Hello and welcome to the Anworth Mortgage First Quarter Earnings Call. [Operator Instructions] Please note this event is being recorded. Before we begin the call, I will make a brief introductory statement. Statements made on this earnings call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and we hereby claim the protection of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 with respect to any such forward-looking statements. Forward-looking statements are those that predict or describe future events or trends that do not relate solely to historical matters. You can generally identify forward-looking statements as statements containing the words may, will, believe, expect, anticipate, intend, estimate, assume, continue, or other similar terms or variations on those terms or the negative of those terms. You should not rely on our forward-looking statements because the matters they describe are subject to assumptions, known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. Statements regarding the following subjects are forward-looking by their nature, our business and investment strategy, market trends and risks, assumptions regarding interest rates, and assumptions regarding prepayment rates on the mortgage loans securing our mortgage-backed securities. Our actual results may differ materially and adversely from those expressed in any forward-looking statement as a result of various factors and uncertainties including, but not limited to, changes in interest rates, changes in the market value of our mortgage-backed securities, changes in the yield curve, the availability of mortgage-backed securities for purchase, increases in the prepayment rates on the mortgage loans securing our mortgage-backed securities, our ability to use borrowings to finance our assets and, if available, the terms of…

Thank you very much. I’m Lloyd McAdams and I welcome you to this call today where we will discuss our first quarter operating results. What I will do initially is will turn the call over to Mr. Joe McAdams, our Chief Financial Officer, and I will participate later in the call. Thank you very much.

Hi, this is Joe. Turning to our reported financial results, the first quarter was a challenging one as volatility in the global financial markets led to lower US Treasury rates, widening yield spreads on lower credit bonds and under performance in general for less liquid investments. So Anworth investment portfolio generated core earnings during the quarter of $13.5 million, which equates to $0.14 per share or roughly 2.25% on an annualized relative to common equity. The company recorded a comprehensive loss of $11.4 million or approximately negative 1.6% for the quarter. This comprehensive income includes the net effect of all unrealized gains and losses on the company's investments. Turning to the company’s investment portfolio, you'll see that the portfolio allocation remains relatively constant from year end, with 76% agency mortgage assets and 24% in residential mortgage credit investments, including both MBS and loans consolidated on the firm's balance sheet via securitization. The agency MBS portfolio remains focused on securities with relatively less interest rate sensitivity than the market in general. We have 41% of our agency portfolio in currently resetting ARMS or ARMS that are within 12 months of their first contractual reset and 29% of our portfolio is invested in fixed rate MBS via TBA transactions, with that focus clearly on securities backed by mortgages with less than 30-year maturities. Looking at the characteristics of the agency portfolio, a few changes to highlight would be the increase in average coupon rate of approximately 4 basis points, due to ARM coupons beginning to reset upwards from increases we've seen on the short end of the yield curve. And you'll also see that premium amortization expense was lower in the quarter, primarily due to having a smaller average agency portfolio during the first quarter relative to prior periods. The actual realized prepayment rate on the agency portfolio increased slightly from 16% CPR to 17% CPR for the quarter and prepayment activity we've observed so far during the second quarter shows a similarly small increase to 18% on average so far. I'll turn it over to Brett to discuss the non-agency portion of our portfolio.

Thanks, Joe. As Joe mentioned during the first quarter, the market continued to be volatile across all asset types and the non-agency market was not immune to this volatility. On the asset side, overall the non-agency portfolio did not grow over the quarter. However, we did add a limited amount – we did a limited amount of purchasing during the quarter. That said, between these limited higher yielding additions and pay downs in some of the lower yielding assets, the overall portfolio yield increased by 3 basis points over the quarter. On the funding side, market volatility did impact some of the counterparties [indiscernible] demonstrated mainly in rates and pricing. We aggressively managed our financing in order to mitigate the impact on our returns. We’re able to rebalance our portfolio, so the impact was negligible and it was a negligible increase to our cost of funds of 0.005%. That said, we managed our position relative to market conditions in order to maintain our leverage target of 2 times on the non-agency portfolio. Overall, the impact of increased interest rates, which ultimately was the catalyst of our higher cost of funds, was a 10 basis point increase in our funding cost. Looking forward, as mentioned during the first – the first quarter was volatile with the month of February being the most difficult. During March and April, we have seen stability return to the market and continued progressive improvement in liquidity. We feel that we are in a good position to take advantage of attractive investment opportunities in the current market. Thanks, Joe.

That gets segue into portfolio of financing and leverage for the overall portfolio, you'll see the average interest rates on repos increased 10 basis points on the quarter to 83 basis points on average. Most of that increase, especially on the agency side, was due to older repos resetting to current market rates as opposed to an increase in market rates during the quarter. But as Brett indicated, we did see non-agency rates increase a little more than agency’s during the quarter. Taking into account our interest rate swap hedges, the average maturity of our borrowings stood at 669 days or approximately 1.75 years at March 31. Our combined investment portfolios’ duration shortened to approximately 1.8 years at March 31, which results in a net interest rate gap that was slightly negative at quarter end once the hedged repo borrowings and Eurodollar future hedges are taken into account. The portfolio’s net interest rate spread, therefore, wound up at 111 basis points or approximately 1.1% for the quarter. This was a 10 basis point decline quarter over quarter from the fourth quarter. During the quarter, we declared a $0.15 dividend for common stockholders. This reflects a 12.9% annualized yield on the stock at March 31. Book value per share at March 31 was $6 per share after declaring the dividend. This was a decline of $0.25 from December 31 and resulted in a return on equity, as I mentioned earlier, of approximately negative 1.6% for the quarter. During the quarter, the company repurchased approximately 2.2 million shares, which was approximately 2.2% of the outstanding shares at an average price of $4.34. The economic benefit from these share repurchases to shareholders could be approximated as around $0.04 per common share. With that, I'll turn the call back over to Lloyd for his comments.

Thank you very much, Joe and Brett. I believe we've provided good picture of the allocation of the portfolio. At this time, what I would like to do is look back at 2015, I would reference you to some comments I made at this time last quarter on February 16 about how our interest rate swaps cover the mortgage backed securities whose rates are fixed beyond two-year periods and it is the portion of our portfolio, particularly the 41% that Joe mentioned, whose interest rates will fix themselves to the current market over the next year. If you don't have a copy of the transcript of my comments from last quarter, you can go over to our website and get a copy. You can contact the office and they'll be more than happy to send you a copy of that analysis. Repeating it even though it is still quite applicable, it doesn't seem a good use of our time, but for those of you who would like to see it, please request. So when I look back at 2015, it kind of all started in 2009 when the Fed funds rate went to 0%. Most investors viewed this decline as benefiting mortgage REITs back then. During the next few years, mortgage REIT stocks increased and new capital raise for mortgage REITs was very large. Anworth had a public raise of capital during this period also at a price above book value. Sometime thereafter, investor sentiment turned toward the Fed eventually raising interest rates might be a cause for mortgage REIT decline of its dividends and income. During this period, mortgage REIT stocks tend to decline pretty much across the board. At the beginning of 2015, fast forward to the past year, the federal reserve itself announced that it would raise…

Well, thank you very much. We appreciate your participation in the call. For those of you who are on the call, we look forward to you checking in with us again next quarter. For those of you reading the transcript, if you have questions or need to ask anything, please let us know. And with that, we thank you very much for participating and your support of Anworth. Good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.