Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Apollo Residential Mortgage, Inc. | d496154d8k.htm |
| EX-99.1 - EX-99.1 - Apollo Residential Mortgage, Inc. | d496154dex991.htm |
 March 7, 2013
Q4 2012
Exhibit 99.2
Information is as of December 31, 2012 except as otherwise
noted. It should not be assumed that investments made
in the future will be profitable or will equal the performance of investments in this document.
Supplemental Financial Information Presentation
|
 2
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Apollo Residential Mortgage, Inc.
2012 Fourth Quarter Earnings Call
March 7, 2013
Michael A. Commaroto
Chief Executive Officer
Stuart Rothstein
Chief Financial Officer
Keith Rosenbloom
Agency Portfolio Manager
Paul Mangione
Non-Agency Portfolio Manager
Teresa Covello
Controller of the Manager
Hilary Ginsberg
Investor Relations Manager |
 3
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
We make forward-looking statements in this presentation and other
filings we make with the SEC within the meaning of 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 our control. These forward-looking statements include
information about possible or assumed future results of our business,
financial condition, liquidity, results of operations, plans and
objectives,
including
information
about
our
ability
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.
The forward-looking statements are based on our beliefs,
assumptions and expectations of our future performance, taking into account all
information currently available to us. Forward-looking statements
are not predictions of future events. These beliefs, assumptions and
expectations
can
change
as
a
result
of
many
possible
events
or
factors,
not
all
of
which
are
known
to
us.
Some
of
these
factors
are
described
in the Company's Annual Report on Form 10-K for the year ended
December 31, 2011 and other filings with the Securities and Exchange
Commission. If a change occurs, our business, financial condition,
liquidity and results of operations may vary materially from those
expressed
in
our
forward-looking
statements.
Any
forward-looking
statement
speaks
only
as
of
the
date
on
which
it
is
made.
New
risks
and
uncertainties
arise
over
time,
and
it
is
not
possible
for
us
to
predict
those
events
or
how
they
may
affect
us.
Except
as
required
by
law,
we
are
not
obligated
to,
and
do
not
intend
to,
update
or
revise
any
forward-looking
statements,
whether
as
a
result
of
new
information,
future
events or otherwise.
This presentation may contain statistics and other data that in some
cases has been obtained from or compiled from information made
available by third-party service providers.
Forward Looking Statements |
 4
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Discussion Topics
1. AMTG Q4 Results
2. Supplemental Financials |
 5
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Fourth Quarter and Full Year 2012 Highlights
Reported
Operating
Earnings
of
$15.7
million,
or
$0.65
per
common
share
for
the
fourth
quarter
of
2012
(1)
Reported book value per common share of $22.49, an increase of 4.8%
over book value per common share of $21.46 at September 30,
2012 Declared
a
$0.70
per
common
share
quarterly
dividend
and
a
$0.35
per
common
share
special
dividend
for
stockholders of record as of December 31, 2012
–
12.2% annualized dividend yield based on AMTG’s closing price of
$22.91 on March 5, 2013 $4.23 billion residential mortgage backed
securities (“RMBS”) portfolio at December 31, 2012 consisted of Agency
RMBS with an estimated fair value of $3.63 billion and non-Agency
RMBS with an estimated fair value of $605.2 million
–
2.7%
blended
net
interest
spread
and
17.3%
levered
asset
yield
at
December
31,
2012
(2)
Agency RMBS pass-through securities experienced prepayments at an
average one month constant prepayment rate (“CPR”) of
5.6% over the quarter ended December 31, 2012. Including Agency Interest-Only Securities (“Agency
IOs”) and Agency Inverse Interest-Only Securities
(“Agency IIOs”), the Agency RMBS portfolio experienced
prepayments
at
an
average
one
month
CPR
of
5.8%
over
the
quarter
ended
December
31,
2012
Realized net gains of $7.6 million, or $0.31 per common share from the
sale of $203.6 million of RMBS 56%
cumulative total return to common shareholders in 2012, comprised of
stock price appreciation and dividends of $3.40 per common
share (1) Operating Earnings and Operating Earnings per common
share are non-GAAP financial measures. Operating Earnings and Operating Earnings per common share presented exclude, as applicable: (i) realized and unrealized gains and losses recognized through
earnings; (ii) non-cash equity compensation; (iii) one time events
pursuant to changes in GAAP; and (iv) certain other non-cash charges. Please see slide 18 for a reconciliation of Operating Earnings and Operating Earnings per common share to GAAP net
income and GAAP net income per common share. Operating Earnings
represents the earnings, as adjusted, allocable to common stock.
(2) Levered Asset Yield calculated as Net Interest Spread multiplied by
the Company’s leverage (debt/equity) multiple, plus the weighted average unlevered yield on RMBS. |
 6
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Financial Summary
($ amounts in thousands except per share data)
Q4 2012
Q4 2011
FY 2012
Interest Income
$33,578
$9,178
$94,369
Interest Expense
(6,110)
(995)
(14,631)
Net Interest Income
$27,468
$8,183
$79,738
Operating
Earnings
(1)
$15,682
$5,225
$53,358
Weighted Average Fully Diluted Common Shares Outstanding
24,167,506
10,301,250
19,984,233
Operating
Earnings
per
Common
Share
(1)
$0.65
$0.51
$2.67
Leverage (Debt / Equity)
5.1x
5.9x
Annualized
Return
on
Average
Assets
(2)
1.9%
1.8%
Annualized
Return
on
Average
Equity
(2)
10.8%
10.4%
(1)
Operating Earnings and Operating Earnings per share are non-GAAP
financial measures. Operating Earnings and Operating Earnings per 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. Please see slide 18 for a reconciliation of Operating
Earnings and Operating Earnings per share to GAAP net income and GAAP
net income per share. Operating Earnings represents the earnings, as adjusted, allocable to common stock.
(2)
Return on Assets is calculated as annualized Operating Earning plus
preferred dividend requirement for the quarter, as a percentage of average assets. Return on Equity is calculated as annualized Operating
Earnings plus preferred dividend requirement for the quarter, as a
percentage of average equity |
 7
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Financial Summary
(2)
$0.30
$0.75
$0.75
$0.85
$0.70
$0.35
$0.00
$0.25
$0.50
$0.75
$1.00
$1.25
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
$19.92
$19.31
$19.65
$21.46
$22.49
$16.00
$18.00
$20.00
$22.00
$24.00
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
(3)
$0.51
$0.78
$0.66
$0.67
$0.65
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
Q4 2011
Q1 2012
Q2 2012
Q32012
Q4 2012
Operating
Earnings
per
Common
Share
(1)
Dividend per Common Share
Book Value per Common Share
(1)
Operating Earnings and Operating Earnings per common share are
non-GAAP financial measures. 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.
Please see slide 18 for a reconciliation of Operating Earnings and
Operating Earnings per common share to GAAP net income and GAAP net income per common share. Operating Earnings represents
the earnings, as adjusted, allocable to common stock.
(2)
The common stock dividend in the fourth quarter of 2012 consisted of a
$0.70 per common share quarterly dividend and a $0.35 per common share special dividend.
(3)
Pro-forma book value per common share at March 31, 2012 including
the impact of the April 20, 2012 equity offering. Book value per common share at March 31, 2012 was $21.09. |
 8
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Portfolio Summary and Net Interest Spread
(1)
Percentages reflect amount of equity allocated to Agency and
non-Agency RMBS, net of associated assets and liabilities (the fair value on
Swaps are allocated to Agency RMBS). Cash and other net, represents cash
and other assets and liabilities not specifically allocable to
Agency or non-Agency RMBS.
Agency RMBS
59%
Non-Agency
RMBS
25%
Cash and
Other, net
16%
(2) Debt/Equity ratios are adjusted for cash held to meet margin
calls and certain other assets and liabilities specifically
allocable to Agency or non-Agency RMBS. In prior
presentations, cash and certain other assets and liabilities not
specifically allocable to Agency or non-Agency RMBS were allocated
based on a proportional breakdown of equity allocated to Agency
and non-Agency RMBS portfolios. We believe that the new presentation better reflects our leverage by
asset class.
(3) Levered Asset Yield calculated as Net Interest Spread
multiplied by the Company’s leverage (debt/equity) multiple, plus the
weighted average unlevered yield on RMBS.
Agency
Non-
Agency
Blended
Asset Yield
2.7%
7.9%
3.4%
Interest Expense
0.5%
2.1%
0.7%
Net Interest Spread
2.2%
5.8%
2.7%
Debt / Equity
(2)
7.6x
2.4x
5.1x
Levered Asset Yield
(3)
19.6%
21.8%
17.3%
Allocation
of
Portfolio
Equity
at
12/31/2012
(1)
Net Interest Spread at 12/31/2012 |
 9
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Agency Portfolio
Agency portfolio continues to focus on securities with
prepayment mitigation attributes such as lower loan
balance and those that have already accessed the
Home Affordable Refinance Program (“HARP”).
(1)
Other includes HARP/MHA 15 Year Pass-Throughs, New Production
20-Year Pass Throughs, Interest Only Securities and Inverse Interest Only Securities.
6.0%
3.7%
5.2%
5.8%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Total Agency Portfolio average one month CPR
($ in thousands)
Estimated Fair Value
Q4 2012 CPR
Agency Fixed Rate
3,572,168
$
5.6
%
Agency IOs and Agency IIOs
53,926
20.3
Total
3,626,094
$
5.8
%
Q4 2012 Agency Portfolio
Constant Prepayment Rates |
 10
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Agency Securities as of December 31, 2012
(1)
Includes unsettled purchases with an aggregate cost of $49,965 and
estimated fair value of $50,043 at December 31, 2012. (2)
Amortized cost is reduced by unrealized losses that are classified as
other-than-temporary impairments. The Company recognized other-than-temporary impairments of $5,475 for the twelve months ended December 31, 2012.
(3)
Weighted average yield at the date presented incorporates estimates for
future prepayment assumptions on all RMBS and loss assumptions on non-Agency RMBS.
(4)
Agency IOs and Agency IIOs have no principal balance and bear interest
on a notional balance. The notional balance is used solely to determine interest distributions on interest-only class of securities.
Agency Portfolio Composition Summary
($ in thousands)
Principal Balance
Unamortized
Premium
(Discount),
Net
Amortized Cost
(1)(2)
Estimated Fair
Value
(1)
Net Weighted
Average
Coupon
Weighted
Average
Yield
(3)
Agency RMBS:
30 Year Mortgages
Coupon Rate
3.5%
1,228,402
$
78,623
$
1,307,025
$
1,318,375
$
3.5
%
2.4
%
4.0%
1,406,138
113,864
1,520,002
1,543,258
4.0
2.6
4.5% and 5.0%
271,764
17,016
288,780
302,156
4.5
3.1
Total 30 Year Mortgages
2,906,304
209,503
3,115,807
3,163,789
3.8
2.5
15-20 Year Mortgages
Coupon Rate
159,605
7,181
166,786
169,172
3.0
2.0
3.5%
221,949
12,883
234,832
239,207
3.5
2.3
Total 15-20 Year Mortgages
381,554
20,064
401,618
408,379
3.3
2.2
Agency IOs and IIOs
(4)
-
-
53,996
53,926
5.9
13.3
Total Agency RMBS
3,287,858
$
229,567
$
3,571,421
$
3,626,094
$
4.0
%
2.7
%
3.0% |
 11
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Non-Agency portfolio continues to focus on seasoned,
sub-prime assets with significant credit enhancement,
Alt-A and pay-option adjustable rate mortgages.
Non-Agency Portfolio
The vintage of the non-Agency portfolio is evenly
distributed between RMBS originated during 1999
through 2005 and RMBS originated during 2006
through 2007.
Subprime
80%
Pay-option
ARM
8%
Alt-A
12%
1999
-2002
3%
2003
6%
2004
26%
2005
19%
2006
31%
2007
15%
Q4 2012 Non-Agency Portfolio
Q4 2012 Non-Agency Portfolio Vintage |
 12
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Non-Agency Securities as of December 31, 2012
(1) Credit enhancement is expressed as a percentage of all
outstanding mortgage loan collateral. The Company's RMBS may incur losses if credit enhancement is reduced to zero.
(2) Information is based on loans for individual groups owned by
the Company. Amounts presented reflect the weighted average monthly performance for the three months ended December 31, 2012.
12/31/12
Holdings
Portfolio Characteristics
Estimated Fair Value ($ in thousands)
$605,197
Amortized Cost to Par Value
67.2%
Net Weighted Average Coupon
1.2%
Collateral Attributes
Weighted Average Loan Age (months)
91.0
Weighted Average Original Loan-to-Value
82.6%
Weighted Average Original FICO Credit Score
640
Current Performance
60+ Day Delinquencies
35.7%
Average Credit Enhancement
(1)
28.0%
3 Month CPR
(2)
2.7% |
 13
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Term to Maturity ($ in thousands)
Notional
Amount
Average Fixed
Pay Rate
Average
Maturity
(Years)
Greater than 1 year and less than 3 years
-
$
-%
-
Greater than 3 years and less than 5 years
1,245,000
1.1
4.4
Greater than 5 years
255,000
1.9
9.6
Total
1,500,000
$
1.2%
5.3
Financing Overview
Agency portfolio financed with repurchase agreement
borrowings employing leverage of approximately 6 to
10 times
Non-Agency portfolio financed with repurchase
agreement borrowings employing leverage of
approximately 1 to 3 times
Interest rate risk associated with Agency RMBS
borrowings mitigated primarily with 5-year interest
rate swaps (“Swaps”)
In the fourth quarter, to further mitigate interest rate
risk, the Company entered into an option to exercise a
Swap at a later date (“Swaption”)
Financing / Hedging Summary
Financing
Interest Rate Swaps
Derivative Instruments
($ in thousands)
Notional Amount
Estimated Fair
Value
Swaps, assets - interest rate
derivatives
-
$
-
$
Swaption - assets - interest rate
derivatives
75,000
750
Swaps, liabilities - interest rate
derivatives
1,500,000
(23,184)
Total derivative
instruments 1,575,000
$
(22,434)
$
Collateral ($ in
thousands) Repurchase
Agreement
Borrowing
Weighted
Average
Borrowing Rate
Weighted
Average
Remaining
Maturity
(days)
Agency RMBS
$3,223,577
0.5%
15
Non-Agency RMBS
430,859
2.1%
58
Total
$3,654,436
0.7%
20 |
 14
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Counterparty Summary
(1)
Represents the amount of cash and/or securities pledged as collateral to
each counterparty less the aggregate of repurchase agreement borrowings and unrealized loss on Swaps for each counterparty, net of collateral pledged.
(2)
Includes foreign based counterparties as well as U.S. domiciled
subsidiaries of such counterparties, as such transactions are generally entered into with a U.S. domiciled subsidiary of such counterparties.
($ in thousands)
Number of
Counterparties
Repurchase
Agreement
Borrowings
Swaps and
Swaptions at
Fair Value
Exposure
(1)
Exposure as
Percentage of
Total Assets
North America
United States
8
2,004,620
$
(15,025)
$
207,406
$
4.6
%
Canada
(2)
1
116,381
-
56,025
1.2
Total North America
9
2,121,001
(15,025)
263,431
5.8
Europe
(2)
Germany
1
268,446
$
-
$
17,944
$
0.4
%
Switzerland
2
284,706
-
26,614
0.6
United Kingdom
2
292,355
(6,716)
22,486
0.5
Netherlands
1
122,334
-
6,881
0.2
Total Europe
6
967,841
(6,716)
73,925
1.7
Asia
(2)
Japan
2
565,594
$
(693)
$
32,343
$
0.7
%
Total Asia
2
565,594
(693)
32,343
0.7
Total Counterparty Exposure
17
$
$
$
8.2
%
3,654,436
(22,434)
369,699 |
 15
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Discussion Topics
1. AMTG Q4 Results
2. Supplemental Financials |
 16
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
July 27, 2011
(commencement of
Twelve months ended
operations) through
(in thousands—except share and per share data)
December 31,
September 30,
2012
2011
2012
2011
Net Interest Income:
Interest income
33,578
$
9,178
$
94,369
$
10,733
$
Interest expense
(6,110)
(995)
(14,631)
(1,138)
Net Interest Income
27,468
8,183
79,738
9,595
Other Income/(Loss):
Realized gain on sale of RMBS, net
7,573
550
39,817
885
$
Unrealized gain on
RMBS, net 24,941
3,765
100,402
2,482
Gain/(loss) on interest rate derivative instruments, net (includes
$4,041, ($3,138), ($20,151) and ($3,246) of unrealized
gains/(losses), respectively)
821
(3,653)
(32,665)
(3,876)
Interest income on cash balances
23
2
48
2
Other Income/(Loss), net
33,358
664
107,602
(507)
Operating Expenses:
General and administrative (includes $170, $73, $444 and $143 of
non-cash stock based compensation, respectively)
(2,569)
(1,705)
(7,780)
(3,283)
Management fees -
related party
(2,418)
(784)
(6,804)
(1,333)
Total Operating Expenses
(4,987)
(2,489)
(14,584)
(4,616)
Net Income
55,839
6,358
172,756
4,472
Preferred Stock Dividends Declared
(5,022)
-
(5,022)
-
Net Income Available to Common Stock and
Participating Securities
50,817
$
6,358
$
167,734
$
4,472
$
Earnings
per
Common
Share
-
Basic
and
Diluted
2.09
$
0.62
$
8.36
$
0.43
$
Dividend Declared per Share of Common
Stock 1.05
$
0.30
$
3.40
$
0.30
$
Three months ended
December 31,
Income Statement |
  17
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Balance Sheet
(in thousands—except share and per share data)
December 31, 2012
December 31, 2011
Assets:
Cash
149,576
$
44,407
$
Restricted cash
93,641
10,402
RMBS, at
fair value ($3,940,913 and $1,167,487 pledged as collateral, respectively)
4,231,291
1,240,472
Investment related
receivable -
116,678
Interest
receivable 11,341
3,908
Deferred financing costs, net
346
455
Interest rate derivative instruments, at fair value
750
235
Other assets
976
370
Total Assets
4,487,921
$
1,416,927
$
Liabilities and Stockholders' Equity
Liabilities:
Borrowings under repurchase agreements
3,654,436
$
1,079,995
$
Investment related payable
50,032
121,144
Accrued interest
payable 6,774
1,123
Interest rate derivative instruments, at fair value
23,184
3,481
Accounts payable and accrued expenses
1,742
1,534
Payable to related party
4,295
1,974
Dividends payable
30,675
3,090
Total Liabilities
3,771,138
1,212,341
Stockholders' Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized and
6,900,000 and 0 shares issued and outstanding, respectively
($172,500 aggregate liquidation preference at December 31, 2012)
69
-
Common stock, $0.01 par value, 450,000,000 shares authorized,
24,205,972 and 10,271,562 shares issued and outstanding
respectively 242
103
Additional paid-in-capital
619,399
203,101
Retained earnings
97,073
1,382
Total Stockholders' Equity
716,783
204,586
Total Liabilities and
Stockholders' Equity 4,487,921
$
1,416,927
$
|
 18
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Operating
Earnings
(1)
Reconciliation
(1)
Operating Earnings and Operating Earnings per common share are
non-GAAP financial measures. 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 the earnings, as adjusted, allocable to common stock
(2)
Reflects basic and diluted earnings per share for each component
presented.
Basic and diluted weighted average common shares outstanding
(in thousands—except share and per share data)
December 31, 2012
Earnings per
Share
(2)
Operating Earnings:
Net income allocable to common stockholders
$167,123
$8.36
Adjustments:
Non-cash stock-based compensation expense
444
0.02
Preferred dividend declared related to future periods
1,150
0.06
Unrealized gain on RMBS, net
(100,402)
(5.02)
Unrealized loss on derivatives, net
20,151
1.01
Realized gain on sale of RMBS, net
(39,817)
(1.99)
Realized loss on Swap terminations, net
4,709
0.24
Total adjustments to net income:
(113,765)
(5.69)
Operating Earnings
$53,358
$2.67
19,984,233
Twelve Months Ended
10,301,250
(in thousands—except share and per share data)
December 31, 2012
Earnings per
Share
(2)
December 31, 2011
Earnings per
Share
(2)
Operating Earnings:
Net income allocable to common stockholders
$50,495
$2.09
$6,329
$0.62
Adjustments:
Non-cash stock-based compensation expense
170
0.01
73
0.01
Preferred dividend declared related to other periods
1,572
0.06
-
-
Unrealized gain on RMBS, net
(24,941)
(1.03)
(3,765)
(0.36)
Unrealized (gain)/loss on derivatives, net
(4,041)
(0.17)
3,138
0.30
Realized gain on sale of RMBS, net
(7,573)
(0.31)
(550)
(0.06)
Total adjustments to net income:
(34,813)
(1.44)
(1,104)
(0.11)
Operating Earnings
$15,682
$0.65
$5,225
$0.51
Basic and diluted weighted average common shares outstanding
24,167,506
Three Months Ended
Three Months Ended |
 19
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Contact Information
Hilary Ginsberg
Investor Relations Manager
212-822-0767 |