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10-Q - FORM 10-Q - Armour Residential REIT, Inc.arr_10q-033112.htm
EX-31.1 - EXHIBIT 31.1 - Armour Residential REIT, Inc.ex31-1.htm
EX-31.2 - EXHIBIT 31.2 - Armour Residential REIT, Inc.ex31-2.htm
EX-32.1 - EXHIBIT 32.1 - Armour Residential REIT, Inc.ex32-1.htm
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EX-32.1 - EXHIBIT 32.2 - Armour Residential REIT, Inc.ex32-2.htm
v2.4.0.6
Note 5 - Agency Securities, Available for Sale
3 Months Ended
Mar. 31, 2012
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]
Note 5 - Agency Securities, Available for Sale

All of our Agency Securities are classified as available for sale and, as such, are reported at their estimated fair value.

As of March 31, 2012, we had the following securities in an unrealized gain or loss position as presented below. The components of the carrying value of available for sale Agency Securities at March 31, 2012 are also presented below.

March 31, 2012
 
Fannie Mae
   
Freddie Mac
   
Ginnie Mae
   
Total Agency Securities
 
   
(dollars in thousands)
 
Agency Securities, gross
  $ 7,557,892     $ 3,622,694     $ 370,326     $ 11,550,912  
Net unamortized premium
    346,183       169,221       17,184       532,588  
Amortized cost
    7,904,075       3,791,915       387,510       12,083,500  
                                 
Gross unrealized gains
    47,559       19,049       5,339       71,947  
Gross unrealized losses
    (10,891 )     (6,965 )     (37 )     (17,893 )
Estimated Fair value
  $ 7,940,743     $ 3,803,999     $ 392,812     $ 12,137,554  

March 31, 2012
 
Adjustable Rate
   
Fixed
 Rate
   
Total Agency Securities
 
   
(dollars in thousands)
 
Agency Securities, gross
  $ 2,514,725     $ 9,036,187     $ 11,550,912  
Net unamortized premium
    100,666       431,922       532,588  
Amortized cost
    2,615,391       9,468,109       12,083,500  
                         
Gross unrealized gains
    33,346       38,601       71,947  
Gross unrealized losses
    (207 )     (17,686 )     (17,893 )
Estimated Fair value
  $ 2,648,530     $ 9,489,024     $ 12,137,554  

As of December 31, 2011, we had the following securities in an unrealized gain or loss position as presented below. The components of the carrying value of available for sale Agency Securities at December 31, 2011 are also presented below.

December 31, 2011
 
Fannie Mae
   
Freddie Mac
   
Ginnie Mae
   
Total Agency Securities
 
   
(dollars in thousands)
 
Agency Securities, principal
  $ 3,451,906     $ 1,283,848     $ 392,476     $ 5,128,230  
Net unamortized premium
    144,337       54,059       18,301       216,697  
Amortized cost
    3,596,243       1,337,907       410,777       5,344,927  
                                 
Gross unrealized gains
    33,558       13,657       5,439       52,654  
Gross unrealized losses
    (3,269 )     (613 )     (24 )     (3,906 )
Estimated Fair value
  $ 3,626,532     $ 1,350,951     $ 416,192     $ 5,393,675  

December 31, 2011
 
Adjustable Rate
   
Fixed
 Rate
   
Total Agency Securities
 
   
(dollars in thousands)
 
Agency Securities, principal
  $ 2,681,911     $ 2,446,319     $ 5,128,230  
Net unamortized premium
    107,641       109,056       216,697  
Amortized cost
    2,789,552       2,555,375       5,344,927  
                         
Gross unrealized gains
    26,157       26,497       52,654  
Gross unrealized losses
    (2,534 )     (1,372 )     (3,906 )
Estimated Fair value
  $ 2,813,175     $ 2,580,500     $ 5,393,675  

Actual maturities of Agency Securities are generally shorter than stated contractual maturities because actual maturities of Agency Securities are affected by the contractual lives of the underlying mortgages, periodic payments of principal and prepayments of principal.

The following table summarizes our Agency Securities as of March 31, 2012 and December 31, 2011.

   
March 31, 2012
   
December 31, 2011
 
   
(dollars in thousands)
 
Weighted Average Life of all Securities
 
Fair Value
   
Amortized Cost
   
Fair Value
   
Amortized Cost
 
Less than one year
  $ 55     $ 56     $ 179     $ 179  
Greater than one year and less than five years
    7,341,099       7,279,217       5,274,072       5,226,255  
Greater than or equal to five years
    4,796,400       4,804,227       119,424       118,493  
Total Agency Securities
  $ 12,137,554     $ 12,083,500     $ 5,393,675     $ 5,344,927  

The weighted average lives of the Agency Securities as of the quarter ended March 31, 2012 and the year ended December 31, 2011 in the table above are based upon market factors, assumptions, models and estimates of ARRM based on ARRM’s judgment and experience. The actual weighted average lives of the Agency Securities could be longer or shorter than estimated.

The following table presents the gross unrealized losses and estimated fair value of our Agency Securities by length of time that such securities have been in a continuous unrealized loss position at March 31, 2012 and December 31, 2011.

   
Unrealized Loss Position For:
(dollars in thousands)
 
   
Less than 12 months
   
12 Months or More
   
Total
 
As of
 
Estimated
Fair Value
   
Unrealized
Losses
   
Estimated
Fair Value
   
Unrealized
Losses
   
Estimated
Fair Value
   
Unrealize
Losses
 
March 31, 2012
 
$
4,382,301
   
$
(17,798)
   
$
38,567
   
$
(95)
   
$
4,420,868
 
 
$
(17,893)
 
December 31, 2011
   
1,173,098
     
(3,560)
     
96,684
     
(346)
     
1,269,782
     
(3,906)
 

The decline in value of these securities is solely due to market conditions and not the quality of the assets. All of our Agency Securities are issued by the GSEs. The GSEs have a rating of “Aaa/AA”. The investments are not considered other than temporarily impaired because we currently have the ability and intent to hold the investments to maturity or for a period of time sufficient for a forecasted market price recovery up to or beyond the cost of the investments and we are not required to sell for regulatory or other reasons. Also, we are guaranteed payment of the principal amount of the securities by the GSEs that created them.

During the quarter ended March 31, 2012, we sold $0.2 billion of Agency Securities resulting in realized gains of $6.3 million. We did not sell any Agency Securities during the quarter ended March 31, 2011.