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ARLINGTON, Va., July 22, 2019 – Shares of Arlington Asset Investment Corp. (NYSE: AI) lost -0.76% to $6.51. The stock traded total volume of 406.238K shares lower than the average volume of 444.74K shares.
Arlington Asset Investment Corp. (AI) reported first-quarter net income of $17.60M, after reporting a loss in the same period a year earlier. The company, based in Arlington, Virginia, said it had earnings of 52 cents per share. Earnings, adjusted for non-recurring gains, came to 32 cents per share.
Other First Quarter Highlights:
As of March 31, 2019, the Company’s agency MBS investment portfolio totaled $5,118.0M in fair value, consisting of $4,192.0M of specified agency MBS and $926.0M of net long to-be-declared (“TBA”) agency MBS. As of March 31, 2019, the Company’s $5,118.0M agency MBS investment portfolio was comprised of the following:
- $230.0M of 4.0% coupon 20-year agency MBS
- $214.0M of 3.5% coupon 30-year agency MBS
- $3,356.0M of 4.0% coupon 30-year agency MBS
- $1,318.0M of 4.5% coupon 30-year agency MBS
As of March 31, 2019, the Company’s $4,192.0M specified agency MBS portfolio had a weighted average amortized cost basis of $104.40 and a weighted average market price of $104.59. The Company’s fixed-rate agency MBS are comprised of securities backed by specified pools of mortgage loans selected for their lower propensity for prepayment. Weighted average pay-up premiums on the Company’s agency MBS portfolio, which represent the estimated price premium of agency MBS backed by specified pools over a generic TBA agency MBS, were about 1.2 percentage points as of March 31, 2019, contrast to three-fifths of a percentage point as of December 31, 2018.
As of March 31, 2019, the Company had $3,964.0M of repurchase agreements outstanding with a weighted average rate of 2.73% and remaining weighted average maturity of 21 days secured by an aggregate of $4,198.0M of agency MBS at fair value, which includes $323.0M at sale price of unsettled agency MBS sale commitments which is included in the line item “sold securities receivable” in the Company’s financial statements. The Company’s “at risk” short-term recourse financing to investable capital ratio was 11.0 to 1 as of March 31, 2019 contrast to 10.6 to 1 as of December 31, 2018. The Company’s “at risk” short-term recourse financing to investable capital is measured as the ratio of the sum of the Company’s repurchase agreement financing, net payable or receivable for unsettled securities and net contractual price of TBA commitments less cash and cash equivalents contrast to the Company’s investable capital measured as the sum of the Company’s shareholders’ equity and long-term unsecured debt.
GAAP net interest income was $7.90M for the first quarter of 2019 contrast to $10.60M for the fourth quarter of 2018, counting the amortization of the Company’s net premium on its agency MBS of $5.90M for the first quarter of 2019 contrast to $7.20M for the fourth quarter of 2018. The Company’s weighted average yield on its agency MBS was 3.36% for the first quarter of 2019 contrast to 3.30% for the fourth quarter of 2018, and the actual weighted-average constant prepayment rate (“CPR”) for the Company’s agency MBS was 7.55% for the first quarter of 2019 contrast to 8.25% for the fourth quarter of 2018. The Company’s weighted average cost of repurchase agreement funding was 2.68% during the first quarter of 2019 contrast to 2.43% during the fourth quarter of 2018.
In addition to interest rate swap agreements, the Company held $215.0M in equivalent notional amount of short positions in 10-year U.S. Treasury note futures as of March 31, 2019 that were purchased during the first quarter of 2019 when the 10-year U.S. Treasury rate was 2.64%. As of March 31, 2019, the total notional amount of the Company’s interest rate hedges consisting of interest rate swaps and U.S. Treasury note futures was 63% of the Company’s outstanding repurchase agreement funding and net TBA purchase commitments with a net duration gap of negative 0.2 years.
The Company reported TBA dollar roll income of $1.40M for the first quarter of 2019 contrast to $2.90M for the fourth quarter of 2018. The implied weighted-average net interest spread of the Company’s TBA dollar rolls was 1.05% for the first quarter of 2019 contrast to 1.66% for the fourth quarter of 2018. TBA dollar roll income is considered the economic equivalent of investing in agency MBS financed with a repurchase agreement and is calculated as the price discount of a forward-settling purchase of a TBA agency MBS relative to the “spot” sale of the same security. Under GAAP, the Company accounts for its TBA commitments as derivative instruments and recognizes income from TBA dollar rolls as a component of net investment gains and losses in the Company’s financial statements.
Economic net interest income was $14.10M for the first quarter of 2019 contrast to $15.90M for the fourth quarter of 2018. Economic net interest income is comprised of net interest income determined in accordance with GAAP, TBA dollar roll income and net interest income or expense from interest rate swaps.
Excluding TBA dollar roll income, the Company had net investment gains on our investment portfolio of $76.60M for the first quarter of 2019. On its related interest rate hedging instruments, the Company had net investment losses of $69.00M, excluding interest rate swap net interest income. This results in a net investment gain on our hedged investment portfolio of $7.60M, or $0.23 per diluted common share, for the first quarter of 2019.
AI has the market capitalization of $234.43M and its EPS growth ratio for the past five years was -24.40%. The return on assets ratio of the Company was -0.40% while its return on investment ratio stands at -2.30%. Price to sales ratio was 3.24 while 43.40% of the stock was owned by institutional investors.