HOME      |     AGM.COM

Investor Toolkit

Print PagePrint Page
E-mail PageE-mail Page
RSS FeedsRSS Feeds
E-mail AlertsE-mail Alerts

News Release

<< Back
Apollo Residential Mortgage, Inc. Reports First Quarter 2012 Financial Results
53% Increase in Operating Earnings per Share

NEW YORK, NY, May 08, 2012 (MARKETWIRE via COMTEX) --Apollo Residential Mortgage, Inc. (the "Company") (NYSE: AMTG) today reported Operating Earnings (a non-GAAP financial measure as defined below) of $8.0 million, or $0.78 per share, for the three months ended March 31, 2012. Net income for the same period was $20.1 million or $1.95 per share. The difference between Operating Earnings and net income was due primarily to net realized gains recognized from the sale of residential mortgage-backed securities ("RMBS") as well as unrealized gains on the value of the Company's RMBS portfolio at quarter end. A reconciliation of Operating Earnings to net income is set forth in this press release.

First Quarter Highlights:

--  Increased Operating Earnings per share by 53% on a sequential quarter

--  Realized net gains of $6.8 million, or $0.66 per share, from the sale
    of $390.9 million of RMBS;

--  $1.3 billion RMBS portfolio at March 31, 2012 consisted of Agency RMBS
    with an estimated fair value of $1.2 billion and non-Agency RMBS with
    an estimated fair value of $179 million;

--  RMBS portfolio had a 2.9% blended net interest spread and a 20.5%
    levered asset yield(1) at March 31, 2012;

--  Fixed-Rate Agency RMBS portfolio experienced prepayments at a three
    month average constant prepayment rate ("CPR") of 5%; Including
    adjustable rate RMBS and Agency Derivatives, the Agency RMBS portfolio
    experienced prepayments at a three month average CPR of 6%;

--  Declared a $0.75 per share quarterly dividend for stockholders of
    record as of March 31, 2012; and

--  Book value per share at March 31, 2012 was $21.09 as compared to
    $19.92 at December 31, 2011, a 6% increase.

(1) Levered asset yield is calculated as net interest spread multiplied by 1 + the leverage (debt/equity) multiple.

"This was the first complete quarter the Company has been fully invested since our initial public offering and we believe our strong financial performance reflects the quality of our Agency and non-Agency asset selection, as well as the benefits of our financing strategy," said Stuart Rothstein, Chief Financial Officer of the Company. "Significantly, our book value per share increased 6% on a sequential basis over last quarter, primarily driven by realized as well as unrealized gains from our portfolio."

Portfolio Summary The following table sets forth additional detail regarding the Company's portfolio as of March 31, 2012:

Residential Mortgage-Backed Securities
(dollars in thousands)
                                                          Weighted Weighted
                        Unamortized  Amortized  Estimated  Average  Average
              Principal   Premium      Cost    Fair Value  Coupon    Yield
               Balance   (Discount)   (1)(2)       (1)       (3)      (4)
------------ ---------- ----------- ---------- ---------- -------- --------
Agency RMBS:
15 year
 fixed-rate  $  191,819 $     8,260 $  200,079 $  201,480      3.3%     2.3%
30 year
 fixed-rate     801,529      48,412    849,941    856,449      4.2%     3.1%
 mortgages       81,898       4,149     86,047     86,848      2.5%     1.1%
 (5)            102,944     (90,513)    12,431     12,790      4.0%    12.8%
             ---------- ----------- ---------- ---------- -------- --------
Total Agency
 RMBS         1,178,190     (29,692) 1,148,498  1,157,567      3.9%     2.9%
             ---------- ----------- ---------- ---------- -------- --------

 RMBS           260,171     (83,656)   176,515    178,969      1.1%     9.4%
             ---------- ----------- ---------- ---------- -------- --------
Total        $1,438,361 $  (113,348)$1,325,013 $1,336,536      3.4%     3.8%
             ========== =========== ========== ========== ======== ========

(1) Includes unsettled purchases with an aggregate cost of $93 and estimated fair value of $102 at March 31, 2012. (2) Amortized cost includes unrealized losses of $971 that have been reclassified pursuant to GAAP. (3) Net weighted average coupon is presented net of servicing and other fees. (4) Weighted average yield incorporates future prepayment and loss assumptions, as applicable. (5) Agency Derivatives include interest only securities and inverse interest only securities.

The Company's fixed-rate Agency RMBS portfolio experienced prepayments at a three month average CPR of 5%. Including adjustable rate RMBS and Agency Derivatives, the Agency RMBS portfolio experienced a three month average CPR of 6%.

The Company's non-Agency RMBS investments consist primarily of seasoned, sub-prime securities. The weighted average cost basis of the Company's non-Agency RMBS portfolio was 68% of par as of March 31, 2012.

Commenting on the Company's portfolio, Michael Commaroto, the Company's Chief Executive Officer, said: "We believe we have constructed a well-diversified portfolio of both Agency and non-Agency securities. As we grow and manage our Agency portfolio, we continue to focus on securities we expect will provide us with the best protection against prepayments and with the least amount of premium over generic securities. Consistent with this emphasis, as spreads continued to tighten throughout the first quarter, we moved down in coupon by selling some of our Agency 5.0% and all of our Agency 5.5% RMBS and purchased Agency 4.0% and Agency 4.5% RMBS. In addition, we sold some of our hybrid adjustable rate RMBS. As a result of these sales, as well as additional sales in our non-Agency portfolio, we realized net gains of $6.8 million, or $0.66 per share in the first quarter."

Mr. Commaroto continued: "With respect to our non-Agency portfolio, we continue to invest in RMBS with significant credit enhancement in the form of structural subordination or perceived equity in the underlying property value. In the event credit enhancement is not available, we seek to invest in RMBS trading at a deep enough discount such that we believe we are adequately compensated for the moderate increase in risk profile."

Portfolio Financing At March 31, 2012, the Company had outstanding borrowings with 14 counterparties totaling $1.2 billion and had entered into master repurchase agreements with 18 counterparties representing over $4 billion of potential funding capacity.

The following table sets forth the Company's borrowings as of March 31, 2012:

                                  Amount         Average     Effective Cost
         Collateral            Outstanding    Interest Rate    of Funds(1)
---------------------------- --------------- --------------  --------------
Agency RMBS                  $     1,040,848            0.3%            0.7%
Non-Agency RMBS                      130,329            1.9%            2.0%
                             --------------- --------------  --------------
Total                        $     1,171,177            0.5%            0.8%
                             =============== ==============  ==============

(1) The effective cost of funds for the period presented is a non-GAAP financial measure. See the accompanying Reconciliation of non-GAAP Financial Measures.

Book Value The Company's book value per share at March 31, 2012 was $21.09, an increase of $1.17 or 6% from the per share book value of $19.92 at December 31, 2011.

The following table sets forth the factors causing the increase in the Company's book value per share from December 31, 2011 to book value per share at March 31, 2012:

Book Value - December 31, 2011                 $   19.92
  Common stock dividends declared                  (0.75)
  Operating Earnings                                0.78
  Equity offering costs                            (0.04)
Non-Operating Items Impacting Net Income
  Unrealized gain on Agency RMBS, net               0.28
  Unrealized gain on non-Agency RMBS, net           0.30
  Unrealized loss on derivatives, net              (0.06)
  Realized gain on sales of Agency RMBS             0.33
  Realized gain on sales of non-Agency RMBS         0.33
Book Value - March 31, 2012                    $   21.09

Subsequent Events On April 20, 2012, the Company completed a follow-on public offering of 13.9 million shares of common stock at a price of $18.00 per share, resulting in net proceeds to the Company of $249.5 million. The Company deployed the proceeds into Agency RMBS with an aggregate purchase price of approximately $1.4 billion and non-Agency RMBS with an aggregate purchase price of approximately $90.1 million as of April 30, 2012.

Teleconference and Website Presentation Details: The Company will be hosting a conference call to discuss its financial results on Wednesday, May 9, 2012 at 10:00 a.m. Eastern Time. Members of the public who are interested in participating in the Company's first 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 71495775). Please note the teleconference call will be available for replay beginning at 12:00 p.m. on Wednesday, May 9, 2012, and ending at midnight on Wednesday, May 16, 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 71495775.

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, finances and manages residential mortgage-backed securities, residential mortgage loans 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 $75 billion of assets under management at December 31, 2011.

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.

             Apollo Residential Mortgage, Inc. and Subsidiaries
              Condensed Consolidated Balance Sheet (Unaudited)
               (in thousands--except share and per share data)

                                                   March 31,    December 31,
                                                      2012          2011
                                                 ------------- -------------
  Cash                                           $      41,340 $      44,407
  Restricted cash                                       18,749        10,402
  RMBS, at fair value ($1,268,405 and $1,173,052
   pledged as collateral, respectively)              1,336,536     1,240,472
  Investment related receivable                          2,186       116,678
  Interest receivable                                    3,927         3,908
  Deferred financing costs, net                            430           455
  Derivative asset                                          83           235
  Other assets                                             203           370
                                                 ------------- -------------
Total Assets                                     $   1,403,454 $   1,416,927
                                                 ============= =============

Liabilities and Stockholders' Equity
  Borrowings under repurchase agreements         $   1,171,177 $   1,079,995
  Investment related payable                                93       121,144
  Accrued interest payable                               1,021         1,123
  Derivative liability                                   3,898         3,481
  Accounts payable and accrued expenses                  1,794         1,534
  Payable to related party                               1,062         1,974
  Dividend payable                                       7,733         3,090
                                                 ------------- -------------
Total Liabilities                                    1,186,778     1,212,341
                                                 ------------- -------------

Stockholders' Equity:
  Common stock, $0.01 par value, 450,000,000
   shares authorized, 10,273,125 and 10,271,562
   shares issued and outstanding in 2012 and
   2011, respectively                                      103           103
  Preferred stock, $0.01 par value, 50,000,000
   shares authorized and no shares outstanding               -             -
  Additional paid-in-capital                           202,796       203,101
  Retained earnings                                     13,777         1,382
                                                 ------------- -------------
Total Stockholders' Equity                             216,676       204,586
                                                 ------------- -------------
Total Liabilities and Stockholders' Equity       $   1,403,454 $   1,416,927
                                                 ============= =============

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

                                                              Three Months
                                                            ended March 31,

Net interest income:
  Interest income                                           $        12,363
  Interest expense                                                   (1,361)
Net interest income                                                  11,002

Other Income (Loss)
  Realized gain on sale of RMBS                                       6,769
  Unrealized gain on RMBS                                             5,950
  Loss on derivative instruments (includes $569 of
   unrealized losses)                                                (1,318)
  Interest income on cash balances                                        2
Other Income, net                                                    11,403

Operating Expenses
  General and administrative (includes $78 non-cash stock
   based compensation)                                               (1,488)
  Management fee - related party                                       (797)
Total operating expenses                                             (2,285)

Net income                                                  $        20,120

Basic and diluted net income per share of common stock      $          1.95

Basic and diluted weighted average common shares
 outstanding                                                     10,301,250

Dividend declared per share of common stock                 $          0.75

Reconciliations of Non-GAAP Financial Measures

This press release contains disclosures related to the Company's Operating Earnings, Operating Earnings per common share, and Effective Cost of Funds for the three months ended March 31, 2012, which constitutes non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. The Company's management believes these 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 months ended March 31, 2012, are as follows:

The following table reconciles Operating Earnings with net income for the three months ended March 31, 2012 and December 31, 2011 (dollar amounts in thousands except share and per share data):

                         Three Months ended March     Three Months ended
                                 31, 2012              December 31, 2011
                         ------------------------  ------------------------
                                        Earnings                  Earnings
                                       Per Share                 Per Share
                                       (Diluted)                 (Diluted)
                         -----------  -----------  -----------  -----------
Net income               $    20,120  $      1.95  $     6,358  $      0.62
  Non-cash stock-based
   compensation expense           78         0.01           73         0.01
  Unrealized gain on
   RMBS                       (5,950)       (0.58)      (3,765)       (0.36)
  Unrealized loss on
   derivatives                   569         0.06        3,138         0.30
  Realized gain on sale
   of RMBS                    (6,769)       (0.66)        (550)       (0.06)
                         -----------  -----------  -----------  -----------
Total adjustments to net
 income:                     (12,072)       (1.17)      (1,104)       (0.11)
                         -----------  -----------  -----------  -----------
Operating Earnings       $     8,048  $      0.78  $     5,254  $      0.51
                         ===========  ===========  ===========  ===========

Basic and diluted
 weighted average common
 shares outstanding:      10,301,250                10,301,250

The following table reconciles the Effective Cost of Funds with interest expense for the three months ended March 31, 2012 (dollar amounts in thousands):

                                           For the Three Months Ended March
                                                       31, 2012
                                                                Cost of
                                            Reconciliation  Borrowing Costs
                                           ---------------- ---------------
Interest expense                           $          1,361            0.50%
  Net interest for Swaps                                749            0.27%
                                           ---------------- ---------------
Effective Borrowing Costs                  $          2,110            0.77%
                                           ================ ===============
Weighted average repurchase borrowings     $      1,099,145

Hilary Ginsberg
(212) 822-0767

SOURCE: Apollo Residential Mortgage, Inc.