ARMOUR Residential Swings to Profit as Rate Hedges Pay Off
ARMOUR Residential REIT (ARR) posted $111.5 million in net income to common stockholders, reversing a $58.0 million loss the prior quarter as swap gains offset a widening equity base.
ARMOUR Residential REIT (ARR), a mortgage real estate investment trust that invests primarily in agency mortgage-backed securities, reported second-quarter 2026 net income to common stockholders of $111.5 million, or $0.86 a share, reversing a first-quarter loss of $58.0 million, or $(0.49) a share.
The swing traced almost entirely to derivatives. Gains on interest rate swaps totaled $110.8 million in the second quarter, up from $71.3 million in the first, as the hedging book that had been built out over the prior year moved in the company's favor. ARMOUR expanded its notional swap position to $15.9 billion at June 30 from $12.9 billion at March 31, the largest sequential increase in the five-quarter series and roughly 54% above the $10.3 billion held a year earlier.
Net interest income rose to $76.8 million from $70.7 million in the first quarter, extending an unbroken climb from $50.4 million in the fourth quarter of 2025, $38.5 million in the third quarter and $33.1 million in the second quarter of last year. That improvement came even as the economic net interest spread continued to narrow, slipping to 1.82% from 1.84% in the first quarter and 1.83% a year earlier, as funding costs crept up alongside portfolio yields.
Distributable earnings available to common stockholders rose to $93.2 million from $90.5 million, but per-share distributable earnings fell to $0.72 from $0.76 as the share count kept expanding. Weighted average common shares outstanding climbed to 130.0 million from 119.6 million, the product of four consecutive quarters of heavy at-the-market issuance; shares outstanding have grown from roughly 91.6 million in the second quarter of 2025 to 141.6 million by a July 20 update. ARMOUR raised $218.7 million through ATM sales of 12.7 million shares in the quarter, up from $215.3 million in the first quarter and more than double the $99.5 million raised in the third quarter of 2025, while repurchasing no shares after buying back 125,000 in the prior period.
Book value per common share rose 0.6% sequentially to $17.53 at June 30 from $17.42 at March 31, reversing a 6.5% decline in the first quarter from $18.63 at year-end 2025. Total economic return improved to 4.8% from a negative 2.6% in the first quarter, though it remained well short of the 10.63% posted in the fourth quarter of 2025 and 7.75% in the third, underscoring a return profile that has swung sharply from quarter to quarter rather than trended in one direction.
The portfolio grew to $21.8 billion at June 30 from $21.1 billion at March 31 and $20.0 billion at year-end 2025, a steadier pace of growth following the roughly 60% expansion for full-year 2025. The mix tilted further toward agency mortgage-backed securities, which stood at 94.5% of the portfolio, while Treasury holdings fell to 2.7% from 4.7% in the first quarter, reversing a prior shift toward Treasuries; TBA exposure held near flat at 2.8%.
Leverage came down after peaking in the first quarter. The debt-to-equity ratio fell to 7.54-to-1 at June 30 from 7.90-to-1 at March 31, having climbed from 7.78-to-1 in the third quarter of 2025 to 7.94-to-1 at year-end. At the same time, ARMOUR's reliance on affiliated repo funding deepened: BUCKLER Securities LLC, an ARMOUR affiliate, accounted for 46.8% of net repurchase agreements at June 30, up from 43.4% at March 31 and 43.3% a year earlier.