Arlington Asset Investment (AAIC) 8-K Arlington Asset Investment Corp. Reports

Contacts:

Media: 703.469.1004 or media@arlingtonasset.com

Investors: Kurt Harrington at 703.469.1080 or ir@arlingtonasset.com

Arlington Asset Investment Corp. Reports

2008 Financial Results

ARLINGTON, VA, March 16, 2009 – Arlington Asset Investment Corp. (the Company), formerly Friedman, Billings, Ramsey Group, Inc., (NYSE: FBR) today reported a net after-tax loss of $268.5 million for the quarter ended December 31, 2008, or $1.77 per share (diluted), compared to net after-tax loss of $270.4 million, or $1.77 per share (diluted), for the fourth quarter of 2007. The Company’s net after-tax loss for the year was $417.5 million, or $2.76 per share (diluted), compared to a net after-tax loss of $658.6 million, or $3.94 per share (diluted) for the year ended December 31, 2007.

Subsequent to December 31, 2008 and through March 13, 2009, the Company continued its previously announced plan to downsize its mortgage-backed securities (MBS) portfolio and fund the extinguishment of its trust preferred debt at a significant discount.  To date in the first quarter of 2009, the Company extinguished $201.7 million of trust preferred debt, recognizing a gain of $131.5 million.  The Company intends to revoke its REIT status effective as of January 1, 2009 in order to maximize the use of its net operating loss, or NOL, carry-forwards.

After taking into consideration the extinguishment of the trust preferred debt and related MBS sales subsequent to year-end, the Company’s consolidated tangible equity at year end would have been $124.6 million, or $0.82 per share.  This includes the Company’s proportionate share of the equity book value of FBR Capital Markets Corporation.

As of March 16, 2009, excluding its interest in FBR Capital Markets Corporation, the Company expects to have $17.8 million in cash as well as $37.1 million of MBS, including $27.3 million of agency fixed-rate MBS, $30.1 million of total MBS repo financing and $50.0 million of trust preferred debt. The Company also had $6.3 million of merchant banking and other long-term investments and no remaining subprime exposure. The Company’s remaining NOL and NCL, net capital loss, carry-forwards equaled $259.6 million and $597.4 million, respectively.

Net loss for the fourth quarter of 2008 of $268.5 million includes:

·   $3.8 million of operating cash loss at the Company, excluding investment losses and $3.6 million of non-cash compensation charges;

·   $35.0 million gain on the extinguishment of $59.1 million of trust preferred debt;

·   $217.1 million of investment loss;

·   $66.9 million of losses, net of minority interest and buy-back gain, relating to FBR Capital Markets Corporation; and

·   $12.1 million of costs related to non-recurring activities and taxes.

On February 23, 2009, the Company announced that it has begun doing business under the name “Arlington Asset Investment Corp.” and that it will seek shareholder approval at the next annual meeting of shareholders of a proposal to amend its charter to change its corporate name from “Friedman, Billings, Ramsey Group, Inc.” to “Arlington Asset Investment Corp.” The Company has notified the New York Stock Exchange (NYSE) of the name change and received the approval from the NYSE to change the ticker symbol to “AI” from “FBR” and will issue a press release when the symbol change becomes effective. 

Complete fourth quarter 2008 financial results and tables for FBR Capital Markets Corporation can be found at www.fbrcapitalmarkets.com.

Arlington Asset Investment Corp. (NYSE: FBR) is a real estate investment trust headquartered in the Washington, D.C. metropolitan area.  For more information, please visit www.arlingtonasset.com. 

Statements concerning future performance, developments, events, market forecasts, revenues, expenses, earnings, run rates 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 mortgage pre-payment speeds, risks associated with merchant banking investments, the realization of gains and losses on principal investments, available technologies, competition for business and personnel, and general economic, political and market conditions. These and other risks are described in the Company's Annual Report and Form 10-K and quarterly reports on Form 10-Q that are available from the Company and from the SEC.

Financial data follow.

ARLINGTON ASSET INVESTMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)

				Quarter Ended
				December 31,
	2008			2007
REVENUES:
Investment banking:
Capital raising	$	745		$	25,648
Advisory		5,306			4,973
Institutional brokerage:
Principal transactions		6,807			2,996
Agency commissions		28,816			26,153
Asset management:
Base management fees		2,827			5,542
Incentive allocations and fees		-			99
Principal investment:
Interest		16,486			50,998
Net investment loss		(283,077	)		(22,327	)
Dividends		452			805
Mortgage banking:
Interest		-			4,059
Net investment loss		-			(83,174	)
Other		904			3,242
Total revenues		(220,734	)		19,014
Interest expense		14,313			52,583
Revenues, net of interest expense		(235,047	)		(33,569	)
NON-INTEREST EXPENSES:
Compensation and benefits		56,860			69,533
Professional services		7,550			15,598
Business development		6,295			10,878
Clearing and brokerage fees		3,235			2,797
Occupancy and equipment		8,441			13,791
Communications		6,374			6,899
Other operating expenses		16,205			15,706
Goodwill impairment		-			108,013
Restructuring charges		-			21,466
Total non-interest expenses		104,960			264,681
Operating loss		(340,007	)		(298,250	)
OTHER INCOME:
Gain on subsidiary share transactions		8,005			4
Gain on reduction in long-term debt		35,005			-
Other income		2			-
Loss before income taxes and minority interest		(296,995	)		(298,246	)
Income tax provision (benefit)		27,311			(15,817	)
Minority interest in losses of consolidated subsidiary		(55,814	)		(12,008	)
Net loss	$	(268,492	)	$	(270,421	)
Basic loss per share	$	(1.77	)	$	(1.77	)
Diluted loss per share	$	(1.77	)	$	(1.77	)
Weighted average shares  - basic		151,270			152,375
Weighted average shares  - diluted		151,270			152,375

ARLINGTON ASSET INVESTMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)

				Twelve Months Ended
				December 31,
	2008			2007
REVENUES:
Investment banking:
Capital raising	$	76,380		$	282,619
Advisory		20,573			34,063
Institutional brokerage:
Principal transactions		20,262			10,152
Agency commissions		118,397			104,792
Asset management:
Base management fees		15,334			23,549
Incentive allocations and fees		-			401
Principal investment:
Interest		100,284			497,256
Net investment loss		(471,714	)		(216,429	)
Dividends		1,446			3,173
Mortgage banking:
Interest		36			51,245
Net investment income (loss)		463			(222,032	)
Other		6,719			15,808
Total revenues		(111,820	)		584,597
Interest expense		85,208			477,437
Revenues, net of interest expense		(197,028	)		107,160
NON-INTEREST EXPENSES:
Compensation and benefits		248,895			361,355
Professional services		40,951			55,741
Business development		30,663			43,518
Clearing and brokerage fees		14,092			12,514
Occupancy and equipment		34,492			52,302
Communications		24,420			28,690
Other operating expenses		35,312			82,246
Goodwill impairment		-			162,765
Restructuring charges		-			46,985
Total non-interest expenses		428,825			846,116
Operating loss		(625,853	)		(738,956	)
OTHER INCOME:
Gain on subsidiary share transactions		7,809			104,062
Gain on reduction in long-term debt		39,083			-
Gain on disposition of subsidiary and other income		73,039			-
Loss before income taxes and minority interest		(505,922	)		(634,894	)
Income tax (benefit) provision		(1,592	)		22,932
Minority interest in (losses) earnings of consolidated subsidiary		(86,867	)		774
Net loss	$	(417,463	)	$	(658,600	)
Basic loss per share	$	(2.76	)	$	(3.94	)
Diluted loss per share	$	(2.76	)	$	(3.94	)
Weighted average shares - basic		151,168			166,975
Weighted average shares  - diluted		151,168			166,975

ARLINGTON ASSET INVESTMENT CORP.
Financial & Statistical Supplement - Operating Results
(Dollars in thousands, except per share data)
(Unaudited)

	Year- Ended
	December 31, 2008				Q-4 08			Q-3 08			Q-2 08			Q-1 08
Revenues
Investment banking:
Capital raising	$	76,380		$	745		$	6,763		$	3,962		$	64,910
Advisory		20,573			5,306			5,999			4,192			5,076
Institutional brokerage:
Principal transactions		20,262			6,807			2,610			4,888			5,957
Agency commissions		118,397			28,816			33,813			29,918			25,850
Asset management:
Base management fees		15,334			2,827			3,710			4,153			4,644
Principal investment:
Interest		100,284			16,486			31,057			26,827			25,914
Net investment loss		(471,714	)		(283,077	)		(164,153	)		(4,797	)		(19,687	)
Dividends		1,446			452			307			258			429
Mortgage banking:
Interest		36			-			-			-			36
Net investment income (loss)		463			-			-			(5	)		468
Other		6,719			904			1,548			1,932			2,335
Total revenues		(111,820	)		(220,734	)		(78,346	)		71,328			115,932
Interest expense		85,208			14,313			25,387			21,858			23,650
Revenues, net of interest expense		(197,028	)		(235,047	)		(103,733	)		49,470			92,282
Non-interest expenses
Compensation and benefits		248,895			56,860			61,111			53,970			76,954
Professional services		40,951			7,550			10,442			10,492			12,467
Business development		30,663			6,295			5,262			6,812			12,294
Clearing and brokerage fees		14,092			3,235			3,834			3,393			3,630
Occupancy and equipment		34,492			8,441			8,282			8,580			9,189
Communications		24,420			6,374			5,773			6,255			6,018
Other operating expenses		35,312			16,205			6,668			7,055			5,384
Total non-interest expenses		428,825			104,960			101,372			96,557			125,936
Operating loss		(625,853	)		(340,007	)		(205,105	)		(47,087	)		(33,654	)
Other income (loss)
Gain (loss) on subsidiary share transactions		7,809			8,005			(4	)		(192	)		-
Gain on reduction in long-term debt		39,083			35,005			4,078
Gain on disposition of subsidiary and other income		73,039			2			-			-			73,037
(Loss) income before income taxes and minority interest		(505,922	)		(296,995	)		(201,031	)		(47,279	)		39,383
Income tax (benefit) provision		(1,592	)		27,311			(18,123	)		(9,974	)		(806	)
Minority interest in losses of consolidated subsidiary		(86,867	)		(55,814	)		(13,886	)		(12,254	)		(4,913	)
Net (loss) income	$	(417,463	)	$	(268,492	)	$	(169,022	)	$	(25,051	)	$	45,102
Total shareholders' equity	$	13,583		$	13,583		$	268,097		$	343,686		$	344,408
Total shareholders' equity, net of AOCI (1)	$	13,701		$	13,701		$	274,547		$	436,093		$	455,761
Basic (loss) earnings per share	$	(2.76	)	$	(1.77	)	$	(1.12	)	$	(0.17	)	$	0.30
Diluted (loss) earnings per share	$	(2.76	)	$	(1.77	)	$	(1.12	)	$	(0.17	)	$	0.30
Ending shares outstanding (in thousands)		151,221			151,221			151,352			150,989			150,915
Book value per share	$	0.09		$	0.09		$	1.77		$	2.28		$	2.28
Book value per share, net of AOCI (1)	$	0.09		$	0.09		$	1.81		$	2.89		$	3.02

Employee count 579 579 666 719 726

(1) Accumulated Other Comprehensive Income (AOCI) includes changes in value of available-for-sale securities and cash flow hedges.  We believe that such changes represent temporary market fluctuations, are not reflective of our market strategy, and therefore, exclusion of AOCI provides a reasonable basis for calculating returns.

ARLINGTON ASSET INVESTMENT CORP.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)

ASSETS	31-Dec-08			31-Dec-07
Cash and cash equivalents	$	254,653		$	692,360
Restricted cash		-			14,166
Receivables		33,949			75,357
Investments:
Mortgage-backed securities, at fair value		594,294			1,791,480
U.S. Treasury bonds, at fair value		550,000			-
Loans held for sale, net		-			65,074
Long-term investments		54,976			169,274
Trading securities, at fair value		17,954			19,057
Due from clearing broker		-			-
Derivative assets, at fair value		264			3,514
Intangible assets, net		8,943			9,837
Furniture, equipment, software and leasehold improvements, net		24,442			30,451
Prepaid expenses and other assets		20,816			74,385
Total assets	$	1,560,291		$	2,944,955
LIABILITIES AND SHAREHOLDERS ’ EQUITY
Liabilities:
Trading account securities sold but not yet purchased, at fair value	$	8,325		$	206
Repurchase agreements		1,063,040			1,744,377
Securities purchased		-			-
Derivative liabilities, at fair value		56			3,558
Interest payable		2,064			5,746
Accrued compensation and benefits		47,259			57,000
Due to clearing broker		3,009			7,059
Accounts payable, accrued expenses and other liabilities		38,925			105,456
Short-term loan financing		-			63,981
Long-term debt		254,357			320,820
Total liabilities		1,417,035			2,308,203
Minority interest		129,673			243,061
Shareholders' equity:
Common stock, 159,217 and 151,883 shares		1,592			1,519
Additional paid-in capital		1,493,130			1,468,801
Accumulated other comprehensive loss, net of taxes		(118	)		(13,071	)
Accumulated deficit		(1,481,021	)		(1,063,558	)
Total shareholders' equity		13,583			393,691
Total liabilities and shareholders' equity	$	1,560,291		$	2,944,955