Apollo Residential Mortgage, Inc. Reports First Quarter 2013 Financial Results

Apollo Residential Mortgage, Inc. Reports First Quarter 2013 Financial Results 
NEW YORK, NY -- (Marketwired) -- 05/06/13 --  Apollo Residential
Mortgage, Inc. (the "Company") (NYSE: AMTG) today reported financial
results for the quarter ended March 31, 2013. 
First Quarter Highlights: 


 
--  Reported Operating Earnings (a non-GAAP financial measure as defined
    below) of $19.1 million, or $0.74 per common share, for the quarter
    ended March 31, 2013; Reported net income allocable to common
    stockholders of $1.8 million, or $0.07 per common share, for the
    quarter ended March 31, 2013;
--  $4.9 billion residential mortgage-backed securities ("RMBS") portfolio
    at March 31, 2013 consisted of Agency RMBS with an estimated fair
    value of $4.3 billion and non-Agency RMBS with an estimated fair value
    of $595.8 million;
--  RMBS and securitized mortgage loan portfolio had a 2.8% blended net
    interest spread and an 17.8% levered asset yield(1) at March 31, 2013;
--  Completed the Company's first purchase and securitization of a
    residential whole loan pool;
--  Completed an underwritten public offering of 7,820,000 shares of
    common stock, including the exercise of the underwriter's option to
    purchase additional shares, at a price of $22.00 per share, raising
    net proceeds of $171.5 million;
--  Declared a $0.70 per common share quarterly dividend;
--  Realized net gains of $15.8 million, or $0.61 per common share, from
    the sale of $589.5 million of RMBS; and
--  Book value per common share at March 31, 2013 was $21.72.

  
(1) Levered asset yield is calculated as net interest spread multiplied
by the leverage (debt/equity) multiple, plus the weighted average
unlevered yield on the asset. 
"AMTG had another solid quarter of financial and operating results,
against a backdrop of volatility in the mortgage market," said
Michael Commaroto, Chief Executive Officer of AMTG. "The Company's
non-Agency RMBS portfolio continued to perform well, bolstered by the
positive trends experienced in the housing market. As we optimized
our portfolio throughout the quarter, we sold $589.5 million of
Agency and non-Agency RMBS and generated net gains of $15.8 million,
or $0.61 per common share. In addition, capitalizing on the Company's
experience in the credit market, AMTG broadened its investment
portfolio during the quarter through the completion of the Company's
first purchase and securitization of a residential whole loan pool." 
First Quarter 2013 Operating Results 
 The Company reported Operating
Earnings of $19.1 million, or $0.74 per common share, for the three
months ended March 31, 2013, as compared to Operating Earnings of
$8.0 million, or $0.78 per common share, for the three months ended
March 31, 2012. Net income allocable to common stockholders for the
three months ended March 31, 2013 was $1.8 million or $0.07 per
common share, as compared to net income allocable to common
stockholders of $20.0 million or $1.95 per common share for the three
months ended March 31, 2012.  
The difference between Operating Earnings and net income allocable to
common stockholders primarily reflects that Operating Earnings
excludes the following: (i) net unrealized gains and losses on RMBS;
(ii) net changes in the fair value of interest rate swaps ("Swaps")
and interest rate swaptions ("Swaptions") and net realized losses on
the termination of Swaps; and (iii) net realized gains from sales of
RMBS. A reconciliation of Operating Earnings to net income allocable
to common stockholders is set forth in Table 5 of this press release. 
Portfolio Summary (Table 1)
 The following table sets forth
additional detail regarding the Company's portfolio as of March 31,
2013: 


 
                                                                            
                                                                   
                         Unamortiz                              Net  Weight-   
                            -ed                        Unreali Weight  ed
                          Premium  Amortized Estimated  -zed    ed   Average
               Principal(Discount), Cost (2) Fair Value Gain/ Average Yield 
                Balance   Net(1)     (3)       (2)      (Loss)  Coupon  (4)  
               ------------------- --------------------------- ------ ----- 
($ amounts in                                                               
 thousands)                                                                 
Agency RMBS:                                                                
30-Year                                                                     
 Mortgages                                                                  
  Coupon Rate:                                                              
  3.5%         $1,757,588$ 111,498 $1,869,086$1,863,750$(5,336)  3.50% 2.57%
  4.0%          1,841,597  154,411  1,996,008 2,002,782  6,774   4.00% 2.69%
  4.5% and 5.0%   240,651   15,000    255,651   266,438 10,787   4.54% 3.22%
               ------------------- --------------------------- ------ ----- 
                3,839,836  280,909  4,120,745 4,132,970 12,225   3.80% 2.67%
               ------------------- --------------------------- ------ ----- 
15-20 Year                                                                  
 Mortgages                                                                  
  Coupon Rate:                                                              
  3.0%             22,236      980     23,216    23,588    372   3.00% 2.05%
  3.5%             72,565    4,350     76,915    77,475    560   3.50% 2.30%
               ------------------- --------------------------- ------ ----- 
                   94,801    5,330    100,131   101,063    932   3.38% 2.24%
               ------------------- --------------------------- ------ ----- 
Agency IOs and                                                              
 Agency IIOs                                                                
 (5)                    -        -     65,377    65,531    154   5.88%13.20%
               ------------------- --------------------------- ------ ----- 
Total Agency    3,934,637  286,239  4,286,253 4,299,564 13,311   3.98% 2.82%
               ------------------- --------------------------- ------ ----- 
Non-Agency RMBS   768,776 (239,997)   528,779   595,838 67,059   1.21% 7.73%
               ------------------- --------------------------- ------ ----- 
Total          $4,703,413$  46,242 $4,815,032$4,895,402$80,370   3.56% 3.36%
               =================== =========================== ====== ===== 

 
(1) A portion of the purchase discount on non-Agency RMBS is not
expected to be recognized as interest income, and is instead viewed
as a credit discount. At March 31, 2013, our non-Agency RMBS had
gross discounts of $239,997 which included credit discounts of
$97,304 and other-than-temporary impairments ("OTTI") of $3,824.
 (2)
Includes unsettled purchases with an aggregate cost of $5,830 at
March 31, 2013 and an estimated fair value of $5,830. 
 (3) Amortized
cost is reduced by unrealized losses that are classified as OTTI. The
Company recognized OTTI of $2,937 for the three months ended March
31, 2013.
 (4) Weighted average yield at the date presented
incorporates estimates for future prepayment assumptions on all RMBS 
and loss assumptions on non-Agency RMBS.
 (5) Agency IOs and Agency
IIOs have no principal balance and bear interest based on a notional
balance. The notional balance is used solely to determine interest
distributions on interest-only class of securities. 
As of March 31, 2013, the average cost basis of the Company's Agency
RMBS portfolio, excluding Agency IOs and Agency IIOs, was 107.3% of
par value and the average cost basis of the Company's non-Agency RMBS
portfolio was 68.8% of par value. 
The Agency RMBS pass-through securities portfolio experienced
prepayments at an average one month constant prepayment rate ("CPR")
over the quarter ended March 31, 2013 of 6.8%. Including Agency
Interest-Only ("Agency IOs") and Agency Inverse Interest-Only
("Agency IIOs") securities, the Agency RMBS portfolio experienced
prepayments at an average one month CPR of 7.0% over the quarter
ended March 31, 2013. 
Whole Loan Pool Purchase and Securitization
 In February, the Company
completed its first securitization transaction contemporaneously with
the purchase of a pool of 755 residential mortgage loans with an
approximate aggregate unpaid principal balance of $155 million. The
securitization was completed through a wholly-owned subsidiary of the
Company and approximately $50.4 million of debt was privately placed,
with the Company retaining the remaining interests in the
securitization.  
Portfolio Financing
 At March 31, 2013, the Company had master
repurchase agreements with 23 counterparties and had outstanding
borrowings with 18 counterparties totaling $4.3 billion. 
(Table 2)
 The following table sets forth the Company's borrowings at
March 31, 2013: 


 
                                                                            
                                                                   Weighted 
                                                       Weighted     Average 
                                           Repurchase   Average    Remaining
                                           Agreement   Borrowing   Maturity 
RMBS Pledged                               Borrowing     Rate       (days)  
                                          ----------- ----------  ----------
($ amounts in thousands)                                                    
Agency RMBS                               $ 3,896,493       0.43%         31
Non-Agency RMBS                               419,645       2.10%         72
Repo - Securitization(1)                       27,203       2.03%         71
                                          ----------- ----------  ----------
Total                                     $ 4,343,341       0.60%         35
                                          =========== ==========  ==========

 
(1) Repo-Securitization reflects the balance of repurchase agreement
borrowings that is collateralized by a non-Agency RMBS issued in
connection with the securitization transaction that the Company
retained. While the RMBS retained in connection with the
securitization transaction do not appear on the Company's balance
sheet, as they are eliminated in consolidation with the
securitization trust, the Company legally owns such securities and
therefore is legally permitted to pledge such securities as
collateral.  
(Table 3)
 The Company's derivative instruments consisted of the
following at March 31, 2013: 


 
                                                                            
                                                    ----------- ----------- 
                                                      Notional    Estimated 
($ amounts in thousands)                               Amount    Fair Value 
                                                    ----------- ----------- 
Swaps, assets - interest rate derivatives           $   150,000 $     1,363 
Swaption, assets - interest rate derivatives            225,000       1,641 
Swaps, liabilities - interest rate derivatives        2,057,000     (25,467)
                                                    ----------- ----------- 
Total derivative instruments                        $ 2,432,000 $   (22,463)
                                                    =========== =========== 

 
(Table 4)
 The following table summarizes the average fixed-pay rate
and average maturity for the Company's Swaps at March 31, 2013: 


 
                                                                            
                                                        Average     Average 
                                            Notional   Fixed Pay   Maturity 
Term to Maturity ($ amounts in thousands)    Amount      Rate       (Years) 
                                          ----------- ----------  ----------
Greater than 3 years and less than 5                                        
 years                                    $ 1,434,000       1.06%        4.3
Greater than 5 years                          773,000       2.00         9.7
                                          ----------- ----------  ----------
Total                                     $ 2,207,000       1.39%        6.2
                                          =========== ==========  ==========

 
Book Value 
 The Company's book value per common share at March 31,
2013 was $21.72.  
Teleconference and Website Presentation Details:
 The Company will be
hosting a conference call to discuss its financial results on
Tuesday, May 7, 2013 at 10:00 a.m. Eastern Time. Members of the
public who are interested in participating in the Company's first
quarter 2013 earnings teleconference call should dial from the U.S.,
(877) 706-7548, or from outside the U.S., (706) 902-2150, shortly
before 10:00 a.m. and reference the Apollo Residential Mortgage, Inc.
teleconference call (number 32723226). Please note the teleconference
call will be available for replay beginning at 12:00 p.m. on Tuesday, 
May 7, 2013, and ending at midnight on Tuesday, May 14, 2013. To
access the replay, callers from the U.S. should dial (855) 859-2056
and callers from outside the U.S. should dial (404) 537-3406, and
enter conference identification number 32723226. 
Webcast:
 The
conference call will also be available on the Company's website at
www.apolloresidentialmortgage.com. To listen to a live broadcast,
please go to the site at least 15 minutes prior to the scheduled
start time in order to register, download and install any necessary
audio software. A replay of the call will also be available for 30
days on the Company's website. 
Supplemental Information
 The Company provides a supplemental
information package to offer more transparency into its financial
results and make its reporting more informative and easier to follow.
The supplemental package is available in the investor relations
section of the Company's website at
www.apolloresidentialmortgage.com.  
About Apollo Residential Mortgage, Inc.
 Apollo Residential Mortgage,
Inc. (NYSE: AMTG) is a real estate investment trust that invests in
and manages residential mortgage-backed securities and other
residential mortgage assets throughout the United States. The Company
is externally managed and advised by ARM Manager, LLC, a Delaware
limited liability company and an indirect subsidiary of Apollo Global
Management, LLC (NYSE: APO), a leading global alte
rnative investment
manager with approximately $114.3 billion of assets under management
at March 31, 2013. 
Additional information can be found on the Company's website at
www.apolloresidentialmortgage.com. 
Forward-Looking Statements 
 Certain statements contained in this
press release constitute forward-looking statements as such term is
defined in Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and
such statements are intended to be covered by the safe harbor
provided by the same. Forward-looking statements are subject to
substantial risks and uncertainties, many of which are difficult to
predict and are generally beyond the Company's control. These
forward-looking statements include information about possible or
assumed future results of the Company's business, financial
condition, liquidity, results of operations, plans and objectives,
including information about the ability of the Company to generate
attractive returns while attempting to mitigate risk. When used in
this release, the words "believe," "expect," "anticipate,"
"estimate," "plan," "continue," "intend," "should," "may" or similar
expressions, are intended to identify forward-looking statements.
Statements regarding the following subjects, among others, may be
forward-looking: the return on equity; the yield on investments; the
ability to borrow to finance assets; and risks associated with
investing in real estate assets, including changes in business
conditions and the general economy. For a further list and
description of such risks and uncertainties, see the Company's Annual
Report on Form 10-K for the year ended December 31, 2012 and other
reports filed by the Company with the Securities and Exchange
Commission. The forward-looking statements, and other risks,
uncertainties and factors are based on the Company's beliefs,
assumptions and expectations of its future performance, taking into
account all information currently available to the Company.
Forward-looking statements are not predictions of future events. The
Company disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.  


 
                                                                            
             Apollo Residential Mortgage, Inc. and Subsidiaries             
                         Consolidated Balance Sheets                        
               (in thousands--except share and per share data)              
                                                                            
                                                 ------------- -------------
                                                   March 31,    December 31,
                                                      2013          2012    
                                                 ------------- -------------
                                                  (Unaudited)               
Assets:                                                                     
  Cash                                           $     170,887 $     149,576
  Restricted cash                                       97,844        93,641
  RMBS, at fair value ($4,634,187 and $3,940,913                            
   pledged as collateral, respectively)              4,895,402     4,231,291
  Securitized mortgage loans (transferred to a                              
   consolidated variable interest entity), at                               
   fair value                                          114,881             -
  Investment related receivable                         32,013             -
  Interest receivable                                   14,728        11,341
  Deferred financing costs, net                            878           346
  Interest rate derivative instruments, at fair                             
   value                                                 3,004           750
  Other assets                                             916           976
                                                 ------------- -------------
Total Assets                                     $   5,330,553 $   4,487,921
                                                 ------------- -------------
                                                                            
Liabilities and Stockholders' Equity                                        
Liabilities:                                                                
  Borrowings under repurchase agreements         $   4,343,341 $   3,654,436
  Non-recourse securitized debt, at fair value          49,852             -
  Investment related payable                             5,830        50,032
  Accrued interest payable                               6,048         6,774
  Interest rate derivative instruments, at fair                             
   value                                                25,467        23,184
  Accounts payable and accrued expenses                  2,011         1,742
  Payable to related party                               3,775         4,295
  Dividends payable                                     26,145        30,675
                                                 ------------- -------------
Total Liabilities                                $   4,462,469 $   3,771,138
                                                 ------------- -------------
                                                                            
Stockholders' Equity:                                                       
  Preferred stock, $0.01 par value, 50,000,000                              
   shares authorized, 6,900,000 shares issued                               
   and outstanding ($172,500 aggregate                                      
   liquidation preference)                       $          69 $          69
  Common stock, $0.01 par value, 450,000,000                                
   shares authorized, 32,027,535 and 24,205,972                             
   shares issued and outstanding, respectively             320           242
  Additional paid-in-capital                           791,266       619,399
  Retained earnings                                     76,429        97,073
                                                 ------------- -------------
Total Stockholders' Equity                       $     868,084 $     716,783
                                                 ------------- -------------
Total Liabilities and Stockholders' Equity       $   5,330,553 $   4,487,921
                                                 ============= =============
                                                                            
                                                                            
                                                                            
             Apollo Residential Mortgage, Inc. and Subsidiaries             
             Consolidated Statements of Operations (Unaudited)              
              (in thousands--except share and per share data)               
                                                                            
                                               -------------  ------------- 
                                                Three months   Three months 
                                                   ended          ended     
                                                 March 31,      March 31,   
                                                 
   2013           2012     
                                               -------------  ------------- 
                                                                            
  Interest income - RMBS                       $      36,914  $      12,363 
  Interest income - securitized mortgage loans         1,333              - 
                                               -------------  ------------- 
Interest Income                                       38,247         12,363 
                                               -------------  ------------- 
  Interest expense - repurchase agreements            (5,907)        (1,361)
  Interest expense - securitized debt                   (310)             - 
                                               -------------  ------------- 
Interest Expense                                      (6,217)        (1,361)
                                               -------------  ------------- 
Net Interest Income                            $      32,030         11,002 
                                               -------------  ------------- 
                                                                            
Other Income/(Loss):                                                        
  Realized gain on sale of RMBS, net           $      15,795          6,769 
  Unrealized gain/(loss) on RMBS, net                (33,048)         5,950 
  Unrealized gain on securitized mortgage                                   
   loans                                               2,848              - 
  Unrealized (loss) on securitized debt                 (872)             - 
  (Loss) on interest rate derivative                                        
   instruments (includes $1,659 and $569 of                                 
   unrealized losses, respectively)                   (5,798)        (1,318)
  Interest income on cash balances                        25              2 
                                               -------------  ------------- 
Other Income/(Loss), net                       $     (21,050) $      11,403 
                                               -------------  ------------- 
                                                                            
Operating Expenses:                                                         
  General and administrative expenses                                       
   (includes $399 and $78 of non-cash stock                                 
   based compensation, respectively)           $      (2,851) $      (1,488)
    Management fee - related party                    (2,789)          (797)
                                               -------------  ------------- 
Total Operating Expenses                       $      (5,640) $      (2,285)
                                               -------------  ------------- 
                                                                            
                                               -------------  ------------- 
Net Income                                     $       5,340  $      20,120 
                                               -------------  ------------- 
Preferred Stock Dividends Declared                    (3,450)             - 
                                               -------------  ------------- 
Net Income Available to Common Stock and                                    
 Participating Securities                      $       1,890  $      20,120 
                                               -------------  ------------- 
Earnings per Common Share - Basic and Diluted  $        0.07  $        1.95 
                                               -------------  ------------- 
Dividend Declared per Share of Common Stock    $        0.70  $        0.75 
                                               -------------  ------------- 

 
Reconciliations of Non-GAAP Financial Measures 
This press release contains disclosures related to the Company's
Operating Earnings and Operating Earnings per common share for the
three months ended March 31, 2013, which constitute non-GAAP
financial measures within the meaning of Regulation G promulgated by
the Securities and Exchange Commission. The Company's management
believes the non-GAAP financial measures presented in this press
release, when considered together with GAAP financial measures,
provide information that is useful to investors in understanding
period-over-period operating results. An analysis of any non-GAAP
financial measures should be made in conjunction with results
presented in accordance with GAAP. 
Operating Earnings and Operating Earnings per common share presented
exclude, as applicable: (i) realized and unrealized gains and losses
recognized through earnings; (ii) non-cash equity compensation; (iii)
one time events pursuant to changes in GAAP; and (iv) certain other
non-cash charges. Operating Earnings represents net income allocable
to common stockholders, as adjusted.  
The Company believes that the non-GAAP measures it presents provide
investors with a useful measure to assess the performance of the
Company's ongoing business and useful supplemental information to
both management and investors in evaluating our financial results. A
reconciliation of the GAAP items discussed above to their non-GAAP
measures for the three months ended March 31, 2013, are as follows: 
(Table 5)
 The following table reconciles net income allocable to
common stockholders with Operating Earnings for the three months
ended March 31, 2013 and March 31, 2012, respectively (dollar amounts
in thousands except share and per share data):  


 
                                                                            
                            Three months ended        Three months ended    
                              March 31, 2013            March 31, 2012      
                         ------------------------  ------------------------ 
                                        Earnings                  Earnings  
                                          Per                       Per     
                                        Share(1)                  Share(1)  
                         -----------  -----------  -----------  ----------- 
Net income allocable to                                                     
 common stockholders     $     1,756  $      0.07  $    20,034  $      1.95 
Adjustments:                                                                
  Non-cash stock-based                                                      
   compensation expense          399         0.01           78         0.01 
  Unrealized (gain)/loss                                                    
   on RMBS, net               33,048         1.29       (5,950)       (0.58)
  Unrealized loss on                                                        
   derivatives, net            1,659         0.06          569         0.06 
  Unrealized gain on                                                        
   securitized mortgage                                                     
   loans                      (2,848)       (0.11)           -            - 
  Unrealized loss on                                                        
   securitized debt              872         0.03            -            - 
  Realized gain on sale                                                     
   of RMBS, net              (15,795)       (0.61)      (6,769)       (0.66)
                         -----------  -----------  -----------  ----------- 
Total adjustments to                                                        
 arrive at operating                                                        
 earnings:                    17,335         0.67      (12,072)       (1.17)
                         -----------  -----------  -----------  ----------- 
Operating earnings       $    19,091  $      0.74  $     7,962  $      0.78 
                         ===========  ===========  ===========  =========== 
                                                                            
Basic and diluted                                                           
 weighted average common                                                    
 shares outstanding:      25,686,304                10,273,125

 
(1) Reflects basic and diluted earnings per share for each component
presented. 
CONTACT: 
Hilary Ginsberg 
(212) 822-0767 
 
 
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