ARMOUR Residential REIT, Inc. (NYSE: ARR and ARR PRC) (“ARMOUR” or
the “Company”) today announced the Company's March 31, 2021
financial position and Q1 results.
March 31, 2021 Financial
Position
- ARMOUR's
stockholders' equity totaled $1,027 million, including:
- Common stock
outstanding of 69,749,026 shares, and
- 7.00% Cumulative
Redeemable Preferred C Stock ("Series C Preferred Stock") with
liquidation preference totaling approximately $163 million.
- ARMOUR's book
value per common share was $12.40 per share.
- ARMOUR's
liquidity, including cash and unencumbered agency and U.S.
government securities, was $687 million.
- ARMOUR's
portfolio composition was 100% Agency MBS, including To Be
Announced ("TBA") Securities.
- ARMOUR's debt to
equity ratio was 4.2 to 1 (based on repurchase agreements divided
by stockholders’ equity). Leverage, including TBA Securities, was
approximately 7.1 to 1.
Q1 2021 Highlights
- ARMOUR
Comprehensive Income of $29.1 million, or $0.40 per common share,
which represents an annualized return of 12% based on stockholders'
equity at the beginning of the quarter.
- ARMOUR Core
Income of $17.7 million which represents $0.23 per common
share.
- ARMOUR paid
common stock dividends of $0.10 per share per month.
The major drivers of the change in the Company's
financial position during Q1 were:
|
|
Q1 2021 |
|
|
(in millions) |
Stockholders' Equity – Beginning |
|
$ |
938.3 |
|
|
Comprehensive
Income (1) |
|
|
Loss on MBS including TBA Securities |
|
(161.3 |
) |
|
Gain on interest rate swaps |
|
182.4 |
|
|
Net Interest Income |
|
16.1 |
|
|
Operating Expenses, net of Fee Waiver (2) |
|
(8.1 |
) |
|
Total Comprehensive
Income |
|
29.1 |
|
|
|
|
|
Capital
Activities |
|
|
Issuance of Series C Preferred Stock |
|
28.2 |
|
|
Issuance of Common Stock |
|
54.2 |
|
|
Dividends |
|
(22.5 |
) |
|
Stockholders' Equity –
Ending |
|
$ |
1,027.3 |
|
|
(1) Includes both realized and unrealized gains
and losses. (2) See discussion on page 2.
As previously reported, for Q1 2021, the
Company’s external manager waived $2.4 million of its
management fee to offset operating expenses. On April 20, 2021, the
Company’s external manager notified ARMOUR that it intended to
adjust the fee waiver to the rate of $2.1 million for the
second quarter of 2021 and $0.7 million per month thereafter
until further notice.
Condensed balance
sheet information: |
|
March 31, 2021 |
|
|
(in millions) |
Assets |
|
|
Cash |
|
$ |
278 |
|
|
Cash collateral posted to
counterparties |
|
53 |
|
|
Investments in securities, at
fair value: |
|
|
Agency Securities |
|
4,318 |
|
|
Receivable for unsettled
sales |
|
359 |
|
|
Derivatives, at fair
value |
|
216 |
|
|
Accrued interest
receivable |
|
11 |
|
|
Prepaid and other |
|
9 |
|
|
Subordinated loan to
BUCKLER |
|
105 |
|
|
Total Assets |
|
$ |
5,349 |
|
|
|
|
|
Liabilities: |
|
|
Repurchase agreements |
|
$ |
3,811 |
|
|
Cash collateral posted by
counterparties |
|
165 |
|
|
Payable for unsettled
purchases |
|
296 |
|
|
Derivatives, at fair
value |
|
45 |
|
|
Accrued interest payable-
repurchase agreements |
|
1 |
|
|
Accounts payable and other
accrued expenses |
|
4 |
|
|
Total Liabilities |
|
4,322 |
|
|
|
|
|
Stockholders’ Equity: |
|
|
Additional paid-in
capital |
|
3,115 |
|
|
Accumulated deficit |
|
(2,225 |
) |
|
Accumulated other
comprehensive income |
|
137 |
|
|
Total Stockholders’
Equity |
|
$ |
1,027 |
|
|
Total Liabilities and
Stockholders’ Equity |
|
$ |
5,349 |
|
|
|
|
|
|
|
|
Core Income, Including Drop
Income
Core Income (defined in more detail below) is a
non-GAAP measure defined as net interest income plus Drop Income
minus hedging costs and net operating
expenses. Core Income 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 “Drop Income,” because the TBA contract is essentially a
leveraged investment in the underlying Agency Securities. The
amount of 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 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
Core Income, including 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 Core
Income is useful to investors because it is related to the amount
of dividends the Company may distribute. However, because Core
Income is an incomplete measure of the Company’s financial
performance and involves differences from total comprehensive
income (loss) computed in accordance with GAAP, Core Income 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 Core Income and a
reconciliation of that Core Income to the Company’s Total
Comprehensive Income appears below:
|
|
Q1 2021(unaudited) |
|
|
(in millions) |
Net Interest Income |
|
$ |
16.1 |
|
|
Drop Income |
|
13.3 |
|
|
Less: Hedging Costs |
|
(3.6 |
) |
|
Operating Expenses, net of Fee Waiver |
|
(8.1 |
) |
|
Core
Income |
|
$ |
17.7 |
|
|
Less dividends on Preferred
Stock |
|
(2.5 |
) |
|
Core Income available
to common stockholders |
|
$ |
15.2 |
|
|
Core Income per Common
Share |
|
$ |
0.23 |
|
|
|
|
|
Core Income |
|
$ |
17.7 |
|
|
Gains (losses): |
|
|
MBS |
|
(97.5 |
) |
|
TBA Securities |
|
(77.1 |
) |
|
Interest Rate Hedges |
|
186.0 |
|
|
Total Comprehensive
Income |
|
$ |
29.1 |
|
|
|
|
|
|
|
|
Company Update
At the close of business on April 19, 2021:
- Common stock outstanding of
71,244,026 shares, Series C Preferred Stock with liquidation
preference totaling approximately $171 million.
- Book value per Common share was
estimated to be $12.15.
- ARMOUR's liquidity, including cash
and unencumbered securities, exceeded $675 million.
- ARMOUR's securities portfolio
included approximately $7.7 billion of Agency MBS (including TBA
Securities).
- ARMOUR's debt to equity ratio (based
on repurchase agreements divided by stockholders' equity) was
approximately 3.6 to 1. Leverage, including TBA Securities was
approximately 6.9 to 1.
COVID-19 Pandemic
The COVID-19 pandemic continues to have a
real-time impact on all business sectors. The extent of the
ultimate impact of the COVID-19 pandemic on the Company's
operational and financial performance will depend on various
developments, including the duration of the outbreak and the spread
of the virus and the federal government's and states' future
responses to the virus, which cannot be reasonably predicted at
this time. While the Company is not able to estimate the future
impact of the COVID-19 pandemic at this time, it could continue to
materially affect the Company’s future financial and operational
results.
Dividends
ARMOUR paid monthly cash dividends of $0.10 per
share of the Company’s common stock for each month in Q1 2021.
ARMOUR previously announced the April and May common stock
dividends of $0.10 per share payable April 29, 2021 and May 27,
2021 to holders of record on April 15, 2021 and May 17, 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 Q1 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 April 15, 2021, May 15, 2021 and June 15,
2021, payable on April 27, 2021, May 27, 2021 and June 28, 2021,
respectively.
Conference Call
As previously announced, the Company will
provide an online, real-time webcast of its conference call with
equity analysts covering Q1 2021 operating results on Thursday,
April 22, 2021, at 8:30 a.m. (Eastern Time). The live broadcast
will be available online and can be accessed at
https://www.webcaster4.com/Webcast/Page/896/40725. 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 exclusively 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 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 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
It
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 or by directing
www.armourreit.com 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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