What changed in Armour Residential REIT, Inc.'s 10-K — 2024 vs 2025

Item 1. Business 2 stockholders’ equity, but we are not limited to that range. The level of our borrowings may vary periodically depending on market conditions.

At December 31, 2025, December 31, 2024 and December 31, 2023, the effective management fee was 0.89%, 0.92% and 0.93% prior to management fees waived, and 0.77%, 0.77% and 0.77%, after management fees ARMOUR Residential REIT, Inc. Item 1.

Risk Factors 7 You should consider carefully all of the risks described below together with the other information contained in this Annual Report on Form 10-K, before making a decision to invest in our securities. This Annual Report on Form 10-K also contains forward-looking statements that involve risks and uncertainties.

The risks and uncertainties described herein should not be considered to be a complete list of all potential risks that may affect us. Additional risks and uncertainties not currently known to us, or not presently deemed material by us, may also impair our operations and performance.

If any of the following events occur, our business, financial condition and operating results may be materially adversely affected, the trading price of our securities could decline and you may lose all or part of your investment. Refer to the Glossary of Terms for definitions of capitalized terms and abbreviations used in this report.

U.S. dollar and share amounts are presented in thousands, except per share amounts or as otherwise noted. Index To Item 1A.

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.

Risk Factors 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.

Government backing of GSEs makes counterparty credit risk for investing in Agency Securities similar to that of U.S. Treasury Securities.

Should GSEs lose that status or go fully private it could cause extreme market volatility and depressed prices on Agency Securities; • The use of derivative instruments may fail to protect or could adversely affect us; • 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.

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; • We may issue stock when investment opportunities are relatively less attractive; and • We may repurchase our common and preferred stock at prices below book value, to the potential disadvantage of selling stockholders.

ARMOUR is externally managed by ACM: • ACM may terminate the management agreement for any reason.

If ACM ceases to be our investment manager, financial institutions providing any financing arrangements to us may not provide future financing to us; • ACM’s liability is limited under the management agreement and we have agreed to indemnify ACM and its affiliates against certain liabilities.

As a result, we could experience poor performance or losses for which ACM would not be liable; • There are potential conflicts of interest with current and future investment entities affiliated with ACM; • There are potential conflicts of interest with the allocation of investment opportunities by ACM; • Members of our management team have competing duties to other entities, which could result in decisions that are not in the best interests of our stockholders; • ACM's management fees are calculated based on our gross equity raised and not on our performance.

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, 2025 equaled 2.11% of stockholders' equity; • The termination of the management agreement may be difficult and costly; • The management agreement with ACM will automatically renew for an additional 5-year term unless ARMOUR gives 180-day written notice of non-renewal; and • The management agreement was not negotiated on an arm’s-length basis and the terms, including fees payable, may not be as favorable to us as if they were negotiated with an unaffiliated third-party.

Risk Factors 9 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; and • Distributable Earnings may not provide sufficient incentive to ACM to maximize risk adjusted returns on our investment portfolio.

Our affiliate BUCKLER is our largest financing counterparty and placement agent under our ATM offering program : • A material portion of our aggregate repurchase financing is facilitated through BUCKLER; • We hold a 10.8% equity ownership interest in BUCKLER and additionally, provided BUCKLER with $250 million in additional regulatory capital; • BUCKLER relies primarily on bilateral and triparty repurchase agreement funding through the FICC; • BUCKLER is the primary placement agent for ARMOUR's common share ATM Program; • BUCKLER may pursue business opportunities with third parties; and • 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.

General risks common to ARMOUR and our peer mortgage REITs: • Making attractive portfolio investments, obtain financing and hedge risks consistent with our strategy; • Complying with REIT and other tax requirements and Maryland law; • Maintaining exemptions from the 1940 Act and CFTC commodity pool regulations; • Our dependence on key personnel, information systems and communication systems; and • Capital markets risks related to our securities.

ARMOUR Residential REIT, Inc. Item 1A. Risk Factors 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.

We invest predominately in MBS backed by loans with fixed interest rates, and to a lesser extent from time to time, in MBS backed by loans with interest rates that adjust on a regular basis, usually either monthly or annually.

Our MBS have maturities ranging from 5 to 30 years (although average lives are much shorter due to amortization and prepayments). Our repurchase agreement borrowings generally have maturities ranging from one to 90 days.

This mismatch in the interest rate terms between our assets and our liabilities is the primary source of our ability to generate positive net interest income because long-term interest rates tend to be higher than short-term rates. Short-term and long-term interest rates do not always move together.

If short-term rates increase faster than long-term rates, the difference between the two may become zero or negative, and we may not have the ability to generate positive net interest income. Changes in short-term rates will most significantly impact our level of net interest income, with rising interest rates likely to reduce our net interest income.

Changes in long-term rates will initially impact the fair value of our investments in securities, with rising interest rates reducing their fair value. Changes in the values of our trading securities are reflected in our income as other gain or loss with rising rates likely to generate losses.

Over longer periods of time, rising long-term interest rates will provide us the opportunity to reinvest principal receipts and otherwise make additional investments in securities with higher yields.

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.

Congress, or changes in the credit rating of the U.S. government, the United Kingdom, or one or more Eurozone nations; however, increased uncertainty or changes in the economic outlook for, or rating of, the creditworthiness of the U.S. government, the United Kingdom, or Eurozone and Asian nations may have adverse impacts on, among other things, the U.S. economy, financial markets, the cost of borrowing, the financial strength of counterparties we transact business with, and the value of assets we hold.

Any such adverse impacts could negatively impact the availability to us of short-term debt financing, our cost of short-term debt financing, our business, and our financial results. We attempt to mitigate interest rate risk by moderating the amount of our financial leverage, diversifying our securities portfolio across both maturities and interest rate coupons, and economic hedging with derivatives.

For example, we enter into interest rate swaps that require us to pay fixed rates and receive variable rates. These swaps are designed to offset the fluctuations in the interest costs of our repurchase financing due to movements in short-term interest rates.

We record our derivatives and our trading securities at fair value and periodic changes in fair value are reflected in our net income (loss) and earnings per share. To the extent that fair value changes on derivatives offset fair value changes in our investments in securities, the fluctuation in our stockholders’ equity will be lower.

Rising interest rates may tend to result in an overall increase in our reported net income even while our total stockholders’ equity declines. 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.

The market prices and yields for Agency Securities and interest rate derivatives like those we hold are generally negatively correlated over time to each other and to certain benchmark prices and interest rates, such as those for U.S. Treasury Securities. Those correlations are never perfect, and can vary widely on occasion, particularly in times of market stress.

This variation in the “spread” relationship among the market yields, and therefore prices, of different instruments can result in our hedging positions being not as effective as normally ARMOUR Residential REIT, Inc. Item 1A. Risk Factors 11 would be expected, exposing us to the risk of unexpected volatility in our net income, earnings per share, and total stockholders’ equity.

Our most recent significant experience of this phenomena occurred in the first half of 2020. Spread risk is difficult and expensive to hedge effectively. Avoiding holding MBS with interest rate spread risk would severely limit our opportunity to generate net interest income because low spread risk investments, such as U.S. Treasury Securities, usually have substantially lower yields.

Our efforts to mitigate spread risk are limited to attempting to identify characteristics that might cause particular MBS to have relatively higher or lower spread risk under potential future market conditions. Such characteristics include characteristics of the underlying loans and current market premium levels.

However, other investment considerations, such as prepayment risk, tend to overshadow spread risk in our selection of Agency Securities.

We cannot predict the impact of future Fed monetary policy on the prices and liquidity of Agency Securities or other securities in which we invest, although Fed action could increase the prices of our target assets and reduce the spread on our investments or decrease our book value.

Changes in Fed policy affect our financial results because our cost of funds is largely dependent on short-term rates. An increase in our cost of funds without a corresponding increase in interest income earned on our investments in securities causes our net income to decline.

We cannot predict the impact of any future actions by the Fed on the prices and liquidity of the securities in which we invest. Future Fed action could reduce the value of our assets, reduce the spread on our investments and/or decrease our book value.

Changes by the Fed in its securities purchase programs or other monetary policy could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. See Item 7. Management's Discussion and Analysis, "Federal Reserve Actions" for further discussion.

We invest in MBS guaranteed by GSEs such as Fannie Mae and Freddie Mac, which are under conservatorship by the FHFA. Changes to the conservatorship or to the laws and regulations affecting the support GSEs receive may adversely affect the availability, financing, pricing, market value and liquidity of our assets. During the FHFA's conservatorship, U.S.

Congress has considered structural changes to GSEs, including considering releasing GSEs from conservatorship. Market volatility and concerns about recession have raised concerns that the GSEs may need additional capital to meet their obligations as guarantors. The market value of MBS is highly dependent on the continued support of the GSEs by the U.S. government.

If this support is modified or withdrawn, if the U.S. Treasury does not inject new capital as needed, or if the GSEs are released from conservatorship, the market value of MBS may significantly decline. The ability to obtain repurchase agreement financing might become difficult, or it may force us to sell assets at a loss.

Policy changes to the relationship between the GSEs and the U.S. government may create market uncertainty, have the actual or perceived effect of reducing credit quality of MBS issued by GSEs; interrupt cash flows on the underlying MBS; and negatively impact our exclusion from the 1940 Act.

The payment of principal and interest on the Freddie Mac and Fannie Mae Agency Securities are guaranteed by those respective agencies and the payment of principal and interest on the Agency Securities guaranteed by Ginnie Mae are backed by the full faith and credit of the U.S. Government. Fannie Mae and Freddie Mac remain in conservatorship of the U.S. Government.

There can be no assurances as to how or when the U.S. Government will end these conservatorships or how the future profitability of Fannie Mae and Freddie Mac and any future credit rating actions may impact the credit risk associated with Agency Securities and, therefore, the value of the Agency Securities.

All of our Agency Securities are issued and guaranteed by GSEs or Ginnie Mae. U.S. Government actions, including U.S. Congress, the Fed, U.S. Treasury, FHFA and other governmental and regulatory bodies may adversely affect our business.