Dynex Capital, Inc. Announces First Quarter 2024 Results
Financial Performance Summary
-
Total economic return of
$0.28 per common share, or 2.1% of beginning book value -
Book value per common share of
$13.20 as ofMarch 31, 2024 -
Comprehensive income of
$0.35 per common share and net income of$0.65 per common share -
Dividends declared of
$0.39 per common share for the first quarter of 2024 -
Renewed the Company's share repurchase program authorizing the repurchase of up to
$50 million of the Company's Series C Preferred Stock and$100 million of its common stock -
Raised equity capital of
$86.8 million during the first quarter through at-the-market ("ATM") common stock issuances -
Liquidity of
$577.1 million as ofMarch 31, 2024 -
Leverage including to-be-announced ("TBA") securities at cost was 8.1 times shareholders' equity as of
March 31, 2024
Management Remarks
"We believe Dynex is uniquely positioned for this environment," said
Earnings Conference Call
As previously announced, the Company's conference call to discuss these results is today at
Consolidated Balance Sheets |
|
|
|
||||
($s in thousands except per share data) |
|
|
|
||||
ASSETS |
(unaudited) |
|
|
||||
Cash and cash equivalents |
$ |
295,715 |
|
|
$ |
119,639 |
|
Cash collateral posted to counterparties |
|
122,614 |
|
|
|
118,225 |
|
Mortgage-backed securities (including pledged of |
|
5,840,559 |
|
|
|
6,038,948 |
|
Derivative assets |
|
8,386 |
|
|
|
54,361 |
|
Accrued interest receivable |
|
27,899 |
|
|
|
28,727 |
|
Other assets, net |
|
9,324 |
|
|
|
9,850 |
|
Total assets |
$ |
6,304,497 |
|
|
$ |
6,369,750 |
|
|
|
|
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
||||
Liabilities: |
|
|
|
||||
Repurchase agreements |
$ |
5,284,708 |
|
|
$ |
5,381,104 |
|
Derivative liabilities |
|
1,314 |
|
|
|
— |
|
Cash collateral posted by counterparties |
|
8,507 |
|
|
|
46,001 |
|
Accrued interest payable |
|
35,672 |
|
|
|
53,194 |
|
Accrued dividends payable |
|
10,990 |
|
|
|
10,320 |
|
Other liabilities |
|
4,774 |
|
|
|
8,396 |
|
Total liabilities |
|
5,345,965 |
|
|
|
5,499,015 |
|
|
|
|
|
||||
Shareholders’ equity: |
|
|
|
||||
Preferred stock |
$ |
107,843 |
|
|
$ |
107,843 |
|
Common stock |
|
641 |
|
|
|
570 |
|
Additional paid-in capital |
|
1,494,893 |
|
|
|
1,404,431 |
|
Accumulated other comprehensive loss |
|
(175,770 |
) |
|
|
(158,502 |
) |
Accumulated deficit |
|
(469,075 |
) |
|
|
(483,607 |
) |
Total shareholders' equity |
|
958,532 |
|
|
|
870,735 |
|
Total liabilities and shareholders’ equity |
$ |
6,304,497 |
|
|
$ |
6,369,750 |
|
|
|
|
|
||||
Preferred stock aggregate liquidation preference |
$ |
111,500 |
|
|
$ |
111,500 |
|
Book value per common share |
$ |
13.20 |
|
|
$ |
13.31 |
|
Common shares outstanding |
|
64,160,931 |
|
|
|
57,038,247 |
|
Consolidated Comprehensive Statements of Income (unaudited) |
|||||||
|
Three Months Ended |
||||||
($s in thousands except per share data) |
|
|
|
||||
INTEREST INCOME (EXPENSE) |
|
|
|
||||
Interest income |
$ |
71,525 |
|
|
$ |
71,188 |
|
Interest expense |
|
(74,717 |
) |
|
|
(73,465 |
) |
Net interest expense |
|
(3,192 |
) |
|
|
(2,277 |
) |
|
|
|
|
||||
OTHER GAINS (LOSSES) |
|
|
|
||||
Unrealized (loss) gain on investments, net |
|
(70,024 |
) |
|
|
263,992 |
|
Gain (loss) on derivative instruments, net |
|
124,635 |
|
|
|
(228,603 |
) |
Total other gains, net |
|
54,611 |
|
|
|
35,389 |
|
|
|
|
|
||||
EXPENSES |
|
|
|
||||
General and administrative expenses |
|
(10,880 |
) |
|
|
(8,318 |
) |
Other operating expense, net |
|
(421 |
) |
|
|
(490 |
) |
Total operating expenses |
|
(11,301 |
) |
|
|
(8,808 |
) |
|
|
|
|
||||
Net income |
|
40,118 |
|
|
|
24,304 |
|
Preferred stock dividends |
|
(1,923 |
) |
|
|
(1,923 |
) |
Net income to common shareholders |
$ |
38,195 |
|
|
$ |
22,381 |
|
|
|
|
|
||||
Other comprehensive income: |
|
|
|
||||
Unrealized (loss) gain on available-for-sale investments, net |
|
(17,268 |
) |
|
|
59,267 |
|
Total other comprehensive (loss) income |
|
(17,268 |
) |
|
|
59,267 |
|
Comprehensive income to common shareholders |
$ |
20,927 |
|
|
$ |
81,648 |
|
|
|
|
|
||||
Weighted average common shares-basic |
|
59,008 |
|
|
|
56,691 |
|
Weighted average common shares-diluted |
|
59,717 |
|
|
|
57,304 |
|
Net income per common share-basic |
$ |
0.65 |
|
|
$ |
0.39 |
|
Net income per common share-diluted |
$ |
0.64 |
|
|
$ |
0.39 |
|
Dividends declared per common share |
$ |
0.39 |
|
|
$ |
0.39 |
|
Discussion of First Quarter Results
The Company's total economic return of
Net gains on the Company's hedging portfolio exceeded net losses on its investment portfolio by
Book value was also impacted by approximately
($s in thousands except per share data) |
Net Changes
|
|
Components of
|
|
Common Book
|
|
Per
|
||||||||
Balance as of |
|
|
|
|
$ |
759,235 |
|
|
$ |
13.31 |
|
||||
Net interest expense |
|
|
$ |
(3,192 |
) |
|
|
|
|
||||||
Operating expenses |
|
|
|
(11,301 |
) |
|
|
|
|
||||||
Preferred stock dividends |
|
|
|
(1,923 |
) |
|
|
|
|
||||||
Changes in fair value: |
|
|
|
|
|
|
|
||||||||
MBS and loans |
$ |
(87,292 |
) |
|
|
|
|
|
|
||||||
TBAs |
|
(15,175 |
) |
|
|
|
|
|
|
||||||
|
|
139,810 |
|
|
|
|
|
|
|
||||||
Total net change in fair value |
|
|
|
37,343 |
|
|
|
|
|
||||||
Comprehensive income to common shareholders |
|
|
|
|
|
20,927 |
|
|
|
0.35 |
|
||||
Capital transactions: |
|
|
|
|
|
|
|
||||||||
Net proceeds from stock issuance (2) |
|
|
|
|
|
90,533 |
|
|
|
(0.07 |
) |
||||
Common dividends declared |
|
|
|
|
|
(23,663 |
) |
|
|
(0.39 |
) |
||||
Balance as of |
|
|
|
|
$ |
847,032 |
|
|
$ |
13.20 |
|
(1) |
|
Amounts represent total shareholders' equity less the aggregate liquidation preference of the Company's preferred stock of |
(2) |
|
Net proceeds from common stock issuances includes |
During the first quarter of 2024, the Company added over
|
|
|
|
||||||||||||||||
($ in millions) |
Par Value |
|
Fair Value |
|
% of
|
|
Par Value |
|
Fair Value |
|
% of
|
||||||||
30-year fixed rate RMBS: |
|
|
|
|
|
|
|
|
|
|
|
||||||||
2.0% coupon |
$ |
696,233 |
|
|
$ |
559,217 |
|
6.8 |
% |
|
$ |
708,528 |
|
|
$ |
586,361 |
|
7.9 |
% |
2.5% coupon |
|
598,717 |
|
|
|
502,714 |
|
6.1 |
% |
|
|
608,580 |
|
|
|
525,018 |
|
7.1 |
% |
4.0% coupon |
|
347,937 |
|
|
|
326,119 |
|
4.0 |
% |
|
|
354,382 |
|
|
|
339,212 |
|
4.6 |
% |
4.5% coupon |
|
1,363,175 |
|
|
|
1,307,279 |
|
15.8 |
% |
|
|
1,383,019 |
|
|
|
1,348,108 |
|
18.2 |
% |
5.0% coupon |
|
2,037,775 |
|
|
|
2,000,866 |
|
24.3 |
% |
|
|
2,070,473 |
|
|
|
2,057,309 |
|
27.7 |
% |
5.5% coupon |
|
885,118 |
|
|
|
887,012 |
|
10.8 |
% |
|
|
897,520 |
|
|
|
907,524 |
|
12.2 |
% |
TBA 4.0% |
|
262,000 |
|
|
|
242,974 |
|
2.9 |
% |
|
|
262,000 |
|
|
|
248,040 |
|
3.3 |
% |
TBA 4.5% |
|
223,000 |
|
|
|
212,529 |
|
2.6 |
% |
|
|
223,000 |
|
|
|
216,415 |
|
2.9 |
% |
TBA 5.0% |
|
518,000 |
|
|
|
505,940 |
|
6.1 |
% |
|
|
518,000 |
|
|
|
512,982 |
|
6.9 |
% |
TBA 5.5% |
|
1,250,000 |
|
|
|
1,244,695 |
|
15.1 |
% |
|
|
200,000 |
|
|
|
201,047 |
|
2.7 |
% |
TBA 6.0% |
|
200,000 |
|
|
|
201,961 |
|
2.4 |
% |
|
|
200,000 |
|
|
|
203,219 |
|
2.7 |
% |
Total Agency RMBS |
$ |
8,381,955 |
|
|
$ |
7,991,308 |
|
96.9 |
% |
|
$ |
7,425,502 |
|
|
$ |
7,145,235 |
|
96.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Agency CMBS |
$ |
117,984 |
|
|
$ |
111,762 |
|
1.4 |
% |
|
$ |
121,293 |
|
|
$ |
115,595 |
|
1.6 |
% |
Agency CMBS IO |
|
(1 |
) |
|
|
124,484 |
|
1.5 |
% |
|
|
(1 |
) |
|
|
133,302 |
|
1.8 |
% |
Non-Agency CMBS IO |
|
(1 |
) |
|
|
21,105 |
|
0.2 |
% |
|
|
(1 |
) |
|
|
26,416 |
|
0.4 |
% |
Non-Agency RMBS |
|
— |
|
|
|
— |
|
— |
% |
|
|
150 |
|
|
|
103 |
|
— |
% |
Total |
$ |
8,499,939 |
|
|
$ |
8,248,659 |
|
100.0 |
% |
|
$ |
7,546,945 |
|
|
$ |
7,420,651 |
|
100.0 |
% |
(1) |
|
CMBS IO do not have underlying par values. |
The following table provides detail on the Company's repurchase agreement borrowings outstanding as of the dates indicated:
|
|
|
|
|
||||||||||||
Remaining Term to Maturity |
|
Balance |
|
Weighted
|
|
WAVG
|
|
Balance |
|
Weighted
|
|
WAVG
|
||||
($s in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less than 30 days |
|
$ |
2,440,188 |
|
5.48 |
% |
|
58 |
|
$ |
2,855,917 |
|
5.61 |
% |
|
92 |
30 to 90 days |
|
|
2,305,208 |
|
5.46 |
% |
|
71 |
|
|
2,525,187 |
|
5.58 |
% |
|
86 |
91 to 180 days |
|
|
539,312 |
|
5.42 |
% |
|
182 |
|
|
— |
|
— |
% |
|
— |
Total |
|
$ |
5,284,708 |
|
5.46 |
% |
|
76 |
|
$ |
5,381,104 |
|
5.59 |
% |
|
89 |
The following table provides information about the performance of the Company's MBS (including TBA securities) and repurchase agreement financing for the first quarter of 2024 compared to the prior quarter:
|
Three Months Ended |
||||||||||||||||||
|
|
|
|
||||||||||||||||
($s in thousands) |
Interest
|
|
Average
|
|
Effective
|
|
Interest
|
|
Average
|
|
Effective
Cost of Funds (3)(4) |
||||||||
Agency RMBS |
$ |
64,281 |
|
|
$ |
5,938,131 |
|
4.33 |
% |
|
$ |
63,816 |
|
|
$ |
5,917,053 |
|
4.31 |
% |
Agency CMBS |
|
925 |
|
|
|
119,286 |
|
3.04 |
% |
|
|
923 |
|
|
|
121,939 |
|
2.97 |
% |
CMBS IO(5) |
|
2,654 |
|
|
|
160,261 |
|
6.28 |
% |
|
|
2,625 |
|
|
|
175,518 |
|
5.36 |
% |
Non-Agency MBS and other |
|
22 |
|
|
|
1,773 |
|
4.86 |
% |
|
|
27 |
|
|
|
2,064 |
|
4.99 |
% |
|
|
67,882 |
|
|
|
6,219,451 |
|
4.36 |
% |
|
|
67,391 |
|
|
|
6,216,574 |
|
4.32 |
% |
Cash equivalents |
|
3,643 |
|
|
|
|
|
|
|
3,797 |
|
|
|
|
|
||||
Total interest income |
$ |
71,525 |
|
|
|
|
|
|
$ |
71,188 |
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Repurchase agreement financing |
|
(74,717 |
) |
|
|
5,365,575 |
|
(5.51 |
)% |
|
|
(73,465 |
) |
|
|
5,168,821 |
|
(5.56 |
)% |
Net interest expense/net interest spread |
$ |
(3,192 |
) |
|
(1.15 |
)% |
|
$ |
(2,277 |
) |
(1.24 |
)% |
(1) |
|
Average balance for assets is calculated as a simple average of the daily amortized cost and excludes securities pending settlement if applicable. |
(2) |
|
Average balance for liabilities is calculated as a simple average of the daily borrowings outstanding during the period. |
(3) |
|
Effective yield is calculated by dividing interest income by the average balance of asset type outstanding during the reporting period. Unscheduled adjustments to premium/discount amortization/accretion, such as for prepayment compensation, are not annualized in this calculation. |
(4) |
|
Cost of funds is calculated by dividing annualized interest expense by the total average balance of borrowings outstanding during the period with an assumption of 360 days in a year. |
(5) |
|
CMBS IO ("Interest only") includes Agency and non-Agency issued securities. |
Hedging Portfolio
The Company uses derivative instruments to hedge exposure to interest rate risk arising from its investment and financing portfolio, and some of these derivatives are designated as hedges for tax purposes. As of
Comprehensive income included unrealized gains of
The table below provides the projected amortization of the Company's net deferred tax hedge gains that may be recognized as taxable income over the periods indicated given conditions known as of
Projected Period of Recognition for Remaining Hedge Gains, Net |
|
|
|
|
|
($ in thousands) |
|
Second quarter 2024 |
|
$ |
25,509 |
Third quarter 2024 |
|
|
25,583 |
Fourth quarter 2024 |
|
|
25,680 |
Fiscal year 2025 |
|
|
103,523 |
Fiscal year 2026 and thereafter |
|
|
649,895 |
|
|
$ |
830,190 |
Non-GAAP Financial Measures
In evaluating the Company’s financial and operating performance, management considers book value per common share, total economic return to common shareholders, and other operating results presented in accordance with GAAP as well as certain non-GAAP financial measures, which include the following: EAD to common shareholders, adjusted net interest income and the related metric adjusted net interest spread. Management believes these non-GAAP financial measures may be useful to investors because they are viewed by management as a measure of the investment portfolio’s return based on the effective yield of its investments, net of financing costs and, with respect to EAD, net of other normal recurring operating income and expenses. Drop income generated by TBA dollar roll positions, which is included in "gain (loss) on derivatives instruments, net" on the Company's consolidated statements of comprehensive income, is included in these non-GAAP financial measures because management views drop income as the economic equivalent of net interest income (interest income less implied financing cost) on the underlying Agency security from trade date to settlement date.
However, these non-GAAP financial measures are not a substitute for GAAP earnings and may not be comparable to similarly titled measures of other REITs because they may not be calculated in the same manner. Furthermore, though EAD is one of several factors management considers in determining the appropriate level of distributions to common shareholders, it should not be utilized in isolation, and it is not an accurate indication of the Company’s REIT taxable income nor its distribution requirements in accordance with the Internal Revenue Code of 1986, as amended.
Reconciliations of the non-GAAP financial measures used in this earnings release to the most directly comparable GAAP financial measures are presented below.
|
Three Months Ended |
||||||
($s in thousands except per share data) |
|
|
|
||||
Comprehensive income to common shareholders |
$ |
20,927 |
|
|
$ |
81,648 |
|
Less: |
|
|
|
||||
Change in fair value of investments, net (1) |
|
87,292 |
|
|
|
(323,259 |
) |
Change in fair value of derivative instruments, net (2) |
|
(125,903 |
) |
|
|
227,759 |
|
EAD to common shareholders |
$ |
(17,684 |
) |
|
$ |
(13,852 |
) |
|
|
|
|
||||
Weighted average common shares |
|
59,008 |
|
|
|
56,691 |
|
EAD per common share |
$ |
(0.30 |
) |
|
$ |
(0.24 |
) |
|
|
|
|
||||
Net interest expense |
$ |
(3,192 |
) |
|
$ |
(2,277 |
) |
TBA drop loss (3) |
|
(1,268 |
) |
|
|
(844 |
) |
Adjusted net interest expense |
$ |
(4,460 |
) |
|
$ |
(3,121 |
) |
Operating expenses |
|
(11,301 |
) |
|
|
(8,808 |
) |
Preferred stock dividends |
|
(1,923 |
) |
|
|
(1,923 |
) |
EAD to common shareholders |
$ |
(17,684 |
) |
|
$ |
(13,852 |
) |
|
|
|
|
||||
Net interest spread |
|
(1.15 |
)% |
|
|
(1.24 |
)% |
Impact from TBA dollar roll transactions (4) |
|
0.14 |
% |
|
|
0.18 |
% |
Adjusted net interest spread |
|
(1.01 |
)% |
|
|
(1.06 |
)% |
(1) |
|
Amount includes realized and unrealized gains and losses from the Company's MBS. |
(2) |
|
Amount includes unrealized gains and losses from changes in fair value of derivatives (including TBAs accounted for as derivative instruments) and realized gains and losses on terminated derivatives and excludes TBA drop income. |
(3) |
|
TBA drop income/loss is calculated by multiplying the notional amount of the TBA dollar roll positions by the difference in price between two TBA securities with the same terms but different settlement dates. |
(4) |
|
The Company estimates TBA implied net interest spread to be (0.35)% and (0.23)% for the three months ended |
Forward Looking Statements
This release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “forecast,” “anticipate,” “estimate,” “project,” “plan,” "may," "could," "will," "continue" and similar expressions identify forward-looking statements that are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Forward-looking statements in this release, including statements made in
All forward-looking statements are qualified in their entirety by these and other cautionary statements that the Company makes from time to time in its filings with the
Company Description
View source version on businesswire.com: https://www.businesswire.com/news/home/20240422758139/en/
(804) 217-5897
Source: