Dynex Capital, Inc. Reports Results for the Third Quarter and Announces Plans to Redeem Preferred Stock and a Common Stock Repurchase Plan.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 third quarter of 2005. Highlights contained in this release include: --Net loss for the quarter was $1.9 million, and $0.27 per common share; --Net loss for the quarter includes non-recurring accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. of $1.1 million for contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. on prior asset sales and related items, and $0.5 million in general and administrative expenses; --Net income for the nine months ended September 30, 2005 was $8.6 million, or $0.38 per common share; --Net income for the nine months includes gains of $9.8 million from the sale of selected investments; and --Common equity book value was $93.9 million, or $7.67 per common share at September 30, 2005, and capital available for investment was $63.9 million. On November 15, 2005, the Company's Board of Directors authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: the redemption by the Company of up to 25% of the 5,628,737 outstanding shares of the Company's Series D 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. . The redemption will be made pursuant to the terms of the designation for the preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. contained in the Company's Articles of Incorporation The document that must be filed with an appropriate government agency, commonly the office of the Secretary of State, if the owners of a business want it to be given legal recognition as a corporation. . Following formal notice of redemption, the Company will pay the initial issue price of $10 per preferred share that is 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. , plus any prorated dividends to date. There are currently no 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 the Series D Preferred Stock. The Company expects to complete the redemption of the 25% of outstanding preferred shares in the first quarter of 2006. The Company's Board of Directors also authorized a stock repurchase plan stock repurchase plan 1. See buyback. 2. See self-tender. under which the Company may repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. up to one million shares of its common stock. Subject to applicable securities laws, such repurchases will be made at times and in amounts as the Company deems appropriate and may be suspended sus·pend v. sus·pend·ed, sus·pend·ing, sus·pends v.tr. 1. To bar for a period from a privilege, office, or position, usually as a punishment: suspend a student from school. or discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: at any time. The Company expects that the funding for the plan will come from available corporate funds. Under the terms of the designation for the Series D Preferred Stock, the Company must have paid or set aside sufficient funds for dividends on the preferred shares for the current dividend period prior to the repurchase of common stock at any time. The preferred stock designation also restricts the Company from redeeming 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. any common shares without the approval of preferred shareholders until its 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 at least 300% of the aggregate issue price of any outstanding preferred stock. Based on that restriction, the Company may not repurchase its common shares at the present time. However, after the completion of the preferred stock redemption discussed above, the Company expects to meet the shareholders' equity requirement and will be permitted to repurchase its common shares without the approval of the preferred shareholders. The Company has scheduled a conference call for Friday, November 18, 2005, at 12:00 p.m. Eastern Time to discuss third quarter results. Investors may participate in the call by dialing (877) 267-2094. The Company also announced that it has filed notice for a five-day extension to file its third quarter Form 10-Q Form 10-Q See 10-Q. as a result of its recent change in its independent accounting firm. 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 commented, "Our results for the quarter reflect our cautious investment philosophy. While we reported a net loss, our investment strategy of investing in only very short-duration, high credit quality assets protected our shareholders' capital, while volatility in the mortgage markets caused price declines in 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 assets. As yields on the ten-year treasury note have risen approximately 64 basis points through today since the end of the second quarter, longer duration assets, particularly residential mortgage securities, have suffered steep price declines, negatively impacting the book value of investors who owned these assets. Our common book value per share of $7.67 at September 30, 2005 is virtually unchanged from our book value of $7.60 at December 31, 2004. One of our primary objectives for 2005 was to preserve our capital base in the face of what we believed could be volatile markets and asset pricing, and we have succeeded so far on that score. Additionally, through asset sales during the year, we have generated $20 million in cash proceeds and lowered the Company's overall risk profile." Mr. Akin continued, "We believe that the fixed-income markets, and specifically the mortgage markets, may be entering a period of distress that will make investment opportunities available for the Company. However, given the lack of compelling investment options immediately available to the Company, the Board authorized the redemption of approximately $14 million of the Company's 9.50% Series D Preferred Stock, which has the added benefit of subsequently allowing the Company to repurchase shares of its common stock when accretive to 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: . We also are continuing to explore strategic investments with potential counter-parties that will supplement the investment capabilities of the Company. As we have indicated in the past, 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. In addition, if we see compelling opportunities, we may continue to monetize Monetize 1. To convert into money. 2. To convert from securities into currency that can be used to purchase goods and services. Notes: For example, you'll often hear Internet marketers talk about "monetizing website visitors. existing investments to free up additional 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. capital while taking advantage of favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. pricing on assets that we own." Third Quarter Results Net loss for the quarter was $1.9 million, compared to a net loss of $56 thousand for the same period last year, and net income of $9.6 million for the second quarter 2005. After consideration of the preferred stock dividend, the Company reported a net loss to common shareholders of $3.2 million or $0.27 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, compared to a net loss of $1.4 million or $0.12 per diluted common share for the same period in 2004. Included in the third quarter results was $1.1 million in other expenses from non-recurring accruals for contingencies and related items on prior asset sales and interest income. In addition, the provision for loan losses of $1.6 million included a one-time $0.4 million credit loss on a 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. finance receivable. The remaining $1.2 million of provision for loan losses related to the Company's investment in commercial mortgage loan pools. At September 30, 2005, approximately $7.3 million in securitized single-family loans and approximately $40.0 million in commercial mortgage loans were sixty-plus days 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. . 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 totaling $20.4 million at September 30, 2005. The Company reported net interest income on its investment portfolio of $2.6 million versus $2.7 million last quarter and $6.4 million in the third quarter 2004. Net interest spread on 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 was 0.23% for the quarter versus 1.21% for the third quarter 2004, and 1.00% for the year ended 2004. Net interest income, and net interest spread, declined as a result of the prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. and sales of higher-yielding investments and the reinvestment of the proceeds from the sale in lower-yielding investments. Since the third quarter of 2004, the Company has sold $587 million of securitized finance receivable investments generating approximately $20 million in net cash proceeds after repayment of the 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 debt. General and administrative expenses were $1.6 million during the quarter, versus $1.4 million last quarter and $1.8 million in the third quarter 2004. General and administrative expenses included approximately $0.5 million in 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. related expenses and accounting fees related to the amounts due to the Company's prior independent accounting firm. The Company expects general and administrative expenses to approximate $1.2 million for the fourth quarter 2005. Nine Month Results Net income for the nine months ended September 30, 2005 increased to $8.6 million from a net loss of $18.4 million for the same period in 2004. After consideration of the preferred stock dividend, the Company reported net income to common shareholders of $4.6 million, or $0.38 per diluted common share, for the nine months ended September 30, 2005 compared to a net loss to common shareholders of $18.9 million, or $1.70 per diluted common share, for the same period in 2004. Net interest income decreased to $9.8 million from $18.3 million for the nine months ended September 30, 2005 and 2004, respectively. The decrease resulted primarily from the derecognition of the collateral associated with the three pools of 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 the related securitization financing, sold between the fourth quarter of 2004 and the second quarter of 2005. The decline in provision for loan losses by $12.9 million to $4.5 million was primarily due to the derecognition of the securitized finance receivables, which were primarily 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. Gain on sale of investments was $9.8 million for the nine months ended September 30, 2005, versus a loss on sale of investments of $3.1 million for the same period in 2004. The 2004 loss was primarily a result of the sale of a portfolio of 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. , and the 2005 gain was mainly related to the sale of the Company's interest in two pools of securitization finance receivables, net of the related securitization financing, during the second quarter. Impairments also declined to $2.3 million for the nine months ended September 30, 2005 from $9.6 million for the same period in 2004. The 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. related to securitized manufactured housing loans which were derecognized during the second quarter of 2005, while the 2005 impairment of approximately $2.3 million is primarily related to impairments on the Company's securitized tax lien receivables. General and administrative expenses decreased by approximately $1.8 million to $4.5 million for the nine months ended September 30, 2005 primarily as a result of decreased litigation expenses and reductions in the expenses associated with the Company's tax lien servicing operation. Balance Sheet Total assets at September 30, 2005, were $872 million versus $1,401 million at December 31, 2004. Investments declined to $848 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 $640 million to $537 million at September 30, 2005 from $1,177 million at December 31, 2004. 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 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. debt and cash, resulting in the net increase of recourse securitization financing of $150 million at September 30, 2005. At September 30, 2005, the Company's investment portfolio consisted of $214 million in single-family mortgage loans and securities, the majority of which are floating rate and financed with floating rate liabilities, and $589 million in fixed-rate commercial mortgage loans. Capital available for investment was $64 million at the end of the third quarter, consisting of $45 million in short-term liquid securities, and cash and cash equivalents of $19 million. An additional $16 million of available capital is financing previously redeemed investment securitization financing bonds on an interim basis until the Company reissues these bonds, which the Company expects will occur in the first quarter of 2006. At the end of December 2004, capital available for investment was $52 million. The improvement in 2005 relates primarily to proceeds received from sales of investments and net cash receipts on the investment portfolio. 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 for the period ended June 30, 2005, as filed with the Securities and Exchange Commission.
DYNEX CAPITAL, INC.
Consolidated Balance Sheets
(Thousands except share data)
(unaudited)
Sept. 30, Dec. 31,
2005 2004
---------- ----------
ASSETS
Cash and cash equivalents $ 19,214 $ 52,522
Other assets 4,807 4,964
---------- ----------
24,021 57,486
Investments:
Securitized finance receivables:
Loans, net 759,386 1,036,123
Debt securities 2,194 206,434
---------- -----------
761,580 1,242,557
Securities 78,890 87,706
Other investments 4,493 7,596
Other loans 3,341 5,589
---------- ----------
848,304 1,343,448
---------- ----------
$ 872,325 $1,400,934
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Securitization financing:
Non-recourse debt $ 537,385 $1,177,280
Recourse debt 149,823 -
---------- -----------
687,208 1,177,280
Repurchase agreements 27,830 70,468
Other liabilities 7,753 4,420
---------- ----------
722,791 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 (loss) income (42) 3,817
Accumulated deficit (273,115) (277,735)
---------- ----------
149,534 148,766
---------- ----------
$ 872,325 $1,400,934
========== ==========
Book value per common share $ 7.67 $ 7.60
========== ==========
DYNEX CAPITAL, INC.
Consolidated Statements of Operations
(Thousands except share data)
(unaudited)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
------------------------- -------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Interest income $ 15,717 $ 30,026 $ 58,303 $ 96,874
Interest and
related expense (13,103) (23,632) (48,500) (78,526)
------------ ------------ ------------ ------------
Net interest income 2,614 6,394 9,803 18,348
Provision for loan
losses (1,622) (1,291) (4,547) (17,438)
------------ ------------ ------------ ------------
Net interest income
after provision
for loan losses 992 5,103 5,256 910
(Loss) gain on sale
of investments, net (48) (3,147) 9,802 (3,143)
Impairment charges (207) (162) (2,259) (9,569)
Other (expense)
income (1,026) (3) 331 (264)
General and
administrative
expenses (1,610) (1,847) (4,500) (6,330)
------------ ------------ ------------ ------------
Net (loss) income (1,899) (56) 8,630 (18,396)
Preferred stock
charge (1,336) (1,381) (4,010) (527)
------------ ------------ ------------ ------------
Net (loss) income
to common
shareholders $ (3,235) $ (1,437) $ 4,620 $ (18,923)
============ ============ ============ ============
Change in net unrealized
gain/loss during
the period on:
Investments classified
as available-for-
sale (116) 211 (4,464) 3,526
Hedge instruments 21 349 605 2,354
------------ ------------ ------------ ------------
Comprehensive
(loss) income $ (1,994) $ 504 $ 4,771 $ (12,516)
============ ============ ============ ============
Net (loss) income
per common share
Basic and
diluted $ (0.27) $ (0.12) $ 0.38 $ (1.70)
============ ============ ============ ============
Weighted average
number of common
shares outstanding:
Basic and
diluted 12,163,391 12,162,391 12,162,951 11,144,102
============ ============ ============ ============
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