BRASILIA (Reuters) -Brazil's government on Friday announced a new real estate funding framework that loosens rules on the mandatory allocation of bank resources to the sector, releasing 36.9 billion reais ($6.72 billion) for them to boost housing loans. The changes are based on easing the use of savings accounts as the main source of housing credit in Latin America's largest economy. Although exempt from income tax, savings accounts offer returns well below the benchmark interest rate, leading to signifi ...

Financial Data and Key Metrics Changes - ARMOUR's Q2 GAAP net loss related to common stockholders was $78.6 million, or $0.94 per common share [4] - Net interest income was $33.1 million, while distributable earnings available to common stockholders were $64.9 million, or $0.77 per common share [4] - The quarter ending book value was $16.9 per common share, with an estimated book value of $16.81 as of July 21 [6] Business Line Data and Key Metrics Changes - ARMOUR raised approximately $104.6 million of capital by issuing about 6.3 million shares of common stock through an at-the-market offering program during Q2 [4] - Since June 30, an additional $58.8 million was raised by issuing approximately 3.5 million shares [5] - Monthly common stock dividends were paid at $0.24 per share, totaling $0.72 for the quarter [5] Market Data and Key Metrics Changes - The 30-year fixed mortgage rate was near 6.75% through late June and early July, dampening refinancing activity [10] - MBS to SOFR spreads widened by approximately 10 basis points quarter over quarter, remaining historically cheap [9] Company Strategy and Development Direction - ARMOUR's strategy focuses on growing and deploying capital thoughtfully during spread dislocations while maintaining robust liquidity and dynamically adjusting hedges for disciplined risk management [17] - The company is optimistic about structural demand for MBS improving later in the year due to evolving regulatory clarity and a potential resumption of Fed easing policy [15] Management's Comments on Operating Environment and Future Outlook - Management noted that the macro landscape is influenced by U.S. fiscal sustainability, Fed independence, and trade dynamics, which are expected to weigh on the market for some time [8] - The company believes that a resumption of the Fed cutting cycle this year could reignite liquidity flow into agency MBS [9] Other Important Information - ARMOUR's estimated net portfolio duration is closely managed at 0.46 years, with implied leverage at eight turns [12] - The MBS portfolio remains concentrated in production MBS with ROEs in the 18% to 20% range [13] Q&A Session Summary Question: Managing spread duration risk during volatility - Management expressed comfort with current leverage levels and noted that spreads remain historically attractive, indicating a potential for modestly increasing leverage [20][21] Question: Allocation to higher coupons and best value in the coupon stack - Management remains favorable towards 5.56 coupons, which are currently modeling the highest ROE, while the allocation to higher coupons has declined due to volatility [25][26] Question: Role of long treasury position within the portfolio - The five-year treasury position is used as part of the hedging strategy and as a proxy for Agency CMBS positions, allowing for tactical adjustments based on spread conditions [28][29] Question: Total expenses after fees waived - Management indicated that the higher expenses were due to increased professional fees and do not expect the same run rate going forward [33] Question: Balancing total return versus carry in the hedge portfolio - Management stated that they are positioned for a bullish steepener and are dynamically adjusting hedges based on macroeconomic views [37][38] Question: Expectations for leverage increase - Management noted that they are comfortable modestly increasing leverage given stable liquidity conditions and attractive spreads, while remaining cautious about making large bets [48][52]

Financial Data and Key Metrics Changes - The company reported GAAP earnings of $14.4 million or $0.10 per share, compared to a loss of $8.4 million or negative $0.07 per share in the previous quarter, indicating a significant sequential improvement [22] - Book value per share ended the quarter at $8.39, a slight decline from $8.46 in the fourth quarter, translating to a positive economic return of 1.3% for the first quarter [22] - Earnings available for distribution (EAD) for the first quarter was $19.8 million or $0.14 per share, up from $18.4 million or $0.13 per share in the fourth quarter [23] Business Line Data and Key Metrics Changes - Sequoia's first quarter performance showed $4 billion in locks, representing a 73% quarter-on-quarter growth, driven by wallet share growth and seasoned bulk portfolios [11] - Net income from Sequoia was $25.8 million, representing a 28% return on equity (ROE) for the quarter, up from 23% in the previous quarter [23] - CorVest generated net income of $2.9 million, resulting in a 20% ROE for the quarter, despite a slight decrease in volumes from the fourth quarter [24] Market Data and Key Metrics Changes - The company noted that the mortgage market has not experienced disproportionate effects from recent market volatility, unlike previous years [6] - The company observed a significant demand for the assets created, with trillions of dollars raised by private credit institutions looking to invest in the residential mortgage space [9] - The company reported that the average capital allocation ticked down for the quarter, indicating a focus on liquidity and execution risk management [38] Company Strategy and Development Direction - The company is focusing on strategic partnerships with entities on both the supply and demand side of the market as part of its growth initiatives [10] - The company is advocating for a leveling of the playing field between private capital and government-sponsored enterprises (GSEs) to streamline regulatory burdens [9] - The company aims to achieve annualized EAD returns on equity in the 9% to 12% range by reallocating capital towards operating platforms and reducing exposure to legacy investments [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the transformation in mortgage financing and the potential for significant growth opportunities in the housing finance policy landscape [8] - The management highlighted the importance of speed and efficiency in managing liquidity and execution risk amidst market volatility [40] - The company is adjusting production priorities in response to emerging local trends to meet growth goals at attractive risk-adjusted returns [17] Other Important Information - The company ended the quarter with unrestricted cash of $260 million, up from $245 million at year-end, indicating improved liquidity [25] - The company has a current share repurchase authorization of over $100 million and is actively evaluating opportunities for buybacks [64] - The company has reduced securities repo by 40% since March 31, reflecting a proactive approach to managing its debt profile [27] Q&A Session Summary Question: How did the company hedge its portfolio during recent market volatility? - Management indicated that they constantly turn capital and move risk quickly, utilizing various transactions to manage the portfolio effectively [32] Question: How does the company manage liquidity and execution risk with high volume locks? - Management emphasized the importance of speed and knowing where risk can be cleared, with half of the pipeline already sold or securitized since the end of the quarter [39] Question: Can you clarify the nature of the $1.9 billion bulk purchases? - Management confirmed that these were closed loans categorized as part of forward purchases, indicating a robust addressable market for such transactions [44] Question: What is the outlook for the bridge loans and the associated risks? - Management noted that the $1.6 per share figure pertains specifically to older vintage multifamily bridge loans, with ongoing efforts to optimize financing and pursue resolutions [49] Question: Can you elaborate on the expected EAD ROE for 2025? - Management indicated a target of 9% to 12% for the full year, with expectations for growth driven by increased flow activity and capital redeployment [59]

Financial Data and Key Metrics Changes - The company reported GAAP earnings of $14.4 million or $0.10 per share, compared to a loss of $8.4 million or negative $0.07 per share in the fourth quarter, indicating a significant sequential improvement driven by strong performance across operating platforms [22] - Book value per share ended the quarter at $8.39, a modest decline from $8.46 in the fourth quarter, translating to a positive economic return of 1.3% for the first quarter [23] - Earnings available for distribution (EAD) for the first quarter was $19.8 million or $0.14 per share, up from $18.4 million or $0.13 per share in the fourth quarter [24] Business Line Data and Key Metrics Changes - Sequoia's first quarter performance showed $4 billion in locks, representing a 73% quarter-on-quarter growth, while the net income from Sequoia was $25.8 million, representing a 28% return on equity (ROE) for the quarter, up from 23% in the previous quarter [11][24] - CorVest generated net income of $2.9 million, resulting in a 20% ROE for the quarter, despite a slight decrease in volumes from the fourth quarter [25] - Aspire's early lock volumes were just over $100 million, tracking within the same gain on sale margin range as Sequoia [25] Market Data and Key Metrics Changes - The company noted that while money center banks reported steep mortgage volume declines of 20% to 30%, Sequoia's growth was driven by wallet share growth and the emergence of seasoned bulk portfolios from banks [11] - The company observed a strong demand for the assets created, with trillions of dollars raised by private credit institutions looking to invest in the residential mortgage space [10] Company Strategy and Development Direction - The company is focusing on strategic partnerships with entities on both the supply and demand side of the market as part of its growth initiatives [10] - The company is advocating for a leveling of the playing field between private capital and government-sponsored enterprises (GSEs) to streamline regulatory burdens and enhance market efficiency [9] - The company aims to reallocate nearly 20% of capital towards operating platforms and retained operating investments while reducing exposure to legacy bridge investments [31] Management's Comments on Operating Environment and Future Outlook - Management indicated that the current macro environment has rendered most projections for 2025 obsolete, but the company is navigating market volatility from a position of strength [5][6] - The management expressed optimism about the potential transformation in housing finance policy and the opportunity for private sector financing without government support [9] - The company expects to achieve its full-year target despite potential short-term volume fluctuations due to market conditions [31] Other Important Information - The company ended the quarter with unrestricted cash of $260 million, up from $245 million at year-end, and recourse leverage stood at 2.5 times compared to 2.4 times in the fourth quarter [26] - The company has a current share repurchase authorization of over $100 million and is actively evaluating the potential for share buybacks [63] Q&A Session Summary Question: How did the company hedge its portfolio during the volatility in April? - The company emphasized its ability to turn capital and move risk quickly, which contributed to managing the period effectively across the book [33][34] Question: How does the company manage liquidity and execution risk with significant volume locks? - The company highlighted its efficient risk turnover and the ability to pre-sell or know where partners are lined up to execute, which mitigates liquidity risk [39][40] Question: Can the company provide clarity on the bulk purchases of seasoned loans? - The company confirmed that the bulk purchases are closed loans and emphasized their focus on distribution and hedging parameters [44][46] Question: What is the outlook for the bridge loans and the associated risks? - The company noted that the uptick in delinquency was a result of strategic decisions to pursue alternative resolutions and that they expect to resolve these issues throughout the year [50][52] Question: Can the company elaborate on the expected EAD ROE for 2025? - The company expects a year-end 2025 run rate of 9% to 12% for EAD ROE, driven by reallocating capital towards operating businesses [58][60]