Arlington Asset Investment Corp. Reports Fourth Quarter and Full Year 2021 Financial Results
Arlington Asset Investment Corp. (NYSE: AAIC) reported net income of $3.1 million, or $0.10 per diluted share, for Q4 2021, with non-GAAP core operating income at $0.5 million, or $0.02 per share. The company achieved a 3.2% increase in book value per common share to $6.16, aided by a stock buyback of 3.8%. For 2021, the net loss per diluted share was $0.38. Arlington launched new investment channels in mortgage servicing rights and single-family rentals, with an initial $61 million in property purchases. The current leverage ratio stands at 1.5 to 1, reflecting strong liquidity.
- Achieved 3.2% increase in book value per share to $6.16.
- Successfully repurchased 3.8% of outstanding shares, enhancing shareholder value.
- Launched two new investment channels, MSR and SFR, diversifying investment risk.
- MSR portfolio generated a 34% annualized return since late 2020.
- Reported a full-year GAAP net loss of $0.38 per diluted share.
- No dividend declared on common stock for Q4 2021 amidst conservative financial management.
MCLEAN, Va., March 2, 2022 /PRNewswire/ -- Arlington Asset Investment Corp. (NYSE: AAIC) (the "Company" or "Arlington") today reported net income available to common shareholders of
Fourth Quarter 2021 Financial Highlights
$6.16 per common share of book value3.2% increase from September 30, 2021$0.10 per diluted common share of GAAP net income$0.02 per diluted common share of non-GAAP core operating income$0.09 per common share of book value accretion from the repurchase3.8% of the outstanding shares of common stock- Purchased an additional
2.5% of the outstanding shares of common stock through March 1, 2022 - 12.2 million share remaining authorization as of March 1, 2022
- 1.5 to 1 "at risk" leverage ratio
Full Year 2021 Financial Highlights
$0.38 per diluted common share of GAAP net loss$0.17 per diluted common share of non-GAAP core operating income$0.27 per common share of book value accretion from the repurchase of9.7% of the outstanding shares of common stock- Successfully launched two new investment silos in mortgage servicing right ("MSR") related assets and single-family residential ("SFR") rental property
- Initial purchases of SFR properties of
$61 million with commitments to purchase an additional$20 million - Supported by
$150 million five-year financing facility at attractive fixed cost of funds of2.76% 7% reduction in general and administrative expenses- Completed a public offering of
$37.8 million of6.00% senior notes due 2026 and redeemed its outstanding6.625% senior notes due 2023 with an outstanding principal balance of$23.8 million
"We are pleased with fourth quarter results, including an economic return of
"As previously discussed, the Company continues to progress toward building multiple high return, non-commodity investment channels that diversify investment risk and improve reliability of returns over time. The Company's initial efforts include platforms for investments in MSRs, SFR rental properties, and credit securities backed by real estate.
"Our MSR portfolio has generated a
"With "at risk" leverage of just 1.5x and high liquidity, we continue to be positioned with a primary focus on protecting shareholder capital from the impact of inflation, rising rates, and Federal Reserve monetary tightening. In addition, we have reduced G&A expenses by
"With the Company's stock trading at a significant discount to book value, we have utilized our strong financial position to repurchase over
"It has taken great effort to transition Arlington into a differentiated investment firm dedicated to developing high return programmatic investment channels, and I would like to thank my colleagues for their efforts to increase shareholder value. I would note that our portfolio is still not fully scaled, and I believe there is additional untapped earnings power in our model. I am optimistic that our strategy and our team will build on our recent successes and that the Company has a bright future."
Fourth Quarter Investment Portfolio
As of December 31, 2021, the Company's investment portfolio totaled
$484 million of agency mortgage-backed securities ("MBS")$125 million of MSR related assets$65 million of credit investments$61 million of SFR real estate assets
The Company has allocated
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 U.S. government sponsored enterprise ("GSE"), such as the Federal National Mortgage Association ("Fannie Mae") or the Federal Home Loan Mortgage Corporation ("Freddie Mac").
As of December 31, 2021, the Company's agency MBS investment portfolio totaled
$344 million of2.0% coupon 30-year agency MBS$140 million of2.5% coupon 30-year agency MBS
As of December 31, 2021, the Company's
The Company's weighted average yield on its agency MBS was
As of December 31, 2021, the Company had
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. Under the terms of the Company's interest rate swap agreements, the Company pays semiannual interest payments based on a fixed rate and receives variable interest payments based upon either the prevailing three-month London Interbank Offered Rate ("LIBOR") or Secured Overnight Financing Rate ("SOFR"). As of December 31, 2021, the Company had
MSR Related Investments
The Company is party to agreements with a licensed, GSE approved residential mortgage loan servicer that enable the Company to garner the economic return of an investment in an 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 option, the mortgage servicing counterparty could utilize leverage on the MSRs that are subject to the Company's MSR financing receivable to finance the purchase of additional MSRs to increase potential returns to the Company. The transactions are accounted for as a financing receivable on the Company's consolidated financial statements.
As of December 31, 2021, the Company had
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"). As of December 31, 2021, the Company's
$29 million commercial mortgage loan$21 million of non-agency MBS collateralized by business purpose residential mortgage loans- Includes a
$10 million net investment in a consolidated VIE $15 million of asset backed securities collateralized by loans secured by residential solar panels
During the fourth quarter of 2021, the Company sold credit investments for gross proceeds of
As of December 31, 2021, the Company had a
Single-family Residential Investments
During the third quarter of 2021, the Company launched its SFR investment strategy of acquiring, leasing and operating single-family residential homes as rental properties. As of December 31, 2021, the Company had acquired 214 SFR properties for a total cost of
As of December 31, 2021, the Company has drawn
Other Fourth Quarter 2021 Financial Highlights
The Company's "at risk" leverage ratio was 1.5 to 1 as of December 31, 2021 compared to 1.8 to 1 as of September 30, 2021. The Company's "at risk" leverage ratio is calculated as the sum of the Company's repurchase agreement financing, long-term secured debt, net payable or receivable for unsettled securities, net contractual price of TBA 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 2021, the Company repurchased 1.2 million shares of its common stock at an average price of
Distributions to Shareholders
The Company's Board of Directors approved distributions to its Series B and Series C preferred shareholders of
The Company is organized and operated in a manner that will allow it to qualify as a REIT for U.S. federal income tax purposes and currently intends to continue to be organized and operated in such a manner. 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
The Company has also announced the tax characteristics of the distributions paid to its preferred shareholders in calendar year 2021. The Company's distributions paid to its Series B and Series C preferred shareholders in 2020 of
Conference Call
The Company will hold a conference call for investors at 10:00 A.M. Eastern Time on Thursday, March 3, 2022 to discuss the Company's fourth quarter 2021 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: AAIC) currently invests primarily in mortgage related and residential real estate 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 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, the uncertainty and economic impact of the ongoing coronavirus (COVID-19) pandemic and the measures taken by the government to address it, including the impact on our business, financial condition, liquidity and results of operations due to a significant decrease in economic activity and disruptions in our financing operations, among other factors, 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 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 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, 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) | ||||||||
December 31, 2021 | September 30, 2021 | |||||||
ASSETS | ||||||||
Cash and cash equivalents (includes | $ | 20,543 | $ | 21,166 | ||||
Restricted cash | 1,132 | 217 | ||||||
Restricted cash of consolidated VIE | 111 | 3,267 | ||||||
Sold securities receivable | 28,219 | — | ||||||
Agency mortgage-backed securities, at fair value | 483,927 | 637,718 | ||||||
MSR financing receivables, at fair value | 125,018 | 112,834 | ||||||
Credit investments, at fair value | 55,919 | 55,277 | ||||||
Mortgage loans of consolidated VIE, at fair value | 7,442 | 16,516 | ||||||
Single-family residential real estate | 60,889 | 9,407 | ||||||
Derivative assets, at fair value | 250 | 2,004 | ||||||
Deposits | 4,549 | 6,114 | ||||||
Other assets (includes | 15,037 | 15,089 | ||||||
Total assets | $ | 803,036 | $ | 879,609 | ||||
LIABILITIES AND EQUITY | ||||||||
Liabilities: | ||||||||
Repurchase agreements | $ | 446,624 | $ | 553,983 | ||||
Secured debt of consolidated VIE, at fair value | 508 | 7,350 | ||||||
Derivative liabilities, at fair value | 228 | 3,020 | ||||||
Long-term unsecured debt | 85,994 | 85,901 | ||||||
Long-term debt secured by single-family properties | 39,178 | — | ||||||
Other liabilities (includes | 6,377 | 4,678 | ||||||
Total liabilities | 578,909 | 654,932 | ||||||
Equity: | ||||||||
Preferred stock (liquidation preference of | 36,208 | 35,849 | ||||||
Common stock | 307 | 316 | ||||||
Additional paid-in capital | 2,030,315 | 2,034,310 | ||||||
Accumulated deficit | (1,842,703) | (1,845,798) | ||||||
Total equity | 224,127 | 224,677 | ||||||
Total liabilities and equity | $ | 803,036 | $ | 879,609 | ||||
Book value per common share (1) | $ | 6.16 | $ | 5.97 | ||||
Common shares outstanding (in thousands) (2) | 30,334 | 31,464 | ||||||
(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. | ||||||||
December 31, 2021 | September 30, 2021 | |||||||
Assets and liabilities of consolidated VIE: | ||||||||
Cash and restricted cash | $ | 2,229 | $ | 3,267 | ||||
Mortgage loans, at fair value | 7,442 | 16,516 | ||||||
Other assets | 547 | 67 | ||||||
Secured debt, at fair value | (508) | (7,350) | ||||||
Other liabilities | (2) | (52) | ||||||
Net investment in consolidated VIE | $ | 9,708 | $ | 12,448 |
ARLINGTON ASSET INVESTMENT CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share data) (Unaudited) | ||||||||||||||||||||
Year Ended | Three Months Ended | |||||||||||||||||||
December 31, 2021 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | ||||||||||||||||
Interest income | ||||||||||||||||||||
Agency mortgage-backed securities | $ | 10,634 | $ | 2,206 | $ | 2,660 | $ | 2,984 | $ | 2,784 | ||||||||||
MSR financing receivables | 6,282 | 2,589 | 1,945 | 1,390 | 358 | |||||||||||||||
Credit securities and loans | 5,058 | 772 | 1,247 | 1,770 | 1,269 | |||||||||||||||
Mortgage loans of consolidated VIE | 2,908 | 144 | 301 | 776 | 1,687 | |||||||||||||||
Other | 648 | 169 | 193 | 125 | 161 | |||||||||||||||
Total interest and other income | 25,530 | 5,880 | 6,346 | 7,045 | 6,259 | |||||||||||||||
Rent revenues from single-family properties | 259 | 259 | — | — | — | |||||||||||||||
Interest expense | ||||||||||||||||||||
Repurchase agreements | 1,483 | 286 | 306 | 403 | 488 | |||||||||||||||
Long-term debt secured by single-family properties | 151 | 151 | — | — | — | |||||||||||||||
Long-term unsecured debt | 5,112 | 1,376 | 1,435 | 1,150 | 1,151 | |||||||||||||||
Secured debt of consolidated VIE | 1,460 | 20 | 173 | 405 | 862 | |||||||||||||||
Total interest expense | 8,206 | 1,833 | 1,914 | 1,958 | 2,501 | |||||||||||||||
Single-family property operating expenses | 629 | 593 | 36 | — | — | |||||||||||||||
Net operating income | 16,954 | 3,713 | 4,396 | 5,087 | 3,758 | |||||||||||||||
Investment and derivative (loss) gain, net | (13,199) | 3,909 | (1,313) | (9,032) | (6,763) | |||||||||||||||
General and administrative expenses | ||||||||||||||||||||
Compensation and benefits | 6,979 | 1,855 | 1,888 | 1,841 | 1,395 | |||||||||||||||
Other general and administrative expenses | 4,725 | 1,125 | 1,009 | 1,349 | 1,242 | |||||||||||||||
Total general and administrative expenses | 11,704 | 2,980 | 2,897 | 3,190 | 2,637 | |||||||||||||||
(Loss) income before income taxes | (7,949) | 4,642 | 186 | (7,135) | (5,642) | |||||||||||||||
Income tax provision (benefit) | 1,566 | 808 | 436 | (76) | 398 | |||||||||||||||
Net (loss) income | (9,515) | 3,834 | (250) | (7,059) | (6,040) | |||||||||||||||
Dividend on preferred stock | (2,916) | (739) | (731) | (723) | (723) | |||||||||||||||
Net (loss) income (attributable) available to common stock | $ | (12,431) | $ | 3,095 | $ | (981) | $ | (7,782) | $ | (6,763) | ||||||||||
Basic (loss) earnings per common share | $ | (0.38) | $ | 0.10 | $ | (0.03) | $ | (0.24) | $ | (0.20) | ||||||||||
Diluted (loss) earnings per common share | $ | (0.38) | $ | 0.10 | $ | (0.03) | $ | (0.24) | $ | (0.20) | ||||||||||
Weighted average common shares outstanding (in thousands) | ||||||||||||||||||||
Basic | 32,312 | 31,100 | 31,927 | 33,066 | 33,181 | |||||||||||||||
Diluted | 32,312 | 31,421 | 31,927 | 33,066 | 33,181 |
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 from financial assets" and "net operating income from SFR properties, excluding depreciation," less "core general and administrative expenses," long-term unsecured debt interest expense, preferred stock dividends and an "income tax provision for taxable REIT subsidiary ("TRS") core operating income."
Economic Net Interest Income from Financial Assets
Economic net interest income from financial assets, a non-GAAP financial measure, is comprised of the following:
- total interest and other income from our investments in interest-bearing securities loans and other financial assets;
- TBA dollar roll income, which represents the implied net interest income earned from the agency MBS which underlie, and are implicitly financed through, our TBA dollar roll transactions. TBA dollar income 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; net of
- interest expense incurred from repurchase agreements or other financing arrangements secured by our investments in interest-bearing financial assets; 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 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 "investment and derivative gain (loss), net." We believe that economic net interest income from financial assets 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 and the costs of corporate financing.
Net Operating Income (Loss) from SFR Properties, Excluding Depreciation
Net operating income (loss) from SFR properties, excluding depreciation, represents the operating income (loss) of the Company's single-family residential properties determined in accordance with GAAP plus the depreciation and amortization of the SFR properties. Net operating income (loss) from SFR properties, excluding depreciation is comprised of the following:
- rent revenues from single-family properties; net of
- single-family property operating expenses; and
- interest expense incurred from long-term debt secured by single-family properties.
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.
Income Tax Provision for TRS Core Operating Income
Our TRSs are subject to U.S. federal and state corporate income taxes. Our computation of core operating income includes a provision for income taxes on the core operating income of our TRSs. The core operating income of our TRSs is comprised of net interest income generated by our TRSs net of our TRSs' general and administrative expenses. In our consolidated statements of comprehensive income prepared in accordance with GAAP, the "income tax provision (benefit)" includes (i) the income tax provision for TRS core operating income and (ii) an income tax provision for (or benefit from) periodic increases (or decreases) in the fair value of the investments of our TRSs, which are recognized in net income as a component of "investment and derivative gain (loss) net."
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 and for the year ended December 31, 2021 (unaudited, amounts in thousands, except per share amounts):
Year Ended | Three Months Ended | |||||||||||||||||||
December 31, 2021 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | ||||||||||||||||
Investments in financial assets | ||||||||||||||||||||
Interest and other income | $ | 25,530 | $ | 5,880 | $ | 6,346 | $ | 7,045 | $ | 6,259 | ||||||||||
TBA dollar roll income | 4,143 | 465 | 1,064 | 1,778 | 836 | |||||||||||||||
Interest expense | (2,943) | (306) | (479) | (808) | (1,350) | |||||||||||||||
Interest rate swap net interest expense | (2,929) | (653) | (379) | (1,187) | (710) | |||||||||||||||
Economic net interest income from financial | 23,801 | 5,386 | 6,552 | 6,828 | 5,035 | |||||||||||||||
Investments in SFR properties | ||||||||||||||||||||
Rent revenues | 259 | 259 | — | — | — | |||||||||||||||
Property operating expenses, excluding depreciation | (330) | (306) | (24) | — | — | |||||||||||||||
Interest expense | (151) | (151) | — | — | — | |||||||||||||||
Net operating loss from SFR properties, | (222) | (198) | (24) | — | — | |||||||||||||||
Core general and administrative expenses | (9,621) | (2,457) | (2,377) | (2,653) | (2,134) | |||||||||||||||
Long-term unsecured debt interest expense | (5,112) | (1,376) | (1,435) | (1,150) | (1,151) | |||||||||||||||
Preferred stock dividend | (2,916) | (739) | (731) | (723) | (723) | |||||||||||||||
Income tax provision for TRS core operating income | (286) | (129) | (85) | (61) | (11) | |||||||||||||||
Non-GAAP core operating income | $ | 5,644 | $ | 487 | $ | 1,900 | $ | 2,241 | $ | 1,016 | ||||||||||
Non-GAAP core operating income per diluted common share | $ | 0.17 | $ | 0.02 | $ | 0.06 | $ | 0.07 | $ | 0.03 | ||||||||||
Weighted average diluted common shares outstanding | 32,626 | 31,421 | 32,243 | 33,424 | 33,444 |
The following table provides a reconciliation of GAAP net income (loss) to non-GAAP core operating income for the last four fiscal quarters and for the year ended December 31, 2021 (unaudited, amounts in thousands):
Year Ended | Three Months Ended | |||||||||||||||||||
December 31, 2021 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | ||||||||||||||||
Net (loss) income (attributable) available to common stock | $ | (12,431) | $ | 3,095 | $ | (981) | $ | (7,782) | $ | (6,763) | ||||||||||
Add (less): | ||||||||||||||||||||
Investment and derivative loss (gain), net | 13,199 | (3,909) | 1,313 | 9,032 | 6,763 | |||||||||||||||
Stock-based compensation expense | 2,083 | 523 | 520 | 537 | 503 | |||||||||||||||
Income tax provision (benefit) for TRS investment | 1,280 | 679 | 351 | (137) | 387 | |||||||||||||||
Depreciation of single-family residential properties | 299 | 287 | 12 | — | — | |||||||||||||||
Add back: | ||||||||||||||||||||
TBA dollar roll income | 4,143 | 465 | 1,064 | 1,778 | 836 | |||||||||||||||
Interest rate swap net interest expense | (2,929) | (653) | (379) | (1,187) | (710) | |||||||||||||||
Non-GAAP core operating income | $ | 5,644 | $ | 487 | $ | 1,900 | $ | 2,241 | $ | 1,016 |
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. 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 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
The following tables present information on the Company's investment and hedge portfolio as of December 31, 2021 (unaudited, dollars in thousands):
Investments:
Assets | Capital Allocation (1) | Capital Allocation (%) | Leverage (2) | |||||||||||||
Agency MBS | $ | 483,927 | $ | 91,763 | 32 | % | 4.3 | |||||||||
MSR financing receivables | 125,018 | 125,018 | 43 | % | 0.3 | |||||||||||
Credit investments (3) | 65,627 | 44,946 | 16 | % | 0.5 | |||||||||||
Single-family residential properties | 60,889 | 26,407 | 9 | % | 1.5 | |||||||||||
Total invested capital | 735,461 | 288,134 | 100 | % |
(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 our repurchase agreement financing, long-term secured debt, net payable or receivable for unsettled securities, net contractual forward purchase price of our TBA commitments and financing embedded in its MSR financing receivables less our cash and cash equivalents compared to our investable capital. |
(3) | Includes our net investment of |
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: | ||||||||||||||||||||||||||||||||
$ | 343,689 | $ | 9,916 | $ | 353,605 | $ | (9,213) | $ | 344,392 | $ | 100.20 | 2.00 | % | 7.7 | ||||||||||||||||||
135,598 | 7,146 | 142,744 | (3,218) | 139,526 | 102.90 | 2.50 | % | 5.7 | ||||||||||||||||||||||||
8 | — | 8 | 1 | 9 | 115.14 | 5.50 | % | 4.9 | ||||||||||||||||||||||||
Total/weighted-average | $ | 479,295 | $ | 17,062 | $ | 496,357 | $ | (12,430) | $ | 483,927 | $ | 100.97 | 2.14 | % | 7.2 |
MSR Financing Receivables:
Amortized Cost Basis (1) | Unrealized Gain | Fair Value | ||||||||
$ | 110,835 | $ | 14,183 | $ | 125,018 | |||||
(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 | ||||||||||||||||||||
$ | 157,640 | $ | (40,398) | $ | 3,731 | $ | 7,865 | $ | (3,820) | $ | 125,018 | 0.32 | ||||||||||||||
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 | $ | 14,020,461 | 2.94 | % | 0.25 | % | 11 months | 1.11 | % | 4.38 | $ | 155,195 | ||||||||||||||
Freddie Mac | 223,975 | 2.98 | % | 0.25 | % | 8 months | 1.09 | % | 4.35 | 2,445 | ||||||||||||||||
Total/weighted-average | $ | 14,244,436 | 2.94 | % | 0.25 | % | 11 months | 1.11 | % | 4.38 | $ | 157,640 |
(1) | Calculated as the underlying MSR price divided by the weighted-average servicing fee. |
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 | $ | 50,000 | 0.71 | % | 0.13 | % | (0.58) | % | 1.8 | |||||||||||
3 to less than 10 years | 100,000 | 0.90 | % | 0.13 | % | (0.77) | % | 6.6 | ||||||||||||
Total/weighted-average | $ | 150,000 | 0.84 | % | 0.13 | % | (0.71) | % | 5.0 |
Credit Investments:
Unpaid Principal Balance | Net Unamortized Premiums (Discounts) | Amortized Original Cost Basis | Net Unrealized Gain (Loss) | Fair Value (1) | Market Price | Leverage | Total Return on Capital (2) | |||||||||||||||||||||||||
Commercial mortgage loan | $ | 29,697 | $ | — | $ | 29,697 | $ | — | $ | 29,697 | $ | 100.00 | 2.3 | 10.67 | % | |||||||||||||||||
Business purpose residential MBS (3) | 21,609 | 1,887 | 23,496 | (2,701) | 20,795 | 96.02 | — | 10.52 | % | |||||||||||||||||||||||
Residential solar panel loan ABS | 18,589 | (3,314) | 15,275 | (141) | 15,134 | 81.23 | — | 2.80 | % | |||||||||||||||||||||||
Total/weighted-average | $ | 69,895 | $ | (1,427) | $ | 68,468 | $ | (2,842) | $ | 65,626 | $ | 93.78 | 0.5 | 10.18 | % |
(1) | For credit investments in securities, includes contractual accrued interest receivable. |
(2) | Calculated as an annualized internal rate of return based upon our initial investment, cash received from the investment, cash paid for secured financing costs (if any) and assumes liquidation at quarter-end at an amount equal to estimated fair value plus accrued interest and the payoff of any secured financing and accrued interest thereon (if any). |
(3) | Includes our net investment in a VIE of |
Single-Family Residential Properties:
Market | Number of Properties | Gross Book Value | Average Gross Book Value | Average Square Feet | Average Year Built | |||||||||||||||
Tulsa, OK | 49 | $ | 12,071 | $ | 246 | 1,740 | 2014 | |||||||||||||
Kansas City, MO | 30 | 8,565 | 286 | 1,925 | 2003 | |||||||||||||||
Memphis, TN | 30 | 8,557 | 285 | 1,949 | 2008 | |||||||||||||||
Atlanta, GA | 28 | 8,434 | 301 | 2,487 | 2010 | |||||||||||||||
Huntsville, AL | 25 | 7,527 | 301 | 2,221 | 2012 | |||||||||||||||
Dallas, TX | 21 | 6,994 | 333 | 1,999 | 2013 | |||||||||||||||
Charlotte, NC | 16 | 5,153 | 322 | 1,884 | 2011 | |||||||||||||||
Birmingham, AL | 15 | 3,887 | 259 | 1,659 | 2019 | |||||||||||||||
Total/weighted average | 214 | $ | 61,188 | $ | 286 | 1,980 | 2011 |
Status of Property | Number of Properties | Gross Book Value | ||||||
In rehabilitation | 41 | $ | 11,260 | |||||
In marketing | 59 | 17,375 | ||||||
Leased not yet occupied | 8 | 2,612 | ||||||
Leased and occupied | 106 | 29,941 | ||||||
Total | 214 | $ | 61,188 |
View original content:https://www.prnewswire.com/news-releases/arlington-asset-investment-corp-reports-fourth-quarter-and-full-year-2021-financial-results-301494531.html
SOURCE Arlington Asset Investment Corp.
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