize those bonds, as you said.

[Operator Instructions]. And at this time, there are no further questions.

All right. I would like to thank everyone for joining us today. And we look forward to speaking with you next quarter.