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 4, 2014 |
DYNEX CAPITAL, INC. | |||
Date: | November 4, 2014 | By: | /s/ Stephen J. Benedetti |
Stephen J. Benedetti | |||
Executive Vice President, Chief Operating Officer and Chief Financial Officer |
FOR IMMEDIATE RELEASE | CONTACT: | Alison Griffin | |
(804) 217-5897 |
($ in thousands, except per share amounts) | 3Q2014 | 2Q2014 | 3Q2013 | ||||||||
Net interest income | $ | 19,942 | $ | 21,146 | $ | 22,948 | |||||
Gain (loss) on derivative instruments, net | $ | 4,842 | $ | (23,074 | ) | $ | (24,019 | ) | |||
Gain (loss) on sale of investments, net | $ | 9,057 | $ | (477 | ) | $ | (825 | ) | |||
Net income (loss) to common shareholders | $ | 28,572 | $ | (8,293 | ) | $ | (6,921 | ) | |||
Net income (loss) per common share | $ | 0.52 | $ | (0.15 | ) | $ | (0.13 | ) | |||
Core net operating income to common shareholders (1) | $ | 13,802 | $ | 14,106 | $ | 14,885 | |||||
Core net operating income per common share (1) | $ | 0.25 | $ | 0.26 | $ | 0.27 | |||||
Return on average common equity (annualized) | 22.7 | % | (6.7 | )% | (5.7 | )% | |||||
Adjusted return on average common equity (annualized) (1) | 11.0 | % | 11.3 | % | 12.3 | % | |||||
Dividends per common share | $ | 0.25 | $ | 0.25 | $ | 0.27 | |||||
Book value per common share, end of period | $ | 9.14 | $ | 9.12 | $ | 8.59 | |||||
Average interest earning assets | $ | 3,820,898 | $ | 3,944,154 | $ | 4,371,485 | |||||
Average interest bearing liabilities | $ | 3,364,225 | $ | 3,466,651 | $ | 3,859,653 | |||||
Weighted average effective yield | 2.73 | % | 2.79 | % | 2.82 | % | |||||
Annualized cost of funds | 0.70 | % | 0.75 | % | 0.88 | % | |||||
Net interest spread | 2.03 | % | 2.04 | % | 1.94 | % | |||||
Adjusted net interest spread (1) | 1.93 | % | 1.92 | % | 1.65 | % | |||||
Debt to shareholders' equity ratio, end of period | 5.2 | x | 5.7 | x | 6.4 | x |
(1) | Core net operating income to common shareholders (including on a per share basis), adjusted return on average common equity, and adjusted net interest spread are non-GAAP financial measures and are reconciled in the supplement to this release. |
Book Value ($ in thousands) | Book Value Per Common Share | |||||||
Shareholders' equity at June 30, 2014 | $ | 612,914 | $ | 9.12 | ||||
GAAP net income to common shareholders: | ||||||||
Core net operating income | 13,802 | 0.25 | ||||||
Amortization of de-designated cash flow hedges | (1,442 | ) | (0.03 | ) | ||||
Change in fair value of derivative instruments, net | 7,113 | 0.13 | ||||||
Gain on sale of investments, net | 9,057 | 0.17 | ||||||
Fair value adjustments, net | 42 | — | ||||||
Other comprehensive income (loss) | (14,482 | ) | (0.26 | ) | ||||
Common dividend declared | (13,683 | ) | (0.25 | ) | ||||
Other | 726 | 0.01 | ||||||
Shareholders' equity at September 30, 2014 | $ | 614,047 | $ | 9.14 |
($ in thousands) | RMBS | CMBS | CMBS IO | Total | |||||||||||
Balance at June 30, 2014 | $ | 2,481,134 | $ | 746,503 | $ | 722,328 | $ | 3,949,965 | |||||||
Purchases | 16,313 | 33,145 | 108,851 | 158,309 | |||||||||||
Principal payments | (131,313 | ) | (20,243 | ) | — | (151,556 | ) | ||||||||
Sales | (53,921 | ) | (136,441 | ) | (97,247 | ) | (287,609 | ) | |||||||
Net amortization | (7,361 | ) | (1,042 | ) | (29,389 | ) | (37,792 | ) | |||||||
Change in net unrealized gain (loss) | 2,007 | (13,318 | ) | (4,613 | ) | (15,924 | ) | ||||||||
Balance at September 30, 2014 | $ | 2,306,859 | $ | 608,604 | $ | 699,930 | $ | 3,615,393 |
3Q2014 | |||||||
($ in thousands) | Amortized cost basis | Gain (loss) on sale of investments, net | |||||
Agency RMBS | $ | 53,921 | $ | (1,200 | ) | ||
Non-Agency CMBS | 136,441 | 8,133 | |||||
Agency CMBS IO | 84,734 | 1,542 | |||||
Non-Agency CMBS IO | 12,513 | 582 | |||||
$ | 287,609 | $ | 9,057 |
As of September 30, 2014 | 3Q2014 | ||||||||||||||||||||
($ in thousands) | Par Balance (Notional for CMBS IO) | Net Premium (Discount) | Amortized Cost | Fair Value | WAVG Coupon | WAVG Effective Yield (2) | |||||||||||||||
Agency MBS: | |||||||||||||||||||||
RMBS | $ | 2,200,149 | $ | 120,667 | $ | 2,320,816 | $ | 2,297,304 | 3.14 | % | 1.80 | % | |||||||||
CMBS | 305,566 | 19,186 | 324,752 | 338,331 | 5.22 | % | 3.48 | % | |||||||||||||
CMBS IO | 9,461,823 | 400,886 | 400,886 | 411,717 | 0.83 | % | 4.24 | % | |||||||||||||
Total (1) | 2,505,715 | 540,739 | 3,046,454 | 3,047,352 | 2.29 | % | |||||||||||||||
Non-Agency MBS: | |||||||||||||||||||||
RMBS | $ | 9,522 | $ | (4 | ) | $ | 9,518 | $ | 9,555 | 4.20 | % | 4.61 | % | ||||||||
CMBS | 266,596 | (12,374 | ) | 254,222 | 270,273 | 4.89 | % | 5.37 | % | ||||||||||||
CMBS IO | 7,246,832 | 282,890 | 282,890 | 288,213 | 0.69 | % | 3.99 | % | |||||||||||||
Total (1) | 276,118 | 270,512 | 546,630 | 568,041 | 4.76 | % | |||||||||||||||
Total MBS portfolio: | $ | 2,781,833 | $ | 811,251 | $ | 3,593,084 | $ | 3,615,393 | 2.70 | % |
(1) | Total par balances of investments exclude notional amounts of CMBS IO. |
(2) | Weighted average effective yield is based on the average balance of investments which is calculated using daily amortized cost basis and excludes notional amounts of CMBS IO. |
September 30, 2014 | December 31, 2013 | ||||||||||||
($ in thousands) | Par Balance | WAVG Coupon | Par Balance | WAVG Coupon | |||||||||
0-12 MTR | $ | 517,498 | 2.93 | % | $ | 575,763 | 2.97 | % | |||||
13-36 MTR | 251,967 | 4.01 | % | 276,862 | 3.89 | % | |||||||
37-60 MTR | 482,374 | 3.22 | % | 619,887 | 3.57 | % | |||||||
61-84 MTR | 247,873 | 3.61 | % | 171,839 | 3.01 | % | |||||||
85-120 MTR | 682,956 | 2.77 | % | 928,580 | 2.99 | % | |||||||
$ | 2,182,668 | 3.15 | % | $ | 2,572,931 | 3.22 | % |
3Q2014 | 2Q2014 | 1Q2014 | 4Q2013 | ||||||||
Agency RMBS | 15.3 | % | 14.1 | % | 12.7 | % | 14.3 | % | |||
Agency CMBS | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | |||
Total weighted average (1) | 13.9 | % | 12.4 | % | 11.3 | % | 12.8 | % |
(1) | CPRs for CMBS IO are not calculated and therefore are not included in the total weighted average. |
Fair Value | Weighted average % of total | |||||||||||||
($ in thousands) | RMBS | CMBS | CMBS IO | |||||||||||
AAA | $ | — | $ | 36,814 | $ | 284,126 | 56.5 | % | ||||||
AA | — | 75,343 | 1,140 | 13.5 | % | |||||||||
A | — | 121,254 | — | 21.3 | % | |||||||||
Below A or not rated | 9,555 | 36,862 | 2,947 | 8.7 | % | |||||||||
$ | 9,555 | $ | 270,273 | $ | 288,213 | 100.0 | % |
($ in thousands) | 3Q2014 | 2Q2014 | 3Q2013 | ||||||||
Agency MBS: | |||||||||||
Weighted average effective yield (1) | 2.29 | % | 2.35 | % | 2.42 | % | |||||
Average balance | $ | 3,143,464 | $ | 3,290,012 | $ | 3,790,071 | |||||
Non-Agency MBS: | |||||||||||
Weighted average effective yield (1) | 4.76 | % | 5.00 | % | 5.45 | % | |||||
Average balance | 626,125 | 599,740 | 517,997 | ||||||||
Mortgage loans held for investment | |||||||||||
Weighted average effective yield (1) | 5.16 | % | 5.17 | % | 5.36 | % | |||||
Average balance | 51,309 | $ | 54,402 | $ | 63,417 | ||||||
Total investments: | |||||||||||
Weighted average effective yield (1) | 2.73 | % | 2.79 | % | 2.82 | % | |||||
Weighted average effective borrowing rate (2) | (0.80 | )% | (0.87 | )% | (1.17 | )% | |||||
Adjusted net interest spread (2) | 1.93 | % | 1.92 | % | 1.65 | % | |||||
Adjusted net interest income (2) | $ | 19,113 | $ | 20,082 | $ | 20,060 | |||||
Average interest earning assets | $ | 3,820,898 | $ | 3,944,154 | $ | 4,371,485 | |||||
Average interest bearing liabilities | $ | 3,364,225 | $ | 3,466,651 | 3,859,653 |
(1) | Weighted average effective yield is based on the average balance of investments which is calculated using daily amortized cost basis. |
(2) | Weighted average effective borrowing rate, adjusted net interest spread, and adjusted net interest income are non-GAAP financial measures and are reconciled in the supplement to this release. |
September 30, 2014 | December 31, 2013 | ||||||||||||
($ in thousands) | Balance | Weighted Average Rate | Balance | Weighted Average Rate | |||||||||
Agency RMBS | $ | 2,081,924 | 0.36 | % | $ | 2,522,503 | 0.42 | % | |||||
Agency CMBS | 258,024 | 0.33 | % | 246,849 | 0.39 | % | |||||||
Agency CMBS IOs | 351,518 | 0.94 | % | 369,948 | 1.16 | % | |||||||
Non-Agency RMBS | 7,724 | 1.67 | % | 10,569 | 1.80 | % | |||||||
Non-Agency CMBS | 198,203 | 1.16 | % | 303,674 | 1.27 | % | |||||||
Non-Agency CMBS IO | 242,458 | 1.03 | % | 106,803 | 1.27 | % | |||||||
Securitization financing bonds | 10,403 | 1.50 | % | 20,651 | 1.59 | % | |||||||
Deferred costs | — | — | (243 | ) | — | ||||||||
$ | 3,150,254 | 0.53 | % | $ | 3,580,754 | 0.61 | % |
Effective Period | Interest Rate Swaps - Payers Net of Receivers (1) | Eurodollar Contracts | Total Weighted Average Notional Outstanding (1) | Weighted Average Rate (1) (2) | |||||||||||
($ in thousands) | |||||||||||||||
4Q14 | $ | 400,000 | $ | — | $ | 400,000 | 1.24 | % | |||||||
2015 | 400,000 | — | 400,000 | 1.06 | % | ||||||||||
2016 | 400,000 | 381,096 | 781,096 | 1.57 | % | ||||||||||
2017 | 288,178 | 1,292,691 | 1,580,869 | 2.66 | % | ||||||||||
2018 | 215,000 | 1,113,767 | 1,328,767 | 3.21 | % | ||||||||||
2019 | 82,178 | 681,027 | 763,205 | 3.72 | % | ||||||||||
2020 | 216,216 | 487,055 | 703,271 | 3.24 | % | ||||||||||
2021 | 164,178 | 194,604 | 358,782 | 2.04 | % | ||||||||||
2022 | 155,000 | — | 155,000 | 2.03 | % | ||||||||||
2023 | 134,370 | — | 134,370 | 2.05 | % | ||||||||||
2024 | 20,765 | — | 20,765 | 1.72 | % |
($ in thousands) | Change in Fair Value of Derivative Instruments, Net | Periodic Interest Costs (1) | Gain on Derivative Instruments, Net | ||||||||
Interest rate swaps-receivers | $ | 103 | $ | 236 | $ | 339 | |||||
Interest rate swaps-payers | 3,153 | (2,507 | ) | 646 | |||||||
Eurodollar contracts | 3,857 | — | 3,857 | ||||||||
Total | $ | 7,113 | $ | (2,271 | ) | $ | 4,842 |
(1) | Periodic interest costs represent interest receipts and payments (including accrued amounts) related to interest rate derivatives during the quarter. |
# | # | # |
September 30, 2014 | December 31, 2013 | ||||||
ASSETS | (unaudited) | ||||||
Mortgage-backed securities | $ | 3,615,393 | $ | 4,018,161 | |||
Mortgage loans held for investment, net | 41,454 | 55,423 | |||||
3,656,847 | 4,073,584 | ||||||
Cash and cash equivalents | 56,639 | 69,330 | |||||
Restricted cash | 32,755 | 13,385 | |||||
Derivative assets | 7,297 | 18,488 | |||||
Receivable for securities sold | 16,321 | — | |||||
Principal receivable on investments | 11,124 | 12,999 | |||||
Accrued interest receivable | 20,986 | 21,703 | |||||
Other assets, net | 11,542 | 7,648 | |||||
Total assets | $ | 3,813,511 | $ | 4,217,137 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Liabilities: | |||||||
Repurchase agreements | $ | 3,150,254 | $ | 3,580,754 | |||
Payable for unsettled mortgage-backed securities | — | 10,358 | |||||
Non-recourse collateralized financing | 11,194 | 12,914 | |||||
Derivative liabilities | 18,058 | 6,681 | |||||
Accrued interest payable | 1,492 | 2,548 | |||||
Accrued dividends payable | 15,621 | 16,601 | |||||
Other liabilities | 2,845 | 1,405 | |||||
Total liabilities | 3,199,464 | 3,631,261 | |||||
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; 54,734,817 and 54,310,484 shares issued and outstanding, respectively | 547 | 543 | |||||
Additional paid-in capital | 763,228 | 761,550 | |||||
Accumulated other comprehensive income (loss) | 16,462 | (33,816 | ) | ||||
Accumulated deficit | (275,848 | ) | (252,059 | ) | |||
Total shareholders' equity | 614,047 | 585,876 | |||||
Total liabilities and shareholders’ equity | $ | 3,813,511 | $ | 4,217,137 | |||
Book value per common share | $ | 9.14 | $ | 8.69 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Interest income: | |||||||||||||||
Mortgage-backed securities | $ | 25,207 | $ | 30,820 | $ | 79,104 | $ | 95,827 | |||||||
Mortgage loans held for investment | 793 | 846 | 2,255 | 2,711 | |||||||||||
26,000 | 31,666 | 81,359 | 98,538 | ||||||||||||
Interest expense: | |||||||||||||||
Repurchase agreements | 6,028 | 8,477 | 20,187 | 29,860 | |||||||||||
Non-recourse collateralized financing | 30 | 241 | 76 | 760 | |||||||||||
6,058 | 8,718 | 20,263 | 30,620 | ||||||||||||
Net interest income | 19,942 | 22,948 | 61,096 | 67,918 | |||||||||||
Provision for loan losses | — | — | — | (261 | ) | ||||||||||
Gain (loss) on derivative instruments, net | 4,842 | (24,019 | ) | (31,654 | ) | (12,683 | ) | ||||||||
Gain (loss) on sale of investments, net | 9,057 | (825 | ) | 5,273 | 2,597 | ||||||||||
Fair value adjustments, net | 42 | 150 | 162 | (590 | ) | ||||||||||
Other income, net | 897 | 748 | 1,108 | 761 | |||||||||||
General and administrative expenses: | |||||||||||||||
Compensation and benefits | (2,351 | ) | (2,282 | ) | (7,232 | ) | (6,948 | ) | |||||||
Other general and administrative | (1,563 | ) | (1,347 | ) | (4,620 | ) | (4,284 | ) | |||||||
Net income (loss) | 30,866 | (4,627 | ) | 24,133 | 46,510 | ||||||||||
Preferred stock dividends | (2,294 | ) | (2,294 | ) | (6,882 | ) | (5,608 | ) | |||||||
Net income (loss) to common shareholders | $ | 28,572 | $ | (6,921 | ) | $ | 17,251 | $ | 40,902 | ||||||
Other comprehensive income: | |||||||||||||||
Change in fair value of available-for-sale investments | $ | (6,867 | ) | $ | (2,671 | ) | $ | 50,212 | $ | (112,037 | ) | ||||
Reclassification adjustment for (gain) loss on sale of investments, net | (9,057 | ) | 825 | (5,273 | ) | (2,597 | ) | ||||||||
Change in fair value of cash flow hedges | — | — | — | 16,381 | |||||||||||
Reclassification adjustment for cash flow hedges (including de-designated hedges) | 1,442 | 2,583 | 5,339 | 11,379 | |||||||||||
Total other comprehensive (loss) income | (14,482 | ) | 737 | 50,278 | (86,874 | ) | |||||||||
Comprehensive income (loss) to common shareholders | $ | 14,090 | $ | (6,184 | ) | $ | 67,529 | $ | (45,972 | ) | |||||
Weighted average common shares: basic and diluted | 54,731 | 54,904 | 54,690 | 54,728 | |||||||||||
Net income (loss) per common share: basic and diluted | $ | 0.52 | $ | (0.13 | ) | $ | 0.32 | $ | 0.75 |
Three Months Ended | |||||||||||
September 30, 2014 | June 30, 2014 | September 30, 2013 | |||||||||
GAAP net income (loss) to common shareholders | $ | 28,572 | $ | (8,293 | ) | $ | (6,921 | ) | |||
Amortization of de-designated cash flow hedges (1) | 1,442 | 1,608 | 2,583 | ||||||||
Change in fair value of derivative instruments, net | (7,113 | ) | 20,402 | 18,548 | |||||||
(Gain) loss on sale of investments, net | (9,057 | ) | 477 | 825 | |||||||
Fair value adjustments, net | (42 | ) | (88 | ) | (150 | ) | |||||
Core net operating income to common shareholders | $ | 13,802 | $ | 14,106 | $ | 14,885 | |||||
Core net operating income per common share | $ | 0.25 | $ | 0.26 | $ | 0.27 | |||||
Average common equity during the period | $ | 503,861 | $ | 497,864 | $ | 484,356 | |||||
ROAE, calculated using annualized GAAP net income (loss) | 22.7 | % | (6.7 | )% | (5.7 | )% | |||||
Adjusted ROAE, calculated using annualized core net operating income | 11.0 | % | 11.3 | % | 12.3 | % |
Three Months Ended | ||||||||||||||||||||
September 30, 2014 | June 30, 2014 | September 30, 2013 | ||||||||||||||||||
Amount | Yield/Rate | Amount | Yield/Rate | Amount | Yield/Rate | |||||||||||||||
GAAP interest income | $ | 26,000 | 2.73 | % | $ | 27,718 | 2.79 | % | $ | 31,666 | 2.82 | % | ||||||||
GAAP interest expense/annualized cost of funds (2) | 6,058 | 0.70 | % | 6,572 | 0.75 | % | 8,718 | 0.88 | % | |||||||||||
Net interest income/spread | 19,942 | 2.03 | % | 21,146 | 2.04 | % | 22,948 | 1.94 | % | |||||||||||
GAAP interest expense/annualized cost of funds (2) | $ | 6,058 | 0.70 | % | $ | 6,572 | 0.75 | % | $ | 8,718 | 0.88 | % | ||||||||
Amortization of de-designated cash flow hedges (1) | (1,442 | ) | (0.17 | )% | (1,608 | ) | (0.18 | )% | (2,583 | ) | (0.26 | )% | ||||||||
Net periodic interest costs of derivative instruments | 2,271 | 0.27 | % | 2,672 | 0.30 | % | 5,471 | 0.55 | % | |||||||||||
Effective borrowing costs | 6,887 | 0.80 | % | 7,636 | 0.87 | % | 11,606 | 1.17 | % | |||||||||||
Adjusted net interest income/spread | $ | 19,113 | 1.93 | % | $ | 20,082 | 1.92 | % | $ | 20,060 | 1.65 | % |
(1) | Amount recorded as a portion of "interest expense" in accordance with GAAP related to the 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. |
(2) | Rates shown are based on annualized interest expense amounts divided by average interest bearing liabilities. Recalculation of annualized cost of funds using total interest expense shown in the table may not be possible because certain expense items use a 360-day year for the calculation while others use actual number of days in the year. |