DYNEX CAPITAL, INC. PRESS RELEASE
Published on August 3, 2007
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PRESS
RELEASE
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FOR
IMMEDIATE RELEASE
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CONTACT: Alison
Griffin
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August
2, 2007
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(804)
217-5897
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DYNEX
CAPITAL, INC. ANNOUNCES
SECOND
QUARTER 2007 RESULTS
Dynex
Capital, Inc. (NYSE: DX) reported net income of $2.7 million and $4.6 million
for the three-month and six-month periods ended June 30, 2007, respectively,
compared to $1.6 million and $2.8 million for the same periods of last year.
Net
income to common shareholders was $1.7 million, or $0.14 per common share,
for
the second quarter of 2007, versus $0.6 million, or $0.05 per common share,
for
the second quarter of 2006. Net income to common shareholders for the
six-month period ended June 30, 2007 was $2.6 million, or $0.22 per common
share, versus $789 thousand, or $0.06 per common share for the same period
in
2006.
The
Company’s common equity book value increased to $8.01 per common share from
$7.93 at March 31, 2007 and $7.78 at December 31, 2006. The Company
also reported adjusted common equity book value of $99.4 million, or $8.19
per
common share, at the end of the second quarter of 2007. Adjusted
common equity book value consists of book value per common share, adjusted
to
reflect all financial assets and financial liabilities at their fair values,
based on anticipated cash flows from the assets less the associated cash
requirements for the liabilities, discounted at estimated market
rates. A reconciliation of common equity book value to adjusted
common equity book value per share is included at the end of this press
release.
The
Company has scheduled a conference call for Friday, August 3, 2007, at 11:00
A.M. EDT, to discuss the second quarter results. Investors may participate
in
the call by dialing 1-800-732-9506.
Thomas
Akin, Chairman, stated, “We are quite pleased to be reporting results for the
quarter of $0.14 per common share. Our portfolio continues to perform
very well from a credit point of view, and we have virtually no exposure to
the
problems that are currently being experienced in the subprime
and Alt-A mortgage markets. We have had only $33 thousand
of credit losses in our securitized single-family mortgage loan portfolio in
the
last 12 months. In addition, our existing investments are yielding in excess
of
11% on a net investment basis, with comparably low leverage. Our
excess cash is being invested at yields approximating One-Month LIBOR, and
leverage on our capital is low, so we have room to substantially increase
earnings by investing our capital as market conditions allow.”
Mr.
Akin
continued, “Over the last several years, we have patiently sold assets, improved
our financial flexibility and increased our available capital, with the
expectation that yields on residential assets would improve. We
believe that the market is in the midst of resetting yields and redefining
risk
premiums for these and other assets. Our view is that this period of
stress will continue for the foreseeable future, and we stand ready to take
advantage of more favorable risk-adjusted returns as they appear. We
continue to stress patience to our shareholders, and we believe that there
will
be opportunities this year to invest our capital at good risk-adjusted
returns.”
Discussion
of Second Quarter Results
The
Company reported net income for the quarter of $2.7 million compared to $1.6
million for the same period last year. After consideration of the
preferred stock dividend, the Company reported net income to common shareholders
of $1.7 million, or $0.14 per common share, compared to $0.6 million, or $0.05
per common share, for the second quarter of 2006.
The
Company reported net interest income on its investment portfolio of $3.0 million
for the second quarter of 2007 compared to $2.5 million for the same period
in
2006. Net interest income for the second quarter of 2007 included
$0.6 million of income from premium amortization related to the prepayment
of
$11.8 million in securitized commercial mortgage loans.
Net
interest income after recapture of provision for loan losses was $3.7 million
for the second quarter of 2007 compared to $2.5 million for the same period
in
2006. The Company recognized a $0.7 million benefit from the
recapture of provision for loan losses, primarily related to improved
performance on two commercial mortgage loans during the first half of 2007
which
led to a reduction of reserves on these loans. At June 30, 2007, the Company
had
no delinquent commercial mortgage loans in its investment portfolio, and there
was only one delinquent loan with a principal balance of $1.4 million held
by
the joint venture in which the Company holds an interest. The Company also
had
only two securitized single-family mortgage loans in real estate owned at June
30, 2007, with a current balance of $132 thousand.
Net
interest spread on investments was 2.17% for the second quarter of 2007 compared
to 0.14% for the second quarter of 2006. Net interest spread for the
second quarter of 2007 was favorably influenced by 0.94% as a result of the
aforementioned $0.6 million in income related to commercial mortgage loan
prepayments. The Company’s net yield on average interest earning
assets was 3.50% for the second quarter of 2007 compared to 1.40% for the second
quarter of 2006. The overall yield on interest earning assets,
including cash and cash equivalents, was 7.95% for the second quarter of 2007
versus 7.51% for the second quarter of 2006, and the weighted average cost
of
funds was 6.24% for the second quarter of 2007 versus 7.64% for the second
quarter of 2006.
The
first
quarter also included other expenses of $0.5 million primarily related to the
change in value in the Company’s mortgage servicing
obligations. General and administrative expenses were $1.2 million
for the second quarter of 2007, which was in-line with the first quarter of
2007
and the second quarter of 2006.
2
Balance
Sheet
Total
assets were $444.6 million at June 30, 2007 compared to $466.6 million at
December 31, 2006. Investments declined from $403.6 million at
December 31, 2006 to $377.9 million at the end of the second quarter of 2007,
primarily as a result of principal payments received.
At
the
end of the second quarter of 2007, the Company had capital immediately available
for reinvestment of $67.9 million, consisting of cash and cash equivalents
and
borrowing capacity under its existing repurchase agreement
facility. There is also $40.3 million of cash and cash equivalents
available for investment in the Company’s joint venture with Deutsche
Bank.
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 conditions, defaults by
borrowers, availability of suitable reinvestment opportunities, variability
in
investment portfolio cash flows, 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, 2006, and other reports filed with and furnished to the Securities
and Exchange Commission.
# # #
3
DYNEX
CAPITAL, INC.
Consolidated
Balance Sheets
(Thousands
except share data)
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||||||||
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June
30, 2007
(unaudited)
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December
31, 2006
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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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$ |
62,556
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$ |
56,880
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||||
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Other
assets
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4,096
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6,111
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||||||
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66,652
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62,991
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|||||||
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Investments:
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||||||||
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Securitized
commercial mortgage loans, net
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220,109
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228,466
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||||||
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Securitized
single-family mortgage loans, net
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99,398
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117,838
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Investment
in joint venture
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39,296
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37,388
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Securities
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13,446
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13,143
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Other
investments
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2,239
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2,802
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Other
loans
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3,438
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3,929
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377,926
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403,566
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|||||||
| $ |
444,578
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$ |
466,557
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LIABILITIES
AND SHAREHOLDERS' EQUITY
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LIABILITIES:
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Securitization
financing
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$ |
201,046
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$ |
211,564
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||||
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Repurchase
agreements
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80,965
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95,978
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Obligation
under payment agreement
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16,829
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16,299
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Other
liabilities
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6,352
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6,178
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305,192
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330,019
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SHAREHOLDERS'
EQUITY:
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Preferred
stock
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41,749
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41,749
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Common
stock
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121
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121
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Additional
paid-in capital
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366,716
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366,637
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Accumulated
other comprehensive income
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793
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663
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Accumulated
deficit
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(269,993 | ) | (272,632 | ) | ||||
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139,386
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136,538
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| $ |
444,578
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$ |
466,557
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Book
value per common share
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$ |
8.01
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$ |
7.78
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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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Six
Months Ended
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|||||||||||||||
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June
30,
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June
30,
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|||||||||||||||
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2007
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2006
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2007
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2006
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Interest
income
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$ |
8,023
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$ |
14,192
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$ |
16,238
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$ |
28,958
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||||||||
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Interest
and related expense
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(5,060 | ) | (11,649 | ) | (10,814 | ) | (24,127 | ) | ||||||||
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Net
interest income
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2,963
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2,543
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5,424
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4,831
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||||||||||||
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Recapture
of provision for loan losses
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702
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-
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1,225
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119
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Net
interest income after recapture of provision for loan
losses
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3,665
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2,543
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6,649
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4,950
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Equity
in earnings of joint venture
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672
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-
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1,302
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-
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Other
(expense) income, net
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(472 | ) |
237
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(1,018 | ) |
370
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General
and administrative expenses
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(1,163 | ) | (1,165 | ) | (2,289 | ) | (2,492 | ) | ||||||||
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Net
income
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2,702
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1,615
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4,643
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2,828
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Preferred
stock charge
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(1,003 | ) | (1,003 | ) | (2,005 | ) | (2,039 | ) | ||||||||
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Net
income to common shareholders
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$ |
1,699
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$ |
612
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$ |
2,638
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$ |
789
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||||||||
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Change
in net unrealized gain (loss) during the period on:
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Investments
classified as
available-for-sale
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(602 | ) |
84
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(476 | ) |
448
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Investment
in joint
venture
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(223 | ) |
-
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606
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-
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Comprehensive
income
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$ |
1,877
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$ |
1,699
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$ |
4,773
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$ |
3,276
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Net
income per common share
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||||||||||||||||
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Basic
and
diluted
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$ |
0.14
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$ |
0.05
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$ |
0.22
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$ |
0.06
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Weighted
average number of common shares outstanding:
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||||||||||||||||
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Basic
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12,136,262
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12,138,469
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12,134,715
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12,150,011
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Diluted
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12,140,893
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12,138,469
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12,136,624
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12,150,011
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DYNEX
CAPITAL, INC.
Reconciliation
of Book Value to Adjusted Common Equity Book Value
(Thousands
except share data)
(unaudited)
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June
30,
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December
31,
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|||||||
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2007
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2006
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|||||||
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Shareholders’
equity
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$ |
139,386
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$ |
136,538
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||||
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Less:
Preferred stock redemption value
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(42,215 | ) | (42,215 | ) | ||||
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Common
equity book value
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97,171
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94,323
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||||||
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Adjustments
to present amortized cost basis investments at fair value:
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||||||||
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Securitized
finance receivables,
net
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2,254
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4,427
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||||||
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Other
mortgage
loans
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683
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776
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Investment
in joint
venture
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(667 | ) | (868 | ) | ||||
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Adjusted
common equity book value
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$ |
99,441
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$ |
98,658
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Adjusted
book value per common share
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$ |
8.19
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$ |
8.13
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