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ARMOUR Residential REIT, Inc. Reports 18.9% Annualized Taxable REIT Income and CORE Income for Q1 2011(May 03, 2011)
VERO BEACH, Fla., May 3, 2011 (GLOBE NEWSWIRE) -- ARMOUR Residential REIT, Inc. (NYSE:ARR) (NYSE Amex:ARR.WS) ("ARMOUR" or the "Company") today announced financial results for the quarter ending March 31, 2011.
First Quarter 2011 Highlights and Current Balance Sheet Information
Q1 2011 estimated taxable REIT income of approximately $8.9 million
Q1 2011 Core Income of approximately $8.9 million
Q1 2011 GAAP earnings of approximately $8.6 million
Q1 2011 estimated taxable REIT income results and Q1 2011 Core Income results equal annualized yield on weighted average Q1 2011 additional paid-in capital (historic book equity) of 18.9%
Q1 2011 weighted average additional paid-in capital of $187.9 million
March 31, 2011, book value per common share of $6.84
As of March 31, 2011, there were 32,254,054 common shares outstanding
Additional paid-in-capital as of March 31, 2011 was $229.7 million or $7.12 per share outstanding at the time
Current book value per common share as of May 2, 2011, is estimated to be $7.19
Shares outstanding as of May 2, 2011 are 49,260,077
Additional paid-in capital as of May 2, 2011 is estimated to be $351.0 million or $7.13 per common share outstanding
Q1 2011 average yield on assets of 3.20% and average net interest spread of 2.40%
Q1 2011 annualized average principal repayment rate (CPR) of 11.7%
No assets were sold during the first quarter of 2011
Monthly "Company Update" was posted to the www.armourreit.com website on April 19, 2011
The Company issued 15,812,500 of common stock during Q1 2011 which increased the amount of shares outstanding from the end of Q4 2010 by 96.2%. These changes were material to the Company and significantly affected reported results, particularly so on a comparable quarter over quarter basis. Therefore, some quarterly comparisons will not be meaningful or may be misleading. Economies of scale are achieved as the Company's equity continues to grow.
Q1 2011 Results
Taxable REIT Income and Core Income
Estimated taxable REIT income for the quarter ended March 31, 2011 was approximately $8.9 million, of which all was paid out as of the applicable record dates. An additional $0.3 million of 2010 taxable income was paid on January 28, 2011. The weighted average additional paid-in capital for the quarter ended March 31, 2011, was $187.9 million. The estimated annual taxable REIT income represents an annualized return on average additional paid-in capital for the quarter of 18.9%. The Company distributes dividends based on its estimate of taxable earnings per common share, not GAAP (Generally Accepted Accounting Principles) earnings. Taxable REIT income and GAAP earnings will differ primarily because the non-taxable unrealized changes in the value of the Company's interest rate hedges are included in GAAP earnings whereas, because they are not realized, valuation changes are not included in taxable income.
Core Income for the quarter ended March 31, 2011, was equal to the estimated taxable REIT income of approximately $8.9 million. No securities were sold in the first quarter of 2011. "Core Income" represents a non-GAAP measure and is defined as net income (loss) excluding impairment losses, gains or losses on sales of securities and early termination of interest rate hedges, unrealized gains or losses on interest rate hedges, and certain non-recurring expenses. CORE Income may differ from GAAP earnings as GAAP earnings include the unrealized change in the value of the Company's interest rate hedging program.
During the quarter ended March 31, 2011, the Company earned approximately $8.6 million. The Company reported a non-realized change in the value of interest rate hedges of approximately ($0.3) million which accounts for the majority of the difference between taxable REIT income and GAAP earnings.
For the quarter ended March 31, 2011, the Company declared dividends of $0.12 per each share outstanding for each month of the quarter. The dividend payments totaled $9.7 million as compared to taxable REIT income available to pay dividends of $9.2 million (approximate taxable REIT income in Q1 2011, plus the carry-over taxable REIT income from 2010, which was paid out as dividends in January 2011 equals $9.2 million).
Share Count and Equity Capital Raises in Q1 2011 and Q2 2011
The Company issued 6,900,000 shares of common stock in an underwritten public offering at $7.55 per share on January 26, 2011. The Company issued 8,912,500 shares of common stock in an underwritten public offering at $7.60 per share on February 8, 2011. As of March 31, 2011, there were 32,254,054 common shares outstanding. The Company issued 17,000,000 shares of common stock in an underwritten public offering at $7.40 per share on April 13, 2011. As of May 2, 2011, there were 49,260,077 shares outstanding.
The Company's portfolio consisted of Fannie Mae, Freddie Mac and Ginnie Mae mortgage securities and was valued at $2.3 billion as of March 31, 2011. During the first quarter of 2011, the annualized yield on average assets was 3.20% and the annualized cost of funds on average liabilities (including realized cost of hedges) was 0.80% resulting in a net interest spread of 2.40% for the quarter.
The $2.3 billion portfolio of Agency securities at March 31, 2011, consisted of 58.4% Hybrid ARMs and 5.1% ARMs. The Company defines "Hybrid ARMs" as those adjustable rate Agency securities with longer than 18 months to rate reset and "ARMs" as those adjustable Agency securities with rate resets shorter than 19 months. The Company's portfolio also consisted of 36.5% of fixed rate Agency assets.
Portfolio Financing, Leverage and Interest Rate Hedges
As of March 31, 2011, the Company financed its portfolio with approximately $2.1 billion of borrowings under repurchase agreements. The Company's debt to equity ratio, as measured to additional paid-in-capital, as of March 31, 2011, was 9.1 to 1. The Company's debt-to-shareholder equity ratio as of March 31, 2011 was 9.5 to 1. The Company's debt to equity ratio estimate as of May 2, 2011, as measured to additional paid-in capital, was 9.2 to 1. The Company's debt to equity ratio estimate as of May 2, 2011, based on the current estimate of shareholders' equity, was 9.1 to 1.
As of March 31, 2011 the Company's repurchase agreements had a weighted-average maturity of approximately 34 days. The Company also uses Eurodollar futures contracts and interest rate swap contracts to hedge financing rate risk. As of March 31, 2011, the Company had a notional amount of $134.0 million of various maturities of Eurodollar futures contracts sold at an average fixed rate of 1.8%. As of March 31, 2011, the Company had a notional amount of $965 million of various maturities of interest rate swaps with an average fixed rate of 1.6%.
The Company's book value (shareholders' equity) on March 31, 2011, was $220.6 million or $6.84 per each of the 32,254,054 common shares outstanding on that date. Additional paid-in-capital (Historic Book Value) as of March 31, 2011, was $229.7 million or $7.12 per share outstanding as of March 31, 2011. Additional paid-in-capital as of May 2, 2011 is estimated to be $351.0 million or approximately $7.13 per share for each of the 49,260,077 shares outstanding. Current book value as of May 2, 2011 is estimated to be $354.2 million or $7.19 per common share outstanding.
Regulation G Reconciliation
Taxable REIT income is calculated according to the requirements of the Internal Revenue Code rather than GAAP. For the year ending December 31, 2011, ARMOUR plans to distribute at least 90% of its taxable REIT income in 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 three months ended and the year ended March 31, 2011:
Three Months ended
March 31, 2010
GAAP net income
Add back: GAAP net loss of taxable REIT subsidiary included above
GAAP net income from REIT operations
Add: Change in value of interest rate contracts
Add: Income tax expense
Estimated taxable REIT income
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.
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, or RMBS, issued or guaranteed by U.S. Government-chartered entities. ARMOUR is externally managed and advised by ARMOUR Residential Management LLC ("ARRM" or "ARRM 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 is 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: firstname.lastname@example.org
Co-Chief Executive Officer, President and Vice Chairman
ARMOUR Residential REIT, Inc.
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