ARR - Earnings call 4 2021 | ARMOUR Residential REIT, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to the ARMOUR Residential REIT's Fourth Quarter and Full Year 2021 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jim Mountain, Chief Financial Officer. Please go ahead.

James Mountain

Thank you, Andrew, and thank you all for joining our call this morning to discuss ARMOUR's fourth quarter 2021 results. which ARMOUR's our Ulm everyone Chief to earnings by and Jeff has today on ARMOUR's Gruber, found Mark Investment release, joined co-CEOs, www.armourreit.com. and Scott Zimmer; access ARMOUR's I'm website, be can Officer. By now, contain statements This forward-looking Act not recitations therefore, the of Litigation Reform meaning of XXXX. that of conference statements are fact, historical call and Securities may within constitute the Private to Act. All provided be statements such intended subject provisions Reform are safe by the the to harbor forward-looking

in Actual could with implied Factors outcomes the beyond reports SEC's the ARMOUR's periodic the differ on results results ARMOUR. outcomes Securities are results forward-looking the of and actual many cause of Risk the to of contained those included materially section filed to the and from Certain from Exchange at materially www.sec.gov. the in differ available could factors due expressed Commission. factors and website by or control impact Copies are that forward-looking the statements statements

All notice. as without of by statements forward-looking and required are made obligation change date to this only in unless are subject disclaim update statements our today's any law. to forward-looking call We conference included

may of discussion in most include certain our A release. to reconciliation earnings our today Also, GAAP measure measures. these non-GAAP the to included measures references comparable is

will shortly online X replay An of year. this be available continue for and conference ARMOUR's website will on call

been $XX.XX September waters. marked Since we per choppy have from down last value spoke, share, $X.XX XX, by markets rate the quarter mortgage common end interest ARMOUR's XXXX. and book was

of agency the future is across market portfolio, mortgage rate hikes in of and likely result reflects purchases. inflation, decrease This interest spread which widening MBS Fed quarter-over-quarter ruminating on talk reductions the our

will and taper relatively us will tantrum. remain optimistic We orderly it that for a expect with avoid and while, another and we're throwing this be tightening market

the value per sector, apples-to-apples was XXXX. common For January on book XX, across $X.XX an comparison share

per value ARMOUR's $X.XX. be February common of approximately XX, business book the we on close share As estimated to

While reflects positions, our portfolio market the negatively MBS billion. securities improving value another it portfolio, billion consisted also current representing spread ARMOUR's increasing yields XX, new $X.X impacts TBA of and of agency widening of XXXX, December for and current $X.X asset investments. At existing MBS opportunities

had opportunities. then, We has by position billion TBA reduced $XXX of increased be securities. advantage treasury U.S. treasury U.S. also to million portfolio agency ARMOUR and billion take $X.X those ready Since improving its by of to its and $X.X

sales includes of was losses QX income, net ARMOUR's or comprehensive which market was termination include does excludes of value derivatives well loss. as gains million, from share. $XX.X and security GAAP $XX.X $X.XX or drop million per but common earnings, TBA early which loss Distributable million it adjustments, $XX.X as

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

prior on our discussed base costs. in administrative we've calls, increases common As share share reduced per

For common share up full annualized basis. an $X.XX ARMOUR's per by share reduces forma pro on year, the XX%, administrative the load which expense common count is

currently waiver manager, company's its The each ARMOUR operating month. continues Capital portion to a management $XXX,XXX offsets the of external waive fee. of Management, expenses

stock dividend. per maintained ARMOUR share per common at dividends also $XX.X of of the $X.XX have that month XXXX common the annum. monthly been dividends rate a for QX Series paid of per share announced The company quarter C The total declared for each recently $X.XX rate fourth the million. XXXX March contractual of dividend in X% for with preferred

discuss Scott Officer, over Ulm, Now positioning I'll current in turn Executive to Co-Chief to strategy portfolio and call further detail. ARMOUR's the Scott?

Scott Ulm

quantitative least in the easing rate X Thanks, XXXX. end program in of meeting in at Jim. hikes hawkish federal a signaling FOMC resulted to December's X the pivot, funds

investors the warning particularly meeting balance shifts policy resolve U.S. for to including further Fed's aggressive securities, In options at OAS historically reassess XX possible and there's inflation possible tightening January's FOMC to even all basis hockey a categories, points reduction for the to an OAS a quarter us, XX the a most address quarter. in tight This sheet asset midyear open March. at on reinforced in the point been FOMC of the mortgage-backed the hike a on of Agency table, valuations widened more fourth hinted send rate, strong MBS. After XXXX. to widening the addition, high by further leaving XX-basis in first

While now the further of historical remains uncertainty posing significantly rate to risk around rising policy high, of longer-term widening. are these averages, closer inflation the levels the to response

and of to We action $X.X X.Xx reduced portfolio our ratio implied our selling leverage billion portfolio today. $XXX down fourth U.S. MBS treasuries. substantially into at in improved of spread billion pool positions significantly TBA negative end net risk $X.X the specified convexity of the in of portfolio MBS, the This million lowered lowered mortgage and rotating ARMOUR XXXX. quarter, the risk our early our our X.Xx the from by in

increase side of slow the opportunities, The mortgage ARMOUR prepayment better portfolio investments. XX-year speeds environment on refinance well rate them. other and of is higher agency-backed the pandemic down and margin existing positioned our now wave. and exceed temporary This new rates wider net and to least and signaling is to investment at end X%, potentially spread this will a take advantage

added future opportunities. Fed the gives removed have and we to of we portfolio with book sizing uncertainty hedge to book. hikes. larger of room have substantial leverage leverage advantage current much liquidity our a for hedged exact investment out improving Our of excess around Because take the X XXX% or more and timing support lower And of of repo have the we us and expense borrowing turns swaps, pay

XX% is our book forward-starting asset of If you our and include our swaps, XXX% current of portfolio is hedged. hedged, repo

of is our is Securities. broker-dealer XX% rate approximately principle XX just active at our average with BUCKLER points. counterparties borrowed low still repo repo different with is Our historically and basis XX today affiliate, ARMOUR

But potentially significant corner. and tightening ending. maintain the see for into lower-risk Fed We a today, we around opportunity going easing profile the quantitative do

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

We continue appropriate. to see dividend level as our

we'd like for that, to questions. With up any open

Operator

[Operator Credit comes Suisse. Instructions] Doug with question The first Harter from

Douglas Harter

Can you discussed, move talk then timing the first be to portfolio redeploy looking for you capital -- would of move conditions of into what the order and kind back that quarter about or treasuries changes you in MBS? that out of to

Mark Gruber

Mark. This Doug. is Sure,

answer So there look be forward. January should those forward. there's spreads are portfolio be look, in a targets and risk throughout we se February. much kind reinvest. little towards with profile, we're real first To moves looking question of wider on the think and We'll of going the going pretty end we'll reinvestments, both think don't -- far. when at some It's we -- and comfortable where opportunities, quarter, your for we so to coming bit really think per to timing to . We no we're have there opportunities invest. the just start yield We the were

Jeffrey Zimmer

meets that. and more more March And dribble as out then, Doug. now we closer XX, members, the to with to I and and the going and between think through Fed more learn they're all conferences we're and So Fed interviews get going to

when then, okay, then characteristics, we month between all and returns other see not We'll when And all convexity, we there'll seeing So 'XX. stuff. of the a may in good before us prepayment get not believe safety see no spectrum, get with the characteristically the we double-digit little X We develop. could actually, suspect start surprises. to they're March you'll heavy we like widening. how be words, month, features good the now slow there, -- bit next prepays investing. then low and we be start things And they're see custody But more kind on invest,

Douglas Harter

And it. then just dividend. Got on the

look imply, return current value, rate, divided to? If think the or might $X.XX the book on at in where achievable you current Do by XX% monthly that, return call that you value. go an would it, environment spreads current that is book the your a

Jeffrey Zimmer

now all marginal is right actually already Your is money, So right? covered. reinvestment overhead

Xs high historical space, kind If that. down you range. in a turns X this Xs of We're high from to leverage at full look it's the

So being careful. more if $X in very than achievable. we it's another billion, invest We're just

the the spreads. degradation You of mortgage have just recently

So as about reinvesting. slow to we're said, very But achievable. it's be yes, going I just

Scott Ulm

which much more a the lack mention, of now. of into the of to swap potentially the kind like their category. we treasuries securities, affect leverage, doesn't But but mortgage-backed Not interesting securities certainly spread right mortgage-backed and treasuries risk with

Operator

from The JMP Securities. next question Cranston comes Trevor with

Trevor Cranston

level. Follow question about up the on dividend the

is the the guys guys comfortable that of you far portfolio notch moves seems least like retaining reiterated taking the around dividend made why a at thinking with sort level. But with you versus to in trading currently of earnings you're that would maybe in at yield near and more decent guys Can power your reinvestment the reduce quarter, stock first term. level a the down that so amount, the maintain share With for the the you just that future? over you it capital want the some it

Jeffrey Zimmer

what this last we over look is maybe what dividend we've longer, and machine conference that what rate even the at said appropriate little over is So X earn. X, X, the can a the calls term, medium

billion defensive. mortgage it we Although the the it's and to And book of of value a lost treasuries quarters, turns billion power. $X each billion, investment that under indicated add we've just mortgages $X.X for $X.X X some earnings few of swapping few of being fact add I the of think and we're despite will because been cents last how a we here, lot out would

with So in to we're now future. would the not the very near are We comfortable that where right dividend. we with expect change

Trevor Cranston

like to you Okay. that in drop given And we've in rates to far think outlook, meaningful there of first Got in seen looks so a on that drop, speeds the close prepay spec sort February. bottomed the the portfolio out? the is Or higher Do pretty any room then for had additional is quarter? it. guys it

Mark Gruber

are to speeds may pretty our a getting We be drop it is. for to, bit, think, turnover room but low we're more portfolio little the So a think little we closer as there speeds.

for to speeds amortization close but the us on for bottom us we're forefront, upside here the the little in we a think to earnings So speeds.

Trevor Cranston

that extended where at they're currently? And imply durations you with fully think pretty portfolio the Okay. is would that the

Mark Gruber

Yes.

Our yes. spec portfolio,

Jeffrey Zimmer

he from meant be when potential to upside didn't said he Just amortization the there. in in he be to earnings clear upside speed, a expense, reduced mean Trevor, just upside, the little clear,

Trevor Cranston

got that. I Yes,

Operator

comes Nolan Thalmann. Ladenburg Instructions] with The [Operator question next Christopher from

Christopher Nolan

agencies? on Based investments expecting we more comments, XX-year be should into your

Scott Ulm

more would we a where expect little I we there. yes, some years we'll bit opportunities. double-digit expect say, be to like think said, There But low we that XX because widening rise we widening, some is yes, But where spread in are target. spread going already opportunities in that's more there are rates.

Christopher Nolan

me, guys excuse -- we X or market posturing into -- Fed the hikes, of Fed is weeks, portfolio X least at going the mean, where market now? is fully what's in you're baking comments coming are where weeks further expecting that's basically, as the and you expect for should further your been defensive you given -- then given is going a we thinking not And treasuries did to I it right transpire? Okay. to in case the than the expect few the

Mark Gruber

leverage that little portfolio get So treasuries. regard is we defensive. From think a more comments, I Scott's was a market a is taken don't the What was into We've more more Fed already in lot meeting. December I that. We've of moved will implying implying what now, the in than down. perspective, to think,

right I some think think we reinvesting not present to talk, really been and the where time want probably able So we'll opportunities defensive assets hopefully, now. do themselves. I as added more is go next have, the to But we

based our we're I think up profile, that with. comfortable on risk we're very set profile our

Christopher Nolan

too of that Or Great. into And anything anything? terms consider, in seeing going non-agency that the old are premature? you might CRTs you or back investments is

Jeffrey Zimmer

Exactly.

Operator

concludes our back to closing would turn I session. any the Mountain like over question-and-answer conference remarks. Jim for to This

James Mountain

months. continuing dialogue Andrew, you, and us. the in the We look to intervening forward all thank Thank you for joining

safe. next until know to us. If you find everybody, free stay arise, So feel reach out. to questions time, And where please

Operator

The you today's presentation. has now attending conference concluded. for Thank

now disconnect. may You

ARMOUR Residential REIT (ARR) 17 Feb 222021 Q4 Earnings call transcript