ai-10q_20200930.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Small reporting company

Emerging growth company

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):Yes ☐ No ☒

Number of shares outstanding of each of the registrant’s classes of common stock, as of October 30, 2020:

	September 30, 2020			December 31, 2019
ASSETS
Cash and cash equivalents	$	8,877		$	19,636
Restricted cash of consolidated VIE		8,658			—
Interest receivable		1,589			10,663
Sold securities receivable		43,703			71,199
Agency mortgage-backed securities, at fair value		617,170			3,768,496
Mortgage credit securities, at fair value		46,352			33,501
Mortgage loans of consolidated VIE, at fair value		124,345			—
Loans, at fair value		70,000			45,000
Derivative assets, at fair value		1,181			1,417
Deposits		2,252			37,123
Other assets		21,208			13,079
Total assets	$	945,335		$	4,000,114
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Repurchase agreements	$	508,739		$	3,581,237
Debt of consolidated VIE, at fair value		121,894			—
Interest payable		569			4,666
Accrued compensation and benefits		2,044			3,626
Dividend payable		—			8,494
Derivative liabilities, at fair value		852			8
Other liabilities		820			507
Other liabilities of consolidated VIE		416			—
Long-term unsecured debt		73,115			74,328
Total liabilities		708,449			3,672,866
Commitments and contingencies
Stockholders’ Equity:
Series B Preferred stock, $0.01 par value, 336,273 and 354,039, shares issued and outstanding, respectively (liquidation preference of $8,407 and $8,851, respectively)		7,943			8,270
Series C Preferred stock, $0.01 par value, 1,131,648 and 1,200,000 shares issued and outstanding, respectively (liquidation preference of $28,291 and $30,000, respectively)		27,630			28,944
Class A common stock, $0.01 par value, 450,000,000 shares authorized, 33,731,170 and 36,755,387 shares issued and outstanding, respectively		337			368
Additional paid-in capital		2,041,986			2,049,292
Accumulated deficit		(1,841,010	)		(1,759,626	)
Total stockholders’ equity		236,886			327,248
Total liabilities and stockholders’ equity	$	945,335		$	4,000,114

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Interest income
Agency mortgage-backed securities	$	2,808		$	28,455		$	29,713		$	94,300
Mortgage credit securities		1,095			4			3,084			19
Loans		1,122			—			2,658			—
Interest and other income		385			215			1,062			904
Total interest income		5,410			28,674			36,517			95,223
Interest expense
Short-term secured debt		470			22,721			16,216			72,230
Long-term unsecured debt		1,162			1,261			3,617			3,802
Total interest expense		1,632			23,982			19,833			76,032
Net interest income		3,778			4,692			16,684			19,191
Investment advisory fee income		—			—			—			250
Investment gain (loss), net
Gain on mortgage investments, net		2,696			16,890			13,415			128,297
Gain (loss) from derivative instruments, net		487			(25,353	)		(102,510	)		(149,630	)
Other, net		769			232			2,776			222
Total investment gain (loss), net		3,952			(8,231	)		(86,319	)		(21,111	)
General and administrative expenses
Compensation and benefits		1,774			2,833			5,529			8,182
Other general and administrative expenses		1,197			1,365			4,013			3,816
Total general and administrative expenses		2,971			4,198			9,542			11,998
Net income (loss)		4,759			(7,737	)		(79,177	)		(13,668	)
Dividend on preferred stock		(726	)		(774	)		(2,258	)		(1,826	)
Net income (loss) available (attributable) to common stock	$	4,033		$	(8,511	)	$	(81,435	)	$	(15,494	)
Basic earnings (loss) per common share	$	0.12		$	(0.23	)	$	(2.26	)	$	(0.44	)
Diluted earnings (loss) per common share	$	0.12		$	(0.23	)	$	(2.26	)	$	(0.44	)
Weighted-average common shares outstanding (in thousands)
Basic		34,655			36,572			35,990			35,399
Diluted		34,697			36,572			35,990			35,399

	Series B Preferred Stock (#)		Series B Preferred Amount ($)			Series C Preferred Stock (#)		Series C Preferred Amount ($)		Class A Common Stock (#)			Class A Amount ($)		Additional Paid-In Capital			Accumulated Deficit			Total
Balances, December 31, 2018		350,595	$	8,245			—	$	—		30,497,998		$	305	$	1,997,876		$	(1,731,982	)	$	274,444
Net income		—		—			—		—		—			—		—			17,594			17,594
Issuance of Class A common stock		—		—			—		—		6,000,000			60		48,750			—			48,810
Issuance of Class A common stock under stock-based compensation plans		—		—			—		—		74,619			1		(1	)		—			—
Issuance of preferred stock		2,035		45			1,200,000		28,880		—			—		—			—			28,925
Stock-based compensation		—		—			—		—		—			—		773			—			773
Dividends declared		—		—			—		—		—			—		—			(14,135	)		(14,135	)
Balances, March 31, 2019		352,630	$	8,290			1,200,000	$	28,880		36,572,617		$	366	$	2,047,398		$	(1,728,523	)	$	356,411
Net loss		—		—			—		—		—			—		—			(23,525	)		(23,525	)
Issuance of Class A common stock		—		—			—		—		—			—		1			—			1
Issuance of preferred stock		1,409		6			—		64		—			—		—			—			70
Stock-based compensation		—		—			—		—		—			—		217			—			217
Dividends declared		—		—			—		—		—			—		—			(8,885	)		(8,885	)
Balances, June 30, 2019		354,039	$	8,296			1,200,000	$	28,944		36,572,617		$	366	$	2,047,616		$	(1,760,933	)	$	324,289
Net loss		—		—			—		—		—			—		—			(7,737	)		(7,737	)
Issuance of Class A common stock		—		—			—		—		—			—		(9	)		—			(9	)
Issuance of Class A common stock under stock-based compensation plans		—		—			—		—		219,395			2		107			—			109
Issuance of preferred stock		—		(13	)		—		—		—			—		—			—			(13	)
Repurchase of Class A common stock under stock-based compensation plans		—		—			—		—		(36,625	)		—		(204	)		—			(204	)
Stock-based compensation		—		—			—		—		—			—

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock	AAIC	NYSE
7.00% Series B Cumulative Perpetual Redeemable Preferred Stock	AAIC PrB	NYSE
8.250% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock	AAIC PrC	NYSE
6.625% Senior Notes due 2023	AIW	NYSE
6.75% Senior Notes due 2025	AIC	NYSE

Title		Outstanding
Class A Common Stock		33,427,687 shares

			Page
PART I — FINANCIAL INFORMATION
	Item 1.	Consolidated Financial Statements and Notes — (unaudited)	1
		Consolidated Balance Sheets	1
		Consolidated Statements of Comprehensive Income	2
		Consolidated Statements of Changes in Equity	3
		Consolidated Statements of Cash Flows	5
		Notes to Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	46
	Item 4.	Controls and Procedures	51
PART II — OTHER INFORMATION
	Item 1.	Legal Proceedings	52
	Item 1A.	Risk Factors	52
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
	Item 3.	Defaults Upon Senior Securities	53
	Item 4.	Mine Safety Disclosures	53
	Item 5.	Other Information	53
	Item 6.	Exhibits	53
		Signatures	56