Borrowings

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Borrowings

Note 9. Borrowings

Repurchase Agreements

The Company finances the purchase of mortgage investments through repurchase agreements, which are accounted for as collateralized borrowing arrangements. In a repurchase transaction, the Company sells a mortgage investment to a counterparty under a master repurchase agreement in exchange for cash and concurrently agrees to repurchase the same asset at a future date in an amount equal to the cash initially exchanged plus an agreed-upon amount of interest. Mortgage investments sold under agreements to repurchase remain on the Company’s consolidated balance sheets because the Company maintains effective control over such assets throughout the duration of the arrangement. Throughout the contractual term of a repurchase agreement, the Company recognizes a “repurchase agreement” liability on its consolidated balance sheets to reflect the obligation to repay to the counterparty the proceeds received upon the initial transfer of the mortgage investment. The difference between the proceeds received by the Company upon the initial transfer of the mortgage investment and the contractually agreed-upon repurchase price is recognized as interest expense ratably over the term of the repurchase arrangement.

Amounts borrowed pursuant to repurchase agreements are equal in value to a specified percentage of the fair value of the pledged collateral. The Company retains beneficial ownership of the pledged collateral throughout the term of the repurchase agreement. The counterparty to the repurchase agreements may require that the Company pledge additional securities or cash as additional collateral to secure borrowings when the value of the collateral declines.

The Company’s MBS repurchase agreement arrangements generally carry a fixed rate of interest and are short-term in nature with contract durations generally ranging from 30 to 60 days, but may be as short as one day or as long as one year. The Company’s mortgage loan repurchase agreement arrangement has a maturity date of August 23, 2023 and an interest rate that resets monthly at a rate equal to SOFR plus 2.61%. Under the terms of the Company’s mortgage loan repurchase agreement, the Company may request extensions of the maturity date of the agreement for up to 364 days, subject to the lender’s approval.

The following table provides information regarding the Company’s outstanding repurchase agreement borrowings as of the dates indicated:

	September 30, 2022			December 31, 2021
Agency MBS repurchase financing:
Repurchase agreements outstanding	$	319,538		$	425,836
Agency MBS collateral, at fair value (1)		336,277			447,979
Net amount (2)		16,739			22,143
Weighted-average rate		3.02	%		0.14	%
Weighted-average term to maturity	13.0 days			13.0 days
Non-agency MBS repurchase financing:
Repurchase agreements outstanding	$	89,809		$	—
MBS collateral, at fair value		99,821			—
Net amount (2)		10,012			—
Weighted-average rate		3.68	%
Weighted-average term to maturity	26.5 days
Mortgage loans repurchase financing:
Repurchase agreements outstanding	$	20,563		$	20,788
Mortgage loans collateral, at fair value		29,375			29,697
Net amount (2)		8,812			8,909
Weighted-average rate		5.27	%		2.60	%
Weighted-average term to maturity	327.0 days			319.0 days
Total mortgage investments repurchase financing:
Repurchase agreements outstanding	$	429,910		$	446,624
Mortgage investments collateral, at fair value (1)		465,473			477,676
Net amount (2)		35,563			31,052
Weighted-average rate		3.27	%		0.25	%
Weighted-average term to maturity	30.8 days			27.2 days

(1)As of December 31, 2021, includes $28,219 at sale price of unsettled agency MBS sale commitments which is included in the line item “sold securities receivable” in the accompanying consolidated balance sheets.

(2)Net amount represents the value of collateral in excess of corresponding repurchase obligation. The amount of collateral at-risk is limited to the outstanding repurchase obligation and not the entire collateral balance.

The following table provides information regarding the Company’s outstanding repurchase agreement borrowings during the three and nine months ended September 30, 2022 and 2021:

	September 30, 2022			September 30, 2021
Weighted-average outstanding balance during the three months ended	$	430,792		$	599,224
Weighted-average rate during the three months ended		2.60	%		0.20	%
Weighted-average outstanding balance during the nine months ended	$	351,960		$	601,897
Weighted-average rate during the nine months ended		1.46	%		0.27	%

Long-Term Unsecured Debt

As of September 30, 2022 and December 31, 2021, the Company had $86,302 and $85,994, respectively, of outstanding long-term unsecured debentures, net of unamortized debt issuance costs of $1,379 and $1,687, respectively. The Company’s long-term unsecured debentures consisted of the following as of the dates indicated:

	September 30, 2022									December 31, 2021
	Senior Notes Due 2025			Senior Notes Due 2026			Trust Preferred Debt			Senior Notes Due 2025			Senior Notes Due 2026			Trust Preferred Debt
Outstanding   Principal	$	34,931		$	37,750		$	15,000		$	34,931		$	37,750		$	15,000
Annual    Interest Rate		6.75	%		6.000	%	LIBOR+ 2.25 - 3.00 %				6.75	%		6.000	%	LIBOR+ 2.25 - 3.00 %
Interest    Payment    Frequency	Quarterly			Quarterly			Quarterly			Quarterly			Quarterly			Quarterly
Weighted-    Average    Interest Rate		6.75	%		6.000	%		5.26	%		6.75	%		6.000	%		2.87	%
Maturity	March 15, 2025			August 1, 2026			2033 - 2035			March 15, 2025			August 1, 2026			2033 - 2035

On July 15, 2021, the Company completed a public offering of $37,750 of 6.000% Senior Notes due 2026 and received net proceeds of $36,570 after deducting underwriter discounts. On August 6, 2021, the Company redeemed all $23,821 in principal amount of its outstanding Senior Notes due 2023 at a redemption price of 100% of the principal amount plus unpaid interest thereon.

The Senior Notes due 2025 and the Senior Notes due 2026 are publicly traded on the New York Stock Exchange under the ticker symbols “AIC” and “AAIN,” respectively. The Senior Notes due 2025 and Trust Preferred Debt may be redeemed in whole or in part at any time and from time to time at the Company’s option at a redemption price equal to the principal amount plus accrued and unpaid interest. The Senior Notes due 2026 may be redeemed in whole or in part at any time and from time to time at the Company’s option on or after August 1, 2023 at a redemption price equal to the principal amount plus accrued and unpaid interest. The indenture governing the Senior Notes contains certain covenants, including limitations on the Company’s ability to merge or consolidate with other entities or sell or otherwise dispose of all or substantially all of the Company’s assets.

Long-Term Debt Secured by Single-family Properties

On September 28, 2021, McLean SFR Investment, LLC (“McLean SFR”), a wholly-owned subsidiary of Arlington Asset, entered into a loan agreement with a third-party lender to fund McLean SFR’s purchases of SFR properties. Under the terms of the loan agreement, loan advances may be drawn up to 74% of the fair value of eligible SFR properties up to a maximum loan amount of $150,000. Advances under the loan agreement may be drawn during the advance period, which ends on the earlier of the date the outstanding principal balance equals the maximum loan amount or March 28, 2023. The outstanding principal balance is due on October 9, 2026 and advances under the loan agreement bear interest at a fixed rate of 2.76%. During the advance period, McLean SFR is subject to a commitment fee on the unfunded commitment if the outstanding loan balance is below certain thresholds. As of September 30, 2022 and December 31, 2021, the outstanding balance was $56,801 and $39,178, respectively, net of unamortized debt issuance costs of $223 and $264, respectively.

Through September 28, 2024, the outstanding principal balance may be prepaid in an amount equal to the excess of (i) the sum of the present value of all remaining scheduled payments of principal and interest on the principal amount of the loan being prepaid discounted using a U.S. Treasury rate over (ii) the outstanding principal balance of the loan. Subsequent to September 28, 2024, the outstanding principal balance may be prepaid in an amount equal to the outstanding principal balance plus accrued interest. On March 25, 2022, McLean SFR entered into a waiver agreement with the lender that waived any prepayment fee determined in accordance with the prior sentence on the portion of outstanding loan balance prepaid with the sale proceeds from the sale of 371 SFR properties consummated on August 19, 2022 in exchange for a one-time waiver fee of 0.80% of the outstanding principal balance prepaid (for further information, see "Note 7. Investments in SFR Properties").

The loan is secured by a first priority interest in all the assets of McLean SFR and a first priority pledge of the equity interest of McLean SFR. If the outstanding principal balance of the loan is greater than 74% of the fair value of the eligible collateral, McLean SFR is required to either pledge additional collateral or prepay the loan in an amount so that the outstanding principal balance does not exceed 74% of the fair value of the eligible collateral. Under the terms of the loan agreement, if McLean SFR does not maintain a

minimum debt service coverage ratio for a specified time period, then all available cash of McLean SFR will be held as additional collateral for the loan amount until the minimum debt service coverage ratio is met. The obligations under the loan agreement may become recourse to Arlington Asset upon the occurrence of certain enumerated acts committed by McLean SFR or Arlington Asset. The loan agreement contains a minimum net worth financial covenant of Arlington Asset.