Arlington Asset Investment Corp. Reports Mixed Results Amidst Challenging Market Conditions
Book value per common share decreased by 3.5% to $6.41 from the previous quarter.
GAAP net loss attributable to common shareholders was $0.26 per diluted common share.
Non-GAAP earnings available for distribution stood at $0.07 per diluted common share.
Arlington's "at risk" leverage ratio was 0.4 to 1 as of September 30, 2023.
On November 13, 2023, Arlington Asset Investment Corp (NYSE:AAIC) released its 8-K filing, detailing financial results for the third quarter ended September 30, 2023. The company reported a decrease in book value per common share and a GAAP net loss, reflecting the ongoing challenges in the financial markets.
Financial Performance Overview
Arlington Asset Investment Corp (NYSE:AAIC) reported a book value of $6.41 per common share, a 3.5% decrease from the prior quarter. The GAAP net loss attributable to common shareholders was $0.26 per diluted common share, while non-GAAP earnings available for distribution were $0.07 per diluted common share. The company's "at risk" leverage ratio stood at 0.4 to 1 as of the end of the quarter.
Investment Portfolio Breakdown
The company's investment portfolio capital allocation as of September 30, 2023, was primarily in MSR financing receivables, which constituted 64% of the invested capital allocation, followed by credit investments at 17%, and Agency MBS at 19%. The total invested capital was $434.9 million, with a leverage ratio of 1.6 for credit investments and 1.0 for Agency MBS.
MSR Related Investments and Credit Investments
The MSR financing receivable investments had an amortized cost basis of $141.9 million, with an unrealized gain of $49.9 million, leading to a fair value of $191.8 million. The weighted average yield on these investments was 14.63% for the quarter. Credit investments, including AAA-rated commercial MBS, commercial mortgage loans, and other assets, had a fair value of $128.5 million and a leverage ratio of 1.6.
Agency MBS and Hedging Strategies
The agency MBS investment portfolio had a fair value of $520.9 million, with a net short TBA position reducing the total agency MBS investment portfolio to $114.6 million. The weighted average yield on specified agency MBS was 4.34% for the quarter. The company also employs various hedging transactions to mitigate interest rate sensitivity, with the weighted average net pay rate of interest rate swap agreements at 0.95% during the third quarter.
Upcoming Shareholder Meeting
Arlington Asset Investment Corp (NYSE:AAIC) has scheduled a special meeting of the company's shareholders on December 12, 2023, for common shareholders to consider and vote on the proposed plan of merger with Ellington Financial Inc.
Additional Information and Forward-Looking Statements
Additional quarterly information will be made available on the company's website. The company cautions that statements concerning future results and events are forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially.
In conclusion, Arlington Asset Investment Corp (NYSE:AAIC) faces a challenging market environment, reflected in its decreased book value and net losses. However, the company continues to manage its investment portfolio with a focus on mortgage-related assets and prepares for a potential merger with Ellington Financial Inc. Investors are encouraged to review the additional materials provided by the company for a more comprehensive understanding of its financial position and strategies.
Explore the complete 8-K earnings release (here) from Arlington Asset Investment Corp for further details.
This article first appeared on GuruFocus.
