ARMOUR Residential REIT, Inc. (NYSE:ARR) Q3 2023 Earnings Conference Call October 26, 2023 8:00 AM ET

Company Participants

James Mountain - CFO

Scott Ulm - Co-CEO, Head of Risk Management and Co-Vice Chairman

Jeffrey Zimmer - Co-CEO, President and Co-Vice Chairman

Mark Gruber - Chief Investment Officer

Conference Call Participants

Trevor Cranston - JMP Securities

Matthew Erdner - JonesTrading

Christopher Nolan - Ladenburg Thalmann

Operator

Good morning, and welcome to ARMOUR Residential REIT's Third Quarter 2023 Earnings Conference Call.

[Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Jim Mountain, Chief Financial Officer. Please go ahead.

James Mountain

Thank you, Drew, and thank you to all of you for joining us this morning to discuss ARMOUR's third quarter 2023 results. Today, I'm joined by ARMOUR's co-CEOs, Scott Ulm and Jeff Zimmer; and our CIO, Mark Gruber.

By now, everyone has access to ARMOUR's earnings release, which can be found on our website, www.armourreit.com. This conference call includes forward-looking statements, which are intended to be subject to the safe harbor protection provided by the Private Securities Litigation Reform Act of 1995. The Risk Factors section of ARMOUR's periodic reports filed with the Securities and Exchange Commission, describes certain factors beyond ARMOUR's control that could cause actual results to differ materially from those expressed in or implied by these forward-looking statements. Those periodic filings can be found on the SEC's website at www.sec.gov.

All of today's forward-looking statements are subject to change without notice. We disclaim any obligation to update them unless required by law. Also, today's discussion refers to certain non-GAAP measures. These measures are reconciled with comparable GAAP measures in our earnings release. An online replay of this conference call will be available on our website shortly and will continue for one year.

On September 29, 2023, ARMOUR completed the previously announced One-For-Five Reverse Stock Split. All of the common share and per share amounts reflect the reverse stock split.

ARMOUR's Q3 GAAP net loss was $179.2 million. Net interest income was $3.6 million. Distributable earnings available to common stockholders was $50.2 million or $1.08 per common share. This non-GAAP measure is defined as net interest income plus TBA drop income, adjusted for the net coupon effective interest rate swaps and futures contracts, minus operating expenses, net of management fee waivers.

Asset yield of 4.65% less cost of funds of 2.92% resulted in a net interest margin of 1.73% for the quarter. ARMOUR Capital Management is continuing to waive a portion of their management fees. They waived $1.65 million for Q3, which offsets operating expenses. The waiver will continue until further notice.