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Subsequent to December 31, 2008 and through March 13, 2009, the Company continued its previously announced plan to downsize its mortgage-backed securities (MBS) portfolio and fund the extinguishment of its trust preferred debt at a significant discount. To date in the first quarter of 2009, the Company extinguished $201.7 million of trust preferred debt, recognizing a gain of $131.5 million. The Company intends to revoke its REIT status effective as of January 1, 2009 in order to maximize the use of its net operating loss, or NOL, carry-forwards.
After taking into consideration the extinguishment of the trust preferred debt and related MBS sales subsequent to year-end, the Company's consolidated tangible equity at year end would have been $124.6 million, or $0.82 per share. This includes the Company's proportionate share of the equity book value of FBR Capital Markets Corporation.
As of March 16, 2009, excluding its interest in FBR Capital Markets Corporation, the Company expects to have $17.8 million in cash as well as $37.1 million of MBS, including $27.3 million of agency fixed-rate MBS, $30.1 million of total MBS repo financing and $50.0 million of trust preferred debt. The Company also had $6.3 million of merchant banking and other long-term investments and no remaining subprime exposure. The Company's remaining NOL and NCL, net capital loss, carry-forwards equaled $259.6 million and $597.4 million, respectively.
Net loss for the fourth quarter of 2008 of $268.5 million includes:
-- $3.8 million of operating cash loss at the Company, excluding investment
losses and $3.6 million of non-cash compensation charges;
-- $35.0 million gain on the extinguishment of $59.1 million of trust
preferred debt;
-- $217.1 million of investment loss;
-- $66.9 million of losses, net of minority interest and buy-back gain,
relating to FBR Capital Markets Corporation; and
-- $12.1 million of costs related to non-recurring activities and taxes.
On February 23, 2009, the Company announced that it has begun doing business under the name "Arlington Asset Investment Corp." and that it will seek shareholder approval at the next annual meeting of shareholders of a proposal to amend its charter to change its corporate name from "Friedman, Billings, Ramsey Group, Inc." to "Arlington Asset Investment Corp." The Company has notified the New York Stock Exchange (NYSE) of the name change and received the approval from the NYSE to change the ticker symbol to "AI" from "FBR" and will issue a press release when the symbol change becomes effective.
Complete fourth quarter 2008 financial results and tables for FBR Capital Markets Corporation can be found at www.fbrcapitalmarkets.com.
Arlington Asset Investment Corp. (NYSE: FBR | Quote | Chart | News | PowerRating) is a real estate investment trust headquartered in the Washington, D.C. metropolitan area. For more information, please visit www.arlingtonasset.com.
Statements concerning future performance, developments, events, market forecasts, revenues, expenses, earnings, run rates 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 and market conditions. These and other risks are described in the Company's Annual Report and Form 10-K and quarterly reports on Form 10-Q that are available from the Company and from the SEC.
Financial data follow.
ARLINGTON ASSET INVESTMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Quarter Ended
December 31,
2008 2007
---- ----
REVENUES:
Investment banking:
Capital raising $745 $25,648
Advisory 5,306 4,973
Institutional brokerage:
Principal transactions 6,807 2,996
Agency commissions 28,816 26,153
Asset management:
Base management fees 2,827 5,542
Incentive allocations and
fees - 99
Principal investment:
Interest 16,486 50,998
Net investment loss (283,077) (22,327)
Dividends 452 805
Mortgage banking:
Interest - 4,059
Net investment loss - (83,174)
Other 904 3,242
--- -----
Total revenues (220,734) 19,014
Interest expense 14,313 52,583
------ ------
Revenues, net of interest
expense (235,047) (33,569)
-------- -------
NON-INTEREST EXPENSES:
Compensation and benefits 56,860 69,533
Professional services 7,550 15,598
Business development 6,295 10,878
Clearing and brokerage fees 3,235 2,797
Occupancy and equipment 8,441 13,791
Communications 6,374 6,899
Other operating expenses 16,205 15,706
Goodwill impairment - 108,013
Restructuring charges - 21,466
--- ------
Total non-interest
expenses 104,960 264,681
------- -------
Operating loss (340,007) (298,250)
-------- --------
OTHER INCOME:
Gain on subsidiary share
transactions 8,005 4
Gain on reduction in long-
term debt 35,005 -
Other income 2 -
- ---
Loss before income taxes and
minority interest (296,995) (298,246)
Income tax provision (benefit) 27,311 (15,817)
Minority interest in losses of
consolidated subsidiary (55,814) (12,008)
------- -------
Net loss $(268,492) $(270,421)
========= =========
Basic loss per share $(1.77) $(1.77)
====== ======
Diluted loss per share $(1.77) $(1.77)
====== ======
Weighted average shares -
basic 151,270 152,375
======= =======
Weighted average shares -
diluted 151,270 152,375
======= =======
ARLINGTON ASSET INVESTMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Twelve Months Ended
December 31,
2008 2007
---- ----
REVENUES:
Investment banking:
Capital raising $76,380 $282,619
Advisory 20,573 34,063
Institutional brokerage:
Principal transactions 20,262 10,152
Agency commissions 118,397 104,792
Asset management:
Base management fees 15,334 23,549
Incentive allocations and
fees - 401
Principal investment:
Interest 100,284 497,256
Net investment loss (471,714) (216,429)
Dividends 1,446 3,173
Mortgage banking:
Interest 36 51,245
Net investment income (loss) 463 (222,032)
Other 6,719 15,808
----- ------
Total revenues (111,820) 584,597
Interest expense 85,208 477,437
Revenues, net of interest
expense (197,028) 107,160
-------- -------
NON-INTEREST EXPENSES:
Compensation and benefits 248,895 361,355
Professional services 40,951 55,741
Business development 30,663 43,518
Clearing and brokerage fees 14,092 12,514
Occupancy and equipment 34,492 52,302
Communications 24,420 28,690
Other operating expenses 35,312 82,246
Goodwill impairment - 162,765
Restructuring charges - 46,985
- ------
Total non-interest
expenses 428,825 846,116
------- -------
Operating loss (625,853) (738,956)
-------- --------
OTHER INCOME:
Gain on subsidiary share
transactions 7,809 104,062
Gain on reduction in long-
term debt 39,083 -
Gain on disposition of
subsidiary and other income 73,039 -
------ ---
Loss before income taxes and
minority interest (505,922) (634,894)
Income tax (benefit) provision (1,592) 22,932
Minority interest in (losses)
earnings of consolidated
subsidiary (86,867) 774
------- ---
Net loss $(417,463) $(658,600)
========= =========
Basic loss per share $(2.76) $(3.94)
====== ======
Diluted loss per share $(2.76) $(3.94)
====== ======
Weighted average shares - basic 151,168 166,975
======= =======
Weighted average shares -
diluted 151,168 166,975
======= =======
ARLINGTON ASSET INVESTMENT CORP.
Financial & Statistical Supplement - Operating Results
(Dollars in thousands, except per share data)
(Unaudited)
Year- Ended
December
31, 2008 Q-4 08 Q-3 08 Q-2 08 Q-1 08
--------- ------ ------ ------ ------
Revenues
--------
Investment banking:
Capital raising $76,380 $745 $6,763 $3,962 $64,910
Advisory 20,573 5,306 5,999 4,192 5,076
Institutional
brokerage:
Principal
transactions
20,262 6,807 2,610 4,888 5,957
Agency
commissions 118,397 28,816 33,813 29,918 25,850
Asset management:
Base management
fees 15,334 2,827 3,710 4,153 4,644
Principal investment:
Interest 100,284 16,486 31,057 26,827 25,914
Net investment
loss (471,714) (283,077) (164,153) (4,797) (19,687)
Dividends 1,446 452 307 258 429
Mortgage banking:
Interest 36 - - - 36
Net investment
income (loss) 463 - - (5) 468
Other 6,719 904 1,548 1,932 2,335
----- --- ----- ----- -----
Total revenues (111,820) (220,734) (78,346) 71,328 115,932
Interest expense 85,208 14,313 25,387 21,858 23,650
------ ------ ------ ------ ------
Revenues, net
of interest
expense (197,028) (235,047) (103,733) 49,470 92,282
-------- -------- -------- ------ ------
Non-interest
expenses
---------
Compensation
and benefits 248,895 56,860 61,111 53,970 76,954
Professional
services 40,951 7,550 10,442 10,492 12,467
Business
development 30,663 6,295 5,262 6,812 12,294
Clearing and
brokerage fees 14,092 3,235 3,834 3,393 3,630
Occupancy and
equipment 34,492 8,441 8,282 8,580 9,189
Communications 24,420 6,374 5,773 6,255 6,018
Other operating
expenses 35,312 16,205 6,668 7,055 5,384
------ ------ ----- ----- -----
Total non-
interest
expenses 428,825 104,960 101,372 96,557 125,936
------- ------- ------- ------ -------
Operating loss (625,853) (340,007) (205,105) (47,087) (33,654)
Other income (loss)
Gain (loss)
on subsidiary
share
transactions 7,809 8,005 (4) (192) -
Gain on
reduction in
long-term
debt 39,083 35,005 4,078
Gain on
disposition
of subsidiary
and other
income 73,039 2 - - 73,037
------ --- --- --- ------
(Loss) income
before income
taxes and
minority
interest (505,922) (296,995) (201,031) (47,279) 39,383
Income tax
(benefit)
provision (1,592) 27,311 (18,123) (9,974) (806)
Minority
interest in
losses of
consolidated
subsidiary (86,867) (55,814) (13,886) (12,254) (4,913)
--------- --------- --------- -------- -------
Net (loss)
income $(417,463) $(268,492) $(169,022) $(25,051) $45,102
========= ========= ========= ======== =======
Total
shareholders'
equity $13,583 $13,583 $268,097 $343,686 $344,408
Total
shareholders'
equity, net of
AOCI (1) $13,701 $13,701 $274,547 $436,093 $455,761
Basic (loss)
earnings per
share $(2.76) $(1.77) $(1.12) $(0.17) $0.30
Diluted (loss)
earnings per
share $(2.76) $(1.77) $(1.12) $(0.17) $0.30
Ending shares
outstanding (in
thousands) 151,221 151,221 151,352 150,989 150,915
Book value per
share $0.09 $0.09 $1.77 $2.28 $2.28
Book value per
share, net of
AOCI (1) $0.09 $0.09 $1.81 $2.89 $3.02
Employee count 579 579 666 719 726
=== === === === ===
(1) Accumulated Other Comprehensive Income (AOCI) includes changes in
value of available-for-sale securities and cash flow hedges. We
believe that such changes represent temporary market fluctuations,
are not reflective of our market strategy, and therefore, exclusion
of AOCI provides a reasonable basis for calculating returns.
ARLINGTON ASSET INVESTMENT CORP.
CONSOLIDATED BALANCE SHEETS
Dollars and shares in thousands, except per share amounts)
(Unaudited)
ASSETS 31-Dec-08 31-Dec-07
--------- ---------
Cash and cash equivalents $254,653 $692,360
Restricted cash - 14,166
Receivables 33,949 75,357
Investments:
Mortgage-backed securities, at fair
value 594,294 1,791,480
U.S. Treasury bonds, at fair value 550,000 -
Loans held for sale, net - 65,074
Long-term investments 54,976 169,274
Trading securities, at fair value 17,954 19,057
Due from clearing broker - -
Derivative assets, at fair value 264 3,514
Intangible assets, net 8,943 9,837
Furniture, equipment, software and
leasehold improvements, net 24,442 30,451
Prepaid expenses and other assets 20,816 74,385
------ ------
Total assets $1,560,291 $2,944,955
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Trading account securities sold but
not yet purchased, at fair value $8,325 $206
Repurchase agreements 1,063,040 1,744,377
Securities purchased - -
Derivative liabilities, at fair value 56 3,558
Interest payable 2,064 5,746
Accrued compensation and benefits 47,259 57,000
Due to clearing broker 3,009 7,059
Accounts payable, accrued expenses and
other liabilities 38,925 105,456
Short-term loan financing - 63,981
Long-term debt 254,357 320,820
------- -------
Total liabilities 1,417,035 2,308,203
--------- ---------
Minority interest 129,673 243,061
Shareholders' equity:
Common stock, 159,217 and 151,883 shares 1,592 1,519
Additional paid-in capital 1,493,130 1,468,801
Accumulated other comprehensive loss,
net of taxes (118) (13,071)
Accumulated deficit (1,481,021) (1,063,558)
---------- ----------
Total shareholders' equity 13,583 393,691
------ -------
Total liabilities and shareholders'
equity $1,560,291 $2,944,955
========== ==========
SOURCE Friedman, Billings, Ramsey Group, Inc.
http://www.fbrcapitalmarkets.com
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