SEC Form 10-Q filed by ARMOUR Residential REIT Inc.

4/23/25 4:23:04 PM ET

Real Estate Investment Trusts

Real Estate

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arr-20250331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

ARMOUR RESIDENTIAL REIT, INC.

(Exact name of registrant as specified in its charter)


Maryland	001-34766	26-1908763
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

3001 Ocean Drive, Suite 201, Vero Beach, FL 32963

(Address of principal executive offices)(zip code)

(772) 617-4340

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading symbols

Name of Exchange on which registered

Preferred Stock, 7.00% Series C Cumulative Redeemable

ARR-PRC

New York Stock Exchange

Common Stock, $0.001 par value

ARR

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer" "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by a check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of outstanding shares of the Registrant’s common stock as of April 22, 2025 was 81,749,506.

ARMOUR Residential REIT, Inc.

TABLE OF CONTENTS


PART I. Financial Information			1
Item 1. Financial Statements			1
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			26
Item 3. Quantitative and Qualitative Disclosures about Market Risk			49
Item 4. Controls and Procedures			52
PART II. Other Information			53
Item 1. Legal Proceedings			53
Item IA. Risk Factors			53
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			53
Item 3. Defaults Upon Senior Securities			53
Item 4. Mine Safety Disclosures			53
Item 5. Other Information			53
Item 6. Exhibits			54
Signatures			55

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ARMOUR Residential REIT, Inc.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share)


	March 31, 2025		December 31, 2024
Assets
Cash and cash equivalents	$	49,115	$	67,970
Cash collateral posted to counterparties	214,374		78,213
Investments in securities, at fair value
Agency Securities (including pledged securities of $13,709,328 ($6,623,085 with BUCKLER) at March 31, 2025 and $11,796,858 ($5,733,374 with BUCKLER) at December 31, 2024)	14,442,377		12,439,414


Derivatives, at fair value	724,827		908,063
Accrued interest receivable	62,215		52,874
Prepaid and other	3,986		1,419
Total Assets	$	15,496,894	$	13,547,953
Liabilities and Stockholders’ Equity
Liabilities:
Repurchase agreements, net (including $5,704,198 and $4,895,003, respectively with BUCKLER)	$	12,490,792	$	10,713,830
Obligations to return securities received as collateral, at fair value	506,340		493,433
Cash collateral posted by counterparties	655,457		833,857
Payable for unsettled purchases	—		103,509
Derivatives, at fair value	71,297		1,285
Accrued interest payable- repurchase agreements (including $23,551 and $14,442, respectively with BUCKLER)	54,665		32,090
Accrued interest payable- U.S. Treasury Securities sold short	7,294		3,801
Accounts payable and other accrued expenses	7,203		4,733
Total Liabilities	$	13,793,048	$	12,186,538

Commitments and contingencies (Note 8 and Note 13)

Stockholders’ Equity:
Preferred stock, $0.001 par value, 50,000 shares authorized; 7.00% Series C Cumulative Preferred Stock; 6,864 shares and 6,847 shares issued and outstanding ($25.00 per share liquidation preference) at March 31, 2025 and December 31, 2024, respectively	7		7
Common stock, $0.001 par value, 125,000 shares authorized; 82,416 shares and 62,412 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively.	82		62
Additional paid-in capital	4,957,900		4,585,739
Cumulative distributions to stockholders	(2,440,621)		(2,383,539)
Accumulated net loss	(813,522)		(840,854)
Total Stockholders’ Equity	$	1,703,846	$	1,361,415
Total Liabilities and Stockholders’ Equity	$	15,496,894	$	13,547,953

See consolidated financial statement notes (unaudited).

ARMOUR Residential REIT, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share)


	For the Three Months Ended March 31,
		2025		2024
Interest Income:
Interest Income		$	172,881	$	141,480
Interest expense (including $(60,976) and $(70,790), respectively with BUCKLER)		(136,540)		(136,149)
Net Interest Income		$	36,341	$	5,331
Other Income (Loss):
Gain (Loss) on Agency Securities, trading, net		208,257		(137,749)
Gain (Loss) on U.S. Treasury Securities, net		(12,906)		10,922
Gain (Loss) on derivatives, net (1)		(191,218)		156,448
Total Other Income		$	4,133	$	29,621
Expenses:
Management fees		10,769		9,803
Compensation		811		1,437
Other operating		3,212		10,846
Total Expenses		$	14,792	$	22,086
Less management fees waived		(1,650)		(1,650)
Total Expenses after fees waived		$	13,142	$	20,436
Net Income		$	27,332	$	14,516
Dividends on preferred stock		(3,000)		(2,995)
Net Income available to common stockholders		$	24,332	$	11,521

Net Income per share available to common stockholders (Note 11):
Basic		$	0.32	$	0.24
Diluted		$	0.32	$	0.24
Dividends declared per common share		$	0.72	$	0.72
Weighted average common shares outstanding:
Basic		75,222		48,770
Diluted		75,380		48,988

(1) Interest income and expense related to our interest rate swap contracts is recorded in gain (loss) on derivatives, net on the consolidated statements of operations. For additional information, see financial statement Note 7.

See consolidated financial statement notes (unaudited).

ARMOUR Residential REIT, Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(in thousands)


	Shares		Par
	Preferred Stock	Common Stock	Preferred Stock		Common Stock		Additional Paid-in Capital		Cumulative Distributions to Stockholders		Accumulated Net Loss		Total Stockholders'Equity
Balance, December 31, 2023	6,847	48,799	$	7	$	49	$	4,318,155	$	(2,220,567)	$	(826,460)	$	1,271,184
Net income	—	—	—		—		—		—		14,516		14,516

Issuance of common stock, net	—	1	—		—		11		—		—		11
Stock based compensation, net of withholding requirements	—	22	—		—		1,053		—		—		1,053
Common stock repurchased	—	(70)	—		—		(1,344)		—		—		(1,344)
Preferred stock dividends	—	—	—		—		—		(2,995)		—		(2,995)
Common stock dividends	—	—	—		—		—		(35,312)		—		(35,312)
Balance, March 31, 2024	6,847	48,752	$	7	$	49	$	4,317,875	$	(2,258,874)	$	(811,944)	$	1,247,113

























Balance, December 31, 2024	6,847	62,412	$	7	$	62	$	4,585,739	$	(2,383,539)	$	(840,854)	$	1,361,415
Net income	—	—	—		—		—		—		27,332		27,332
Issuance of Preferred stock, net	17	—	—		—		279		—		—		279
Issuance of common stock, net	—	19,994	—		20		371,417		—		—		371,437
Stock based compensation, net of withholding requirements	—	10	—		—		465		—		—		465

Preferred stock dividends	—	—	—		—		—		(3,000)		—		(3,000)
Common stock dividends	—	—	—		—		—		(54,082)		—		(54,082)
Balance, March 31, 2025	6,864	82,416	$	7	$	82	$	4,957,900	$	(2,440,621)	$	(813,522)	$	1,703,846

See consolidated financial statement notes (unaudited).

ARMOUR Residential REIT, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	For the Three Months Ended March 31,
	2025		2024
Cash Flows Provided By (Used In) Operating Activities:
Net Income	$	27,332	$	14,516
Adjustments to reconcile net income to net cash and cash equivalents and cash collateral posted to counterparties provided by operating activities:
Net (accretion) amortization of premium on Agency Securities	(621)		436

(Gain) Loss on Agency Securities, trading, net	(208,257)		137,749
(Gain) Loss on U.S. Treasury Securities, net	12,906		(10,922)
Stock based compensation	465		1,053
Changes in operating assets and liabilities:
(Increase) Decrease in accrued interest receivable	(9,562)		914
(Increase) Decrease in prepaid and other assets	(2,567)		240
Change in derivatives, at fair value	253,248		(84,023)
Increase in accrued interest payable- repurchase agreements	22,575		23,375
Increase in accrued interest payable- U.S. Treasury Securities sold short	3,493		6,820
Increase in accounts payable and other accrued expenses	2,470		6,654
Net cash and cash equivalents and cash collateral posted to counterparties provided by operating activities	$	101,482	$	96,812
Cash Flows Provided By (Used In) Investing Activities:
Purchases of Agency Securities	(2,405,583)		(422,542)
Purchases of U.S. Treasury Securities	—		(97,003)
Principal repayments of Agency Securities	274,007		182,548
Proceeds from sales of Agency Securities	234,204		347,896
Proceeds from sales of U.S. Treasury Securities	—		859,277
Disbursements on reverse repurchase agreements (includes $(461,250) and $(1,805,375) with BUCKLER, respectively)	(613,250)		(2,425,876)
Receipts from reverse repurchase agreements (includes $447,063 and $1,254,000 with BUCKLER, respectively)	598,750		1,667,250
Increase (Decrease) in cash collateral posted by counterparties	(178,400)		67,230
Net cash and cash equivalents and cash collateral posted to counterparties provided by (used in) investing activities	$	(2,090,272)	$	178,780
Cash Flows Provided By (Used In) Financing Activities:
Issuance of Series C Preferred stock, net of expenses	279		—
Issuance of common stock, net of expenses	371,425		1
Proceeds from repurchase agreements (including $14,360,617 and $13,324,607, respectively with BUCKLER)	26,294,795		23,129,610
(Continued)

ARMOUR Residential REIT, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	For the Three Months Ended March 31,
	2025		2024
Principal repayments on repurchase agreements (including $(13,537,234) and $(12,575,496), respectively with BUCKLER)	(24,503,333)		(23,364,903)
Series C Preferred stock dividends paid	(3,000)		(2,995)
Common stock dividends paid	(54,070)		(35,302)
Common stock repurchased	—		(1,344)
Net cash and cash equivalents and cash collateral posted to counterparties provided by (used in) financing activities	$	2,106,096	$	(274,933)
Net increase in cash and cash equivalents and cash collateral posted to counterparties	117,306		659
Cash and cash equivalents and cash collateral posted to counterparties - beginning of period	146,183		258,858
Cash and cash equivalents and cash collateral posted to counterparties - end of period	$	263,489	$	259,517
Supplemental Disclosure:
Cash paid during the period for interest	$	132,272	$	136,718
Non-Cash Investing Activities:
Receivable for unsettled sales	$	—	$	35,948
Payable for unsettled purchases	$	—	$	(199,683)

See consolidated financial statement notes (unaudited).

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)

Note 1 - Organization and Nature of Business Operations

References to "we," "us," "our," or the "Company" are to ARMOUR Residential REIT, Inc. ("ARMOUR") and its subsidiaries. References to "ACM" are to ARMOUR Capital Management LP, a Delaware limited partnership. ARMOUR owns a 10.8% equity interest in BUCKLER Securities LLC ("BUCKLER"). BUCKLER is a Delaware limited liability company and a FINRA-regulated broker-dealer, controlled by ACM. Refer to the Glossary of Terms for definitions of capitalized terms and abbreviations used in this report. U.S. dollar amounts are presented in thousands, except per share amounts or as otherwise noted.

ARMOUR is an externally managed Maryland corporation incorporated in 2008. The Company is managed by ACM, an investment advisor registered with the Securities and Exchange Commission (the "SEC"), (see Note 8 - Commitments and Contingencies and Note 13 - Related Party Transactions). We have elected to be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). Our qualification as a REIT depends on our ability to meet, on a continuing basis, various complex requirements under the Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels and the concentration of ownership of our capital stock. We believe that we are organized in conformity with the requirements for qualification as a REIT under the Code and our manner of operations enables us to meet the requirements for taxation as a REIT for federal income tax purposes. As a REIT, we will generally not be subject to federal income tax on the REIT taxable income that we currently distribute to our stockholders. If we fail to qualify as a REIT in any taxable year and do not qualify for certain statutory relief provisions, we will be subject to federal income tax at regular corporate rates. Even if we qualify as a REIT for U.S. federal income tax purposes, we may still be subject to some federal, state and local taxes on our income.

At March 31, 2025 and December 31, 2024, we invested in mortgage backed securities ("MBS"), issued or guaranteed by a United States ("U.S.") Government-sponsored entity ("GSE"), such as the Federal National Mortgage Association ("Fannie Mae"), the Federal Home Loan Mortgage Corporation ("Freddie Mac"), or a government agency such as Government National Mortgage Administration ("Ginnie Mae") (collectively, "Agency Securities"). Our Agency Securities consist primarily of fixed rate loans. Our charter permits us to invest in MBS backed by fixed rate, hybrid adjustable rate and adjustable rate home loans as well as unsecured notes and bonds issued by GSEs, U.S. Treasuries and money market instruments.

Note 2 - Basis of Presentation and Consolidation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the SEC. Accordingly, the condensed financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the calendar year ending December 31, 2025. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2024.

The unaudited consolidated financial statements include the accounts of ARMOUR Residential REIT, Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates affecting the accompanying consolidated financial statements include the valuation of MBS and derivative instruments.

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)

Note 3 - Summary of Significant Accounting Policies

Cash and cash equivalents

Cash and cash equivalents includes cash on deposit and highly liquid short-term investments with financial institutions with original maturities of three months or less. We may maintain deposits in federally insured financial institutions in excess of federally insured limits. However, management believes we are not exposed to significant credit risk due to the financial position and creditworthiness of the depository institutions in which those deposits are held.

Cash Collateral Posted To/By Counterparties

Cash collateral posted to/by counterparties represents cash posted by us to counterparties or posted by counterparties to us as collateral. Cash collateral posted to/by counterparties may include collateral for interest rate swap contracts, interest rate swaptions, basis swap contracts, futures contracts, repurchase agreements on our MBS and our Agency Securities purchased or sold on a to-be-announced basis ("TBA Agency Securities").

The interest earned or paid on cash collateral posted to/by counterparties is recorded in gain on derivatives, net in the consolidated statements of operations.

Investments in Securities, at Fair Value

Our investments in securities are generally classified as trading securities. Management determines the appropriate classifications of the securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date.

Trading Securities are reported at their estimated fair values with gains and losses included in Other Income (Loss) as a component of the consolidated statements of operations.

Receivables and Payables for Unsettled Sales and Purchases

We account for purchases and sales of securities on the trade date based on the specific identification method, including purchases and sales for forward settlement. Receivables and payables for unsettled trades represent the agreed trade price multiplied by the outstanding balance of the securities at the balance sheet date.

Accrued Interest Receivable and Payable

Accrued interest receivable includes interest accrued between payment dates on securities and interest on unsettled sales of securities. Accrued interest payable includes interest on unsettled purchases of securities and interest on repurchase agreements, net. At certain times, we may have interest payable on U.S. Treasury Securities sold short.

Repurchase Agreements, net

We finance the acquisition of the majority of our MBS through the use of repurchase agreements. Our repurchase agreements are secured by our MBS and bear interest rates that have moved in close relationship to the Federal Funds Effective Rate ("Federal Funds Rate") and the Secured Overnight Funding Rate ("SOFR"). Under these repurchase agreements, we sell MBS to a lender and agree to repurchase the same MBS in the future for a price that is higher than the original sales price. The difference between the sales price that we receive and the repurchase price that we pay represents interest paid to the lender, which accrues over the life of the repurchase agreement. A repurchase agreement operates as a financing arrangement under which we pledge our MBS as collateral to secure a loan which is equal in value to a specified percentage of the estimated fair value of the pledged collateral. We retain beneficial ownership of the pledged collateral. At the maturity of a repurchase agreement, we are required to repay the loan and concurrently receive back our pledged collateral from the lender or, with the consent of the lender, we may renew such agreement at the then prevailing interest rate. The repurchase agreements may require us to pledge additional assets to the lender in the event the estimated fair value of the existing pledged collateral declines or take back certain pledged collateral if values increase.

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)

In addition to the repurchase agreement financing discussed above, at certain times, we have entered into reverse repurchase agreements with certain of our repurchase agreement counterparties. Under a typical reverse repurchase agreement, we purchase U.S. Treasury Securities from a borrower in exchange for cash and agree to sell the same securities in the future in exchange for a price that is higher than the original purchase price. The difference between the purchase price originally paid and the sale price represents interest received from the borrower. Reverse repurchase agreement receivables and repurchase agreement liabilities are presented net when they meet certain criteria, including being with the same counterparty, being governed by the same master repurchase agreement ("MRA"), settlement through the same brokerage or clearing account and maturing on the same day. At March 31, 2025 and December 31, 2024, we had $512,750 ($461,250 of which were with BUCKLER) and $498,250 ($447,063 of which were with BUCKLER), respectively, in reverse repurchase agreements which are recorded in repurchase agreements, net on our consolidated balance sheet.

Obligations to Return Securities Received as Collateral, at Fair Value

We also sell to third parties the U.S. Treasury Securities received as collateral for reverse repurchase agreements and recognize the resulting obligation to return said U.S. Treasury Securities as a liability on our consolidated balance sheet. Interest is recorded on the repurchase agreements, reverse repurchase agreements and U.S. Treasury Securities on an accrual basis and presented as net interest expense. Both parties to the transaction have the right to make daily margin calls based on changes in the fair value of the collateral received and/or pledged. At March 31, 2025 and December 31, 2024, we had obligations to return securities received as collateral associated with our reverse repurchase agreements of $506,340 and $493,433, respectively.

Derivatives, at Fair Value

We recognize all derivatives individually as either assets or liabilities at fair value on our consolidated balance sheets. All changes in the fair values of our derivatives are reflected in our consolidated statements of operations. We designate derivatives as hedges for tax purposes and any unrealized derivative gains or losses would not affect our distributable net taxable income. These transactions may include interest rate swap contracts, interest rate swaptions, basis swap contracts and futures contracts.

We also may utilize forward contracts for the purchase or sale of TBA Agency Securities. We account for TBA Agency Securities as derivative instruments if it is reasonably possible that we will not take or make physical delivery of the Agency Security upon settlement of the contract. We account for TBA dollar roll transactions as a series of derivative transactions. We may also purchase and sell TBA Agency Securities as a means of investing in and financing Agency Securities (thereby increasing our “at risk” leverage) or as a means of disposing of or reducing our exposure to Agency Securities (thereby reducing our “at risk” leverage). We agree to purchase or sell, for future delivery, Agency Securities with certain principal and interest terms and certain types of collateral, but the particular Agency Securities to be delivered are not identified until shortly before the TBA settlement date. We may also choose, prior to settlement, to move the settlement of these securities out to a later date by entering into an offsetting short or long position (referred to as a “pair off”), net settling the paired off positions for cash, and simultaneously purchasing or selling a similar TBA Agency Security for a later settlement date. This transaction is commonly referred to as a “dollar roll.” When it is reasonably possible that we will pair off a TBA Agency Security, we account for that contract as a derivative.

Revenue Recognition

Interest income is earned and recognized on Agency Securities based on their unpaid principal amounts and their contractual terms. We record interest payable for interest received on securities sold during the period between the trade date and settlement date and interest receivable for purchases during the period between the trade date and settlement date. Premiums and discounts associated with the purchase of Multi-Family MBS, which are generally not subject to prepayment, are amortized or accreted into interest income over the contractual lives of the securities using a level yield method. Premiums and discounts associated with the purchase of other Agency Securities are amortized or accreted into interest income over the actual lives of the securities, reflecting actual prepayments as they occur. Purchase and sale transactions (including TBA Agency Securities) are recorded on the trade date, based on the specific identification method, to the extent it is probable that we will take or make timely physical delivery of the related securities.

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)

Interest income on U.S. Treasury Securities is recognized based on their unpaid principal amounts and their contractual terms. Recognition of interest income commences on the settlement date of the purchase transaction and continues through the settlement date of the sale transaction.

Note 4 - Fair Value of Financial Instruments

Our valuation techniques for financial instruments use observable and unobservable inputs. Observable inputs reflect readily obtainable data from third-party sources, while unobservable inputs reflect management’s market assumptions. The Accounting Standards Codification Topic No. 820, "Fair Value Measurement," classifies these inputs into the following hierarchy:

Level 1 Inputs - Quoted prices for identical instruments in active markets.

Level 2 Inputs - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Inputs - Prices determined using significant unobservable inputs. Unobservable inputs may be used in situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period). Unobservable inputs reflect management’s assumptions about the factors that market participants would use in pricing an asset or liability and would be based on the best information available.

The fair value of financial instruments is the amount received to sell an asset or the amount paid to transfer the liability in a transaction between willing market participants on the measurement date. At the beginning of each period, we assess the assets and liabilities that are measured at fair value on a recurring basis to determine if any transfers between levels in the fair value hierarchy are needed.

The following describes the valuation methodologies used for our assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy. Any transfers between levels are assumed to occur at the beginning of the reporting period.

Investments in Securities

Fair value for our investments in securities are based on obtaining a valuation for each security from third-party pricing services and/or dealer quotes. The third-party pricing services use common market pricing methods that may include pricing models that may incorporate such factors as coupons, prepayment speeds, spread to the Treasury curves and interest rate swap curves, duration, periodic and life caps and credit enhancement. If the fair value of a security is not available from the third-party pricing services or such data appears unreliable, we obtain pricing indications from up to three dealers who make markets in similar securities. Management reviews pricing used to ensure that current market conditions are properly reflected. This review includes, but is not limited to, comparisons of similar market transactions or alternative third-party pricing services, dealer pricing indications and comparisons to a third-party pricing model. Fair values obtained from the third-party pricing services for similar instruments are classified as Level 2 securities if the inputs to the pricing models used are consistent with the Level 2 definition. If quoted prices for a security are not reasonably available from the third-party pricing service, but dealer pricing indications are, the security will be classified as a Level 2 security. If neither is available, management will determine the fair value based on characteristics of the security that we receive from the issuer and based on available market information and classify it as a Level 3 security. U.S. Treasury Securities are classified as Level 1, as quoted unadjusted prices are available in active markets for identical assets.

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)

Derivatives

The fair values of our interest rate swap contracts, interest rate swaptions and basis swap contracts are valued using information provided by third-party pricing services that incorporate common market pricing methods that may include current interest rate curves, forward interest rate curves and market spreads to interest rate curves and are classified as Level 2. We estimate the fair value of TBA Agency Securities based on similar methods used to value our Agency Securities and they are classified as Level 2. Management compares the pricing information received to dealer quotes to ensure that the current market conditions are properly reflected. Futures contracts are traded on the Chicago Mercantile Exchange ("CME") which requires the use of daily mark-to-market collateral and they are classified as Level 1.

The following tables provide a summary of our assets and liabilities that are measured at fair value on a recurring basis at March 31, 2025 and December 31, 2024.


March 31, 2025	Level 1		Level 2		Level 3		Balance
Assets at Fair Value:
Agency Securities	$	—	$	14,442,377	$	—	$	14,442,377

Derivatives	$	—	$	724,827	$	—	$	724,827
Liabilities at Fair Value:
Obligations to return securities as collateral	$	—	$	506,340	$	—	$	506,340
Derivatives	$	45,088	$	26,209	$	—	$	71,297

December 31, 2024	Level 1		Level 2		Level 3		Balance
Assets at Fair Value:
Agency Securities	$	—	$	12,439,414	$	—	$	12,439,414

Derivatives	$	13,300	$	894,763	$	—	$	908,063
Liabilities at Fair Value:
Obligations to return securities as collateral	$	—	$	493,433	$	—	$	493,433
Derivatives	$	328	$	957	$	—	$	1,285

There were no transfers of assets or liabilities between the levels of the fair value hierarchy during the three months ended March 31, 2025 or for the year ended December 31, 2024.

Excluded from the tables above are financial instruments, including cash and cash equivalents, cash collateral posted to/by counterparties, receivables, payables (categorized as Level 1) and borrowings under repurchase agreements, net (categorized as Level 2), which are presented in our consolidated financial statements at cost, which approximates fair value at March 31, 2025 and December 31, 2024.

Note 5 - Investments in Securities

As of March 31, 2025 and December 31, 2024, our securities portfolio consisted of $14,442,377 and $12,439,414 of investment securities, at fair value, respectively. We also had $917,895 and $0 of TBA Agency Securities, at fair value, which were reported at net carrying value of $192 and $(908), respectively, at March 31, 2025 and December 31, 2024. TBA Securities are reported in Derivatives, at fair value on our consolidated balance sheets (see Note 7 - Derivatives). The net carrying value of our TBA Agency Securities represents the difference between the fair value of the underlying Agency Security in the TBA contract and the cost basis or the forward price to be paid or received for the underlying Agency Security.

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)

The tables below present the components of the carrying value and the unrealized gain or loss position of our investments in securities at March 31, 2025 and December 31, 2024.


March 31, 2025	Principal Amount		Amortized Cost		Gross Unrealized Loss		Gross Unrealized Gain		Fair Value

Agency Securities, trading	$	14,729,346	$	14,598,037	$	(220,575)	$	64,915	$	14,442,377


December 31, 2024

Agency Securities, trading	$	12,957,039	$	12,806,504	$	(370,044)	$	2,954	$	12,439,414

The following table summarizes the weighted average lives of our investments in securities at March 31, 2025 and December 31, 2024.


	March 31, 2025				December 31, 2024
Weighted Average Life	Fair Value		Amortized Cost		Fair Value		Amortized Cost
< 1 year	$	—	$	—	$	—	$	—
≥ 1 year and < 3 years	297,908		297,846		—		—
≥ 3 years and < 5 years	3,118,693		3,107,609		1,329,834		1,341,663
≥ 5 years	11,025,776		11,192,582		11,109,580		11,464,841
Totals	$	14,442,377	$	14,598,037	$	12,439,414	$	12,806,504

We use a third-party model to calculate the weighted average lives of our investments in securities. Weighted average life is calculated based on expectations for estimated prepayments for the underlying mortgage loans of our investments in securities. These estimated prepayments are based on assumptions such as interest rates, current and future home prices, housing policy and borrower incentives. The weighted average lives of our investments in securities at March 31, 2025 and December 31, 2024 in the table above are based upon market factors, assumptions, models and estimates from the third-party model and also incorporate management’s judgment and experience. The actual weighted average lives of these securities could be longer or shorter than estimated.

Note 6 - Repurchase Agreements, net

At March 31, 2025, we had active MRAs with 33 counterparties and had $12,490,792 in outstanding borrowings with 17 of those counterparties. At December 31, 2024, we had MRAs with 33 counterparties and had $10,713,830 in outstanding borrowings with 17 counterparties.

The following tables represent the contractual repricing regarding our repurchase agreements to finance MBS purchases at March 31, 2025 and December 31, 2024. Our repurchase agreements require excess collateral, known as a “haircut.” At March 31, 2025, the average gross haircut percentage was 2.74% compared to 2.77% at December 31, 2024. The haircut for our repurchase agreements vary by counterparty and therefore, the changes in the average haircut percentage will vary with the changes in our counterparty repurchase agreement balances.


March 31, 2025	Balance		Weighted Average Contractual Rate		Weighted Average Maturity in days

≤ 30 days (1)	$	6,776,203	4.47	%	16
> 30 days to ≤ 60 days	5,714,589		4.47	%	43


Total or Weighted Average	$	12,490,792	4.47	%	28

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)

(1)Net of reverse repurchase agreements of $512,750 ($461,250 of which were with BUCKLER). Obligations to return securities received as collateral of $506,340 associated with the reverse repurchase agreements are all due within 30 days.


December 31, 2024	Balance		Weighted Average Contractual Rate		Weighted Average Maturity in days

≤ 30 days (1)	$	10,466,630	4.72	%	17
> 30 days to ≤ 60 days	$	247,200	4.63	%	31
Total or Weighted Average	$	10,713,830	4.72	%	17

(1)Net of reverse repurchase agreements of $498,250 ($447,063 of which were with BUCKLER). Obligations to return securities received as collateral of $493,433 associated with the reverse repurchase agreements all matured in January 2025.

The following tables present information about the gross and net securities purchased and sold under our repurchase agreements, net on the accompanying consolidated balance sheets at March 31, 2025 and December 31, 2024.


March 31, 2025							Gross Amounts Not Offset
	Gross Amounts		Gross Amounts offset in the Consolidated Balance Sheet		Net Amounts Presented in the Consolidated Balance Sheet		Financial Instruments (1)		Cash Collateral		Total Net
Assets
Reverse Repurchase Agreements	$	512,750	$	(512,750)	$	—	$	—	$	—	$	—
Totals	$	512,750	$	(512,750)	$	—	$	—	$	—	$	—

Liabilities
Repurchase Agreements	$	(13,003,542)	$	512,750	$	(12,490,792)	$	12,490,792	$	—	$	—
Totals	$	(13,003,542)	$	512,750	$	(12,490,792)	$	12,490,792	$	—	$	—

(1)The fair value of securities pledged against our repurchase agreements was $13,709,328 at March 31, 2025.


December 31, 2024							Gross Amounts Not Offset
	Gross Amounts		Gross Amounts offset in the Consolidated Balance Sheet		Net Amounts Presented in the Consolidated Balance Sheet		Financial Instruments (1)		Cash Collateral		Total Net
Assets
Reverse Repurchase Agreements	$	498,250	$	(498,250)	$	—	$	—	$	—	$	—
Totals	$	498,250	$	(498,250)	$	—	$	—	$	—	$	—

Liabilities
Repurchase Agreements	$	(11,212,080)	$	498,250	$	(10,713,830)	$	10,713,830	$	—	$	—
Totals	$	(11,212,080)	$	498,250	$	(10,713,830)	$	10,713,830	$	—	$	—

(1)The fair value of securities pledged against our repurchase agreements was $11,796,858 at December 31, 2024.

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)

Our repurchase agreements require that we maintain adequate pledged collateral. A decline in the value of the MBS pledged as collateral for borrowings under repurchase agreements could result in the counterparties demanding additional collateral pledges or liquidation of some of the existing collateral to reduce borrowing levels. We manage this risk by maintaining an adequate balance of available cash and unpledged securities. An event of default or termination event under the standard MRA would give our counterparty the option to terminate all repurchase transactions existing with us and require any amount due to be payable immediately. In addition, certain of our MRAs contain a restriction that prohibits our leverage from exceeding twelve times our stockholders’ equity as well as termination events in the case of significant reductions in equity capital. We also may receive cash or securities as collateral from our derivative counterparties which we may use as additional collateral for repurchase agreements. Certain interest rate swap contracts provide for cross collateralization and cross default with repurchase agreements and other contracts with the same counterparty.

At each of March 31, 2025 and December 31, 2024, BUCKLER accounted for 45.7% of our aggregate borrowings and had an amount at risk of 7.4% and 8.0%, respectively, of our total stockholders' equity with a weighted average maturity of 30 days and 15 days, respectively, on repurchase agreements, net (see Note 13 - Related Party Transactions).

In addition, at March 31, 2025, we had 4 repurchase agreement counterparties that individually accounted for over 5% of our aggregate borrowings. In total, these counterparties accounted for approximately 23.0% of our repurchase agreement borrowings outstanding at March 31, 2025. At December 31, 2024, we had 3 repurchase agreement counterparties that individually accounted for over 5% of our aggregate borrowings. In total, these counterparties accounted for 19.9% of our repurchase agreement borrowings at December 31, 2024.

Note 7 - Derivatives

We enter into derivative transactions to manage our interest rate risk and agency mortgage rate exposures. We have agreements with our derivative counterparties that provide for the posting of collateral based on the fair values of our derivatives. Through this margin process, either we or our counterparties may be required to pledge cash or securities as collateral. Collateral requirements vary by counterparty and change over time based on the fair value, notional amount and remaining term of the contracts. Certain contracts provide for cross collateralization and cross default with repurchase agreements and other contracts with the same counterparty.

Interest rate swap contracts are designed to lock in long-term average funding costs for repurchase agreements associated with our assets in an attempt to maximize earnings from our assets. Such transactions are based on assumptions about prepayments which, if not realized, will cause transaction results to differ from expectations. Interest rate swaptions generally provide us the option to enter into an interest rate swap agreement at a certain point of time in the future with a predetermined notional amount, stated term and stated rate of interest in the fixed leg and interest rate index on the floating leg. Basis swap contracts allow us to exchange one floating interest rate basis for another, thereby allowing us to diversify our floating rate basis exposures.

All of our interest rate contracts have floating leg interest rate indexes of either the Federal Funds Rate or SOFR. The Federal Funds Rate is published daily by the New York Federal Reserve and is a measure of unsecured borrowings by depository institutions from other depository institutions or GSEs. SOFR is published daily by the New York Federal Reserve and is the average overnight rate for borrowings secured by U.S. Treasury securities. We enter into interest rate swap contracts either directly with a counterparty (a “bilateral” contract) or through a centrally-cleared swap contract. In a bilateral contract, we exchange margin collateral with the counterparty and have exposure to counterparty risk. In a centrally-cleared contract, we exchange margin collateral with a Futures Clearing Merchant, with whom we have opened an account. Our counterparty risk is limited to the clearing exchange itself. All of our centrally-cleared swaps are cleared by the CME. In general, centrally-cleared interest rate swap contracts require us to post higher initial margin than bilateral contracts.

Futures contracts are traded on the CME which requires the use of daily mark-to-market collateral and the CME provides substantial credit support. The collateral requirements of the CME require us to pledge assets under a bi-lateral margin arrangement, including either cash or Agency Securities and these requirements may vary and change over time based on the market value, notional amount and remaining term of the futures contracts. In the event we are unable to

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)

meet a margin call under one of our futures contracts, the counterparty to such agreement may have the option to terminate or close-out all of the outstanding futures contracts with us. In addition, any close-out amount due to the counterparty upon termination of the counterparty’s transactions would be immediately payable by us pursuant to the applicable agreement.

TBA Agency Securities are forward contracts for the purchase (“long position”) or sale (“short position”) of Agency Securities at a predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date. The specific Agency Securities delivered into the contract upon the settlement date, published each month by the Securities Industry and Financial Markets Association, are not known at the time of the transaction. We may enter into TBA Agency Securities as a means of hedging against short-term changes in interest rates. We may also enter into TBA Agency Securities as a means of acquiring or disposing of Agency Securities and we may from time to time utilize TBA dollar roll transactions to finance Agency Security purchases. We estimate the fair value of TBA Agency Securities based on similar methods used to value our Agency Securities.

We have netting arrangements in place with all derivative counterparties pursuant to standard documentation developed by ISDA. We are also required to post or hold cash collateral based upon the net underlying market value of our open positions with the counterparty. A decline in the value of the open positions with the counterparty could result in the counterparties demanding additional collateral pledges or liquidation of some of the existing collateral to reduce borrowing levels. We manage this risk by maintaining an adequate balance of available cash and unpledged securities. An event of default or termination event under the standard ISDA agreement would give our counterparty to the applicable agreement the right to terminate the agreement. In addition, certain of our ISDA agreements contain a restriction that prohibits our leverage from exceeding twelve times our stockholders’ equity as well as termination events in the case of significant reductions in equity capital.

The following tables present information about the potential effects of netting our derivatives if we were to offset the assets and liabilities on the accompanying consolidated balance sheets. We currently present these financial instruments at their gross amounts and they are included in Derivatives, at fair value on the accompanying consolidated balance sheets at March 31, 2025 and December 31, 2024.


			Gross Amounts Not Offset
Assets	Gross Amounts(1)		Financial Instruments		Cash Collateral		Total Net
March 31, 2025
Interest rate swap contracts (2)	$	724,324	$	(25,898)	$	(528,602)	$	169,824
Futures contracts	—		(45,088)		87,071		41,983
TBA Agency Securities	503		(311)		447		639
Totals	$	724,827	$	(71,297)	$	(441,084)	$	212,446

December 31, 2024
Interest rate swap contracts (2)	$	894,714	$	—	$	(781,923)	$	112,791
Futures contracts	13,300		(328)		24,702		37,674
TBA Agency Securities	49		(957)		1,578		670
Totals	$	908,063	$	(1,285)	$	(755,643)	$	151,135

(1)See Note 4 - Fair Value of Financial Instruments for additional discussion.

(2)Includes $11,745 and $47,045 of centrally-cleared interest rate swap contracts, respectively.

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)


			Gross Amounts Not Offset
Liabilities	Gross Amounts(1)		Financial Instruments		Cash Collateral		Total Net
March 31, 2025
Interest rate swap contracts (2)	$	(25,898)	$	25,898	$	—	$	—
Futures contracts	(45,088)		45,088		—		—
TBA Agency Securities	(311)		311		—		—
Totals	$	(71,297)	$	71,297	$	—	$	—

December 31, 2024

Futures contracts	$	(328)	$	328	$	—	$	—
TBA Agency Securities	(957)		957		—		—
Totals	$	(1,285)	$	1,285	$	—	$	—

(1)See Note 4 - Fair Value of Financial Instruments for additional discussion.

(2)Includes $(25,898) of centrally-cleared interest rate swap contracts, respectively.

The following table represents the information regarding our derivatives which are included in Gain on derivatives, net in the accompanying consolidated statements of operations for the three months ended March 31, 2025 and March 31, 2024.


		Income (Loss) Recognized
	For the Three Months Ended March 31,
Derivatives			2025		2024
Interest rate swap contracts (1)			$	(138,916)	$	160,709
Futures contracts			(61,509)		—
TBA Agency Securities			9,207		(4,261)
Total Gain (Loss) on Derivatives, net			$	(191,218)	$	156,448

(1)Includes $(70,758) and $25,046 of centrally-cleared interest rate swap contract income (loss) for the three months ended March 31, 2025 and March 31, 2024, respectively.

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)

The following tables present information about our derivatives at March 31, 2025 and December 31, 2024. We did not have any TBA Agency Securities at December 31, 2024.


Interest Rate Swap Contracts (1)	Notional Amount		Weighted Average Remaining Term (Months)	Weighted Average Rate
March 31, 2025
< 3 years	$	2,305,000	27	2.19	%
≥ 3 years and < 5 years	604,000		55	0.49	%
≥ 5 years and < 7 years	3,048,000		70	0.93	%
≥ 7 years	2,425,000		109	3.53	%
Total or Weighted Average (2)	$	8,382,000	68	2.00	%

December 31, 2024
< 3 years	$	1,255,000	24	0.60	%
≥ 3 years and < 5 years	604,000		58	0.49	%
≥ 5 years and < 7 years	2,648,000		71	0.85	%
≥ 7 years	2,725,000		108	3.20	%
Total or Weighted Average (3)	$	7,232,000	76	1.66	%

(1)Pay Fixed/Receive Variable.

(2)Of this amount, $3,375,000 notional are SOFR based swaps, the last of which matures in 2035; and $5,007,000 notional are Federal Funds based swaps, the last of which matures in 2032. Of this amount, $3,175,000 notional are centrally-cleared interest rate swap contracts, the last of which matures in 2035.

(3)Of this amount, $2,225,000 notional are SOFR based swaps, the last of which matures in 2034; and $5,007,000 notional are Federal Funds based swaps, the last of which matures in 2032. Of this amount, $2,025,000 notional are centrally-cleared interest rate swap contracts, the last of which matures in 2034.


TBA Agency Securities	Notional Amount		Cost Basis		Fair Value
March 31, 2025




30 Year Long, 6.0%	$	600,000	$	608,734	$	608,649
30 Year Long, 6.5%	300,000		308,969		309,246

Total TBA Agency Securities	$	900,000	$	917,703	$	917,895

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)

Note 8 - Commitments and Contingencies

Management

The Company is managed by ACM, pursuant to a management agreement (see also Note 13 - Related Party Transactions). The management agreement entitles ACM to receive management fees payable monthly in arrears. Currently, the monthly management fee is 1/12th of the sum of (a) 1.5% of gross equity raised up to $1.0 billion plus (b) 0.75% of gross equity raised in excess of $1.0 billion. Gross equity raised includes the total amounts of paid in capital relating to both our common and preferred stock, before deduction of brokerage commissions and other costs of capital raising. Amounts paid to stockholders to repurchase stock, before deduction of brokerage commissions and costs, reduces gross equity raised. Dividends specifically designated by the Board as liquidation dividends will reduce the amount of gross equity raised. To date, the Board has not so designated any of the dividends paid by the Company. Realized and unrealized gains and losses do not affect the amount of gross equity raised. At March 31, 2025, the effective management fee was 0.90% prior to management fees waived, and 0.87% after management fees waived, based on gross equity raised of $4,873,845.

During each of the three months ended March 31, 2025, and March 31, 2024, ACM voluntarily waived management fees of $1,650. ACM is currently waiving $550 per month of its contractual management fee until ACM provides further notice to ARMOUR. The monthly management fees are not calculated based on the performance of our assets. Accordingly, the payment of our monthly management fees may not decline in the event of a decline in our earnings and may cause us to incur losses. We are also responsible for any costs and expenses that ACM incurs solely on our behalf other than the various overhead expenses specified in the terms of the management agreement.

ACM may terminate this waiver by providing notice to ARMOUR on or before the 25th day of the preceding month. This waiver does not constitute a waiver of any other amounts due to ACM from ARMOUR under the management agreement or otherwise, including but not limited to any expense reimbursements, any amounts calculated by reference to the contractual Base Management Fee, or any awards under the 2009 Stock Incentive Plan as amended (the “Plan”).

The contractual term of the management agreement extends through December 31, 2029. Based on the management fee base, gross equity raised, as of March 31, 2025, the Company’s contractual management fee commitments, prior to management fees waived, are:


Year	Contractual Management Fee
Remainder of 2025	33,040
2026	44,054
2027	44,054
2028	44,054
2029	44,054
Total	$	209,256

The Company cannot voluntarily terminate the management agreement without cause before the expiration of its contractual term. If the management agreement is terminated in connection with a liquidation of the Company or certain business combination transactions, the Company is obliged to pay ACM a termination fee equal to 4 times the contractual management fee (before any waiver) for the preceding 12 months.

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)

Indemnifications and Litigation

We enter into certain contracts that contain a variety of indemnifications, principally with ACM and underwriters, against third-party claims for errors and omissions in connection with their services to us. We have not incurred any costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the estimated fair value of these agreements, as well as the maximum amount attributable to past events, is not material. Accordingly, we have no liabilities recorded for these agreements at March 31, 2025 and December 31, 2024.

Note 9 - Stock Based Compensation

We adopted the Plan to attract, retain and reward directors and other persons who provide services to us in the course of operations. The Plan authorizes the Board to grant awards including common stock, restricted shares of common stock (“RSUs”), stock options, performance shares, performance units, stock appreciation rights and other equity and cash-based awards (collectively, “Awards”), subject to terms as provided in the Plan. At March 31, 2025, there were 228 shares available for future issuance under the Plan.

Transactions related to awards for the three months ended March 31, 2025 are summarized below:


	March 31, 2025
	Number of Awards	Weighted Average Grant Date Fair Value per Award
Unvested RSU Awards Outstanding beginning of period	170	$	36.38

Vested	(12)	$	39.98

Unvested RSU Awards Outstanding end of period	158	$	36.09

At March 31, 2025, there was approximately $5,691 of unvested stock based compensation related to the Awards (based on a weighted grant date price of $36.09 per share), which we expect to recognize as an expense as follows: for the remainder of 2025 an expense of $1,480, in 2026 an expense of $1,793, and thereafter an expense of $2,418. Our policy is to account for forfeitures as they occur. We also pay each of our non-executive Board members quarterly fees of $33, which are payable in cash, common stock, RSUs or a combination of common stock, RSUs and cash at the option of the director. Non-executive Board members have the option to participate in the Company's Non-Management Director Compensation and Deferral Program (the "Deferral Program"). The Deferral Program permits non-executive Board members to elect to receive either common stock or RSUs or a combination of common stock and RSUs at the option of the director, instead of all or part of their quarterly cash compensation and/or all or part of their committee and chairperson cash retainers.

Note 10 - Stockholders' Equity

The following table presents the components of cumulative distributions to stockholders at March 31, 2025 and December 31, 2024.


Cumulative Distributions to Stockholders	March 31, 2025		December 31, 2024
Preferred dividends	$	171,791	$	168,791
Common stock dividends	2,268,830		2,214,748
Totals	$	2,440,621	$	2,383,539

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)

Preferred Stock

At March 31, 2025 and December 31, 2024, we were authorized to issue up to 50,000 shares of preferred stock, par value $0.001 per share, with such designations, voting and other rights and preferences as may be determined from time to time by our Board of Directors (“Board”) or a committee thereof. At March 31, 2025, 10,000 shares of the Company’s authorized preferred stock, par value $0.001 per share were designated as shares of 7.00% Series C Cumulative Redeemable Preferred Stock ("Series C Preferred Stock") with the powers, designations, preferences and other rights as set forth therein and a total of 40,000 shares of our authorized preferred stock remained available for designation as future series.

At March 31, 2025 and December 31, 2024, we had 6,864 and 6,847 shares of Series C Preferred Stock issued and outstanding with a par value of $0.001 per share and a liquidation preference of $25.00 per share, or $171,600 and $171,175 in the aggregate, respectively. At March 31, 2025 and December 31, 2024, there were no accrued or unpaid dividends on the Series C Preferred Stock. Shares designated as Series C Preferred Stock but unissued, which are available under the Preferred C ATM Sales Agreement, totaled 3,136 and 3,153 at March 31, 2025 and December 31, 2024.

On January 29, 2020, the Company entered into an Equity Sales Agreement (the “Preferred C ATM Sales Agreement”) with B. Riley Securities, Inc. (formerly B. Riley FBR, Inc.) and BUCKLER, as sales agents (individually and collectively, the “Agents"), and ACM, pursuant to which the Company may offer and sell, over a period of time and from time to time, through one or more of the Agents, as the Company’s agents, up to 6,550 of Series C Preferred Stock. The Preferred C ATM Sales Agreement relates to a proposed “at-the-market” offering program. Under the Preferred C ATM Sales Agreement, we will pay the agent designated to sell our shares an aggregate commission of up to 2.0% of the gross sales price per share of our Series C Preferred Stock sold through the designated agent under the Preferred C ATM Sales Agreement. On June 20, 2024, the Preferred C ATM Sales Agreement was amended to add BTIG, LLC, as a sales agent. During the three months ended March 31, 2025, we sold 17 shares under this agreement for proceeds of $279, net of issuance costs and commissions of approximately $106.

Preferred Stock Repurchase Program

On July 26, 2022, the Board authorized a repurchase program of up to an aggregate of 2,000 shares of the Company’s outstanding Series C Preferred Stock ("Series C Preferred Stock Repurchase Program"). Under the Series C Preferred Stock Repurchase Program, shares may be purchased in the open market, including block trades, through privately negotiated transactions, or pursuant to a trading plan separately adopted in the future. The timing, manner, price and amount of any repurchases will be at our discretion, in consultation with the Pricing Committee of the Board, subject to the requirements of the Exchange Act and related rules. We are not required to repurchase any shares under the Series C Preferred Stock Repurchase Program and it may be modified, suspended or terminated at any time for any reason. We do not intend to purchase shares from our Board or other affiliates. Under Maryland law, such repurchased shares are treated as authorized but unissued. We did not repurchase any shares under the Series C Preferred Stock Repurchase Program during the three months ended March 31, 2025.

Common Stock

At March 31, 2025 and December 31, 2024, we were authorized to issue up to 125,000 shares of common stock, par value $0.001 per share, with such designations, voting and other rights and preferences as may be determined from time to time by our Board. We had 82,416 and 62,412 shares of common stock issued and outstanding at March 31, 2025 and December 31, 2024, respectively.

On July 26, 2023 we entered into an Equity Sales Agreement (the “2023 Common stock ATM Sales Agreement”), with BUCKLER, JonesTrading Institutional Services LLC, Citizens JMP Securities, LLC (formerly JMP Securities LLC), Ladenburg Thalmann & Co. Inc. and B. Riley Securities, Inc., as sales agents, relating to the shares of our common stock. In accordance with the terms of the 2023 Common Stock ATM Sales agreement, we may offer and sell over a period of time and from time to time, up to 15,000 shares of our common stock, par value $0.001 per share. On October 25, 2023, the 2023 Common stock ATM Sales Agreement was amended to add StockBlock Securities LLC, as a sales agent and on June 20, 2024 it was

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)

further amended to add BTIG, LLC as a sales agent. On August 23, 2024, the 2023 Common stock ATM Sales Agreement was amended to increase by 25,000 the number of shares of our common stock that may be offered and sold under the 2023 Common stock ATM Sales Agreement. On September 20, 2024, the 2023 Common stock ATM Sales Agreement was further amended to add Janney Montgomery Scott LLC, as a sales agent. On February 13, 2025, the 2023 Common stock ATM Sales Agreement was further amended to increase by 15,000 the number of shares of our common stock that may be offered and sold under the 2023 Common stock ATM Sales Agreement.

During the three months ended March 31, 2025, we sold 19,992 common shares under this agreement for proceeds of $371,412, net of issuance costs and commissions of approximately $3,143. See Note 13 - Related Party Transactions for discussion of additional transactions with BUCKLER.

During the three months ended March 31, 2025, we issued 1 common shares under our Common Stock Dividend Reinvestment Program ("DRIP") for net proceeds of $25.

Common Stock Repurchase Program

At March 31, 2025 and December 31, 2024, there were 2,217 authorized shares remaining under the Company's common stock repurchase authorization (the "Common Stock Repurchase Program"). Under the Common Stock Repurchase Program, shares may be purchased in the open market, including block trades, through privately negotiated transactions, or pursuant to a trading plan separately adopted in the future. The timing, manner, price and amount of any repurchases will be at our discretion, subject to the requirements of the Exchange Act, and related rules. We are not required to repurchase any shares under the Common Stock Repurchase Program and it may be modified, suspended or terminated at any time for any reason. We do not intend to purchase shares from our Board or other affiliates. Under Maryland law, such repurchased shares are treated as authorized but unissued. In the second quarter of 2025, through April 8, 2025, we repurchased (667) common shares under this authorization for a cost of $(10,031) with BUCKLER. See Note 13 - Related Party Transactions for discussion of additional transactions with BUCKLER.

Equity Capital Activities

The following tables present our equity transactions for the three months ended March 31, 2025 and for the year ended December 31, 2024.


Transaction Type	Completion Date	Number of Shares	Per Share price (1)		Net Proceeds (costs)
March 31, 2025
Preferred C ATM Sales Agreement	January 22, 2025 - January 23, 2025	17	$	16.08	$	279
2023 Common stock ATM Sales Agreement	January 2, 2025 - March 19, 2025	19,992	$	18.58	$	371,412
DRIP shares issued	January 27, 2025 - March 27, 2025	1	$	18.47	$	25


December 31, 2024
2023 Common stock ATM Sales Agreement	July 26, 2024 - December 27, 2024	13,619	$	19.50	$	265,614
DRIP shares issued	January 25, 2024 - December 30, 2024	5	$	18.95	$	86
Common stock repurchased	January 22, 2024 - January 25, 2024	(70)	$	19.31	$	(1,344)

(1)Weighted average price

Dividends

A cash dividend of $0.14583 per outstanding share of Series C Preferred Stock, or $1,001 in the aggregate, will be paid on April 28, 2025, to holders of record on April 15, 2025. We have also declared cash dividends of $0.14583 per

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)

outstanding share of Series C Preferred Stock payable May 27, 2025, to holders of record on May 15, 2025, and payable June 27, 2025, to holders of record on June 15, 2025.

A cash dividend of $0.24 per outstanding common share, or $19,661 in the aggregate, will be paid on April 29, 2025, to holders of record on April 15, 2025. We have also declared a cash dividend of $0.24 per outstanding common share payable May 29, 2025, to holders of record on May 15, 2025.

The following table presents our Series C Preferred Stock dividend transactions for the three months ended March 31, 2025.


Record Date	Payment Date	Rate per Series C Preferred Share		Aggregate amount paid to holders of record
January 15, 2025	January 27, 2025	$	0.14583	$	998
February 15, 2025	February 27, 2025	$	0.14583	1,001
March 15, 2025	March 27, 2025	$	0.14583	1,001






Total dividends paid				$	3,000

The following table presents our common stock dividend transactions for the three months ended March 31, 2025.


Record Date	Payment Date	Rate per common share		Aggregate amount paid to holders of record
January 15, 2025	January 30, 2025	$	0.24	$	16,009
February 14, 2025	February 27, 2025	$	0.24	18,384
March 17, 2025	March 27, 2025	$	0.24	19,689






Total dividends paid				$	54,082

Note 11 - Net Income per Common Share

The following table presents a reconciliation of net income and the shares used in calculating weighted average basic and diluted earnings per common share for the three months ended March 31, 2025 and March 31, 2024.


	For the Three Months Ended March 31,
		2025		2024
Net Income		$	27,332	$	14,516
Less: Preferred dividends		(3,000)		(2,995)
Net Income available to common stockholders		$	24,332	$	11,521

Weighted average common shares outstanding – basic		75,222		48,770
Add: Effect of dilutive non-vested awards, assumed vested		158		218
Weighted average common shares outstanding – diluted		75,380		48,988

Net Income per share available to common stockholders - basic		0.32		0.24
Net Income per share available to common stockholders - diluted		0.32		0.24

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)

Note 12 - Income Taxes

The following table reconciles our GAAP net income to estimated REIT taxable income for the three months ended March 31, 2025 and March 31, 2024.


	For the Three Months Ended March 31,
		2025		2024
GAAP net income		$	27,332	$	14,516
Book to tax differences:
TRS (income) loss		(71)		41

Agency Securities		(208,257)		137,749
U.S. Treasury Securities		12,906		(10,922)
Changes in interest rate contracts		234,023		(97,737)

Amortization of deferred hedging costs		(16,334)		(21,378)
Amortization of deferred Treasury Future gains		3,087		4,597
Other		114		644
Estimated REIT taxable income		$	52,800	$	27,510

Interest rate contracts and futures contracts are treated as hedging transactions for U.S. federal income tax purposes. Unrealized gains and losses on open interest rate contracts are not included in the determination of REIT taxable income. Realized gains and losses on interest rate contracts and futures contracts terminated before their maturity are deferred and amortized over the remainder of the original term of the contract for REIT taxable income. At March 31, 2025 and December 31, 2024, we had approximately $(192,655) and $(189,450), respectively, of net deductible expense relating to previously terminated interest rate swap and treasury futures/shorts contracts amortizing through the year 2035 and 2034, respectively. At March 31, 2025, we had $257,341 of net operating loss carryforwards available for use indefinitely.


Net capital losses realized	Amount		Available to offset capital gains through


2021	$	(15,606)	2026
2022	$	(732,477)	2027
2023	$	(472,002)	2028
2024	$	(46,823)	2029

The Company's subsidiary, ARMOUR TRS, Inc. has made an election as a taxable REIT subsidiary (“TRS”). As such, the TRS is taxable as a domestic C corporation and subject to federal, state, and local income taxes based upon its taxable income.

The aggregate tax basis of our assets and liabilities was greater than our total Stockholders’ Equity at March 31, 2025 by approximately $234,872, or approximately $2.85 per common share (based on the 82,416 common shares then outstanding). State and federal tax returns for the years 2022 and later remain open and are subject to possible examination.

We are required and intend to timely distribute substantially all of our REIT taxable income in order to maintain our REIT status under the Code. Total dividend payments to stockholders for the three months ended March 31, 2025 and March 31, 2024 were $57,082 and $38,307, respectively.

Our estimated REIT taxable income and dividend requirements to maintain our REIT status are determined on an annual basis. Dividends paid in excess of current tax earnings and profits for the year will generally not be taxable to common stockholders.

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)

Our management is responsible for determining whether tax positions taken by us are more likely than not to be sustained on their merits. We had no material unrecognized tax benefits or material uncertain tax positions for any periods presented.

Note 13 - Related Party Transactions

ACM

The Company is managed by ACM, pursuant to a management agreement. All of our executive officers are also employees of ACM. ACM manages our day-to-day operations, subject to the direction and oversight of the Board. The management agreement runs through December 31, 2029 and is thereafter automatically renewed for an additional five-year term unless terminated under certain circumstances. Either party must provide 180 days prior written notice of any such termination.

Under the terms of the management agreement, ACM is responsible for costs incident to the performance of its duties, such as compensation of its employees and various overhead expenses. ACM is responsible for the following primary roles:

•Advising us with respect to, arranging for and managing the acquisition, financing, management and disposition of, elements of our investment portfolio;

•Evaluating the duration risk and prepayment risk within the investment portfolio and arranging borrowing and hedging strategies;

•Coordinating capital raising activities;

•Advising us on the formulation and implementation of operating strategies and policies, arranging for the acquisition of assets, monitoring the performance of those assets and providing administrative and managerial services in connection with our day-to-day operations; and

•Providing executive and administrative personnel, office space and other appropriate services required in rendering management services to us.

ACM has voluntarily waived a portion of its contractual management fee. ACM is currently waiving $550 per month of its contractual management fee until ACM provides further notice to ARMOUR (see Note 8 - Commitments and Contingencies).

The following table reconciles the fees incurred in accordance with the management agreement for the three months ended March 31, 2025 and March 31, 2024.


	For the Three Months Ended March 31,
		2025		2024
ARMOUR management fees		$	10,754	$	9,807
Less management fees waived		(1,650)		(1,650)
Total management fee expense		$	9,104	$	8,157

We are required to take actions as may be reasonably required to permit and enable ACM to carry out its duties and obligations. We are also responsible for any costs and expenses that ACM incurred solely on our behalf other than the various overhead expenses, which are included in Other Operating expenses in the consolidated statements of operations specified in the terms of the management agreement. For the three months ended March 31, 2025 and March 31, 2024, we reimbursed ACM $1,355 and $38, respectively, for other expenses incurred on our behalf. In 2020, 2021 and 2023, we elected to grant restricted stock unit awards to our executive officers and other ACM employees that generally vest over 5 years. In 2020, 2021 and 2023, we elected to grant RSUs to the Board. We recognized stock based compensation expense of $61 and $93 for the three months ended March 31, 2025 and March 31, 2024, respectively.

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)

BUCKLER

At March 31, 2025, we held an ownership interest in BUCKLER of 10.8%, which is included in prepaid and other assets in our consolidated balance sheet and is accounted for using the equity method as BUCKLER maintains specific ownership accounts. Based on our evaluation of certain protective rights and the nature of the on demand subordinated loan agreement, we have determined that we do not have the power to direct the day-to-day activities that most significantly impact BUCKLER's economic performance and additionally do not have the obligation to absorb losses or the right to receive benefits that could be significant to BUCKLER. As a result, we do not have a controlling financial interest, and thus, are not BUCKLER's primary beneficiary and do not consolidate BUCKLER.

The value of the investment was $549 at March 31, 2025 and $453 at December 31, 2024, reflecting our total investment plus our share of BUCKLER’s operating results, in accordance with the terms of the operating agreement of BUCKLER that our independent directors negotiated. The primary purpose of our investment in BUCKLER is to facilitate our access to repurchase financing.

Our operating agreement with BUCKLER contains certain provisions to benefit and protect the Company, including (1) sharing in any (a) defined profits realized by BUCKLER from the anticipated financing spreads resulting from repurchase financing facilitated by BUCKLER, and (b) distributions from BUCKLER to its members of net cash receipts, and (2) the realization of anticipated savings from reduced clearing, brokerage, trading and administrative fees. In addition, the independent directors of the Company must approve, in their sole discretion, any third-party business engaged by BUCKLER and may, under certain circumstances, cause BUCKLER to wind up and dissolve and promptly return certain subordinated loans we provide to BUCKLER as regulatory capital (as described more fully below). For each of the three months ended March 31, 2025 and March 31, 2024, we earned $0 from BUCKLER as an allocated share of Financing Gross Profit for a reduction of interest on repurchase agreements charged to the Company. Financing Gross Profit is defined in the operating agreement.

Effective March 20, 2023, the Company committed to provide on demand a subordinated loan agreement to BUCKLER in an amount up to $200,000, this commitment extends through March 20, 2026. Effective February 28, 2025, the Company committed to an additional on demand subordinated loan agreement in the amount of $50,000 that extends through February 28, 2028. These commitments are collateralized by mortgage backed and/or U.S. Treasury Securities owned by the Company and pledged to BUCKLER. They are treated by BUCKLER currently as capital for regulatory purposes and BUCKLER may pledge the securities to secure its own borrowings.

On February 22, 2021, the Company entered into an uncommitted revolving credit facility and security agreement with BUCKLER. Under the terms of the facility, the Company may, in its sole and absolute discretion, provide drawings to BUCKLER of up to $50,000. Interest on drawings is payable monthly at the Federal Reserve Bank of New York SOFR plus 2% per annum. To date, BUCKLER has not yet used the facility and therefore no interest expense was payable for the three months ended March 31, 2025.

With BUCKLER as the sales agent, under the 2023 Common stock ATM Sales Agreement, we sold 9,792 common shares for proceeds of $183,200, net of issuance costs and commissions of approximately $1,384 during the three months ended March 31, 2025.

In the second quarter of 2025, through April 8, 2025, with BUCKLER as the agent, we repurchased (667) common shares under the current repurchase authorization which cost $(10,031), including commissions of approximately $75, to BUCKLER (see Note 10 - Stockholders' Equity).

Note 14 - Segment Reporting

We operate in the U.S. and invest primarily in fixed rate residential, adjustable rate and hybrid adjustable rate residential MBS issued or guaranteed by U.S. GSEs or guaranteed by Ginnie Mae. From time to time, we may also invest in U.S. Treasury Securities and money market instruments. Resources and financial performance are assessed by our CEO and Co-Chief Investment Officers who collectively are the Company’s Chief Operating Decision Maker (“CODM”), based on total

ARMOUR Residential REIT, Inc.

CONSOLIDATED FINANCIAL STATEMENT NOTES (UNAUDITED)

(in thousands, except per share)

assets reported on the consolidated balance sheets and net income as reported on the consolidated statements of operations. Our CODM views consolidated expense information related to interest expense, management fees, compensation and other operating expenses as disclosed on our consolidated statement of operations as significant. The CODM manages our investment portfolio as a whole and decisions regarding investments and hedging are made collectively based on the inputs above. Accordingly, the Company consists of a single operating and reportable segment and the consolidated financial statements and notes thereto are presented as a single reportable segment. Since the Company operates in a single segment, the segment information is consistent with the consolidated financial statements. Therefore, no reconciliation is necessary.

Note 15 - Subsequent Events

Except as disclosed above in Note 10 and Note 13, no subsequent events were identified through the date of filing this Quarterly Report on Form 10-Q.

Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations

ARMOUR Residential REIT, Inc.

References to “we,” “us,” “our,” or the “Company” are to ARMOUR Residential REIT, Inc. (“ARMOUR”) and its subsidiaries. References to “ACM” are to ARMOUR Capital Management LP, a Delaware limited partnership. ARMOUR owns a 10.8% equity interest in BUCKLER Securities LLC ("BUCKLER"), a Delaware limited liability company and a FINRA-regulated broker-dealer, controlled by ACM. Refer to the Glossary of Terms for definitions of capitalized terms and abbreviations used in this report.

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. U.S. dollar amounts are presented in thousands, except per share amounts or as otherwise noted.

Overview

We are a Maryland corporation managed by ACM, an investment advisor registered with the SEC (see Note 8 and Note 13 to the consolidated financial statements). We have elected to be taxed as a REIT under the Code. We believe that we are organized in conformity with the requirements for qualification as a REIT under the Code and our manner of operations enables us to meet the requirements for taxation as a REIT for federal income tax purposes.

ARMOUR brings private capital into the mortgage markets to support home ownership for a broad and diverse spectrum of Americans. We seek to create stockholder value through thoughtful investment and risk management of a leveraged and diversified portfolio of MBS. We rely on the decades of experience of our management team for (i) MBS securities portfolio analysis and selection, (ii) access to equity capital and repurchase financing on potentially attractive rates and terms, and (iii) hedging and liquidity strategies to moderate interest rate and MBS price risk. We prioritize maintaining common share dividends appropriate for the intermediate term rather than focusing on short-term market fluctuations.

We are deeply committed to implementing sustainable environmental, responsible social, and prudent governance practices that improve our work and our world. We strive to contribute to a healthy, sustainable environment by utilizing resources efficiently. As an organization, we create a relatively small environmental footprint. Still, we are focused on minimizing the environmental impact of our business where possible.

At March 31, 2025 and December 31, 2024, we invested in MBS, issued or guaranteed by a U.S. GSE, such as Fannie Mae, Freddie Mac, or a government agency such as Ginnie Mae (collectively, Agency Securities). Our Agency Securities consist primarily of fixed rate loans. Our charter permits us to invest in MBS backed by fixed rate, hybrid adjustable rate and adjustable rate home loans as well as unsecured notes and bonds issued by GSEs, U.S. Treasuries and money market instruments.

We earn returns on the spread between the yield on our assets and our costs, including the interest cost of the funds we borrow, after giving effect to our hedges. We identify and acquire MBS, finance our acquisitions with borrowings under a series of short-term repurchase agreements and then hedge certain risks based on our entire portfolio of assets and liabilities and our management’s view of the market.

Factors that Affect our Results of Operations and Financial Condition

Our results of operations and financial condition are affected by various factors, many of which are beyond our control, including, among other things, our net interest income, the market value of our assets and the supply of and demand for such assets. Recent events, such as those discussed below, can affect our business in ways that are difficult to predict and may produce results outside of typical operating variances. Our net interest income varies primarily as a result of changes in interest rates, borrowing costs and prepayment speeds, the behavior of which involves various risks and uncertainties. We currently invest primarily in Agency Securities, for which the principal and interest payments are guaranteed by a GSE or other government agency. From time to time, we also invest in U.S. Treasury Securities and money market instruments subject to certain income tests we must satisfy for our qualification as a REIT. We expect our investments to be subject to risks arising from prepayments resulting from existing home sales, financings, delinquencies and foreclosures. We are exposed to changing mortgage spreads, which could result in declines in the fair value of our

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)

investments. Our asset selection, financing and hedging strategies are designed to work together to generate current net interest income while moderating our exposure to market volatility.

Interest Rates

Changes in interest rates, particularly short-term interest rates, may significantly influence our net interest income. With the maturities of our assets, generally of a longer term than those of our liabilities, interest rate increases will tend to decrease our net interest income and the market value of our assets (and therefore our book value). Such rate increases could possibly result in operating losses or adversely affect our ability to make distributions to our stockholders. Our operating results depend, in large part, upon our ability to manage interest rate risks effectively while maintaining our status as a REIT.

While we use strategies to economically hedge some of our interest rate risk, we do not hedge all of our exposure to changes in interest rates and prepayment rates, as there are practical limitations on our ability to insulate our securities portfolio from all potential negative consequences associated with changes in short-term interest rates in a manner that will allow us to seek attractive net spreads on our securities portfolio. For GAAP purposes, all changes in the fair value of our derivatives currently flow through earnings. Currently, all of our Agency MBS portfolio is designated as trading securities and changes in the fair values of our derivatives and Agency MBS flow through earnings together. Accordingly, our results of operations will not be subject to the additional fluctuations caused by the previous differences in mark-to-market accounting treatments. Comparisons with companies that use hedge accounting for all or part of their derivative activities may not be meaningful.

Prepayment Rates

Prepayments on MBS and the underlying mortgage loans may be influenced by changes in market interest rates and a variety of economic and geographic factors, policy decisions by regulators, as well as other factors beyond our control. To the extent we hold MBS acquired at a premium or discount to par, or face value, changes in prepayment rates may impact our anticipated yield. In periods of declining interest rates, prepayments on our MBS will likely increase. If we are unable to reinvest the proceeds of such prepayments at comparable yields, our net interest income may decline. Our operating results depend, in large part, upon our ability to manage prepayment risks effectively while maintaining our status as a REIT.

In addition to the use of derivatives to hedge interest rate risk, a variety of other factors relating to our business may also impact our financial condition and operating performance; these factors include:

•our degree of leverage;

•our access to funding and borrowing capacity;

•the REIT requirements under the Code; and

•the requirements to qualify for an exclusion under the 1940 Act and other regulatory and accounting policies related to our business.

Management

See Note 8 and Note 13 to the consolidated financial statements.

Market and Interest Rate Trends and the Effect on our Securities Portfolio

First Quarter 2025 Trends

The current U.S. administration has recently introduced tariffs on imports from a broad set of countries, including Canada, Mexico, European Union member states, Japan and China. In response to these tariffs, global trading partners have or are likely to impose their own tariffs. Such U.S. tariffs and responsive tariffs have increased the volatility of financial markets and interest rates. ARMOUR believes that it has acted to mitigate risk, moderate leverage and maximize liquidity.

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)

The Company expects that it will remain focused on prioritizing liquidity through this period of increased market volatility and financial risks. The Company has met all of its obligations to repurchase agreement counterparties in a timely manner, while managing the risk of its assets and hedging portfolios. See Item 1A. "Risk Factors" for further discussion of the possible impact of tariffs on our business.

Federal Reserve Actions

At the Federal Reserve Open Market Committee ("FOMC") meetings on January 29, 2025 and March 19, 2025, the Fed maintained the target range for the Federal Funds Rate at 4.25% to 4.50%. At the March 2025 meeting, the Fed stated that inflation remains somewhat elevated while economic activity has continued to expand at a solid pace, with the unemployment rate stabilizing at a low level in recent months and labor market conditions remaining solid. The Fed cautioned, however, that uncertainty around the economic outlook has increased, and stated that in considering the extent and timing of additional adjustments to the target range for the Federal Funds Rate, it will carefully assess incoming data, the evolving outlook, and the balance of risks.

The Fed also stated that it will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, but beginning in April, it will slow the pace of decline of its securities holdings. It will reduce the monthly redemption cap on its Treasury securities to $5 billion from $25 billion, while maintaining the monthly redemption cap on its agency debt and agency mortgage-backed securities at $35 billion. Beginning on April 1, 2025, the Fed will roll over at auction the amount of principal payments from its holdings of Treasury securities maturing in each calendar month that exceeds a cap of $5 billion per month. It will also reinvest the amount of principal payments from its holdings of agency debt and agency mortgage-backed securities received in each calendar month that exceeds a cap of $35 billion per month into Treasury securities.

Financial markets will likely be highly sensitive to the Fed’s interest rate decisions, its bond purchasing and balance sheet holding decisions, as well as its communication. We intend to continue to mitigate risk and maximize liquidity within the scope of our business plan. The agency mortgage-backed securities market remains highly dependent on the future course and timing of the Fed's actions on interest rates as well as its purchases and holdings of our target assets.

Developments at Fannie Mae and Freddie Mac

The payments we receive on the Agency Securities in which we invest depend upon a steady stream of payments by borrowers on the underlying mortgages and the fulfillment of guarantees by GSEs. There can be no assurance that the U.S. Government's intervention in Fannie Mae and Freddie Mac will continue to be adequate or assured for the longer-term viability of these GSEs. These uncertainties may lead to concerns about the availability of and market for Agency Securities in the long term. Accordingly, if the GSEs defaulted on their guaranteed obligations, suffered losses or ceased to exist, the value of our Agency Securities and our business, operations and financial condition could be materially and adversely affected.

Short-term Interest Rates and Funding Costs

Changes in Fed policy affect our financial results, since our cost of funds is largely dependent on short-term rates. An increase in our cost of funds without a corresponding increase in interest income earned on our MBS would cause our net income to decline.

Below is the Fed's target range for the Federal Funds Rate at each Fed meeting where a change was made since the beginning of 2023.

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)


Meeting Date	Lower Bound		Higher Bound
December 18, 2024	4.25	%	4.50	%
September 18, 2024	4.75	%	5.00	%





July 26, 2023	5.25	%	5.50	%
May 3, 2023	5.00	%	5.25	%
March 22, 2023	4.75	%	5.00	%
February 1, 2023	4.50	%	4.75	%

Our borrowings in the repurchase market have closely tracked the Federal Funds Rate, and SOFR. Traditionally, a lower Federal Funds Rate has indicated a time of increased net interest spread and higher asset values. Volatility in these rates and divergence from the historical relationship among these rates could negatively impact our ability to manage our securities portfolio. If rates were to increase as a result, our net interest spread and the value of our securities portfolio might suffer as a result. Our derivatives are either Federal Funds Rate or SOFR-based interest rate swap contracts (see Note 7 to the consolidated financial statements).

The following graph shows the effective Federal Funds Rate as compared to SOFR on a monthly basis from March 31, 2023 to March 31, 2025.

Long-term Interest Rates and Mortgage Spreads

Our securities are valued at an interest rate spread versus long-term interest rates (mortgage spread). This mortgage spread varies over time and can be above or below long-term averages, depending upon market participants' current desire to own MBS over other investment alternatives. When the mortgage spread gets smaller (or negative) versus long-term interest rates, our book value will be positively affected. When this spread gets larger (or positive), our book value will be negatively affected.

Mortgage spreads can vary due to movements in securities valuations, movements in long-term interest rates or a combination of both. We mainly use interest rate swap contracts, interest rate swaptions, basis swap contracts and futures

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)

contracts to economically hedge against changes in the valuation of our securities. We do not use such hedging contracts for speculative purposes.

We may reduce our mortgage spread exposure by entering in to certain TBA Agency Securities short positions. The TBA short positions may represent different securities and maturities than our MBS and TBA Agency Security long positions, and accordingly, may perform somewhat differently. While we expect our TBA Agency Securities short positions to perform well compared to our related mortgage securities, there can be no assurance as to their relative performance.

Results of Operations


	For the Three Months Ended March 31,
		2025		2024
Net Interest Income		$	36,341	$	5,331
Total Other Income		4,133		29,621
Total Expenses after fees waived		(13,142)		(20,436)
Net Income		$	27,332	$	14,516

Net income for the three months ended March 31, 2025 compared to net income for the three months ended March 31, 2024 reflected a larger investment portfolio and lower costs for repurchase financing compared to the three months ended March 31, 2024 as well as gains on our trading securities offset by losses on derivatives. Total expenses after fees waived for the three months ended March 31, 2024 included non recurring costs associated with the previously disclosed Special Committee internal investigation.

Net interest income is a function of the size of and yield earned from our investment portfolio and the size of and cost of our repurchase and other financing costs.


	For the Three Months Ended March 31,
		2025		2024
Interest Income		$	172,881	$	141,480
Interest Expense		(136,540)		(136,149)
Net Interest Income		$	36,341	$	5,331

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)

The following table details the factors impacting our net interest income for three months ended March 31, 2025 and March 31, 2024.


	For the Three Months Ended March 31, 2025						For the Three Months Ended March 31, 2024
	Interest Income (Expense)		Average Balance		Yield/Rate		Interest Income (Expense)		Average Balance		Yield/Rate
Interest-bearing Assets:
Agency Securities, Net of Amortization	$	172,426	$	13,766,081	5.01	%	$	139,923	$	11,381,407	4.92	%
Cash Equivalents & Treasury Securities	455		73,394		2.48	%	1,557		183,525		3.39	%

Total Interest Income/Average Interest Earning Assets	$	172,881	$	13,839,475	5.00	%	$	141,480	$	11,564,932	4.89	%

Interest-bearing Liabilities:
Repurchase Agreements	(131,109)		11,601,923		(4.52)	%	(127,350)		9,111,334		(5.59)	%
Treasury Securities Sold Short	(5,431)		502,293		(4.32)	%	(8,799)		1,039,669		(3.39)	%
Total Interest Expense/Average Interest Bearing Liabilities	$	(136,540)	$	12,104,216	(4.51)	%	$	(136,149)	$	10,151,003	(5.36)	%
Net Interest Income/Net Interest Spread	$	36,341			0.49	%	$	5,331			(0.47)	%
Net Yield on Interest Earning Assets					1.05	%					0.18	%

The yield on our assets is most significantly affected by the rate of repayments on our Agency Securities. The following graph shows the annualized CPR on a monthly basis for the quarterly periods ended on the dates shown below.

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)

Other Income (Loss)


	For the Three Months Ended March 31,
		2025		2024
Other Income (Loss):
Gain (Loss) on Agency Securities, trading, net		208,257		(137,749)
Gain (Loss) on U.S. Treasury Securities, net		(12,906)		10,922
Gain (Loss) on derivatives, net		(191,218)		156,448
Total Other Income		$	4,133	$	29,621

Three Months Ended March 31, 2025 vs. Three Months Ended March 31, 2024

•Gain (Loss) on Agency Securities, trading, net includes mark to market changes in the fair value of our securities as well as the gain (loss) on sales.

◦The change in fair value of the securities was $211,430 for the three months ended March 31, 2025 compared to $(135,123) for the three months ended March 31, 2024.

◦Sales of our Agency Securities, trading resulted in realized gains (losses) of $(3,173) and $(2,626) for the three months ended March 31, 2025 and March 31, 2024, respectively.

◦During the three months ended March 31, 2025, and March 31, 2024, we sold $234,204 and $347,896 (including $35,948 of receivables for unsettled sales), respectively, of Agency Securities, trading.

•Gain (Loss) on U.S. Treasury Securities, net resulted from the change in fair value of the securities as well as the gain (loss) on sales.

◦The change in fair value of the securities was $(12,906) and $15,133, for the three months ended March 31, 2025 and March 31, 2024, respectively.

◦During the three months ended March 31, 2024, we sold short $97,004 of U.S. Treasury Securities, resulting in losses of $(4,211) for the three months ended March 31, 2024.

•Gain (Loss) on Derivatives resulted from a combination of the following:

◦Changes in fair value due to interest rate movements.

◦Interest rate swap contracts' aggregate notional balance was $8,382,000 at March 31, 2025 and $7,232,000 at December 31, 2024.

◦Our TBA Agency Securities aggregate notional balance was $900,000 at March 31, 2025 and $0 at December 31, 2024.

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)

Expenses


	For the Three Months Ended March 31,
		2025		2024
Expenses:
Management fees		$	10,769	$	9,803
Compensation		811		1,437
Other operating		3,212		10,846
Total Expenses		$	14,792	$	22,086
Less management fees waived		(1,650)		(1,650)
Total Expenses after fees waived		$	13,142	$	20,436

The Company is managed by ACM, pursuant to a management agreement. The management fees are determined based on gross equity raised. Therefore, management fees increase when we raise capital and decline when we repurchase previously issued stock and make liquidation distributions as approved and so designated by a majority of the Board. However, because the management fee rate decreases to 0.75% per annum for gross equity raised in excess of $1.0 billion pursuant to the management agreement, the effective management fee rate declines as equity is raised. The cost of repurchased stock and any dividends specifically designated by the Board as liquidation distributions will reduce the amount of gross equity raised used to calculate the monthly management fee. Realized and unrealized gains and losses do not affect the amount of gross equity raised. At March 31, 2025 and March 31, 2024, the effective management fee, prior to management fees waived, was 0.90% and 0.93% based on gross equity raised of $4,873,845 and $4,230,648, respectively. During each of the three months ended March 31, 2025 and March 31, 2024 ACM voluntarily waived management fees of $1,650 (see Note 13 - Related Party Transactions).

Compensation includes non-executive director compensation as well as the restricted stock units awarded to our Board and executive officers directly or through ACM. The fluctuation from year to year is due to the number of awards vesting.

Other Operating expenses include:

•Fees for market and pricing data, analytics and risk management systems and portfolio related data processing costs as well as stock exchange listing fees and similar stockholder related expenses, net of other miscellaneous income.

•Professional fees for securities clearing, legal, audit and consulting costs that are generally driven by the size and complexity of our securities portfolio, the volume of transactions we execute and the extent of research and due diligence activities we undertake on potential transactions.

•Insurance premiums for both general business and directors and officers liability coverage fluctuate from year to year due to changes in premiums.

•For the three months ended March 31, 2024, other expenses included $9,010 of expenses related to the previously disclosed Special Committee internal investigation.

Taxable Income

As a REIT that regularly distributes all of its taxable income, we are generally not required to pay federal income tax (see Note 12 to the consolidated financial statements).

Realized gains and losses on interest rate contracts and treasury futures terminated before their maturity are deferred and amortized over the remainder of the original term of the contract for REIT taxable income. At March 31, 2025 and December 31, 2024, we had approximately $(192,655) and $(189,450), respectively, of net deductible expense relating

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)

to previously terminated interest rate swap and treasury futures/shorts contracts amortizing through the years 2035 and 2034, respectively. At March 31, 2025, we had $257,341 of net operating loss carryforwards available for use indefinitely.

Financial Condition

Investment In Securities

Our securities portfolio consists primarily of Agency Securities backed by fixed rate home loans. Our charter permits us to invest in MBS backed by fixed rate, hybrid adjustable rate and adjustable rate home loans as well as unsecured notes and bonds issued by GSEs, U.S. Treasuries and money market instruments, subject to certain income tests we must satisfy for our qualification as a REIT. Our TBA Agency Securities are reported at net carrying value and are reported in Derivatives, at fair value on our consolidated balance sheets (see Note 7 to the consolidated financial statements).

Agency Securities:

Agency Security purchase and sale transactions, including purchases and sales for forward settlement, are recorded on the trade date, based on the specific identification method, to the extent it is probable that we will take or make timely physical delivery of the related securities. Premiums and discounts associated with the purchase of Multi-Family MBS, which are generally not subject to prepayment, are amortized or accreted into interest income over the contractual lives of the securities using a level yield method. Premiums and discounts associated with the purchase of other Agency Securities are amortized or accreted into interest income over the actual lives of the securities, reflecting actual prepayments as they occur. Gains or losses realized from the sale of securities are included in income and are determined using the specific identification method. We typically purchase Agency Securities at premium prices. The lower the prepayment rate, the lower the amount of amortization expense for a particular period. Accordingly, the yield on an asset and earnings are higher. If prepayment rates increase, the amount of amortization expense for a particular period will go up. These increased prepayment rates would act to decrease the yield on an asset and would decrease earnings.

Our net interest income is primarily a function of the difference between the yield on our assets and the financing (borrowing and hedging) cost of owning those assets. Since we tend to purchase Agency Securities at a premium to par, the main item that can affect the yield on our Agency Securities after they are purchased is the rate at which the mortgage borrowers repay the loan. While the scheduled repayments, which are the principal portion of the homeowners’ regular monthly payments, are fairly predictable, the unscheduled repayments, which are generally refinancing of the mortgage but can also result from repurchases of delinquent, defaulted, or modified loans, are less so. Being able to accurately estimate and manage these repayment rates is a critical portion of the management of our securities portfolio, not only for estimating current yield but also for considering the rate of reinvestment of those proceeds into new securities, the yields on those new securities and the impact of the repayments on our hedging strategy.

TBA Agency Securities:

We account for TBA Agency Securities as derivative instruments if it is reasonably possible that we will not take or make physical delivery of the Agency Security upon settlement of the contract. TBA Agency Securities are forward contracts for the purchase (“long position”) or sale (“short position”) of Agency Securities at a predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date. The specific Agency Securities delivered pursuant to the contract upon the settlement date, published each month by the Securities Industry and Financial Markets Association, are not known at the time of the transaction. We estimate the fair value of TBA Agency Securities based on similar methods used to value our Agency Securities. TBA Agency Securities are included in the table below on a gross basis, as applicable, since they can be used to establish and finance portfolio positions in Agency Securities.

The tables below summarize certain characteristics of our investments in securities at March 31, 2025 and December 31, 2024.

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)


March 31, 2025	Principal Amount		Amortized Cost		Gross Unrealized Gain (Loss)		Fair Value		CPR (1)		Weighted Average Months to Maturity	Percent of Total


Agency Fixed Rates ≥ 181 months
2.5%	$	293,300	$	240,918	$	3,169	$	244,087	3.7	%	327	1.6	%
3.0%	730,327		632,447		364		632,811		3.5	%	317	4.1	%
3.5%	1,297,046		1,243,746		(72,208)		1,171,538		4.5	%	326	7.6	%
4.0%	1,022,043		1,015,442		(59,333)		956,109		4.2	%	326	6.2	%
4.5%	957,106		948,610		(32,060)		916,550		4.3	%	328	6.0	%
5.0%	1,915,033		1,901,321		(19,956)		1,881,365		5.3	%	342	12.3	%
5.5%	3,264,260		3,276,154		(529)		3,275,625		6.3	%	344	21.3	%
6.0%	4,086,584		4,148,834		20,340		4,169,174		7.7	%	346	27.1	%
6.5%	653,001		669,512		7,609		677,121		14.2	%	347	4.4	%
Other Agency Securities
Agency CMBS	510,646		521,053		(3,056)		517,997		n/a		50	3.4	%
Total Agency Securities	$	14,729,346	$	14,598,037	$	(155,660)	$	14,442,377	6.1	%	329	94.0	%
TBA Agency Securities (2)
30 Year Long, 6.0%	600,000		608,734		(85)		608,649		n/a		n/a	4.0	%
30 Year Long, 6.5%	300,000		308,969		277		309,246		n/a		n/a	2.0	%

Total TBA Agency Securities	$	900,000	$	917,703	$	192	$	917,895	n/a		n/a	6.0	%
Totals	$	15,629,346	$	15,515,740	$	(155,468)	$	15,360,272				100.0	%

(1)Weighted average CPR during the quarter for the securities owned at March 31, 2025. Negative CPR can occur if payments are not made on the first of the month and the scheduled principal amount is not received.

(2)Our TBA Agency Securities were recorded as derivative instruments in our accompanying consolidated financial statements. Our TBA Agency Securities were reported at net carrying values of $192, at March 31, 2025 and were reported in Derivatives, at fair value on our consolidated balance sheets (see Note 7 to the consolidated financial statements).

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)


December 31, 2024	Principal Amount		Amortized Cost		Gross Unrealized Gain (Loss)		Fair Value		CPR (1)		Weighted Average Months to Maturity	Percent of Total
Agency Fixed Rates ≥ 181 months
2.5%	$	297,928	$	244,720	$	(1,954)	$	242,766	3.2	%	330	2.0	%
3.0%	741,422		642,064		(12,481)		629,583		3.9	%	320	5.1	%
3.5%	1,319,235		1,265,106		(95,476)		1,169,630		4.6	%	329	9.4	%
4.0%	1,038,798		1,032,126		(79,202)		952,924		5.3	%	329	7.7	%
4.5%	972,765		964,169		(47,336)		916,833		5.6	%	331	7.4	%
5.0%	2,198,347		2,178,480		(51,735)		2,126,745		6.1	%	346	17.1	%
5.5%	2,705,528		2,723,247		(40,980)		2,682,267		10.2	%	345	21.6	%
6.0%	2,646,152		2,696,087		(28,015)		2,668,072		13.7	%	343	21.4	%
6.5%	526,144		538,733		914		539,647		28.5	%	347	4.3	%
Other Agency Securities
Agency CMBS	510,720		521,772		(10,825)		510,947		n/a		53	4.0	%
Total Investments in Securities	$	12,957,039	$	12,806,504	$	(367,090)	$	12,439,414	8.7	%	328	100.0	%

(1)Weighted average CPR during the fourth quarter for the securities owned at December 31, 2024. Negative CPR can occur if payments are not made on the first of the month and the scheduled principal amount is not received.

The following tables summarize changes in our investments in securities as of March 31, 2025 and December 31, 2024, excluding TBA Agency Securities (see Note 7 to the consolidated financial statements).


	March 31, 2025		December 31, 2024
	Agency Securities, Trading		U.S. Treasury Securities Sold Short		Agency Securities, Trading		U.S. Treasury Securities Sold Short
Balance, beginning of period	$	12,439,414	$	(497,234)	$	11,159,754	$	(355,322)
Purchases (1)	2,302,296		—		7,271,101		869,257
Proceeds from sales	(234,204)		—		(4,589,515)		(1,050,019)

Principal repayments	(274,007)		—		(1,053,625)		—
Gains (losses)	208,257		(12,906)		(348,646)		37,602
Accrued interest payable	—		(3,493)		—		1,248
Amortization of purchase premium	621		—		345		—
Balance, end of period	$	14,442,377	$	(513,633)	$	12,439,414	$	(497,234)

(1)Purchases include cash paid during the period, plus payable for investment securities purchased during the period as of period end.

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)

Repurchase Agreements, net

We have entered into repurchase agreements to finance the majority of our MBS. Our repurchase agreements are secured by our MBS and bear interest at rates that have moved in close relationship to the Federal Funds Rate and SOFR. We have established borrowing relationships with numerous investment banking firms and other lenders, 17 of which had open repurchase agreements with us at March 31, 2025 and December 31, 2024. We had outstanding balances under our repurchase agreements, net at March 31, 2025 and December 31, 2024 of $12,490,792 (net of reverse repurchase agreements of $512,750, $461,250 of which were with BUCKLER) and $10,713,830 (net of reverse repurchase agreements of $498,250, $447,063 of which were with BUCKLER) respectively. We had obligations to return securities received as collateral associated with our reverse repurchase agreements as of March 31, 2025 and December 31, 2024 of $506,340 and $493,433, respectively. At each of March 31, 2025 and December 31, 2024, BUCKLER accounted for 45.7% of our aggregate borrowings and had an amount at risk of 7.4% and 8.0%, respectively, of our total stockholders' equity with a weighted average maturity of 30 days and 15 days, respectively, on repurchase agreements (see Note 6 to the consolidated financial statements).

Our repurchase agreements require excess collateral, known as a “haircut.” At March 31, 2025, the average gross haircut percentage was 2.74% compared to 2.77% at December 31, 2024.

Derivative Instruments

We use various contracts to manage our interest rate risk as we deem prudent in light of market conditions and the associated costs with counterparties that have a high-quality credit rating and with futures exchanges. We generally pay a fixed rate and receive a floating rate with the objective of fixing a portion of our borrowing costs and hedging the change in our book value to some degree. The floating rate we receive is generally the Federal Funds Rate or SOFR. We had contractual commitments under derivatives at March 31, 2025 and December 31, 2024. At March 31, 2025 and December 31, 2024, we had derivatives with a net fair value of $653,530 and $906,778, respectively (see Note 7 to the consolidated financial statements).

At March 31, 2025, we had interest rate swap contracts with an aggregate notional balance of $8,382,000, a weighted average swap rate of 2.00% and a weighted average term of 68 months. At December 31, 2024, we had interest rate swap contracts with an aggregate notional balance of $7,232,000, a weighted average swap rate of 1.66% and a weighted average term of 76 months. We also had TBA Agency Securities with an aggregate notional balance of $900,000 at March 31, 2025. We did not have TBA Agency Securities at December 31, 2024 (see Note 7 to the consolidated financial statements).

The following table details the changes in the fair value of our interest rate swap contracts for the three months ended March 31, 2025 and for the year ended December 31, 2024.


Interest Swap Contracts	For the Three Months Ended March 31, 2025		For the Year Ended December 31, 2024
Net Balance, beginning of period	$	894,715	$	870,560
Net interest rate swap contract payments paid	(69,014)		(237,688)
Interest rate swap income accrued	91,093		397,045
Interest rate swap expense accrued	(49,623)		(168,942)
Unrealized gains (losses)	(180,386)		17,435
Gain on early terminations	11,641		16,305
Net Balance, end of period	$	698,426	$	894,715

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)

Our policies do not contain specific requirements as to the percentages or amount of interest rate risk that we are required to hedge. No assurance can be given that our derivatives will have the desired beneficial impact on our results of operations or financial condition. We have not elected cash flow hedge accounting treatment as allowed by GAAP. Since we do not designate our derivative activities as cash flow hedges, realized as well as unrealized gains/losses from these transactions will impact our GAAP earnings.

Use of derivative instruments may fail to protect or could adversely affect us because, among other things:

•available derivatives may not correspond directly with the interest rate risk for which protection is sought (e.g., the difference in interest rate movements for long-term U.S. Treasury Securities compared to Agency Securities);

•the duration of the derivatives may not match the duration of the related liability;

•the counterparty to a derivative agreement with us may default on its obligation to pay or not perform under the terms of the agreement and the collateral posted may not be sufficient to protect against any consequent loss;

•we may lose collateral we have pledged to secure our obligations under a derivative agreement if the associated counterparty becomes insolvent or files for bankruptcy;

•we may experience a termination event under one or more of our derivative agreements related to our REIT status, equity levels and performance, which could result in a payout to the associated counterparty and a taxable loss to us;

•the credit-quality of the party owing money on the derivatives may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and

•the value of derivatives may be adjusted from time to time in accordance with GAAP to reflect changes in fair value; downward adjustments, or “mark-to-market losses,” would reduce our net income or increase any net loss.

Although we attempt to structure our derivatives to offset the changes in asset prices, the complexity of the actual and expected prepayment characteristics of the underlying mortgages as well as the volatility in mortgage interest rates relative to U.S. Treasury and interest rate swap contract rates makes achieving high levels of offset difficult. We recognized net (losses) gains related to our derivatives of $(191,218) and $156,448, for the three months ended March 31, 2025 and March 31, 2024, respectively.

As required by the Dodd-Frank Act, the Commodity Futures Trading Commission has adopted rules requiring certain interest rate swap contracts to be cleared through a derivatives clearing organization. We are required to clear certain new interest rate swap contracts. Centrally-cleared interest rate swaps may have higher margin requirements than bilateral interest rate swaps. We have established an account with a futures commission merchant for this purpose. At March 31, 2025 and December 31, 2024, we had $3,175,000 and $2,025,000, respectively, of notional amount of centrally-cleared interest rate swap contracts.

We are required to account for our TBA Agency Securities as derivatives when it is reasonably possible that we will not take or make timely physical delivery of the related securities. However, from time to time, we use TBA Agency Securities primarily to effectively establish portfolio positions. See the section, "TBA Agency Securities" above.

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)

The following graphs present the notional and weighted average interest rate of our interest rate swap contracts by year of maturity.

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)

Liquidity and Capital Resources

At March 31, 2025, our liquidity totaled $847,961, consisting of $49,115 of cash and cash equivalents plus $798,846 of unencumbered Agency Securities and U.S. government securities (including securities received as reverse margin collateral). Our primary sources of funds are borrowings under repurchase arrangements, monthly principal and interest payments on our MBS and cash generated from our operating results.

We generally maintain liquidity to pay down borrowings under repurchase arrangements to reduce borrowing costs and otherwise efficiently manage our long-term investment capital. Because the level of our borrowings can be adjusted on a daily basis, the level of cash and cash equivalents carried on our consolidated balance sheet is significantly less important than our potential liquidity available under our borrowing arrangements. We continue to pursue additional lending counterparties in order to help increase our financial flexibility and ability to withstand periods of contracting liquidity in the credit markets.

In addition to the repurchase agreement financing discussed above, from time to time we have entered into reverse repurchase agreements with certain of our repurchase agreement counterparties. Under a typical reverse repurchase agreement, we purchase U.S. Treasury Securities from a borrower in exchange for cash and agree to sell the same securities back in the future. We then sell such U.S. Treasury Securities to third parties and recognize a liability to return the securities to the original borrower. Reverse repurchase agreement receivables and repurchase agreement liabilities are presented net when they meet certain criteria, including being with the same counterparty, being governed by the same MRA, settlement through the same brokerage or clearing account and maturing on the same day. The practical effect of these transactions is to replace a portion of our repurchase agreement financing of our MBS in our securities portfolio with short positions in U.S. Treasury Securities. We believe that this helps to reduce interest rate risk, and therefore counterparty credit and liquidity risk. Both parties to the repurchase and reverse repurchase transactions have the right to make daily margin calls based on changes in the value of the collateral obtained and/or pledged.

Our primary uses of cash are to purchase MBS, pay interest and principal on our borrowings, fund our operations and pay dividends. From time to time, we purchase or sell assets for forward settlement up to 90 days in the future to lock in purchase prices or sales proceeds. At March 31, 2025 and December 31, 2024, we financed our securities portfolio with $12,490,792 (net of reverse repurchase agreements of $512,750, $461,250 of which were with BUCKLER) and $10,713,830 (net of reverse repurchase agreements of $498,250, $447,063 of which were with BUCKLER) of borrowings under repurchase agreements, respectively. At March 31, 2025 and December 31, 2024, we had obligations to return securities received as collateral associated with our reverse repurchase agreements of $506,340 and $493,433, respectively.

We generally seek to borrow (on a recourse basis) between six and ten times the amount of our total stockholders’ equity. Our debt to equity ratios at March 31, 2025 and December 31, 2024, were 7.33:1 and 7.87:1, respectively. Our leverage ratios, including notional on our TBA Agency Securities, were 7.87:1 at each of March 31, 2025 and December 31, 2024, respectively. Implied leverage, including TBA Securities and forward settling sales and unsettled purchases was 7.87:1 and 7.95:1 at March 31, 2025 and December 31, 2024, respectively.

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)

Securities Portfolio Matters


	For the Three Months Ended March 31,
	2025		2024
Securities purchased using proceeds from repurchase agreements and principal repayments	$	2,302,296	$	450,700
Average securities portfolio, including TBA Securities	$	14,362,748	$	11,511,407
Cash received from principal repayments on MBS	$	274,007	$	182,548
Net cash increase (decrease) from repurchase agreements	$	1,776,962	$	(993,919)
Cash interest payments made on liabilities	$	132,272	$	136,718
Net cash and cash equivalents and cash collateral posted to counterparties provided by operating activities	$	101,482	$	96,812

Other potential sources of liquidity include our automatic shelf registration filed with the SEC, pursuant to which we may offer an unspecified amount of shares of our common stock, preferred stock, warrants, depositary shares and debt securities.

The following tables present our equity transactions for the three months ended March 31, 2025 and for the year ended December 31, 2024 (see Note 10 and Note 13 to the consolidated financial statements).


Transaction Type	Completion Date	Number of Shares	Per Share price (1)		Net Proceeds (costs)
March 31, 2025
Preferred C ATM Sales Agreement	January 22, 2025 - January 23, 2025	17	$	16.08	$	279
2023 Common stock ATM Sales Agreement	January 2, 2025 - March 19, 2025	19,992	$	18.58	$	371,412
DRIP shares issued	January 27, 2025 - March 27, 2025	1	$	18.47	$	25


December 31, 2024
2023 Common stock ATM Sales Agreement	July 26, 2024 - December 27, 2024	13,619	$	19.50	$	265,614
DRIP shares issued	January 25, 2024 - December 30, 2024	5	$	18.95	$	86
Common stock repurchased	January 22, 2024 - January 25, 2024	(70)	$	19.31	$	(1,344)

Other Contractual Obligations

The Company is managed by ACM, pursuant to a management agreement (see Note 8 and Note 13 to the consolidated financial statements). The management agreement runs through December 31, 2029 and is thereafter automatically renewed for an additional five-year term unless terminated under certain circumstances.

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)

The following table reconciles the fees incurred in accordance with the management agreement for the three months ended March 31, 2025 and March 31, 2024 (see Note 8 to the consolidated financial statements).


	For the Three Months Ended March 31,
		2025		2024
ARMOUR management fees		$	10,754	$	9,807
Less management fees waived		(1,650)		(1,650)
Total management fee expense		$	9,104	$	8,157

We adopted the 2009 Stock Incentive Plan (as amended, the “Plan”) to attract, retain and reward directors and other persons who provide services to us in the course of operations. The Plan authorizes the Board to grant awards including common stock, restricted shares of common stock (“RSUs”), stock options, performance shares, performance units, stock appreciation rights and other equity and cash-based awards (collectively, “Awards”), subject to terms as provided in the Plan. At March 31, 2025, there were 228 shares available for future issuance under the Plan.

At March 31, 2025, there was approximately $5,691 of unvested stock based compensation related to the Awards (based on a weighted grant date price of $36.09 per share), which we expect to recognize as an expense as follows: for the remainder of 2025 an expense of $1,480, in 2026 an expense of $1,793, and thereafter an expense of $2,418. Our policy is to account for forfeitures as they occur. We also pay each of our non-executive Board members quarterly fees, which are payable in cash, common stock, RSUs or a combination of common stock, RSUs and cash at the option of the director. Compensation to be paid to our non-executive Board in the form of cash and common equity is $1,219 annually (see Note 9 to the consolidated financial statements).

We currently believe that we have sufficient liquidity and capital resources available for the acquisition of additional investments, repayments on repurchase borrowings, reacquisition of securities to be returned to borrowers and the payment of cash dividends as required for continued qualification as a REIT.

Repurchase Agreements, net

Declines in the value of our Agency Securities portfolio can trigger margin calls by our lenders under our repurchase agreements. An event of default or termination event under the standard MRA would give our counterparty the option to terminate all repurchase transactions existing with us and require any amount due to be payable immediately.

Changing capital or other financial market regulatory requirements may cause our lenders to exit the repurchase market, increase financing rates, tighten lending standards or increase the amount of required equity capital or haircut we post, any of which could make it more difficult or costly for us to obtain financing.

The following graph represents the outstanding balances of our repurchase agreements (before the effect of netting reverse repurchase agreements), which finance most of our MBS. Our repurchase agreements balance will fluctuate based on our change in capital, leverage targets and the market prices of our assets (including the effects of principal paydowns) and the level and timing of investment and reinvestment activity (see Note 6 and Note 13 to the consolidated financial statements).

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)

Effects of Margin Requirements, Leverage and Credit Spreads

Our MBS have values that fluctuate according to market conditions and, as discussed above, the market value of our MBS will decrease as prevailing interest rates or credit spreads increase. When the value of the securities pledged to secure a repurchase agreement decreases to the point where the positive difference between the collateral value and the loan amount is less than the haircut, our lenders may issue a margin call, which requires us to pay the difference in cash or pledge additional collateral to meet the obligations under our repurchase agreements. Under our repurchase facilities, our lenders have full discretion to determine the value of the MBS we pledge to them. Most of our lenders will value securities based on recent trades in the market. Lenders also issue margin calls as the published current principal balance factors change on the pool of mortgages underlying the securities pledged as collateral when scheduled and unscheduled principal repayments are announced monthly.

Forward-Looking Statements Regarding Liquidity

Based on our current portfolio, leverage rate and available borrowing arrangements, we believe that our cash flow from operations and our ability to make timely portfolio adjustments will be sufficient to enable us to meet anticipated short-term (one year or less) liquidity requirements such as to fund our investment activities, meet our financing obligations, pay fees under the management agreement and fund our distributions to stockholders and pay general corporate expenses.

We may increase our capital resources by obtaining long-term credit facilities or making public or private offerings of equity or debt securities, including classes of preferred stock, common stock and senior or subordinated notes to meet our liquidity requirements. As of the date hereof, we have "at-the-market" offering programs with 3,136 shares of 7.00% Series C Cumulative Redeemable Preferred Stock available under the Preferred C ATM Sales Agreement and 18,060 shares of common stock available under the 2023 Common stock ATM Sales Agreement. In accordance with the terms of these agreements, we may offer and sell shares of stock over a period of time and from time to time, with BUCKLER and other agents as sales agents (see Note 10 to the consolidated financial statements). These liquidity requirements include maturing repurchase agreements, settling TBA Agency Security positions and potentially making net payments on our interest rate swap contracts, and in each case, continuing to meet ongoing margin requirements. Such financing will depend

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)

on market conditions for capital raises and for the investment of any proceeds and there can be no assurances that we will successfully obtain any such financing.

Stockholders’ Equity

See Note 10 to the consolidated financial statements.

Critical Accounting Estimates

Valuation

Fair value is based on valuations obtained from third-party pricing services and/or dealer quotes. The third-party pricing services use common market pricing methods that include valuation models which incorporate such factors as coupons, collateral type, bond structure, historical and projected future prepayment speeds, priority of payments, historical and projected future delinquency rates and default severities, spread to the Treasury curve and interest rate swap curves, duration, periodic and life caps and credit enhancement. If the fair value of the MBS is not available from the third-party pricing services or such data appears unreliable, we obtain pricing indications from up to three dealers who make markets in similar MBS. Management reviews pricing used to ensure that current market conditions are properly reflected. This review includes, but is not limited to, comparisons of similar market transactions or alternative third-party pricing services, dealer pricing indications and comparisons to a third-party pricing model.

Valuation modeling is required because each individual MBS pool is a separately identified security with individual combinations of characteristics that influence market pricing. While the Agency Security market is generally very active and liquid within the context of broader classes of MBS, any particular security will likely trade infrequently. Our bilateral contracts with individual dealers and counterparties are not cleared through recognized clearing organizations, and valuation models for these positions rely on information from the active and liquid general interest rate swap market to infer the value of these unique positions.

From time to time, we challenge the information and valuations we receive from third-party pricing services. Occasionally, the third-party pricing services revise their information or valuations as a result of such challenges. While we have concluded that the fair values reflected in the financial statements are appropriate, there is no way to verify that the particular fair value estimated for any individual position represents the price at which it may actually be bought or sold at any given date.

Fair value for our U.S. Treasury Securities is based on obtaining a valuation for each U.S. Treasury Security from third-party pricing services and/or dealer quotes.

We update our fair value estimates at the end of each business day to reflect current market dynamics. During times of high market volatility, it can be difficult to obtain accurate market information timely, and accordingly, the confidence interval around our valuation estimates will increase, potentially significantly. During the three months ended March 31, 2025, the largest inter-day movement in the overall estimated values of our investment and hedge positions translated to a change in estimated book value of (0.28) per common share. Similarly, 98% of inter-day movements in estimated value translated to changes in estimated book value per share of 0.43 or less.

Inflation

Virtually all of our assets and liabilities are interest rate-sensitive in nature. As a result, interest rates and other factors influence our performance far more than inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Our financial statements are prepared in accordance with GAAP and any distributions we may make will be determined by our Board based in part on our REIT taxable income as calculated

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)

according to the requirements of the Code; in each case, our activities and balance sheet are measured with reference to fair value without considering inflation.

Subsequent Events

See Note 10, Note 13 and Note 15 to the consolidated financial statements.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The forward-looking statements in this report are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. See Part II, Item 1A. "Risk Factors" of this Quarterly Report on Form 10-Q and Part I, Item 1A. "Risk Factors" of our most recent Annual Report on Form 10-K. You should carefully consider these risks before you make an investment decision with respect to our stock, along with the following factors that could cause actual results to vary from our forward-looking statements:

•risks related to governmental regulation, including uncertainties from the change in the U.S. federal administration, including the impact of sanctions, tariffs and other trade policies of the U.S. and its global trading partners;

•changes in interest rates, interest rate spreads and the yield curve or prepayment rates;

•the geopolitical situation as a result of the war between Russia and Ukraine, as well as the outbreak of hostilities in the Middle East, may continue to adversely affect the U.S. economy, which may lead the Fed to take actions that may impact our business;

•the impact of the federal conservatorship of Fannie Mae and Freddie Mac and related efforts, along with any changes in laws and regulations affecting the relationship between Fannie Mae and Freddie Mac and the federal government and the Fed system;

•the possible material adverse effect on our business if the U.S. Congress passed legislation reforming or winding down Fannie Mae or Freddie Mac;

•mortgage loan modification programs and future legislative action;

•actions by the Fed which could cause a change of the yield curve, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders;

•the impact of a delay or failure of the U.S. Government in reaching an agreement on the national debt ceiling;

•availability, terms and deployment of capital;

•changes in economic conditions generally;

•the impact of COVID-19 or a new pandemic on our operations;

•general volatility of the financial markets, including markets for mortgage securities;

•a downgrade of the U.S. Government's or certain European countries' credit ratings and future downgrades of the U.S. Government's or certain European countries' credit ratings may materially adversely affect our business, financial condition and results of operations;

•our inability to maintain the level of non-taxable returns of capital through the payment of dividends to our stockholders or to pay dividends to our stockholders at all;

•inflation or deflation;

•the impact of a shutdown of the U.S. Government;

•availability of suitable investment opportunities;

•the degree and nature of our competition, including competition for MBS;

•changes in our business and investment strategy;

ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis (continued)

•our failure to maintain our qualification as a REIT;

•our failure to maintain an exemption from being regulated as a commodity pool operator;

•our dependence on ACM and ability to find a suitable replacement if ACM was to terminate its management relationship with us;

•the existence of conflicts of interest in our relationship with ACM, BUCKLER, certain of our directors and our officers, which could result in decisions that are not in the best interest of our stockholders;

•the potential for BUCKLER's inability to access attractive repurchase financing on our behalf or secure profitable third-party business;

•our management's and certain directors' competing duties to other affiliated entities, which could result in decisions that are not in the best interest of our stockholders;

•changes in personnel at ACM or the availability of qualified personnel at ACM;

•limitations imposed on our business by our status as a REIT under the Code;

•the potential burdens on our business of maintaining our exclusion from the 1940 Act and possible consequences of losing that exclusion;

•changes in GAAP, including interpretations thereof;

•changes in applicable laws and regulations; and

•changes in effectiveness of our controls

We cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on forward-looking statements, which apply only as of the date of this report. We do not intend and disclaim any duty or obligation to update or revise any industry information or forward-looking statements set forth in this report to reflect new information, future events or otherwise, except as required under the U.S. federal securities laws.

GLOSSARY OF TERMS

ARMOUR Residential REIT, Inc.


Term						Definition
2023 Common stock ATM Sales Agreement						An equity sales agreement that we entered into on July 26, 2023 with BUCKLER, JonesTrading Institutional Services LLC, Citizens JMP Securities, LLC (formerly JMP Securities LLC), Ladenburg Thalmann & Co. Inc. and B. Riley Securities, Inc., as sales agents, as amended on October 25, 2023 to add StockBlock Securities LLC as a sales agent, as amended on June 20, 2024 to add BTIG, LLC as a sales agent, as amended on August 23, 2024 to increase the number of shares of the Company's common stock that may be offered and sold under the agreement by 25,000, as amended on September 20, 2024, to add Janney Montgomery Scott LLC as a sales agent, as further amended on February 13, 2025, to increase the number of shares of the Company's common stock that may be offered and sold under the agreement by 15,000, pursuant to which we may offer and sell over a period of time and from time to time up to 55,000 shares of our common stock, par value $0.001 per share.
Agency CMBS						Commercial mortgage backed securities.
Agency Securities						Securities issued or guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae; interests in or obligations backed by pools of fixed rate, hybrid adjustable rate and adjustable rate mortgage loans.
Basis swap contracts						Derivative contracts that allow us to exchange one floating interest rate basis for another, for example, Federal Funds Rate and SOFR, thereby allowing us to diversify our floating rate basis exposures.
Board						ARMOUR’s Board of Directors.
BUCKLER						A Delaware limited liability company, and a FINRA-regulated broker-dealer. The primary purpose of our investment in BUCKLER is to facilitate our access to repurchase financing, on potentially more attractive terms (considering rate, term, size, haircut, relationship and funding commitment) compared to other suitable repurchase financing counterparties.
CFO						Chief Financial Officer and Controller of ARMOUR, Gordon Harper.
CME						Chicago Mercantile Exchange.
CEO						Chief Executive Officer of ARMOUR, Scott Ulm.
Code						The Internal Revenue Code of 1986.
Common Stock Repurchase Program						ARMOUR's common stock repurchase program originally authorized by our Board on December 17, 2012, as amended from time to time.
CPR						Constant prepayment rate.
Dodd-Frank Act						The Dodd-Frank Wall Street Reform and Consumer Protection Act.
Exchange Act						Securities Exchange Act of 1934.
Fannie Mae						The Federal National Mortgage Association.
Fed						The U.S. Federal Reserve.
Federal Funds Rate						Federal Funds Effective Rate.
FINRA						The Financial Industry Regulatory Authority. A private corporation that acts as a self-regulatory organization.
Freddie Mac						The Federal Home Loan Mortgage Corporation.
GAAP						Accounting principles generally accepted in the United States of America.
Ginnie Mae						The Government National Mortgage Administration.
GSE						A U.S. Government Sponsored Entity. Obligations of agencies originally established or chartered by the U.S. government to serve public purposes as specified by the U.S. Congress; these obligations are not explicitly guaranteed as to the timely payment of principal and interest by the full faith and credit of the U.S. government.
Haircut						The weighted average margin requirement, or the percentage amount by which the collateral value must exceed the loan amount. Among other things, it is a measure of our unsecured credit risk to our lenders.

ARMOUR Residential REIT, Inc.

GLOSSARY OF TERMS (continued)


Hybrid						A mortgage that has a fixed rate for an initial term after which the rate becomes adjustable according to a specific schedule.
ISDA						International Swaps and Derivatives Association.
MBS						Mortgage backed securities. A security representing a direct interest in a pool of mortgage loans. The pass-through issuer or servicer collects the payments on the loans in the pool and “passes through” the principal and interest to the security holders on a pro rata basis.
MRA						Master repurchase agreement. A document that outlines standard terms between the Company and counterparties for repurchase agreement transactions.
Multi-Family MBS						MBS issued under Fannie Mae's Delegated Underwriting System (DUS) program.
Preferred C ATM Sales Agreement						An equity sales agreement that we entered into on January 20, 2020 with B. Riley Securities, Inc. (formerly B. Riley FBR, Inc.) and BUCKLER, as sales agents, as amended on June 20, 2024 to add BTIG, LLC as a sales agent, pursuant to which we may offer and sell, over a period of time and from time to time, through one or more of the agents, up to 6,550 shares of Series C Preferred Stock.
REIT						Real Estate Investment Trust. A special purpose investment vehicle that provides investors with the ability to participate directly in the ownership or financing of real-estate related assets by pooling their capital to purchase and manage mortgage loans and/or income property.
SEC						The Securities and Exchange Commission.
SOFR						Secured overnight funding rate. A measure of the cost of borrowing cash overnight collateralized by U.S. Treasury Securities.
TBA Agency Securities						Forward contracts for the purchase (“long position”) or sale (“short position”) of Agency Securities at a predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date.
TBA Drop Income						The discount associated with TBA Agency Securities contracts which reflects the expected interest income on the underlying deliverable Agency Securities, net of an implied financing cost, which would have been earned by the buyer if the TBA Agency Securities contract had settled on the next regular settlement date instead of the forward settlement date specified. TBA Drop Income is calculated as the difference between the forward settlement price of the TBA Agency Securities contract and the spot price of similar TBA Agency Securities contracts for regular settlement. The Company generally accounts for TBA Agency Securities contracts as derivatives and TBA Drop Income is included as part of the periodic changes in fair value of the TBA Agency Securities that the Company recognizes in the Other Income (Loss) section of its Consolidated Statement of Operations.
TRS						Taxable REIT subsidiary.
U.S.						United States.
1940 Act						The Investment Company Act of 1940.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

ARMOUR Residential REIT, Inc.

We seek to create stockholder value through thoughtful investment and risk management of a leveraged and diversified portfolio of MBS. While we do not seek to avoid risk completely, we believe the risk can be quantified from historical experience and seek to actively manage that risk, to earn sufficient compensation to justify taking those risks and to maintain capital levels consistent with the risks we undertake.

Interest Rate Risk

Our primary market risk is interest rate risk. Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control. Changes in the general level of interest rates can affect net interest income, which is the difference between the interest income earned on our assets and the interest expense incurred in connection with our liabilities, by affecting the spread between the interest-earning assets and interest-bearing liabilities. Changes in the level of interest rates also can affect the value of MBS and our ability to realize gains from the sale of these assets. A decline in the value of the MBS pledged as collateral for borrowings under repurchase agreements could result in the counterparties demanding additional collateral pledges or liquidation of some of the existing collateral to reduce borrowing levels.

Our borrowings are not subject to similar restrictions and are generally repurchase agreements of limited duration that track the Federal Funds Rate and SOFR and are periodically refinanced at current market rates. Therefore, on average, our cost of funds may rise or fall more quickly than our earnings rate on our assets. Hence, in a period of increasing interest rates, interest rates on our borrowings could increase without limitation, while the changes in the interest rates on our mortgage related assets could be limited. These factors could lower our net interest income or cause a net loss during periods of rising interest rates, which would negatively impact our liquidity, net income and our ability to make distributions to stockholders.

We anticipate that in most cases the interest rates, interest rate indices and repricing terms of our mortgage assets and our funding sources will not be identical, thereby creating an interest rate mismatch between assets and liabilities. These indices generally move in the same direction, but there can be no assurance that this will continue to occur. Furthermore, our net income may vary somewhat as the spread between one-month interest rates, the typical term for our repurchase agreements, and the interest rates on our mortgage assets varies. During periods of changing interest rates, such interest rate mismatches could negatively impact our net interest income, dividend yield and the market price of our stock.

Another component of interest rate risk is the effect changes in interest rates will have on the market value of our MBS. We face the risk that the market value of our MBS will increase or decrease at different rates than that of our liabilities, including our derivative instruments and obligations to return securities received as collateral.

We primarily assess our interest rate risk by estimating the effective duration of our assets and the effective duration of our liabilities and by estimating the time difference between the interest rate adjustment of our assets and the interest rate adjustment of our liabilities. Effective duration essentially measures the market price volatility of financial instruments as interest rates change. We generally estimate effective duration using various financial models and empirical data. Different models and methodologies can produce different effective duration estimates for the same securities.

The sensitivity analysis tables presented below reflect the estimated impact of an instantaneous parallel shift in the yield curve, up and down 50 and 100 basis points, on the market value of our interest rate-sensitive investments and net interest income, at March 31, 2025 and December 31, 2024. It assumes that the mortgage spread on our MBS remains constant. Actual interest rate movements over time will likely be different, and such differences may be material. When evaluating the impact of changes in interest rates, prepayment assumptions and principal reinvestment rates are adjusted based on ACM’s expectations. Interest rates for interest rate swaps and repurchase agreements are assumed to remain positive. The analysis presented utilized assumptions, models and estimates of ACM based on ACM's judgment and experience.

ARMOUR Residential REIT, Inc.

Market Risk Disclosures (continued)


	Percentage Change in Projected
Change in Interest Rates	Net Interest Income	Portfolio Including Derivatives	Shareholder's Equity
March 31, 2025
1.00%	(1.23)%	(0.99)%	(8.94)%
0.50%	(0.69)%	(0.36)%	(3.26)%
(0.50)%	0.87%	(0.02)%	(0.22)%
(1.00)%	2.06%	(0.47)%	(4.27)%

December 31, 2024
1.00%	(4.92)%	(0.98)%	(9.16)%
0.50%	(2.50)%	(0.42)%	(3.89)%
(0.50)%	2.67%	0.18%	1.65%
(1.00)%	5.58%	0.03%	0.28%

While the tables above reflect the estimated immediate impact of interest rate increases and decreases on a static securities portfolio, we rebalance our securities portfolio from time to time either to seek to take advantage of or reduce the impact of changes in interest rates. It is important to note that the impact of changing interest rates on market value and net interest income can change significantly when interest rates change beyond 100 basis points from current levels. Therefore, the volatility in the market value of our assets could increase significantly when interest rates change beyond amounts shown in the tables above. In addition, other factors impact the market value of and net interest income from our interest rate-sensitive investments and derivative instruments, such as the shape of the yield curve, market expectations as to future interest rate changes and other market conditions. Accordingly, interest income would likely differ from that shown above and such difference might be material and adverse to our stockholders.

Mortgage Spread Risk

Weakness in the mortgage market may adversely affect the performance and market value of our investments. This could negatively impact our book value. Furthermore, if our lenders are unwilling or unable to provide additional financing, we could be forced to sell our MBS at an inopportune time when prices are depressed.

The table below quantifies the estimated changes in the fair value of our securities portfolio and in our stockholders' equity as of March 31, 2025 and December 31, 2024. The estimated impact of changes in spreads is in addition to our interest rate sensitivity presented above. Our securities portfolio's sensitivity to mortgage spread changes will vary with changes in interest rates and in the size and composition of our securities portfolio. Therefore, actual results could differ materially from our estimates.


	March 31, 2025		December 31, 2024
	Percentage Change in Projected		Percentage Change in Projected
Change in MBS spread	Portfolio Value	Shareholders' Equity	Portfolio Value	Shareholders' Equity
+25 BPS	(1.23)%	(11.12)%	(1.31)%	(11.96)%
+10 BPS	(0.49)%	(4.45)%	(0.52)%	(4.78)%
-10 BPS	0.49%	4.45%	0.52%	4.78%
-25 BPS	1.23%	11.12%	1.31%	11.96%

ARMOUR Residential REIT, Inc.

Market Risk Disclosures (continued)

Prepayment Risk

As we receive payments of principal on our MBS, premiums paid on such securities are amortized against interest income and discounts are accreted to interest income as realized. Premiums arise when we acquire MBS at prices in excess of the principal balance of the mortgage loans underlying such MBS. Conversely, discounts arise when we acquire MBS at prices below the principal balance, adjusted for expected impairment losses, of the mortgage loans underlying such MBS. Volatility in actual prepayment speeds will create volatility in the amount of premium amortization we recognize. Higher speeds will reduce our interest income and lower speeds will increase our interest income.

Credit Risk

We have limited our exposure to impairment losses on our securities portfolio of Agency Securities. The payment of principal and interest on the Freddie Mac and Fannie Mae Agency Securities are guaranteed by those respective agencies and the payment of principal and interest on the Agency Securities guaranteed by Ginnie Mae are backed by the full faith and credit of the U.S. Government. Fannie Mae and Freddie Mac remain in conservatorship of the U.S. Government. There can be no assurances as to how or when the U.S. Government will end these conservatorships or how the future profitability of Fannie Mae and Freddie Mac and any future credit rating actions may impact the credit risk associated with Agency Securities and, therefore, the value of the Agency Securities. All of our Agency Securities are issued and guaranteed by GSEs or Ginnie Mae. The GSEs have a long term credit rating of AA+.

Liquidity Risk

Our primary liquidity risk arises from financing long-maturity MBS with short-term debt. The interest rates on our borrowings adjust frequently while the interest rates on our MBS are fixed. Accordingly, in a period of rising interest rates, our borrowing costs will usually increase faster than our interest earnings from MBS. Our repurchase agreements require that we maintain adequate pledged collateral. A decline in the value of the MBS pledged as collateral for borrowings under repurchase agreements could result in the counterparties demanding additional collateral pledges or liquidation of some of the existing collateral to reduce borrowing levels.

Operational Risk

We rely on our financial, accounting and other data processing systems. Computer malware, viruses, computer hacking and phishing attacks have become more prevalent in our industry and may occur on our systems. Although we have not detected a material cybersecurity breach to date, other financial services institutions have reported material breaches of their systems, some of which have been significant. Even with all reasonable security efforts, not every breach can be prevented or even detected. It is possible that we have experienced an undetected breach. There is no assurance that we, or the third parties that facilitate our business activities, have not or will not experience a breach. It is difficult to determine what, if any, negative impact may directly result from any specific interruption or cyber-attacks or security breaches of our networks or systems (or the networks or systems of third parties that facilitate our business activities) or any failure to maintain performance.

ACM has established an Information Technology Steering Committee (the "ITSC") to help mitigate technology risks including cybersecurity. One of the roles of the ITSC is to oversee cyber risk assessments, monitor applicable key risk indicators, review cybersecurity training procedures, oversee the Company’s Cybersecurity Policies, including an incident response plan, and engage third parties to conduct periodic penetration testing. Our cybersecurity risk assessment includes an evaluation of cyber risk related to sensitive data held by third parties on their systems. There is no assurance that these efforts will effectively mitigate cybersecurity risk and mitigation efforts are not an assurance that no cybersecurity incidents will occur.

In addition, our Audit Committee periodically monitors and oversees our information and cybersecurity risks including reviewing and approving any information and cybersecurity policies, procedures and resources, and reviewing our information and cybersecurity risk assessment, detection, protection, and mitigation systems.

ARMOUR Residential REIT, Inc.

Market Risk Disclosures (continued)

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to ensure that information required to be disclosed in our reports filed or furnished under the Exchange Act, is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures. Our CEO and CFO participated in an evaluation by our management of the effectiveness of our disclosure controls and procedures as of the end of our first quarter that ended on March 31, 2025. Based on their participation in that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of March 31, 2025.

Internal Control Over Financial Reporting

Our CEO and CFO participated in an evaluation by our management of any changes in our internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the first quarter ended March 31, 2025. That evaluation did not identify any changes that have been materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ARMOUR Residential REIT, Inc.

Item 1. Legal Proceedings

During the quarter ended March 31, 2025, there have been no material changes to the legal proceedings disclosed in our Annual Report on Form 10–K for the year ended December 31, 2024, filed with the SEC on February 12, 2025.

Item 1A. Risk Factors

Except as set forth below, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 12, 2025.

Recent tariff actions by the U.S and other countries may adversely affect our business, financial condition and results of operations.

The current U.S. administration has recently implemented tariffs on imports from a broad set of countries, including Canada, Mexico, European Union member states, Japan and China. In response to these tariffs, global trading partners have or are likely to impose their own tariffs. Such U.S. tariffs and responsive tariffs have resulted in significant financial market volatility, and their impact on the global economy has been significant. Further effects of these tariffs cannot be predicted with certainty. Continued uncertainty surrounding trade policies and the potential for further tariff increases or the imposition of new tariffs may lead to a continuation or worsening of the impact of the tariffs on the financial markets, including the MBS, repurchase and equity markets. In addition, many economists and certain financial data have indicated an increased likelihood of U.S. and global recessions as a result of the disruptions to international trade. These trade actions and the widespread uncertainty and international tensions resulting therefrom may have a material adverse effect on our business, results of operations, ability to access capital, and financial condition and on the market price of our common stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

ARMOUR Residential REIT, Inc.

Item 6. Exhibits


Exhibit Index
Exhibit Number						Description

10.1						Amendment No. 5, dated February 13, 2025, by and among ARMOUR Residential REIT, Inc. and ARMOUR Capital Management LP, and BUCKLER Securities LLC, B. Riley Securities, Inc., BTIG, LLC, Citizens JMP Securities, LLC, Janney Montgomery Scott LLC, JonesTrading Institutional Services LLC, Ladenburg Thalmann & Co. Inc. and StockBlock Securities LLC (Incorporated by reference to Exhibit 1.1 to ARMOUR's Current Report on Form 8-K filed with the SEC on February 13, 2025).
31.1						Certification of Chief Executive Officer Pursuant to SEC Rule 13a-14(a)/15d-14(a) (1)
31.2						Certification of Chief Financial Officer Pursuant to SEC Rule 13a-14(a)/15d-14(a) (1)
32.1						Certification of Chief Executive Officer Pursuant to 18 U.S.C. §1350 (2)
32.2						Certification of Chief Financial Officer Pursuant to 18 U.S.C. §1350 (2)

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						XBRL Taxonomy Extension Schema Document (1)
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB						XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document (1)
104						Cover Page Interactive Data (formatted as Inline XBRL and contained in Exhibit 101)


(1)						Filed herewith.
(2)						Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


April 23, 2025			ARMOUR RESIDENTIAL REIT, INC.

			/s/ Gordon M. Harper
			Gordon M. Harper
			Chief Financial Officer, Duly Authorized Officer, Principal Financial Officer and Principal Accounting Officer

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4/28/2025		Neutral → Buy	Janney
2/10/2025		Neutral	BTIG Research
6/6/2024	$20.00	Neutral	Janney
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ARMOUR Residential REIT, Inc. Announces Q1 Results and March 31, 2025 Financial Position

ARMOUR Residential REIT, Inc. Announces May 2025 Dividend Rate per Common Share

ARMOUR Residential REIT, Inc. First Quarter 2025 Webcast Scheduled for April 24, 2025

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ARMOUR Residential REIT upgraded by Janney

BTIG Research initiated coverage on ARMOUR Residential REIT

Janney initiated coverage on ARMOUR Residential REIT with a new price target

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ARMOUR Residential REIT, Inc. Announces Q1 Results and March 31, 2025 Financial Position

ARMOUR Residential REIT, Inc. Announces May 2025 Dividend Rate per Common Share

ARMOUR Residential REIT, Inc. First Quarter 2025 Webcast Scheduled for April 24, 2025

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