Dynex Capital(US:DX)2024-02-25 16:00Investment Portfolio - As of December 31, 2023, the majority of the company's investments were Agency-issued pass-through RMBS, primarily backed by fixed-rate single-family mortgage loans [20]. - CMBS investments comprised less than 2% of the investment portfolio as of December 31, 2023, backed by multifamily housing loans with a typical balloon payment after approximately 10 years [22]. - The investment policy limits investments in non-Agency MBS rated BBB+ or lower to $250 million in market value, with a maximum of $50 million at risk [30]. Leverage and Hedging - The company employs leverage to enhance returns, primarily through repurchase agreements, with original terms to maturity ranging from overnight to six months [25]. - As of December 31, 2023, the company did not have more than 10% of equity at risk with any of its repurchase agreement counterparties [26]. - The company’s hedging strategy is dynamic, adjusting based on assessments of U.S. and global economic conditions and monetary policies [28]. Financial Performance - The company’s financial performance is influenced by factors such as interest rates, prepayment rates, and market liquidity [19]. - The company’s business model may be impacted by the availability and cost of financing, particularly in the context of disruptions in the repurchase agreement market [34]. Tax and Income - The estimated REIT taxable income for the year ended December 31, 2023, is $40.5 million, which includes $80.5 million related to amortization of net deferred tax hedge gains [48]. - Projected amortization of net deferred tax hedge gains as of December 31, 2023, totals $861.824 million, with $104.115 million expected to be recognized in fiscal year 2025 [49]. - Common dividends declared for the year ended December 31, 2023, amount to $1.56000 per share, with $0.74112 classified as ordinary income and $0.81888 as return of capital [50]. - Preferred Series C dividends declared for the year ended December 31, 2023, are $1.72500 per share, unchanged from the previous year [50]. - The company has $590.8 million of capital loss carryforwards, with the majority expiring by 2028, and $8.1 million of net operating loss carryforwards expiring over the next 2 years if not utilized [49]. REIT Compliance - To maintain REIT status, the company must derive at least 75% of its gross income from real estate-related sources and 95% of its gross income must consist of qualifying income [52]. - The company must meet multiple asset tests, including the requirement that at least 75% of total assets represent cash, government securities, or real estate assets [54]. - The company operates under the exemption provided under Section 3(c)(5)(C) of the Investment Company Act of 1940, ensuring at least 55% of assets are mortgage loans and at least 80% are real estate-related [57]. Human Capital and Diversity - As of December 31, 2023, the company had 22 full and part-time employees with an average tenure of 12.8 years and a voluntary turnover rate of 0% [41]. - 50% of the company's employees were women or self-identified minorities as of December 31, 2023 [43]. - The company has initiated a Human Capital Strategy Planning process overseen by the Board of Directors to enhance employee management and development [45]. Market Competition - Increased competition in the market may reduce the available supply of investments and negatively impact the company's ability to earn acceptable income from these investments [45].