Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Ellington Residential Mortgage REIT Third Quarter 2013 Results Conference Call. Today’s call is being recorded. At this time, all participants have been placed in listen-only mode and the floor will be open for your questions following the presentation. (Operator Instructions) It is now my pleasure to turn the floor over to, Sara Brown. Please go ahead.

Before we start I would like to remind everyone that certain statements made during this conference call, including statements concerning future strategies, intentions and plans may constitute forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical in nature and can be identified by words such as belief, expect, anticipate, estimate, project, plan, continue, intend, should, would, could, goal, objective, will, may, seek, or similar expressions by reference to strategies plans, or intentions. Forward-looking statements are subject to a variety of risks and uncertainties including those described in Exhibit 99.1 of our quarterly report on Form 10-Q filed on June 11, 2013, that could cause the company’s actual results to differ materially from its beliefs, expectations, estimates and projections. Other risks and uncertainties and factors that could cause actual results to differ materially from those projected maybe described from time to time in reports we file with the SEC. Consequently, you should not rely on these forward-looking statements as predictions of future events. Statements made during this conference call are as of the date of this call and the company undertakes no obligation to update or revise any forward-looking statement whether as a result of new information, future events or otherwise. Okay. I have on the call with me today, Larry Penn, Chief Executive Officer of Ellington Residential; Mark Tecotzky, our Chief Investment Officer; and Lisa Mumford our Chief Financial Officer. As a reminder, we have posted a third quarter earnings conference call presentation to our website, www.earnreit.com. You will find it right on the presentations page in the 'For Our Shareholders' section of the website. Lisa and Mark's prepared remarks will track the presentation so it will be helpful if you have this presentation in front of you and turn to Slide 4 to follow along. While you getting that in front of you, I would just like to mention that while the full name of the company is Ellington Residential Mortgage REIT, sometimes on this call we will refer to it just as Ellington Residential, and sometimes on this call we will refer to it by its NYSE ticker, E-A-R-N or EARN. I will now turn the call over to Larry.

Thanks, Sara. It's our pleasure to speak with our shareholders this morning as we release our third quarter 2013 results. We appreciate everyone taking the time to participate on the call today. We will follow the same format as we did on the previous call. First, Lisa will run through our financial results. Then Mark will discuss how the residential mortgage-backed securities market performed over the course of the quarter, how we positioned our RMBS portfolio and what our market outlook is. Finally, I will follow with some additional remarks before opening the floor to questions. Hopefully you now have the presentation in front of you and open to Slide 4. With that I am going to turn it over to Lisa.

Thank you, Larry, and good morning everyone. In the third quarter, we earned total GAAP income of $6.8 million or $0.74 per share. Of those amounts, core earnings represented $5.6 million or $0.61 per share. GAAP earnings over and above core earnings was $1.2 million or $0.13 per share. During the second quarter we had a GAAP net loss of $9.7 million or $1.55 per share, and we had positive core earnings of $1.3 million or $0.21 per share. During the third quarter, we recovered a significant portion of the second quarter GAAP net loss through a combination of spread capture as measured by core earnings, trading gains and asset price improvements. You will recall that while we consider ourselves substantially ramped by the end of the second quarter, during the second quarter we were not fully ramped up as our initial public offering only closed in early May. Let's look at the components of our core earnings. During the third quarter our average yield in our portfolio increased from 2.82% in the second quarter to 3.09% in the third quarter. Mark will talk about this more in his remarks but we actively traded the portfolio. Within our holdings of agency RMBS, as measures by sales and excluding principal paydowns, we turned [ph] over almost half of the portfolio. In so doing we were able to purchase pools at prices that we haven't seen for quite some time thereby providing a nice boost to our yields. Quarter-over-quarter our agency yields increased 33 basis points to 2.96%. On the summary portfolio tables beginning on Slide 12 of the presentation, you can also see that as of the end of the quarter the average cost of our agency portfolio declined almost 1.4 points. We believe over the course of the quarter we…

Thanks, Lisa. This is a quarter marked by both extreme interest rate volatility and extreme volatility in the relationship between the agency mortgages and the traditional rate hedging instruments as swaps and treasuries. Fannie 3.5 traded in the 4 point range but meanwhile the 5-year treasury notes only traded in the 2.5 point range. To not only preserve but actually increase book value this quarter required two things. First, in the violent sell off to early September, you had to have enough of the correct hedges in place so that book value decline was manageable and you weren't forced into large scale portfolio liquidations. Second, you had to recognize the very compelling valuation that agency MBS reached at certain times in the quarter and you had to capture that opportunity. I think that this quarter also shows that you have to be dynamic in your portfolio positioning. One particular strategy that worked in the past won't always work in the future. You have to evaluate the market every quarter based on the current conditions. Let's look at the current opportunity. So on Slide 7, specified pool pay-ups. For most of 2013, specified pool pay-ups have been the thorn in the side of mortgage REITs. Pay-ups have been contracting in sell off but they haven't done much at all in values, therefore have been underperforming expected interest rate performance. As a result of that underperformance, we now view them as having excellent risk reward balanced. We show this on Slide 7. Here we regress the pay-up on medium loan balanced 30-year Fannie 4s against the price of TBA or generic 30-year Fannie 4s. We conceive from the data points in the upper right, that these pools used to trigger [ph] over 140 tics over TBA. That’s almost 4.5 points. Now the…

Thanks, Mark. This quarter was just a great quarter for Ellington Residential in so many ways. We increased our net interest margin. We generated GAAP income enough to cover our dividend and then some. We increased book value and we increased the size of our portfolio, all at the same time. I guarantee you, there is no way we could have done all that without a very active management style and approach that we bring to the RMBS market. Furthermore, I feel that this style and approach of ours positions us very well to take advantage of some great opportunities which I will discuss shortly. Now as you recall, the markets in May and June have been very challenging. Although we navigated those months really well, thanks to some very disciplined hedging. To put my closing remarks from this third quarter earnings call in perspective, I would like to start by just quoting my final paragraph and my closing remarks of our second quarter earnings call. Here's what I had said. Importantly, there are a lot of silver linings here. Agency pools offer terrific value here. Prepayment and policy risk has gone down as rates have risen and meanwhile spreads are wider. In fact, we could make back more than half of that 5.5% book value decline with just a 10-basis point tightening in MBS yield spreads. Furthermore, our competition for assets is noticeably lower than it's been in a long time and we still have dry powder. So while this was a difficult quarter for us, the market move has created many opportunities going forward. We believe as strongly as ever in our approach and our strategy. We hope to continue to differentiate ourselves, not just by controlling downside and bad markets as we did in this past quarter,…

(Operator Instructions) Our first question comes from the line of Douglas Harter with Credit Suisse.

Thanks. Just wondering if you guys could talk about your outlook for where you agency mortgage spreads heading in the next three-six months?

Hey, Doug, it's Mark. I think that you saw in the third quarter is rates were so volatile and you got the 10-year note right up to 3% and there was clearly a lot of deleveraging, mutual fund redemptions. So I think a lot of the selling of MBS that we would have expected would a company the take [ph] the announcement from the fed, I think some significant portion of that you saw take place in the third quarter. So I think that positioning right now is more balanced than what it was. So I would say that while we expect volatility going forward, I don’t think it's going to be of the magnitude of what we have seen. I think it's still an open question though because, you know there is a lot of ways the fed can taper, right. The magnitude by which they reduce their purchase over time I think is going to be very important. So I think there is a lot of ways they could taper which would be very damaging to the market at all, and you have a lot of big portfolio on their way to MBS already setup. And then there are ways in which they could taper, which I think could cause pressure on spreads. So I think it's still an open question. I would just say that, the positioning coming into tapering now though, I think is much more on size than what it was three-months ago.

Great. And then, obviously you guys added some ARMs. Can you talk about where you see that market today? How much of the selling pressure from other players has passed and where those spreads relative to where they might have been, say six months ago, or some frame or references where spreads are today versus the past?

Yes. You know ARMs are a fantastic, great asset. When we first started doing whole pools in the other company, in the EFC, that’s all we owned because it's fantastic asset for a REIT. And then I think what happened is that because they are also fantastic asset for a bank and as good as your REIT funds, banks funds better. So I think the competition for ARMs just got to be too fierce from the banks and it drove them to levels they weren't the most attractive asset for a REIT, at least the way we looked at things. So we reduced our holdings a lot. Now what happened in the third quarter, there was some supply of ARMS that was coming from some portfolio sales at a time when the primary dealers weren't in the mood to really warehouse a lot of risks. So there were some big portfolio trades that took place. We were able to buy a few pieces at levels that to us looked like they were probably 60 basis points wider than where they had been. Now since then it has been a pretty material recovery in ARM spreads. I think the AOCI filters coming off for banks is going to make ARMs even more attractive to banks relative to fixed rates than they had been. So I don’t know who the other buyers have been. I know some other REITS bought. But you have retraced at least half of the widening. So we look from, we find pieces that fit. We would like to find more. But it's not nearly as liquid a market as the fixed rate market. So I think you just have to be ready to react for them when you see levels that are attractive.

(Operator Instructions) Our next question comes from the line of Trevor Cranston with JMP Securities.

Congratulations on a nice quarter. There was a brief mention in the slide deck, I don’t think you guys talked about it much in the prepared remarks, about adding some reverse MBS pools this quarter. Can you guys maybe just expand a little bit what you see as attractive about that market and if that’s something you could see becoming a more material part of your portfolio going forward.

Yes. So this is the [indiscernible] program with reverse mortgages. And what we like about them is that they don’t have the same prepayment reaction to interest rates as the other types of agency MBS we have. So I think the returns on them are attractive. From net interest margins they look good but I also think that from a diversification standpoint, they are a great asset for us and they are not short yields. So if you think like in bond [ph] term, they are not short, as much volatility as a traditional 30-year, 15-year mortgage-backed bond is. So you can finance them attractively. It just depends on the level where they are at relative to other agency MBS. But I could definitely see that sector growing. I think it's a -- I think the most thoughtful portfolio we can construct is going to be a portfolio that takes advantage of as many pockets of value in the agency mortgage market as we can find and we can think of an analyze and get comfortable with. So ARMs, reverse mortgages, I think those represent great pockets of value from time to time there. So I think trying to drive the return for shareholders is important for us to get that exposure at times when we think it's going to a be a good total return.

That’s helpful. And on the dividend, obviously core earnings are a little bit higher than the dividend this quarter. Can you guys just talk a little bit about the, how you think about the policy if you expect to treat the dividend kind of similarly to how you do at EFC, where you set it at a level that can be sustained for a few quarters and then sometimes a true-up at the end of the year. Of if you would expect it to move around a bit more quarter-to-quarter with results coming.

Sure. I think we -- everyone's different, no right or wrong here. But I think we like the sort of stable dividend approach. And as you say, sort of looking out to the near and medium term to see what's sustainable. So now one thing that a REIT like our needs to be focused on is the fact that you are acquired to payout all your taxable income, right. So that’s something that will also affect the dividend although potentially only on a onetime basis, right. But other than that I think, we are hopeful that our core earnings will continue at a nice level and that will enable us to continue to maintain a stable dividend and we have sized it at something that we think is conservatively sustainable over the near to medium term.

Our next question comes from the line of Jim Young with West Family Investments.

Mark, you had mentioned that there are different ways that the fed could taper. Could you share with us how you think about the different scenarios and how are you with the probability where you connect this [indiscernible]?

Hey, Jim, that’s a hard question. I was just really thinking about that they have a lot of latitude and the magnitude by which they reduced their monthly purchases. You know what's interesting is that since they have been doing QE3 [ph], the huge range in monthly production of agency mortgages. You know in the March, April we were, there was a lot of refi's, right. It was 70-odd percent of the volume. So you had very big gross issuance numbers in the agency mortgage market and the fed was basically buying the $40 billion plus few investing pay-downs. Now as we have sold off some of the big coupons, no longer refinancing the Fannie 3s, Fannie 3.5s, refi index is much lower and the gross volumes you are seeing have come down a lot. Yet the Fed hasn’t changed their purchase volume at all. So I think that given that gross volumes are pretty low right now, if they do taper, I would say, $5 billion-$10 billion a month, then they are buying what acts to be more impactful than what their buying was the first quarter of this year, because volumes are down so much. So just saying that -- you know I can't really probability weight [ph] it, but volumes are down a lot. So I could see them, if they did kind of gentle taper I think the market could perceive that as being very supportive of a lower mortgage rate. I think that’s not getting to exactly what you want, I just don’t have probabilities in my head. I just think that the fed has a lot of latitude in how they start to extricate themselves from this position of providing this extraordinary liquidity.

(Operator Instructions) At this time it appears we have no further questions. I would now like to turn the floor back over to Mr. Larry Penn for any additional or closing remarks.

Okay. Thanks everyone for participating on the call today. Enjoy the holidays and we look forward to speaking with you on next quarter.

Ladies and gentlemen, this concludes Ellington Residential Mortgage REIT's third quarter 2013 financial results conference call. Please disconnect your lines at this time and have a wonderful day.