Dynex Capital, Inc. Reports First Quarter 2003 Results.Business Editors/Real Estate Writers GLEN ALLEN Glen Allen is the name of several places in the United States of America:
Dynex Capital, Inc. (NYSE NYSE See: New York Stock Exchange : DX) reported today net income of $0.7 million for the first quarter 2003, versus net income of $0.5 million for the first quarter 2002, and a net loss of $12.9 million for the fourth quarter 2002. Book value per common share Book Value Per Common Share A measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly. Formula: adjusted for dividends in arrears dividends in arrears Dividend payments on cumulative preferred stock that have been passed by a firm's directors. These dividends must be brought up to date before any payments are made to common stockholders. on preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. , was $9.94 per common share at March 31, 2003 versus $8.57 at December 31, 2002. After consideration of the preferred stock benefit, the Company reported net income to common shareholders of $11.2 million or $1.03 per common share for the first quarter 2003, versus a net loss of $1.9 million or $0.18 per common share for the first quarter 2002, and a net loss of $15.3 million or $1.40 per common share for the fourth quarter 2002. The Company has scheduled a conference call for Tuesday, May 6, 2003, at 11:00 a.m. Eastern Time. Investors may participate in listen mode only by calling the following number 800-633-8524. First Quarter 2003 Results The Company reported net interest margin before provision for losses on its investment portfolio of $10.1 million compared to $9.5 million for the first quarter 2002, and $11.1 million for the fourth quarter 2002. After provision for losses, net interest margin was $4.3 million, versus $3.9 million in the first quarter 2002, and a negative $1.1 million in the fourth quarter 2002. Net interest spread on the Company's investment portfolio for the quarter was 1.58% versus 1.42% in the first quarter 2002 and 1.62% in the fourth quarter 2002. Net income to common shareholders for the first quarter 2003 benefited from the results of the tender offer on the Company's Series A, Series B and Series C Cumulative Convertible Preferred Stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". . The Company purchased for cash 730,709 shares of its preferred stock for a total cash payment of $19.3 million, and exchanged 9.50% senior unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. notes totaling $32.1 million for 1,156,891 shares of its preferred stock. The overall preferred stock benefit from the tender offer was $12.4 million, consisting of the cancellation of $16.4 million in dividends in arrears on those shares tendered, less $4.0 million of premium paid by the Company relative to book value on the preferred stock tendered. Net income also benefited from the call of certain mortgage-backed securities Mortgage-backed securities (MSBs) Securities backed by a pool of mortgage loans. during the quarter. The Company called securities with a principal balance of $8.2 million, and sold the underlying collateral consisting of seasoned single-family mortgage loans, at a gain of $0.4 million. Balance Sheet Total assets at March 31, 2003 were $2.1 billion, versus $2.2 billion at December 31, 2002. The decline in assets was primarily the result of prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. in the Company's investment portfolio. Prepayment speeds Prepayment speed Also called speed, the estimated rate at which mortgagors pay off their loans ahead of schedule, critical in assessing the value of mortgage pass-through securities. for the entire investment portfolio as measured by the "constant prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. rate", or CPR Cardiopulmonary Resuscitation (CPR) Definition Cardiopulmonary resuscitation (CPR) is a procedure to support and maintain breathing and circulation for a person who has stopped breathing (respiratory arrest) and/or whose heart has stopped (cardiac , was 24% during the first quarter, versus 19% CPR in the fourth quarter 2002. Cash flow from the Company's investment portfolio was approximately $14.3 million for the first quarter 2003. Shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. was $174.0 million at March 31, 2003 versus $223.4 million at December 31, 2002. The decrease in shareholders' equity was primarily due to the retirement of the shares of preferred stock related to the tender offer. Common book value per share, net of liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy preference on Series A, Series B, and Series C Preferred Stock, increased to $9.94 per share from $8.57 per share at December 31, 2002. The increase in common book value per share was also primarily due to the tender offer. Preferred dividends preferred dividend n. a payment of a corporation's profits to holders of preferred shares of stock. (See: preferred stock) in arrears Adv. 1. in arrears - in debt; "he fell behind with his mortgage payments"; "a month behind in the rent"; "a company that has been run behindhand for years"; "in arrears with their utility bills" behindhand, behind at March 31, 2003 were $16.7 million. Discussion Stephen J. Benedetti, Chief Financial Officer of the Company, stated, "Net interest margin before provision for losses, and correspondingly cash flow from the investment portfolio, continued to benefit from the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. short-term interest-rate environment. Current market expectations are that short-term interest rates Short-term interest rates Interest rates on loan contracts-or debt instruments such as Treasury bills, bank certificates of deposit or commerical paper-having maturities of less than one year. Often called money market rates. will likely remain at these or lower levels for the balance of 2003. With those expectations in mind, we expect cash flow for the second quarter of 2003 to equal or exceed the cash flow in the first quarter. In the current rate environment, however, prepayments of investments, coupled with the continued downward resets of adjustable-rate assets, which currently constitute 23% of our investment portfolio, will likely reduce cash flow from the investment portfolio over the balance of 2003." Mr. Benedetti continued, "From a credit performance perspective, our investment in manufactured housing Manufactured housing (also known as prefab housing) is a type of housing unit that is largely assembled in factories and then transported to sites of use. In the United States, the term "manufactured home" specifically refers to a house built entirely in a protected loans and securities continue to under-perform due to difficulties being experienced in that sector. For that reason, results will continue to be adversely impacted by high provisions for losses and impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charges on that portion of our investment portfolio until market conditions stabilize stabilize See peg. ". Mr. Benedetti concluded, "With the successful completion of the tender offer, we were able to provide liquidity to the holders of the Company's Preferred Stock and enhance shareholder value for both our preferred and common shareholders during the quarter. We anticipate calling another approximate $17 million in mortgage-backed securities in the second quarter, and selling the underlying seasoned single-family mortgage loans. The Board will continue to evaluate alternatives for the use of the Company's cash flows, with the focus being on what would be the most attractive alternative to improving overall shareholder value." Separately, the Company announced that its 2003 Annual Meeting of Stockholders will be held on Friday, May 30, 2003, at 9:00 a.m. Eastern Time, at The Place at Innsbrook, located at 4036 Cox Road, Glen Allen, Virginia Glen Allen is a census-designated place (CDP) in Henrico County, Virginia, United States. The population was 12,562 at the 2000 census. Geography Glen Allen is located at (37.660094, -77.485634)GR1. . Dynex Capital, Inc. is a financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. company that elects to be treated as a real estate investment trust (REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). ) for federal income tax purposes. Note: This document contains "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the Private Securities Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. 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. 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. As discussed in the Company's filings with the SEC, these factors may include, but are not limited to, changes in general economic and market conditions, disruptions in the capital markets, fluctuations in interest rates, the accuracy of subjective estimates used in determining the fair value of certain financial assets Financial assets Claims on real assets. of the Company, the impact of recently issued financial accounting standards, increases in costs and other general competitive factors.
DYNEX CAPITAL, INC.
Consolidated Balance Sheets
(Thousands except share data)
(unaudited)
March 31, December 31,
2003 2002
--------------- ---------------
ASSETS
Cash and cash equivalents $ 6,951 $ 15,242
Other assets 4,284 4,747
--------------- ---------------
11,235 19,989
Investments:
Collateral for collateralized
bonds:
Loans 1,749,763 1,818,577
Debt securities 310,606 329,920
Other investments 53,082 54,322
Securities 3,333 6,208
Other loans 8,559 9,288
--------------- ---------------
2,125,343 2,218,315
--------------- ---------------
$2,136,578 $2,238,304
=============== ===============
LIABILITIES AND SHAREHOLDERS'
EQUITY
LIABILITIES:
Collateralized bonds $1,928,973 $2,013,271
Notes payable 32,079 -
Other liabilities 1,484 1,612
--------------- ---------------
1,962,536 2,014,883
--------------- ---------------
SHAREHOLDERS' EQUITY:
Preferred stock 47,013 94,586
Common stock 109 109
Additional paid-in capital 360,706 364,743
Accumulated other comprehensive
loss (15,973) (17,472)
Accumulated deficit (217,813) (218,545)
--------------- ---------------
174,042 223,421
--------------- ---------------
$2,136,578 $2,238,304
=============== ===============
Preferred dividends in arrears 16,677 31,157
=============== ===============
Book value per common share
(inclusive of dividends in
arrears) $ 9.94 $ 8.57
=============== ===============
DYNEX CAPITAL, INC.
Consolidated Statements of Operations
(Thousands except share data)
(unaudited)
Three Months Ended
March 31,
-------------------------
2003 2002
------------ ------------
Interest income $ 38,181 $ 42,940
Interest and related expense 28,050 (33,440)
------------ ------------
Net interest margin before provision 10,131 9,500
Provision for losses (5,844) (5,643)
------------ ------------
Net interest margin 4,287 3,857
Impairment charges (2,078) (2,111)
Gain on sale of investments, net 527 77
Other income, net 17 552
General and administrative expenses (2,021) (1,894)
------------ ------------
Net income 732 481
Preferred stock benefit (charge) 10,444 (2,396)
------------ ------------
Net income (loss) available to common
shareholders $ 11,176 $ (1,915)
============ ============
Per common share:
Basic and diluted $ 1.03 $ (0.18)
Weighted average number of common shares
outstanding 10,873,903 10,873,853
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