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ARMOUR Residential REIT (ARR) delivered a largely in-line Q1 2025, with both book value (BV) and core earnings (or EAD) closely matching expectations.

BV declined slightly, but the 0.3% variance from our projection was well within range, especially given the market volatility across March. Like most agency mREITs, ARR expanded its fixed-rate agency MBS portfolio during the quarter, growing from $12.4B to $14.4B. This was correctly anticipated in our modeling and resulted in an on-balance sheet valuation gain of $195.4M, nearly a direct match to our estimate.

ARR slightly reduced its hedging coverage ratio from 89% to 84%, which was a bit more aggressive than projected. That led to a slightly larger-than-expected derivative valuation loss, though nothing materially concerning.

Core earnings/EAD showed a minor outperformance - a welcome change after a rough Q4. This improvement was driven by a strong rebound in net spread income, partially offset by slightly higher expenses and lower hedging income. Per-share results came in modestly above projections due to a slightly lower share count than expected.

While its Q1 performance was directionally solid, we continue to view Dynex Capital (DX) as offering a better valuation with a modestly stronger risk/reward profile. Peers like (AGNC) , (NLY) , and (ORC) also deserve continued monitoring in this volatile rate environment.

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This article was compiled by my assistant. If there are any mistakes, blame him - I certainly will.