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Dynex Capital Inc. Reports Operating Results (10-Q)

August 09, 2010 | About:

Dynex Capital Inc. (NYSE:DX) filed Quarterly Report for the period ended 2010-06-30.

Dynex Capital Inc. has a market cap of $151.39 million; its shares were traded at around $9.98 with a P/E ratio of 7.98 and P/S ratio of 4.09. The dividend yield of Dynex Capital Inc. stocks is 9.22%.DX is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Non-Agency securities do not come with guaranty of payment from the U.S. government. Therefore we seek investments in high credit quality securities that are rated ‘A or better by at least one nationally recognized statistical ratings organization. Since the third quarter of 2009, we have purchased $60.8 million in ‘AAA rated CMBS issued in 2004 and 2005 and redeemed $111.3 million in ‘AAA -rated CMBS issued by us in 1998. On July 15, 2010, we redeemed another $43.4 million in ‘A -rated CMBS issued by us in 1998. We consider CMBS issued by us to have superior attributes compared to other CMBS available in the market, given their seasoning and our knowledge of the underlying commercial mortgage loans.

The increase in non-Agency CMBS since December 31, 2009 is primarily due to our purchase of approximately $93.1 million in ‘AAA rated CMBS, which was partially offset by sales of $31.3 million and principal payments of $15.1 million. The net unrealized gain on our non-Agency CMBS has also increased $9.9 million since December 31, 2009.

Our securitized commercial mortgage loans are pledged to two securitization trusts, which were issued in 1993 and 1997, and have outstanding principal balances, including defeased loans, of $11.2 million and $126.9 million, respectively, as of June 30, 2010 compared to $13.1 million and $142.0 million, respectively, as of December 31, 2009. The decrease in the balance of these mortgage loans from December 31, 2009 to June 30, 2010 was primarily related to principal payments, net of amounts received on defeased loans, of $16.3 million. We provided approximately $0.1 million for estimated losses on these commercial mortgage loans as a result of an increase in estimated losses on the commercial loan portfolio.

Repurchase agreements decreased $47.4 million from December 31, 2009 to June 30, 2010 primarily due to principal payments of $395.6 million offset by additional borrowings of $348.7 million. We utilized TALF to purchase CMBS during the first quarter of 2010 in lieu of additional repurchase agreement borrowings.

Our securitization financing balance decreased only $1.8 million from December 31, 2009 to June 30, 2010. Although we made principal payments of $15.5 million on our securitization financing bonds during the six months ended June 30, 2010, we added a net $14.3 million to our balance sheet as a result of the adoption of amendments to ASC Topics 810 and 860. Our bond premium and deferred cost amortization during the six months ended June 30, 2010 was approximately $0.6 million.

Shareholders equity increased due to net income of $12.8 million, other comprehensive income of $7.4 million, and additional paid-in capital of $10.8 million. Our other comprehensive income resulted primarily from an increase in the fair value of our Agency MBS and non-Agency CMBS to an average price of 105.5 and 99.3, respectively, as of June 30, 2010 from 104.2 and 96.3, respectively, as of December 31, 2009. This increase was offset by a $3.8 million decrease in the fair value of our interest rate swap agreements. The increase in additional paid-in capital primarily resulted from our issuance of 1,140,200 shares of our common stock at an average price of $9.04, which resulted in proceeds of $10.3 million, net of issuance costs, as further discussed in Note 11 of the Condensed Notes to the Unaudited Consolidated Financial Statements. The remaining $0.5 million resulted from the granting and exercise of various stock awards to directors and employees under our stock incentive plans. These increases in shareholders equity were offset by dividends declared on our common and preferred stock of $9.0 million.

Read the The complete Report

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