Two Harbors Investment Corp (TWO) 2009 Q4 法說會逐字稿

Good morning. My name is Jonathan and I will be your conference facilitator. At this time I would like to welcome everyone to Two Harbors Fourth Quarter 2009 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise.

(Operator Instructions)

I would now like to turn the call over to Anh Huynh, Investor Relations for Two Harbors.

Thank you, Jonathan, and good morning. Welcome to Two Harbors Fourth Quarter 2009 Financial Results Conference Call. The press release and financial tables associated with today's conference call were distributed yesterday evening. If you don't have a copy you may find them on the Company's website at www.twoharborsinvestment.com.

This call is also being broadcast live over the internet, and may be accessed on our website under the webcast link. In addition, we would like to encourage you to reference the accompanying presentation to this call. This presentation can also be found under the webcast link.

Before management begins the discussion of the fourth quarter results, I wish to remind you that the remarks by Two Harbors' management during this conference call and the supporting slide presentation may include forward-looking statements. Forward-looking statements reflect our views regarding future events and financial performance. Forward-looking statements specifically associated with the use of words such as anticipate, expect, estimate, believe, assume, project and should. We caution investors not to rely unduly on forward-looking statements.

We urge you to carefully consider the risk described in our filings with the SEC, which may obtained off the SEC website at www.sec.gov. We do not take under -- we do not undertake any obligations to update or correct any forward-looking statements if later events are proven to be inaccurate.

I would now like to turn the call over to Two Harbors' President and Chief Executive Officer, Tom Siering.

Thank you, Anh. I would like to welcome everyone to Two Harbors' Initial Earnings Call. Many analysts from the investment community have joined us this morning. On behalf of the Company, I would like to thank all the participants on today's call, for your interest and support in Two Harbors.

Joining me this morning to discuss the financial results for the quarter are Jeff Stolt, our Chief Financial Officer, and Bill Roth, or Co-Chief Investment Officer. Also Brad Farrell, our Controller, is here with us today.

We are very please with both our fourth quarter financial results, as well as our key accomplishments. Before I turn the call over to Jeff, I would like to take a few minutes to highlight our achievements during the fourth quarter of 2009.

Two Harbors was established to take advantage of the opportunities in both the Agency and Non-Agency sectors in the RMBS market. The Company commenced operations as a REIT on October 28, 2009 through the completion of a merger with Capitol Acquisition. As a result of this transaction, the Company raised approximately $124 million in cash for investment purposes. On December 21st, we declared our first dividend of $0.26 per share.

Two Harbors' goal is to select securities that not only reflected inherent value individually, but also represent a well-balanced portfolio collectively. Our objective is to achieve attractive returns while balancing risks, including interest rates, prepayment, mortgage spread and financing risks.

Two Harbors substantially deployed its investment capital during the fourth quarter, and created an initial portfolio that is consistent with our investment objectives. We believe that 2010 will continue to offer attractive investment opportunities in the mortgage sector. We are very focused on macro events that may affect the portfolio. Although the Company anticipates the Federal Reserve will maintain its benign stance for some time, we believe the targeting a low portfolio duration will protect it in the event of unforeseen interest rate hikes.

We manage duration risk in some novel ways, including the purchase of interest-only, or IO securities. Despite this measure of caution, the portfolio is benefiting from attractive yield spreads, driven by our low cost of funding. Two Harbors is optimistic as we focus on building our business. The Company has an experienced investment team, and a substantial operational and administrative infrastructure.

Our co-chief investment officers have experience dating back to the dawn of the modern mortgage market. We also consider our systems and controls to be among the best in the industry, thus we believe we have a platform built for the long run, and for the market cycles to come.

This concludes my opening remarks. I will now turn the call over to Jeff Stolt, to review our financial results.

Thank you, Tom. Before I begin discussing the financial results for the fourth quarter, I would like to take a moment to review the timeline which is presented on slide four. As Tom mentioned, Two Harbors was established through a merger with Capitol Acquisition effective October 28, as part of this combination, the Company incurred $8 million in transaction expenses, and $0.1 million in capital acquisitions operating expenses net of tax, prior to the closing date.

It is important to point out that unlike an IPO, or secondary offering, where the expenses are a directed adjustment equity, under GAAP these business combination costs were recorded as operating expenses in the month of October. A few other points to make are, the fourth quarter reflects approximately two months of operations for the Company, given our start date. Our operating expenses were incurred over this timeframe, yet this includes some expenses which would typically be incurred over a full year. Such as, SOX consulting, tax preparation and conducting a financial audit.

During the quarter, capital was successfully deployed generating interest income. The weighted average number of days that securities were earning income in our portfolio, however, was only 37 days. With the timeline laying the foundation of my discussion, I would now like to review the financial results of the fourth quarter which starts on slide five. Two Harbors recorded adjusted core earnings of $1.1 million or $0.08 per share for the fourth quarter of 2009.

Two categories of adjustments were applied to calculate the adjusted core earnings. The first category of adjustments totaled $0.6 million. This consisted -- this consisted primarily, of $0.3 million of realized gain on the sale of $2.5 million worth of security, and $0.4 million unrealized gain associated with our interest rate swap.

The second category, as we covered earlier, is the nonrecurring merger expenses of $8.1 million. Now turning to slide six -- the Company reported a net loss for the quarter of $6.4 million, or $0.38 per basic and diluted share on a GAAP basis. For the quarter ended December 31, 2009, Two Harbors was -- reported net interest income of $2.7 million.

This net interest income included $1.2 million of net premium amortization associated with our Agency RMBS portfolio, and $0.6 million of accreted discount amortization associated with our Non-Agency RMBS portfolio. Interest expense was approximately $0.1 million, representing an annualized cost of 0.4%. Two Harbors reported $9.4 million in operating expenses for the quarter, which includes the transaction and pre-combination expenses I previously mentioned.

Going forward, Two Harbors anticipates normalized operating expenses to be in the range of 2.8% to 3.2%. This estimate is based on stockholders' equity as of December 31, 2009, which was $122 million. The Company's book value per share was $9.08 on December 31, 2009 compared to $9.30 on October 28, 2009.

The decrease in book value arose principally from $0.26 per share in dividends declared in the fourth quarter, and approximately $0.07 per share decline in the investment portfolio. This decline is as a result of marking our bonds at the bid side of the market at December 31, 2009. Since year end, we have seen a general in our asset values in the market which, if sustained, should arise -- sorry, should erase that initial decline arising from the bid offer spread.

These adjustments were offset by post-merger GAAP earnings within the REIT of $0.13 per share. We recognize there was a significant amount of noise in the fourth quarter of 2009 due to accounting for the cost of the merger, and the abbreviated operational and investment periods. As such, we do not believe that the return on equity for this period is a useful measure for the investors. Therefore, we elected not to provide this information in our press release.

With the merger cost behind us, and full investment periods, we intend to provide commentary on our realized ROE in future quarters. To reiterate what Tom said earlier, we are excited with our accomplishments in building out a robust infrastructure and feel very confident in our procedures and controls.

I would now like to turn the call over to Bill, for a detailed discussion of our portfolio.

Thank you, Jeff. I would like to start out by saying that it's an exciting time to be a mortgage investor. Due to the dislocations across various sectors of the mortgage market, we see this as a time of great investment opportunity. We expect the Agency market to continue to offer value throughout 2010. The conclusion of the Fed's purchase program next month, and the recently-announced GSE buyout plans will affect Agency fixed rate and ARM Pools. We anticipate that these events will create volatility in the market, and as a result, there will be buying opportunities for the value investor.

We view the Non-Agency market as an attractive investment opportunity for the foreseeable future. Loss adjusted yields are very attractive on an historical basis, especially when compared to other fixed income sectors. The technicals are also compelling. We estimate that in 2010 the Non-Agency market will shrink by $250 billion to $300 billion, due to pay downs as well as liquidations. Additionally, the influx of PPIP money has added another buyer base, while the recent change in insurance company capital requirements has removed a potential forced seller of bonds (inaudible).

As this is our first earnings call, before I get to the portfolio, I'd like to take a minute to provide an overview of our investment approach. We believe we can take advantage of the investment opportunities in the mortgage market without taking unnecessary risks. Slide seven illustrates our approach to balancing risks, specifically interest rate, prepayment and mortgage spread. As to interest rate risk, our portfolio is constructed to target a low duration.

We are able to attain low interest rate exposure by using several approaches including using interest-only bonds to offset fixed-rate bonds, holding a high percentage in adjustable rate securities, and through the use of interest rate swaps. On prepayment risk, our approach is to acquire Agency Bonds with relatively stable prepayment profiles, and Non-Agency Bonds with prepayment upside. We invest in Agency Bonds with desirable prepayment characteristics which provide for more stable prepayments over time.

For example, bonds with explicit prepayment protection or those backed by season loans. For Non-Agencies, our approach is to select bonds using very slow prepayment assumptions. Yet, where we believe actual realized speeds will be faster leading to higher returns. This approach is intended to protect us on our Agency Bonds, but give us potential upsides on Non-Agencies.

Two Harbors also actively manages the portfolio to mitigate potential impacts on mortgage spread risk. We believe that the incorporation of interest-only bonds will benefit the portfolio in the event mortgage spreads widen. In addition, we have been focused on Agency Bonds that have not been a part of the Fed's purchase program, particularly short reset hybrids and multi-family bonds.

I would now like to refer you to slide eight as I discuss the composition and performance of the portfolio. As Tom mentioned, we substantially deployed our capital in the fourth quarter to create a portfolio based on our balanced risk philosophy. The initial aggregate portfolio was $495 million comprised of $418 million in Agency securities, and $77 million in Non-Agencies. Debt to equity was a moderate 3.4 times.

Let me also add that we were not fully deployed in Senior Non-Agency bonds as of year-end. You can see in the pie chart that at December 31, we had $54 million in senior bonds. Our target for senior Non-Agency bonds is approximately 75 million. We are excited about our initial portfolio, and there are many aspects of the portfolio we would like to share with you in further detail. However, for the purposes of today's call, I would like to focus on some key highlights.

I would like to begin by highlighting the yields we achieved during the fourth quarter. The annualized yield on average earning assets was 6.2%. Agency securities realized a yield of 4.4% while Non-Agencies realized a yield of 16.2%. This Non-Agency return was primarily due to the performance of our mezzanine bonds.

On the funding side, the annualized cost to funds on our repos was 0.4%. This resulted in an average interest rate spread of 5.8%. As we became closer to fully deployed over the quarter, the yield on our assets changed. At December 31, the weighted average yield on assets was 4.7%. This change was primarily due to our purchases of short reset Agency ARMs in late December, which somewhat offset the higher yielding assets purchased earlier in the period. I would also like to point out that the continued purchases of senior Non-Agency bonds in early 2010 will have a positive impact on our realized yields going forward.

On the funding side, Two Harbors established relationships with six counterparties during the quarter. We plan on adding additional counterparties to further diversify financing alternatives. Our cost of financing at December 31 was 0.4%, on repo financing of $411 million. To enhance our liquidity, $204 million or about half of the total was for a term of six months.

Despite the improved financing availability today, we believe that it is prudent to extend repo terms at a small cost to help manage liquidity risk. During the fourth quarter Two Harbors also entered into interest rate swaps to hedge against the financing interest rate risk. At December 31, our interest rate swaps had an aggregate total notional amount of $100 million or 24% of our outstanding borrowings. The term is two years at a rate of 1.17%.

As for prepayments, we are very pleased with the experience on our bonds in the fourth quarter. Agency securities we owned at December 31, experienced a three-month average CPR of 12%. We believe that our focus on prepayment protection on premium bonds is the primary driver in achieving such a low CPR relative to the market.

It is also worth noting that 83% of our Agency portfolio had either explicit prepayment protection, or were backed by season loans. Our approach to Agency security selection, also intended to minimize the potential effect of delinquency buyouts on the portfolio. Two Harbors announced a few weeks ago that we estimated the portfolio impact of the GSE buyout plans to be negligible.

On the Non-Agency side, our realized CPR was 15%, which was not only greater than our assumptions, but also higher than the speeds on our Agency pools. This prepayment result on bonds with an average cost basis of $50 is an example of the type of booster performance that we might realize. In fact, at December 31 we had, roughly, $91 million in discount on our Non-Agency bonds.

On the interest rate exposure side, it is certainly enticing, given the shape of the yield curve, to attempt to generate higher returns by taking on interest rate risks. We believe that given the current level of rates, and where we are in the cycle, keeping a tight rein on duration will protect shareholders if and when rates begin to rise. Our portfolio is aligned with this philosophy and our interest rate gap, as of December 31, was only two months.

Thank you very much for joining us today. I would now like to turn the call back over to Tom.

Thank you, Bill. Hopefully, we've conveyed our excitement about the opportunity [set] within the mortgage market today, and our strategies for dealing with the various risks inherent in it.

This concludes our prepared remarks. We will now open the call to questions. Jonathan?

Certainly.

(Operator Instructions)

Our first question comes from [Trevor Cranston] from JMP Securities. Your question please.

All right, thanks for taking the question. I was wondering if you could talk a little bit more about the composition of your Agency portfolio given you've stated that you expect the impact of the GSE buyouts to be negligible. So, specifically, I was wondering, a little bit, if you could talk a bit about the breakdown by the Agency, may be a little bit about what type of vintages you own? I mean, it sounds like most of it is fairly seasoned.

Sure, Trevor, thanks for the question. Good morning.

Good morning.

Yes, as I noted, 83% of our portfolio is either has explicit prepayment protection or is seasoned. Of that 83% a good portion of that are very high quality multi-family pools, which are not subject to buyout by the Agency, and the rest are 2005 and earlier vintages.

We will actually have a substantial amount of this information disclosed in the 10-K, but to give you a little further color, on the remaining 17%, we tend to focus on very high credit quality pools, meaning high FICO scores and low LTVs, and then we also have some Ginnie Maes. Our feeling there was that we didn't want to play the credit-impaired slow-prepayment game.

Okay. That's very helpful. Thank you. Then for also, it looks like on slide eight you mentioned that you filled the senior Non-Agency allocation since the end of the year. I was wondering if you could talk a little bit generally about the types of yields you've been able to get, or the types of yields you can see in that market today, and what the availability, in terms of repo, look like for the Senior Non-Agency market.

Yes, sure. You may recall in our investor presentation which we filed in an 8-K in January we showed a range of yields on a bunch of the different asset types that we were involved in, and at the time, you may recall, that we showed a range of 8% to 12% for Senior Non-Agency.

I would say that that range, since the beginning of the year, has actually expanded, and the lower end of that range right now is around 6%, but the top end of that range is still in the low double-digits. So, that's sort of where we're seeing, you know, that range of yields today. In terms of financing, we've gotten terms on Non-Agency, haircuts range between 20% to 40% depending on the bond, and we're seeing LIBOR spreads of anywhere from LIBOR plus 100 to LIBOR plus 175. And I'd say the terms on that range from one to six months.

Okay. And so, in your initial disclosure back on December 8, I think the cost of your repo was around 0.3 and that went up to the end of the year to 0.4 is that because of that in term repo associated with Agency collateral, or is it because you've added some Non-Agency repo towards the latter half of December?

Yes, we haven't actually disclosed -- what we have on repo, against what particular securities. The one thing I would note, as I mentioned in my comments that we did extend and have about half of our repo out for six months. So if you think about where LIBOR at the end of the year was for six months, it should not come as a surprise to you that our repo cost did go up somewhat.

Okay.

Obviously, six months LIBOR is higher than one month LIBOR.

Yes. Okay. I think that's all I've got for now.

Thanks, Trevor.

Thanks for taking my questions.

Thank you. Our next question comes from Bose George from KBW. Your question please.

Hi, good morning, and congratulations on the first earnings call.

Thanks, Bose.

I have a couple things, one was -- I was just wondering if you could talk a little bit more your use of IOs, and could that percentage go up if you feel that -- you wanted to be more protected on rates. You know, I was just wondering if any sort of REIT accounting issues were related to that?

Hey, Bose, good morning. Thank you. I can talk a little bit about our further future use of IOs and I'll just put in a context of sort of the way we view IOs relative to the portfolio. As you know, IOs actually have a -- can have a substantial negative duration, which therefore provides interest rate protection, not only against rising rates, but also against mortgage spreads widening.

So I would say that to the extent that we believe that we needed to have additional protection, and we thought IOs were attractive in terms of using them for those purposes, you know, we would use them as necessary. You know, I can't tell you whether -- how much more we might want or need, the other alternative is obviously to use other interest rate hedging tools which we have available to us like swaps, or futures, et cetera.

Okay.

Would you do me a favor? Repeat your question on the accounting part.

Yes, I was just wondering if there's any REIT accounting issues that limit your ability to use this, or limit it to some -- to some percentage, or if there's any REIT accounting issues related to the use of IOs?

Sure, Bose. Thanks. No there is not any REIT issues, it is considered good income --

Okay.

-- and therefore no accounting issues as well.

Okay, great. And then just in terms of -- you guys clearly could use some scale, and I was just wondering what you would kind of -- what you would need to see in the market before you try to grow in terms of adding more capital?

Sure. Bose, it's Tom. Thanks for that question. We believe that if we drive shareholder value that we'll have -- that the market will ultimately reward us for that, and there is a possibility that we may do follow-on offerings within our shares. But any such offering would be done with consideration to the net proceeds, relative to book value.

Also considerations obviously would be what it does for our expense ratio, and what it does for the liquidity for our shares. But what we're really obsessed with on the front-end is being good guardians of the Company and driving shareholder value, and if we do a good job of those things, the market will ultimately reward us for that.

Good, thanks. Just one last thing. I was just wondering what the Mezzanine Securities in the Non-Agency portfolio were?

Oh, yes. Hey, Bose, this is Bill. We actually, in the 10-K, will have a substantial amount of information with regards to our Senior and Mezzanine Securities, in terms of seasoning and coupon, et cetera. I think one of the things that we highlighted, that we focused highly on though, is seasoned collateral.

I find that seasoned collateral -- typically, if someone's been paying their mortgage for five years or more they're probably likely to continue to do so, unless they are beset by hardship. So I can't go into the explicit detail now, but once you see the 10-K, if you have some further questions after that we can definitely follow up on that.

Okay, great. Thanks very much, guys.

Thanks, Bose.

Thank you. Our next question comes from Gabe Poggi from FBR Capital Markets. Your question please.

Well, can you kind of give some color on how the market is -- it's been a little bit time since the GSE announced that buyback -- how the market reacted over the last --? What you're seeing in the market over the last few days? What opportunities you're seeing? You said you saw a lot of volatility, and that we're in the early endings of this, but what you're seeing -- what you've seen, really, since the announcement, what you're seeing today and what you think there would be pockets of value for you guys to take advantage of?

Hey, Gabe, it's Bill. Good morning. Yes, it's actually fairly interesting, we've seen actually, just in the last couple of days, a substantial amount of volatility in the higher coupon 30-year pass-throughs, especially the Fannie Mae's, because there's a great deal of uncertainty about how much will get bought out, over what time period are they going to buy what out, in the early months, or in the later months. And so, we've actually seen price swings on Fannie's sixes and 6.5s move quite a bit.

As a result, to the extent that there are pools that are based off that, that are very attractive, those could be opportunities. We saw agency ARM Pools, that are sort of the credit-impaired type that were paying very slowly, those prices came down dramatically.

Frankly there hasn't been much trading, because some of the folks haven't really wanted to sell at the lower prices. My outlook is that as we actually see the prepayment speeds hit, which for Freddie Mac will be in early March. And Fannie Mae is going to take several months. I actually think you'll see some people potentially start to want to sell, which could be an opportunity to pick up some pools that are attractive on an ongoing basis.

Okay, that's what I was looking for. Thank you.

Sure.

Thank you.

(Operator Instructions)

Our next question comes from Jim Fowler from [Harvest Capital], your question please?

Good morning. Thank you for taking my question. Just a follow up to a prior question on the Mezzanine -- on the Senior Non-Agencies, and if you refer the question to your disclosure on -- can you confirm that in the disclosure on the 10-K you will put in the credit enhancement below the Mezz bonds and the collateral supporting the Mezz bonds, or can you answer that now please?

Yes. Hey, Jim. Thanks for that. In the -- just a minute, I actually have the details here, so let me take a look at it so I can give you a proper answer. Yes, in the 10-K, we delineate the amount of senior bonds that we have as well as the amount of Mezzanine bonds.

What the average prices are, the average credit enhancement, and the average delinquencies, as well some other metrics that I think you'll find useful. The only thing I would caution you on, is that not all bonds are created equal, and since we're providing averages for the bucket, you have to be careful, because an average doesn't necessarily accurately capture the value in each particular security.

Will you then -- agreed entirely. Would you then provide the underlying collateral in the -- or at least some indication what the shelf is?

We do tell you what kind of loan type it is, for instance prime, or Alt-A, et cetera, and we give you some details as to the vintages. We don't go into shelves or servicers et cetera. We also have some geographics that I think you will find useful.

Great. And also, thanks for the disclosure on the -- or the commentary on the Agency. So the conclusion there is, your exposure to Freddie Mac is de minimis, correct?

Yes, I mean, we put out that press release, we thought that that was particularly important information to the market. Given the average dollar price of our Agency bonds and the fact that we have -- we went through each security and determined that we thought that the impact was negligible.

Just -- a broad question -- hopefully you can just -- because you're experts on this and I don't know how this works, but --. So there's going to be a factor change in early March for Freddie holders, and a factor change in early April with the first cash payment coming in mid-April.

How is that going to be managed for people that own Freddie securities in terms of meeting the two-factor margin call without receiving a payment? And is that an opportunity if some of those folks have to start selling bonds to create liquidity -- is that an opportunity for you to acquire them more cheaply?

I just want to make sure I understand your question. When the factor comes out in early March and it drops, obviously, more than it has in the past --

Yes.

If someone owns the security and they're repoing it, they suffer a margin call.

Right.

And -- because they won't get the cash until the payment date which is much later.

Yes. Right.

So your question is, to what extent do we expect to see selling to meet margin calls?

Right, exactly.

I --

-- is an interesting animal, right? Because you're going to get two -- you're going to get two more -- you're going to get two factor changes in their buyout program -- whatever their buy out is going to be a two -- the factors are going to change in two months without -- and you're not going to get your first cash payment if you're a leveraged owner of that until after the second, so you have two margin calls before you get any cash. I mean, what --?

Right, yes.

How's that going to be managed?

I mean -- I think that -- I can't really speak to how --. I mean, that question sort of gets to who owns the securities, and are they substantially leveraged enough that they might need to sell something or sell -- or to raise some cash. I don't -- we don't really have that amount of information on who owns them and how much leverage is applied to them, et cetera.

I'm going to estimate that any selling that we see is actually reflective of the fact that somebody might freak out because they see a really fast prepayment speed, and they think, oh my gosh, I don't want to own these as opposed to a dramatic unwind of leverage in the system.

You have to also remember the Fed own a bunch of bonds, Fannie and Freddie owns a bunch of bonds, I mean, there's a lot of Agency bonds that are not on repo.

Right, correct. Good. Okay, great. Thanks everybody, particularly for the upcoming disclosure. Appreciate it.

Thank you. Our next question comes from Ed Groshans from Height Analytics. Your question please.

Bill, how are you today? Tom?

Hey, Ed.

Good morning. I was just wondering, I guess what your outlook for the shape of the yield curve would be. I don't know if you listened to [Mike Farrell], on analyst call. I just wanted to know if you were kind of inline with his assessment, or if you were taking a different view of what the shape of the yield curve would be going forward.

Okay, thanks for that. You know, one thing that we try not to do is to make too many bets on the shape on the curve or what -- the absolute level of interest rates. You know, we're really trying to pick relative value in the mortgage market and sort of keep our hedges such that our duration is fairly neutral.

I mean, the only thing that I can tell you is if you look back historically, rates are low until they're not, and what happens is if you look back to when there was an increase in rates by the Fed, typically the market didn't really like that very much, and it sells off quite hard when that happens, and at that point it's a little bit too late.

So, we think rates are going to be fairly low for a while, but the day that it comes we want to be ready in advance of that.

Okay. And then I guess along those lines, and then also the other commentary, you know, if there are sellers because of the Fannie and Freddie buybacks along with the current opportunities, you're seeing. So, it seems like there are opportunities out there today.

The buybacks of delinquent loans could accelerate speeds and create some other opportunities, and that as the rate environment changes that can create additional opportunities. And I guess, Tom, I'll kind of direct this to you, you know, it seems that Two Harbors is pretty much fully invested right now. And I know you want to be capital relative to book value for cap raises, but what about doing some alternative cap raises?

I don't know if -- Annaly did do the $500 million convertible securities that seemed to be received pretty well. Are things along those lines on your palette, just to -- if there are those opportunities?

Yes, thanks for that question. We touched on that a bit earlier, and as I said before, what we're focused on is building shareholder value. We do think there is a tremendous opportunity set at present within the mortgage market today, but we want to be good guardians of the shares. And so the extent that we do raise additional capital, it will be with every contemplation for shareholders' interest in mind.

Okay. Great, that you, guys, so much. Have a good day.

Thanks, Ed.

Thanks.

Thank you. This does conclude the question and answer session of today's program. I'd like to turn the program back to the CEO for any further remarks.

Thank you, Jonathan. At Two Harbors we are enthusiastic about our infrastructure, our team, our portfolio construction and our future. I would like to thank you, again, for joining us today. Good day.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.