ARMOUR Residential REIT, Inc. Reports 16.2% Annualized ROE From Taxable REIT
Income for Q4 2012
VERO BEACH, Fla., Feb. 22, 2013 (GLOBE NEWSWIRE) -- ARMOUR Residential REIT,
Inc. (NYSE: ARR, ARR PrA, and ARR PrB; NYSE MKT: ARR.WS) ("ARMOUR" or the
"Company") today announced financial results for the quarter ended December
Fourth Quarter 2012 Highlights and Financial Information
*Q4 2012 estimated taxable REIT income of approximately $90.3 million
($0.29 per Common share)
*Q4 2012 Common dividends paid were $83.6 million ($0.27 per Common share)
*Q4 2012 Preferred dividends paid were $1.0 million
*Q4 2012 Core Income of approximately $69.8 million ($0.22 per Common
*Q4 2012 GAAP income of approximately $115.8 million ($0.37 per Common
*Q4 2012 realized gains on Agency Securities sales totaled $20.5 million
($0.07 per Common share) compared to $15.1 million ($0.06 per Common
share) in Q3 2012
*Q4 2012 estimated taxable REIT income results equal annualized yield on Q4
2012 weighted average additional paid-in capital of 16.2%
*Q4 2012 Core Income results equal annualized yield on Q4 2012 weighted
average additional paid-in capital of 12.5%
*Q4 2012 average yield on assets of 2.47% and average net interest margin
*Q4 2012 annualized average principal repayment rate (CPR) of 14.1%
*As of December 31, 2012, there were 2,005,611 shares of Series A Preferred
*As of December 31, 2012, there were 309,013,984 shares of Common Stock
*Book Value (shareholders' equity) as of December 31, 2012 was $2.3 billion
or $7.29 per diluted Common share outstanding. The Company previously
reported on February 13, 2013, that it estimated its then-current Book
Value to be between $6.70 and $6.76 per diluted Common share.
*Additional paid-in capital as of December 31, 2012 was $2.2 billion or
$7.31 per Common share outstanding
*The ARMOUR Residential REIT, Inc. monthly "Company Update" can be found at
Q4 2012 Results
Taxable REIT Income and Core Income
Estimated taxable REIT income for the quarter endedDecember 31, 2012,was
approximately $90.3million. The weighted average additional paid-in capital
for the quarter endedDecember31,2012, was $2.2 billion. The estimated
taxable REIT income represents an annualized return on weighted average
additional paid-in capital for the quarter of 16.2%. The Company distributes
dividends based on its estimate of taxable earnings per common share, not
based on earnings calculated in accordance with Generally Accepted Accounting
Principles (GAAP). Taxable REIT income and GAAP earnings will differ
primarily because of the non-taxable unrealizedchanges in the value ofthe
Company's derivatives, which the company uses as hedges. These unrealized
gains/losses are included in GAAP earnings, whereas unrealized valuation
changes are not included in taxable income.
Core Income for the quarter endedDecember 31, 2012, was $69.8million. "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
certain non-recurring expenses.CoreIncome may differ from GAAP earnings as
GAAP earnings include the unrealized gains or losses of the Company's
derivative instruments and the gains or losses on Agency Securities.
For the purposes of computing GAAP net income, 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 consolidated
statement of comprehensive income. Due to the rise in interest rates during
the quarter, the corresponding unrealized gain on derivatives was
$25.5million. GAAP net income for the fourth quarter of 2012 was
$115.8million, including realized gains on the sales of Agency Securities of
For the quarter ended December 31, 2012, the Company paid dividends of $0.09
per outstanding share of common stock for each month of the quarter resulting
in payments to common stockholders of $83.6 million. For the quarter ended
December 31, 2012, the Company paid dividends of $0.17 per outstanding share
of Series A Preferred Stock for each month of the quarter resulting in
payments to preferred stockholders of $1.0 million. The Company had estimated
taxable REIT income available to pay dividends of $90.3 million in Q4 2012.
Per Share Amounts
Calculations of quarterly amounts per Common share are based on the weighted
average common shares outstanding (diluted) of 309.6 million for Q4 and 270.0
million for Q3.The effects of dilution are not material.Per Common share
amounts are net of applicable dividends on Preferred Stock.
The Company's portfolio consisted of Fannie Mae, Freddie Mac and Ginnie Mae
mortgage securities and was valued at $19.1 billion as of December 31, 2012.
During the fourth quarter of 2012,the annualized yield on average
assetswas2.47%, and the annualized cost of funds on average liabilities
(including realized cost of hedges) was 0.92% resulting in a net interest
spread of 1.55% for the quarter.
The $19.1 billion portfolio of Agency Securities at December 31, 2012
consisted of 88.6% fixed rate Agency Securities and 11.4% ARMs and Hybrid
ARMs. The Company defines "Hybrid ARMs" as adjustable rate Agency Securities
with longer than 18 months to rate resetand "ARMs" as adjustable Agency
Securities with rate resets shorter than 19 months.
Portfolio Financing, Leverage and Interest Rate Hedges
As ofDecember 31, 2012, the Company financed its portfolio with approximately
$18.4 billion of borrowings under repurchase agreements. The Company's debt
to equity ratio, as measured to additional paid-in-capital, as of December 31,
2012, was8.25 to 1. The Company's debt-to-total shareholder equity ratio as
of December 31, 2012, was 7.96 to 1.
As of December 31, 2012, 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 34
days. The Company had a notional amount of $8.7 billion of various maturities
of interest rate swap contracts with a weighted average swap rate of 1.2%.
The Company had a notional amount of $1.1 billion of various maturities of
swaptions with a weighted average swap rate of 2.1%. The Company had a
notional amount of $0.1 billion of various maturities of Eurodollar futures
contracts sold at a weighted average swap equivalent rate of 1.8%.
ARMOUR's management fee is 1.5% (per annum) of gross equity raised up to $1
billion and 0.75% (per annum) of gross equity raised above $1.0 billion. As
of December 31, 2012, ARMOUR's effective management fee was 1.08% based on
gross equity raised.The previously reported February 2013 equity capital
raises described below further reduced our effective management fees to
1.01%.Economies of scale are achieved as the Company's equity continues to
Regulation G Reconciliation
Taxable REIT income is calculated according to the requirements of the
Internal Revenue Coderather than GAAP. ARMOUR plans to distribute at least
90% of its taxable REIT incomein order to maintain its tax qualification as a
REIT. The following table reconciles ARMOUR's consolidated results from
operations to taxable REIT income for the quarter ended December 31, 2012:
December 31, 2012
GAAP net income $115.8
Unrealized gain on derivatives (25.5)
Estimated taxable REIT income $90.3
Gain on sale of Agency Securities (20.5)
Core Income $69.8
ARMOUR believes that the foregoing reconciliation of 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. However, because taxable REIT income is an
incomplete measure of the Company's financial performance and involves
differences from net income computed in accordance with GAAP, taxable REIT
income should be considered as supplementary to, and not as a substitute for,
ARMOUR's net income computed in accordance with GAAP as a measure of the
Company's financial performance.
Share Count and Equity Capital Raises
The Company issued 13,384 shares of common stock during the fourth quarter of
2012 under our dividend reinvestment plan at a weighted average price of $6.83
per share. As of December 31, 2012, there were 309,013,984 common shares
On February 20, 2013, we completed the sale of 65,000,000 shares of our Common
Stock at net price to us of $6.75 per share, for an aggregate total of $438.5
million after our other offering expenses. The Underwriters have 30 days to
exercise an overallotment option to purchase up to an additional 9,750,000
shares Common Stock under their overallotment option.
Series A Preferred Stock
The Company issued 220,611 shares of our 8.25% Series A Cumulative Preferred
Stock ("Series A Preferred Stock") in at-the-market offerings at a weighted
average price of $25.51 per share during the fourth quarter of 2012. As of
December 31, 2012, there were 2,005,611 shares of Series A Preferred Stock
outstanding, an increase of 12.4% from September 30, 2012.
Series B Preferred Stock
On February 12, 2013, we completed the sale of 5,400,000 shares of our 7.875%
Series B Cumulative Preferred Stock ("Series B Preferred Stock") at $25.00 per
share, for an aggregate total of $135.0 million. Net proceeds after
underwriting fees and expenses were approximately $130.5 million. The
Underwriters have 30 days to exercise an overallotment option to purchase up
to an additional 810,000 shares of Series B Preferred Stock. On February 20,
2013 the underwriters purchased 250,000 shares of the 810,000 shares of Series
B Preferred Stock available under the overallotment option.
ARMOUR Residential REIT, Inc.
ARMOUR is a Maryland corporation that invests primarily in hybrid adjustable
rate, adjustable rate and fixed rate residential mortgage backed securities.
These securities are issued or guaranteed by U.S. Government-chartered
entities. ARMOUR is externally managed and advised by ARMOUR Residential
Management LLC. ARMOUR Residential REIT, Inc. intends to qualify and has
elected to be taxed as a REIT under the Internal Revenue Code for U.S. federal
income tax purposes.
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 Securities and Exchange Commission ("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.
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: Investor Contact: email@example.com
James R. Mountain
Chief Financial Officer
ARMOUR Residential REIT, Inc.
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