Dynex Capital Reports Significant Financial Improvements in Q3 2024, Net Income Reaches $29.1 Million

Dynex Capital, Inc. reported significant financial improvements in its third quarter of 2024, reflecting a robust recovery from the previous fiscal period. The company, classified as an accelerated filer and internally managed mortgage real estate investment trust (REIT), recorded a net income of $29.1 million for the three months ended September 30, 2024, compared to a net loss of $44.9 million in the same quarter of 2023. For the nine-month period, net income reached $62.8 million, a stark contrast to a net loss of $30.4 million in the prior year.

Interest income surged to $83.5 million for the third quarter, up from $63.3 million year-over-year, and totaled $231 million for the nine months, marking a 70% increase compared to $136.3 million in 2023. This growth was primarily driven by the company's investments in Agency mortgage-backed securities (MBS), which accounted for a substantial portion of the interest income.

The company also reported a significant unrealized gain on investments of $192.9 million for the third quarter, compared to an unrealized loss of $179.1 million in the same period of 2023. For the nine months, the unrealized gain was $80.9 million, reversing a loss of $121.5 million in the previous year. This positive shift was attributed to tighter MBS spreads and favorable market conditions following a U.S. Federal Funds rate cut in September 2024.

Total assets increased to $7.8 billion as of September 30, 2024, up from $6.4 billion at the end of 2023, driven by a rise in mortgage-backed securities valued at $7.3 billion, compared to $6.0 billion previously. Total liabilities also rose to $6.7 billion, up from $5.5 billion, primarily due to increased repurchase agreements, which totaled $6.4 billion, reflecting a strategic decision to leverage financing for MBS purchases.

The company’s shareholders' equity improved to $1.1 billion, up from $870.7 million at the end of 2023, with a book value per common share of $13.00 as of September 30, 2024. Dynex Capital also raised $267.9 million through common stock issuances during the nine months, enhancing its capital position for future investments.

Operating expenses increased by $1.5 million compared to the previous quarter, largely due to higher performance-based bonuses. However, total share-based compensation expenses for the nine months rose to $6.2 million from $3.6 million in 2023, reflecting accelerated recognition of expenses for certain stock incentive awards.

Overall, Dynex Capital's strategic focus on Agency MBS and effective management of its investment portfolio have positioned the company favorably in a recovering market, as evidenced by its improved financial metrics and operational performance.