Dynex Capital(US:DX)2025-07-28 20:03PART I Financial Statements Presents unaudited consolidated financial statements for Dynex Capital, Inc., showing total assets increased to $11.3 billion and a net loss of $16.3 million for Q2 2025 Consolidated Balance Sheets Total assets increased to $11.3 billion by June 30, 2025, from $8.2 billion at year-end 2024, driven by mortgage-backed securities and repurchase agreements Consolidated Balance Sheet Highlights ($s in thousands) | Account | June 30, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $11,311,265 | $8,184,579 | | Mortgage-backed securities, at fair value | $10,510,006 | $7,512,087 | | Total Liabilities | $9,701,272 | $6,999,643 | | Repurchase agreements | $8,600,143 | $6,563,120 | | Total Shareholders' Equity | $1,609,993 | $1,184,936 | Consolidated Statements of Comprehensive Income (Loss) The company reported a net loss of $13.6 million for Q2 2025 and a net loss to common shareholders of $21.3 million for H1 2025, primarily due to derivative losses Key Income Statement Data ($s in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net interest income (expense) | $23,128 | $1,287 | $40,260 | $(1,904) | | Total other (loss) gains, net | $(24,441) | $(2,348) | $(32,532) | $52,264 | | Net (loss) income | $(13,606) | $(8,304) | $(16,682) | $31,815 | | Net (loss) income to common shareholders | $(16,286) | $(10,227) | $(21,285) | $27,968 | | Net (loss) income per common share-diluted | $(0.14) | $(0.15) | $(0.21) | $0.44 | Consolidated Statements of Shareholders' Equity Shareholders' equity increased to $1.61 billion by June 30, 2025, driven by $521.8 million from common stock issuance, partially offset by net loss and dividends - For the six months ended June 30, 2025, the company issued 40.7 million shares, raising $521.8 million13 - Total dividends on common stock for the first six months of 2025 amounted to $103.2 million13 Consolidated Statements of Cash Flows Net cash provided by financing activities was $2.46 billion for H1 2025, primarily funding $2.41 billion in investing activities and generating $38.2 million from operations Cash Flow Summary for Six Months Ended June 30 ($s in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $38,242 | $1,505 | | Net cash used in investing activities | $(2,413,422) | $(102,685) | | Net cash provided by financing activities | $2,459,478 | $272,579 | | Net increase in cash | $84,298 | $171,399 | Notes to the Consolidated Financial Statements Detailed notes reveal the company's structure as a mortgage REIT, with its Agency MBS portfolio growing to $10.5 billion, financed by $8.6 billion in repurchase agreements, and $522 million raised via ATM program - The company is an internally managed mortgage REIT that primarily invests on a leveraged basis in Agency mortgage-backed securities (Agency MBS) and to-be-announced securities (TBAs)20 Mortgage-Backed Securities Portfolio ($s in thousands) | Date | Fair Value | Amortized Cost | | :--- | :--- | :--- | | June 30, 2025 | $10,510,006 | $10,743,650 | | Dec 31, 2024 | $7,512,087 | $7,912,848 | Repurchase Agreements Outstanding ($s in thousands) | Date | Balance | Weighted Average Rate | | :--- | :--- | :--- | | June 30, 2025 | $8,600,143 | 4.47% | | Dec 31, 2024 | $6,563,120 | 4.80% | - During the six months ended June 30, 2025, the company issued 40,712,768 shares of common stock through its at-the-market (ATM) program, raising approximately $522 million101 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses H1 2025 capital deployment of $522 million into Agency MBS, growing the portfolio to $14.0 billion, improving net interest income, but resulting in a comprehensive loss due to hedging activities Executive Overview The company raised $522 million via its ATM program in H1 2025, deploying capital into Agency MBS to improve net interest and spread income amidst lower interest rates and market volatility - The company raised approximately $522 million of new capital through its ATM program during the six months ended June 30, 2025112 - Net interest income and spread income have improved due to adding higher-yielding assets, reducing financing costs, and yield from the swap portfolio112 Common Book Value Per Share Rollforward (Q2 2025) | Description | Per Common Share | | :--- | :--- | | Balance as of March 31, 2025 | $12.56 | | Comprehensive loss to common shareholders | - | | Net proceeds from stock issuance | - | | Common dividends declared | - | | Balance as of June 30, 2025 | $11.95 | Financial Condition The investment portfolio, including TBAs, grew by 44% to $14.0 billion by June 30, 2025, financed by increased repurchase agreements, with a weighted average market yield of 5.20% - The investment portfolio (including TBAs) increased by approximately 44% as of June 30, 2025, compared to December 31, 2024124 - The company added approximately $2.8 billion of Agency RMBS and $418 million of Agency CMBS during the six months ended June 30, 2025126 Total Agency RMBS Portfolio (including TBAs) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Par/Notional ($s in thousands) | $14,041,261 | $10,136,763 | | Estimated Duration (years) | 5.02 | 5.22 | | Market Yield | 5.20% | 5.49% | Results of Operations Q2 2025 net interest income improved to $23.1 million, but a $58.1 million derivative loss resulted in a comprehensive loss, while H1 2025 net interest income reached $40.3 million Quarterly Results Summary ($s in thousands) | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Net interest income | $23,128 | $17,133 | | Loss on derivative instruments, net | $(58,093) | $(118,088) | | Comprehensive (loss) income to common shareholders | $(12,222) | $14,391 | Semi-Annual Net Interest Income Comparison ($s in thousands) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net interest income (expense) | $40,260 | $(1,904) | | Average Repurchase Financing Cost | 4.50% | 5.49% | Non-GAAP EAD per Common Share | Period | EAD per common share | | :--- | :--- | | Q2 2025 | $0.22 | | Q1 2025 | $0.21 | Liquidity and Capital Resources Total liquidity reached $891 million by June 30, 2025, comprising cash and unencumbered Agency MBS, with leverage at 8.3 times shareholders' equity, supporting the company's REIT dividend policy - Total liquidity as of June 30, 2025, was approximately $891 million, consisting of $388 million in unrestricted cash and $499 million in unencumbered Agency MBS174 - Leverage, including the cost basis of TBA long positions, was 8.3 times shareholders' equity as of June 30, 2025; leverage based solely on repurchase agreements was 5.3 times176177 - As a REIT, the company is required to distribute at least 90% of its REIT taxable income to shareholders annually186 Quantitative and Qualitative Disclosures About Market Risk The company manages interest rate risk with hedging instruments but not spread risk, providing sensitivity analyses for interest rate shifts and market spread changes on its portfolio and common equity Interest Rate Sensitivity Analysis (Parallel Shift) as of June 30, 2025 | Rate Change | Total % Change in Market Value | Total % Change in Common Equity | | :--- | :--- | :--- | | +100 bps | (0.8)% | (7.8)% | | +50 bps | (0.3)% | (2.5)% | | -50 bps | (0.1)% | (1.3)% | | -100 bps | (0.8)% | (8.0)% | Market Spread Sensitivity Analysis as of June 30, 2025 | Spread Change | % Change in Market Value of Investments | % Change in Common Equity | | :--- | :--- | :--- | | +20/+50 bps | (1.1)% | (10.2)% | | +10 bps | (0.5)% | (5.1)% | | -10 bps | 0.5% | 5.1% | | -20/-50 bps | 1.1% | 10.2% | Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective221 - No material changes were made to internal control over financial reporting during the three months ended June 30, 2025222 PART II Legal Proceedings The company reports no pending or threatened legal proceedings expected to materially adversely affect its financial condition or results of operations - To the Company's knowledge, there are no pending or threatened legal proceedings which could have a material adverse effect on the Company223 Risk Factors No material changes have occurred regarding the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - There have been no material changes from the risk factors discussed in the 2024 Form 10-K224 Unregistered Sale of Equity Securities and Use of Proceeds The company has an authorized share repurchase program for up to $100 million common stock and $50 million preferred stock, but no repurchases occurred in Q2 2025 - The company did not repurchase any shares of its common stock or Series C Preferred Stock during the three months ended June 30, 2025226 Other Information No directors or Section 16 officers adopted or terminated any Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - No directors or Section 16 officers adopted or terminated any Rule 10b5-1 trading arrangements during Q2 2025229 Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, securities descriptions, compensatory plans, and Sarbanes-Oxley certifications