Form 8-K Armour Residential REIT, For: Aug 02
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM 8-K
______________
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 2, 2016
ARMOUR Residential REIT, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Maryland | 001-34766 | 26-1908763 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
3001 Ocean Drive, Suite 201 Vero Beach, Florida | 32963 | |
(Address of Principal Executive Offices) | (Zip Code) | |
(772) 617-4340
(Registrant’s Telephone Number, Including Area Code)
n/a
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On August 2, 2016, ARMOUR Residential REIT, Inc. (“ARMOUR” or the “Company”) issued a press release announcing its operating results for the second quarter ended June 30, 2016. A copy of the press release is furnished as Exhibit 99.1 to this current report on Form 8-K.
The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liabilities under that section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. | Description |
99.1 | Press Release dated August 2, 2016 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: August 2, 2016
ARMOUR RESIDENTIAL REIT, INC. | |||
By: | /s/ James R. Mountain | ||
Name: | James R. Mountain | ||
Title: | Chief Financial Officer | ||
Exhibit Index
Exhibit No. | Description |
99.1 | Press Release dated August 2, 2016 |
ARMOUR RESIDENTIAL REIT, INC. REPORTS FINANCIAL RESULTS
FOR THE QUARTER ENDED JUNE 30, 2016
Book Value Per Common Share Increases 4.86% in Second Quarter
VERO BEACH, Florida - - August 2, 2016 -- ARMOUR Residential REIT, Inc. (NYSE: ARR, ARR PrA, and ARR PrB) (“ARMOUR” or the “Company”) today announced financial results for the quarter ended June 30, 2016.
Q2 2016 Highlights and Financial Information
• | Q2 2016 key results: |
◦ | $21.2 million ($0.47 per Common share) net income under Generally Accepted Accounting Principles (“GAAP”) |
◦ | $27.1 million ($0.63 per Common share) Core Income including drop income (as defined below), which represents an annualized return of 9.9% based on stockholders’ equity at the beginning of the quarter |
◦ | 4.86% increase in book value per common share |
◦ | $0.71 per share Common dividends for Q2 at the rate of $0.27 for April and $0.22 per month for May and June. |
◦ | 2.68% average yield on assets and 1.35% average net interest margin |
◦ | 9.85% annualized average principal repayment rate (“CPR”) |
◦ | 36,748,000 (approximately) weighted average diluted Common shares outstanding |
• | At June 30, 2016: |
◦ | $1.14 billion ($25.67 per Common share) stockholders’ equity |
◦ | $8.7 billion portfolio of mortgage securities |
◦ | $2.3 billion notional amount of (“to-be-announced”) TBA Agency Securities |
◦ | $5.4 billion notional amount of interest rate swaps |
◦ | 7.00 to 1 “leverage” (debt to stockholders’ equity) |
▪ | 8.95 to 1 “implied leverage,” reflecting TBA Agency Securities purchased forward and excluding debt related to forward settling sales |
◦ | $507.2 million of liquidity in cash and unpledged securities (44.51% of stockholders’ equity) |
◦ | Stock outstanding: |
▪36,703,275 shares of Common Stock
▪2,180,572 shares of Series A Cumulative Redeemable Preferred
▪5,650,000 shares of Series B Cumulative Redeemable Preferred
Updated Information
• | Common dividends per share - $0.22 paid on July 27, 2016, and $0.22 declared by the Company’s board of directors for August and September |
• | Book value at July 29, 2016, was estimated to be $26.94 per Common share |
• | Additional updated information on the Company’s investment, financing and hedge positions can be found in ARMOUR Residential REIT, Inc.’s most recent “Company Update.” ARMOUR posts unaudited and unreviewed Company Updates each month on www.armourreit.com. |
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ARMOUR Residential REIT, Inc. Reports Financial Results for the Quarter Ended June 30, 2016
Page 2
August 2, 2016
ARMOUR Completed $85.2 Million Acquisition of JAVELIN Mortgage Investment Corp.
On April 6, 2016, the Company completed the acquisition of JAVELIN for an aggregate of approximately $85.2 million in cash. For the quarter ended June 30, 2016, the condensed consolidated financial statements reflect interest income of $4.9 million, net income of $3.2 million and total identifiable net assets of $98.5 million and a non-taxable gain of $6.5 million as a result of the acquisition.
GAAP Net Income (Loss)
For the purposes of computing GAAP net income (loss), 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 statement of comprehensive income (loss). GAAP net income for Q2 2016 was approximately $21.2 million, including unrealized gains and realized losses on derivatives of $66.1 million and $(112.5) million, respectively.
Core Income, Including Drop Income
Core Income, including drop income, for the quarter ended June 30, 2016, was approximately $27.1 million. “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, plus drop income, as defined below. Core Income 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, Non-Agency and Interest-only Securities.
The Company may enter into to-be-announced (“TBA”) dollar roll transactions that generate “drop income.” Drop income is defined as the difference in price between two TBA contracts with the same terms but different settlement dates. Drop income is the economic equivalent of the assumed net interest spread (yield less financing costs) and is calculated as the difference between the spot price for regular settlement and the forward settlement price on the trade date.
Dividends
The Company paid dividends of $0.27 per Common share of record for April and $0.22 per Common share of record per each month for May and June. Payments to Common stockholders for Q2 2016, were approximately $26.1 million. The Company also paid monthly dividends of $0.171875 per outstanding share of 8.250% Series A Cumulative Redeemable Preferred Stock and $0.1640625 per outstanding share of 7.875% Series B Cumulative Redeemable Preferred Stock, resulting in aggregate payments to preferred stockholders of approximately $3.9 million in Q2 2016.
Common dividends in the amount of $0.22 per Common share were paid on July 27, 2016 to holders of record on July 15, 2016. Common dividends in the amount of $0.22 per Common share have been declared for holders of record on August 15, 2016 (payable August 29, 2016), and on September 15, 2016 (payable September 27, 2016). The board of directors determines the Common share dividend rate based upon the REIT requirements and other relevant considerations. Dividends in excess of taxable REIT income for the year (including any amounts carried forward from prior years) will generally be treated as non-taxable return of capital to Common stockholders.
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ARMOUR Residential REIT, Inc. Reports Financial Results for the Quarter Ended June 30, 2016
Page 3
August 2, 2016
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 for the quarter ended June 30, 2016, reflect, to the extent dilutive, the effects of 0.1 million unvested stock awards.
Portfolio
As of June 30, 2016, the Company’s Agency Securities portfolio consisted of Fannie Mae, Freddie Mac and Ginnie Mae mortgage securities, substantially all of which are fixed rate securities, and was valued at $7.7 billion on a trade date basis. The Company’s Non-Agency Securities portfolio was valued at $916.6 million at quarter end. During Q2 2016, the annualized yield on average assets was 2.68%, and the annualized cost of funds on average liabilities (including realized cost of hedges) was 1.33%, resulting in a net interest spread of 1.35% for Q2 2016. During Q2 2016, the Company sold approximately $3.2 billion of Agency Securities, resulting in gains of approximately $14.6 million.
Portfolio Financing, Leverage and Interest Rate Hedges
As of June 30, 2016, the Company financed its mortgage backed securities portfolio with approximately $8.0 billion of borrowings under repurchase agreements. The Company’s leverage ratio as of June 30, 2016, was 7.00 to 1 (8.95 to 1, including TBA Agency Securities purchased forward and excluding debt related to forward settling sales). As of June 30, 2016, the Company’s liquidity totaled approximately $507.2 million, consisting of approximately $389.4 million of cash and equivalents, plus approximately $117.9 million of unpledged securities (including securities received as collateral). As of June 30, 2016, the Company’s repurchase agreements had a weighted-average maturity of approximately 28 days.
The Company had a notional amount of various maturities of interest rate swap contracts of approximately $5.4 billion with a weighted average swap rate of 1.65%.
Regulation G Reconciliation
Core Income excludes 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, plus drop income. The Company believes that Core Income is useful to investors because it is related to the amount of dividends the Company may distribute. However, because Core Income is an incomplete measure of the Company’s financial performance and involves differences from net income computed in accordance with GAAP, 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 performance.
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ARMOUR Residential REIT, Inc. Reports Financial Results for the Quarter Ended June 30, 2016
Page 4
August 2, 2016
The following table reconciles the Company’s results from operations to Core Income for the quarter ended June 30, 2016:
Core Income | ||||
(in millions) | ||||
GAAP net income | $ | 21.2 | ||
Book to tax differences: | ||||
Non-Agency Securities | (10.4 | ) | ||
Interest-only Securities | 1.2 | |||
Changes in interest rate contracts | 29.0 | |||
Gain on sale of Securities | (14.6 | ) | ||
Bargain purchase price on acquisition of JAVELIN | (6.5 | ) | ||
TBA drop income | 7.2 | |||
Core Income | $ | 27.1 | ||
Common Stock
As of June 30, 2016, there were 36,703,275 Common shares outstanding.
The following table shows the changes in stockholders’ equity per Common share during the quarter ended June 30, 2016:
Stockholders’ equity per Common share - March 31, 2016 | $ | 24.48 | ||
Core Income | 0.63 | |||
Investment net gain | 1.09 | |||
Bargain purchase price on acquisition of JAVELIN | 0.18 | |||
Common stock dividends | (0.71 | ) | ||
Stockholders’ equity per Common share - June 30, 2016 | $ | 25.67 | ||
As of August 1, 2016, we had 36,703,275 Common shares outstanding and 1,874,366 remaining authorized under our Repurchase Program. Book value at July 29, 2016, was estimated to be $26.94 per Common Share.
Preferred Stock
As of June 30, 2016, there were 2,180,572 shares of 8.250% Series A Cumulative Redeemable Preferred Stock and 5,650,000 shares of 7.875% Series B Cumulative Redeemable Preferred Stock outstanding.
Conference Call
As previously announced, the Company will provide an online, real-time webcast of its conference call with equity analysts covering Q2 2016 operating results on Wednesday, August 3, 2016, at 8:00 a.m. (Eastern Time). The live broadcast will be available online and can be accessed at https://www.webcaster4.com/Webcast/Page/896/16523. To monitor the live webcast, please visit the website at least 15 minutes prior to the start of the call to register, download, and install any necessary audio software.
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ARMOUR Residential REIT, Inc. Reports Financial Results for the Quarter Ended June 30, 2016
Page 5
August 2, 2016
An online replay of the event will be available on the Company’s website at www.armourreit.com/ and continue for one year.
ARMOUR Residential REIT, Inc.
ARMOUR invests primarily in fixed rate residential, adjustable rate and hybrid adjustable rate residential mortgage-backed securities issued or guaranteed by U.S. Government-sponsored enterprises (“GSEs”), or guaranteed by the Government National Mortgage Association. In addition, ARMOUR invests in other securities backed by residential mortgages for which the payment of principal and interest is not guaranteed by a GSE or government agency. ARMOUR is externally managed and advised by ARMOUR Capital Management LP, an investment advisor registered with the Securities and Exchange Commission (“SEC”).
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 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, except as required by law.
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: [email protected]
James R. Mountain
Chief Financial Officer
ARMOUR Residential REIT, Inc.
(772) 617-4340
- END -
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