Positive operating cash income Net income of $42.4 million Book
value of $17.84 per share ARLINGTON, Va., Nov. 9
/PRNewswire-FirstCall/ -- Arlington Asset Investment Corp.
(NYSE:AI) (the Company) today reported net income of $42.4 million
for the quarter ended September 30, 2009, or $5.38 per share
(diluted), compared to a net loss of $169.0 million, or $22.34 per
share (diluted) for the quarter ended September 30, 2008. For the
nine months ended September 30, 2009, the Company reported net
income of $111.8 million, or $14.28 per share (diluted), compared
to a net loss of $149.0 million, or $19.71 per share (diluted) for
the nine months ended September 30, 2008. As of September 30, 2009,
book value per share was $17.84. The per share data reflect the
impact of a 1-for-20 reverse stock split that was effective on
October 6, 2009. Third Quarter Highlights Net income of $42.4
million for the third quarter of 2009 includes the following: --
$0.9 million of operating cash income, excluding $2.0 million of
non-cash compensation charges; -- $1.7 million in net investment
gains from mortgage-backed securities (MBS) related activities; --
$4.2 million of net expenses related to income tax provisions and
non-recurring activities; -- $28.0 million of gain from the
extinguishment of Trust Preferred securities; -- $18.0 million in
net gain from the sale and change in fair value of shares of FBR
Capital Markets Corporation (FBR Capital Markets) common stock.
During the quarter, the Company deployed proceeds from its May 20,
2009 sale of FBR Capital Markets stock primarily to grow its
non-agency MBS portfolio. The non-agency MBS portfolio consists
primarily of first tranche securities in private label residential
mortgage securitizations. At September 30, 2009, the book value of
the Company's unlevered non-agency MBS portfolio was $55.7 million
which represented $132.1 million of face value with a weighted
average coupon of 5.7% and an average cost of 42% of par. During
the third quarter of 2009, the unlevered annualized yield on that
portfolio was 20% measured as a percentage of book value. The
Company's net interest income increased to $3.4 million during the
quarter primarily as a result of growth in our non-agency MBS
portfolio. In addition, the Company's ongoing overhead expenses
were reduced by $1 million compared to the second quarter of 2009.
During the quarter, the levered agency MBS portfolio of $118.1
million was structured with the intent to significantly reduce bond
price risk. Subsequent to September 30, 2009, additional capital
was deployed to the Company's non-agency MBS portfolio, including a
portion of the proceeds from the Company's October 28, 2009 sale of
FBR Capital Markets stock. At November 6, 2009, the book value of
the Company's non-agency portfolio was approximately $99 million
which represented $211 million of face value with a weighted
average coupon of 5.7%, an average cost basis of 47% of par, and an
expected annualized yield of approximately 20% measured as a
percentage of book value. Corporate Direction On October 28, 2009,
the Company announced the closing on the sale of all of its
remaining 14.8 million shares of FBR Capital Markets common stock
at $6.00 per share in an underwritten public offering. Proceeds to
the Company, after the underwriting discount but before expenses,
were $84.1 million. The net price per share after the underwriting
discount to the Company was $5.70, which was less than the
Company's carrying value of $5.93 per share at September 30, 2009.
As a result, in the fourth quarter of 2009, the Company expects to
record a pre-tax book loss of $3.4 million related to the sale of
FBR Capital Markets common stock. With the sale of FBR Capital
Markets stock and other actions taken to strengthen the Company's
balance sheet and reduce costs, the Company is positioned to focus
all of its capital and resources on its core principal investing
strategy and expects to benefit from: -- Approximately $165 million
of investable capital; -- Low balance sheet leverage of 0.5x total
assets as of September 30, 2009; -- Unlevered non-agency MBS
portfolio of $211 million in face value at November 6, 2009, with a
cost basis of 47% of par, and expected annualized yield of
approximately 20%; -- Strong liquidity position with $62 million in
cash available for future investment at November 6, 2009; and --
Reduction of $1 million in general overhead expenses compared to
the second quarter of 2009 with potential for additional reductions
in future quarters. The Company intends to expand investments that
generate attractive current cash returns and have potential for
capital appreciation, including primarily the growth of its
existing non-agency mortgage securities portfolio. The deployment
of capital into investments that offer current income as well as
capital appreciation potential positions the Company to utilize its
net operating loss carry-forwards and net capital loss
carry-forwards, which are currently in excess of $800 million. "We
have completed the major steps to strengthen and monetize the
Company's balance sheet, achieved operational independence, reduced
overhead costs and deployed liquidity from recent asset sales
primarily in non-agency MBS with attractive cash risk adjusted
returns as well as upside potential," said J. Rock Tonkel, Jr.,
President and Chief Operating Officer. "We look forward to
realizing the Company's earnings potential for shareholders as we
achieve full deployment of our capital along with continued
reductions in one time as well as ongoing fixed expenses. We
believe our capital is well protected with substantial liquidity
and low leverage. Using a selective approach, we continue to
capitalize on attractive investment opportunities which we expect
to allow us to generate attractive cash returns on invested
capital, utilize our tax benefits and offer an opportunity for
growth in book value per share going forward." About the Company
Arlington Asset Investment Corp. (NYSE:AI) is a principal
investment firm that invests primarily in mortgage-related assets.
The Company is headquartered in the Washington, D.C. metropolitan
area. For more information, please visit
http://www.arlingtonasset.com/ Statements concerning future
performance, plans and steps to position the Company to realize
value, and any other guidance on present or future periods,
constitute forward-looking statements that are subject to a number
of factors, risks and uncertainties that might cause actual results
to differ materially from stated expectations or current
circumstances. These factors include, but are not limited to,
changes in interest rates, increased costs of borrowing, decreased
interest spreads, changes in mortgage pre-payment speeds, risks
associated with merchant banking investments, the realization of
gains and losses on principal investments, available technologies,
competition for business and personnel, and general economic,
political, regulatory and market conditions. These and other risks
are described in the Company's Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q that are available from the Company
and from the SEC. Financial data follows ARLINGTON ASSET INVESTMENT
CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in
thousands, except per share amounts) Quarter Ended (Unaudited)
September 30, ------------------- 2009 2008 -------- --------
REVENUES: Capital markets $- $50,694 Principal investment: Interest
3,719 23,173 Net investment income (loss) 19,737 (153,110)
Dividends - 158 Other - 739 -------- -------- Total revenues (loss)
23,456 (78,346) Interest expense 310 25,387 -------- --------
Revenues (loss), net of interest expense 23,146 (103,733) --------
-------- NON-INTEREST EXPENSES: Compensation and benefits 2,735
61,111 Professional services 878 10,442 Business development 16
5,262 Clearing and brokerage fees - 3,834 Occupancy and equipment
94 8,282 Communications 100 5,773 Other operating expenses 1,163
6,668 -------- -------- Total non-interest expenses 4,986 101,372
-------- -------- Operating income (loss) 18,160 (205,105) --------
-------- OTHER INCOME (LOSS): Loss on subsidiary share transactions
(116) - Gain on extinguishment of long-term debt 27,982 4,078 Other
loss (4) (4) -------- -------- Income (loss) before income taxes
46,022 (201,031) Income tax provision (benefit) 3,585 (18,123)
-------- -------- Net income (loss) 42,437 (182,908) Less: Net loss
attributable to the noncontrolling interest of consolidated
subsidiary - (13,886) -------- -------- Net income (loss)
attributable to Arlington Asset shareholders $42,437 $(169,022)
======== ========= Basic earnings (loss) per share attributable to
Arlington Asset (1) $5.51 $(22.34) ======== ========= Diluted
earnings (loss) per share attributable to Arlington Asset (1) $5.38
$(22.34) ======== ========= Weighted average shares - basic (in
thousands) (1) 7,705 7,565 ======== ========= Weighted average
shares - diluted (in thousands) (1) 7,895 7,565 ======== =========
(1) Reflects the impact of 1-for-20 reverse stock split effective
October 6, 2009. ARLINGTON ASSET INVESTMENT CORP. CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except
per share amounts) Nine Months Ended (Unaudited) September 30,
------------------- 2009 2008 -------- -------- REVENUES: Capital
markets $81,075 $207,766 Principal investment: Interest 7,600
70,867 Net investment income (loss) 15,754 (173,311) Dividends 108
497 Other - 3,095 -------- -------- Total revenues 104,537 108,914
Interest expense 3,656 70,895 -------- -------- Revenues, net of
interest expense 100,881 38,019 -------- -------- NON-INTEREST
EXPENSES: Compensation and benefits 73,466 192,035 Professional
services 12,871 33,401 Business development 13,139 24,368 Clearing
and brokerage fees 5,950 10,857 Occupancy and equipment 13,573
26,051 Communications 8,964 18,046 Other operating expenses 10,099
19,107 -------- -------- Total non-interest expenses 138,062
323,865 -------- -------- Operating loss (37,181) (285,846)
-------- -------- OTHER INCOME (LOSS): Loss on subsidiary share
transactions (10,028) (189) Gain on extinguishment of long-term
debt 160,435 4,078 Other (loss) income (11) 73,030 --------
-------- Income (loss) before income taxes 113,215 (208,927) Income
tax provision (benefit) 12,830 (28,903) -------- -------- Net
income (loss) 100,385 (180,024) Less: Net loss attributable to the
noncontrolling interest of consolidated subsidiary (11,459)
(31,053) -------- -------- Net income (loss) attributable to
Arlington Asset shareholders $111,844 $(148,971) ======== ========
Basic earnings (loss) per share attributable to Arlington Asset (1)
$14.58 $(19.71) ======== ======== Diluted earnings (loss) per share
attributable to Arlington Asset (1) $14.28 $(19.71) ========
======== Weighted average shares - basic (in thousands) (1) 7,673
7,557 ======== ======== Weighted average shares - diluted (in
thousands) (1) 7,830 7,557 ======== ======== (1) Reflects the
impact of 1-for-20 reverse stock split effective October 6, 2009.
ARLINGTON ASSET INVESTMENT CORP. CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands, except per share amounts)
(Unaudited) ASSETS 30-Sep-09 31-Dec-08 ---------- ---------- Cash
and cash equivalents $13,299 $254,653 Receivables: Interest 1,111
1,378 Other 60 32,571 Investments: Mortgage-backed securities, at
fair value 173,895 594,294 U.S. Treasury bonds, at fair value -
550,000 Equity investments, at fair value 87,497 - Trading
securities, at fair value - 17,954 Long-term and other investments
2,563 54,976 Derivative assets, at fair value - 264 Intangible
assets, net - 8,943 Furniture, equipment, software and leasehold
improvements, net 114 24,442 Prepaid expenses and other assets
4,786 20,816 ---------- ---------- Total assets $283,325 $1,560,291
========== ========== LIABILITIES AND EQUITY Liabilities:
Repurchase agreements $100,000 $1,063,040 Trading account
securities sold but not yet purchased, at fair value - 8,325
Derivative liabilities, at fair value - 56 Interest payable 129
2,064 Accrued compensation and benefits 7,360 47,259 Due to
clearing broker - 3,009 Accounts payable, accrued expenses and
other liabilities 22,041 38,925 Long-term debt 16,816 254,357
---------- ---------- Total liabilities 146,346 1,417,035
---------- ---------- Equity: Common stock, 7,920 and 7,961 shares
(1) 80 80 Additional paid-in capital (1) 1,505,787 1,494,642
Accumulated other comprehensive income (loss) 289 (118) Accumulated
deficit (1,369,177) (1,481,021) ---------- ---------- Total
Arlington Asset shareholders' equity 136,979 13,583 ----------
---------- Noncontrolling interest - 129,673 ---------- ----------
Total equity 136,979 143,256 ---------- ---------- Total
liabilities and equity $283,325 $1,560,291 ========== ==========
Book value per share - Arlington Asset shareholder's equity (1)
$17.84 $1.80 Book value per share - total equity (1) $17.84 $18.95
Shares outstanding (in thousands) (1) 7,679 7,561 (1) Reflects the
impact of 1-for-20 reverse stock split effective October 6, 2009.
DATASOURCE: Arlington Asset Investment Corp. CONTACT: Media,
+1-877-370-4413, or ; Investors: Kurt Harrington, +1-877-370-4413,
or Web Site: http://www.arlingtonasset.com/
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