ARMOUR Residential REIT, Inc. (NYSE: ARR and ARR PRC) (“ARMOUR” or
the “Company”) today announced the Company's unaudited Q2 results
and June 30, 2024 financial position.
ARMOUR's Q2
2024 Results
- GAAP net loss related to common
stockholders of $(51.3) million or $(1.05) per common share.
- Net interest income of $7.0
million.
- Distributable Earnings available to
common stockholders of $52.5 million, which represents $1.08 per
common share (see explanation of this non-GAAP measure on page
4).
- Average interest income on interest
earning assets of 5.00% and interest cost on average interest
bearing liabilities of 5.52%.
- Economic interest income was 4.74%
less economic interest expense of 2.69% for an economic net
interest spread of 2.05% (see explanation of this non-GAAP measure
on page 6).
- Paid common stock dividends of
$0.24 per share per month, or $0.72 per share for Q2.
ARMOUR's June 30,
2024 Financial Position
- Book value per common share of
$20.30. See the table below for a reconciliation since March 31,
2024.
Book Value, March 31, 2024 |
$ |
22.07 |
|
Net loss per common share |
|
(1.05 |
) |
Less: Common dividends per common share |
|
(0.72 |
) |
Book Value, June 30, 2024 |
$ |
20.30 |
|
- Liquidity, including cash and
unencumbered agency and U.S. government securities, of $630.2
million.
- Agency mortgage-backed securities
("MBS") portfolio totaled $8.9 billion and TBA Agency Securities
totaled $1.2 billion.
- Repurchase agreements, net totaled
$7.1 billion; 56.5% were with ARMOUR affiliate BUCKLER Securities
LLC.
- Debt to equity ratio of 6.09:1
(based on repurchase agreements divided by total stockholders’
equity). Implied leverage, including TBA Securities and forward
settling sales and unsettled purchases was 7.44:1.
- Interest Rate swap contracts
totaled $8.3 billion of notional amount.
Company Update
At the close of business on July 22, 2024:
- Common stock outstanding of
48,765,569 shares.
- 7.00% Cumulative Redeemable
Preferred C Stock ("Series C Preferred Stock") with liquidation
preference totaling approximately $171.2 million.
- Estimated Book value per common
share was approximately $20.37, after the accrual of July Series C
Preferred Stock and common dividends.
- Liquidity, including cash and
unencumbered securities, exceeded $553 million. MBS principal and
interest receivable due July 25, 2024 totaled
$98.1 million.
- Securities portfolio included
approximately $10.4 billion of Agency MBS (including TBA
Securities).
- Debt to equity ratio (based on
repurchase agreements divided by total stockholders' equity) was
approximately 6.5 to 1. Implied leverage, including TBA Agency
Securities and forward settling sales was 7.8 to 1.
In July 2024 the voluntary notice of dismissal
by the plaintiffs in the JAVELIN Mortgage Investment Corp.
shareholder litigation of their previously filed appeal was
processed by the courts.
Book value per common share consisted
of:
|
June 30,2024 |
|
December 31,2023 |
|
(in millions except per share) |
Common stock, at par value - 48,765,569 and 48,798,954 shares
outstanding, respectively |
$ |
0.1 |
|
|
$ |
0.1 |
|
Additional paid-in capital |
|
4,318.6 |
|
|
|
4,318.2 |
|
Cumulative distributions to stockholders |
|
(2,297.1 |
) |
|
|
(2,220.6 |
) |
Accumulated net loss |
|
(860.3 |
) |
|
|
(826.5 |
) |
Total Stockholders' Equity |
$ |
1,161.3 |
|
|
$ |
1,271.2 |
|
Less: liquidation preference - 7.00% Cumulative Redeemable
Preferred C Stock - 6,846,978 shares outstanding |
|
(171.2 |
) |
|
|
(171.2 |
) |
Equity Attributable to Common Stockholders |
$ |
990.1 |
|
|
$ |
1,100.0 |
|
Book value per common share |
$ |
20.30 |
|
|
$ |
22.54 |
|
|
|
|
|
|
|
|
|
The major drivers of the change in the
Company's financial position were:
|
Q2 2024 |
|
Q1 2024 |
|
(in millions) |
Total Stockholders' Equity – Beginning |
$ |
1,247.1 |
|
|
$ |
1,271.2 |
|
Income (Loss) |
|
|
|
Investment in securities: |
|
|
|
Loss on MBS |
$ |
(112.9 |
) |
|
$ |
(137.7 |
) |
Gain on U.S. Treasury Securities |
|
19.2 |
|
|
|
10.9 |
|
Gain (Loss) on TBA Securities |
|
23.2 |
|
|
|
(4.3 |
) |
Gain on interest rate swaps |
|
30.1 |
|
|
|
160.7 |
|
Loss on futures contracts |
|
(3.6 |
) |
|
|
— |
|
Net Interest Income |
|
7.0 |
|
|
|
5.3 |
|
Total Expenses after fees waived (1) |
|
(11.3 |
) |
|
|
(20.4 |
) |
Net Income (Loss) |
$ |
(48.3 |
) |
|
$ |
14.5 |
|
Preferred stock dividends |
|
(3.0 |
) |
|
|
(3.0 |
) |
Common stock dividends |
|
(35.3 |
) |
|
|
(35.3 |
) |
Capital Activities |
|
|
|
Issuance of common stock |
|
0.8 |
|
|
|
1.0 |
|
Common shares repurchased |
|
— |
|
|
|
(1.3 |
) |
Total Stockholders' Equity – Ending |
$ |
1,161.3 |
|
|
$ |
1,247.1 |
|
(1) The Company’s external manager has waived a portion of its
contractual management fee at the rate of $1.65 million per quarter
for each of Q2 2024 and Q1 2024.
|
|
|
|
Condensed Balance Sheet (unaudited) |
June 30,2024 |
|
December 31,2023 |
|
(in millions) |
Assets |
|
|
|
Cash |
$ |
126.6 |
|
|
$ |
221.9 |
|
Cash collateral posted to counterparties |
|
62.3 |
|
|
|
37.0 |
|
Agency Securities, at fair value |
|
8,857.9 |
|
|
|
11,159.8 |
|
Derivatives, at fair value |
|
965.2 |
|
|
|
877.4 |
|
Accrued interest receivable |
|
37.0 |
|
|
|
47.1 |
|
Prepaid and other |
|
3.3 |
|
|
|
1.2 |
|
Total Assets |
$ |
10,052.3 |
|
|
$ |
12,344.4 |
|
|
|
|
|
Liabilities |
|
|
|
Repurchase agreements, net |
$ |
7,071.8 |
|
|
$ |
9,648.0 |
|
Obligations to return securities received as collateral, at fair
value |
|
501.0 |
|
|
|
350.3 |
|
Cash collateral posted by counterparties |
|
920.1 |
|
|
|
860.1 |
|
Payable for unsettled purchases |
|
341.3 |
|
|
|
171.5 |
|
Derivatives, at fair value |
|
9.7 |
|
|
|
5.0 |
|
Accrued interest payable- repurchase agreements |
|
32.7 |
|
|
|
26.5 |
|
Accrued interest payable- U.S. Treasury Securities sold short |
|
3.6 |
|
|
|
5.0 |
|
Accounts payable and other accrued expenses |
|
10.8 |
|
|
|
6.8 |
|
Total Liabilities |
$ |
8,891.0 |
|
|
$ |
11,073.2 |
|
|
|
|
|
Stockholders’ Equity |
|
|
|
7.00% Cumulative Redeemable Preferred C Stock ($0.001 par value per
share, $25.00 per share liquidation preference) |
$ |
— |
|
|
$ |
— |
|
Common stock ($0.001 par value per share) |
|
0.1 |
|
|
|
0.1 |
|
Additional paid-in capital |
|
4,318.6 |
|
|
|
4,318.2 |
|
Cumulative distributions to stockholders |
|
(2,297.1 |
) |
|
|
(2,220.6 |
) |
Accumulated net loss |
|
(860.3 |
) |
|
|
(826.5 |
) |
Total Stockholders’ Equity |
|
1,161.3 |
|
|
|
1,271.2 |
|
Total Liabilities and Stockholders’ Equity |
$ |
10,052.3 |
|
|
$ |
12,344.4 |
|
|
|
|
|
|
|
|
|
Distributable Earnings
Distributable Earnings is a non-GAAP measure
defined as net interest income plus TBA Drop Income adjusted for
the net coupon effect of interest rate swaps and futures contracts
minus net operating expenses. Distributable Earnings is based on
the historical cost basis of our Agency Securities, interest rate
swaps and futures contracts. Distributable Earnings differs,
potentially significantly, from net interest income and from net
income (loss) (which includes realized gains and losses and market
value adjustments).
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 equivalent to
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
Reconciliations
Distributable Earnings and Distributable
Earnings per common share
The Company believes that Distributable Earnings
and Distributable Earnings per common share may be useful to
investors because our Board of Directors may consider Distributable
Earnings and Distributable Earnings per common share as part of its
deliberations when determining the level of dividends on our common
stock. Distributable Earnings and Distributable Earnings per common
share tend to be more stable over time and this practice is
designed to increase the stability of our common stock dividend
from month to month. However, because Distributable Earnings is an
incomplete measure of the Company’s financial performance and
involves significant differences from net interest income and net
income (loss) computed in accordance with GAAP, Distributable
Earnings should be considered as supplementary to, and not as a
substitute for, the Company’s net interest income and net income
(loss) computed in accordance with GAAP as a measure of certain
aspects of the Company’s financial performance.
The elements of ARMOUR’s Distributable Earnings
and Distributable Earnings per common share and a reconciliation of
those amounts to the Company’s Net Interest Income, Net Income
(Loss) and Net Income (Loss) per common share appear below:
|
|
|
|
|
Q2 2024 |
|
Q1 2024 |
|
($ in millions except, share and per share) |
Net Interest Income |
$ |
7.0 |
|
|
$ |
5.3 |
|
TBA Drop Income (loss) |
|
0.7 |
|
|
|
(0.2 |
) |
Net interest income on interest rate swaps |
|
58.6 |
|
|
|
58.7 |
|
Net interest income on futures contracts |
|
0.5 |
|
|
|
— |
|
Total Expenses after fees waived |
|
(11.3 |
) |
|
|
(20.4 |
) |
Distributable Earnings |
$ |
55.5 |
|
|
$ |
43.4 |
|
Dividends on Preferred Stock |
|
(3.0 |
) |
|
|
(3.0 |
) |
Distributable Earnings available to common
stockholders |
$ |
52.5 |
|
|
$ |
40.4 |
|
Distributable Earnings per common share |
$ |
1.08 |
|
|
$ |
0.82 |
|
|
|
|
|
Net Income (Loss) |
$ |
(48.3 |
) |
|
$ |
14.5 |
|
Items Excluded from Distributable Earnings: |
|
|
|
Loss on MBS |
|
112.9 |
|
|
|
137.7 |
|
Gain on U.S. Treasury Securities |
|
(19.2 |
) |
|
|
(10.9 |
) |
(Gain) Loss on TBA Securities, less TBA Drop Income (loss) |
|
(22.5 |
) |
|
|
4.1 |
|
Loss on futures contracts |
|
4.1 |
|
|
|
— |
|
(Gain) Loss on interest rate swaps |
|
28.5 |
|
|
|
(102.0 |
) |
Total items excluded |
$ |
103.8 |
|
|
$ |
28.9 |
|
Distributable Earnings |
$ |
55.5 |
|
|
$ |
43.4 |
|
Dividends on Preferred Stock |
|
(3.0 |
) |
|
|
(3.0 |
) |
Distributable Earnings available to common
stockholders |
$ |
52.5 |
|
|
$ |
40.4 |
|
Distributable Earnings per common share |
$ |
1.08 |
|
|
$ |
0.82 |
|
|
|
|
|
Net Income (Loss) |
$ |
(48.3 |
) |
|
$ |
14.5 |
|
Dividends on Preferred Stock |
|
(3.0 |
) |
|
|
(3.0 |
) |
Net Income (Loss) available (related) to common
stockholders |
$ |
(51.3 |
) |
|
$ |
11.5 |
|
Net Income (Loss) per common share |
$ |
(1.05 |
) |
|
$ |
0.24 |
|
Weighted average common shares outstanding |
|
48,770,069 |
|
|
|
48,988,025 |
|
|
|
|
|
|
|
|
|
Economic Interest Income, Economic Interest
Expense, Economic Net Interest Income/Net Interest Spread and
Economic Net Yield on Interest Earning Assets
The Company believes that these non GAAP
measures, which includes the effects of TBA drop income and net
interest income (expense) on interest rate swaps and futures
contracts, may be useful to investors because they reflect items
that we consider in the management of the Company’s investment
portfolio and related funding. The Company believes that the
inclusion in economic net interest income of interest rate swaps
and futures contracts, which are recognized under GAAP in gain/loss
on derivative instruments, is meaningful as interest rate swaps are
the primary instrument the Company uses to economically hedge
against fluctuations in the Company’s borrowing costs and their
inclusion is more indicative of the Company’s total cost of funds
than interest expense alone. It does not include all interest
earning assets and interest bearing liabilities, such as cash
collateral posted and held. Accordingly, it is not a substitute for
net interest income or net income (loss) determined in accordance
with GAAP and should be considered as supplementary to such GAAP
measures as a measure of certain aspects of the Company’s financial
performance.
|
|
|
Q2 2024 |
|
(in millions) |
|
|
|
Income (Expense) |
|
Average Balance |
|
Average Rate |
Interest Bearing Assets: |
|
|
|
|
|
Agency Securities, Net of Amortization |
$ |
127.7 |
|
|
$ |
10,144.5 |
|
5.04 |
% |
Cash Equivalents & Treasury Securities |
|
2.2 |
|
|
|
240.5 |
|
3.70 |
% |
Total Interest Income/Average Interest Earning Assets |
|
129.9 |
|
|
|
10,385.0 |
|
5.00 |
% |
TBA drop income (loss)/Implied Average TBA Securities |
|
0.7 |
|
|
|
643.3 |
|
0.42 |
% |
Economic interest income |
$ |
130.6 |
|
|
$ |
11,028.3 |
|
4.74 |
% |
|
|
|
|
|
|
Interest Bearing Liabilities: |
|
|
|
|
|
Repurchase Agreements |
$ |
(114.3 |
) |
|
$ |
8,217.0 |
|
(5.57) |
% |
Treasury Securities Sold Short |
|
(8.6 |
) |
|
|
691.7 |
|
(4.99) |
% |
Total Interest Expense/Average Interest Bearing Liabilities |
|
(122.9 |
) |
|
|
8,908.7 |
|
(5.52) |
% |
Implied Average TBA Funding Positions |
|
— |
|
|
|
589.9 |
|
— |
% |
Net interest income (expense) on interest rate swaps |
|
58.6 |
|
|
|
— |
|
2.63 |
% |
Net interest income (expense) on futures contracts |
|
0.5 |
|
|
|
— |
|
0.02 |
% |
Economic interest expense |
$ |
(63.8 |
) |
|
$ |
9,498.6 |
|
(2.69) |
% |
Economic net interest income/net interest spread |
$ |
66.8 |
|
|
|
|
2.05 |
% |
Economic net yield on interest earning assets |
|
|
|
|
2.42 |
% |
|
|
|
|
|
|
|
|
|
|
Q1 2024 |
|
(in millions) |
|
|
|
Income (Expense) |
|
Average Balance |
|
Average Rate |
Interest Bearing Assets: |
|
|
|
|
|
Agency Securities, Net of Amortization |
$ |
139.9 |
|
|
$ |
11,381.4 |
|
4.92 |
% |
Cash Equivalents & Treasury Securities |
|
1.6 |
|
|
|
183.5 |
|
3.39 |
% |
Total Interest Income/Average Interest Earning Assets |
|
141.5 |
|
|
|
11,564.9 |
|
4.89 |
% |
TBA drop income (loss)/Implied Average TBA Securities |
|
(0.2 |
) |
|
|
130.0 |
|
(0.51) |
% |
Economic interest income |
$ |
141.3 |
|
|
$ |
11,694.9 |
|
4.83 |
% |
|
|
|
|
|
|
Interest Bearing Liabilities: |
|
|
|
|
|
Repurchase Agreements |
$ |
(127.4 |
) |
|
$ |
9,111.3 |
|
(5.59) |
% |
Treasury Securities Sold Short |
|
(8.8 |
) |
|
|
1,039.7 |
|
(3.39) |
% |
Total Interest Expense/Average Interest Bearing Liabilities |
|
(136.1 |
) |
|
|
10,151.0 |
|
(5.36) |
% |
Implied Average TBA Funding Positions |
|
— |
|
|
|
121.4 |
|
— |
% |
Net interest income (expense) on interest rate swaps |
|
58.7 |
|
|
|
— |
|
2.31 |
% |
Economic interest expense |
$ |
(77.4 |
) |
|
$ |
10,272.4 |
|
(3.02) |
% |
Economic net interest income/net interest spread |
|
63.4 |
|
|
|
|
1.81 |
% |
Economic net yield on interest earning assets |
|
|
|
|
2.18 |
% |
|
|
|
|
|
|
|
Dividends
ARMOUR paid monthly cash dividends of $0.24 per
share of the Company’s common stock each month in Q2 2024. On July
30, 2024, a cash dividend of $0.24 per outstanding common share
will be paid to holders of record on July 15, 2024. We have also
declared a cash dividend of $0.24 per outstanding common share
payable August 29, 2024 to holders of record on August 15, 2024.
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 Q2 2024. On July 29, 2024, a cash dividend of $0.14583 per
outstanding share of Series C Preferred Stock will be paid to
holders of record on July 15, 2024. We have also declared cash
dividends of $0.14583 per outstanding share of Series C Preferred
Stock payable August 27, 2024 to holders of record on August 15,
2024 and payable September 27, 2024 to holders of record on
September 15, 2024.
The Company forecasts that Series C Preferred
Stock dividends for 2024 will likely be treated as fully taxable
ordinary income. Common stock dividends for 2024 will likely be
treated, at least partially, as taxable ordinary income.
Conference CallAs previously
announced, the Company will provide an online, real-time webcast of
its conference call with equity analysts covering Q2 2024 operating
results on Thursday, July 25, 2024, at 8:00 a.m. (Eastern Time).
The live broadcast will be available online and can be accessed at
https://event.choruscall.com/mediaframe/webcast.html?webcastid=sQCKRL45.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 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.
Investors, 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:
investor@armourreit.com
Gordon HarperChief Financial OfficerARMOUR
Residential REIT, Inc. (772) 617-4340
ARMOUR Residential REIT (NYSE:ARR)
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From Oct 2024 to Nov 2024
ARMOUR Residential REIT (NYSE:ARR)
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From Nov 2023 to Nov 2024