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
First Quarter 2009 Financial Results
ARLINGTON, Va., May 8, 2009 – Arlington Asset Investment Corp. (the Company), formerly Friedman, Billings, Ramsey Group, Inc., (NYSE: FBR) today reported net after-tax income of $101.6 million for the quarter ended March 31, 2009, or $0.67 per share (diluted), compared to net after-tax income of $45.1 million for the first quarter of 2008, and a net after-tax loss of $268.5 million for the fourth quarter of 2008. As of March 31, 2009, book value per share for FBR Group shareholders’ equity was $0.79.
During the quarter ended March 31, 2009, the Company extinguished $201.7 million of trust preferred debt, recognizing a gain of $132.5 million. Although, there are no assurances of completion, the Company intends to continue its program to extinguish the remaining $50.0 million of trust preferred debt outstanding at March 31, 2009.
Additionally, effective January 1, 2009, the Company elected to discontinue its status as a real-estate investment trust in order to utilize its net operating loss carry-forwards. As of March 31, 2009, the Company’s net operating loss carry-forwards and net capital loss carry-forwards were approximately $320 million and $600 million, respectively.
First Quarter Highlights
Net income of $101.6 million for the first quarter of 2009, reflecting both cash and non-cash items, includes the following:
| | · | $3.1 million of operating cash loss at FBR Group, excluding $7.0 million of non-cash compensation charges; |
| | · | $132.5 million gain on the extinguishment of $201.7 million of trust preferred debt; |
| | · | $9.3 million of losses, net of minority interest, relating to FBR Capital Markets; |
| | · | $8.9 million of primarily state income tax provision related to the gain on the debt extinguishment; and |
| | · | $2.6 million of costs related to non-recurring activities. |
On April 7, 2009, the Company settled its previously disclosed bankruptcy matter regarding First NLC. Under the settlement agreement, the Trustee released all claims that the Trustee or the bankruptcy estate of First NLC may have against the Company and its officers, directors, employees and affiliates in exchange for the payment by the Company of approximately $4.0 million, which the Company accrued for as of December 31, 2008 and paid on April 20, 2009. Under the settlement agreement, the Company and each of the officers, directors, employees and affiliates released all claims against the Trustee and the First NLC bankruptcy estate.
About the Company
Arlington Asset Investment Corp. (NYSE: FBR) invests in mortgage-related assets and merchant banking opportunities and is the majority owner of FBR Capital Markets Corporation, a separate publicly traded company. The Company is headquartered in the Washington, D.C. metropolitan area. For more information, please visit www.arlingtonasset.com.
Complete first quarter 2009 financial results and tables for FBR Capital Markets can be found at www.fbrcapitalmarkets.com.
Statements concerning future performance, plans and steps to position the Company to realize value, 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, regulatory and market conditions. These and other risks are described in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q that are available from the Company and from the SEC.
Financial data follows.
ARLINGTON ASSET INVESTMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| (Dollars in thousands, except per share amounts) | | Quarter Ended | |
| (Unaudited) | | March 31, | |
| | | | | | | |
| | | 2009 | | | 2008 | |
| REVENUES: | | | | | | |
| Capital markets | | $ | 49,903 | | | $ | 104,079 | |
| Principal investment: | | | | | | | | |
| Interest | | | 2,600 | | | | 24,852 | |
| Net investment income (loss) | | | 6 | | | | (14,659 | ) |
| Dividends | | | - | | | | 206 | |
| Other | | | - | | | | 1,454 | |
| Total revenues | | | 52,509 | | | | 115,932 | |
| Interest expense | | | 2,763 | | | | 23,650 | |
| Revenues, net of interest expense | | | 49,746 | | | | 92,282 | |
| | | | | | | | | |
| NON-INTEREST EXPENSES: | | | | | | | | |
| Compensation and benefits | | | 45,137 | | | | 76,954 | |
| Professional services | | | 4,769 | | | | 12,467 | |
| Business development | | | 5,981 | | | | 12,294 | |
| Clearing and brokerage fees | | | 3,297 | | | | 3,630 | |
| Occupancy and equipment | | | 8,105 | | | | 9,189 | |
| Communications | | | 5,227 | | | | 6,018 | |
| Other operating expenses | | | 5,325 | | | | 5,384 | |
| Total non-interest expenses | | | 77,841 | | | | 125,936 | |
| | | | | | | | | |
| Operating loss | | | (28,095 | ) | | | (33,654 | ) |
| | | | | | | | | |
| OTHER INCOME: | | | | | | | | |
| Gain on extinguishment of long-term debt | | | 132,453 | | | | - | |
| Other (loss) income | | | (139 | ) | | | 73,037 | |
| | | | | | | | | |
| Income before income taxes and noncontrolling interest | | | 104,219 | | | | 39,383 | |
| | | | | | | | | |
| Income tax provision (benefit) | | | 9,555 | | | | (806 | ) |
| Net income | | | 94,664 | | | | 40,189 | |
| Less: Net loss attributable to the noncontrolling interest of consolidated subsidiary | | | (6,900 | ) | | | (4,913 | ) |
| Net income attributable to FBR Group shareholders | | $ | 101,564 | | | $ | 45,102 | |
| | | | | | | | | |
| Basic earnings per share attributable to FBR Group | | $ | 0.67 | | | $ | 0.30 | |
| Diluted earnings per share attributable to FBR Group | | $ | 0.67 | | | $ | 0.30 | |
| | | | | | | | | |
| Weighted average shares - basic (in thousands) | | | 152,349 | | | | 150,784 | |
| Weighted average shares - diluted (in thousands) | | | 152,440 | | | | 151,419 | |
ARLINGTON ASSET INVESTMENT CORP.
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands, except per share amounts)
(Unaudited)
| | | 31-Mar-09 | | | 31-Dec-08 | |
| ASSETS | | | | | | |
| Cash and cash equivalents | | $ | 224,566 | | | $ | 254,653 | |
| Receivables: | | | | | | | | |
| Interest | | | 495 | | | | 1,378 | |
| Other | | | 17,493 | | | | 32,571 | |
| Investments: | | | | | | | | |
| Mortgage-backed securities, at fair value | | | 38,347 | | | | 594,294 | |
| U.S. Treasury bonds, at fair value | | | - | | | | 550,000 | |
| Long-term investments | | | 44,927 | | | | 54,976 | |
| Trading securities, at fair value | | | 30,773 | | | | 17,954 | |
| Due from clearing broker | | | 3,734 | | | | - | |
| Derivative assets, at fair value | | | - | | | | 264 | |
| Intangible assets, net | | | 8,605 | | | | 8,943 | |
| Furniture, equipment, software and leasehold improvements, net | | | 22,238 | | | | 24,442 | |
| Prepaid expenses and other assets | | | 8,092 | | | | 20,816 | |
| Total assets | | $ | 399,270 | | | $ | 1,560,291 | |
| | | | | | | | |
| LIABILITIES AND EQUITY | | | | | | | | |
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Trading account securities sold but | | $ | 12,402 | | | $ | 8,325 | |
| not yet purchased, at fair value | | | | | | | | |
| Repurchase agreements | | | 26,194 | | | | 1,063,040 | |
| Derivative liabilities, at fair value | | | 66 | | | | 56 | |
| Interest payable | | | 418 | | | | 2,064 | |
| Accrued compensation and benefits | | | 30,022 | | | | 47,259 | |
| Due to clearing broker | | | - | | | | 3,009 | |
| Accounts payable, accrued expenses and other liabilities | | | 31,135 | | | | 38,925 | |
| Long-term debt | | | 51,736 | | | | 254,357 | |
| Total liabilities | | | 151,973 | | | | 1,417,035 | |
| | | | | | | | |
| Equity: | | | | | | | | |
| Common stock, 158,957 and 159,217 shares issued and outstanding | | | 1,590 | | | | 1,592 | |
| Additional paid-in capital | | | 1,499,802 | | | | 1,493,130 | |
| Accumulated other comprehensive loss, net of taxes | | | (230 | ) | | | (118 | ) |
| Accumulated deficit | | | (1,379,457 | ) | | | (1,481,021 | ) |
Total FBR Group shareholders' equity | | | 121,705 | | | | 13,583 | |
| Noncontrolling interest | | | 125,592 | | | | 129,673 | |
| Total equity | | | 247,297 | | | | 143,256 | |
| | | | | | | | | |
| Total liabilities and equity | | $ | 399,270 | | | $ | 1,560,291 | |
| | | | | | | | | |
| Book value per share - FBR Group shareholders' equity | | $ | 0.79 | | | $ | 0.79 | |
| | | | | | | | | |
| Book value per share - total equity | | $ | 1.61 | | | $ | 0.95 | |
| | | | | | | | | |
| Shares outstanding (in thousands) | | | 153,831 | | | | 151,221 | |
