Good morning and welcome to the Fourth Quarter 2015 Earnings Conference Call for Orchid Island Capital. This call is being recorded today, February 25, 2016. 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 Litigations 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 from 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. Our view of the world has changed markedly since the end of the third quarter of 201,5twice. The fourth quarter of 2015 brought the first rate hike by the U.S. Federal Reserve, otherwise really the Fed since 2006. The path leading up to this initial hike was very volatile, beginning in 2013 with the taper tantrum when the Fed first signaled an end to quantitative easing, the third episode of QE at that and continuing to the summer of last year when the market was poised for the first hike only to back away as developments in China and elsewhere roiled the financial markets. Market conditions changed again very rapidly and the economic data strengthened as we moved into the fourth quarter, this paved the way for the Fed to hike rates at the December meeting. The Fed also hit at three or more hikes this year via their dot plot, the market forecast of the individual members and keeping with at least in paradigm sudden reversals in market conditions and investor attitudes. The market fell into turmoil again in January which is priced off most if not all Fed hikes in 2016. Once again developments abroad are mainly to blame, although this time domestic economic data contributed as well after fourth quarter growth in GDP was initially reported at only 0.6%. Since late January 2016, the data has reversed for the most part but conditions appeared quite unstable for now. Since the end of last summer what we continue to observe is sudden reversals in investor attitudes about risky assets. Every day is either a risk-on or a risk-off day. The primary driver is the price of a barrel of oil wither West Texas intermediate or [indiscernible]. Some days movements in China take the lead, usually…

Thank you. Ladies and gentlemen [Operator Instructions]. Our first question is from David Walrod of Ladenburg. Your line is open.

You talked in presentation about how you bought that about 1.2 million shares last year, stocks trading a little higher than your average repurchase. Could you talk about your appetite for continuing to buyback share this year and can you also comment if you have bought any share back year-to-date?

Year-to-date no, were still in the black out period which will end shortly. And we still would have appetite, I guess our unofficial target has been kind of somewhere in the high eight's to nine, we feel that seems to be the levels that make sense to us when we trade at or below that when it starts to get above that left so. But we will continue to buy back shares, we've bought back 5.3% inception to-date I guess, we are somewhat hesitant to get too much, because the size of the company is still not that large and it wasn’t that long as though that for instance kind of we weren’t allowed access to repo by all counterparties because of the size of the company. So we are not going to do it to the point where it starts to become detrimental in terms of access to repo that’s it.

Hi, Dave this is Hunter, I would just add our stock can make some pretty wild swings from time-to-time for a reasons that are unrenowned to us. So we do like to keep some power dry in that buyback plan when we think that the price of the stock is just dislocated from what makes sense and we would be pretty aggressive in those situations I think and less so when we are at the higher end of the range.

Great, and then in your prepared remarks I think you said leverage currently is more like 7.6 times, did I get that right?

It's about 7.5.

7.5 okay. And then you last one from me you talked about how you have kept your captive insurance company, can you talk about I guess from a industry standpoint [Indiscernible] done to I guess kind of lobby congress to change that ruling?

Yes, there is an effort of float and I believe there might even be a litigation effort as float as well, obviously the negative is that it’s an election year and it's kind of hard to get the attention of politicians, but there is a house bill out there that's being pursued, and I believe on the Senate side it's part of a much larger piece of legislation. I think Shelby is the name of the senator who is in charge of the committee or he is the guy behind it, and I think the way that legislation is written, it's just a small piece of that, I don't know that they would peel that out and create a standalone piece at the Senate side. The House side, you know it may move forward and I think that the chairman of the FHFA Mel Watt’s comments kind of implies that they would like to see Congress maybe be proactive and change things, but you know did you say it in the way I interpret his remarks anyway, is that their interpreting rules has written and if Congress take it in the best interest of you know the country to change that they need to be proactive and come forward. But I think it could happen, I don’t think it's a high probability event.

But it makes a lot of sense for what that’s worth obviously, you know permanent capital vehicle participating in the home loan bank systems seems like something that our elected officials should get behind, but we'll see what happens.

And there is very strong alignment of our business model with the intend to home loan act, we are holders of mortgages. There is two steps in the process of providing financing to the housing market. One is the maker loan and the second one is the holder loan, not all the players in the market that make these loans have the intention or ability to hold those loans to maturity. So they need players like us that's what we do, we are an all agency REIT and we own and we buy production holds on a very regular basis.

Okay that's all very helpful. Thanks a lot guys.

Thank you.

Thank you, our next question's from Christopher Testa of National Securities Corporation, your line is open.

Good morning, thanks for taking my questions and congrats on a strong quarter. just wanted to just ask so the leverage picked up in the quarter just Bob did you say that was fair to take advantage of what you saw were attractive opportunities in the market and that should be coming down now into the current quarter rather?

Well I didn't say that it's specifically, but we did in fact did that. It is off this quarter, we just felt comfortable with speeds that were coming in as seasonal slowdown in fees and the market was rallying and particularly the long end, I mean we mentioned the fact that rates moved higher in the fourth quarter you know that was very much a belly of the curve led flattening, tenure didn’t move much and of course on the tenures whatever 170 area today it's moving every minute. So we don’t see a lot of risk of a long end led sell-off, so we're comfortable with that level of leverage and you know I'll let Hunter speak for a moment here Bob. You know what we bid opportunistically in terms of buying assets, but it was really just general level of comfort with leverage getting to the high end of our range.

With respect to the downtick in the leverage this period that's really just a result of some portfolio repositioning, we were pretty active in the very first part of the year by call protected securities they actually were relatively light, there was lot of uncertainty. At the end of last year and not a lot of trades frankly that liquidity was pretty poor at the end of the year, especially in the areas where we tend to hang out. And so we feel like we probably jump in and buy some things relatively cheap we did that it turned out to be a good move, because we've had this vicious rally that's been going around since early January when rates were approaching 230s in the long end of the curve and since come down by about 50 basis points. So as we came down, we have shed a little bit of duration just strategically doing so and that's where we get those lower leverage ratios.

Okay, got it and where the speeds down mostly from the you know mortgage rates ticking higher in the quarter and how much of it was from the mortgage rates going up relative to housing turnover also slowing.

Well, it’s also the composition of the portfolio we're chasing slightly, some of the trades we did lower the wall of the portfolio which will tend to bring speeds down, but you know clearly, first two months of the year speeds were slower, they will probably pick up the next month and meaningfully slow the month after that, but I would say it was a combination as Hunter said.

Just on that note, so far as the response to this rate movement has been relatively muted as compared to last year, so we haven't seen the refi index hit the same levels that we saw with about the same amount of refi incentive in the early part of 2015. So we're cautiously optimistic, the three components that were really a play in the fourth - which sort of slower speeds in the fourth quarter were a little bit less housing turnover, a stronger I think seasonal slowdown element and then high rates obviously.

And other comment on there is some of the various Wall Street firms have pointed out in their research, if you look at the refi data of late, the average whole balance of loans has crept up substantially over last year which might be part of the lot of the refinancing activities in the jumbo market. We will find out if that’s the case, so we will see if there is a convergence between the conventional and non-conventional refi rate. If that is the case then that would imply the more the agency collateral will respond less to the rate, which makes sense because when you go back to 2013 say the spring 2013 we had been in a very low rate environment for a very long period of time and then we pulled off into late 2013 and 2014. So over that period, you had a lot of higher coupon mortgages created I think even 4.5 which own a lot of weren’t being originated in early 2013. So then when we had the refi waiver last year it was a lot of that collateral being exposed to lower rates for the first time. The amount of newer loans that are subject to or exposed to refinancing now are even much lesser it was last year. so that kind of facts how we would tell you that this way [indiscernible] should be less than what we observed last year.

Okay, great. That's a good color. And just I noticed that in the press release you said that you may pledge structured MBS as part of the repo funding, but retain the cash. Would you be actually applying leverage on the structured MBS or is that just something that's [indiscernible] to this part of repos to boos the cash balances?

Exactly right. When we thought that for a while, it's just the idea is if you have a material market move on given day would you were to get - subject to large margin calls, if you needed to have the cash then you have to sell an IO and raise cash.

Right, okay that makes sense.

One of the ways you can see Chris is just by looking at our cash balances compared to the balance of the structured securities portfolio. So we have structured security portfolio of say a $100 million and maybe we will have $20 million those held unencumbered in the box and then the rest pledged out. Would you look at the different screen of cash and the borrows against those securities is always the cash it's always higher.

Okay and I just want to just paraphrase, so could you give me the unrealized losses on derivatives were the core earnings roughly $0.51 to $0.52 per share?

The core - say it again.

Were the core earnings that back now $0.51 a share or $0.52?

Yes, that's as we discussed at our Analyst Day last year where you take net interest spread as the cost less the premium loss in the pay down which is to [Indiscernible] premium amortization, you should all the number like that.

Alright yes, but I just thought the unrealized loss on derivatives is calculated in that as well.

No. That's actually is mark-to-market, pure mark-to-market.

That's okay. So that's just the total mark-to-market. Got it, okay. Alright, and just the last question. Just the comments on the fed potentially hiking rates more, just seeing what I see kind of the in the leverage loan markets, I mean credit spreads are really widened dramatically, defaults are starting to pick up outside of just energy and metals and mining. People are very tepid and very worried those that when in the broadly syndicated and just the proprietary leverage loans space. Just wondering why you think the Fed would be raising rates when kind of the credit markets are really flashing red right now?

Well I think we basically place that bet on if you will is inflation data, you are starting to see an uptick in wage inflation and you dad that you will continue to see that build really if there is clear evidenced that there is wage - labor shortages in certain areas and all of the various measures of wage inflation whether its average hourly earnings or labor cost at ECI are all starting to tick higher. And the other as we mentioned the comment is just base line effects, I guess what would be really interesting to see what would happen. This I didn’t heard anybody pose this question. What if we were sitting here six months from now and all of the various metrics of inflation were running higher at or even maybe above the 2% target and we still had some of the conditions that you just described, what was the fed due in that circumstance. And I think they would still hike, but that would be an interesting scenario. There is no question mainly because of the energy prices that large portions of this economy are distressed certainly anything related to all the shale regions of the country. And then also import prices are affected by the strength of the dollar to the extent that really continues un abided for another 10 months or I guess that could change our thinking and maybe it will but I don’t think it will. I just think that the price of oil where it is now causes too much pain across the globe in spite of what Saudi Arabia says, I mean we all know that their cost of producing oil is very low, but that doesn’t change the fact they are accustomed to receiving $90 or whatever it…

Hot it. Alright thanks for taking my questions.

Thanks Chris.

[Operator Instructions] At this time, I see no other questions in queue. I would like to turn it back to management for closing remarks.

Thanks operator. Thank you for taking the time to be with us this morning to the extent that you didn’t get a chance to ask a question or you listen to the replay and would like to ask a question at a later point in time, please feel free to call us at the office. The number is 772-231-1400, we will be very happy to take your call, otherwise we look forward to talking to you next time, have a good day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes your program. You may now disconnect.