DALLAS, TX -- February 20, 2026 -- Armour Residential REIT, Inc. (NYSE: ARR): Stonegate Capital Partners Updates Coverage on Armour Residential REIT, Inc. (NYSE: ARR). The Company ended the quarter with interest income, net income to common, and diluted EPS of $236.5M, $208.7M, and $1.86. This was a year over year increase of 55.1%, $258.1M and $2.69 respectively. This was primarily driven by the strong growth in average interest income on interest earning assets while interest cost on average interest-bearing liabilities declined. Given the current macro environment, we expect this performance to be sustainable.
Additional Metrics: In addition to the strong metrics noted above, ARR also saw impressive economic net interest income of $96.78M in the fourth quarter, which is an increase from the $60.9M posted in 4Q24. Economic interest rate was 4.97% for the quarter and decreased from 5.0% last quarter while economic interest expense was 3.20%, a small increase from 3.17% last quarter. This led to an economic interest spread of 1.77% for 4Q25. Distributable earnings for the quarter were $79.7M or $0.71 per share. Distributable EPS declined 1.4% sequentially and 9.1% year over year. Finally, the Company ended the quarter with a BV/Share of $18.63 which is an increase of 6.5% compared to $17.49 at the end of last quarter. This gain in BV, combined with common dividends, resulted in a total economic return of 10.63% for the quarter.
Strong Payout Ratios: Armour was once again a strong dividend payer in the quarter. Total dividend payments were $0.72 per common share in the third quarter, which is a monthly rate of $0.24. We note that the dividends paid monthly allow for faster compounding and better aligns with monthly mortgage cash flows. This is an annualized dividend yield of 16.4% at quarter end and 16.3% as of this report. Dividends per share are flat y/y with dividend yield increasing from 15.5% in this quarter last year. In addition to the dividend yield the Company also maintains strong payout ratio when compared to distributable earnings per share. As mentioned above ARR had distributable earnings per share of $0.71, which resulted in a payout ratio of 101%. This is an increase from 92% seen in this quarter last year.
Robust Balance Sheet: Armour ended 4Q25 on impressive footing with liquidity of $1.2B, which includes cash and unencumbered securities. The portfolio totaled $20B and was comprised of 97% Agency MBS. Repo agreements totaled $17.9B, 47% of which was held with BUCKLER Securities LLC. Debt to equity ratio was 7.94:1 at quarter end.
Valuation: We use both a Distributable Payout Model and P/BV comp analysis to guide our valuation. Our Distributable Net Income Model assumes that ARR will continue to payout 60.0% to 80.0% of its distributable net income with an average discount rate of 12.5% and a growth rate of 2.0%. This results in a valuation range of $17.73 to $23.64 with a mid-point of $20.69. Our P/BV valuation uses a +/-2.5% discount/premium to BV of $18.63. This is in-line with Comps trading at a BV/Share average premium of 0.2%. This returns a valuation range of $18.63 to $19.10 with a mid-point of $18.86. Lastly, we note that ARR currently pays a dividend yield of 16.3%, which is greater than average comps at 14.7%.
Stonegate Capital Partners is a leading capital markets advisory firm providing investor relations, equity research, and institutional investor outreach services for public companies. Our affiliate, Stonegate Capital Markets (member FINRA) provides a full spectrum of investment banking services for public and private companies.
