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Arlington Asset Investment Corp. Reports Operating Results (10-K)

February 23, 2012 | About:
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10qk

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Arlington Asset Investment Corp. (AI) filed Annual Report for the period ended 2011-12-31.

Arlington Asset has a market cap of $184.1 million; its shares were traded at around $23.84 with a P/E ratio of 4.2 and P/S ratio of 4.3. The dividend yield of Arlington Asset stocks is 14.6%.

Highlight of Business Operations:

During 2011, we redeployed approximately $74 million of capital from sales of private-label MBS, primarily to our agency-backed MBS portfolio. As of December 31, 2011, our leveraged agency-backed MBS portfolio consisted of $591.1 million in face value with a cost basis of $609.1 million and a fair value of $637.0 million. This migration of capital to agency-backed MBS portfolio during 2011 contributed significantly to the increase in net interest income and growth in distributable income and dividends to our shareholders. As a result, our non-GAAP core operating income also increased significantly, $46.4 million for the year ended December 31, 2011 compared to $31.2 million for the year ended December 31, 2010. Given current market conditions, while no assurance can be given, we intend to continue to deploy additional capital to our agency-backed MBS portfolio with the objective of further increasing net interest income and non-GAAP core operating income.

During 2011, we redeployed approximately $74 million of capital from sales of private-label MBS, primarily to our agency-backed MBS portfolio. As of December 31, 2011, our leveraged agency-backed MBS portfolio consisted of $591.1 million in face value with a cost basis of $609.1 million and a fair value of $637.0 million. This migration of capital to agency-backed MBS portfolio during 2011 contributed significantly to the increase in net interest income and growth in distributable income and dividends to our shareholders. As a result, our non-GAAP core operating income also increased significantly, $46.4 million for the year ended December 31, 2011 compared to $31.2 million for the year ended December 31, 2010. Given current market conditions, while no assurance can be given, we intend to continue to deploy additional capital to our agency-backed MBS portfolio with the objective of further increasing net interest income and non-GAAP core operating income.

In addition to the financial results reported in accordance with generally accepted accounting principles as consistently applied in the United States (GAAP), we calculated non-GAAP core operating income for the years ended December 31, 2011 and 2010. Our core operating income for the years ended December 31, 2011 and 2010 was $46.4 million and $31.2 million, respectively. In determining core operating income, we excluded certain costs and the following non-cash expenses: (1) compensation costs associated with stock-based awards, (2) accretion of MBS purchase discounts adjusted for principal repayments in excess of proportionate invested capital, (3) unrealized mark-to-market adjustments on the trading MBS and hedge instruments and (4) other-than-temporary impairment charges recognized. This non-GAAP measurement is used by management to analyze and assess the operating results and dividends. We believe that this non-GAAP measurement assists investors in understanding the impact of these non-core items and non-cash expenses on our performance and provides additional clarity around our forward earnings capacity and trend. A limitation of utilizing this non-GAAP measure is that the GAAP accounting effects of these events do in fact reflect the underlying financial results of our business and these effects should not be ignored in evaluating and analyzing our financial results. Therefore, we believe net income on a GAAP basis and core operating income on a non-GAAP basis should be considered together.

The realized gains on sale of available-for-sale investments, net, recognized for the year ended December 31, 2011 were primarily the result of proceeds received of $79.2 million from the sales of $119.0 million in face value of MBS at a net gain of $13.0 million and realized net gains from the sale of other investments of $1.9 million as compared to the result of proceeds received of $253.1 million from the sales of $335.0 million in face value of MBS at a net gain of $10.0 million for the year ended December 31, 2010.

The realized gains on sale of available-for-sale investments, net, recognized for the year ended December 31, 2010 were primarily the result of proceeds received of $253.1 million from sales of $335.0 million in face value of MBS at a net gain of $10.0 million as compared to the result of proceeds received of $600.3 million from sales of $687.4 million in face value of MBS at a net gain of $4.6 million for the year ended December 31, 2009.

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