Arlington Asset Investment Corp. Reports First Quarter 2009 Financial Results

ARLINGTON, Va., May 7 /PRNewswire-FirstCall/ -- Arlington Asset Investment Corp. (the Company), formerly Friedman, Billings, Ramsey Group, Inc., (NYSE: FBR) today reported net after-tax income of $101.6 million for the quarter ended March 31, 2009, or $0.67 per share (diluted), compared to net after-tax income of $45.1 million for the first quarter of 2008, and a net after-tax loss of $268.5 million for the fourth quarter of 2008. As of March 31, 2009, book value per share for FBR Group shareholders' equity was $0.79.

During the quarter ended March 31, 2009, the Company extinguished $201.7 million of trust preferred debt, recognizing a gain of $132.5 million. Although, there are no assurances of completion, the Company intends to continue its program to extinguish the remaining $50.0 million of trust preferred debt outstanding at March 31, 2009.

Additionally, effective January 1, 2009, the Company elected to discontinue its status as a real-estate investment trust in order to utilize its net operating loss carry-forwards. As of March 31, 2009, the Company's net operating loss carry-forwards and net capital loss carry-forwards were approximately $320 million and $600 million, respectively.

First Quarter Highlights

Net income of $101.6 million for the first quarter of 2009, reflecting both cash and non-cash items, includes the following:

• $3.1 million of operating cash loss at FBR Group, excluding $7.0 million of non-cash compensation charges;
• $132.5 million gain on the extinguishment of $201.7 million of trust preferred debt;
• $9.3 million of losses, net of minority interest, relating to FBR Capital Markets;
• $8.9 million of primarily state income tax provision related to the gain on the debt extinguishment; and
• $2.6 million of costs related to non-recurring activities.

On April 7, 2009, the Company settled its previously disclosed bankruptcy matter regarding First NLC. Under the settlement agreement, the Trustee released all claims that the Trustee or the bankruptcy estate of First NLC may have against the Company and its officers, directors, employees and affiliates in exchange for the payment by the Company of approximately $4.0 million, which the Company accrued for as of December 31, 2008 and paid on April 20, 2009. Under the settlement agreement, the Company and each of the officers, directors, employees and affiliates released all claims against the Trustee and the First NLC bankruptcy estate.

About the Company

Arlington Asset Investment Corp. (NYSE: FBR) invests in mortgage-related assets and merchant banking opportunities and is the majority owner of FBR Capital Markets Corporation, a separate publicly traded company. The Company is headquartered in the Washington, D.C. metropolitan area. For more information, please visit www.arlingtonasset.com.

Complete first quarter 2009 financial results and tables for FBR Capital Markets can be found at www.fbrcapitalmarkets.com.

Statements concerning future performance, plans and steps to position the Company to realize value, 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, regulatory and market conditions. These and other risks are described in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q that are available from the Company and from the SEC.

Financial data follows.

    ARLINGTON ASSET INVESTMENT CORP.
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
    (Dollars in thousands, except per share amounts)      Quarter Ended
    (Unaudited)                                             March 31,
                                                        -----------------
                                                          2009     2008
                                                        --------  -------
    REVENUES:
    Capital markets                                      $49,903 $104,079
    Principal investment:
      Interest                                             2,600   24,852
      Net investment income (loss)                             6  (14,659)
      Dividends                                                -      206
    Other                                                      -    1,454
                                                        --------  -------
    Total revenues                                        52,509  115,932
    Interest expense                                       2,763   23,650
                                                        --------  -------
      Revenues, net of interest expense                   49,746   92,282
                                                        --------  -------

    NON-INTEREST EXPENSES:
    Compensation and benefits                             45,137   76,954
    Professional services                                  4,769   12,467
    Business development                                   5,981   12,294
    Clearing and brokerage fees                            3,297    3,630
    Occupancy and equipment                                8,105    9,189
    Communications                                         5,227    6,018
    Other operating expenses                               5,325    5,384
                                                        --------  -------
      Total non-interest expenses                         77,841  125,936
                                                        --------  -------

    Operating loss                                       (28,095) (33,654)
                                                        --------  -------
    OTHER INCOME:
      Gain on extinguishment of long-term debt           132,453        -
      Other (loss) income                                   (139)  73,037
                                                        --------  -------

      Income before income taxes and
       noncontrolling interest                           104,219   39,383

    Income tax provision (benefit)                         9,555     (806)
                                                        --------  -------
      Net income                                          94,664   40,189
      Less:  Net loss attributable to the
       noncontrolling interest of consolidated
       subsidiary                                         (6,900)  (4,913)
                                                        --------  -------
      Net income attributable to
       FBR Group shareholders                           $101,564  $45,102
                                                        ========  =======

    Basic earnings per share attributable to
     FBR Group                                             $0.67    $0.30
                                                        ========  =======
    Diluted earnings per share attributable to
     FBR Group                                             $0.67    $0.30
                                                        ========  =======

    Weighted average shares  - basic
     (in thousands)                                      152,349  150,784
                                                        ========  =======
    Weighted average shares  - diluted
     (in thousands)                                      152,440  151,419
                                                        ========  =======



    ARLINGTON ASSET INVESTMENT CORP.
    CONSOLIDATED BALANCE SHEETS
    (Dollars and shares in thousands, except per share amounts)
    (Unaudited)

                                                    31-Mar-09     31-Dec-08
    ASSETS                                          ---------     ---------

    Cash and cash equivalents                       $224,566      $254,653
    Receivables:
      Interest                                           495         1,378
      Other                                           17,493        32,571
    Investments:
      Mortgage-backed securities, at fair value       38,347       594,294
      U.S. Treasury bonds, at fair value                   -       550,000
      Long-term investments                           44,927        54,976
      Trading securities, at fair value               30,773        17,954
    Due from clearing broker                           3,734             -
    Derivative assets, at fair value                       -           264
    Intangible assets, net                             8,605         8,943
    Furniture, equipment, software and leasehold
     improvements, net                                22,238        24,442
    Prepaid expenses and other assets                  8,092        20,816
                                                    --------    ----------
        Total assets                                $399,270    $1,560,291
                                                    ========    ==========

    LIABILITIES AND EQUITY

    Liabilities:
    Trading account securities sold but not
     yet purchased, at fair value                    $12,402        $8,325
    Repurchase agreements                             26,194     1,063,040
    Derivative liabilities, at fair value                 66            56
    Interest payable                                     418         2,064
    Accrued compensation and benefits                 30,022        47,259
    Due to clearing broker                                 -         3,009
    Accounts payable, accrued expenses and
     other liabilities                                31,135        38,925
    Long-term debt                                    51,736       254,357
                                                  ----------    ----------
        Total liabilities                            151,973     1,417,035
                                                  ----------    ----------

    Equity:
    Common stock, 158,957 and 159,217 shares
     issued and outstanding                            1,590         1,592
    Additional paid-in capital                     1,499,802     1,493,130
    Accumulated other comprehensive loss,
     net of taxes                                       (230)         (118)
    Accumulated deficit                           (1,379,457)   (1,481,021)
                                                  ----------    ----------
        Total FBR Group shareholders' equity         121,705        13,583
    Noncontrolling interest                          125,592       129,673
                                                  ----------    ----------
        Total equity                                 247,297       143,256
                                                  ----------    ----------

        Total liabilities and equity                $399,270    $1,560,291
                                                  ==========    ==========
    Book value per share - FBR Group
     shareholders' equity                              $0.79         $0.79
                                                  ==========    ==========

    Book value per share - total equity                $1.61         $0.95
                                                  ==========    ==========

    Shares outstanding (in thousands)                153,831       151,221
                                                  ==========    ==========

SOURCE Friedman, Billings, Ramsey Group, Inc.