Dynex Capital, Inc. Reports Results for the First Quarter.GLEN ALLEN Glen Allen is the name of several places in the United States of America:
See: New York Stock Exchange : DX) announced today its financial results for the first quarter of 2005. Highlights contained in this release include: --Cash flows from the investment portfolio were $6.6 million for the quarter, and $10.8 million including the sale of certain investments; --Net income for the first quarter was $0.9 million, and net loss to common shareholders was $0.4 million, or $0.03 per share on a basic and fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis; --Net interest spread for the quarter was 0.72%, versus 0.71% for the fourth quarter of 2004. --Total investment portfolio assets were $1,274 million and cash and cash equivalents were $60.5 million at March 31, 2005, versus total investment portfolio assets of $1,343 million and cash and cash equivalents of $52.5 million at December 31, 2004; and --Common equity book value was $88.6 million, or $7.28 per common share at March 31, 2005, versus $92.5 million, or $7.60 per common share at December 31, 2004. The Company has scheduled a conference call for Thursday, May 12, 2005, at 12:00 p.m. Eastern Time to discuss fourth quarter results. Investors may participate by calling (800) 313-8077. The Company also announced that is Annual Shareholders' Meeting shareholders' meeting n. a meeting, usually annual, of all shareholders of a corporation (although in large corporations only a small percentage attend) to elect the Board of Directors and hear reports on the company's business situation. will be held on June 14, 2005 in Richmond, Virginia Richmond IPA: [ɹɯʒmɐnɖ] is the capital of the Commonwealth of Virginia, in the United States. , the location of the Company's headquarters. The Company also announced that on May 9, 2005, it sold securitized securitized Of, related to, or being debt securities that are secured with assets. For example, mortgage purchase bonds are secured by mortgages that have been purchased with the bond issue's proceeds. 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, for a net $9.0 million. The sale is expected to result in the removal of approximately $372 million in securitized finance receivable assets, net of reserves, and $369 million in securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. financing borrowings from the Company's balance sheet. The Company expects to record a gain on the sale in excess of $8.0 million, increasing common book value per share by approximately $0.66, to approximately $7.94 per share on a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis at March 31, 2005. The Company is retaining the servicing rights on the investments being sold. Commenting on the first quarter results, Thomas (language) Thomas - A language compatible with the language Dylan(TM). Thomas is NOT Dylan(TM). The first public release of a translator to Scheme by Matt Birkholz, Jim Miller, and Ron Weiss, written at Digital Equipment Corporation's Cambridge Research Laboratory runs B. Akin AKIN American Kurdish Information Network , Chairman of the Board of Directors stated, "As expected, we reported essentially break-even results for our common shareholders for the first quarter, while investment portfolio cash flows modestly declined due to run-off in the investment portfolio. During the quarter, our focus was on our previously stated goals of selling non-core assets, which culminated with the transaction completed on May 9th. Not only did this transaction generate $9.0 million in cash flow, management was successful in selling an investment in excess of book value, and it also resulted in the removal of non-core assets which were not generating meaningful returns on the capital invested in these assets. These sold assets contributed only approximately $981 thousand in net interest income and $150 thousand of net cash flows for the first quarter, and we anticipate being able to replace these amounts quickly once we begin substantive reinvestment Reinvestment Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash. 1. In terms of stocks, it is the reinvestment of dividends to purchase additional shares. efforts." Mr. Akin continued, "After the completion of the transaction, our investment portfolio now consists principally of securitized single-family and commercial mortgage loans. Along with the sale of our manufactured housing assets, during April we redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. our outstanding single-family securitization financing transaction of approximately $196 million. The redemption was financed with repurchase agreement Repurchase agreement An agreement with a commitment by the seller (dealer) to buy a security back from the purchaser (customer) at a specified price at a designated future date. financing, which will save the Company on average an annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. 0.25% in its cost to finance the associated assets. We also took the opportunity to sell most of our investment in another mortgage REIT Mortgage REIT An REIT that invests in loans secured by real estate which derive income from mortgage interest and fees. mortgage REIT , Bimini Mortgage Management. The total return earned on that portion of the investment during the period we owned it approximated 18%." Mr. Akin concluded, "As our investment portfolio declines from the sale or run-off of under-performing and non-core assets, our reported results should become more transparent and understandable. As we have indicated in previous investor communications, our risk profile in recent years has become less interest-rate sensitive, and is more sensitive to credit performance on the underlying loans in our investment portfolio, predominantly pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. on our remaining investment in commercial mortgage loans. While we have added recourse The right of an individual who is holding a Commercial Paper, such as a check or promissory note, to receive payment on it from anyone who has signed it if the individual who originally made it is unable, or refuses, to tender payment. leverage back to the balance sheet with the securitization financing redemption completed in April, the assets securing this leverage are high-credit quality single-family mortgage assets. With respect to reinvestment strategies for our capital, our viewpoint remains the same as it has in recent quarters, that acceptable risk-adjusted returns Risk-Adjusted Return A measure of how much risk a fund or portfolio takes on to earn its returns, usually expressed as a number or a rating. Notes: This is often represented by the Sharpe Ratio. The more return per unit of risk, the better. do not exist in mortgage assets today, and we will continue only to invest in high-credit quality, very short-duration assets. We are focused, however, on our longer-term investment strategies, and the associated investment policies, procedures and infrastructure necessary for prudent reinvestment and to avoid putting our balance sheet at undue risk in what likely will be a volatile environment over the next twelve months." Below is a discussion of the first quarter results and certain items on the Company's balance sheet at March 31, 2005. First Quarter Results For the quarter ended March 31, 2005, the Company reported net income of $0.9 million compared to a net loss of $5.4 million for the same period for 2004. After consideration of the 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. dividend, the Company reported a net loss to common shareholders of $0.4 million or $0.03 per common share for the first quarter of 2005, compared to a net loss of $6.6 million or $0.60 per common share for the first quarter of 2004. Cash flow from the Company's investment portfolio was $6.6 million for the first quarter 2005, compared to $6.8 million for the fourth quarter 2004. Cash flow declined in the first quarter principally as a result of declines in interest-earning assets from prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. in the investment portfolio, and cash retained within a manufactured housing securitization transaction as a result of increases in losses on the underlying collateral pledged. The Company reported net interest income on its investment portfolio of $4.5 million in the first quarter 2005 compared to $6.4 million in the first quarter 2004. Net interest income after provision for loan losses was $2.2 million for the first quarter 2005 compared to a loss of $0.8 million for the same period in 2004. Provision for loan losses in the first quarter 2005 was $2.3 million compared to $7.2 million in 2004. 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 for the first quarter of 2005 were $0.3 million versus $1.7 million for the same period in 2004. Impairment charges for 2004 are primarily comprised of charges for a debt-security backed principally by manufactured housing loans. There are no such impairment charges for the first quarter of 2005. General and administrative expenses were $1.5 million in first quarter 2005 compared to $2.5 million in the first quarter 2004. The decline in general and administrative expenses from the first quarter 2004 was primarily due to a reduction in compensation expense and the 2004 expenses associated with the 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. in Texas. Balance Sheet Total assets at March 31, 2005, were $1,340 million, a decline of $60.8 million from December 31, 2004. Cash and cash equivalents was $60.5 million at March 31, 2005 versus $52.5 million at the end of 2004. The increase in cash and cash equivalents resulted primarily from net portfolio cash flows and the sale of an equity security that generated proceeds of approximately $4.3 million. Investments declined to $1,274 million versus $1,343 million at December 31, 2004, principally as a result of prepayments in the Company's securitized finance receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed , and principal repayments on residential mortgage-backed securities Residential mortgage-backed securities (RMBS) are a type of bond commonly issued in American security markets. They are a type of Mortgage-backed security which are backed by mortgages on residential rather than commercial real estate. purchased by the Company in 2004. At March 31, 2005, the Company's investment portfolio consisted of $324.5 million in single-family mortgage loans and securities, the majority of which are floating rate and financed with floating rate liabilities, $621.3 million in commercial mortgage loans, substantially all of which are fixed rate and financed with fixed rate liabilities, and $338.3 million in manufactured housing loans and securities which were subsequently sold in May. During the quarter, the weighted-average earning asset Earning asset An asset that generates income, e.g., income from rental property. yield on the investment portfolio was 6.99%, and the average cost of funds Cost of Funds The interest rate paid on an outstanding loan. Notes: Money isn't free! Cost of funds is the cost of borrowing money. See also: Interest Rate Cost of funds Interest rate associated with borrowing money. was 6.27%, resulting in a net interest spread to the Company of 0.72% in the first quarter, versus 0.71% for the fourth quarter 2004 and 1.00% for all of 2004. 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. declined to $144.9 million at March 31, 2005 compared to $148.8 million at December 31, 2004. The decrease in shareholders' equity was primarily due to an unrealized accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. other comprehensive loss recorded on the manufactured housing loan security subsequently sold in May. As previously indicated, the sale of this security and other manufactured housing loans is expected to generate an $8 million gain during the second quarter 2005. On a pro forma basis at March 31, 2005, assuming the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. sale of the manufactured housing loan assets, shareholders' equity would be an estimated $153 million, and 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: would be an estimated $7.94. 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. Additional information about Dynex Capital, Inc. is available at www.dynexcapital.com. 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 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. These factors may include, but are not limited to, changes in general economic and market condition, variability in investment portfolio cash flows, defaults by borrowers, fluctuations in interest rates, defaults by third-party servicers, prepayments of investment portfolio assets, other general competitive factors, the impact of regulatory changes, and the impact of Section 404 of the Sarbanes-Oxley Act See SOX. of 2002. For additional information, see the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the period ended December 31, 2004, as filed with the Securities and Exchange Commission.
DYNEX CAPITAL, INC.
Consolidated Balance Sheets
(Thousands except share data)
(unaudited)
March 31, December 31,
2005 2004
--------------- -------------
ASSETS
Cash and cash equivalents $60,534 $52,522
Other assets 5,768 4,964
--------------- -------------
66,302 57,486
Investments:
Securitized finance receivables:
Loans, net 996,076 1,036,123
Debt securities 195,304 206,434
Securities 70,033 87,706
Other investments 7,168 7,596
Other loans 5,242 5,589
--------------- -------------
1,273,823 1,343,448
--------------- -------------
$1,340,125 $1,400,934
=============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Non-recourse securitization financing $1,131,617 $1,177,280
Repurchase agreements 59,367 70,468
Other liabilities 4,277 4,420
--------------- -------------
1,195,261 1,252,168
--------------- -------------
SHAREHOLDERS' EQUITY:
Preferred stock 55,666 55,666
Common stock 122 122
Additional paid-in capital 366,896 366,896
Accumulated other comprehensive income
(loss) 317 3,817
Accumulated deficit (278,137) (277,735)
--------------- -------------
144,864 148,766
--------------- -------------
$1,340,125 $1,400,934
=============== =============
Book value per common share $7.28 $7.60
=============== =============
DYNEX CAPITAL, INC.
Consolidated Statements of Operations
(Thousands except share data)
(unaudited)
Three Months Ended
March 31,
-----------------------
2005 2004
----------- -----------
Interest income $24,053 $33,631
Interest and related expense (19,596) (27,196)
----------- -----------
Net interest income 4,457 6,435
Provision for loan losses (2,261) (7,200)
----------- -----------
Net interest income after provision for loan
losses 2,196 (765)
Impairment charges (266) (1,661)
Gain (loss) on sale of investments, net 79 (34)
Other income (expense) 417 (459)
General and administrative expenses (1,492) (2,468)
----------- -----------
Net income (loss) 934 (5,387)
Preferred stock charge (1,337) (1,191)
----------- -----------
Net loss to common shareholders $(403) $(6,578)
=========== ===========
Change in net unrealized loss during the
period on:
Investments classified as available-for-sale (3,883) 259
Hedge instruments 383 81
----------- -----------
Comprehensive loss $(2,566) $(5,047)
=========== ===========
Net loss per common share
Basic and diluted $(0.03) $(0.60)
=========== ===========
Weighted average number of common shares
outstanding:
Basic and diluted 12,162,391 10,873,903
=========== ===========
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