Welcome to the AG Mortgage Investment Trust third quarter 2012 earnings conference call. My name is Christine and I’ll be your operator for today’s conference. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session. Please note today’s conference is being record. I will now turn the call over to Lisa Yahr, Head Of Investor Relations. You may began.

Thanks, Christine and good morning everyone. Welcome to the AG Mortgage Investment Trust third quarter 2012 earnings conference call. Joining me on today’s call are David Roberts, our Chief Executive Officer; Jonathan Lieberman, our Chief Investment Officer; and Frank Stadelmaier, our Chief Financial Officer. Before we begin, I’d like to review our Safe Harbor statement. Today’s conference call and corresponding slide presentation continued forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such statements are intended to be subject to the protection provided by their format. 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 8, 2012. Additional information concerning the factors that could cause actual results to differ materially from those contained in a forward-looking statements are included in the risks factors section of the Company’s periodic reports filed with the Securities and Exchange Commission. Copies of the report 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. With that I’ll the turn the call over to David Roberts.

Thanks, Lisa and good morning to everybody. We had a very productive quarter, so we’re very pleased to talk about it. We had extremely strong core earnings of $3 per share. We had three capital raises that were done very efficiently and were beneficial to our shareholders and our book value increased and we’re very pleased with the way the portfolio was positioned at the end of the quarter. I want to make two comments on the importance of flexibility and how we view that. We continue to be very proactive in using the breadth of Angelo, Gordon platforms and Angelo, Gordon’s resources to construct the best risk reward portfolio from our point of view. Today our portfolio includes both agency book as well as a credit book. In the future, it may include new originations of residential mortgages and it may include new originations of commercial mortgages as we continued to use the platform and our experience in the real estate area. So that’s point number one about flexibility. Point number two is related to core earnings and our dividend policy. In the past, we’ve talked about how our dividend policy follows directionally our core earnings performance. It is also important for you to know that we manage our portfolio, we manage AG Mortgage Investment Trust portfolio to achieve what we believe is the best risk adjusted return. We do not have specific targets for core earnings. In fact, core earnings really are results of what the portfolio produces and the portfolio will change as conditions in the market change and our outlook changes over time. So we’re continued to be flexible not only in using all of Angelo, Gordon’s, and the investment teams resources to construct the portfolio, but we want to be flexible as well not to be locked in to producing a certain yield regardless of market conditions. So with that, I will turn it over to Jonathan Lieberman, Chief Investment Officer to talk about the portfolio and what happened during the quarter.

Good morning, and thank you David, first I just wanted to express Angelo, Gordon and AG MITT’s sympathies for the difficulties of our citizens and our fellow Tri-state residents where hurricane Sandy’s damage in yesterday’s [Northeast]. We know the challenges faced by our fellow Tri-state citizens and we’ll actively support the recovery of our community. With respect to the third quarter performance, we are very very pleased with our performance and how the portfolio has setup going into the third and the fourth quarter, which we’re now halfway through. The second point I want to make is I’m extremely satisfied that we now have meaningful portfolio allocation tension. Our pipeline of credit investment opportunities now requires the sale of existing positions to generate investable capital. Third point is portfolio construction has resulted in strong investment performance during the second half of this year and we’re well positioned for 2013. I’m now going to turn to a presentation that’s been posted on our website, it’s always the same format as prior quarters. Page 5, as we’ve discussed on our prior quarter calls our fundamental economic outlook is the genesis for our thought process on portfolio construction, asset allocation and hedging. Page 5 outlines our current outlook, which has not changed meaningfully from last quarter. The global macro environment continues to be challenging. US economy continues to remain muted by most measurable statistics. GDP growth was revised lower for the second quarter, labor market conditions, although improving, still remain challenging with above average elevated unemployment and on payrolls barely able to keep pace with natural population growth. So the election is behind us the looming fiscal cliff will render virtually impossible any chances or near term meaningful job creation in the economic recovery in our view given that it will undoubtedly be…

Thanks, Jonathan, good morning. This quarter was a busy one for us in three separate capital market transactions we raised $328 million and used the proceeds to grow assets from $2.7 billion to $4.9 billion. As a result, there’s a lot going on in the quarterly numbers, I’ll give you some of the highlights here. For the quarter we’ve reported net income of $61.2 million or $3.10 for fully diluted share. We reported core earnings of $20 million or $1.03 for fully diluted share. Versus $13.5 million or $0.86 per share in the prior quarter. The increase in core earnings was driven primarily by three factors, each of which I’ll further detail in a moment. First the net interest margin earned on a portfolio increased period over period, second was the accretive nature of our preferred offerings, and third was the positive retrospective adjustment we recorded. These increases were offset by the timing of deployment of proceeds raised in our capital offerings which resulted in us being marginally under-deployed relative to prior quarter. The weighted average net interest margin earned during the quarter was 2.5% versus 2.6% in the prior quarter. This increase was attributable to the growth in the credit portion of our portfolio, from 16.4% of gross assets to 19.7% of assets. This is offset by decrease in NIM of our agency portfolio which was driven primarily by the deployment of equity proceeds into agency assets with lower yields [that have been] previously available. Next, I’ll discuss the effects of our preferred offerings. In august we completed an offering of 8.25% series A preferred to the stock which resulted in net proceeds to us of $49.9 million. In late September we completed an offering of 8% series B preferred stock, which resulted in net proceeds of $111 million.…

Thank you. (Operator Instruction) The first question comes from Stephen Laws from Deutsche Bank, please go ahead

Hi, good morning. Congratulations on a great quarter, the numbers were great and there is a credit sensitive asset mix was definitely larger than expected so nice job ramping outside out of portfolio. I guess first off as I think about the options you have outside agency, MBS, as you deploy capital or else you worked at reallocating capital. You know, can you talk about yields and your targets buckets in the portfolio today, especially what you’re seeing on new investments in the senior non agencies, you guys I think did target the senior securities there, and as opposed to see peers maybe a little bit more junior and that allows you to have slightly higher leverage, but I’m curious what yields are on new investments there?

You know I would first of all break it into what I would call commodity, credit assets and little bit less commodity oriented credit assets where our insight into the underlying loans or ability to source really differentiates our ability to find assets. So you a prime jumbo RMBS, you’re looking at somewhere between you know 4% to 5% or 5.25%. Risk adjusted for probably a 4 year to 6 year duration security, but we’ve been able to source selectively assets that can have 50 to an additional 100-150 basis points more yield in that type of prime asset. It’s a similar story as you move around in the credit spectrum you move out a prime you’re basically, when you go to Alt-a, you can add the 50-75 basis point out to the generic commoditized product where literally, we could go in and we could add $100 million to $200 million of those assets in an afternoon, but if you’re much more selective and you’re able to into just source some more unique assets you can certainly pickup anywhere from 50 basis points to 200 basis points of incremental yield.

Okay great and then expanding on that with these non [ACF] that in the prepared remarks you guys mentioned, I believe some residential whole loans, and you said some other classes then a little later in the prepared remarks talked about terms financing markets and trying to not have a 100% reliance from short term recourse financing, are those two things related with any specific asset classes, we’re only willing to invest in a bunch of whole loans that you think you can turn around and securitize those, can you maybe talk about how you look at increasing option from asset side in comparison to when you might be able to diversify the financing?

Right I mean we have as on September we had $963 million of assets, equity invested, amortized cost, fair market value of assets allocated on credit side. We had one year facility in place with one counter party at $75 million, we are actively working on several facilities that range from 180 days out to 3 years that will allow us to diversify our financing and move away from short term financing or the credit book, we think that’s important as credit book grows in size and as the agencies portfolio potentially shrinks in size given the liquidity constraints of each market, although right now the credit markets are exceptionally liquid we still have to prepare for the point and time when those markets are more challenging, On, in terms of whole loans we can procure reasonable facilities for whole loans of anywhere from 6 months to a year. We would be comfortable holding those securities in our facility of 6 months to year at attractive financing levels and we can certainly securitize those assets readily and turn them into [qceps] bonds which could be financed on an easier basis than the whole loans long term. Part of the strategy if we were to execute on raw collateral would be longer duration financing arrangements that would go hand in hand with the execution of the procurement of those assets.

Right thanks for the color, so very nice to have those options for future investments. But I guess, one final question and I’ll drop off and get back in the queue if I have another one, I know it’s touchy to talk about your dividend but it’s always little tricky forecasting dividends for companies with large cushions of undistributed taxable income. Can you guys maybe talk a little bit, and I know you can’t really talk and quantify the dividends going forward, maybe what goes into your – the board’s consideration and thought process, as they do establish that dividend with respect to where we see core earnings and what the cushion and how we should think about that going forward?

Hi, this is David Roberts. We really look at where core earnings are shaping up in the quarter that we’re declaring the dividend, what’s happening in the marketplace, what’s happening with the portfolio and you know the timing of it is typically when close to two thirds of that quarter are done. So we’re still a number of weeks away from making the determination for the fourth quarter. And in terms of the cushion, we know we look at what our opportunities are in the marketplace and you know what makes sense over the long term for shareholders. So I know that’s not a specific an answer as you’d like but that’s basically our process and we try to be to use a word, I started off with, we tried to be flexible and look at everything and take everything into account at the point in time we have to make that decision.

Okay great, well that’s still helpful so we would continue use quarter names as guidance as a rough guide there. Great thank you guys, very much for the time for questions.

The next question comes from Steve Delaney, from JMP Securities. Please go ahead.

Thank you, good morning everyone and I echo Stephen Laws’ comments, great quarter. Wanted to talk a little bit about the credit side of the book. You’re one of the few hybrid REITs that has the ability to go both on residential side and the commercial and it appears you’ve obviously been - thus far you’ve found more value in legacy RMBS than in CMBS. I was just wondering Jonathan if you could comment on how you see those two markets currently and if in fact you are even looking at say some of the, the mezz tranches on the new issue CMBS since there is actually new supply in that market as opposed to the on the RMBS market. Thank you.

Sure, Good morning, thank you for the question. We do look at new issue CMBS, we have found some assets there to be very attractive, the challenge had predominantly been on the financing side for CMBS that we may like mezzanine piece but putting in place the appropriate financing arrangements to allow us to achieve an ROE commensurate with the other asset classes, as the times held those back. And then we also have seen sometimes a little bit of overreaching on some of the new issue deals where we’ve disagreed with potentially rating agency levels or the credit determination of the counter parties. The final point I would make is, there is historically more volatility on the CMBS side. So we are typically a little bit more cautious to make sure that we have the correct credit the correct liquidity situation and the correct financing in place, but we do like what we see out there today.

I appreciate that and of course I guess some of those, when you’re looking at the new CMBS, you’re looking at 10 year paper which makes you have to be a little more cautious on your hedging as well, which effects your cost the funds.

Absolutely.

Jonathan, just one other thing, I think David Roberts mentioned this at the outset on home loans and I guess it’s ties also into the commercial market. Where are home loans I think are little more I guess, I’d say the markets a little more liquid or little more certainty the securitization market is a little more viable there? But we’re seeing a lot of it the commercial REITs continuing to be able to post maybe 10% to 11% coupons on mezz loans and I was wondering to like Angelo’s network of relationships, with banks, insurance companies et cetera, is that hyper paper represent an option and of course we recently just show will let’s see this way, we don’t have close transaction but there is rumors that Redwood will be able to get a CLO on not their home loan book but their mezz book, so I was just wondering if CRE mezz might be part of the type of products that David Roberts was alluding too,

It’s, David.

Hello David.

Hi, yeah, certainly, it certainly an option, we have a very large network on the real estate side of 45 operating partners, we have a very big net lease area as well, and then of course we are one of the largest players in the CMBS market, as you know. So that can produce a pretty robust deal flow for us, where we can pick and choose and see where we might be able to get an asset for the REIT that we think has really exceptional risk reward. So something that we’re certainly open to and I think it’s a good option and has a place in the portfolio.

Well, thank you guys for the comments.

The next question comes from Boris Pialloux from National Securities. Please go ahead.

Hi, thanks for taking my question and great quarter, I have like two questions. One is regarding the leverage, is the leverage back to six time, is that going to be more stand out where you would actually decrease your leverage because you’re investing more in credit assets. And second is some of your peers are looking at outside – looking out side there was a mortgage backed securities, looking out MSRs and GSC credit investment, so just want to have your thought on this type of market?

Sure, in terms of the leverage, leverage for the third quarter at 6.06 was representative of where we anticipate leverage being given the current mix at quarter end, we are not able to nor do we seek to lever the credit piece of our portfolio as highly as our agency book. We are seek to maintain a certain amount of surplus liquidity to meet any sort of prepayment activity or change in price. As the credit piece increases or continues to increase we would anticipate that leverage would gradually also decline. As I mentioned right now we are predominately fully deployed in all asset classes, and so that the really is very, very strong attention in the portfolio that if we want to make additional credit investments, we need to shade lower yielding assets in the book whether their agency or credit and then adjust our leverage accordingly. The second part of your question, we are and have looked at any sort of truncation from the GSC to straight credit risk and when those transactions [REIT] and we will evaluate them and make a determination of their appropriate for the portfolio. With respect to MSRs we have looked at MSRs extensively we are very gratified that we did not make investments in MSRs six months ago because we would be looking at very sizable losses, unless we had the capability of refinancing our own borrowers. So in an environment we are basically we anticipate elevated prepayment speeds, unless you have the ability to REIT capture those borrowers, you have material risk of financial impairment.

Okay, thank you.

(Operator Instructions) The next question comes from Mike Widner from Stifel Nicolaus. Please go ahead.

Good morning guys. Let me ask you a little bit more about sort of durations and your hedging and in particular as you said the model exchange the durations were down and were change the CPRs and so your duration gap effective extended in the quarter, leaving you with about 1.8 year gap, does that change your view of the hedging and is there because of that longer duration kind of do you think about adding swaps or in general how do you think about that in the exposure that that you would add.

It’s Frank, I think the models are reasonable approximation of what it, but it’s just a model and it’s going to be subject to change going in the forward certainly that durations stretching out, we’ll make us think about that but I think we’re comfortable with the hedging levels that we have given the interest rate environment given the asset that we have, given the leverage that we’re running.

This is Jonathan, I think we did increase the percentage of swaps relative to our agency book quarter-over-quarter, I think it’s also interesting if you spread other REITs their portfolios and look at their asset mixes relative to their swap ratios and try to look at their duration gaps, we’re comfortable with our coverage of the portfolio we’re especially comfortable we’re also in the midst of rotating assets from the portfolio into less duration sensitive assets and I think there is certain factors that are incorporated in to this reasonable models and then there are certain factors that models unfortunately our retrospective in their evaluation and we do have pretty good insight into government policy, I think we have pretty good insight into our view of QE3 and if we had much more material hedges on we might be having a different conversation with you.

So let me go back to one of the first things, you just said, there is what you guys expect durations to realistically be and then there is what gets spit out of various models on the street. And frankly I think sometimes what gets spit out of any model can be a little silly and disconnected from reality, because that’s the nature of models particularly when you start getting into securities whether it literally has been zero, historical experience with the performance and we really have literally zero historical experience with the yield curve being where it is and all the other things that are going on in the world today. So I do appreciate the fact that the models are a guideline. But that being said, from a chronological duration standpoint to put aside the changing price over changing market yield thing, the caller duration, actual chronological duration, CPR duration everyone will look at it. Most of the assets actually seem to be longer duration. I would suspect them to be longer duration than what your models are actually spitting out today and I think that is evidenced by the CPRs that you are getting of the so called prepay protected securities remain prepay protected and in fact durations, asset durations are probably actually longer for some of these guys, for some others it’s the opposite, but longer than what’s. So just kind of wrestling with that particularly as you think about hedging. As you said things would have turned out different had you hedged differently going into the quarter, but now that the yield curve is actually flattened, we’re heading into the spring and this year maybe different but pretty much every year for the past four years we saw a sharp rise in the yield curve as the world decides today. This spring is going to be the one where things really take off, the world is going to get better and suddenly the 10-year treasury rates go from [1.8%] to 2.25%, and that can be a very different situation. So, I don’t know I mean putting all that together I mean how do you guys philosophically think about how to hedge this particularly after you get some nice book value gains how do you think about whether to lock that in or whether to just say hey we are going to go with our guidance and do what we think is most likely to evolve?

Mike I would just say personal, I am not sure you are locking in book value as much as you are locking in NIM. You maybe locking in potentially future losses on your book value if you are wrong on prepay speeds. So philosophically I think it’s a much more nuance conversation. We have sold in the last week some assets in the agency side because prepay speeds are either increasing or anticipated to increase. That locks in the game permanently and allows us to rotate that capital. We have not elected to remove any of our swaps when we have executed on those types of transactions. The portfolio is a young portfolio, its CPR will increase over time. You has a 12 basis point movement yesterday in 10-year swaps, 10 maybe it was, was it 10 or 12, somewhere in that general vicinity and there is a high probability that it will continue to decline may be over the next couple weeks. We have 30-year auction this afternoon. We have a fiscal cliff. We have potentially some contraction in the economic activity. So I think it’s, there is a higher probability may be that prepayments will increase for portfolio. We have a very low prepayment speed so our extension risk is not dramatic. We have probably I would say more probability of asymmetric contraction in the duration of our book than we do have a probability of our book really kind of extending out on us. So we are comfortable with the hedge ratio that we have currently. If we believe that rates will move dramatically, we will 50 basis points up we will execute accordingly and we have looked at adding [swap options] and other derivatives to protect book value and in many cases we found that the protection offered by these other derivative looks very good on paper, but that the economic value is pretty minimal when you strike your swaps at 250% to [275.3%] that really does not protect you against the tenure going to two in a quarter.

So thank you I appreciate that. Let me just follow-up on sort of one important element that you mentioned, you know something that has been lost a lot recently in the discussion of hedging is something you alluded to. There is hedging book value and then there is hedging net interest spread and for better or worse the way I tend to think about it is you have people that talk about durations that get spit out of models that are really about the price change versus the change in and so you look at your hedge durations and your asset durations and that basis, but that’s all about kind of book value hedging and that’s where the zero duration gap or whatever tends to work as a hedge, you know it’s all about the price changes, which you know as you point out is quite a bit different than saying we’re trying to hedge our NIM. Just so you know that conversation has seemed to vanish with a lot of REITs lately particularly and this is my concern, particularly in the quest for preserving dividends and preserving spreads it sort of works to your advantage and I am not saying you guys in general, but industry more broadly, it works to your advantage to kind of understate the duration of your assets, so that then you can get away with under hedging the portfolio and therefore kind of preserving a NIM. So I certainly don’t want to suggest that you guys are going that. It doesn’t appear to me that you are, but it does seem to be a little bit of a trend in the industry and just we are in a very unusual time, I know an unprecedented time in terms of MBS prices in terms of what the Fed is doing with QE3 and in terms of the asset. I mean, no matter how you just want to look at it. This is, there is not a lot of historical precedents to judge, how does this work when things change rapidly. So again just going back philosophically that tension between hedging NIM versus hedging book value risk is an important one, and you talked a little bit about it, but just how do you do that when you are dynamically reallocating the portfolio particularly in an environment where asset prices move 300 basis points in the quarter and then you decided it’s time to sell. Then do you reallocate your hedges and – so that’s just a broad open-ended question, but…

Mike we agree with you that this is a very unique point in history. I think we have emphasized on prior calls that we think that this is historic point in economic history and probably the most challenging point since the Great Depression. I would highlight you that, our hedging philosophy is a function of our view on the economy and upfront we told you that we view the economy is quite muted. We view, the world economy is quite muted and challenging and deleveraging at the sovereign level and the state level will have to occur and is yet to occur. That said, we also said to you that basically we think housing is one of the strong points of economy and we also said that we expect prepayment speeds to remain elevated. I mean, we expect it to remain elevated both on the agency side but also even on the credit side. So that is not that nuance may not be picked up by many people, but at least what we feel from the data and what we’re seeing in the marketplace is that you may have prepayment risk in ‘13 than people anticipate and our hedge ratio is an attempt to basically mitigate that risk and not increase risk in the portfolio. With respect to the NIM, we have a certain amount of the portfolio hedged. We also have the ability to move around a number of days that we have our repos in place, that further locks down LIBOR risk. We balance it by adding more floating rate assets as well, one-month and three-month adjustable assets to the mix, and so we won sensitivities both on the NIM side as well as book value and then we come up with tolerance bands that we’re are comfortable operating through. If we believe that the fundamentals are changing we are not wed to these philosophical points of these demarcation lines, we adjust accordingly. It’s very important to maintain flexibility in this environment and we are lucky that the Angelo, Gordon platform allows us and a tremendous amount of flexibility with our origination capability.

Well thanks guys. I appreciate the comments and color and agree that this is kind of an unprecedented time and good luck in negotiating through to as well as you have over the past couple of quarters.

Thank you.

At this time there are no additional questions. Please go ahead with any final remarks.

This is David Roberts, I would probably close by thanking everyone for their, both for their time and for the very good questions and dialogue. We appreciate it and wish everyone well for the remainder of the calendar year.

Thank you for participating in the AG Mortgage Investment Trust’s third quarter 2012 earnings conference call. This concludes the conference for today. You may all disconnect at this time.