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| 8-K - 8-K - Armour Residential REIT, Inc. | a8-kapr2018investorpresent.htm |
ARMOUR RESIDENTIAL REIT, Inc.
Investor Presentation
04/17/2018
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.
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• 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.
PLEASE READ: Important Regulatory and Yield Estimate Risk Disclosures
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(1) Leverage does not include TBA dollar rolls or forward settling transactions.
Market Date 1/31/18 2/28/18 3/31/18
Common Stock Price $23.41 $21.42 $23.28
Estimated Book Value $25.84 $24.83 $24.61
Common Shares Outstanding 41,877,404 41,877,404 41,902,723
Preferred A Shares Outstanding 2,180,572 2,180,572 2,180,572
Preferred B Shares Outstanding 6,369,269 6,369,269 6,369,269
Asset Balance Sheet Duration 3.89 4.10 3.68
Hedge Balance Sheet Duration (3.05) (3.50) (3.14)
Net Balance Sheet Duration 0.84 0.60 0.54
Leverage(1) 5.8 5.8 5.5
Rates DV01 $888,000 $574,000 $583,000
Spread DV01 $5,633,000 $5,168,000 $4,870,000
FNCL 3.5 Price 101.06 99.86 100.22
FNCI 3.0 Price 100.52 99.61 99.89
10 Year Treasury Yield 2.71% 2.86% 2.74%
5 Year OIS Swap Rate 2.28% 2.38% 2.35%
10 Year OIS Swap Rate 2.38% 2.49% 2.41%
ARMOUR Key Metrics
Asset Yield Cost of Funds
NIM
NIM Breakdown
3.5
3.0
2.5
2.0
1.5
1.0
1Q
16
2Q
16
3Q
16
4Q
16
1Q
17
2Q
17
3Q
17
4Q
17
ARMOUR invests in and manages a leveraged portfolio of mortgage-related assets and U.S. government securities.
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Capitalization
Common Stock Dividend Policy
Shareholder Alignment
Transparency and Governance
ARMOUR REIT Manager
• Total capitalization of $1,245.0 million composed of:
◦ Estimated book value of common stock of $1,031.2 million.
◦ Preferred stock par value of $213.7 million.
• ARMOUR pays common stock dividends monthly.
• Dividends are typically announced on a monthly basis.
• Since inception, ARR has paid out $1.3 billion in dividends through March 2018. (1)
• $250 million in share repurchases between May 2013 and December 2015.
• $123 million additional "return of capital" to shareholders between 2013 and 2015.
• Senior management made open market purchases of $2.5 million of stock in 2016-18.
• Updated portfolio and liability details can be found 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.
• ARMOUR REIT is externally managed by ARMOUR Capital Management LP.
ARMOUR Overview
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(1) Includes both common and preferred stock dividends.
(2) Due to the prepayment lockout feature of our Agency multifamily securities, premium is amortized using a level yield methodology.
Information as of 03/31/18
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3
4
5
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Equity Allocation
Duration
Hedging
Liquidity
Leverage
• ARMOUR invests in mortgage-related assets and U.S. government securities. Allocation of equity in repo is:
◦ 56.2% in Agency securities.
◦ 42.7% in Credit Risk and Non-Agency securities.
◦ 1.1% in US Treasuries.
• 0.54 net balance sheet duration.
◦ 3.68 gross asset duration.
◦ (3.14) hedge duration.
• $6.8 billion in interest rate swaps.
◦ 71.6% of Agency fixed rate and TBA assets hedged.
◦ 110.8% of Agency fixed rate asset repurchase agreements hedged.
• $686.7 million in total liquidity.
◦ $216.5 million in cash.
◦ $470.2 million in unlevered securities.
• 5.5x estimated shareholder's equity.(1)
◦ $6.9 billion in net REPO borrowings.
ARMOUR Balance Sheet Metrics
(1) Leverage does not include TBA dollar rolls or forward settling transactions.
Information as of 03/31/18
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2
3
4
5
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Information as of 03/31/2018. 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 Portfolio & Hedge Positioning
Securities
% of
Portfolio
Current Value
(millions)
Weighted Average
Book Price
Weighted Average
Market Price
Weighted Average
Net/Gross Coupon
Estimated
Effective
DurationAgency ARMs & Hybrids 0.6% $61.3 104.8% 103.5% 3.08/3.71 1.02
Agency Multifamily Ballooning in 120 Months or Less 13.9% $1,464.1 101.9% 100.6% 3.19/4.42 5.91
Agency Fixed Rates Maturing Between 0 and 180 Months 12.6% $1,324.7 104.2% 103.2% 3.81/4.28 3.60
Agency Fixed Rates Maturing Between 181 and 240 Months 0.3% $27.1 108.9% 104.9% 4.42/5.02 3.84
Agency Fixed Rates Maturing Between 241 and 360 Months 32.0% $3,368.3 105.0% 102.3% 3.89/4.39 4.40
Agency Interest-Only 0.2% $24.9 18.4% 19.8% 4.85/5.37 -3.23
US Treasuries 6.4% $670.7 99.7% 100.1% 2.66/2.66 5.82
Agency & US Treasury Portfolio 65.9% $6,941.1 103.4% 101.6% 3.61/4.21 4.65
Agency 15Y TBA 15.9% $1,678.4 101.6% 101.7% N/A 3.01
Agency 30Y TBA 8.9% $940.1 104.4% 104.5% N/A 3.12
TBA Portfolio 24.9% $2,618.4 102.6% 102.7% N/A 3.05
Legacy Non-Agency Assets 0.8% $84.0 76.0% 85.5% 5.46/4.68 5.01
New Issue Prime Fixed Non-Agency 0.2% $18.2 94.5% 97.2% 3.69/3.97 6.73
Credit Risk Transfer 8.2% $866.7 98.7% 114.3% 6.37/4.06 -1.84
Non-Agency Portfolio 9.2% $968.9 96.6% 111.5% 6.24/4.11 -1.09
Total Portfolio 100.0% $10,528.4 101.7% 101.9% 3.91/4.23 3.72
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) 3 21 33 — 60 67 80 — 105 119 67
Notional Amount (millions) $50 $550 $1,675 $0 $775 $1,050 $825 $0 $1,250 $625 $6,800
Weighted Average Rate 0.92 1.21 1.83 — 2.10 1.84 2.07 — 1.95 2.33 1.90
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(1) Affiliated with ARMOUR.
Information as of 03/31/2018. Some totals may not foot due to rounding.
Repo Counter-Party
Principal
Borrowed
(millions)
Percentage of Repo
Positions with
ARMOUR
Weighted
Average Original
Term in Days
Weighted
Average
Remaining
Term in Days
Longest
Remaining
Term in Days
1 BUCKLER Securities LLC(1) $3,697.1 53.9% 31 22 63
2 ABN AMRO Bank N.V. $369.1 5.4% 49 33 48
3 FHLB - Cincinnati $308.7 4.5% 4 4 4
4 Mitsubishi UFJ Securities (USA), Inc. $304.4 4.4% 53 46 54
5 ING Financial Markets LLC $289.8 4.2% 28 4 4
6 The Bank of Nova Scotia $212.7 3.1% 46 27 53
7 RBC Capital Markets $175.0 2.6% 61 46 47
8 Citigroup Global Markets Inc. $163.8 2.4% 48 33 53
9 Wells Fargo Securities $130.6 1.9% 30 15 15
10 Royal Bank of Canada $105.4 1.5% 31 18 29
11 Barclays Capital Inc. $102.6 1.5% 31 14 25
12 Mirae Asset Securities (USA) Inc. $99.8 1.5% 12 3 3
13 J.P. Morgan Securities LLC $98.7 1.4% 31 18 22
14 South Street Securities LLC $95.4 1.4% 63 50 61
15 KGS-Alpha Capital Markets, L.P. $74.8 1.1% 60 47 47
16 Societe Generale $74.6 1.1% 32 15 25
17 Wells Fargo Bank, N.A. $73.1 1.1% 30 18 22
18 E D & F Man Capital Markets Inc. $54.2 0.8% 61 46 46
19 BNP Paribas Securities Corp. $53.9 0.8% 31 22 25
20 Daiwa Securities America Inc. $53.7 0.8% 52 37 46
21 Citibank, N.A. $51.1 0.7% 62 61 61
22 ICBC Financial Services LLC $47.1 0.7% 58 57 57
23 Merrill Lynch, Pierce, Fenner & Smith Inc. $46.7 0.7% 32 14 22
24 MUF Securities EMEA $45.0 0.7% 31 16 22
25 Morgan Stanley & Co. LLC $43.4 0.6% 30 21 25
26 UBS Securities LLC $42.6 0.6% 31 17 22
27 The Bank of New York Mellon $40.4 0.6% 29 8 8
Total or Weighted Average Repo Positions $6,853.7 100.0% 35 24
Weighted Average Repo Rate 2.01%
Weighted Average Haircut 5.53%
ARMOUR Repo Composition
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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 Portfolio Constant Prepayment Rates ("CPR")
Trailing Twelve Month Portfolio CPR
15
10
5
0
Fe
bru
ary
20
17
Ma
rch
20
17
Ap
ril
20
17
Ma
y 2
01
7
Jun
e 2
01
7
Jul
y 2
01
7
Au
gu
st
20
17
Se
pte
mb
er
20
17
Oc
tob
er
20
17
No
ve
mb
er
20
17
De
ce
mb
er
20
17
Jan
ua
ry
20
18
Fe
bru
ary
20
18
Ma
rch
20
18
March 2018 Agency Asset CPR
0 5 10 15 20
CPR
ARMs & Hybrids
10 & 15 Year Pass-Throughs
20 Year Pass-Throughs
25 & 30 Year Pass-Throughs
Agency Multifamily
Agency IO
Portfolio Average
10.7
9.1
2.8
5.7
0.0
14.1
5.2
17-Feb 17-Mar 17-Apr 17-May 17-Jun 17-Jul 17-Aug 17-Sep 17-Oct 17-Nov 17-Dec 18-Jan 18-Feb 18-Mar
CPR 7.3 6.1 7.8 5.8 7.4 7.5 6.8 7.0 6.2 8.6 6.2 7.0 6.6 5.2
ARMOUR Residential REIT, Inc.
3001 Ocean Drive
Suite 201
Vero Beach, FL 32963
armourreit.com
772-617-4340