Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Ellington Financial Third Quarter 2015 Financial Results Conference Call. Today's call is being recorded. At this time, all participants have been placed in listen-only mode and the floor will be opened for your questions following the presentation. [Operator Instructions]. It is now my pleasure to turn the floor over to Ania Pritchard, Investor Relations. You may begin.

Thanks, Jackie. Before we start, I would like to remind everyone that certain statements made during this conference call may constitute forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical in nature and they are based on management's beliefs, assumptions, and expectations. As described under Item 1A of our Annual Report on Form 10-K filed March 13, 2015, forward-looking statements are subject to a variety of risks and uncertainties that could cause the Company's actual results to differ from its beliefs, expectations, estimates, and projections. Consequently, you should not rely on these forward-looking statements as predictions of future events. Statements made during this conference call are made as of the date of this call and the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. I have with me today on the call Larry Penn, Chief Executive Officer of Ellington Financial; Mark Tecotzky, our Co-Chief Investment Officer; and Lisa Mumford, our Chief Financial Officer. With that, I will now turn the call over to Larry.

Thanks, Ania. Once again it's our pleasure to speak with our shareholders this morning as we release our third quarter results. As always, we appreciate your taking the time to participate on the call today. First some highlights, despite difficult dynamics, where global market volatility caused interest rates to fall, and credit spreads to widen significantly across the Board, Ellington Financial was still able to generate a small profit for the quarter. Our credit hedges inflated us from some of the impact of widening spread. And we also benefited from the fact that many of the asset classes that we have been opportunistically rotating into as part of our portfolio realignment, like short duration commercial loans, and distressed small balance commercial mortgage loans, are generally less sensitive to movements in interest rates. 2015 has certainly been a challenging year so far, with a very high level of volatility. But we're excited about the investment pipeline we are building and the opportunities we are seeing. Things are cheaper now, and there's less competition. As announced in our earnings release, we refined our capital management strategy, including a new dividend level, and an accelerated pace of share repurchases. I will elaborate fully on that later in the call. We will follow the same format as we have in previous calls. First, Lisa, will run through our financial results. Then, Mark, will discuss how the MBS market performed over the course of the quarter, how we positioned our portfolio, and what our market outlook is. I will follow with some closing remarks before opening the floor for questions. As a reminder, we posted our third quarter earnings conference call presentation right on the Home page of our website, www.ellingtonfinancial.com. Lisa and Mark's prepared remarks will track the presentation. So if you have this presentation in front of you, please turn to Page 4 to follow along. I'm going to turn it over to Lisa now.

Thank you, Larry, and good morning everyone. As you can see in our earnings attribution table on Page 4 of the presentation, during the third quarter, we earned net income of $3.9 million or $0.12 per share. Our credit strategy generated gross income of $10.6 million or $0.31 per share, our Agency strategy had a gross loss of $1.8 million or $0.05 per share, and we had expenses of $4.9 million or $0.14 per share. Our return on equity for the quarter was 0.5% and on a year-to-date basis was 4.7% or 6.3% annualized. In both our credit and Agency RMBS strategies, during the third quarter, the significant tightening in swap spreads negatively impacted our results, leading to losses on our interest rate hedges. In both strategies, we hedge against the risk of rising interest rates. Both strategies were also impacted by yield spread widening that affected most sectors of the fixed income market during the third quarter. However, in our credit strategy, our credit hedges offset some of the impact of the widening, and on our Agency strategy, our pay-up increased during the period. Within our credit portfolio, it's important to note that while the spread widening that took place during the quarter dampened our results; its impact was in the form of unrealized losses. We were not in any way forced to sell asset and realize actual losses. This can be seen by the fact that we actually generated realized gains of $12.1 million or $0.35 per share, the majority of which came from our non-Agency RMBS portfolio which we continued to sell down in favor of the other asset classes that we've been rotating into. We also had a meaningful contribution to realized gains from our CLOs and non-performing residential and small balanced commercial mortgage loans. That…

Thanks, Lisa. To begin, I will quickly go through the market backdrop for the quarter because at this point in the earnings cycle others has covered most of it already. During the third quarter, we got bad news about emerging economies, especially China, and what it previously been a fairly consensus view among market participants that the U.S. economy was strong enough to shove off this global weakening with challenge in September, when the Fed decided not to raise the target Federal funds rate. This set the market with the feeling that things would worsen in the U.S. than previously thought. It's more pessimistic view; was also reinforced by the weak September payroll report released in early October. Our portfolio was set up pretty well for all this. The real outperformers as to credit market widening were legacy structured products including non-Agency RMBS and legacy CLOs. Price movements in these sectors are actually quite muted and housing market fundamentals remain strong, while legacy CLOs back the outperformed newer vintages. Every market drawdown the past year showed a lower and lower data of legacy structured products to high yield corporate bonds and equity. We believe that going forward structured credit will continue to outperform. We managed to avoid the real losers for the quarter, high yield distressed debt, and CLO 2.0s. CMBS also widened during the quarter but we did not have a lot of CUSIP exposure and like many others in this space we had CMBS hedges in place. Many market participants are asking whether it's time to buy high yield aggressively but we are not convinced. The high yield market is becoming less and less liquid by the day and cash is decoupling from CDX. Our fear is that if redemption hit ETF or large distressed hedge funds price…

Thanks, Mark. During the third quarter, we purchased our first batch of non-QM loans from one of the flow agreements we have in place. This included settlements on commitments that we made in the late in the second quarter. The ramp up business slowed than we had hoped but we are launching a bunch of new products and basically still just getting started. Some of the slow start was also just making sure that all the origination systems were integrated properly. And now that those were in place, our primary non-QM source and originator on which we are significant strategic investor, had significantly ramped up their non-QM sales force just in the past 30 days. So we expect to really see things get going in November and December. Our consumer loan portfolio is a key growth area for us. We continue to add to our portfolio under our flow agreements with originators. Our portfolio currently includes unsecured loans as well as auto loans. We have flow agreements in place with multiple originators and we're seeing lots of new opportunities in this area. We're very selective as to who we'll buy product from, what product we'll buy including underwriting guidelines and of course at what price. So we end up turning down lots of opportunities but at the same time, we've been able slowly but steadily to increase our roster of originators that are providing us consumer loan throughout. We have also arranged financing on many of our consumer loan and we expect to continue to expand our funding sources which would encompass most of our consumer loan flow going forward. So with yields on this product that are already high on an unleveraged basis, as you can see on page 13 of the presentation, on a leverage basis the yields…

[Operator Instructions]. Our first question comes from the line of Steve DeLaney with JMP Securities.

Our next question comes from the line of Sam Choe with Credit Suisse.

Our next question comes from the line of Mike Widner with KBW.

Our next question comes from the line of Lee Cooperman with Omega Advisors.