Dynex Capital(US:DX)2023-11-05 16:00PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited consolidated financial statements for Q3 2023 and FY2022, including balance sheets, income, equity, cash flows, and accounting notes Consolidated Balance Sheets Consolidated Balance Sheet Highlights (September 30, 2023 vs. December 31, 2022) | Metric | Sep 30, 2023 ($ thousands) | Dec 31, 2022 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------------- | :------------------------- | :------------------------- | :------------------- | :--------- | | Total Assets | 6,040,782 | 3,605,234 | 2,435,548 | 67.56% | | Total Liabilities | 5,236,436 | 2,703,906 | 2,532,530 | 93.66% | | Total Shareholders' Equity | 804,346 | 901,328 | (96,982) | -10.76% | | Mortgage-backed securities (fair value) | 5,583,758 | 3,112,705 | 2,471,053 | 79.39% | | Repurchase agreements | 5,002,230 | 2,644,405 | 2,357,825 | 89.16% | Consolidated Statements of Comprehensive Income (Loss) Consolidated Statements of Comprehensive Income (Loss) Highlights | Metric (in $ thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net interest (expense) income | (2,262) | 7,122 | (5,654) | 36,875 | | Total other (losses) gains, net | (32,147) | (43,217) | (709) | 88,502 | | Total operating expenses | (8,642) | (10,579) | (24,072) | (25,505) | | Net (loss) income | (43,051) | (46,674) | (30,435) | 99,872 | | Net (loss) income to common shareholders | (44,974) | (48,597) | (36,205) | 94,102 | | Comprehensive loss to common shareholders | (86,748) | (99,705) | (72,629) | (109,256) | | Net (loss) income per common share-basic | (0.82) | (1.07) | (0.67) | 2.33 | | Dividends declared per common share | 0.39 | 0.39 | 1.17 | 1.17 | Consolidated Statements of Shareholders' Equity Shareholders' Equity Changes (Nine Months Ended September 30, 2023) | Metric (in $ thousands) | Balance as of Dec 31, 2022 | Stock Issuance | Share-based Compensation | Net Loss | Dividends | Other Comprehensive Loss | Balance as of Sep 30, 2023 | | :------------------------ | :------------------------- | :------------- | :----------------------- | :------- | :-------- | :----------------------- | :------------------------- | | Preferred Stock | 107,843 | — | — | — | — | — | 107,843 | | Common Stock | 536 | 28 | 2 | — | — | — | 566 | | Additional Paid-in Capital | 1,357,514 | 36,648 | 3,153 | — | — | — | 1,397,268 | | Accumulated Other Comprehensive Loss | (181,346) | — | — | — | — | (36,424) | (217,770) | | Accumulated Deficit | (383,219) | — | — | (30,435) | (69,907) | — | (483,561) | | Total Shareholders' Equity | 901,328 | 36,676 | 3,155 | (30,435) | (69,907) | (36,424) | 804,346 | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Highlights (Nine Months Ended September 30) | Metric (in $ thousands) | 2023 | 2022 | | :------------------------ | :-------- | :-------- | | Net cash provided by operating activities | 45,629 | 96,278 | | Net cash used in investing activities | (2,404,087) | (271,471) | | Net cash provided by financing activities | 2,325,017 | 260,439 | | Net (decrease) increase in cash including cash posted to counterparties | (33,441) | 85,246 | | Cash including cash posted to counterparties at end of period | 416,436 | 506,553 | Notes to the Consolidated Financial Statements NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Dynex Capital is a mortgage REIT investing in leveraged Agency MBS and TBA securities, preparing GAAP financials with estimates, and maintaining REIT tax status - Dynex Capital, Inc. is an internally managed mortgage REIT, primarily investing in Agency MBS and TBA securities on a leveraged basis20 - The company's financial statements are prepared in accordance with U.S. GAAP for interim financial information, requiring management to make estimates and assumptions, particularly for amortization of premiums/discounts and fair value measurements2122 - Dynex has elected to be taxed as a REIT, necessitating the distribution of at least 90% of its annual REIT taxable income to shareholders26 NOTE 2 – NET INCOME (LOSS) PER COMMON SHARE Details basic and diluted net income (loss) per common share, excluding anti-dilutive unvested RSUs and PSUs for Q3 and nine months ended September 30, 2023 Net (Loss) Income Per Common Share | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Weighted average common shares-basic | 54,556,853 | 45,347,852 | 54,175,367 | 40,452,740 | | Weighted average common shares-diluted | 54,556,853 | 45,347,852 | 54,175,367 | 40,740,690 | | Net (loss) income to common shareholders | $(44,974) | $(48,597) | $(36,205) | $94,102 | | Net (loss) income per common share-basic | $(0.82) | $(1.07) | $(0.67) | $2.33 | | Net (loss) income per common share-diluted | $(0.82) | $(1.07) | $(0.67) | $2.31 | - Unvested RSUs and PSUs were excluded from the diluted net loss per common share calculation for the three and nine months ended September 30, 2023, and the three months ended September 30, 2022, because their inclusion would have been anti-dilutive55 NOTE 3 – MORTGAGE-BACKED SECURITIES MBS portfolio fair value increased from $3.1 billion to $5.6 billion, primarily Agency RMBS, with unrealized losses of $(179.1) million (Q3) and $(121.5) million (9 months) due to rising rates MBS Portfolio Fair Value by Type | Investment Type | Sep 30, 2023 Fair Value ($ thousands) | Dec 31, 2022 Fair Value ($ thousands) | | :---------------- | :------------------------------------ | :------------------------------------ | | Agency RMBS | 5,298,271 | 2,762,878 | | Agency CMBS | 112,396 | 124,690 | | CMBS IO | 172,987 | 224,985 | | Non-Agency other | 103 | 152 | | Total | 5,583,757 | 3,112,705 | Unrealized Loss on Investments (Fair Value through Net Income) | Metric (in $ thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total unrealized loss on investments, net | (179,100) | (69,197) | (121,491) | (245,551)