ARMOUR Residential REIT, Inc. (NYSE: ARR, ARR PrA, and ARR PrB)
("ARMOUR" or the "Company") today announced financial results for
the quarter ended June 30, 2014.
Q2 2014 Highlights and Financial
Information
- Core Income and estimated taxable Real Estate Investment Trust
("REIT") income of approximately $50.9 million or $0.13 per Common
share, which represents a 10.90% return on stockholders' equity at
the beginning of the quarter
- Q2 2014 Generally Accepted Accounting Principles ("GAAP") net
loss of approximately $(70.2) million or $(0.21) per Common
share
- Stockholders' equity as of June 30, 2014 was approximately $2.0
billion or $4.90 per Common share
- Ratio of debt to stockholders' equity ("leverage") of 7.90 to 1
as of June 30, 2014
- Liquidity as of June 30, 2014, consisting of cash and unpledged
securities, of approximately $1.1 billion
- Sales of Agency Securities in Q2 2014 totaled approximately
$1.2 billion, completing the previously announced portfolio
repositioning. The sales resulted in GAAP gains of approximately
$11.2 million and tax capital losses of approximately $(314.9)
million
- Q2 2014 average yield on assets of 2.86% and average net
interest margin of 1.46%
- Q2 2014 annualized average principal repayment rate (CPR) of
5.12%
- Stock outstanding as of June 30, 2014: Common - 357,189,085
shares Series A Cumulative Redeemable Preferred - 2,180,572 shares
Series B Cumulative Redeemable Preferred - 5,650,000 shares
- Q2 2014 weighted average diluted Common shares were
357,111,170
- Additional updated information on the Company's investment,
financing and hedge positions can be found in ARMOUR Residential
REIT, Inc.'s most recent "Company Update." ARMOUR posts unaudited
and unreviewed Company Updates each month on
www.armourreit.com
Q2 2014 Results
Core Income and Estimated Taxable REIT
Income
Core Income for the quarter ended June 30, 2014, was
approximately $50.9 million. "Core Income" represents a non-GAAP
measure and is defined as net income excluding impairment losses,
gains or losses on sales of securities and early termination of
derivatives, unrealized gains or losses on derivatives and U.S.
Treasury Securities and certain non-recurring expenses. Core Income
may differ from GAAP net income, which includes the unrealized
gains or losses of the Company's derivative instruments and the
gains or losses on Agency Securities and U.S. Treasury
Securities.
Estimated taxable REIT income for the quarter ended June 30,
2014, was approximately $50.9 million. The Company distributes
dividends based on its estimate of taxable earnings, not based on
net income calculated in accordance with GAAP. Taxable REIT income
and GAAP net income will generally differ primarily because of the
non-taxable unrealized changes in the value of the Company's
derivatives, which the Company uses as economic hedges, and other
than temporary impairment of Agency Securities to be sold in later
periods. These gains/losses on derivatives are included in GAAP net
income, whereas valuation changes are not included in taxable
income. Additionally, capital losses realized for tax purposes will
be carried forward to offset future capital gains. However,
interest expense on U.S. Treasury Securities sold short, which was
$4.3 million in Q2 2014, does reduce taxable income.
GAAP Net (Loss)
For the purposes of computing GAAP net income (loss), the change
in fair value of the Company's derivatives is reflected in current
period net income, while the change in fair value of its Agency
Securities is reflected in its statement of comprehensive income.
GAAP net loss for Q2 2014 was approximately $(70.2) million,
including losses on security sales of approximately $(4.6)
million.
Dividends
The Company paid dividends of $0.05 per Common share of record
for each month of Q2 2014, resulting in payments to common
stockholders of approximately $53.8 million. The Company also paid
monthly dividends in Q2 2014 of $0.171875 per outstanding share of
8.250% Series A Cumulative Redeemable Preferred Stock and
$0.1640625 per outstanding share of 7.875% Series B Cumulative
Redeemable Preferred Stock, resulting in payments to preferred
stockholders of an aggregate of approximately $3.9 million. The
Company's taxable REIT income and dividend requirements to maintain
REIT status are determined on an annual basis. Dividends in excess
of taxable REIT income for the year will generally not be taxable
to common stockholders. Our REIT dividend requirements are based on
the amount of our ordinary taxable income. Realized capital losses
do not affect the amount of the Company's ordinary taxable income,
but will generally be available to offset capital gains realized
primarily through 2018.
Per Share Amounts
Per Common share amounts are net of applicable Preferred Stock
dividends and liquidation preferences. The denominators used to
calculate per Common share amounts for the quarter ended June 30,
2014, reflect, to the extent dilutive, the effects of 1.3 million
unvested stock awards.
Portfolio
During Q2 2014, the Company sold approximately $1.2 billion of
Agency Securities, resulting in GAAP gains of approximately $11.2
million and realized capital losses of approximately $(314.9)
million for tax purposes. These sales completed the previously
announced repositioning to move the portfolio from 30-year fixed
rate Agency Securities and 25-year fixed rate Agency Securities to
15-year fixed rate Agency Securities and 20-year fixed rate Agency
Securities. As of June 30, 2014, the Company's portfolio consisted
of Fannie Mae, Freddie Mac and Ginnie Mae mortgage securities,
substantially all of which are fixed rate securities, and was
valued at $17.0 billion. During Q2 2014, the annualized yield
on average assets was 2.86%, and the annualized cost of
funds on average liabilities (including realized cost of hedges)
was 1.40%, resulting in a net interest spread of 1.46% for Q2
2014.
Portfolio Financing, Leverage and Interest Rate
Hedges
As of June 30, 2014, the Company financed its
portfolio with approximately $14.4 billion of net borrowings under
repurchase agreements and $1.0 billion of obligations to return
securities received as collateral (U.S. Treasury Securities sold
short). The Company's leverage ratio as of June 30, 2014,
was 7.90 to 1. As of June 30, 2014, the Company's
liquidity totaled approximately $1.1 billion, consisting of
approximately $433.1 million of cash and equivalents, plus
approximately $639.8 million of unpledged Agency Securities
(including Agency Securities received as collateral).
As of June 30, 2014, the following information was
available related to the Company's interest rate risk and hedging
activities: The Company's repurchase agreements had a
weighted-average maturity of approximately 58 days. The Company had
a notional amount of approximately $10.0 billion of various
maturities of interest rate swap contracts with a weighted average
swap rate of 1.50%. The Company had a notional amount of
approximately $5.3 billion of various maturities of swaptions with
a weighted average swap rate of 2.94%. The Company had a notional
amount of approximately $25.0 million of various maturities of
Eurodollar futures contracts sold at a weighted average swap
equivalent rate of 2.13%.
Clearing regulations adopted under the Dodd-Frank Act have
increased the initial margin requirements for most types of
interest rate swap contracts. The portfolio repositioning will
allow the Company to manage the interest rate risk created by the
differing maturity profiles of our assets and the liabilities with
shorter tenor interest rate swap contracts and futures contracts
that have smaller initial margin requirements.
Management Fee
The Company pays a management fee of 1.5% (per annum) of gross
equity raised up to $1.0 billion and 0.75% (per annum) of
gross equity raised above $1.0 billion. As of June 30, 2014,
the effective management fee was 1.03% based on gross equity
raised, net of stock buybacks and dividends in excess of annual
taxable REIT income.
Regulation G Reconciliation
Taxable REIT income is calculated according to the requirements
of the Internal Revenue Code ("the Code") rather than GAAP.
The Company plans to timely distribute at least 90% of its taxable
REIT income in order to maintain its tax qualification as a
REIT under the Code. The Company believes that taxable REIT income
is useful to investors because taxable REIT income is directly
related to the amount of dividends the Company is required to
distribute in order to maintain its REIT tax qualification status.
Core Income also excludes gains and losses on security
sales. However, because taxable REIT income and Core Income
are incomplete measures of the Company's financial performance and
involve differences from net income computed in accordance with
GAAP, taxable REIT income and Core income should be considered as
supplementary to, and not as a substitute for, the Company's net
income computed in accordance with GAAP as a measure of the
Company's financial performance.
The following table reconciles the Company's results from
operations to Core Income and estimated taxable REIT income for the
quarter ended June 30, 2014
|
Quarter Ended June 30,
2014 |
|
(in thousands) |
GAAP net loss |
$ (70,190) |
Book to tax differences: |
|
Changes in interest rate
contracts |
116,273 |
Loss on Security Sales |
4,614 |
Amortization of deferred
hedging gains |
461 |
Net premium amortization
differences |
(266) |
Other |
5 |
Core Income and estimated taxable REIT
income |
$ 50,897 |
Common Stock
The Company issued 17,191 shares of common stock during Q2 2014
under its dividend reinvestment plan at a weighted average
price of $4.24 per share. As of June 30, 2014, there were
357,189,085 Common shares outstanding.
Preferred Stock
As of June 30, 2014, there were 2,180,572 shares of 8.250%
Series A Cumulative Redeemable Preferred Stock and 5,650,000 shares
of 7.875% Series B Cumulative Redeemable Preferred Stock
outstanding.
ARMOUR Residential REIT, Inc.
ARMOUR is a Maryland corporation that invests primarily in fixed
rate, hybrid adjustable rate and adjustable rate residential
mortgage backed securities. These securities are issued or
guaranteed by U.S. Government-sponsored entities and Ginnie Mae.
ARMOUR is externally managed and advised by ARMOUR Residential
Management LLC, an investment advisor registered with the
Securities and Exchange Commission ("SEC"). ARMOUR Residential
REIT, Inc. intends to qualify and has elected to be taxed as a REIT
under the Code for U.S. federal income tax purposes.
Safe Harbor
This press release includes "forward-looking statements" within
the meaning of the safe harbor provisions of the United States
Private Securities Litigation Reform Act of 1995. Actual
results may differ from expectations, estimates and projections
and, consequently, you should not rely on these forward looking
statements as predictions of future events. Words such
as "expect," "estimate," "project," "budget," "forecast,"
"anticipate," "intend," "plan," "may," "will," "could," "should,"
"believes," "predicts," "potential," "continue," and similar
expressions are intended to identify such forward-looking
statements. These forward-looking statements involve
significant risks and uncertainties that could cause the actual
results to differ materially from the expected results. Additional
information concerning these and other risk factors are contained
in the Company's most recent filings with the SEC. All
subsequent written and oral forward-looking statements concerning
the Company are expressly qualified in their entirety by the
cautionary statements above. The Company cautions readers not
to place undue reliance upon any forward-looking statements, which
speak only as of the date made. The Company does not
undertake or accept any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statements
to reflect any change in their expectations or any change in
events, conditions or circumstances on which any such statement is
based, except as required by law.
Additional Information and Where to Find It
Investors, security holders and other interested persons may
find additional information regarding the Company at the SEC's
Internet site at http://www.sec.gov/, or the Company website
www.armourreit.com or by directing requests to: ARMOUR Residential
REIT, Inc., 3001 Ocean Drive, Suite 201, Vero Beach, Florida 32963,
Attention: Investor Relations.
CONTACT: investors@armourreit.com
James R. Mountain
Chief Financial Officer
ARMOUR Residential REIT, Inc.
(772) 617-4340
ARMOUR Residential REIT (NYSE:ARR)
Historical Stock Chart
From Mar 2024 to Apr 2024
ARMOUR Residential REIT (NYSE:ARR)
Historical Stock Chart
From Apr 2023 to Apr 2024