Dynex Capital, Inc. Reports Third Quarter 2001 Results and Announces Tender Offers to be Funded.Business Editors 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 a net loss of $7.5 million, or $0.75 per basic and 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 third quarter 2001, versus a net loss of $836,000, or $0.35 per basic and diluted common share for the third quarter 2000, and net income of $2.8 million or $1.16 per basic and diluted common share for the second quarter of 2001. For the third quarter, the Company reported net interest margin before provision for losses on its investment portfolio of $11.8 million compared to $13.0 million for the second quarter of 2001. Inclusive of inclusive of prep. Taking into consideration or account; including. provision for losses, the Company reported that net interest margin for the third quarter was a negative $2.4 million. The decrease in net interest margin for the third quarter 2001 was primarily due to (i) prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. on adjustable-rate mortgage Adjustable-rate mortgage (ARM) A mortgage that features predetermined adjustments of the loan interest rate at regular intervals based on an established index. The interest rate is adjusted at each interval to a rate equivalent to the index value plus a predetermined spread, or loans and securities, (ii) the reset of interest rates downward on a portion of the Company's adjustable-rate mortgage loans and securities, and (iii) the increase in provision for losses as a result of the continued under-performance of 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 in the Company's investment portfolio. The Company increased its provision for losses by $7.6 million during the quarter to account for such losses in the manufactured housing loan portfolio. Third quarter results were also negatively impacted by further losses of $1.2 million related to Eurodollar short positions which the Company entered into in a prior quarter in order to effectively lock-in LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). borrowing rates for approximately one-third of the Company's floating-rate liabilities through 2001. These Eurodollar short positions do not qualify for hedge treatment under FAS No. 133 and thus losses on the entire position must be recognized in the quarter incurred. The Company also reported that it incurred an extraordinary loss of $1.0 million related to the write-off of unamortized bond issue costs and discounts on the call of one series of collateralized bonds. This series of collateralized bonds, which is collateralized principally by adjustable-rate single-family mortgage loans and securities, was called and resold by the Company during the quarter. The Company reported that as of September 30, 2001, its remaining 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 consisted principally of $57.9 million of July 2002 Senior Notes and $6.8 million relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc repurchase agreements 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. . In addition, 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. increased to $181.3 million at September 30, 2001 from $175.7 million at June 30, 2001. This increase was due to the improvement in the mark-to-market value of the assets of the Company. The improvement in the market value of the Company's investment portfolio resulted primarily from the lower interest rate environment. The impact of losses relating to the manufactured housing loan portfolio did not have a material effect on the market value on the investment portfolio, as the mark-to-market valuation has generally incorporated expectations of such losses. Regarding the outlook for the Company, Mr. Potts commented, "We would expect net interest margin before provision for losses to improve for the fourth quarter, as a result of the recent reductions by the Federal Reserve in the 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. which has the near-term effect of increasing our interest spread. Regarding the provision for losses, our expectation is that the provision for the quarter will likely be less during the fourth quarter than the third, but still higher than the $6.6 million recorded in the second quarter due to the performance of the manufactured housing loan portfolio. All other 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. loan portfolios are performing reasonably as expected." Mr. Potts further commented, "The Company continues to focus on repayment of its recourse debt obligations, and enhancing the overall value of its existing investments. Concurrently with these efforts, as we have previously reported, management and the Board continue to explore alternatives to improving shareholder value and generating liquidity for shareholders. In that regard, the Company initiated tender offers in September on its Series A, Series B and Series C 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. , which will result in the purchase of 486,517 shares of the Preferred Stock. The Company plans to fund the purchase of the tendered shares on November 2, 2001. On a proforma basis, assuming the tender offers had been completed as of September 30, 2001, total shareholders' equity would have declined from $181.3 million to $172.3 million, and the aggregate 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 for all series of Preferred Stock would have declined from $134.9 to $118.9 million, while 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: inclusive of accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. and unpaid preferred dividends preferred dividend n. a payment of a corporation's profits to holders of preferred shares of stock. (See: preferred stock) would have increased from $4.06 to $4.66." The Company also reported on the recent developments surrounding certain 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 which it is engaged. In regard to the litigation with California Investment Fund (CIF (1) (Common Intermediate Format) A standard video format used in videoconferencing. CIF formats are defined by their resolution, and standards both above and below the original resolution have been established. The original CIF is also known as Full CIF (FCIF). ) as a result of the termination by the Company of the merger agreement dated November 7, 2000 between the Company and CIF, in a case heard in the Eastern District Court in Alexandria, Virginia Alexandria is an independent city in the Commonwealth of Virginia. As of the 2000 census, the city had a total population of 128,284. Located along the Western bank of the Potomac River, Alexandria is approximately 6 miles (9.6 kilometers) south of downtown Washington, DC. , the jury returned a verdict whereby (i) the escrow escrow Instrument, such as a deed, money, or property, that constitutes evidence of obligations between two or more parties and is held by a third party. It is delivered by the third party only upon fulfillment of some condition. amount consisting of $1 million and 572,178 shares of common stock is to be awarded to the Company, and (ii) the Company is to pay CIF a termination fee termination fee The one-time charge for terminating or transferring an individual retirement account. If a financial institution charges a termination fee, the fee must be spelled out in the original agreement that is signed when the account is opened. of $2 million. The judge has yet to enter the jury verdict pending review of motions filed by the two parties. Additionally, the action brought by ACA ACA - Application Control Architecture Financial Guaranty As a verb, to agree to be responsible for the payment of another's debt or the performance of another's duty, liability, or obligation if that person does not perform as he or she is legally obligated to do; to assume the responsibility of a guarantor; to warrant. Corporation (ACA) against the Company has been settled out of court. The settlement, provides, among other things, that the Company is permitted to fund the purchase of shares of its Series A, Series B and Series C Preferred Stock tendered pursuant to the Company's tender offers initiated in September, while generally limiting the Company from making any other distributions to its shareholders, including further tender offers on the Preferred Stock, until such time as the Senior Notes are fully repaid or defeased. The Company has scheduled a conference call for Monday, November 5, 2001, at 11:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy . Investors may participate in a listen only mode by calling the following number (212) 346-0291. 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 Act of 1995) that inherently involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these 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 conditions, disruptions in the capital markets, the availability of funds from the Company's lenders to finance future loans, fluctuations in interest rates, increases in costs and other general competitive factors.
DYNEX CAPITAL, INC.
Consolidated Balance Sheets
(Thousands except share data)
(unaudited)
September 30, December 31,
2001 2000
------------- -------------
ASSETS
Investments:
Collateral for collateralized
bonds $ 2,558,555 $ 3,042,158
Securities 5,163 9,364
Other investments 34,143 42,284
Loans held for sale 2,891 19,102
Cash 18,071 26,773
Other assets 14,827 19,915
------------- -------------
$ 2,633,650 $ 3,159,596
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Non-recourse debt $ 2,384,670 $ 2,856,728
Recourse debt 64,964 134,168
Other liabilities 2,674 11,569
------------ ------------
2,452,308 3,002,465
------------- ------------
SHAREHOLDERS' EQUITY:
Preferred stock 106,975 127,407
Common stock 114 114
Additional paid-in capital 361,469 351,999
Accumulated other comprehensive
loss (94,738) (124,589)
Accumulated deficit (192,478) (197,800)
-------------- -------------
181,342 157,131
-------------- -------------
$ 2,633,650 $ 3,159,596
============== =============
Book value per common share
(inclusive of preferred dividends
in arrears) $ 4.06 $ 0.37
============== ==============
DYNEX CAPITAL, INC.
Consolidated Statements of Operations
(unaudited)
(Thousands except for share data)
Three Months Nine Months
Ended Ended
-------------------- --------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2001 2000 2001 2000
--------- --------- --------- ---------
Interest income:
Collateral for
collateralized bonds $ 50,767 $ 68,300 $ 168,358 $ 206,923
Securities 157 301 831 3,303
Other investments 1,374 1,180 4,766 4,216
Loans held for sale 98 704 431 10,570
--------- --------- --------- ---------
52,396 70,485 174,386 225,012
--------- --------- --------- ---------
Interest and related expense:
Non-recourse debt 39,192 59,881 132,863 176,577
Recourse debt 1,316 3,492 5,739 18,785
Other 62 590 531 4,417
--------- --------- --------- ---------
40,570 63,963 139,133 199,779
--------- --------- --------- ---------
Net interest margin
before provision
for losses 11,826 6,522 35,253 25,233
Provision for losses (14,247) (5,270) (27,424) (16,101)
--------- --------- --------- ---------
Net interest margin (2,421) 1,252 7,829 9,132
Net (loss) gain on sales,
write-downs,impairment
charges and litigation (650) (557) 6,893 (85,467)
Trading losses (1,161) - (2,881) -
- -
Other income 59 42 39 2,619
--------- --------- --------- ---------
(4,173) 737 11,880 (73,716)
General and
administrative expenses (2,299) (1,573) (6,777) (6,519)
--------- --------- --------- --------
(Loss) income before
extraordinary item (6,472) (836) 5,103 (80,235)
Extraordinary item -
(loss) gain from
extinguishment of debt (1,010) - 1,835 -
--------- --------- ---------- -------
Net (loss) income (7,482) (836) 6,938 (80,235)
Preferred Stock
(charge) benefit (1,097) (3,227) 6,053 (9,683)
--------- --------- --------- ---------
Net (loss) gain available
to common shareholders $ (8,579) $ (4,063) $ 12,991 $ (89,918)
========= ========= ========= ========
Per common share before
extraordinary item:
Basic $ (0.66) $ (0.35) $ 0.97 $ (7.86)
Diluted $ (0.66) $ (0.35) $ 0.97 $ (7.86)
Per common share after
extraordinary item:
Basic $ (0.75) $ (0.35) $ 1.13 $ (7.86)
Diluted $ (0.75) $ (0.35) $ 1.13 $ (7.86)
Weighted average number of common
shares outstanding:
Basic and Diluted 11,446,090 11,446,010 11,446,167 11,444,911
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