Dynex Capital, Inc. has recently released its 10-K report, revealing a detailed insight into its business operations and financial performance. The company, a mortgage real estate investment trust, primarily invests in mortgage-backed securities (MBS) on a leveraged basis in the United States, focusing on agency and non-agency MBS comprising residential MBS, commercial MBS (CMBS), and CMBS interest-only securities. Dynex Capital, Inc. qualifies as a real estate investment trust for federal income tax purposes and generally would not be subject to federal income taxes if it distributes at least 90% of its taxable income to its stockholders as dividends. The company was incorporated in 1987 and is headquartered in Glen Allen, Virginia.
In its ITEM 7 * MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Dynex Capital, Inc. provides an overview of the market data and a summary of its results for the year ended December 31, 2024. The report highlights the company's significant growth in total assets, which increased over 28%, and total shareholders' equity, which increased over 36%. The company added approximately $2.2 billion in higher coupon Agency RMBS at a lower cost of financing, leading to a net interest income of $5.9 million versus a loss of $(7.9) million in the prior year. Additionally, the company repositioned its hedges, contributing net periodic interest of $16.1 million to its earnings for the year ended December 31, 2024. Despite the growth in its balance sheet, Dynex Capital, Inc. managed its operating expenses and lowered its expense ratio by approximately 70 basis points compared to the prior year.
The report also provides a current outlook, stating that inflation fears that drove U.S. Federal Reserve policy over the last three years are starting to subside. The company is focused on regulatory changes and potential impacts on monetary policy, yield curve, and supply and demand dynamics. It also mentions that the financing environment is still liquid and supportive of ownership of high-quality liquid assets such as Agency MBS. Dynex Capital, Inc. may continue to expand its capital base through the ATM program to deploy into an attractive market, achieve scale, and continue to attract a higher price-to-book multiple on its common stock price.
In terms of the financial condition, the report discusses the company's investment portfolio, which increased approximately 32% compared to the previous year. The company purchased approximately $2.2 billion of higher coupon Agency RMBS during the year ended December 31, 2024, and increased its TBA positions by a notional of $1.0 billion during the same period. The report also provides detailed information on the composition of the MBS portfolio, including TBAs, as well as the company's repurchase agreements and derivative assets and liabilities. Additionally, it compares the year ended December 31, 2024, with the year ended December 31, 2023, in terms of its net interest expense and net interest spread.
Following these announcements, the company's shares moved 0.9%, and are now trading at a price of $14.07. For the full picture, make sure to review Dynex Capital's 10-K report.
