ARMOUR Residential REIT, Inc. (NYSE: ARR and ARR PRC) (“ARMOUR” or
the “Company”) today announced the Company's September 30, 2021
financial position and Q3 results.
ARMOUR's September 30, 2021 Financial
Position
- Stockholders' equity totaled $1,144
million, including:
- Common stock outstanding of
87,708,731 shares, and
- 7.00% Cumulative Redeemable
Preferred C Stock ("Series C Preferred Stock") with liquidation
preference totaling approximately $171 million.
- Book value per common share was
$11.09 per share.
- Liquidity, including cash and
unencumbered agency and U.S. government securities, was $790
million.
- Portfolio composition was 98%
Agency mortgage-backed securities ("MBS"), including To Be
Announced ("TBA") Securities and 2% U.S. Treasury Securities.
- Debt to equity ratio was 3.0 to 1
(based on repurchase agreements divided by stockholders’ equity).
Leverage, including TBA Securities, was approximately 6.7 to
1.
ARMOUR's Q3 2021 Highlights
- Paid Common stock dividends of
$0.10 per share per month.
- Comprehensive income of $13.3
million, or $0.12 per common share, which represents an annualized
return of 5% based on stockholders' equity at the beginning of the
quarter.
- Net interest income of $20.4
million.
- Distributable Earnings (see
explanation of non-GAAP measures on page 2) of $24.7 million which
represents $0.25 per common share.
- Issued 4,550,825 shares of common
stock through at the market offering programs, raising $49.1
million of capital after fees and expenses.
The major drivers of the change in the Company's
financial position during Q3 were:
|
|
|
Q3 2021 |
|
(in millions) |
Stockholders' Equity – Beginning |
$ |
1,108.6 |
|
Comprehensive
Income |
|
Agency MBS including TBA Securities (1) |
|
Loss on MBS |
$ |
(28.5 |
) |
Gain on TBA Securities |
6.3 |
|
Interest rate swaps |
|
Net interest expense |
(7.0 |
) |
Termination losses |
(58.7 |
) |
Unrealized gain |
89.7 |
|
Net Interest Income |
20.4 |
|
Operating Expenses, net of Fee Waiver (2) |
(8.9 |
) |
Total Comprehensive
Income |
13.3 |
|
|
|
Capital
Activities |
|
Issuance of Common Stock |
50.3 |
|
Dividends |
(28.5 |
) |
Stockholders' Equity –
Ending |
$ |
1,143.7 |
|
(1) Includes both realized and unrealized gains
and losses. (2) See discussion on page 3.
|
|
|
|
Book Value, June 30,
2021 |
$ |
11.28 |
|
Comprehensive income per common share |
0.12 |
|
Less: Common dividends per common share |
(0.30 |
) |
Capital Raising Activities |
(0.01 |
) |
Book Value, September
30, 2021 |
$ |
11.09 |
|
|
|
|
|
As previously reported, for Q3 2021, the
Company’s external manager waived $2.1 million of its
management fee to offset operating expenses. On October 25, 2021,
the Company's external manager notified ARMOUR that it intended to
adjust the fee waiver from the rate of $0.70 million per month
to $0.65 million per month, effective November 1, 2021, until
further notice.
Condensed balance
sheet information: |
September 30, 2021 |
|
(in millions) |
Assets |
|
Cash |
$ |
126 |
|
Cash collateral posted to counterparties |
30 |
|
Investments in securities, at fair value: |
|
Agency Securities |
4,259 |
|
U.S. Treasury Securities |
195 |
|
Receivable for unsettled sales |
82 |
|
Derivatives, at fair value |
179 |
|
Accrued interest receivable |
10 |
|
Prepaid and other |
2 |
|
Subordinated loan to BUCKLER |
105 |
|
Total Assets |
$ |
4,988 |
|
|
|
Liabilities: |
|
Repurchase agreements |
$ |
3,450 |
|
Cash collateral posted by counterparties |
155 |
|
Payable for unsettled purchases |
211 |
|
Derivatives, at fair value |
23 |
|
Accounts payable and other accrued expenses |
5 |
|
Total Liabilities |
3,844 |
|
|
|
Stockholders’ Equity: |
|
Additional paid-in capital |
3,335 |
|
Accumulated deficit |
(2,315 |
) |
Accumulated other comprehensive income |
124 |
|
Total Stockholders’
Equity |
$ |
1,144 |
|
Total Liabilities and
Stockholders’ Equity |
$ |
4,988 |
|
|
|
|
|
Distributable Earnings, Including TBA
Drop Income
Distributable Earnings (defined in more detail
below) is a non-GAAP measure defined as net interest income plus
TBA Drop Income minus hedging costs and net operating expenses.
Distributable Earnings differs from GAAP total comprehensive
income, which include gains and losses and market value adjustments
as described below.
For a portion of its Agency Securities the
Company may enter into TBA forward contracts for the purchase or
sale of Agency Securities at a predetermined price, face amount,
issuer, coupon and stated maturity on an agreed-upon future date,
but the particular Agency Securities to be delivered are not
identified until shortly before the TBA settlement date. The
Company accounts for TBA Agency Securities as derivative
instruments if it is reasonably possible that it will not take or
make physical delivery of the Agency Securities upon settlement of
the contract. The Company may choose, prior to settlement, to move
the settlement of these securities out to a later date by entering
into an offsetting short or long position (referred to as a “pair
off”), net settling the paired off positions for cash, and
simultaneously purchasing or selling a similar TBA Agency Security
for a later settlement date. This transaction is commonly referred
to as a “dollar roll.” The Company accounts for TBA dollar roll
transactions as a series of derivative transactions.
Forward settling TBA contracts typically trade
at a discount, or “Drop,” to the regular settled TBA contract to
reflect the expected interest income on the underlying deliverable
Agency Securities, net of an implied financing cost, which would
have been earned by the buyer if the contract settled on the next
regular settlement date. When the Company enters into TBA contracts
to buy Agency Securities for forward settlement, it earns this “TBA
Drop Income,” because the TBA contract is essentially a leveraged
investment in the underlying Agency Securities. The amount of TBA
Drop Income is calculated as the difference between the spot price
of similar TBA contracts for regular settlement and the forward
settlement price on the trade date. The Company generally accounts
for TBA contracts as derivatives and TBA Drop Income is included as
part of the periodic changes in fair value of the TBA contracts
that the Company recognizes currently in the Other Income (Loss)
section of its Consolidated Statement of Operations.
Regulation G Reconciliation
Distributable Earnings, including TBA Drop
income, excludes gains or losses from securities sales and early
termination of derivatives, market value adjustments (including
impairments) and certain non-recurring expenses. The Company
believes that Distributable Earnings is useful to investors because
it is related to the amount of dividends the Company may distribute
and is one of one of many factors considered by its Board of
Directors in declaring dividends. However, because Distributable
Earnings is an incomplete measure of the Company’s financial
performance and involves differences from total comprehensive
income (loss) computed in accordance with GAAP, Distributable
Earnings should be considered as supplementary to, and not as a
substitute for, the Company’s total comprehensive income (loss)
computed in accordance with GAAP as a measure of the Company’s
financial performance.
The elements of ARMOUR’s Distributable Earnings
and a reconciliation of that Distributable Earnings to the
Company’s Total Comprehensive Income appears below:
|
|
|
Q3 2021(unaudited) |
|
(in millions) |
Net Interest Income |
$ |
20.4 |
|
TBA Drop Income |
20.2 |
|
Less: Net interest expense on
interest rate swaps |
(7.0 |
) |
Operating Expenses, net of Fee Waiver |
(8.9 |
) |
Distributable
Earnings |
$ |
24.7 |
|
Less dividends on Preferred Stock |
(3.0 |
) |
Distributable Earnings
available to common stockholders |
$ |
21.7 |
|
Distributable Earnings
per Common Share |
$ |
0.25 |
|
|
|
Distributable
Earnings |
$ |
24.7 |
|
Loss on MBS |
(28.5 |
) |
Gain on TBA Securities, less
TBA Drop Income |
(13.9 |
) |
Termination loss on interest
rate swaps |
(58.7 |
) |
Unrealized gain on interest
rate swaps |
89.7 |
|
Total Comprehensive
Income |
$ |
13.3 |
|
|
|
|
|
Company Update
At the close of business on October 26,
2021:
- Common stock outstanding of
89,689,029 shares; Series C Preferred Stock with liquidation
preference totaling approximately $171 million.
- Book value per Common share was
estimated to be $10.97.
- Liquidity, including cash and
unencumbered securities, exceeded $896.3 million.
- Securities portfolio included
approximately $8.7 billion of Agency MBS (including TBA
Securities).
- Debt to equity ratio (based on
repurchase agreements divided by stockholders' equity) was
approximately 3.0 to 1. Leverage, including TBA Securities was
approximately 7.0 to 1.
The Company's remote work environment protocol
has allowed operations to remain fully functional while working
remotely. While all of ACM's eligible employees are fully
vaccinated, the Company has slowed the phased plan to return to
working full time from the ACM’s offices. The Company currently
expects to be fully returned to the office work environment in
November 2021, depending on local COVID-19 conditions.
Dividends
ARMOUR paid monthly cash dividends of $0.10 per
share of the Company’s common stock for each month in Q3 2021.
ARMOUR previously announced the October and November common stock
dividends of $0.10 per share payable October 28, 2021 and November
29, 2021 to holders of record on October 15, 2021 and November 15,
2021, respectively. ARMOUR’s Board of Directors will determine
future common dividend rates based on an evaluation of the
Company’s results, financial position, real estate investment trust
(“REIT”) tax requirements, and overall market conditions as the
quarter progresses. In order to maintain ARMOUR’s tax status as a
REIT, the Company is required to timely distribute substantially
all of its ordinary REIT taxable income for the tax year.
ARMOUR paid monthly cash dividends of $0.14583
per share of the Company’s Series C Preferred Stock for each month
in Q3 2021. ARMOUR previously announced monthly dividends on its
Series C Preferred Stock at the rate of $0.14583 per share to
holders of record on October 15, 2021, November 15, 2021 and
December 15, 2021, payable on October 27, 2021, November 29, 2021
and December 27, 2021, respectively.
Conference Call
As previously announced, the Company will
provide an online, real-time webcast of its conference call with
equity analysts covering Q3 2021 operating results on Thursday,
October 28, 2021, at 8:00 a.m. (Eastern Time). The live broadcast
will be available online and can be accessed at
https://services.choruscall.com/mediaframe/webcast.html?webcastid=hQhcFnFk.
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 invests primarily in fixed rate
residential, adjustable rate and hybrid adjustable rate residential
mortgage-backed securities issued or guaranteed by U.S.
Government-sponsored enterprises or guaranteed by the Government
National Mortgage Association. ARMOUR is externally managed and
advised by ARMOUR Capital Management LP, an investment advisor
registered with the Securities and Exchange Commission (“SEC”).
Safe HarborThis 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, the impact of the COVID-19
pandemic on the Company's operational and financial performance 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 its
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
ItInvestors, security holders and other interested persons
may find ARMOUR's most recent Company Update and additional
information regarding the Company at the SEC’s internet site at
www.sec.gov, or the Company website at 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.comJames R.
MountainChief Financial OfficerARMOUR Residential REIT, Inc. (772)
617-4340
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