Dynex Capital Inc (DX) Reports Q3 2023 Financial Results
Dynex Capital Inc (NYSE:DX) reported a total economic loss of $(1.56) per common share for Q3 2023.
The company declared dividends of $0.39 per common share for the third quarter of 2023.
Dynex Capital Inc (NYSE:DX) purchased $865.3 million of higher coupon Agency residential mortgage-backed securities (RMBS) during the third quarter.
The average balance of interest-earning assets increased by 34% compared to the second quarter.
On October 23, 2023, Dynex Capital Inc (NYSE:DX) released its third-quarter 2023 financial results. The company reported a total economic loss of $(1.56) per common share, or (11.0)% of beginning book value, which declined $1.95 to $12.25 as of September 30, 2023. Despite the challenging market conditions, the company declared dividends of $0.39 per common share for the third quarter of 2023.
Financial Performance Summary
The company reported a comprehensive loss of $(1.59) per common share and a net loss of $(0.82) per common share. During the third quarter, Dynex Capital Inc (NYSE:DX) purchased $865.3 million of higher coupon Agency residential mortgage-backed securities (RMBS). The average balance of interest-earning assets increased by 34% compared to the second quarter. The leverage including to-be-announced ("TBA") securities at cost was 8.5 times shareholders' equity as of September 30, 2023.
Management Remarks
The global economy and markets are undergoing a major transition as we move from government balance sheets supporting assets to private capital. We have positioned our shareholders in the most liquid assets which have already experienced a steep price correction. Forward returns are compelling, and we continue to maintain a balanced, liquid and flexible approach to our portfolio," said Byron L. Boston, Chief Executive Officer. "We are managing for the long term during this cycle and are prepared for various scenarios so that we are positioned to capitalize on the return opportunities available in this environment."
Financial Position and Investment Portfolio
As of September 30, 2023, the company's total assets stood at $6,040,782, with liabilities amounting to $5,236,436. The total shareholders' equity was $804,346. The company's investment portfolio was primarily comprised of Agency RMBS, including TBA securities (96%), and the rest were Agency CMBS, Agency CMBS IO, and non-Agency CMBS IO (4%).
Outlook and Strategy
The company's total economic loss was driven by declines in the fair value of its investments as longer-term bond yields rose in the third quarter of 2023. The fair value of the company's investments were also impacted by wider spreads. However, the derivatives instruments used by the company to hedge interest rate risk mitigated some of the impact, with losses on assets exceeding the gains on the hedging portfolio by $73.9 million.
Dynex Capital Inc (NYSE:DX) continues to maintain a balanced, liquid, and flexible approach to its portfolio, preparing for various scenarios to capitalize on the return opportunities available in the current environment.
This article first appeared on GuruFocus.
