Dynex Capital, Inc. ("Dynex" or the "Company") (NYSE: DX) reported its second 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 return of $0.79 per common share, or 5.7% of beginning book value
- Book value per common share increased $0.40 to $14.20 as of June 30, 2023
- Dividends declared of $0.39 per common share for the second quarter of 2023
- Comprehensive income of $0.79 per common share and net income of $0.97 per common share
- Purchased $2.2 billion of higher coupon Agency residential mortgage-backed securities ("RMBS") during the second quarter
- Average balance of interest-earning assets increased 20% and average balance of to-be-announced ("TBA") securities declined 28% compared to the first quarter
- Liquidity in excess of $561.5 million in cash and unencumbered assets as of June 30, 2023
- Leverage including TBA securities at cost was 7.7 times shareholders' equity as of June 30, 2023
Management Remarks
“In today's financial markets, knowing and trusting who is managing your money is critically important,” said Byron L. Boston, Chief Executive Officer. “We manage our business for the long term, and we are leaning into our experience and discipline to guide Dynex Capital through an unprecedented global environment. Our strong liquidity position gives us the flexibility to act swiftly on potential opportunities as they arise. We remain diligent in managing our balance sheet, and we are positioned to capitalize on the great return opportunities available in this environment.”
Earnings Conference Call
As previously announced, the Company's conference call to discuss these results is today at 10:00 a.m. Eastern Time and may be accessed via telephone in the United States by dialing 1-888-330-2022 and providing the ID 1957092 or by live audio webcast by clicking the "Webcast" button in the “Current Events” section on the homepage of the Company's website (www.dynexcapital.com), which includes a slide presentation. To listen to the live conference call via telephone, please dial in at least 10 minutes before the call begins. An archive of the webcast will be available on the Company's website approximately two hours after the live call ends.
Consolidated Balance Sheets | |||||||||||
($s in thousands except per share data) | June 30, 2023 | March 31, 2023 | December 31, 2022 | ||||||||
ASSETS | (unaudited) | (unaudited) | |||||||||
Cash and cash equivalents | $ | 300,108 | $ | 279,028 | $ | 332,035 | |||||
Cash collateral posted to counterparties | 132,646 | 114,594 | 117,842 | ||||||||
Mortgage-backed securities (including pledged of $4,441,105, $3,012,970, and $2,810,957, respectively) | 5,059,308 | 3,296,784 | 3,112,705 | ||||||||
Due from counterparties | 1,364 | 115,323 | 10,348 | ||||||||
Derivative assets | 174 | 37,179 | 7,102 | ||||||||
Accrued interest receivable | 22,988 | 17,234 | 15,260 | ||||||||
Other assets, net | 9,367 | 9,716 | 9,942 | ||||||||
Total assets | $ | 5,525,955 | $ | 3,869,858 | $ | 3,605,234 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Liabilities: | |||||||||||
Repurchase agreements | $ | 4,201,901 | $ | 2,937,124 | $ | 2,644,405 | |||||
Due to counterparties | 371,576 | 24,918 | 4,159 | ||||||||
Derivative liabilities | 23,621 | — | 22,595 | ||||||||
Cash collateral posted by counterparties | — | 27,125 | 435 | ||||||||
Accrued interest payable | 33,794 | 12,806 | 16,450 | ||||||||
Accrued dividends payable | 9,440 | 9,214 | 9,103 | ||||||||
Other liabilities | 4,661 | 3,843 | 6,759 | ||||||||
Total liabilities | 4,644,993 | 3,015,030 | 2,703,906 | ||||||||
Shareholders’ equity: | |||||||||||
Preferred stock | $ | 107,843 | $ | 107,843 | $ | 107,843 | |||||
Common stock | 542 | 539 | 536 | ||||||||
Additional paid-in capital | 1,365,484 | 1,361,000 | 1,357,514 | ||||||||
Accumulated other comprehensive loss | (175,996 | ) | (166,553 | ) | (181,346 | ) | |||||
Accumulated deficit | (416,911 | ) | (448,001 | ) | (383,219 | ) | |||||
Total shareholders' equity | 880,962 | 854,828 | 901,328 | ||||||||
Total liabilities and shareholders’ equity | $ | 5,525,955 | $ | 3,869,858 | $ | 3,605,234 | |||||
Preferred stock aggregate liquidation preference | $ | 111,500 | $ | 111,500 | $ | 111,500 | |||||
Book value per common share | $ | 14.20 | $ | 13.80 | $ | 14.73 | |||||
Common shares outstanding | 54,204,319 | 53,876,914 | 53,637,095 | ||||||||
Consolidated Comprehensive Statements of Income (Loss) (unaudited) | Six Months Ended | ||||||||||
Three Months Ended | |||||||||||
($s in thousands except per share data) | June 30, 2023 | March 31, 2023 | June 30, 2023 | ||||||||
Interest income | $ | 42,212 | $ | 30,846 | $ | 73,058 | |||||
Interest expense | (45,142 | ) | (31,308 | ) | (76,450 | ) | |||||
Net interest expense | (2,930 | ) | (462 | ) | (3,392 | ) | |||||
Realized loss on sales of investments, net | (51,601 | ) | (23,315 | ) | (74,916 | ) | |||||
Unrealized gain on investments, net | 488 | 57,120 | 57,609 | ||||||||
Gain (loss) on derivative instruments, net | 116,012 | (67,267 | ) | 48,745 | |||||||
General and administrative expenses | (7,197 | ) | (7,372 | ) | (14,569 | ) | |||||
Other operating expense, net | (435 | ) | (426 | ) | (861 | ) | |||||
Net income (loss) | 54,337 | (41,722 | ) | 12,616 | |||||||
Preferred stock dividends | (1,923 | ) | (1,923 | ) | (3,847 | ) | |||||
Net income (loss) to common shareholders | $ | 52,414 | $ | (43,645 | ) | $ | 8,769 | ||||
Other comprehensive income: | |||||||||||
Unrealized (loss) gain on available-for-sale investments, net | (9,443 | ) | 14,793 | $ | 5,350 | ||||||
Total other comprehensive (loss) income | (9,443 | ) | 14,793 | 5,350 | |||||||
Comprehensive income (loss) to common shareholders | $ | 42,971 | $ | (28,852 | ) | $ | 14,119 | ||||
Net income (loss) per common share-basic | $ | 0.97 | $ | (0.81 | ) | $ | 0.16 | ||||
Net income (loss) per common share-diluted | $ | 0.96 | $ | (0.81 | ) | $ | 0.16 | ||||
Weighted average common shares-basic | 54,137 | 53,824 | 53,981 | ||||||||
Weighted average common shares-diluted | 54,585 | 53,824 | 54,327 | ||||||||
Dividends declared per common share | $ | 0.39 | $ | 0.39 | $ | 0.78 | |||||
Results Discussion
The Company's book value per common share increased $0.40 during the second quarter to $14.20 as of June 30, 2023. Higher interest rates resulted in gains of $170.0 million from the Company's interest rate hedges, primarily its 5-year U.S. Treasury futures, which offset the impact of higher interest rates on the fair value of the Company's investment portfolio. Though spreads on higher coupon assets widened
