Mikhail Goberman: Kind of with that in mind, I’m just thinking about leverage and seeing your, eight turns right now, kind of in between the historical range of 6 and 10. If you guys see, the opportunities that you hope to see going forward, how you can ratchet that leverage up a bit. Could we potentially see a sort of drift towards a 9 and 10 range if we get a good amount of spread tightening?
Robert Cauley: Yes, you can. 10, maybe not, but, we’ve been in the mid 9s before. We could do that. And we have two ways of getting there. The one big step we already took which is where we got rid of a lot of the TBA shorts when mortgages got to very wide levels. And then we, raised some equity, but also added to our balance sheet just through purchases. So yes, we could go higher. I mean, it’s, I don’t think it’s meaningfully higher, but we could. And, you know, we’re at a wide level now. So I mean, this arguably is the time to do that. So, yeah, we could go a little wider, but I don’t think meaningfully or higher leverage, I should say.
Mikhail Goberman: All right. Thanks a lot, guys. Appreciate it.
Robert Cauley: Yes.
Operator: [Operator Instructions] We go next now to Christopher Nolan at Ladenburg Thalmann.
Christopher Nolan: Hey, guys. Bob, on your comment, you mentioned $0.40 per quarter going forward. Was that including the discount accretion and the hedge income that you were discussing?
Robert Cauley: Yes. So, basically, I kind of walk you through from the negative $0.34 added back accretion. I think it was $0.12 added back to hedge, which was [0.59]. So, that got you to [0.37]. And that was for that quarter. I mean, obviously, this quarter is not necessarily going to be a mere image of that. And with the additional assets we added, that got you to about [0.40]. So, there’s still a slight gap there, at least for gap purposes, no pun intended. As I said, for hedge purposes or for tax purposes, we have a lot of legacy hedges that were closed years ago that still covered this period. And just to kind of refresh your mind how that works, say you entered into a 10-year swap today and you designated that as a hedge for tax purposes.
And a year from now, you close out that position and let’s say that the open interest at the time you close it out was $10 million. For GAAP purposes, you would have recorded that $10 million mark-to-market gain, and that would be the end of it. For tax purposes, that $10 million is applied to the balance of the hedge period, that period being the day you close it to the end of the maturity day of that swap. So, if I closed out a 10-year swap one year from today, I would apply that $10 million as an offset to interest income for the period beginning one year from today and ending 10 years from today. So, we have a lot of those hedges that have been closed, and we had open interest, positive open interest in those hedge positions. And so, they’re available to offset interest expense in the periods of those hedge periods.
So, I don’t have the numbers in front of me. I think we provided them at year end, but those numbers are in the low hundreds of millions of dollars for the balance of all of those hedges. And so, they apply so much per year for the next few years. So from a tax perspective, it’s a lot different. From GAAP, it’s just whatever you’re realizing in that particular period. There’s no application of that position over any future period. It’s all captured in the current period. And so, we’re showing approximately a $0.40 positive net interest margin for this second quarter only, but for tax, it’s a lot different.
