Armour Residential REIT Inc
For the period ended Dec 31, 2024. Filed Feb 12, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 12, 2025
ARR$12.60+0.2%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-15.
0001428205-24-000061
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-12.
0001428205-25-000027
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 222 previous paragraphs and 236 current paragraphs.
160 unchanged; 46 reworded; 12 added; 12 removed; 4 previous and 18 current paragraphs rearranged.
Tables are not compared: 3 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (12)
Current report
•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;
Current report
After the Fed increased the Federal Funds Rate to a target range of 5.25% to 5.50% in July 2023 to tame rising inflation, it kept the target range at this level until September 2024, stating in 2024 FOMC meetings that the risks to achieving its employment and inflation goals continue to move into better balance. In September 2024, the Fed started reducing its target range, decreasing it by 0.50% to 4.75% to 5.00%, and stating that the risks to achieving its employment and inflation goals were then roughly in balance. The Fed subsequently reduced the target range by 0.25% each in November and December 2024, bringing the target range down to 4.25% to 4.50%.
Current report
While short-term interest rates fell as the Fed reduced its target range by 100 basis points from September to December, long term interest rates were volatile throughout the year and rose by 69 basis points, negatively impacting the market value of our investments. There were many factors that contributed to the rise in long term rates, including the Fed’s quantitative tightening policies that remained throughout 2024. These policies included reducing the Fed’s holdings of agency mortgage-backed securities and U.S. Treasuries, creating net supply in the market.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
If the markets do not respond favorably to any actions or if such actions do not function as intended, they could have adverse market implications and could negatively impact our consolidated financial statements. The actual or anticipated action or inaction on U.S. fiscal policy matters, including the U.S. debt ceiling, could result in a wide range of negative economic effects, including increased financial market and interest rate volatility and wider market spreads between mortgage assets and benchmark interest rates. New regulatory requirements, including more stringent capital rules, could adversely affect financing availability and/or terms from our counterparties, reduce market liquidity and mortgage loan origination and limit activities of significant organizations and entities that are important to our business.
Current report
Our MBS portfolio may lose some of its liquidity capital due to margin calls from repurchase counterparties on the fourth business day of each month.
Current report
On the fourth business day of each month, factors drop and lower the market value of our Agency Securities. This reflects both scheduled and unscheduled principal paydowns, which are guaranteed by GSEs. These payments are passed to investors by the end of the same month. This time delay may create a risk to our liquidity when unscheduled principal paydowns are larger than expected.
Current report
Reliance on inaccurate models or estimates could lead to poor business decisions and expose us to risk.
Current report
Analytical models and other data are used to value our assets, to aid in risk management, hedging strategies and potential investment opportunities. Models and estimates may be sourced from third-parties or may be developed internally. These are dependent on market factors, assumptions and estimates from third-parties as well as management’s judgment and experience. If the models or the underlying assumptions or inputs are inaccurate or incomplete, decisions made based on that information may be inaccurate and could cause actual results to differ from projected results.
Removed paragraphs (12)
Previous report
•Changes in interest rates generally, and volatility in the relationship between market prices and yields on our MBS and the prices and yields on benchmark fixed income securities, have previously and may in the future adversely impact our net interest income, total comprehensive income, asset values and stockholders’ equity;
Previous report
•As compared to our common stock equity of $1,100,009 at December 31, 2023, the fair value of our interest rate swaps was $870,560, which represents forecasts of future net swap coupon amounts. We have received this fair value in cash from our counterparties due to variation margin requirements in our swap contracts. We have used that cash in our investment and liquidity management and reported an offsetting liability. Periodic net swap coupon amounts are largely offset by corresponding changes in swap fair values and related variation margin payments. As a result, net swap coupon amounts have little current impact on our investment returns, financial position or results of operations. Interest rate swaps primarily affect our exposure to future changes in forward interest rates;
Previous report
•Paying dividends that exceed our total economic return, and repurchasing or redeeming common stock reduces our capital base and increases our expense ratio and potentially limits our ability to invest in, finance and hedge our MBS portfolio;
Previous report
•ACM may terminate the management agreement for any reason without incurring a termination fee. If ACM ceases to be our manager, it may constitute an event of default under our financing arrangements;
Previous report
•ACM’s liability is contractually limited and we have agreed to indemnify ACM;
Previous report
•ACM is not precluded from serving our competitors or pursuing competing businesses;
Previous report
•Through December 31, 2029, the Company is obliged to pay contractual management fees totaling approximately $235,440 based on gross equity raised as of December 31, 2023. ARMOUR may terminate the agreement without cause only under limited circumstances, which include a termination fee equal to four times the prior 12 months' contractual management fee. The management agreement automatically renews to December 31, 2034 unless the Company gives ACM written notice of non-renewal on or before July 3, 2029 as the result of either (i) a vote of two-thirds of our independent directors or (ii) a vote of a majority of the shares of common stock outstanding (other than shares held by ACM or its affiliates). The Board of Directors has extended and may further extend the management agreement without stockholder approval.
Previous report
•Distributable Earnings may cause ACM to make portfolio decisions that may accelerate the realization of losses and delay the realization of gains, which may not maximize our risk-adjusted returns.
Previous report
•We hold a 10.8% equity ownership in BUCKLER and a subordinated loan agreement up to $200,000, which qualifies as regulatory capital;
Previous report
•BUCKLER provides repurchase financing to third parties and may pursue other lines of business. We cannot guarantee that BUCKLER will not incur losses from these activities. Significant losses by BUCKLER from other business could impair the value of our investment in BUCKLER and limit BUCKLER’s ability to provide attractive repurchase financing to ARMOUR; and
Previous report
•ACM owns 75.4% of the equity in BUCKLER and certain of our officers are also officers and equity owners of BUCKLER, which may lead to conflicts of interest between BUCKLER and ARMOUR.
Previous report
In an effort to tame rising inflation levels, the Fed aggressively increased the Federal Funds Rate from a target range of 0.25% to 0.50% in the first quarter of 2022 and continued increases through July 2023, ending the fourth quarter of 2023 with a target range of 5.25% to 5.50% as set in July 2023. In addition, the Fed’s quantitative tightening policies included reducing its holdings of agency mortgage-backed securities and U.S. Treasuries, creating net supply in the market. The combination of these actions resulted in short and long-term interest rates increasing throughout most of 2023. The U.S. 10 year Treasury rose by over 100 basis points from the start of the year to late October, negatively impacting the market value of our investments, while the rise in short-term rates increased our borrowing costs. From late October to the end of 2023, as the Fed communicated that they would pivot to rate cuts in 2024. Long-term interest rates declined, with the U.S. 10 year Treasury decreasing by more than 100 basis points during such period.
Reworded paragraphs (46)
Previous wording
Changes in interest rates impact our level of net interest income, total comprehensive income and stockholders' equity and we cannot always successfully mitigate such interest rate risks.
Current wording
•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;
Previous wording
The fair value of our interest rate swaps represents forecasted future net swap coupon amounts. The fair value of these positions has already been included in total comprehensive income and total stockholders’ equity. It has been received by us in cash through variation margin payments made by our counterparties, which we recognize as a liability. Both the asset and liability will ultimately go to zero. This exact path of this inevitable decline is uncertain and will depend on future changes in interest rates and other factors.
Current wording
•The fair value of our interest rate swaps represents forecasted future net swap coupon amounts. The fair value of these positions has already been included in total comprehensive income (loss) and total stockholders’ equity. It has been received by us in cash through variation margin payments made by our counterparties, which we recognize as a liability. Both the asset and liability will ultimately go to zero. This exact path of this eventual decline is uncertain and will depend on future changes in interest rates and other factors;
Previous wording
ARMOUR actively issues new shares and redeems outstanding shares of its common stock:
Current wording
ARMOUR actively issues new shares and may redeem outstanding shares of its common and preferred stock:
Previous wording
We may repurchase our common stock at prices below book value, to the potential disadvantage of selling stockholders.
Current wording
•We may repurchase our common and preferred stock at prices below book value, to the potential disadvantage of selling stockholders; and
Previous wording
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, 2023, equaled 3.09% of stockholders' equity.
Current wording
•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, 2024 equaled 3.03% of stockholders' equity.
Previous wording
Our affiliate BUCKLER is our largest financing counterparty and placement agent under our ATM program:
Current wording
Our affiliate BUCKLER is our largest financing counterparty and placement agent under our ATM offering program:
Previous wording
BUCKLER is the primary placement agent for ARMOUR's common share ATM Programs.
Current wording
•BUCKLER is the primary placement agent for ARMOUR's common share ATM Program;
Previous wording
ARMOUR’s business of investing in MBS relies heavily on financial leverage which magnifies our interest rate and spread risks:
Current wording
ARMOUR’s MBS investments rely heavily on financial leverage, magnifying our interest rate and spread risks:
Previous wording
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 fair values of our available for sale securities are generally not reflected in our net income or our earnings per share, but rather are reflected directly in our stockholders’ equity. 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.
Current wording
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.
Previous wording
It can be difficult to predict the impact on interest rates of unexpected and uncertain global political and economic events, such as the outbreak of a pandemic such as COVID-19, epidemic disease, warfare (including the war between Russia and Ukraine as well as the hostilities in the Middle East), 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 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.
Current wording
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 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.
Previous wording
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. However, our income statement volatility will not be reduced, because the fair value changes in our available for sale securities are reflected directly in stockholders’ equity. Rising interest rates may tend to result in an overall increase in our reported net income even while our total stockholders’ equity declines.
Current wording
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.
Previous wording
At December 31, 2023, the aggregate fair value of our interest rate swaps was $870,560, which compares to the amount of our equity attributable to our common stock of $1,100,009. The fair value of our interest rate swaps represents forecasted present values of future net swap coupon amounts. Variation margin provisions in our swap contracts require our counterparties to post to us cash collateral equal to that fair value. We have used that cash collateral to collateralize or reduce our repurchase financing balances, to acquire additional Agency Securities or to increase our cash liquidity. Future changes in forward interest rates are the primary determining factor in the economic and aggregate financial reporting impact of our swaps on our investment returns, financial position and results of operations.
Current wording
At December 31, 2024, the aggregate fair value of our interest rate swaps was $894,714, which compares to the amount of our equity attributable to our common stock of $1,190,240. The fair value of our interest rate swaps represents forecasted present values of future net swap coupon amounts. Variation margin provisions in our swap contracts require our counterparties to post to us cash collateral equal to that fair value. We have used that cash collateral to collateralize or reduce our repurchase financing balances, to acquire additional Agency Securities or to increase our cash liquidity. Future changes in forward interest rates are the primary determining factor in the economic and aggregate financial reporting impact of our swaps on our investment returns, financial position and results of operations.
Previous wording
Periodic net swap coupon receipts and payments were forecasted to arrive at the estimated fair values of our swaps. Accordingly, amounts reported as the periodic net coupon effect of our interest rate swaps largely represent values that were previously recognized elsewhere in total comprehensive income. Periodic net swap coupon amounts are largely offset by corresponding adjustments in the fair values of the swaps, which are concurrently reported in total comprehensive income and total stockholders’ equity, resulting in a relatively minor aggregate impact. When considered with the variation margin requirements, periodic net swap coupon amounts have relatively little practical impact on our current investment, financing or liquidity positions.
Current wording
Periodic net swap coupon receipts and payments were forecasted to arrive at the estimated fair values of our swaps. Accordingly, amounts reported as the periodic net coupon effect of our interest rate swaps largely represent values that were previously recognized elsewhere in total comprehensive income (loss). Periodic net swap coupon amounts are largely offset by corresponding adjustments in the fair values of the swaps, which are concurrently reported in total comprehensive income (loss) and total stockholders’ equity, resulting in a relatively minor aggregate impact. When considered with the variation margin requirements, periodic net swap coupon amounts have relatively little practical impact on our current investment, financing or liquidity positions.
Previous wording
The fair value of our swap positions will ultimately go to zero over their remaining terms, which averaged 68 months as of December 31, 2023. The rate and exact path of this inevitable decline is uncertain and will depend on future changes in expected forward interest rates and other factors. These factors will also drive the future amounts of net swap receipts or payments and corresponding future fair values and variation margin amounts. We also may terminate swaps before their maturity and receive or make final settlement payments based on the estimated fair value of the swap at the time of termination.
Current wording
The fair value of our swap positions will ultimately go to zero over their remaining terms, which averaged 76 months as of December 31, 2024. The rate and exact path of this inevitable decline is uncertain and will depend on future changes in expected forward interest rates and other factors. These factors will also drive the future amounts of net swap receipts or payments and corresponding future fair values and variation margin amounts. We also may terminate swaps before their maturity and receive or make final settlement payments based on the estimated fair value of the swap at the time of termination.
Previous wording
During stressful market conditions, we may be forced to sell MBS at depressed prices, thereby potentially incurring permanent equity losses.
Current wording
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.
Previous wording
We mitigate our credit risk by evaluating the credit quality of our counterparties on an ongoing basis, reducing or closing positions with counterparties where we have credit concerns, monitoring our collateral positions to minimize excess collateral balances and diversifying our repurchase financing and derivatives positions among numerous counterparties. At December 31, 2023 and December 31, 2022, BUCKLER accounted for 48.4% and 50.2%, respectively, of our aggregate borrowings and had an amount at risk of 8.1% and 12.9%, respectively, of our total stockholders' equity (see Note 14 to the consolidated financial statements).
Current wording
We mitigate our credit risk by evaluating the credit quality of our counterparties on an ongoing basis, reducing or closing positions with counterparties where we have credit concerns, monitoring our collateral positions to minimize excess collateral balances and diversifying our repurchase financing and derivatives positions among numerous counterparties. At December 31, 2024 and December 31, 2023, BUCKLER accounted for 45.7% and 48.4%, respectively, of our aggregate borrowings and had an amount at risk of 8.0% and 8.1%, respectively, of our total stockholders' equity (see Note 15 to the consolidated financial statements).
Previous wording
ARMOUR actively issues new shares of its common stock:
Current wording
ARMOUR actively issues new shares and may redeem outstanding shares of its common and preferred stock:
Previous wording
•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 dilute existing stockholders;
Current wording
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.
Previous wording
Since 2020, we have relied on “at the market” offerings (or “ATM”) to issue new shares of our common stock. Under our ATM programs, we instruct a placement agent to accept bids and post offers for our stock in the regular trading markets throughout the trading day. These transactions are typically executed through automated trading algorithms and subject to limits including minimum sales prices and maximum percentage of trading volume. A placement agent may also entertain direct offers from its institutional customers on our behalf. Our ATM sales are not the subject of contemporaneous public reporting. Therefore, the direct impact on overall market trading prices for our stock is difficult to discern, but may also be negative. Fees to placement agents for ATM transactions represent a lower percentage of stock proceeds than underwriting fees for block offerings.
Current wording
Since 2020, we have relied on ATM offerings to issue new shares of our common stock. Under our ATM programs, we instruct a placement agent to accept bids and post offers for our stock in the regular trading markets throughout the trading day. These transactions are typically executed through automated trading algorithms and subject to limits including minimum sales prices and maximum percentage of trading volume. A placement agent may also entertain direct offers from its institutional customers on our behalf. Our ATM sales are not the subject of contemporaneous public reporting. Therefore, the direct impact on overall market trading prices for our stock is difficult to discern, but may also be negative. Fees to placement agents for ATM transactions represent a lower percentage of stock proceeds than underwriting fees for block offerings.
Previous wording
We consider the potential dilution of existing stockholders as part of our decision to issue new shares. ARMOUR’s board of directors has authorized our CEO to issue new common shares where the net proceeds to the Company, after fees and expenses, represents at least 93.5% of our most recent estimate of ARMOUR’s book value per common share. We endeavor to achieve net proceeds representing a higher percentage. For 2023, we realized net proceeds that averaged approximately 98% of recently estimated book value, resulting in an aggregate dollar dilution of $7,802. We also consider the favorable impact to existing stockholders of spreading administrative and operating expenses over an increased number of common shares.
Current wording
We consider the potential dilution of existing stockholders as part of our decision to issue new shares. ARMOUR’s board of directors has authorized our CEO and CFO to issue new common shares where the net proceeds to the Company, after fees and expenses, represents at least 93.50% of our most recent estimate of ARMOUR’s book value per common share. We endeavor to achieve net proceeds representing a higher percentage. For 2024, we realized net proceeds that averaged approximately 98.7% of recently estimated book value, resulting in an aggregate dollar dilution of $3,487. We also consider the favorable impact to existing stockholders of spreading administrative and operating expenses over an increased number of common shares.
Previous wording
•We may repurchase our common stock at prices below book value, to the potential disadvantage of selling stockholders; and
Current wording
We may repurchase our common and preferred stock at prices below book value, to the potential disadvantage of selling stockholders.
Previous wording
(1) Per shares amounts are not intended to be added across periods under GAAP. In this illustration, comprehensive loss per common share for the year ended December 31, 2023 and December 31, 2022, is $(0.03) and $1.87 per share, respectively (lower) higher than the algebraic sum of corresponding amounts for the four individual quarters of the year. Similarly, the (dilutive) accretive effect of our capital activity is $(0.03) and $1.87 per common share, respectively (larger) smaller when calculated on an annual basis as compared to the algebraic sum of the individual quarterly calculations.
Current wording
(1) Per shares amounts are not intended to be added across periods under GAAP. In this illustration, comprehensive loss per common share for the year ended December 31, 2024 and December 31, 2023, is $(0.08) and $0.03 per share, respectively (lower) higher than the algebraic sum of corresponding amounts for the four individual quarters of the year. Similarly, the (dilutive) accretive effect of our capital activity is $(0.08) and $0.03 per common share, respectively (larger) smaller when calculated on an annual basis as compared to the algebraic sum of the individual quarterly calculations.
Previous wording
Financial institutions that finance our investments may require that ACM continue to act in such capacity. If ACM ceases to be our manager, it may constitute an event of default and the financial institution providing the arrangement may have acceleration rights with respect to outstanding borrowings and termination rights with respect to our ability to finance our future investments with that institution. If we are unable to obtain financing for our accelerated borrowings and for our future investments under such circumstances, it is likely that we would be materially and adversely affected.
Current wording
The management agreement allows ACM to terminate its service to ARMOUR for any reason upon 180 days prior written notice. No termination fee shall be due from ACM to ARMOUR following any termination by ACM. Financial institutions that finance our investments may require that ACM continue to act in such capacity. If ACM ceases to be our manager, it may constitute an event of default and the financial institution providing the arrangement may have acceleration rights with respect to outstanding borrowings and termination rights with respect to our ability to finance our future investments with that institution. If we are unable to obtain financing for our accelerated borrowings and for our future investments under such circumstances, it is likely that we would be materially and adversely affected.
Previous wording
•Reductions in our total stockholders’ equity have not reduced our management fee expense. ACM’s contractual management fee is calculated using the contractually defined base “gross equity raised,” which substantially exceeds total stockholders’ equity determined under GAAP. As a result, ACM’s annualized contractual management fee rate as of December 31, 2023 equaled 3.09% of total stockholders’ equity;
Current wording
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, 2024 equaled 3.03% of stockholders' equity.
Previous wording
At December 31, 2023 gross equity raised totaled $4,231,965 resulting in an effective contractual management fee rate, prior to management fees waived, of 0.93% of that base. The resulting annualized contractual management fee of $39,240 represents 3.09% of the Company’s total stockholders’ equity determined in accordance with GAAP of $1,271,184 at December 31, 2023.
Current wording
At December 31, 2024 gross equity raised totaled $4,498,880 resulting in an effective contractual management fee rate of 0.92% prior to management fees waived and 0.77% after management fees waived, of that base. The resulting annualized contractual management fee of $41,242 represents 3.03% of the Company’s total stockholders’ equity determined in accordance with GAAP of $1,361,415 at December 31, 2024.
Previous wording
•ACM has voluntarily waived a portion of its contractual management fee. ACM has reduced and may further reduce the amount of or discontinue entirely its voluntary waiver without our consent; and
Current wording
ACM has voluntarily waived a portion of its contractual management fee. ACM has reduced, and may further reduce, the amount of or discontinue entirely its voluntary fee waiver without our consent.
Previous wording
ACM began waiving 40% of its management fee beginning with the second quarter of 2020. ACM reduced the fee waiver to the rate of $7,800 for the year ended December 31, 2022. For the year ended December 31, 2023 ACM adjusted the fee waiver rate to $1,650 for the first quarter of 2023 and $550 per month thereafter until further notice (see Note 8 to the consolidated financial statements). ACM may prospectively further reduce the amount of or discontinue entirely its voluntary fee waiver at its sole discretion and without requiring our consent.
Current wording
During the years ended December 31, 2024, December 31, 2023 and December 31, 2022 ACM voluntarily waived management fees of $6,600, $6,600 and $7,800 respectively. ACM is currently waiving $550 per month of its contractual management fee until ACM provides further notice to ARMOUR (see Note 9 to the consolidated financial statements). ACM may prospectively further reduce the amount of or discontinue entirely its voluntary fee waiver at its sole discretion and without requiring our consent.
Previous wording
We may not terminate our management agreement with ACM before December 31, 2029, except for cause or in connection with the liquidation of ARMOUR or certain business combination transactions. For the period from January 1, 2024 through December 31, 2029, ARMOUR is obliged to pay contractual management fees totaling approximately $235,440 based on gross equity raised as of December 31, 2023, the date of the most recent management contract extension.
Current wording
We may not terminate our management agreement with ACM before December 31, 2029, except for cause or in connection with the liquidation of ARMOUR or certain business combination transactions. For the period from January 1, 2025 through December 31, 2029, ARMOUR is obliged to pay contractual management fees totaling approximately $206,210 based on gross equity raised as of December 31, 2024, the date of the most recent management contract extension.
Previous wording
The term “cause” is limited to those circumstances described in the management agreement with ACM and generally includes a final court determination of material breach of the management agreement, willful misconduct, gross negligence or fraud. Upon a termination by us in connection with the liquidation of ARMOUR or certain business combination transactions the management agreement provides that ARMOUR will pay ACM a termination payment equal to four times the contractual base management fee payable to ACM in the preceding full 12 months, calculated as of the effective date of the termination of the agreement. ACM's voluntary fee waiver does not reduce the amount of such termination payment. The contractual management fee payable to ACM for the 12 months ended December 31, 2023, was $38,121. The contractually required termination payment would increase the effective cost to us to terminate the management agreement in connection with the liquidation of ARMOUR or certain business combinations and adversely affect ARMOUR's attractiveness as a potential business combination target.
Current wording
The term “cause” is limited to those circumstances described in the management agreement with ACM and generally includes a final court determination of material breach of the management agreement, willful misconduct, gross negligence or fraud. Upon a termination by us in connection with the liquidation of ARMOUR or certain business combination transactions the management agreement provides that ARMOUR will pay ACM a termination payment equal to four times the contractual base management fee payable to ACM in the preceding full 12 months, calculated as of the effective date of the termination of the agreement. ACM's voluntary fee waiver does not reduce the amount of such termination payment. The contractual management fee payable to ACM for the 12 months ended December 31, 2024, was $39,726. The contractually required termination payment would increase the effective cost to us to terminate the management agreement in connection with the liquidation of ARMOUR or certain business combinations and adversely affect ARMOUR's attractiveness as a potential business combination target.
Previous wording
Distributable Earnings is a non-GAAP measure which excludes gains and losses, and therefore is an imperfect measure of our overall financial performance. Distributable Earnings is not a standardized metric.
Current wording
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.
Previous wording
We consider Distributable Earnings as a measure of our investment performance and discuss our periodic financial results in terms of Distributable Earnings in our press releases and conference calls with equity analysts. We believe that Distributable Earnings is useful to investors because it is related to the amount of dividends we may distribute. Distributable Earnings is a non-GAAP measure defined as net interest income plus TBA Drop Income adjusted for the net coupon effect of interest rate swaps minus net operating expenses. Distributable Earnings differs, potentially significantly, from net interest income and from total comprehensive loss (which includes realized gains and losses and market value adjustments).
Current wording
We consider Distributable Earnings as a measure of our investment performance and discuss our periodic financial results in terms of Distributable Earnings in our press releases and conference calls with equity analysts. We believe that Distributable Earnings is useful to investors because it is related to the amount of dividends we may distribute. Distributable Earnings is a non-GAAP measure defined as net interest income plus TBA Drop
Previous wording
The following table illustrates the relationship between Distributable Earnings and net interest income and total comprehensive income for the year ended December 31, 2023 and December 31, 2022.
Current wording
The following table illustrates the relationship between Distributable Earnings and net interest income and total comprehensive income (loss) for the year ended December 31, 2024 and December 31, 2023.
Previous wording
Distributable Earnings is based on the historical cost basis of our Agency Securities and interest rate swaps, while we report substantially all of our assets and liabilities at current fair values. As a result, Distributable Earnings may include amounts that were recognized and reported elsewhere in our consolidated financial statements previously. For example, the net coupon effect of interest rate swaps is the primary driver of market value adjustments on these positions that were recognized in total comprehensive loss and total stockholders’ equity in prior periods.
Current wording
Distributable Earnings is based on the historical cost basis of our Agency Securities and interest rate swaps, while we report substantially all of our assets and liabilities at current fair values. As a result, Distributable Earnings may include amounts that were recognized and reported elsewhere in our consolidated financial statements previously. For example, the net coupon effect of interest rate swaps is the primary driver of market value adjustments on these positions that were recognized in total comprehensive income (loss) and total stockholders’ equity in prior periods.
Previous wording
Our affiliate BUCKLER is our largest financing counterparty and placement agent under our ATM program:
Current wording
Our affiliate BUCKLER is our largest financing counterparty and placement agent under our ATM offering program:
Previous wording
At December 31, 2023, BUCKLER provided approximately $4,667,483, or 48.4% of ARMOUR’s repurchase financing. BUCKLER is subject to various broker-dealer regulations. BUCKLER’s failure to comply with these regulations and facilitate attractive repurchase financing and its ability to conduct business with third parties could adversely affect ARMOUR’s funding costs, “haircuts” and/or counterparty exposure. We cannot guarantee that BUCKLER will be able to provide repurchase financing on more attractive terms in the future.
Current wording
At December 31, 2024, BUCKLER provided approximately $4,895,003, or 45.7% of ARMOUR’s repurchase financing. BUCKLER is subject to various broker-dealer regulations. BUCKLER’s failure to comply with these regulations and facilitate attractive repurchase financing and its ability to conduct business with third parties could adversely affect ARMOUR’s funding costs, “haircuts” and/or counterparty exposure. We cannot guarantee that BUCKLER will be able to provide repurchase financing on more attractive terms in the future.
Previous wording
•BUCKLER relies primarily on bilateral and triparty repurchase agreement funding through the FICC. If BUCKLER became unable to access these facilities, our own funding could become more difficult and more expensive. We maintain repurchase relationships with other counterparties which may reduce this risk;
Current wording
BUCKLER relies primarily on bilateral and triparty repurchase agreement funding through the FICC.
Previous wording
ARMOUR continues to maintain active repurchase financing arrangements with numerous other counterparties with the intention of reducing our risk of relying primarily on BUCKLER. At December 31, 2023, we had repurchase borrowings from 14 different counterparties including BUCKLER. However, there can be no assurance as to the availability, terms, or cost of additional repurchase financing that might be available from other counterparties if we needed to replace BUCKLER’s financing capacity, particularly on short notice or during times of market distress.
Current wording
ARMOUR continues to maintain active repurchase financing arrangements with numerous other counterparties with the intention of reducing our risk of relying primarily on BUCKLER. At December 31, 2024, we had repurchase borrowings from 17 different counterparties including BUCKLER. However, there can be no assurance as to the availability, terms, or cost of additional repurchase financing that might be available from other counterparties if we needed to replace BUCKLER’s financing capacity, particularly on short notice or during times of market distress.
Previous wording
BUCKLER has acted as placement agent for 71% of the shares of common stock that ARMOUR has issued through its ATM programs in 2023. BUCKLER’s commission rate for these placements has been lower than the commission rates of other placement agents involved in our ATM program. Placement commissions represent a significant contribution to BUCKLER profitability. If BUCKLER became unable to participate in our ATM program, our placement costs would increase. If we reduce the volume of ATM placements with BUCKLER, its profitability may be adversely affected.
Current wording
BUCKLER has acted as placement agent for 83% of the shares of common stock that ARMOUR has issued through its ATM programs in 2024. BUCKLER’s commission rate for these placements has been lower than the commission rates of other placement agents involved in our ATM program. Placement commissions represent a significant contribution to BUCKLER profitability. If BUCKLER became unable to participate in our ATM program, our placement costs would increase. If we reduce the volume of ATM placements with BUCKLER, its profitability may be adversely affected.
Previous wording
We are subject to conflicts of interest arising out of our relationship with ACM and its affiliates, including BUCKLER. Entities affiliated with Mr. Ulm and Mr. Zimmer are the general partners of ACM and each of Mr. Ulm, Mr. Zimmer, Mr. Staton and Mr. Bell is a limited partner in ACM. ACM and our executive officers control BUCKLER.
Current wording
We are subject to conflicts of interest arising out of our relationship with ACM and its affiliates, including BUCKLER. An entity affiliated with Mr. Ulm is one of the two general partners of ACM, and each of Mr. Ulm, Mr. Staton and Mr. Bell is a limited partner in ACM. ACM controls BUCKLER.
Previous wording
The daily collateral maintenance required for our repurchase financing and our hedging derivatives generally move in opposite directions as market interest rates change. However, because market yields on our Agency Securities are not perfectly correlated with interest rate swap market yields, it is likely that our daily requirements to post collateral to our counterparties will not equal the collateral our counterparties are required to post to us. In times of higher market volatility, those differences can become more significant.
Current wording
The daily collateral maintenance required for our repurchase financing and our hedging derivatives generally move in opposite directions as market interest rates change. However, because market yields on our Agency Securities are not perfectly correlated with interest rate market yields, it is likely that our daily requirements to post collateral to our counterparties will not equal the collateral our counterparties are required to post to us. In times of higher market volatility, those differences can become more significant.
Showing the first 40 of 46 pairs. Open the source sections for the rest.
Rearranged current paragraphs (18)
Current report — wording carried from elsewhere
•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
Current report — wording carried from elsewhere
•BUCKLER may pursue business opportunities with third parties; and
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
The fair value of our interest rate swaps represents forecasted future net swap coupon amounts. The fair value of these positions has already been included in total comprehensive income (loss) and total stockholders’ equity. It has been received by us in cash through variation margin payments made by our counterparties, which we recognize as a liability. Both the asset and liability will ultimately go to zero. This exact path of this eventual decline is uncertain and will depend on future changes in interest rates and other factors.
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
There are potential conflicts of interest with current and future investment entities affiliated with ACM.
Current report — wording carried from elsewhere
There are potential conflicts of interest with the allocation of investment opportunities by ACM.
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
The termination of the management agreement may be difficult and costly.
Current report — wording carried from elsewhere
The management agreement with ACM will automatically renew for an additional 5-year term unless ARMOUR gives 180-day written notice of non-renewal.
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
Income adjusted for the net coupon effect of interest rate swaps minus net operating expenses. Distributable Earnings differs, potentially significantly, from net interest income and from total comprehensive income (loss) (which includes realized gains and losses and market value adjustments).
Current report — wording carried from elsewhere
Distributable Earnings may not provide sufficient incentive to ACM to maximize risk adjusted returns on our investment portfolio.
Current report — wording carried from elsewhere
A material portion of our aggregate repurchase financing is facilitated through BUCKLER.
Current report — wording carried from elsewhere
We hold a 10.8% equity ownership interest in BUCKLER and additionally, provided BUCKLER with $200 million in additional regulatory capital.
Current report — wording carried from elsewhere
BUCKLER is the primary placement agent for ARMOUR's common share ATM Program.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
•Our MBS have maturities ranging from 10 to 30 years (although amortization and prepayments reduce average lives) while our repurchase agreement borrowings generally are for one to 90 days;
Previous report — wording carried elsewhere
•Distributable Earnings is a non-GAAP measure which excludes gains and losses in portfolio value, which makes Distributable Earnings more stable from month to month but also makes it an imperfect measure of our overall financial performance as compared to total comprehensive income (loss) computed in accordance with GAAP. Our Board of Directors considers Distributable Earnings among other factors when declaring dividends on our common stock. Since 2010, ARMOUR has distributed common stock dividends totaling approximately $1,993,110 while incurring cumulative total comprehensive (loss) attributable to common stockholders of $(1,052,585). Such losses include approximately $(622,300) in 2013, $(539,942) in the first quarter of 2020 and $(399,914) in the first three quarters of 2022; and
Previous report — wording carried elsewhere
•BUCKLER has acted as placement agent for 71% of the shares of common stock that ARMOUR has issued through its ATM programs in 2023;
Previous report — wording carried elsewhere
The management agreement allows ACM to terminate its service to ARMOUR for any reason upon 180 days prior written notice. No termination fee shall be due from ACM to ARMOUR following any termination by ACM.