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 July 27, 2016 |
DYNEX CAPITAL, INC. | |||
Date: | July 27, 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 | |
July 27, 2016 | (804) 217-5897 |
• | Comprehensive income of $0.35 per common share comprised of net loss to common shareholders of $(0.11) per common share and other comprehensive income of $0.46 per common share |
• | Core net operating income per common share, a non-GAAP measure, of $0.21 |
• | Net interest spread of 1.94% and adjusted net interest spread, a non-GAAP measure, of 1.87% |
• | Book value per common share of $7.69 at June 30, 2016, an increase of $0.15, or 2%, from March 31, 2016 book value per common share of $7.54 |
• | Leverage of 6.1x shareholders' equity at June 30, 2016 versus 6.4x shareholders equity at March 31, 2016 |
• | Dividend declared of $0.21 per common share |
• | net interest income of $16.7 million |
• | net unrealized gains on changes in fair value of investments of $23.0 million |
• | net loss on derivatives of $16.3 million, substantially all of which was an unrealized loss on changes in fair value |
• | realized losses of $(0.3) million on MBS sales |
• | a decline of $2.3 million in interest income compared to the first quarter of 2016 due to the declining balance of our investment portfolio and lower prepayment penalty income on Agency CMBS during the second quarter as mentioned above; |
• | a decline of $1.3 million in adjusted interest expense due to a reduction in the average notional balance of current pay-fixed interest rate swaps as discussed below; and |
• | lower general and administrative costs of $0.4 million as a result of lower salary and stock compensation expense compared to the first quarter of 2016. |
($ in thousands) | RMBS | CMBS | CMBS IO | Total | |||||||||||
Balance at March 31, 2016 | $ | 1,549,591 | $ | 1,016,476 | $ | 762,685 | $ | 3,328,752 | |||||||
Purchases | — | — | — | — | |||||||||||
Principal payments | (90,008 | ) | (6,421 | ) | — | (96,429 | ) | ||||||||
Sales | (10,584 | ) | — | — | (10,584 | ) | |||||||||
Net premium amortization | (3,950 | ) | (765 | ) | (31,316 | ) | (36,031 | ) | |||||||
Unrealized gain during the period | 3,392 | 13,559 | 6,076 | 23,027 | |||||||||||
Balance at June 30, 2016 | $ | 1,448,441 | $ | 1,022,849 | $ | 737,445 | $ | 3,208,735 |
Three Months Ended | |||||||||||||
June 30, 2016 | March 31, 2016 | ||||||||||||
($ in thousands) | Average Balance | Effective Yield (1) | Average Balance | Effective Yield (1) | |||||||||
RMBS: | |||||||||||||
Agency | $ | 1,436,582 | 1.83 | % | $ | 1,549,079 | 1.84 | % | |||||
Non-Agency | 59,037 | 3.62 | % | 64,025 | 3.62 | % | |||||||
1,495,619 | 1.90 | % | 1,613,104 | 1.91 | % | ||||||||
CMBS: | |||||||||||||
Agency | 869,271 | 2.92 | % | 879,727 | 3.01 | % | |||||||
Non-Agency | 110,393 | 6.06 | % | 137,866 | 5.37 | % | |||||||
979,664 | 3.28 | % | 1,017,593 | 3.33 | % | ||||||||
CMBS IO: | |||||||||||||
Agency | 395,468 | 3.75 | % | 413,100 | 3.80 | % | |||||||
Non-Agency | 348,832 | 3.91 | % | 362,288 | 3.92 | % | |||||||
744,300 | 3.83 | % | 775,388 | 3.85 | % | ||||||||
Total MBS Investments: | $ | 3,219,583 | 2.76 | % | $ | 3,406,085 | 2.78 | % |
June 30, 2016 | December 31, 2015 | ||||||||||||
($ in thousands) | Balance | Weighted Average Rate | Balance | Weighted Average Rate | |||||||||
Agency RMBS | $ | 1,284,519 | 0.67 | % | $ | 1,439,436 | 0.47 | % | |||||
Non-Agency RMBS | 45,581 | 1.81 | % | 52,128 | 1.77 | % | |||||||
Agency CMBS | 547,234 | 0.67 | % | 301,427 | 0.49 | % | |||||||
Non-Agency CMBS | 101,795 | 1.37 | % | 126,378 | 1.26 | % | |||||||
Agency CMBS IO | 331,263 | 1.30 | % | 360,245 | 1.24 | % | |||||||
Non-Agency CMBS IO | 283,906 | 1.39 | % | 302,771 | 1.33 | % | |||||||
Securitization financing bonds | 6,182 | 1.80 | % | 7,035 | 1.65 | % | |||||||
Total repurchase agreement financing | 2,600,480 | 0.88 | % | 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) | Notional Balance (1) | Weighted Average Net Pay Rate (1) | ||||
Balance of effective interest rate swaps at March 31, 2016 | $ | 805,000 | 1.41 | % | ||
Effective interest rate swaps added | — | — | % | |||
Previously forward-starting interest rate swaps (2) | — | — | % | |||
Effective interest rate swaps terminated | (500,000 | ) | 1.89 | % | ||
Balance of effective interest rate swaps at June 30, 2016 | $ | 305,000 | 0.64 | % |
(1) | Includes pay-fixed interest rate swaps, net of receive-fixed interest rate swaps. |
(2) | Represents interest rate swaps entered into in prior periods that became effective during the quarter presented. |
($ in thousands) | Realized Gains (Losses) | Change in Fair Value of Derivative Instruments | Periodic Interest Costs (1) | Gain (Loss) on Derivative Instruments, Net | |||||||||||
Receive-fixed interest rate swaps | $ | — | $ | 2,422 | $ | 1,321 | $ | 3,743 | |||||||
Pay-fixed interest rate swaps | (72 | ) | (13,975 | ) | (1,807 | ) | (15,854 | ) | |||||||
Eurodollar futures | — | (4,186 | ) | — | (4,186 | ) | |||||||||
Total | $ | (72 | ) | $ | (15,739 | ) | $ | (486 | ) | $ | (16,297 | ) |
(1) | Amounts represent interest earned or incurred related to interest rate swaps effective during the quarter. |
# | # | # |
June 30, 2016 | December 31, 2015 | ||||||
ASSETS | (unaudited) | ||||||
Mortgage-backed securities | $ | 3,208,735 | $ | 3,493,701 | |||
Mortgage loans held for investment, net | 21,815 | 24,145 | |||||
Investment in limited partnership | — | 10,835 | |||||
Investment in FHLB stock | 5,260 | 11,475 | |||||
Cash and cash equivalents | 96,897 | 33,935 | |||||
Restricted cash | 83,679 | 51,190 | |||||
Derivative assets | 18,421 | 7,835 | |||||
Principal receivable on investments | 7,794 | 6,193 | |||||
Accrued interest receivable | 19,619 | 22,764 | |||||
Other assets, net | 6,853 | 7,975 | |||||
Total assets | $ | 3,469,073 | $ | 3,670,048 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Liabilities: | |||||||
Repurchase agreements | $ | 2,600,480 | $ | 2,589,420 | |||
FHLB advances | 263,000 | 520,000 | |||||
Non-recourse collateralized financing | 7,520 | 8,442 | |||||
Derivative liabilities | 90,260 | 41,205 | |||||
Accrued interest payable | 1,714 | 1,743 | |||||
Accrued dividends payable | 12,257 | 13,709 | |||||
Other liabilities | 2,316 | 3,504 | |||||
Total liabilities | 2,977,547 | 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; 49,145,087 and 49,047,335 shares issued and outstanding, respectively | 491 | 490 | |||||
Additional paid-in capital | 726,063 | 725,358 | |||||
Accumulated other comprehensive income (loss) | 51,908 | (12,768 | ) | ||||
Accumulated deficit | (396,594 | ) | (330,713 | ) | |||
Total shareholders' equity | 491,526 | 492,025 | |||||
Total liabilities and shareholders’ equity | $ | 3,469,073 | $ | 3,670,048 | |||
Book value per common share | $ | 7.69 | $ | 7.71 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Interest income | $ | 22,816 | $ | 24,527 | $ | 47,905 | $ | 48,626 | |||||||
Interest expense | 6,100 | 5,542 | 12,410 | 10,913 | |||||||||||
Net interest income | 16,716 | 18,985 | 35,495 | 37,713 | |||||||||||
(Loss) gain on derivatives, net | (16,297 | ) | 17,090 | (64,561 | ) | (8,233 | ) | ||||||||
Loss on sale of investments, net | (297 | ) | (1,491 | ) | (4,238 | ) | (183 | ) | |||||||
Fair value adjustments, net | 28 | 20 | 51 | 59 | |||||||||||
Other income, net | 290 | 612 | 353 | 645 | |||||||||||
General and administrative expenses: | |||||||||||||||
Compensation and benefits | (1,875 | ) | (2,351 | ) | (4,093 | ) | (4,467 | ) | |||||||
Other general and administrative | (1,796 | ) | (2,403 | ) | (3,669 | ) | (4,544 | ) | |||||||
Net (loss) income | (3,231 | ) | 30,462 | (40,662 | ) | 20,990 | |||||||||
Preferred stock dividends | (2,294 | ) | (2,294 | ) | (4,588 | ) | (4,588 | ) | |||||||
Net (loss) income to common shareholders | $ | (5,525 | ) | $ | 28,168 | $ | (45,250 | ) | $ | 16,402 | |||||
Other comprehensive income: | |||||||||||||||
Change in net unrealized gain on available-for-sale investments | $ | 22,730 | $ | (42,027 | ) | $ | 60,491 | $ | (18,722 | ) | |||||
Reclassification adjustment for loss on sale of investments, net | 297 | 1,491 | 4,238 | 183 | |||||||||||
Reclassification adjustment for de-designated cash flow hedges | (80 | ) | 857 | (53 | ) | 1,914 | |||||||||
Total other comprehensive income (loss) | 22,947 | (39,679 | ) | 64,676 | (16,625 | ) | |||||||||
Comprehensive income (loss) to common shareholders | $ | 17,422 | $ | (11,511 | ) | $ | 19,426 | $ | (223 | ) | |||||
Net (loss) income per common share-basic and diluted | $ | (0.11 | ) | $ | 0.52 | $ | (0.92 | ) | $ | 0.30 | |||||
Weighted average common shares | 49,119 | 54,574 | 49,080 | 54,687 |
2Q2016 | 1Q2016 | 4Q2015 | 3Q2015 | 2Q2015 | |||||||||||||||
Net (loss) income per common share | $ | (0.11 | ) | $ | (0.81 | ) | $ | 0.61 | $ | (0.74 | ) | $ | 0.52 | ||||||
Core net operating income per common share (1) | $ | 0.21 | $ | 0.22 | $ | 0.25 | $ | 0.24 | $ | 0.21 | |||||||||
Comprehensive income (loss) per common share | $ | 0.35 | $ | 0.04 | $ | (0.30 | ) | $ | (0.22 | ) | $ | (0.21 | ) | ||||||
Dividends per common share | $ | 0.21 | $ | 0.21 | $ | 0.24 | $ | 0.24 | $ | 0.24 | |||||||||
Book value per common share, end of period | $ | 7.69 | $ | 7.54 | $ | 7.71 | $ | 8.19 | $ | 8.53 | |||||||||
Leverage at period end (2) | 6.1 | x | 6.4 | x | 6.5 | x | 6.4 | x | 6.2 | x | |||||||||
Average interest earning assets | $ | 3,242,413 | $ | 3,429,875 | $ | 3,598,748 | $ | 3,818,140 | $ | 3,748,536 | |||||||||
Average interest bearing liabilities | $ | 2,916,432 | $ | 3,095,490 | $ | 3,237,574 | $ | 3,405,850 | $ | 3,320,760 | |||||||||
Net interest income | $ | 16,716 | $ | 18,779 | $ | 19,689 | $ | 20,237 | $ | 18,985 | |||||||||
Adjusted net interest income (1) | $ | 16,150 | $ | 17,126 | $ | 19,093 | $ | 19,342 | $ | 18,049 | |||||||||
Effective yield by investment type (3): | |||||||||||||||||||
RMBS | 1.90 | % | 1.91 | % | 1.91 | % | 1.76 | % | 1.82 | % | |||||||||
CMBS | 3.28 | % | 3.33 | % | 3.19 | % | 3.36 | % | 3.38 | % | |||||||||
CMBS IO | 3.83 | % | 3.85 | % | 3.90 | % | 3.85 | % | 3.86 | % | |||||||||
Mortgage loans held for investment | 3.80 | % | 3.82 | % | 3.96 | % | 4.37 | % | 4.24 | % | |||||||||
Effective yield-total portfolio | 2.77 | % | 2.78 | % | 2.74 | % | 2.69 | % | 2.63 | % | |||||||||
Cost of funds (4) | 0.83 | % | 0.81 | % | 0.70 | % | 0.67 | % | 0.66 | % | |||||||||
Net interest spread | 1.94 | % | 1.97 | % | 2.04 | % | 2.02 | % | 1.97 | % | |||||||||
Adjusted cost of funds (1) | 0.90 | % | 1.02 | % | 0.78 | % | 0.78 | % | 0.77 | % | |||||||||
Adjusted net interest spread (1) | 1.87 | % | 1.76 | % | 1.96 | % | 1.91 | % | 1.86 | % | |||||||||
CPR for Agency RMBS (5) | 17.4 | % | 13.2 | % | 13.5 | % | 18.8 | % | 16.7 | % |
(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 | |||||||||||||||||||
June 30, 2016 | March 31, 2016 | December 31, 2015 | September 30, 2015 | June 30, 2015 | |||||||||||||||
GAAP net (loss) income to common shareholders | $ | (5,525 | ) | $ | (39,725 | ) | $ | 30,237 | $ | (39,271 | ) | $ | 28,168 | ||||||
Less: | |||||||||||||||||||
Amortization of de-designated cash flow hedges (1) | (80 | ) | 27 | 727 | 857 | 857 | |||||||||||||
Change in fair value of derivative instruments, net (2) | 15,811 | 46,584 | (19,177 | ) | 50,997 | (18,883 | ) | ||||||||||||
Loss (gain) on sale of investments, net | 297 | 3,941 | 908 | (113 | ) | 1,491 | |||||||||||||
Fair value adjustments, net | (28 | ) | (24 | ) | 6 | (16 | ) | (20 | ) | ||||||||||
Core net operating income to common shareholders | $ | 10,475 | $ | 10,803 | $ | 12,701 | $ | 12,454 | $ | 11,613 | |||||||||
Weighted average common shares | 49,119 | 49,041 | 49,299 | 52,777 | 54,574 | ||||||||||||||
Core net operating income per common share | $ | 0.21 | $ | 0.22 | $ | 0.25 | $ | 0.24 | $ | 0.21 |
(2) | Amount includes any realized gains (losses) recognized during the period presented and excludes net periodic interest costs of derivative instruments. |
Three Months Ended | |||||||||||||||||||
($ in thousands) | June 30, 2016 | March 31, 2016 | December 31, 2015 | September 30, 2015 | June 30, 2015 | ||||||||||||||
Interest income | $ | 22,816 | $ | 25,089 | $ | 25,522 | $ | 26,096 | $ | 24,527 | |||||||||
Adjusted interest expense (1) | 6,666 | 7,963 | 6,429 | 6,754 | 6,478 | ||||||||||||||
Adjusted net interest income (1) | 16,150 | 17,126 | 19,093 | 19,342 | 18,049 | ||||||||||||||
Other income, net | 290 | 63 | 180 | (215 | ) | 612 | |||||||||||||
General & administrative expenses | (3,671 | ) | (4,092 | ) | (4,278 | ) | (4,379 | ) | (4,754 | ) | |||||||||
Preferred stock dividends | (2,294 | ) | (2,294 | ) | (2,294 | ) | (2,294 | ) | (2,294 | ) | |||||||||
Core net operating income to common shareholders | $ | 10,475 | $ | 10,803 | $ | 12,701 | $ | 12,454 | $ | 11,613 |
(1) | Non-GAAP financial measures reconciled on next page. |
Three Months Ended | ||||||||||||||||||||
June 30, 2016 | March 31, 2016 | December 31, 2015 | ||||||||||||||||||
Amount | Yield/Rate | Amount | Yield/Rate | Amount | Yield/Rate | |||||||||||||||
GAAP interest income | $ | 22,816 | 2.77 | % | $ | 25,089 | 2.78 | % | $ | 25,522 | 2.74 | % | ||||||||
GAAP interest expense/cost of funds (1) | 6,100 | 0.83 | % | 6,310 | 0.81 | % | 5,833 | 0.70 | % | |||||||||||
Net interest income/spread | 16,716 | 1.94 | % | 18,779 | 1.97 | % | 19,689 | 2.04 | % | |||||||||||
GAAP interest expense/cost of funds (1) | $ | 6,100 | 0.83 | % | $ | 6,310 | 0.81 | % | $ | 5,833 | 0.70 | % | ||||||||
Less: amortization of de-designated cash flow hedges (2) | 80 | — | % | (27 | ) | — | % | (727 | ) | (0.08 | )% | |||||||||
Add: net periodic interest costs of derivative instruments | 486 | 0.07 | % | 1,680 | 0.21 | % | 1,323 | 0.16 | % | |||||||||||
Adjusted interest expense/ adjusted cost of funds | 6,666 | 0.90 | % | 7,963 | 1.02 | % | 6,429 | 0.78 | % | |||||||||||
Adjusted net interest income/spread | $ | 16,150 | 1.87 | % | $ | 17,126 | 1.76 | % | $ | 19,093 | 1.96 | % | ||||||||
Three Months Ended | ||||||||||||||||||||
September 30, 2015 | June 30, 2015 | |||||||||||||||||||
Amount | Yield/Rate | Amount | Yield/Rate | |||||||||||||||||
GAAP interest income | $ | 26,096 | 2.69 | % | $ | 24,527 | 2.63 | % | ||||||||||||
GAAP interest expense/cost of funds (1) | 5,859 | 0.67 | % | 5,542 | 0.66 | % | ||||||||||||||
Net interest income/spread | 20,237 | 2.02 | % | 18,985 | 1.97 | % | ||||||||||||||
GAAP interest expense/cost of funds (1) | $ | 5,859 | 0.67 | % | $ | 5,542 | 0.66 | % | ||||||||||||
Less: amortization of de-designated cash flow hedges (2) | (857 | ) | (0.10 | )% | (857 | ) | (0.10 | )% | ||||||||||||
Add: net periodic interest costs of derivative instruments | 1,752 | 0.21 | % | 1,793 | 0.21 | % | ||||||||||||||
Adjusted interest expense/ adjusted cost of funds | 6,754 | 0.78 | % | 6,478 | 0.77 | % | ||||||||||||||
Adjusted net interest income/spread | $ | 19,342 | 1.91 | % | $ | 18,049 | 1.86 | % |
(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 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. |