ARMOUR earnings for the third quarter of 2026 showed a $327 million GAAP net loss, or $2.26 per common share, as wider mortgage spreads weighed on the portfolio. Book value per common share fell 17% from June 30 to $14.55 at quarter-end. During the October 22 earnings discussion, management nevertheless said it expected distributable earnings to be around the dividend level in the coming quarter.
Key Takeaways
- Wider mortgage spreads drove a sharp book-value decline and a negative quarterly economic return.
- Management expressed comfort with the announced November dividend, but its earnings outlook remains guidance.
- Liquidity, rather than a fixed leverage target, is guiding asset purchases and share repurchases.
Table of Contents
- ARMOUR earnings separate portfolio losses from dividend outlook
- Liquidity takes priority over adding leverage
- September sales position the portfolio for reinvestment
- Buybacks compete with portfolio investment for cash
- Conclusion
ARMOUR earnings separate portfolio losses from dividend outlook
ARMOUR reported a negative 12.9% total economic return for the quarter. The deterioration in book value was central to the results, even as management maintained a constructive medium-term view of mortgage investments.
Chief Executive Officer Scott Ulm said volatility in both the stock price and book value had pushed the dividend yield higher. He pointed to the already-announced November dividend as evidence of management's comfort with the current payout.
Ulm's expectation that distributable earnings would be in the range of the dividend applies to the coming quarter; it is not a reported result or a guarantee of future coverage. That distinction matters because the GAAP loss and management's distributable-earnings outlook describe different measures and periods.
| Item | Details |
|---|---|
| Q3 prepayment speed | Averaged 8.5 CPR, down 25% from the preceding quarter. |
| Funding access | Management cited access to 20 repo counterparties. |
| Net duration | Rose to 0.38 years from approximately zero. |
| Hedging preference | Management continued to favor an approximately 80/20 nominal mix of swaps versus futures. |
Liquidity takes priority over adding leverage
ARMOUR ended the third quarter with $1.02 billion of liquidity. Co-Chief Investment Officer and Head of Risk Management Desmond Macauley said leverage was 7.9 times as of October 19, excluding Treasury long positions and adjusting for expected paydowns.
Macauley said the company retained capacity to add leverage when the macroeconomic outlook became clearer. Wider mortgage spreads made prospective investments more attractive in management's view, but near-term volatility argued for caution.
Management said approximately half the portfolio was financed through affiliated Buckler Securities. ARMOUR's 2025 financing disclosures also identify Buckler's borrowing relationship, providing historical context for the affiliate's role rather than verification of the latest quarterly funding figures.
September sales position the portfolio for reinvestment
Co-Chief Investment Officer Sergey Losyev said September asset sales focused on five- and 10-year DUS pools and deeper-discount mortgage securities with 50–60 months of seasoning. Those holdings had outperformed during the month.
The sales combined liquidity and leverage management with profit-taking. ARMOUR planned to reinvest proceeds in securities whose spreads had widened more, particularly coupons of 4.5% and above that management believed would benefit from slower prepayments.
Macauley said existing liquidity stress tests already incorporated COVID-like extreme scenarios and did not require changes after September's volatility. Management said the company had not been forced to sell assets for liquidity reasons.
Buybacks compete with portfolio investment for cash
ARMOUR issued shares earlier in the quarter when pricing was attractive and close to book value, then repurchased shares after volatility left the stock trading farther below book value, Ulm said.
He emphasized that repurchases must offer a compelling price and fit within overall liquidity management. Buying back stock uses cash that could otherwise support portfolio investment, and repurchased shares may not be easy to reissue.
Conclusion
The next confirmed payout marker is ARMOUR's already-announced November dividend. The subsequent earnings update will show whether distributable earnings matched management's coverage expectation while the company preserved liquidity.
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