Dynex Capital, Inc. Reports Results for the Second 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 second quarter of 2005. Highlights contained in this release include: --Net income was $9.6 million, or $0.54 per common share on a fully-diluted basis; --Net income includes gains on sales of investments of $9.6 million, 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 assets of $1.8 million; --Sales of investments, net of reserves and unamortized discounts and premiums, totaled $369 million during the quarter, with approximately $364 million of associated 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 being removed from the Company's balance sheet; --Continued growth in available liquidity as measured by cash and investments in liquid securities, which improved to $63 million at the end of the second quarter of 2005, with an additional $18 million expected in the third quarter from the reissuance of securitization financing bonds 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. during the quarter; and --Common equity book value was $96.6 million, or $7.94 per common share at June 30, 2005, versus $88.6 million, or $7.28 per common share at March 31, 2005. The Company has scheduled a conference call for Tuesday, August 16, 2005, at 11:00 a.m. Eastern Time to discuss second quarter results. Investors may participate by calling (800) 701-7176. Commenting on the second quarter results, Thomas B. Akin AKIN American Kurdish Information Network , Chairman of the Board of Directors stated, "We continued our progress toward strengthening and simplifying our balance sheet, as we successfully shed $369 million in non-core assets at a substantial gain during the quarter, generating net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of $12.4 million in the process. Total 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. is now approximately $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: at the end of the second quarter was $7.94. We took advantage of favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. market conditions to sell assets that do not fit the long-term investment profile for the Company. We have now substantially completed sales of assets in our investment portfolio that we do not view as integral to our long-term investment strategy. At the end of the second quarter, our capital was largely invested in cash and liquid securities, 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. commercial mortgage loans and securitized single-family loans." Mr. Akin continued, "As spreads in fixed-income products remain tight, and with the flatter yield curve environment, we believe it is prudent to remain on the sidelines On the sidelines An investor who decides not to invest due to market uncertainty. on the sidelines Of or relating to investors who, having assessed the market, have decided to avoid committing their funds. for deploying capital beyond very short-maturity instruments. We believe this strategy is appropriate in today's environment, as the returns available in our view do not justify the risks involved, and we will not add excessive leverage in this environment in an effort to manufacture higher returns on our capital. However, we do remain actively engaged in evaluating 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. opportunities, including those that would be considered outside the traditional mortgage REIT Mortgage REIT An REIT that invests in loans secured by real estate which derive income from mortgage interest and fees. mortgage REIT investment model. Our book value has improved to $7.94 per common share and we have significant resources available to be deployed." Mr. Akin concluded, "From an interest-rate risk point of view, our balance sheet is largely match-funded, and rising interest rates today should have only a marginal effect on current portfolio performance, while potentially providing opportunities for favorable reinvestment. The predominant pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. risk to our capital is credit risk as a result of our ownership of commercial loans, which, despite several loans in default, overall continue to perform reasonably well. For the near-term, our focus will remain on managing our existing investment assets, including their credit performance, and further positioning the Company for future reinvestment opportunities as discussed above. Our objective will be to continue to seek only those investments that will generate superior 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. , with the long-term objective of capital preservation and earnings stability in a variety of interest rate and credit cycles." Below is a discussion of the quarterly results and certain items on the Company's balance sheet at June 30, 2005. Second Quarter Results For the quarter ended June 30, 2005, the Company reported net income of $9.6 million compared to a net loss of $13.0 million for the same period in 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 net income to common shareholders of $8.3 million or $0.54 per 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. common share for the quarter ended June 30, 2005, compared to a net loss of $10.9 million or $0.95 per common share for the same period in 2004. Results in the second quarter of 2004 include a preferred stock benefit from a tender offer completed during that quarter. Excluding gains from sales of investments, impairment charges, and other income, the Company had net income of $670 thousand for the second quarter of 2005 compared to a net loss of $5.4 million for the second quarter of 2004. The Company's expected results for the third quarter will likely range from a slight loss to modest net income, barring any unusual events, which will continue for the foreseeable fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. future until the Company begins to redeploy re·de·ploy tr.v. re·de·ployed, re·de·ploy·ing, re·de·ploys 1. To move (military forces) from one combat zone to another. 2. capital in higher-yielding assets. The Company reported net interest income on its investment portfolio of $2.7 million during the quarter, versus $4.5 million in the first quarter 2005 and $5.5 million in the second quarter 2004. Net interest income declined as a result of the sales of investments and increased amortization expense of deferred costs relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. on commercial mortgage loans. Net interest income after provision for loan losses was $2.1 million for the second quarter versus $2.2 million for the first quarter 2005 and a negative $3.4 million for the second quarter in 2004. Provision for loan losses in the second quarter 2005 was $664 thousand versus $2.3 million in first quarter 2005 and $8.9 million in the second quarter 2004. First quarter 2005 provisions include amounts to increase reserves for impaired commercial loans, and second quarter 2004 provisions include amounts for 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 which have subsequently been sold. Gain on sale of investments in the second quarter 2005 reflects the sale of approximately $367 million in manufactured housing loan and single-family loan investments. Gain on sale of investments also includes approximately $1.4 million from the sale of four delinquent delinquent 1) adj. not paid in full amount or on time. 2) n. short for an underage violator of the law as in juvenile delinquent. DELINQUENT, civil law. He who has been guilty of some crime, offence or failure of duty. commercial mezzanine loans A mezzanine loan is a relatively large loan, typically unsecured (ie., not backed by a pledging of assets) or with a deeply subordinated security structure (e.g., third lien on the property but non-recourse vis-a-vis the borrower). . Impairment charges for the second quarter were $1.8 million versus $7.7 million for the same period in 2004. Impairment charges for the second quarter consist principally of impairments on the Company's investment in delinquent property tax receivables, while impairment charges for the same period in 2004 are primarily comprised of charges for a debt-security backed principally by manufactured housing loans. At June 30, 2005, the Company's remaining investment in tax liens Tax Lien A claim imposed by the federal government to liquidate a persons property until owing tax and debt is fully paid. Notes: Tax liens can be purchased from the government in the form of an investment. totals $5.2 million, and the Company collected $707 thousand on these receivables during the second quarter. General and administrative expenses were $1.4 million in the second quarter 2005 compared to $2.0 million in the second quarter 2004. The decline in general and administrative expenses from the second quarter 2004 was primarily due to a reduction in compensation expense due to reduced staffing, and 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. expenses in 2005. Overall, during the second quarter, general and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. excluding costs related to the tax lien servicing operations, litigation costs, and Sarbanes-Oxley consulting costs was $864 thousand, or 2.3% of shareholders' equity on 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. basis. Balance Sheet Total assets at June 30, 2005, were $931 million versus $1,401 million at December 31, 2004. Investments declined to $901 million versus $1,343 million at December 31, 2004, principally as a result of the sale of $369 million in investments during the second quarter. Non-recourse securitization financing decreased by $618 million to $559 million from $1,177 million at June 30, 2005 and December 31, 2004, respectively. The decrease is mainly from the derecognition of $364 million of debt associated with the sale of the underlying collateral, and the redemption at par of $196 million of non-recourse securitization financing bonds. The redemption was completed with a combination of recourse debt and cash, resulting in the net increase of recourse securitization financing of $166 million at June 30, 2005. The Company expects to reissue re·is·sue v. re·is·sued, re·is·su·ing, re·is·sues v.tr. To issue again, especially to make available again. v.intr. To come forth again. n. 1. substantially all of the redeemed bonds during the third quarter, resulting in the repayment of the $166 million in recourse securitization financing and the release of $18 million of cash invested in these redeemed bonds. At June 30, 2005, the Company's investment portfolio consisted of $198 million in single-family mortgage loans and securities, the majority of which are floating rate and financed with floating rate liabilities, and $617 million in fixed-rate commercial mortgage loans. The Company had short-term investments included in securities of $35 million, and cash and cash equivalents of $24 million. In addition, the Company had approximately $4 million invested in 'AAA'-rated single-family residential mortgage backed securities, net of the related 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. Average interest earning assets Earning Assets Any income-earning asset owned by a company. Notes: These assets are generally interest-bearing accounts, bonds, and securities available for sale. See also: Asset, Asset Valuation, Earnings, Net Interest Margin declined during the quarter, in large part due to the sale of investments. Proceeds were generally reinvested in lower yielding short-term investments. Except for its investment in tax liens, the Company has likely completed its asset sales for the foreseeable future. At June 30, 2005, approximately $6.5 million in single-family loans and approximately $36.9 million in commercial mortgage loans were sixty or more days delinquent. The Company expects only nominal losses on the delinquent single-family loans, and had reserves or other credit loss protection on the commercial mortgage loans of $19.2 million at June 30, 2005. 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 Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 and Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the period ended March 31, 2005, as filed with the Securities and Exchange Commission.
DYNEX CAPITAL, INC.
Consolidated Balance Sheets
(Thousands except share data)
(unaudited)
June 30, Dec. 31,
2005 2004
----------- ----------
ASSETS
Cash and cash equivalents $ 23,789 $ 52,522
Other assets 6,058 4,964
----------- ----------
29,847 57,486
Investments:
Securitized finance receivables:
Loans, net 800,914 1,036,123
Debt securities 2,352 206,434
----------- -----------
803,266 1,242,557
Securities 89,556 87,706
Other investments 5,157 7,596
Other loans 3,442 5,589
----------- ----------
901,421 1,343,448
----------- ----------
$ 931,268 $1,400,934
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES:
Securitization financing:
Non-recourse debt $ 559,070 $1,177,280
Recourse debt 165,743 -
----------- -----------
724,813 1,177,280
Repurchase agreements 47,191 70,468
Other liabilities 6,399 4,420
----------- ----------
778,403 1,252,168
----------- ----------
SHAREHOLDERS' EQUITY:
Preferred stock 55,666 55,666
Common stock 122 122
Additional paid-in capital 366,903 366,896
Accumulated other comprehensive income 54 3,817
Accumulated deficit (269,880) (277,735)
----------- ----------
152,865 148,766
----------- ----------
$ 931,268 $1,400,934
=========== ==========
Book value per common share $ 7.94 $ 7.60
=========== ==========
DYNEX CAPITAL, INC.
Consolidated Statements of Operations
(Thousands except share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Interest income $ 18,533 $ 33,217 $ 42,586 $ 66,848
Interest and
related expense (15,801) (27,698) (35,397) (54,894)
------------ ------------ ------------ ------------
Net interest income 2,732 5,519 7,189 11,954
Provision for loan
losses (664) (8,947) (2,925) (16,147)
------------ ------------ ------------ ------------
Net interest income
(loss) after provision
for loan losses 2,068 (3,428) 4,264 (4,193)
Gain on sale of
investments, net 9,552 20 9,850 4
Impairment charges (1,786) (7,746) (2,052) (9,407)
Other income (expense) 1,158 216 1,357 (261)
General and admini-
strative expenses (1,398) (2,015) (2,890) (4,483)
------------ ------------ ------------ ------------
Net income (loss) 9,594 (12,953) 10,529 (18,340)
Preferred stock
(charge) benefit (1,337) 2,045 (2,674) 854
------------ ------------ ------------ ------------
Net income (loss)
to common
shareholders $ 8,257 $ (10,908) $ 7,855 $ (17,486)
============ ============ ============ ============
Change in net unrealized
gain/(loss) during
the period on:
Investments classified
as available-for-sale (465) 3,056 (4,348) 3,315
Hedge instruments 201 1,924 584 2,005
------------ ------------ ------------ ------------
Comprehensive
income (loss) $ 9,330 $ (7,973) $ 6,765 $ (13,020)
============ ============ ============ ============
Net income (loss)
per common share
Basic $ 0.68 $ (0.95) $ 0.65 $ (1.59)
============ ============ ============ ============
Diluted $ 0.54 $ (0.95) $ 0.59 $ (1.59)
============ ============ ============ ============
Weighted average
number of common
shares outstanding:
Basic 12,163,061 11,468,635 12,162,728 10,972,844
============ ============ ============ ============
Diluted 17,791,798 11,468,635 17,791,594 10,972,844
============ ============ ============ ============
|
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion