Armour Residential REIT Inc

Previous wording

References to “we,” “us,” “our,” or the “Company” are to ARMOUR Residential REIT, Inc. (“ARMOUR”) and its subsidiaries. References to “ACM” are to ARMOUR Capital Management LP, a Delaware limited partnership. ARMOUR owns a 10.8% equity interest in BUCKLER Securities LLC ("BUCKLER"), a Delaware limited liability company and a FINRA-regulated broker-dealer, controlled by ACM and certain executive officers of ARMOUR. Refer to the Glossary of Terms for definitions of capitalized terms and abbreviations used in this report.

Current wording

References to “we,” “us,” “our,” or the “Company” are to ARMOUR Residential REIT, Inc. (“ARMOUR”) and its subsidiaries. References to “ACM” are to ARMOUR Capital Management LP, a Delaware limited partnership. ARMOUR owns a 10.8% equity interest in BUCKLER Securities LLC ("BUCKLER"), a Delaware limited liability company and a FINRA-regulated broker-dealer, controlled by ACM. Refer to the Glossary of Terms for definitions of capitalized terms and abbreviations used in this report.

Previous wording

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. All per share amounts, common shares outstanding and stock-based compensation amounts for all periods reflect the effect of our Reverse Stock Split. U.S. dollar amounts are presented in thousands, except per share amounts or as otherwise noted.

Current wording

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. U.S. dollar amounts are presented in thousands, except per share amounts or as otherwise noted.

Previous wording

At September 30, 2024 and December 31, 2023, we invested in MBS, issued or guaranteed by a U.S. GSE, such as Fannie Mae, Freddie Mac, or a government agency such as Ginnie Mae (collectively, Agency Securities). Our Agency Securities consist of fixed rate loans. From time to time we have also invested in U.S. Treasury Securities and money market instruments.

Current wording

At March 31, 2025 and December 31, 2024, we invested in MBS, issued or guaranteed by a U.S. GSE, such as Fannie Mae, Freddie Mac, or a government agency such as Ginnie Mae (collectively, Agency Securities). Our Agency Securities consist primarily of fixed rate loans. Our charter permits us to invest in MBS backed by fixed rate, hybrid adjustable rate and adjustable rate home loans as well as unsecured notes and bonds issued by GSEs, U.S. Treasuries and money market instruments.

Previous wording

While we use strategies to economically hedge some of our interest rate risk, we do not hedge all of our exposure to changes in interest rates and prepayment rates, as there are practical limitations on our ability to insulate our securities portfolio from all potential negative consequences associated with changes in short-term interest rates in a manner that will allow us to seek attractive net spreads on our securities portfolio. For GAAP purposes, all changes in the fair value of our derivatives currently flow through earnings. Changes in the fair value of our legacy Agency MBS portfolio, that was designated as available for sale historically, were recognized in other comprehensive income. Therefore, historical earnings reported in accordance with GAAP have fluctuated even in situations where our derivatives were operating as intended. Currently, all of our Agency MBS portfolio is designated as trading securities and changes in the fair values of our derivatives and Agency MBS flow through earnings together. Accordingly, our results of operations will not be subject to the additional fluctuations caused by the previous differences in mark-to-market accounting treatments. Comparisons with companies that use hedge accounting for all or part of their derivative activities may not be meaningful.

Current wording

While we use strategies to economically hedge some of our interest rate risk, we do not hedge all of our exposure to changes in interest rates and prepayment rates, as there are practical limitations on our ability to insulate our securities portfolio from all potential negative consequences associated with changes in short-term interest rates in a manner that will allow us to seek attractive net spreads on our securities portfolio. For GAAP purposes, all changes in the fair value of our derivatives currently flow through earnings. Currently, all of our Agency MBS portfolio is designated as trading securities and changes in the fair values of our derivatives and Agency MBS flow through earnings together. Accordingly, our results of operations will not be subject to the additional fluctuations caused by the previous differences in mark-to-market accounting treatments. Comparisons with companies that use hedge accounting for all or part of their derivative activities may not be meaningful.

Previous wording

The Fed said it will continue reducing its holdings of Treasury securities and agency debt and agency mortgage backed securities, according to its previously announced plans. The Fed 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 $25 billion per month. The Fed will also reinvest the amount of principal payments from its holdings of agency debt and agency mortgage backed securities received in each calendar month that exceeds a cap of $35 billion per month into Treasury securities.

Current wording

The Fed also stated that it will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, but beginning in April, it will slow the pace of decline of its securities holdings. It will reduce the monthly redemption cap on its Treasury securities to $5 billion from $25 billion, while maintaining the monthly redemption cap on its agency debt and agency mortgage-backed securities at $35 billion. Beginning on April 1, 2025, the Fed 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 $5 billion per month. It will also reinvest the amount of principal payments from its holdings of agency debt and agency mortgage-backed securities received in each calendar month that exceeds a cap of $35 billion per month into Treasury securities.

Previous wording

Below is the Fed's target range for the Fed Funds Rate at each Fed meeting where a change was made since the beginning of 2023.

Current wording

Below is the Fed's target range for the Federal Funds Rate at each Fed meeting where a change was made since the beginning of 2023.

Previous wording

The following graph shows the effective Fed Funds Rate as compared to SOFR on a monthly basis from September 30, 2022 to September 30, 2024.

Current wording

The following graph shows the effective Federal Funds Rate as compared to SOFR on a monthly basis from March 31, 2023 to March 31, 2025.

Previous wording

Net income for the three and nine months ended September 30, 2024 compared to net loss for the three and nine months ended September 30, 2023 reflected gains on our trading securities offset by losses on derivatives. During the nine months ended September 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".

Current wording

Net income for the three months ended March 31, 2025 compared to net income for the three months ended March 31, 2024 reflected a larger investment portfolio and lower costs for repurchase financing compared to the three months ended March 31, 2024 as well as gains on our trading securities offset by losses on derivatives. Total expenses after fees waived for the three months ended March 31, 2024 included non recurring costs associated with the previously disclosed Special Committee internal investigation.

Previous wording

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

Current wording

The following table details the factors impacting our net interest income for three months ended March 31, 2025 and March 31, 2024.

Previous wording

Three and Nine Months Ended September 30, 2024 vs. Three and Nine Months Ended September 30, 2023

Current wording

Three Months Ended March 31, 2025 vs. Three Months Ended March 31, 2024

Previous wording

•Gain (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.

Current wording

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

Previous wording

◦Sales of our Agency Securities, trading resulted in realized gains (losses) of $98 and $(100,409) and $(21,241) and $(304,652) for the three and nine months ended September 30, 2024 and September 30, 2023, respectively.

Current wording

◦Sales of our Agency Securities, trading resulted in realized gains (losses) of $(3,173) and $(2,626) for the three months ended March 31, 2025 and March 31, 2024, respectively.

Previous wording

•Gain (Loss) on U.S. Treasury Securities resulted from the change in fair value of the securities as well as the gain (loss) on sales.

Current wording

•Gain (Loss) on U.S. Treasury Securities, net resulted from the change in fair value of the securities as well as the gain (loss) on sales.

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 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 September 30, 2024 and September 30, 2023, the effective management fee, prior to management fees waived, was 0.92% and 0.93% based on gross equity raised of $4,361,496 and $4,235,238, respectively. During each of the three and nine months ended September 30, 2024 and September 30, 2023 ACM voluntarily waived management fees of $1,650 and $4,950, respectively (see Note 15 - 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 make 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 March 31, 2025 and March 31, 2024, the effective management fee, prior to management fees waived, was 0.90% and 0.93% based on gross equity raised of $4,873,845 and $4,230,648, respectively. During each of the three months ended March 31, 2025 and March 31, 2024 ACM voluntarily waived management fees of $1,650 (see Note 13 - Related Party Transactions).

Previous wording

•For the nine months ended September 30, 2024, other expenses included $9,010 of expenses related to the Special Committee internal investigation in the first quarter of 2024. With the dismissal this quarter of the JAVELIN class action lawsuits, other expenses for the three and nine months ended September 30, 2024 reflect the reversal of $1,000 of certain costs accrued in prior years.

Current wording

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

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 September 30, 2024 and December 31, 2023, we had approximately $(225,758) 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 September 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.

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 March 31, 2025 and December 31, 2024, we had approximately $(192,655) and $(189,450), respectively, of net deductible expense relating to previously terminated interest rate swap and treasury futures/shorts contracts amortizing through the years 2035 and 2034, respectively. At March 31, 2025, we had $257,341 of net operating loss carryforwards available for use indefinitely.

Previous wording

Our securities portfolio consists of Agency Securities backed by fixed rate home loans. Our charter permits us to invest in MBS backed by fixed rate, hybrid adjustable rate and adjustable rate home loans as well as unsecured notes and bonds issued by GSEs, U.S. Treasuries and money market instruments, subject to certain income tests we must satisfy for our qualification as a REIT. Our TBA Agency Securities are reported at net carrying value and are reported in Derivatives, at fair value on our consolidated balance sheets (see Note 8 to the consolidated financial statements).

Current wording

Our securities portfolio consists primarily of Agency Securities backed by fixed rate home loans. Our charter permits us to invest in MBS backed by fixed rate, hybrid adjustable rate and adjustable rate home loans as well as unsecured notes and bonds issued by GSEs, U.S. Treasuries and money market instruments, subject to certain income tests we must satisfy for our qualification as a REIT. Our TBA Agency Securities are reported at net carrying value and are reported in Derivatives, at fair value on our consolidated balance sheets (see Note 7 to the consolidated financial statements).

Previous wording

Agency Security purchase and sale transactions, including purchases and sales for forward settlement, are recorded on the trade date to the extent it is probable that we will take or make timely physical delivery of the related securities. Gains or losses realized from the sale of securities are included in income and are determined using the specific identification method. We typically purchase Agency Securities at premium prices. The premium price paid over par value on those assets is expensed as the underlying mortgages experience repayment or prepayment. The lower the prepayment rate, the lower the amount of amortization expense for a particular period. Accordingly, the yield on an asset and earnings are higher. If prepayment rates increase, the amount of amortization expense for a particular period will go up. These increased prepayment rates would act to decrease the yield on an asset and would decrease earnings.

Current wording

Agency Security purchase and sale transactions, including purchases and sales for forward settlement, are recorded on the trade date, based on the specific identification method, to the extent it is probable that we will take or make timely physical delivery of the related securities. Premiums and discounts associated with the purchase of Multi-Family MBS, which are generally not subject to prepayment, are amortized or accreted into interest income over the contractual lives of the securities using a level yield method. Premiums and discounts associated with the purchase of other Agency Securities are amortized or accreted into interest income over the actual lives of the securities, reflecting actual prepayments as they occur. Gains or losses realized from the sale of securities are included in income and are determined using the specific identification method. We typically purchase Agency Securities at premium prices. The lower the prepayment rate, the lower the amount of amortization expense for a particular period. Accordingly, the yield on an asset and earnings are higher. If prepayment rates increase, the amount of amortization expense for a particular period will go up. These increased prepayment rates would act to decrease the yield on an asset and would decrease earnings.

Previous wording

(2)Our TBA Agency Securities were recorded as derivative instruments in our accompanying consolidated financial statements. Our TBA Agency Securities were reported at net carrying values of $1,816, at December 31, 2023 and were reported in Derivatives, at fair value on our consolidated balance sheets (see Note 8 to the consolidated financial statements).

Current wording

(2)Our TBA Agency Securities were recorded as derivative instruments in our accompanying consolidated financial statements. Our TBA Agency Securities were reported at net carrying values of $192, at March 31, 2025 and were reported in Derivatives, at fair value on our consolidated balance sheets (see Note 7 to the consolidated financial statements).

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, 16 and 14 of which had open repurchase agreements with us at September 30, 2024 and December 31, 2023, respectively. We had outstanding balances under our repurchase agreements, net at September 30, 2024 and December 31, 2023 of $10,186,415 and $9,647,982, respectively, consistent with the increase in our MBS in our securities portfolio. At September 30, 2024 and December 31, 2023, BUCKLER accounted for 41.4% and 48.4%, respectively, of our aggregate borrowings and had an amount at risk of 7.3% and 8.1%, respectively, of our total stockholders' equity with a weighted average maturity of 10 days and 12 days, respectively, on repurchase agreements (see Note 7 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 Federal Funds Rate and SOFR. We have established borrowing relationships with numerous investment banking firms and other lenders, 17 of which had open repurchase agreements with us at March 31, 2025 and December 31, 2024. We had outstanding balances under our repurchase agreements, net at March 31, 2025 and December 31, 2024 of $12,490,792 (net of reverse repurchase agreements of $512,750, $461,250 of which were with BUCKLER) and $10,713,830 (net of reverse repurchase agreements of $498,250, $447,063 of which were with BUCKLER) respectively. We had obligations to return securities received as collateral associated with our reverse repurchase agreements as of March 31, 2025 and December 31, 2024 of $506,340 and $493,433, respectively. At each of March 31, 2025 and December 31, 2024, BUCKLER accounted for 45.7% of our aggregate borrowings and had an amount at risk of 7.4% and 8.0%, respectively, of our total stockholders' equity with a weighted average maturity of 30 days and 15 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 September 30, 2024, the average haircut percentage was 2.95% compared to 2.74% at December 31, 2023.

Current wording

Our repurchase agreements require excess collateral, known as a “haircut.” At March 31, 2025, the average gross haircut percentage was 2.74% compared to 2.77% at December 31, 2024.

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 September 30, 2024 and December 31, 2023. At September 30, 2024 and December 31, 2023, we had derivatives with a net fair value of $673,884 and $872,376, respectively (see Note 8 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 Federal Funds Rate or SOFR. We had contractual commitments under derivatives at March 31, 2025 and December 31, 2024. At March 31, 2025 and December 31, 2024, we had derivatives with a net fair value of $653,530 and $906,778, respectively (see Note 7 to the consolidated financial statements).

Previous wording

At September 30, 2024, we had interest rate swap contracts with an aggregate notional balance of $6,686,000, a weighted average swap rate of 1.42% and a weighted average term of 72 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 $300,000 at December 31, 2023. We did not have TBA Agency Securities at September 30, 2024 (see Note 8 to the consolidated financial statements).

Current wording

At March 31, 2025, we had interest rate swap contracts with an aggregate notional balance of $8,382,000, a weighted average swap rate of 2.00% and a weighted average term of 68 months. At December 31, 2024, we had interest rate swap contracts with an aggregate notional balance of $7,232,000, a weighted average swap rate of 1.66% and a weighted average term of 76 months. We also had TBA Agency Securities with an aggregate notional balance of $900,000 at March 31, 2025. We did not have TBA Agency Securities at December 31, 2024 (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 nine months ended September 30, 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 three months ended March 31, 2025 and for the year ended December 31, 2024.

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 (losses) gains related to our derivatives of $(209,959) and $(3,829) and $291,142 and $350,932, for the three and nine months ended September 30, 2024 and September 30, 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 (losses) gains related to our derivatives of $(191,218) and $156,448, for the three months ended March 31, 2025 and March 31, 2024, 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. At

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. At March 31, 2025 and December 31, 2024, we had $3,175,000 and $2,025,000, respectively, of notional amount of centrally-cleared interest rate swap contracts.

Previous wording

At September 30, 2024, our liquidity totaled $667,427, consisting of $63,855 of cash and cash equivalents plus $603,572 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.

Current wording

At March 31, 2025, our liquidity totaled $847,961, consisting of $49,115 of cash and cash equivalents plus $798,846 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.

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 September 30, 2024, we had $522,938 ($469,188 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 September 30, 2024 and December 31, 2023, we had obligations to return securities received as collateral associated with our reverse repurchase agreements of $522,660 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.

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 September 30, 2024 and December 31, 2023, we financed our securities portfolio with $10,186,415 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 September 30, 2024 and December 31, 2023, were 7.74:1 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 7.74:1 and 7.83:1 at September 30, 2024 and December 31, 2023, respectively. Implied leverage, including TBA Securities and forward settling sales and unsettled purchases was 8.18:1 and 7.96:1 at September 30, 2024 and December 31, 2023, respectively.

Current wording

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, 2025 and December 31, 2024, were 7.33:1 and 7.87:1, respectively. Our leverage ratios, including notional on our TBA Agency Securities, were 7.87:1 at each of March 31, 2025 and December 31, 2024, respectively. Implied leverage, including TBA Securities and forward settling sales and unsettled purchases was 7.87:1 and 7.95:1 at March 31, 2025 and December 31, 2024, respectively.

Previous wording

The following tables present our equity transactions for the nine months ended September 30, 2024 and for the year ended December 31, 2023 (see Note 11 and Note 15 to the consolidated financial statements).

Current wording

The following tables present our equity transactions for the three months ended March 31, 2025 and for the year ended December 31, 2024 (see Note 10 and Note 13 to the consolidated financial statements).

Previous wording

The following table reconciles the fees incurred in accordance with the management agreement for the three and nine months ended September 30, 2024 and September 30, 2023 (see Note 9 to the consolidated financial statements).

Current wording

The following table reconciles the fees incurred in accordance with the management agreement for the three months ended March 31, 2025 and March 31, 2024 (see Note 8 to the consolidated financial statements).

Previous wording

At September 30, 2024, there was approximately $7,009 of unvested stock based compensation related to the Awards (based on a weighted grant date price of $37.68 per share), which we expect to recognize as an expense as follows: for the remainder of 2024 an expense of $835, in 2025 an expense of $1,986, and thereafter an expense of $4,188. 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 10 to the consolidated financial statements).

Current wording

At March 31, 2025, there was approximately $5,691 of unvested stock based compensation related to the Awards (based on a weighted grant date price of $36.09 per share), which we expect to recognize as an expense as follows: for the remainder of 2025 an expense of $1,480, in 2026 an expense of $1,793, and thereafter an expense of $2,418. 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 of 7.00% Series C Cumulative Redeemable Preferred Stock available under the Preferred C ATM Sales Agreement and 29,690 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 11 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 3,136 shares of 7.00% Series C Cumulative Redeemable Preferred Stock available under the Preferred C ATM Sales Agreement and 18,060 shares of common stock 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

Valuation modeling is required because each individual MBS pool is a separately identified security with individual combinations of characteristics that influence market pricing. While the Agency Security market is generally very active and liquid within the context of broader classes of MBS, any particular security will likely trade infrequently. Our interest rate contracts are bilateral contracts with individual dealers and counterparties and are not cleared through recognized clearing organizations. Valuation models for these positions rely on information from the active and liquid general interest rate swap market to infer the value of these unique positions.

Current wording

Valuation modeling is required because each individual MBS pool is a separately identified security with individual combinations of characteristics that influence market pricing. While the Agency Security market is generally very active and liquid within the context of broader classes of MBS, any particular security will likely trade infrequently. Our bilateral contracts with individual dealers and counterparties are not cleared through recognized clearing organizations, and valuation models for these positions rely on information from the active and liquid general interest rate swap market to infer the value of these unique positions.

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 and nine months ended September 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.

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 months ended March 31, 2025, the largest inter-day movement in the overall estimated values of our investment and hedge positions translated to a change in estimated book value of (0.28) per common share. Similarly, 98% of inter-day movements in estimated value translated to changes in estimated book value per share of 0.43 or less.

Previous wording

The forward-looking statements in this report are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. See Part I, Item 1A. "Risk Factors" of our most recent Annual Report on Form 10-K. You should carefully consider these risks before you make an investment decision with respect to our stock, along with the following factors that could cause actual results to vary from our forward-looking statements:

Current wording

The forward-looking statements in this report are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. See Part II, Item 1A. "Risk Factors" of this Quarterly Report on Form 10-Q and Part I, Item 1A. "Risk Factors" of our most recent Annual Report on Form 10-K. You should carefully consider these risks before you make an investment decision with respect to our stock, along with the following factors that could cause actual results to vary from our forward-looking statements: