8-K

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): December 2, 2009

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)

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 7.01 Regulation FD Disclosure.

On December 2, 2009, Arlington Asset Investment Corp., a Virginia corporation (the “Company”), will participate at the 2009 FBR Capital Markets Fall Investor Conference. A copy of the slide presentation to be used at this presentation is attached as Exhibit 99.1.

The information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 furnished pursuant to Item 9.01, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section. Furthermore, the information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 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, as amended.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit Number	Description
99.1	Investor presentation to be made by Arlington Asset Investment Corp. at the 2009 FBR Capital Markets Fall Investor Conference on December 2, 2009.

2

SIGNATURE

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

	ARLINGTON ASSET INVESTMENT CORP.
Date: December 2, 2009	By:	/s/    KURT R. HARRINGTON
	Name:	Kurt R. Harrington
	Title:	Executive Vice President, Chief Financial Officer and Chief Accounting Officer

3

EXHIBIT INDEX

Exhibit Number	Description
99.1	Investor presentation to be made by Arlington Asset Investment Corp. at the 2009 FBR Capital Markets Fall Investor Conference on December 2, 2009.

EX-99.1

FBR Capital Markets Investor Conference Presentation

December 2, 2009

Exhibit 99.1

Information Related to Forward-Looking Statements

This

presentation

contains

“forward-looking

statements”

within

the

meaning

of

the

Private

Securities

Litigation

Reform

Act

of 1995.  These include statements regarding future results or expectations.  Forward-looking statements can be

identified

by

forward-looking

language,

including

words

such

as

“believes,”

“anticipates,”

“expects,”

“estimates,”

“intends,”

“may,”

“plans,”

“projects,”

“potential,”

“prospective,”

“will”

and similar expressions, or the negative of these

words. Such forward-looking statements are based on facts and conditions as they exist at the time such statements

are made.  Forward-looking statements are also based on predictions as to future facts and conditions, the accurate

prediction of which may be difficult and involve the assessment of events beyond our control.  Forward-looking

statements are further based on various operating assumptions. Caution must be exercised in relying on forward-

looking statements.  Due to known and unknown risks, actual results may differ materially from expectations or

projections.

You should carefully consider these risks when you make a decision concerning an investment in our common stock,

along with the following factors, among others, that may cause our actual results to differ materially from those

described in any forward-looking statements: risks and uncertainties relating to the recent global economic downturn;

changes in economic and market conditions; changes in interest rates; changes in anticipated earnings; our ability to

maintain adequate liquidity; 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; our ability to comply with the continued listing standards of the NYSE; our ability to maintain our

exemption

from

registration

as

an

investment

company

pursuant

to

the

Investment

Company

Act

of

1940;

our

ability

to

generate earnings or gains and otherwise realize taxable benefits associated with net operating loss carry-forwards

and net capital loss carry-forwards; our ability to realize continued cost savings; our ability to pay future dividends;

available technologies; competition for business and personnel; changes in, and our ability to remain in compliance

with, law, regulations or government policies affecting our business; and the factors described in the sections entitled

“Risk Factors”

in our annual report on Form 10-K for the year ended December 31, 2008 and our other public filings

with the SEC.  You should not place undue reliance on these forward-looking statements, which apply only as of the

date

of

this

presentation.

We

undertake

no

obligation

to

update

or

revise

any

forward-looking

statement,

whether

written or oral, relating to matters discussed in this presentation, except as may be required by applicable securities

laws.

Arlington Asset Overview

FOCUSED STRATEGY

-

Internally

managed

investment

firm

with

a

primary

focus

today

in

Non-Agency

residential

mortgage-

backed

securities (“RMBS”)

-

Straightforward C-Corp structure

SOUND AND TRANSPARENT BALANCE SHEET

-

Core investments funded with permanent capital

-

Low leverage, high liquidity

ATTRACTIVE POTENTIAL EARNINGS POWER DRIVEN BY CORE NON-AGENCY MBS STRATEGY:

-

Attractive expected risk/return vs. other alternatives (~20% unlevered returns)

-

Current cash income with potential appreciation (~50% discount to face value)

-

Expect to utilize tax benefits

-

Opportunity to monetize appreciated capital over time and re-invest

$800 MILLION OF TAX BENEFITS (OFF BALANCE SHEET)

SIGNIFICANT UPSIDE POTENTIAL

-

Cash earnings

-

Non-Agency RMBS portfolio

-

Net operating loss carry-forwards (“NOLs”) and net capital loss carry-forwards (“NCLs”)

Non-Agency RMBS Investment Opportunity

Market dislocation has provided an exceptional investment opportunity in $2 trillion Non-Agency market

-

Greater than $1 trillion in Prime and Alt-A RMBS

Opportunity to benefit from unprecedented Government policy to improve liquidity in the mortgage market

Ability to invest in collateral-backed assets at significant discount to par value

Creates potential unlevered current cash returns in the high teens to low 20’s (coupon yield +

prepayment accretion)

Under

severe

modeling

assumptions

we

expect

to

receive

more

than

our

investment

through

prepayments or reflation

Reflation

potential equals gap between cost and face value and will grow as portfolio grows

-

Approximately $112 million at 11/6/09 compared to market cap of $102 million

$800 million in NOLs

and NCLs

to shelter future earnings and capital gains

Results in potential book value growth and favorable tax treatment for potential dividends

Arlington Asset Highlights (NYSE:  AI)

Position

Eric F. Billings

Chairman & CEO

J. Rock Tonkel, Jr.

Chief Operating Officer

Kurt R. Harrington

Chief Financial Officer

Brian J. Bowers

Chief Investment Officer

Arlington Asset Management Team

(1) Comparable Companies (tickers: RWT & CIM) have a Price to Book = 123%

(2) As of 9/30/09

(3) As of 11/6/09

(4) As of 11/30/09

Share Price

(4)

$13.25

Cash

(3)

62

$        

Shares O/S

(2)

7.7

Non-Agency MBS

(3)

99

$        

Market Cap

(4)

$102

Total Assets

(2)

283

$      

BV per share

(2)

$17.84

Long Term Debt

(2)

17

$        

Price to Book

(1)

74%

Shareholders' Equity

(2)

137

$      

Share Data

($ in millions, except per share data)

Key Financial Data

($ in millions)

Strategic Decision to Focus as a Principal Investment Firm

Reduce/Sell Trust Preferred Securities (TruPS)

-

Redeem/Sell

$318

million

TruPS

at

Discount

-

Reduce $22 million Annual Interest Expense

-

Eliminate covenants

Reduce Repo Debt

Improve Balance Sheet Liquidity

Preserve and Optimize $800 million Tax Benefits

Reduce G&A Expenses

Monetize 56% FBCM Ownership Stake…

…And Re-Invest in Ongoing Business

Redeemed $303 million at 34% vs. par ($15 million outstanding)

$201 million Gain

$450K Annual Interest Expense (3% Cost of Funds)

No Covenants Remaining

$0 Un-Hedged Repo Debt

$62 million Cash at 11/6/09

Senior Alt-A Non-Agency Market Volume ~ $500 million/day

$185

million

Utilized

to

Offset

TruPS

Gains

(~$65

million

B/V

pickup)

Converted to C-Corp Structure

70%+ Overhead Expense Savings vs. 4Q08

Transitioned to Independent Operating Systems

Received proceeds of $165 million

$100+ million Invested in Non-Agency RMBS Portfolio with Current

Unlevered Cash Returns of Approximately 20%

EMBARKED ON PLAN

TO

RESULT

Arlington Asset Non-Agency Portfolio Summary

(1)

Prime and Alt A RMBS not Guaranteed by

FN/FH/GN

Average Loan Size:

$581K

# of Loans:

16,400

Original LTV:

71%

Wgt

Avg

Loan Origination Date:

July 2006

Original FICO:

726

Coupon:

5.7%

Purchase Price:

46%

Credit Enhancement:

11%

60+ Delinquency:

21%

Wgt

Avg

Loan Age:

40 months

3mo CPR:

17%

3mo Severity:

46%

Cumulative Loss to Date:

2.3%

(1) As of 11/15/09

Housing Market: 2006 to Today

S&P/Case Schiller Home Price Index

125

135

145

155

165

175

185

195

205

215

225

S&P 500

600

700

800

900

1000

1100

1200

1300

1400

1500

1600

Down 30%

Down 56%

*Source: Bloomberg

Mortgage Deliquency Rate (60+ Days)

0

5

10

15

20

25

30

US Unemployment Rate

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

Non-Agency RMBS Price History Since Year-End 2007

*Source: Amherst Securities

30

40

50

60

70

80

90

100

RETURN ON INVESTMENT EXAMPLES

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Invested Capital

Cash Accretion

Downside Protection with Upside Potential

Frequency         25%

Severity

46%

Return vs

Par  100%

Frequency         50%

Severity

60%

Return vs

Par    80%

Frequency         80%

Severity

75%

Return vs

Par    46%

Coupon Yield on

Invested Capital:

12.5%

Coupon Yield on

Invested Capital:

12.5%

Coupon Yield on

Invested Capital:

12.5%

Cash Accretion:

119%

Cash Accretion:

75%

Non-Agency RMBS Investment Opportunity

(1) Assumes total investment mix of 70% Senior and 30% Mezzanine RMBS.  As a percentage

of face value, this assumption implies a mix of 55% Senior and 45% Mezzanine RMBS.

Current Face

100

$

Dollar Cost

46

$  

Coupon

5.8%

Coupon Yield

12.5%

CPR on Senior Bonds

15.0

Prepayment

8.3

$ 

Return of Principal

5.0

$ 

Accretion

3.3

$ 

Accretion in BPS

7.1%

Unlevered Return

19.6%

ILLUSTRATIVE RETURN MODEL

(1)

Potential Cash Earnings Power

Annualized

3Q

2009

Operating

Cash

Income

of

$3.6

million

or

$.47

per

share

-

7.7 million shares outstanding

$43 million Increase in Non-Agency RMBS Portfolio Book Value from 9/30/09 to 11/6/09

$50+ million Available for Investment at 11/6/09

Overhead Expense Reductions

2% Expected Alternative Minimum Tax Rate

Book Value Per Share with Potential Upside Opportunities

Reflation of Non-Agency RMBS Investment Portfolio

Net Operating Loss Carry-forwards and Capital Loss Carry-

forwards

Trust Preferred Securities

$62 million of cash

$99 million Non-Agency Capital Invested with $211

million of face value

Status at 11/6/09

Potential Upside Opportunities

9/30/2009

Book

Value

Cash and cash equivalents

13

$        

Mortgage Backed Securities

Agency, net of $100 repo

18

Non-Agency Private Label

56

Total

87

$        

Investment in FBR Capital Markets

88

Other Investments

3

Total cash, securities and investments

178

$      

Long-term debt

(17)

Other assets/liabilities, net

(24)

Shareholders' equity

137

$      

Book value per share

17.84

$   

Allocation of Book Value

($ in millions, except per share data)

Conclusion

FOCUSED STRATEGY

-

Internally

managed

investment

firm

with

a

primary

focus

today

in

Non-Agency

residential

mortgage-

backed

securities (“RMBS”)

-

Straightforward C-Corp structure

SOUND AND TRANSPARENT BALANCE SHEET

-

Core investments funded with permanent capital

-

Low leverage, high liquidity

ATTRACTIVE POTENTIAL EARNINGS POWER DRIVEN BY CORE NON-AGENCY MBS STRATEGY:

-

Attractive expected risk/return vs. other alternatives (~20% unlevered returns)

-

Current cash income with potential appreciation (~50% discount to face value)

-

Expect to utilize tax benefits

-

Opportunity to monetize appreciated capital over time and re-invest

$800 MILLION OF TAX BENEFITS (OFF BALANCE SHEET)

SIGNIFICANT UPSIDE POTENTIAL

-

Cash earnings

-

Non-Agency RMBS portfolio

-

Net operating loss carry-forwards (“NOLs”) and net capital loss carry-forwards (“NCLs”)