ARMOUR Residential REIT, Inc. Reports Financial Results for the Quarter Ended September 30, 2025

Overview of ARMOUR Residential REIT, Inc.

ARMOUR Residential REIT, Inc. (ARMOUR) is a real estate investment trust (REIT) that invests primarily in mortgage-backed securities (MBS) issued or guaranteed by U.S. government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac, as well as U.S. Treasury securities. The company is managed by ARMOUR Capital Management LP, an investment advisor registered with the SEC.

ARMOUR’s goal is to create value for shareholders through careful investment and risk management of a leveraged and diversified portfolio of MBS. The company relies on the experience of its management team to analyze and select MBS, access equity capital and repurchase financing, and implement hedging and liquidity strategies to moderate interest rate and MBS price risk. ARMOUR prioritizes maintaining common share dividends over the intermediate term rather than focusing on short-term market fluctuations.

The company is committed to sustainable environmental, responsible social, and prudent governance practices that improve its work and the world. ARMOUR strives to minimize its environmental impact and contribute to a healthy, sustainable environment.

Financial Performance

For the three and nine months ended September 30, 2025, ARMOUR reported net income of $159,259 and $110,983, respectively, compared to $65,880 and $32,046 for the same periods in 2024. This increase was driven by gains on the company’s trading securities portfolio and higher interest income from a larger average securities portfolio, offset by losses on derivatives and higher interest expense on a larger average balance of repurchase agreements.

ARMOUR’s net interest income, which is the difference between the yield on its assets and the cost of its borrowings, was $38,517 and $107,963 for the three and nine months ended September 30, 2025, compared to $1,839 and $14,139 for the same periods in 2024. The improvement in net interest income was due to a larger average securities portfolio and higher yields, partially offset by higher interest expense on increased borrowings.

The company’s other income, which includes gains and losses on its securities and derivatives portfolios, was $134,018 and $43,787 for the three and nine months ended September 30, 2025, compared to $74,487 and $60,069 for the same periods in 2024. The increase was primarily driven by higher gains on the agency securities portfolio, partially offset by larger losses on derivatives.

Total expenses, after management fees waived, were $13,276 and $40,767 for the three and nine months ended September 30, 2025, compared to $10,446 and $42,162 for the same periods in 2024. The increase was mainly due to higher management fees resulting from a larger equity base, partially offset by lower other operating expenses.

Factors Affecting Financial Condition and Performance

ARMOUR’s results are influenced by various factors, including interest rates, prepayment rates on its MBS, its degree of leverage, access to funding, and regulatory and accounting requirements.

Interest Rates: Changes in interest rates, particularly short-term rates, can significantly impact the company’s net interest income. Rising rates tend to decrease net interest income and the market value of ARMOUR’s assets, which could adversely affect its ability to make distributions to shareholders. The company uses interest rate hedging strategies, such as interest rate swaps, to manage its exposure to interest rate risk, but it does not hedge all of this exposure.

Prepayment Rates: Prepayments on the underlying mortgage loans in ARMOUR’s MBS portfolio can be influenced by various factors, including changes in market interest rates. Higher prepayment rates can negatively impact the company’s anticipated yield, as it may be unable to reinvest the proceeds at comparable yields. ARMOUR uses a variety of hedging strategies to manage prepayment risk.

Leverage: ARMOUR generally seeks to borrow between six and ten times its total stockholders’ equity. Its debt-to-equity ratio was 7.78:1 and 7.87:1 at September 30, 2025 and December 31, 2024, respectively. Higher leverage can amplify the impact of changes in asset values and interest rates on the company’s financial condition and results.

Funding: ARMOUR finances the majority of its MBS portfolio through repurchase agreements with various counterparties. Disruptions in the repurchase market or changes in regulatory requirements could make it more difficult or costly for the company to obtain financing.

Regulatory and Accounting: As a REIT, ARMOUR must comply with certain requirements to maintain its tax-advantaged status. The company is also subject to various accounting standards that can impact the recognition of gains, losses, and other items on its financial statements.

Market and Interest Rate Trends

During the nine months ended September 30, 2025, the U.S. administration introduced tariffs on imports, which increased financial market volatility and interest rate fluctuations. ARMOUR expects to continue prioritizing liquidity given the potential for renewed market volatility and financial risks.

The Federal Reserve has taken various actions during this period, including lowering the target range for the federal funds rate from 4.25%-4.50% to 4.00%-4.25% in September 2025. The Fed has also continued reducing its holdings of Treasury securities and agency mortgage-backed securities. These actions by the Fed can significantly influence ARMOUR’s financial results, as the company’s cost of funds is largely dependent on short-term interest rates.

Developments at Fannie Mae and Freddie Mac, the two largest GSEs, can also impact ARMOUR, as the company’s investments in agency MBS depend on the continued viability and support of these entities by the U.S. government.

Investment Portfolio and Financing

At September 30, 2025, ARMOUR’s investment portfolio consisted primarily of agency MBS, with a small allocation to U.S. Treasury securities. The company’s agency MBS portfolio had a fair value of $17,805,194, with a weighted average constant prepayment rate (CPR) of 7.5%. ARMOUR also had $251,641 in U.S. Treasury securities.

The company finances its investments primarily through repurchase agreements, with an outstanding balance of $16,557,426 at September 30, 2025. ARMOUR had a debt-to-equity ratio of 7.78:1 at that date, including its TBA agency securities positions.

ARMOUR uses various derivative instruments, such as interest rate swaps and TBA agency securities, to manage its interest rate and prepayment risk. At September 30, 2025, the company had interest rate swap contracts with an aggregate notional balance of $10,402,000 and TBA agency securities with a notional balance of $125,000.

Liquidity and Capital Resources

ARMOUR’s primary sources of funds are borrowings under repurchase agreements, monthly principal and interest payments on its MBS, and cash generated from its operating activities. At September 30, 2025, the company had $1,141,390 in liquidity, consisting of $44,238 in cash and cash equivalents and $1,097,152 in unencumbered agency securities and U.S. Treasury securities.

The company generally seeks to borrow between six and ten times its total stockholders’ equity to finance its investments. ARMOUR’s debt-to-equity ratio was 7.78:1 at September 30, 2025, including its TBA agency securities positions.

In addition to repurchase agreement financing, ARMOUR has entered into reverse repurchase agreements to help reduce interest rate risk and counterparty credit and liquidity risk. The company also has access to additional sources of capital, including an automatic shelf registration for the issuance of various securities.

Outlook and Risks

ARMOUR believes it has sufficient liquidity and capital resources to fund its investment activities, meet financing obligations, pay dividends, and cover general corporate expenses. However, the company faces various risks that could impact its financial condition and operating performance, including:

• Volatility in interest rates and mortgage spreads
• Changes in prepayment rates on its MBS
• Disruptions in the repurchase agreement market or changes in regulatory requirements
• Uncertainty surrounding the future of Fannie Mae and Freddie Mac
• Potential losses on its derivative hedging instruments
• Challenges in maintaining its REIT status and exclusion from regulation as an investment company

ARMOUR’s management team is experienced in navigating these types of risks and is committed to maintaining a prudent, risk-managed approach to investing and financing the company’s operations. By prioritizing liquidity, diversification, and disciplined risk management, ARMOUR aims to generate consistent returns for its shareholders over the long term.