ARMOUR Residential REIT, Inc. (NYSE: ARR and ARR PRC) (“ARMOUR” or
the “Company”) today announced the Company's March 31, 2022
financial position and Q1 results.
ARMOUR's March 31, 2022 Financial
Position
- Book value per
common share was $8.48.
- Liquidity,
including cash and unencumbered agency and U.S. government
securities, was $628.3 million.
- Portfolio
composition was 85% Agency mortgage-backed securities ("MBS"),
including To Be Announced ("TBA") Securities and 15% U.S. Treasury
Securities.
- Debt to equity
ratio was 6.3 to 1 (based on repurchase agreements divided by total
stockholders’ equity). Leverage, including TBA Securities, was 7.0
to 1.
- Interest Rate
swap contracts totaled $7.4 billion of notional amount,
representing 103% of total repurchase agreement and TBA Securities
liabilities.
ARMOUR's Q1 2022 Highlights
-
Paid common stock dividends of $0.10 per share per month.
- Comprehensive
loss related to common stockholders of $(148.0) million or $(1.54)
per common share, which represents an annualized return of (60)%
based on equity attributable to common stockholders at the
beginning of the quarter.
- Net interest
income of $30.9 million.
- Distributable
Earnings available to common stockholders (see explanation of this
non-GAAP measure on page 3) of $26.7 million which represents $0.28
per common share.
- Issued 6,161,156
shares of common stock through at the market offering programs,
raising $54.4 million of capital after fees and expenses.
- Net interest
margin increased to 1.78%, up 3 basis points from the prior
quarter.
Book Value, December 31, 2021 |
|
$ |
10.33 |
|
Comprehensive loss per common share |
|
|
(1.54 |
) |
Less: Common dividends per common share |
|
|
(0.30 |
) |
Capital Raising Activities |
|
|
(0.01 |
) |
Book Value, March 31, 2022 |
|
$ |
8.48 |
|
|
|
|
|
|
Book value per common share consisted of:
|
|
March 31, 2022 |
|
|
(in millions except per share) |
Common stock - 100,361,261 shares outstanding |
|
$ |
0.1 |
|
Additional paid-in capital |
|
|
3,458.5 |
|
Cumulative distributions to stockholders |
|
|
(1,870.1 |
) |
Accumulated net loss |
|
|
(595.0 |
) |
Accumulated other comprehensive income |
|
|
28.4 |
|
Total Stockholders' Equity |
|
$ |
1,021.9 |
|
Less: liquidation preference - 7.00% Cumulative Redeemable
Preferred C Stock - 6,846,978 shares outstanding |
|
|
(171.2 |
) |
Equity Attributable to Common Stockholders |
|
$ |
850.7 |
|
Book value per common share |
|
$ |
8.48 |
|
|
|
|
|
|
The major drivers of the change in the Company's
financial position during Q1 were:
|
|
Q1 2022 |
|
|
(in millions) |
Total Stockholders' Equity – Beginning |
|
$ |
1,143.6 |
|
Comprehensive Income (Loss) |
|
|
Investment in securities (1) |
|
|
Loss on MBS |
|
$ |
(332.9 |
) |
Loss on U.S. Treasury Securities |
|
|
(78.4 |
) |
Loss on TBA Securities |
|
|
(99.2 |
) |
Interest rate swaps |
|
|
Net interest expense |
|
|
(6.3 |
) |
Unrealized gain |
|
|
350.1 |
|
Net Interest Income |
|
|
30.9 |
|
Total Expenses after fees waived (2) |
|
|
(9.2 |
) |
Total Comprehensive Loss |
|
$ |
(145.0 |
) |
|
|
|
Capital Activities |
|
|
Issuance of common stock |
|
|
55.4 |
|
Dividends |
|
|
(32.1 |
) |
Total Stockholders' Equity – Ending |
|
$ |
1,021.9 |
|
|
|
|
|
|
(1) Includes both realized and unrealized gains
and losses. (2) The Company’s external manager has waived a portion
of its contractual management fee at the rate of $0.65 million per
month until further notice.
Condensed balance sheet information: |
|
March 31, 2022 |
|
|
(in millions) |
Assets |
|
|
Cash |
|
$ |
316.9 |
|
Cash collateral posted to counterparties |
|
|
9.3 |
|
Investments in securities, at fair value: |
|
|
Agency Securities |
|
|
6,399.3 |
|
U.S. Treasury Securities |
|
|
1,258.0 |
|
Derivatives, at fair value |
|
|
543.2 |
|
Accrued interest receivable |
|
|
17.4 |
|
Prepaid and other |
|
|
57.8 |
|
Subordinated loan to BUCKLER |
|
|
105.0 |
|
Total Assets |
|
$ |
8,706.9 |
|
|
|
|
Liabilities: |
|
|
Repurchase agreements |
|
$ |
6,440.0 |
|
Cash collateral posted by counterparties |
|
|
549.7 |
|
Payable for unsettled purchases |
|
|
687.3 |
|
Derivatives, at fair value |
|
|
0.5 |
|
Accrued interest payable- repurchase agreements |
|
|
1.0 |
|
Accounts payable and other accrued expenses |
|
|
6.5 |
|
Total Liabilities |
|
|
7,685.0 |
|
|
|
|
Stockholders’ Equity: |
|
|
7.00% Cumulative Redeemable Preferred C Stock ($0.001 par value per
share, $25.00 per share liquidation preference) - 6,846,978 shares
outstanding |
|
$ |
— |
|
Common stock ($0.001 par value per share) - 100,361,261 shares
outstanding: |
|
|
0.1 |
|
Additional paid-in capital |
|
|
3,458.5 |
|
Cumulative distributions to stockholders |
|
|
(1,870.1 |
) |
Accumulated net loss |
|
|
(595.0 |
) |
Accumulated other comprehensive income |
|
|
28.4 |
|
Total Stockholders’ Equity |
|
$ |
1,021.9 |
|
Total Liabilities and Stockholders’ Equity |
|
$ |
8,706.9 |
|
|
|
|
|
|
Distributable Earnings, Including TBA
Drop IncomeDistributable 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 loss,
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
ReconciliationDistributable 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 and Distributable Earnings per
common share are useful to investors because our Board of Directors
considers Distributable Earnings and Distributable Earnings per
common share 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 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 Distributable Earnings per common share and a reconciliation of
those amounts to the Company’s Total Comprehensive Loss and
Comprehensive loss per common share appear below:
|
|
Q1 2022(unaudited) |
|
|
(in millions) |
Net Interest Income |
|
$ |
30.9 |
|
TBA Drop Income |
|
|
14.3 |
|
Net interest expense on interest rate swaps |
|
|
(6.3 |
) |
Total Expenses after fees waived |
|
|
(9.2 |
) |
Distributable Earnings |
|
$ |
29.7 |
|
Dividends on Preferred Stock |
|
$ |
(3.0 |
) |
Distributable Earnings available to common
stockholders |
|
$ |
26.7 |
|
Distributable Earnings per common share |
|
$ |
0.28 |
|
|
|
|
Distributable Earnings |
|
$ |
29.7 |
|
Loss on MBS |
|
|
(332.9 |
) |
Loss on U.S. Treasury Securities |
|
|
(78.4 |
) |
Loss on TBA Securities, less TBA Drop Income |
|
|
(113.5 |
) |
Unrealized gain on interest rate swaps |
|
|
350.1 |
|
Total Comprehensive Loss |
|
$ |
(145.0 |
) |
Dividends on Preferred Stock |
|
$ |
(3.0 |
) |
Comprehensive loss related to common
stockholders |
|
$ |
(148.0 |
) |
Comprehensive loss per common share |
|
$ |
(1.54 |
) |
Weighted average common shares outstanding - 96,225,891 |
|
|
|
|
|
Company Update
At the close of business on April 26, 2022:
- Common stock
outstanding of 103,170,033 shares; 7.00% Cumulative Redeemable
Preferred C Stock ("Series C Preferred Stock") with liquidation
preference totaling approximately $171.2 million.
- Book value per
common share was estimated to be $7.63.
- Liquidity,
including cash and unencumbered securities, exceeded $646.2
million.
- Securities
portfolio included approximately $8.2 billion of Agency MBS
(including TBA Securities) and U.S. Treasury Securities.
- Debt to equity ratio (based on
repurchase agreements divided by total stockholders' equity) was
approximately 6.2 to 1. Leverage, including TBA Securities was
approximately 7.5 to 1.
Between April 1, 2022 and April 14, 2022, we
issued 2,809 shares under our 2021 Common stock ATM Sales Agreement
for proceeds of $22,974 net of issuance costs and commissions of
$231.
DividendsARMOUR paid monthly
cash dividends of $0.10 per share of the Company’s common stock for
each month in Q1 2022. ARMOUR will pay common stock dividends of
$0.10 per share on April 29, 2022 to holders of record on April 18,
2022. ARMOUR previously announced the May common stock dividends of
$0.10 per share to be paid on May 27, 2022 to holders of record on
May 16, 2022. 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 2022. ARMOUR paid Series C Preferred Stock dividends of
$0.14583 per share on April 27, 2022 to holders of record on April
15, 2022. ARMOUR previously announced the May and June Series C
Preferred Stock dividends of $0.14583 per share to be paid on May
27, 2022 and June 27, 2022 to holders of record on May 15, 2022 and
June 15, 2022, respectively.
Conference CallAs previously
announced, the Company will provide an online, real-time webcast of
its conference call with equity analysts covering Q1 2022 operating
results on Thursday, April 28, 2022, 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=cFnxnwvv.
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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