Welcome to the AG Mortgage Investment Trust's second quarter 2014 earnings call. My name is Christine and I will be the operator for today's call. At this time, all participants are in a listen-only mode. Please note that this conference is being recorded. I will now turn the call over to Mr. Allan Krinsman. You may begin.

Thanks, Christine. Good morning, everyone. We appreciate you joining us for today's conference call to review AG Mortgage Investment Trust's second quarter 2014 results and recent developments. Joining me on today's call are David Roberts, our Chief Executive Officer, Jonathan Lieberman, our Chief Investment Officer and Brian Sigman, our Chief Financial Officer. Before we begin, I would like to review our Safe Harbor statement. Today's conference call and corresponding slide presentation contain 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 the Reform Act. Statements regarding the following subjects are forward-looking statements by their nature. Our business and investment strategy, 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, August 6, 2014. 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. With that, I will turn the call over to David Roberts.

Thank you, Allan, and good morning everyone. AG Mortgage Investment Trust had solid and positive performance on all fronts in the second quarter of 2014. Similar to the fist quarter, our core earnings were approximately equal to a $0.60 per share dividend and we made additional progress in increasing our portfolio's allocation to value added credit assets. In both residential and commercial whole loan sectors, our deal flow and our capabilities continue to increase. AG Mortgage Investment Trust investment team continues to work hard and well at balancing risk, book value and current earnings. With that introduction, I will turn things over to Jonathan Lieberman, President and Chief Investment Officer of MITT.

Thank you, David. Good morning, all. In sharp to last summer's taper tantrum, fixed income capital markets during the first half of 2014 had a favorable uncharacteristically calm and notable for their lack of volatility. The sea of tranquility is occurring despite tapering of the Federal Reserve's quantitative easing program and modest softness in high-yield unsecured securities as well as some geopolitical issues. Mortgage investments with strong interest income attributes continue to outperform under these market conditions. Accordingly, we were very pleased with MITT's portfolio of performance, as well as our investment teams' execution on several strategic initiatives. With respect to MITT's asset and financial performance, we distributed our fourth consecutive quarterly dividend of $0.60. MITT has paid cumulative dividends of $2.40 to our shareholders over the past 12 months. We continue to retain $1.91 of undistributed taxable income for potential future distributions. The investment team continued to execute on several key metrics such as yield on interest-earning assets, net interest rate spread, debt to equity ratio, asset liability gap and the ratio of credit assets relative to our agency MBS allocation. During the second quarter, Angelo, Gordon sourced and made new investments on behalf of MITT in both residential and commercial real estate loans. Our asset manager, Angelo, Gordon continues to add talented investment professionals, which will benefit MITT's shareholders in the future. As I noted in our prior quarters' earnings call, we have specific investment and return objectives for 2014. The key observable metrics were continued rotation of capital into credit assets, new investments in residential and CRE loans, protection of book value and restoration of optimal risk-adjusted earnings capacity for the company. The investment team executed on all key objectives for MITT, including core earnings covering our quarterly dividend and very high quality of earnings, may I…

Thanks, Jonathan. In the second quarter, we reported core earnings of $17 million, or $0.60 per fully diluted share versus $17.7 million or $0.62 per share in the prior quarter, At June 30, we had a negative $0.03 retrospective adjustment to our premium amortization on our agency portfolio. Stripping this out, core would have been $0.63 per share. We are pleased with this result as it marks the third quarter in a row where our core has met or exceeded our common dividend. Overall for the quarter, we reported net income available to common shareholders of $37.8 million, or $1.33 per fully diluted share. In addition to the $0.60 of core earnings our net income included realized and unrealized gains or $0.73 per share. This $0.73 gain was primarily due to $0.59 of net unrealized gains on our securities and derivatives portfolio. Additionally, we had $0.06 of realized gains on our securities and derivative portfolios, including gains on our equity in earnings line items and another $0.08 of net gains on our linked transactions. At June 30, our book value was $20.26, an increase of $0.73 or 4% from last quarter. This increase was primarily a result of a total $0.73 net gain on our securities and derivatives portfolio as I described above (inaudible). To give you a better sense of our current $3.8 billion portfolio, I would like to highlight a few more statistics. As described on page three and four of our presentation, the portfolio at June 30, 2014 had a net interest margin of 2.7%. This was composed of an asset yield of 4.4% offset by repo and swap cost of 0.93% and 0.78% respectively for a total cost of funds of 1.71%. We are pleased that our net interest margin continues to trend higher as the…

(Operator Instructions). Our first question comes from Trevor Cranston from JMP Securities. Please go ahead.

Hi, thanks. I guess, the first thing on the residential investments in the quarter. Can you go into a little bit more detail about the structure of those? I know they are in security form. So are those investments where you are buying bond off of RPO or loan pools that other people securitized? And if that's the case, can you talk about where in the capital stack you are buying?

We have purchased loans in security format collapsed structures to basically be left with, in some cases, whole loans, which then we put into a trust and then we take back trust certificates that we are permitted to hold those assets. So that's part of the investment and then part of the investment is where we are buying residual interest or other securities that we will be able to collapse in the future. And then the third way that we buy whole loans is, we are actually buying of unsecuritized whole loans and then once again we are putting them into a trust, and for technical reasons, we must put them into that trust and then take back certificates. And so they will show up in a line in basically our disclosure as securities held for investment.

Got it. That's helpful. There has been some talk among other market participants about a lot of competition in that market. Can you guys just kind of give us some color on what you are seeing in terms of price levels and expected returns?

So I would agree that there is certainly heightened competition, but the market is a very sizable one. It can be okay at times. And our situation is where you can get exclusive looks at collateral. So in the broad hedge [ph] style auctions, you saw at least in this past quarter, very material heightened competition. In other cases in similar time periods, we have been able into enter into bilateral agreements to acquire assets that have been materially cheaper than basically those broadly marketed processes. We also benefit from counterparties that are looking for certainty of execution and have, what I would call non-standard situations and we can work with them. So we have been able to procure loans in the high single-digit unlevered cases and with leverage to achieve what we would consider attractive mid-teen type of returns.

Got it. And the last thing then, when you look at the opportunities on the resi side and the commercial side, would you characterize either opportunities having a more substantial pipeline right now? Or how should we think about the near-term outlook for opportunity to put capital into to each of those categories?

Each of the investment teams are seeing strong opportunities, given their sourcing capacity and the relationships. Each team has material pipeline of opportunities that they are engaged in and seeking to close. It will be choppy in terms of timing. These deals are unpredictable in terms of documentation, diligence but as I said, we see equal opportunities on both sides of the business and look forward to deploying capital on both sides of the business.

Okay. Thank you. Appreciate the comments.

Thank you. Our next question comes from Jason Stewart from Compass Point. Please go ahead.

Hi, good morning. On the two commercial real estate loans, could you give us a little bit more information about the structure, maybe LTV of those ones you made in the second quarter?

Hi, it is David Roberts. I think we don't really want to set the precedent of going loan by loan, but what would I will tell you is that the process by which we go through is, we have a team that looks a lot of different transactions, working closely with Jonathan and myself, Brian, of course, our long-established equity real estate team and we are looking for assets that are typically in some sort of a transition, some sort of value add where it makes sense for the borrower to look to someone like us to come in, really understand the asset, understand what the plan is to stabilize it and we expect them to get taken out sometimes earlier than our state maturity and we try to negotiate from make wholes to increase the yield, which is what happened, if you are recall, with our first loan. But I don't think it would be appropriate for us to go loan by loan as we expect this to assemble a meaningful portfolio, both in terms of size and in terms of diversity.

That's fair. So I guess my takeaway would be generally lower LTV loans rather than taking an initial higher LTV and retaining a mezz after doing some other permanent financing. I mean that would be the strategy that you are going down as the transitional. I mean you are not going back and forth between the two different types of products here.

I think the takeaway should be that if there is an opportunity to finance a 100% leased Manhattan office building, we are not going to be competitive unless there is a huge tenant that's going to be moving out and we have to underwrite what the market is and a lot of the traditional lenders will stay away because they don't want any sort of transitional assets. So I wouldn't take my comments to indicate a particular loan-to-value range because that's going to differ depending on all the factors that go into our assessment of the risk of whatever the transition is.

Okay, and when you look at these properties, what would the, and this is for modeling purposes, a typical average life be? When should we start factoring in takeouts?

A typical loan might be a three year maturity with two one-year extensions or it might be two year maturity with three one-year extensions. But these are, I would say, they generally will be more transitional in nature. You asked about, once again whether we should think about this as mezz or unitranche first lien. We are putting in place the funding facility that will give us the flexibility to evaluate whether we should settle off our first lien. Banks are very, very aggressive. Or alternatively to have the option of putting the same loan, that loan, on the line at an attractive funding level.

Okay, and are you at the point where you can share your expectation for leverage on that facility?

We can't share, but it would be typical, I would say, to some of our comps which are between 65 and 75. Did that answer that?

Thanks, and then one more question on the RPO/MPO purchases. I sort of sounded like as you were describing the answer to the previous question, these were almost deals that have been factored down and you were purchasing almost the cleanup call. Am I thinking about that as a part of what you are looking or is that a completely different opportunity set?

That is part of the opportunity set. So buying basically legacy cleanup calls or legacy subordinate securities is one part of where we are acquiring whole loans. So these are loans in some cases that are six to 10 years old, strong performance characteristics and we think it's an attractive investment opportunity to co-opt the structure and then to basically improve the service and quality going forward. In other cases, it's outright purchase of legacy whole loans.

Okay. On the cleanup calls, there has certainly been a couple other servicers/investors who have pursued a similar strategy. Have you found one or two primary partners to do this with? Or is this on an opportunistic basis, when you find somebody you are willing to go in with and service the loans? Or are these something that you are going to service yourself?

Well, both Angelo, Gordon and MITT do not control a servicer. We use third parties in all cases who we basically oversee actively. So these are active managed servicers and we basically put the assets with a servicer that we think is best suited to service a distinct type of collateral.

Okay. I will jump out. Thank you.

Thank you. Our next question comes from Merrill Ross from Wunderlich Securities. Please go ahead.

Good morning. I had two questions. The first is relatively simple. It's the equity in earnings from the affiliate, that $3.3 million in the quarter. Can you give us a little color on that?

So we co-invested in some several CMBS securities as a partner and JV with other Angelo, Gordon funds. The JV entity sold those Seoul securities as part of a resecuritization and it was a pretty large gain on that sale. As opposed to flowing out just through securities, because it was a JV investment, it flows up through as a JV investment and equity in earnings.

Okay. So that's not likely to reoccur anyway?

Not the gain. That's not part of the core. But as a part of the core, any NIM through that JV is part of core and the gains are stripped out.

Got it. Okay, the second question is a little more theoretical. Just looking back at slide 10, the market has been relatively tranquil, low volatility, certainly as compared to last year. And I am finding that modeling earnings is very, very sensitive to how you construct these hedges and so maybe you can give us a little bit of theory about where you might lighten up or double down as you roll forward your hedges?

Good question. So we expected some degree of volatility in rates and if may be you did not have geopolitical issues in the marketplace, as well as some weakness in Europe, potentially the 10 year would be maybe 20 or 25 basis points higher, and maybe the front end would be another 10 or 15 basis points higher. They way we are currently positioned, when we saw a selloff last week of, I think, 10 or 15 basis points roughly, it really did not move valuation of our portfolio. The hedge has pretty much moved in sync with the current portfolio, give or take maybe $250,000 to $500,000 in one direction or another, which we think is pretty good symmetry of movement given as a $3.8 billion book. In the event rates were to gravitate higher in the backend to, let's say, from 2.44, where I think they were this morning to closer to 2.75, we would potentially lift some hedges in the long end of the curve, the tens. And if the market started to price in fully maybe at first quarter, moving in the Fed funds or additional reverse repo from the Fed, potentially we would lighten up in the fours and the fives portion of the curve.

Thank you. That's helpful.

Thank you. (Operator Instructions). We have no further questions at this time.

Thank you very much, everybody. Look forward to speaking to you next quarter.

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