MCLEAN, Va., Nov. 7, 2019 /PRNewswire/ -- Arlington Asset
Investment Corp. (NYSE: AI) (the "Company" or "Arlington") today reported net loss
attributable to common shareholders of $8.5
million, or $0.23 per diluted
common share, and non-GAAP core operating income of $6.5 million, or $0.18 per diluted common share, for the quarter
ended September 30, 2019. A
reconciliation of non-GAAP core operating income to GAAP net income
(loss) before income taxes appears at the end of this press
release.
Third Quarter 2019 Financial Highlights
- $0.23 per diluted common share of
GAAP net loss
- $0.18 per diluted common share of
non-GAAP core operating income
- $7.35 per common share of book
value
- $0.225 per common share
dividend
"Conditions in the third quarter were challenging for levered
agency mortgage-backed security ("MBS") investments as the
continued flattening of the interest rate curve as well as elevated
prepayment speeds compressed net interest spread returns," said J.
Rock Tonkel, Jr., the Company's President and Chief Executive
Officer. "In response, the Company took several steps to
navigate through this investment environment. First, the
Company lowered its prepayment risk exposure by shifting its agency
MBS investment portfolio towards both lower coupon securities and
specified agency MBS with loan collateral that have favorable
prepayment characteristics. Second, the Company took
advantage of the favorable rates available in the interest rate
swap market by increasing its notional amount of short-term
interest rate swaps to lock into a lower current net cost of
funding than what was then available in the repo funding
market. In addition, the Federal Reserve's actions since the
start of the third quarter to lower short-term interest rates and
provide liquidity to the repo markets have improved current funding
rates and conditions materially. While net spread pressures
remain, since the start of the fourth quarter, a steeper interest
rate curve, lower funding rates and slightly wider agency MBS
spreads have led to higher returns on new investment opportunities
today for the Company and its shareholders."
Other Third Quarter Highlights
As of September 30, 2019, the
Company's agency MBS investment portfolio totaled $4,113 million in fair value, consisting of
$4,013 million of specified agency
MBS and $100 million of net long
to-be-announced ("TBA") agency MBS. As of September 30, 2019, the Company's $4,113 million agency MBS investment portfolio
was comprised of the following:
- $173 million of 2.5% coupon
30-year agency MBS
- $826 million of 3.0% coupon
30-year agency MBS
- $1,342 million of 3.5% coupon
30-year agency MBS
- $1,300 million of 4.0% coupon
30-year agency MBS
- $472 million of 4.5% coupon
30-year agency MBS
As of September 30, 2019, the
Company's $4,013 million specified
agency MBS portfolio had a weighted average amortized cost basis of
$103.39 and a weighted average market
price of $104.47. The Company's
fixed-rate agency MBS are comprised of securities backed by
specified pools of mortgage loans selected for their lower
propensity for prepayment. Weighted average pay-up premiums
on the Company's agency MBS portfolio, which represent the
estimated price premium of agency MBS backed by specified pools
over a generic TBA agency MBS, were approximately 1.25 percentage
points as of September 30, 2019,
compared to 2 percentage points as of June
30, 2019. Overall, pay-up premiums on fixed-rate
agency MBS increased during the third quarter of 2019 due to higher
prepayment expectations as a result of the decline in mortgage
rates; however, the Company's total weighted average pay-up
premiums on its agency MBS portfolio declined during the third
quarter of 2019 due to the Company reallocating its concentration
of fixed-rate agency MBS toward lower coupon securities which
generally carry lower pay-up premiums compared to higher coupon
securities.
As of September 30, 2019, the
Company had $3,698 million of
repurchase agreements outstanding with a weighted average rate of
2.35% and remaining weighted average maturity of 22 days secured by
an aggregate of $3,891 million of
agency MBS at fair value. The Company's "at risk" short-term
recourse financing to investable capital ratio was 9.9 to 1 as of
September 30, 2019 compared to 9.1 to
1 as of June 30, 2019. The
Company's "at risk" short-term recourse financing to investable
capital is measured as the ratio of the sum of the Company's
repurchase agreement financing, net payable or receivable for
unsettled securities and net contractual price of TBA commitments
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.
GAAP net interest income was $4.7
million for the third quarter of 2019 compared to
$6.6 million for the second quarter
of 2019, including the amortization of the Company's net premium on
its agency MBS of $7.4 million for
the third quarter of 2019 compared to $7.2
million for the second quarter of 2019. The Company's
weighted average yield on its agency MBS was 2.96% for the third
quarter of 2019 compared to 3.21% for the second quarter of 2019,
and the actual weighted-average constant prepayment rate ("CPR")
for the Company's agency MBS was 12.85% for the third quarter of
2019 compared to 10.16% for the second quarter of 2019. The
Company's weighted average cost of repurchase agreement funding was
2.46% during the third quarter of 2019 compared to 2.64% during the
second quarter of 2019.
The Company enters into various hedging transactions to mitigate
the interest rate sensitivity of its cost of borrowing and the
value of its agency MBS portfolio including interest rate swap
agreements, U.S. Treasury note futures, put and call options on
10-year U.S. Treasury note futures, and options on agency
MBS. 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 as net investment gains and losses in the
Company's financial statements.
Under the terms of the Company's interest rate swap agreements,
the Company pays semiannual interest payments based on a fixed rate
and receives quarterly variable interest payments based upon the
prevailing three-month London Interbank Offered Rate ("LIBOR") on
the date of reset. As of September 30,
2019, the Company had $3,000
million in notional amount of interest rate swap agreements
with a weighted average pay fixed rate of 1.83% and a remaining
weighted average maturity of 3.4 years. The Company's
weighted average net receive rate of its interest rate swap
agreements was 0.52% during the third quarter of 2019 compared to
0.50% during the second quarter of 2019.
As of September 30, 2019, the
total notional amount of the Company's interest rate swaps was 79%
of the Company's outstanding repurchase agreement funding and net
TBA purchase commitments with a net duration gap of zero.
The Company reported TBA dollar roll income of $0.9 million for the third quarter of 2019
compared to $2.0 million for the
second quarter of 2019. The implied weighted-average net
interest spread of the Company's TBA dollar rolls was 0.93% for the
third quarter of 2019 compared to 0.84% for the second quarter of
2019. TBA dollar roll income is considered the economic
equivalent of investing in agency MBS financed with a repurchase
agreement and is calculated as the price discount of a
forward-settling purchase of a TBA agency MBS relative to the
"spot" sale of the same security. Under GAAP, the Company
accounts for its TBA commitments as derivative instruments and
recognizes income from TBA dollar rolls as a component of net
investment gains and losses in the Company's financial
statements.
Economic net interest income was $10.1
million for the third quarter of 2019 compared to
$12.3 million for the second quarter
of 2019. Economic net interest income is comprised of net
interest income determined in accordance with GAAP, TBA dollar roll
income and net interest income or expense from interest rate
swaps. Economic net interest income is a non-GAAP financial
measure that is described later in this press release.
Excluding TBA dollar roll income, the Company had net investment
gains on its investment portfolio of $19.2
million for the third quarter of 2019. On its related
interest rate hedging instruments, the Company had net investment
losses of $32.8 million, excluding
interest rate swap net interest income. This results in a net
investment loss on the Company's hedged investment portfolio of
$13.6 million, or $0.37 per diluted common share, for the third
quarter of 2019.
Distributions to Shareholders
The Company's Board of Directors approved a distribution to
common shareholders of $0.225 per
share for the third quarter of 2019. The distribution was
paid on October 31, 2019 to
shareholders of record as of September
30, 2019. The Company's Board of Directors also
approved distributions to its Series B and Series C preferred
shareholders of $0.4375 per share and
$0.515625 per share, respectively,
for the third quarter of 2019. The distributions were paid on
September 30, 2019 to shareholders of
record as of September 18, 2019.
The tax characterization of the Company's distributions to
shareholders is determined and reported to shareholders on Form
1099-DIV after the end of the calendar year.
Commencing with its taxable year ending December 31, 2019, the Company intends to elect
and operate in a manner that will allow it to qualify as a REIT for
U.S. federal income tax purposes. As a REIT, distributions to
shareholders will generally be taxable as ordinary income that are
not eligible to be taxed as qualified dividends. However, a
portion of such distributions may be designated as long-term
capital gain dividends to the extent that such portion is
attributable to the Company's sale of capital assets held for more
than one year. Non-corporate taxpayers may deduct up to 20%
of dividends received from a REIT that are not designated as
capital gain dividends or qualified dividend income, subject to
certain limitations. Distributions in excess of the Company's
current and accumulated earnings and profits will be treated as a
tax-free return of capital to the extent of each shareholder's tax
basis in the Company's stock and as capital gain thereafter.
Conference Call
The Company will hold a conference call for investors
at 9:00 A.M. Eastern Time on Friday, November 8,
2019 to discuss the Company's third quarter 2019 results.
Investors may listen to the earnings call via the internet at:
http://www.arlingtonasset.com/index.php?s=19.
Replays of the earnings call will be available for 60 days via
webcast at the Internet address provided above, beginning two hours
after the call ends.
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: AI) currently invests
primarily in mortgage-related and other assets and intends to
qualify to be taxed as a REIT commencing with its taxable year
ending December 31, 2019. 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
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 political and monetary policies,
changes in default rates, changes in prepayment rates and other
assumptions underlying our estimates related to our projections of
future core earnings, 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 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, and general economic, political,
regulatory and market conditions. 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)
|
|
|
|
September 30,
2019
|
|
|
June 30,
2019
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
12,129
|
|
|
$
|
34,684
|
|
Interest
receivable
|
|
|
11,684
|
|
|
|
12,471
|
|
Sold securities
receivable
|
|
|
—
|
|
|
|
546,106
|
|
Mortgage-backed
securities, at fair value
|
|
|
|
|
|
|
|
|
Agency
|
|
|
4,013,161
|
|
|
|
3,414,580
|
|
Private-label
|
|
|
25
|
|
|
|
26
|
|
Derivative assets, at
fair value
|
|
|
675
|
|
|
|
6,243
|
|
Deposits
|
|
|
43,298
|
|
|
|
31,247
|
|
Other
assets
|
|
|
18,566
|
|
|
|
18,535
|
|
Total assets
|
|
$
|
4,099,538
|
|
|
$
|
4,063,892
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
|
$
|
3,697,906
|
|
|
$
|
3,531,539
|
|
Interest
payable
|
|
|
3,356
|
|
|
|
3,336
|
|
Accrued compensation
and benefits
|
|
|
3,502
|
|
|
|
2,436
|
|
Dividend
payable
|
|
|
8,397
|
|
|
|
8,392
|
|
Derivative
liabilities, at fair value
|
|
|
724
|
|
|
|
3,131
|
|
Purchased securities
payable
|
|
|
—
|
|
|
|
113,019
|
|
Other
liabilities
|
|
|
3,204
|
|
|
|
3,534
|
|
Long-term unsecured
debt
|
|
|
74,272
|
|
|
|
74,216
|
|
Total
liabilities
|
|
|
3,791,361
|
|
|
|
3,739,603
|
|
Equity:
|
|
|
|
|
|
|
|
|
Preferred stock
(liquidation preference of $38,851)
|
|
|
37,227
|
|
|
|
37,240
|
|
Common
stock
|
|
|
368
|
|
|
|
366
|
|
Additional paid-in
capital
|
|
|
2,048,423
|
|
|
|
2,047,616
|
|
Accumulated
deficit
|
|
|
(1,777,841)
|
|
|
|
(1,760,933)
|
|
Total
equity
|
|
|
308,177
|
|
|
|
324,289
|
|
Total liabilities
and equity
|
|
$
|
4,099,538
|
|
|
$
|
4,063,892
|
|
Book value per
common share (1)
|
|
$
|
7.35
|
|
|
$
|
7.80
|
|
Common shares
outstanding (in thousands) (2)
|
|
|
36,627
|
|
|
|
36,578
|
|
|
|
|
|
|
|
|
|
|
(1) Book value per
common share is calculated as total equity 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 unvested restricted common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
ARLINGTON ASSET
INVESTMENT CORP.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Dollars in
thousands, except per share data)
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
|
September
30,
2019
|
|
|
June
30,
2019
|
|
|
March
31,
2019
|
|
|
December
31,
2018
|
|
Interest
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency mortgage-backed
securities
|
|
$
|
28,455
|
|
|
$
|
32,275
|
|
|
$
|
33,570
|
|
|
$
|
36,914
|
|
Private-label
mortgage-backed securities
|
|
|
4
|
|
|
|
14
|
|
|
|
1
|
|
|
|
4
|
|
Other
|
|
|
215
|
|
|
|
428
|
|
|
|
261
|
|
|
|
256
|
|
Total interest
income
|
|
|
28,674
|
|
|
|
32,717
|
|
|
|
33,832
|
|
|
|
37,174
|
|
Interest
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term secured
debt
|
|
|
22,721
|
|
|
|
24,866
|
|
|
|
24,643
|
|
|
|
25,286
|
|
Long-term unsecured
debt
|
|
|
1,261
|
|
|
|
1,269
|
|
|
|
1,272
|
|
|
|
1,264
|
|
Total interest
expense
|
|
|
23,982
|
|
|
|
26,135
|
|
|
|
25,915
|
|
|
|
26,550
|
|
Net interest
income
|
|
|
4,692
|
|
|
|
6,582
|
|
|
|
7,917
|
|
|
|
10,624
|
|
Investment
advisory fee income
|
|
|
—
|
|
|
|
—
|
|
|
|
250
|
|
|
|
—
|
|
Investment (loss)
gain, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on trading
investments, net
|
|
|
16,890
|
|
|
|
42,239
|
|
|
|
69,168
|
|
|
|
32,591
|
|
Loss from derivative
instruments, net
|
|
|
(25,353)
|
|
|
|
(69,072)
|
|
|
|
(55,205)
|
|
|
|
(101,483)
|
|
Other, net
|
|
|
232
|
|
|
|
150
|
|
|
|
(160)
|
|
|
|
(18)
|
|
Total investment
(loss) gain, net
|
|
|
(8,231)
|
|
|
|
(26,683)
|
|
|
|
13,803
|
|
|
|
(68,910)
|
|
General and
administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
|
2,833
|
|
|
|
2,233
|
|
|
|
3,116
|
|
|
|
395
|
|
Other general and
administrative expenses
|
|
|
1,365
|
|
|
|
1,191
|
|
|
|
1,260
|
|
|
|
1,263
|
|
Total general and
administrative expenses
|
|
|
4,198
|
|
|
|
3,424
|
|
|
|
4,376
|
|
|
|
1,658
|
|
(Loss) income
before income taxes
|
|
|
(7,737)
|
|
|
|
(23,525)
|
|
|
|
17,594
|
|
|
|
(59,944)
|
|
Income tax
benefit
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(33,639)
|
|
Net (loss)
income
|
|
|
(7,737)
|
|
|
|
(23,525)
|
|
|
|
17,594
|
|
|
|
(26,305)
|
|
Dividend on preferred
stock
|
|
|
(774)
|
|
|
|
(774)
|
|
|
|
(278)
|
|
|
|
(153)
|
|
Net (loss) income
(attributable) available to common stock
|
|
$
|
(8,511)
|
|
|
$
|
(24,299)
|
|
|
$
|
17,316
|
|
|
$
|
(26,458)
|
|
Basic (loss) earnings
per common share
|
|
$
|
(0.23)
|
|
|
$
|
(0.67)
|
|
|
$
|
0.52
|
|
|
$
|
(0.87)
|
|
Diluted (loss)
earnings per common share
|
|
$
|
(0.23)
|
|
|
$
|
(0.67)
|
|
|
$
|
0.52
|
|
|
$
|
(0.87)
|
|
Weighted average
common shares outstanding (in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
36,572
|
|
|
|
36,533
|
|
|
|
33,053
|
|
|
|
30,392
|
|
Diluted
|
|
|
36,572
|
|
|
|
36,533
|
|
|
|
33,139
|
|
|
|
30,392
|
|
Non-GAAP Core Operating Income
In addition to the Company's results of operations determined in
accordance with generally accepted accounting principles as
consistently applied in the United
States ("GAAP"), the Company also reports "non-GAAP core
operating income." The Company defines core operating income
as "economic net interest income" and investment advisory fee
income less "core general and administrative expenses" and
preferred stock dividends.
Economic Net Interest Income
Economic net interest income, a non-GAAP financial measure,
represents the interest income earned net of interest expense
incurred from all of our interest bearing financial instruments as
well as the agency MBS which underlie, and are implicitly financed
through, our TBA dollar roll transactions. Economic net
interest income is comprised of the following:
- net interest income determined in accordance with GAAP;
- TBA agency MBS dollar roll income, which is calculated as the
price discount of a forward-settling purchase of a TBA agency MBS
relative to the "spot" sale of the same security, earned ratably
over the period beginning on the settlement date of the sale and
ending on the settlement date of the forward-settling purchase;
and
- net interest income earned or expense incurred from interest
rate swap agreements.
In the Company's consolidated statements of comprehensive income
prepared in accordance with GAAP, TBA agency MBS dollar roll income
and the net interest income earned or expense incurred from
interest rate swap agreements are reported as a component of the
overall periodic change in the fair value of derivative instruments
within the line item "gain (loss) from derivative instruments, net"
of the "investment gain (loss), net" section. We believe that
economic net interest income assists investors in understanding and
evaluating the financial performance of the Company's
long-term-focused, net interest spread-based investment strategy,
prior to the deduction of core general and administrative
expenses.
Core General and Administrative Expenses
Core general and administrative expenses are non-interest
expenses reported within the line item "total general and
administrative expenses" of the consolidated statements of
comprehensive income less stock-based compensation expense and
non-recurring expense. For the three months ended September 30, 2019, core general and
administrative expense exclude a non-recurring expense related to a
one-time out-of-period payment made in the third quarter of 2019
for a business, professional and occupation license tax from
Arlington County, Virginia for the
2018 tax year.
Non-GAAP Core Operating Income Results
The following table presents the Company's computation of
economic net interest income and core operating income for the last
four fiscal quarters (unaudited, amounts in thousands, except per
share amounts):
|
Three Months
Ended
|
|
|
September
30,
2019
|
|
|
June
30,
2019
|
|
|
March
31,
2019
|
|
|
December
31,
2018
|
|
GAAP net interest
income
|
$
|
4,692
|
|
|
$
|
6,582
|
|
|
$
|
7,917
|
|
|
$
|
10,624
|
|
TBA dollar roll
income
|
|
923
|
|
|
|
1,995
|
|
|
|
1,420
|
|
|
|
2,940
|
|
Interest rate swap
net interest income
|
|
4,445
|
|
|
|
3,769
|
|
|
|
4,747
|
|
|
|
2,304
|
|
Economic net interest
income
|
|
10,060
|
|
|
|
12,346
|
|
|
|
14,084
|
|
|
|
15,868
|
|
Investment advisory
fee income
|
|
—
|
|
|
|
—
|
|
|
|
250
|
|
|
|
—
|
|
Core general and
administrative expenses
|
|
(2,797)
|
|
|
|
(3,207)
|
|
|
|
(3,603)
|
|
|
|
(2,324)
|
|
Preferred stock
dividend
|
|
(774)
|
|
|
|
(774)
|
|
|
|
(278)
|
|
|
|
(153)
|
|
Non-GAAP core
operating income
|
$
|
6,489
|
|
|
$
|
8,365
|
|
|
$
|
10,453
|
|
|
$
|
13,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP core
operating income per
diluted
common share
|
$
|
0.18
|
|
|
$
|
0.23
|
|
|
$
|
0.32
|
|
|
$
|
0.44
|
|
Weighted average
diluted common
shares
outstanding
|
|
36,751
|
|
|
|
36,644
|
|
|
|
33,139
|
|
|
|
30,437
|
|
The following table provides a reconciliation of GAAP pre-tax
net income (loss) to non-GAAP core operating income for the last
four fiscal quarters (unaudited, amounts in thousands):
|
Three Months
Ended
|
|
|
September
30,
2019
|
|
|
June
30,
2019
|
|
|
March
31,
2019
|
|
|
December
31,
2018
|
|
GAAP (loss) income
before income taxes
|
$
|
(7,737)
|
|
|
$
|
(23,525)
|
|
|
$
|
17,594
|
|
|
$
|
(59,944)
|
|
Add
(less):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment loss
(gain), net
|
|
8,231
|
|
|
|
26,683
|
|
|
|
(13,803)
|
|
|
|
68,910
|
|
Stock-based
compensation expense
|
|
913
|
|
|
|
217
|
|
|
|
773
|
|
|
|
(666)
|
|
Preferred stock
dividend
|
|
(774)
|
|
|
|
(774)
|
|
|
|
(278)
|
|
|
|
(153)
|
|
Non-recurring
expense
|
|
488
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Add
back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TBA dollar roll
income
|
|
923
|
|
|
|
1,995
|
|
|
|
1,420
|
|
|
|
2,940
|
|
Interest rate swap net
interest income
|
|
4,445
|
|
|
|
3,769
|
|
|
|
4,747
|
|
|
|
2,304
|
|
Non-GAAP core
operating income
|
$
|
6,489
|
|
|
$
|
8,365
|
|
|
$
|
10,453
|
|
|
$
|
13,391
|
|
Non-GAAP core operating income is used by management to evaluate
the financial performance of the Company's long-term 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. The Company
believes that non-GAAP core operating income assists investors in
understanding and evaluating the financial performance of the
Company's long-term 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 "non-core" 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.
For example, the economic cost or benefit of hedging instruments
other than interest rate swap agreements, such as U.S. Treasury
note futures or options on U.S. Treasury note futures, do not
affect the computation of non-GAAP core operating income. In
addition, the Company's calculation of non-GAAP core operating
income may not be comparable to other similarly titled measures of
other companies. Therefore, the Company believes that net
income and comprehensive income determined in accordance with GAAP
should be considered in conjunction with non-GAAP core operating
income. Furthermore, there may be differences between
non-GAAP core operating income and taxable income determined in
accordance with the Internal Revenue Code. As a REIT, the
Company will be required to distribute at least 90% of its REIT
taxable income (subject to certain adjustments) to qualify as a
REIT and all of its taxable income in order to not be subject to
any U.S. Federal or state corporate income taxes.
Accordingly, non-GAAP core operating income may not equal the
Company's distribution requirements as a REIT.
The following tables present information on the Company's
investment and hedge portfolio as of September 30, 2019 (unaudited, dollars in
thousands):
Agency MBS:
|
|
Fair
Value
|
|
Specified agency
MBS
|
|
$
|
4,013,161
|
|
Net long agency TBA
position
|
|
|
99,593
|
|
Total
|
|
$
|
4,112,754
|
|
Specified Agency MBS:
|
|
Unpaid
Principal
Balance
|
|
|
Net
Unamortized
Purchase
Premiums
|
|
|
Amortized
Cost Basis
|
|
|
Net
Unrealized
Gain (Loss)
|
|
|
Fair
Value
|
|
|
Market
Price
|
|
|
Coupon
|
|
|
Weighted
Average
Expected
Remaining
Life
|
|
30-year fixed
rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.5%
|
|
$
|
73,009
|
|
|
$
|
798
|
|
|
$
|
73,807
|
|
|
$
|
(674)
|
|
|
$
|
73,133
|
|
|
$
|
100.17
|
|
|
|
2.50
|
%
|
|
|
9.1
|
|
3.0%
|
|
|
808,462
|
|
|
|
21,109
|
|
|
|
829,571
|
|
|
|
(3,082)
|
|
|
|
826,489
|
|
|
|
102.23
|
|
|
|
3.00
|
%
|
|
|
7.0
|
|
3.5%
|
|
|
1,293,792
|
|
|
|
38,904
|
|
|
|
1,332,696
|
|
|
|
8,948
|
|
|
|
1,341,644
|
|
|
|
103.70
|
|
|
|
3.50
|
%
|
|
|
5.0
|
|
4.0%
|
|
|
1,226,631
|
|
|
|
48,677
|
|
|
|
1,275,308
|
|
|
|
24,444
|
|
|
|
1,299,752
|
|
|
|
105.96
|
|
|
|
4.00
|
%
|
|
|
4.8
|
|
4.5%
|
|
|
439,456
|
|
|
|
20,573
|
|
|
|
460,029
|
|
|
|
12,100
|
|
|
|
472,129
|
|
|
|
107.43
|
|
|
|
4.50
|
%
|
|
|
4.3
|
|
5.5%
|
|
|
12
|
|
|
|
—
|
|
|
|
12
|
|
|
|
2
|
|
|
|
14
|
|
|
|
112.39
|
|
|
|
5.50
|
%
|
|
|
5.2
|
|
Total/weighted-average
|
|
$
|
3,841,362
|
|
|
$
|
130,061
|
|
|
$
|
3,971,423
|
|
|
$
|
41,738
|
|
|
$
|
4,013,161
|
|
|
$
|
104.47
|
|
|
|
3.65
|
%
|
|
|
5.4
|
|
Net Long Agency TBA Positions:
|
|
Notional
Amount:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Long
(Short)
Position
|
|
|
Implied
Cost
Basis
|
|
|
Implied
Fair
Value
|
|
|
Net
Carrying
Amount
|
|
2.5% 30-year MBS
purchase commitments, net
|
|
$
|
100,000
|
|
|
$
|
100,273
|
|
|
$
|
99,593
|
|
|
$
|
(680)
|
|
3.0% 30-year MBS
purchase commitments, net
|
|
|
100,000
|
|
|
|
101,547
|
|
|
|
101,563
|
|
|
|
16
|
|
3.0% 30-year MBS sale
commitments, net
|
|
|
(100,000)
|
|
|
|
(101,953)
|
|
|
|
(101,563)
|
|
|
|
390
|
|
Total TBA commitments,
net
|
|
$
|
100,000
|
|
|
$
|
99,867
|
|
|
$
|
99,593
|
|
|
$
|
(274)
|
|
Interest Rate Swap Agreements:
|
|
|
|
|
|
Weighted-average:
|
|
|
|
Notional Amount
|
|
|
Fixed
Pay Rate
|
|
|
Variable
Receive Rate
|
|
|
Net Receive
(Pay) Rate
|
|
|
Remaining
Life (Years)
|
|
Years to
maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 3
years
|
|
$
|
2,175,000
|
|
|
|
1.73
|
%
|
|
|
2.19
|
%
|
|
|
0.46
|
%
|
|
|
1.7
|
|
3 to less than 7
years
|
|
|
500,000
|
|
|
|
1.62
|
%
|
|
|
2.12
|
%
|
|
|
0.50
|
%
|
|
|
6.3
|
|
7 to less than 10
years
|
|
|
300,000
|
|
|
|
2.85
|
%
|
|
|
2.16
|
%
|
|
|
(0.69)
|
%
|
|
|
9.3
|
|
10 or more
years
|
|
|
25,000
|
|
|
|
2.96
|
%
|
|
|
2.16
|
%
|
|
|
(0.80)
|
%
|
|
|
28.5
|
|
Total /
weighted-average
|
|
$
|
3,000,000
|
|
|
|
1.83
|
%
|
|
|
2.17
|
%
|
|
|
0.34
|
%
|
|
|
3.4
|
|
View original
content:http://www.prnewswire.com/news-releases/arlington-asset-investment-corp-reports-third-quarter-2019-financial-results-300954340.html
SOURCE Arlington Asset Investment Corp.