ARMOUR Residential REIT, Inc. Reports 13.5% Annualized ROE From Taxable REIT
Income for Q2 2013
VERO BEACH, Fla., Aug. 1, 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 June 30,
Second Quarter 2013 Highlights and Financial Information
*Estimated taxable REIT income of approximately $91.4 million represents
13.5% annualized yield on stockholders' equity at the beginning of the
*Common dividends paid were $78.7 million or $0.21 per Common share of
*Preferred dividends paid were $3.9 million
*Core Income of approximately $69.9 million or $0.18 per Common share
*GAAP net income of approximately $481.4 million or $1.28 per Common share
*Realized gains on Agency Securities sales totaled $20.9 million or $0.06
per Common share
*Core Income represents 10.3% annualized yield on stockholders' equity at
the beginning of the quarter
*Average yield on assets of 2.53% and average net interest margin of 1.38%
*Annualized average principal repayment rate (CPR) of 10.8%
*Stock outstanding as of June 30, 2013:
Common – 370,737,000 shares
Series A Preferred - 2,181,000 shares
Series B Preferred - 5,650,000 shares
*Q2 2013 weighted average diluted Common shares were 374,135,000
*Book Value (stockholders' equity) as of June 30, 2013 was $2.2 billion or
$5.43 per Common share
*Agency Securities sales since June 30, 2013 totaled approximately $4.2
billion, resulting in realized capital losses of approximately $0.2
*Additional updated information on the Company's investment, financing and
hedge positions can be found in the ARMOUR Residential REIT, Inc. July 16,
2013 "Company Update." ARMOUR posts Company Updates each month on
Q2 2013 Results
Taxable REIT Income and Core Income
Estimated taxable real estate investment trust ("REIT") income for the quarter
ended June 30, 2013 was approximately $91.4 million. The Company distributes
dividends based on its estimate of taxable earnings, not based on net income
calculated in accordance with Generally Accepted Accounting Principles
("GAAP"). Taxable REIT income and GAAP net income 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
on derivatives are included in GAAP net income, whereas unrealized valuation
changes are not included in taxable income.
Core Income for the quarter endedJune 30, 2013 was $69.9million. "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 U.S.
Treasury Securities and certain non-recurring expenses.CoreIncome may
differ from GAAP net income, which includes the unrealized gains or losses of
the Company's derivative instruments and the gains or losses on Agency
Securities and U.S. Treasury 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
$412.2million. GAAP net income for the second quarter of 2013 was
$481.4million, including realized gains on the sales of Agency Securities of
The Company paid dividends of $0.07 per Common share of record for each month
of the quarter, resulting in payments to common stockholders of $78.7 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 $1.2 million and $0.16 per outstanding share of Series B
Preferred Stock resulting in payments to Series B Preferred stockholders of
$2.7million. The Company had estimated taxable REIT income available to pay
dividends of $91.4 million in Q2 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 June 30, 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 $22.6 billion as of June 30, 2013.
During the second quarter of 2013,the annualized yield on average
assetswas2.53%, and the annualized cost of funds on average liabilities
(including realized cost of hedges) was 1.14%, resulting in a net interest
spread of 1.38% for the quarter.
The $22.6 billion portfolio of Agency Securities at June 30, 2013 consisted of
93.9% fixed rate Agency Securities and 6.1% 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 rate Agency Securities with rate
resets shorter than 19 months.
Portfolio Financing, Leverage and Interest Rate Hedges
As ofJune 30, 2013, the Company financed its portfolio with approximately
$19.8 billion of net borrowings under repurchase agreements and $1.9 billion
of U.S. Treasury Securities sold short. The Company's debt to equity ratio, as
measured to paid-in capital, as of June 30, 2013, was7.77 to 1. The Company's
debt-to-total stockholders' equity ratio as of June 30, 2013 was 9.77 to 1.
As of June 30, 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 38 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 $750.0 million of various maturities of
swaptions with a weighted average swap rate of 2.2%. The Company had a
notional amount of $74.0 million of various maturities of Eurodollar futures
contracts sold at a weighted average swap equivalent rate of 2.1%.
The Company pays a management fee of 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 June 30, 2013, the effective management fee was 1.016% based
on gross equity raised.
Regulation G Reconciliation
Taxable REIT income is calculated according to the requirements of the
Internal Revenue Code("the Code") rather than GAAP. The Company plans to
distribute at least 90% of its taxable REIT incomein order to maintain its
tax qualification as a REIT under the Code. The Company 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, the Company's net income
computed in accordance with GAAP as a measure of the Company's financial
The following table reconciles the Company's consolidated results from
operations to taxable REIT income and Core income for the quarter ended June
June 30, 2013
GAAP net income $481.4
Unrealized gain on derivatives (412.2)
Unrealized loss on U.S. Treasury Securities sold short 21.7
Amortization of deferred hedging costs 0.5
Estimated taxable REIT income $91.4
Gain on sale of Agency Securities (20.9)
Gain on sale of U.S. Treasury Securities (0.6)
Core Income $69.9
The Company issued 16,517 shares of common stock during the second quarter of
2013 under its dividend reinvestment plan at a weighted average price of $5.23
per share. As of June 30, 2013, there were 370,737,000 Common shares
outstanding. During May 2013 the Company repurchased 3,395,603 shares of our
outstanding common stock under the Repurchase Program at a weighted average
price of $5.94 per share for an aggregate of $20.3 million.
As of June 30, 2013, there were 5,650,000 shares of Series B Preferred Stock
outstanding. As of June 30, 2013, there were 2,181,000 shares of Series A
Preferred Stock outstanding.
Subsequent Agency Security Sales
Since June 30, 2013, the Company has sold approximately $4.2 billion of Agency
Securities and U.S. Treasury Securities resulting in realized capital losses
of approximately $0.2 billion. Our REIT dividend requirements are based on the
amount of our ordinary taxable income. These capital losses do not affect the
amount of the Company's ordinary taxable income, but will generally be
available to offset capital gains realized in the years 2013 through 2018.
Through June 30, 2013, the Company realized approximately $40.0million of
capital gains subject to such offsetting.
ARMOUR Residential REIT, Inc.
ARMOUR is a Maryland corporation that invests primarily in fixed rate, hybrid
adjustable rate and adjustable rate residential mortgage backed securities.
These securities are issued or guaranteed by U.S. Government-sponsored
entities. 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 Code for U.S. federal income
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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