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What changed in Armour Residential REIT, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Armour Residential REIT, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+343 added−355 removedSource: 10-K (2025-02-12) vs 10-K (2023-12-31)

Top changes in Armour Residential REIT, Inc.'s 2024 10-K

343 paragraphs added · 355 removed · 288 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

32 edited+3 added−6 removed41 unchanged
Biggest changeAccordingly, 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.
Biggest changeWe 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 is further entitled to receive termination fees from us under certain circumstances.
The level of our borrowings may vary periodically ARMOUR Residential REIT, Inc. Business (continued) 2 depending on market conditions. In addition, certain of our MRAs and ISDAs contain a restriction that prohibits our leverage from exceeding twelve times our total stockholders’ equity as well as termination events in the case of significant reductions in equity capital.
The level of our borrowings may vary periodically depending on market conditions. In addition, certain of our MRAs and ISDAs contain a restriction that prohibits our ARMOUR Residential REIT, Inc. Business (continued) 2 leverage from exceeding twelve times our total stockholders’ equity as well as termination events in the case of significant reductions in equity capital.
For GAAP purposes, all changes in the fair value of our derivatives currently flow through earnings. Changes in the fair value of our legacy Agency MBS portfolio, that was designated as available for sale historically, were recognized in other comprehensive income.
For GAAP purposes, all changes in the fair value of our derivatives currently flow through earnings. Changes in the fair value of our legacy Agency MBS portfolio, that was designated as available for sale historically, were recognized in other comprehensive income (loss).
We understand that ESG practices can create value by improving the environment and the lives of ACM's employees, our stockholders, our business partners, and the community and we recognize that understanding our efforts on ESG practices is increasingly important to those key relationships.
We understand that ESG practices can create value by improving the environment and the lives of our employees, stockholders, business partners, and the community and we recognize that understanding our efforts on ESG practices is increasingly important to those key relationships.
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.
The management agreement entitles ACM to receive a management fee 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.
We are required to take actions as may be reasonably required to permit and enable ACM to carry out its duties and obligations. From time to time, we grant restricted stock unit awards to our Board and to our executive officers that vest over various periods through 2027 and 2029, respectively (see Note 9 to the consolidated financial statements).
We are required to take actions as may be reasonably required to permit and enable ACM to carry out its duties and obligations. From time to time, we grant restricted stock unit awards to our Board and to our executive officers that vest over various periods through 2027 and 2029, respectively (see Note 10 to the consolidated financial statements).
Assets At December 31, 2023 and December 31, 2022, 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").
Assets At December 31, 2024 and December 31, 2023, 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").
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 Incident Response Plan and engage third parties to conduct periodic penetration testing.
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.
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.
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; as such, it is possible that we have experienced an undetected breach.
Management The Company is managed by ACM, pursuant to a management agreement (see Note 8 and Note 14 to the consolidated financial statements). 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.
Management The Company is managed by ACM, pursuant to a management agreement (see Note 9 and Note 15 to the consolidated financial statements). 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.
Dividends in excess of REIT taxable income for the year (including taxable income carried forward from the previous year) will generally not be taxable to common stockholders. The portion of the dividends on our common and preferred stock which represented non-taxable return of capital was 47.5% in 2023, 100.0% in 2022 and 100.0% in 2021.
Dividends in excess of REIT taxable income for the year (including taxable income carried forward from the previous year) will generally not be taxable to common stockholders. The portion of the dividends on our common and preferred stock which represented non-taxable return of capital was 14.8% in 2024, 47.5% in 2023 and 100.0% in 2022.
Real Estate Investment Trust Requirements 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.
Business (continued) 5 Real Estate Investment Trust Requirements 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.
Corporate Information We are managed by ACM pursuant to a management agreement between ARMOUR and ACM. We do not have any employees. As of December 31, 2023, ACM had 22 employees that provide services to us. Principal office location: 3001 Ocean Drive, Suite 201, Vero Beach, FL 32963 Phone number: (772) 617-4340. Website: www.armourreit.com .
Corporate Information We are managed by ACM pursuant to a management agreement between ARMOUR and ACM. We do not have any employees. As of February 11, 2025, ACM had 20 employees that provide services to us. Principal office location: 3001 Ocean Drive, Suite 201, Vero Beach, FL 32963 Phone number: (772) 617-4340. Website: www.armourreit.com .
See General risks common to ARMOUR and our peer mortgage REITs in Item 1A. Risk Factors of this Form 10-K for further discussion. ARMOUR Residential REIT, Inc. Business (continued) 6 Compliance with NYSE Corporate Governance Standards We comply with the corporate governance standards of the NYSE.
See General risks common to ARMOUR and our peer mortgage REITs in Item 1A. Risk Factors of this Form 10-K for further discussion. Compliance with NYSE Corporate Governance Standards We comply with the corporate governance standards of the NYSE.
At December 31, 2023, we had approximately $(247,349) in tax deductible expense relating to previously terminated interest rate swap, treasury futures contracts and treasury shorts amortizing through the year 2033. Investment Company Act of 1940 Exclusion We conduct our business so as not to become regulated as an investment company under the 1940 Act.
At December 31, 2024, we had approximately $(189,450) in tax deductible expense relating to previously terminated interest rate swap, treasury futures contracts and treasury shorts amortizing through the year 2034. Investment Company Act of 1940 Exclusion We conduct our business so as not to become regulated as an investment company under the 1940 Act.
In the event that ACM and the Board determine that we should raise additional equity capital, we have the authority, without stockholder approval, to issue additional stock in any manner and on such terms and for such consideration as we deem appropriate, at any ARMOUR Residential REIT, Inc. Business (continued) 5 time.
In the event that ACM and the Board determine that we should raise additional equity capital, we have the authority, without stockholder approval, to issue additional stock in any manner and on such terms and for such consideration as we deem appropriate, at any time.
In acquiring MBS, we compete with numerous mortgage REITs, mortgage finance and specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, other lenders, governmental bodies and other entities.
In acquiring MBS, we compete with numerous mortgage REITs, mortgage finance and specialty ARMOUR Residential REIT, Inc. Business (continued) 6 finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, other lenders, governmental bodies and other entities.
We make available on our website under “SEC filings,” free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such materials to the SEC.
We make available on our website under “SEC filings,” free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file or furnish such materials to the SEC.
No other reclassifications have been made to previously reported amounts. Strategies 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.
Strategies 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.
At December 31, 2023, there were 41,201 authorized shares of common stock and 43,153 authorized shares of preferred stock, respectively, available for issuance.
At December 31, 2024, there were 62,588 authorized shares of common stock and 43,153 authorized shares of preferred stock, respectively, available for issuance.
At December 31, 2023, there were 2,287 authorized shares of common stock remaining available for repurchase under our Common Stock Repurchase Program and 2,000 authorized shares of Series C Preferred Stock available for repurchase under our Series C Preferred Stock Repurchase Program.
At December 31, 2024, there were 2,217 authorized shares of common stock remaining available for repurchase under our Common Stock Repurchase Program and 2,000 authorized shares of Series C Preferred Stock available for repurchase under our Series C Preferred Stock Repurchase Program. ARMOUR Residential REIT, Inc.
Based on the management fee base, gross equity raised, as of December 31, 2023, the Company’s contractual management fee commitments are: Year Contractual Management Fee 2024 39,240 2025 39,240 2026 39,240 2027 39,240 2028 39,240 2029 39,240 Total $ 235,440 The Company cannot voluntarily terminate the management agreement without cause before the expiration of its contractual term.
Based on the management fee base, gross equity raised, as of December 31, 2024, the Company’s contractual management fee commitments, prior to management fees waived, are: Year Contractual Management Fee 2025 $ 41,242 2026 41,242 2027 41,242 2028 41,242 2029 41,242 Total $ 206,210 The Company cannot voluntarily terminate the management agreement without cause before the expiration of its contractual term.
The Company is managed by ACM, an investment advisor registered with the Securities and Exchange Commission ("SEC") (which registration the Company provides notice of to the state of Florida), (see Note 8 and Note 14 to the consolidated financial statements).
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 ("SEC") (which registration the Company provides notice of to the state of Florida), (see Note 9 and Note 15 to the consolidated financial statements).
Our investor relations website can be found under the “Investor Relations” tab at www.armourreit.com .
Our investor relations website can be found at www.armourreit.com .
ARMOUR’s Nominating and Corporate Governance Committee has primary oversight of our efforts in ESG policies, activities, and communications. We ARMOUR Residential REIT, Inc. Business (continued) 4 assess our practices with a goal of meeting or exceeding industry and peer standards.
To demonstrate our commitment, ARMOUR’s Nominating and Corporate Governance Committee provides primary oversight of our efforts in ESG policies, activities, and communications. Together, we assess our practices with a goal of meeting or exceeding industry and peer standards.
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 and certain executive officers of ARMOUR. Refer to the Glossary of Terms for definitions of capitalized terms and abbreviations used in this report.
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. U.S. dollar amounts are presented in thousands, except per share amounts or as otherwise noted.
At December 31, 2023, December 31, 2022 and December 31, 2021, the effective management fee rate, prior to management fees waived, was 0.93%, 0.95% and 0.98% based on gross equity raised of $4,231,965, $3,787,042 and $3,313,937 and effectively a rate of 3.09%, 3.53% and 3.43% based on total stockholders' equity, respectively. ARMOUR Residential REIT, Inc.
At December 31, 2024, December 31, 2023 and December 31, 2022, the effective management fee was 0.92%, 0.93% and 0.95% prior to management fees waived, and 0.77%, 0.77% and 0.74%, after management fees waived, based on gross equity raised of $4,498,880, $4,231,965 and $3,787,042, respectively and effectively a rate of 3.03%, 3.09% and 3.23% based on total stockholders' equity.
ACM is further entitled to receive termination fees from us under certain circumstances. On February 14, 2023, the Company extended the contractual term of the management agreement through December 31, 2029.
On February 14, 2023, the Company extended the contractual term of the management agreement through December 31, 2029.
Our Agency Securities consist of fixed rate loans. 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. Borrowings We borrow against our MBS using repurchase agreements.
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. Borrowings We borrow against our MBS using repurchase agreements.
Human Capital Resources Our greatest strength and most important assets are the members of the ARMOUR team. Their overall well-being is paramount to the Company's success. ACM ensures its employees have a rewarding, supportive, and healthy working environment in which to thrive, and endeavors to support their success in all things. A diverse and inclusive internal climate is supported.
ACM ensures its employees have a rewarding, supportive, and healthy working environment in which to thrive, and endeavors to support their success in all things.
We continually seek opportunities to enhance the communities where we operate through corporate giving, employee volunteering, human capital development, and environmental sustainability programs. We continue to evaluate relevant corporate sustainability reporting frameworks with a goal of adopting and implementing best practices in our reporting framework.
We continually seek opportunities to enhance the communities where we operate through corporate giving, employee volunteering, human capital development, and environmental sustainability programs. Additional information regarding our efforts to implement environmental and social factors in the operation of our business is available in the ESG section of our website at www.armourreit.com.
During the years ended December 31, 2023, December 31, 2022 and December 31, 2021, ACM voluntarily waived management fees of $6,600 and $7,800 and $8,600, respectively (see Note 8 to the consolidated financial statements). The monthly management fees are not calculated based on the performance of our assets.
ARMOUR Residential REIT, Inc. Business (continued) 3 During the years ended December 31, 2024, December 31, 2023 and December 31, 2022 ACM voluntarily waived management fees of $6,600, $6,600 and $7,800 respectively. ACM is currently waiving $550 per month of its contractual management fee until ACM provides further notice to ARMOUR.
Removed
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.
Added
All per share amounts, common shares outstanding and stock-based compensation amounts for all periods presented reflect our one-for-five reverse stock split (the "Reverse Stock Split"), which was effective September 29, 2023. No other reclassifications have been made to previously reported amounts.
Removed
All per share amounts, common shares outstanding and stock-based compensation amounts for all periods presented reflect our Reverse Stock Split. Interest earned/paid on cash collateral posted/held on interest rate swap contracts was reclassified from Interest Income to Gain (loss) on derivatives, net, in the consolidated financial statements to conform to current presentation.
Added
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.
Removed
Business (continued) 3 ACM began waiving 40% of its management fee during the second quarter of 2020 and on January 13, 2021, ACM notified ARMOUR that it intended to adjust the fee waiver to the rate of $2,400 for the first quarter of 2021 and $800 per month thereafter.
Added
Furthermore, we continue to evaluate relevant corporate sustainability reporting frameworks with a goal of adopting and implementing best practices in our reporting framework. ARMOUR Residential REIT, Inc. Business (continued) 4 Human Capital Resources Our greatest strength and most important assets are the members of the ARMOUR team. Their overall well-being is paramount to the Company's success.
Removed
On April 20, 2021, ACM notified ARMOUR that it intended to adjust the fee waiver to the rate of $2,100 for the second quarter of 2021 and $700 per month thereafter.
Removed
On October 25, 2021, ACM notified ARMOUR that it intended to adjust the fee waiver from the rate of $700 per month to $650 per month, effective November 1, 2021, until further notice.
Removed
On February 14, 2023, ACM notified ARMOUR that it intended to adjust the fee waiver to the rate of $1,650 for the first quarter of 2023 and $550 per month thereafter until ACM provides further notice to ARMOUR.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

123 edited+30 added−24 removed232 unchanged
Biggest changeRisk Factors (continued) 8 Risk Factor Summary ARMOUR’s MBS investments rely heavily on financial leverage, magnifying our interest rate and spread risks: • Changes in interest rates generally, and volatility in the relationship between market prices and yields on our MBS and the prices and yields on benchmark fixed income securities, have previously and may in the future adversely impact our net interest income, total comprehensive income, asset values and stockholders’ equity; • Our MBS have maturities ranging from 10 to 30 years (although amortization and prepayments reduce average lives) while our repurchase agreement borrowings generally are for one to 90 days; • Fed monetary policy significantly influences interest rates and short-term financing availability; • As compared to our common stock equity of $1,100,009 at December 31, 2023, the fair value of our interest rate swaps was $870,560, which represents forecasts of future net swap coupon amounts.
Biggest changeRisk Factors (continued) 8 Risk Factor Summary ARMOUR’s MBS investments rely heavily on financial leverage, magnifying our interest rate and spread risks: • Changes in interest rates impact our level of net interest income, total comprehensive income (loss) and stockholders' equity and we cannot always successfully mitigate such interest rate risks; • Volatility in the relationships between the market prices and yields for our securities and certain benchmark prices and interest rates periodically will adversely affect our net income, earnings per share and stockholders' equity • Fed monetary policy significantly influences interest rates and short-term financing availability; • U.S.
If we fail to qualify for an exclusion from registration as an investment company or an exclusion from the definition of an investment company, our ability to use leverage would be substantially reduced. Our business will be materially and adversely affected if we fail to qualify for an exclusion from regulation under the 1940 Act.
If we fail to qualify for an exclusion from registration as an investment company or an exclusion from the definition of an investment company, our ability to use leverage would be substantially reduced. Our business will be materially and adversely affected if we fail to qualify for an exclusion from regulation under the 1940 Act.
As a result, Distributable Earnings may include amounts that were recognized and reported elsewhere in our consolidated financial statements previously. For example, the net coupon effect of interest rate swaps is the primary driver of market value adjustments on these positions that were recognized in total comprehensive loss and total stockholders’ equity in prior periods.
As a result, Distributable Earnings may include amounts that were recognized and reported elsewhere in our consolidated financial statements previously. For example, the net coupon effect of interest rate swaps is the primary driver of market value adjustments on these positions that were recognized in total comprehensive income (loss) and total stockholders’ equity in prior periods.
However, because market yields on our Agency Securities are not perfectly correlated with interest rate swap market yields, it is likely that our daily requirements to post collateral to our counterparties will not equal the collateral our counterparties are required to post to us. In times of higher market volatility, those differences can become more significant.
However, because market yields on our Agency Securities are not perfectly correlated with interest rate market yields, it is likely that our daily requirements to post collateral to our counterparties will not equal the collateral our counterparties are required to post to us. In times of higher market volatility, those differences can become more significant.
Periodic net swap coupon amounts are largely offset by corresponding adjustments in the fair values of the swaps, which are concurrently reported in total comprehensive income and total stockholders’ equity, resulting in a relatively minor aggregate impact.
Periodic net swap coupon amounts are largely offset by corresponding adjustments in the fair values of the swaps, which are concurrently reported in total comprehensive income (loss) and total stockholders’ equity, resulting in a relatively minor aggregate impact.
Accordingly, the attributed accretion or dilution we report for a quarter or longer period may not be fully representative of the daily results of our capital activities. ARMOUR Residential REIT, Inc. Risk Factors (continued) 17 ARMOUR is externally managed by ACM: ACM may terminate the management agreement for any reason.
Accordingly, the attributed accretion or dilution we report for a quarter or longer period may not be fully representative of the daily results of our capital activities. ARMOUR Residential REIT, Inc. Risk Factors (continued) 18 ARMOUR is externally managed by ACM: ACM may terminate the management agreement for any reason.
Accordingly, even when we are able to invest the proceeds of stock issuances in MBS at attractive prices, there may be a temporary delay before we begin to earn investment income. We may repurchase our common stock at prices below book value, to the potential disadvantage of selling stockholders .
Accordingly, even when we are able to invest the proceeds of stock issuances in MBS at attractive prices, there may be a temporary delay before we begin to earn investment income. We may repurchase our common and preferred stock at prices below book value, to the potential disadvantage of selling stockholders.
The commitment is treated by BUCKLER currently as capital for regulatory purposes and BUCKLER may pledge the securities to secure its own borrowings (see Note 14 to the consolidated financial statements). BUCKLER relies primarily on bilateral and triparty repurchase agreement funding through the FICC.
The commitment is treated by BUCKLER currently as capital for regulatory purposes and BUCKLER may pledge the securities to secure its own borrowings (see Note 15 to the consolidated financial statements). BUCKLER relies primarily on bilateral and triparty repurchase agreement funding through the FICC.
Similarly, the (dilutive) accretive effect of our capital activity is $(0.03) and $1.87 per common share, respectively (larger) smaller when calculated on an annual basis as compared to the algebraic sum of the individual quarterly calculations. The denominator effect is also present when aggregating days into a month or months into a quarter for purposes of per share calculations.
Similarly, the (dilutive) accretive effect of our capital activity is $(0.08) and $0.03 per common share, respectively (larger) smaller when calculated on an annual basis as compared to the algebraic sum of the individual quarterly calculations. The denominator effect is also present when aggregating days into a month or months into a quarter for purposes of per share calculations.
We rely on sophisticated information technology systems, networks, and infrastructure in managing our day-to-day operations. Despite cyber-security measures already in place, which we monitor on a regular basis, our information technology systems, networks, and infrastructure may be vulnerable to deliberate attacks or unintentional events that could interrupt or interfere with their functionality or the confidentiality of our information.
We rely on sophisticated information technology systems, networks, and infrastructure in managing our day-to-day operations. Despite cybersecurity measures already in place, which we monitor on a regular basis, our information technology systems, networks, and infrastructure may be vulnerable to deliberate attacks or unintentional events that could interrupt or interfere with their functionality or the confidentiality of our information.
For example, the ongoing war between Russia and Ukraine and resulting economic sanctions imposed by many countries on Russia, as well as the recent outbreak of hostilities in the Middle East, have led to disruption, instability and volatility in the U.S. and global markets and industries and are expected to have a negative impact on the U.S. and broader global economies.
For example, the ongoing war between Russia and Ukraine and resulting economic sanctions imposed by many countries on Russia, as well as the ongoing hostilities in the Middle East, have led to disruption, instability and volatility in the U.S. and global markets and industries and are expected to have a negative impact on the U.S. and broader global economies.
ARMOUR’s board of directors has authorized our CEO to issue new common shares where the net proceeds to the Company, after fees and expenses, represents at least 93.5% of our most recent estimate of ARMOUR’s book value per common share. We endeavor to achieve net proceeds representing a higher percentage.
ARMOUR’s board of directors has authorized our CEO and CFO to issue new common shares where the net proceeds to the Company, after fees and expenses, represents at least 93.50% of our most recent estimate of ARMOUR’s book value per common share. We endeavor to achieve net proceeds representing a higher percentage.
Other mortgage REITs report Distributable Earnings or similar measures that are calculated on a different basis than the basis we use. For example, other calculations may exclude some or all prepayment effects and/or more or less hedging activities. Because Distributable Earnings is not a standardized metric, it may not be directly comparable across various reporting companies. ARMOUR Residential REIT, Inc.
Other mortgage REITs report Distributable Earnings or similar measures that are calculated on a different basis than the basis we use. For example, other calculations may exclude some or all prepayment effects and/or more or less hedging activities. Because Distributable Earnings is not a standardized metric, it may not be directly comparable across various reporting companies.
Risk Factors (continued) 13 There is a risk that our counterparties might be unwilling to continue to extend repurchase financing to us. Changes in regulation, market conditions or the financial position or business strategy of our counterparties could cause them to reduce or terminate our repurchase financing facilities.
There is a risk that our counterparties might be unwilling to continue to extend repurchase financing to us. Changes in regulation, market conditions or the financial position or business strategy of our counterparties could cause them to reduce or terminate our repurchase financing facilities.
Termination would have little practical effect on our current investment, financing or liquidity positions. Terminating or entering into new swaps changes our exposure to future interest rate changes. The fair value of our swap positions will ultimately go to zero over their remaining terms, which averaged 68 months as of December 31, 2023.
Termination would have little practical effect on our current investment, financing or liquidity positions. Terminating or entering into new swaps changes our exposure to future interest rate changes. The fair value of our swap positions will ultimately go to zero over their remaining terms, which averaged 76 months as of December 31, 2024.
In addition, if stockholders hold our shares as a capital asset, to the extent return of capital distributions exceed their adjusted tax basis in their shares, such stockholders would be required to include those distributions in income as long-term capital gain (or short-term capital gain if their shares have been held for one year or less).
In addition, if stockholders hold our shares as a capital asset, to the extent return of capital distributions exceed their adjusted tax basis in their shares, such stockholders would be required to include those distributions in income as long-term capital gain (or short-term capital gain if their shares have been held for one year or less). ARMOUR Residential REIT, Inc.
Risk Factors (continued) 21 We consider Distributable Earnings as a measure of our investment performance and discuss our periodic financial results in terms of Distributable Earnings in our press releases and conference calls with equity analysts. We believe that Distributable Earnings is useful to investors because it is related to the amount of dividends we may distribute.
We consider Distributable Earnings as a measure of our investment performance and discuss our periodic financial results in terms of Distributable Earnings in our press releases and conference calls with equity analysts. We believe that Distributable Earnings is useful to investors because it is related to the amount of dividends we may distribute.
Risk Factors Page Risk Factor Summary 8 ARMOUR’s MBS investments rely heavily on financial leverage, magnifying our interest rate and spread risks 8 ARMOUR actively issues new shares and redeems outstanding shares of its common and preferred stock 8 ARMOUR is externally managed by ACM 8 We and equity analysts consider Distributable Earnings as a measure of ARMOUR’s investment performance 9 Our affiliate BUCKLER is our largest financing counterparty and placement agent under our ATM program 9 General risks common to ARMOUR and our peer mortgage REITs 9 ARMOUR Residential REIT, Inc.
Risk Factors Page Risk Factor Summary 8 ARMOUR’s MBS investments rely heavily on financial leverage, magnifying our interest rate and spread risks 8 ARMOUR actively issues new shares and may redeem outstanding shares of its common and preferred stock 8 ARMOUR is externally managed by ACM 8 We and equity analysts consider Distributable Earnings as a measure of ARMOUR’s investment performance 9 Our affiliate BUCKLER is our largest financing counterparty and placement agent under our at-the-market ("ATM") offering program 9 General risks common to ARMOUR and our peer mortgage REITs 9 ARMOUR Residential REIT, Inc.
The management agreement entitles ACM to receive a management fee payable monthly in arrears calculated based on gross equity raised (see Note 8 and Note 14 to the consolidated financial statements). The annualized management fee rate is (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.
The management agreement entitles ACM to receive a management fee payable monthly in arrears calculated based on gross equity raised (see Note 9 and Note 15 to the consolidated financial statements). The annualized management fee rate is (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.
Officers and directors of ours who are also officers of ACM will therefore benefit from the exculpation and indemnification ARMOUR Residential REIT, Inc. Risk Factors (continued) 18 provisions of our articles of incorporation and by-laws and accordingly may not be liable to us in such circumstances.
Officers and directors of ours who are also officers of ACM will therefore benefit from the exculpation and indemnification provisions of our articles of incorporation and by-laws and accordingly may not be liable to us in such circumstances. ARMOUR Residential REIT, Inc.
In addition, in certain cases, the modification of a debt instrument or, potentially, an increase in the value of a debt instrument that we acquired at a significant discount, could result in the conversion of the instrument from a qualifying real estate asset to a wholly or partially non-qualifying asset that must be contributed to a TRS or disposed of in order for us to qualify or maintain our ARMOUR Residential REIT, Inc.
In addition, in certain cases, the modification of a debt instrument or, potentially, an increase in the value of a debt instrument that we acquired at a significant discount, could result in the conversion of the instrument from a qualifying real estate asset to a wholly or partially non-qualifying asset that must be contributed to a TRS or disposed of in order for us to qualify or maintain our qualification as a REIT.
The sale and purchase prices are set several percentage points below the current fair value of the MBS. This “haircut” percentage provides the counterparty with excess collateral to secure their loan and provides us with an incentive to complete the repurchase transaction on schedule. ARMOUR Residential REIT, Inc.
The sale and purchase prices are set several percentage points below the current fair value of the MBS. This “haircut” percentage provides the counterparty with excess collateral to secure their loan and provides us with an incentive to complete the repurchase transaction on schedule.
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. ARMOUR Residential REIT, Inc.
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.
Risk Factors (continued) 33 We are subject to financial reporting and other requirements for which our accounting, internal audit and other management systems and resources may not be adequately prepared . We are subject to reporting and other obligations under the Securities Act and the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act.
We are subject to financial reporting and other requirements for which our accounting, internal audit and other management systems and resources may not be adequately prepared . We are subject to reporting and other obligations under the Securities Act and the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act.
This, along with other factors, should enable us to qualify for the tax benefits accorded to a REIT under the Code. However, we have not established a minimum dividend payment level and our ability to pay dividends may be adversely affected by the risk factors described in this report.
This, along with other factors, should enable us to qualify for the tax benefits accorded to a REIT under the Code. However, we ARMOUR Residential REIT, Inc. Risk Factors (continued) 34 have not established a minimum dividend payment level and our ability to pay dividends may be adversely affected by the risk factors described in this report.
Capital loss carry forwards totaling $(1,057,560) expired unused in 2023 and prior years because we did not generate enough taxable net capital gains during that period relative to our level of distributions. Our current practice of declaring dividends based on non-GAAP Distributable Earnings increases the likelihood that net capital gains realized will be treated as distributed in the year realized.
Capital loss carry forwards totaling $(1,071,379) expired unused in 2024 and prior years because we did not generate enough taxable net capital gains during that period relative to our level of distributions. Our current practice of declaring dividends based on non-GAAP Distributable Earnings increases the likelihood that net capital gains realized will be treated as distributed in the year realized.
Gross equity raised substantially exceeds total stockholders' equity determined in accordance with GAAP and management fee expenses do not decline with reductions in our total stockholders' equity. As a result, ACM's annualized contractual management fee rate as of December 31, 2023, equaled 3.09% of stockholders' equity.
Gross equity raised substantially exceeds total stockholders' equity determined in accordance with GAAP and management fee expenses do not decline with reductions in our total stockholders' equity. As a result, ACM's annualized contractual management fee rate as of December 31, 2024 equaled 3.03% of stockholders' equity .
There are potential conflicts of interest in our relationship with ACM and its affiliates, including BUCKLER, which could result in decisions that are not in the best interests of our stockholders. We are subject to conflicts of interest arising out of our relationship with ACM and its affiliates, including BUCKLER. Entities affiliated with Mr. Ulm and Mr.
There are potential conflicts of interest in our relationship with ACM and its affiliates, including BUCKLER, which could result in decisions that are not in the best interests of our stockholders . We are subject to conflicts of interest arising out of our relationship with ACM and its affiliates, including BUCKLER. An entity affiliated with Mr.
ARMOUR continues to maintain active repurchase financing arrangements with numerous other counterparties with the intention of reducing our risk of relying primarily on BUCKLER. At December 31, 2023, we had repurchase borrowings from 14 different counterparties including BUCKLER.
ARMOUR continues to maintain active repurchase financing arrangements with numerous other counterparties with the intention of reducing our risk of relying primarily on BUCKLER. At December 31, 2024, we had repurchase borrowings from 17 different counterparties including BUCKLER.
We may be a target of a short squeeze, and investors may lose a significant portion or all of their investment if they purchase our shares at a rate that is significantly disconnected from our underlying value.
We may be a target of a short squeeze, and investors may lose a significant portion or all of their investment if they purchase our shares at a rate that is significantly disconnected from our underlying value. ARMOUR Residential REIT, Inc.
We and equity analysts consider Distributable Earnings as a measure of ARMOUR’s investment performance: Distributable Earnings is a non-GAAP measure which excludes gains and losses, and therefore is an imperfect measure of our overall financial performance. Distributable Earnings is not a standardized metric. ARMOUR Residential REIT, Inc.
We and equity analysts consider Distributable Earnings as a measure of ARMOUR’s investment performance : Distributable Earnings is a non-GAAP measure which excludes gains and losses, and therefore is an imperfect measure of our overall financial performance, and is not a standardized metric.
As more swap transactions are being executed through clearing facilities, our ability to enter into new bilateral swaps is waning. We have begun using exchange -traded futures contracts and cleared swaps in place of bilateral swaps. While these contracts are more liquid than bilateral swaps, they also may require substantially higher initial margin deposits.
As more swap transactions are being executed through clearing facilities, our ability to enter into new bilateral swaps has waned. We have been using exchange -traded futures contracts and cleared swaps in place of bilateral swaps. While these contracts are more liquid than bilateral swaps, they also may require substantially higher initial margin deposits.
We also may terminate swaps before their maturity and receive or make final settlement payments based on the estimated fair value of the swap at the time of termination. During stressful market conditions, we may be forced to sell MBS at depressed prices, thereby potentially incurring permanent equity losses.
We also may terminate swaps before their maturity and receive or make final settlement payments based on the estimated fair value of the swap at the time of termination. During stressful market conditions, we have sold and may in the future be forced to sell MBS at distressed prices, thereby potentially incurring permanent equity losses.
Our common stock has experienced and may continue to experience price fluctuations, which could cause you to lose a significant portion of your investment and interfere with our efforts to grow our business.
Risk Factors (continued) 36 Our common stock has experienced and may continue to experience price fluctuations, which could cause you to lose a significant portion of your investment and interfere with our efforts to grow our business.
In this illustration, comprehensive loss per common share for the year ended December 31, 2023 and December 31, 2022, is $(0.03) and $1.87 per share, respectively (lower) higher than the algebraic sum of corresponding amounts for the four individual quarters of the year.
In this illustration, comprehensive loss per common share for the year ended December 31, 2024 and December 31, 2023, is $(0.08) and $0.03 per share, respectively (lower) higher than the algebraic sum of corresponding amounts for the four individual quarters of the year.
The market trading price of our common stock tends to be positively correlated with the general price levels of the MBS that represent our target investments. Therefore, opportunities to raise capital at attractive prices may occur when potential investment opportunities are relatively less attractive.
Risk Factors (continued) 16 We may issue stock when investment opportunities are relatively less attractive. The market trading price of our common stock tends to be positively correlated with the general price levels of the MBS that represent our target investments. Therefore, opportunities to raise capital at attractive prices may occur when potential investment opportunities are relatively less attractive.
The remainder of our investment in securities (other than government securities, TRSs and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer.
The remainder of our investment in securities (other than government securities, TRSs and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in ARMOUR Residential REIT, Inc.
We may change our target assets financing strategy and investment strategies at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the investments described in this Annual Report on Form 10-K.
We may change our target assets financing strategy and investment strategies at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the investments described in this Annual Report on Form 10-K. Our Board also determines our ARMOUR Residential REIT, Inc.
When considered with the variation margin requirements, periodic net swap coupon amounts have relatively little practical impact on our current investment, financing or liquidity positions. Terminating interest rate swaps would merely result in the offsetting of our recognized interest rate swap asset and obligation to return cash collateral posted.
When considered with the variation margin requirements, periodic net swap coupon amounts have relatively little practical impact on our current investment, financing or liquidity positions. ARMOUR Residential REIT, Inc. Risk Factors (continued) 13 Terminating interest rate swaps would merely result in the offsetting of our recognized interest rate swap asset and obligation to return cash collateral posted.
Furthermore, while the exemptive relief eliminates the CPO requirement, we still operate a commodity pool and are therefore subject to other CFTC requirements. Such other requirements may include having our interest rate swap contracts cleared through recognized clearing organizations or having to post higher initial margins on uncleared swaps.
Furthermore, while the exemptive relief eliminates the CPO requirement, we still operate a commodity pool and are therefore subject to ARMOUR Residential REIT, Inc. Risk Factors (continued) 32 other CFTC requirements. Such other requirements may include having our interest rate swap contracts cleared through recognized clearing organizations or having to post higher initial margins on uncleared swaps.
Such factors are themselves influenced by government monetary, fiscal and regulatory policies and ARMOUR Residential REIT, Inc. Risk Factors (continued) 14 general economic conditions such as the level of and trends in interest rates, gross domestic product, employment and consumer confidence. Prepayment expectations are an integral part of pricing Agency Securities in the marketplace.
Such factors are themselves influenced by government monetary, fiscal and regulatory policies and general economic conditions such as the level of and trends in interest rates, gross domestic product, employment and consumer confidence. Prepayment expectations are an integral part of pricing Agency Securities in the marketplace.
We may not terminate our management agreement with ACM before December 31, 2029, except for cause or in connection with the liquidation of ARMOUR or certain business combination transactions.
The termination of the management agreement may be difficult and costly. We may not terminate our management agreement with ACM before December 31, 2029, except for cause or in connection with the liquidation of ARMOUR or certain business combination transactions.
Accordingly, we may temporarily invest the proceeds of stock issuances by reducing our repo borrowings on our existing portfolio or ARMOUR Residential REIT, Inc. Risk Factors (continued) 15 purchasing US Treasuries or other assets in anticipation of more attractive MBS investment opportunities in the future. Typically, we purchase our MBS for regular settlement, which occurs only once a month.
Accordingly, we may temporarily invest the proceeds of stock issuances by reducing our repo borrowings on our existing portfolio or purchasing US Treasuries or other assets in anticipation of more attractive MBS investment opportunities in the future. Typically, we purchase our MBS for regular settlement, which occurs only once a month.
It can be difficult to predict the impact on interest rates of unexpected and uncertain global political and economic events, such as the outbreak of a pandemic such as COVID-19, epidemic disease, warfare (including the war between Russia and Ukraine as well as the hostilities in the Middle East), economic and international trade conflicts or sanctions, the change in the political makeup of the U.S.
It can be difficult to predict the impact on interest rates of unexpected and uncertain global political and economic events, such as pandemics, epidemic disease, warfare (including the ongoing war between Russia and Ukraine and Middle East hostilities), economic and international trade conflicts or sanctions, the change in the political makeup of the U.S.
In the absence of offsetting net capital loss carry forward amounts, we will be ARMOUR Residential REIT, Inc. Risk Factors (continued) 28 required to make timely distributions of future net capital gains realized, or alternatively, pay U.S. federal income tax on such realized net capital gains not distributed. Distributions to tax-exempt investors may be classified as unrelated business taxable income.
In the absence of offsetting net capital loss carry forward amounts, we will be required to make timely distributions of future net capital gains realized, or alternatively, pay U.S. federal income tax on such realized net capital gains not distributed. Distributions to tax-exempt investors may be classified as unrelated business taxable income.
We may be required at times to adopt less efficient methods of financing certain of our mortgage related investments and we may be precluded from ARMOUR Residential REIT, Inc. Risk Factors (continued) 31 acquiring certain types of higher yielding securities. The net effect of these factors would be to lower our net interest income.
We may be required at times to adopt less efficient methods of financing certain of our mortgage related investments and we may be precluded from acquiring certain types of higher yielding securities. The net effect of these factors would be to lower our net interest income.
In addition, in general, no more than 5% of the value of our assets (other than government securities, TRSs and qualified real estate assets) can consist of the securities of any one issuer, and no more than 20% of the value of our total securities can be represented by securities of one or more TRSs.
Risk Factors (continued) 28 general, no more than 5% of the value of our assets (other than government securities, TRSs and qualified real estate assets) can consist of the securities of any one issuer, and no more than 20% of the value of our total securities can be represented by securities of one or more TRSs.
If we fail to comply with the REIT tax requirements, we must dispose of a portion of our assets within 30 days after the end of the calendar quarter in order to avoid losing our REIT status and suffering adverse tax ARMOUR Residential REIT, Inc. Risk Factors (continued) 26 consequences.
If we fail to comply with the REIT tax requirements, we must dispose of a portion of our assets within 30 days after the end of the calendar quarter in order to avoid losing our REIT status and suffering adverse tax consequences.
Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or ARMOUR Residential REIT, Inc. Risk Factors (continued) 35 estimate the amount, timing, or nature of our future offerings.
Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of our future offerings.
These transactions may not be the result of arm’s length negotiations and may involve conflicts between our interests and the interests of ACM and/or its affiliates in obtaining favorable terms and conditions. ACM's management fees are calculated based on our gross equity raised and not on our performance.
These transactions may not be the result of arm’s length negotiations and may involve conflicts between our interests and the interests of ACM and/or its affiliates in obtaining favorable terms and conditions. ARMOUR Residential REIT, Inc. Risk Factors (continued) 20 ACM's management fees are calculated based on our gross equity raised and not on our performance.
As a result of the foregoing restrictions, we are limited in our ability to make or dispose of certain investments. To the extent that the SEC staff publishes new or different guidance with respect to these matters, we may be required to adjust our strategy accordingly.
As a result of the foregoing restrictions, we are limited in our ability to make or dispose of certain investments. To the extent that the SEC staff publishes new or different guidance with respect to these ARMOUR Residential REIT, Inc. Risk Factors (continued) 31 matters, we may be required to adjust our strategy accordingly.
Our Board also determines our operational policies and may amend or revise such policies, including our policies with respect to our REIT qualification, acquisitions, dispositions, operations, indebtedness and distributions, or approve transactions that deviate from these policies, without a vote of, or notice to, our stockholders.
Risk Factors (continued) 26 operational policies and may amend or revise such policies, including our policies with respect to our REIT qualification, acquisitions, dispositions, operations, indebtedness and distributions, or approve transactions that deviate from these policies, without a vote of, or notice to, our stockholders.
Our return of capital distributions may increase capital gains. Differences in accounting methods for tax and financial reporting purposes have periodically resulted in ARMOUR reporting taxable income that is less than our comprehensive income for the same period. ARMOUR has also reported taxable losses for periods in which it reported comprehensive income.
Differences in accounting methods for tax and financial reporting purposes have periodically resulted in ARMOUR reporting taxable income that is less than our comprehensive income for the same period. ARMOUR has also reported taxable losses for periods in which it reported comprehensive income.
ARMOUR Residential REIT, Inc. Risk Factors (continued) 16 The following tables illustrate these denominator effects for ARMOUR for 2023 and 2022.
ARMOUR Residential REIT, Inc. Risk Factors (continued) 17 The following tables illustrate these denominator effects for ARMOUR for 2024 and 2023.
Several of our competitors are substantially larger and have considerably greater financial, technical, marketing and other ARMOUR Residential REIT, Inc. Risk Factors (continued) 24 resources than we do. Several other REITs may have investment objectives that overlap with ours, which may create additional competition for investment opportunities and financing.
Several of our competitors are substantially larger and have considerably greater financial, technical, marketing and other resources than we do. Several other REITs may have investment objectives that overlap with ours, which may create additional competition for investment opportunities and financing.
ARMOUR Residential REIT, Inc. Risk Factors (continued) 10 ARMOUR’s business of investing in MBS relies heavily on financial leverage which magnifies our interest rate and spread risks: Changes in interest rates impact our level of net interest income, total comprehensive income and stockholders' equity and we cannot always successfully mitigate such interest rate risks.
ARMOUR Residential REIT, Inc. Risk Factors (continued) 10 ARMOUR’s MBS investments rely heavily on financial leverage, magnifying our interest rate and spread risks: Changes in interest rates impact our level of net interest income, total comprehensive income (loss) and stockholders' equity and we cannot always successfully mitigate such interest rate risks.
ACM's voluntary fee waiver does not reduce the amount of such termination payment. The contractual management fee payable to ACM for the 12 months ended December 31, 2023, was $38,121.
ACM's voluntary fee waiver does not reduce the amount of such termination payment. The contractual management fee payable to ACM for the 12 months ended December 31, 2024, was $39,726.
Agency Securities with characteristics expected to be favorable often command marginally higher prices, or “pay ups.” We seek to purchase Agency Securities with favorable prepayment characteristics when the required pay ups are relatively lower and may sell our Agency Securities when their pay ups are relatively higher.
Agency Securities with characteristics expected to be favorable often command marginally higher prices, or “pay ups.” We seek to purchase Agency Securities with favorable ARMOUR Residential REIT, Inc. Risk Factors (continued) 15 prepayment characteristics when the required pay ups are relatively lower and may sell our Agency Securities when their pay ups are relatively higher.
In the future, as we expand our staff, we may absorb internally some or all of the services provided by AVM. Until we elect to move those services in-house, ARMOUR Residential REIT, Inc. Risk Factors (continued) 32 we continue to use AVM or other third-parties that provide similar services.
In the future, as we expand our staff, we may absorb internally some or all of the services provided by AVM. Until we elect to move those services in-house, we continue to use AVM or other third-parties that provide similar services.
At December 31, 2023 and December 31, 2022, BUCKLER accounted for 48.4% and 50.2%, respectively, of our aggregate borrowings and had an amount at risk of 8.1% and 12.9%, respectively, of our total stockholders' equity (see Note 14 to the consolidated financial statements). Factors beyond our control may increase the prepayment speeds on our MBS, thereby reducing our interest income.
At December 31, 2024 and December 31, 2023, BUCKLER accounted for 45.7% and 48.4%, respectively, of our aggregate borrowings and had an amount at risk of 8.0% and 8.1%, respectively, of our total stockholders' equity (see Note 15 to the consolidated financial statements). Factors beyond our control may increase the prepayment speeds on our MBS, thereby reducing our interest income.
ARMOUR actively issues new shares of its common stock: We have issued and may in the future issue shares of our common stock in “at the market” offerings or underwritten “block” offerings, which may adversely impact the market price of our stock and result in dilution to existing stockholders. We have historically been active in raising capital for ARMOUR.
ARMOUR actively issues new shares and may redeem outstanding shares of its common and preferred stock : We have issued and may in the future issue shares of our common stock in “at the market” offerings or underwritten “block” offerings, which may adversely impact the market price of our stock and result in dilution to existing stockholders.
Accordingly, we are not certain we will be able to qualify and remain qualified as a REIT for federal income tax purposes. Even a technical or inadvertent mistake could jeopardize our REIT status. Furthermore, the U.S.
Accordingly, we are not certain we will be able to qualify and remain qualified as a REIT for federal income tax purposes. Even a technical or inadvertent mistake could jeopardize our REIT status. Furthermore, the U.S. Congress or the IRS might change tax laws or regulations and the ARMOUR Residential REIT, Inc.
Risk Factors (continued) 27 qualification as a REIT. Thus, compliance with the REIT requirements may hinder our ability to make and, in certain cases, to maintain ownership of, certain attractive investments. Complying with REIT requirements may force us to liquidate otherwise attractive investments.
Thus, compliance with the REIT requirements may hinder our ability to make and, in certain cases, to maintain ownership of, certain attractive investments. Complying with REIT requirements may force us to liquidate otherwise attractive investments.
These differences cause us to distribute common stock dividends that differ from our total economic return. Since 2010, ARMOUR has distributed common stock dividends totaling approximately $1,993,110 while incurring cumulative total comprehensive (loss) attributable to common stockholders of $(1,052,585).
These differences cause us to distribute common stock dividends that differ from our total economic return. Since 2010, ARMOUR has distributed common stock dividends totaling approximately $2,144,101 while incurring cumulative total comprehensive (loss) attributable to common stockholders of $(1,078,961).
There are potential conflicts of interest with current and future investment entities affiliated with ACM.
Risk Factors (continued) 19 There are potential conflicts of interest with current and future investment entities affiliated with ACM.
For example, longer tenor ARMOUR Residential REIT, Inc. Risk Factors (continued) 25 cleared swaps may require initial margin deposits currently as high as 4.7% of the notional swap amount. Higher initial margin requirements will increase our need for liquidity.
For example, longer tenor cleared swaps may require initial margin deposits currently as high as 4.7% of the notional swap amount. Higher initial margin requirements will increase our need for liquidity.
In the event that we elect to fund any distribution to our stockholders from sources other than our earnings, the ARMOUR Residential REIT, Inc. Risk Factors (continued) 34 amount of capital available to us to purchase our target assets would decrease, which could have an adverse effect on our overall financial results and performance.
In the event that we elect to fund any distribution to our stockholders from sources other than our earnings, the amount of capital available to us to purchase our target assets would decrease, which could have an adverse effect on our overall financial results and performance. Our return of capital distributions may increase capital gains.
Interest rate swaps primarily affect our exposure to future changes in forward interest rates; • During stressful market conditions, we have sold and may in the future be forced to sell MBS at distressed prices, thereby potentially incurring permanent equity losses; and • We have credit exposure to our financing and derivative counterparties for the value of our collateral they hold in excess of our current liabilities.
This exact path of this eventual decline is uncertain and will depend on future changes in interest rates and other factors; • During stressful market conditions, we have sold and may in the future be forced to sell MBS at distressed prices, thereby potentially incurring permanent equity losses; and • We have credit exposure to our financing and derivative counterparties for the value of our collateral they hold in excess of our current liabilities.
Risk Factors (continued) 30 companies and are not relying on the exclusion from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 Act. We rely on the exclusion from the definition of “investment company” provided by Section 3(c)(5)(C) of the 1940 Act.
Government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exclusion from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 Act. We rely on the exclusion from the definition of “investment company” provided by Section 3(c)(5)(C) of the 1940 Act.
For the period from January 1, 2024 through December 31, 2029, ARMOUR is obliged to pay contractual management fees totaling approximately $235,440 based on gross equity raised as of December 31, 2023, the date of the most recent management contract extension.
For the period from January 1, 2025 through December 31, 2029, ARMOUR is obliged to pay contractual management fees ARMOUR Residential REIT, Inc. Risk Factors (continued) 21 totaling approximately $206,210 based on gross equity raised as of December 31, 2024, the date of the most recent management contract extension.
Government securities and cash items) on an unconsolidated basis. Excluded from the term “investment securities,” among other things, in Section 3(a)(1)(C) of the 1940 Act, as defined above, are U.S. Government securities and securities issued by majority-owned subsidiaries that are not themselves investment ARMOUR Residential REIT, Inc.
Government securities and cash items) on an unconsolidated basis. Excluded from the term “investment securities,” among other things, in Section 3(a)(1)(C) of the 1940 Act, as defined above, are U.S.
Such net capital losses may be carried forward for five taxable years and generally used to offset undistributed taxable net capital gains realized during the carry forward period. Net capital losses realized totaling $(13,819), $(15,605), $(732,478), and $(496,265) will be available to offset future capital gains realized in 2024, 2026, 2027 and 2028 respectively.
Such net capital losses may be carried forward for five taxable years and generally used to offset undistributed taxable net capital gains realized during the carry forward period. Net capital losses realized totaling $(15,606), $(732,477), $(472,002), and $(46,823) will be available to offset future capital gains realized in 2026, 2027, 2028 and 2029 respectively.
The performance of our common stock correlates to the performance of our REIT investments, which may be speculative and aggressive compared to other types of investments. The investments we make in accordance with our investment objectives may result in a greater amount of risk as compared to alternative investment options, including relatively higher risk of volatility or loss of principal.
The investments we make in accordance with our investment objectives may result in a greater amount of risk as compared to alternative investment options, including relatively higher risk of volatility or loss of principal. Our investments may be speculative and aggressive, and therefore an investment in our common stock may not be suitable for someone with lower risk tolerance.
However, there can be no assurance as to the availability, terms, or cost of additional repurchase financing that might be available from other counterparties if we needed to replace BUCKLER’s financing capacity, particularly on short notice or during times of market distress. ARMOUR Residential REIT, Inc.
However, there can be no assurance as to the availability, terms, or cost of additional repurchase financing that might be available from other counterparties if we needed to replace BUCKLER’s financing capacity, particularly on short notice or during times of market distress. BUCKLER is the primary placement agent for ARMOUR's common share ATM Program.
For example, in declining interest rate environments, we may replace interest rate swaps that have declined in value with new swaps requiring a lower fixed coupon payment while retaining in portfolio appreciated mortgage securities.
Risk Factors (continued) 23 accelerating the realization of losses and delaying the realization of gains. For example, in declining interest rate environments, we may replace interest rate swaps that have declined in value with new swaps requiring a lower fixed coupon payment while retaining in portfolio appreciated mortgage securities.
However, there are certain exceptions to this rule, including: (i) part of the income and gain recognized by certain qualified employee pension trusts with respect to our common stock may be treated as unrelated business taxable income if we become a “pension held” REIT and such qualified employee pension trust owns more than 10% of our common stock; (ii) part of the income and gain recognized by a tax-exempt investor with respect to our common stock would constitute unrelated business taxable income if the investor incurs debt in order to acquire the common stock; (iii) part or all of the income or gain recognized with respect to our common stock by social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans which are exempt from federal income taxation under the Code may be treated as unrelated business taxable income; and (iv) to the extent that we are (or a part of us, or a disregarded subsidiary of ours, is) a “taxable mortgage pool,” (or if we hold residual interests in a REMIC), a portion of the distributions paid to a tax-exempt stockholder that is allocable to excess inclusion income may be treated as unrelated business taxable income.
Risk Factors (continued) 29 stock; (iii) part or all of the income or gain recognized with respect to our common stock by social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans which are exempt from federal income taxation under the Code may be treated as unrelated business taxable income; and (iv) to the extent that we are (or a part of us, or a disregarded subsidiary of ours, is) a “taxable mortgage pool,” (or if we hold residual interests in a REMIC), a portion of the distributions paid to a tax-exempt stockholder that is allocable to excess inclusion income may be treated as unrelated business taxable income.
In particular, we may make loans to ACM or its affiliates or purchase, or ACM may cause us to purchase, ARMOUR Residential REIT, Inc. Risk Factors (continued) 19 assets from ACM or its affiliates or make co-purchases alongside ACM or its affiliates.
In particular, we may make loans to ACM or its affiliates or purchase, or ACM may cause us to purchase, assets from ACM or its affiliates or make co-purchases alongside ACM or its affiliates.
Accordingly, amounts reported as the periodic net coupon effect of our interest rate swaps largely represent values that were previously recognized elsewhere in total comprehensive income.
Periodic net swap coupon receipts and payments were forecasted to arrive at the estimated fair values of our swaps. Accordingly, amounts reported as the periodic net coupon effect of our interest rate swaps largely represent values that were previously recognized elsewhere in total comprehensive income (loss).
Congress or the IRS might change tax laws or regulations and the courts might issue new rulings, in each case potentially having retroactive effect, which could make it more difficult or impossible for us to qualify as a REIT.
Risk Factors (continued) 27 courts might issue new rulings, in each case potentially having retroactive effect, which could make it more difficult or impossible for us to qualify as a REIT.
Qualifying assets for this purpose include mortgage loans and other assets, such as whole pool Agency Securities that are considered the functional equivalent of mortgage loans for purposes of the 1940 Act. The SEC staff has not issued guidance with respect to whole pool Credit Risk and Non-Agency Securities.
Qualifying assets for this purpose include mortgage loans and other assets, such as whole pool Agency Securities that are considered the functional equivalent of mortgage loans for purposes of the 1940 Act.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThis committee consists of the Chief Technology Officer ("CTO"), IT Systems Administrator, Chief Investment Officer, VP of Finance, Treasurer and Controller and the CFO. Our CTO has over a twenty years of experience with cybersecurity, and our IT Systems Administrator has cybersecurity experience and certifications. All ACM employees are required to complete monthly cybersecurity trainings.
Biggest changeOur CTO has over a twenty years of experience with cybersecurity, and our IT Systems Administrator has cybersecurity experience and certifications. All ACM employees are required to complete monthly cybersecurity trainings. Our ITSC oversees our governance programs, tests our compliance with standards, remediates known risks, and leads our cybersecurity training procedures.
Item 1C. Cybersecurity 37 Risk Management We recognize the importance of developing, implementing, and maintaining cybersecurity measures to safeguard our information systems and protect the integrity and confidentiality of our data. ACM has established an Information Technology Steering Committee (the "ITSC”) to help mitigate technology risks including those relating to cybersecurity.
Item 1C. Cybersecurity 38 Risk Management We recognize the importance of developing, implementing, and maintaining cybersecurity measures to safeguard our information systems and protect the integrity and confidentiality of our data. ACM has established an Information Technology Steering Committee (the "ITSC”) to help mitigate technology risks including those relating to cybersecurity.
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.
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), any failure to maintain performance or any other risk from cybersecurity threats.
Risk Factors of this Form 10-K for further discussion. Governance Our Board is aware of the critical nature of managing risks associated with cybersecurity threats and has established oversight mechanisms to ensure effective governance in managing risks associated with cybersecurity threats.
Risk Factors of this Form 10-K for further discussion. Governance Our Board is aware of the critical nature of managing risks associated with cybersecurity threats and has established oversight mechanisms to ensure effective governance in managing risks associated with cybersecurity threats. Our Audit Committee periodically monitors and oversees our information and cybersecurity risks including ARMOUR Residential REIT, Inc.
This review helps in identifying areas for improvement and attempting to ensure the alignment of cybersecurity efforts with the overall risk management framework. Risk Management Personnel Primary responsibility for assessing, monitoring, and managing our cybersecurity risks rests with the ITSC.
This review helps in identifying areas for improvement and attempting to ensure the alignment of cybersecurity efforts with the overall risk management framework. Risk Management Personnel Primary responsibility for assessing, monitoring, and managing our cybersecurity risks rests with the ITSC. This committee consists of the Chief Technology Officer ("CTO"), IT Systems Administrator, Co-Chief Investment Officers, Controller and the CFO.
Information technology subscriptions and cybersecurity updates are reviewed regularly by our CTO and continuing education in the cybersecurity field is ongoing. This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. The ITSC implements and oversees processes for the regular monitoring of our information systems.
Monitoring The ITSC is informed by our CTO about the latest developments in cybersecurity, including potential threats and innovative risk management techniques. Information technology subscriptions and cybersecurity updates are reviewed regularly by our CTO and continuing education in the cybersecurity field is ongoing. This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents.
These briefings encompass a broad range of topics, including: • Current cybersecurity landscape and emerging threats; • Status of ongoing cybersecurity initiatives and strategies; • Incident reports from any cybersecurity events; and • Compliance with regulatory requirements and industry standards.
They provide comprehensive briefings to the Audit Committee on a regular basis, with a minimum frequency of once per year. These briefings encompass a broad range of topics, including: • Current cybersecurity landscape and emerging threats; • Status of ongoing cybersecurity initiatives and strategies; • Incident reports from any cybersecurity events; and • Compliance with regulatory requirements and industry standards.
This includes the deployment of advanced security measures and regular system audits to identify potential vulnerabilities. In the event of a cybersecurity incident, the ITSC is equipped with a well-defined incident response plan. This plan includes immediate actions to mitigate the impact and long-term strategies for remediation and prevention of future incidents.
The ITSC implements and oversees processes for the regular monitoring of our information systems. This includes the deployment of advanced security measures and regular system audits to identify potential vulnerabilities. In the event of a cybersecurity incident, the ITSC is equipped with a well-defined incident response plan.
Reporting The ITSC regularly informs the CEO of all known aspects related to cybersecurity risks and incidents. This attempts to ensure that the highest levels of management are kept abreast of the cybersecurity posture and potential risks facing ARMOUR. Furthermore, significant cybersecurity matters are escalated to the Board, so that the Board can provide guidance on critical cybersecurity issues.
This plan includes immediate actions to mitigate the impact and long-term strategies for remediation and prevention of future incidents. Reporting The ITSC regularly informs the CEO of all known aspects related to cybersecurity risks and incidents. This attempts to ensure that the highest levels of management are kept abreast of the cybersecurity posture and potential risks facing ARMOUR.
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.
Computer malware, viruses, computer hacking and phishing attacks have become more prevalent in our industry and may occur on our systems.
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.
Cybersecurity (continued) 39 reviewing and approving any information and cybersecurity policies, procedures and resources, and reviewing our information and cybersecurity risk assessment, detection, protection, and mitigation systems. Management’s Role The ITSC and the Chief Executive Officer (“CEO") play a pivotal role in informing the Audit Committee on cybersecurity risks.
Removed
Cybersecurity (continued) 38 Management’s Role The ITSC and the Chief Executive Officer (“CEO") play a pivotal role in informing the Audit Committee on cybersecurity risks. They provide comprehensive briefings to the Audit Committee on a regular basis, with a minimum frequency of once per year.
Added
Although we have not detected a material cybersecurity breach to date, or encountered any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to affect the Company, including its business strategy, results of operations or financial condition, other financial services institutions have reported material breaches of their systems, some of which have been significant.
Removed
Our ITSC oversees our governance programs, tests our compliance with standards, remediates known risks, and leads our cybersecurity training procedures. Monitoring The ITSC is informed about the latest developments in cybersecurity, including potential threats and innovative risk management techniques by our CTO.
Added
Furthermore, significant cybersecurity matters are escalated to the Board, so that the Board can provide guidance on critical cybersecurity issues. ARMOUR Residential REIT, Inc. 40

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLegal Proceedings See Note 8 - Commitments and Contingencies for information on legal proceedings. Item 4. Mine Safety Disclosures Not applicable. PART II
Biggest changeLegal Proceedings See Note 9 - Commitments and Contingencies for information on legal proceedings. Item 4. Mine Safety Disclosures Not applicable. PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 39 PART II 40 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 40 Item 6. [Reserved] 43 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 44 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 69 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 40 PART II 41 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 41 Item 6. [Reserved] 43 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 44 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 69 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur estimated REIT taxable income available to pay dividends was $124,717 for the year ended December 31, 2023. Dividends in excess of REIT taxable income for the year will generally not be taxable to common stockholders.
Biggest changeTotal dividend payments to common stockholders were $150,990 and dividend payments to preferred stockholders were $11,982 for the year ended December 31, 2024. Our estimated REIT taxable income available to pay dividends was $140,041 for the year ended December 31, 2024. Dividends in excess of REIT taxable income for the year will generally not be taxable to common stockholders.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (continued) 42 Performance Graph The following graph compares the stockholder’s cumulative total return, assuming $100 invested at December 31, 2018, with all reinvestment of dividends, as if such amounts had been invested in: (i) our common stock; (ii) the stocks included in the S&P 500 and (iii) the stocks included in the NAREIT Mortgage REIT Index.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (continued) 42 Performance Graph The following graph compares the stockholder’s cumulative total return, assuming $100 invested at December 31, 2019, with all reinvestment of dividends, as if such amounts had been invested in: (i) our common stock; (ii) the stocks included in the S&P 500 and (iii) the stocks included in the NAREIT Mortgage REIT Index.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ARMOUR Residential REIT, Inc. 40 Stock Symbols and Holders of Common Equity Our 7.00% Series C Cumulative Preferred Stock (“Series C Preferred Stock”), and our common stock are currently listed on the NYSE under the symbols “ARR-PRC” and “ARR,” respectively.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ARMOUR Residential REIT, Inc. 41 Stock Symbols and Holders of Common Equity Our 7.00% Series C Cumulative Preferred Stock (“Series C Preferred Stock”), and our common stock are currently listed on the NYSE under the symbols “ARR-PRC” and “ARR,” respectively.
Dividends cannot be paid on our common stock unless we have paid full cumulative dividends on all classes of our preferred stock. For the year ended December 31, 2023, we paid full cumulative dividends on our preferred stock.
Dividends cannot be paid on our common stock unless we have paid full cumulative dividends on all classes of our preferred stock. For the year ended December 31, 2024, we paid full cumulative dividends on our preferred stock.
The portion of the dividends on our common stock which represented non-taxable return of capital was approximately 47.5% in 2023, 100.0% in 2022 and 100.0% in 2021. ARMOUR Residential REIT, Inc.
The portion of the dividends on our common stock which represented non-taxable return of capital was approximately 14.8% in 2024, 47.5% in 2023 and 100.0% in 2022. ARMOUR Residential REIT, Inc.
Future dividends will be at the discretion of the Board and will depend on our earnings and financial condition, maintenance of our REIT qualification, restrictions on making distributions under MGCL and such other factors as our Board deems relevant.
Dividend Policy We intend to continue to make regular cash distributions to holders of shares of common stock. Future dividends will be at the discretion of the Board and will depend on our earnings and financial condition, maintenance of our REIT qualification, restrictions on making distributions under MGCL and such other factors as our Board deems relevant.
On March 14, 2024, the closing per share price of our common stock as reported on the NYSE was $18.72. As of March 14, 2024, we had 149 stockholders of record of our outstanding common stock. We believe that there are more beneficial owners of shares of our common stock.
On February 11, 2025, the closing per share price of our common stock as reported on the NYSE was $19.06. As of February 11, 2025, we had 152 stockholders of record of our outstanding common stock. We believe that there are more beneficial owners of shares of our common stock.
For historical information on the frequency and amount of cash dividends paid to the holders of shares of our preferred stock and common stock see Note 10 to the consolidated financial statements. ARMOUR Residential REIT, Inc.
For historical information on the frequency and amount of cash dividends paid to the holders of shares of our preferred stock and common stock see Note 11 to the consolidated financial statements. Our REIT taxable income and dividend requirements are determined on an annual basis.
Period Ending Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 ARMOUR Residential REIT $ 100.00 $ 97.96 $ 65.38 $ 66.15 $ 45.13 $ 38.18 S&P 500 Index $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 NAREIT Mortgage REIT Index $ 100.00 $ 121.33 $ 98.56 $ 113.97 $ 83.64 $ 96.48 The information in the performance graph and table has been obtained from sources believed to be reliable, but neither its accuracy nor its completeness can be guaranteed.
Period Ending Index 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 ARMOUR Residential REIT $ 100.00 $ 66.78 $ 67.57 $ 46.09 $ 39.00 $ 44.13 S&P 500 Index $ 100.00 $ 118.40 $ 152.39 $ 124.79 $ 157.59 $ 197.02 NAREIT Mortgage REIT Index $ 100.00 $ 81.23 $ 93.93 $ 68.94 $ 79.52 $ 79.80 The information in the performance graph and table has been obtained from sources believed to be reliable, but neither its accuracy nor its completeness can be guaranteed.
Removed
Common Stock Repurchase Program Issuer Purchases of Equity Securities The following table presents information regarding our common stock repurchases made during the three months ended December 31, 2023 (in thousands, except per share price).
Removed
Total Number of Shares Purchased (1) Average Price Paid Per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares That May Yet Be Purchased Under the Publicly Announced Plans or Programs (3) October 1, 2023 - October 31, 2023 (98) $ 14.65 (98) 2,402 November 1, 2023 - November 30, 2023 (115) $ 16.33 (115) 2,287 December 1, 2023 - December 31, 2023 — — — Total (213) (213) 2,287 (1) All shares were repurchased pursuant to our stock repurchase program (the "Common Stock Repurchase Program") (see Note 10 to the consolidated financial statements).
Removed
(2) Weighted average share price, including fees and commissions. (3) The Board authorized the Common Stock Repurchase Program, which was announced on December 17, 2012, to initially authorize the Company to repurchase up to $100 million of its outstanding shares of common stock.
Removed
The Board subsequently amended the repurchase authorization from (a) $100 million shares to 50,000 shares (such number not reflecting the Company's one-for-eight reverse stock split of its common stock or the Reverse Stock Split), (b) to 9,000 shares effective in connection with the Company's one-for-eight reverse stock split of its common stock, (c) back up to 9,000 shares (1,800 as adjusted for the Reverse Stock Split) and (d) most recently, up to 2,500 (on a post-Reverse Stock Split basis) effective October 30, 2023.
Removed
At December 31, 2023 there were 2,287 authorized shares remaining under the current Common Stock Repurchase Program. Dividend Policy We intend to continue to make regular cash distributions to holders of shares of common stock.
Removed
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (continued) 41 Our REIT taxable income and dividend requirements are determined on an annual basis. Total dividend payments to common stockholders were $216,224 and dividend payments to preferred stockholders were $11,982 for the year ended December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

104 edited+20 added−29 removed64 unchanged
Biggest changeThe change in fair value of the securities was $(489,316), due to the change in interest rates and mortgage spreads, for the year ended December 31, 2022. For the year ended December 31, 2022, we sold $5,360,328 of these securities which resulted in a loss of $(457,350).
Biggest changeYear Ended December 31, 2022 • During the first quarter of 2023, we sold the remaining balance of our Available for Sale Securities which resulted in a realized loss of $(7,471). • Loss on Agency Securities, trading, net includes mark to market changes in the fair value of our securities as well as the loss on sales. ◦ The change in fair value of the securities was $419,213 for the year ended December 31, 2023 compared to $(489,316) for the year ended December 31, 2022. ◦ Sales of our Agency Securities, trading resulted in realized losses of $(471,878) and $(457,350) for the years ended December 31, 2023 and December 31, 2022, respectively. ◦ During the years ended December 31, 2023 and December 31, 2022, we sold $6,100,661 and $5,360,328, respectively, of Agency Securities, trading. • Loss on U.S.
ARMOUR Residential REIT, Inc. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 55 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: ARMOUR Residential REIT, Inc. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 55 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.
Our Agency Securities consist of fixed rate loans. From time to time we have also invested in U.S. Treasury Securities 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.
Our Agency Securities consist primarily of fixed rate loans. From time to time we have also invested in U.S. Treasury Securities 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.
The cost of repurchased stock and any dividends specifically designated by the Board as liquidation dividends 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.
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.
For GAAP purposes, all changes in the fair value of our derivatives currently flow through earnings. Changes in the fair value of our legacy Agency MBS portfolio, that was designated as available for sale historically, were recognized in other comprehensive income.
For GAAP purposes, all changes in the fair value of our derivatives currently flow through earnings. Changes in the fair value of our legacy Agency MBS portfolio, that was designated as available for sale historically, were recognized in other comprehensive income (loss).
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 December 31, 2023 and December 31, 2022, 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).
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 December 31, 2024 and December 31, 2023, 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).
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 December 31, 2023 and December 31, 2022.
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 December 31, 2024 and December 31, 2023.
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).
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 8 to the consolidated financial statements).
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 61 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 of Financial Condition and Results of Operations (continued) 60 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.
December 31, 2023 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 3.5% 1,181,289 1,157,554 (70,416) 1,087,138 3.7 % 340 9.5 % 4.0% 1,130,222 1,123,331 (49,895) 1,073,436 4.5 % 341 9.4 4.5% 1,054,481 1,045,143 (21,283) 1,023,860 3.8 % 343 8.9 5.0% 1,620,054 1,609,875 (1,517) 1,608,358 4.0 % 347 14.0 5.5% 3,280,469 3,294,740 10,566 3,305,306 4.3 % 351 28.8 6.0% 2,416,172 2,458,340 2,515 2,460,855 5.3 % 350 21.5 6.5% 52,896 54,259 566 54,825 6.0 % 348 0.4 Other Agency Securities Agency CMBS $ 542,578 $ 540,138 $ 5,838 $ 545,976 n/a 115 4.8 Total Agency Securities $ 11,278,161 $ 11,283,380 $ (123,626) $ 11,159,754 4.2 % 336 97.3 % TBA Agency Securities: 30 Year Long, 6.0% (2) 300,000 303,223 1,816 305,039 n/a n/a 2.7 Total Investments in Securities $ 11,578,161 $ 11,586,603 $ (121,810) $ 11,464,793 n/a n/a 100.0 % (1) Weighted average CPR during the fourth quarter for the securities owned at December 31, 2023.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 56 December 31, 2023 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 3.5% $ 1,181,289 $ 1,157,554 $ (70,416) $ 1,087,138 3.7 % 340 9.5 % 4.0% 1,130,222 1,123,331 (49,895) 1,073,436 4.5 % 341 9.4 4.5% 1,054,481 1,045,143 (21,283) 1,023,860 3.8 % 343 8.9 5.0% 1,620,054 1,609,875 (1,517) 1,608,358 4.0 % 347 14.0 5.5% 3,280,469 3,294,740 10,566 3,305,306 4.3 % 351 28.8 6.0% 2,416,172 2,458,340 2,515 2,460,855 5.3 % 350 21.5 6.5% 52,896 54,259 566 54,825 6.0 % 348 0.4 Other Agency Securities Agency CMBS $ 542,578 $ 540,138 $ 5,838 $ 545,976 n/a 115 4.8 % Total Agency Securities $ 11,278,161 $ 11,283,380 $ (123,626) $ 11,159,754 4.2 % 336 97.3 % TBA Agency Securities: 30 Year Long, 6.0% (2) $ 300,000 $ 303,223 $ 1,816 $ 305,039 n/a n/a 2.7 % Total Investments in Securities $ 11,578,161 $ 11,586,603 $ (121,810) $ 11,464,793 n/a n/a 100.0 % (1) Weighted average CPR during the fourth quarter for the securities owned at December 31, 2023.
Realized gains and losses on interest rate contracts terminated before their maturity are deferred and amortized over the remainder of the original term of the contract for REIT taxable income.
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.
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 2023, the largest inter-day movement was the overall estimated values of our investment and hedge positions translated to a change in estimated book value of $(0.94) per common share.
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 2024, the largest inter-day movement was the overall estimated values of our investment and hedge positions translated to a change in estimated book value of $(0.52) per common share.
Our TBA Agency Securities were reported at net carrying values of $1,816, at December 31, 2023 and are reported in Derivatives, at fair value on our consolidated balance sheets (see Note 7 to the consolidated financial statements). ARMOUR Residential REIT, Inc.
Our TBA Agency Securities were reported at net carrying values of $1,816, at December 31, 2023 and were reported in Derivatives, at fair value on our consolidated balance sheets (see Note 8 to the consolidated financial statements). ARMOUR Residential REIT, Inc.
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 December 31, 2023, there were 173 shares available for future issuance under the Plan.
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 December 31, 2024, there were 228 shares available for future issuance under the Plan.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 57 The following tables summarize our investment in securities and collateral sold as of December 31, 2023 and December 31, 2022, excluding TBA Agency Securities (see Note 7 to the consolidated financial statements). Available for Sale Securities Trading Securities Agency Agency U.S. Treasuries U.S.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 57 The following tables summarize our investment in securities and collateral sold as of December 31, 2024 and December 31, 2023, excluding TBA Agency Securities (see Note 8 to the consolidated financial statements). Available for Sale Securities Trading Securities Agency Agency U.S. Treasuries U.S.
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 14 to the consolidated financial statements). ARMOUR Residential REIT, Inc.
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 7 and Note 15 to the consolidated financial statements). ARMOUR Residential REIT, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 68 • the degree and nature of our competition, including competition for MBS; • changes in our business and investment strategy; • 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 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; and • changes in applicable laws and regulations.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 68 • availability of suitable investment opportunities; • the degree and nature of our competition, including competition for MBS; • changes in our business and investment strategy; • 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.
Agency Securities: Agency Security purchase and sale transactions, including purchases and sales for forward settlement, are recorded on the trade date to the extent it is probable that we will take or make timely physical delivery of the related securities.
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.
TBA Agency Securities are included in the table below on a gross basis as 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 December 31, 2023 and December 31, 2022.
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 December 31, 2024 and December 31, 2023.
We recognized net gains related to our derivatives of $51,748, $810,808 and $52,493, respectively for the years ended December 31, 2023, December 31, 2022 and December 31, 2021. 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 recognized net gains related to our derivatives of $323,500, $51,748 and $810,808, respectively for the years ended December 31, 2024, December 31, 2023 and December 31, 2022. 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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 47 Below is the Fed's target range for the Federal Funds Rate at each Fed meeting where a change was made since March 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 47 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.
For the Year Ended December 31, 2023: Interest Income (Expense) Average Balance Yield/Rate Agency Securities, Net of Amortization $ 546,246 $ 11,381,637 4.80 % Cash Equivalents & Treasury Securities 5,684 159,112 3.57 % Subordinated Loan to BUCKLER 973 22,726 4.28 % Total Interest Income/Average Interest Earning Assets $ 552,903 $ 11,563,475 4.78 % Interest-bearing Liabilities: Repurchase Agreements $ (506,242) $ 9,580,996 (5.28) % Treasury Securities Sold Short (19,552) 432,922 (4.52) % Total Interest Expense/Average Interest Bearing Liabilities $ (525,794) $ 10,013,918 (5.25) % Net Interest Income/Net Interest Spread $ 27,109 (0.47) % Net Yield on Interest Earning Assets 0.23 % ARMOUR Residential REIT, Inc.
For the Year Ended December 31, 2023 Interest Income (Expense) Average Balance Yield/Rate Agency Securities, Net of Amortization $ 546,246 $ 11,381,637 4.80 % Cash Equivalents & Treasury Securities 5,684 159,112 3.57 % Subordinated Loan to BUCKLER 973 22,726 4.28 % Total Interest Income/Average Interest Earning Assets $ 552,903 $ 11,563,475 4.78 % Interest-bearing Liabilities: Repurchase Agreements $ (506,242) $ 9,580,996 (5.28) % Treasury Securities Sold Short (19,552) 432,922 (4.52) % Total Interest Expense/Average Interest Bearing Liabilities $ (525,794) $ 10,013,918 (5.25) % Net Interest Income/Net Interest Spread $ 27,109 (0.47) % Net Yield on Interest Earning Assets 0.23 % The following table details the factors impacting our net interest income for the year ended December 31, 2022.
During the years ended December 31, 2023, December 31, 2022 and December 31, 2021 ACM voluntarily waived management fees of $6,600, $7,800 and $8,600 respectively (see Note 8 to the consolidated financial statements). Compensation includes non-executive director compensation as well as the restricted stock units awarded to our Board and executive officers through ACM.
During the years ended December 31, 2024, December 31, 2023 and December 31, 2022 ACM voluntarily waived management fees of $6,600, $6,600 and $7,800 respectively (see Note 9 to the consolidated financial statements). Compensation includes non-executive director compensation as well as the restricted stock units awarded to our Board and executive officers directly or through ACM.
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: • the impact of COVID-19 or a new pandemic on our operations; • the geopolitical situation as a result of the war between Russia and Ukraine, as well as the recent 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.
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: • 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.
Our operating results depend, in large part, upon our ability to manage prepayment risks effectively while maintaining our status as a REIT.
Our operating results depend, in large part, upon our ability to manage interest rate risks effectively while maintaining our status as a REIT.
Compensation to be paid to our non-executive Board in the form of cash and common equity is $1,351 annually (see Note 9 to the consolidated financial statements).
Compensation to be paid to our non-executive Board in the form of cash and common equity is $1,219 annually (see Note 10 to the consolidated financial statements).
For the Years Ended December 31, 2023 December 31, 2022 December 31, 2021 ARMOUR management fees $ 38,121 $ 33,714 $ 31,063 Less management fees waived (6,600) (7,800) (8,600) Total management fee expense $ 31,521 $ 25,914 $ 22,463 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.
For the Years Ended December 31, 2024 December 31, 2023 December 31, 2022 ARMOUR management fees $ 39,726 $ 38,121 $ 33,714 Less management fees waived (6,600) (6,600) (7,800) Total management fee expense $ 33,126 $ 31,521 $ 25,914 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.
At December 31, 2023, we had interest rate swap contracts with an aggregate notional balance of $6,786,000, a weighted average swap rate of 1.37% and a weighted average term of 68 months.
At December 31, 2024 and December 31, 2023, we had interest rate swap contracts with an aggregate notional balance of $7,232,000 and $6,786,000, a weighted average swap rate of 1.66% and 1.37% and a weighted average term of 76 and 68 months, respectively.
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.
Subsequent Events See Note 11 and Note 17 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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 60 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.
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.
Our repurchase agreements require excess collateral, known as a “haircut.” At December 31, 2023, the average haircut percentage was 2.74% compared to 3.85% at December 31, 2022.
Our repurchase agreements require excess collateral, known as a “haircut.” At December 31, 2024, the average gross haircut percentage was 2.77% compared to 2.74% at December 31, 2023.
Implied leverage, including TBA Securities and forward settling sales and unsettled purchases was 7.96:1 and 6.83:1 at December 31, 2023 and December 31, 2022, respectively.
Implied leverage, including TBA Securities and forward settling sales and unsettled purchases was 7.95:1 and 7.96:1 at December 31, 2024 and December 31, 2023, respectively.
Our debt to equity ratios at December 31, 2023 and December 31, 2022, were 7.59:1 and 5.81:1, respectively, as we substituted Agency MBS for TBA Agency Securities. Our leverage ratios, including our TBA Agency Securities, were 7.83:1 and 6.51:1 at December 31, 2023 and December 31, 2022, respectively.
Our debt to equity ratios at December 31, 2024 and December 31, 2023, were 7.87:1 and 7.59:1, respectively, as we substituted Agency MBS for TBA Agency Securities. Our leverage ratios, including our TBA Agency Securities, were 7.87:1 and 7.83:1 at December 31, 2024 and December 31, 2023, respectively.
For the Year Ended December 31, 2022: Interest Income (Expense) Average Balance Yield/Rate Agency Securities, Net of Amortization $ 211,378 $ 7,245,174 2.92 % Cash Equivalents & Treasury Securities 15,456 940,545 1.64 % Subordinated Loan to BUCKLER 1,598 105,000 1.52 % Total Interest Income/Average Interest Earning Assets $ 228,432 $ 8,290,719 2.76 % Interest-bearing Liabilities: Repurchase Agreements $ (117,577) $ 6,463,109 (1.82) % Treasury Securities Sold Short (3,191) 84,020 (3.80) % Total Interest Expense/Average Interest Bearing Liabilities $ (120,768) $ 6,547,129 (1.84) % Net Interest Income/Net Interest Spread $ 107,664 0.91 % Net Yield on Interest Earning Assets 1.30 % The following table details the factors impacting our net interest income for the year ended December 31, 2021.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 50 For the Year Ended December 31, 2022 Interest Income (Expense) Average Balance Yield/Rate Agency Securities, Net of Amortization $ 211,378 $ 7,245,174 2.92 % Cash Equivalents & Treasury Securities 15,456 940,545 1.64 % Subordinated Loan to BUCKLER 1,598 105,000 1.52 % Total Interest Income/Average Interest Earning Assets $ 228,432 $ 8,290,719 2.76 % Interest-bearing Liabilities: Repurchase Agreements (117,577) 6,463,109 (1.82) % Treasury Securities Sold Short (3,191) 84,020 (3.80) % Total Interest Expense/Average Interest Bearing Liabilities $ (120,768) $ 6,547,129 (1.84) % Net Interest Income/Net Interest Spread $ 107,664 0.91 % Net Yield on Interest Earning Assets 1.30 % The yield on our assets is most significantly affected by the rate of repayments on our Agency Securities.
Similarly, 95% of inter-day movements in estimated value translated to changes in estimated book value per share of $1.30 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.
Similarly, 95% of inter-day movements in estimated value translated to changes in estimated book value per share of $0.86 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 ARMOUR Residential REIT, Inc.
At December 31, 2023 and at December 31, 2022, we had approximately $(247,349) and $(307,316), respectively, in tax deductible expense relating to previously terminated interest rate swap and treasury futures contracts amortizing through the years 2033 and 2032, respectively. At December 31, 2023, we had $257,341 of net operating loss carryforwards available for use indefinitely.
At December 31, 2024 and at December 31, 2023, we had approximately $(189,450) and $(247,349) respectively, of net deductible expense relating to previously terminated interest rate swap and treasury futures/shorts contracts amortizing through the years 2034 and 2033, respectively. At December 31, 2024, we had $257,341 of net operating loss carryforwards available for use indefinitely.
These 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 on ARMOUR Residential REIT, Inc.
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.
We also had TBA Agency Securities with an aggregate notional balance of $300,000 and $800,000 at December 31, 2023 and December 31, 2022, respectively. The following table details the changes in the fair value of our interest rate swap contracts for the years ended December 31, 2023 and December 31, 2022.
We also had TBA Agency Securities with an aggregate notional balance of $0 and $300,000 at December 31, 2024 and December 31, 2023, respectively (see Note 8 to the consolidated financial statements). The following table details the changes in the fair value of our interest rate swap contracts for the years ended December 31, 2024 and December 31, 2023.
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 liquidation distributions as approved and so designated by a majority of the Board.
Therefore, management fees increase when we raise capital and decline when we repurchase previously issued stock and distribute liquidation distributions as approved and so designated by a majority of the Board.
At December 31, 2023 and December 31, 2022, BUCKLER accounted for 48.4% and 50.2%, respectively, of our aggregate borrowings and had an amount at risk of 8.1% and 12.9%, respectively, of our total stockholders' equity (see Note 6 to the consolidated financial statements).
At December 31, 2024 and December 31, 2023, BUCKLER accounted for 45.7% and 48.4%, respectively, of our aggregate borrowings and had an amount at risk of 8.0% and 8.1%, respectively, of our total stockholders' equity (see Note 7 to the consolidated financial statements).
Meeting Date Lower Bound Higher Bound 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 % December 14, 2022 4.25 % 4.50 % November 2, 2022 3.75 % 4.00 % September 21, 2022 3.00 % 3.25 % July 27, 2022 2.25 % 2.50 % June 15, 2022 1.50 % 1.75 % May 4, 2022 0.75 % 1.00 % March 16, 2022 0.25 % 0.50 % Our borrowings in the repurchase market have closely tracked the Federal Funds Rate, and SOFR.
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.
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.
With the dismissal in the third quarter of 2024 of the JAVELIN class action lawsuits, other expenses for the year ended December 31, 2024 reflect the reversal of approximately $1,000 of certain costs accrued in prior years. • 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.
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 December 31, 2023, we had $1,275,000 notional amount of centrally-cleared interest rate swap contracts.
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.
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.
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.
At December 31, 2023, December 31, 2022 and December 31, 2021, the effective management fee, prior to management fees waived was 0.93%, 0.95% and 0.98% based on gross equity raised of $4,231,965, $3,787,042 and $3,313,937, respectively.
At December 31, 2024, December 31, 2023 and December 31, 2022, the effective management fee was 0.92%, 0.93% and 0.95% prior to management fees waived, and 0.77%, 0.77% and 0.74%, after management fees waived, based on gross equity raised of $4,498,880, $4,231,965 and $3,787,042, respectively.
Government in reaching an agreement on the national debt ceiling; • availability, terms and deployment of capital; • extended trade disputes with foreign countries; • changes in economic conditions generally; • changes in interest rates, interest rate spreads and the yield curve or prepayment rates; • general volatility of the financial markets, including markets for mortgage securities; • a downgrade of the U.S.
Government in reaching an agreement on the national debt ceiling; • availability, terms and deployment of capital; • extended trade disputes with foreign countries; • 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.
(“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 and certain executive officers of ARMOUR.
(“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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 46 • 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 section titled Management in Item 1.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 46 • 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.
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. ARMOUR Residential REIT, Inc.
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 62 Liquidity and Capital Resources At December 31, 2023, our liquidity totaled $657,001, consisting of $221,888 of cash and cash equivalents plus $435,113 of unencumbered Agency Securities and U.S. government securities (including securities received as reverse margin collateral).
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 61 Liquidity and Capital Resources At December 31, 2024, our liquidity totaled $608,026, consisting of $67,970 of cash and cash equivalents plus $540,056 of unencumbered Agency Securities and U.S. government securities (including securities received as reverse margin collateral).
Treasury Securities were $5,374,982 for the year ended December 31, 2022 resulting in realized loss of $(144,563). • Gain on derivatives, net resulted from a combination of the following: ▪ Interest rate swap contracts' aggregate notional balance was $6,786,000 at December 31, 2023 and $6,350,000 at December 31, 2022. ▪ Our total TBA Agency Securities aggregate notional balance was $300,000 at December 31, 2023 and $800,000 at December 31, 2022.
Treasury Securities. • Gain on derivatives, net resulted from a combination of the following: ◦ Changes in fair value due to interest rate movements. ◦ Interest rate swap contracts' aggregate notional balance was $6,786,000 at December 31, 2023 and $6,350,000 at December 31, 2022. ◦ Our total TBA Agency Securities aggregate notional balance was $300,000 at December 31, 2023 and $800,000 at December 31, 2022.
Treasury Securities resulted from the change in fair value of the securities as well as gains on sales during the year ended December 31, 2022. The change in fair value of the securities was $(7,705) for the year ended December 31, 2022.
Treasury Securities, net resulted from the change in fair value of the securities as well as the loss on sales ◦ The change in fair value of the securities was $(16,496) for the year ended December 31, 2023 compared to $(7,705) for the year ended December 31, 2022. ◦ Sales of U.S.
The Fed also stated that it will continue reducing its holdings of agency mortgage-backed securities and other fixed-income assets as described in its previously announced plans and that it will reinvest into agency MBS the amount of principal payments from the Fed's holdings of agency debt and agency MBS received in each calendar month that exceeds a cap of $35 billion per month.
The Fed 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.
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.
You should not place undue reliance on forward-looking statements, which apply only as of the date of this report.
Other Income (Loss) For the Years Ended December 31, 2023 December 31, 2022 December 31, 2021 Other Income (Loss): Realized gain (loss) on sale of available for sale Agency Securities (reclassified from Other comprehensive loss) $ (7,471) $ (7,452) $ 10,952 Impairment losses on available for sale Agency Securities — (4,183) — Loss on Agency Securities, trading (52,665) (946,666) (77,145) Loss on U.S.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 51 Other Income (Loss) For the Years Ended December 31, 2024 December 31, 2023 December 31, 2022 Other Income (Loss): Realized loss on sale of available for sale Agency Securities (reclassified from Other comprehensive loss) $ — $ (7,471) $ (7,452) Impairment losses on available for sale Agency Securities — — (4,183) Loss on Agency Securities, trading, net (348,646) (52,665) (946,666) Gain (Loss) on U.S.
Results of Operations For the Years Ended December 31, 2023 December 31, 2022 December 31, 2021 Net Interest Income 27,109 107,664 73,369 Total Other Loss (51,481) (299,761) (23,091) Total Expenses after fees waived (43,551) (37,833) (34,915) Net Income (Loss) $ (67,923) $ (229,930) $ 15,363 Reclassification adjustment for realized (gain) loss on sale of available for sale Agency Securities 7,471 7,452 (10,952) Reclassification adjustment for Impairment losses on available for sale Agency Securities — 4,183 — Net unrealized gain (loss) on available for sale Agency Securities 4,056 (130,135) (61,106) Other comprehensive income (loss) $ 11,527 $ (118,500) $ (72,058) Comprehensive Loss $ (56,396) $ (348,430) $ (56,695) Net loss for the years ended December 31, 2023 and December 31, 2022 reflects interest income from a larger average securities portfolio as well as net gain on our derivatives offset by losses on Agency Securities and U.S.
Results of Operations For the Years Ended December 31, 2024 December 31, 2023 December 31, 2022 Net Interest Income 26,800 27,109 107,664 Total Other Income (Loss) 12,456 (51,481) (299,761) Total Expenses after fees waived (53,650) (43,551) (37,833) Net Loss $ (14,394) $ (67,923) $ (229,930) Reclassification adjustment for realized loss on sale of available for sale Agency Securities — 7,471 7,452 Reclassification adjustment for Impairment losses on available for sale Agency Securities — — 4,183 Net unrealized gain (loss) on available for sale Agency Securities — 4,056 (130,135) Other comprehensive income (loss) $ — $ 11,527 $ (118,500) Comprehensive Loss $ (14,394) $ (56,396) $ (348,430) Net losses for the years ended December 31, 2024, December 31, 2023 and December 31, 2022 reflect losses on our trading securities offset by gains on derivatives.
Taxable Income ARMOUR Residential REIT, Inc. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 54 As a REIT that regularly distributes all of its taxable income, we are generally not required to pay federal income tax (see Note 13 to the consolidated financial statements).
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 14 to the consolidated financial statements).
Overview We are a Maryland corporation managed by ACM, an investment advisor registered with the SEC (see Note 8 and Note 14 to the consolidated financial statements). We have elected to be taxed as a REIT under the Code.
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 9 and Note 15 to the consolidated financial statements). We have elected to be taxed as a REIT under the Code.
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.
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 ARMOUR Residential REIT, Inc.
The Fed further indicated that it 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 $60 billion per month.
The Fed said it will continue reducing its holdings of Treasury securities and agency debt and agency mortgage backed securities, according to its previously announced plans. 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 $25 billion per month.
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; ARMOUR Residential REIT, Inc.
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: ARMOUR Residential REIT, Inc.
Series C Preferred Stock dividends for 2023 will be treated 100.00% as fully taxable ordinary income. Common stock dividends for 2023 will be treated 52.54% as taxable ordinary income and 47.46% as non-taxable return of capital.
Series C Preferred Stock dividends for 2024 will be treated 100.00% as fully taxable ordinary income. Common stock dividends for 2024 will be treated 85.18% as taxable ordinary income and 14.82% as non-taxable return of capital. ARMOUR Residential REIT, Inc.
We currently invest primarily in Agency Securities, for which the principal and interest payments are guaranteed by a GSE or other government agency. We also invest in U.S. Treasury Securities and money market instruments. We expect our investments to be subject to risks arising from prepayments resulting from existing home sales, financings, delinquencies and foreclosures.
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.
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. At December 31, 2023 and December 31, 2022, we had $353,937 and $704,276 in reverse repurchase agreements.
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. ARMOUR Residential REIT, Inc.
We have established borrowing relationships with numerous investment banking firms and other lenders, 14 of which had open repurchase agreements with us at December 31, 2023 and 16 of which had open repurchases agreements with us at December 31, 2022.
We have established borrowing relationships with numerous investment banking firms and other lenders, 17 and 14 of which had open repurchase agreements with us at December 31, 2024 and December 31, 2023, respectively. We had outstanding balances under our repurchase agreements, net at December 31, 2024 of $10,713,830 (net of reverse repurchase agreements of $498,250).
Accordingly, our results of operations will not be subject to the additional fluctuations caused by the previous differences in mark-to-market accounting treatments.
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.
At December 31, 2023, there was approximately $11,404 of unvested stock based compensation related to the Awards (based on a weighted grant date price of $38.21 per share), which we expect to recognize as an expense as follows: in 2024 an expense of $3,626, in 2025 an expense of $2,346, and thereafter an expense of $5,432.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 64 At December 31, 2024, there was approximately $6,185 of unvested stock based compensation related to the Awards (based on a weighted grant date price of $36.38 per share), which we expect to recognize as an expense as follows: in 2025 an expense of $1,987, in 2026 an expense of $1,793, and thereafter an expense of $2,405.
Market and Interest Rate Trends and the Effect on our Securities Portfolio Federal Reserve Actions On December 13, 2023, the Fed kept its target range for the Federal Funds Rate unchanged at 5.25% to 5.50%, which they had set on July 26, 2023 and maintained on September 20, 2023.
Market and Interest Rate Trends and the Effect on our Securities Portfolio Federal Reserve Actions On September 18, 2024, the Fed lowered the target range for the Federal Funds Rate by 0.5% to 4.75% to 5.00%, which it had kept unchanged since July 26, 2023.
We had obligations to return securities received as collateral associated with our reverse repurchase agreements as of December 31, 2023 and December 31, 2022 of $350,273 and $502,656, respectively.
We had outstanding balances under our repurchase agreements, net at December 31, 2023 of $9,647,982 (net of reverse repurchase agreements of $353,937). We had obligations to return securities received as collateral associated with our reverse repurchase agreements as of December 31, 2024 and December 31, 2023 of $493,433 and $350,273, respectively.
We generally maintain liquidity to pay down borrowings under repurchase arrangements to reduce borrowing costs and otherwise efficiently manage our long-term investment capital.
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.
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 interest rate contracts are bilateral contracts with individual dealers and counterparties and are not cleared through recognized clearing organizations.
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.
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).
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.
Under a typical reverse repurchase agreement, we purchase U.S. Treasury Securities from a borrower in exchange for cash and ARMOUR Residential REIT, Inc. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 63 agree to sell the same securities back in the future. We then sell such U.S.
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.
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.
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.
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).
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 8 to the consolidated financial statements).
For the Years Ended December 31, 2023 December 31, 2022 December 31, 2021 Expenses: Management fees $ 38,188 $ 33,774 $ 31,108 Compensation 4,944 5,485 6,614 Other Operating 7,019 6,374 5,793 Total Expenses $ 50,151 $ 45,633 $ 43,515 Less management fees waived (6,600) (7,800) (8,600) Total Expenses after fees waived $ 43,551 $ 37,833 $ 34,915 Expenses The Company is managed by ACM, pursuant to a management agreement.
Expenses For the Years Ended December 31, 2024 December 31, 2023 December 31, 2022 Expenses: Management fees $ 39,734 $ 38,188 $ 33,774 Compensation 4,737 4,944 5,485 Other Operating 15,779 7,019 6,374 Total Expenses $ 60,250 $ 50,151 $ 45,633 Less management fees waived (6,600) (6,600) (7,800) Total Expenses after fees waived $ 53,650 $ 43,551 $ 37,833 ARMOUR Residential REIT, Inc.
During the year ended December 31, 2023, the change in fair value of the securities was $(16,496). For the year ended December 31, 2023, we sold short $651,621 and sold $618,520 of U.S. Treasury Securities resulting in a realized loss of $(26,597). The change in fair value of the securities was $(7,705) for the year ended December 31, 2022.
Treasury Securities resulted in realized losses of $(26,597) and $(144,563) for the years ended December 31, 2023 and December 31, 2022, respectively. ◦ For the year ended December 31, 2023 we sold short $651,621 of U.S. Treasury Securities. ◦ For the years ended December 31, 2023 and December 31, 2022, we sold $618,520 and $5,374,982, respectively, of U.S.
Securities Portfolio Matters For the Years Ended December 31, 2023 December 31, 2022 December 31, 2021 Securities purchased using proceeds from repurchase agreements and principal repayments $ 10,730,949 $ 16,630,390 $ 2,253,829 Average securities portfolio, including TBA Securities $ 11,451,334 8,270,780 7,677,721 Cash received from principal repayments on MBS $ 803,158 573,609 870,985 Net cash increase (decrease) from repurchase agreements $ 3,184,924 2,515,021 (588,028) Cash interest payments made on liabilities $ 607,030 144,938 21,316 Cash and cash collateral posted to counterparties provided by operating activities (1) $ 132,816 124,085 11,738 (1) The increase in cash and cash collateral posted to counterparties related to operating activities from 2022 to 2023 is related to the repositioning of our securities portfolio and the increase from 2021 to 2022 is related to the realized gains on derivatives.
Securities Portfolio Matters For the Years Ended December 31, 2024 December 31, 2023 Securities purchased using proceeds from repurchase agreements and principal repayments $ 7,271,101 $ 10,730,949 Average securities portfolio, including TBA Securities $ 11,610,751 11,451,334 Cash received from principal repayments on MBS $ 1,053,625 803,158 Net cash increase from repurchase agreements $ 1,065,848 3,184,924 Cash interest payments made on liabilities $ 686,182 607,030 Cash and cash collateral posted to counterparties provided by operating activities (1) $ 261,459 132,816 (1) The increase in cash and cash collateral posted to counterparties related to operating activities from 2023 to 2024 is related to exiting certain MBS positions.
At December 31, 2023 and December 31, 2022, we financed our securities portfolio with $9,647,982 (net of reverse repurchase agreements of $353,937) and $6,463,058 (net of reverse repurchase agreements of $704,276) of borrowings under repurchase agreements, respectively. We generally seek to borrow (on a recourse basis) between six and ten times the amount of our total stockholders’ equity.
At December 31, 2024 and December 31, 2023, we had obligations to return securities received as collateral associated with our reverse repurchase agreements of $493,433 and $350,273, respectively. We generally seek to borrow (on a recourse basis) between six and ten times the amount of our total stockholders’ equity.
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.
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. All per share amounts, common shares outstanding and stock-based compensation amounts for all periods reflect the effect of our Reverse Stock Split.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOne 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 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.
Biggest changeACM 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.
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 December 31, 2023 and December 31, 2022. It assumes that the mortgage spread on our MBS remains constant.
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 December 31, 2024 and December 31, 2023. It assumes that the mortgage spread on our MBS remains constant.
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 December 31, 2023 and December 31, 2022.
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 December 31, 2024 and December 31, 2023.
Market Risk Disclosures (continued) 71 December 31, 2023 December 31, 2022 Percentage Change in Projected Percentage Change in Projected Change in MBS spread Portfolio Value Stockholders' Equity Portfolio Value Stockholders' Equity +25 BPS (1.14)% (10.29)% (1.54)% (12.39)% +10 BPS (0.46)% (4.12)% (0.61)% (4.96)% -10 BPS 0.46% 4.12% 0.61% 4.96% -25 BPS 1.14% 10.29% 1.54% 12.39% 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.
Market Risk Disclosures (continued) 71 December 31, 2024 December 31, 2023 Percentage Change in Projected Percentage Change in Projected Change in MBS spread Portfolio Value Stockholders' Equity Portfolio Value Stockholders' Equity +25 BPS (1.31)% (11.96)% (1.14)% (10.29)% +10 BPS (0.52)% (4.78)% (0.46)% (4.12)% -10 BPS 0.52% 4.78% 0.46% 4.12% -25 BPS 1.31% 11.96% 1.14% 10.29% 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.
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 the ITSC to help mitigate technology risks including cybersecurity.
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.
Percentage Change in Projected Change in Interest Rates Net Interest Income Portfolio Including Derivatives Stockholder's Equity December 31, 2023 1.00% (5.93)% (1.24)% (11.57)% 0.50% (2.96)% (0.50)% (4.64)% (0.50)% 2.95% 0.20% 1.83% (1.00)% 5.89% 0.07% 0.61% December 31, 2022 1.00% 2.81% (1.60)% (13.54)% 0.50% 1.41% (0.76)% (6.39)% (0.50)% (1.42)% 0.60% 5.08% (1.00)% (2.87)% 0.98% 8.31% 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.
Percentage Change in Projected Change in Interest Rates Net Interest Income Portfolio Including Derivatives Stockholder's Equity 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% December 31, 2023 1.00% (5.93)% (1.24)% (11.57)% 0.50% (2.96)% (0.50)% (4.64)% (0.50)% 2.95% 0.20% 1.83% (1.00)% 5.89% 0.07% 0.61% 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.
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.
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.

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