Good morning, everyone. I’d like to welcome you to the Arlington Asset Fourth Quarter and Full Year 2015 Earnings Call. Please be aware that each of your lines is in a listen-only mode. After the company’s remarks, we will open the floor for your questions. [Operator Instructions] Thank you. I’d now like to turn the conference over to Richard Konzmann. Mr. Konzmann, you may begin.

Thank you very much and good morning. This is Rich Konzmann, Chief Financial Officer of Arlington Asset. Before we begin this morning’s call, I would like to remind everyone that statements concerning future financial or business performance, market conditions, business strategies or expectations, and any other guidance on present or future periods constitute forward-looking statements that are subject to a number of factors, risk and uncertainties that might cause actual results to differ materially from stated expectations or current circumstances. These forward-looking statements are based on management’s beliefs, assumptions and expectations which are subject to change risk and uncertainty as a result of possible events or factors. These and other material risks are described in the company’s Annual Report on Form 10-K for the year-ended December 31, 2014, and other documents filed by the company with the SEC from time-to-time, which are available from the company and from the SEC and you should read and understand these risks when evaluating any forward-looking statement. I would now like to turn the call over to Rock Tonkel for his comments.

Thank you, Rich. Good morning and welcome to the fourth quarter and full year of 2015 earnings call for Arlington Asset. Joining me on the call today are Eric Billings, our Executive Chairman; and Brian Bowers, our Chief Investment Officer. During the fourth quarter, the company’s results benefitted from less volatile market conditions and lower prepayment speeds in the company’s agency MBS portfolio contributing to an increase in net book value per share. In December, the U.S. Federal Reserve increased the target federal funds rate for the first time in over nine years while also suggesting in its commentary, that it could continue to raise the target rate further in 2016 depending on economic data. After one month into the New Year the global economic outlook has grown dimmer, and financial conditions have tightened. Foreign Central banks have taken an increasingly accommodative stands and the timing and amount of further rate increases in 2016 by the Federal Reserve now remain less certain. Renewed interest rate volatility and lower forward interest rates have resulted in spread widening between the company’s agency MBS and interest rate hedges to date this year. Looking forward, while wider MBS spreads and continued low short term interest rates will bolster hedge returns for the company going forward, we are cautious about the broader economic and market outlook. Returning to the results for the fourth quarter, we reported non-GAAP core operating income per diluted share of $1.35 unchanged from the third quarter of 2015 and an increase from the fourth quarter of 2014 of $1.24 per diluted share. From a GAAP perspective, we reported total comprehensive income of $0.86 per diluted share for the fourth quarter and book value of $21.05 per share as of yearend. We would like to highlight that the amortization of net premiums…

Certainly, at this time we will open the floor for your questions. [Operator Instructions] We have our first question coming from Trevor Cranston from JMP Securities.

Hey, Trevor.

Good morning, Rock. I guess the first thing, can you talk a little bit more about what’s the drivers of the decision to change the composition of the hedge portfolio where. And then also maybe talk a little bit about how you kind of envision that mix between swaps and treasury hedges going forward from here if you’re kind of happy with the balance right now or if you would expect it to continue to move? Thanks.

Sure. So, what we observed over some time was that the Eurodollars had become somewhat less correlated to the mortgage securities, and as a consequence we felt like they were not providing us some proper alignment with our risk. I’d say the future contract that we have historically have used probably demonstrated similar characteristics, but they also had characteristics of being somewhat liquid at points in time. So we felt like it was best to not only move out of those classes of hedges, but also to take advantage at the time of the tightening in swaps spread versus treasuries. And so, we were able to make that switch at a time when it was reasonably favorable. I wouldn’t say it was at the tights, but it wasn’t at the wides of the recent sort of local ranges of the swaps spread. So that was a sort of favorable opportunity in that context. It also allowed us to take advantage of a newer capability to enter into exchange credit swaps and obviously have the benefit of the easier income accounting recognition and also for those instruments, but also the liquidity of those instruments. Now, as per the treasury futures they offer a capital protection as a very highly liquid instrument that has become much more closely correlated to the mortgage security. And so, I think from a going forward perspective I would say, we probably over time may make some modest incremental increases in the proportionality of the swap hedge, exchange credit swaps versus the treasury futures, but those will depend on market conditions and a range of other factors over time. I think we’re contain with where we stand today, but we may migrate that a little bit more to higher proportionality over time if market conditions tells us that’s the right thing to do.

Got it. That’s helpful. And then, I guess from your comments it sounded like you guys think spread are reasonably attractive and offer pretty returns right now, but you’re also little bit cautious on the environment. Can you talk about kind of in the near term how you guys are prioritizing; putting capital in terms of reinvesting versus potentially buying back shares given that they’re trading at a fairly substantial discount book?

Yes. Well, we bought here from the fourth and while the number is somewhat limited, it sort of the fact that the price trade – the stock traded in the price range, our price range for our short window of time what we were able to buy. So, we’re – as we said in the past we’re – we have bought the stock in the past, we’re completely focused on that as an opportunity. We look to it as the benchmark against which we’re judging other alternatives, but we also are highly sensitive to the level of accretion that’s require, so in our view it make sense for the business. So, we’ll be very focused on that opportunity going forward and we’ll see what opportunity the market gives us as we go along in time.

Okay. Thank you.

Thank you. Our next question comes from Dan Altscher from FBR.

Hi, Dan.

Hey, good morning. Thanks everyone for taking the questions. So, I just want to run through just a couple of numbers to make sure I understood everything correctly. So, I guess beginning in the first quarter of 2016 we’re going to see premium amortization run through interest expense I think you indicated that was around $0.25 in the fourth quarter. And then also as the swaps become I guess fully on line for a full quarter, I think you’ve indicated that there was maybe an incremental $0.13 of interest expense or that was maybe the total interest expense that would have been there for the full quarter, can you just clarify those?

Sure, Dan. This is Rich. To answer your first question about the premium amortization on the agency MBS, our intention is to change our accounting method in the first quarter of 2016 so that amortization of the premiums would flow through as – included in GAAP interest income and therefore also in our core income. And then so, right now, as we’ve discussed in the past is that premium amortizations flowing through our gains and losses, changes in fair value and through book value, so they’re running through net income and running through book value, so it will geography change if you will on the income statement, that’s relates to that. Seeing our estimate for the fourth quarter, it was approximately $0.25 of premium amortization based upon proportionate amortization -- for proportionate pay-down as we receive them. To answer to your second question, the $0.13 number that Rock commented on in his prepared remarks that was the incremental amount. We did have some swap expense that was incurred during the fourth quarter, but we entered into our swaps in the later part of the quarter. I want to say in total they were about -- it was about $0.18 for the quarter, so about $0.05 was already reflected in core, but we try to do a pro forma number to say, what’s number it would have been if we had them out there for the entire quarter. So the $0.13 would be incremental to the core number that we have to report it.

Got it. Okay. Sorry, go ahead Rock.

Historically though the economic cost of those items has been reflected through the book value and now going forward it will simply be change in geography and it will be reflected through the core income statement.

Yes. There’s no change in net income, it just breaking out of component or the change in the fair value that’s currently running through there will be reflected in core.

Yes. That’s understood. And just one other cookie from a geographic standpoint, where I guess in the fourth from a line item did we see kind of that periodic expense for those swaps. So it was in the – I guess the gain loss of derivatives or will that maybe somewhere else?

It’s in the gain loss from derivatives.

Okay. Perfect. Different topic, we hear across fixed income land that, there is a – I guess a lack of liquidity in many types of securities, presumably you’re not seeing any sort of liquidity issues on the agency side, but can you gives us a sense as to whatever sort of liquidity option you’re seeing in the private label market for I guess specifically the securities that you own or a like, I mean, I’ll see regular sale some in the quarter which is great, so I suggest -- liquidity, but can you just comment how liquid those markets are actually now?

Well, it ebbs and flows, Dan, as you would expect with movement in risk assets on an appetite for risk assets, right. So, in a week like the last week you’d probably aren’t threatened about the seller, but we’ve seen opportunities through last quarter and I’m sure we’ll more this quarter to be able to move those assets at regional prices. So, I think as a broad matter it’s an interesting question, because these assets as a class it held up quite well relative to other fixed income assets. You’ve seen improvement in underlying credit and while prices are being you haven’t seen the magnitude of spread widening here you may have seen in other assets classes across fixed income including other non-agency mortgage on a classes. So I think they’ve actually been resilient from a credit perspective and they’ve been relatively resilient from a price perspective, which would suggest you that there’s a reasonable level of liquidity there or you’d see more meaningful price movements I suspect. So again, it ebbs and flows, but we can typically find opportunities and transact in markets that aren’t highly risk up markets when you don’t want to trade assets at discounts.

Got it. Okay. That’s helpful commentary. Maybe just one more on the commentary front, you guys were early on just starting to do the direct repo, and it sounds like that increasing, I guess the competitor recently indicated they are looking to do or start their own sort of direct repo or build their broker dealer to deal with some regulatory challenges, they are facing some of the broader dealers. Can you just comment a little bit what you’re hearing from your counterparties on the lending side, how much regulatory Basel III et cetera has maybe already impacted in financing cost, financing availability or maybe where it might going over the next couple of years as Basel III starts to get phased in?

Well, as you know, Dan, its typically one of the most prominent questions that are raised on calls like this across the industry, but also with -- in direct meetings with investors and the conversations that we have constantly, literally, daily as you’d expect with all the counterparties in our book, but also others that were speaking to it any one time, we’re always speaking to additional incremental repo, potential repo parties whether its director through the street. It seems to us that the concerns that folks have which was completely legitimate because it’s a meaningful risk to the business over time to the industry, have been met by market circumstances that are far more favorable. We just moved all our FHBL balances for example and there were no issues at all, seamless. So, what we’ve seen is some shrinkage as we’ve talked about on these calls and in meetings among the Europeans that seems to be primarily completed. Most of the U.S. banks continue to have a relatively robust appetite; all thought it’s different across different banks much more robust than others. And then, there are incremental middle markets or other participants for our U.S. domestic middle market participants that have come into the market with more meaningful appetite and they’re being informed all the time. So, it doesn’t surprise us at all that some of the larger folks in this industry are setting a broker deals and accessing that for us at our size, it maybe a little different just because of the G&A burden of that sort of thing. It’s easier for large organization to do it, but we certainly have experience in our past with broker dealers as you all know and it’s something we look at from our perspective. In the meantime, we feel like the repo universe has expanded, we’re not aware of any particular pressures. In fact, we’re always having conversations with folks who want to talk about new exposure or increase exposures.

All right. Thanks for the commentary Rock. I appreciate it.

Thank you. Our next question comes from Lucy Webster from Compass Point.

Good morning, guys. My question is I was wondering if you could comment on what you’re thinking in the short term in terms of prepays and just how that relates to the potential relative value of the side pool [ph] is going forward versus other investment opportunities?

Well, I think couple of things we talk about a lot. One is that, well, seasonality is probably not we’re against here, one. Two, we’re always in the process of refining the portfolio to read out higher payers, faster payers especially as inevitably a portfolio of seasons over time, so that’s a process we’re always in. I don’t have any reason here to think we’re likely to see either a meaningful decreases or big spikes from here. We’ve been – last time we were down around these rate levels. We did see heightened expectations in mortgages for prepay speeds that really materialize somewhat but not anywhere near the magnitude of what was embedded in the price of the securities. I doubt we’ll see a movement in speeds to the point we did last year, but early part last year, but that’s possible. I just won’t think we feel like it’s likely. So our look is relatively [Indiscernible] on speeds from here.

Great. That’s all from me. Thanks.

[Operator Instructions] Our next question comes from Douglas Harter from Credit Suisse.

Thanks. You guys talked a little bit about the geography changes coming in the first quarter. Is that going to have any impact on the dividend or is that already reflected when you last adjusted the dividend?

Those costs have as I said before as you know Doug are already borne in the -- borne through the book value. So, when we are looking and said in the dividend we are taking them into consideration already.

Great. And then obviously we’ve so far in January and so far for the two days of February it’s been --any color you can give us on your performance so far quarter to date?

Well in environments like this where you see these rapid rallies in rates, the mortgages don’t keep pace from a price perspective with the movement in treasury prices. So you will never believe that the level of spread widening in there and we’ve experienced that during the first month of the year, we’ve seen about a almost 40 basis point rally a little higher than 43 yesterday, [Indiscernible] rally in the tens and when you see that pace of movement you are going to realize some spread widening. So we’ve encountered some spread widening during the course of the first month and but it’s early in and we’re right at the front end of the quarter. So, totally in.

And I guess how do you feel about your level of leverage to be able to kind of observe periods of volatility like this.

Well we have the flexibility to do, to absorb that through the just given the overall flexibility we have built into the organization in the portfolio. So I think that’s been exhibited over the last year and I think we’ve been comfortable maintaining the portfolio given the hedging construct and the spread returns and the leverage in the portfolio and for now we view it the same way. Look, we review these questions every day, looking at market conditions and to the extent that we think there is some form of reset clearly there’s been some form of reset in economic expectations, actual growth of financial condition so we are mindful of that, but we are generally comfortable with the construct of the portfolio as you’ve observed it over a period for time now.

Great. Very helpful, Rock. Operator Thank you. Our next question comes from Michael Diana from Maxim Group.

Hi, Mike.

Hey Rock. You mentioned the move your federal home loan borrowings into repos seamless [ph] do you have any comment on the cost of that relative to the fourth quarter?

I’d say, essentially the way we think about it Mike is that the way we had it structured and probably would have saved us on those balances about 20, 25 basis points, so that’s a lost opportunity but we only had a relatively small balance for most of the quarter and so the only period in which we had a really relevant balance was part of December, maybe all the part of December. So I don’t think we think of that its material change going forward, it’s just an opportunity that isn’t there.

Okay, great.

It would have been worth maybe a penny or two a quarter and now it’s not.

Okay. Great, thanks.

Thank you. Mr. Tonkel, at this time there are no more questions.

Okay, thanks very much. We appreciate your time.

Thank you ladies and gentlemen. This concludes today’s teleconference. You may now disconnect.