Virginia (State or other jurisdiction of incorporation) | 1-9819 (Commission File Number) | 52-1549373 (IRS Employer Identification No.) | |
4991 Lake Brook Drive, Suite 100 Glen Allen, Virginia (Address of principal executive offices) | 23060-9245 (Zip Code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit No. | Description | |
99.1 | Press Release dated November 1, 2016 |
DYNEX CAPITAL, INC. | |||
Date: | November 1, 2016 | By: | /s/ Stephen J. Benedetti |
Stephen J. Benedetti | |||
Executive Vice President, Chief Financial Officer and Chief Operating Officer |
FOR IMMEDIATE RELEASE | CONTACT: | Alison Griffin | |
November 1, 2016 | (804) 217-5897 |
• | Comprehensive income of $0.27 per common share comprised of net income to common shareholders of $0.25 per common share and other comprehensive income of $0.02 per common share |
• | Core net operating income per common share, a non-GAAP measure, of $0.20 |
• | Net interest spread of 1.90% and adjusted net interest spread, a non-GAAP measure, of 1.87% |
• | Book value per common share of $7.76 at September 30, 2016, an increase of $0.07 from June 30, 2016 book value per common share of $7.69 |
• | Leverage of 5.8x shareholders' equity at September 30, 2016 versus 6.1x shareholders equity at June 30, 2016 |
• | Dividend declared of $0.21 per common share |
• | a decline of $(1.7) million in interest income compared to the previous quarter, $0.7 million of which resulted from the declining investment portfolio balance with the remaining decline of $1.0 million primarily related to an increase in prepayments on RMBS; and |
• | net gain on derivative instruments of $2.4 million compared to a net loss of $(16.3) million for the previous quarter due to interest rates increasing during the third quarter of 2016. |
($ in thousands) | RMBS | CMBS | CMBS IO | Total | |||||||||||
Balance at June 30, 2016 | $ | 1,448,441 | $ | 1,022,848 | $ | 737,446 | $ | 3,208,735 | |||||||
Purchases | — | 56,614 | 35,232 | 91,846 | |||||||||||
Principal payments | (103,391 | ) | (48,691 | ) | — | (152,082 | ) | ||||||||
Sales | — | — | — | — | |||||||||||
Net premium amortization | (4,407 | ) | (1,193 | ) | (33,042 | ) | (38,642 | ) | |||||||
Unrealized (loss) gain during the period | (1,375 | ) | (1,602 | ) | 3,587 | 610 | |||||||||
Balance at September 30, 2016 | $ | 1,339,268 | $ | 1,027,976 | $ | 743,223 | $ | 3,110,467 |
Three Months Ended | |||||||||||||
September 30, 2016 | June 30, 2016 | ||||||||||||
($ in thousands) | Average Balance | Effective Yield (1) | Average Balance | Effective Yield (1) | |||||||||
RMBS: | |||||||||||||
Agency | $ | 1,338,079 | 1.78 | % | $ | 1,436,582 | 1.83 | % | |||||
Non-Agency | 52,322 | 3.62 | % | 59,037 | 3.62 | % | |||||||
1,390,401 | 1.85 | % | 1,495,619 | 1.90 | % | ||||||||
CMBS: | |||||||||||||
Agency | 878,131 | 2.90 | % | 869,271 | 2.92 | % | |||||||
Non-Agency | 96,109 | 5.70 | % | 110,393 | 6.06 | % | |||||||
974,240 | 3.17 | % | 979,664 | 3.28 | % | ||||||||
CMBS IO: | |||||||||||||
Agency | 381,038 | 3.82 | % | 395,468 | 3.75 | % | |||||||
Non-Agency | 343,821 | 3.94 | % | 348,832 | 3.91 | % | |||||||
724,859 | 3.88 | % | 744,300 | 3.83 | % | ||||||||
Total MBS Investments: | 3,089,500 | 2.75 | % | 3,219,583 | 2.76 | % |
September 30, 2016 | December 31, 2015 | ||||||||||||
($ in thousands) | Balance | Weighted Average Rate | Balance | Weighted Average Rate | |||||||||
Agency RMBS | $ | 1,156,635 | 0.70 | % | $ | 1,439,436 | 0.47 | % | |||||
Non-Agency RMBS | 38,613 | 1.88 | % | 52,128 | 1.77 | % | |||||||
Agency CMBS | 594,661 | 0.69 | % | 301,427 | 0.49 | % | |||||||
Non-Agency CMBS | 69,687 | 1.50 | % | 126,378 | 1.26 | % | |||||||
Agency CMBS IO | 322,632 | 1.38 | % | 360,245 | 1.24 | % | |||||||
Non-Agency CMBS IO | 290,626 | 1.45 | % | 302,771 | 1.33 | % | |||||||
Securitization financing bonds | 5,424 | 1.86 | % | 7,035 | 1.65 | % | |||||||
Total repurchase agreement financing | 2,478,278 | 0.91 | % | 2,589,420 | 0.75 | % | |||||||
FHLB advances collateralized with Agency CMBS | $ | 263,000 | 0.51 | % | $ | 520,000 | 0.40 | % |
Effective Period | Weighted Average Notional Outstanding for the Period (1) (2) | Weighted Average Net Pay Rate (1) (2) | |||||
($ in thousands) | |||||||
Remainder of 2016 | $ | 305,000 | 0.64 | % | |||
2017 | 405,712 | 2.01 | % | ||||
2018 | 801,027 | 3.21 | % | ||||
2019 | 541,219 | 3.55 | % | ||||
2020 | 469,262 | 3.47 | % | ||||
2021 | 555,205 | 2.72 | % | ||||
2022 | 600,000 | 2.67 | % | ||||
2023 | 600,000 | 2.67 | % | ||||
2024 | 607,104 | 2.67 | % | ||||
2025 | 344,521 | 2.53 | % |
(1) | Includes pay-fixed interest rate swaps, net of receive-fixed interest rate swaps. |
(2) | Eurodollar futures included in these amounts are presented on the weighted average basis outstanding for the effective period indicated. |
($ in thousands) | Change in Fair Value of Derivative Instruments | Periodic Interest Costs (1) | Gain (Loss) on Derivative Instruments, Net | ||||||||
Receive-fixed interest rate swaps | $ | (4,241 | ) | $ | 1,265 | $ | (2,976 | ) | |||
Pay-fixed interest rate swaps | 3,975 | (1,420 | ) | 2,555 | |||||||
Eurodollar futures | 2,830 | — | 2,830 | ||||||||
Total | $ | 2,564 | $ | (155 | ) | $ | 2,409 |
(1) | Amounts represent interest earned or incurred related to interest rate swaps effective during the quarter. |
# | # | # |
September 30, 2016 | December 31, 2015 | ||||||
ASSETS | (unaudited) | ||||||
Mortgage-backed securities | $ | 3,110,467 | $ | 3,493,701 | |||
Mortgage loans held for investment, net | 20,366 | 24,145 | |||||
Investment in limited partnership | — | 10,835 | |||||
Investment in FHLB stock | 5,260 | 11,475 | |||||
Cash and cash equivalents | 73,406 | 33,935 | |||||
Restricted cash | 84,685 | 51,190 | |||||
Derivative assets | 12,985 | 7,835 | |||||
Principal receivable on investments | 9,594 | 6,193 | |||||
Accrued interest receivable | 19,501 | 22,764 | |||||
Other assets, net | 7,292 | 7,975 | |||||
Total assets | $ | 3,343,556 | $ | 3,670,048 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Liabilities: | |||||||
Repurchase agreements | $ | 2,478,278 | $ | 2,589,420 | |||
FHLB advances | 263,000 | 520,000 | |||||
Non-recourse collateralized financing | 7,025 | 8,442 | |||||
Derivative liabilities | 84,023 | 41,205 | |||||
Accrued interest payable | 2,163 | 1,743 | |||||
Accrued dividends payable | 12,259 | 13,709 | |||||
Other liabilities | 1,889 | 3,504 | |||||
Total liabilities | 2,848,637 | 3,178,023 | |||||
Shareholders’ equity: | |||||||
Preferred stock, par value $.01 per share, 8.5% Series A Cumulative Redeemable; 8,000,000 shares authorized; 2,300,000 shares issued and outstanding ($57,500 aggregate liquidation preference) | $ | 55,407 | $ | 55,407 | |||
Preferred stock, par value $.01 per share, 7.625% Series B Cumulative Redeemable; 7,000,000 shares authorized; 2,250,000 shares issued and outstanding ($56,250 aggregate liquidation preference) | 54,251 | 54,251 | |||||
Common stock, par value $.01 per share, 200,000,000 shares authorized; 49,148,595 and 49,047,335 shares issued and outstanding, respectively | 491 | 490 | |||||
Additional paid-in capital | 726,701 | 725,358 | |||||
Accumulated other comprehensive income (loss) | 52,578 | (12,768 | ) | ||||
Accumulated deficit | (394,509 | ) | (330,713 | ) | |||
Total shareholders' equity | 494,919 | 492,025 | |||||
Total liabilities and shareholders’ equity | $ | 3,343,556 | $ | 3,670,048 | |||
Book value per common share | $ | 7.76 | $ | 7.71 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Interest income | $ | 21,135 | $ | 26,096 | $ | 69,040 | $ | 74,722 | |||||||
Interest expense | 6,068 | 5,859 | 18,478 | 16,772 | |||||||||||
Net interest income | 15,067 | 20,237 | 50,562 | 57,950 | |||||||||||
Gain (loss) on derivative instruments, net | 2,409 | (52,749 | ) | (62,153 | ) | (60,982 | ) | ||||||||
Gain (loss) on sale of investments, net | — | 113 | (4,238 | ) | (70 | ) | |||||||||
Fair value adjustments, net | 34 | 16 | 86 | 75 | |||||||||||
Other income (expense), net | 545 | (215 | ) | 898 | 430 | ||||||||||
General and administrative expenses: | |||||||||||||||
Compensation and benefits | (1,736 | ) | (2,327 | ) | (5,829 | ) | (6,794 | ) | |||||||
Other general and administrative | (1,619 | ) | (2,052 | ) | (5,288 | ) | (6,596 | ) | |||||||
Net income (loss) | 14,700 | (36,977 | ) | (25,962 | ) | (15,987 | ) | ||||||||
Preferred stock dividends | (2,294 | ) | (2,294 | ) | (6,882 | ) | (6,882 | ) | |||||||
Net income (loss) to common shareholders | $ | 12,406 | $ | (39,271 | ) | $ | (32,844 | ) | $ | (22,869 | ) | ||||
Other comprehensive income: | |||||||||||||||
Change in net unrealized gain on available-for-sale investments | $ | 769 | $ | 26,674 | $ | 61,260 | $ | 7,951 | |||||||
Reclassification adjustment for (gain) loss on sale of investments, net | — | (113 | ) | 4,238 | 70 | ||||||||||
Reclassification adjustment for de-designated cash flow hedges | (99 | ) | 857 | (152 | ) | 2,772 | |||||||||
Total other comprehensive income | 670 | 27,418 | 65,346 | 10,793 | |||||||||||
Comprehensive income (loss) to common shareholders | $ | 13,076 | $ | (11,853 | ) | $ | 32,502 | $ | (12,076 | ) | |||||
Net income (loss) per common share-basic and diluted | $ | 0.25 | $ | (0.74 | ) | $ | (0.67 | ) | $ | (0.42 | ) | ||||
Weighted average common shares | 49,147 | 52,777 | 49,102 | 54,043 |
3Q2016 | 2Q2016 | 1Q2016 | 4Q2015 | 3Q2015 | |||||||||||||||
Net income (loss) per common share | $ | 0.25 | $ | (0.11 | ) | $ | (0.81 | ) | $ | 0.61 | $ | (0.74 | ) | ||||||
Core net operating income per common share (1) | $ | 0.20 | $ | 0.21 | $ | 0.22 | $ | 0.25 | $ | 0.24 | |||||||||
Comprehensive income (loss) per common share | $ | 0.27 | $ | 0.35 | $ | 0.04 | $ | (0.30 | ) | $ | (0.22 | ) | |||||||
Dividends per common share | $ | 0.21 | $ | 0.21 | $ | 0.21 | $ | 0.24 | $ | 0.24 | |||||||||
Book value per common share, end of period | $ | 7.76 | $ | 7.69 | $ | 7.54 | $ | 7.71 | $ | 8.19 | |||||||||
Leverage at period end (2) | 5.8 | x | 6.1 | x | 6.4 | x | 6.5 | x | 6.4 | x | |||||||||
Average interest earning assets | $ | 3,110,884 | $ | 3,242,413 | $ | 3,429,875 | $ | 3,598,748 | $ | 3,818,140 | |||||||||
Average interest bearing liabilities | $ | 2,806,948 | $ | 2,916,432 | $ | 3,095,490 | $ | 3,237,574 | $ | 3,405,850 | |||||||||
Net interest income | $ | 15,067 | $ | 16,716 | $ | 18,779 | $ | 19,689 | $ | 20,237 | |||||||||
Adjusted net interest income (1) | $ | 14,813 | $ | 16,150 | $ | 17,126 | $ | 19,093 | $ | 19,342 | |||||||||
Effective yield by investment type (3): | |||||||||||||||||||
RMBS | 1.85 | % | 1.90 | % | 1.91 | % | 1.91 | % | 1.76 | % | |||||||||
CMBS | 3.17 | % | 3.28 | % | 3.33 | % | 3.19 | % | 3.36 | % | |||||||||
CMBS IO | 3.88 | % | 3.83 | % | 3.85 | % | 3.90 | % | 3.85 | % | |||||||||
Mortgage loans held for investment | 3.84 | % | 3.80 | % | 3.82 | % | 3.96 | % | 4.37 | % | |||||||||
Effective yield-all investments | 2.75 | % | 2.77 | % | 2.78 | % | 2.74 | % | 2.69 | % | |||||||||
Cost of funds (4) | 0.85 | % | 0.83 | % | 0.81 | % | 0.70 | % | 0.67 | % | |||||||||
Net interest spread | 1.90 | % | 1.94 | % | 1.97 | % | 2.04 | % | 2.02 | % | |||||||||
Adjusted cost of funds (1) | 0.88 | % | 0.90 | % | 1.02 | % | 0.78 | % | 0.78 | % | |||||||||
Adjusted net interest spread (1) | 1.87 | % | 1.87 | % | 1.76 | % | 1.96 | % | 1.91 | % | |||||||||
CPR for Agency RMBS (5) | 18.9 | % | 17.4 | % | 13.2 | % | 13.5 | % | 18.8 | % |
(1) | Non-GAAP financial measures are reconciled in the supplement to this release. |
(2) | Also commonly referred to by the Company as "overall leverage" and is calculated by dividing total liabilities by total shareholders' equity. |
(3) | Effective yield is weighted by the average balance of investments which is calculated using daily amortized cost basis. |
(4) | Percentages shown are based on annualized interest expense amounts divided by average interest bearing liabilities. |
(5) | Represents the 3-month average constant prepayment rate ("CPR"). |
Three Months Ended | |||||||||||||||||||
September 30, 2016 | June 30, 2016 | March 31, 2015 | December 31, 2015 | September 30, 2015 | |||||||||||||||
GAAP net income (loss) to common shareholders | $ | 12,406 | $ | (5,525 | ) | $ | (39,725 | ) | $ | 30,237 | $ | (39,271 | ) | ||||||
Less: | |||||||||||||||||||
(Accretion) amortization of de-designated cash flow hedges (1) | (99 | ) | (80 | ) | 27 | 727 | 857 | ||||||||||||
Change in fair value of derivative instruments, net (2) | (2,564 | ) | 15,811 | 46,584 | (19,177 | ) | 50,997 | ||||||||||||
Loss (gain) on sale of investments, net | — | 297 | 3,941 | 908 | (113 | ) | |||||||||||||
Fair value adjustments, net | (34 | ) | (28 | ) | (24 | ) | 6 | (16 | ) | ||||||||||
Core net operating income to common shareholders | $ | 9,709 | $ | 10,475 | $ | 10,803 | $ | 12,701 | $ | 12,454 | |||||||||
Weighted average common shares | 49,147 | 49,119 | 49,041 | 49,299 | 52,777 | ||||||||||||||
Core net operating income per common share | $ | 0.20 | $ | 0.21 | $ | 0.22 | $ | 0.25 | $ | 0.24 |
(2) | Amount includes any realized gains (losses) recognized during the period presented and excludes net periodic interest costs of derivative instruments. |
Three Months Ended | ||||||||||||||||||||
September 30, 2016 | June 30, 2016 | March 31, 2016 | ||||||||||||||||||
Amount | Yield/Rate | Amount | Yield/Rate | Amount | Yield/Rate | |||||||||||||||
GAAP interest income | $ | 21,135 | 2.75 | % | $ | 22,816 | 2.77 | % | $ | 25,089 | 2.78 | % | ||||||||
GAAP interest expense/cost of funds (1) | 6,068 | 0.85 | % | 6,100 | 0.83 | % | 6,310 | 0.81 | % | |||||||||||
Net interest income/spread | 15,067 | 1.90 | % | 16,716 | 1.94 | % | 18,779 | 1.97 | % | |||||||||||
GAAP interest expense/cost of funds (1) | $ | 6,068 | 0.85 | % | $ | 6,100 | 0.83 | % | $ | 6,310 | 0.81 | % | ||||||||
Less: accretion (amortization) of de-designated cash flow hedges (2) | 99 | 0.01 | % | 80 | — | % | (27 | ) | — | % | ||||||||||
Add: net periodic interest costs of derivative instruments | 155 | 0.02 | % | 486 | 0.07 | % | 1,680 | 0.21 | % | |||||||||||
Adjusted interest expense/ adjusted cost of funds | 6,322 | 0.88 | % | 6,666 | 0.90 | % | 7,963 | 1.02 | % | |||||||||||
Adjusted net interest income/spread | $ | 14,813 | 1.87 | % | $ | 16,150 | 1.87 | % | $ | 17,126 | 1.76 | % | ||||||||
Three Months Ended | ||||||||||||||||||||
December 31, 2015 | September 30, 2015 | |||||||||||||||||||
Amount | Yield/Rate | Amount | Yield/Rate | |||||||||||||||||
GAAP interest income | $ | 25,522 | 2.74 | % | $ | 26,096 | 2.69 | % | ||||||||||||
GAAP interest expense/cost of funds (1) | 5,833 | 0.70 | % | 5,859 | 0.67 | % | ||||||||||||||
Net interest income/spread | 19,689 | 2.04 | % | 20,237 | 2.02 | % | ||||||||||||||
GAAP interest expense/cost of funds (1) | $ | 5,833 | 0.70 | % | $ | 5,859 | 0.67 | % | ||||||||||||
Less: amortization of de-designated cash flow hedges (2) | (727 | ) | (0.08 | )% | (857 | ) | (0.10 | )% | ||||||||||||
Add: net periodic interest costs of derivative instruments | 1,323 | 0.16 | % | 1,752 | 0.21 | % | ||||||||||||||
Adjusted interest expense/ adjusted cost of funds | 6,429 | 0.78 | % | 6,754 | 0.78 | % | ||||||||||||||
Adjusted net interest income/spread | $ | 19,093 | 1.96 | % | $ | 19,342 | 1.91 | % |
(1) | Percentages shown are based on annualized interest expense amounts divided by average interest bearing liabilities. |
(2) | Amount recorded as a portion of "interest expense" in accordance with GAAP related to the accretion (amortization) of the balance remaining in accumulated other comprehensive loss as of June 30, 2013 as a result of the Company's discontinuation of hedge accounting. |