Arlington Asset Investment Corp. (AI, Financial) filed Quarterly Report for the period ended 2009-06-30.
Arlington Asset Investment Corporation is a publicly traded company that invests on a leveraged basis in residential mortgage-backed securities (MBS) including collateralized mortgage obligations (CMOs). These CMOs are either issued by a United States Government agency or guaranteed as to principal and interest by United States Government agencies or United States Government-sponsored entities. The Company also invests in both AAA-rated MBS issued by private organizations (private-label MBS) and net interest margin securities and it holds merchant banking investments. In addition to this the company owns approximately 39% interest in FBR Capital Markets Corporation. FBR Capital Markets Corporation is a holding company for various subsidiaries that conducts capital markets asset management and merchant banking businesses. Arlington Asset Investment Corp. has a market cap of $73.12 million; its shares were traded at around $0.46 with and P/S ratio of 0.13.
During the quarter ended June 30, 2009, we began our efforts to re-build our mortgage-backed securities (MBS) portfolio. Our strategy is to be selective in identifying non-agency senior MBSs that could provide attractive loss-adjusted yield on an unlevered basis. As of June 30, 2009, the Company had $29.9 million in unlevered non-agency MBS. We are also continuing to invest in agency MBS on a leveraged basis as we believe that these investments will provide attractive risk-adjusted returns given the current environment. As of June 30, 2009, the Company had $119.4 million in its agency MBS portfolio. We will continue to evaluate investment opportunities against the returns available in each of our investment alternatives and endeavor to allocate our assets and capital with an emphasis toward the highest risk-adjusted return available. This strategy may cause us to have different allocations of capital in different environments.
The Company recorded net interest income of $1.2 million and $8.5 million from MBS held in its principal investment portfolio for the three months ended June 30, 2009 and 2008, respectively. The Company recorded net interest income of $3.6 million and $14.9 million from MBS held in its principal investment portfolio for the six months ended June 30, 2009 and 2008, respectively. The decrease in net interest income during the three and six months ended June 30, 2009 is due mainly to the decrease in the average balance of MBS investments held in our portfolio offset by the increase in the average yield.
The total value of our merchant banking portfolio and other investments was $75.4 million as of June 30, 2009. Of this total, $71.3 million represents an investment in FBR Capital Markets, $2.6 million was held in the merchant banking portfolio and $1.5 million was held in alternative asset funds. Net unrealized losses in the merchant banking portfolio included in accumulated other comprehensive income (AOCI) totaled $0.1 million as of June 30, 2009.
During the three and six months ended June 30, 2009, we recorded $0.5 million and $1.5 million, respectively, in other-than-temporary impairment write-downs as part of the Companys quarterly assessments of unrealized losses in its portfolio.
As shown in the table above, net interest income decreased by $7.7 million to $1.2 million during the three months ended June 30, 2009 compared to $8.9 million during the three months ended June 30, 2008. This decrease in interest income was primarily due to a lower average balance on the MBS portfolio.
Read the The complete ReportAI is in the portfolios of NWQ Managers of NWQ Investment Management Co, Charles Brandes of Brandes Investment.
Arlington Asset Investment Corporation is a publicly traded company that invests on a leveraged basis in residential mortgage-backed securities (MBS) including collateralized mortgage obligations (CMOs). These CMOs are either issued by a United States Government agency or guaranteed as to principal and interest by United States Government agencies or United States Government-sponsored entities. The Company also invests in both AAA-rated MBS issued by private organizations (private-label MBS) and net interest margin securities and it holds merchant banking investments. In addition to this the company owns approximately 39% interest in FBR Capital Markets Corporation. FBR Capital Markets Corporation is a holding company for various subsidiaries that conducts capital markets asset management and merchant banking businesses. Arlington Asset Investment Corp. has a market cap of $73.12 million; its shares were traded at around $0.46 with and P/S ratio of 0.13.
Highlight of Business Operations:
As discussed above, on May 20 and June 19, 2009, we liquidated 16,667,000 and 1,500,000 shares of FBR Capital Markets common stock, respectively, resulting in remaining holdings representing an approximately 39% and 24% interest in FBR Capital Markets, respectively. As a result, effective May 20, 2009, we deconsolidated the results of FBR Capital Markets activities in preparing the Companys consolidated financial statements. The Company recorded $9.8 million of losses related to the sales of FBR Capital Markets stock and $4.0 million of losses related to the fair value measurement of the remaining shares during the quarter ended June 30, 2009. With the sale of FBR Capital Markets stock on May 20, 2009 and resulting deconsolidation, the Company elected to adopt the provisions of SFAS 159 to apply fair value accounting for the remaining shares of its FBR CapitalDuring the quarter ended June 30, 2009, we began our efforts to re-build our mortgage-backed securities (MBS) portfolio. Our strategy is to be selective in identifying non-agency senior MBSs that could provide attractive loss-adjusted yield on an unlevered basis. As of June 30, 2009, the Company had $29.9 million in unlevered non-agency MBS. We are also continuing to invest in agency MBS on a leveraged basis as we believe that these investments will provide attractive risk-adjusted returns given the current environment. As of June 30, 2009, the Company had $119.4 million in its agency MBS portfolio. We will continue to evaluate investment opportunities against the returns available in each of our investment alternatives and endeavor to allocate our assets and capital with an emphasis toward the highest risk-adjusted return available. This strategy may cause us to have different allocations of capital in different environments.
The Company recorded net interest income of $1.2 million and $8.5 million from MBS held in its principal investment portfolio for the three months ended June 30, 2009 and 2008, respectively. The Company recorded net interest income of $3.6 million and $14.9 million from MBS held in its principal investment portfolio for the six months ended June 30, 2009 and 2008, respectively. The decrease in net interest income during the three and six months ended June 30, 2009 is due mainly to the decrease in the average balance of MBS investments held in our portfolio offset by the increase in the average yield.
The total value of our merchant banking portfolio and other investments was $75.4 million as of June 30, 2009. Of this total, $71.3 million represents an investment in FBR Capital Markets, $2.6 million was held in the merchant banking portfolio and $1.5 million was held in alternative asset funds. Net unrealized losses in the merchant banking portfolio included in accumulated other comprehensive income (AOCI) totaled $0.1 million as of June 30, 2009.
During the three and six months ended June 30, 2009, we recorded $0.5 million and $1.5 million, respectively, in other-than-temporary impairment write-downs as part of the Companys quarterly assessments of unrealized losses in its portfolio.
As shown in the table above, net interest income decreased by $7.7 million to $1.2 million during the three months ended June 30, 2009 compared to $8.9 million during the three months ended June 30, 2008. This decrease in interest income was primarily due to a lower average balance on the MBS portfolio.
Read the The complete ReportAI is in the portfolios of NWQ Managers of NWQ Investment Management Co, Charles Brandes of Brandes Investment.
