Good morning, ladies and gentlemen. I would like to welcome everyone to the Arlington Asset’s Second Quarter 2019 Earnings Call. Please be aware that each of your lines is in a listen-only mode. After the Company’s remarks, we will open the floor for questions. [Operator Instructions]It's now my pleasure to turn the conference over to Mr. Ben Strickler, Chief Accounting Officer. Mr. Strickler. You may begin, sir.

Thank you very much and good morning. This is Ben Strickler, Chief Accounting Officer of Arlington Asset.Before we begin this morning's call, I would like to remind everyone that statements concerning future financial or business performance, market conditions, business strategies or expectations and any other guidance on present or future periods constitute Forward-Looking Statements that are subject to a number of factors, risks and uncertainties that might cause actual results to differ materially from stated expectations or current circumstances.These forward-looking statements are based on management's belief, assumptions and expectations which are subject to change, risk and uncertainty as a result of possible events or factors. These and other material risk are described in the Company’s Annual Report on Form 10-K and other documents filed by the Company with the SEC from time-to-time, which are available from the Company and from the SEC. And you should read and understand these risks when evaluating any forward-looking statement.I would now like to turn the call over to Rock Tonkel for his remarks.

Thank you, Ben. Good morning and welcome to the second quarter of 2019 earnings call for Arlington Asset. Also joining me on the call today or Rich Konzmann our Chief Financial Officer; and Brian Bowers, our Chief Investment Officer.The combination of a weakening global outlook, ongoing trade tensions and declining inflation expectation have lead the Federal Reserve to ease financial conditions by cutting the Federal Funds rate by 25 basis points, ending its balance sheet reduction two months earlier than previously communicated and signaling and more accommodative monetary policy standards going forward. Market is now price more than 100 basis points in Federal Reserve rate cuts in the next 12-months.In the second quarter, the 10-year U.S. Treasury raised about 40 basis points and at 2.1% as of June 30th. With a significant decline in interest rates prepayment expectations for mortgages moved meaningfully higher and increased prepayment outlook, heightened interest rate volatility and then inversion of the front end of the interest rate cure to funding lead to agency MBS, underperforming versus interest rate hedges in the quarter.In particular, both higher coupon agency and generic PVA securities underperform, lower coupon and specified agency MBS with favorable prepayment characteristics during the second quarter. While agency investments spread tightened during the month of July, leading through agency MBS, modestly outperforming interest rate hedges renewed market volatility centered around trade related concerns in early August has led to 10-year U.S. Treasury to decline below 1.7%.Turning to our actual results for a quarter we reported a GAAP net loss of $0.67 per share and core operating income of $0.23 per share. As of June 30th book value was $7.80 per share, a decline from the last quarter due to agency MBS underperforming versus interest rate hedges.The Company’s book value is approximately $8.10 per common share…

Thank you sir. Ladies and gentlemen, at this time the floor is opened for questions. [Operator instructions] Our first question comes from Doug Harter with Credit Suisse.

Hey Rock, this is actually [Josh] (Ph) on for Doug. I appreciate the comment on the portfolio construction, shifting into lower coupons and away from TBAs. Just looking at the market and where prices are today, given the richness of the spec pools market, how are you thinking about the risk reward trade-off between spec pools and TBAs and what would you need to see to reverse the trend and start adding more generic TBAs? Thanks.

I guess my first answer for Josh is that other than in the low coupon end of the stack TBA returns continue to be quite low, based on the feed expectations continuing to be elevated. That is number one. Number two, is given the changes that have occurred in the TBA market versus the protections that one can get in payout on spec tool securities.Today, even with the richness, where it is, even with the prices, I would say where they are. At the margin, we would say that spec tool opportunities are trying the TBA opportunity and so new dollar investment would be focused generally in the lower coupon spec tool markets.

It make sense. And then around book value, I appreciate the comments around performance in July. We have heard from a few peers that the August volatility is basically wiped out the majority of that outperformance. I'm curious if you guys are seeing a similar dynamic in your portfolio. Thanks.

I would say overall yes. I think that is a fair characterization. I mean, it's early price. It's still early in the quarter. So we will see how things evolve with the spreads over the course of the quarter. But I think that is a fair commentary. That the change in the market probably offset - in August have offset. June, maybe a little bit more than that.

Great. Thanks for the comment Rock.

Thank you. [Operator Instructions] Our next question comes from [Michael Gubberman] (Ph) with JMP Securities.

Good morning.

Good morning, guys. Thanks for taking the question. I know the interest rate environment is pretty volatile. But how fast do you guys think prepays would get if the tenure continues to decline say 1.5 maybe even lower?

Well, keep in mind that as of this morning, we are15 basis points away from that. So we have already made part of that move. I would say we would expect them to accelerate from - the question, I suppose is systemically is there any capacity constraints on the refinancing flood that might come from ongoing lower rates.But I think while we suspect there may be some constraints, we would expect these to continue to elevate and as I said in my comments, the shift to lower coupon securities should help to constrain the magnitude and the of those increases in prepayment fees.So part of the - there are multiple reasons for the shift in coupon focus to three and 3.5 from four and 4.5. And one of those benefits is to constrain as best we can to insulate against further increases in CPR. So we expect to continue that process. And we expect to get - to receive a benefit in mitigating some of those increases overtime. Should rate stay here or go lower.

Great, thanks for that. And just quick, how does credit look in-light of the continued rate volatility, is it starting to look more attractive?

Well, certainly funding rates on credit are lower. And structured securities are more attractive from an and advanced rate perspective and cost of funds overall in structure. And if one can get comfortable with the credit side, which there don't seem yet to be really meaningful changes in the credit profile and residential credit.Then today, credit is probably more attractive than it has been. Although, like other fixed income instruments investment spreads are tight, but it's more attractive, probably more attractive today than it has been given the funding cost decline.

Alright. Thank you very much. And I appreciate.

Thank you. Mr. Tonkel. You have no further questions at this time, sir.

Okay. Thank you very much. If you have further questions, we are happy to respond offline. Thank you, bye.

Thank you, ladies and gentlemen. That includes Arlington Asset second quarter and 2019 earnings call. You may now disconnect and have a wonderful morning.