ARMOUR Residential REIT (NYSE:ARR) reported first-quarter 2026 results against a backdrop of heightened market volatility, as management pointed to geopolitical tensions and a sharp rise in oil prices that widened mortgage-backed securities (MBS) spreads and lifted implied volatility during the quarter.
Chief Financial Officer Gordon Harper said the company posted a total economic return of -2.6% for the first quarter. ARMOUR recorded a GAAP net loss attributable to common stockholders of $58 million, or $0.49 per common share. Net interest income was $70.7 million.
Book value declined in Q1, then recovered early in Q2
ARMOUR ended the quarter with book value of $17.42 per common share, down 6.5% from December 31, 2025. However, Harper said that as of Monday, April 20, the company’s estimated book value was $18.05 per common share, reflecting the accrual of the April common dividend.
Chief Executive Officer Scott Ulm attributed the first-quarter disruption to macro and geopolitical events, describing a bear-flattening yield curve amid a “shallower path of Fed cuts,” while “implied volatility more than doubled” and nominal mortgage spreads widened during the quarter. Ulm said that wider spreads and elevated volatility “ultimately proved to be a buying opportunity for ARMOUR,” and he added that as spreads retraced tighter and interest rates stabilized, ARMOUR saw “a recovery in our book value of 3.5% quarter-to-date net of dividend.”
Dividend and capital actions
ARMOUR paid monthly common dividends of $0.24 per share during the quarter, totaling $0.72 for the first quarter. Harper said the company aims to pay “an attractive dividend that is appropriate in context and stable over the medium term.”
The company also disclosed additional dividend declarations:
- A $0.24 per share cash dividend paid April 29, 2026, to holders of record on April 15, 2026.
- A declared $0.24 per share cash dividend payable May 28, 2026, to holders of record on May 15, 2026.
On the capital front, Harper said ARMOUR raised approximately $215 million by issuing about 11.8 million shares of common stock and $6.4 million by issuing about 306,000 shares of preferred stock through its at-the-market programs during the quarter. Through April 15, 2026, the company raised an additional $7.2 million via 416,000 common shares and $179,000 via 8,600 preferred shares through the same programs.
Harper added that in March 2026, ARMOUR repurchased 125,000 shares under its stock repurchase program.
In response to a question about how the company weighs issuance versus repurchases, Ulm said the decision is “all about price” and “opportunity,” including considerations around investment horizons and per-share operating efficiency as the shareholder base changes. He added that ARMOUR is “very committed to being on both sides of the market,” but characterized decisions to issue or repurchase as “very carefully calibrated.”
Ulm also told analysts that volatility plays a role in activity levels, saying it is “not a positive for share price” and that higher volatility generally makes ARMOUR “less active on the issuance side, but maybe a little more active on the repurchase side.”
Portfolio positioning: agency focus, specified pools, and liquidity
Co-Chief Investment Officer Sergey Losyev said ARMOUR’s net balance sheet duration was approximately 0.4 years. He put implied leverage (excluding Treasury shorts) at 7.85x, describing it as a “balanced posture” that reflected purchases made when spreads widened in March.
Losyev said expected month-end liquidity, including April paydowns, was $1.2 billion, or “nearly 50% of Monday’s total equity.” ARMOUR’s asset portfolio remained “100% agency MBS, agency CMBS, and U.S. Treasuries,” and he said it stood at “over $21 billion,” marking a fourth consecutive quarter of growth in assets and capital base.
He said ARMOUR net added nearly $900 million of MBS since the company’s last conference call and that the firm took advantage of March spread widening in new production coupons. The company also added “seasoned, deeper discount MBS” and “15-year agency MBS TBA rolls.” Losyev said specified pools with favorable prepayment characteristics represented 95% of ARMOUR’s MBS holdings.
In agency CMBS, Losyev said ARMOUR rotated a large portion of its DUS portfolio out of the 5-year sector and into 10-year DUS paper, citing positive convexity and the ability to earn an additional 30-40 basis points of spread with longer SOFR hedges.
Spread outlook, ROE on new purchases, and funding conditions
During the Q&A, Co-Chief Investment Officer and Head of Risk Management Desmond Macauley said that for par and premium securities, ARMOUR was seeing return on equity “in the mid to high-teens,” assuming about eight times leverage and hedging to “half duration.” Macauley added that in scenario analysis, a 10-basis-point tightening in option-adjusted spreads (OAS) could add roughly 3% to 5% in total return through book value, which he said could lift returns from around 16% toward the 19% to 20% range in that example.
On longer-term spreads, Macauley compared current conditions to 2019 and said current spreads to swaps were around 150 basis points versus about 120 basis points then, suggesting spreads are “wider by 30 basis points.” He added that versus Treasuries, spreads were roughly 20 basis points wider than that period. “We think conservatively, we can see another 20 basis points of tightening here over the medium term,” he said.
Asked about dollar-roll opportunities, Losyev said the TBA market “has certainly returned to some level this year,” but remains “fairly volatile and unstable.” He said ARMOUR uses TBAs “opportunistically for total return opportunities,” but continues to prefer specified pools for the “certainty of cash flows” and protection from “tail risk if mortgage rates turn lower in the future.”
On leverage, Macauley told JMP Securities that the company was comfortable with its current level and noted that ARMOUR increased leverage after spreads widened in March, which benefited book value. He said the company prioritizes risk management and liquidity stress testing, and would consider adding leverage if spreads widen further, provided volatility is not systemic.
Losyev described funding markets as “refreshingly uneventful” in the first quarter, saying repo remained liquid and stable. He said repo spreads traded inside 15 basis points above SOFR and the fed funds rate, and that approximately 80% of ARMOUR’s repo principal was financed at a 3% haircut or lower, with a weighted average haircut of about 2.75%. He also stated that Buckler Securities accounted for roughly 45% of ARMOUR’s repo financing book.
Looking ahead, Ulm reiterated a constructive stance on agency MBS, arguing the “case to own MBS remains strong” and could strengthen if the Federal Reserve resumes easing later in the year. He said the company’s approach remains unchanged: “Stress test our liquidity, apply systematic hedging, and deploy capital when opportunities present themselves.”
About ARMOUR Residential REIT (NYSE:ARR)
ARMOUR Residential REIT (NYSE:ARR) is a mortgage real estate investment trust that was formed in 2008 to acquire and manage a portfolio of residential mortgage-backed securities (RMBS). The company’s investments are primarily agency-sponsored and agency-guaranteed RMBS issued by U.S. government-sponsored enterprises, along with credit risk transfer securities and select non-agency residential and multifamily RMBS. By focusing on high-quality mortgage assets, ARMOUR Residential REIT seeks to generate stable income and preserve capital through diversified exposure to the U.S.
