Dynex Capital, Inc. Announces First Quarter 2025 Results
GLEN ALLEN, Va.--(BUSINESS WIRE)--April 21, 2025--
Dynex Capital, Inc. ("Dynex" or the "Company") $(DX)$ reported its first quarter 2025 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 return of $0.33 per common share, or 2.6% of beginning
book value, comprised of dividends declared of $0.47 per common share
offset by a decline in book value of $(0.14) per common share
-- Book value per common share of $12.56 as of March 31, 2025
-- Comprehensive income of $0.16 per common share and net loss of $(0.06)
per common share
-- Raised equity capital of $240 million, net of issuance costs, through
at-the-market ("ATM") common stock issuances
-- Purchased $895 million in Agency RMBS and $55 million in Agency CMBS and
increased TBA investments by $430 million
-- Liquidity of $790 million as of March 31, 2025
-- Leverage including to-be-announced ("TBA") securities at cost was 7.4
times shareholders' equity as of March 31, 2025
Management Remarks
"Over the past several quarters, we have deliberately positioned ourselves for a more dynamic macroeconomic environment. We've taken decisive steps to build resilience, including raising capital at attractive terms, preserving liquidity, and adding flexibility across our portfolio," said Byron L. Boston, Chairman and Co-CEO. Smriti L. Popenoe, Co-CEO and President, added, "We are delivering on our core strategy with a healthy balance sheet, high-quality liquid assets, and a robust liquidity position, and have remained agile even as the external environment shifted."
Earnings Conference Call
As previously announced, the Company's conference call to discuss these results is today at 10:00 a.m. Eastern Time and may be accessed via telephone by dialing 1-877-407-6914 or by live audio webcast by clicking the "Webcast" button on the Investors page of the Company's website (www.dynexcapital.com), which includes a slide presentation. To listen to the live conference call via telephone, please dial in at least ten minutes before the call begins. An archive of the webcast will be available on the Company's website approximately two hours after the live call ends.
Consolidated Balance Sheets
($s in thousands except per share
data) March 31, 2025 December 31, 2024
---------------- ---------------------
ASSETS audited
Cash and cash equivalents $ 327,447 $ 377,099
Cash collateral posted to
counterparties 260,563 244,440
Mortgage-backed securities
(including pledged of
$7,620,616 and $6,893,629,
respectively) 8,399,925 7,512,087
Due from counterparties 2,645 10,445
Derivative assets 6,791 133
Accrued interest receivable 36,686 32,841
Other assets, net 10,779 7,534
----------- --------------
Total assets $ 9,044,836 $ 8,184,579
=========== ==============
LIABILITIES AND SHAREHOLDERS'
EQUITY
Liabilities:
Repurchase agreements $ 7,234,723 $ 6,563,120
Due to counterparties 332,676 341,924
Derivative liabilities 3,810 22,814
Cash collateral posted by
counterparties 4,798 --
Accrued interest payable 46,861 44,672
Accrued dividends payable 20,707 16,501
Other liabilities 5,346 10,612
----------- --------------
Total liabilities 7,648,921 6,999,643
Shareholders' equity:
Preferred stock $ 107,843 $ 107,843
Common stock 1,022 845
Additional paid-in capital 1,982,781 1,742,471
Accumulated other
comprehensive loss (153,099) (172,489)
Accumulated deficit (542,632) (493,734)
----------- --------------
Total shareholders' equity 1,395,915 1,184,936
----------- --------------
Total liabilities and
shareholders' equity $ 9,044,836 $ 8,184,579
=========== ==============
Preferred stock aggregate
liquidation preference $ 111,500 $ 111,500
Book value per common share $ 12.56 $ 12.70
Common shares outstanding 102,226,355 84,491,800
Consolidated Comprehensive Statements of Income (unaudited)
--------------------------------------------------------------------------
Three Months Ended
---------------------------------------
($s in thousands except per share
data) March 31, 2025 December 31, 2024
---------------- ---------------------
INTEREST INCOME
Interest income $ 95,059 $ 88,496
Interest expense (77,926) (81,609)
----------- --------------
Net interest income 17,133 6,887
OTHER GAINS (LOSSES)
Unrealized gain (loss) on
investments, net 109,997 (223,225)
(Loss) gain on derivatives,
net (118,088) 276,670
----------- --------------
Total other (losses) gains, net (8,091) 53,445
EXPENSES
General and administrative
expenses (11,764) (8,799)
Other operating expense, net (354) (447)
----------- --------------
Total operating expenses (12,118) (9,246)
Net (loss) income (3,076) 51,086
Preferred stock dividends (1,923) (1,923)
----------- --------------
Net (loss) income to common
shareholders $ (4,999) $ 49,163
=========== ==============
Other comprehensive income:
Unrealized gain (loss) on
available-for-sale
investments, net 19,390 (36,601)
----------- --------------
Total other comprehensive income
(loss) 19,390 (36,601)
----------- --------------
Comprehensive income to common
shareholders $ 14,391 $ 12,562
=========== ==============
Weighted average common
shares-basic 90,492,327 81,145,733
Weighted average common
shares-diluted 90,492,327 81,705,477
Net (loss) income per common
share-basic $ (0.06) $ 0.61
Net (loss) income per common
share-diluted $ (0.06) $ 0.60
Dividends declared per common
share $ 0.47 $ 0.43
The following table summarizes the changes in the Company's financial position during the first quarter of 2025:
($s in thousands Components of
except per share Net Changes in Comprehensive Common Equity
data) Fair Value Income Rollforward
----------------- ---------------- ----------------- ----------------
Balance as of
December 31, 2024
(1) $ 1,073,436
Net interest
income $ 17,133
Net periodic
interest from
interest rate
swaps 10,851
Operating
expenses (12,118)
Preferred stock
dividends (1,923)
Changes in
fair value:
MBS and
loans $ 129,387
TBAs 42,174
U.S.
Treasury
futures (44,347)
Interest
rate swaps (127,577)
Interest
rate
swaptions 811
--------
Total net
change in fair
value 448
--- ------- ---
Comprehensive
income to common
shareholders 14,391
Capital
transactions:
Net proceeds
from stock
issuance (2) 240,487
Common
dividends
declared (43,899)
---------
Balance as of
March 31, 2025
(1) $ 1,284,415 (1) Amounts represent total shareholders' equity less the aggregate liquidation preference of the Company's preferred stock of $111,500. (2) Net proceeds from common stock issuances includes $239.7 million from ATM issuances and $0.8 million from amortization of share-based compensation, net of grants.
Investment Portfolio and Financing
The following table provides detail on the Company's MBS investments, including TBA securities, as of the periods indicated:
March 31, 2025 December 31, 2024
----------------------------------------- ----------------------------------------
Amortized Amortized
Cost/Implied Unrealized Cost/Implied Unrealized
($ in millions) Cost Basis Fair Value Gain (Loss) Cost Basis Fair Value Gain (Loss)
------------- ----------- ------------- ------------- ---------- -------------
30-year fixed
rate RMBS:
2.0% coupon $ 654,189 $ 518,108 $(136,081) $ 666,107 $ 516,541 $(149,566)
2.5% coupon 572,705 465,278 (107,427) 582,776 463,402 (119,374)
4.0% coupon 318,061 299,052 (19,009) 325,091 299,774 (25,317)
4.5% coupon 1,593,059 1,576,921 (16,138) 1,291,410 1,252,219 (39,191)
5.0% coupon 2,364,405 2,370,615 6,210 2,315,518 2,284,613 (30,905)
5.5% coupon 2,650,442 2,651,860 1,418 2,207,296 2,178,180 (29,116)
6.0% coupon 299,966 303,998 4,032 307,211 307,509 298
TBA 4.0% 1,194,627 1,193,191 (1,436) 424,917 421,796 (3,121)
TBA 4.5% 365,420 369,887 4,467 361,610 359,837 (1,773)
TBA 5.0% 537,463 537,505 42 693,938 684,706 (9,232)
TBA 5.5% 630,622 629,718 (904) 860,609 852,053 (8,556)
------------ ---------- -------- ------------ --------- --------
Total Agency
RMBS $ 11,180,959 $10,916,133 $(264,826) $ 10,036,483 $9,620,630 $(415,853)
============ ========== ======== ============ ========= ========
Agency CMBS $ 109,578 $ 106,429 $ (3,149) $ 99,848 $ 95,463 $ (4,385)
Agency CMBS IO 102,898 99,267 (3,631) 109,335 103,606 (5,729)
Non-Agency CMBS
IO 6,013 8,397 2,384 8,256 10,780 2,524
------------ ---------- -------- ------------ --------- --------
Total $ 11,399,448 $11,130,226 $(269,222) $ 10,253,922 $9,830,479 $(423,443)
============ ========== ======== ============ ========= ========
The following table provides detail on the Company's repurchase agreement borrowings outstanding as of the dates indicated:
March 31, 2025 December 31, 2024
-------------------------------- --------------------------------
WAVG WAVG
Weighted Original Weighted Original
Remaining Term to Average Term to Average Term to
Maturity Balance Rate Maturity Balance Rate Maturity
------------------ ---------- ---------- -------- ---------- ---------- --------
($s in thousands)
Less than 30 days $3,932,031 4.47% 67 $1,742,440 4.83% 68
30 to 90 days 2,997,548 4.45% 96 4,820,680 4.78% 83
91 to 180 days 305,144 4.40% 152 -- --% --
--------- ---- --- -------- --------- ---- ---
Total $7,234,723 4.46% 83 $6,563,120 4.80% 79
========= ==== === ======== ========= ==== === ========
The following table provides details on the performance of the Company's MBS, repurchase agreement financing, and interest rate swaps for the first quarter of 2025 compared to the prior quarter:
Three Months Ended
-------------------------------------------------------------------------------------------
March 31, 2025 December 31, 2024
-------------------------------------------- ---------------------------------------------
Effective Effective
Average Yield/ Average Yield/
Interest Balance Financing Interest Balance Financing
($s in thousands) Income/Expense (1)(2) Cost(3)(4) Income/Expense (1)(2) Cost(3)(4)
------------------ ---------- ------------ ------------------ ---------- -------------
Agency RMBS $ 90,075 $7,726,081 4.66% $ 82,490 $7,181,923 4.59%
Agency CMBS 735 86,880 3.38% 760 100,308 2.96%
CMBS IO(5) 2,332 113,263 8.74% 2,605 122,097 8.00%
Mortgage loans 14 999 4.96% 19 1,082 6.23%
-------- ---- --------- ----- ---- -------- ---- --------- ----- -----
93,156 7,927,223 4.71% 85,874 7,405,410 4.63%
Cash equivalents 1,903 2,622
-------- ---- -------- ----
Total interest
income $ 95,059 $ 88,496
Repurchase
agreement
financing (77,926) 6,842,485 (4.56)% (81,609) 6,431,743 (4.97)%
-------- --- ----- --- -------- --- ----- ----
Net interest
income/net
interest
spread $ 17,133 0.15% $ 6,887 (0.34)%
======== ==== ===== ==== ======== ==== ===== ====
Net periodic
interest from
interest rate
swaps 10,851 0.64% 11,926 0.74%
-------- ---- ----- ---- -------- ----
Economic net
interest
income (6) $ 27,984 0.79% $ 18,813 0.41%
======== ==== ===== ==== ======== ==== ---------- ===== =====
(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
annualized 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) Financing cost 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. (6) Represents a non-GAAP
measure.
Hedging Portfolio
The following tables provide details on the Company's interest rate hedging portfolio as of the dates indicated:
March 31, 2025 December 31, 2024
------------------- ---------------------
WAVG WAVG
Notional Fixed Notional Fixed
Amount Long Pay Amount Long Pay
Derivative Type (Short) Rate (Short) Rate
------------------ ------------ ----- ------------ -------
($s in thousands)
30-year U.S.
Treasury futures $ (766,500) n/a $ (516,500) n/a
10-year U.S.
Treasury futures $ (795,000) n/a (735,000) n/a
4-5 year interest
rate swaps (1,275,000) 3.42% (1,275,000) 3.42%
6-7 year interest
rate swaps (3,510,000) 3.66% (3,085,000) 3.61%
9-10 year interest
rate swaps (1,350,000) 3.92% (1,025,000) 3.83%
10-15 year interest
rate swaps (200,000) 3.93% -- --%
March 31, 2025 December 31, 2024
---------------------------------- ---------------------------
Underlying Receiver Swap Underlying Receiver Swap
--------------------------------- ---------------------------
Average
Average Fixed Average
Notional Average Fixed Term Notional Receive Term
Amount Receive Rate (Years) Amount Rate (Years)
--------- ------------- ------- -------- ------- --------
($s in thousands)
1-2 year interest
rate swaption $ 500,000 3.25% 5 year -- --% --
The following table provides detail on the Company's "gain (loss) on derivatives, net" recognized in the Company's consolidated statements of comprehensive income (loss) during the periods indicated:
Three Months Ended
---------------------------------------
March 31, 2025 December 31, 2024
---------------- ---------------------
Unrealized gain (loss):
TBA securities $ 24,851 $ (23,158)
U. S. Treasury futures (18,546) (4,462)
Interest rate swaps (127,577) 151,010
Interest rate swaptions 811 --
----------- --------------
(120,461) 123,390
Realized gain (loss) upon
settlement, maturity or
termination:
TBA securities 17,323 (49,385)
U. S. Treasury futures (25,801) 190,739
Interest rate swaps -- --
----------- --------------
(8,478) 141,354
Net periodic interest:
Interest rate swaps 10,851 11,926
----------- --------------
(Loss) gain on derivatives, net $ (118,088) $ 276,670
=========== ==============
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 March 31, 2025; however, uncertainty inherent in the forward interest rate curve makes future realized gains and losses difficult to estimate, and as such, these projections are subject to change for any given period.
Projected Period of Recognition for Remaining Tax Hedge
Gains, Net March 31, 2025
------------------------------------------------------- ------------------
($ in thousands)
Fiscal year 2025 (including estimate of $24.9 million
for first quarter) $ 100,144
Fiscal year 2026 100,421
Fiscal year 2027 95,831
Fiscal year 2028 and thereafter 422,642
--------------
$ 719,038
==============
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 earnings available for distribution ("EAD") to common shareholders (including per common share) and economic net interest income (and the related metric economic 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/expenses.
Drop income/loss 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 EAD because management views drop income/loss as the economic equivalent of net interest income on the underlying Agency security from trade date to settlement date. However, drop income/loss does not represent the total realized gain/loss from the Company's TBA securities.
Management also includes net periodic interest from its interest rate swaps, which is included in "gain (loss) on derivatives instruments, net", in each of these non-GAAP measures because interest rate swaps are used by the Company to economically hedge the impact of changing interest rates on its borrowing costs from repurchase agreements, and including net periodic interest from interest rate swaps is a helpful indicator of the Company's total financing cost in addition to GAAP interest expense.
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 our 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 or its distribution requirements in accordance with the Tax Code.
Reconciliations of each non-GAAP measure to certain GAAP financial measures are provided below.
Three Months Ended
-----------------------------------------
($s in thousands except per share
data) March 31, 2025 December 31, 2024
------------------ ---------------------
Comprehensive income to common
shareholders (GAAP) $ 14,391 $ 12,562
Less:
Change in fair value of
investments, net (1) (129,387) 259,826
Change in fair value of
derivative instruments, net
(2) 133,724 (264,285)
---------- -------------
EAD to common shareholders
(non-GAAP) $ 18,728 $ 8,103
========== =============
Weighted average common shares 90,492,327 81,145,733
Net interest income (GAAP) $ 17,133 $ 6,887
Net periodic interest from
interest rate swaps 10,851 11,926
---------- -------------
Economic net interest income 27,984 18,813
TBA drop income (3) 4,785 459
Operating expenses (12,118) (9,246)
Preferred stock dividends (1,923) (1,923)
---------- -------------
EAD to common shareholders
(non-GAAP) $ 18,728 $ 8,103
========== =============
Net interest spread (GAAP) 0.15% (0.34)%
Net periodic interest as a
percentage of average repurchase
borrowings 0.64% 0.75%
---------- -------------
Economic net interest spread
(non-GAAP) 0.79% 0.41%
========== =============
(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 and net periodic interest from interest rate swaps.
(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.
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 Mr. Boston's and Ms. Popenoe's quotes, may include, without limitation, statements regarding the Company's financial performance in future periods, future interest rates, future market credit spreads, management's views on expected characteristics of future investment and macroeconomic environments, central bank strategies, prepayment rates and investment risks, future investment strategies, future leverage levels and financing strategies, the use of specific financing and hedging instruments and the future impacts of these strategies, future actions by the Federal Reserve, and the expected performance of the Company's investments. The Company's actual results and timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements as a result of unforeseen external factors. These factors may include, but are not limited to, ability to find suitable investment opportunities; changes in domestic economic conditions; geopolitical events, such as terrorism, war or other military conflict, including the wars between Russia and
Ukraine and between Israel and Hamas and the related impacts on macroeconomic conditions as a result of such conflicts; changes in interest rates and credit spreads, including the repricing of interest-earning assets and interest-bearing liabilities; the Company's investment portfolio performance, particularly as it relates to cash flow, prepayment rates and credit performance; the impact on markets and asset prices from changes in the Federal Reserve's policies regarding purchases of Agency RMBS, Agency CMBS, and U.S. Treasuries; actual or anticipated changes in Federal Reserve monetary policy or the monetary policy of other central banks; adverse reactions in U.S. financial markets related to actions of foreign central banks or the economic performance of foreign economies including in particular China, Japan, the European Union, and the United Kingdom; uncertainty concerning the long-term fiscal health and stability of the United States; the cost and availability of financing, including the future availability of financing due to changes to regulation of, and capital requirements imposed upon, financial institutions; the cost and availability of new equity capital; changes in the Company's use of leverage; changes to the Company's investment strategy, operating policies, dividend policy or asset allocations; the quality of performance of third-party servicer providers, including the Company's sole third-party service provider for our critical operations and trade functions; the loss or unavailability of the Company's third-party service provider's service and technology that supports critical functions of the Company's business related to the Company's trading and borrowing activities due to outages, interruptions, or other failures; the level of defaults by borrowers on loans underlying MBS; changes in the Company's industry; increased competition; changes in government regulations affecting the Company's business; changes or volatility in the repurchase agreement financing markets and other credit markets; changes to the market for interest rate swaps and other derivative instruments, including changes to margin requirements on derivative instruments; uncertainty regarding continued government support of the U.S. financial system and U.S. housing and real estate markets, or to reform the U.S. housing finance system including the resolution of the conservatorship of Fannie Mae and Freddie Mac; the composition of the Board of Governors of the Federal Reserve; the political environment in the U.S.; systems failures or cybersecurity incidents; and exposure to current and future claims and litigation. For additional information on risk factors that could affect the Company's forward-looking statements, see the Company's Annual Report on Form 10-K for the year ended December 31, 2024, and other reports filed with and furnished to the Securities and Exchange Commission.
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 Securities and Exchange Commission and other public communications. The Company cannot assure the reader that it will realize the results or developments the Company anticipates or, even if substantially realized, that they will result in the consequences or affect the Company or its operations in the way the Company expects. Forward-looking statements speak only as of the date made. The Company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances arising after the date on which they were made, except as otherwise required by law. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of, the Company.
Company Description
Dynex Capital, Inc. is a financial services company committed to ethical stewardship of stakeholders' capital, employing comprehensive risk management and disciplined capital allocation to generate dividend income and long-term total returns through the diversified financing of real estate assets in the United States. Dynex operates as a REIT and is internally managed to maximize stakeholder alignment. Additional information about Dynex Capital, Inc. is available at www.dynexcapital.com.
View source version on businesswire.com: https://www.businesswire.com/news/home/20250421604340/en/
CONTACT: Alison Griffin
(804) 217-5897
(END) Dow Jones Newswires
April 21, 2025 08:00 ET (12:00 GMT)
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