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8-K - FORM 8-K - Apollo Residential Mortgage, Inc.d624219d8k.htm
EX-99.2 - EX-99.2 - Apollo Residential Mortgage, Inc.d624219dex992.htm

Exhibit 99.1

 

LOGO

 

FOR IMMEDIATE RELEASE  
CONTACT: Hilary Ginsberg   NYSE: AMTG

              (212) 822-0767

 

APOLLO RESIDENTIAL MORTGAGE, INC. REPORTS

THIRD QUARTER 2013 FINANCIAL RESULTS

New York, NY, November 6, 2013 - Apollo Residential Mortgage, Inc. (the “Company”) (NYSE: AMTG) today reported financial results for the three and nine month periods ended September 30, 2013.

Third Quarter 2013 Summary

 

    Reported operating earnings(1) of $11.4 million, or $0.36 per common share, for the quarter ended September 30, 2013. Reported net income allocable to common stock and participating securities of $8.2 million, or $0.25 per common share, for the quarter ended September 30, 2013;

 

    $3.4 billion RMBS portfolio at September 30, 2013 consisted of Agency RMBS with an estimated fair value of $2.3 billion and non-Agency RMBS with an estimated fair value of $1.1 billion;

 

    RMBS and securitized mortgage loan portfolio had a 2.6% effective net interest rate spread and a 14.0% effective levered asset yield(1) at September 30, 2013;

 

    Quarter end leverage multiple of 3.8x at September 30, 2013;

 

    Declared a $0.40 per common share quarterly dividend;

 

    Book value per common share at September 30, 2013 was $18.50; and

 

    Subsequent to quarter end, the Board of Directors authorized the repurchase of up to $50 million of the Company’s outstanding shares of common stock.

 

(1)  Reflects a non-GAAP” financial measure (i.e., a measure that is not calculated in accordance with U.S. Generally Accepted Accounting Principles. See “Reconciliations of Non-GAAP Financial Measures” ) in this press release.

“Given the ongoing volatility in the fixed income markets during the third quarter, AMTG continued to rebalance the Company’s portfolio,” said Michael Commaroto, Chief Executive Officer of the Company. “Throughout the quarter, we opportunistically deployed capital into non-Agency RMBS and continued to reduce leverage. As a result, at quarter end, our portfolio equity was allocated 43% to non-Agency RMBS and securitized mortgage loans, 47% to Agency RMBS and 10% to cash and our leverage ratio was 3.8x. Our operating earnings this quarter reflect the time lag associated with reinvesting the proceeds from the sale of our Agency RMBS into non-Agency RMBS and therefore, we believe they are not indicative of the potential earnings power of our investment portfolio with our current equity allocation. As interest rates continue to fluctuate, AMTG will remain focused on expanding our footprint in the non-Agency market and exploring additional credit-related strategies.”

Third Quarter 2013 Financial Results

The Company reported operating earnings of $11.4 million, or $0.36 per common share, for the three months ended September 30, 2013, as compared to operating earnings of $16.2 million, or $0.67 per common share, for the three months ended September 30, 2012. Net income allocable to common stock and participating securities for the three months ended September 30, 2013 was $8.2 million, or $0.25 per common share, as compared to net income allocable to common stock and participating securities of $70.4 million, or $2.91 per common share for the three months ended September 30, 2012.

For the nine months ended September 30, 2013, the Company reported operating earnings of $49.4 million, or $1.65 per common share, as compared to operating earnings of $38.1 million, or $2.05 per common share, for the nine months ended September 30, 2012. Net loss allocable to common stock and participating securities for the nine months ended September 30, 2013 was $66.1 million, or $2.22 per common share, as compared to net income allocable to common stock and participating securities of $116.9 million, or $6.28 per common share, for the nine months ended September 30, 2012.


The difference between operating earnings and net income/(loss) allocable to common stockholders, its closest GAAP measure, primarily reflects that operating earnings excludes the following: (i) net unrealized gains/losses on investments; (ii) net changes in the fair value of derivative instruments and net realized gains/losses on the termination of derivative instruments; and (iii) net realized gains/losses from sales of investments. Reconciliations of operating earnings to net income/(loss) allocable to common stockholders for the three and nine months ended September 30, 2013 and September 30, 2012, respectively, are set forth in Tables 6 and 7 of this press release.

Portfolio Summary (Table 1)

The following table sets forth additional detail regarding the Company’s investments as of September 30, 2013:

 

     Principal
Balance
     Unamortized
Premium
(Discount),
Net (1)
    Amortized Cost (2)      Estimated
Fair Value
     Unrealized
Gain/(Loss)
    Net
Weighted
Average
Coupon
    Weighted
Average
Yield (3)
 
($ amounts in thousands)                                              

Agency RMBS:

                 

30-Year Mortgages

                 

ARM

   $ 12,337       $ 827      $ 13,164       $ 13,089       $ (75     4.09     1.77

Fixed-rate coupons:

                 

3.5%

     468,755         30,771        499,526         477,308         (22,218     3.50     2.49

4.0%

     1,514,596         131,741        1,646,337         1,587,384         (58,953     4.00     2.51

4.5% & 5.0%

     54,328         4,401        58,729         58,624         (105     4.59     3.12
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
     2,050,016         167,740        2,217,756         2,136,405         (81,351     3.90     2.52
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

15-Year Mortgages

                 

3.0% Coupons

     53,640         1,428        55,068         55,478         410        3.00     2.45
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Agency IOs (4)

     —           —          42,962         43,272         310        3.93     13.66
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Agency IIOs(4)

     —           —          28,403         25,367         (3,036     6.37     16.06
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total Agency RMBS

     2,103,656         169,168        2,344,189         2,260,522         (83,667     4.05     2.88
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Non-Agency RMBS

     1,356,359         (300,657     1,055,702         1,117,820         62,118        1.24     6.87
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total RMBS

   $ 3,460,015       $ (131,489   $ 3,399,891       $ 3,378,342       $ (21,549     3.11     4.11
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Securitized Mortgage Loans

   $ 151,383       $ (41,709   $ 109,674       $ 109,586       $ (88     5.86     8.19
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Other Investment Securities

   $ 11,596       $ —        $ 11,596       $ 11,712       $ 116        3.59     3.59
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total Portfolio

   $ 3,622,994       $ (173,198   $ 3,521,161       $ 3,499,640       $ (21,521     3.20     4.24
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Note: The Company applies trade-date accounting. Included in the above table are unsettled purchases with an aggregate cost of $91 at September 30, 2013, with an estimated fair value of $92 at such date.

 

(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 September 30, 2013, our non-Agency RMBS had gross discounts of $300,964 which included credit discounts of $123,681 and other-than-temporary impairments (“OTTI”) of $5,554.
(2)  Amortized cost is reduced by unrealized losses that are classified as OTTI. The Company recognized OTTI of $2,747 and $7,699 for the three and nine months ended September 30, 2013, 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. At September 30, 2013, the Company’s Agency IOs had a notional balance of $429,204 and the Company’s Agency IIOs had a notional balance of $155,676.

As of September 30, 2013, the average cost basis of the Company’s Agency RMBS portfolio, excluding Agency IOs and Agency IIOs, was 108.0% of par value and the average cost basis of the Company’s non-Agency RMBS portfolio was 77.8% 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 September 30, 2013 of 6.3%. Including Agency IOs and Agency IIOs securities, the Agency RMBS portfolio experienced prepayments at an average one month CPR of 6.7% over the quarter ended September 30, 2013.

 

2


Portfolio Financing

At September 30, 2013, the Company had master repurchase agreements with 23 counterparties and had outstanding borrowings with 17 counterparties totaling $2.9 billion.

(Table 2)

The following table sets forth the Company’s borrowings at September 30, 2013:

 

($ amounts in thousands)

   Balance      Weighted
Average
Borrowing
Rate
    Weighted Average
Remaining Maturity

Repurchase agreement borrowings:

       

Agency RMBS

   $ 1,989,518         0.41   40 days

Non-Agency RMBS(1)

     884,362         2.00      124 days

Other investment securities

     7,800         1.76      25 days
  

 

 

    

 

 

   

 

Total repurchase agreements

   $ 2,881,680         0.90   66 days
  

 

 

    

 

 

   

 

Securitized debt

   $ 45,590         4.00   58 months(2)
  

 

 

    

 

 

   

 

Total borrowings

   $ 2,927,270         0.95  
  

 

 

    

 

 

   

 

 

(1) Includes $27,014 of repurchase borrowings collateralized by non-Agency RMBS acquired in connection with the Company’s securitization transaction from a consolidated variable interest entity (“VIE”) at September 30, 2013 that is eliminated from our consolidated balance sheet.
(2)  Securitized debt, which represents non-recourse senior securities sold to third parties in connection with a securitization transaction, has a final contractual maturity of May 2047. Weighted average remaining maturity represents the estimated final maturity of the security based on the final projected repayment of principal. The actual maturity of the securitized debt may differ significantly from this estimate given that actual interest collections, mortgage prepayments and/or losses on liquidation of mortgages may differ significantly from those expected.

(Table 3)

The Company’s derivative instruments consisted of the following at September 30, 2013:

 

($ amounts in thousands)    Notional
Amount
     Estimated Fair
Value
 

Swaps – assets

   $ 1,187,000       $ 38,907   

Swaptions – assets

     1,175,000         13,757   

Swaps – (liabilities)

     680,000         (6,172
  

 

 

    

 

 

 

Total derivative instruments

   $ 3,042,000       $ 46,492   
  

 

 

    

 

 

 

(Table 4)

The following table summarizes the average fixed-pay rate and average maturity for the Company’s Swaps at September 30, 2013:

 

Term to Maturity ($ amounts in thousands)

   Notional
Amount
     Average
Fixed
Pay
Rate
    Average
Maturity
(Years)
 

Greater than 1 year to 3 years

   $ 45,000         1.30     2.9   

Greater than 3 years to 5 years

     1,114,000         1.05        3.8   

Greater than 5 years

     708,000         2.01        9.0   
  

 

 

    

 

 

   

 

 

 

Total

   $ 1,867,000         1.42     5.8   
  

 

 

    

 

 

   

 

 

 

 

3


(Table 5)

At September 30, 2013, the Company’s Swaptions had an aggregate notional amount of $1.2 billion. The following table presents information about the Company’s Swaptions at September 30, 2013:

 

($ amounts in thousands)    Option      Underlying Swap  

Fixed Pay Rate for Underlying Swap

   Fair Value      Weighted
Average
Months
Until
Option
Expiration
     Notional
Amount
     Swap
Terms
(Years)
 

3.00 – 3.25%

   $ 2,236         9       $ 100,000         10   

3.26 – 3.50%

     6,065         7         475,000         10   

3.51 – 3.75%

     3,277         7         375,000         10   

3.76 – 4.00%

     1,495         11         125,000         10   

4.01 – 4.41%

     684         11         100,000         10   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 13,757         8       $ 1,175,000         10   
  

 

 

    

 

 

    

 

 

    

 

 

 

Book Value

The Company’s book value per common share at September 30, 2013 was $18.50 as compared to book value per common share of $18.63 at June 30, 2013.

Stock Repurchase Plan

Subsequent to quarter end, the Board of Directors authorized the repurchase of up to $50 million of the Company’s outstanding shares of common stock.

Purchases made pursuant to the stock repurchase program will be made in either the open market or in privately negotiated transactions on a periodic basis as permitted by applicable securities laws. The timing, pricing and manner of any purchases will be determined by the Company in light of market conditions, available investment alternatives and capital availability.

Teleconference and Website Presentation Details:

The Company will be hosting a conference call to discuss its financial results on Thursday, November 7, 2013 at 9:00 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) 445-0818, or from outside the U.S., (724) 498-0351, shortly before 9:00 a.m. and reference the Apollo Residential Mortgage, Inc. Teleconference Call (number 79625205). Please note the teleconference call will be available for replay beginning at 12:00 p.m. on Thursday, November 7, 2013, and ending at midnight on Thursday, November 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 79625205.

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.

 

4


About Apollo Residential Mortgage, Inc.

Apollo Residential Mortgage, Inc 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 $113 billion of assets under management at June 30, 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.

 

5


Apollo Residential Mortgage, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands—except share and per share data)

 

     September 30, 2013     December 31, 2012  
     (Unaudited)        

Assets:

    

Cash

   $ 142,242      $ 149,576   

Restricted cash

     60,996        93,641   

RMBS, at fair value (of which $3,185,374 and $3,940,913 were pledged as collateral, respectively)

     3,378,342        4,231,291   

Securitized mortgage loans (transferred to a consolidated VIE), at fair value

     109,586        —     

Other investment securities, at fair value (of which $11,712 and $0 were pledged as collateral, respectively)

     11,712        —     

Investment related receivables

     3,684        —     

Interest receivable

     10,048        11,341   

Deferred financing costs, net

     914        346   

Derivative instruments, at fair value

     52,664        750   

Other assets

     956        976   
  

 

 

   

 

 

 

Total Assets

   $ 3,771,144      $ 4,487,921   
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Liabilities:

    

Borrowings under repurchase agreements

   $ 2,881,680      $ 3,654,436   

Non-recourse securitized debt, at fair value

     46,003        —     

Investment related payables

     91        50,032   

Obligation to return cash held as collateral

     42,381        —     

Accrued interest payable

     7,155        6,774   

Derivative instruments, at fair value

     6,172        23,184   

Payable to related party

     3,770        4,295   

Dividends payable

     16,714        30,675   

Accounts payable and accrued expenses

     2,135        1,742   
  

 

 

   

 

 

 

Total Liabilities

   $ 3,006,101      $ 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, 32,037,408 and 24,205,972 shares issued and outstanding, respectively

     320        242   

Additional paid-in-capital

     791,619        619,399   

Retained earnings/(accumulated deficit)

     (26,965     97,073   
  

 

 

   

 

 

 

Total Stockholders’ Equity

   $ 765,043      $ 716,783   
  

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 3,771,144      $ 4,487,921   
  

 

 

   

 

 

 

 

6


Apollo Residential Mortgage, Inc. and Subsidiaries

Consolidated Statements of Operations (Unaudited)

(in thousands – except per share data)

 

    

Three months ended

September 30,

   

Nine months ended

September 30,

 
     2013     2012     2013     2012  

Interest Income:

        

RMBS

   $ 32,013      $ 26,438      $ 107,959      $ 60,791   

Securitized mortgage loans

     2,324        —          5,954        —     

Other investment securities

     79        —          79        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Interest Income

     34,416        26,438        113,992        60,791   
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest Expense:

        

Repurchase agreements

     (6,299     (4,289     (18,935     (8,521

Securitized debt

     (490     —          (1,308     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Interest Expense

     (6,789     (4,289     (20,243     (8,521
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Interest Income

   $ 27,627      $ 22,149      $ 93,749      $ 52,270   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other Income/(Loss):

        

Realized gain/(loss) on sale of RMBS, net

   $ (16,596   $ 13,861      $ (48,309   $ 32,244   

Unrealized gain/(loss) on RMBS, net

     28,143        54,913        (139,727     75,461   

Unrealized gain/(loss) on securitized mortgage loans

     537        —          (88     —     

Unrealized (loss) on securitized debt

     (428     —          (413     —     

Unrealized gain on other investment securities

     116        —          116        —     

Gain/(loss) on derivative instruments, net (includes ($27,572), (9,831), $50,547 and ($24,192) of unrealized gains/(losses), respectively)

     (21,687     (16,653     55,884        (33,486

Other, net

     4        16        72        25   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other Income/(Loss), net

   $ (9,911   $ 52,137      $ (132,465   $ 74,244   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Expenses:

        

General and administrative (includes $207, $105, $752 and $274 of non-cash stock based compensation, respectively)

   $ (3,089   $ (1,858   $ (8,374   $ (5,211

Management fee – related party

     (2,941     (2,031     (8,651     (4,386
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Expenses

   $ (6,030   $ (3,889   $ (17,025   $ (9,597
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income/(Loss)

   $ 11,686      $ 70,397      $ (55,741   $ 116,917   
  

 

 

   

 

 

   

 

 

   

 

 

 

Preferred Stock Dividends Declared

     (3,450     —          (10,350     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income/(Loss) Allocable to Common Stock and Participating Securities

   $ 8,236      $ 70,397      $ (66,091   $ 116,917   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings/(Loss) per Common Share – Basic and Diluted

   $ 0.25      $ 2.91      $ (2.22   $ 6.28   
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends Declared per Share of Common Stock

   $ 0.40      $ 0.85      $ 1.80      $ 2.35   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

7


Reconciliations of Non-GAAP Financial Measures

Included in this press release are disclosures about the Company’s “operating earnings,” “operating earnings per common share,” “effective cost of funds,” “effective interest expense,” “effective levered asset yield” and “effective net interest rate spread” which measures constitute non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. The Company believes that the non-GAAP financial measures presented, when considered together with GAAP financial measures, provide information that is useful to investors in understanding the Company’s 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) certain 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 is a non-GAAP financial measure that is used by the Company to assess its business results.

To determine the effective cost of funds, interest expense is adjusted to include the net interest component related to 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. Therefore, the Company presents the effective cost of funds to reflect interest expense as adjusted to include a portion of the realized loss (i.e., the interest expense component) for Swaps.

The Company believes that the presentation of effective cost of funds is useful for investors as it presents the Company’s borrowing costs as viewed by management. The Company believes that the non-GAAP measures presented provide investors, and other readers of this press release with meaningful information to assess the performance of the Company’s ongoing business and believe it is useful supplemental information for both management and investors in evaluating the Company’s financial results. The primary limitation associated with operating earnings as a measure of the Company’s financial performance over any period is that such measure excludes, except for the net interest component of Swaps, the effects of net realized and unrealized gains and losses from investments and realized and unrealized gains and losses from derivative instruments. In addition, the Company’s presentation of operating earnings may not be comparable to similarly-titled measures of other companies, who may use different definitions or calculations for such term. As a result, operating earnings should not be considered as a substitute for GAAP net income as a measure of the Company’s financial performance or the Company’s liquidity under GAAP.

A reconciliation of the GAAP items discussed above to their non-GAAP measures for the three and nine months ended September 30, 2013 and the three and nine months ended September 30, 2012, are presented in the tables below.

 

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(Table 6)

The following table reconciles net income/(loss) allocable to common stockholders with operating earnings for the three months ended September 30, 2013 and September 30, 2012, respectively:

 

     Three months ended
September 30, 2013
    Three months ended
September 30, 2012
 
($ amounts in thousands except share and per share data)   

 

    Earnings
Per Share(1)
   

 

    Earnings
Per Share(1)
 

Net income allocable to common stockholders

   $ 8,158      $ 0.25      $ 70,249      $ 2.91   

Adjustments:

        

Non-cash stock-based compensation expense

     207        0.01        105        —     

Unrealized (gain) on RMBS, net

     (28,143     (0.88     (54,913     (2.27

Unrealized loss on derivatives, net

     27,572        0.86        9,831        0.40   

Unrealized (gain) on securitized mortgage loans, net

     (537     (0.02     —          —     

Unrealized loss on securitized debt, net

     428        0.01        —          —     

Unrealized (gain) on other investment securities

     (116     —          —          —     

Realized (gain)/loss on sale of RMBS, net

     16,596        0.52        (13,861     (0.57

Realized (gain)/loss on Swap/Swaption terminations, net

     (12,498     (0.38     4,747        0.20   

Realized (gain) on TBA Short(2), net

     (281     (0.01     —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments to arrive at operating earnings:

     3,228        0.11        (54,091     (2.24
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating earnings

   $ 11,386      $ 0.36      $ 16,158      $ 0.67   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted weighted average

common shares outstanding:

     31,999,792          24,214,410     

 

(1) Reflects basic and diluted earnings per share for each component presented.
(2) A TBA Short refers to a “to-be-announced” contract to sell certain Agency RMBS on a forward basis.

(Table 7)

The following table reconciles net income/(loss) allocable to common stockholders with operating earnings for the nine months ended September 30, 2013 and September 30, 2012, respectively:

 

     Nine months ended
September 30, 2013
    Nine months ended
September 30, 2012
 
($ amounts in thousands except share and per share data)   

 

    Earnings
Per Share(1)
   

 

    Earnings
Per Share(1)
 

Net income/(loss) allocable to common stockholders

   $ (66,442   $ (2.22   $ 116,628      $ 6.28   

Adjustments:

        

Non-cash stock-based compensation expense

     752        0.03        274        0.01   

Unrealized (gain)/loss on RMBS, net

     139,727        4.67        (75,461     (4.06

Unrealized (gain)/loss on derivatives, net

     (50,547     (1.69     24,192        1.30   

Unrealized loss on securitized mortgage loans, net

     88        —          —          —     

Unrealized loss on securitized debt, net

     413        0.01        —          —     

Unrealized gain on other investment securities

     (116     —          —       

Realized (gain)/loss on sale of RMBS, net

     48,309        1.61        (32,244     (1.73

Realized (gain)/loss on Swap/Swaption terminations, net

     (22,526     (0.75     4,709        0.25   

Realized gain on TBA Short(2), net

     (281     (0.01     —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments to arrive at operating earnings:

   $ 115,819      $ 3.87      $ (78,530     (4.23
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating earnings

   $ 49,377      $ 1.65      $ 38,098      $ 2.05   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted weighted average

common shares outstanding:

     29,916,932          18,628,087     

 

(1) Reflects basic and diluted earnings per share for each component presented.
(2) A TBA Short refers to a “to-be-announced” contract to sell certain Agency RMBS on a forward basis.

 

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(Table 8)

The following table reconciles the effective cost of funds with interest expense for the three and nine months ended September 30, 2013:

 

     Three months ended
September 30, 2013
    Nine months ended
September 30, 2013
 
($ amounts in thousands except per share data)    Reconciliation      Cost of Funds/
Effective
Cost of Funds
    Reconciliation      Cost of Funds/
Effective
Cost of Funds
 

Interest Expense

   $ 6,789         0.89   $ 20,243         0.74

Adjustment:

          

Net interest paid for Swaps

     6,894         0.91     17,470         0.63
  

 

 

    

 

 

   

 

 

    

 

 

 

Effective interest expense/effective cost of funds

   $ 13,683         1.80   $ 37,713         1.37
  

 

 

    

 

 

   

 

 

    

 

 

 

Weighted average balance of borrowings

   $ 3,013,372         $ 3,671,026      

 

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