ARMOUR Residential REIT, Inc. Announces Q3 Results and September 30, 2024 Financial Position
ARMOUR's Q3 2024 Results
GAAP net income available to common stockholders of
$62.9 million or$1.21 per common share.Net interest income of
$1.8 million .Distributable Earnings available to common stockholders of
$52.0 million , which represents$1.00 per common share (see explanation of this non-GAAP measure on page 4).Average interest income on interest earning assets of 4.89% and interest cost on average interest bearing liabilities of 5.51%.
Economic interest income was 4.44% less economic interest expense of 2.44% for an economic net interest spread of 2.00% (see explanation of this non-GAAP measure on page 6).
Raised
$129.4 million of capital by issuing 6,413,735 shares of common stock through an at the market offering program.Paid common stock dividends of
$0.24 per share per month, or$0.72 per share for Q3.
ARMOUR's
Book value per common share of
$20.76 . See the table below for a reconciliation sinceJune 30, 2024 .
| Book Value, | $ | 20.30 | ||
| Net Income per common share | 1.21 | |||
| Less: Common dividends per common share | (0.72 | ) | ||
| Equity Capital Activities, net | (0.03 | ) | ||
| Book Value, | $ | 20.76 | ||
Total economic return, which is change in book value for the period plus common dividends paid for the quarter, was 5.81% for Q3 2024 up from (4.76)% for Q2 2024.
Liquidity, including cash and unencumbered agency and
U.S. government securities, of$667.4 million .Agency mortgage-backed securities ("MBS") portfolio totaled
$12.4 billion .Repurchase agreements, net totaled
$10.2 billion ; 41.4% were with ARMOUR affiliateBUCKLER Securities LLC .Debt to equity ratio of 7.74:1 (based on repurchase agreements divided by total stockholders’ equity). Implied leverage, including forward settling sales and unsettled purchases was 8.18:1.
Interest Rate swap contracts totaled
$6.7 billion of notional amount.
Company Update
At the close of business on
Common stock outstanding of 55,760,266 shares.
7.00% Cumulative Redeemable Preferred C Stock ("Series C Preferred Stock") with liquidation preference totaling approximately
$171.2 million .Liquidity, including cash and unencumbered securities, exceeded
$489 million . MBS principal and interest receivable dueOctober 25, 2024 totaled$141 .9 million.Securities portfolio included approximately
$12 .1 billion of Agency MBS (includingTBA Securities ).Through
October 15, 2024 raised$11 .1 million of capital by issuing 567,720 shares of common stock through an at the market offering program.Debt to equity ratio (based on repurchase agreements divided by total stockholders' equity) and Implied leverage, including
TBA Agency Securities and forward settling sales were both 8.6 to 1.
Book value per common share consisted of:
| (in millions except per share) | ||||||||
| Common stock, at par value - 55,192,546 and 48,798,954 shares outstanding, respectively | $ | 0.1 | $ | 0.1 | ||||
| Additional paid-in capital | 4,448.8 | 4,318.2 | ||||||
| Cumulative distributions to stockholders | (2,337.6 | ) | (2,220.6 | ) | ||||
| Accumulated net loss | (794.4 | ) | (826.5 | ) | ||||
| Total Stockholders' Equity | $ | 1,316.9 | $ | 1,271.2 | ||||
| Less: liquidation preference - 7.00% Cumulative Redeemable Preferred C Stock - 6,846,978 shares outstanding | (171.2 | ) | (171.2 | ) | ||||
| Equity Attributable to Common Stockholders | $ | 1,145.7 | $ | 1,100.0 | ||||
| Book value per common share | $ | 20.76 | $ | 22.54 | ||||
The major drivers of the change in the Company's financial position were:
| Q32024 | Q2 2024 | |||||||
| (in millions) | ||||||||
| Total Stockholders' Equity – Beginning | $ | 1,161.3 | $ | 1,247.1 | ||||
| Income (Loss) | ||||||||
| Investment in securities: | ||||||||
| Gain (Loss) on MBS | $ | 306.1 | $ | (112.9 | ) | |||
| Gain (Loss) on | (21.7 | ) | 19.2 | |||||
| Gain on | 39.1 | 23.2 | ||||||
| Gain (Loss) on interest rate swaps | (232.6 | ) | 30.1 | |||||
| Loss on futures contracts | (16.4 | ) | (3.6 | ) | ||||
| Net Interest Income | 1.8 | 7.0 | ||||||
| Total Expenses after fees waived(1) | (10.4 | ) | (11.3 | ) | ||||
| Net Income (Loss) | $ | 65.9 | $ | (48.3 | ) | |||
| Preferred stock dividends | (3.0 | ) | (3.0 | ) | ||||
| Common stock dividends | (37.5 | ) | (35.3 | ) | ||||
| Capital Activities | ||||||||
| Issuance of common stock | 130.2 | 0.8 | ||||||
| Total Stockholders' Equity – Ending | $ | 1,316.9 | $ | 1,161.3 | ||||
(1) The Company’s external manager has waived a portion of its contractual management fee at the rate of
| Condensed Balance Sheet (unaudited) | ||||||||
| (in millions) | ||||||||
| Assets | ||||||||
| Cash | $ | 63.9 | $ | 221.9 | ||||
| Cash collateral posted to counterparties | 134.2 | 37.0 | ||||||
, at fair value | 12,422.8 | 11,159.8 | ||||||
| Derivatives, at fair value | 731.8 | 877.4 | ||||||
| Accrued interest receivable | 49.0 | 47.1 | ||||||
| Prepaid and other | 2.8 | 1.2 | ||||||
| Total Assets | $ | 13,404.5 | $ | 12,344.4 | ||||
| Liabilities | ||||||||
| Repurchase agreements, net | $ | 10,186.4 | $ | 9,648.0 | ||||
| Obligations to return securities received as collateral, at fair value | 522.7 | 350.3 | ||||||
| Cash collateral posted by counterparties | 692.7 | 860.1 | ||||||
| Payable for unsettled purchases | 587.3 | 171.5 | ||||||
| Derivatives, at fair value | 57.9 | 5.0 | ||||||
| Accrued interest payable- repurchase agreements | 24.9 | 26.5 | ||||||
| Accrued interest payable- | 7.3 | 5.0 | ||||||
| Accounts payable and other accrued expenses | 8.4 | 6.8 | ||||||
| Total Liabilities | $ | 12,087.6 | $ | 11,073.2 | ||||
| Stockholders’ Equity | ||||||||
| 7.00% Cumulative Redeemable Preferred C Stock ( | $ | — | $ | — | ||||
| Common stock ( | 0.1 | 0.1 | ||||||
| Additional paid-in capital | 4,448.8 | 4,318.2 | ||||||
| Cumulative distributions to stockholders | (2,337.6 | ) | (2,220.6 | ) | ||||
| Accumulated net loss | (794.4 | ) | (826.5 | ) | ||||
| Total Stockholders’ Equity | 1,316.9 | 1,271.2 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 13,404.5 | $ | 12,344.4 | ||||
Distributable Earnings
Distributable Earnings is a non-GAAP measure defined as net interest income plus TBA Drop Income adjusted for the net coupon effect of interest rate swaps and futures contracts minus net operating expenses. Distributable Earnings is based on the historical cost basis of our
For a portion of its
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
Regulation G Reconciliations
Distributable Earnings and Distributable Earnings per common share
The Company believes that Distributable Earnings and Distributable Earnings per common share may be useful to investors because our Board of Directors may consider Distributable Earnings and Distributable Earnings per common share as part of its deliberations 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 significant differences from net interest income and net income (loss) computed in accordance with GAAP, Distributable Earnings should be considered as supplementary to, and not as a substitute for, the Company’s net interest income and net income (loss) computed in accordance with GAAP as a measure of certain aspects 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 Net Interest Income, Net Income (Loss) and Net Income (Loss) per common share appear below:
| Q32024 | Q22024 | |||||||
| ($ in millions except, share and per share) | ||||||||
| Net Interest Income | $ | 1.8 | $ | 7.0 | ||||
| TBA Drop and interest margin Income (loss) | (0.6 | ) | 0.7 | |||||
| Net interest income on interest rate swaps | 63.4 | 58.6 | ||||||
| Net interest income on futures contracts | 0.8 | 0.5 | ||||||
| Total Expenses after fees waived | (10.4 | ) | (11.3 | ) | ||||
| Distributable Earnings | $ | 55.0 | $ | 55.5 | ||||
| Dividends on Preferred Stock | (3.0 | ) | (3.0 | ) | ||||
| Distributable Earnings available to common stockholders | $ | 52.0 | $ | 52.5 | ||||
| Distributable Earnings per common share | $ | 1.00 | $ | 1.08 | ||||
| Net Income (Loss) | $ | 65.9 | $ | (48.3 | ) | |||
| Items Excluded from Distributable Earnings: | ||||||||
| (Gain) Loss on MBS | (306.1 | ) | 112.9 | |||||
| (Gain) Loss on | 21.7 | (19.2 | ) | |||||
| Gain on | (39.7 | ) | (22.5 | ) | ||||
| Loss on futures contracts | 17.2 | 4.1 | ||||||
| Loss on interest rate swaps | 296.0 | 28.5 | ||||||
| Total items excluded | $ | (10.9 | ) | $ | 103.8 | |||
| Distributable Earnings | $ | 55.0 | $ | 55.5 | ||||
| Dividends on Preferred Stock | (3.0 | ) | (3.0 | ) | ||||
| Distributable Earnings available to common stockholders | $ | 52.0 | $ | 52.5 | ||||
| Distributable Earnings per common share | $ | 1.00 | $ | 1.08 | ||||
| Net Income (Loss) | $ | 65.9 | $ | (48.3 | ) | |||
| Dividends on Preferred Stock | (3.0 | ) | (3.0 | ) | ||||
| Net Income (Loss) available (related) to common stockholders | $ | 62.9 | $ | (51.3 | ) | |||
| Net Income (Loss) per common share | $ | 1.21 | $ | (1.05 | ) | |||
| Weighted average common shares outstanding | 51,832,743 | 48,770,069 | ||||||
Economic Interest Income, Economic Interest Expense, Economic Net Interest Income/Net Interest Spread and Economic Net Yield on Interest Earning Assets
The Company believes that these non GAAP measures, which includes the effects of TBA drop income and net interest income (expense) on interest rate swaps and futures contracts, may be useful to investors because they reflect items that we consider in the management of the Company’s investment portfolio and related funding. The Company believes that the inclusion in economic net interest income of interest rate swaps and futures contracts, which are recognized under GAAP in gain/loss on derivative instruments, is meaningful as interest rate swaps are the primary instrument the Company uses to economically hedge against fluctuations in the Company’s borrowing costs and their inclusion is more indicative of the Company’s total cost of funds than interest expense alone. It does not include all interest earning assets and interest bearing liabilities, such as cash collateral posted by counterparties. Accordingly, it is not a substitute for net interest income or net income (loss) determined in accordance with GAAP and should be considered as supplementary to such GAAP measures as a measure of certain aspects of the Company’s financial performance.
| Q32024 | ||||||||||
| (in millions) | ||||||||||
| Income (Expense) | Average Balance | Average Rate | ||||||||
| Interest Bearing Assets: | ||||||||||
, Net of Amortization | $ | 125.7 | $ | 10,310.5 | 4.87 | % | ||||
| 1.4 | 77.3 | 7.28 | % | ||||||
| Total Interest Income/Average Interest Earning Assets | 127.1 | 10,387.8 | 4.89 | % | ||||||
| TBA drop income (loss)/ | (0.7 | ) | 986.7 | (0.30 | )% | |||||
| Economic interest income | $ | 126.4 | $ | 11,374.5 | 4.44 | % | ||||
| Interest Bearing Liabilities: | ||||||||||
| Repurchase Agreements | $ | (119.6 | ) | $ | 8,572.7 | (5.58 | )% | |||
| Treasury Securities Sold Short | (5.6 | ) | 517.1 | (4.33 | )% | |||||
| Total Interest Expense/Average Interest Bearing Liabilities | (125.2 | ) | 9,089.8 | (5.51 | )% | |||||
| Implied Average TBA Funding Positions | — | 894.6 | — | % | ||||||
| Net interest income (expense) on interest rate swaps | 63.4 | — | 2.79 | % | ||||||
| Net interest income (expense) on futures contracts | 0.8 | — | 0.03 | % | ||||||
| Economic interest expense | $ | (61.0 | ) | $ | 9,984.4 | (2.44 | )% | |||
| Economic net interest income/net interest spread | $ | 65.3 | 2.00 | % | ||||||
| Economic net yield on interest earning assets | 2.30 | % | ||||||||
| Q22024 | ||||||||||
| (in millions) | ||||||||||
| Income (Expense) | Average Balance | Average Rate | ||||||||
| Interest Bearing Assets: | ||||||||||
, Net of Amortization | $ | 127.7 | $ | 10,144.5 | 5.04 | % | ||||
| 2.2 | 240.5 | 3.70 | % | ||||||
| Total Interest Income/Average Interest Earning Assets | 129.9 | 10,385.0 | 5.00 | % | ||||||
| TBA drop income (loss)/ | 0.7 | 643.3 | 0.42 | % | ||||||
| Economic interest income | $ | 130.6 | $ | 11,028.3 | 4.74 | % | ||||
| Interest Bearing Liabilities: | ||||||||||
| Repurchase Agreements | $ | (114.3 | ) | $ | 8,217.0 | (5.57 | )% | |||
| Treasury Securities Sold Short | (8.6 | ) | 691.7 | (4.99 | )% | |||||
| Total Interest Expense/Average Interest Bearing Liabilities | (122.9 | ) | 8,908.7 | (5.52 | )% | |||||
| Implied Average TBA Funding Positions | — | 589.9 | — | % | ||||||
| Net interest income (expense) on interest rate swaps | 58.6 | — | 2.63 | % | ||||||
| Net interest income (expense) on futures contracts | 0.5 | — | 0.02 | % | ||||||
| Economic interest expense | $ | (63.8 | ) | $ | 9,498.6 | (2.69 | )% | |||
| Economic net interest income/net interest spread | 66.8 | 2.05 | % | |||||||
| Economic net yield on interest earning assets | 2.42 | % | ||||||||
Dividends
ARMOUR paid monthly cash dividends of
ARMOUR paid monthly cash dividends of
The Company forecasts that Series C Preferred Stock dividends for 2024 will likely be treated as fully taxable ordinary income. Common stock dividends for 2024 will likely be treated, at least partially, as taxable ordinary income.
Conference Call
As previously announced, the Company will provide an online, real-time webcast of its conference call with equity analysts covering Q3 2024 operating results on
ARMOUR invests primarily in fixed rate residential, adjustable rate and hybrid adjustable rate residential mortgage-backed securities issued or guaranteed by
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
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 www.armourreit.com or by directing requests to:
CONTACT:
investor@armourreit.com
Chief Financial Officer
(772) 617-4340
Source: ARMOUR Residential REIT, Inc.