Attached files
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| 8-K - FORM 8-K - Apollo Residential Mortgage, Inc. | d311908d8k.htm |
| EX-99.1 - EARNINGS RELEASE - Apollo Residential Mortgage, Inc. | d311908dex991.htm |
 March 7, 2012
Supplemental Financial Information Presentation
Q4 2011
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Exhibit 99.2 |
 2
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Apollo Residential Mortgage, Inc.
2011 Fourth Quarter Earnings Call
March 7, 2012
Michael A. Commaroto
Chief Executive Officer
Stuart Rothstein
Chief Financial Officer
Keith Rosenbloom
Agency Portfolio Manager
Paul Mangione
Non-Agency Portfolio Manager
Joy Margolies
ARM Manager Treasurer |
 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
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”)
Recent Highlights
Completed substantial deployment of IPO capital during the fourth
quarter of 2011 Reported total Operating Earnings of $5.3
million, or $0.51 per diluted weighted share for the fourth
quarter of 2011 (1)
–
Earnings per share NOT indicative of full run rate earnings potential
due to investment ramp throughout the quarter
–
Given pace of investment, we believe earnings achieved are indicative
of our ability to generate attractive returns from
investments Book Value per share of $19.92 at December 31,
2011 Put in place over $3.6 billion of potential financing
capacity Declared an initial dividend of $0.30 per share for
2011, which reflected a stub period during which AMTG’s
portfolio was not fully invested Declared a dividend of $0.75 per
share for the first quarter of 2012 –
The first quarter dividend represents a 16.7% dividend yield on an
annualized basis based on the Company’s closing price of
$18.01 as of March 5, 2012 (1)
Operating
earnings
is
a
non-GAAP
financial
measure
that
is
used
to
approximate
cash
available
for
distribution
and
is
defined
by
the
Company
as
net
interest
margin
less
cash
operating
expenses
and
management
fees.
Please see slide 19 for a reconciliation of Operating Earnings and
Operating Earnings per Diluted Weighted Share to GAAP Net Income and GAAP Net Income per Diluted Weighted Share. |
 6
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
AMTG –
Financial Summary
Note:
Return
on
Assets
is
calculated
as
annualized
operating
income
for
the
quarter
as
a
percentage
of
average
assets.
Return
on
Equity
is
calculated
as
annualized
operating
income
for
the
quarter
as
a
percentage
of
average
equity.
Q3 2011
Q4 2011
FY 2011
Interest Income (in thousands)
$1,555
$9,178
$10,733
Interest Expense (in thousands)
(143)
(995)
(1,138)
Net Investment Income (in thousands)
$1,412
$8,183
$9,595
Operating Earnings (in thousands)
($760)
$5,254
$4,494
Fully Diluted Shares O/S (mm)
10.3
10.3
10.3
Operating Earnings per Share
($0.07)
$0.51
$0.44
Leverage (Debt / Equity)
2.6x
5.9x
Annualized ROA
(0.6%)
1.8%
Annualized ROE
(1.5%)
10.4% |
 7
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Financial Summary
Reported Q4 and FY11 Operating Earnings of $0.51
and $0.44 per diluted share, respectively, reflecting
attractive yields and favorable funding environment
Focused on disciplined asset selection stressing
prepayment protection for Agency RMBS and
stability of performance for non-Agency RMBS
Financial Highlights
Operating Earnings
(1)
Book Value per Share
Dividend per Share
(1)
Operating
earnings
is
a
non-GAAP
financial
measure
that
is
used
to
approximate
cash
available
for
distribution
and
is
defined
by
the
Company
as
Net
Interest
Margin
less
operating
expenses
and
management
fees.
Please
see
slide
19
for
a
reconciliation
of
Operating
Earnings
and
Operating
Earnings
per
DilutedWeighted
Share
to
GAAP
Net
Income
and
GAAP
Net
Income
per
DilutedWeighted
Share.
($0.07)
$0.51
($0.20)
($0.10)
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
Q3 2011
Q4 2011
$0.00
$0.30
$0.75
$0.00
$0.25
$0.50
$0.75
Q3 2011
Q4 2011
Q1 2012
$19.58
$19.92
$19.00
$19.25
$19.50
$19.75
$20.00
Q3 2011
Q4 2011 |
 8
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Agency,
58%
Non-
Agency,
18%
Cash, 22%
Operating Performance and Portfolio Summary
Well structured portfolio of Agency and non-Agency
RMBS, with significant amount of cash retained to
meet margin calls driven by market moves
Summary Portfolio Composition
Net Interest Margin
(1)
Leverage multiples adjusted for balance sheet cash held to meet margin
calls. Cash allocated to strategy based on proportional breakdown of equity allocated to each strategy.
(2)
Levered
Asset
Yield
calculated
as
Net
Interest
Margin
multiplied
by
leverage
(Assets
/
Equity)
multiple.
Agency
Non-
Agency
Blended
Asset Yield
2.7%
13.0%
3.7%
Interest Expense
(0.7%)
(1.8%)
(0.8%)
Net Interest Margin
2.0%
11.2%
2.9%
Debt / Equity
(1)
6.5x
1.5x
5.3x
Levered Asset Yield
(2)
15.0%
28.2%
18.3% |
 9
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Sub-
Prime, 78.4%
Alt-A, 20.8%
Option-
ARM, 0.8%
Focus on Security Selection
Agency RMBS portfolio built around specified pools
and derivatives of specified pools with underlying
characteristics expected to mitigate prepayments such
as low loan balance and high LTV new production
loans unable to access HARP
Q4 2011 Agency Portfolio
Non-Agency RMBS portfolio built around seasoned,
sub-prime and alt-A bonds with significant credit
enhancement, seasoning and/ or loan characteristics to
provide a stable return profile over various stress
scenarios
Q4 2011 Non-Agency Portfolio
Low Loan
Balance 30 Yr
Pass-throughs,
38.3%
High LTV /
100% Refi 30
Yr Pass-
throughs,
25.5%
Short Reset
ARMs, 10.6%
Low Loan
Balance 15 Yr
Pass-
throughs, 10.1%
Hybrid
ARMs, 9.3%
Seasoned 30
Year Pass-
throughs, 3.8%
Low Credit 30
Year Pass-
throughs, 0.9%
Interest Only
CMOs, 0.8%
Inverse Interest
Only
CMOs, 0.7% |
 10
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Agency Securities as of December 31, 2011
(1) Includes unsettled purchases with an aggregate cost of $121,019 and
estimated fair value of $121,294 at December 31, 2011. (2) Net
weighted average coupon is presented net of servicing and other fees.
($ in thousands)
Principal Balance
($k)
Estimated Fair
Value ($k)
% of Agency
Portfolio
Amortized Cost
($k)
(1)
Net Weighted Avg.
Coupon
(2)
30-Year Mortgages
4.5%
$536,972
$572,515
50.7%
$568,951
4.3%
5.0-6.0%
184,633
201,636
17.9%
199,241
5.1%
6.5%
0
0
0.0%
0
0.0%
Total 30 Yr
$721,605
$774,151
68.6%
$768,192
4.5%
15-Year Mortgages
4.0%
$107,878
$113,886
10.1%
$112,933
3.5%
4.5%
0
0
0.0%
0
0.0%
Total 15 Yr
$107,878
$113,886
10.1%
$112,933
3.5%
ARM
$214,438
$224,422
19.9%
$224,565
2.8%
Agency Derivatives
125,099
15,667
1.4%
16,198
4.4%
Total Other
$339,537
$240,089
21.3%
$240,763
3.4%
Total
$1,169,020
$1,128,126
100.0%
$1,121,888
4.1% |
 11
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Agency MBS -
Bottom Up Investment Process
Loan
Balance
Geography
Loan Purpose
Originator
/ Servicer
Relative value tool identifies underlying loan characteristics which
drive security prepayments and performance
Adjustable Rate MBS
Borrower profile of new originations vs.
pre-crisis loans
Amortizing vs. Non-amortizing loans
Fixed rate period vs. post reset
GNMA: Increasing market share but
poor loan disclosure
Government engineered
affordability programs
Housing market conditions impact
on turnover
Key Agency Loan Characteristics
Fixed Rate Mortgages
Impact from Loan Structure Different Depending on Underlying Asset
|
 12
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Non-Agency Securities as of December 31, 2011
12/31/11
Holdings
Portfolio Characteristics
Market Value ($ in thousands)
$112,346
Weighted Avg. Adj. Purchase Price
56.7%
Net Weighted Avg. Coupon
1.0%
Collateral Attributes
Avg. Loan Age (months)
82.2
Avg. Original LTV
80.5%
Avg. Original FICO
625
Current Performance
60+ Day Delinquencies
42.2%
Average Credit Enhancement
31.5%
3 Month CPR
2.6% |
 13
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Non-Agency Portfolio Historically More Stable than ABX
AMTG Non-Agency bonds historically approximately 15% as volatile as
the overall ABX Index 25.00
30.00
35.00
40.00
45.00
50.00
55.00
60.00
65.00
70.00
75.00
Aug-08
Nov-08
Feb-09
May-09
Aug-09
Nov-09
Feb-10
May-10
Aug-10
Nov-10
Feb-11
May-11
Aug-11
Nov-11
ABX 06-2 Price Index vs. AMTG Non-Agency Composite
ABX 06-2 Index
AMTG Non-Agency Composite Index
Note: AMTG Non-Agency Composite Index represents historical pricing
of composite index created based on weighted holdings of non-Agency securities held by AMTG as of 12/31/11. |
  14
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Financing Overview
We financed our Agency positions with repurchase
agreements with maturities ranging from 1 to 3
months employing leverage of approximately 8-9
times
We hedged our interest rate risk on our Agency
positions with a combination of 3 year, 5 year and 10
year interest rate swaps in order to manage our
duration gap
We financed our non-Agency positions with
repurchase agreements with maturities ranging from 1
to 3 months employing leverage of approximately 2
times. Since all of our non-Agency positions and
related repurchase agreements are floating rate, we
have not employed interest rate swaps to hedge our
interest rate risk
Financing / Hedging Summary
Financing
Interest Rate Swaps
Repurchase Agreements
($ in thousands)
12/31/11
Amount
Within 30 days
$708,752
30 to 59 days
371,243
Total
$1,079,995
Swaps
Notional Amts
Avg.
Maturities
($ in thousands)
Maturity (Yrs)
2014
25,000
2.7
2015
310,000
4.8
2016 and later
10,000
9.9
$345,000
4.8 |
 15
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Focus on Stability: Leading Risk Management and Controls
Apollo Residential Mortgage has implemented a series of risk controls
designed to ensure a conservative balance sheet able to weather
short-term price shocks Our risk tests are designed to meet
two separately calculated liquidity hurdles: –
Test 1 -
Statistical value-at-risk (“VAR”) hurdle:
Determined by calculating the average loss scenario of
simulations greater than the 0.2% percentile probability over a
5-day period, approximating the likelihood of occurrence
once every 10 years –
Test
2
–
“Gut
Check”
hurdle:
The
greatest
historical
5-day
move
in
spreads
for
Agency
RMBS
and
the
greatest
historical 5-day move in dollar prices for each individual
non-Agency bond are used to calculate max loss scenarios
Sample Liquidity Hurdle –
VAR Analysis
-
Liquidity held to
satisfy the over 0.2%
percentile probability
scenarios, which
approximates a
likelihood of
occurrence once every
10 years
-
As of February 29,
2012, AMTG currently
holds over $40 million
of liquidity on a pro
forma basis in excess
of these risk threshold
minimums |
 16
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Discussion Topics
1. AMTG Q4 Results
2. Supplemental Financials |
 17
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Income Statement
Three Months
ended
December 31,
2011
For the Period
from July 27, 2011
(commencement
of operations)
through December
31, 2011
Net interest income:
Interest income
9,178
10,733
Interest expense
(995)
(1,138)
Net interest income
8,183
9,595
Operating expenses:
General and administrative (includes non-cash stock based
compensation (1,705)
(3,283)
Management fee – related party
(784)
(1,333)
Total operating expenses
(2,489)
(4,616)
Interest income on cash balances
2
2
Realized gain on sale of mortgage-backed securities
550
885
Unrealized gain on mortgage-backed securities
3,765
2,482
Loss on derivative instruments (includes unrealized losses of
$3,138 for the three months ended December 31, 2011 and $3,246
for the period from July 27, 2011 (commencement of operations)
through December 31, 2011)
(3,653)
(3,876)
Net income
6,358
4,472
Basic and diluted net income per share of common
stock $0.62
$0.43
Basic and diluted weighted average common shares outstanding
10,301,250
10,301,250
Dividend declared per share of common stock
$0.30
$0.30 |
 18
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Balance Sheet
(in thousands -
except share and per share data)
December 31, 2011
Assets:
Cash
$44,407
Restricted cash
10,402
Mortgage-backed securities, at fair value
1,240,472
Investment related receivable
116,678
Interest receivable
3,908
Deferred financing costs, net
455
Derivative asset
235
Other assets
370
Total Assets
$1,416,927
Liabilities and Stockholders' Equity
Liabilities:
Borrowings under repurchase agreements
$1,079,995
Investment related payable
121,144
Accrued interest payable
1,123
Derivative liability
3,481
Accounts payable and accrued expenses
1,534
Payable to related party
1,974
Dividend payable
3,090
Total Liabilities
$1,212,341
Stockholders' Equity:
Common stock, $0.01 par value, 450,000,000 shares authorized,
10,271,562 shares issued and outstanding
103
Preferred stock, $0.01 par value, 50,000,000 shares authorized and
no shares outstanding
-
Additional paid-in-capital
203,101
Retained earnings
1,382
Total Stockholders' Equity
204,586
Total Liabilities and Stockholders' Equity
$1,416,927 |
 19
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
Operating Earnings Reconciliation
Three Months
ended December
31, 2011
Earnings Per
Share
(Diluted)
For the period from
July 27, 2011
(commencement of
operations) through
December 31, 2011
Earnings Per
Share
(Diluted)
Operating Earnings:
Net income
$6,358
$0.62
$4,472
$0.43
Adjustments:
Non-cash stock-based compensation expense
73
0.01
143
0.01
Unrealized gain on RMBS
(3,765)
(0.36)
(2,482)
(0.24)
Unrealized loss on derivatives
3,138
0.30
3,246
0.32
Realized gain on sale of RMBS
(550)
(0.06)
(885)
(0.08)
Total adjustments:
(1,104)
(0.11)
22
0.01
Operating Earnings
$5,254
$0.51
$4,494
$0.44
10,301,250
10,301,250
Basic and diluted weighted average common shares outstanding:
|
 20
APOLLO RESIDENTIAL MORTGAGE, INC. (“AMTG”)
|