Dynex Capital, Inc. ("Dynex" or the "Company") (NYSE: DX) reported its third quarter 2023 financial results today. Management will host a call today at 10:00 a.m. Eastern Time to discuss the results and business outlook. Details to access the call can be found below under "Earnings Conference Call."
Financial Performance Summary
- Total economic loss of $(1.56) per common share, or (11.0)% of beginning book value, which declined $1.95 to $12.25 as of September 30, 2023
- Dividends declared of $0.39 per common share for the third quarter of 2023
- Comprehensive loss of $(1.59) per common share and net loss of $(0.82) per common share
- Purchased $865.3 million of higher coupon Agency residential mortgage-backed securities ("RMBS") during the third quarter
- Average balance of interest-earning assets increased 34% compared to the second quarter
- Leverage including to-be-announced ("TBA") securities at cost was 8.5 times shareholders' equity as of September 30, 2023
Management Remarks
"The global economy and markets are undergoing a major transition as we move from government balance sheets supporting assets to private capital. We have positioned our shareholders in the most liquid assets which have already experienced a steep price correction. Forward returns are compelling, and we continue to maintain a balanced, liquid and flexible approach to our portfolio," said Byron L. Boston, Chief Executive Officer. "We are managing for the long term during this cycle and are prepared for various scenarios so that we are positioned to capitalize on the return opportunities available in this environment."
Earnings Conference Call
As previously announced, the Company's conference call to discuss these results is today at 10:00 a.m. Eastern Time and may be accessed via telephone in the United States by dialing 1-888-330-2022 and providing the ID 1957092 or by live audio webcast by clicking the "Webcast" button in the “Current Events” section on the homepage of the Company's website (www.dynexcapital.com), which includes a slide presentation. To listen to the live conference call via telephone, please dial in at least 10 minutes before the call begins. An archive of the webcast will be available on the Company's website approximately two hours after the live call ends.
Consolidated Balance Sheets | |||||||||||
($s in thousands except per share data) | September 30, 2023 | June 30, 2023 | December 31, 2022 | ||||||||
ASSETS | (unaudited) | (unaudited) | |||||||||
Cash and cash equivalents | $ | 271,168 | $ | 300,108 | $ | 332,035 | |||||
Cash collateral posted to counterparties | 145,268 | 132,646 | 117,842 | ||||||||
Mortgage-backed securities (including pledged of $5,279,554, $4,441,105, and $2,810,957, respectively) | 5,583,758 | 5,059,308 | 3,112,705 | ||||||||
Due from counterparties | — | 1,364 | 10,348 | ||||||||
Derivative assets | 4,594 | 174 | 7,102 | ||||||||
Accrued interest receivable | 26,756 | 22,988 | 15,260 | ||||||||
Other assets, net | 9,238 | 9,367 | 9,942 | ||||||||
Total assets | $ | 6,040,782 | $ | 5,525,955 | $ | 3,605,234 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Liabilities: | |||||||||||
Repurchase agreements | $ | 5,002,230 | $ | 4,201,901 | $ | 2,644,405 | |||||
Due to counterparties | 152,955 | 371,576 | 4,159 | ||||||||
Derivative liabilities | 22,029 | 23,621 | 22,595 | ||||||||
Cash collateral posted by counterparties | — | — | 435 | ||||||||
Accrued interest payable | 43,168 | 33,794 | 16,450 | ||||||||
Accrued dividends payable | 9,972 | 9,440 | 9,103 | ||||||||
Other liabilities | 6,082 | 4,661 | 6,759 | ||||||||
Total liabilities | 5,236,436 | 4,644,993 | 2,703,906 | ||||||||
Shareholders’ equity: | |||||||||||
Preferred stock | $ | 107,843 | $ | 107,843 | $ | 107,843 | |||||
Common stock | 566 | 542 | 536 | ||||||||
Additional paid-in capital | 1,397,268 | 1,365,484 | 1,357,514 | ||||||||
Accumulated other comprehensive loss | (217,770 | ) | (175,996 | ) | (181,346 | ) | |||||
Accumulated deficit | (483,561 | ) | (416,911 | ) | (383,219 | ) | |||||
Total shareholders' equity | 804,346 | 880,962 | 901,328 | ||||||||
Total liabilities and shareholders’ equity | $ | 6,040,782 | $ | 5,525,955 | $ | 3,605,234 | |||||
Preferred stock aggregate liquidation preference | $ | 111,500 | $ | 111,500 | $ | 111,500 | |||||
Book value per common share | $ | 12.25 | $ | 14.20 | $ | 14.73 | |||||
Common shares outstanding | 56,555,574 | 54,204,319 | 53,637,095 | ||||||||
Consolidated Comprehensive Statements of Income (Loss) (unaudited) | Nine Months Ended | ||||||||||
Three Months Ended | |||||||||||
($s in thousands except per share data) | September 30, 2023 | June 30, 2023 | September 30, 2023 | ||||||||
Interest income | $ | 63,271 | $ | 42,212 | $ | 136,329 | |||||
Interest expense | (65,533 | ) | (45,142 | ) | (141,983 | ) | |||||
Net interest expense | (2,262 | ) | (2,930 | ) | (5,654 | ) | |||||
Realized loss on sales of investments, net | — | (51,601 | ) | (74,916 | ) | ||||||
Unrealized gain on investments, net | (179,100 | ) | 488 | (121,491 | ) | ||||||
Gain (loss) on derivative instruments, net | 146,953 | 116,012 | 195,698 | ||||||||
General and administrative expenses | (7,841 | ) | (7,197 | ) | (22,410 | ) | |||||
Other operating expense, net | (801 | ) | (435 | ) | (1,662 | ) | |||||
Net (loss) income | (43,051 | ) | 54,337 | (30,435 | ) | ||||||
Preferred stock dividends | (1,923 | ) | (1,923 | ) | (5,770 | ) | |||||
Net (loss) income to common shareholders | $ | (44,974 | ) | $ | 52,414 | $ | (36,205 | ) | |||
Other comprehensive income: | |||||||||||
Unrealized loss on available-for-sale investments, net | (41,774 | ) | (9,443 | ) | $ | (36,424 | ) | ||||
Total other comprehensive loss | (41,774 | ) | (9,443 | ) | (36,424 | ) | |||||
Comprehensive (loss) income to common shareholders | $ | (86,748 | ) | $ | 42,971 | $ | (72,629 | ) | |||
Net (loss) income per common share-basic | $ | (0.82 | ) | $ | 0.97 | $ | (0.67 | ) | |||
Net (loss) income per common share-diluted | $ | (0.82 | ) | $ | 0.96 | $ | (0.67 | ) | |||
Weighted average common shares-basic | 54,557 | 54,137 | 54,175 | ||||||||
Weighted average common shares-diluted | 54,557 | 54,585 | 54,175 | ||||||||
Dividends declared per common share | $ | 0.39 | $ | 0.39 | $ | 1.17 | |||||
Results Discussion
The Company's total economic loss of $(1.56) per common share was driven by declines in the fair value of its investments as longer-term bond yields rose in the third quarter of 2023 in response to the Federal Reserve's additional increase of 25 basis points in the Federal Funds Target Rate, which is now 5.50%, and the Federal Rese
