Dynex Capital, Inc. (NYSE: DX) reported its second quarter 2017
results today. As previously announced, the Company's quarterly
conference call to discuss these results is today at 10:00 a.m.
Eastern Time and may be accessed using conference ID 54789102 via
telephone in the U.S. at 1-866-392-3507 (internationally at
1-614-999-9383) or by live webcast which includes a slide
presentation, the link for which is provided under “Investor
Center” on the Company's website (www.dynexcapital.com).
Second Quarter 2017
Highlights
- Comprehensive income to common
shareholders of $0.05 per common share and net loss to common
shareholders of $(0.20) per common share
- Core net operating income to common
shareholders, a non-GAAP measure, of $0.19 per common share
- Book value per common share of $7.38 at
June 30, 2017 compared to $7.52 at March 31, 2017 and $7.18 at
December 31, 2016
- Sold $271.4 million in hybrid ARMs
during the quarter and entered into to-be-announced ("TBA") forward
contracts for the purchase of 30-year fixed rate Agency RMBS with
an if settled cost basis of $416.3 million at June 30, 2017
- Added a net $990.0 million in pay-fixed
interest rate swaps to substantially mitigate the risk to higher
funding costs and to adjust the hedge position for the addition of
TBA securities
- Leverage of 5.2x shareholders’ equity
at June 30, 2017 and leverage including the amortized cost
basis of TBA securities (if settled) of 6.0x shareholders’ equity
at June 30, 2017
- Dividend declared of $0.18 per common
share
Management's Remarks
“We are pleased with the results for the second quarter,”
commented Byron L. Boston, CEO. "The benefit of a diversified
investment strategy of a combined CMBS and RMBS portfolio resulted
in core net operating income to common shareholders of $0.19 per
common share this quarter. While book value was down slightly for
the quarter partially due to weakening prices of hybrid ARMs, our
CMBS and CMBS IO portfolios continue to perform strongly."
Mr. Boston continued, “This quarter we increased our leverage
and reallocated our capital from short duration lower yielding
investments to 30-year fixed-rate Agency mortgage-backed securities
given the compelling opportunity relative to other sectors. We have
continued to invest in this sector in the third quarter which will
help drive earnings for the remainder of the year. Longer term
we feel that there are potential strong tailwinds for the industry,
and in particular, the prospects for mortgage REITs from housing
finance reform.”
Earnings Summary
Comprehensive income to common shareholders for the second
quarter of 2017 was $2.3 million compared to $26.6 million in the
first quarter of 2017. Net loss to common shareholders was $(10.1)
million for the second quarter of 2017 compared to net income of
$6.6 million in the first quarter of 2017, the key components of
which are explained below.
Core net operating income to common shareholders, a non-GAAP
measure, was $9.3 million for the second quarter of 2017 versus
$7.4 million for the first quarter of 2017. Core net operating
income to common shareholders includes $1.4 million in drop income
from TBA securities (discussed further below) for the second
quarter of 2017, which the Company did not invest in during the
first quarter of 2017. Please refer to "Use of Non-GAAP Financial
Measures" below for more information on management's use of core
net operating income and other non-GAAP measures. Reconciliations
of all non-GAAP measures to GAAP measures are provided as a
supplement to this press release.
Net interest income increased $1.2 million compared to the first
quarter of 2017 primarily due to higher prepayment compensation of
$2.2 million from CMBS and CMBS IO, partially offset by higher
borrowing costs of $1.2 million as a result of increased short-term
rates.
The Company recognized a loss on derivative instruments, net of
$(15.8) million comprised primarily of a $(16.2) million decline in
fair value of interest rate swaps due to lower swap rates during
the quarter and $1.7 million in net realized and unrealized gains
on TBA securities financed in the dollar roll market. TBA
securities are forward contracts accounted for as derivative
instruments in the Company's financial statements; however,
management views TBA securities as the economic equivalent in all
material respects of investing in and financing generic Agency
fixed-rate RMBS through the repurchase agreement market. The $1.7
million in net realized and unrealized gains generated from TBA
securities during the second quarter of 2017 consisted of $1.4
million in drop income and a $0.3 million increase in fair value.
Drop income, which is derived from TBA dollar roll transactions,
represents the difference in price between the near settling TBA
contract and the price for the same contract with a later
settlement date. This difference is also viewed by management as
the economic equivalent of net interest income (interest income
less implied financing cost) on the underlying Agency security from
trade date to settlement date
Book Value and Economic
Return
Book value per common share decreased $(0.14) to $7.38 at June
30, 2017 from March 31, 2017. Book value for the quarter was
negatively impacted by the underperformance of assets versus our
hedges, particularly our hybrid ARMs. Our hedges performed as
expected as the yield curve flattened. Economic return on book
value was 0.5% for the second quarter of 2017 and 7.8% for the
first half of 2017. Economic return on book value is calculated by
dividing (i) the sum of dividends declared per common share and the
change in book value per common share by (ii) beginning book value
per common share.
Investments Summary
The Company’s average interest earning assets were $3.1 billion
for the second quarter of 2017 compared to $3.2 billion for the
first quarter of 2017. Average interest earning assets declined as
the Company partially rotated out of variable-rate Agency RMBS and
into TBA securities which are not included in average interest
earning assets. For the second quarter of 2017, average
interest earning assets and average TBA securities on an if-settled
basis totaled $3.4 billion.
The following table summarizes activity, average balances, and
annualized effective yields on the Company’s MBS portfolio for the
second quarter of 2017:
($ in thousands) RMBS CMBS CMBS IO
Total Fair value at March 31, 2017 $ 1,101,169 $ 1,316,181 $
769,399 $ 3,186,749 Purchases — 111,085 30,423 141,508 Principal
payments (72,660 ) (16,686 ) — (89,346 ) Sales (287,782 ) (58,237 )
— (346,019 ) (Premium amortization)/discount accretion (2,855 ) 185
(38,644 ) (41,314 ) Net unrealized gain 1,888
7,657 2,903 12,448 Fair value at
June 30, 2017 $ 739,760 $ 1,360,185 $ 764,081
$ 2,864,026 Average balance $ 1,001,175 $ 1,331,664 $
756,367 $ 3,089,206 MBS effective yield 1.92 % 3.07 % 3.87 % 2.89 %
Financing Summary
The Company's cost of funds increased 19 basis points for the
second quarter of 2017 compared to the first quarter of 2017
primarily as a result of the increase in short-term interest rates.
The following table summarizes the Company's borrowings by
collateral type for the periods indicated:
Three Months EndedJune 30, 2017 (1)
Three Months EndedMarch 31, 2017
AverageBalance
WeightedAverage Rate
AverageBalance
WeightedAverage Rate
($ in thousands) Agency CMBS $ 1,105,798 1.05 % $ 1,031,264 0.84 %
Non-Agency CMBS 47,828 1.96 % 65,749 1.70 % Agency CMBS IO 349,997
1.85 % 346,643 1.63 % Non-Agency CMBS IO 298,507 1.93 % 296,179
1.71 % Agency RMBS 933,877 1.01 % 1,074,512 0.86 % Non-Agency RMBS
12,884 2.32 % 24,836 2.13 % Securitization financing bond
4,128 2.36 % 4,550 2.14 % Total repurchase agreement
financing 2,753,019 1.26 % 2,843,733 1.07 % Other financing (2)
6,003 1.77 % 6,359 1.35 % Total average liabilities
and cost of funds (3) $ 2,759,022 1.25 % $ 2,850,092 1.06 %
(1)
Information on our repurchase agreements
outstanding as of June 30, 2017 are provided in the supplement to
this release.
(2)
Other financing for both periods presented
includes non-recourse collateralized financing collateralized with
a portion of the mortgage loans held for investment, net on the
Company's consolidated balance sheet.
(3)
Total cost of funds includes amount
recorded as a portion of "interest expense" in accordance with GAAP
related to the accretion of the balance remaining in accumulated
other comprehensive income as a result of the Company's
discontinuation of hedge accounting effective June 30, 2013.
Hedging Activities
The Company uses interest rate swaps to mitigate the impact of
higher interest rates on its earnings and book value. The Company
added a net $990.0 million in pay-fixed interest rate swaps during
the second quarter of 2017, given the potential for higher
short-term interest rates as a result of the recent and projected
increases in the Federal Funds rate as well as to hedge the
Company's TBA position. During the second quarter of 2017, the
Company had an average notional of $2.1 billion in effective
interest rate swaps outstanding at a weighted average net pay-fixed
rate of 1.30% versus an average notional of $1.3 billion in
effective interest rate swaps at a weighted average net pay-fixed
rate of 1.16% for the first quarter of 2017.
June 30, 2017 Effective Interest Rate Swaps by
Year:
WeightedAverageNotionalOutstanding
forthe Period (1)
WeightedAverageNet
Pay-FixedRate (1)
($ in thousands) Remainder of 2017 $ 2,870 1.41 % 2018 $
2,623 1.79 % 2019 $ 2,019 1.93 % 2020 $ 1,660 2.12 % 2021 $ 1,460
2.21 % 2022 $ 1,078 2.43 % 2023 $ 1,075 2.45 % 2024 $ 1,075 2.47 %
2025 $ 695 2.43 % 2026 $ 466 2.35 %
(1)
Includes pay-fixed interest rate swaps,
net of receive-fixed interest rate swaps.
Company Description
Dynex Capital, Inc. is an internally managed real estate
investment trust, or REIT, which invests in mortgage assets on a
leveraged basis. The Company invests in Agency and non-Agency
RMBS, CMBS, and CMBS IO. Additional information about Dynex
Capital, Inc. is available at www.dynexcapital.com.
Use of Non-GAAP Financial
Measures
In addition to the Company's operating results presented in
accordance with GAAP, this release includes certain non-GAAP
financial measures including core net operating income to common
shareholders (including per common share), adjusted interest
expense, adjusted net interest income and the related metrics
adjusted cost of funds and adjusted net interest spread. Schedules
reconciling core net operating income to common shareholders,
adjusted interest expense, and adjusted net interest income to GAAP
financial measures are provided as a supplement to this release.
Management views core net operating income to common shareholders
as an estimate of the net interest earnings from our investments
after operating expenses and preferred stock dividends. In addition
to the non-GAAP reconciliation set forth in the supplement to this
release, which derives core net operating income to common
shareholders from GAAP net income to common shareholders as the
nearest GAAP equivalent measure, core net operating income to
common shareholders can also be determined by adjusting net
interest income to include interest rate swap periodic interest
costs, drop income on TBA securities, general and administrative
expenses (GAAP), and preferred dividends. Management includes drop
income in core net operating income and in adjusted net interest
income because TBA securities are viewed by management as
economically equivalent to holding and financing Agency RMBS using
short-term repurchase agreements. Management also includes periodic
interest costs from its interest rate swaps, which are included in
"gain(loss) on derivatives instruments" on the Company's
consolidated statements of comprehensive income, in adjusted net
interest expense and in adjusted net interest income because
interest rate swaps are used by the Company to economically hedge
the Company's borrowing costs from repurchase agreements, and
including periodic interest costs from interest rate swaps is a
helpful indicator of the Company’s total cost of financing in
addition to GAAP interest expense. Because these measures are used
in the Company's internal analysis of financial and operating
performance, management believes that they provide greater
transparency to our investors of management's view of our economic
performance. Management also believes the presentation of these
measures, when analyzed in conjunction with the Company's GAAP
operating results, allows investors to more effectively evaluate
and compare the performance of the Company to that of its peers.
Because these non-GAAP financial measures include or exclude, as
applicable, certain items used to compute GAAP net income to common
shareholders, GAAP net interest income, or GAAP interest expense,
these non-GAAP measures should be considered as a supplement to,
and not as a substitute for, the Company's GAAP results as reported
on its consolidated statements of comprehensive income. In
addition, because not all companies use identical calculations, the
Company's presentation of its non-GAAP measures may not be
comparable to other similarly-titled measures of other
companies.
Forward Looking
Statements
This release contains “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995.
The words “believe,” “expect,” “forecast,” “anticipate,”
“estimate,” “project,” “plan,” and similar expressions identify
forward-looking statements that are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified.
Forward-looking statements in this release may include, without
limitation, statements regarding future interest rates, our views
on expected characteristics of future investment environments,
prepayment rates on our investment portfolio and risks posed by our
investment portfolio, our future investment strategies, our future
leverage levels and financing strategies, the use of specific
financing and hedging instruments and the future impacts of these
strategies, future actions by the Federal Reserve, and the expected
performance of our investments. The Company's actual results and
timing of certain events could differ materially from those
projected in or contemplated by the forward-looking statements as a
result of unforeseen external factors. These factors may include,
but are not limited to, changes in general economic and market
conditions, including volatility in the credit markets which
impacts asset prices and the cost and availability of financing,
defaults by borrowers, availability of suitable reinvestment
opportunities, variability in investment portfolio cash flows,
fluctuations in interest rates, fluctuations in property
capitalization rates and values of commercial real estate, defaults
by third-party servicers, prepayments of investment portfolio
assets, other general competitive factors, uncertainty around
government regulatory and monetary policy, the impact of regulatory
changes, including the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 and ongoing financial institution regulatory
reform efforts, the full impacts of which are unknown at this time,
and another ownership change under Section 382 that further impacts
the use of our tax net operating loss carryforward. For additional
information on risk factors that could affect the Company's
forward-looking statements, see the Company's Annual Report on Form
10-K for the year ended December 31, 2016, and other reports filed
with and furnished to the Securities and Exchange Commission.
DYNEX CAPITAL, INC.
CONSOLIDATED BALANCE SHEETS
($ in thousands except per share data)
June 30, 2017 December 31, 2016
ASSETS (unaudited) Mortgage-backed securities $ 2,864,026 $
3,212,084 Mortgage loans held for investment, net 17,345 19,036
Cash and cash equivalents 100,863 74,120 Restricted cash 45,377
24,769 Derivative assets 267 28,534 Principal receivable on
investments 5,812 11,978 Accrued interest receivable 19,295 20,396
Other assets, net 7,235 6,814 Total
assets $ 3,060,220 $ 3,397,731
LIABILITIES
AND SHAREHOLDERS’ EQUITY Liabilities: Repurchase
agreements $ 2,540,759 $ 2,898,952 Non-recourse collateralized
financing 5,892 6,440 Derivative liabilities 1,686 6,922 Accrued
interest payable 1,524 3,156 Accrued dividends payable 11,121
12,268 Other liabilities 1,963 2,809
Total liabilities 2,562,945 2,930,547
Shareholders’
equity: Preferred stock, par value $.01 per share; 50,000,000
shares authorized; 5,348,658 and 4,571,937 shares issued and
outstanding, respectively ($133,716 and $114,298 aggregate
liquidation preference, respectively) $ 128,165 $ 110,005
Common stock, par value $.01 per share,
200,000,000 shares authorized; 49,234,493 and 49,153,463 shares
issued and outstanding, respectively
492 492 Additional paid-in capital 728,124 727,369 Accumulated
other comprehensive loss (257 ) (32,609 ) Accumulated deficit
(359,249 ) (338,073 ) Total shareholders' equity
497,275 467,184 Total liabilities and
shareholders’ equity $ 3,060,220 $ 3,397,731
Book value per common share $ 7.38 $ 7.18
DYNEX CAPITAL, INC.
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
(UNAUDITED)
(amounts in thousands except per share
data)
Three Months EndedJune 30,
Six Months EndedJune 30, 2017
2016 2017 2016 Interest income $ 24,856
$ 22,816 $ 47,275 $ 47,905 Interest expense 8,714
6,100 16,233 12,410 Net
interest income 16,142 16,716 31,042 35,495 Loss on
derivative instruments, net (15,802 ) (16,297 ) (15,627 ) (64,561 )
Loss on sale of investments, net (3,709 ) (297 ) (5,417 ) (4,238 )
Fair value adjustments, net 30 28 40 51 Other income (loss), net 4
290 (42 ) 353 General and administrative expenses: Compensation and
benefits (2,041 ) (1,875 ) (4,286 ) (4,093 ) Other general and
administrative (2,056 ) (1,796 ) (4,091 )
(3,669 )
Net (loss) income (7,432 ) (3,231 ) 1,619
(40,662 ) Preferred stock dividends (2,641 ) (2,294 )
(5,077 ) (4,588 )
Net loss to common
shareholders $ (10,073 ) $ (5,525 ) $ (3,458 ) $ (45,250 )
Other comprehensive income: Change in net unrealized
gain on available-for-sale investments $ 8,739 $ 22,730 $ 27,107 $
60,491 Reclassification adjustment for loss on sale of investments,
net 3,709 297 5,417 4,238 Reclassification adjustment for
de-designated cash flow hedges (73 ) (80 )
(172 ) (53 )
Total other comprehensive income
12,375 22,947 32,352
64,676
Comprehensive income to common shareholders $
2,302 $ 17,422 $ 28,894 $ 19,426
Net loss per common share-basic and diluted $ (0.20 ) $
(0.11 ) $ (0.07 ) $ (0.92 )
Weighted average common shares
49,218 49,119 49,197 49,080
DYNEX CAPITAL, INC.
KEY STATISTICS
(UNAUDITED)
($ in thousands except per share data)
June 30,2017
March 31,2017
December 31,2016
September 30,2016
June 30,2016
Portfolio and Other Balance Sheet Statistics: Total MBS, at
fair value as of period end $ 2,864,026 $ 3,186,749 $ 3,212,084 $
3,110,467 $ 3,208,735 Agency CMBS, at amortized cost as of period
end $ 1,330,084 $ 1,257,330 $ 1,166,454 $ 909,365 $ 867,065 Agency
CMBS, at par as of period end $ 1,315,974 $ 1,243,516 $ 1,152,586 $
898,317 $ 856,352 Agency RMBS, at amortized cost as of period end $
744,089 $ 1,082,108 $ 1,214,324 $ 1,300,997 $ 1,394,717 Agency
RMBS, at par as of period end $ 715,015 $ 1,033,735 $ 1,157,258 $
1,239,856 $ 1,329,159 CMBS IO, at amortized cost as of period end
(1) $ 752,861 $ 761,083 $ 757,892 $ 730,760 $ 728,729 Other
non-Agency MBS, at cost as of period end $ 37,443 $ 99,080 $
106,297 $ 116,133 $ 165,599 Net TBA position, at fair value as of
period end $ 414,644 $ — $ — $ — $ — Net TBA position, at amortized
cost as of period end (if settled) $ 416,312 $ — $ — $ — $ — Net
TBA position, at carrying value as of period end $ (1,668 ) $ — $ —
$ — $ — Average interest earning assets (2) $ 3,107,014 $ 3,206,026
$ 3,166,598 $ 3,110,884 $ 3,242,413 Average interest bearing
liabilities $ 2,759,022 $ 2,850,092 $ 2,832,870 $ 2,806,948 $
2,916,432 Book value per common share, end of period $ 7.38 $ 7.52
$ 7.18 $ 7.76 $ 7.69 Leverage at period end (3) 5.2 x 5.8 x 6.3 x
5.8 x 6.1 x Adjusted leverage at period end (4) 6.0 x 5.8 x 6.3 x
5.8 x 6.1 x
Performance Statistics: Net (loss) income
per common share $ (0.20 ) $ 0.13 $ 1.36 $ 0.25 $ (0.11 ) Core net
operating income per common share (5) $ 0.19 $ 0.15 $ 0.20 $ 0.20 $
0.21 Comprehensive income (loss) per common share $ 0.05 $ 0.54 $
(0.37 ) $ 0.27 $ 0.35 Dividends per common share $ 0.18 $ 0.18 $
0.21 $ 0.21 $ 0.21 Effective yield on investments (2) 2.90 % 2.79 %
2.78 % 2.75 % 2.77 % Cost of funds (6) 1.25 % 1.06 % 0.94 % 0.85 %
0.83 % Net interest spread 1.65 % 1.73 % 1.84 % 1.90 % 1.94 %
Adjusted cost of funds (7) 1.46 % 1.16 % 0.97 % 0.88 % 0.90 %
Adjusted net interest spread (8) 1.50 % 1.63 % 1.81 % 1.87 % 1.87 %
CPR for Agency RMBS (9) 16.8 % 16.3 % 19.3 % 18.9 % 17.4 %
(1)
CMBS IO includes Agency and non-Agency
issued securities.
(2)
Includes mortgage loans held for
investment and does not include net TBA position.
(3)
Leverage is calculated by dividing total
liabilities by total shareholders' equity.
(4)
Adjusted leverage as of June 30, 2017
equals the sum of (i) total liabilities and (ii) amortized cost
basis of TBA securities (if settled) divided by total shareholders'
equity.
(5)
Non-GAAP financial measures are reconciled
in the supplement to this release.
(6)
Percentages shown are equal to annualized
interest expense divided by average interest bearing
liabilities.
(7)
Adjusted cost of funds is equal to
annualized adjusted interest expense (a non-GAAP measure) divided
by average interest bearing liabilities.
(8)
Adjusted net interest spread is calculated
by deducting adjusted cost of funds from effective yield and also
includes drop income from TBAs.
(9)
Represents the average constant prepayment
rate ("CPR") experienced during the quarter.
DYNEX CAPITAL, INC.
SUPPLEMENTAL INFORMATION
(UNAUDITED)
($ in thousands)
Computations of Non-GAAP Measures:
June 30,2017
March 31,2017
December 31,2016
September 30,2016
June 30,2016
Net interest income $ 16,142 $ 14,900 $ 16,105 $ 15,067 $ 16,716
Add: drop income 1,351 — — — — Add: net periodic interest costs (1)
(1,352 ) (615 ) (140 ) (155 ) (486 ) Less: de-designated hedge
accretion (2) (73 ) (99 ) (99 ) (99 )
(80 ) Adjusted net interest income 16,068 14,186 15,866
14,813 16,150 Other income 4 (46 ) (18 ) 545 290 General and
administrative expenses (4,097 ) (4,280 ) (3,589 ) (3,355 ) (3,671
) Preferred stock dividends (2,641 ) (2,435 )
(2,303 ) (2,294 ) (2,294 ) Core net operating income
to common shareholders $ 9,334 $ 7,425 $ 9,956
$ 9,709 $ 10,475
(1)
Amounts represent net periodic interest
costs on effective interest rate swaps outstanding during the
period and exclude termination costs and changes in fair value.
(2)
Amount recorded as a portion of "interest
expense" in accordance with GAAP related to the accretion of the
balance remaining in accumulated other comprehensive income as a
result of the Company's discontinuation of hedge accounting
effective June 30, 2013.
June 30, 2017 Repurchase Agreements
by Collateral Type: Balance
WeightedAverage Rate
Agency CMBS 1,192,447 1.21 % Non-Agency CMBS 31,407 2.23 % Agency
CMBS IO 353,922 2.04 % Non-Agency CMBS IO 293,725 2.13 % Agency
RMBS 665,346 1.29 % Non-Agency RMBS — — % Securitization financing
bond 3,912 2.45 % Total repurchase agreements
$
2,540,759
1.47 %
Interest RateSwaps
TBASecurities
Total Change in fair value
$
(16,167
)
$
366
$ (15,801 ) Periodic interest costs
(1,352
)
—
(1,352 ) Drop income
—
1,351
1,351 Loss on derivative instruments, net
$
(17,519
)
$
1,717
$ (15,802 )
DYNEX CAPITAL, INC.
RECONCILIATIONS OF GAAP MEASURES TO
NON-GAAP MEASURES
(UNAUDITED)
($ in thousands)
Three Months Ended
June 30,2017
March 31,2017
December 31,2016
September 30,2016
June 30,2016
GAAP net (loss) income to common shareholders $ (10,073 ) $ 6,616 $
66,758 $ 12,406 $ (5,525 ) Less: Accretion of de-designated cash
flow hedges (1) (73 ) (99 ) (99 ) (99 ) (80 ) Change in fair value
of derivative instruments, net (2) 15,801 (790 ) (56,686 ) (2,564 )
15,811 Loss on sale of investments, net 3,709 1,708 — — 297 Fair
value adjustments, net (30 ) (10 ) (17 )
(34 ) (28 ) Core net operating income to common
shareholders $ 9,334 $ 7,425 $ 9,956 $ 9,709
$ 10,475 Weighted average common shares 49,218
49,176 49,151 49,147 49,119 Core net operating income per common
share $ 0.19 $ 0.15 $ 0.20 $ 0.20 $ 0.21
(1)
Amount recorded as a portion of "interest
expense" in accordance with GAAP related to the accretion of the
balance remaining in accumulated other comprehensive income as a
result of the Company's discontinuation of hedge accounting
effective June 30, 2013.
(2)
Amount represents net realized and
unrealized gains and losses on derivatives and excludes net
periodic interest costs related to these instruments.
Three Months Ended
June 30,2017
March 31,2017
December 31,2016
September 30,2016
June 30,2016
Amount Amount Amount
Amount Amount GAAP net interest income $ 16,142 $
14,900 $ 16,105 $ 15,067 $ 16,716 Add: TBA drop income 1,351 — — —
— Add: net periodic interest costs (1) (2) (1,352 ) (615 ) (140 )
(155 ) (486 ) Less: de-designated hedge accretion (3) (73 )
(99 ) (99 ) (99 )
(80 ) Non-GAAP adjusted net interest income $ 16,068
$ 14,186 $ 15,866 $ 14,813 $ 16,150
GAAP interest expense $ 8,714 $ 7,519 $ 6,753
$ 6,068 $ 6,100 Add: net periodic interest costs (1) (2) 1,352 615
140 155 486 Less: de-designated hedge accretion (3) 73
99 99 99 80
Non-GAAP adjusted interest expense $ 10,139 $ 8,233
$ 6,992 $ 6,322 $ 6,666
(1)
Amount represents net periodic interest
costs on effective interest rate swaps outstanding during the
period and exclude termination costs and changes in fair value.
(2)
Amount related to interest rate swaps
hedging TBA position was $475 for the three months ended June 30,
2017.
(3)
Amount recorded as a portion of "interest
expense" in accordance with GAAP related to the accretion of the
balance remaining in accumulated other comprehensive income as a
result of the Company's discontinuation of hedge accounting
effective June 30, 2013.
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Dynex Capital, Inc.Alison Griffin,
804-217-5897
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