Arlington Asset Investment(AAIC) - 2021 Q1 - Quarterly Report

Investment Strategy - Arlington Asset Investment Corp. focuses primarily on investing in mortgage-related assets, with capital allocated between agency MBS, mortgage credit investments, and MSR-related assets[164]. - The company is internally managed and does not have an external investment advisor, allowing for direct control over investment strategies[165]. - Arlington Asset's investment strategy includes hedging transactions to mitigate interest rate sensitivity of borrowing costs and the value of fixed-rate mortgage investments[165]. - The company anticipates potential investment opportunities arising from the current economic environment due to increased liquidity[183]. - The company has committed to invest a minimum of $25 million in MSR financing transactions, fully funded as of March 31, 2021[262]. Economic Environment - Housing prices reported an 11.2$80 billion per month in Treasury securities and $40 billion in agency MBS[168]. - The transition from LIBOR to SOFR is expected to be gradual and complicated, with significant differences between the two rates potentially affecting borrowing costs[171]. Financial Performance - GAAP net interest income decreased by$5.3 million, or 58.2%, from $9.1 million for the three months ended March 31, 2020, to$3.8 million for the three months ended March 31, 2021[206]. - Net loss attributable to common stock was $6.763 million, compared to a net loss of$94.944 million in the previous year[205]. - Diluted loss per common share was $(0.20), a significant improvement from$(2.59) in the prior year[205]. - Economic net interest income for the three months ended March 31, 2021, was $3.884 million, down from$9.838 million in the same period last year[212]. - The company reported a GAAP net loss of $6.040 million for Q1 2021, a significant improvement compared to a net loss of$94.170 million in Q1 2020[232]. Asset Management - Liquid assets totaled $181.6 million as of March 31, 2021, consisting of cash and cash equivalents of$48.2 million and unencumbered agency MBS of $133.4 million at fair value[183]. - The total mortgage investment portfolio at fair value as of March 31, 2021, was$724.1 million, with a capital allocation of $312.6 million[184]. - The company has a mortgage loan investment with a principal balance of$44.9 million, bearing interest at one-month LIBOR plus a spread of 4.25% and a LIBOR floor of 2.00%[174]. - The company had $36 million of MSR financing receivable investments at fair value[194]. - The company reported net interest income primarily from agency MBS, mortgage credit investments, and MSR financing receivables, net of interest expenses[199]. Debt and Leverage - As of March 31, 2021, the company's debt-to-equity leverage ratio was 2.7 to 1, indicating a significant reliance on debt financing[237]. - The company reduced its "at risk" leverage ratio to 1.4 to 1 as of March 31, 2021, by selling mortgage investments and reducing repo borrowings[183]. - The company had$73.1 million of total long-term unsecured debt as of March 31, 2021, with senior notes accruing interest at rates of 6.625% and 6.75%[244]. - As of March 31, 2021, outstanding repurchase agreements totaled $505.6 million, with a weighted-average rate of 0.33$27.9 million and pays a fixed dividend of 8.250% per annum until March 30, 2024[269]. - The Series B Preferred Stock has a liquidation preference of $8.4 million and pays a cumulative cash dividend of 7.00% per annum[269].