Skip to content
    ARR
    Earnings call· Jun 2026(Q2 FY26)

    Armour Residential REIT, Inc. ARR

    Jul 23, 2026 Source

    Executive summary

    ARMOUR Residential REIT Q2 FY26 — Strong Economic Return Amidst Macro Headwinds

    ARMOUR Residential REIT delivered a strong second quarter, achieving a 4.8% total economic return and growing its capital base despite a challenging macroeconomic environment. The company maintained a near-zero net balance sheet duration and an implied leverage of 7.5 turns, reflecting a cautious yet opportunistic approach. Management continues to prioritize stable common share dividends and disciplined capital deployment through its ATM programs, while closely monitoring Fed policy and inflation trends.

    Highlights

    5

    • Achieved a total economic return of 4.8% for the quarter.

    • Reported GAAP net income available to common stockholders of $111.5 million or $0.86 per common share.

    • Delivered distributable earnings available to common stockholders of $93.2 million or $0.72 per common share.

    • Book value per common share increased by 0.6% to $17.53 at quarter-end.

    • Grew portfolio size to over $22 billion, marking the fifth consecutive quarter of growth.

    Concerns

    3

    • Estimated book value as of July 20 was $17 per common share, down from $17.53 at quarter-end.

    • Mortgage spreads are modestly wider heading into the third quarter.

    • Signs of demand cooling in the mortgage market were observed this quarter.

    Operational metrics

    33
    Total economic return
    4.8%
    Q2 FY26

    Total economic return for the quarter.

    GAAP net income available to common stockholders
    $111.5M
    Q2 FY26

    GAAP net income available to common stockholders.

    GAAP net income per common share
    $0.86
    Q2 FY26

    GAAP net income per common share.

    Net interest income
    $76.8M
    Q2 FY26

    Net interest income for the quarter.

    Distributable earnings available to common stockholders
    $93.2M
    Q2 FY26

    Non-GAAP measure defined as net interest income plus TBA drop income adjusted for income or expense on interest rate swaps and futures contracts minus operating expenses.

    Capital raised via common stock ATM
    $218.7M
    Q2 FY26

    Capital raised by issuing common stock through at-the-market offering programs.

    Common stock shares issued via ATM
    12.7M
    Q2 FY26

    Number of common shares issued through at-the-market offering programs.

    Capital raised via preferred stock ATM
    $4.1M
    Q2 FY26

    Capital raised by issuing preferred stock through at-the-market offering programs.

    Preferred stock shares issued via ATM
    198,000
    Q2 FY26

    Number of preferred shares issued through at-the-market offering programs.

    Capital raised via common stock ATM
    $88.3M
    Q3 FY26 YTD

    Capital raised by issuing common stock through at-the-market offering programs through July 14, 2026.

    Common stock shares issued via ATM
    5.2M
    Q3 FY26 YTD

    Number of common shares issued through at-the-market offering programs through July 14, 2026.

    Monthly common stock dividend
    $0.24
    Q2 FY26

    Monthly common stock dividend paid per common share.

    Total common stock dividend
    $0.72
    Q2 FY26

    Total common stock dividend paid per common share for the quarter.

    Book value per common share
    $17.53up 0.6%
    Q2 FY26

    Book value per common share at quarter end, up from March 31, 2026.

    Estimated book value per common share
    $17
    Q3 FY26

    Estimated book value per common share as of July 20, reflects accrual of July common dividend of $0.24 per share.

    Mortgage option adjusted spreads tightening
    7
    Q2 FY26

    Mortgage option adjusted spreads tightened across ARMOUR's asset classes.

    Net balance sheet duration
    near 0
    Q2 FY26

    Net balance sheet duration at quarter end.

    Implied leverage
    7.5x
    Q2 FY26

    Implied leverage, excluding treasury holdings.

    Liquidity position
    $1.2B
    July month-end

    Expected July month-end liquidity position, including monthly paydowns.

    Liquidity as % of total equity
    nearly 50%
    July month-end

    Expected July month-end liquidity as a percentage of total equity.

    Portfolio size
    $22B
    Q2 FY26

    Total portfolio size.

    Net added new mortgage assets
    $1.3B
    since last conference call in April

    Net added new mortgage assets since ARMOUR's last conference call in April.

    Specified pools as % of MBS holdings
    over 95%
    Q2 FY26

    Percentage of ARMOUR's MBS holdings concentrated in specified pools.

    Aggregate portfolio prepayments
    11.4
    Q2 FY26 average

    Average aggregate portfolio prepayments for Q2.

    Aggregate portfolio prepayments
    11.2
    Q1 FY26 average

    Average aggregate portfolio prepayments for Q1.

    Aggregate portfolio prepayments
    8.8
    July report

    Aggregate portfolio prepayments in the July report.

    Hedges as OIS and SOFR pay fixed swaps
    86%
    Q2 FY26

    Percentage of ARMOUR's hedges that are OIS and SOFR pay fixed swaps.

    Static returns for 30-year 5s to 6s
    mid-teens
    current

    Static returns for 30-year 5s to 6s.

    Impact of OAS tightening on total return
    4%-5%
    future

    Potential additional total return through book value if spreads tighten.

    GSEs retained portfolios capacity remaining
    $100B
    current

    Remaining capacity under Fannie Mae and Freddie Mac's regulatory cap.

    GSEs added mortgages
    $20B
    March

    Amount of mortgages added by GSEs in March.

    Fed treasury bill purchases
    $10B
    current

    Reduced rate of Fed treasury bill purchases.

    Marginal fee
    75
    current

    Marginal fee for capital raising.

    Industry KPIs

    3
    MetricValueDetails
    Investment volume closed$1.3BUSD
    Net debt adjusted EBITDA7.5xx
    Ffo core ffo normalized ffo per share$0.72USD

    Risks & headwinds

    5
    Less predictable Central BankOngoing

    Could push interest rate volatility higher

    Mitigation: Maintaining near-zero net balance sheet duration and systematic hedging.

    Firmer inflation, more hawkish Fed, and sustained rise in volatilityOngoing

    Could prompt investors to demand greater compensation for mortgage risk, pushing spreads and yields wider

    Mitigation: Disciplined approach at current valuations until market understanding of Fed's reaction function improves.

    Bearish reaction function of the FedOngoing

    Needs better understanding

    Mitigation: Comfortable with current leverage, but continuously monitoring market conditions.

    Oil prices increasingOngoing

    Could flow over to headline inflation, leading to potential Fed hikes

    Mitigation: Preparing for both scenarios, protecting portfolio convexity from both sides of rate moves.

    Higher haircut percentages on longer duration hedgesOngoing

    Impacts liquidity

    Mitigation: Liquidity is stress-tested over extreme scenarios, comfortable with current levels.

    What to watch in Q3 FY26

    5

    Fed's reaction function to macroeconomic factors

    next quarter
    CurrentLess predictable Central Bank, broader policy framework under review
    TargetBetter understanding of Fed's reaction function

    Why it matters

    Clarity on Fed policy will influence interest rate volatility and mortgage spreads, impacting portfolio performance.

    Under Chairman Warsh's new leadership with traditional forward guidance receding and the Fed's broader policy framework under review, a less predictable Central Bank could push interest rate volatility higher.

    Q&A highlights

    9

    How does ARMOUR approach capital raising given the outlook for range-bound spreads and market risks?

    Management considers opportunities, cost reduction (spreading costs over a larger capital base), and the 75 basis point marginal fee. They evaluate the opportunity set in the market for execution.

    “The way we've always approached capital is to look at what we can do with it and what the opportunities are. And so we continue along that course. We're also mindful that raising capital lowers our costs.”

    asked by Doug Harter · answered by Scott Ulm

    2 min read5 chapters

    Detailed Narrative

    01

    Q2 Performance Highlights

    ARMOUR Residential REIT reported a total economic return of 4.8% for the second quarter of 2026, driven by tightening MBS spreads. The company achieved GAAP net income of $111.5 million, or $0.86 per common share, and distributable earnings of $93.2 million, or $0.72 per common share. Book value per common share increased by 0.6% to $17.53 at quarter-end, reflecting positive performance despite a challenging macroeconomic backdrop.

    02

    Capital Raising and Dividend Strategy

    During Q2, ARMOUR raised approximately $218.7 million by issuing 12.7 million shares of common stock and $4.1 million by issuing 198,000 shares of preferred stock through its at-the-market (ATM) programs. The company continues to prioritize maintaining common share dividends appropriate for the intermediate term, paying $0.24 per common share per month for a total of $0.72 for the quarter. Management noted that raising capital lowers costs by spreading them over a larger capital base and that the marginal fee is 75 basis points.

    03

    Portfolio Positioning and Hedging

    The company's net balance sheet duration registered at near zero at quarter-end, reflecting a neutral view on interest rates and the yield curve shape. Implied leverage, excluding treasury holdings, was around 7.5 turns, a modestly lighter level to reflect caution. ARMOUR's asset portfolio remains 100% Agency MBS, Agency CMBS, and U.S. Treasuries, with a portfolio size exceeding $22 billion. Approximately 86% of ARMOUR's hedges are OIS and SOFR pay fixed swaps, favoring shorter and intermediate maturities for less spread volatility.

    04

    Market Outlook and Technicals

    Despite a macroeconomic backdrop that would normally weigh on the sector, Agency MBS delivered positive Q2 performance due to supportive market supply-demand dynamics. Elevated mortgage rates are constraining new loan production, leading to negative net issuance of Fannie Mae and Freddie Mac securities. Strong inflows into bond funds from domestic and international investors continue to support Agency MBS. However, management remains mindful of potential disruptions from firmer inflation, a more hawkish Fed, and sustained volatility.

    05

    CMBS and Coupon Strategy

    ARMOUR's CMBS position complements the portfolio by offering portfolio optimization and a targeted approach to the longer end of the yield curve, serving as a substitute for more expensive specified pools. The company has been concentrating its purchase mix in par and slight premium coupons (5s to 6s) that benefit from a slower prepayment environment. The portfolio remains concentrated in specified pools with favorable prepayment characteristics, representing over 95% of MBS holdings, while avoiding generic paper with high average loan sizes.

    AI-generated summary of the company’s earnings call. Not investment advice.