Good morning, and welcome to ARMOUR Residential REIT's Fourth Quarter 2025 conference call. This morning, I'm joined by our Chief Financial Officer, Gordon Harper, as well as our Co-Chief Investment Officers, Sergey Losyev and Desmond Macauley.

I'll now turn the call over to Gordon to run through the financial results.

Thank you, Scott. By now, everyone has access to ARMOUR's earnings release, which can be found on ARMOUR's website, www.armourreit.com.

This conference call includes forward-looking statements, which are intended to be subject to the safe harbor protection provided by the Private Securities Litigation Reform Act of 1995. The Risk Factors section of ARMOUR's periodic reports filed with the Securities and Exchange Commission describe certain factors beyond ARMOUR's control that could cause actual results to differ materially from those expressed in or implied by these forward-looking statements.

Those periodic filings can be found on the SEC's website at www.sec.gov. All of today's forward-looking statements are subject to change without notice.

We disclaim any obligation to update them unless required by law. Also, today's discussion refers to certain non-GAAP measures.

These measures are reconciled with comparable GAAP measures in our earnings release. An online replay of this conference call will be available on ARMOUR's website shortly and will continue for one year.

Q4 was a strong quarter for ARMOUR, with a total economic return of 10.63% for the quarter as we benefited from MBS spreads tightening, lower MBS volatility, and a lower interest rate environment. The market momentum we saw in Q4 has continued so far into Q1.

ARMOUR's Q4 GAAP net income available to common stockholders was $208.7 million, or $1.86 per share. Net interest income was $50.4 million.

Distributable earnings available to common stockholders was $79.8 million, or 71 cents per common share. This non-GAAP measure is defined as net interest income plus TBA drop income, adjusted for interest income or expense on our interest rate swaps and futures contracts, minus net operating expenses.

Quarter-end book value was $18.63 per common share, up 6.5% from September 30th. Our most recent current available estimate of book value as of Tuesday, February 17th, was $18.37 per common share, which reflects the payment of our January dividend of 24 cents and the accrual of the entire February common dividend payable on February 27th, 2026, again, of 24 cents per common share.

During Q4, ARMOUR raised approximately $3.8 million of capital by issuing approximately 183,000 shares of preferred stock through an at-the-market offering program. Through February 11th, 2026, we've raised approximately $138 million of capital under our common at-the-market program by issuing approximately 7.5 million shares of common stock, which is mildly dilutive.

We also issued $4.8 million of capital from the issuance of 230,000 shares of preferred stock under our preferred at-the-market program. ARMOUR paid monthly common dividends per share of 24 cents per common share per month, for a total of 72 cents for the quarter.

As we've stated previously, we aim to pay an attractive dividend that is appropriate in the context and stable over the medium term. On January 29th, we paid a cash dividend of 24 cents per outstanding common share to the holders of record on January 15th, 2026.

We have also declared cash dividends of 24 cents per outstanding common share payable on February 27th, 2026, and March 30th, 2026, to holders of record on February 17th and March 16th, respectively. I will now turn the call back over to CEO Scott Ulm to discuss ARMOUR's portfolio position and current strategy.

Thank you, Gordon. ARMOUR REIT delivered a robust fourth quarter, marking a 6.5% increase in book value in the fourth quarter.

The strong growth extended to our balance sheet. The portfolio grew for a second consecutive quarter, increasing by more than 10% from the end of the third quarter of 2025, driven by roughly 22 basis points of spread tightening while maintaining moderate leverage throughout the quarter.

ARMOUR's mortgage assets now total over $20 billion, supported by a strong capital liquidity position of approximately 54% of total shareholders' equity as of the end of January. We've viewed agency MBS as a high-conviction opportunity from the onset of the Fed's easing cycle in the third quarter of 2024, and the backdrop for 2026 has now turned materially more supportive.

Despite spreads tightening meaningfully so far in 2026, the market's appeal remains anchored in declining rate volatility and easing funding costs, supported by the Fed's efforts to lower rates and maintain ample banking liquidity. While prepayments have moved off their cyclical lows of recent years, they remain contained, with primary mortgage rates still anchored around 6%.

Add in a steeper yield curve, and the result is a market that we expect to continue to favor MBS, with compelling returns relative to returns in corporate credit, where spreads are trading at historically tight valuations. Technical supply and demand dynamics are now working with us, not against us.

The administration's focus on lowering mortgage spreads reinforces a clear North Star for a stable mortgage market, an objective we expect Fannie Mae and Freddie Mac to support through FHFA's $200 billion MBS purchase mandate. The GSEs have posted strong monthly purchases of mortgage assets throughout last year, while net issuance of conventional MBS remained negative in the fourth quarter.

The imbalance has revived attractive returns in the TBA roll market, creating a liquid carry environment and expanding the buyer base for agency MBS. I'll now turn it over to Desmond for more detail on our portfolio.

Thanks, Scott. ARMOUR's most recent net balance sheet duration stands at 0.14 years, with a modest positive bias to the front end of the curve, consistent with easing monetary policy.

Implied leverage, excluding Treasury longs, is 7.9 turns, a balanced posture that reflects tighter spreads and a lower-volatility backdrop versus the prior year. The portfolio remains nearly 100% agency MBS, agency CMBS, or DUS, and US Treasuries to target specific yield curve exposures.

Consistent with our balance sheet growth, we added over $3 billion of MBS pools and DUS across the fourth quarter and early first quarter, and our purchase mix has evolved as rates and spreads have moved. Early in the fourth quarter, we determined it was most attractive to overweight premium dollar MBS, which offered the most attractive spreads and yields.

Anticipating that GSE purchases would most likely concentrate in near-par coupons where the impact on primary mortgage rates is most direct, we added over a billion of 4.5% and 5% coupon MBS ahead of Trump's GSE announcement in early January. As belly coupons tightened to historically rich levels to near single-digit OAS, we shifted toward lower coupons and seasoned collateral, where affordability initiatives aimed at unfreezing the housing market could drive higher turnover speeds while preserving higher yields in deeper discount MBS.

Within premium bonds, we focused more on call protection in higher-tier maximum loan size pools while keeping pay-up targets at 24/32 or lower. In agency CMBS, our five-year DUS position experienced extreme spread tightening.

On a relative value basis, 10-year DUS bonds now screen more attractive, particularly when hedged with longer-dated SOFR swaps with pay-fixed rates still cheaper than Treasury hedges. Roughly 86% of our hedges are in OIS and SOFR pay-fixed swaps, with a balance in Treasury futures.

The benchmark 10-year SOFR swap spread has normalized back to its pre-liberation day average of approximately negative 37 basis points, and we anticipate further gains will likely hinge on the path of policy debate around the Fed's desired balance sheet size and banking deregulation. Aggregate portfolio prepayments averaged 11.1 CPR through Q4 2025 and Q1 2026 to date versus 8.1 CPR in Q3 2025, stable, but running at a somewhat higher level versus the prior year.

Despite tighter mortgage spreads, the 30-year mortgage rate has remained in a tight 6% to 6.3% band, though it has recently shifted toward the low end of that range. The administration's push for affordability without sacrificing home price appreciation leaves mortgage rates and spreads as the two primary levers to accomplish that.

However, the easy work has already been done. The mortgage rate spread to the 10-year Treasury is now below its 15-year average.

Further declines in mortgage rates will therefore require lower long-end Treasury yields, which have not declined in sync with front-end rate cuts since the start of the easing cycle in 2024. Still, we remain mindful that many originators have built significant capacity to ramp up refinancing, which could be triggered by a sustained move below 6% and may accelerate speeds in par and premium coupons in coming quarters.

Refi activity has proven to be highly sensitive to marginal mortgage rate declines, keeping prepayment risk in TBAs and generic premium MBS elevated. Coupon selection and specified collateral remain the key to containing the prepayment risk.

We are positioned accordingly. Nearly 30% of assets are in prepayment-protected agency CMBS pools and discount MBS, while specified MBS pools with some form of prepayment protection comprise over 92% of ARMOUR's portfolio.

Funding markets have also turned the corner. 2026 repo conditions have improved materially versus last year.

Markets are liquid, and financing levels have eased, with repo rates averaging roughly SOFR plus 15 basis points. The SOFR to fed funds spread has also normalized to near flat.

As repo rates backed up in late 2025, the Fed moved quickly to contain intra-month funding pressures tied to falling reserves and elevated T-bill supply. First, the Fed continues to implement a policy of easing the overnight fed funds rate.

Second, it has shifted its reinvestments by directing paydowns of its Treasury and MBS holdings back into the Treasury market. Third, it initiated outright purchases of up to $40 billion per month in Treasury bills and other short-dated Treasuries to stabilize reserve balances and maintain ample system liquidity.

This response reinforces the systemic importance of repo markets as the foundation for liquid financial conditions and underscores the Fed's low tolerance for a repeat of the September 2019 episode, when reserve scarcity and balance sheet frictions contributed to a sharp dislocation in secured funding. While the incoming chair has signaled an appetite for a smaller Fed footprint and a reduced balance sheet over time, we expect the central bank's focus on orderly funding markets to remain the highest priority, with a willingness to respond preemptively ahead of any emerging stress.

As of today, we finance the portfolio across 23 active repo counterparties. Approximately 80% of our repo principal is financed at a 3% haircut or lower, and the weighted average haircut across the repo book is approximately 2.75%.

Box-loan securities accounts for roughly 40% to 60% of our repo financing. Back to you, Scott.

Thanks, Desmond. We continue to set our dividend with a medium-term outlook.

While acknowledging relatively tighter spreads versus the prior year, we expect the backdrop of a steeper yield curve and lower volatility remains supportive for a consistent and predictable return profile for our assets. Our approach remains unchanged: stress-test our liquidity, apply systematic hedging, and deploy capital when opportunities present themselves.

Overall, we're confident in our positioning, our strategy, and our ability to deliver value for shareholders in 2026. Before we open the line for questions, we'd also like to highlight that we've launched a new investor presentation, now available on ARMOUR's website.

It provides additional insight for investors, including how our portfolio has transformed over time. Thank you for joining today's call and for your continued interest in ARMOUR.

Good morning. Thank you for taking the question.

I was wondering on the portfolio interest-bearing assets, by my estimates it increased year over year around 49%. I was wondering the outlook in '26.

Do you see potential for similar growth or maybe a little bit less given the increase in 2025? Thank you.

There are a couple elements there, but certainly one of the most important is capital raising. When we see an opportunity to raise capital combined with investment opportunities we like, we'll execute on that.

We discriminate a fair amount in terms of what is going to be attractive or not. I'm afraid I've got to tell you it depends on how the market behaves, both on the investment side and the equity side, of whether we will be similar or smaller or in some other relationship to what we were able to do last year.

Great. Thank you so much.

Then just to confirm, book value as of Tuesday was $18.37 per share?

Correct. That's after the accrual of our full February dividend and the payment of our January dividend.

Great. Perfect.

Thank you so much.

Hey, thanks. Good morning.

Can you guys talk about where you're seeing incremental returns on new investments today, given the spread tightening that's occurred, and how you view that incremental level of return compared to the dividend you're currently paying? Thanks.

Yes, hi, Trevor. This is Desmond Macauley.

On a carry basis, the levered yield on 30-year 5s, which are currently production coupon, is around mid-teens, let's say about 15%. This assumes eight turns of leverage hedged to 0.5 duration using swap hedges, and it's a static framework over a period of just about three months.

It doesn't assume any more spread tightening. Now, we think, at least in the medium term, we could see a bit more spread tightening, let's say we get another 10 basis points of OAS tightening, that adds about 4% to that return.

Also, the curve could steepen some more, if we see another 50 basis points in curve steepening, particularly led by the front end through more Fed cuts, which is that we anticipate, that can also add about another 1% or so. Those are all parts of the full total return framework, some of that would accrue to our book value.

Now, in terms of marginal capital raise, we see that hurdle rate is about 16%, so that would be dividend yield for common, and the management fee is just 75 basis points on new equity, you add that together, that's roughly about 16%. You can see that for production coupon, the base-case returns are close to that level already, and with just a little bit more steepener, and if we see more tightening, it would surpass that by a couple more points.

Does that answer your question?

That's very helpful. Thank you.

Then I guess in general, can you guys talk about how you're thinking about the likelihood of further actions driven by the government to attempt to lower mortgage rates, things such as increasing the GSE portfolio limits further or potentially doing other things like lowering g-fees, etc.? Thanks.

Hey, Trevor, this is Sergey. Around that week in Davos, we were expecting maybe a few more announcements on the affordability push that the administration has announced with the GSE purchases.

We haven't gotten anything. It feels to us that maybe the lowest-hanging fruit has been picked in terms of pressuring spreads and mortgage rates lower, but without affecting home prices.

I think the next steps kind of have both positives and negatives for that push in terms of the g-fee cuts for the GSEs take away some of the profitability, make them less of profitable enterprise, and more of policy tool. It will introduce negative convexity to investors who may demand wider spreads.

Some of the further steps may work counter to what administration has called a North Star in terms of keeping mortgage spreads nice and stable. We do expect more announcements.

Obviously, there've been announcements on importability, assumability of mortgage loans, 50-year loans have been taken off the table. There are a lot of announcements that are made, but once you get to the implementation stage of it, things have been quite slow.

Having said that, we definitely expect in the mid-term here for these announcements to be quite active.

Okay. Appreciate the comments.

Thank you.

Morning, and thanks for taking my questions. I wanted to start with just asking for a little more thoughts on your current liquidity.

It looks like quarter over quarter, you put a little more to work, but then it looks like it's back up as of last month-end. I guess how do you think about this in the near term?

Hi, Dave. I think our liquidity, we mentioned, is about 54% of the total equity as of month-end.

It's a really good spot. It reflects our moderate leverage, kind of where we have been steady in terms of liquidity.

We don't foresee any sharp changes given our current position in the portfolio.

Understood. Thank you.

Then I also note you mentioned in prepared remarks that about maybe 30% of your portfolio is payment-protected, with mortgage rates hovering around the 6%. I know the market likes nice round numbers.

Do you see any risk of a tipping point, or is more maybe a linear situation as mortgage rates may be fatigued to stick lower?

Look, prepayments have increased from Q4 so far in Q1, we noted it in our script. We're definitely towards the lower range of the mortgage rates that we've been over the last couple of years.

February prevailing mortgage rate will be lower after the GSE announcements as well. The risk of faster prepayments has increased, right?

I think in sync with that, our portfolio has morphed over the last couple of quarters to protect us more from lower mortgage rates, 30% in discounts and DUS, specified pools make up 92%. Within the 92%, almost 40% is in the low-loan-balance stories, others credit and geo stories.

We feel like faster refinances are in the future, but we built our portfolio for that environment.

Understood. Thank you.

Hey, thanks. Good morning.

I think you guys mentioned in the opening remarks haircuts for MBS have come down. It's kind of an interesting comment.

Can you maybe frame kind of where that level is relative to the historical levels? Then if the GSEs are helping reduce volatility in the market, could we see that haircut level come down even further, potentially?

We would hope so. A lot of the guidance on haircuts comes from FICC, but in terms of our bilateral counterparty repo haircuts, we have worked with a lot of our counterparts to bring down the maximum haircuts closer to our weighted average of 2.75%.

I think almost 80% of our repo book is at 3%.

Okay. Following up on the conversation around just where you are in the coupon stack.

You mentioned originators have been really able to leverage some of their tools to be aggressive on refi. How does that drive the appetite for the current coupon specifically?

The OAS that's in the current coupon, how do you compare that to some of the lower coupons and just where you feel comfortable taking prepayment risk?

We've been looking away from current coupons because that's kind of where the biggest impact from the announcement has been really all throughout the Q4. We did add in Q4 a little over a billion in 4.5s and 5s, but since then, probably we're more looking at the wings, deeper discount coupons where we can see some of the housing activity perhaps reignite with any of these affordability measures.

In terms of premium coupons, they're still our core holding. If you look at the OAS spread difference between 102 price and current coupon MBS, we're at close to two standard deviations on that spread, historically speaking, right?

A lot of the fears in prepayments and g-fee cuts have already been priced into the premiums. It's really looking at kind of bar-belled approach in the coupon stack at this point.

Even within the belly of the coupon stack, you can find stories which pick OAS versus TBA specifically, maybe like seasoned collateral, things like that.

How many Fed cuts do you feel like are currently priced into the mortgage basis?

How many Fed cuts?

Yeah. How many Fed cuts for the rest of this year do you think are priced into the mortgage basis right now?

The market is expecting by the end of December a little bit over two cuts. From our perspective, we think it's reasonable.

We think that normalization will continue this year. It looks like when we get to around June, the probability is about 100%, getting close to 100%.

That will be a very good environment for the MBS market and mortgage spreads. We think that the curve is already steepened.

If we do see more cuts, then funding costs will come down, the curve will steepen even more, and that makes the entire space more attractive, and it adds to overall total return.

Great. Thank you, guys, so much.

Appreciate your comments.

Thank you very much for your interest in ARMOUR REIT. If there are follow-up questions, don't hesitate to call the office, and we will get back to you as soon as we can.

Thanks so much, and good morning to you.