Dynex Capital (NYSE: DX) reported Q1 EPS of $0.51, $0.02 worse than the analyst estimate of $0.53.

Summary of First Quarter 2020 Results

• Comprehensive loss of $(1.45) per common share comprised of:
  • $(4.63) net loss per common share
  • $3.18 other comprehensive income per common share on available-for-sale securities
• Core net operating income, a non-GAAP measure, of $0.51 per common share
• Quarterly negative economic return to common shareholders of (8.3)% based on dividends declared of $0.45 per common share less the decline in book value per common share of $(1.94) to $16.07 at March 31, 2020
• Net interest spread and adjusted net interest spread, a non-GAAP measure, of 1.32% and 1.47%, respectively, for the first quarter of 2020
• Reduced the MBS portfolio by approximately 28% to $3.7 billion as of March 31, 2020 primarily through sales of $1.8 billion in Agency RMBS and $0.2 billion of Agency CMBS at a realized gain of $84.8 million
• Leverage of 8.8x shareholders\' equity, not including the impact of securities sold but unsettled at March 31, 2020, which collateralized $1.4 billion of our repurchase agreement borrowings that were repaid with proceeds in early April
• Repositioned the hedging portfolio by terminating the majority of interest rate swaps and entering net short positions of $1.2 billion in Treasury futures and $1.7 billion in put options on Treasury futures
• Issued 4.5 million shares of 6.90% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock and used the proceeds to redeem all 2.3 million shares outstanding of 8.50% Series A Preferred Stock and partially redeem 1.7 million shares outstanding of 7.625% Series B Preferred stock, impacting book value per common share by approximately $(0.15)
• Subsequent sales of Agency CMBS which had an amortized cost of $1.3 billion as of March 31, 2020 materially changed our leverage and liquidity position since March 31, 2020.

Management Remarks

"The first quarter of 2020 was marked by extreme periods of volatility as a result of multiple exogenous shocks during the quarter," commented Byron L. Boston, President. "We were prepared coming into the quarter for potential market surprises and took a number of actions early which allowed us to weather the volatility and exit the quarter in a solid financial position. Mass liquidations by equity and fixed income market participants were the main driver of wider spreads for the quarter for virtually all asset classes. Our quarterly economic return to common shareholders was a negative (8.3)%, and we earned core net operating income of $0.51 per common share, which exceeded our dividends declared of $0.45 per common share for the quarter."

Mr. Boston continued, "Today our leverage is approximately 4 times shareholders' equity and our investment portfolio stands at approximately $2.4 billion. We have the flexibility, capital and liquidity to make investments and see opportunities to invest capital today. Post quarter-end, market conditions have improved and we will continue our disciplined capital management as we assess the evolving risk environment."

For earnings history and earnings-related data on Dynex Capital (DX) click here.