Two Harbors Investment Corp. Operating Performance (unaudited)
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(dollars in thousands, except per common share data)
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Three Months Ended September 30, 2021 |
Three Months Ended June 30, 2021 | ||||||||||||||
Earnings attributable to common stockholders
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Earnings
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Per weighted average basic common share
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Annualized return on average common equity
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Earnings
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Per weighted average basic common share
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Annualized return on average common equity
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Comprehensive Income (Loss) | $ | 45,226 | $ | 0.15 | 9.1 | % | $ | (194,606) | $ | (0.71) | (40.7) | % | |||
GAAP Net Income (Loss) | $ | 52,576 | $ | 0.17 | 10.5 | % | $ | (131,707) | $ | (0.48) | (27.5) | % | |||
Earnings Available for Distribution(1)(2)
| $ | 73,607 | $ | 0.24 | 14.7 | % | $ | 51,519 | $ | 0.19 | 10.8 | % | |||
Operating Metrics
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Dividend per common share | $ | 0.17 | $ | 0.17 | |||||||||||
Annualized dividend yield(3)
| 10.7 | % | 9.0 | % | |||||||||||
Book value per common share at period end | $ | 6.40 | $ | 6.42 | |||||||||||
Return on book value(4)
| 2.3 | % | (9.6) | % | |||||||||||
Operating expenses, excluding non-cash LTIP amortization and nonrecurring expenses(5)
| $ | 12,858 | $ | 12,469 | |||||||||||
Operating expenses, excluding non-cash LTIP amortization and nonrecurring expenses, as a percentage of average equity(5)
| 1.9 | % | 1.9 | % |
Two Harbors Investment Corp. Portfolio | ||||||||
(dollars in thousands) | ||||||||
Portfolio Composition | As of September 30, 2021 | As of June 30, 2021 | ||||||
(unaudited) | (unaudited) | |||||||
Agency | ||||||||
Fixed Rate | $ | 6,647,517 | 74.5 | % | $ | 7,824,889 | 78.9 | % |
Other Agency(1)
| 54,291 | 0.6 | % | 60,061 | 0.6 | % | ||
Total Agency | 6,701,808 | 75.1 | % | 7,884,950 | 79.5 | % | ||
Mortgage servicing rights(2)
| 2,213,312 | 24.8 | % | 2,020,106 | 20.4 | % | ||
Other | 8,173 | 0.1 | % | 5,559 | 0.1 | % | ||
Aggregate Portfolio | 8,923,293 | 9,910,615 | ||||||
Net TBA position(3)
| 8,973,364 | 7,164,835 | ||||||
Total Portfolio | $ | 17,896,657 | $ | 17,075,450 |
Portfolio Metrics
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Three Months Ended September 30, 2021 |
Three Months Ended June 30, 2021 | ||
(unaudited)
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(unaudited)
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Annualized portfolio yield during the quarter(4)
| 3.33 | % | 2.72 | % |
Annualized cost of funds on average borrowing balance during the quarter(5)
| 0.78 | % | 0.79 | % |
Annualized net yield for aggregate portfolio during the quarter
| 2.55 | % | 1.93 | % |
Portfolio Metrics Specific to RMBS and Agency Derivatives
| As of September 30, 2021 | As of June 30, 2021 | ||
(unaudited)
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(unaudited)
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Weighted average cost basis of Agency principal and interest securities(1)
| $ | 104.86 | $ | 105.03 |
Weighted average three month CPR on Agency RMBS
| 30.1 | % | 32.3 | % |
Fixed-rate investments as a percentage of aggregate RMBS and Agency Derivatives portfolio
| 99.1 | % | 99.2 | % |
Adjustable-rate investments as a percentage of aggregate RMBS and Agency Derivatives portfolio
| 0.9 | % | 0.8 | % |
Portfolio Metrics Specific to MSR(1)
| As of September 30, 2021 | As of June 30, 2021 | ||
(dollars in thousands)
| (unaudited) |
(unaudited)
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Unpaid principal balance | $ | 194,393,942 | $ | 185,209,738 |
Weighted average gross coupon | 3.4 | % | 3.5 | % |
Weighted average current loan size | $ | 321 | $ | 312 |
Weighted average original FICO score(2)
| 758 | 758 | ||
Weighted average original LTV | 72 | % | 72 | % |
60+ day delinquencies | 1.7 | % | 2.2 | % |
Net servicing fee | 26.4 basis points | 26.5 basis points | ||
Three Months Ended September 30, 2021 |
Three Months Ended June 30, 2021 | |||
(unaudited) | (unaudited) | |||
Fair value losses | $ | (42,500) | $ | (268,051) |
Servicing income | $ | 122,960 | $ | 112,816 |
Servicing expenses | $ | 21,401 | $ | 18,503 |
Change in servicing reserves | $ | (378) | $ | 163 |
Other Investments and Risk Management Metrics
| As of September 30, 2021 | As of June 30, 2021 | ||
(dollars in thousands)
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(unaudited)
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(unaudited)
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Net long TBA notional amount(3)
| $ | 8,742,000 | $ | 6,854,000 |
Interest rate swaps notional, utilized to economically hedge interest rate exposure (or duration)
| $ | 17,036,595 | $ | 15,646,953 |
Swaptions net notional, utilized as macroeconomic hedges | (941,000) | (201,000) | ||
Total interest rate swaps and swaptions notional | $ | 16,095,595 | $ | 15,445,953 |
September 30, 2021 |
Balance
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Weighted Average Borrowing Rate
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Weighted Average Months to Maturity
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Number of Distinct Counterparties
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(dollars in thousands, unaudited) | |||||||||
Repurchase agreements collateralized by RMBS | $ | 6,998,701 | 0.18 | % | 3.61 | 16 | |||
Repurchase agreements collateralized by MSR | 125,000 | 4.00 | % | 5.98 | 1 | ||||
Total repurchase agreements | 7,123,701 | 0.25 | % | 3.65 | 17 | ||||
Revolving credit facilities collateralized by MSR and related servicing advance obligations
| 420,761 | 3.42 | % | 17.52 | 4 | ||||
Term notes payable collateralized by MSR | 396,479 | 2.89 | % | 32.84 | n/a | ||||
Unsecured convertible senior notes | 424,270 | 6.25 | % | 38.32 | n/a | ||||
Total borrowings | $ | 8,365,211 |
June 30, 2021 |
Balance
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Weighted Average Borrowing Rate
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Weighted Average Months to Maturity
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Number of Distinct Counterparties
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(dollars in thousands, unaudited) | ||||||||||
Repurchase agreements collateralized by RMBS | $ | 8,225,622 | 0.22 | % | 2.47 | 15 | ||||
Repurchase agreements collateralized by MSR | 125,000 | 4.00 | % | 9.01 | 1 | |||||
Total repurchase agreements | 8,350,622 | 0.28 | % | 2.56 | 16 | |||||
Revolving credit facilities collateralized by MSR and related servicing advance obligations
| 533,519 | 3.68 | % | 13.94 | 4 | |||||
Term notes payable collateralized by MSR | 396,183 | 2.89 | % | 35.87 | n/a | |||||
Unsecured convertible senior notes | 423,742 | 6.25 | % | 38.32 | n/a | |||||
Total borrowings | $ | 9,704,066 |
Borrowings by Collateral Type | As of September 30, 2021 | As of June 30, 2021 | ||
(dollars in thousands)
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(unaudited)
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(unaudited)
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Collateral type:
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Agency RMBS and Agency Derivatives
| $ | 6,997,972 | $ | 8,224,426 |
Mortgage servicing rights and related servicing advance obligations | 942,240 | 1,054,702 | ||
Other - secured | 729 | 1,196 | ||
Other - unsecured(1)
| 424,270 | 423,742 | ||
Total | $ | 8,365,211 | $ | 9,704,066 |
Debt-to-equity ratio at period-end(2)
| 3.1 | :1.0 | 3.9 | :1.0 |
Economic debt-to-equity ratio at period-end(3)
| 6.1 | :1.0 | 6.5 | :1.0 |
Cost of Funds Metrics
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Three Months Ended September 30, 2021 |
Three Months Ended June 30, 2021 | ||
(unaudited)
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(unaudited)
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Annualized cost of funds on average borrowings during the quarter:
| 1.0 | % | 0.9 | % |
Agency RMBS and Agency Derivatives
| 0.2 | % | 0.2 | % |
Mortgage servicing rights and related servicing advance obligations(4)
| 4.4 | % | 4.5 | % |
Other - secured | 1.8 | % | 1.9 | % |
Other - unsecured(1)(4)
| 6.9 | % | 6.7 | % |
TWO HARBORS INVESTMENT CORP. | ||||
CONDENSED CONSOLIDATED BALANCE SHEETS
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(dollars in thousands, except share data) | ||||
September 30, 2021 |
December 31, 2020 | |||
(unaudited) | ||||
ASSETS | ||||
Available-for-sale securities, at fair value (amortized cost $6,369,038 and $14,043,175, respectively; allowance for credit losses $15,429 and $22,528, respectively)
| $ | 6,664,744 | $ | 14,650,922 |
Mortgage servicing rights, at fair value | 2,213,312 | 1,596,153 | ||
Cash and cash equivalents | 1,076,216 | 1,384,764 | ||
Restricted cash | 783,974 | 1,261,667 | ||
Accrued interest receivable | 27,676 | 47,174 | ||
Due from counterparties | 336,554 | 146,433 | ||
Derivative assets, at fair value | 53,044 | 95,937 | ||
Reverse repurchase agreements | 85,000 | 91,525 | ||
Other assets | 244,028 | 241,346 | ||
Total Assets | $ | 11,484,548 | $ | 19,515,921 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
Liabilities: | ||||
Repurchase agreements | $ | 7,123,701 | $ | 15,143,898 |
Revolving credit facilities | 420,761 | 283,830 | ||
Term notes payable | 396,479 | 395,609 | ||
Convertible senior notes | 424,270 | 286,183 | ||
Derivative liabilities, at fair value | 82,895 | 11,058 | ||
Due to counterparties | 112,255 | 135,838 | ||
Dividends payable | 67,311 | 65,480 | ||
Accrued interest payable | 10,523 | 21,666 | ||
Other liabilities | 111,465 | 83,433 | ||
Total Liabilities | 8,749,660 | 16,426,995 | ||
Stockholders' Equity: | ||||
Preferred stock, par value $0.01 per share; 100,000,000 shares authorized and 29,050,000 and 40,050,000 shares issued and outstanding, respectively ($726,250 and $1,001,250 liquidation preference, respectively)
| 702,550 | 977,501 | ||
Common stock, par value $0.01 per share; 700,000,000 shares authorized and 313,900,227 and 273,703,882 shares issued and outstanding, respectively
| 3,139 | 2,737 | ||
Additional paid-in capital | 5,429,155 | 5,163,794 | ||
Accumulated other comprehensive income | 299,899 | 641,601 | ||
Cumulative earnings | 1,214,277 | 1,025,756 | ||
Cumulative distributions to stockholders | (4,914,132) | (4,722,463) | ||
Total Stockholders' Equity | 2,734,888 | 3,088,926 | ||
Total Liabilities and Stockholders' Equity | $ | 11,484,548 | $ | 19,515,921 |
TWO HARBORS INVESTMENT CORP. | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
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(dollars in thousands) | ||||||||
Certain prior period amounts have been reclassified to conform to the current period presentation | ||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, | |||||||
2021 | 2020 | 2021 | 2020 | |||||
(unaudited) | (unaudited) | |||||||
Interest income: | ||||||||
Available-for-sale securities | $ | 35,837 | $ | 89,200 | $ | 134,581 | $ | 443,614 |
Other | 203 | 516 | 1,011 | 8,936 | ||||
Total interest income | 36,040 | 89,716 | 135,592 | 452,550 | ||||
Interest expense: | ||||||||
Repurchase agreements | 5,761 | 18,652 | 21,212 | 222,068 | ||||
Revolving credit facilities | 5,605 | 2,391 | 17,375 | 8,748 | ||||
Term notes payable | 3,249 | 3,321 | 9,685 | 11,678 | ||||
Convertible senior notes | 7,267 | 4,821 | 20,743 | 14,366 | ||||
Federal Home Loan Bank advances | - | - | - | 1,747 | ||||
Total interest expense | 21,882 | 29,185 | 69,015 | 258,607 | ||||
Net interest income | 14,158 | 60,531 | 66,577 | 193,943 | ||||
Other income (loss): | ||||||||
Gain (loss) on investment securities | 28,642 | (9,107) | 119,991 | (1,037,222) | ||||
Servicing income | 122,960 | 99,114 | 342,895 | 342,802 | ||||
(Loss) gain on servicing asset | (42,500) | (112,763) | 16,887 | (938,219) | ||||
(Loss) gain on interest rate swap and swaption agreements | (3,947) | 1,401 | 5,102 | (296,117) | ||||
(Loss) gain on other derivative instruments | (15,019) | 65,596 | (239,718) | 8,734 | ||||
Other income (loss) | - | 84 | (5,701) | 948 | ||||
Total other income (loss) | 90,136 | 44,325 | 239,456 | (1,919,074) | ||||
Expenses: | ||||||||
Management fees | - | 5,759 | - | 31,738 | ||||
Servicing expenses | 21,041 | 26,197 | 64,668 | 70,049 | ||||
Compensation and benefits | 9,198 | 10,099 | 28,645 | 26,503 | ||||
Other operating expenses | 7,406 | 8,877 | 22,111 | 21,389 | ||||
Restructuring charges | - | (139,788) | - | 6,000 | ||||
Total expenses | 37,645 | (88,856) | 115,424 | 155,679 | ||||
Income (loss) before income taxes | 66,649 | 193,712 | 190,609 | (1,880,810) | ||||
Provision for (benefit from) income taxes | 325 | (8,202) | 2,088 | (39,504) | ||||
Net income (loss) | 66,324 | 201,914 | 188,521 | (1,841,306) | ||||
Dividends on preferred stock | 13,748 | 18,950 | 44,711 | 56,851 | ||||
Net income (loss) attributable to common stockholders | $ | 52,576 | $ | 182,964 | $ | 143,810 | $ | (1,898,157) |
Basic earnings (loss) per weighted average common share | $ | 0.17 | $ | 0.67 | $ | 0.50 | $ | (6.94) |
Diluted earnings (loss) per weighted average common share | $ | 0.17 | $ | 0.64 | $ | 0.49 | $ | (6.94) |
Dividends declared per common share | $ | 0.17 | $ | 0.14 | $ | 0.51 | $ | 0.33 |
Weighted average number of shares of common stock: | ||||||||
Basic | 307,773,420 | 273,705,785 | 285,192,353 | 273,567,998 | ||||
Diluted
| 346,730,073 | 291,876,935 | 319,966,115 | 273,567,998 | ||||
TWO HARBORS INVESTMENT CORP. | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS), CONTINUED
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(dollars in thousands) | ||||||||
Certain prior period amounts have been reclassified to conform to the current period presentation | ||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, | |||||||
2021 | 2020 | 2021 | 2020 | |||||
(unaudited) | (unaudited) | |||||||
Comprehensive income (loss): | ||||||||
Net income (loss) | $ | 66,324 | $ | 201,914 | $ | 188,521 | $ | (1,841,306) |
Other comprehensive (loss) income, net of tax: | ||||||||
Unrealized (loss) gain on available-for-sale securities | (7,350) | 36,216 | (341,702) | 30,940 | ||||
Other comprehensive (loss) income | (7,350) | 36,216 | (341,702) | 30,940 | ||||
Comprehensive income (loss) | 58,974 | 238,130 | (153,181) | (1,810,366) | ||||
Dividends on preferred stock | 13,748 | 18,950 | 44,711 | 56,851 | ||||
Comprehensive income (loss) attributable to common stockholders
| $ | 45,226 | $ | 219,180 | $ | (197,892) | $ | (1,867,217) |
TWO HARBORS INVESTMENT CORP.
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RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
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(dollars in thousands, except share data)
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Certain prior period amounts have been reclassified to conform to the current period presentation
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Three Months Ended September 30, |
Three Months Ended June 30, | |||
2021 | 2021 | |||
(unaudited)
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(unaudited)
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Reconciliation of Comprehensive income (loss) to Earnings Available for Distribution: | ||||
Comprehensive income (loss) attributable to common stockholders | $ | 45,226 | $ | (194,606) |
Adjustment for other comprehensive loss attributable to common stockholders: | ||||
Unrealized loss on available-for-sale securities | 7,350 | 62,899 | ||
Net income (loss) attributable to common stockholders | $ | 52,576 | $ | (131,707) |
Adjustments for non-EAD: | ||||
Realized gain on securities | (21,087) | (15,493) | ||
Unrealized (gain) loss on securities | (7,714) | 49,620 | ||
Provision for credit losses | 159 | 7,392 | ||
Realized and unrealized (gain) loss on mortgage servicing rights | (23,749) | 202,651 | ||
Realized gain on termination or expiration of interest rate swaps and swaptions | (5,220) | (8,642) | ||
Unrealized loss (gain) on interest rate swaps and swaptions | 13,608 | (13,607) | ||
Loss (gain) on other derivative instruments | 61,355 | (24,721) | ||
Change in servicing reserves
| (378) | 163 | ||
Non-cash equity compensation expense
| 2,559 | 4,611 | ||
Other nonrecurring expenses
| 1,187 | 1,397 | ||
Net provision for (benefit from) income taxes on non-EAD | 311 | (20,145) | ||
Earnings available for distribution to common stockholders(1)
| $ | 73,607 | $ | 51,519 |
Weighted average basic common shares
| 307,773,420 | 273,718,561 | ||
Earnings available for distribution to common stockholders per weighted average basic common share(2)
| $ | 0.24 | $ | 0.19 |
TWO HARBORS INVESTMENT CORP. | ||||||||||
SUMMARY OF QUARTERLY EARNINGS AVAILABLE FOR DISTRIBUTION | ||||||||||
(dollars in millions, except per share data) | ||||||||||
Certain prior period amounts have been reclassified to conform to the current period presentation | ||||||||||
Three Months Ended | ||||||||||
September 30, 2021 |
June 30, 2021 |
March 31, 2021 |
December 31, 2020 |
September 30, 2020 | ||||||
(unaudited) | ||||||||||
Net Interest Income: | ||||||||||
Interest income | $ | 36.0 | $ | 43.4 | $ | 56.1 | $ | 72.5 | $ | 89.7 |
Interest expense | 21.9 | 24.4 | 22.7 | 22.6 | 29.2 | |||||
Net interest income | 14.1 | 19.0 | 33.4 | 49.9 | 60.5 | |||||
Other income: | ||||||||||
Servicing income, net of amortization(1)
| 56.7 | 47.4 | 43.8 | 41.1 | 42.2 | |||||
Interest spread on interest rate swaps | 4.5 | 2.4 | 1.7 | 2.0 | 0.8 | |||||
Gain on other derivative instruments | 46.3 | 26.6 | 18.9 | 43.5 | 32.9 | |||||
Other income | - | - | 0.1 | 0.1 | 0.1 | |||||
Total other income | 107.5 | 76.4 | 64.5 | 86.7 | 76.0 | |||||
Expenses | 34.2 | 31.0 | 36.2 | 37.3 | 43.5 | |||||
Earnings available for distribution before income taxes
| 87.4 | 64.4 | 61.7 | 99.3 | 93.0 | |||||
Income tax (benefit) expense | - | (0.8) | (1.3) | (1.7) | (1.5) | |||||
Earnings available for distribution | 87.4 | 65.2 | 63.0 | 101.0 | 94.5 | |||||
Dividends on preferred stock | 13.8 | 13.7 | 17.2 | 19.0 | 18.9 | |||||
Earnings available for distribution to common stockholders(2)
| $ | 73.6 | $ | 51.5 | $ | 45.8 | $ | 82.0 | $ | 75.6 |
Earnings available for distribution to common stockholders per weighted average basic common share(3)
| $ | 0.24 | $ | 0.19 | $ | 0.17 | $ | 0.30 | $ | 0.28 |
Earnings available for distribution return on average common equity
| 14.7 | % | 10.8 | % | 8.8 | % | 15.9 | % | 15.7 | % |
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Disclaimer
Two Harbors Investment Corp. published this content on 08 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 November 2021 21:31:40 UTC.