ARR - Earnings call 3 2021 | ARMOUR Residential REIT, Inc.

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Operator

Hello, and welcome to the ARMOUR Residential REIT's Third Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note, today's event is being recorded. I'd now like to turn the conference over to your host today, Jim Mountain. Mr. Mountain, please go ahead.

James Mountain

thanks to of XXXX discuss and us for results. Keith, morning this ARMOUR's you, to you all joining Thank third quarter Zimmer; Today, Ulm Gruber. ARMOUR's by and Jeff I'm Mark our co-CEOs, CIO, joined and Scott now, be on can By release, www.armourreit.com. found has ARMOUR's ARMOUR's access earnings everyone which website, to

the outcomes safe statements of impact This All expressed statements materially Litigation statements outcomes intended harbor Act. protections recitations meaning forward-looking provided within by ARMOUR. the are historical results and from conference of many statements such the Reform factors and Reform or and, Actual to these fact to differ the not may implied are contain Securities beyond by results Act the the XXXX. could of therefore, due forward-looking call of Private the control subject be that of constitute to forward-looking

forward-looking cause to which differ forward-looking Factors Certain results on reports, periodic statements factors with Copies the Exchange are SEC's included available www.sec.gov. Commission. statements we're from in section They in change are actual statements that law. are required notice. the do to in any call are this Risk All forward-looking made date the as subject Securities at website are without disclaim those so ARMOUR's contained and could to filed by of We only. update conference our of obligation today's made to unless materially

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

per portfolio its share, for in of common value concentrate down $XX.XX was the foreseeable to QX MBS from XXXX. $X.XX future. end Quarter-end book the continues agency ARMOUR activity

and the the most widening debt that the over stimulus several increasingly ultimate likely taper and reflects result to calendar. across portfolio, direction MBS ceiling decrease of the consume quarter-over-quarter imminent Congressional of concerns spread of Fed This our bills which is continue

negatively spread consisted our representing MBS agency improving impacts of $X.X value September ARMOUR's TBA securities portfolio opportunities billion MBS widening it market often plus While of another $X.X portfolio, the represents for XX, new of investments. also current At existing billion. positions

GAAP the business of value comprehensive estimated unencumbered nearly past share. Liquidity, $XX.XX early common gains income net earnings, be cash security includes or derivatives sales common of representing our almost million, income, At close ARMOUR's equity. XX% adjustments excludes and this Tuesday, total but QX share. or book we was million drop per as as to $X.XX $XXX securities, from including per market which approximately includes was million, $XX.X Distributable income. million value which TBA of $XX.X losses and $XX termination was of well

we noticed about name used have name this the core income. think this statistic. of from we changed better may non-GAAP we think the You way of measure reflects that the this prior We

ATM of raising expenses. after During common the issued X,XXX,XXX through of quarter, program, fees shares $XX.X stock million capital our and ARMOUR

have share. efforts to about raising capital common added book our quarters, X first value the per For $X.XX

over whether In from these margin, offerings their per share for at addition accretive or considering administrative also cost we to dilutive look on spreading the potential costs base. larger are savings share a

XXXX. million $X.X was portion quarter initiated of its in This company's offset waiver quarter third of of the the the a second management That continued of manager XXXX. expenses for operating fee. to waive ACM, external waiver

share. at $XX.X for $X.XX common a waiver the total million. dividends for the fee as third Preferred total $X.XXXXX to XXXX, expect well $X per dividends declared the month paid and in rate million. of the October management dividends per ARMOUR XXXX share for we $X.XX C of per common For Stock as QX November each We've at QX also that rate share of quarter

me call Ulm, and current discuss portfolio to further to strategy. position the Scott? ARMOUR's Now Executive, turn Scott co-Chief over let

Scott Ulm

employment rising Thanks, may be underwhelming the Jim. soon Cognizant mid-XXXX, FOMC than to inflation longer in transitory, its Interest signaled in between chain elevated prices and the as risks by driven to of date rates intention remained down supply upswing disruptions at a X asset purchase by as XXXX. has to and the taper an third stalemate increases pent-up November prove in with finally amounts start monthly demand. that quarter

increasing on rate Unfazed interest hikes instead follow. the bond focused of long-anticipated markets by to announcement on likely pace timing imminence official the the of tapering, and

the in growth are mid-October, borrowing pricing recovery. hikes rate of shorter-term higher the an in for rates, expectations remains the X approximately by outlook in XX-year for perhaps on year-to-date rates of Despite another X rate short-term As treasuries economic yield the hikes hybrid below muddying longer X.XX%, OIS followed XXXX, XXXX.

this to market pricing The that earlier taper, seen be seems by year. widening looming in happened as the spread the

a some negative in strong rate production decline slowly X basis premiums points, continuing market. TBA continuing fading could second shift economic nearly to view cheapening in earnings. unchanged do option-adjusted mortgages TBAs tightened third of levels. in points. of tailwind We pools on to demand cash community are extraordinarily in instances, at specialness provide on the recovery However, start by monthly have we current quarter, trading implied dollar spreads production-specified to the improved is without to bid from sector TBAs buyers backstop rolls bank portfolios The from production strong a an underperformed demand XXXX, wall as XXXX, In expand XX in any to mean some specialness XX-year high. purchases to of A OAS with funding to the as The expense still to are their continue yield opportunity the X since see outright Specified lending of measurable funding quarter XXXX. spreads supported basis securities a net next in rich, expect from pools by continues the banking bank Fed for We for to while portfolios. Nominal set dollar roll modestly. were and of this year. access the provide potential

However, worst of remain roll [indiscernible] strong deliver to persisting foresee away portfolio, the Fed's months. the returns we and bonds next the vast beyond locked in majority

approximately until present our continue For allocate TBA assets to to XX% rolls opportunities to stay to attractive TBAs. now, themselves. plan of XX-year proportions We we weighted specified and in with XX-XX these XX-year pools more

aggregate characteristics and we foundation The which composed as favorable predictable stable among and of in peer DUS other lower prepayment half the pools. to prepayment for lowest rates our ahead. act that MBS group loan assets a protection of are contribute believe and our primarily These prepayment in assets and penalties balances have earnings

tailwind the Third relative previous quarter. to prepayments past quarter to CPR quarter, earnings. slowed observed ARR's XX.X the year, averaged portfolio below the from third providing in a in the XX.X the speeds CPR

speeds levels quarter. fourth in remain to expect similar the at We

of leverage leverage to the loans. end, X.Xx implied is TBAs, Our at which X.X below our includes quarter third historical X turns

take provides lower of dry powder opportunities. market to us Our future advantage leverage with

maturities an any funding around with increase, over average past lows potential the the placed debt ceiling rate quarter, hike their year-end the third benefit. X point funding and our out historic XX points rates second and quarter risks Overnight Fed's basis of the basis XX% we've basis repo To year-end. XX throughout remained repurchase Despite repo at ranged between to have overnight ARMOUR's points. XX in remove markets to of reverse the

counterparties, with is our XX% ARMOUR is active with Securities. XX broker-dealer and borrowed our approximately different principal repo BUCKLER of affiliate,

medium-term As on on based we set the our I've our outlook noted before, business. dividend policy

appropriate. With as level dividend our see questions. take to that, to continue We be delighted we'd

Operator

Instructions] [Operator

Thalmann. Nolan And the first question Ladenburg from comes with Christopher

Christopher Nolan

quick couple Jim, nonrecurring questions. the or items earnings? revenue expenses there A of in any was

James Mountain

million? I bond the prepaid make-whole did perspective, is answer in that the X And looking think was DUS that Mark that From -- perspective, a and had expense some think revenue have that. I'm from an I at we no. interest $X

Mark Gruber

Yes.

Christopher Nolan

indicate you. issuance And the did ATM then in value comments, in Got you to book accretive the your quarter? was that

James Mountain

in Not quarter. the

If the the $X.XX the release, the think at $X.XX for in that dilutive was it I was accretive. and made I it's quarter, comment you year-to-date, look press reconciliation

Christopher Nolan

sort guys question terms outlook. a mean, macro I view. of just overall guess you long your mean, Where then do been the of quarter appreciate particular bit. into the and to you I quarter as in you of Great. I general what that provided do perspective moving up And they've I And have you're the and first the that? fourth down a on see color a going? in market terms rates for expecting

Jeffrey Zimmer

little in coffee. recently XX-year Jeffrey. caused bit and oil to It's The year-end X.XX% Internally, by some that for cup the recently a our for flatten taken surprise. touched that's we've a and note people rise the was target curve of has prices

flat in before economic stay or again, slowing lot of a have you with and and If for a a commodity increase it's it's energy you itself prices persistent bit. little prices, around down while exhibited output have inflation inflation may

to the not after us on which continued until to rates XX-year will the you if think do Fed higher. November to give would And modestly said, start in they're economy going lift-off, perform X expect of they being guidance That well, when terms we be would the stop well taper.

XXXX. expect fourth quarter until So we the lift-off at of least wouldn't

that is in when be of as obviously, world we there do our being the a our reinvestment winds the doing to the bit our do. Fed's X.X air product, leverage, us markets, they'll about to their well, by into certainly of decided And And hedged, expect okay, out brings and said worst we least dividend we're the we're Fed have term, driven, everybody deliverable spreads in clean the to Fed stuff's best buy. talked as other participants gets which mortgage said, worst the rate. to at little provides mortgage in generally, performance the out participate lot a the way what the comments, for not and the fact underneath the turns of to And when it absorbing going his exceed mortgage medium paydowns. the earlier, market. who although be spreads constant That Scott down, widen the And of of in

did up XX-year get to by the short answer So X.XX% we anyway, to is XX-year. the expect

affect achieved term. helpful. around surprise The the the I prices, it hope long it commodity due do that's doesn't that. and bull We have a we what concerns flattener to some to but energy was

Christopher Nolan

Great. It helps, Jeff.

Operator

[Operator Instructions]

Securities. from Mikhail the And question will next JMP with Goberman come

Mikhail Goberman

to your need to you going Wondering widening speeds from outlook to just a how where leverage quick question see for now, is and spread it also be point forward. increase this much prepay able on

Jeffrey Zimmer

our in here the prepay of Mark, why we address you rest those have for outlook the quarter? don't because our models

Mark Gruber

Yes.

maybe rest any down we increase assume prepaid don't just quarter, We would in of the the see speeds. to For flat really really slightly.

the the So of year. for basically, the for rest the of -- rest

Jeffrey Zimmer

so widen much. waiting And so for this, is what we're for, maybe we everybody spreads waiting not might and so have

And the ahead get paydowns Let's gives every just the expecting says a of and money be what to is It's end hard looking they taper, if have spreads starting start putting here, little believe perfect still our to of wideners. to or next the ability be. it'd we'll December. X Does you're in or bit would you paydowns. to anticipated opportunity work. month. we're answer tighten, OAS point basis That that, you're November go we'll going XX widener wides pick X. toward see the that not everybody do for? going to November, Fed to not get us what And what take on big here widener. But to reinvest advantage a If X to get the that We widely is start of if

Mikhail Goberman

helpful. that's Yes,

Operator

that Thank presentation. the so question And conference well you as session as today's does Thank the for much you. conclude attending call.

your disconnect phone now lines. may You

ARMOUR Residential REIT (ARR) 28 Oct 212021 Q3 Earnings call transcript