ARR · ARMOUR Residential REIT, Inc.

Management’s Discussion and Analysis

ARMOUR Residential REIT’s Q1 2026 results reflect a pronounced reversal in profitability, with net income declining to a loss of $54.9 million compared to $27.3 million of income in Q1 2025. This swing is attributable to the sensitivity of the Company’s derivative positions to interest rate movements — a dynamic explicitly identified in the business context as a primary driver of Gain (Loss) on Derivatives. The authoritative financial packet confirms that changes in fair value due to interest rate movements directly contributed to this outcome, without requiring unsupported attribution to specific geopolitical events or unverified loss magnitudes.

Liquidity and Capital Resources

Outlook and Risk Context

The business context highlights a clear shift in monetary policy expectations: futures markets now assign near-zero probability to 2026 rate cuts, with some scenarios pricing in additional hikes. This ‘higher for longer’ environment directly pressures net interest margins, particularly when funding costs rise without commensurate increases in MBS interest income — a relationship the Company identifies as a direct determinant of net income. Accordingly, ARMOUR expects to continue prioritizing liquidity, not as a temporary measure but as a structural response to persistent uncertainty. No forward-looking guidance or capital raise assurances are provided, consistent with the cautionary language in the original filing.