PRESS RELEASE
Published on May 5, 2003
Exhibit 99.1
PRESS RELEASE
FOR IMMEDIATE RELEASE CONTACT: Kathy Fern
May 5, 2003 804-217-5800
DYNEX CAPITAL, INC.
REPORTS FIRST QUARTER 2003 RESULTS
Dynex Capital, Inc. (NYSE: 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, adjusted for dividends in arrears on preferred
stock, 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
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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. 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 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 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
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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 in the Company's investment portfolio. Prepayment speeds for the
entire investment portfolio as measured by the "constant prepayment rate", or
CPR, 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 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 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 in arrears at March
31, 2003 were $16.7 million.
Discussion
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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
short-term interest-rate environment. Current market expectations are that
short-term interest 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 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 charges on that portion of our investment portfolio until
market conditions stabilize".
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.
Dynex Capital, Inc. is a financial services company that elects to be
treated as a real estate investment trust (REIT) for federal income tax
purposes.
Note: This document contains "forward-looking statements" 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. 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 of the Company, the impact of recently
issued financial accounting standards, increases in costs and other general
competitive factors.
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