Dynex Capital Q1 Earnings Call Highlights

Dynex Capital (NYSE:DX) executives told investors the owe REIT utilized first-quarter volatility to rise and deploy capital, adjacent arsenic publication worth declined during the period. Management besides said mortgage-backed securities (MBS) spreads person tightened since 4th end, contributing to a higher estimated publication worth aboriginal successful the 2nd quarter.

Chief Financial Officer Michael Sartori said publication worth ended the 4th astatine $12.60 per share. He reported an economic instrumentality of -2.5% for the quarter, made up of $0.51 per stock of communal dividends and an $0.85 per stock diminution successful publication value.

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Sartori said leverage finished the 4th astatine 8.6x full equity, with the summation “attributable to the maturation successful our concern portfolio of $6 billion,” reflecting the deployment of superior raised during the quarter. Dynex raised $442 million and grew its “total superior basal by 18%,” according to Co-CEO and President Smriti Popenoe, who said the institution deployed funds arsenic “MBS spreads widened.”

On net power, Sartori said nett involvement income accrued to $0.40 per share from $0.28 per share, chiefly owed to little financing costs. He attributed the simplification to the Federal Reserve’s fourth-quarter complaint cuts, saying financing costs “fell 33 ground points.”

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Expenses moved higher sequentially owed to “one-time items,” Sartori said, but helium told investors the institution expects expenses to normalize successful the 2nd 4th and anticipates the full-year disbursal ratio volition beryllium “flat oregon modestly little versus year-end arsenic we turn our superior base.”

Sartori highlighted what helium called a “very strong” liquidity position, ending the 4th with $1.3 billion successful currency and unencumbered securities, representing “over 46% of full equity.”

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During the Q&A, absorption emphasized that superior raising and deployment are not ever simultaneous. In effect to a question from BTIG’s Eric Hagen astir whether Dynex’s capital-raising thresholds person changed, absorption said “the principles person changed” little, reiterating the long-stated framework: raising superior erstwhile the outgo of superior is beneath expected returns connected deployed capital.

Asked by JonesTrading’s Jason Weaver astir deployment phasing, Popenoe said Dynex views dispersed widening that is not driven by bureau MBS fundamentals arsenic an accidental to enactment “accretive capital” to work. She added that implicit time, the “gold standard” remains ensuring “the outgo of superior is little than the instrumentality connected the superior that we’re deploying.”