Apollo Residential Mortgage, Inc. Reports Third Quarter 2012 Financial Results

Tue Nov 6, 2012 4:15pm EST

* Reuters is not responsible for the content in this press release.

  NEW YORK, NY, Nov 06 (Marketwire) -- 
Apollo Residential Mortgage, Inc. (the "Company") (NYSE: AMTG) today
reported Operating Earnings (a non-GAAP financial measure as defined
below) of $16.3 million, or $0.67 per common share, for the three months
ended September 30, 2012. Net income for the same period was $70.4
million or $2.91 per common share. 

    For the nine months ended September 30, 2012, the Company reported
Operating Earnings of $38.4 million, or $2.06 per common share. Net
income for the nine months ended September 30, 2012 was $116.9 million,
or $6.28 per common share. 

    The difference between Operating Earnings and net income primarily
reflects the exclusion of: (i) net unrealized gains on residential
mortgage-backed securities ("RMBS"); (ii) net changes in the fair value
of interest rate swaps ("Swaps") 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 is set forth in this
press release. 

    Third Quarter Highlights:


--  $4.23 billion RMBS portfolio at September 30, 2012 consisted of Agency
    RMBS with an estimated fair value of $3.67 billion and non-Agency RMBS
    with an estimated fair value of $561 million;
--  Book value per common share at September 30, 2012 was $21.46 as
    compared to $19.65 at June 30, 2012, a 9.2% increase;
--  Declared an $0.85 per common share quarterly dividend for stockholders
    of record as of September 28, 2012, an increase of 13.3% over the
    prior quarter's dividend per common share;
--  RMBS portfolio had a 2.8% blended net interest spread and an 18.4%
    levered asset yield(1) at September 30, 2012;
--  Agency RMBS pass-through securities portfolio experienced prepayments
    at an average one month constant prepayment rate ("CPR") over the
    quarter ended September 30, 2012 of 5.0%. 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 5.2% over the quarter ended September 30,
    2012;
--  Realized net gains of $13.9 million, or $0.57 per common share, from
    the sale of $674.3 million of RMBS; and
--  Completed a public offering of 6,900,000 shares of the Company's 8.00%
    Series A Cumulative Redeemable Perpetual Preferred Stock (the "Series
    A Preferred Stock"), which generated net proceeds to the Company of
    approximately $166.6 million.

    

(1) Levered asset yield is calculated as net interest spread
multiplied by the leverage (debt/equity) multiple, plus the weighted
average unlevered yield on RMBS.

    "AMTG had another solid quarter of operating results and meaningful book
value growth, despite a backdrop of extreme market volatility," said
Michael Commaroto, Chief Executive Officer of the Company. "We believe
our Agency RMBS asset selection strategy focused on prepayment protected
securities continues to prove its value, as our Agency portfolio's CPR
experience remained low in the quarter. In addition, AMTG's non-Agency
portfolio benefitted from the rally in the credit markets coupled with
improving fundamentals in the housing market. As we consistently look to
optimize our portfolio mix, the rotation of our portfolio has generated
significant gains that ultimately need to be distributed to our common
shareholders in our quarterly dividend. As a result, the dividend per
common share declared by our Board in the third quarter represented a
13.3% increase over the prior quarter." 

    Portfolio Summary
 (Table 1)
 The following table sets forth additional
detail regarding the Company's portfolio as of September 30, 2012 ($
amounts in thousands):

                                                                    Weighted
                     Unamortized                    Unrealized  Net   Aver-
           Principal  Premium   Amortized  Estimated   Gain  Weighted  age
            Balance  (Discount),  Cost     Fair Value    /    Average Yield 
              (1)       Net      (1)(2)        (1)    (Loss)  Coupon   (3)
          ---------- ---------  ---------- ---------- ------- ------ ------ 
Agency
 RMBS:
30-Year
 Mortgages
 Coupon Rate:
  3.5%    $1,159,596 $  75,686  $1,235,282 $1,247,005 $11,723    3.5%   2.6%
  4.0%     1,361,212   110,496   1,471,708  1,492,310  20,602    4.0%   2.7%
  4.5% and
   5.0%      281,553    18,361     299,914    312,434  12,520    4.5%   3.3%
          ---------- ---------  ---------- ---------- ------- ------ ------ 
           2,802,361   204,543   3,006,904  3,051,749  44,845    3.8%   2.7%
          ---------- ---------  ---------- ---------- ------- ------ ------ 
15-20 Year
 Mortgages
 Coupon Rate:
  3.0%       183,585     8,339     191,924    195,665   3,741    3.0%   2.0%
  3.5%       346,865    21,033     367,898    374,255   6,357    3.5%   2.3%
          ---------- ---------  ---------- ---------- ------- ------ ------ 
             530,450    29,372     559,822    569,920  10,098    3.3%   2.2%
          ---------- ---------  ---------- ---------- ------- ------ ------ 
Agency IOs
 and Agency
 IIOs (4)                           52,200     51,755    (445)   5.7%  12.0%
          ---------- ---------  ---------- ---------- ------- ------ ------ 
Total
 Agency    3,332,811   233,915   3,618,926  3,673,424  54,498    3.9%   2.7%
          ---------- ---------  ---------- ---------- ------- ------ ------ 
Non-Agency
 RMBS        806,983  (274,801)    532,182    561,054  28,872    1.2%   7.9%
          ---------- ---------  ---------- ---------- ------- ------ ------ 
Total     $4,139,794 $ (40,886) $4,151,108 $4,234,478 $83,370    3.4%   3.4%
          ========== =========  ========== ========== ======= ====== ======

     

    (1) Includes unsettled purchases with an aggregate cost of $131,680 at
September 30, 2012 and an estimated fair value of $133,494. 
 (2)
Amortized cost is reduced by unrealized losses that are classified as
other-than-temporary impairments. The Company recognized
other-than-temporary impairments of $553 and $3,308 for the three and
nine months ended September 30, 2012 respectively.
 (3) Weighted average
yield at the date presented incorporates estimates for future prepayment
assumptions on all RMBS and loss assumptions on non-Agency RMBS.
 (4)
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 September 30, 2012, the average cost basis of the Company's Agency
RMBS portfolio, excluding Agency IOs and Agency IIOs, was 107% of par
value and the average cost basis of the Company's non-Agency RMBS
portfolio was 66% of par value.

    Portfolio Financing
 At September 30, 2012, the Company had master
repurchase agreements with 20 counterparties representing an aggregate of
approximately $7.5 billion of potential funding capacity and had
outstanding borrowings with 16 counterparties totaling $3.7 billion.

    (Table 2)
 The following table sets forth the Company's borrowings at
September 30, 2012:

                                                                   Weighted 
                                          Weighted                 Average
                              Repurchase   Average    Effective   Remaining 
                              Agreement   Borrowing    Cost of     Maturity 
RMBS Pledged                  Borrowing     Rate      Funds(1)      (days)
                             ----------- ----------  ----------  -----------
Agency RMBS                  $ 3,314,990        0.4%        0.8%          51
Non-Agency RMBS                  394,694        2.0         2.2           86
                             ----------- ----------  ----------  -----------
Total                        $ 3,709,684        0.6%        1.0%          55
                             =========== ==========  ==========  ===========


    
(1) The Effective Cost of Funds is a non-GAAP financial measure. It
is calculated on an annualized basis and includes the interest component
for Swaps. While Swaps are not accounted for using hedge accounting, such
instruments are viewed by the Company as an economic hedge against
increases in interest rates. A reconciliation of the Effective Cost of
Funds to interest expense is set forth in this press release.

    (Table 3)
 The Company's derivative instruments consist of the following
at September 30, 2012:

                                                September 30, 2012
                                      ------------------------------------- 
                                       Notional Amount Estimated Fair Value 
                                      ---------------- -------------------- 
        Swaps, assets                 $              - $                  - 
        Swaps, liabilities                   1,500,000              (27,438)
                                      ---------------- -------------------- 
        Total derivative instruments  $      1,500,000 $            (27,438)
                                      ================ ==================== 


    
(Table 4)
 The following table summarizes the average fixed pay rate
and average maturity for the Company's Swaps at September 30, 2012:

                                                 September 30, 2012
                                      --------------------------------------
                                                     Average       Average
                                        Notional    Fixed Pay     Maturity
        Term to Maturity                 Amount        Rate        (Years)
                                      ------------ -----------  ------------
        Greater than 1 year and less
         than 3 years                 $          -           -%            -
        Greater than 3 years and less
         than 5 years                    1,245,000         1.1           4.7
        Greater than 5 years               255,000         1.9           9.9
                                      ------------ -----------  ------------
        Total                         $  1,500,000         1.2%          5.6
                                      ============ ===========  ============


    
Book Value 
 The Company's book value per common share at September
30, 2012 was $21.46, an increase of $1.81 or 9.2% from the per common
share book value of $19.65 at June 30, 2012. 

    Preferred Stock Offering
 In September, the Company completed a public
offering of 6,900,000 shares of the Company's 8.00% Series A Preferred
Stock, including the exercise of the underwriters' option to purchase
additional shares. Net proceeds from the offering were approximately
$166.6 million, which the Company deployed, on a levered basis, into
additional Agency and non-Agency RMBS.

    Teleconference and Website Presentation Details:
 The Company will be
hosting a conference call to discuss its financial results on Wednesday,
November 7, 2012 at 10:00 a.m. Eastern Time. Members of the public who
are interested in participating in the Company's third quarter 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
38830172). Please note the teleconference call will be available for
replay beginning at 12:00 p.m. on Wednesday, November 7, 2012, and ending
at midnight on Wednesday, November 14, 2012. 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 3880172.

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 alternative investment manager with
approximately $105 billion of assets under management at June 30, 2012.

    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, 2011
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 Sheet
               (in thousands--except share and per share data)

                                                September 30,  December 31, 
                                                    2012           2011
                                               -------------- --------------
                                                 (unaudited)
Assets:
  Cash                                         $      131,552 $       44,407
  Restricted cash                                      58,551         10,402
  RMBS, at fair value ($4,017,679 and
   $1,167,487 pledged as collateral,
   respectively)                                    4,234,478      1,240,472
  Investment related receivable                       154,277        116,678
  Interest receivable                                  11,719          3,908
  Deferred financing costs, net                           435            455
  Swaps, at fair value                                      -            235
  Other assets                                            856            370
                                               -------------- --------------
Total Assets                                   $    4,591,868 $    1,416,927
                                               -------------- --------------

Liabilities and Stockholders' Equity
Liabilities:
  Borrowings under repurchase agreements       $    3,709,684      1,079,995
  Investment related payable                          132,085        121,144
  Accrued interest payable                              3,420          1,123
  Swaps, at fair value                                 27,438          3,481
  Accounts payable and accrued expenses                 2,053          1,534
  Payable to related party                              5,182          1,974
  Dividends payable                                    20,628          3,090
                                               -------------- --------------
Total Liabilities                              $    3,900,490 $    1,212,341
                                               -------------- --------------

Stockholders' Equity:
    Preferred stock, $0.01 par value,
     50,000,000 shares authorized, 6,900,000
     and 0 shares issued and outstanding,
     respectively ($172,500 aggregate
     liquidation preference at September 30,
     2012)                                     $           69              -
    Common stock, $0.01 par value, 450,000,000
     shares authorized, 24,184,410 and
     10,271,562 shares issued and outstanding,
     respectively                                         242            103
    Additional paid-in-capital                        619,229        203,101
    Retained earnings                                  71,838          1,382
                                               -------------- --------------
  Total Stockholders' Equity                          691,378        204,586
                                               -------------- --------------
  Total Liabilities and Stockholders' Equity   $    4,591,868 $    1,416,927
                                               ============== ==============

             Apollo Residential Mortgage, Inc. and Subsidiaries
             Consolidated Statements of Operations (unaudited)
              (in thousands--except share and per share data)

                                                              July 27, 2011 
                                                              (commencement 
                                                                    of
                                 Three Months   Nine Months    operations)
                                    ended          ended         through
                                September 30,  September 30,  September 30, 
                                     2012           2012           2011
                                -------------  -------------  ------------- 
Net Interest Income:
   Interest income              $      26,438  $      60,791  $       1,555 
   Interest expense                    (4,289)        (8,521)          (143)
                                -------------  -------------  ------------- 
Net Interest Income                    22,149         52,270          1,412 
                                -------------  -------------  ------------- 

Other Income (Loss):
   Realized gain on sale of
    RMBS, net                          13,861         32,244            335 
   Unrealized gain (loss) on
    RMBS, net                          54,913         75,461         (1,283)
   Loss on derivative
    instruments (includes
    $9,831, $24,192 and $108 of
    unrealized losses
    respectively)                     (16,653)       (33,486)          (223)
   Interest income on cash
    balances                               16             25              - 
                                -------------  -------------  ------------- 
Other Income (Loss), net               52,137         74,244         (1,171)
                                -------------  -------------  ------------- 

Operating Expenses:
   General and administrative
    (includes $105, $274, and
    $70 non-cash stock based
    compensation, respectively)        (1,858)        (5,211)        (1,578)
   Management fee - related
    party                              (2,031)        (4,386)          (549)
                                -------------  -------------  ------------- 
Total Operating Expenses               (3,889)        (9,597)        (2,127)
                                -------------  -------------  ------------- 

                                -------------  -------------  ------------- 
Net Income (Loss)                      70,397        116,917         (1,886)
                                -------------  -------------  ------------- 
Net Income/(Loss)
 Available/(Allocable) to
 Common Stock and Participating
 Securities                     $      70,397  $     116,917  $      (1,886)
                                =============  =============  ============= 

Earnings (Loss) per Common
 Share - Basic and Diluted      $        2.91  $        6.28  $       (0.18)
                                =============  =============  ============= 

Dividend Declared per Share of
 Common Stock                   $        0.85  $        2.35  $           - 
                                =============  =============  ============= 


    
 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
and nine months ended September 30, 2012 and Effective Cost of Funds for
the three months ended September 30, 2012, 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. Effective Cost of Funds includes the net interest component
related to the Company's Swaps. While the Company has not elected hedge
accounting for its Swaps, such derivative instruments are viewed by the
Company as an economic hedge against increases in future market interest
rates. 

    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 and nine months ended September 30, 2012, are as
follows:

    (Table 5) 

    The following table reconciles Operating Earnings with net income for the
three and nine months ended September 30, 2012 (dollar amounts in
thousands except share and per share data): 

                               Three Months ended      Nine Months ended
                               September 30, 2012      September 30, 2012
                             ----------------------  ---------------------- 
                                           Earnings                Earnings 
                                          Per Share               Per Share 
                                          (Diluted)               (Diluted) 
                             -----------  ---------  -----------  --------- 
Net income - GAAP            $    70,397  $    2.91  $   116,917  $    6.28 
Adjustments:
  Non-cash stock-based
   compensation expense              105          -          274       0.01 
  Unrealized (gain)/loss on
   RMBS, net                     (54,913)     (2.27)     (75,461)     (4.05)
  Unrealized (gain)/loss on
   derivatives, net                9,831       0.40       24,192       1.30 
  Realized gain on sale of
   RMBS, net                     (13,861)     (0.57)     (32,244)     (1.73)
  Realized loss on Swap
   terminations                    4,747       0.20        4,709       0.25 
                             -----------  ---------  -----------  --------- 
Total adjustments to net
 income:                         (54,091)     (2.24)     (78,530)     (4.22)
                             -----------  ---------  -----------  --------- 
Operating Earnings           $    16,306  $    0.67  $    38,387  $    2.06 
                             ===========  =========  ===========  ========= 

Basic and diluted weighted
 average common shares
 outstanding:                 24,214,410              18,628,087


    
(Table 6)
 The following table reconciles the Effective Cost of Funds
with interest expense for the three months ended September 30, 2012
(dollar amounts in thousands):

                                              For the Three Months Ended
                                                  September 30, 2012
                                           ---------------------------------
                                                             Effective Cost
                                            Reconciliation      of Funds
                                           ---------------- --------------- 
Interest expense                           $          4,289             0.7%
Adjustment:
  Net interest for Swaps                              2,075             0.3%
                                           ---------------- --------------- 
Effective Cost of Funds                    $          6,364             1.0%
                                           ================ =============== 
Weighted average repurchase borrowings     $      2,625,055

    


CONTACT: 
Hilary Ginsberg 
(212) 822-0767 

Copyright 2012, Marketwire, All rights reserved.

-0-
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.