MFA Financial, Inc. (MFA) Q1 2018 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the MFA Financial First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode and later we will conduct a question-and-answer session. Instructions will be given at that time. [Operator Instructions] And as a reminder, this conference is being recorded. I will now turn the conference over to Mr. Harold Schwartz. Please go ahead.

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 reflects management’s beliefs, expectations and assumptions as to MFA’s future performance and operations. When used, statements that are not historical in nature, including those containing words such as will, 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, 2017, 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 first quarter 2018 financial results. Thank you for your time. I would now like to turn this call over to MFA’s Chief Executive Officer and President, Craig Knutson.

Thank you, Hal. Good morning, everyone. I’d like to welcome you to MFA’s first quarter 2018 financial results webcast. With me today are Steve Yarad, CFO; Gudmundur Kristjansson, Senior Vice President; Bryan Wulfsohn, Senior Vice President; and other members of senior management. We are pleased with both MFA’s financial results and our investment activity in the first quarter of 2018. Our investment portfolio centered largely around residential mortgage credit assets, continues to produce attractive results while maintaining stable book value. MFA’s muted interest rate sensitivity coupled with our low leverage multiple provide these returns with a much lower risk profile than our peers. We experienced unprecedented run-off of residential mortgage credit assets during 2017, which challenged us to reinvest this capital. Our investment team spent considerable time and effort last year looking new counterparties and establishing relationships in order to source low volume. These efforts are bearing fruit as we have been able to acquire significant size in both Q4 of 2017 and Q1 of 2018. MFA’s reputation as a reliable buyer of credit sensitive loans has enabled us to purchase pools of whole loans, including in some cases, transactions with limited competition, at the same time, we continue to analyze new investment opportunities. As we have demonstrated over many years, MFA has the intellectual capacity to understand, evaluate and price assets that are difficult to value initially with legacy non-agency RMBS in 2008 and 2009 then with non-rated RPL/NPL securities in 2013, followed by CRT and credit sensitive home loans and most recently, with MSR-related assets, we’ve earned a reputation as an early mover with a sizable appetite. Please turn to Page 3. We generated earnings per share of $0.20 in the first quarter, which was down from the fourth quarter of 2017, as prices of CRT securities in the first quarter were flat after rising to all-time tight levels in Q4 last year when they recovered from hurricane-related declines in the third quarter. Our book value declined slightly in the first quarter to $7.62 per share, due primarily to our investment strategy coupled with low levels of leverage, MFA’s book value has been very stable with less than a 2% variance between high and low book value for the last six quarters and a quarter-over-quarter average variance of less than 1%. While 2017 was generally a benign period for book values, the first quarter of 2018 was not. And MFA’s strategy insulated shareholders from the sharp book value deterioration experienced by much of the sector. Our new investments exceeded our run-off in the first quarter of 2018 by approximately $117 million. We paid common shareholders a $0.20 dividend for the first quarter of 2018, the 18th consecutive quarter in which we have paid $0.20. And finally, our estimated undistributed taxable income at March 31, 2018 was $0.10 per share. Please turn to Page 4. MFA’s residential mortgage credit investment strategy continues to provide attractive returns, as strong credit fundamentals drive earnings and book value. Residential mortgage credit assets now comprise over 70% of MFA’s total assets and nearly 90% of our equity allocation. Residential home loans, including REO now represent MFA’s largest asset class at $2.8 billion, with over $1 billion of equity allocated to this asset class. Additionally, and Bryan will elaborate further later on in the presentation, we have committed significant resources to our asset management effort. We recognize that by immersing ourselves in the complicated and sometimes messy details of managing credit sensitive loans that we can achieve better outcomes and improved returns. As good as our third-party services are, there is a tangible benefit to direct oversight and involvement in decision-making. And finally, our legacy non-agency portfolio continues to perform well and contribute materially to our financial results generating a yield in the first quarter of 9.44%. Please turn to Page 5. We continue to focus primarily on credit sensitive residential mortgage assets. The credit assets we have acquired are generating good returns 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 we own, the resulting higher market pricing makes new investing more challenging by altering risk return profiles. We have maintained pricing discipline, while continuously reevaluating our existing asset classes, as well as exploring new opportunities. We believe that the likelihood of market uncertainty and potential asset price disruptions is materially higher this year than it was in 2017. Our investment strategy of focusing on shorter-term assets with more sensitivity to credit than to interest rates is designed to preserve book value, while still producing attractive returns, because MFA has lower leverage less interest rate sensitivity and reduced prepayment sensitivity than other similar companies, our returns are achieved with materially less risk. We look forward to continue – we look to continue to expand our investment opportunity set within the residential mortgage space, focusing primarily on credit and utilizing the same disciplined approach to risk reward as we have done historically. Furthermore, our substantial liquidity together with our low level of leverage provides us with significant dry powder to take advantage of spread widening and/or other market opportunities that arise, whether in credit or in rates. Please turn to Page 6. We were able to purchase over $700 million of assets in the first quarter, including a little over $500 million of residential whole loans. Our portfolio acquisitions exceeded run-off by almost $120 million and we deployed approximately $160 million of incremental capital during the quarter, as our incremental investment assets utilize less leverage than the assets that ran off. And the efforts of our asset management team has had a meaningful impact on the outcomes in returns of our existing credit sensitive whole loan assets. And now I’ll turn the call over to Stevie Yarad, who will provide further details on the financial results for the first quarter.

Thanks, Craig. As Craig has outlined earlier in this presentation, MFA’s relatively unchanged book value, stable dividend continue to highlight our financial results this quarter. While net income was lower on a sequential quarter basis, this is primarily due to lower price volatility on our CRT portfolio account for fair value. This is in contrast to the price fluctuations when our CRT experienced during the second-half of 2017, which resulted in significant unrealized gains in the fourth quarter, as concerns related to Hurricane subsided and pricing reached at historic tight levels. Please turn to Page 7, where we present a summary analysis of the key items impacting net income this quarter. Interviewing our results, you will note that sequential quarter decline in net income is primarily due to other income, which is driven by the following. One, decreases in unrealized gains on our CRT securities, as previously discussed, that resulted in negative income for the quarter of approximately $900,000, compared to gains in the fourth quarter of 2017 of approximately $13.5 million, the turnaround in EPS terms of nearly $0.04 per common share. And two, while still a strong performance for the quarter, income from fair value loans is not as high as the prior quarter. Income from fair value loans this quarter primarily includes the following. One, cash coupon income of $13.6 million. This is $3.4 million higher than the prior quarter; two, net unrealized mark-to-market gains of $13.7 million to $7.3 million less than the prior quarter. Finally, gains on transfers to REO, liquidation gains and other cash receipts which totaled $11.1 million this quarter. This is $1.2 million higher than the prior quarter. Our G&A expenses this quarter were marginally higher, reflecting higher compensation-related expenses in the prior quarter. Going forward, G&A expense as a percentage of equity should range between 1.4% and 1.5%. As we have noted in our recent earnings calls, the increase contribution of other income to MFA’s overall earnings, including some items accounted for fair value due to our accounting election of the fair value option may result in fluctuations in the overall level of MFA’s net income in future reporting periods. And now I’d like to turn the call over to Gudmundur Kristjansson, Christiansen, who’ll provide more details about our investment activity and portfolio performance this quarter.

Thank you, Steve. Turning to Page 8. We had another very active quarter, as we purchased in excess of $700 million across the residential mortgage universe. Majority of our investments are in residential whole loans and MSR-related assets. And as Craig pointed out earlier, residential whole loans and REO is now our largest asset class at approximately $2.8 billion. Turning to Page 9. MFA’s strategy of targeting credit sensitive assets with limited interest rate sensitivity positioned us extremely well for the rising interest rate environment we have experienced over the last 2.5 years and continues to serve us well today as rates seen by us rise further. This strategy has successfully maintained an attractive interest rate spread, as well as protecting MFA’s book value. in December of 2015, Fed funds have increased by approximately 150 basis points, while the 10-year treasury increased by approximately 160 basis points from its lows of 130 to 160 basis points in July of 2016. As you can see on the graph on this page, MFA’s yield on interest earning assets has increased during this period by approximately 120 basis points to 550 basis points at the end of the first quarter, while our net interest rate spread has remained roughly unchanged. We have achieved this by focusing primarily on credit sensitive assets that benefit from continued strong credit fundamentals, as well as our preference for short duration and floating rate assets. In addition, our interest rate swaps and increased competition to fund our credit sensitive assets have kept the re-book costs from rising as fast as Fed funds. Turn to Page 10. Here we show the yields cost of funds and spreads for more significant holdings. Given the current yield of our assets and the yields we’re seeing in the marketplace, we believe that with the appropriate amount of leverage for each of our asset classes will continue to generate attractive returns for our shareholders. Turn to Page 11. MFA’s interest rate risk changed a little in the quarter, as the majority of our assets continue to be primarily sensitive to mortgage credit, and as such, continue to benefit from the strong positive fundamentals supporting residential mortgage credit. Due to MFA’s emphasis on credit and the fact that two-thirds of our assets have adjustable rate coupons, coupons step-up structures or are hybrid ARMs, our asset duration remains low. At the end of the first quarter, our asset duration was approximately 147 basis points, up 6 basis points from the fourth quarter. In addition, due to the highly seasoned nature of our agency and non-agency MBS, our asset duration doesn’t change much as rates rise or fall. As such, changes in long-term interest rates will not materially change our interest rate risk profile. The size of our interest rate hedgeportfolio was unchanged in the first quarter at $2.55 billion. While the hedge duration declined approximately 30 basis points to minus 180 basis points, as our swap shortened naturally over time. In addition to market value protection, our interest rate swaps currently hedged about 40% of our repurchase agreements. As a result, MFA’s net duration increased modestly by 11 basis points to 102 basis points at the end of the first quarter. Turn to Page 12. MFA’s strategy of limiting interest rate risk has consistently delivered book value stability, limiting the quarter-over-quarter change in book value we have experienced. A big factor in achieving this has been our strategy of maintaining a low and stable asset duration, as we can see from the orange line on the left graph on this page. In the last few years, the largest quarter-over-quarter change in book value was 4%, with the average change being less than 2%. In addition to average book value stability, we’re also very happy with our book value has held up during the recent large interest rate increases, which proved challenging for many levered investors in our space. In the fourth quarter of 2016, our book value was roughly unchanged, while the two-year treasury rate increased by 43 basis points and the 10-year treasury rate increased by 84 basis points. And over the last two quarters, our book value declined by only 1%, while two-year treasury rates increased by 79 basis points and the 10-year treasury rate increased by 41 basis points. To sum this up, we are pleased with our investment strategy has protected book value, while maintaining an attractive net interest rate margin due in the current rising interest rate environment. With that, I will turn the call over to Bryan Wulfsohn, who’ll discuss our credit sensitive assets in more detail.

Thank you, Gudmundur. Now turning to Page 13. Residential mortgage credit market continues to enjoy both fundamental and technical support. Interest rates and mortgage rates are rising, but still remain low by historical standards. The unemployment rate is down to 3.9% from 4.4% a year ago. There is a dearth of homes available for sale with 3.7 months of supply in March, we believe this lack of supply will keep upward pressure on home prices. According to the CoreLogic, loan performance insights report released in April, the latest reported month-end delinquencies dropped 0.2% to 4.9% versus a year ago. Turning to Page 14. We again had success in acquiring packages of residential whole loans adding over $500 million in the first quarter. We continue to be more active on the NPL side as RPL spreads remain tight. We saw approximately $12 billion of trading activity across the legacy loan space in the first quarter Our expectation for supply is $40 billion for the year-ending 2018, which is similar to the trading volumes in 2017. Again, we expect the volume to be more heavily weighted towards re-performing versus non-performing loans as the universe of delinquent loans has decreased over time. Asset returns on non-performing loans continue to be consistent with our expectations of 5% to 7%. Again, as a reminder, our credit sensitive loans appear on our balance sheet on two lines, loans held at carrying value, $1.1 billion, and loans held at fair value, $1,556 million. This election is permanent and is made at the time of acquisition. Typically, we elect carrying value for re-performing loans and fair value for non-performing loans. Turning to Page 15. We believe our oversight of servicing decisions and active management of the portfolio produces better economic outcomes. This slide shows the outcomes for loans that were purchased prior to March month-end 2017, therefore, owned for more than one-year. 33% of loans that were delinquent at purchase are now either performing or paid in full, 47% have either liquidated or REO to be liquidated, 26% are still in non-performing status. We are very pleased with our performance since modification as over 82% of our modifications are either performing or paid in full. These results continue to outperform on our initial expectations for re-performance. Turning to Page 16. We believe our loan asset management team continues to improve upon their already impressive results. The team is working in concert with our servicers to more quickly get loans to re-perform, as well as limit and reduce timelines to resolution. This is evidenced by the two charts on the right-hand side of the page. On the top chart, you can see improvement in re-performance rates since 25% of NPLs acquired in 2016 held for 12 months were making monthly payments or at paid in full. This compares to 18% in 2015 and 17% in 2014. On the lower chart, you can see our resolution timeline performance improved year-over-year. 27% of loans were resolved after 12 months after loans acquired in 2016 versus 19% in 2015 and 15% in 2014. Turning to Page 17. We added modestly to our portfolio of our RPL/NPL MBS in the first quarter. Current market yields for A1s are approximately 3.75% and around 5% for A2s. A1 spreads remain relatively tight over the first quarter and yield moved higher with rates. We still see the majority of demand in A1 space coming from unlevered money managers. And now, I’d like to turn the call back over to Craig.

Thank you, Bryan. In summary, we remain active in the investment market. We have maintained our disciplined pricing approach, which sometimes means we don’t win bids. We are investing for the long-term, so we are keenly aware that reaching too far 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 are quite confident that we will have a seat at the table, the expertise to understand and structure the transaction and ample capital to be able to invest in meaningful size. We believe that our approach to asset management will lead to better realized returns over time. This concludes our prepared remarks. Operator, would you please open up the call for questions.

[Operator Instructions] And our first question is from the line of Doug Herter with Credit Suisse. Please go ahead.

Thanks. Craig, can you talk about what the outlooks like for repayments in the next couple of quarters?

Prepayments?

Yes. Oh, yes, repayments. Are there any of the, I guess, the RPL securities that have step-ups coming that might sort of accelerate the amount of cash you’re getting back and have to deploy?

So, that portfolio was less than – it’s probably a third of the size than it was a little more than a year ago. So I think a lot of those payoffs that we saw last year, we’re – just because of the size of the portfolio, we’re certainly not as acceptable to it. Typically those deals payoff not because they reached their three-year step-up, but they – it’s usually when they become callable, because many of the older deals were done at higher rates. So we could see some deals get called, but I don’t think we’ll see anything like we saw last year.

Got it. And then, obviously, your last comment that – it’s competitive in your discipline. But I guess, how do you see the pipeline of opportunities that you’re bidding on as far as – so we – how we can think about deployment of capital?

I think, they’re good. It’s two quarters in a row that we’ve deployed over $150 million of incremental capital, which is no small task when you’re replacing runoff. When – as Bryan pointed out, I think, in the loan market, there’s still pretty robust supply. There was a very big transaction yesterday. There was about $17 billion. So there’s still opportunities out there. I think, the difference is with whole loans unlike agencies, for instance, you – we can only buy whole loans when they’re for sale, agencies we could buy any day of the week. So it is somewhat sensitive to timing, but the pipeline looks actually very good.

Great. Thank you.

Sure.

And our next question is from the line of Bose George with KBW. Please go ahead.

Hi, guys, good morning. Actually, first just on the agency portfolio, given the spreads there, I mean, should we see that continuing to decline? And also just from a whole pool test standpoint, I mean, how does that look just, I guess, you’re growing whole loans, so does that offset a lot of the decline there?

Yes, I’ll let Gudmundur talk about the agency market. But keep in mind that all the loans we buy, those are good assets for any of those tests. So we don’t really feel any pressure in that regard.

Hi, Bose, yes on the current agency holdings, yes, I would expect that they will continue to run down. But as you said before and Craig has highlighted, I mean, all options are on the table from a new investments point of view. So to the extent, the Fed continues to pull away from the agency markets and rates rise such as the all-in asset yields on agency MBS improve. And depending what happens to spreads, we definitely stand ready to take advantage of those situations, as they present itself. We only said, we don’t have anything against the agency MBS. It was just the fact that, because we were competing against uneconomic bio, which is Fed, and so they pushed spread so tight and it didn’t make any sense for us. But to the extent, we see opportunities there. We’ll take advantage of that.

Okay, it makes sense. Thanks. And then actually, the MSR investments that you guys are making, are you essentially secured lender to MSR holders? Is that what that investment is?

Yes, that’s a good way of phrasing it. We’re essentially lending to some sort of a structure, whether let’s say, a security securitization vehicle or corporate loan type of structure.

And do you see decent opportunities for growth in that, or is that kind of a one opportunistic situation?

So those, yes, I mean, it’s opportunistic, but there’s a steady flow and it’s an evolving market. It really evolved out of nothing two years ago. And we don’t think initially going to be grow into being a initially a large asset class, but we think it’s going to continue to present opportunities going forward.

Great, thanks. And just one more, Craig, you referred to that $17 billion Capital One transaction the other day. Is that still sort of being sold into the market by the dealers? Is it – and is it – could that be a pretty big opportunity for guys like you?

Hey, Bose, this is Bryan. I mean, that was just yesterday. There was an article that was out this morning, it was just awarded. So I think, that process is still ongoing.

Okay. Okay, great. Thanks.

Sure, Bose.

[Operator Instructions] Our next question is from the line of Steve DeLaney with JMP Securities. Please go ahead.

Thanks for taking the question and congratulations on another solid quarter.

Thanks.

The residential whole loan volume over $500 million this quarter and now $1 billion acquired in the last two quarters. I’m just curious you don’t break it out. But is there any new production in QM products included in there with the NPL/RPL loans that you’re acquiring?

So, Steve, as we’ve said repeatedly since really last summer, all investment options are on the table every day.

Right.

And in the current investment environment, we can’t afford to be complacent or limit our investment options. We take meetings all the time on all kinds of residential mortgage-related investment opportunities and I doubt very much if there are any new investment prospects that we haven’t looked at. In some cases, these meetings never lead to actual investments. In other cases, they might, but it may take months or in the case of whole loans, it was actually years before from our first meetings to when we first started buying those. And when these opportunities do lead to investments, they’re usually smaller first before eventually growing into significant asset classes for us.

Right.

When this is the case for competitive reasons, we’d prefer not to give away any early mover advantage that we might have. But suffice to say, we’re very involved in all sectors. I can’t even count how many meetings we have every week, every month with new ideas and new prospects.

That – that’s helpful, Craig. And I do respect – appreciate that RPL/NPL market is institutionalized and everybody knows, there are dozens and dozens of players in that market. And I appreciate that these are emerging opportunities need to be confidential at this time. Thank you for the way you’ve clarified that.

Sure, Steve.

Bryan, just a question on your Page 14 slide, we – you expect $40 billion of NPL/RPL transactions this year, have you seen any recent studies that tell us sort of with the remaining size of RPL/NPL mortgage debt outstanding is, just the entire kind of universe?

I mean, when you say, we were talking about tradable supply versus just re-performing loans, because the majority of these assets are never going to trade, right? So…

So maybe we should talk about the tradables, yes.

Right. So when we say there’s another – expect another $40 billion this year, maybe you can expect a similar amount. But that’s just going to keep trending towards RPL versus NPL as – again as the economy has just improved and the legacy issues just continue to be worked through. There just aren’t as many new NPL is being created. So I think, $40 billion for the next two to three years, it’s probably still is a possibility and probability. But again, looking forward passed that, it’s tough to tell.

Right, okay. So it could be something – you’ve got some vision now. And does that have something to do with your – it sounds like you guys are making more of a commitment internally towards asset management sort of determining more of your outcomes? I’m just curious if the outlook in the flow kind of pass into that operational strategy?

Yes, just – as we’ve continued to be more active on the NPL space, there is just more – there is more management that’s required and therefore the amount of loans you take on, you need more people to be able to effectively manage those additional units. So, that’s sort of we’ve been bulking up our expertise on that side.

Okay, thank you. And Steve, just to close, Steve Yarad, looking forward do you – is your GAAP EPS reported a reasonable proxy for REIT taxable income or should we consider any like ongoing discrepancies that when you and the Board sit down and talk about the dividend, is there going to be any material differences between GAAP and RTI on a quarter to quarter basis?

Yes Steve, it is an interesting question, because I think if you look at our GAAP and our taxable income on a quarterly basis over past four or so years, ironically it’s have actually on an average basis going t be at the same amount, right around the $0.20 per share, if you go back over say the last four year period. However, from quarter-to-quarter either because of differences in GAAP income and taxable income when we stabilize on securitization, we have unwound the securitization. We’ve had an obvious RMBS settlement, from quarter to quarter you can have significant $0.02 or $0.03 difference between GAAP and taxable income in an individual quarter. So it’s hard, and it’s really hard to predict taxable income, particularly now as we have – our portfolio is more centered on residual whole loans. And as Bryan talked about, we are focusing on NPLs and turning NPLs into RPLs going forward, which has – which can have impacts on taxable income when you have that modification activity. So the – it’s interesting, over time they have sort of trended towards the same amounts, so from that perspective you would say that GAAP has been a reasonable proxy of tax. On an any individual quarter you can have differences there and it’s very difficult to say going forward what that taxable income might be in relation to GAAP. So Steve, I don’t know if that really necessarily answers your question, but just giving you the color on how it trended over the last several quarters.

It’s very helpful, because it – very helpful, Craig.

I’ll give you just one example of why it’s so difficult to forecast. So if we look at nonperforming loans for instance, when we modify a loan that generates a taxable gain, but it doesn’t generate any gain for GAAP purposes. On the other hand with nonperforming loans, if we account for those using fair value and the value of the loans increased, that produces GAAP income, but that doesn’t produce any taxable income. So it’s sufficed to say it’s really complicated and in some ways the two are in totally different areas, so it’s exceedingly difficult to forecast.

Got it, no it’s – the comment, Steve’s comment about smoothing out over the course of the year is really we wouldn’t care so much about quarter to quarter is just that it reasonably should track over a longer period, a year I’d say. So thanks everyone for their comments.

Yes, Steve, just to clarify on that. Certainly over the past four years that’s been the case, but it is difficult to know whether that would – that trend will continue definitely into the future.

Understood, thanks.

Thanks Steve.

And we have no further questions. It looks like someone just queued up again. We have Doug Herter again with Credit Suisse. Please go ahead.

Thanks. I just wanted to get your opinion on the recent consolidation in this space and whether that’s something you guys would be interested in participating in as a way to grow your capital base?

Sure Doug, thanks for the question. We’ve obviously paid attention to recent merger and acquisition activity in our space. Who knew that mortgage REIT people could engage in discussion on really interesting topics and not just geeky mortgage things like negative convexity and duration. Before we know, we might even get invited to cocktail parties. As we evaluate any possible merger or acquisition, we really consider only the interest of our shareholders. For some others these transactions might make sense because increased scale can lower high operating expenses which produce a drag on ROE. In MFA’s case, we feel that we have an adequate equity base and we have among the lowest operating expense ratios in the sector already. So when we look at these transactions, we would likely be most interested if they offer us the opportunity to acquire assets that we want to own at an attractive price. And so if the assets are not assets that we would likely purchase in the marketplace and/or if the price is at or above book, it’s difficult to justify the enormous effort and substantial distraction that accompanies such transactions. That said, as we’ve said, as Gudmundur has said on this call and as I’ve said, as we say about our assets, everything is on the table every day. We try not to say that we don’t do something even if we never have, rather we may not have done something or bought some asset class in the past, but that does mean that we can never do that in the future. Facts and circumstances can and do change.

Thanks Craig, it makes sense.

Thanks Doug.

And now we have no further questions at the moment.

All right. So I want to thank everyone for joining us on the call today and we look forward to speaking to you again in the quarter in August, thanks.