ARMOUR Residential REIT, Inc. Reports 13.8% Annualized ROE From Taxable REIT
Income for Q1 2013
VERO BEACH, Fla., May 2, 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 March 31,
First Quarter 2013 Highlights and Financial Information
*Estimated taxable REIT income was approximately $86.0 million representing
13.8% annualized yield on Q1 2013 weighted average paid-in capital
*Common dividends paid were $79.8 million or $0.24 per Common share of
*Preferred dividends paid were $2.5 million
*Core Income was approximately $67.5 million or $0.18 per Common share
*GAAP income was approximately $102.3 million or $0.27 per Common share
*Realized gains on Agency Securities sales totaled $18.5 million or $0.05
per Common share as compared to $20.5 million or $0.07 per Common share in
*Core Income represents 10.8% annualized yield on Q1 2013 weighted average
*Average yield on assets was 2.33% and average net interest margin was
*Annualized average principal repayment rate (CPR) was 15.7%
*Stock outstanding as of March 31, 2013:
Common - 374,053,198 shares
Series A Preferred - 2,180,572 shares
Series B Preferred - 5,650,000 shares
*Book Value (shareholders' equity) as of March 31, 2013 was $2.7 billion or
$6.69 per Common share
*Paid-in capital as of March 31, 2013 was $2.8 billion or $6.95 per Common
*The ARMOUR Residential REIT, Inc. monthly "Company Update" can be found at
Q1 2013 Results
Taxable REIT Income and Core Income
Estimated taxable REIT income for the quarter ended March 31, 2013, was
approximately $86.0million. The weighted average paid-in capital for the
quarter endedMarch31,2013, was $2.5 billion. The estimated taxable REIT
income represents an annualized return on weighted average paid-in capital for
the quarter of 13.8%. The Company distributes dividends based on its estimate
of taxable earnings, 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 endedMarch 31, 2013, was $67.5million. "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
$16.3million. GAAP net income for the first quarter of 2013 was
$102.3million, including realized gains on the sales of Agency Securities of
The Company paid dividends of $0.08 per Common share of record for each month
of the quarter, resulting in payments to common stockholders of $79.8 million.
The Company also paid monthly dividends of $0.17 per outstanding share of
Series A Preferred Stock resulting in payments to Series A Preferred
stockholders of $1.1 million. For the quarter ended March 31, 2013, the
Company paid initial dividends of $0.25 per outstanding share of Series B
Preferred Stock, resulting in payments to Series B Preferred stockholders of
$1.4 million. The Company had estimated taxable REIT income available to pay
dividends of $86.0 million in Q1 2013.
Per Share Amounts
Per Common share amounts are net of applicable Preferred Stock dividends and
liquidation preferences.The denominators used to calculate per Common share
amounts as of March 31, 2013 and for the quarter then ended reflect the
dilutive effects of unvested stock awards.Such effects are not material.
The Company's portfolio consisted of Fannie Mae, Freddie Mac and Ginnie Mae
mortgage securities and was valued at $24.3 billion as of March 31, 2013.
During the first quarter of 2013,the annualized yield on average
assetswas2.33%, and the annualized cost of funds on average liabilities
(including realized cost of hedges) was 0.98%, resulting in a net interest
spread of 1.35% for the quarter.
The $24.3 billion portfolio of Agency Securities at March 31, 2013 consisted
of 92.2% fixed rate Agency Securities and 7.8% 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 ofMarch 31, 2013, the Company financed its portfolio with approximately
$24.8 billion of borrowings under repurchase agreements. The Company's debt to
equity ratio, as measured to paid-in capital, as of March 31, 2013, was8.85
to 1. The Company's debt-to-total shareholder equity ratio as of March 31,
2013, was 9.17 to 1.
As of March 31, 2013, 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 36 days. The
Company had a notional amount of $12.3 billion of various maturities of
interest rate swap contracts with a weighted average swap rate of 1.4%. The
Company had a notional amount of $1.6 billion of various maturities of
swaptions with a weighted average swap rate of 2.1%. The Company had a
notional amount of $99.0 million of various maturities of Eurodollar futures
contracts sold at a weighted average swap equivalent rate of 1.9%.
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
March 31, 2013, ARMOUR's effective management fee was 1.01% based on gross
equity raised.Economies of scale are achieved as the Company's equity
continues to increase.
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. ARMOUR believes that 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. Core income also excludes gains and losses on security sales.However,
because taxable REIT income and Core income are incomplete measures of the
Company's financial performance and involve differences from net income
computed in accordance with GAAP, taxable REIT income and Core 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
The following table reconciles ARMOUR's consolidated results from operations
to taxable REIT income and Core income for the quarter ended March 31, 2013:
GAAP net income $102.3
Unrealized gain on derivatives (16.3)
Estimated taxable REIT income $86.0
Gain on sale of Agency Securities (18.5)
Core Income $67.5
On February 20, 2013, the Company completed the sale of 65,000,000 shares of
common stock in a follow-on public offering at a price of $6.75 per share
during the first quarter 2013. The Company also issued 10,110 shares of common
stock during the first quarter of 2013 under its dividend reinvestment plan at
a weighted average price of $6.64 per share. As of March 31, 2013, there were
374,053,198 common shares outstanding, an increase of 21.0% from December31,
On February 12, 2013, the Company completed the sale of 5,400,000 shares of
its 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. On February
20, 2013, the Company sold 250,000 shares of the additional 810,000 shares of
Series B Preferred Stock available under the overallotment option.As of March
31, 2013, there were 5,650,000 shares of Series B Preferred Stock outstanding.
The Company issued 174,961 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 first quarter of 2013. As of
March 31, 2013, there were 2,180,572 shares of Series A Preferred Stock
outstanding, an increase of 8.7% from December 31, 2012.
ARMOUR Residential REIT, Inc.
ARMOUR is a Maryland corporation that invests in residential mortgage backed
securities issued or guaranteed by U.S. Government-sponsored entities. Our
portfolio consists primarily of securities backed by fixed rate, hybrid
adjustable rate, and adjustable rate home loans. ARMOUR is externally managed
and advised by ARMOUR Residential Management LLC, an investment advisor
registered with the Securities and Exchange Commission ("SEC"). 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 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
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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