Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Ellington Financial Third Quarter 2013 Financial 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 opened for your questions following the presentation. (Operator Instructions). It is now my pleasure to turn the floor over to, Sylvia Hechema, Investor Relations. You may begin.

Before we start I’d 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 or by reference to strategies plans, or intentions. Forward-looking statements are subject to risks and uncertainties including among other things those described under item 1 A of the company’s annual report on Form 10-K filed on March 15, 2013. That could cause the company’s actual results to differ from its believes, expectations, estimates and projections. Other risks, uncertainties and factors that could cause actual results to differ materially from those projected maybe described from time-to-time in reports we filed with the SEC. Consequently you should rely on these forward looking statements as predictions of future events. Statements made during this conference call are made as of the date of this call and the company undertakes no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Okay. I have on the call with me today on the call, Larry Penn, Chief Executive Officer of Ellington Financial; Mark Tecotzky, our Co-Chief Investment Officer; and Lisa Mumford our Chief Financial Officer. With that I will turn it over to Larry.

Thanks Silvia. Once again it is our pleasure to speak with our shareholders this morning as we release our third quarter results. As always we appreciate you are taking the time to participate on the call today. We will follow the same format as we have on previous calls. First, Lisa will run through our financial results. Then Mark will discuss how the MBS market performed over the course of the quarter, how we positioned our portfolio, and what our market outlook is. I will follow with some closing remarks before openings the floor to questions. As a remainder we have posted a third quarter earnings conference call presentation to our website www.ellingtonfinancial.com. You’ll find it right on our Shareholders page or alternatively on the Presentations page of the website. Lisa and Mark’s prepared will track the presentation. So if you have this presentation in front of you please turn to page three to follow on. I’m going to turn it over to Lisa now.

Thank you, Larry. And good morning everyone. On page three of the presentation you can see that for the quarter ended September 30, 2013 we earned $11.7 million or $0.45 per share. On a sequential quarter-over-quarter basis income was essentially flat although in the current quarter we had approximately 2.4 million more shares outstanding as a result of our second quarter follow on equity offering. Those shares were outstanding for the entirety of the third quarter. Our nine months return on equity was 11.1%. Within our non-agency strategy we had growth income of $15.1 million or $0.58 per share compared to $17.7 million in the second quarter or $0.74 per share. In the third quarter we had net interest income of $13.2 million compared to $11.1 million in the second quarter. Net interest income is interest income less interest expense. While our book yields increase slightly quarter-over-quarter to 8.67% from 8.61% the more material driver here was the increase in the size of our portfolio. Our average holdings based on amortized cost was $750 million in the third quarter while for the second quarter our average holdings were $590 million. You may recall that we deployed the vast majority of the net proceeds from our second quarter equity offerings in our non-agency strategy. The other key driver of our third quarter non-agency results was net realized gains which when combined with net unrealized losses with a net gain of $6.7 million. During the quarter, excluding principal pay downs we turned over about 20% of this portfolio which generated net realized gains. Mark will talk more about the sectors we traded into and out of but as a result of the portfolio is turnover we lowered the overall cost of our portfolio by about 3.2 points, thereby creating additional upside potential.…

Thanks Lisa. There was extreme volatility in the quarter in multiple dimensions. First extreme interest rate volatility; 10 year and 5 year swap rates paid in the 50 basis points yield range, 30 year Fannie 3.5 traded in the 4 point price range. There was also a lot of volatility in credit spreads; the high yield index traded in the 4 point range. The high yield index volatility has nothing to do with interest rate those just skip to Fannie’s risk-on, risk-off moves. There was not a big different in starting and ending point through a lot of indices in benchmark, but they were extremes ups and downs within the quarter. These extreme valuation swings created a lot of opportunities for us. So look at the non-agency portfolio on page 10, it stays the same size while looks like we didn’t do much but we actually did a lot. We very actively rotated the portfolio. We turned over 22% of the portfolio and dropped their weighted average dollar price by three points and increased our loss adjusted deals. The portfolio construction that allows us to be still active and so opportunistic this quarter was our low leverage, a little over 2.1. Leverage levels is one of the biggest differences in EFC and many mortgage rates. Everyone knows that leverage amplifies returns, both gains and losses, leverage does something else. High levels of leverage generally force the manager to be procyclical as opposed to counter cyclical. What does that meant for mortgage managers the last couple of quarters? Many companies had book value declines when interest rates shut up with credit spreads volume. Faced with declining equity, they sold assets to prevent their debt to equity ratios from going too high. This is a procyclical dynamic, selling after prices have already…

Thanks Mark. Similar to the second quarter the third quarter was filled with extreme interest rate volatility, but once again Ellington Financial was able to capture upside, control downside and distinguish itself from many of its peers. As you can see on our earnings attribution table on page three of the presentation we were again profitable in both our non-agency and our agency strategies. Now things got off to me a stormy start -- 24 basis points in just one day on July 5th, however we were able to play-off them throughout the entire quarter. In fact we slightly increased our leverage this quarter as excellent asset acquisition opportunities presented themselves each time and new shock hit the mortgage market compared to an increase in our leverage over the quarter to our peer who almost all reduced their leverage during the quarter. How was Ellington Financial able to do this? By controlling its interest rate duration through disciplined hedging, by keeping leverage lower in the first place. We want to be able to buy when others are feeling pressure of sales and it’s exactly what we were able to do this quarter. I am sure by keeping our leverage lower, our core run rate is slightly lower than it could be, but the flexibility and security that lower leverage and higher liquidity provides is well working to us. We want to be able to withstand greater financial shocks and accounts when opportunities arise to just what our European bank options off a large portfolio. We can trade the portfolio more actively which we love to do and it was been a consistent and significant component of our earnings. In fact if you are in account to believe that the financial system will probably bounce around at a range for a…

(Operator Instructions) Our first question comes from the line of Steve DeLaney of JMP Securities.

Good morning everyone and thanks for the detail presentation in the slide deck. I just what I like to start is it is notable that the swing in relative contribution between the second and third quarter by surprise just given some of the challenges in the agency space that some of the traditional mortgage lease encountered. Your agency revenue contribution appears to gone up by 3.7 and the non-agency down by 2.6 million. And I just wanted to, if that is reflective of maybe an ongoing repositioning or was that just reflecting opportunities that presented themselves where you took advantage of the volatility through active trading?

Steve, it’s Mark. I think it was more the latter. There was -- in over time you forget how all things were, but there were some really crazy days in the second quarter, there was that July 5 and same report, we had a market really moved, and there was a lot of selling out of traditional fixed income money managers. There was obviously selling from REITs. So if you’re fortunate enough to be in a position to add assets at times it’s been volatility in the quarter, there were some great opportunities. So I think it was just it. We came into the quarter with a lot of our interest exposure on the agency side tends with past dues. So when there was mortgage end performance relative t swaps, we were comfortable taking more mortgage basis exposure versus swaps at that time and that helped the result. So good opportunity in the pool market. Larry mentioned there were some sellers of ARMs that we haven't seen for a while. So we able to participate in that. So I think which is a combination of those factors.

That's helpful. And I can sort of picture in my mind how all of those things played out, with the volatility on July 5th and then again on September 5th. Let me ask a big picture question and then I will drop off to get back in the queue. We have watched, over last two weeks we have seen these earnings reports from residential mortgage REITs primarily. Universally people have either delevered or tightened in their duration, added more swaps and longer swaps. And here is my general question. It's almost like somebody flipped a light switch, and everybody got a memo. I know the 100 basis point rise in rates that we got in May/June can cause people to look in the mirror, and think about where their risk really is. But my question is could it be that over the last several months repo dealers on the agency side, usually just thinking about obvious things like leverage, liquidity, that type of thing. But do you get the sense that there is more company-specific evaluation on the credit side of net duration positions, and more of a stress test type of a mentality by the repo dealers, and could that possibly be driven by the fact the dealers themselves are getting more scrutiny from the New York Fed? I know that is a long-winded question and I apologize, but I think you can understand where I am going.

I mean that's an interesting theory. We haven't heard that.

It is a conspiracy therapy I agreed.

I think that, well first of all, I’d like to say that I think in terms of extending out on the curve on our hedges right I think the market is probably catching up to sort of our way of looking at the world and hedging. We've always done that. I think that part of it just when rates were lower right, there was a much more uncertainty, if you look at scenarios in terms of where what the ultimate average life of these agency MBS were going to be. And I think people were hedging to maybe an expected case which is pretty short like three years or so. And now that rates are higher when you look at the different scenarios and their probabilities I think people realized now that most of them involved these assets been quite a long. So I think that what people are the way the people hedge where they’re focusing more on the most likely scenarios are causing them to hedge out either on a curve before frankly I think they just had a lot more negative convexity than they have now. And of course rates have come down now. So we might be getting again back to regime where there is a lot of more negative convexity, our rates were up 3%, a lot of these portfolios have lost lot of the negative convexity and so in a way it’s simple to hedge, but also in a way if you hedge in that manner you’re sucking more the juice at your spread than when you were when rates are lower and you were willing to knowingly or not accept that negative convexity. I don’t if that makes sense, but that’s my take on it.

No, it does. And I think look everybody buys a bond and they think they know the duration of the bond and maybe. We certainly are seeing the reality that people are finding it necessary to be longer hedge now than they were. So I think, it’s just a compliment to the way you guys have set your hedge book up.

And just about to add one more thing the fact that we have used this opportunity over the last couple of quarters to buy higher coupon specified pools with call protection, right. So that's again not maybe a sector that so much in favor and that's been beaten down and we think that we’re getting corporates action very cheaply. Again call protection is not something that in your face right now. So I think it’s undervalued. And I think that should rates move lower, the extra yield that that gives us and ability when we’re short TBAs to see our TBAs as shorts as rate rally, go down in price. I wish go up in price slower and on a hedge basis enable us to make money while our specified pools, those pass are increasing right, as rates go down and the corporate things becomes more meaningful, so that’s the kind of thing that we’re looking for. Granted right now in this straight environment, it’s not buying us much necessarily in terms of as much as it will if rates go down, so that's why we’re positioned ourselves that way.

Well, thank you for the comments.

Our next question comes from line of Jim Fowler of Harvest Capital.

Good morning and thank you for taking the question. Maybe a bit of a bigger picture question as well. Back when QE3 started and the fed was purchasing $40 billion of MBS. Given the mortgage issuance at that point in time, it was 45% to 55% of total issuance. Now given where refinancing activity has gone to slowed remarkably and purchases picking up sluggishly, the continued QE is a much higher percentage some have suggested 100% of issuance if not little bit less, little bit more. But my question is, what do you think the impact to prices will be when that buyer decides to quick buying as much or in total given the change in the percentage of buying that they have been doing of the issuance and how does, one, what do you think the impact will be and secondly how are you prepared for that and how do you think what opportunities might present themselves when it in fact occurs?

Jim, it’s Mark. It’s a great question and it’s obviously something we think about a lot. If you think about what’s happened in the second quarter and the first half of September of this quarter that was a pricing structure of the market where I think there was underlying assumption that the fed was going to stop tapering in September. So in response to that, you saw very large outflows from fixed income mutual funds, you saw a large reduction in the number of shares outstanding for a lot of the bond EPS, there was obviously pressure on REIT valuation, you saw a big increase in discounted book of closed end municipal bonds funds. (inaudible) symptomatic of lot of investors thinking that 15 consecutives even have a hard time and I think that you push REIT just to the point, you kind of have the (inaudible) that one day early September. When you push portfolios to the point where you saw a lot of deleveraging already occurred. So if look at 8 weeks is tremendous deleveraging second and third quarter, say got closed mutual funds, those are obviously one day liquidity. So I think a lot of the deleveraging that will be to take place for the market to reprice itself to and pricing structure not for the fed activity has really occurred and you have seen the money managers continually selling ABC Holdings in effect the fed is buying right. You mentioned with refi activity lower the fed buying activity is close to 100% for lot of these coupons of what being introduced. So I think when the fed steps away you will see some weakening of roles which should be beneficial to stretch by pool valuation. So I mentioned specialized pool valuations have been very depressed. They were a big source of book value declines for people in first quarter results and second quarter. So I think that the fed stepping away will be supportive of just like pool valuations, but it is not cleared to me that you are going to see the scale of widening that we witnessed in the second and early third quarter occurred because I think that the most levered portfolios already delevered and I don't see them releveraging aggressively just based on the fed not tapering in September right. Because I think it's very much on people radar that it’s more a question of when as opposed to if the fed activity.

Okay, great. Thanks Mark. Appreciate it.

(Operator Instructions). Your next question comes from the line of Douglas Harter of Credit Suisse.

Thanks. I was wondering if you guys, how you would think about sizing some of these the less liquid investments, whether it is NPLs or if you buy an originator as you get into loans, how you are thinking about that?

Yeah. I mean, I think as you can see, we like to in some of the less liquid areas, we do like to spread it around not get too concentrated. We're not there yet, this package that I spoke about in NPLs, it has the advantage first of all, even though it's less liquid, it's the duration of the cash flow is still probably under two years. So that has to be factored in as well. We don't mind having, I would say a more [bar-belled] portfolio, where we have got some core liquid positions that can provide us a lot of yield on return on equity basis and have a lot of cash and have a lot of liquid position. I mean that's really frankly where we like to be rather than having a portfolio that’s more uniformly just stay in the middle liquidity range. So yes, so I don’t want to try to put any targets or limits on it, but I would say that we want to continue to be able to be nimble and as result as that if those illiquid products get bigger, so for example NPLs would be in that category. And as you mentioned if and this is really down the road right, when you talk about originated creating a pipeline of investments for us, I mean that’s really looking down the road. But if you look there, then yeah if we're retaining the junior most pieces of those securitizations, then absolutely that would be less liquid and we would have to consider having adequate liquidity away from there to be able to again to trade around that. So I know that’s not that specific, but sort of that’s our philosophy is to have this bar-belled approach.

That’s helpful. Thank you very much.

There are no further questions at this time. I would now like to turn the floor back over to Larry Penn for closing remarks.

Thank you, Operator. Well, look just thanks everybody for participating on the call today. Happy holidays. And we look forward to speaking with you all next quarter.

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