EXHIBIT 99.1 - EARNINGS PRESS RELEASE MAY 10, 2006
Published on May 11, 2006
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Exhibit
99.1
|
 |
PRESS
RELEASE
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FOR
IMMEDIATE RELEASE
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CONTACT:
Alison Griffin
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|
May
10, 2006
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(804)
217-5897
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DYNEX
CAPITAL, INC. ANNOUNCES
FIRST
QUARTER 2006 RESULTS
Dynex
Capital, Inc. (NYSE: DX) announced today its financial results for the first
quarter of 2006. Highlights contained in this release include:
| · |
Net
income to common shareholders for the quarter of $0.2 million, or
$0.01
per common share;
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| · |
Net
interest income was $2.3 million and the net yield on average earning
assets was 1.25% versus 1.07% in the fourth quarter
2005;
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| · |
Net
income for the quarter includes an expense of approximately $0.1
million
for the adoption of the provisions of FAS 123(R) related to stock
based
compensation;
|
| · |
Common
equity book value was $93.5 million, or $7.70 per common share at
March
31, 2006, an improvement of $0.05 per share from the end of 2005;
and
|
| · |
Completed
the redemption of 1,407,198 shares of Series D Preferred Stock for
$14.1
million, and the repurchase of 20,300 shares of the Company’s common stock
at an average price of $6.72 per
share.
|
The
Company has scheduled a conference call for Thursday, May 11, 2006, at 3:00
p.m.
Eastern Time to discuss first quarter results. Investors may participate in
the
call by dialing (888) 214-7570.
Thomas
Akin, Chairman, stated, “Overall we are pleased with the results of the first
quarter. We increased book value per share and reported modest net income to
our
common shareholders. The credit performance on our loans is in line with
expectations and, overall, our investment portfolio generated earnings
sufficient to support our current operating costs and the preferred stock
dividend, meaning additional investments by the Company will be accretive to
our
earnings and our book value. ”
Mr.
Akin
continued, “We did not make any significant investments of capital during the
quarter, and we did complete the redemption of 25% of our Series D Preferred
Stock, which will eliminate approximately $1.3 million in annual preferred
stock
dividends. We also repurchased a modest amount of our common stock during the
quarter at 87% of book value, on average, and view additional repurchases as
an
attractive use of our capital as long as our stock is trading at a substantial
discount to book and intrinsic value.”
Mr.
Akin
concluded, “Our evaluation of investment opportunities continues to proceed. As
the yield curve steepens and the Federal Reserve indicates that the round of
increases in the Federal Funds rate is nearing its close, we believe more
compelling investment opportunities are on the horizon. In the meantime, yields
on short-duration assets continue to improve quarter-to-quarter. The Annual
Meeting of Shareholders will be on June 15th
at 9:00
a.m. EDT at the Park Central Hotel in New York City. We hope that all of our
shareholders can join us at that time as we discuss our outlook for 2006 and
beyond.”
First
Quarter Results
The
Company reported net income for the quarter of $1.2 million compared to $0.9
million for the same period last year. After consideration of the preferred
stock dividend, the Company reported net income of $0.2 million, or $0.01 per
common share, compared to a net loss of $0.4 million, or $0.03 per common share,
for the first quarter of 2005.
The
Company reported net interest income on its investment portfolio of $2.3 million
for the first quarter of 2006 compared to $4.5 million for the same period
in
2005 and $2.1 million for the quarter ended December 31, 2005. The average
asset
yield for the first quarter of 2006 was 7.57%, and the weighted-average cost
of
funds was 7.72%, for a negative net interest spread of 0.16% for the quarter
versus a negative net interest spread of 0.17% in the fourth quarter 2005.
The
negative net interest spread is primarily related to two delinquent commercial
loans with an aggregate unpaid principal balance of approximately $31.1 million
and net carrying basis of $16.0 million, both of which loans are on non-accrual,
reducing net interest income by approximately $0.5 million during the quarter.
One of the loans, with a principal balance of $7.8 million and a net carrying
basis of $1.0 million, liquidated in April 2006 at no additional loss to the
Company . The second loan, which had a principal balance and a net carrying
basis of $23.3 and $15.0 million, respectively, at March 31, 2006, was
foreclosed on after the end of the quarter and is expected to liquidate in
the
next twelve months. Net yield on average interest earning assets was 1.25%
during the quarter versus 1.07% for the fourth quarter of 2005.
The
first
quarter 2006 results include a benefit from provision for loan losses of $0.1
million compared to an expense of $2.3 million for the same period in 2005.
The
benefit during the quarter was a result of declining delinquencies in
securitized single-family loans. At March 31, 2006, $5.9 million in securitized
single-family loans and $35.9 million in commercial mortgage loans were
sixty-plus days delinquent. The Company has reserves or other credit loss
protection on the securitized single-family and commercial mortgage loans
totaling $21.5 million at March 31, 2006.
General
and administrative expenses decreased from $1.5 million for the first quarter
of
2005 to $1.3 million for the same period in 2006. General and administrative
expenses in 2006 included approximately $0.1 million related to the initial
adoption of the fair value method of accounting for stock based compensation
under FAS 123(R). Expenses in the first quarter 2006 also include an estimated
$0.2 million of fees related to the Company’s annual audit for 2005, and should
decline for the remainder of the year.
2
Balance
Sheet
Total
assets at March 31, 2006 were $767.0 million versus $806.0 million at December
31, 2005. Investments declined to $739.2 million at March 31, 2006 from $756.4
million at December 31, 2005, principally as a result of principal payments
received on the Company’s investment in securitized finance receivables and
loans. Non-recourse securitization financing decreased by $13.1 million to
$503.5 million at March 31, 2006 from $516.6 million at December 31, 2005 as
a
result of principal payments on the related bonds.
Preferred
shares outstanding were 4,221,539 after the redemption in January, and common
shares outstanding after repurchases in March 2006 were 12,161,682. The weighted
average repurchase price during the quarter was $6.72. The Company anticipates
continued repurchases of the common stock in the second quarter of
2006.
At
March
31, 2006, the Company’s investment portfolio consisted of $167.3 million in
securitized single-family mortgage loans and securities, the majority of which
are floating rate and financed with floating rate liabilities, and $545.3
million in fixed-rate securitized commercial mortgage loans. Capital available
for investment, which includes cash and short-term, high credit quality
securities, was $38.3 million and $45.2 million at March 31, 2006 and December
31, 2005, respectively. The decline in capital available for investment was
primarily due to the use of $14.1 million to redeem preferred stock during
the
quarter as discussed above, which was partially offset by the net cash receipts
on the investment portfolio during the quarter. The Company’s common book value
per share also increased by $0.05 per share to $7.70 per share on the earnings
for the quarter and an increase in the unrealized gains on certain of its
investments.
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. Additional
information about Dynex Capital, Inc. is available at
www.dynexcapital.com.
Note:
This document contains “forward-looking statements” within the meaning of the
Private Securities Litigation Reform 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, availability of suitable reinvestment
opportunities, defaults by borrowers, fluctuations in interest rates,
fluctuations in property capitalization rates and values of commercial real
estate, 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 of 2002. For additional
information, see the Company’s Annual Report on Form 10-K for the period ended
December 31, 2005, as filed with the Securities and Exchange
Commission.
# # #
3
DYNEX
CAPITAL, INC.
Consolidated
Balance Sheets
(Thousands
except share data)
(unaudited)
|
March
31,
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December
31,
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||||||
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2006
|
2005
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||||||
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ASSETS
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|||||||
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Cash
and cash equivalents
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$
|
23,290
|
$
|
45,235
|
|||
|
Other
assets
|
4,480
|
4,332
|
|||||
|
27,770
|
49,567
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||||||
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Investments:
|
|||||||
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Securitized
finance receivables
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694,086
|
722,152
|
|||||
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Securities
|
36,271
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24,908
|
|||||
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Other
investments
|
3,829
|
4,067
|
|||||
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Other
loans
|
5,008
|
5,282
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|||||
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739,194
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756,409
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||||||
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$
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766,964
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$
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805,976
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||||
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LIABILITIES
AND SHAREHOLDERS' EQUITY
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|||||||
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LIABILITIES:
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|||||||
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Securitization
financing:
|
|||||||
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Non-recourse
securitization financing
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$
|
503,536
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$
|
516,578
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|||
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Repurchase
agreements secured by securitization financing
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120,963
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133,104
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|||||
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Repurchase
agreements secured by securities
|
162
|
211
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|||||
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Other
liabilities
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6,637
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6,749
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|||||
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631,298
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656,642
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||||||
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SHAREHOLDERS'
EQUITY:
|
|||||||
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Preferred
stock
|
41,749
|
55,666
|
|||||
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Common
stock
|
121
|
122
|
|||||
|
Additional
paid-in capital
|
366,612
|
366,903
|
|||||
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Accumulated
other comprehensive income
|
504
|
140
|
|||||
|
Accumulated
deficit
|
(273,320
|
)
|
(273,497
|
)
|
|||
|
135,666
|
149,334
|
||||||
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$
|
766,964
|
$
|
805,976
|
||||
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Book
value per common share
|
$
|
7.70
|
$
|
7.65
|
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DYNEX
CAPITAL, INC.
Consolidated
Statements of Operations
(Thousands
except share data)
(unaudited)
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Three
Months Ended
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|||||||
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March
31,
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|||||||
|
2006
|
2005
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||||||
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Interest
income
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$
|
14,766
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$
|
24,053
|
|||
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Interest
and related expense
|
12,478
|
19,596
|
|||||
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Net
interest income
|
2,288
|
4,457
|
|||||
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Provision
for loan losses
|
119
|
(2,261
|
)
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||||
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Net
interest income after provision for loan losses
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2,407
|
2,196
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|||||
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Gain
on sale of investments, net
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24
|
79
|
|||||
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Impairment
charges
|
-
|
(87
|
)
|
||||
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Other
income
|
109
|
238
|
|||||
|
General
and administrative expenses
|
(1,327
|
)
|
(1,492
|
)
|
|||
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Net
income
|
1,213
|
934
|
|||||
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Preferred
stock charge
|
(1,036
|
)
|
(1,337
|
)
|
|||
|
Net
income (loss) to common shareholders
|
$
|
177
|
$
|
(403
|
)
|
||
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Change
in net unrealized gain/loss during the period on:
|
|||||||
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Investments
classified as available-for-sale
|
364
|
(3,883
|
)
|
||||
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Hedge
instruments
|
-
|
383
|
|||||
|
Comprehensive
income (loss)
|
$
|
1,577
|
$
|
(2,566
|
)
|
||
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Net
income (loss) per common share
|
|||||||
|
Basic
and diluted
|
$
|
0.01
|
$
|
(0.03
|
)
|
||
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Weighted
average number of common shares outstanding:
|
|||||||
|
Basic
and diluted
|
12,161,682
|
12,162,391
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