Good morning and welcome to the First Quarter 2013 Earnings Conference Call for Orchid Island Capital Incorporated. This call is being recorded today on Wednesday, November 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 of 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.

Thank you, operator and welcome everybody to our third quarter earnings call. As a very volatile second quarter in which the 10 year note rate increased by close to 100 basis points and MBS places sold out materially, the third quarter started off in the same fashion. The market reacted violently to the Federal Reserve's hint that that they will begin to taper their assets purchases by yearend in May and June and suddenly been stopped until late in the third quarter. The economic data release early in the third quarter was generally strong or at least the employment data which par with the Fed's contention that there has been material improvement in September of 2012 when QE3 was announced. This development was to be the basis for the beginning of at least wind down their asset purchase program as the quarter progress the MBS asset prices continue to sell up and MBS duration extended. Shortly before the nonfarm payroll report for August was issued on September 6, the yield on a 10 year U.S. Treasury note briefly surpassed 3%. When the Fed met later that month and market was fully exciting to Fed to announce the initial tapering of their asset purchases. The market was dead wrong. The Fed did not announce any changes to their asset purchase program. In fact, the Fed decided to cancel these through options to the economic activity that might occur if Congress and the administration were unable to address the pending exploration of the continuing resolution, there was plenty [indiscernible] on a temporary basis and the related need to increase the country's debt ceiling. They were quite pathetic. The government shut-down for over 20 days while the power that be in Washington [hang it] over the terms of resolution to the mini crisis.…

Our first question is from David Walrod. Your line is open. Please proceed with your question.

Hi, good morning.

Good morning, David.

Kind of a conceptual question, a lot of your peers given all the volatility have been taking down leverage and increasing their hedging, and I am just curious if given the way you can be somewhat nimble with your portfolio. You broaden your allocation to pass -throughs to about 49% from 52%. Does it make sense given your commentary about rates being, the press forward extended period, does it make sense to up the allocation to the pass -throughs for maybe two three quarters and maybe reduce the hedge a little bit in order to maximize earnings and then maybe reallocate.

Sure. David, what we are trying to focus on here is sort of having our cake and eating it too I guess, and that the market is provided us with an opportunity to take some gains on some buyers by virtue of the fact that have extended since we purchased them. Some of them were up or down little bit versus the prior mark which shows up in our GAAP reporting, but generally speaking, we're welling the money on those purchases and rates have moved a long way. So what we have been able to do is improve our risk profile by going up in coupon those IOs and still sort of have the same capital allocation to that space with more coverage. Similarly on the pass-through side rates finally came back and after we were comfortable shedding a little bit duration without appearing that we are going to get which side too bad and so in the third quarter, we sold a lot of asset classes pass-through space that had done what we thought exceptionally well, so there is lot of buying activity in 15 year threes, we took advantage of that and sold it little bit. We took advantage of some of this stress in the hybrid arm market by buying into that. And also for the first time in couple of months, the market presented us with an opportunity to buy higher coupon for the year fixed rate by 4s and 4.5. So in general what we try to do is as rates have moved gradually, higher from the taper announcement, since it had moved lower from the non taper announcement, we have lighten up on some of the high duration 30 year fixed rate products and ended some lower, some lower duration assets like 4s and 4.5 versus say 3s and 3.5, so we believe that, back to your original question, so I think what we are doing here is we are improving the profile of the portfolio and also increasing the income earnings capacity on the margin. So hopefully that's beneficial in the coming few months.

Yes, actually I have one final point to that note that we've been able to as we flatten our profile a little bit without increasing the hedge. So the hedge is basically the same by moving up in coupon and fixed rate and up in coupon and IOs, we now have kind of same protection from operate, we didn't have to increase the hedge, you follow the peers and you know the buy increase in the hedge it became very much a big issue with respect to earnings power, because current rate stiffen, so if you hedge up the curve, you are paying say for instance stakes on swap is very, very costly so do not have to increase the hedges very beneficial in terms of future earnings, and also as I said the other market generally speaking is offering service better return and have been the case to the most of the year.

(Operator Instructions). I am not showing any further questions. Please proceed with any further remarks.

Thank you, operator. Once again I appreciate everybody's time, to the extent somebody is just a little shy or listening to the replay of the call and has questions further to what was discussed today, please feel free to call us in the office, our number is 772-231-1400. We will be very glad to field any more questions. Otherwise we look forward to speaking to you next quarter. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.