ARMOUR Residential REIT, Inc. (NYSE: ARR, ARR PrA, and ARR PrB)
("ARMOUR" or the "Company") today announced financial results for
the quarter ended December 31, 2014.
Q4 2014 Highlights and Financial
Information
- Core Income and estimated taxable Real Estate Investment Trust
("REIT") income of approximately $41.1 million or $0.10 per Common
share, which represents a 8.96% return on stockholders' equity at
the beginning of the quarter
- Q4 2014 Generally Accepted Accounting Principles ("GAAP") net
loss of approximately $(143.2) million or $(0.41) per Common
share
- Stockholders' equity as of December 31, 2014 was approximately
$1.75 billion or $4.39 per Common share
- December 31, 2014 ratios of debt to stockholders' equity
("leverage") and interest rate hedges were 7.94 to 1 and 93.9%,
respectively Liquidity as of December 31, 2014, consisting of cash
and unpledged securities, of approximately $1.0 billion
- Liquidity as of December 31, 2014, consisting of cash and
unpledged securities, of approximately $1.0 billion
- Q4 2014 average yield on assets of 2.71% and average net
interest margin of 1.27%
- Q4 2014 annualized average principal repayment rate (CPR) of
6.45%
- Stock outstanding as of December 31, 2014:
- Common - 353,158,749 shares
- Series A Cumulative Redeemable Preferred - 2,180,572
shares
- Series B Cumulative Redeemable Preferred - 5,650,000
shares
- Q4 2014 weighted average diluted Common shares were
357,134,281
- 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
Q4 2014 Results
Core Income and Estimated Taxable REIT
Income
Core Income for the quarter ended December 31, 2014, was
approximately $41.1 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 December 31,
2014, was approximately $41.1 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
$1.1 million in Q4 2014, is tax deductible.
GAAP Net Income (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 Q4 2014 was approximately $(143.2) million,
including losses on security sales of approximately $(1.9)
million.
Dividends
The Company paid dividends of $0.05 per Common share of record
for each month of Q4 2014, resulting in payments to Common
stockholders of approximately $53.8 million. The Company also paid
monthly dividends in Q4 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 be treated as
non-taxable return of capital 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 December
31, 2014, reflect, to the extent dilutive, the effects of 1.1
million unvested stock awards.
Portfolio
During Q4 2014, the Company sold approximately $0.3 billion of
Agency Securities, resulting in gains of approximately $0.1
million. All of the Q4 sales of Agency Securities settle in Q1
2015. As of December 31, 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 $15.3 billion on a trade date basis. During Q4 2014, the
annualized yield on average assets was 2.71%, and the annualized
cost of funds on average liabilities (including realized cost of
hedges) was 1.44%, resulting in a net interest spread of 1.27% for
Q4 2014.
Portfolio Financing, Leverage and Interest Rate
Hedges
As of December 31, 2014, the Company financed its portfolio with
approximately $13.9 billion of borrowings under repurchase
agreements. The Company's leverage ratio as of December 31, 2014,
was 7.94 to 1. As of December 31, 2014, the Company's
liquidity totaled approximately $1.0 billion, consisting of
approximately $494.6 million of cash and equivalents, plus
approximately $490.5 million of unpledged Agency Securities
(including Agency Securities received as collateral).
As of December 31, 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 60 days. The Company had
a notional amount of approximately $13.0 billion of various
maturities of interest rate swap contracts with a weighted average
swap rate of 1.60%. The Company had a notional amount of
approximately $10.0 million of various maturities of Eurodollar
futures contracts sold at a weighted average swap equivalent rate
of 2.11%. In Q4 the Company also realized $(2.0) million loss on
U.S. Treasury Securities sold short.
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 December 31, 2014.
|
Quarter Ended December 31,
2014 |
|
(in thousands) |
GAAP net income |
$ (143,172) |
Book to tax differences: |
|
Changes in interest rate contracts |
184,710 |
Loss on Security Sales |
1,869 |
Amortization of deferred hedging
costs |
(2,273) |
Other |
5 |
Core Income and estimated taxable REIT
income |
$ 41,139 |
Common Stock
The Company issued 14,398 shares of Common stock during Q4 2014
under its dividend reinvestment plan at a weighted average
price of $3.88 per share. As of December 31, 2014, there were
353,158,749 Common shares outstanding. During the quarter ended
December 31, 2014 the Company repurchased 4,203,700 shares of
our outstanding Common stock under a stock repurchase program at a
weighted average price of $3.75 per share for an aggregate cost of
$15.8 million.
Preferred Stock
As of December 31, 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.
Conference Call
As previously announced, the Company will provide an online,
real-time webcast of its conference call with equity analysts
covering Q4 2014 operating results on Wednesday, February 25, 2015
at 8:00 a.m. (Eastern Time). The live broadcast will be available
online and can be accessed at
http://www.videonewswire.com/event.asp?id=101697. To monitor the
live webcast, please visit the website at least 15 minutes prior to
the start of the call to register, download, and install any
necessary audio software. An online replay of the event will
be available on the Company's website at www.armourreit.com and
continue for one year.
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.
The Company is externally managed and advised by
ARMOUR Capital Management LP ("ACM" formerly called 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
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