Armour Residential REIT Inc

Previous wording

On March 20, 2024, the Fed kept its target range for the Federal Funds Rate unchanged at 5.25% to 5.50%. The Fed stated that the risks to achieving its employment and inflation goals are moving into better balance and in considering any adjustments to the target range for the Federal Funds Rate, the Fed will carefully assess incoming data, the evolving outlook, and the balance of risks. The Fed further stated that it does not expect it will be appropriate to reduce the target range for the Federal Funds Rate until it has gained greater confidence that inflation is moving sustainably toward 2%.

Current wording

On June 12, 2024, the Fed kept its target range for the Federal Funds Rate unchanged at 5.25% to 5.50%. The Fed stated that the risks to achieving its employment and inflation goals have moved toward better balance over the past year and in considering any adjustments to the target range for the Federal Funds Rate, the Fed will carefully assess incoming data, the evolving outlook, and the balance of risks. The Fed further stated that it does not expect it will be appropriate to reduce the target range for the Federal Funds Rate until it has gained greater confidence that inflation is moving sustainably toward 2%.

Previous wording

The Fed also stated that it will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities 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 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.

Current wording

On May 1, 2024, The Fed stated that it will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, but with changes to its previously announced plans. The Fed stated that beginning in June, it would slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion. Therefore, beginning on June 1, the Fed rolled 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. The Fed further stated that it will maintain the monthly redemption cap on Agency debt and agency mortgage-backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasuries.

Previous wording

Net Income for the three months ended March 31, 2024 compared to the net loss for the three months ended March 31, 2023 reflected interest income from a larger average securities portfolio, offset by higher interest rates applicable to repurchase agreements and the larger average securities portfolio, gains from our derivatives and higher expenses due to the costs associated with the previously disclosed Special Committee internal investigation. Information about this investigation and the findings are disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, under the heading, “Item 9B. Other Information.”

Current wording

Net loss for the three and six months ended June 30, 2024 compared to net income for the three and six months ended June 30, 2023 reflected realized and unrealized losses on our trading securities. During the six months ended June 30, 2024, total expenses included costs associated with the previously disclosed Special Committee internal investigation. Information about this investigation and the findings are disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, under the heading, “Item 9B. Other Information".

Previous wording

The following table details the factors impacting our net interest income for three months ended March 31, 2024 and March 31, 2023.

Current wording

The following table details the factors impacting our net interest income for three and six months ended June 30, 2024 and June 30, 2023.

Previous wording

Three Months Ended March 31, 2024 vs. Three Months Ended March 31, 2023

Current wording

Three and Six Months Ended June 30, 2024 vs. Three and Six Months Ended June 30, 2023

Previous wording

•Gain (Loss) on Agency Securities, trading, includes changes in fair value of the securities as well as the gain (loss) on sales. For the three months ended March 31, 2024, the change in fair value of the securities was $(135,123) compared to $290,521 for the three months ended March 31, 2023. During the three months ended March 31, 2024, we sold $347,896 (including $35,948 of receivables for unsettled sales) of Agency Securities, trading, compared to $862,947 during the three months ended March 31, 2023, resulting in realized losses of $(2,626) and $(170,155), respectively.

Current wording

•Loss on Agency Securities, trading, includes mark to market changes in the fair value of our securities as well as the gain (loss) on sales.

Previous wording

•Gain (Loss) on U.S. Treasury Securities resulted from the change in fair value of the securities as well as the loss on sales. For the three months ended March 31, 2024 and March 31, 2023, the change in fair value of the securities was $15,133 and $(6,465), respectively. For the three months ended March 31, 2024, we sold short $97,004 of U.S. Treasury Securities resulting in realized loss of $(4,211). For the three months ended March 31, 2023, we sold $(613,852) of U.S. Treasury Securities resulting in a loss of $(5,389).

Current wording

•Gain on U.S. Treasury Securities resulted from the change in fair value of the securities as well as the gain (loss) on sales. For the three and six months ended June 30, 2024 and June 30, 2023, the change in fair value of the securities was $12,476 and $27,609 and $11,933 and $5,468, respectively. For the three and six months ended June 30, 2024, we sold short $772,253 and $869,257 of U.S. Treasury Securities resulting in realized gains of $6,673 and $2,462, respectively. For the three and six months ended June 30, 2023, we sold $0 and $(613,852) of U.S. Treasury Securities resulting in losses of $0 and $(5,389), respectively.

Previous wording

◦Interest rate swap contracts' aggregate notional balance increased from $6,786,000 at December 31, 2023 to $7,186,000 at March 31, 2024.

Current wording

◦Interest rate swap contracts' aggregate notional balance increased from $6,786,000 at December 31, 2023 to $8,286,000 at June 30, 2024.

Previous wording

The Company is managed by ACM, pursuant to a management agreement. 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. However, because the management fee rate decreases to 0.75% per annum for gross equity raised in excess of $1.0 billion pursuant to the management agreement, the effective management fee rate declines as equity is raised. 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. At March 31, 2024 and March 31, 2023, the effective management fee, prior to management fees waived, was 0.93% and 0.94% based on gross equity raised of $4,230,648 and $3,965,947, respectively. During each of the three months ended March 31, 2024 and March 31, 2023 ACM voluntarily waived management fees of $1,650 (see Note 14 - Related Party Transactions).

Current wording

The Company is managed by ACM, pursuant to a management agreement. 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 distribute liquidation distributions as approved and so designated by a majority of the Board. However, because the management fee rate decreases to 0.75% per annum for gross equity raised in excess of $1.0 billion pursuant to the management agreement, the effective management fee rate declines as equity is 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. At June 30, 2024 and June 30, 2023, the effective management fee, prior to management fees waived, was 0.93% and 0.94% based on gross equity raised of $4,230,675 and $4,042,078, respectively. During each of the three and six months ended June 30, 2024 and June 30, 2023 ACM voluntarily waived management fees of $(1,650) and $3,300, respectively (see Note 14 - Related Party Transactions).

Previous wording

•For the three months ended March 31, 2024, other expenses included $9,010 of expenses related the Special Committee internal investigation.

Current wording

•For the six months ended June 30, 2024, other expenses included $9,010 of expenses related to the Special Committee internal investigation in the first quarter of 2024.

Previous wording

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. At March 31, 2024 and December 31, 2023, we had approximately $(228,407) and $(247,349), respectively, of net deductible expense relating to previously terminated interest rate swap and treasury futures/shorts contracts amortizing through the year 2034. At March 31, 2024, we had $257,341 of net operating loss carryforwards available for use indefinitely. For 2024, we forecast that estimated ordinary REIT taxable income will be positive. This would likely result in Series C Preferred Stock dividends for 2024 being treated as fully taxable ordinary income. Common stock dividends for 2024 are expected to partially be treated as taxable ordinary income.

Current wording

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. At June 30, 2024 and December 31, 2023, we had approximately $(227,619) and $(247,349), respectively, of net deductible expense relating to previously terminated interest rate swap and treasury futures/shorts contracts amortizing through the year 2034. At June 30, 2024, we had $257,341 of net operating loss carryforwards available for use indefinitely. For 2024, we forecast that estimated ordinary REIT taxable income will be positive. This would likely result in Series C Preferred Stock dividends for 2024 being treated as fully taxable ordinary income. Common stock dividends for 2024 are expected to partially be treated as taxable ordinary income.

Previous wording

We have entered into repurchase agreements to finance the majority of our MBS. Our repurchase agreements are secured by our MBS and bear interest at rates that have moved in close relationship to the Fed Funds Rate and SOFR. We have established borrowing relationships with numerous investment banking firms and other lenders, 14 of which had open repurchase agreements with us at March 31, 2024 and December 31, 2023. We had outstanding balances under our repurchase agreements, net at March 31, 2024 and December 31, 2023 of $8,654,063 and $9,647,982, respectively, consistent with the increase in our MBS in our securities portfolio. At March 31, 2024 and December 31, 2023, BUCKLER accounted for 56.2% and 48.4%, respectively, of our aggregate borrowings and had an amount at risk of 9.4% and 8.1%, respectively, of our total stockholders' equity with a weighted average maturity of 27 days and 12 days, respectively, on repurchase agreements (see Note 6 to the consolidated financial statements).

Current wording

We have entered into repurchase agreements to finance the majority of our MBS. Our repurchase agreements are secured by our MBS and bear interest at rates that have moved in close relationship to the Fed Funds Rate and SOFR. We have established borrowing relationships with numerous investment banking firms and other lenders, 14 of which had open repurchase agreements with us at June 30, 2024 and December 31, 2023. We had outstanding balances under our repurchase agreements, net at June 30, 2024 and December 31, 2023 of $7,071,767 and $9,647,982, respectively, consistent with the decrease in our MBS in our securities portfolio. At June 30, 2024 and December 31, 2023, BUCKLER accounted for 56.5% and 48.4%, respectively, of our aggregate borrowings and had an amount at risk of 7.8% and 8.1%, respectively, of our total stockholders' equity with a weighted average maturity of 13 days and 12 days, respectively, on repurchase agreements (see Note 6 to the consolidated financial statements).

Previous wording

Our repurchase agreements require excess collateral, known as a “haircut.” At March 31, 2024, the average haircut percentage was 2.90% compared to 2.74% at December 31, 2023.

Current wording

Our repurchase agreements require excess collateral, known as a “haircut.” At June 30, 2024, the average haircut percentage was 2.73% compared to 2.74% at December 31, 2023.

Previous wording

We use various contracts to manage our interest rate risk as we deem prudent in light of market conditions and the associated costs with counterparties that have a high quality credit rating and with futures exchanges. 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 Fed Funds Rate or SOFR. We had contractual commitments under derivatives at March 31, 2024 and December 31, 2023. At March 31, 2024 and December 31, 2023, we had derivatives with a net fair value of $956,399 and $872,376, respectively (see Note 7 to the consolidated financial statements).

Current wording

We use various contracts to manage our interest rate risk as we deem prudent in light of market conditions and the associated costs with counterparties that have a high quality credit rating and with futures exchanges. 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 Fed Funds Rate or SOFR. We had contractual commitments under derivatives at June 30, 2024 and December 31, 2023. At June 30, 2024 and December 31, 2023, we had derivatives with a net fair value of $955,532 and $872,376, respectively (see Note 7 to the consolidated financial statements).

Previous wording

At March 31, 2024, we had interest rate swap contracts with an aggregate notional balance of $7,186,000, a weighted average swap rate of 1.56% and a weighted average term of 66 months. 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. We also had TBA Agency Securities with an aggregate notional balance of $0 and $300,000 at March 31, 2024 and December 31, 2023, respectively (see Note 7 to the consolidated financial statements).

Current wording

At June 30, 2024, we had interest rate swap contracts with an aggregate notional balance of $8,286,000, a weighted average swap rate of 1.93% and a weighted average term of 63 months. 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. We also had TBA Agency Securities with an aggregate notional balance of $1,400,000 and $300,000 at June 30, 2024 and December 31, 2023, respectively (see Note 7 to the consolidated financial statements).

Previous wording

The following table details the changes in the fair value of our interest rate swap contracts for the three months ended March 31, 2024 and for the year ended December 31, 2023.

Current wording

The following table details the changes in the fair value of our interest rate swap contracts for the six months ended June 30, 2024 and for the year ended December 31, 2023.

Previous wording

Although we attempt to structure our derivatives to offset the changes in asset prices, the complexity of the actual and expected prepayment characteristics of the underlying mortgages as well as the volatility in mortgage interest rates relative to U.S. Treasury and interest rate swap contract rates makes achieving high levels of offset difficult. We recognized net gains related to our derivatives of $156,448 and $(134,400), for the three months ended March 31, 2024 and March 31, 2023, respectively.

Current wording

Although we attempt to structure our derivatives to offset the changes in asset prices, the complexity of the actual and expected prepayment characteristics of the underlying mortgages as well as the volatility in mortgage interest rates relative to U.S. Treasury and interest rate swap contract rates makes achieving high levels of offset difficult. We recognized net gains related to our derivatives of $49,682 and $206,130 and $194,190 and $59,790, for the three and six months ended June 30, 2024 and June 30, 2023, respectively.

Previous wording

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 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. During the three months ended March 31, 2024, we entered into $1,675,000 notional amount of centrally-cleared interest rate swap contracts. At December 31, 2023, we had $1,275,000 notional amount of centrally-cleared interest rate swap contracts.

Current wording

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 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. During the six months ended June 30, 2024, we entered into $2,775,000 notional amount of centrally-cleared interest rate swap contracts. At December 31, 2023, we had $1,275,000 notional amount of centrally-cleared interest rate swap contracts.

Previous wording

At March 31, 2024, our liquidity totaled $659,319, consisting of $221,297 of cash and cash equivalents plus $438,022 of unencumbered Agency Securities and U.S. government securities (including securities received as reverse margin collateral). 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. Other potential sources of liquidity include our automatic shelf registration filed with the SEC, pursuant to which we may offer an unspecified amount of shares of our common stock, preferred stock, warrants, depositary shares and debt securities. During the three months ended March 31, 2024, we repurchased 70 common shares under our current repurchase authorization for a cost of $(1,344) (refer to Note 10 and Note 14 to the consolidated financial statements).

Current wording

At June 30, 2024, our liquidity totaled $630,180, consisting of $126,562 of cash and cash equivalents plus $503,618 of unencumbered Agency Securities and U.S. government securities (including securities received as reverse margin collateral). 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. Other potential sources of liquidity include our automatic shelf registration filed with the SEC, pursuant to which we may offer an unspecified amount of shares of our common stock, preferred stock, warrants, depositary shares and debt securities. During the six months ended June 30, 2024, we repurchased 70 common shares under our current repurchase authorization for a cost of $(1,344) (refer to Note 10 and Note 14 to the consolidated financial statements).

Previous wording

In addition to the repurchase agreement financing discussed above, from time to time we have entered into reverse repurchase agreements with certain of our repurchase agreement counterparties. 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. 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. The practical effect of these transactions is to replace a portion of our repurchase agreement financing of our MBS in our securities portfolio with short positions in U.S. Treasury Securities. We believe that this helps to reduce interest rate risk, and therefore counterparty credit and liquidity risk. 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 March 31, 2024 and December 31, 2023 we had $1,112,563 ($905,313 of which were with BUCKLER) and $353,937 (all of which were with BUCKLER), in reverse repurchase agreements. At March 31, 2024 and December 31, 2023, we had obligations to return securities received as collateral associated with our reverse repurchase agreements of $1,101,625 and $350,273, respectively.

Current wording

In addition to the repurchase agreement financing discussed above, from time to time we have entered into reverse repurchase agreements with certain of our repurchase agreement counterparties. 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. 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. The practical effect of these transactions is to replace a portion of our repurchase agreement financing of our MBS in our securities portfolio with short positions in U.S. Treasury Securities. We believe that this helps to reduce interest rate risk, and therefore counterparty credit and liquidity risk. 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 June 30, 2024, we had $498,813 ($448,313 of which were with BUCKLER) and at December 31, 2023 we had $353,937 (all of which were with BUCKLER), in reverse repurchase agreements. At June 30, 2024 and December 31, 2023, we had obligations to return securities received as collateral associated with our reverse repurchase agreements of $500,965 and $350,273, respectively.

Previous wording

Our primary uses of cash are to purchase MBS, pay interest and principal on our borrowings, fund our operations and pay dividends. From time to time, we purchase or sell assets for forward settlement up to 90 days in the future to lock in purchase prices or sales proceeds. At March 31, 2024 and December 31, 2023, we financed our securities portfolio with $8,654,063 and $9,647,982 of borrowings under repurchase agreements. We generally seek to borrow (on a recourse basis) between six and ten times the amount of our total stockholders’ equity. Our debt to equity ratios at March 31, 2024 and December 31, 2023, were 6.94:1 and 7.59:1, respectively, as we substituted Agency MBS for TBA Agency Securities. Our leverage ratios, including notional on our TBA Agency Securities, were 6.94:1 and 7.83:1 at March 31, 2024 and December 31, 2023, respectively. Implied leverage, including TBA Securities and forward settling sales and unsettled purchases was 7.07:1 and 7.96:1 at March 31, 2024 and December 31, 2023, respectively.

Current wording

Our primary uses of cash are to purchase MBS, pay interest and principal on our borrowings, fund our operations and pay dividends. From time to time, we purchase or sell assets for forward settlement up to 90 days in the future to lock in purchase prices or sales proceeds. At June 30, 2024 and December 31, 2023, we financed our securities portfolio with $7,071,767 and $9,647,982 of borrowings under repurchase agreements. We generally seek to borrow (on a recourse basis) between six and ten times the amount of our total stockholders’ equity. Our debt to equity ratios at June 30, 2024 and December 31, 2023, were 6.09:1 and 7.59:1, respectively, as we substituted Agency MBS for TBA Agency Securities. Our leverage ratios, including notional on our TBA Agency Securities, were 7.14:1 and 7.83:1 at June 30, 2024 and December 31, 2023, respectively. Implied leverage, including TBA Securities and forward settling sales and unsettled purchases was 7.44:1 and 7.96:1 at June 30, 2024 and December 31, 2023, respectively.

Previous wording

The following table reconciles the fees incurred in accordance with the management agreement for the three months ended March 31, 2024 and March 31, 2023 (see Note 8 to the consolidated financial statements).

Current wording

The following table reconciles the fees incurred in accordance with the management agreement for the three and six months ended June 30, 2024 and June 30, 2023 (see Note 8 to the consolidated financial statements).

Previous wording

At March 31, 2024, there was approximately $8,637 of unvested stock based compensation related to the Awards (based on a weighted grant date price of $39.68 per share), which we expect to recognize as an expense as follows: for the remainder of 2024 an expense of $4,092, in 2025 an expense of $1,987, and thereafter an expense of $2,558. Our policy is to account for forfeitures as they occur. We also pay each of our non-executive Board members quarterly fees, which are payable in cash, common stock, RSUs or a combination of common stock, RSUs and cash at the option of the director. Compensation to be paid to our non-executive Board in the form of cash and common equity is $1,198 annually (see Note 9 to the consolidated financial statements).

Current wording

At June 30, 2024, there was approximately $7,823 of unvested stock based compensation related to the Awards (based on a weighted grant date price of $38.76 per share), which we expect to recognize as an expense as follows: for the remainder of 2024 an expense of $1,667, in 2025 an expense of $1,986, and thereafter an expense of $4,170. Our policy is to account for forfeitures as they occur. We also pay each of our non-executive Board members quarterly fees, which are payable in cash, common stock, RSUs or a combination of common stock, RSUs and cash at the option of the director. Compensation to be paid to our non-executive Board in the form of cash and common equity is $1,219 annually (see Note 9 to the consolidated financial statements).

Previous wording

We may increase our capital resources by obtaining long-term credit facilities or making public or private offerings of equity or debt securities, including classes of preferred stock, common stock and senior or subordinated notes to meet our liquidity requirements. As of the date hereof, we have "at-the-market" offering programs with 3,153 shares available under the Preferred C ATM Sales Agreement and 11,671 shares of common stock remain available under the Company's Equity Sales Agreement with B. Riley Securities, Inc. (formerly B. Riley FBR, Inc.) and BUCKLER, as sales agents (individually and collectively, the “Agents"), and ACM, pursuant to which the Company may offer and sell, over a period of time and from time to time, through one or more of the Agents, as the Company’s agents, up to 6,550 of 7.00% Series C Cumulative Redeemable Preferred Stock (see Note 10 to the consolidated financial statements). 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. Such financing will depend on market conditions for capital raises and for the investment of any proceeds and there can be no assurances that we will successfully obtain any such financing.

Current wording

We may increase our capital resources by obtaining long-term credit facilities or making public or private offerings of equity or debt securities, including classes of preferred stock, common stock and senior or subordinated notes to meet our liquidity requirements. As of the date hereof, we have "at-the-market" offering programs with 3,153 shares of 7.00% Series C Cumulative Redeemable Preferred Stock available under the Preferred C ATM Sales Agreement and 11,671 shares of common stock remain available under the 2023 Common stock ATM Sales Agreement. In accordance with the terms of these agreements, we may offer and sell shares of stock over a period of time and from time to time, with BUCKLER and other agents as sales agents (see Note 10 to the consolidated financial statements). 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. Such financing will depend on market conditions for capital raises and for the investment of any proceeds and there can be no assurances that we will successfully obtain any such financing.

Previous wording

We update our fair value estimates at the end of each business day to reflect current market dynamics. 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 the three months ended March 31, 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. Similarly, 95% of inter-day movements in estimated value translated to changes in estimated book value per share of $0.86 or less.

Current wording

We update our fair value estimates at the end of each business day to reflect current market dynamics. 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 the three and six months ended June 30, 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. Similarly, 95% of inter-day movements in estimated value translated to changes in estimated book value per share of $0.86 or less.

Previous wording

•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;

Current wording

•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;

Previous wording

•our management's competing duties to other affiliated entities, which could result in decisions that are not in the best interest of our stockholders;

Current wording

•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;

Previous wording

•changes in GAAP, including interpretations thereof; and

Current wording

•changes in GAAP, including interpretations thereof;

Previous wording

•changes in applicable laws and regulations.

Current wording

•changes in applicable laws and regulations; and