Dynex Capital, Inc. (NYSE: DX) reported its first quarter 2018
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 4576425 via
telephone in the U.S. at 1-866-393-4306 (internationally at
1-734-385-2616) 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).
First Quarter 2018
Highlights
- Comprehensive loss to common
shareholders of $(0.07) per common share and net income to common
shareholders of $0.74 per common share
- Core net operating income to common
shareholders, a non-GAAP measure, of $0.18 per common share
- Dividend declared of $0.18 per common
share
- Book value per common share of $7.07 at
March 31, 2018 compared to $7.34 at December 31, 2017,
resulting in an economic loss on book value per common share of
(1.2)%, inclusive of the dividend declared
- Leverage including TBA dollar roll
positions of 6.5x shareholders’ equity at March 31, 2018
slightly higher than 6.4x at December 31, 2017
Management's Remarks
Byron Boston, President and CEO commented, "Treasury and swap
rates rose sharply during the quarter from improved global growth
prospects, among other factors. Our diversified investment
portfolio helped mitigate the impact of the increase in rates,
limiting the book value decline to (3.7%) during the
quarter. Despite the environment and the decline in book
value, we generated core net operating income of $0.18 for the
quarter. For the fifth consecutive quarter, we maintained a
cash dividend of $0.18."
Mr. Boston continued, "We feel that we are in a good position
for the second quarter of 2018 even if rates continue to move
higher. Our leverage remains modest and our liquidity is
strong. We have a large portion of our net interest spread
exposure to higher short-term interest rates hedged through
interest rate swaps and Eurodollar futures. We believe our
diversified investment portfolio will help cushion the impact of a
move higher in rates. And finally, we believe the outlook for our
Company is favorable as the Federal Reserve reduces its balance
sheet and the attractiveness of returns on mortgage backed
securities improves. This should provide us an opportunity to add
assets at accretive marginal returns for our shareholders in the
future."
First Quarter 2018 Earnings
Summary
Comprehensive loss to common shareholders was $(4.1) million for
the first quarter of 2018 versus comprehensive income to common
shareholders of $4.5 million for the fourth quarter of 2017. The
Company recognized an other comprehensive loss of $(45.5) million
for the first quarter of 2018 related to a net decline in fair
value of MBS as a result of higher interest rates during the
quarter. Other comprehensive loss offset net income to common
shareholders which increased to $41.4 million for the first quarter
compared to $19.1 million for the prior quarter due to a higher net
gain on derivative instruments as a result of swap rates increasing
during the quarter. Net interest income declined $0.5 million due
to an increase of $1.5 million in repurchase agreement financing
costs, partially offset by an increase of $1.1 million in interest
income. Interest income increased $1.7 million as a result of a
larger balance of average interest earning assets, which was
partially offset by a decline of $0.6 million in prepayment penalty
compensation on CMBS and CMBS IO.
Core net operating income to common shareholders, a non-GAAP
measure, was $10.2 million for the first quarter of 2018 compared
to $10.8 million for the prior quarter of 2017. Adjusted net
interest income declined $0.6 million due principally to higher
financing rates and lower prepayment income, partially offset by an
increase in investments during the quarter as described above. In
addition, TBA drop income declined a modest $0.2 million from lower
average TBA dollar roll positions during the first quarter.
Finally, net periodic interest costs were $0.1 million lower in the
first quarter of 2018 versus the fourth quarter of 2017 despite a
higher average effective notional balance of interest rate swaps as
a result of the increase in three-month LIBOR during the first
quarter.
Book Value and Economic
Return
Book value per common share decreased $(0.27) to $7.07 at
March 31, 2018 from $7.34 at December 31, 2017 primarily
due to the decline in the fair value of the Company's investments
in excess of the increase in fair value of hedges as interest rates
rose during the quarter. The $(0.27) decline in book value and the
$0.18 dividend declared resulted in an economic loss on book value
of $(0.09) per common share, or (1.2)% of beginning book value, for
the first quarter of 2018.
Investments
The average amortized cost basis of the
Company's investment portfolio including TBA dollar roll positions
("TBAs") increased slightly to $4.0 billion during the first
quarter of 2018 versus $3.9 billion for the prior quarter. The
following table provides details of our available-for-sale ("AFS")
investments and dollar roll positions as of March 31,
2018:
March 31, 2018 Type of
Investment: Par
AmortizedCost/ImpliedCost
Basis
FairValue/ImpliedMarket
Value
($ in thousands) 30-year fixed-rate RMBS: 3.0% coupon $ 240,229 $
241,958 $ 234,745 4.0% coupon 688,534 723,215 708,060 TBA dollar
roll positions (4.1% average coupon) (1) (2) (3) 825,000
844,941 846,940 Total 30-year fixed-rate 1,753,763 1,810,114
1,789,745 Adjustable-rate RMBS: 3.1% coupon (3) 268,543
278,474 272,635 Agency CMBS 1,004,572 1,015,486 984,065 CMBS
IO (4)
n/a
652,563 658,269 Other non-Agency MBS 8,771 5,092 7,048 U.S.
Treasuries 209,000 207,083 204,535
Total AFS
portfolio and TBA dollar roll positions $ 3,244,649 $
3,968,812 $ 3,916,297
(1) Par, implied cost basis, and
implied market value of TBA dollar roll positions represents
amounts for the underlying Agency MBS as if settled.(2) The net
carrying value of TBA dollar roll positions, which is the
difference between their implied market value and implied cost
basis, was $2.0 million as of March 31, 2018 and is included
on the consolidated balance sheet within “derivative assets”.(3)
Represents the weighted average coupon based on amortized cost.(4)
Includes both Agency and non-Agency IO securities with a combined
notional balance of $25.2 billion.
Asset Yields and Net Interest Spread
The following table provides detail on asset
yields for our AFS investments for the periods indicated:
Three Months Ended Type of
Investment: March 31, 2018 December 31,
2017 30-year fixed-rate Agency RMBS (1) 3.15 % 3.02 %
Adjustable-rate Agency RMBS 2.15 % 2.11 % Agency CMBS 2.80 % 2.80 %
CMBS IO 3.84 % 3.82 % Other non-Agency MBS 11.37 % 10.21 % U.S.
Treasuries 2.33 % 2.14 % Total asset yield on AFS investments 3.09
% 3.07 %
(1) Excludes TBA dollar roll positions.
The increase of 2 basis points in the Company's average asset
yield on its investment portfolio (excluding TBAs) from the fourth
quarter of 2017 to the first quarter of 2018 was principally driven
by purchases of higher yielding fixed-rate Agency RMBS.
Net interest spread on the Company's investment portfolio
decreased 20 basis points to 1.34% for the first quarter of 2018
from 1.54% for the fourth quarter of 2017 due primarily to higher
repurchase agreement financing costs which increased 22 basis
points during the quarter. Adjusted net interest spread was 1.40%
for the first quarter of 2018, a decrease of 12 basis points from
the prior quarter. Adjusted net interest spread declined as a
result of the 22 basis point increase in repurchase agreement
financing costs, partially offset by a 9 basis point increase in
implied net interest spread on TBAs which was primarily due to
slower implied prepayment speeds as a result of the higher interest
rate environment during the quarter.
Hedging Summary
The Company primarily uses interest rate swaps
to mitigate the impact of higher interest rates on its
comprehensive income. The Company's interest rate swaps had a net
favorable impact on comprehensive income of $48.2 million during
the first quarter of 2018, inclusive of a realized loss of $(0.5)
million due to terminations of $100.0 million of pay-fixed interest
rate swaps. Interest rate swaps with a notional balance of $1.3
billion and a weighted-average pay-fixed rate of 1.27% matured
early in the first quarter, and the Company added swaps with a
notional balance of $375.0 million at a weighted average pay-fixed
rate of 2.84%. The aggregate notional balance of currently
effective and forward-starting interest rate swaps as of March 31,
2018 was $3.1 billion and $1.6 billion, respectively. The following
table provides details of the Company's interest rate swaps
effective during the first quarter of 2018 compared to fourth
quarter of 2017:
Three Months Ended ($ in thousands)
March 31,2018
December 31,2017
Average pay-fixed notional balance, net of receive-fixed $
3,290,556 $ 3,027,065 Weighted average net pay-fixed
rate 1.66 % 1.43 % Weighted average net receive-variable rate 1.64
% 1.36 %
The Company also utilizes Eurodollar futures to mitigate
interest rate risk. As of March 31, 2018, the Company had
Eurodollar futures with an aggregate notional balance of $1.3
billion at a weighted average rate of 1.82% with average
contractual lives of 3 months that will mature in June and
September of 2018. Eurodollar futures do not incur periodic
interest or similar costs/benefits and therefore are not included
in core net operating income to common shareholders. The Company's
Eurodollar futures had a net favorable impact on comprehensive
income of $1.9 million during the first quarter of 2018. This
favorable impact includes a net realized gain of $0.9 million on
$650.0 million of Eurodollar futures with a contract rate of 1.67%
that matured in March 2018.
The following table summarizes the weighted
average notional effective during the periods indicated and the
weighted average rate for the Company’s interest rate hedges held
as of March 31, 2018:
March 31,
2018
WeightedAverageNotional
WeightedAverageRate
($ in thousands) Remainder of 2018 $ 2,891,218
1.87 % 2019 2,474,027 2.05 % 2020 2,115,451 2.22 % 2021 2,165,479
2.28 % 2022 2,113,795 2.41 % 2023 1,420,000 2.57 % 2024 1,346,503
2.60 % 2025 1,088,973 2.56 % 2026 860,616 2.55 % 2027 415,822 2.77
% 2028 and thereafter 145,737 2.80 %
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. 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, although the Company's presentation of its
non-GAAP measures may not be comparable to other similarly-titled
measures of other companies. 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 Company's financial performance
excluding changes in fair value of its investments and derivatives.
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 dollar roll positions, general and
administrative expenses, and preferred dividends. Management
includes drop income, which is included in "gain (loss) on
derivatives instruments, net" on the Company's consolidated
statements of comprehensive income, in core net operating income
and in adjusted net interest income because TBA dollar roll
positions 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 also included in "gain (loss) on
derivatives instruments, net", in adjusted net interest expense,
and in adjusted net interest income because interest rate swaps are
used by the Company to economically hedge the impact of changing
interest rates on its 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. However, these non-GAAP measures
do not provide a full perspective on our results of operations, and
therefore, their usefulness is limited. For example, these non-GAAP
measures do not include gains or losses from available-for-sale
investments, changes in fair value of and costs of terminating
interest rate swaps, as well as realized and unrealized gains or
losses from any instrument used by management to economically hedge
the impact of changing interest rates on its portfolio and book
value per common share, such as Eurodollar futures and TBA short
positions. As a result, 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.
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,” "may," "could," 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 the Company's
financial performance in future periods, future interest rates,
future market credit spreads, our views on expected characteristics
of future investment environments, prepayment rates and investment
risks, 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, changes in
monetary policy and in particular the impact of changes in balance
sheet reinvestment policy of the Federal Reserve, 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 the impact of
government 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, 2017, and other reports filed with and furnished to the
Securities and Exchange Commission.
All forward-looking statements are qualified in
their entirety by these and other cautionary statements that the
Company makes from time to time in its filings with the Securities
and Exchange Commission and other public communications. The
Company cannot assure the reader that it will realize the results
or developments the Company anticipates or, even if substantially
realized, that they will result in the consequences or affect the
Company or its operations in the way the Company expects.
Forward-looking statements speak only as of the date made. The
Company undertakes no obligation to update or revise any
forward-looking statements to reflect events or circumstances
arising after the date on which they were made, except as otherwise
required by law. As a result of these risks and uncertainties,
readers are cautioned not to place undue reliance on any
forward-looking statements included herein or that may be made
elsewhere from time to time by, or on behalf of, the Company.
DYNEX CAPITAL, INC.CONSOLIDATED
BALANCE SHEETS($ in thousands except per share data)
March 31,2018
December 31,2017
ASSETS (unaudited) Mortgage-backed securities $
2,864,822 $ 3,026,989 U.S. Treasuries 204,535 146,530
Mortgage loans held for investment, net 15,099 15,738 Cash and cash
equivalents 28,072 40,867 Restricted cash 58,312 46,333 Derivative
assets 4,754 2,940 Receivable for securities sold 643 — Principal
receivable on investments 66 165 Accrued interest receivable 22,913
19,819 Other assets, net 6,456 6,397 Total assets $
3,205,672 $ 3,305,778
LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities:
Repurchase agreements $ 2,613,892 $ 2,565,902 Payable for unsettled
securities 23,468 156,899 Non-recourse collateralized financing
5,290 5,520 Derivative liabilities — 269 Accrued interest payable
5,123 3,734 Accrued dividends payable 12,563 12,526 Other
liabilities 1,712 3,870 Total liabilities 2,662,048
2,748,720
Shareholders’ equity: Preferred stock -
aggregate liquidation preference of $147,725 and $147,217,
respectively $ 141,788 $ 141,294 Common stock, par value $.01 per
share: 55,996,048 and 55,831,549 shares issued and outstanding,
respectively 560 558 Additional paid-in capital 776,117 775,873
Accumulated other comprehensive loss (54,159 ) (8,697 ) Accumulated
deficit (320,682 ) (351,970 ) Total shareholders' equity 543,624
557,058 Total liabilities and shareholders’ equity $
3,205,672 $ 3,305,778 Book value
per common share $ 7.07 $ 7.34
DYNEX CAPITAL, INC.CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME(UNAUDITED)(amounts in
thousands except per share data)
Three Months Ended
March 31,2018
December 31,2017
September 30,2017
June 30,2017
March 31,2017
Interest income $ 25,190 $ 24,124 $ 23,103 $
24,856 $ 22,419 Interest expense 11,595 10,056
9,889 8,714 7,519 Net interest income
13,595 14,068 13,214 16,142 14,900 Gain (loss) on derivative
instruments, net 38,354 12,678 5,993 (15,802 ) 175 Loss on sale of
investments, net (3,775 ) (902 ) (5,211 ) (3,709 ) (1,708 ) Fair
value adjustments, net 29 12 23 30 10 Other (expense) income, net
(253 ) (50 ) (109 ) 4 (46 ) General and administrative expenses:
Compensation and benefits (1,962 ) (2,153 ) (2,070 ) (2,041 )
(2,245 ) Other general and administrative (1,681 ) (1,690 ) (1,529
) (2,056 ) (2,035 )
Net income (loss) 44,307 21,963 10,311
(7,432 ) 9,051 Preferred stock dividends (2,940 ) (2,910 ) (2,808 )
(2,641 ) (2,435 )
Net income (loss) to common shareholders $
41,367 $ 19,053 $ 7,503 $
(10,073 ) $ 6,616
Other
comprehensive income: Unrealized (loss) gain on
available-for-sale investments, net $ (49,189 ) $ (15,438 ) $ 981 $
8,739 $ 18,368 Reclassification adjustment for loss on sale of
investments, net 3,775 902 5,211 3,709 1,708 Reclassification
adjustment for de-designated cash flow hedges (48 ) (48 ) (48 ) (73
) (99 )
Total other comprehensive (loss) income (45,462 )
(14,584 ) 6,144 12,375 19,977
Comprehensive
(loss) income to common shareholders $ (4,095 ) $
4,469 $ 13,647 $ 2,302 $
26,593
Net income (loss) per common share-basic
and diluted $ 0.74 $ 0.36 $ 0.15 $ (0.20 ) $ 0.13
Weighted
average common shares 55,871 53,399 49,832 49,218 49,176
DYNEX CAPITAL, INC.KEY
STATISTICS(UNAUDITED)($ in thousands except per share
data)
As Of
March 31,2018
December 31,2017
September 30,2017
June 30,2017
March 31,2017
Portfolio and Other Balance Sheet Statistics: Total MBS fair
value $ 2,864,822 $ 3,026,989 $ 2,921,444 $
2,864,026 $ 3,186,749 Agency CMBS, amortized cost $
1,015,486 $ 1,134,409 $ 1,314,925 $ 1,330,084 $ 1,257,330 Agency
RMBS-fixed rate, amortized cost $ 965,173 $ 903,269 $ 541,262 $ — $
— Agency RMBS-variable rate, amortized cost $ 278,474 $ 289,305 $
305,265 $ 744,089 $ 1,082,108 CMBS IO, amortized cost(1) $ 652,563
$ 683,833 $ 717,115 $ 752,861 $ 761,083 Other non-Agency MBS,
amortized cost $ 5,092 $ 23,536 $ 37,441 $ 37,443 $ 99,080 TBA
dollar roll positions, fair value (if settled) $ 846,940 $ 830,908
$ 683,680 $ 414,644 $ — TBA dollar roll positions, amortized cost
(if settled) $ 844,941 $ 829,425 $ 683,813 $ 416,312 $ — TBA dollar
roll positions, carrying value $ 1,999 $ 1,483 $ (133 ) $ (1,668 )
$ — U.S. Treasuries, fair value $ 204,535 $ 146,530 $ — $ — $ —
Book value per common share, end of period $ 7.07 $ 7.34 $ 7.46 $
7.38 $ 7.52 Leverage including TBA dollar roll positions at cost as
if settled at period end (2) 6.5 x 6.4 x 6.3 x 6.0 x 5.8 x
Three Months Ended
March 31,2018
December 31,2017
September 30,2017
June 30,2017
March 31,2017
Performance Statistics: Net income (loss) per common share $
0.74 $ 0.36 $ 0.15 $ (0.20 ) $ 0.13 Core net operating income per
common share (3) $ 0.18 $ 0.20 $ 0.19 $ 0.19 $ 0.15 Comprehensive
income (loss) per common share $ (0.07 ) $ 0.08 $ 0.27 $ 0.05 $
0.54 Dividends per common share $ 0.18 $ 0.18 $ 0.18 $ 0.18 $ 0.18
Average interest earning assets (4) $ 3,140,125 $ 2,939,786 $
2,960,595 $ 3,107,014 $ 3,206,026 Average TBA dollar roll position
$ 866,821 $ 944,103 $ 797,484 $ 259,842 $ — Average interest
bearing liabilities $ 2,651,101 $ 2,563,206 $ 2,622,067 $ 2,759,022
$ 2,850,092 Effective yield on investments 3.09 % 3.07 % 2.95 %
2.90 % 2.79 % Cost of funds (5) 1.75 % 1.53 % 1.48 % 1.25 % 1.06 %
Net interest spread 1.34 % 1.54 % 1.47 % 1.65 % 1.73 % Adjusted
cost of funds (6) 1.79 % 1.59 % 1.66 % 1.46 % 1.16 % Adjusted net
interest spread (7) 1.40 % 1.52 % 1.44 % 1.50 % 1.63 % CPR for
adjustable-rate Agency RMBS (8) 11.0 % 16.0 % 17.1 % 16.8 % 16.3 %
CPR for fixed-rate Agency RMBS (8) 5.3 % 4.3 % 1.3 % — % — %
(1) CMBS IO includes Agency and non-Agency
issued securities.(2) Leverage equals the sum of (i) total
liabilities and (ii) amortized cost basis of TBA dollar roll
positions (if settled) divided by total shareholders' equity.(3)
Non-GAAP financial measures are reconciled in the supplement to
this release.(4) Excludes TBA dollar roll positions.(5) Percentages
shown are equal to annualized interest expense divided by average
interest bearing liabilities.(6) Adjusted cost of funds is equal to
annualized adjusted interest expense (a non-GAAP measure) divided
by average interest bearing liabilities.(7) Adjusted net interest
spread includes the impact of drop income from TBA dollar roll
positions after deducting adjusted cost of funds from effective
yield.(8) Represents the average constant prepayment rate ("CPR")
experienced during the quarter.
DYNEX CAPITAL, INC.SUPPLEMENTAL
INFORMATION(UNAUDITED)($ in thousands)
Computations of Non-GAAP Measures:
March 31,2018
December 31,2017
September 30,2017
June 30,2017
March 31,2017
Net interest income $ 13,595 $ 14,068 $ 13,214
$ 16,142 $ 14,900 Add: TBA drop income (1) 3,733
3,925 3,902 1,351 — Add: net periodic interest costs (2) (220 )
(319 ) (1,131 ) (1,352 ) (615 ) Less: de-designated hedge accretion
(3) (48 ) (48 ) (48 ) (73 ) (99 ) Adjusted net interest income
17,060 17,626 15,937 16,068 14,186 Other (loss) income (253 ) (50 )
(109 ) 4 (46 ) General and administrative expenses (3,643 ) (3,843
) (3,599 ) (4,097 ) (4,280 ) Preferred stock dividends (2,940 )
(2,910 ) (2,808 ) (2,641 ) (2,435 ) Core net operating income to
common shareholders $ 10,224 $ 10,823 $
9,421 $ 9,334 $ 7,425
(1) TBA drop income is calculated by
multiplying the notional amount of the TBA dollar roll positions by
the difference in price between two TBA securities with the same
terms but different settlement dates.(2) Amount represents net
periodic interest costs on effective interest rate swaps
outstanding during the period and excludes unrealized gains and
losses from changes in fair value of derivatives and realized gains
and losses on terminated derivatives.(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 loss as a result of the Company's discontinuation of
cash flow hedge accounting effective June 30, 2013.
DYNEX CAPITAL, INC.RECONCILIATIONS OF
GAAP MEASURES TO NON-GAAP MEASURES(UNAUDITED)($ in
thousands)
Three Months Ended
March 31,2018
December 31,2017
September 30,2017
June 30,2017
March 31,2017
GAAP net income (loss) to common shareholders $ 41,367 $
19,053 $ 7,503 $ (10,073 ) $ 6,616
Less: Change in fair value of derivative instruments, net (1)
(34,841 ) (9,072 ) (3,222 ) 15,801 (790 ) Loss on sale of
investments, net 3,775 902 5,211 3,709 1,708 Accretion of
de-designated cash flow hedges (2) (48 ) (48 ) (48 ) (73 ) (99 )
Fair value adjustments, net (29 ) (12 ) (23 ) (30 ) (10 ) Core net
operating income to common shareholders $ 10,224 $
10,823 $ 9,421 $ 9,334 $
7,425 Weighted average common shares 55,871
53,399 49,832 49,218 49,176 Core net operating income per common
share $ 0.18 $ 0.20 $ 0.19 $ 0.19 $ 0.15
(1) Amount includes unrealized gains
and losses from changes in fair value of derivatives and realized
gains and losses on terminated derivatives and excludes net
periodic interest costs incurred on effective interest rate swaps
outstanding during the period.(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 loss as
a result of the Company's discontinuation of cash flow hedge
accounting effective June 30, 2013.
Three Months Ended
March 31,2018
December 31,2017
September 30,2017
June 30,2017
March 31,2017
GAAP net interest income $ 13,595 $ 14,068 $
13,214 $ 16,142 $ 14,900 Add: TBA drop income 3,733
3,925 3,902 1,351 — Add: net periodic interest costs (1) (220 )
(319 ) (1,131 ) (1,352 ) (615 ) Less: de-designated hedge accretion
(2) (48 ) (48 ) (48 ) (73 ) (99 )
Non-GAAP adjusted net interest income $ 17,060 $
17,626 $ 15,937 $ 16,068
$ 14,186
GAAP interest expense $ 11,595 $ 10,056 $
9,889 $ 8,714 $ 7,519 Add: net periodic interest costs (1) 220 319
1,131 1,352 615 Less: de-designated hedge accretion (2) 48
48 48 73 99 Non-GAAP adjusted interest
expense $ 11,863 $ 10,423 $
11,068 $ 10,139 $ 8,233
(1) Amount represents net periodic interest
costs on effective interest rate swaps outstanding during the
period and excludes unrealized gains and losses from changes in
fair value of derivatives and realized gains and losses on
terminated derivatives.(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 loss as
a result of the Company's discontinuation of cash flow hedge
accounting effective June 30, 2013.
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version on businesswire.com: https://www.businesswire.com/news/home/20180502005761/en/
Dynex Capital, Inc.Alison Griffin,
804-217-5897
Dynex Capital (NYSE:DX)
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