Toggle SGML Header (+)


Section 1: 8-K (8-K)

Document
false0001428205 0001428205 2020-03-13 2020-03-13 0001428205 us-gaap:SeriesCPreferredStockMember 2020-03-13 2020-03-13 0001428205 us-gaap:CommonStockMember 2020-03-13 2020-03-13


UNITED 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) March 13, 2020

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))
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading symbols
 
Name of Exchange on which registered
Preferred Stock, 7.00% Series C Cumulative Redeemable
 
ARR-PRC
 
New York Stock Exchange
Common Stock, $0.001 par value
 
ARR
 
New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).        

Emerging growth company

If an emerging growth company, indicate by a check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act






Item 7.01.    Regulation FD Disclosure.

On March 13, 2020, ARMOUR Residential REIT, Inc. (“ARMOUR”) produced for distribution a slide deck presentation, which contains updates on ARMOUR's financial position, business and operations. Attached as Exhibit 99.1 to this report is the slide deck presentation produced by ARMOUR.

The slide deck presentation attached to this report as Exhibit 99.1 is furnished pursuant to this Item 7.01 and shall not be deemed filed in this or any other filing of ARMOUR under the Securities Exchange Act of 1934, as amended, unless expressly incorporated by specific reference in any such filing.

Item 9.01.    Financial Statements and Exhibits.

(d) Exhibits
 
 
Exhibit No.
Description
99.1
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)






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: March 13, 2020

ARMOUR RESIDENTIAL REIT, INC.

By: /s/ Mark Gruber 
Name: Mark Gruber
Title: Chief Operating Officer





(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

companyupdatefebruary202
ARMOUR RESIDENTIAL REIT, Inc. Company Update 3/13/20 ARMOUR seeks to create shareholder value through thoughtful investment and risk management that produces current yield and superior risk adjusted returns over the long term.  Our focus on residential real estate finance supports home ownership for a broad and diverse spectrum of Americans by bringing private capital into the mortgage markets.


 
PLEASE READ: Important Regulatory and Yield Estimate Risk Disclosures 2 • Certain statements made in this presentation regarding ARMOUR Residential REIT, Inc. (“ARMOUR” or the “Company”), and any other statements regarding ARMOUR’s future expectations, beliefs, goals or prospects constitute forward-looking statements made within the meaning of Section 21E of the Securities Exchange Act of 1934. Any statements that are not statements of historical fact (including statements containing the words “believes,” “plans,” “anticipates,” “expects,” “estimates” and similar expressions) should also be considered forward-looking statements. Forward-looking statements include but are not limited to statements regarding the projections for ARMOUR’s business and plans for future growth and operational improvements. A number of important factors could cause actual results or events to differ materially from those indicated by such forward-looking statements. ARMOUR assumes no obligation to update the information in this communication, except as otherwise required by law. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. • This material is for information purposes only and does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation for any securities or financial instruments. The statements, information and estimates contained herein are based on information that the company believes to be reliable as of today's date unless otherwise indicated, but cannot be represented that such statements, information or estimates are complete or accurate. • Actual realized yields, durations and net durations described herein will depend on a number of factors that cannot be predicted with certainty. Estimated yields do not reflect any of the costs of operation of ARMOUR. • THE INFORMATION PRESENTED HEREIN IS UNAUDITED AND UNREVIEWED.


 
ARMOUR Overview 3 ARMOUR invests in and manages a leveraged portfolio of mortgage-related assets and U.S. government securities. 1 Capitalization • Total capitalization of $1,374.0 million composed of: ◦ Estimated book value of common stock of $1,252.8 million. ◦ Preferred stock par value of $121.2 million. ◦ The company redeemed all $210 million Series B Preferred shares on February 27th. 2 Dividend Policy • ARMOUR pays dividends monthly. • Since inception, ARR has paid out $1.6 billion in dividends.(1) 3 Shareholder Alignment • Returned $390 million through share repurchases and return of capital since May 2013. • Senior management has made open market purchases of $4.4 million of stock since 2016. • Managed preferred shares through repurchases, calls, and refinancing to maximize value in capital structure. 4 Transparency and Governance • Updated portfolio and liability details can be found monthly at www.armourreit.com. • Agency premium amortization is expensed monthly as it occurs.(2) • Hedge positions are marked-to-market daily (GAAP/Tax differences). • Non-Executive Board Chairman and separate Lead Independent Director. 5 ARMOUR REIT Manager • ARMOUR REIT is externally managed by ARMOUR Capital Management LP. (1) Includes both common and preferred stock dividends through February 2020. (2) Due to the prepayment lockout feature of our Agency multifamily securities, premium is amortized using a level yield methodology. Information as of 2/28/20


 
ARMOUR Key Metrics 4 Market Date 2/28/20 1/31/20 12/31/19 9/30/19 06/30/19 03/31/19 Common Stock Price $18.08 $19.26 $17.87 $16.75 $18.64 $19.53 Estimated Book Value(1) $21.26 $21.04 $20.84 $20.43 $20.50 $21.29 Common Shares Outstanding 58,927,098 58,877,848 58,877,848 58,889,758 59,192,390 59,791,877 Preferred A Shares Outstanding — — — — 2,180,572 2,180,572 Footnotes Preferred B Shares Outstanding — — 8,383,344 7,201,971 6,505,479 6,369,269 1. Consistent with industry practice, ARMOUR will Preferred C Shares Outstanding 4,848,508 3,658,697 — — — — discontinue publishing monthly book value results after the first quarter of 2020. Portfolio Size (millions) $14,299 $14,369 $13,832 $12,752 $14,412 $13,859 2. The Preferred B shares were redeemed at $25/share on Interest Rate Swap Notional (millions) $7,825 $8,125 $7,975 $7,075 $7,625 $9,775 February 27th. Please note that equity excludes Preferred B shares as of January 31st. Repurchase Agreements (millions) $11,866 $11,724 $11,355 $11,679 $13,297 $12,143 Net TBA Positions (millions) 1,285 1,273 1,006 (32) — 317 3. Rates DV01, Spread DV01, and Net Balance Sheet Duration as of 2/28/20 are based on the most recently (2) Debt-to-Equity 8.6x 8.8x 7.9x 8.5x 9.3x 8.2x available version of the rates model we subscribe to. Applying that model as of 1/31/20 yields Rates DV01 of Implied Leverage including TBAs(2) 9.6x 9.8x 8.9x 8.4x 9.3x 8.5x $1.1 million, Spread DV01 of $6.4 million, and Net Balance (3) Rates DV01 $902,000 $(153,000) $911,000 $619,000 $432,000 $(250,000) Sheet Duration of 0.81. Rates DV01 is the dollar value change for a parallel shift of 1 bp change in interest rates Spread DV01(3) $6,019,000 $6,138,000 $6,687,000 $5,859,000 $6,494,000 $6,913,000 and Spreads DV01 is the dollar value change for a 1 bp change in option adjusted spreads. Net Balance Sheet Duration(3) 0.64 (0.11) 0.66 0.49 0.30 (0.18) Liquidity(4) (millions) $593 $760 $641 $598 $596 $720 4. Liquidity positions include cash and unlevered securities. FNCL 3.0 Price $102.92 $102.27 $101.44 $101.56 $100.80 $99.58 FNCL 3.5 Price $103.81 $103.25 $102.88 $102.64 $102.22 $101.39 2 Year Treasury Yield 0.92% 1.32% 1.57% 1.62% 1.76% 2.26% 5 Year Treasury Yield 0.94% 1.31% 1.69% 1.55% 1.77% 2.23% 10 Year Treasury Yield 1.15% 1.51% 1.92% 1.67% 2.01% 2.41% 2 Year OIS Swap Rate 0.76% 1.19% 1.47% 1.36% 1.57% 2.12% 5 Year OIS Swap Rate 0.76% 1.11% 1.50% 1.25% 1.54% 2.04% 10 Year OIS Swap Rate 0.90% 1.25% 1.67% 1.33% 1.73% 2.16%


 
ARMOUR Net Interest Margin 5 Net Interest Margin Analysis 4 3 Asset Yield Cost of Funds NIM Q1 2017 2.93% 1.32% 1.61% t Q2 2017 3.11% 1.39% 1.72% n e c Q3 2017 3.06% 1.42% 1.64% r 2 e P Q4 2017 3.02% 1.47% 1.55% Q1 2018 3.05% 1.53% 1.52% 1 Q2 2018 3.13% 1.57% 1.56% Q3 2018 3.46% 1.82% 1.64% Q4 2018 3.59% 1.92% 1.67% Q1 2019 3.65% 2.03% 1.62% 0 2 2 2 2 2 2 2 2 2 2 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 Q2 2019 3.70% 2.30% 1.40% 0 1 2 3 4 5 6 7 8 9 Q3 2019 3.56% 2.25% 1.31% Q4 2019 3.63% 2.14% 1.49% Asset Yield Cost of Funds Net Interest Margin


 
ARMOUR Portfolio 6 Estimated % of Current Value Weighted Average Weighted Average Weighted Average Effective Securities Portfolio (millions) Book Price Market Price Net/Gross Coupon Duration Agency ARMs & Hybrids 0.3% $36.2 104.8% 103.6% 3.53/4.13 1.18 Agency Multifamily Ballooning in 120 Months or Less 19.2% $2,745.8 101.8% 111.9% 3.47/4.52 6.32 Agency Fixed Rates Maturing Between 0 and 180 Months 13.6% $1,947.4 103.4% 106.4% 3.55/4.12 3.60 Agency Fixed Rates Maturing Between 181 and 240 Months 0.0% $1.1 107.9% 109.3% 4.25/5.37 3.62 Agency Fixed Rates Maturing Between 241 and 360 Months 50.9% $7,276.7 102.5% 106.7% 3.80/4.41 1.78 US Treasury 1.5% $211.3 101.2% 105.7% 1.75/1.75 8.91 Agency & US Treasury Portfolio 85.5% $12,218.5 102.5% 107.8% 3.65/4.34 3.21 Agency 15Y TBA Long Positions 5.4% $774.7 102.0% 103.3% 2.83/ N/A 2.26 Agency 30Y TBA Long Positions 3.6% $510.2 100.2% 102.0% 2.50/ N/A 2.69 Net TBA Positions 9.0% $1,284.9 Legacy Non-Agency Assets 0.4% $63.6 74.3% 83.3% 5.55/4.57 2.09 New Issue Prime Fixed Non-Agency 0.1% $15.7 95.0% 102.9% 3.68/3.95 3.00 Credit Risk Transfer 5.0% $716.1 99.4% 105.6% 5.59/4.10 -2.09 Credit Risk & Non-Agency Portfolio 5.6% $795.5 96.8% 103.3% 5.54/4.14 -1.66 Total Portfolio 100.0% $14,298.8 102.1% 107.0% 3.67/4.26 2.87 • Approximately 95% of ARMOUR's Agency portfolio (excluding TBA positions) benefits from favorable prepayment characteristics, including: ◦ 23% have prepayment penalties (DUS). ◦ 52% have loan balances less than or equal to 225k. ◦ 21% have loan-to-value ratios greater than 95%, FICO scores of less than 700 or seasoning of greater than 24 months. Information as of 02/28/2020. Portfolio value is based on independent third-party pricing. Information includes estimates of the effect of forward settling trades. Some totals may not foot due to rounding.


 
ARMOUR Hedge & Financing Composition 7 Interest Rate Swaps Remaining Term (Months) 0-12 13-24 25-36 37-48 49-60 61-72 73-84 85-96 97-108 109-120 Total Weighted Average Remaining Term (Months) 9 21 33 44 55 — 81 — — 116 49 Notional Amount (millions) $1,675 $75 $1,775 $1,150 $925 — $1,350 — — $875 $7,825 • Approximately 82% of ARMOUR's Interest Rate Swap Positions are pay fixed and receive Fed Funds with a weighted average remaining term of 52 months. • Approximately 13% of ARMOUR's Interest Rate Swap Positions are pay fixed and receive 3-Month Libor with a weighted average remaining term of 36 months. • Approximately 5% of ARMOUR's Interest Rate Swap Positions are pay fixed and receive SOFR with a weighted average remaining term of 50 months. Repurchase Agreements Principal Weighted Weighted Average Longest Borrowed % of Repo Positions Average Original Remaining Term in Remaining Repo Counterparty (millions) with ARMOUR Term in Days Days Term in Days BUCKLER Securities LLC (1) $5,443.9 45.9% 37 28 88 All Other Counterparties (2) $6,421.8 54.1% 59 35 88 Total or Weighted Average Repo Positions $11,865.7 100% 49 32 Agency Repo Principal $10,978 Non-Agency Repo Principal $685.1 US Treasury Repo Principal $202.6 Weighted Average Repo Rate 1.79% Weighted Average Haircut 5.03% (1) Affiliated with ARMOUR. (2) ARMOUR has signed MRAs with 49 counterparties and is currently active with 23 of them. Information as of 02/28/2020. Some totals may not foot due to rounding.


 
ARMOUR Portfolio Constant Prepayment Rates ("CPR") 8 Trailing Twelve Month Portfolio CPR* 25 20 15 10 5 0 9 9 9 9 9 9 9 9 9 9 0 0 0 1 1 1 1 1 1 1 1 1 1 2 2 2 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 h il y e ly st r r r r y y h rc r a n u u e e e e ar ar rc a p M u J g b b b b u u a A J u m to m m n r M A te c ve ce a b M p O o e J Fe Se N D Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 CPR 4.1 5.5 7.7 8.8 8.4 14.5 17.0 18.6 18.5 14.3 14.1 12.0 13.1 *On 3/5/20 the most recent prepayment data was released. Constant Prepayment Rate ("CPR") is the annualized equivalent of single monthly mortality ("SMM"). CPR attempts to predict the percentage of principal that will prepay over the next twelve months based on historical principal pay downs. CPR is reported on the 4th business day of the month for the previous month's prepayment activity.


 
ARMOUR Residential REIT, Inc. 3001 Ocean Drive Suite 201 Vero Beach, FL 32963 armourreit.com 772-617-4340


 
(Back To Top)