Arlington Asset Investment Corp Reports Second Quarter 2022 Financial Results.

MCLEAN, Va: Arlington Asset Investment Corp. (NYSE: AAIC) (the "Company" or "Arlington") today reported financial results for the quarter ended June 30, 2022.

Second Quarter 2022 Financial Highlights

$6.30 per common share of book value

1.8% increase from March 31, 2022

$0.01 per diluted common share of GAAP net loss attributable to common shareholders

$0.05 per diluted common share of non-GAAP earnings available for distribution (formerly referred to as core operating income)

$0.09 per common share of book value accretion from the repurchase of 3.2% of the outstanding shares of common stock

Purchased an additional 1.1% of the outstanding shares of common stock through August 8, 2022

10.7 million share remaining authorization as of August 8, 2022

1.6 to 1 "at risk" leverage ratio

"Arlington's successful transition from a primarily levered agency MBS strategy to one focused on multiple high return, non-commodity investment channels in mortgage servicing rights ("MSRs"), single-family residential ("SFR") rental properties and select credit investments continued to produce positive results during the second quarter, including a positive economic return for the fourth consecutive quarter.

"The execution of this strategy has enabled the Company to consistently grow book value per share during periods of volatile market conditions while traditional mortgage REITs experienced losses. Over the last twelve months, the Company delivered a 6.1% economic return while its mortgage REIT peers have experienced a negative 10.5% economic return," said J. Rock Tonkel, Jr., the Company's President and Chief Executive Officer.

"The Company's differentiated investment strategy has performed well during both positive and negative market conditions and is positioned to continue to do so. With our largest investment capital allocation in our MSR strategy, the Company's financial results benefited from another strong quarterly performance in our MSR investment portfolio that generated a total annualized return of 41% during the second quarter.

"Within the Company's credit investment strategy, widening of credit spreads has created compelling new investment opportunities in high quality assets. Late in the second quarter, the Company made several investments in highly rated senior commercial mortgage bonds that offer double digit levered returns and is actively evaluating similar investment opportunities.

"As of today, the Company has essentially reached its stated goal of $200 million of SFR rental properties with a total committed investment of $197 million and a strong expected net unlevered rental yield of 4.8%. The Company previously announced that it had entered into an agreement to sell a portion of its SFR portfolio with an expected closing date later this month at a significant gain that would be expected to add approximately $0.50 per share to our second quarter book value if consummated. Assuming the sale is completed, we have the ability to grow our SFR investment portfolio back to approximately $200 million, subject to market conditions, to fully realize the benefit of our below market fixed rate five-year financing facility. However, we will take a disciplined approach in purchasing new homes in the near term as the residential housing market evolves in the current environment.

"We continue to believe there is greater value in Arlington's business than the public markets recognize. Since reinstituting our current common stock repurchase program in 2020, the Company has aggressively returned capital to shareholders by purchasing 25% of its outstanding shares, delivering $0.75 per share of accretion to shareholders.

"Having successfully positioned Arlington to preserve capital and grow book value per share, the Company now has the opportunity to capitalize on substantially wider investment spreads with superior risk adjusted returns in the low to mid-teens in high grade residential and commercial mortgage securitized products. We expect that the redeployment of capital into these higher return investments will drive greater earnings potential which can be used to increase our equity capital, return capital to shareholders through accretive stock repurchases or reinstate a dividend to common shareholders."

Second Quarter Investment Portfolio

As of June 30, 2022, the Company's investment portfolio capital allocation was as follows (dollars in thousands):

June 30, 2022

Assets

Invested Capital

Allocation (1)

Invested Capital

Allocation (%)

Leverage (2)

MSR financing receivables

$

120,260

$

120,260

41

%

0.5

Single-family residential properties

182,783

64,605

22

%

1.9

Credit investments (3)

168,432

63,058

21

%

1.7

Agency MBS (4)

235,781

48,102

16

%

4.0

Total invested capital

$

707,256

296,025

100

%

Cash and other corporate capital

5,486

Total investable capital

$

301,511

1.6

(1)

Our investable capital is calculated as the sum of our shareholders' equity capital plus accumulated depreciation of our single-family residential properties and long-term unsecured debt.

(2)

Our leverage is measured as the ratio of the sum of our repurchase agreement financing, long-term debt secured by single-family residential properties, net payable or receivable for unsettled securities, net contractual forward purchase (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 $25,529 in two variable interest entities with gross assets and liabilities of $231,301 and $205,772, respectively, that are consolidated for GAAP financial reporting purposes.

(4)

Agency MBS assets include the fair value of the agency MBS which underlie the Company's to-be-announced ("TBA") forward purchase and sale commitments. In accordance with GAAP, the Company's 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 June 30, 2022, the fair value of the agency MBS that underlie the Company's net short position in TBA commitments had a fair value of $(146,576) and a net carrying value of $337.

MSR Related Investments

The Company is party to agreements with a licensed...