Good morning, and welcome to the first quarter 2023 earnings conference call for Orchid Island Capital. This call is being recorded today, April 28th, 2023. At this time, the company would like to remind the listeners that statements made during today's conference call relating to matters that are not historical facts are forward-looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Listeners are cautioned that such forward-looking statements are based on information currently available on the management's good faith belief with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward-looking statements. Important factors that could cause such differences are described in the company's filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K. The company assumes no obligation to update such forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking statements. Now, I would like to turn the conference over to the company's Chairman and Chief Executive Officer, Mr. Robert Cauley. Please go ahead, sir. Good morning, everyone. Thank you for joining us today. Hopefully, everybody's been able to download our slide deck off of the website because as usual, that's what we'll be going through. As usual, also, I'll just kind of walk you through the agenda. The first thing we'll do is just briefly go over the highlights of our results for the quarter. I'll go into a description of the market developments that we faced during the quarter, our financial results, and then I'll go into greater detail on our portfolio characteristics, hedge positions, and so forth. I also, unlike most calls, want to spend some time at the end to talk about developments so far in Q2, which are... One, they've been very significant, especially for mortgage participants, but also because they're very meaningful for us and our positioning and our outlook going forward. With that, just turning to slide 4, Orchid Island reported net income per share of $0.09. Net earnings per share of -$0.24, excluding realized and unrealized gains and losses in RMBS and derivative instruments, including net interest income and interest rate swaps. We had a gain of $0.33 per share from net realized and unrealized gains on RMBS and derivative instruments, again, including net interest income on the swaps. Book value per share was $11.55 at March 31st versus $11.93 at the end of 2022. In Q1, the company declared and subsequently paid $0.48 per share in dividends. Since its last initial public offering, the company's declared $65.29 in dividends per share, including the dividend declared in April of 2023. For the quarter, our total economic gain was $0.10 per share, which is 0.84% for the quarter unannualized. I'd also like to just point out, just because it's topical, that all of the assets and hedges of Orchid Island are held at fair value. None of our assets or hedges are classified as available for sale or held to maturity, and accordingly, fluctuations in the value of both are reflected in earnings in the period they occur. We have no issues with held to maturity or even available for sale. Now turning to slide 6, we can go through the market developments. In this slide, just two points here. One, you can see, as we move through time, the peak of this curve just keeps moving further and further to the left. You can see that, you know, the red line reflected, the curve at the end of the year, and the most recent one was last Friday. All that reflects is the market's perception that the Fed is nearing the end of their heightening cycle. In other words, the peak of rates is getting closer. Also if you look out the curve, it's inverted. The market expects a recession to follow at some point in the future. But I also want to point out that if you look at these curves, you can see that the movement for the quarter was very minimal, 30, 40 basis points, and that's very misleading. It does not tell the story of what we faced. In fact, quite the opposite. In fact, if you look at what happened in the first quarter of 2023, it's really just a continuation of what we faced throughout 2022, and that is very high volatile markets, lots of interest rate vol, market conditions changing dramatically, and that affects, you know, everybody in the markets and in particular the mortgage market. That has had a profound impact on how we have, you know, reacted to these market conditions in terms of our leverage ratio, our positioning, and our performance. I'll go into those in greater detail later. For now, we'll continue going through what we faced in the quarter. As you can see, trying to get a picture of what happened in the first quarter. You can see that, you know, in the case of the 10-year, just using that as a proxy, how much things changed. Really, I would describe it as kind of phases, if you will. The first phase, which kind of ended in early February, was just a continuation of what we saw late in 2022, and that was this kind of belief that inflation was ebbing and that the Fed was nearing the end of their tightening cycle and would start to ease. That changed very dramatically in early February. The primary catalyst was the nonfarm payroll report on the third, which was a blowup number north of 500,000. Subsequent data over the balance of February was very strong, and the market just made a big pivot and started trading higher. The yield on the two-year Treasury exceeded or 5% in early March. The terminal rate pricing in by the market of Fed Funds, the terminal Fed Funds rate got north of 550 basis points. A big sea change from where we were in January. There was another catalyst. In early March, around the 9th, we had Silicon Valley and Signature Bank fail, we had a huge move the other way. In the case of the two-year Treasury yield, the yield declined by 130 basis points in a little over two weeks. The December Fed Funds future contract declined by 175 basis points in one week. The market went to thinking that the banking crisis was gonna force the Fed's hand, that it was gonna impact the economy. Of course, they would assume also that credit conditions would tighten meaningfully. This big pivot occurred again. That was around March 9th. But even after that, as we moved through the balance of March and into April, after the Fed also and the Treasury, the FDIC had taken significant steps to buffer the impact, if you will, of the failed banks. You know, the Fed introduced their Bank Term Funding facility. The Treasury and the FDIC moved to guarantee bank deposits. These macroprudential steps, as they're referred to, seemed to work. As we moved through the balance of March and into April, it appeared that these macroprudential steps were gonna work, they were gonna contain the problem, and the Fed could focus on monetary policy and inflation, which was still running quite strong, especially the Fed's new preferred measure, what we call supercore, which is services ex shelter, which has become the kind of the buzzword in the market for inflation. That's still running quite strong. Assuming these conditions were contained, the Fed could continue to hike rates, that's kind of where we stand today, at least we were until this week, now we've had another bank show up on the verge of collapse, which is First Republic. That's obviously, you know, a risk going forward. Is there going to be another shoe to drop? The market's very much on edge and very, very sensitive to the latest headline. It all contributes to this theme of just a very volatile market, realized volatility, implied volatility, and options market are high. Just what we've seen in the rates market is just amazing. In fact, there was a brief period in March, I believe it was, when the 2-year futures market actually stopped trading for 2 minutes, and that is extremely rare. I don't know that that's ever happened. It's just a function of the extreme volatility in rates that we've experienced. Really you could argue going back over a year. That's kind of the background, and it has meaningful implications for us and how we manage our business. Just going through the rest of the slides on page 8, this is one that we like to talk about. Again, there are many measures of the relative cheapness or richness of mortgages, but this particular one is just looking at the current coupon spread of the 10-year Treasury. There are, of course, many others you can use. Just to point out a few things, you know, one, you saw the spike in 2020 when we got to 165 basis points, which at the time was the highest level we had seen since the financial crisis. We surpassed that last fall when we got to 190, and we're somewhere in the low 170s today. If you kind of look at this chart on the bottom, you can see it's still creeping up, or look at the 1 on the top. That level there reflected on the top is last Friday at 168. We've probably been as much as 5 higher this week as a result of the news relating to First Republic and the potential for liquidations of their portfolio. I'll have a lot more to say about that in a few minutes. The rest of these slides, just glancing them quickly. Obviously, the 5 and 10-year points of the curve are no longer as topical given what the current shape of the curve. You know, as you can see, the curve is still very flat or nearly inverted. Slide 10, somewhat interesting. These are holdings by both the Fed and the bank. As you can see, starting in April of 2020 when the Fed started their QE and the balance sheet started to grow, that bank holdings of mortgages also grow. Then they started QT last year, and they've been both coming down. If you note on the very far right side, you can see that the bank line dropped. That just reflects the FDIC taking over, Signature Bank and Silicon Valley Bank, and you would expect that those two continue to bleed off over time. Slide 11. The top left, you can just see the performance of a select group of mortgages, and it kind of follows the same pattern I just described. The first month or so of the quarter, we did very, very well. There was the kind of reversal as the market started to price in much more aggressive Fed hikes and so forth, and rates sold off. In early March, we had the bank failures and market rallied and mortgages did well, but less so. You can kind of see there, that even though rates fell precipitously, mortgage performance was lagging, and that just reflected the widening. Of course, the reason is it because the FDIC has taken over 2 banks that had a combined $114 billion of securities that need to be liquidated. That's an obvious risk for the mortgage market. That's a lot of supply that we're gonna have to face. With respect to the bottom left, you can see the rural markets which have been trending softer over the balance of the quarter. They've gotten very, very weak. Again, this just reflects the anticipation of a lot of supply coming out through FDIC sales, and what that means for the mortgage market we'll see over the course of the balance of the year. Specified pool payouts, they've stabilized. You know, they tend to do well when rolls are bad. Given where the rates are, there's really no reason, given that most of the market's out of the money, that these numbers, these spreads would be anywhere near where they were prior to the pandemic. With respect to slide 12, one point I want to make out here is just that this shows you the movement involved implied in the 3-month by 10-year swaption, and it seems to be sort of on the low end of the range. These levels are all very high relative to where they were pre-pandemic. As you can see, earlier this quarter we had a very high spike and pretty much the highest reading we've seen over the last year. It just continues to be a very volatile period. Slide 13, I'm not gonna say much. You can just see that mortgage spreads are widening. It does say TBA liberal assets. That should be SOFR. That's what we're going to be going with solely going forward. Just some specified pool payouts. You can see they've moved somewhat higher. On slides, 14 and really 15, just the kind of the performance of this mortgage asset class for Q1. Mortgages did quite well. They were very representative of the all fixed income assets, kind of the middle of the range you can see. That again, that's through March. We moved into April and the FDIC liquidations were announced and commenced last week, and pressure mortgages have come under, you kind of see on the bottom or on page 15. I'll point out just a couple of things. The first column is kind of peak at the top. It says year-to-date change, and that's through April 21st, so last Friday. You can see that most of these numbers are negative, which implies tightening and mortgages are wider, and they stand out really in contrast to pretty much every class, asset class there. If you look on the far right, the last two columns, the one that says 22 highs, that's basically we've seen extreme spread widening last year. Those are the high level marks. If you look at current levels versus those peaks, most of them are negative in meaningfully high numbers. A mortgage is not so much. It just kind of reflects the fact that what's going on in the market today, especially in Q2, late Q1, is very much market-centric, at least for now. Now turning on to slide 16. This is kind of our expectations for speeds. I just want to point out a couple of things. If you look at the top right, this is the primary-secondary spread, so the spread between prevailing mortgage rates and underlying Treasury rates. One thing or a couple of things that stand out. If you look at the period that ends at the end of 2021, you can see a gradual tightening trend and relatively low volatility in that spread. In other words, the day-to-day movements were very minor. If you look at starting last year, the trend is kind of an increasing trend, but also much more volatile. We see much greater volatility in the primary-secondary spread. What does that mean for mortgage rates? Well, if you look on the left side, that red line is the mortgage survey rate. Really what it kind of implies is that rates have become fairly sticky at a high level. I suspect that they're likely to stay that way until we really see clear evidence that the Fed is going to pivot and we start to see, you know, longer rates meaningfully move lower and, you know, we'll see what happens in the primary-secondary spread. For now, it just seems to be that the takeaway here is that we're gonna have sticky high mortgage rates for a while. Now if we talk about our financial results. Slide 18. This is a slide that we've presented every quarter, and I know that there's going to be questions, so I'll just try to head those off. If you look at the left-hand side, you can see that, when we bifurcate our results between kind of like the net interest income and expenses versus the realized and unrealized gains, it flips to -$0.24, and we pay a dividend of $0.48. I, like I did the last few quarters, just want to point out a couple of things. One, because of our accounting, we do not use what's called the level yield method, which means that discount accretion or premium amortization are not captured in our interest income number. Because we don't use hedge accounting, the effect of hedges on our interest expense number are not reflected here. Just like I said again, like I did the last few quarters, for the quarter, the discount accretion number was about $4.8 million. That's about $0.125. The effect of our hedges in the current period, I talked about this at length at year-end, just how much we have available to offset our interest expense for tax purposes from both our current and legacy hedges is very, very large. The impact of the existing hedges for the quarter added almost $0.50. That negative $0.24 actually goes to about $0.38 and a half cents, which would be a proxy for what we earned if reflective of the accretion of discount in our hedges. Again, we paid $0.48. There's a shortfall there, but it points to our positioning, which again, I'm going to speak to at length in a few moments. You know, we do have a low coupon bias. We have not opted to try to change the coupon composition of the portfolio in an effort to chase higher funding costs because we think that in the long term, that strategy is not going to work. We really don't like the especially the convexity. Again, I'll talk about this more in a moment, but of the higher coupons, we think they're very much exposed to a rally, which will probably follow the end of the Fed's tightening cycle. There is a slight shortfall in the earnings, but from a total rate of return perspective going forward, we remain very comfortable with the portfolio position. That could change if conditions warrant, but for now, that is our intention. Again, a slight shortfall this quarter, same as the last two. All in all, not all that significant, especially given the fact that our hedges are so much in the money. Running through the remaining slides. Slide 19. Really just history here. The green line is kind of our economic net interest income, and as you can see, it kind of appears to be bottoming. That's probably just consistent with the fact that we're nearing the end of a tightening cycle in all likelihood, that should stabilize and eventually help them move forward. The remaining slides, 20, is just pure history. I'm not going to say anything about that. Slide 21 is our leverage ratio. This is, of course, important. On the left-hand side, we report our leverage ratio kind of like on a GAAP basis. This is total liabilities divided by equity. Unlike most of our peers, who use TBAs extensively, we're short TBAs. We're not long. In essence, our economic leverage ratio, which would be our liabilities adjusted for the shorts in the TBA, is much lower than it's reported here. That's actually about 8 or about 6.5 at the end of the first quarter versus the 8.4 reported here. Meaningfully lower, and that's about where it was at the end of the year. It really did not change. Since the end of the first quarter, it has drifted slightly higher just because we've had some modest book value erosion, without making any meaningful changes to the portfolio, but it's still in the high 60s. It's still quite low, and we still have capacity to expand that fairly meaningfully so, when and if conditions warrant, and we think that time is coming soon. That's why we wanna maintain that type of positioning. Going on slide 22, just basically the allocation of capital, is very much unchanged. We still have no desire to own IOs in this environment. They have basically been as fully extended as they can, and we think there's just much more downside to owning those than upside. The right side just kind of rolls you through the portfolio changes for the quarter. As you can see, we added about $470 million of pass-throughs. We did use the ATM, raised some capital early in the quarter. We sold about 2.7 million shares, raised a little under $32 million and bought about $470 million of mortgages, and I'll talk about where we allocated that. We did grow the portfolio slightly during the quarter, and we would like to continue to raise capital going forward just because of the investment opportunities being the way they are. That's kind of it. Now, as I said, we can talk a little more detail about the portfolio. That's on slide 24. As I mentioned, we did add about $470 million. The additions were primarily in Fannie 4s, and we did also about $320 million. These are kind of low pay-up specified pools. We added some Fannie 5s, same kind of thing, so we're not looking to add a lot of specified pool duration, but we did move up in coupon somewhat. That being said, the weighted average coupon of the portfolio at the end of the first quarter was 3.56. That's only up about 9 basis points from the end of last year, which was 3.47. Really not much has changed since the year-end. We continue to maintain the same lower coupon bias, because we think that those are offer the by far the best total rate of return, prospects going forward. You know, we don't wanna try to chase the up in coupon trade because we think that those mortgages are very much exposed to either a rally or a sell-off. Prepayment speeds on slide 25. Obviously, these are extremely muted, and as I said, we expect that to probably be the case until we see a meaningful move with respect to a Fed pivot. I'm gonna skip slide 26. 27 is our funding. I wanna make a few points here. On the left side, we list all of our counterparties, and I wanna say basically three things. One, that this list is very stable, hasn't changed. We continue to have very ample access to funding. We have no funding issues whatsoever. Not only that, but execution levels remain very stable. Haircuts are stable, spreads, stable. They're obviously slightly higher than they were, you know, a year and a half ago when we were close to the zero bound, in funding were, you know, 10 and 12 basis points, 15 basis points, and now we're at much higher levels. The spreads are slightly higher, but have been very stable. On the right side, again, talking about our hedges, as you can see, the red line is our cost of funds, and it very much tracks one-month SOFR. If you look at our economic cost of funds, you can see that it's pretty much leveled off, and that reflects the effect of the hedges, and it's pretty much stabilized. To the extent that we are close to the end of the heightening cycle and the red line is going to flatten, you would expect the blue line also to continue to do that. Our funding costs have really pretty much been locked in at a fairly desirable level. Turning to slide 28, our hedges. I do want to say a fair amount about this slide. First, just to kind of give you the changes. On the top left, you can see our Treasury futures. They did change. We, as I mentioned, we did raise some capital earlier, and we pretty much added to our 5-year note future shorts, but we also made some changes to the ultras. We reduced the ultras. The short position went from $174.5 million to $54 and change. That was moved into a swap position. It's actually a forward starting swap. If you look on the right side, you can see the longer maturity swaps increased. That's what happened there. Much more important, I would say, with respect to the bottom left, we added to our TBA shorts in the 3% coupon. As we just saw on the prior slide, we have a very large allocation to that coupon. Especially given the choppiness in the mortgage market, those have been very effective hedges. In the other side, on the bottom right, these positions, while they've only increased slightly during the quarter, all of these instruments have a very high exposure to vol, and they do well in this type of high vol environment among other market conditions. We've been able to reap some very nice gains from those. They've performed very well for us. Even though the total size of the positions hasn't changed much, we've actually been fairly active trading there. Hunter's been very active and done very well at harvesting some very nice profits. We will continue to employ those strategies as long as we stay in this high vol environment. Really, I would say that if you look at the combination of our increased sizes of our TBA shorts and these hedge positions with using vol-related instruments, they've been very effective for us maintaining kind of a low coupon strategy, especially coupons exposed to these bank liquidations. They've really enabled us to maintain pretty good book value performance in that environment, and a very minimal book value erosion during the quarter, even with a very modest overdistribution. That, that has been a very key part of the strategy, if you will. That's kind of it. I mean, just to summarize the first quarter results, we've been able to maintain a low coupon bias. It's our preferred position. This is how we wanna position going forward. We think that we are near the end of a Fed hiking cycle. We think a recession is likely to follow. It's more a question of when, not if. I think that the if or the when is gonna be driven by the path of inflation, but the combination of all the hikes and the tightening of lending standards, it is to us pretty clear evidence that we're heading to a slowdown in the economy, in which case you would expect longer duration mortgages to perform well, very easy to hedge, very great convexity in those assets. Our hedges have worked very well. The combination of a low leverage ratio, the TBA shorts, and these law-related instruments have been very effective in allowing our strategy to do very well in this environment, even with a modest overdistribution. So that's kind of the wrap for Q1. Just to kind of, as I mentioned, I wanted to spend some time talking about developments in the second quarter and what that means for us going forward. As I mentioned, you know, when we entered April, it looked like all of the macroprudential steps that the Fed and the FDIC had taken were working. They were containing the issue, and the Fed could refocus on trying to fight inflation. That appears to be what's going to happen. That being said, once the FDIC took over those 2 banks, and they may have to take over a third, those assets have to be liquidated. We started last week with these liquidations from agency mortgages, and they're expected to take months. You know, I suspect that given the way the auctions have started out, they're going well, but they may be less than was originally planned. You're still looking at a pretty prolonged period of liquidations of mortgages and other asset classes. You know, that obviously is a meaningful development for a mortgage investor. The other thing is, you know, we're very mindful of the risk that, you know, given the length of time that this could occur, even if the market turns in our favor, the size of these sales over time could degrade the performance of mortgages, especially the lower coupons that we own. There's also the possibility that we could have another bank get taken over and the liquidation list could grow. There's even more risk, and that is just the fact that inflation could stay high and the Fed could keep rates higher for longer. Those are the risks that we face given our position. It's meaningful that we address these and have a strategy in place to deal with them. I think that, as I said, I think our strategy is sound and the intention is to continue to follow it and based on pretty much the premise that we do expect that the economy's eventually gonna roll over, that the Fed will pivot. We think when we do so, we're gonna be very well positioned. One thing I want to say about the liquidations of the mortgages that are being sold from the Silicon Valley and the Signature Bank portfolio is that, you know, they're skewed towards lower coupons, which are longer duration assets. Keep in mind that if the economy's rolling over and credit starts to perform poorly, mortgages are kind of a countercyclical asset. They don't have any credit element, and they tend to do well in those types of environments. That would bode well, if that were to occur, and these assets that are being sold have been longer duration assets. A lot of asset managers are meaningfully underweight this sector. This would offer them an opportunity to get to more neutral position, and especially given that the coupons that are being sold are extremely large components of the index. It would be, you know, it's more likely that those would be the ones that would be desired. We think that that's gonna help these liquidation lists do well when and if we do see this outcome. It also, of course, lines up with what we own. You know, we also think, as I said, up in coupon, if you look at mortgage originations going back through 2022 and into 2023, all these higher coupons are extremely exposed to a rally or a sell-off, frankly. Certainly a rally because they are gonna be the most likely to be refinanced. Given the balance of risk that we face, we're very comfortable with our current positioning. In fact, we would look to the extent we can to add capital to be able to increase our allocation and continue to position ourselves even better to take advantage of the situation when it does in fact eventually occur. That's kind of it. That's kind of how we've gone through the first quarter, how we position ourselves going forward. With that, operator, I think we can turn the call over to questions. Thank you. If you would like to ask a question, please press star followed by the number 1 on your telephone keypad. If you'd like to withdraw your question, please press star 1 again. We'll pause for just a moment to compile the Q&A roster. Our first question comes from Jason Stewart from JonesTrading. Please go ahead, your line is open. Hey, Jason. Hey, Bob. Thanks for again, all the great comments. It sounds like you're gonna stay up in the coupon stack. No, no, down. We're lower coupon bias. Definitely. You know, we have a high concentration in 3s. We've added some 4s and 5s, but we're trying to avoid the top of the stack. We think, as I said, that the markets and the economy are gonna roll over, and we expect duration to perform well in that environment. The higher coupons we think are very exposed to that. They are the low-hanging fruit, if you will. When and if that occurs, and the mortgage bankers out there are looking to refi. We expect those to experience very high speeds. These lower coupons, which are quite easy to hedge and have duration in them, would do very well in that environment. Right. Agreed. What's your view on natural turnover in housing right now? It's very low. It's gone into the mid-single digits. It's trending, you know, it can only go so low. You know, four, three, 3-5 CPR. You know, you have a lot of issues now. One is, I'm sure you're aware of it, affordability is extremely low. The combination of high prices and high rates, make affordability very high. It's tough for new homeowners. A lot of existing homes are owned by people who have very low rates. They really have no reason, no economic reason to be moving because they would be just replacing their expensive home with another expensive home, only their mortgage would be much higher. I would expect existing home sales to remain very benign, and I think that new home sales are gonna be challenged by low affordability, high mortgage rates. I would say it's gonna be low, and it really probably isn't likely to change meaningfully until you kind of see the market go the other way in a meaningful way. With that said. Gotcha. The first quarter was very slow. We would expect, you know, a modest acceleration in speed. Just the seasonal effect of coming into the summer months, into the second and third quarter, to be a little bit better for us, which would mean slightly faster. Gotcha. Okay. that's helpful. Then do you have an opinion on the MSR market right now? We don't follow it that closely, but I know that it's a number of our peers are involved. I think it's more downside than upside. You know, you've seen a lot of the large banks, the G-SIBs move away from the market. I'm sure you know more than I do that, for instance, Wells has been selling some of theirs. You know, that asset in the current market is very great carry, but I don't see a lot of upside for it in the future. It's very, very tricky to hedge right now. I think that the new production is, it would be particularly challenging, to the extent that they're, you know, MSRs that are created off of these new higher mortgage rates are going to be... You know, if our, if our view of the MSR market parallels, what we've done in IO space, which I think it does, you know,... Yep we're not seeing that as a great asset class. Yep. All right, gentlemen. Appreciate the time. All right. Thank you, Jason. As a reminder to ask a question, please press star followed by 1. Our next question comes from Mikhail Goberman from JMP Securities. Please go ahead. Your line is open. Hey, guys. good morning. Mikhail. Thanks for taking the call. Mm-hmm. Hi. Just a couple real quick ones. Could you guys give an update on book value for the quarter and thus far? The 6.5x economic leverage figure you guys gave, is that a March 31st figure, or is that a current number? Uh- Both. Both. It's maybe a little bit higher 'cause book's down a little bit. To answer the first question, we were down about 2% as of last Friday, maybe another 1.5% or so this week because of what happened with respect to First Republic. Mortgages obviously widened. I think I mentioned on the call we're probably 5 wider than where we were just last Friday. And it's really somewhat perplexing because unlike Silicon Valley Bank and Signature Bank, at least based on what information's out there in the market, the balance sheet, the assets of First Republic don't contain much in the way of agency mortgages, a few billion, $2 billion-$3 billion. It's much more unsecuritized whole loans. We understand. ... uni debt. That's gonna be an issue to liquidate. That market is not that big, but there's not a lot of agency mortgages. That being said, there's been days... there's been times this week when the mortgage market trades to every headline regarding First Republic Bank. That's just... You know, we're hypersensitive because the liquidation started last week and, you know, they said when they started it was gonna be a 30 to 40-week process, and that's obviously a long time. It looks like because they've added or they've modified the process, now you can upsize some of these auction lists. For instance, you know, they might put $150 million of a certain coupon out there, but you can add an extra $100 million. And so far that's been... a lot of these have been not only traded at good levels, but a lot of buyers have been upsizing. Maybe it goes faster, but it's still a long time. I mean, it's, you know, this is gonna be here for a while. It's gonna get very technical within even the agency mortgage class as well. You know, for example, so 15-year list that came out yesterday, it was like $660-some million. You know, I don't know, everyone else would have their own opinion about how it did, but it definitely put pressure on 15-year sector initially. You know, that sector is gonna have, I think, have a hard time digesting all this volume 'cause it's just not as liquid as the 30-year sector. So you may see little nuances. We've experienced it in our portfolio as well because we have the down in coupon focus. So, you know, news stories like this break, the first couple of days after it broke, we saw significant pressure. The volatility, day to day in our book values, you know, we could be 1 or 1.5% moves on a day. And then, the last couple of days we've seen things refirm. Yesterday was, you know, a reversal of that. Today, at least before the call started, looked like it was gonna be a continuation of more of the same. So we may end up, by the time the day is over, kind of flat to slightly down on the week. But um, you know, things are changing very rapidly, I guess, is what I'm getting at.Right. Right. Yeah. Sounds like buckle up is, and enjoy the ride is the motto for maybe the rest of the It's been this way for a while. Yeah. Well, with that in mind, best of luck going forward. Thank you, Frank. Thank you for the detailed comments as usual. It's as I say, I think it's the finest slide deck in the agency MBS space. Thanks, guys. Thanks, Mikhail. Have a good weekend. You too. Our next question comes from Christopher Nolan from Ladenburg Thalmann. Please go ahead. Your line is open. Hey, guys. Hey, Chris. How should we look at the dividend, common dividend going forward? The comments that you provided in terms of the discount accretion income and the hedges was very interesting, and that seems to be a big guiding guidepost for you guys in terms of your dividend payout. Is that a sustainable income? Well, here's the deal, Chris. I mean, we really wanna maintain this positioning. We have a view. You know, we think that the economy is starting to roll over and that eventually, you know, the hiking cycle is gonna end, and they're gonna have to pivot. These are the assets we wanna own when that happens. Even if there's a slight overdistribution, you know, if you think of total rate of return, it's a combination of, you know, coupon and price. We think that the potential price appreciation far outweighs the, you know, shortcoming, if you will, on income. Just from a book value perspective, if we bleed off a little bit of book because we're over distributing, we think when the market rallies that the price appreciation of these things is gonna overwhelm that effect and net-net, we're gonna be better off. I mean, we think the return opportunities are very high in that scenario. You know, we wanna try to do that. That being said, if, you know, if we end up, you know, looks like inflation's just not gonna decline or even accelerates and that the Fed's gonna and the economy's not rolling over, that we're gonna have to stay here, then, you know, we're gonna have to reconsider. You know, like we're closely, I think, to the end of the cycle, and we think the data is starting to roll over. You know, we have to just be very diligent and mindful of what's going on. We're gonna try to hold on to the strategy, keep the dividend where it is, and we'll see. If it becomes apparent that that's not the case, then we will have to reconsider and potentially, you know, make some changes to the portfolio, which would probably involve going up in coupon to generate more income. Yeah. I just would add a few. We talk about this all the time. What we've been doing, especially in vol space, our efforts have been focused on putting positions in place that will do very well, you know, highly geared trades that will do very well to the extent that the curve continues to sort of flatten from a standpoint of not realizing. Inversion ... the inversion, right? I think there are a couple nuances that are important when we have this conversation about what our earning stream is. We've kind of outlined as many of the, you know, the easier to grasp things, I think, in terms of discount accretion and the value of our hedges that have, you know, subsequently become realized gains that contribute to this dividend stream. There are also some more subtle things. The portfolio is sort of in the position where we're in the opposite boat than we were when we had an extreme premium world, right? Back then, we would buy specified pools, and as they age, we would recognize decay in pool payups, right? That's just the sort of the nature. These brand new pools are more highly desired and have better carry than older ones. We're in the position now where a lot of the high discounts or the big discount pools that we own are aging such that they're appreciating in value by a tick or two per month, right? We have like we said, we had some more subtle things in the portfolio. With respect, you know, going back to the vol positions, you know, we will see if the Fed is a higher for longer, takes a higher for a longer sort of tone, those positions will do very well. That will offset some of the, you know, damage done by the fact that we're not realizing forwards. The other side of that is if we start realizing forwards, then we're gonna quickly start stacking up more income on a month over month basis for the sort of under-hedged, if you will, part of the portfolio. I think that's the way we try to think about it and, I think we also feel comfortable in the current level for those reasons. Mm-hmm. Okay. Thanks, guys. Yep. Thank you, Chris. As a reminder to ask a question, please press star followed by 1 on your telephone keypad. We have no further questions in queue. I'd like to turn the call back over to Mr. Cawley for closing remarks. Thank you, operator. Thank you, everyone. As usual, to the extent you have follow-on questions and you wish to call us, please do so at the office. The number is 7722311400. Or if you're just listening to the replay and you have some questions, very willing and look forward to taking any and all questions. Otherwise, we look forward to speaking with you at the end of the second quarter. Thank you. Bye. This concludes today's conference call. Thank you for your participation. You may now disconnect.