MCLEAN,
Va., March 31, 2023 /PRNewswire/ -- Arlington
Asset Investment Corp. (NYSE: AAIC) (the "Company," "Arlington," "we," "us" or "our") today
reported financial results for the quarter and full year ended
December 31, 2022.
Fourth Quarter 2022 Financial Highlights
- $6.59 per common share of book
value
-
- 2.2% increase from prior quarter
- $6.48 per common share of book
value as of February 28,
2023(a)
- $0.13 per diluted common share of
GAAP net income available to common shareholders
- $0.09 per diluted common share of
non-GAAP earnings available for distribution
- $0.04 per common share of book
value accretion from the repurchase of capital stock including 1.3%
of the outstanding shares of common stock as of September 30, 2022
- 0.3 to 1 "at risk" leverage ratio as of December 31, 2022
-
- decrease from 1.2 to 1 as of September
30, 2022
- Completed previously announced sale of remaining portfolio of
single-family residential ("SFR") properties that resulted in a
$0.02 per common share increase to
book value
Full Year 2022 Financial Highlights
- $0.09 per diluted common share of
GAAP net income available to common shareholders
- $0.29 per diluted common share of
non-GAAP earnings available for distribution
- 7.0% increase in book value per common share
- $0.30 per common share of book
value accretion from the repurchase of capital stock including 9.2%
of the outstanding shares of common stock
Fourth Quarter Investment Portfolio
As of December 31, 2022, the
Company's investment portfolio capital allocation was as follows
(dollars in thousands):
|
|
December 31,
2022
|
|
|
|
Assets
|
|
|
Invested Capital
Allocation (1)
|
|
|
Invested Capital
Allocation (%)
|
|
|
Leverage
(2)
|
|
MSR financing
receivables
|
|
$
|
180,365
|
|
|
$
|
180,365
|
|
|
|
63
|
%
|
|
|
—
|
|
Credit investments
(3)
|
|
|
167,519
|
|
|
|
58,485
|
|
|
|
21
|
%
|
|
|
1.9
|
|
Agency MBS
(4)
|
|
|
43,722
|
|
|
|
45,566
|
|
|
|
16
|
%
|
|
|
—
|
|
Total invested
capital
|
|
$
|
391,606
|
|
|
|
284,416
|
|
|
|
100
|
%
|
|
|
|
Cash and other
corporate capital, net
|
|
|
|
|
|
19,329
|
|
|
|
|
|
|
|
Total investable
capital
|
|
|
|
|
$
|
303,745
|
|
|
|
|
|
|
0.3
|
|
(1)
|
Our investable capital
is calculated as the sum of our shareholders' equity capital and
long-term unsecured debt.
|
(2)
|
Our leverage is
measured as the ratio of the sum of our repurchase agreement
financing, net payable or receivable for unsettled securities, net
contractual forward purchase or sale price of our TBA commitments
and leverage within our MSR financing receivables less our cash and
cash equivalents compared to our investable capital.
|
(3)
|
Includes our net
investment of $28,904 in VIEs with gross assets and liabilities of
$198,511 and $169,607, respectively, that is consolidated for GAAP
financial reporting purposes.
|
(4)
|
Agency mortgage-backed
securities ("MBS") assets include the fair value of the agency MBS
which underlie our TBA forward purchase and sale commitments.
In accordance with GAAP, our TBA forward commitments are reflected
on the consolidated balance sheets as derivative assets and
liabilities at fair value in the financial statement line items
"other assets" and "other liabilities". As of December 31,
2022, the fair value of the underlying agency MBS that underlie our
net short position in TBA commitments had a fair value of
$(399,818) with a net carrying value of $5,630.
|
MSR Related Investments
The Company is party to agreements with a licensed, U.S.
government sponsored enterprise ("GSE") approved residential
mortgage loan servicer that enable the Company to garner the
economic return of an investment in a mortgage servicing right
("MSR") purchased by the mortgage servicing counterparty. The
arrangement allows the Company to participate in the economic
benefits of investing in an MSR without holding the requisite
licenses to purchase or hold MSRs directly. Under the terms
of the arrangement, the Company provides capital to the mortgage
servicing counterparty to purchase MSRs directly and the Company,
in turn, receives all the economic benefits of the MSRs less a fee
payable to the counterparty. At the Company's request, the mortgage
servicing counterparty may utilize leverage on the MSRs to which
the Company's MSR financing receivables are referenced to finance
the purchase of additional MSRs to increase potential returns to
the Company. These transactions are accounted for as
financing receivables in the Company's consolidated financial
statements.
The Company's MSR financing receivable investments as of
December 31, 2022 are summarized in
the tables below (dollars in thousands):
Amortized Cost Basis
(1)
|
|
|
Unrealized
Gain
|
|
|
Fair
Value
|
|
$
|
134,469
|
|
|
$
|
45,896
|
|
|
$
|
180,365
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents capital
investments plus accretion of interest income net of cash
distributions.
|
MSR Financing
Receivable Underlying Reference Amounts:
|
|
|
|
|
|
|
|
MSRs
|
|
|
Financing
|
|
|
Advances
Receivable
|
|
|
Cash and Other
Net
Receivables
|
|
|
Counterparty
Incentive
Fee
Accrual
|
|
|
MSR Financing
Receivables
|
|
|
Implicit
Leverage
|
|
$
|
184,107
|
|
|
$
|
(7,863)
|
|
|
$
|
6,046
|
|
|
$
|
10,643
|
|
|
$
|
(12,568)
|
|
|
$
|
180,365
|
|
|
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying Reference
MSRs:
|
|
Holder of
Loans
|
|
Unpaid
Principal
Balance
|
|
|
Weighted-
Average
Note Rate
|
|
|
Weighted-
Average
Servicing
Fee
|
|
|
Weighted-
Average
Loan Age
|
|
Price
|
|
|
Multiple
(1)
|
|
|
Fair
Value
|
|
Fannie Mae
|
|
$
|
12,547,523
|
|
|
|
3.09
|
%
|
|
|
0.25
|
%
|
|
24 months
|
|
|
1.35
|
%
|
|
|
5.41
|
|
|
$
|
169,839
|
|
Freddie Mac
|
|
|
1,023,446
|
|
|
|
3.72
|
%
|
|
|
0.25
|
%
|
|
22 months
|
|
|
1.39
|
%
|
|
|
5.58
|
|
|
|
14,268
|
|
Total/weighted-average
|
|
$
|
13,570,969
|
|
|
|
3.14
|
%
|
|
|
0.25
|
%
|
|
24 months
|
|
|
1.36
|
%
|
|
|
5.42
|
|
|
$
|
184,107
|
|
|
|
(1)
|
Calculated as the
underlying MSR price divided by the weighted-average servicing
fee.
|
As of December 31, 2022, the
mortgage servicing counterparty had drawn $7.9 million of financing under its credit
facility collateralized by the MSRs to which the Company's MSR
financing receivables are referenced, resulting in an implicit
leverage ratio of less than 0.1 to 1. The weighted average
yield on the Company's MSR financing receivables was 14.98% for the
fourth quarter of 2022 compared to 15.95% for the third quarter of
2022, and the actual weighted-average constant prepayment rate
("CPR") for the MSRs underlying the Company's MSR financing
receivables was 4.26% for the fourth quarter of 2022 compared to
6.48% for the third quarter of 2022. As of December 31, 2022, the valuation multiple of the
MSRs underlying the Company's MSR financing receivables, calculated
as the underlying MSR price divided by the weighted-average
servicing fee, was 5.42. As of February 28, 2023, the valuation multiple of the
MSRs underlying the Company's MSR financing receivables was
5.36.(a)
Credit Investments
The Company's credit investments generally include mortgage
loans secured by residential or commercial real property or MBS
collateralized by residential or commercial mortgage loans or
residential solar panel loans ("non-agency" MBS or ABS). As
of December 31, 2022, the Company's
credit investment portfolio at fair value was comprised of the
following (dollars in thousands):
|
|
Market
Price
|
|
|
Fair Value
(1)
|
|
|
Financing
|
|
|
Invested Capital
(2)
|
|
|
Leverage
|
|
Commercial
MBS
|
|
$
|
98.93
|
|
|
$
|
98,933
|
|
|
$
|
88,953
|
|
|
$
|
10,188
|
|
|
|
8.7
|
|
Commercial mortgage
loan
|
|
|
100.00
|
|
|
|
29,264
|
|
|
|
20,485
|
|
|
|
8,931
|
|
|
|
2.3
|
|
Residential MBS -
interest-only (3)
|
|
|
10.76
|
|
|
|
24,036
|
|
|
|
—
|
|
|
|
24,036
|
|
|
|
—
|
|
Residential MBS
(3)
|
|
|
64.66
|
|
|
|
1,048
|
|
|
|
—
|
|
|
|
1,048
|
|
|
|
—
|
|
Business purpose
residential MBS (4)
|
|
|
91.75
|
|
|
|
7,244
|
|
|
|
—
|
|
|
|
7,244
|
|
|
|
—
|
|
Corporate asset-backed
loan
|
|
|
100.00
|
|
|
|
4,914
|
|
|
|
—
|
|
|
|
4,958
|
|
|
|
—
|
|
Solar ABS
|
|
|
41.10
|
|
|
|
2,080
|
|
|
|
—
|
|
|
|
2,080
|
|
|
|
—
|
|
Total/weighted-average
|
|
|
|
|
$
|
167,519
|
|
|
$
|
109,438
|
|
|
$
|
58,485
|
|
|
|
1.9
|
|
(1)
|
For non-commercial
credit investments in securities, includes contractual accrued
interest receivable.
|
(2)
|
Invested capital
includes investment accrued interest receivable and financing
accrued interest payable.
|
(3)
|
Residential MBS –
interest-only and residential MBS, in combination, reflect our net
investment at fair value of $25,084 in a VIE with gross assets and
liabilities of $194,490 and $169,406, respectively, that is
consolidated for GAAP financial reporting purposes.
|
(4)
|
Includes our net
investment of $3,820 in a VIE with gross assets and liabilities of
$4,021 and $201, respectively, that is consolidated for GAAP
financial reporting purposes.
|
As of December 31, 2022, the
Company had $89.0 million in
repurchase agreements outstanding with a weighted average rate of
5.02% and remaining weighted average maturity of 20 days secured by
$98.9 million of non-agency MBS at
fair value. As of December 31,
2022, the Company had a $20.5
million repurchase agreement outstanding with a rate of
6.84% and remaining maturity of 235 days secured by a $29.3 million commercial mortgage loan at fair
value.
Agency MBS
The Company's agency MBS consist of residential mortgage
pass-through certificates for which the principal and interest
payments are guaranteed by a government sponsored enterprise, such
as the Federal National Mortgage Association ("Fannie Mae") or the
Federal Home Loan Mortgage Corporation ("Freddie Mac"). As of
December 31, 2022, the Company's
agency MBS investment portfolio totaled $43.7 million at fair value comprised of
$443.5 million of specified agency
MBS and $(399.8) million of net short
to-be-announced ("TBA") agency MBS. As of December 31, 2022, the Company's specified agency
MBS investment portfolio was comprised of the following (dollars in
thousands):
|
|
Unpaid
Principal
Balance
|
|
|
Net
Unamortized
Purchase
Premiums
(Discounts)
|
|
|
Amortized
Cost Basis
|
|
|
Net
Unrealized
Gain (Loss)
|
|
|
Fair
Value
|
|
|
Market
Price
|
|
|
Coupon
|
|
|
Weighted
Average
Expected
Remaining
Life
|
|
Fannie Mae
|
|
$
|
253,120
|
|
|
$
|
(3,813)
|
|
|
$
|
249,307
|
|
|
$
|
(10,294)
|
|
|
$
|
239,013
|
|
|
$
|
94.43
|
|
|
|
4.09
|
%
|
|
|
9.2
|
|
Freddie Mac
|
|
|
217,206
|
|
|
|
(1,451)
|
|
|
|
215,755
|
|
|
|
(11,228)
|
|
|
|
204,527
|
|
|
|
94.16
|
|
|
|
4.06
|
%
|
|
|
9.6
|
|
Total/weighted-average
|
|
$
|
470,326
|
|
|
$
|
(5,264)
|
|
|
$
|
465,062
|
|
|
$
|
(21,522)
|
|
|
$
|
443,540
|
|
|
$
|
94.30
|
|
|
|
4.07
|
%
|
|
|
9.4
|
|
The Company's weighted average yield on its specified agency MBS
was 4.16% for the fourth quarter of 2022 compared to 3.98% for the
third quarter of 2022, and the actual weighted-average CPR for the
Company's specified agency MBS was 4.07% for the fourth quarter of
2022 compared to 6.36% for the third quarter of 2022.
As of December 31, 2022, the
Company's net short TBA agency MBS investment portfolio was
comprised of the following (dollars in thousands):
|
|
Notional Amount:
Long (Short)
Position (1)
|
|
|
Implied
Cost Basis (2)
|
|
|
Implied
Fair Value (3)
|
|
|
Net Carrying
Amount (4)
|
|
3.0% 30-year MBS sale
commitments
|
|
$
|
(70,000
|
)
|
|
$
|
(62,828
|
)
|
|
$
|
(61,516
|
)
|
|
$
|
1,312
|
|
4.0% 30-year MBS sale
commitments
|
|
|
(150,000
|
)
|
|
|
(142,255
|
)
|
|
|
(140,830
|
)
|
|
|
1,425
|
|
4.5% 30-year MBS sale
commitments
|
|
|
(205,000
|
)
|
|
|
(200,365
|
)
|
|
|
(197,472
|
)
|
|
|
2,893
|
|
Total net long (short)
agency TBA positions
|
|
$
|
(425,000
|
)
|
|
$
|
(405,448
|
)
|
|
$
|
(399,818
|
)
|
|
$
|
5,630
|
|
(1)
|
Notional amount
represents the unpaid principal balance of the underlying agency
MBS.
|
(2)
|
Implied cost basis
represents the contractual forward price for the underlying agency
MBS.
|
(3)
|
Implied fair value
represents the current fair value of the underlying agency
MBS.
|
(4)
|
Net carrying amount
represents the difference between the implied cost basis and the
implied fair value of the underlying agency MBS. This amount
is reflected on the Company's consolidated balance sheets as a
component of "other assets" and "other liabilities."
|
As of December 31, 2022, the
Company had $406.1 million of
repurchase agreements outstanding with a weighted average rate of
4.47% and remaining weighted average maturity of 12 days secured by
an aggregate of $425.0 million of
agency MBS at fair value. The Company's weighted average cost
of repurchase agreement funding secured by agency MBS was 3.77%
during the fourth quarter of 2022 compared to 2.33% during the
third quarter of 2022.
The Company enters into various hedging transactions to mitigate
the interest rate sensitivity of its cost borrowing and the value
of its fixed-rate agency MBS and MSR financing receivables.
Under the terms of the Company's interest rate swap agreements, the
Company pays or receives interest payments based on a fixed rate
and pays or receives variable interest payments based upon the
Secured Overnight Financing Rate ("SOFR"). As of December 31, 2022, the Company's interest swap
agreements were comprised of the following (dollars in
thousands):
|
|
|
|
|
Weighted-average:
|
|
|
|
Notional
Amount
|
|
|
Fixed
Receive Rate
|
|
Variable
Pay Rate
|
|
Net (Pay)
Receive Rate
|
|
Remaining
Life (Years)
|
|
Years to
maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 5
years
|
|
$
|
60,000
|
|
|
3.58 %
|
|
4.30 %
|
|
(0.72) %
|
|
|
4.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company's weighted average net receive rate of its interest
rate swap agreements was 1.08% during the fourth quarter of 2022
compared to a net receive rate of 0.55% during the third quarter of
2022. Under GAAP, the Company has not designated these
transactions as hedging instruments for financial reporting
purposes and, therefore, all gains and losses on its hedging
instruments are recorded to line item "investment and derivative
gains (losses), net" in the Company's financial
statements.
Single-family Residential Investments
During the fourth quarter of 2022, the
Company completed its previously announced sale of its wholly-owned
subsidiary, McLean SFR Investment, LLC, which included all the
Company's remaining investments in SFR properties and its long-term
debt facility secured by SFR properties, for a gross sale price of
$87.1 million including the
assumption of the debt liability, for a gain of $1.8 million that is net of accrued incentive
fees and termination fees to the Company's third-party investment
advisory firm.
Other Fourth Quarter 2022 Financial Highlights
The Company's book value was $6.59
per common share as of December 31,
2022 compared to $6.45 per
common share as of September 30,
2022. Book value per common share is calculated as total
equity plus accumulated depreciation of SFR properties less the
preferred stock liquidation preference divided by common shares
outstanding plus vested restricted stock units convertible into
common stock less unvested restricted common stock.
The Company's "at risk" leverage ratio was 0.3 to 1 as of
December 31, 2022 compared to 1.2 to
1 as of September 30, 2022. The
Company's "at risk" leverage ratio is calculated as the sum of the
Company's repurchase agreement financing, long-term debt secured by
single-family properties, net payable or receivable for unsettled
securities, net contractual price of TBA purchase and sale
commitments and financing embedded in its MSR financing receivables
less cash and cash equivalents compared to the Company's investable
capital measured as the sum of the Company's shareholders' equity
and long-term unsecured debt.
During the fourth quarter of 2022, the Company repurchased 0.4
million shares of its common stock at an average price of
$2.95 per share for a total purchase
cost of $1.1 million, representing
1.3% of common stock outstanding as of September 30, 2022. As of December 31, 2022, the Company had remaining
authorization from its Board of Directors to repurchase up to 10.2
million shares of its common stock.
Distributions to Shareholders
The Company has also announced the tax characteristics of the
distributions paid to its preferred shareholders in calendar year
2022. The Company's distributions paid to its Series B and
Series C preferred shareholders in 2022 of $1.75 per share and $2.0625 per share, respectively, were all a
return of capital. Preferred shareholders should receive a
Form 1099-DIV containing this information from their brokers,
transfer agents or other institutions.
Additional Information
The Company will make available additional quarterly information
for the benefit of its shareholders through a supplemental
presentation that will be available at the Company's website,
www.arlingtonasset.com. The presentation will be available on
the Webcasts and Presentations section located under the Updates
& Events tab of the Company's website.
About the Company
Arlington Asset Investment Corp. (NYSE: AAIC) currently invests
primarily in mortgage related assets and has elected to be taxed as
a REIT. The Company is headquartered in the Washington, D.C. metropolitan area. For
more information, please visit www.arlingtonasset.com.
Statements concerning interest rates, portfolio allocation,
financing costs, portfolio hedging, prepayments, dividends, book
value, utilization of loss carryforwards, any change in long-term
tax structures (including any REIT election), use of equity raise
proceeds and any other guidance on present or future periods, as
well as the Company's estimates for certain financial information
post year-end, 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, inflation, changes in interest rates, increased costs
of borrowing, decreased interest spreads, credit risks underlying
the Company's assets, especially related to the Company's mortgage
credit investments, changes in political and monetary policies,
changes in default rates, changes in prepayment rates and other
assumptions underlying our estimates related to our projections of
future earnings available for distribution, changes in the
Company's returns, changes in the use of the Company's tax
benefits, the Company's ability to qualify and maintain
qualification as a REIT, changes in the agency MBS asset yield,
changes in the Company's monetization of net operating loss
carryforwards, changes in the Company's investment strategy,
changes in the Company's ability to generate cash earnings and
dividends, preservation and utilization of the Company's net
operating loss and net capital loss carryforwards, impacts of
changes to and changes by Fannie Mae and Freddie Mac, actions taken
by the U.S. Federal Reserve, the Federal Housing Finance Agency and
the U.S. Treasury, availability of opportunities that meet or
exceed the Company's risk adjusted return expectations, ability and
willingness to make future dividends, ability to generate
sufficient cash through retained earnings to satisfy capital needs,
the uncertainty and economic impact of a resurgence of the
coronavirus (COVID-19) pandemic, and the effect of general
economic, political, regulatory and market conditions, including
the impact of a potential recessionary environment. These and
other material risks are described in the Company's most recent
Annual Report on Form 10-K and any other documents filed by the
Company with the SEC from time to time, which are available from
the Company and from the SEC, and you should read and understand
these risks when evaluating any forward-looking statement. All
forward-looking statements speak only as of the date on which they
are made. New risks and uncertainties arise over time, and it is
not possible to predict those events or how they may affect the
Company. Except as required by law, the Company is not
obligated to, and does not intend to, update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Financial data to follow
ARLINGTON ASSET
INVESTMENT CORP.
|
CONSOLIDATED BALANCE
SHEETS
|
(Dollars in thousands,
except per share amounts)
|
(Unaudited)
|
|
|
December 31,
2022
|
|
|
September 30,
2022
|
|
ASSETS
|
|
|
|
|
|
|
Cash and cash
equivalents (includes $296 and $560, respectively,
from consolidated VIEs)
|
|
$
|
28,021
|
|
|
$
|
13,803
|
|
Restricted
cash
|
|
|
—
|
|
|
|
590
|
|
Restricted cash of
consolidated VIEs
|
|
|
2,191
|
|
|
|
1,954
|
|
Agency mortgage-backed
securities, at fair value
|
|
|
443,540
|
|
|
|
445,122
|
|
MSR financing
receivables, at fair value
|
|
|
180,365
|
|
|
|
164,585
|
|
Credit investments, at
fair value
|
|
|
133,701
|
|
|
|
145,158
|
|
Mortgage loans of
consolidated VIEs, at fair value
|
|
|
193,957
|
|
|
|
203,456
|
|
Single-family
residential real estate (net of $-0- and $977, respectively, of
accumulated depreciation)
|
|
|
—
|
|
|
|
81,242
|
|
Deposits
|
|
|
1,823
|
|
|
|
3,228
|
|
Other assets (includes
$2,067 and $1,413, respectively, from consolidated VIEs)
|
|
|
18,720
|
|
|
|
15,003
|
|
Total
assets
|
|
$
|
1,002,318
|
|
|
$
|
1,074,141
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Repurchase
agreements
|
|
$
|
515,510
|
|
|
$
|
429,910
|
|
Purchased securities
payable
|
|
|
—
|
|
|
|
93,081
|
|
Secured debt of
consolidated VIEs, at fair value
|
|
|
169,345
|
|
|
|
182,336
|
|
Long-term unsecured
debt
|
|
|
86,405
|
|
|
|
86,302
|
|
Long-term debt secured
by single-family properties
|
|
|
—
|
|
|
|
56,801
|
|
Other liabilities
(includes $262 and $265, respectively, from consolidated
VIEs)
|
|
|
13,718
|
|
|
|
11,501
|
|
Total
liabilities
|
|
|
784,978
|
|
|
|
859,931
|
|
Equity:
|
|
|
|
|
|
|
Preferred stock
(liquidation preference of $33,420 and $33,612,
respectively)
|
|
|
32,821
|
|
|
|
32,968
|
|
Common stock
|
|
|
282
|
|
|
|
286
|
|
Additional paid-in
capital
|
|
|
2,024,298
|
|
|
|
2,024,746
|
|
Accumulated
deficit
|
|
|
(1,840,061)
|
|
|
|
(1,843,790)
|
|
Total
equity
|
|
|
217,340
|
|
|
|
214,210
|
|
Total liabilities
and equity
|
|
$
|
1,002,318
|
|
|
$
|
1,074,141
|
|
Book value per
common share (1)
|
|
$
|
6.59
|
|
|
$
|
6.45
|
|
Common shares
outstanding (in thousands) (2)
|
|
|
27,904
|
|
|
|
28,154
|
|
|
|
|
|
|
|
|
(1) Book value per
common share is calculated as total equity plus accumulated
depreciation of single-family residential real estate less the
preferred stock liquidation preference divided by common shares
outstanding.
|
|
(2) Represents common
shares outstanding plus vested restricted stock units convertible
into common stock less shares of unvested restricted
common stock. The amount of unvested restricted common stock
was 831 as of December 31, 2022. Does not include
performance-based
units that are convertible into common stock following both the
achievement of performance goals over applicable performance
periods and
continued employment. The number of shares of common stock
issuable under outstanding performance-based units can range from
41 to
4,581 as of December 31, 2022.
|
|
|
|
|
|
|
|
|
|
|
December 31,
2022
|
|
|
September 30,
2022
|
|
Assets and
liabilities of consolidated VIEs:
|
|
|
|
|
|
|
Cash and restricted
cash
|
|
$
|
2,487
|
|
|
$
|
2,514
|
|
Mortgage loans, at fair
value
|
|
|
193,957
|
|
|
|
203,456
|
|
Other assets
|
|
|
2,067
|
|
|
|
1,413
|
|
Secured debt, at fair
value
|
|
|
(169,345)
|
|
|
|
(182,336)
|
|
Other
liabilities
|
|
|
(262)
|
|
|
|
(265)
|
|
Net investment in
consolidated VIEs
|
|
$
|
28,904
|
|
|
$
|
24,782
|
|
ARLINGTON ASSET
INVESTMENT CORP.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(Dollars in thousands,
except per share data)
|
(Unaudited)
|
|
|
|
Year
Ended
|
|
|
Three Months
Ended
|
|
|
|
December 31,
2022
|
|
|
December 31,
2022
|
|
|
September 30,
2022
|
|
|
June 30,
2022
|
|
|
March 31,
2022
|
|
Interest
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MSR financing
receivables
|
|
$
|
15,419
|
|
|
$
|
4,446
|
|
|
$
|
3,608
|
|
|
$
|
3,983
|
|
|
$
|
3,382
|
|
Agency mortgage-backed
securities
|
|
|
11,920
|
|
|
|
4,732
|
|
|
|
3,631
|
|
|
|
2,065
|
|
|
|
1,492
|
|
Credit securities and
loans
|
|
|
7,512
|
|
|
|
2,932
|
|
|
|
2,736
|
|
|
|
991
|
|
|
|
853
|
|
Mortgage loans of
consolidated VIEs
|
|
|
7,570
|
|
|
|
2,302
|
|
|
|
2,303
|
|
|
|
1,611
|
|
|
|
1,354
|
|
Other
|
|
|
862
|
|
|
|
314
|
|
|
|
110
|
|
|
|
113
|
|
|
|
325
|
|
Total interest and
other income
|
|
|
43,283
|
|
|
|
14,726
|
|
|
|
12,388
|
|
|
|
8,763
|
|
|
|
7,406
|
|
Rent revenues from
single-family properties
|
|
|
6,173
|
|
|
|
869
|
|
|
|
2,103
|
|
|
|
2,137
|
|
|
|
1,064
|
|
Interest
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
|
|
8,983
|
|
|
|
5,081
|
|
|
|
2,863
|
|
|
|
763
|
|
|
|
276
|
|
Long-term debt secured
by single-family properties
|
|
|
2,202
|
|
|
|
335
|
|
|
|
741
|
|
|
|
718
|
|
|
|
408
|
|
Long-term unsecured
debt
|
|
|
5,742
|
|
|
|
1,516
|
|
|
|
1,456
|
|
|
|
1,400
|
|
|
|
1,370
|
|
Secured debt of
consolidated VIEs
|
|
|
4,584
|
|
|
|
906
|
|
|
|
912
|
|
|
|
1,578
|
|
|
|
1,188
|
|
Total interest
expense
|
|
|
21,511
|
|
|
|
7,838
|
|
|
|
5,972
|
|
|
|
4,459
|
|
|
|
3,242
|
|
Single-family
property operating expenses
|
|
|
6,073
|
|
|
|
755
|
|
|
|
1,872
|
|
|
|
1,915
|
|
|
|
1,531
|
|
Net operating
income
|
|
|
21,872
|
|
|
|
7,002
|
|
|
|
6,647
|
|
|
|
4,526
|
|
|
|
3,697
|
|
Investment and
derivative gain (loss), net
|
|
|
2,587
|
|
|
|
1,809
|
|
|
|
1,235
|
|
|
|
370
|
|
|
|
(827)
|
|
General and
administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
|
9,845
|
|
|
|
3,200
|
|
|
|
2,256
|
|
|
|
2,324
|
|
|
|
2,065
|
|
Other general and
administrative expenses
|
|
|
5,070
|
|
|
|
1,267
|
|
|
|
1,121
|
|
|
|
1,463
|
|
|
|
1,219
|
|
Total general and
administrative expenses
|
|
|
14,915
|
|
|
|
4,467
|
|
|
|
3,377
|
|
|
|
3,787
|
|
|
|
3,284
|
|
Income (loss) before
income taxes
|
|
|
9,544
|
|
|
|
4,344
|
|
|
|
4,505
|
|
|
|
1,109
|
|
|
|
(414)
|
|
Income tax provision
(benefit)
|
|
|
4,118
|
|
|
|
(45)
|
|
|
|
1,074
|
|
|
|
802
|
|
|
|
2,287
|
|
Net income
(loss)
|
|
|
5,426
|
|
|
|
4,389
|
|
|
|
3,431
|
|
|
|
307
|
|
|
|
(2,701)
|
|
Dividend on preferred
stock
|
|
|
(2,784)
|
|
|
|
(660)
|
|
|
|
(675)
|
|
|
|
(707)
|
|
|
|
(742)
|
|
Net income (loss)
available (attributable) to
common stock
|
|
$
|
2,642
|
|
|
$
|
3,729
|
|
|
$
|
2,756
|
|
|
$
|
(400)
|
|
|
$
|
(3,443)
|
|
Basic earnings (loss)
per common share
|
|
$
|
0.09
|
|
|
$
|
0.13
|
|
|
$
|
0.10
|
|
|
$
|
(0.01)
|
|
|
$
|
(0.12)
|
|
Diluted earnings (loss)
per common share
|
|
$
|
0.09
|
|
|
$
|
0.13
|
|
|
$
|
0.10
|
|
|
$
|
(0.01)
|
|
|
$
|
(0.12)
|
|
Weighted average
common shares outstanding (in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
28,717
|
|
|
|
27,956
|
|
|
|
28,338
|
|
|
|
28,766
|
|
|
|
29,832
|
|
Diluted
|
|
|
29,243
|
|
|
|
28,468
|
|
|
|
28,913
|
|
|
|
28,766
|
|
|
|
29,832
|
|
Non-GAAP Earnings Available for Distribution
In addition to the results of operations determined in
accordance with GAAP, we also report a non-GAAP financial measure
"earnings available for distribution". We define earnings
available for distribution as net income available to common stock
determined in accordance with GAAP adjusted for the following
items:
- Plus (less) realized and unrealized losses (gains) on
investments and derivatives;
- Plus (less) income tax provision (benefit) for TRS realized and
unrealized gains and losses on investments and derivatives
- Plus TBA dollar roll income (expense)
- Plus (less) interest rate swap net interest income
(expense)
- Plus depreciation of single-family residential properties
- Plus stock-based compensation
Realized and unrealized gains and losses recognized with respect
to our mortgage related investments and economic hedging
instruments, which are reported in line item "investment and
derivative gain (loss), net" of our consolidated statements of
comprehensive income, other than TBA dollar roll income and
interest rate swap net interest income or expense, are excluded
from the computation of earnings available for distribution as such
gains on losses are not reflective of the economic interest income
earned or interest expense incurred from our interest-bearing
financial assets and liabilities during the indicated reporting
period. Because our long-term-focused investment strategy for
our mortgage related investment portfolio is to generate a net
spread on the leveraged assets while prudently hedging periodic
changes in the fair value of those assets attributable to changes
in benchmark interest rates, we generally expect the fluctuations
in the fair value of our mortgage related investments and economic
hedging instruments to largely offset one another over time.
In addition, certain of our investments are held by our TRS which
is subject to U.S. federal and state corporate income taxes.
In calculating earnings available for distribution, any income tax
provision or benefit associated with gains or losses on our
mortgage related investments and economic hedging instruments are
also excluded from earnings available for distribution.
TBA dollar roll income (expense) represents the economic
equivalent of net interest income (expense) generated from our
transactions in non-specified fixed-rate agency MBS, executed
through sequential series of forward-settling purchase and sale
transactions that are settled on a net basis (known as "dollar
roll" transactions). Dollar roll income (expense) is generated
(incurred) as a result of delaying, or "rolling," the settlement of
a forward-settling purchase (sale) of a TBA agency MBS by entering
into an offsetting "spot" sale (purchase) with the same
counterparty prior to the settlement date, net settling the
"paired-off" positions in cash, and contemporaneously entering
another forward-settling purchase (sale) with the same counterparty
of a TBA agency MBS of the same essential characteristics for a
later settlement date at a price discount relative to the spot sale
(purchase). The price discount of the forward-settling purchase
(sale) relative to the contemporaneously executed spot sale
(purchase) reflects compensation to the seller for the interest
income (inclusive of expected prepayments) that, at the time of
sale, is expected to be foregone as a result of relinquishing
beneficial ownership of the MBS from the settlement date of the
spot sale until the settlement date of the forward purchase, net of
implied repurchase financing costs. We calculate dollar roll income
(expense) as the excess of the spot sale (purchase) price over the
forward-settling purchase (sale) price and recognize this amount
ratably over the period beginning on the settlement date of the
sale (purchase) and ending on the settlement date of the forward
purchase (sale). In our consolidated statements of comprehensive
income prepared in accordance with GAAP, TBA agency MBS dollar roll
income (expense) is reported as a component of the overall periodic
change in the fair value of TBA forward commitments within the line
item "investment and derivative gain (loss), net."
We utilize interest rate swap agreements to economically hedge a
portion of our exposure to variability in future interest cash
flows, attributable to changes in benchmark interest rates,
associated with future roll-overs of our short-term repurchase
agreement financing arrangements. Accordingly, the net interest
income earned or expense incurred (commonly referred to as "net
interest carry") from our interest rate swap agreements in
combination with repurchase agreement interest expense recognized
in accordance with GAAP represents our effective "economic interest
expense." In our consolidated statements of comprehensive income
prepared in accordance with GAAP, the net interest income earned or
expense incurred from interest rate swap agreements is reported as
a component of the overall periodic change in the fair value of
derivative instruments within the line item "investment and
derivative gain (loss), net."
The following table provides a reconciliation of GAAP net income
(loss) available (attributable) to common stock for the last four
fiscal quarters (unaudited, dollars in thousands):
|
|
Year
Ended
|
|
|
Three Months
Ended
|
|
|
|
December 31,
2022
|
|
|
December 31,
2022
|
|
|
September 30,
2022
|
|
|
June 30,
2022
|
|
|
March 31,
2022
|
|
Net income (loss)
available (attributable) to common
stock
|
|
$
|
2,642
|
|
|
$
|
3,729
|
|
|
$
|
2,756
|
|
|
$
|
(400)
|
|
|
$
|
(3,443)
|
|
Add
(less):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment and
derivative (gain) loss, net
|
|
|
(2,587)
|
|
|
|
(1,809)
|
|
|
|
(1,235)
|
|
|
|
(370)
|
|
|
|
827
|
|
Income tax provision
(benefit) for TRS investment
gain (loss)
|
|
|
2,616
|
|
|
|
(344)
|
|
|
|
406
|
|
|
|
496
|
|
|
|
2,058
|
|
Depreciation of
single-family residential properties
|
|
|
2,176
|
|
|
|
225
|
|
|
|
632
|
|
|
|
604
|
|
|
|
715
|
|
Stock-based
compensation expense
|
|
|
3,537
|
|
|
|
865
|
|
|
|
919
|
|
|
|
992
|
|
|
|
761
|
|
Add
back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TBA dollar roll income
(expense)
|
|
|
253
|
|
|
|
(429)
|
|
|
|
(421)
|
|
|
|
280
|
|
|
|
823
|
|
Interest rate swap net
interest (expense) income
|
|
|
(103)
|
|
|
|
212
|
|
|
|
258
|
|
|
|
(282)
|
|
|
|
(291)
|
|
Non-GAAP earnings
available for distribution
|
|
$
|
8,534
|
|
|
$
|
2,449
|
|
|
$
|
3,315
|
|
|
$
|
1,320
|
|
|
$
|
1,450
|
|
Non-GAAP earnings
available for distribution per
diluted common share
|
|
$
|
0.29
|
|
|
$
|
0.09
|
|
|
$
|
0.11
|
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
Weighted average
diluted common shares outstanding
|
|
$
|
29,243
|
|
|
|
28,468
|
|
|
|
28,913
|
|
|
|
29,300
|
|
|
|
30,315
|
|
Earnings available for distribution is used
by management to evaluate the financial performance of our
long-term-focused, net interest spread-based investment strategy
and core business activities over periods of time as well as assist
with the determination of the appropriate level of periodic
dividends to common stockholders. In addition, we believe that
earnings available for distribution assists investors in
understanding and evaluating the financial performance of our
long-term-focused, net interest spread-based investment strategy
and core business activities over periods of time as well as its
earnings capacity.
A limitation of utilizing this non-GAAP
financial measure is that the effect of accounting for all events
or transactions in accordance with GAAP does, in fact, reflect the
financial results of our business and these effects should not be
ignored when evaluating and analyzing our financial results. In
addition, our calculation of earnings available for distribution
may not be comparable to other similarly titled measures of other
companies. Therefore, we believe that earnings available for
distribution should be considered as a supplement to, and in
conjunction with, net income and comprehensive income determined in
accordance with GAAP. Furthermore, there may be differences between
earnings available for distribution and taxable income determined
in accordance with the Internal Revenue Code. As a REIT, we
are required to distribute at least 90% of our REIT taxable income
(subject to certain adjustments) to qualify as a REIT and all of
our taxable income in order to not be subject to any U.S. federal
or state corporate income taxes. Accordingly, earnings available
for distribution may not equal our distribution requirements as a
REIT.
______________________________
(a) The Company's financial statement closing and review
procedures for the quarter ended March 31,
2023 are not yet complete and, as a result, the financial
information set forth above reflects the Company's preliminary
estimate with respect to such information, based on information
currently available to management, and may vary from the Company's
actual financial results.
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content:https://www.prnewswire.com/news-releases/arlington-asset-investment-corp-reports-fourth-quarter-and-full-year-2022-financial-results-301786591.html
SOURCE Arlington Asset Investment Corp.