So prepayment speeds come in slower than we thought or slower than projected, that will be a benefit. If they come in faster than expected, that would be a down and so forth. So even without any portfolio activity, there’s natural variation at the quarter end. We think all of that being considered, taking into consideration the forward-looking projection on Slide 15. There is a good estimate of what we think the portfolio will learn. And as Nick said earlier, that snapshot at the end of the quarter is actually lower than it would be if we rent today by a couple of hundred basis points probably. And so given all that and how that corresponds to dividend, we feel pretty good.
Kenneth Lee: Got it. Very helpful there. And just one follow-up on the potential expansion on the round point, the DTC channel. Wondering how should we think about potential need for investments or spending along with those efforts? Thanks.
William Greenberg: Yes, we think the capital investment for that activity will be pretty low. The intent is not for us to originate these loans and necessarily hold them. All right. We will do what is normally done in these sorts of things which will originate the loans and sell them directly into the agencies. Right, and we’ll keep the servicing for ourselves, of course. And the idea is that this is just going to replace the servicing that otherwise would have run-off, right and would have disappeared. And the benefit of having it in-house and having the recapture thing is that we can keep the servicing. We can keep the loans on the RoundPoint platform rather than having them refinance away. Right. So that’s the whole idea of what we’re trying to do with this. Direct to consumer channel.
Kenneth Lee: Got it. Very helpful there. Thanks again.
William Greenberg: Yes. Thank you.
Operator: Thank you. Next question is coming from Bose George from KBW. Your line is now live.
Bose George: Hey, guys. Good morning. Actually, could we get an update on your book value quarter-to-date?
William Greenberg: Yes, as of the close of Friday, we think that book value is up between 1% and 1.5%.
Bose George: Okay, great, thanks. And then the range in your target sort of IXM, what takes you to the high end versus a low end. Is it a lot of it prepayment expectations or just curious what kind of drives that range?
Nicholas Letica: Hey, Bose. Nick, thank you for the question. We have various factors that go into that range. Among them would be our prepayment assumptions as well as some of our funding assumptions. And those are things that are primary drivers of that range.
Bose George: Okay, thanks. And then just in terms of where that number is intra quarter Bill, did you say it’s going to back up a couple of hundred basis points? Is that what you said?
William Greenberg: Yes. Again, as Nick and I both said, it moves around with the portfolio and so forth. But I’d say given our current coupon distribution and so forth. Yes, that’s about the right magnitude.
Bose George: Okay.
William Greenberg: On the security side of the portfolio, not on the combined thing, if you look at the RMBS part, which is 10 to 11, that’s probably 200 basis points higher given our portfolio right now, but not in the overall.
Bose George: Okay. And the overall, could you characterize how much the overall is up?
William Greenberg: You just multiply by the relative capital allocations of that. So that’d be 38% times the times the 200.
Bose George: Okay, great. Thanks.
Operator: Thank you. Next question is coming from Rick Shane from JPMorgan. Your line is now live.
Rick Shane: Thanks guys, for taking my questions. Good morning. I just wanted to talk a little bit about the use of the ATM during the quarter. Curious if this is going to be something we should expect going forward more aggressively. When we do the math, it looks like you did the offering a little bit below $14 per share and even on a sort of mark to market basis. If we go back to your comments last quarter at this time about where book value was intra quarter, it looks like the offerings were dilutive to book modestly. Can you talk about the rationale for that, please?
Nicholas Letica: Yes, sure. Thanks, Rick. I think that’s correct. We also saw them as modestly dilutive to book. The rationale is the same as what we said when we raised capital in February of 2023. We think that at its most sort of mechanical level, that even at a slight discount to book, the dilution of the expenses means that the return on the investment of that dilution is still quite high, certainly higher than our cost of capital. It’s in the, I’d say mid double digits. By that I mean 30%, 40%, somewhere in those sorts of numbers. And also, as we always say, we have to have something that’s good to do with the money, and we think we do, which is to buy more MSR with that money in February, of course we did that. Right away, today we’re looking for pools to buy that fit our criteria.
But with the RoundPoint acquisition, the earnings that we make on new MSR purchases are greater than the existing MSR that we have in our portfolio because the marginal cost of service goes down with the more loans that we have on the platform. And so it’s a really very powerful set of math in order to take that money and invest in new MSR, where we are the servicer and we get the benefits of the economies of scale that we thought that paying a slight dilution today was well worth it for those reasons.
Rick Shane: Got it. Thank you. And then there was some repurchase of the prefs as well. Is that just an arbitrage when you see the implied yield on the prefs, approaching the yield on the common, you’ll step in, or how should we think about that? What drove it? Because it seemed like it was across all three of the press.
William Greenberg: Hey, yes. We’ve – for the last, for a long time, we’ve been managing our capital structure, and we do consistently, constantly evaluate where our preps are trading relative to our assets and where that arbitrage lies. And I think, and as you guys know from prior times, we have been seeking, all else being equal, to reduce our share of preps as a percentage of our total shareholder equity. So those things last quarter, they did align, the prefs, so we did buy back a little over 200,000 shares of preps, which is activity we’ll continue to do. Should they trade at an attractive level, as you said, relative to where our investments are?
Rick Shane: Got it. Okay, that’s it for me, guys. Thank you.
William Greenberg: Thanks, Rick.
