Welcome to the AG Mortgage Investment Trust Third Quarter 2015 Earnings Call. My name is Ethan and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I would now turn the call over to Karen Werbel, Head of Investor Relations. Karen, you may begin..

our business and investment strategy and market trends and risks, assumptions regarding interest rates and prepayments, changes in the yield curve and changes in government programs or regulations affecting our business. The Company’s actual results may differ materially from those projected due to the impact of many factors beyond its control.

All forward-looking statements included in this conference call and the slide presentation, are based on our beliefs and expectations as of today, November 10, 2015. Please note that information reported on today’s call speaks only as of today.

And therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading.

Additional information concerning the factors that could cause actual results to differ materially from those contained in the forward-looking statements are included in the Risk Factors section of the Company’s periodic reports filed with the Securities and Exchange Commission. Copies of the reports are available on the SEC’s website at www.sec.gov.

Finally, we disclaim any obligation to update our forward-looking statements, unless required by law..

Thank you, Karen. It’s David Roberts. Good morning, everyone. The third quarter was a tough one for both credit and for agency RMBS. Most credit spreads widen during the quarter including MBS and ABS. Additional swap spreads tightened materially during the quarter which lower the value of our interest rate hedges.

As a result of all these factors our book value decline during the quarter by about 4% to $18.47 per share at quarters end. During the quarter we continue to defense expenses in today’s lower yielding environment. We carried lower leverage therefore decreasing the size of our investment portfolio.

In addition to our lower leverage we also adjusted the risk profile of the portfolio by rotating at certain agency derivatives. In this quarter, we had a negative retro adjustment of $0.04 per share compared to a positive retro adjustment of $0.04 per share last quarter and $0.08 negative swing $0.08 per share negative swing.

As well in this quarter we had no drop income from TBAs compared to TBA drop income of $0.03 per share last quarter. All the above factors led to a decline in core earnings to $0.46 per share after the $0.04 per share retro adjustment and $0.50 per share before the retro adjustment.

Based on current conditions we would expect core earnings going forward to be more consistent with this quarter’s performance than previous quarters. We have said before that our dividend policy is to track to general direction of core earnings.

Accordingly, we now expect our fourth quarter dividend to decline from $0.60 per share and our dividend flat our view of the core earnings run rate at the time of the Boards divided decision.

Additionally, we created the share buyback option to give us the potential means to increase book value per share our decision whether to use the share buyback will take into account the impact of core earnings and the liquidity of our investment portfolio at the time.

We are also working hard to accelerate our transition from agency RMBS to credit and in particular to value add and organically originated assets. To that we are accessing a transaction that would provide a platform for us to buying originate and increased array of credit assets including mortgage servicing rights and home loans.

With that, I will turn it over to Jonathan Lieberman..

Good morning, thank you, David. During the third quarter we experienced macro volatility, elevated correlations across most markets, confusion over Fed monetary policy, gradual market structure. We also saw another chapter in the multi-year Greek and European debt tragedy.

Meanwhile, China saw to distance its monetary policy from potential Fed action and it tempted to decouple it’s currency to some degree from the strengthening U.S. dollar.

Further clouding the investment environment was the continued collapse of oil and commodity prices, which impacted equities, high yield and debt, capital flows, currencies and geopolitical relationships among other things. All of these headwinds weighed on bond prices and credit spreads for both non-risk and risk assets.

In August, capital market volatility deteriorated and liquidity evaporated in most markets including treasuries and agency CMBS. Despite worldwide markets experiencing their worst doubt of instability and losses since August of 2011, the U.S. consumer continued to judiciously spend. And while the U.S.

manufacturing and commodity related employment contracted, the service sector in the U.S. continues to add employees to the overall workforce at a reasonable pace. With respect to structured credit markets historically the summer months are slower periods of activity with more limited liquidity, staffing and risk taking.

Turmoil in the energy and EM sectors as well as U.S. and Asian equity markets further constrained activity and appears to have caused structured credit and agency spreads to reprice. As it’s typical in periods of high volatility, the mortgage bases often widens and causes agency CMBS to underperform.

Further compounding underperformance during September was a decoupling of swap spreads from benchmark U.S. Treasury securities. The decline in U.S. swap spreads is accelerated in the last two weeks. Agency CMBS performed better if coupled with treasury hedgings. With respect to non-agency RMBS and ABS spreads were wider across most sub-sectors.

The least impacted securities were senior high cash flow, non-agency CMBS. The most severely impacted sectors were long duration [indiscernible] RMBS and second peer ABS to more. During August and September primary issuance and secondary trading was anemic and bid offer gapped out.

Similarly, CMBS experienced a material spread widening due to a combination of very heavy new issuances perceived weak, secondary liquidity and credit quality concerns.

Actual cash trading activity for structured credit was quite subdued as sellers of securities remain proactive to transact and can see largely to technical factors impacting in the markets. Broker dealers remained on the sideline with little to no interest and positioning securities are making markets.

On the other hand while the market activity stood still fundamental mortgage credit continued its pattern of stable to modest improvement in borrower performance. Home prices also continued to modestly rise and inventory levels remain light in many major markets.

Consumer appetite for housing continues to remain firm with expanding mortgage credit availability taking hold in many markets. Away from securities as David mentioned MITT’s investment team has steadily increased resources dedicated to sourcing organic investment opportunities in the consumer, commercial and residential finance markets.

The management team is actively assessing and evaluating credit creation opportunities which may include platforms, which enabled MITT to invest in CRE lending, MSRs and new residential mortgage products.

MITT continues to benefit from Angelo, Gordon’s multidiscipline platform adding, sourcing and investment capacity and non-agency RMBS, ABS and CMBS. For example MITT was able to leverage the AG platform to participate alongside other AG bonds in two term securitizations of non-performing mortgage loans in July and October.

This securitization permitted the funding of non-performing loans with senior fixed rate debt which is non-mark-to-market. Now turning to earnings, MITT reported a negative $0.13 of net income and core earnings of $0.46. The decrease in net income from last quarter was primarily attributable to the agency CMBS segment of the investment portfolio.

Mortgage basis widening, delta hedging and swap hedging underperformance were responsible for the majority of this disappointing performance. Notwithstanding a difficult environment, the credit segment of the investment portfolio generally held up and performed in line with expectations.

Core earnings also declined due to decrease in overall leverage higher cost of funds for certain segments of the portfolio and the aggregated size of the overall investment portfolio.

Additionally, we had negative $0.04 retrospective adjustment this quarter due to quarter-over-quarter decreases in interest rates and no TBA drop income during the reported period. Book value declined to $18.47, which represents a decrease of $0.74 netting for the impact of our dividend paid to shareholders on October 30.

As I previously mentioned the largest component of our decrease in book value was the decline in market value of our interest rate swaps.

The aggregate portfolio size increased to approximately $3.1 billion as a result of the sale of agency securities that continued rotation into less levered credit assets and organic amortization of our agency assets. As of September 30, our hedge ratio stood at 73% of our financing secured by agency RMBS and 39% of our overall financing.

At end of October the hedge ratio was approximately 62% of our financing secured by agency RMBS with 31% of our overall financing.

Turning now to prepayment fees, the cost in prepayment rate for agency book was 10.5% for the third quarter, leverage declined modestly to 3.58 times, down from 3.64 times last quarter and quarter ending net interest margin increased modestly to 3.01%. Slide 7, sets out our 2015 outlook.

The relatively healthy domestic labor market, low energy costs and steadily improving home prices to continue to bolts through the consumers balance sheet and to keep the U.S. economy float, despite persistent weakness in manufacturing and renewed weakness in the oil industry and energy industry.

Fed Chairwoman Yellen’s message that the economy is making slow, but steady progress and if sustained, will be ready for gentle policy rate adjustment in the fourth quarter of 2015 or the first quarter of 2016 sets the tone.

Whether the Fed opts to lift rates in December or sometime in 2016, we ultimately expect Fed funds to remain below 2% over the next several years. As the front-end inches higher, we see few signs at the moment of runaway inflation and have positioned this portfolio and our hedges to maintain that biased or flatter in the coming years.

Moving on to our portfolio, Slide 8 shows details of some of our top level metrics for the quarter. The fair value of our agency and credit book was approximately $1.5 billion each.

Focusing first on our agency CMBS portfolio, capital allocated to agency CMBS declined as we reduced agency 20-year CMBS to derivative positions and allow organic amortization of our overall agency hold on pools.

This is consistent with our previously illustrated objective to reduce overall agency exposure and shift capital to more attractive credit positions. From a prepayment perspective, our pools continue to perform in line with our expectations with Q3 CPR of 10.5% and October CPR of approximately 12.2%.

The agency segment of our portfolio continues to impact mix returns due to the combination of higher funding costs, hedge underperformance and mortgage basis wide. Agency hold pools remain on material component of the overall portfolio that allows mid [indiscernible] 1940 at compliance requirements.

We believe that conditions in early 2016 after potential Fed action may provide a better investment environment for agency MBS. After the reduction in capital allocate to agency MBS credit investment now comprise the majority of our overall portfolio. Our aggregate credit book stood at approximately $1.5 billion fair value at quarter end.

Performance of our credit book continues to be in line with our investment underwrite. Valuations for credit RMBS and CMBS did weaken on limited trading volume and potentially effected by broader capital markets volatility during the third quarter.

However participants in the legacy RMBS market often refer to all market as resilient and despite the broader market sell off mortgage credit bar outperformed other domestic equity and corporate credit markets during the quarter. During the third quarter we purchased additional positions in non-agency MBS, GSC risk transfer security CMBS and ABS.

Specifically we in current face value of approximately $38 million of Prime securities, $17 million of Subprime securities $21 million of front pay short duration NPL securities. We have also invested in current face value of approximately $50 million of CMBS and $235 million of CMBS IO and $1 million of ABS.

Turning now to Slide 11, we provide an update on our financing, we currently have 38 finance counterparties, funding continues to be plentiful and stable for the company with the acceptance of our wholly-owned subsidiary into the FHLB of Cincinnati.

We have additional stable and flexible our financing from really reliable counterparty can began to follow up our agency CMBS during the quarter borrowing approximately $400 million during the month of October. Turning to Slide 12, we now show our duration GAAP inclusive of agency in credit securities we previously have not done so.

As the effective duration on our credit investments it becomes a more meaningful metric in light of our shift to higher dollar price credit investment. To GAAP inclusive of agency in credit decreased from $1.64 to $1.29 years mostly due to a decrease in interest rates and our portfolio rotation from June 30 to September 30.

Net interest margin during the quarter was approximately 2.65%. Our hedging and interest rate sensitivities are laid on the next slide. We continue to adjust our hedge positions in response to changes in our portfolio, U.S. economic conditions and potential normalization of U.S. monetary policy.

Our hedge book continues to have a bias towards a flattener and we believe will perform better as the Fed begins to tighten and as we get into the first quarter of next year.

I would like to wrap up by saying that this was a challenging quarter for fixed income investor’s very difficult investment environment we believe that the portfolio will ultimately produce favorable returns once the markets transition and reprice trustful changes and global economic conditions.

With that, I will turn the call over to Brian to review our financial results..

Thanks, Jonathan. In the third quarter, we reported core earnings of $13 million or $0.46 per fully diluted share versus $18.6 million or $0.65 per share in the prior quarter. At September 30, we had a negative $0.04 retrospective adjustment to our premium amortization on our agency portfolio. Stripping this out, core would have been $0.50.

Overall, for the quarter, we reported a net loss available to common stockholders of $3.7 million or $0.13 per fully diluted share. The $0.46 of core earnings was offset by net and unrealized losses $0.60 per share.

The $0.60 per share loss was primarily due to $0.50 of net realized and unrealized losses on our agency, secured and derivative portfolio and $0.10 of net realized and unrealized losses on the credit portfolio. At September 30, our book value was $18.47, a decrease of $0.74 or 3.9% from last quarter.

This decrease is mostly attributable to the losses I previously mentioned as well as the core earnings in below our dividend. To give you a better sense of our current $3.1 billion, I would like to highlight a few more statistics. As described on Page 4 and 5 of our presentation, the portfolio at September 30, 2015 had a net interest margin of 3.01%.

This was composed of an asset yield of 4.67% offset by financing and hedging cost of 1.18% and 0.51% respectively for the total cost of funds of 1.69%. Our net interest margin increased mostly as a result of the addition of treasury long positions and the removal of some treasury short positions, which decreased our cost of hedging.

We do not have any forward starting swaps and therefore our swap costs reflect the true cost of our swaps. On the funding side, we continue to be active. We are pleased to announce that as of the end of October MITT has borrowed approximately $400 million of financing from the FHLB of Cincinnati.

Although overall financing costs did increase during the quarter, we are pleased that MIIT benefited from lower agency financing rates with FHLB. Additionally during the quarter we did recognize a one-time $0.03 write-off of deferred financing fees on our commercial real estate loan facility.

Our liquidity currently remains strong and at quarter end, we had total liquidity of $173 million composed of $40 million of cash, and $102 million of un-levered agency hopeful securities and $23 million of un-levered agency IO securities. That concludes our prepared remarks and we would now like to open the call for questions.

Operator?.

We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Trevor Cranston from JMP Securities. Trevor, go ahead..

Thanks, good morning. I guess on the platform you guys mentioned that you are looking at potentially bringing on. Can you maybe expand a little bit on the specific strategies you’d be interested in pursuing there, that would be maybe prime jumbo loan securitization or something more like [non-covenants] with balance sheet? Thanks..

I think initially we would envision it being qualified mortgages, then over time it would gravitate potentially to jumbo mortgage services like and at the appropriate time if we think there is an opportunity [indiscernible] or consumer the platform would have those capabilities..

Okay.

So would it be something where we could expect some agency originations and the mix where you would be retaining the MSRs and there would be some gain on sale income or would it be more purely kind of jumbo side for the balance sheet?.

It could potentially be MSR off of the agency, the characterization of how income would roll through our balance sheet. I think that we would have to kind of reserve comment until the time when we’re active in this space..

Got it. And then I appreciate the comments on your core earnings and the dividend at the beginning of the call.

Can you maybe give us an idea of kind of throughout the quarter when the portfolio changes you made took place just help give us some idea of kind of where the run rate core earnings might be going forward versus where in 3Q came in? Thanks..

Well, organic pay downs have been occurring on a monthly basis throughout the quarter, we have been not been reinvesting in the agency book. And then I believe it was towards the later part of the quarter that we exited out 20-year, we also where I think exiting over a course of several months out of some of the inverse IO decisions..

Okay, thank you..

[Operator Instructions] And our next question comes from Eric Hagen from KBW. Eric, please go ahead..

Hey, good morning guys. We’ve heard from some of the other companies in the sector that taking I guess little more cautious approach deploying capitals in a more deliberate way and spreads have widened.

Are you guys - would you say you are equally kind of cautious or you more would you characterize your outlook a little more aggressive right now?.

I would say that we are consistent with some of the other REITs that you mentioned on the more conservative side, we certainly - we are making opportunistic investments in the credit side where we see some opportunity, but with respect to the agency market consistent with our - probably really trying to reduce overall exposure it would really require something extraordinary for us to add additional exposure there..

Yes, maybe drilling down into that characterization of the extraordinary, where would spreads have to be I guess you guys I’m really excited about the environment, because I agree that it’s very cautious and the clarity is lacking internally?.

Eric, I think we would have to be able to really lock down funding cost and really lock down hedging which is been - it’s been a very, very challenging in the last two weeks with the continued decoupling of the swap curve.

I think we’ve seen some opportunities on the risk transfer trade, CRT, we thought they were attractive and we have seen a few opportunities and some short duration non-agency and there we will put capital out that’s somewhere between 50 and 100 basis points will either of where the market was maybe pre-August..

That’s helpful. And then on the credit risk transfer space, what you think about the non-stock and cash deal and some of the other risk transfer strategies….

So I think you are probably referring life I think it’s Madison Avenue..

Yes..

I think that remained shut so we have participated in some limited form, generally we have been a very small participant in the overall CRT space which is and we’ve been opportunistic buying it and then exiting it at times.

So we’ve been quite pleased with how we approached it and if there is opportunities there those securities come at attractive levels, we generally may consider adding..

Got it. Thanks guys. Appreciate it..

And it appears we have no further questions at this time..

Okay, thank you. And we look forward to speaking with you on next quarter..

Thank you..

Thank you. Ladies and gentlemen, this concludes today’s conference. Thank you for participating. You may now disconnect..