ARMOUR Residential REIT, Inc.

Greetings and welcome to the Armour Residential REIT, Inc. First Quarter 2021 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded Thursday, April 22nd, 2021. I would now like to turn the conference over to Jim Mountain, Chief Financial Officer. Please go ahead.

Thank you, Kelly. And thank you all for joining our call to discuss Armour's first quarter 2021 results. This morning, I'm joined as usual by Armour's co-CEOs, Scott Ulm and Jeff Zimmer, and by our CIO, Mark Gruber. By now, everyone has access to Armour's earnings release, which can be found on Armour's website, www.armourreit.com. This conference call may contain statements that are not mere recitations of historical fact, and therefore constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act. Actual outcomes and results could differ materially from the outcomes and results expressed or implied by the forward-looking statements due to impacts of many factors beyond the control of armor. Certain factors that could cause actual results to differ materially from those contained in the forward-looking statements are included in the risk factors section of armor's periodic reports filed with the Securities and Exchange Commission. Copies of these reports are available on the SEC's website at www.sec.gov. All forward-looking statements included in this conference call are made only as of today's date and are subject to change without notice. We disclaim any obligation to update our forward-looking statements unless we are required to do so by law. Also, our discussion today may include references to certain non-GAAP measures. A reconciliation of these measures to our most comparable GAAP measures is included in our earnings release, which can be found on Armour's website. An online replay of this conference call will be available on Armour's website shortly and will continue for one year. Armour continues to concentrate its portfolio activities in agency MBS for the foreseeable future. Quarter end book value was $12.40 per common share. up $0.08 from Q4 2020. As of the close of business this past Monday, we estimated book value to be approximately $12.15 per common share. Armour's portfolio consisted exclusively of specified agency mortgage-backed securities valued at approximately $4.3 billion, plus agency TBA positions representing another $3.6 billion in underlying securities. Armour's Q1 GAAP comprehensive income was $29.1 million, which includes $71.3 million of GAAP net income and represents an annualized return on equity of 12%. Let me make a brief comment on prepayment accounting and core income. We recognize the amortization expense of prepayments as they occur. Given the recent ramp up in prepayments, We estimate that using the forecast method for this quarter, amortization would have been six to seven cents lower per share or about 29% of core income. We paid dividends of 10 cents per common share for each month in the first quarter for a total of $20.1 million. We've also declared the April and May common dividends at the rate of 10 cents per common share. Series C preferred stock dividend for each month in Q2 and continuing is at the contractual rate of 14.583 cents per share. Armors Common and Series C preferred stock ATM programs were active in Q1 and through Friday, April 9th. They raised approximately $107.7 million in total capital. Common stock represented about two-thirds of that total and preferred stock represented the remaining third. We saw no discernible effect on share prices and dilution to common stockholders was negligible, a shade over four cents per common share for the entire program. That equates on a per share expense basis to savings that will occur over about 16 months. Our current projections for 2021 show that 100% of both common and preferred dividends will likely be treated as tax basis adjustments rather than current taxable income when it gets distributed to our shareholders. That's due to the tax shield provided by the amortization of hedging costs that were previously deferred for tax purposes. This is consistent with the results for 2020. ACM, the company's external manager, continued to waive a portion of its management fee, which was initiated in the second quarter of 2020. This waiver offset $2.4 million of operating expenses for Q1 2021. On April 20, 2021, the company's external manager notified Armour that it intended to adjust this fee waiver to the rate of $2.1 million for the second quarter of 2021, and continue with the rate of $700,000 per month thereafter until further notice. The annual meeting of Armour Residential REIT is scheduled for Thursday, May 13th at 8 a.m. Eastern Time. By now, all shareholders of record of Armour Common Stock should have received their notice and access cards in the mail. If not, they should contact their broker. Full proxy statement and annual report are available electronically at proxyvote.com or on the SEC website. Stockholders of record may also request paper copies by following the instructions on their notice and access card. The annual meeting will be webcast on www.cstproxy.com slash ArmourReit slash 2021, and it will be virtual only again this year. That link is also on the notice and access cards. We encourage all Armour Common stockholders to log into proxyvote.com and register their votes in advance. I've already voted my ARR shares and the process is painless. Shareholders who wish to vote their shares during the annual meeting will need to obtain a legal proxy in advance, however. Now, let me turn the call over to Co-Chief Executive Officer Scott Ulm so that, Scott, you can discuss Harmer's portfolio position and current strategy.

Thanks, Jim.