ARMOUR Residential REIT Inc (NYSE:ARR) Q2 2019 Earnings Conference Call Transcript

Jul 25, 2019 • 08:00 am ET

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ARMOUR Residential REIT Inc (NYSE:ARR) Q2 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Greetings and welcome to the ARMOUR Residential REIT Second Quarter 2019 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded Thursday, July 25 2019.

I would now like to turn the conference over to Jim Mountain, Chief Financial Officer. Please go ahead.

Executive
James Robert Mountain

Thank you, Edison. And thank you all for joining our call to discuss ARMOUR's second quarter 2019 results. This morning, I'm joined by ARMOUR's Co-CEOs Scott Ulm and Jeff Zimmer and our CIO and Chief Operating Officer, Mark Gruber.

By now everyone has access to ARMOUR's earnings release and Form 10-Q, which can be found on ARMOUR's website www.armourreit.com. This conference call may contain statements that are not mere recitations of historical facts, and therefore, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

All such forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act. Actual outcomes and results could differ materially from the outcomes and results that expressed or implied by these forward-looking statements due to the impact of many factors, beyond the control of ARMOUR. Certain factors that could cause actual results to differ materially from those contained in the forward-looking statements are included in the Risk Factors section of ARMOUR's periodic report filed with the Securities and Exchange Commission. Copies of those reports are available on the SEC's website at www.sec.gov. All forward-looking-statements included in this conference call are made only as of today's date and are subject to change without notice. We disclaim any obligation to update our forward-looking statements unless required to do so by law.

Also our discussion today may include references to certain non-GAAP measures. A reconciliation of these measures to the most comparable GAAP measure is included in our earnings release, which can be found on ARMOUR's website. An online replay of this conference call will be available on ARMOUR's website shortly and will continue for one year.

Turning to the results. Armour's Q2 GAAP net loss was $183.2 million, or $3.14 [Phonetic] per common share. The net loss was driven primarily by changes in the aggregate levels and mark-to-market movements of our interest rate swaps. Core income, which includes mark-to-market items such as changes in interest rate contracts, losses on Credit Risk and Non-Agency Securities and TBA dropped income was $41.9 million, or $0.63 per common share.

For the last 12 quarters, our core earnings have consistently exceeded dividends. Through June 30th, that excess totaled $39.8 million, which represents about $0.67 per common share outstanding at quarter end. Based on stockholders' equity at the beginning of the quarter, core income represents an annualized ROE of a 11.3%.

During the quarter, ARMOUR repurchased 625,000 common shares, which added a little over $0.02 per share to book value. Insiders purchased an additional 98,000 shares during Q2. On June 25, we called for redemption all 2,180,572 shares