Good morning and welcome to the second quarter 2013 earnings conference call for Orchid Island Capital Incorporated. This call is being recorded today Tuesday, August 6, 2013. At this time, the company would like to remind the listeners that statements made during today's conference call, relating to matters that are not historical facts are forward-looking statements subject to the safe-harbor provisions on the Private Securities Litigation Reform Act of 1995. Listeners are cautioned that such forward-looking statements are based on information currently available on the management's good faith, belief with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward-looking statements. Important factors that could cause such differences are described in the company's filings with the Securities and Exchange Commission, including the company's most recent Annual Report on Form 10-K. The company assumes no obligation to update such forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking statements. Now I would like to turn the conference over to the company's Chairman and Chief Executive Officer, Mr. Robert Cauley. Please go ahead, sir.

Thanks, operator. In February, Orchid Island Capital completed its initial public offering and began trading on the NYSE MKT under the ticker ORC. It was the completion of a project that was several years in the making. Throughout the process, we continuously emphasized the need to position our portfolio defensively. As you know, we deploy our capital into two portfolios, one comprised of traditional pass-through securities funded in the repo market and the other comprised of structured securities containing assets that have a difference in sensitivity to interest rates. The purpose of the structured securities is to shield the pass-through portfolio from material price declines when and if interest rates rise. We view the market as materially exposed to an interest rate shock and maintain that while we did not know when the market would sense that Federal Reserve was about remove their substantial accommodation, we expected that when they did it would lead to a very swift and significant sell-off in the rates and MBS markets. We further have stressed that the outcome had to be positioned for in advance because if the market moved quickly as we expected, relying on dynamic hedging strategies would likely be too risky since it would itself (inaudible) one would be able to respond quickly enough. Risk management and protection of book value are the focus of our investment strategy and in environment such as this, with rates still low and many investors fearful of back up in rates, the cost of hedging our book value is quite high. In our case, we rely heavily on interest only securities. Yields on the types of IOs we own are quite low and often negative. In order to protect our book value we need to allocate a substantial portion of our capital to these assets…

(Operator Instructions) Our first question comes from David Walrod of Ladenburg. You may begin.

Just wanted to clarify. If I look at your quarter-over-quarter, the pass-through securities portfolio and the structured portfolio went down, your cash balance went up. So you are saying you would do that again post the quarter with the $6.5 million of repo that you did off the structured portfolio?

No, actually that occurred mid-July. That was just recently.

Right. So that would in addition to, mostly if you did that, you mentioned in your press release that you would turn a leverage but not reinvest that capital. So this was in addition, what happened was in addition to what you did in the second quarter.

We did not close any structured securities during the second quarter.

It looks, according to your press release, that you did that with, not with the structured portfolio but with the traditional pass-through portfolio.

Could you just repeat that? I am not sure we are following you here?

Maybe I could follow-up you offline on that one.

Okay.

Okay, can you give us a sense of where prepay could come in? You said that the prepays and the IOs hadn't come down yet. Can you give us an idea where they came in so far this quarter?

We have the numbers from July that were in our press release when we announced the July dividend. I don't that in front of me. I believe there was a slight decrease. Of course, we have speeds tonight. I don't expect a material decrease in the IOs that we own that have the most extension potential. We have talked a lot about the some of these IOs we own are negative yields and the reason they are is because they are generally collateralized by loans that were, for the most part, originated post crisis, very low LTV, very high FICO and the coupons are 4.5%, 5%. So they are well on the money, prepaying very, very fast. When rates slowed off 500 basis points or so during the second quarter and into the early third, the moved less than the money and those prices would respond. That's kind of what we are alluding to is that it's somewhat of a muted response because it probably will be September release of August speeds before you really see a meaningful slowdown. So on those types of assets that was not a material slowdown last month, there maybe some more tonight. It's very critical for us to be able to run those things on a model. We were talking about this like yesterday, some of the models have showed them slowing to 35 and some of them show them slowing to 20. That obviously means a lot for an asset such as that. So we will put out a press release next week when we announce our August dividend and we will have our August speeds, but the long answer to your question is, in July, on most of the items that we care about, the slowdown was not that material.

It is certainly in line with what we experienced in the second quarter just to add to Bob's comments. I think we will see a partial slowdown in the speeds that come out tonight and the full effect of the new rate environment in the September prepay release, as Bob -mentioned. So we expect to start seeing an uptick in income from those securities or a decrease in amortization, if you look at it, probably starting this month but more material impact being soaked in the third month of the quarter and then on into the fourth quarter to the extent we don't retrace and go back to lower rates.

Good, and then, your yield on the portfolio went up pretty significantly in the second quarter versus the first quarter. Should we think about the run rate going forward as being at these levels or was there something in the quarter that pushed it higher?

I think it was a combination of some slight trading but it is higher. There is no question about that. One thing we did do during the second quarter was sell some bit rate pass-throughs and redeploy into a slight different coupon but importantly very close to par and as a result there is little or no premium amortization with that. The short answer is, yes, you should expect that the yield should be expanded slightly.

But it is probably worth cautioning you that we are having continuous discussions amongst ourselves and with our board as to what to do with that expanded income. It doesn't necessarily needs to translate into earnings for the rest of the year. We may use it to buy hedge positions and take a more defensive position on rates. That has not been decided yet.

Alright, that's helpful. Then, the last question I have, do you have the weighted average share count handy?

We can get you that but that did not change. Should still be the 3,341,665.

Okay.

We did not buy back any shares. I apologize for that question. Just give me a call and we will be glad to go over that with you.

(Operator Instructions) I am showing no further questions at this time. I would like to turn the conference back over to Robert Cauley for closing remarks.

Thank you, operator. We appreciate you taking the time to listen to our remarks today and to the extent you have questions that come up after the call or maybe after you listen to a replay, please feel free to call us at office on the number 772-231-1400. We are always will to take any and all questions. Again, thank you for your time.

Ladies and gentlemen, this concludes today's conference. Thanks for your participation. Have a wonderful day.