8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________

FORM 8-K

______________

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) July 26, 2023

ARMOUR Residential REIT, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	001-34766	26-1908763
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

3001 Ocean Drive, Suite 201
Vero Beach,	Florida	32963
(Address of Principal Executive Offices)		(Zip Code)

(772) 617-4340

(Registrant’s Telephone Number, Including Area Code)

n/a

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading symbols	Name of Exchange on which registered
Preferred Stock, 7.00% Series C Cumulative Redeemable	ARR-PRC	New York Stock Exchange
Common Stock, $0.001 par value	ARR	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).        

Emerging growth company ☐

If an emerging growth company, indicate by a check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Item 2.02.     Results of Operations and Financial Condition.

On July 26, 2023, ARMOUR Residential REIT, Inc. (the “Company”) issued a press release announcing its Q2 results and June 30, 2023 financial position. A copy of the press release is furnished as Exhibit 99.1 to this current report on Form 8-K.

The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liabilities under that section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01.      Financial Statements and Exhibits.  

(d) Exhibits

Exhibit No.	Description
99.1	Press Release dated July 26, 2023
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: July 26, 2023

ARMOUR RESIDENTIAL REIT, INC.
By:	/s/ James R. Mountain
Name:	James R. Mountain
Title:	Chief Financial Officer

EX-99.1

ARMOUR RESIDENTIAL REIT, INC. ANNOUNCES

Q2 RESULTS AND JUNE 30, 2023 FINANCIAL POSITION

VERO BEACH, Florida -- July 26, 2023 -- ARMOUR Residential REIT, Inc. (NYSE: ARR and ARR PRC) (“ARMOUR” or the “Company”) today announced the Company's Q2 results and June 30, 2023 financial position.

ARMOUR's Q2 2023 Results

◦Earnings available to common stockholders of $40.0 million or $0.20 per common share.

◦Net interest income of $5.8 million.

◦Distributable Earnings available to common stockholders of $45.4 million, which represents $0.23 per common share (see explanation of this non-GAAP measure on page 3).

◦Asset yield of 4.24%, less net cost of funds of 2.49% for a net interest margin of 1.75%.

◦Paid common stock dividends of $0.08 per share per month.

◦Raised $77.5 million of capital by issuing 15,160,000 shares of common stock through an at the market offering program.

◦Repurchased 425,000 shares of common stock at a net cost of $4.88 per share.

ARMOUR's June 30, 2023 Financial Position

◦Book value per common share of $5.38 resulting from:

Book Value, March 31, 2023	$	5.44
Earnings per common share	0.20
Less: Common dividends per common share	(0.24)
Equity Capital Activities, net	(0.02)
Book Value, June 30, 2023	$	5.38

◦Liquidity, including cash and unencumbered agency and U.S. government securities, of $644.4 million.

◦Portfolio composition was 100% Agency mortgage-backed securities ("MBS"), net of To Be Announced ("TBA") Security positions.

◦Debt to equity ratio of 7.1 to 1 (based on repurchase agreements divided by total stockholders’ equity).

◦Interest Rate swap contracts totaled $8.8 billion of notional amount, representing 96% of total repurchase agreement and TBA Securities liabilities.

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Book value per common share consisted of:

	June 30, 2023
	(in millions except per share)
Common stock, at par value - 206,810,059 shares outstanding	$	0.2
Additional paid-in capital	4,128.4
Cumulative distributions to stockholders	(2,098.7)
Accumulated net loss	(746.9)
Total Stockholders' Equity	$	1,283.0
Less: liquidation preference - 7.00% Cumulative Redeemable Preferred C Stock - 6,846,978 shares outstanding	(171.2)
Equity Attributable to Common Stockholders	$	1,111.8
Book value per common share	$	5.38

The major drivers of the change in the Company's financial position during Q2 were:

	Q2 2023
	(in millions)
Total Stockholders' Equity – Beginning	$	1,215.1
Earnings
Investment in securities: (1)
Loss on MBS	$	(162.8)
Gain on U.S. Treasury Securities	11.9
Loss on TBA Securities	(3.3)
Amortization of prior unrealized losses	5.1
Interest rate swaps:
Net interest income	52.2
Gains	110.2
Amortization of prior unrealized gains	37.6
Futures contracts:
Net interest income	0.7
Losses (1)	(3.1)
Net Interest Income	5.8
Total Expenses after fees waived (2)	(11.3)
Net Income	$	43.0
Capital Activities
Issuance of common stock	78.3
Common stock repurchases	(2.1)
Dividends	(51.3)
Total Stockholders' Equity – Ending	$	1,283.0

(1)Includes both realized and unrealized gains and losses.

(2)The Company’s external manager has waived a portion of its contractual management fee at the rate of $1,650 for Q2 2023.

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July 26, 2023

Condensed balance sheet information:	June 30, 2023
	(in millions)
Assets:
Cash	$	163.7
Cash collateral posted to counterparties	52.5
Agency Securities, at fair value	11,176.6
Receivable for unsettled sales	94.8
Derivatives, at fair value	1,001.0
Accrued interest receivable	45.8
Prepaid and other	4.7
Total Assets	$	12,539.1
Liabilities:
Repurchase agreements, net	$	9,121.3
Obligations to return securities received as collateral, at fair value	497.2
Cash collateral posted by counterparties	963.7
Payable for unsettled purchases	616.4
Derivatives, at fair value	11.6
Accrued interest payable- repurchase agreements	34.0
Accrued interest payable- U.S. Treasury Securities sold short	3.5
Accounts payable and other accrued expenses	8.4
Total Liabilities	11,256.1
Stockholders’ Equity:
Common stock ($0.001 par value per share) - 206,810,059 shares outstanding:	0.2
Additional paid-in capital	4,128.4
Cumulative distributions to stockholders	(2,098.7)
Accumulated net loss	(746.9)
Total Stockholders’ Equity	1,283.0
Total Liabilities and Stockholders’ Equity	$	12,539.1

Distributable Earnings

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 is based on the historical cost basis of our Agency Securities and interest rate swaps. Distributable Earnings differs, potentially significantly, from net interest income and from net income (which includes realized gains and losses and market value adjustments). The net coupon effect of interest rate swaps is the primary driver of market value adjustments on these positions that were recognized in net income and total stockholders’ equity in prior periods.

For a portion of its Agency Securities the Company may enter into TBA forward contracts for the purchase or sale of Agency Securities at a predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date, but the particular Agency Securities to be delivered are not identified until shortly before the TBA settlement date. The Company accounts for TBA Agency Securities as derivative instruments if it is reasonably possible that it will not take or make physical delivery of the Agency Securities upon settlement of the contract.

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The Company may choose, prior to settlement, to move the settlement of these securities out to a later date by entering into an offsetting short or long position (referred to as a “pair off”), net settling the paired off positions for cash, and simultaneously purchasing or selling a similar TBA Agency Security for a later settlement date. This transaction is commonly referred to as a “dollar roll.” The Company accounts for TBA dollar roll transactions as a series of derivative transactions.

Forward settling TBA contracts typically trade at a discount, or “Drop,” to the regular settled TBA contract to reflect the expected interest income on the underlying deliverable Agency Securities, net of an implied financing cost, which would have been earned by the buyer if the contract settled on the next regular settlement date. When the Company enters into TBA contracts to buy Agency Securities for forward settlement, it earns this “TBA Drop Income,” because the TBA contract is essentially equivalent to a leveraged investment in the underlying Agency Securities. The amount of TBA Drop Income is calculated as the difference between the spot price of similar TBA contracts for regular settlement and the forward settlement price on the trade date. The Company generally accounts for TBA contracts as derivatives and TBA Drop Income is included as part of the periodic changes in fair value of the TBA contracts that the Company recognizes currently in the Other Income (Loss) section of its Consolidated Statement of Operations.

Regulation G Reconciliation

The Company believes that Distributable Earnings and Distributable Earnings per common share may be useful to investors because our Board of Directors considers Distributable Earnings and Distributable Earnings per common share as part of its deliberations when determining the level of dividends on our common stock. Distributable Earnings and Distributable Earnings per common share tend to be more stable over time and this practice is designed to increase the stability of our common stock dividend from month to month. However, because Distributable Earnings is an incomplete measure of the Company’s financial performance and involves significant differences from net interest income and net income computed in accordance with GAAP, Distributable Earnings should be considered as supplementary to, and not as a substitute for, the Company’s net interest income and net income computed in accordance with GAAP as a measure of the Company’s financial performance.

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ARMOUR Residential REIT, Inc. Announces Q2 Results and June 30, 2023 Financial Position

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July 26, 2023

The elements of ARMOUR’s Distributable Earnings and Distributable Earnings per common share and a reconciliation of those amounts to the Company’s Net Interest Income, Net Income and Earnings per common share appear below:

	Q2 2023 (unaudited)
	(in millions)
Net Interest Income	$	5.8
TBA Drop Income	1.0
Net interest income on interest rate swaps	52.2
Net interest income on futures contracts	0.7
Total Expenses after fees waived	(11.3)
Distributable Earnings	$	48.4
Dividends on Preferred Stock	(3.0)
Distributable Earnings available to common stockholders	$	45.4
Distributable Earnings per common share	$	0.23
Net Income	$	43.0
Items Excluded from Distributable Earnings:
Loss on MBS	162.8
Gain on U.S. Treasury Securities	(11.9)
Loss on TBA Securities, less TBA Drop Income	4.3
Amortization of prior unrealized net gains/losses	(42.7)
Loss on futures contracts	3.1
Unrealized gain on interest rate swaps	(110.2)
Add net	$	5.4
Distributable Earnings	$	48.4
Dividends on Preferred Stock	(3.0)
Distributable Earnings available to common stockholders	$	45.4
Distributable Earnings per common share	$	0.23
Net Income	$	43.0
Dividends on Preferred Stock	(3.0)
Earnings available to common stockholders	$	40.0
Earnings per common share	$	0.20
Weighted average common shares outstanding - 200,379,403

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ARMOUR Residential REIT, Inc. Announces Q2 Results and June 30, 2023 Financial Position

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July 26, 2023

Company Update

At the close of business on July 24, 2023:

◦Common stock outstanding of 228,309,234 shares.

◦7.00% Cumulative Redeemable Preferred C Stock ("Series C Preferred Stock") with liquidation preference totaling approximately $171.2 million.

◦Estimated Book value per common share was approximately $5.25.

◦Liquidity, including cash and unencumbered securities, exceeded $639 million.

◦Securities portfolio included approximately $12.2 billion of Agency MBS (including TBA Securities).

◦Debt to equity ratio (based on repurchase agreements divided by total stockholders' equity) was approximately 7.8 to 1. Leverage, including TBA Securities was approximately 7.5 to 1. Implied leverage, including TBA Securities and forward settling sales and unsettled purchases was 7.8 to 1.

Through July 12, 2023, we raised approximately, $109.3 million of capital by issuing 21,499,175 shares of common stock at $5.08 net proceeds per share, after fees and expenses, through an at-the-market offering program, which has now been exhausted.

On July 25, 2023, the Company approved a new equity sales agreement on substantially the same terms as its previous ATM sales agreement with our affiliate BUCKLER Securities LLC and four other agents related to an at-the-market offering of up to 75,000,000 shares of our common stock.

Dividends

ARMOUR paid monthly cash dividends of $0.08 per share of the Company’s common stock each month in Q2 2023. On July 28, 2023, a cash dividend of $0.08 per outstanding common share will be paid to holders of record on July 17, 2023. We have also declared a cash dividend of $0.08 per outstanding common share payable August 30, 2023 to holders of record on August 15, 2023. ARMOUR’s Board of Directors will determine future common dividend rates based on an evaluation of the Company’s results, financial position, real estate investment trust (“REIT”) tax requirements, and overall market conditions as the quarter progresses. In order to maintain ARMOUR’s tax status as a REIT, the Company is required to timely distribute substantially all of its ordinary REIT taxable income for the tax year.

ARMOUR paid monthly cash dividends of $0.14583 per share of the Company’s Series C Preferred Stock for each month in Q2 2023. On July 27, 2023, a cash dividend of $0.14583 per outstanding share of Series C Preferred Stock will be paid to holders of record on July 15, 2023. We have also declared cash dividends of $0.14583 per outstanding share of Series C Preferred Stock payable August 28, 2023 to holders of record on August 15, 2023 and payable September 27, 2023 to holders of record on September 15, 2023.

The Company forecasts that Series C Preferred Stock dividends for 2023 will likely be treated as fully taxable ordinary income. Common stock dividends for 2023 will likely be treated, at least partially, as taxable ordinary income.

Conference Call

As previously announced, the Company will provide an online, real-time webcast of its conference call with equity analysts covering Q2 2023 operating results on Thursday, July 27, 2023, at 8:00 a.m. (Eastern Time). The live broadcast will be available online and can be accessed at https://event.choruscall.com/mediaframe/webcast.html?webcastid=EIcbrnD1. To monitor the live webcast, please visit the website at least 15 minutes prior to the start of the call to register, download, and install any necessary audio software. An online replay of the event will be available on the Company’s website at www.armourreit.com and continue for one year.

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ARMOUR Residential REIT, Inc.

ARMOUR invests primarily in fixed rate residential, adjustable rate and hybrid adjustable rate residential mortgage-backed securities issued or guaranteed by U.S. Government-sponsored enterprises or guaranteed by the Government National Mortgage Association. ARMOUR is externally managed and advised by ARMOUR Capital Management LP, an investment advisor registered with the Securities and Exchange Commission (“SEC”).

Safe Harbor

This press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ from expectations, estimates and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Additional information concerning these, the impact of the COVID-19 pandemic on the Company's operational and financial performance and other risk factors are contained in the Company’s most recent filings with the SEC. All subsequent written and oral forward-looking statements concerning the Company are expressly qualified in their entirety by the cautionary statements above. The Company cautions readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made. The Company does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based, except as required by law.

Additional Information and Where to Find It

Investors, security holders and other interested persons may find ARMOUR's most recent Company Update and additional information regarding the Company at the SEC’s internet site at www.sec.gov, or the Company website at www.armourreit.com or by directing requests to: ARMOUR Residential REIT, Inc., 3001 Ocean Drive, Suite 201, Vero Beach, Florida 32963, Attention: Investor Relations.

CONTACT:     investors@armourreit.com

James R. Mountain

Chief Financial Officer

ARMOUR Residential REIT, Inc.

(772) 617-4340

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XML

Cover	Jul. 26, 2023
Document Information [Line Items]
Document Type	8-K
Document Period End Date	Jul. 26, 2023
Entity Registrant Name	ARMOUR Residential REIT, Inc.
Entity Incorporation, State or Country Code	MD
Entity File Number	001-34766
Entity Tax Identification Number	26-1908763
Entity Address, Address Line One	3001 Ocean Drive, Suite 201
Entity Address, City or Town	Vero Beach,
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	32963
City Area Code	772
Local Phone Number	617-4340
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Entity Central Index Key	0001428205
Amendment Flag	false
Preferred Class C
Document Information [Line Items]
Title of 12(b) Security	Preferred Stock, 7.00% Series C Cumulative Redeemable
Trading Symbol	ARR-PRC
Security Exchange Name	NYSE
Common Stock
Document Information [Line Items]
Title of 12(b) Security	Common Stock, $0.001 par value
Trading Symbol	ARR
Security Exchange Name	NYSE