-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QsLctHDTgvIGYqr5+HQMKQMbdmDKYUnRLBp1xS/iYXrNXvjNvPD4XdhpOzi7fS7y B3RbN/H7aVA6W1Sd4aT5kg== 0001144204-10-055699.txt : 20101027 0001144204-10-055699.hdr.sgml : 20101027 20101027123401 ACCESSION NUMBER: 0001144204-10-055699 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20101025 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20101027 DATE AS OF CHANGE: 20101027 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Arlington Asset Investment Corp. CENTRAL INDEX KEY: 0001209028 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 541873198 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-34374 FILM NUMBER: 101144322 BUSINESS ADDRESS: STREET 1: 1001 19TH STREET NORTH CITY: ARLINGTON STATE: VA ZIP: 22209 BUSINESS PHONE: 7033730200 MAIL ADDRESS: STREET 1: 1001 19TH STREET NORTH CITY: ARLINGTON STATE: VA ZIP: 22209 FORMER COMPANY: FORMER CONFORMED NAME: FRIEDMAN BILLINGS RAMSEY GROUP INC DATE OF NAME CHANGE: 20030331 FORMER COMPANY: FORMER CONFORMED NAME: FOREST MERGER CORP DATE OF NAME CHANGE: 20021205 8-K 1 v200086_8k.htm
 

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 8-K
 

 
CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of Report (date of earliest event reported): October 25, 2010
 
ARLINGTON ASSET INVESTMENT CORP.
(Exact name of Registrant as specified in its charter)
 

 
Virginia
 
54-1873198
 
000-50230   
(State or Other Jurisdiction
of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
 
(Commission File Number)
 
1001 Nineteenth Street North
Arlington, VA 22209
(Address of principal executive offices) (Zip code)
 
(877) 370-4413
(Registrant’s telephone number including area code)

N/A
(Former name or former address, if changed from last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


 
 

 
 
Item 2.02.
Results of Operations and Financial Condition.
 
On October 25, 2010, Arlington Asset Investment Corp. issued a press release announcing its financial results for the quarter ended September 30, 2010.  A copy of the press release is attached hereto as Exhibit 99.1.

The information in Item 2.02 of this Current Report on Form 8-K, including the exhibit furnished pursuant to Item 9.01, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities under that Section.  Furthermore, the information in Item 2.02 of this Current Report on Form 8-K, including the exhibit furnished pursuant to Item 9.01 shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933.
 
Item 9.01.
Financial Statements and Exhibits.
 
(d)          Exhibits.
 
Exhibit
No.
 
Description
     
99.1
 
Arlington Asset Investment Corp. Press Release dated October 25, 2010.
 
 
2

 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

 
ARLINGTON ASSET INVESTMENT CORP.
     
Date: October 27, 2010
By:
/s/ Kurt R. Harrington
 
Name:
Kurt R. Harrington
 
Title:
Executive Vice President, Chief Financial Officer and Chief Accounting Officer

 

 
 
EXHIBIT INDEX

Exhibit
No.
 
Description
     
99.1
 
Arlington Asset Investment Corp. Press Release dated October 25, 2010.

 

 

EX-99.1 2 v200086_ex99-1.htm

Contacts:
Media: 877.370.4413 or ir@arlingtonasset.com 
Investors: Kurt Harrington at 877.370.4413 or ir@arlingtonasset.com

Arlington Asset Investment Corp. Reports Third Quarter 2010 Financial Results
Book value increase of $1.81 per share to $25.02 per share
Core Operating Income of $7.7 million or $0.97 per share (1)
Continued positive trend in credit performance

ARLINGTON, VA, October 25, 2010 – Arlington Asset Investment Corp. (NYSE: AI) (the “Company”) today reported core operating income of $7.7 million for the quarter ended September 30, 2010, or $0.97 per share (diluted).  In determining core operating income, a non-GAAP financial measure, the Company has excluded non-recurring costs and the following non-cash expenses: (1) compensation costs associated with stock-based awards, (2) accretion/amortization of mortgage-backed securities (“MBS”) purchase discounts/premiums adjusted for principal repayments in excess of proportionate invested capital, and (3) unrealized mark-to-market adjustments on the trading MBS and interest rate hedge instruments.  A reconciliation of core operating income to GAAP net income appears at the end of this press release.  On a GAAP basis, the Company reported net income of $5.2 million for the quarter ended September 30, 2010, or $0.65 per share (diluted), compared to net income of $8.8 million, or $1.10 per share (diluted) for the quarter ended June 30, 2010 and $42.4 million, or $5.38 per share (diluted) for the quarter ended September 30, 2009.  As of September 30, 2010, the Company’s book value per share was $25.02.

“For the third quarter, Arlington shareholders experienced a $1.81 per share increase in book value after payment of a $0.60 per share dividend.  The dividend plus the increase in book value resulted in a 10.4% return to investors for the quarter and a 34.7% return for the nine months ended September 30, 2010 (46.3% on an annualized basis).  Total 60 day plus delinquencies and loss severities in the Company’s non-agency MBS portfolio continued a positive trend for the third consecutive quarter.  Arlington benefited again this quarter from generally higher non-agency MBS prices associated with increased capital flows to the sector, a continued positive trend in credit statistics and broadened investor awareness of the attractive loss adjusted returns available in the non-agency MBS sector,” said J. Rock Tonkel, Jr., President and Chief Operating Officer.  “We believe the non-agency MBS sector continues to be undervalued and offers the opportunity for attractive risk-adjusted returns on new investments as well as the potential for reflation to prices more in line with other investment alternatives.  For Arlington, the potential for book value growth through reflation is represented by the $194 million discount on the Company’s non-agency MBS.”

Third Quarter Highlights

Net interest income from the Company’s non-agency MBS portfolio was $8.1 million during the third quarter of 2010 representing an annualized yield of 18.2% as compared to $8.1 million during the second quarter of 2010 representing an annualized yield of 18.6%.  Realized gains from sales of non-agency MBS during the third quarter of 2010 were $1.9 million.  Cash expenses declined to $2.4 million for the third quarter of 2010.
 
During the quarter, the Company’s investable capital was deployed primarily in its non-agency MBS portfolio with a market value of $220 million at September 30, 2010.  The following table represents certain statistics of the Company’s non-agency MBS portfolio as of September 30, 2010 (dollars in millions):

 
 

 


   
Senior
Securities
   
Re-REMIC /
Mezzanine
Securities
   
Total Non-Agency MBS
 
                   
3rd Qtr. yield (as a % of amortized cost)
    16.0 %     19.1 %     18.2 %
Average cost (as a % of face value)
    65 %     44 %     48 %
WAC
    5.1 %     5.7 %     5.6 %
                         
Face value
  $ 75     $ 298     $ 373  
Amortized cost
  $ 49     $ 130     $ 179  
Purchase discount
  $ 26     $ 161     $ 187  
Fair market value
  $ 57     $ 163     $ 220  
                         
60+ delinquent
    27.4 %     17.1 %     19.9 %
Credit enhancement
    14.2 %     8.0 %     9.7 %
Severity
    44.7 %     42.0 %     42.7 %
3 month CPR
    15.2       15.6       15.5  
 
Key credit and prepayment measures in the Company’s non-agency MBS portfolio continued a positive trend during the quarter. Total 60 day plus delinquencies in the Company’s non-agency MBS portfolio declined to 19.9% at September 30, 2010 from 20.8% at June 30, 2010 and trailing three month average loss severities on liquidated loans declined to 42.7% at September 30, 2010 from 42.8% at June 30, 2010.

At September 30, 2010, the face value of the Company’s agency MBS portfolio was $163 million with a weighted average coupon of 4.81, a CPR of 12.0, and a yield of 4.8%.  The Company hedged the agency MBS portfolio using Eurodollar futures with a September 15, 2015 maturity and a weighted average rate of 2.34% at September 30, 2010.

The Company’s Board of Directors approved a $0.60 dividend for the third quarter of 2010.  The dividend will be paid on October 29, 2010 to shareholders of record on September 30, 2010.  This represented a 10% annualized dividend yield based on the Class A common stock closing price of $24.10 on October 25, 2010.

During the three and nine months ended September 30, 2010, the Company repurchased 193,824 and 222,846 shares of its Class A common stock pursuant to its share repurchase program.  As of September 30, 2010, 277,154 shares remain available for repurchase under the repurchase program.
 
 
In addition to the financial results reported in accordance with generally accepted accounting principles as consistently applied in the United States (GAAP), the Company has disclosed non-GAAP core operating income for the quarter ended September 30, 2010 in this press release. This non-GAAP measurement is used by management to analyze and assess the operating results and dividends.  Management believes that this non-GAAP measurement assists investors in understanding the impact of these non-core items and non-cash expenses on the performance of the Company and provides additional clarity around the Company's forward earnings capacity and trend.

 
 

 
 
 
A limitation of utilizing this non-GAAP measure is that the GAAP accounting effects of these events do in fact reflect the underlying financial results of Arlington Asset Investment Corp.’s business and these effects should not be ignored in evaluating and analyzing the Company's financial results. Therefore, management believes net income on a GAAP basis and core operating income on a non-GAAP basis should be considered together.
 
The following table presents a reconciliation of the GAAP financial results to non-GAAP measurements discussed above (dollars in thousands):
 
GAAP net income
  $ 5,156  
Adjustments:
       
Non-recurring costs
    (610 )
Stock compensation
    702  
Net unrealized mark-to-market loss on trading MBS and interest rate hedge instruments
    3,036  
Adjusted interest related to purchase discount accretion / premium amortization
    (630 )
Non-GAAP core operating income
  $ 7,654  
Non-GAAP core operating income per share (diluted)
  $ 0.97  
 
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 www.arlingtonasset.com.
 
Statements concerning future performance, returns, 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 default rates, preservation of our net operating loss and net capital loss carry-forwards, impacts of regulatory changes and changes to Fannie Mae and Freddie Mac, availability of opportunities that meet or exceed our risk adjusted return expectations, ability and willingness to make future dividends, ability to generate sufficient cash through retained earnings to satisfy capital needs, changes in mortgage pre-payment speeds, ability to realize book value growth through reflation, 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 and you should read and understand these risks when evaluating any forward-looking statement.
 
Financial data follows

 
 

 

ARLINGTON ASSET INVESTMENT CORP.
                       
CONSOLIDATED STATEMENTS OF OPERATIONS
                       
(Dollars in thousands, except per share data)
 
Quarter Ended
   
Nine Months Ended
 
(Unaudited)
 
September 30
   
September 30
 
   
2010
   
2009
   
2010
   
2009
 
INTEREST INCOME
                       
Interest on investment securities
  $ 10,150     $ 3,717     $ 29,400     $ 7,578  
Dividends and other interest income
    -       2       1       130  
Total interest income
    10,150       3,719       29,401       7,708  
                                 
INTEREST EXPENSE
                               
Interest on short-term debt
    178       114       405       418  
Interest on long-term debt
    146       196       423       2,986  
Total interest expense
    324       310       828       3,404  
                                 
Net interest income
    9,826       3,409       28,573       4,304  
                                 
OTHER INCOME (LOSS), NET
                               
Investment (loss) gain
    (2,089 )     1,588       642       1,632  
Gain on extinguishment of long-term debt
    -       27,982       -       160,435  
Other loss
    (3 )     (4 )     (10 )     (147 )
Total other (loss) income, net
    (2,092 )     29,566       632       161,920  
                                 
Income from continuing operations before other expenses
    7,734       32,975       29,205       166,224  
                                 
OTHER EXPENSES
                               
Compensation and benefits
    2,365       2,736       7,664       13,238  
Professional services
    233       878       993       5,997  
Business development
    19       17       58       7,900  
Occupancy and equipment
    90       94       294       416  
Communications
    44       99       156       247  
Other operating expenses
    387       1,163       1,684       3,859  
Total other expenses
    3,138       4,987       10,849       31,657  
                                 
Income from continuing operations before income taxes
    4,596       27,988       18,356       134,567  
                                 
Income tax (benefit) provision
    (560 )     3,584       (199 )     12,029  
                                 
Income from continuing operations, net of taxes
    5,156       24,404       18,555       122,538  
Income (loss) from discontinued operations, net of taxes
    -       18,033       -       (22,153 )
                                 
Net income
    5,156       42,437       18,555       100,385  
Net loss attributable to noncontrolling interests
    -       -       -       (11,459 )
Net income attributable to Arlington Asset Investment Corp. shareholders
  $ 5,156     $ 42,437     $ 18,555     $ 111,844  
                                 
                                 
EARNINGS PER SHARE - BASIC
                               
Income from continuing operations attributable to Arlington Asset Investment Corp. shareholders
  $ 0.66     $ 3.17     $ 2.39     $ 15.97  
Income (loss) from discontinued operations attributable to Arlington Asset Investment Corp. shareholders
    -       2.34       -       (1.39 )
Net income attributable to Arlington Asset Investment Corp. shareholders
  $ 0.66     $ 5.51     $ 2.39     $ 14.58  
                                 
EARNINGS PER SHARE - DILUTED
                               
Income from continuing operations attributable to Arlington Asset Investment Corp. shareholders
  $ 0.65     $ 3.09     $ 2.35     $ 15.65  
Income (loss) from discontinued operations attributable to Arlington Asset Investment Corp. shareholders
    -       2.29       -       (1.37 )
Net income attributable to Arlington Asset Investment Corp. shareholders
  $ 0.65     $ 5.38     $ 2.35     $ 14.28  
                                 
Weighted average shares outstanding - basic (in thousands)
    7,755       7,705       7,768       7,673  
                                 
Weighted average shares outstanding - diluted (in thousands)
    7,887       7,895       7,904       7,830  
 

 
ARLINGTON ASSET INVESTMENT CORP.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)

   
September 30, 2010
   
December 31, 2009
 
ASSETS
           
             
Cash and cash equivalents
  $ 8,231     $ 10,123  
Receivables
               
Interest
    2,368       2,011  
Sold securities receivable
    58,686       -  
Other
    424       20  
Mortgage-backed securities, at fair value
               
Available-for-sale
    220,403       295,600  
Trading
    163,151       -  
Other investments
    5,857       2,580  
Deposits
    5,929       2,589  
Prepaid expenses and other assets
    572       726  
Total assets
  $ 465,621     $ 313,649  
                 
LIABILITIES AND EQUITY
               
                 
Liabilities:
               
Repurchase agreements
  $ 164,584     $ 126,830  
Purchased securities payable
    64,277       -  
Interest payable
    160       124  
Dividend payable
    4,672       -  
Derivative liability
    4,597       -  
Accounts payable, accrued expenses and other liabilities
    14,544       13,904  
Accrued compensation and benefits
    5,715       5,921  
Long-term debt
    15,948       16,857  
Total liabilities
    274,497       163,636  
                 
Equity:
               
Common stock
    77       80  
Additional paid-in capital
    1,505,823       1,507,394  
Accumulated other comprehensive income
    41,399       7,015  
Accumulated deficit
    (1,356,175 )     (1,364,476 )
Total equity
    191,124       150,013  
                 
Total liabilities and equity
  $ 465,621     $ 313,649  
                 
Book Value per Share
  $ 25.02     $ 19.54  
                 
Shares Outstanding (in thousands)
    7,638       7,679  
 
 
 

 
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-----END PRIVACY-ENHANCED MESSAGE-----