Arlington Asset Investment(AAIC) - 2022 Q1 - Quarterly Report

Economic Indicators - As of March 31, 2022, the 10-year U.S. Treasury rate was 2.34%, an increase of 83 basis points from the previous quarter[165]. - The Consumer Price Index rose by 1.2% in the first quarter of 2022, with an annual increase of 8.5%[165]. - The Federal Open Market Committee raised the federal funds rate by 25 basis points to a range of 0.25% to 0.50% and anticipates ongoing increases[166]. - Housing prices showed a significant annual gain of 19.8% as reported by the Standard & Poor's CoreLogic Case-Shiller U.S. National Home Price NSA index in February 2022[166]. Company Financials - As of March 31, 2022, the total invested capital was $636.6 million, with MSR financing receivables accounting for$139.2 million[176][178]. - The company reported a net loss attributable to common stock for the three months ended March 31, 2022, was $3.443 million, compared to a net loss of$6.763 million for the same period in 2021[199]. - Economic net interest income from financial assets was $6,474,000 for the three months ended March 31, 2022, compared to$5,035,000 for the same period in 2021, reflecting a 28.7% increase[207]. - The company reported net interest income/spread of $5,942,000 for the three months ended March 31, 2022, compared to$4,909,000 for the same period in 2021[207]. Investment Portfolio - The credit investment portfolio included a $29.6 million commercial mortgage loan and$53.5 million in non-agency MBS or ABS investments[180]. - As of March 31, 2022, the agency MBS investment portfolio had an unpaid principal balance of $304.666 million, with a net unrealized loss of$22.667 million[186]. - The annualized prepayment rate for the agency MBS was 9.01% for the three months ended March 31, 2022, with approximately 79% of the portfolio in specified pools of low balance loans[187]. Debt and Leverage - As of March 31, 2022, the company's debt-to-equity leverage ratio was 3.2 to 1, and the "at risk" leverage ratio was 1.3 to 1[233]. - The company had outstanding repurchase agreement borrowings of $284.9 million as of March 31, 2022, with a weighted-average rate of 0.54$86.1 million as of March 31, 2022, with various senior notes maturing between 2025 and 2035[250]. Risk Factors - The company is subject to various risks including changes in interest rates, economic conditions, and regulatory changes that may affect its financial performance[164]. - Key risks include changes in interest rates, the overall environment for mortgage markets, and the impact of U.S. Federal Reserve monetary policy[289]. - Changes in laws and regulations affecting the business are considered significant risks[290]. Operational Performance - Net operating income from investments in financial assets increased by $1.0 million, or 20.4$4.9 million for the three months ended March 31, 2021, to $5.9 million for the same period in 2022[202]. - General and administrative expenses for the three months ended March 31, 2022, were$3.284 million, compared to $2.637 million for the same period in 2021[199]. - The company reported a net operating loss of$800,000 from SFR properties for the three months ended March 31, 2022, due to property costs incurred prior to lease commencement[210]. Shareholder Information - The company intends to distribute 100% of its taxable income to shareholders, subject to REIT distribution requirements[264]. - The company repurchased 1,009,566 shares of common stock for a total purchase price of $3.5 million during the three months ended March 31, 2022[261]. - As of March 31, 2022, the company had Series B Preferred Stock outstanding with a liquidation preference of$9.5 million and Series C Preferred Stock with a liquidation preference of $27.9 million[262]. Future Outlook - The ongoing COVID-19 pandemic poses uncertainty and economic impact on the company's business, financial condition, and results of operations[286]. - Future expansion into areas beyond investing in MBS is anticipated, with expectations of returns from such expansions[289]. - The company acknowledges that actual results could differ significantly from estimates due to various market conditions and assumptions[271].