Company Quick10K Filing
Dynex Capital
Price14.70 EPS-9
Shares24 P/E-2
MCap355 P/FCF3
Net Debt-139 EBIT-100
TEV216 TEV/EBIT-2
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-02-25
10-Q 2019-09-30 Filed 2019-11-05
10-Q 2019-06-30 Filed 2019-08-06
10-Q 2019-03-31 Filed 2019-05-03
10-K 2018-12-31 Filed 2019-02-27
10-Q 2018-09-30 Filed 2018-11-06
10-Q 2018-06-30 Filed 2018-08-07
10-Q 2018-03-31 Filed 2018-05-08
10-K 2017-12-31 Filed 2018-03-05
10-Q 2017-09-30 Filed 2017-11-03
10-Q 2017-06-30 Filed 2017-08-08
10-Q 2017-03-31 Filed 2017-05-10
10-K 2016-12-31 Filed 2017-03-15
10-Q 2016-09-30 Filed 2016-11-07
10-Q 2016-06-30 Filed 2016-08-05
10-Q 2016-03-31 Filed 2016-05-09
10-K 2015-12-31 Filed 2016-03-08
10-Q 2015-09-30 Filed 2015-11-05
10-Q 2015-06-30 Filed 2015-08-10
10-Q 2015-03-31 Filed 2015-05-11
10-K 2014-12-31 Filed 2015-03-12
10-Q 2014-09-30 Filed 2014-11-10
10-Q 2014-06-30 Filed 2014-08-11
10-Q 2014-03-31 Filed 2014-05-12
10-K 2013-12-31 Filed 2014-03-04
10-Q 2013-09-30 Filed 2013-11-12
10-Q 2013-06-30 Filed 2013-08-09
10-Q 2013-03-31 Filed 2013-05-10
10-K 2012-12-31 Filed 2013-03-08
10-Q 2012-09-30 Filed 2012-11-08
10-Q 2012-03-31 Filed 2012-05-10
10-K 2011-12-31 Filed 2012-03-02
10-Q 2011-09-30 Filed 2011-11-09
10-Q 2011-06-30 Filed 2011-08-05
10-Q 2011-03-31 Filed 2011-05-10
10-K 2010-12-31 Filed 2011-03-16
10-Q 2010-09-30 Filed 2010-11-09
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-05-10
10-K 2009-12-31 Filed 2010-03-08
8-K 2020-07-29 Earnings, Exhibits
8-K 2020-06-09
8-K 2020-05-06
8-K 2020-04-27
8-K 2020-04-15
8-K 2020-03-19
8-K 2020-03-13
8-K 2020-02-27
8-K 2020-02-13
8-K 2020-02-06
8-K 2019-11-13
8-K 2019-10-31
8-K 2019-07-31
8-K 2019-06-20
8-K 2019-06-11
8-K 2019-05-31
8-K 2019-05-10
8-K 2019-05-01
8-K 2019-02-07
8-K 2019-01-28
8-K 2019-01-28
8-K 2019-01-01
8-K 2018-12-11
8-K 2018-10-31
8-K 2018-09-04
8-K 2018-08-02
8-K 2018-06-29
8-K 2018-05-15
8-K 2018-05-02
8-K 2018-03-12
8-K 2018-02-21

DX 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1 - Organization and Summary of Significant Accounting Policies
Note 2 - Mortgage - Backed Securities
Note 3 - Repurchase Agreements
Note 4 - Derivatives
Note 5 - Fair Value of Financial Instruments
Note 6 - Shareholders' Equity and Share - Based Compensation
Note 7 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 4. Mine Safety Disclosures
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 a1q20ex-311ceocertific.htm
EX-31.2 a1q20ex-312cfocertific.htm
EX-32.1 a1q20ex-321soxcertific.htm

Dynex Capital Earnings 2020-03-31

Balance SheetIncome StatementCash Flow

dx-20200331
0000826675--12-312020Q1FALSE00008266752020-01-012020-03-310000826675us-gaap:CommonStockMember2020-01-012020-03-310000826675us-gaap:SeriesBPreferredStockMember2020-01-012020-03-310000826675us-gaap:SeriesCPreferredStockMember2020-01-012020-03-31xbrli:shares00008266752020-04-30iso4217:USDxbrli:sharesiso4217:USD00008266752020-03-3100008266752019-12-3100008266752019-01-012019-03-310000826675us-gaap:PreferredStockMember2019-12-310000826675us-gaap:PreferredStockIncludingAdditionalPaidInCapitalMember2019-12-310000826675us-gaap:CommonStockMember2019-12-310000826675us-gaap:AdditionalPaidInCapitalMember2019-12-310000826675us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310000826675us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2019-12-310000826675us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2020-01-0100008266752020-01-010000826675us-gaap:PreferredStockMember2020-01-012020-03-310000826675us-gaap:PreferredStockIncludingAdditionalPaidInCapitalMember2020-01-012020-03-310000826675us-gaap:CommonStockMember2020-01-012020-03-310000826675us-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-310000826675us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2020-01-012020-03-310000826675us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-03-310000826675us-gaap:PreferredStockMember2020-03-310000826675us-gaap:PreferredStockIncludingAdditionalPaidInCapitalMember2020-03-310000826675us-gaap:CommonStockMember2020-03-310000826675us-gaap:AdditionalPaidInCapitalMember2020-03-310000826675us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-310000826675us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2020-03-310000826675us-gaap:PreferredStockMember2018-12-310000826675us-gaap:PreferredStockIncludingAdditionalPaidInCapitalMember2018-12-310000826675us-gaap:CommonStockMember2018-12-310000826675us-gaap:AdditionalPaidInCapitalMember2018-12-310000826675us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310000826675us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2018-12-3100008266752018-12-310000826675us-gaap:PreferredStockMember2019-01-012019-03-310000826675us-gaap:PreferredStockIncludingAdditionalPaidInCapitalMember2019-01-012019-03-310000826675us-gaap:CommonStockMember2019-01-012019-03-310000826675us-gaap:AdditionalPaidInCapitalMember2019-01-012019-03-310000826675us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2019-01-012019-03-310000826675us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-03-310000826675us-gaap:PreferredStockMember2019-03-310000826675us-gaap:PreferredStockIncludingAdditionalPaidInCapitalMember2019-03-310000826675us-gaap:CommonStockMember2019-03-310000826675us-gaap:AdditionalPaidInCapitalMember2019-03-310000826675us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-310000826675us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2019-03-3100008266752019-03-310000826675us-gaap:CommercialMortgageBackedSecuritiesMemberdx:AgencyMember2020-03-310000826675us-gaap:ResidentialMortgageBackedSecuritiesMemberdx:AgencyMember2020-03-310000826675us-gaap:InterestOnlyStripMember2020-03-310000826675us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember2020-03-310000826675us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2020-03-310000826675us-gaap:CommercialMortgageBackedSecuritiesMemberdx:AgencyMember2019-12-310000826675us-gaap:ResidentialMortgageBackedSecuritiesMemberdx:AgencyMember2019-12-310000826675us-gaap:InterestOnlyStripMember2019-12-310000826675us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember2019-12-310000826675us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2019-12-310000826675us-gaap:ResidentialMortgageBackedSecuritiesMemberdx:AgencyMember2020-01-012020-03-310000826675us-gaap:ResidentialMortgageBackedSecuritiesMemberdx:AgencyMember2019-01-012019-03-310000826675us-gaap:CommercialMortgageBackedSecuritiesMemberdx:AgencyMember2020-01-012020-03-310000826675us-gaap:CommercialMortgageBackedSecuritiesMemberdx:AgencyMember2019-01-012019-03-31xbrli:pure0000826675us-gaap:InterestOnlyStripMemberdx:AgencyMember2020-03-310000826675us-gaap:InterestOnlyStripMemberdx:AgencyMember2019-12-310000826675dx:NonAgencyMemberus-gaap:InterestOnlyStripMember2020-03-310000826675dx:NonAgencyMemberus-gaap:InterestOnlyStripMember2019-12-310000826675us-gaap:MaturityUpTo30DaysMember2020-03-310000826675us-gaap:MaturityUpTo30DaysMember2019-12-310000826675us-gaap:Maturity30To90DaysMember2020-03-310000826675us-gaap:Maturity30To90DaysMember2019-12-31dx:Agreements0000826675dx:JPMorganMember2020-03-310000826675us-gaap:InterestRateSwapMember2020-01-012020-03-310000826675us-gaap:InterestRateSwapMember2019-01-012019-03-310000826675us-gaap:InterestRateSwaptionMember2020-01-012020-03-310000826675us-gaap:InterestRateSwaptionMember2019-01-012019-03-310000826675us-gaap:FutureMember2020-01-012020-03-310000826675us-gaap:FutureMember2019-01-012019-03-310000826675us-gaap:ExchangeTradedOptionsMember2020-01-012020-03-310000826675us-gaap:ExchangeTradedOptionsMember2019-01-012019-03-310000826675us-gaap:ForwardContractsMemberus-gaap:LongMember2020-01-012020-03-310000826675us-gaap:ForwardContractsMemberus-gaap:LongMember2019-01-012019-03-310000826675us-gaap:ShortMemberus-gaap:ForwardContractsMember2020-01-012020-03-310000826675us-gaap:ShortMemberus-gaap:ForwardContractsMember2019-01-012019-03-310000826675us-gaap:ExchangeTradedOptionsMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2020-03-310000826675us-gaap:ExchangeTradedOptionsMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2019-12-310000826675us-gaap:InterestRateSwaptionMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2020-03-310000826675us-gaap:InterestRateSwaptionMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2019-12-310000826675us-gaap:ForwardContractsMemberus-gaap:NotDesignatedAsHedgingInstrumentTradingMemberus-gaap:LongMember2020-03-310000826675us-gaap:ForwardContractsMemberus-gaap:NotDesignatedAsHedgingInstrumentTradingMemberus-gaap:LongMember2019-12-310000826675us-gaap:FutureMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2020-03-310000826675us-gaap:FutureMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2019-12-310000826675us-gaap:ShortMemberus-gaap:ForwardContractsMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2020-03-310000826675us-gaap:ShortMemberus-gaap:ForwardContractsMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2019-12-310000826675us-gaap:InterestRateSwapMemberdx:MaturityinthreeyearsorlessMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2020-03-310000826675us-gaap:InterestRateSwapMemberdx:MaturityinthreeyearsorlessMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2020-01-012020-03-310000826675us-gaap:InterestRateSwapMemberdx:MaturityinthreeyearsorlessMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2019-12-310000826675us-gaap:InterestRateSwapMemberdx:MaturityinthreeyearsorlessMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2019-01-012019-12-310000826675us-gaap:InterestRateSwapMemberdx:Maturitybetween3and6yearsMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2019-12-310000826675us-gaap:InterestRateSwapMemberdx:Maturitybetween3and6yearsMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2019-01-012019-12-310000826675us-gaap:InterestRateSwapMemberdx:Maturitybetween6and10yearsMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2020-03-310000826675us-gaap:InterestRateSwapMemberdx:Maturitybetween6and10yearsMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2020-01-012020-03-310000826675us-gaap:InterestRateSwapMemberdx:Maturitybetween6and10yearsMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2019-12-310000826675us-gaap:InterestRateSwapMemberdx:Maturitybetween6and10yearsMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2019-01-012019-12-310000826675us-gaap:InterestRateSwapMemberdx:Maturitygreaterthan10yearsMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2019-12-310000826675us-gaap:InterestRateSwapMemberdx:Maturitygreaterthan10yearsMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2019-01-012019-12-310000826675us-gaap:InterestRateSwapMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2020-03-310000826675us-gaap:InterestRateSwapMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2020-01-012020-03-310000826675us-gaap:InterestRateSwapMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2019-12-310000826675us-gaap:InterestRateSwapMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2019-01-012019-12-310000826675us-gaap:InterestRateSwaptionMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2020-01-012020-03-310000826675us-gaap:FutureMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2020-01-012020-03-310000826675us-gaap:ExchangeTradedOptionsMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2020-01-012020-03-310000826675us-gaap:ForwardContractsMemberus-gaap:NotDesignatedAsHedgingInstrumentTradingMemberus-gaap:LongMember2020-01-012020-03-310000826675us-gaap:ShortMemberus-gaap:ForwardContractsMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2020-01-012020-03-310000826675us-gaap:ExchangeTradedOptionsMember2020-03-310000826675us-gaap:InterestRateSwaptionMember2019-12-310000826675us-gaap:ExchangeTradedOptionsMember2019-12-310000826675us-gaap:ForwardContractsMemberus-gaap:LongMember2019-12-310000826675us-gaap:FutureMember2020-03-310000826675us-gaap:ShortMemberus-gaap:ForwardContractsMember2020-03-310000826675us-gaap:ShortMemberus-gaap:ForwardContractsMember2019-12-310000826675us-gaap:FairValueMeasurementsRecurringMember2020-03-310000826675us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-03-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2020-03-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2020-03-310000826675us-gaap:FairValueMeasurementsRecurringMember2019-12-310000826675us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2019-12-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2019-12-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ExchangeTradedOptionsMember2020-03-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:ExchangeTradedOptionsMember2020-03-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:ExchangeTradedOptionsMember2020-03-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ExchangeTradedOptionsMemberus-gaap:FairValueInputsLevel3Member2020-03-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ExchangeTradedOptionsMember2019-12-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:ExchangeTradedOptionsMember2019-12-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:ExchangeTradedOptionsMember2019-12-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ExchangeTradedOptionsMemberus-gaap:FairValueInputsLevel3Member2019-12-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:InterestRateSwaptionMember2020-03-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:InterestRateSwaptionMember2020-03-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:InterestRateSwaptionMember2020-03-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:InterestRateSwaptionMemberus-gaap:FairValueInputsLevel3Member2020-03-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:InterestRateSwaptionMember2019-12-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:InterestRateSwaptionMember2019-12-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:InterestRateSwaptionMember2019-12-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:InterestRateSwaptionMemberus-gaap:FairValueInputsLevel3Member2019-12-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForwardContractsMemberus-gaap:LongMember2020-03-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:ForwardContractsMemberus-gaap:LongMember2020-03-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForwardContractsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:LongMember2020-03-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForwardContractsMemberus-gaap:LongMemberus-gaap:FairValueInputsLevel3Member2020-03-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForwardContractsMemberus-gaap:LongMember2019-12-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:ForwardContractsMemberus-gaap:LongMember2019-12-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForwardContractsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:LongMember2019-12-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForwardContractsMemberus-gaap:LongMemberus-gaap:FairValueInputsLevel3Member2019-12-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForwardContractsMemberus-gaap:ShortMember2020-03-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:ForwardContractsMemberus-gaap:ShortMember2020-03-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForwardContractsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:ShortMember2020-03-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForwardContractsMemberus-gaap:ShortMemberus-gaap:FairValueInputsLevel3Member2020-03-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForwardContractsMemberus-gaap:ShortMember2019-12-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:ForwardContractsMemberus-gaap:ShortMember2019-12-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForwardContractsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:ShortMember2019-12-310000826675us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForwardContractsMemberus-gaap:ShortMemberus-gaap:FairValueInputsLevel3Member2019-12-310000826675us-gaap:FutureMemberus-gaap:FairValueMeasurementsRecurringMember2020-03-310000826675us-gaap:FutureMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2020-03-310000826675us-gaap:FutureMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2020-03-310000826675us-gaap:FutureMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2020-03-310000826675us-gaap:FutureMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310000826675us-gaap:FutureMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2019-12-310000826675us-gaap:FutureMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2019-12-310000826675us-gaap:FutureMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2019-12-310000826675us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember2019-12-310000826675us-gaap:LoansReceivableMember2019-12-310000826675us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember2020-01-012020-03-310000826675us-gaap:LoansReceivableMember2020-01-012020-03-310000826675us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMemberus-gaap:InterestIncomeMember2020-01-012020-03-310000826675us-gaap:LoansReceivableMemberus-gaap:InterestIncomeMember2020-01-012020-03-310000826675us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember2020-03-310000826675us-gaap:LoansReceivableMember2020-03-310000826675us-gaap:SeriesCPreferredStockMember2020-03-310000826675us-gaap:SeriesAPreferredStockMember2020-03-140000826675us-gaap:SeriesAPreferredStockMember2020-03-142020-03-140000826675us-gaap:SeriesBPreferredStockMember2020-03-160000826675us-gaap:SeriesBPreferredStockMember2020-03-162020-03-160000826675us-gaap:SeriesBPreferredStockMember2020-03-3100008266752020-01-132020-01-1300008266752020-01-012020-01-310000826675us-gaap:CommonStockMember2020-01-242020-01-240000826675us-gaap:CommonStockMember2020-01-012020-01-3100008266752020-02-142020-02-1400008266752020-02-012020-02-290000826675us-gaap:CommonStockMember2020-02-242020-02-240000826675us-gaap:CommonStockMember2020-02-012020-02-2900008266752020-03-102020-03-1000008266752020-03-012020-03-310000826675us-gaap:CommonStockMember2020-03-232020-03-230000826675us-gaap:CommonStockMember2019-03-012019-03-310000826675us-gaap:RestrictedStockMember2019-12-310000826675us-gaap:RestrictedStockMember2018-12-310000826675us-gaap:RestrictedStockMember2020-01-012020-03-310000826675us-gaap:RestrictedStockMember2019-01-012019-03-310000826675us-gaap:RestrictedStockMember2020-03-310000826675us-gaap:RestrictedStockMember2019-03-310000826675us-gaap:SubsequentEventMemberus-gaap:CommercialMortgageBackedSecuritiesMember2020-05-11


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2020
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number: 1-9819
DYNEX CAPITAL, INC.
(Exact name of registrant as specified in its charter)
Virginia52-1549373
(State or other jurisdiction of incorporation)(IRS Employer Identification No.)
4991 Lake Brook Drive, Suite 100
Glen Allen,Virginia23060-9245
(Address of principal executive offices)(Zip Code)
(804)217-5800 
(Registrant’s telephone number, including area code) 

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.01 per shareDXNew York Stock Exchange
7.625% Series B Cumulative Redeemable Preferred Stock, par value $0.01 per shareDXPRBNew York Stock Exchange
6.90% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per shareDXPRCNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes                   No           

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes                        No           

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes                      No            

On April 30, 2020, the registrant had 22,981,978 shares outstanding of common stock, $0.01 par value, which is the registrant’s only class of common stock.



DYNEX CAPITAL, INC.
FORM 10-Q
INDEX



Page
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
Consolidated Balance Sheets as of March 31, 2020 (unaudited) and December 31, 2019
Consolidated Statements of Comprehensive Income (Loss) for the three months ended
March 31, 2020 (unaudited) and March 31, 2019 (unaudited)
Consolidated Statements of Shareholders' Equity for the three months ended
March 31, 2020 and March 31, 2019 (unaudited)
Consolidated Statements of Cash Flows for the three months ended
March 31, 2020 (unaudited) and March 31, 2019 (unaudited)
Notes to the Unaudited Consolidated Financial Statements
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
PART II. OTHER INFORMATION
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits
SIGNATURES



i


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DYNEX CAPITAL, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands except share data)
 March 31, 2020December 31, 2019
ASSETS(unaudited)
Cash and cash equivalents$51,411  $62,582  
Restricted cash59,204  71,648  
Receivable for securities sold, pledged to counterparties1,503,571    
Mortgage-backed securities (including pledged of $3,224,750 and $5,024,625 respectively), at fair value
3,719,706  5,188,163  
Mortgage loans held for investment, at fair value (1)
7,922  9,405  
Derivative assets3,031  4,290  
Accrued interest receivable23,104  26,209  
Other assets, net6,269  8,307  
Total assets$5,374,218  $5,370,604  
LIABILITIES AND SHAREHOLDERS’ EQUITY   
Liabilities:      
Repurchase agreements$4,408,106  $4,752,348  
Payable for unsettled securities382,371  6,180  
Non-recourse collateralized financing2,171  2,733  
Derivative liabilities13,640  974  
Accrued interest payable9,606  15,585  
Accrued dividends payable5,424  6,280  
Other liabilities2,293  3,516  
 Total liabilities$4,823,611  $4,787,616  
Shareholders’ equity:      
Preferred stock, par value $0.01 per share; 50,000,000 shares authorized; 7,248,330 and 6,788,330 shares issued and outstanding, respectively ($181,208 and $169,708 aggregate liquidation preference, respectively)
$174,709  $162,807  
Common stock, par value $0.01 per share, 90,000,000 shares authorized;
22,981,978 and 22,945,993 shares issued and outstanding, respectively
230  229  
Additional paid-in capital858,203  858,347  
Accumulated other comprehensive income246,778  173,806  
Accumulated deficit(729,313) (612,201) 
 Total shareholders’ equity550,607  582,988  
 Total liabilities and shareholders’ equity$5,374,218  $5,370,604  
See notes to the unaudited consolidated financial statements.
(1) The Company elected the fair value option for its mortgage loans held for investment as of January 1, 2020. Amount shown as of December 31, 2019 is the amortized cost, net of an allowance..
1


DYNEX CAPITAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
 (amounts in thousands except per share data)
Three Months Ended
March 31,
 20202019
Interest income$39,822  $39,957  
Interest expense22,101  26,276  
  Net interest income17,721  13,681  
Loss on derivative instruments, net(195,567) (61,697) 
Gain on sale of investments, net84,783    
Fair value adjustments, net(372) (13) 
Other operating expense, net(423) (231) 
General and administrative expenses:
Compensation and benefits(2,163) (1,898) 
Other general and administrative(2,458) (2,056) 
Net loss(98,479) (52,214) 
Preferred stock dividends(3,841) (3,059) 
Preferred stock redemption charge(3,914)   
Net loss to common shareholders$(106,234) $(55,273) 
Other comprehensive income:
Unrealized gain on available-for-sale investments, net$157,755  $86,632  
Reclassification adjustment for gain on sale of investments, net(84,783)   
Reclassification adjustment for de-designated cash flow hedges  (165) 
Total other comprehensive income72,972  86,467  
Comprehensive (loss) income to common shareholders$(33,262) $31,194  
Net loss per common share-basic and diluted$(4.63) $(2.42) 
Weighted average common shares-basic and diluted22,963  22,812  
See notes to the unaudited consolidated financial statements.
2


DYNEX CAPITAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(unaudited)
($ in thousands)
Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total Shareholders’ Equity
SharesAmountSharesAmount
Balance as of
December 31, 2019
6,788,330  $162,807  22,945,993  $229  $858,347  $173,806  $(612,201) $582,988  
Cumulative effect of change in accounting principle—  —  —  —  —  —  (548) (548) 
Stock issuance4,460,000  107,988        —  —  107,988  
Redemption of preferred stock(4,000,000) (96,086) —  —  —  —  (3,914) (100,000) 
Restricted stock granted, net of amortization—  —  67,511  1  306  —  —  307  
Repurchase of common stock—  —  (18,782)   (206) —  —  (206) 
Adjustments for tax withholding on share-based compensation—  —  (12,744)   (235) —  —  (235) 
Stock issuance costs—  —  —  —  (9) —  —  (9) 
Net loss—  —  —  —  —  —  (98,479) (98,479) 
Dividends on preferred stock—  —  —  —  —  —  (3,841) (3,841) 
Dividends on common stock—  —  —  —  —  —  (10,330) (10,330) 
Other comprehensive income—  —  —  —  —  72,972  —  72,972  
Balance as of
March 31, 2020
7,248,330  $174,709  22,981,978  $230  $858,203  $246,778  $(729,313) $550,607  
Balance as of December 31, 20185,954,594  $142,883  20,939,073  $209  $818,861  $(35,779) $(399,021) $527,153  
Stock issuance
213,468  5,015  3,109,047  31  53,841  —  —  58,887  
Restricted stock granted, net of amortization
—  —  50,821  1  297  —  —  298  
Adjustments for tax withholding on share-based compensation
—  —  (16,231)   (296) —  —  (296) 
Stock issuance costs
—  —  —  —  (212) —  —  (212) 
Net loss
—  —  —  —  —  —  (52,214) (52,214) 
Dividends on preferred stock
—  —  —  —  —  —  (3,059) (3,059) 
Dividends on common stock
—  —  —  —  —  —  (12,350) (12,350) 
Other comprehensive income
—  —  —  —  —  86,467  —  86,467  
Balance as of
March 31, 2019
6,168,062  $147,898  24,082,710  $241  $872,491  $50,688  $(466,644) $604,674  
See notes to the unaudited consolidated financial statements.
3


DYNEX CAPITAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
($ in thousands)
Three Months Ended
 March 31,
 20202019
Operating activities:  
Net loss$(98,479) $(52,214) 
Adjustments to reconcile net loss to cash provided by operating activities: 
Decrease (increase) in accrued interest receivable3,105  (5,056) 
(Decrease) increase in accrued interest payable(5,979) 2,631  
Loss on derivative instruments, net195,567  61,697  
Gain on sale of investments, net(84,783)   
Fair value adjustments, net372  13  
Amortization of investment premiums, net33,118  31,083  
Other amortization and depreciation, net499  222  
Stock-based compensation expense307  298  
Change in other assets and liabilities, net254  1,625  
Net cash and cash equivalents provided by operating activities43,981  40,299  
Investing activities:  
Purchase of investments(155,594) (1,019,100) 
Principal payments received on investments140,032  73,817  
Proceeds from sales of investments487,464    
Principal payments received on mortgage loans held for investment615  646  
Net payments on derivatives, including terminations (187,822) (62,382) 
Other investing activities  (102) 
Net cash and cash equivalents provided by (used in) investing activities284,695  (1,007,121) 
Financing activities:  
Borrowings under repurchase agreements16,555,552  32,608,826  
Repayments of repurchase agreement borrowings(16,899,794) (31,623,917) 
Principal payments on non-recourse collateralized financing(569) (242) 
Proceeds from issuance of preferred stock107,988  5,015  
Proceeds from issuance of common stock  53,872  
Cash paid for redemption of preferred stock(100,000)   
Cash paid for stock issuance costs  (185) 
Cash paid for common stock repurchases(206)   
Payments related to tax withholding for stock-based compensation(235) (296) 
Dividends paid(15,027) (22,292) 
Net cash and cash equivalents (used in) provided by financing activities(352,291) 1,020,781  
Net (decrease) increase in cash, cash equivalents, and restricted cash(23,615) 53,959  
Cash, cash equivalents, and restricted cash at beginning of period134,230  88,704  
Cash, cash equivalents, and restricted cash at end of period$110,615  $142,663  
Supplemental Disclosure of Cash Activity:  
Cash paid for interest$28,074  $23,807  
See notes to the unaudited consolidated financial statements.
4


NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.
(amounts in thousands except share data)

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Dynex Capital, Inc. (“Company”) was incorporated in the Commonwealth of Virginia on December 18, 1987 and commenced operations in February 1988. The Company is an internally managed mortgage real estate investment trust, or mortgage REIT, which primarily earns income from investing on a leveraged basis in debt securities, the majority of which are specified pools of Agency mortgage-backed securities (“MBS”) consisting of commercial MBS (“CMBS”), residential MBS (“RMBS”), and CMBS interest-only (“IO”) securities and non-Agency MBS, which consist mainly of CMBS IO. Agency MBS have a guaranty of principal payment by a U.S. government-sponsored entity (“GSE”) such as Fannie Mae and Freddie Mac which are in conservatorship and are currently supported by a senior preferred stock purchase agreement from U.S. Treasury. Non-Agency MBS are issued by non-governmental enterprises and do not have a guaranty of principal payment. The Company also invests in other types of mortgage-related securities, such as to-be-announced securities (“TBAs” or “TBA securities”).

Impact of COVID-19

As a result of the economic, health and market turmoil brought about by the corononavirus (“COVID-19”) pandemic, fixed income and equity markets experienced severe disruption during mid-March of 2020, including securities in which we invest, which caused asset prices to fall and margin calls from derivative and repurchase agreement counterparties to increase. The Agency MBS market largely stabilized after the Federal Reserve announced that it would purchase Agency RMBS and CMBS as well as U.S. Treasuries in the amounts needed to support smooth market functioning. In addition, the U.S. Congress passed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act to provide economic relief to individuals, businesses, state and local governments, and the health care system. The CARES Act includes mortgage loan forbearance and modification programs to qualifying borrowers who may have difficulty making their loan payments and individual states have adopted similar policies addressing loan payments, rent payments, foreclosures and evictions. The Company is not able to predict the impact these policies may have on its investments at this time. The impact of forbearance on the Company’s MBS could range from immaterial to significant depending on actual losses incurred on underlying loans as well as future public policy choices, and actions by the GSEs, their regulator the Federal Housing Finance Authority ("FHFA"), the Federal Reserve, and federal and state governments. There can be no assurance as to how these and other actions by the U.S. government will affect the efficiency, liquidity and stability of the financial and mortgage markets. To the extent the financial or mortgage markets do not respond favorably to any of these actions, or such actions do not function as intended, our business, results of operations and financial condition may be materially adversely affected.

As interest rates rallied given uncertainty around the impact of COVID-19, the Company sold a significant portion of its Agency RMBS portfolio in early March prior to asset prices falling, realizing significant gains upon sale. The Company also terminated the majority of its interest rate swaps given the reduction in the size of its portfolio and the lower interest rate environment. In addition, as explained in Note 7, the Company has subsequently sold a significant portion of its Agency CMBS since March 31, 2020. At this time, the Company is uncertain as to the amount and timing of reinvestment of these proceeds and for the very near-term is focused on book value and capital preservation. Details on management’s actions taken in response to the market disruption caused by COVID-19 are described within certain of these Notes to the Unaudited Consolidated Financial Statements.

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company and its subsidiaries (together, “Dynex” or, as appropriate, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 10, Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all significant adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of the consolidated financial statements have been included; however, uncertainty over the continuing impact that COVID-19 will have on the global economy and on the Company’s business makes any estimates and assumptions as of March 31, 2020 inherently less certain than they would be absent the current and potential impacts of
5


NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.
(amounts in thousands except share data)

COVID-19. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for any other interim periods or for the entire year ending December 31, 2020. The unaudited consolidated financial statements included herein should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”) filed with the SEC.

All references to common shares, per common share amounts, and restricted stock have been adjusted to reflect the
effect of the Company’s 1-for-3 reverse stock split effected on June 20, 2019 for all periods presented.

Consolidation and Variable Interest Entities
 
The consolidated financial statements include the accounts of the Company and the accounts of its majority owned subsidiaries and variable interest entities (“VIE”) for which it is the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation.

The Company consolidates a VIE if the Company is determined to be the VIE’s primary beneficiary, which is defined as the party that has both: (i) the power to control the activities that most significantly impact the VIE’s financial performance and (ii) the right to receive benefits or absorb losses that could potentially be significant to the VIE. The Company reconsiders its evaluation of whether to consolidate a VIE on an ongoing basis, based on changes in the facts and circumstances pertaining to the VIE.

The Company consolidates a securitization trust, which has residential mortgage loans included in “mortgage loans held for investment” on its consolidated balance sheet, of which a portion is pledged as collateral for one remaining bond recorded as “non-recourse collateralized financing” on its consolidated balance sheet. The Company owns the subordinate class in the trust and has been deemed the primary beneficiary.

Though the Company invests in Agency and non-Agency MBS which are generally considered to be interests in VIEs, the Company does not consolidate these entities because it does not meet the criteria necessary to be deemed a primary beneficiary.

Use of Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. The most significant estimates used by management include, but are not limited to, amortization of premiums and discounts and fair value measurements of its investments. These items are discussed further below within this note to the consolidated financial statements.

Income Taxes

The Company has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986 and the corresponding provisions of state law. To qualify as a REIT, the Company must meet certain tests including investing in primarily real estate-related assets and the required distribution of at least 90% of its annual REIT taxable income to shareholders after consideration of its net operating loss (“NOL”) carryforward and not including taxable income retained in its taxable subsidiaries. As a REIT, the Company generally will not be subject to federal income tax on the amount of its income or capital gains that is distributed as dividends to shareholders.

The Company assesses its tax positions for all open tax years and determines whether the Company has any material unrecognized liabilities and records these liabilities, if any, to the extent they are deemed more likely than not to have been incurred.

6


NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.
(amounts in thousands except share data)

Net Income (Loss) Per Common Share

The Company calculates basic net income per common share by dividing net income to common shareholders for the period by weighted-average shares of common stock outstanding for that period. The Company did not have any potentially dilutive securities outstanding during the three months ended March 31, 2020 or March 31, 2019.

Holders of unvested shares of the Company’s issued and outstanding restricted common stock are eligible to receive non-forfeitable dividends. As such, these unvested shares are considered participating securities and therefore are included in the computation of basic net income per common share using the two-class method. Upon vesting, restrictions on transfer expire on each share of restricted stock, and each such share of restricted stock represents one unrestricted share of common stock.

Because the Company’s 7.625% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”) and its 6.9000% Series C Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”) (collectively, the “Preferred Stock”) are redeemable at the Company’s option for cash only and may convert into shares of common stock only upon a change of control of the Company (and subject to other circumstances) as described in Article IIIB and Article IIIC of the Company’s Articles of Amendment to the Restated Articles of Incorporation (the “Restated Articles of Incorporation, as amended”), the effect of those shares and their related dividends is excluded from the calculation of diluted net income per common share.

The Company’s weighted average common shares outstanding and net loss per common share amounts presented on its consolidated statement of comprehensive income for the three months ended March 31, 2019 have been restated to reflect the effect of the 1-for-3 reverse stock split effected by the Company in June of 2019.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with original maturities of three months or less as well as unrestricted demand deposits at highly rated financial institutions. The Company’s cash balances fluctuate throughout the year and may exceed Federal Deposit Insurance Company insured limits from time to time. Although the Company bears risk to amounts in excess of those insured by the FDIC, it does not anticipate any losses as a result.

Restricted Cash

Restricted cash consists of cash the Company has pledged to cover initial and variation margin with its financing and certain derivative counterparties.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Company's consolidated balance sheet as of March 31, 2020 that sum to the total of the same such amounts shown on the Company’s consolidated statement of cash flows for the three months ended March 31, 2020:
March 31, 2020
Cash and cash equivalents$51,411  
Restricted cash59,204  
Total cash, cash equivalents, and restricted cash shown on consolidated statement of cash flows$110,615  

7


NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.
(amounts in thousands except share data)

Mortgage-Backed Securities
 
The Company’s MBS are designated as available-for-sale (“AFS”) and are recorded at fair value on the Company’s consolidated balance sheet. Changes in unrealized gain (loss) on the Company’s MBS are reported in other comprehensive income (“OCI”) until the investment is sold or matures. Although the Company generally intends to hold its AFS securities until maturity, it may sell any of these securities as part of the overall management of its business. Upon the sale of an AFS security, any unrealized gain or loss is reclassified out of accumulated other comprehensive income (“AOCI”) into net income as a realized “gain (loss) on sale of investments, net” using the specific identification method.

The fair value of the Company’s MBS pledged as collateral against repurchase agreements is disclosed parenthetically on the Company’s consolidated balance sheets.

Interest Income, Premium Amortization, and Discount Accretion. Interest income on MBS is accrued based on the outstanding principal balance (or notional balance in the case of interest-only, or “IO” securities) and their contractual terms. Premiums or discounts associated with the purchase of Agency MBS as well as any non-Agency MBS rated ‘AA’ and higher are amortized or accreted into interest income over the projected life of such securities using the effective yield method, and adjustments to premium amortization and discount accretion are made for actual cash payments. The Company’s projections of future cash payments are based on input and analysis received from external sources and internal models and include assumptions about the amount and timing of loan prepayment rates, fluctuations in interest rates, credit losses, and other factors. On at least a quarterly basis, the Company reviews and makes any necessary adjustments to its cash flow projections and updates the yield recognized on these assets.

The Company does not currently hold any non-Agency MBS that were purchased at a discount with credit ratings of less than ‘AA’ or not rated by any of the nationally recognized credit rating agencies at the time of purchase.

Determination of MBS Fair Value. The Company estimates the fair value of the majority of its MBS based upon prices obtained from third-party pricing services and broker quotes. The remainder of the Company’s MBS are valued by discounting the estimated future cash flows derived from cash flow models that utilize information such as the security’s coupon rate, estimated prepayment speeds, expected weighted average life, collateral composition, estimated future interest rates, expected losses, and credit enhancements as well as certain other relevant information. Please refer to Note 5 for further discussion of MBS fair value measurements.

Allowance for Credit Losses. The Company recently adopted Accounting Standards Codification Topic 326, Financial Instruments - Credit Losses. On at least a quarterly basis, the Company evaluates any MBS with a fair value less than its amortized cost for credit losses. If the difference between the present value of cash flows expected to be collected on the MBS is less than its amortized cost, the difference is recorded as an allowance for credit loss through net income up to and not exceeding the amount that the amortized cost exceeds current fair value. Subsequent changes in credit loss estimates are recognized in earnings in the period in which they occur. Because the majority of the Company’s investments are higher credit quality and most are guaranteed by a GSE, the Company is not likely to have an allowance for credit losses recorded on its consolidated balance sheet.

8


NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.
(amounts in thousands except share data)

Repurchase Agreements
 
The Company’s repurchase agreements, which are used to finance its purchases of MBS, are accounted for as secured borrowings under which the Company pledges its securities as collateral to secure a loan, which is equal in value to a specified percentage of the estimated fair value of the pledged collateral. The Company retains beneficial ownership of the pledged collateral. At the maturity of a repurchase agreement, the Company is required to repay the loan and concurrently receives back its pledged collateral from the lender or, with the consent of the lender, the Company may renew the agreement at the then prevailing financing rate. A repurchase agreement lender may require the Company to pledge additional collateral in the event of a decline in the fair value of the collateral pledged. Repurchase agreement financing is recourse to the Company and the assets pledged. Most of the Company’s repurchase agreements are based on the September 1996 version of the Bond Market Association Master Repurchase Agreement, which generally provides that the lender, as buyer, is responsible for obtaining collateral valuations from a generally recognized source agreed to by both the Company and the lender, or, in an instance when such source is not available, the value determination is made by the lender.

Derivative Instruments

The Company’s derivative instruments include interest rate swaps, futures, options, and forward contracts for the purchase or sale of Agency RMBS on a non-specified pool basis, commonly referred to as to-be-announced (“TBA”) securities. Derivative instruments are reported at their fair value on the Company’s consolidated balance sheet as derivative assets if in a gain position or as derivative liabilities if in a loss position, at the end of the period reported. All periodic interest benefits/costs and changes in fair value of derivative instruments, including gains and losses realized upon termination, maturity, or settlement are recorded in “gain (loss) on derivative instruments, net” on the Company’s consolidated statement of comprehensive income (loss). Cash receipts and payments related to derivative instruments are classified in the investing activities section of the consolidated statements of cash flows in accordance with the underlying nature or purpose of the derivative transactions.

Generally, the Company enters into pay-fixed interest rate swaps, which involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the interest rate swap without exchange of the underlying notional amount. From time to time the Company may also enter into receive-fixed interest rate swaps that involve the receipt of fixed-rate amounts from a counterparty in exchange for the Company making variable-rate payments over the life of the interest rate swap without exchange of the underlying notional amount. The Company’s interest rate swap agreements are centrally cleared through the Chicago Mercantile Exchange (“CME”). The Company’s CME cleared swaps require that the Company post initial margin as collateral, and in addition, variation margin is exchanged, typically in cash, for changes in the fair value of the CME cleared swaps. The exchange of variation margin for CME cleared swaps is legally considered to be the settlement of the derivative itself as opposed to a pledge of collateral. Accordingly, the Company accounts for the daily exchange of variation margin associated with its CME cleared interest rate swaps as a direct increase or decrease to the carrying value of the related derivative asset or liability.

The Company may also enter into long and short positions in U.S. Treasury futures contracts. U.S. Treasury futures are valued based on exchange pricing with daily margin settlements. The Company realizes gains or losses on these contracts upon expiration at an amount equal to the difference between the current fair value of the underlying asset and the contractual price of the futures contract. Unlike interest rate swaps, the Company does not treat the daily margin exchanges for its U.S. Treasury futures as legal settlement of the instrument.

The Company currently holds put options on U.S. Treasury futures which provide the Company the right, but not an obligation, to buy U.S. Treasury futures at a predetermined notional amount and stated term in the future. Put options on U.S. Treasury futures are valued based on exchange pricing without daily exchanges of margin amounts. The Company records the premium paid for the option contract as a derivative asset on its consolidated balance sheet and adjusts the balance for changes in fair value through “gain (loss) on derivative instruments” until the option is exercised or the contract expires. The Company may also purchase options for interest rate swaps (“interest rate swaptions”) which are accounted for similarly.

A TBA security is a forward contract (“TBA contract”) for the purchase (“long position”) or sale (“short position”) of a non-specified Agency MBS at a predetermined price with certain principal and interest terms and certain types of collateral, but the particular Agency securities to be delivered are not identified until shortly before the settlement date. The
9


NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.
(amounts in thousands except share data)

Company accounts for long and short positions in TBAs as derivative instruments because the Company cannot assert that it is probable at inception and throughout the term of an individual TBA transaction that its settlement will result in physical delivery of the underlying Agency RMBS or that the individual TBA transaction will not settle in the shortest time period possible.

Please refer to Note 4 for additional information regarding the Company’s derivative instruments as well as Note 5 for information on how the fair value of these instruments are calculated.

Share-Based Compensation

Pursuant to the Company’s 2018 Stock and Incentive Plan (“2018 Plan”), the Company may grant share-based compensation to eligible employees, non-employee directors or consultants or advisors to the Company, including restricted stock awards, stock options, stock appreciation rights, performance units, restricted stock units, and performance cash awards. The Company’s restricted stock currently issued and outstanding may be settled only in shares of its common stock, and therefore are treated as equity awards with their fair value measured at the grant date and recognized as compensation cost over the requisite service period with a corresponding credit to shareholders’ equity. The requisite service period is the period during which a participant is required to provide service in exchange for an award, which is equivalent to the vesting period specified in the terms of the time-based restricted stock award. None of the Company’s restricted stock awards have performance-based conditions. The Company does not currently have any share-based compensation issued or outstanding other than restricted stock issued to its employees, officers, and directors.

Contingencies

In the normal course of business, there may be various lawsuits, claims, and other contingencies pending against the Company. On a quarterly basis, the Company evaluates whether to establish provisions for estimated losses from those matters. The Company recognizes a liability for a contingent loss when: (a) the underlying causal event has occurred prior to the balance sheet date; (b) it is probable that a loss has been incurred; and (c) there is a reasonable basis for estimating that loss. A liability is not recognized for a contingent loss when it is only possible or remotely possible that a loss has been incurred, however, possible contingent losses shall be disclosed. If the contingent loss (or an additional loss in excess of any accrual) is at least a reasonable possibility and material, then the Company discloses a reasonable estimate of the possible loss or range of loss, if such reasonable estimate can be made. If the Company cannot make a reasonable estimate of the possible material loss, or range of loss, then that fact is disclosed.

As previously disclosed in the 2019 Form 10-K, the receiver (the “Receiver”) for one of the plaintiffs awarded damages in a judgment (the "DCI Judgment") against Dynex Commercial, Inc. ("DCI"), a subsidiary of a former affiliate of the Company, filed a separate claim in May 2018 against the Company seeking payment of the damages awarded in connection with the DCI Judgment, alleging that the Company breached a litigation cost sharing agreement, as amended (the "Agreement", that was initially entered into by the Company and DCI in December 2000. On November 21, 2019, the U.S. District Court, Northern District of Texas ("Northern District Court") granted in part and denied in part summary judgment on the Receiver’s claim and the Company’s claim for offset and recoupment. The Northern District Court found that the Company breached the Agreement and therefore must pay damages to the Receiver. The Northern District Court simultaneously granted the Company’s motion for summary judgment finding that DCI also breached the Agreement and that the Company can recover amounts due to it from DCI under the Agreement. The Receiver subsequently filed a claim for damages with the Northern District Court of approximately $12,600, while the Company filed claims for damages ranging from $13,300 to $30,600, including interest. The Receiver filed objections (the "Objections") with the Northern District Court to, among other things, the Company recovering amounts incurred prior to entry into the Agreement and amounts incurred under the Agreement after January 31, 2006, including interest, which is the date that DCI’s corporate existence ceased under Virginia law. The Company has disputed, among other things, that the Receiver's Objections as not supportable under Virginia law and has further refined its damages claim to range from $13,300 based on simple interest to $17,800 based on a combination of simple and compound interest, which the Company believes is supportable under Virginia law. On March 5, 2020, the Company filed its response to the DCI Plaintiffs opening brief filed on February 4, 2020 in the Court of Appeals for the Fifth Circuit. There have been no other material developments in this matter during the three months ended March 31, 2020. After consultation with litigation counsel, the Company believes, based upon information currently available and its evaluation of Virginia law, that the likelihood of loss is not probable, and given the range of potential claims for damages by the Company to offset the Receiver's claims, the amount of possible loss cannot be reasonably estimated, and therefore, no
10


NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.
(amounts in thousands except share data)

contingent liability has been recorded.

Recently Issued and Adopted Accounting Pronouncements

The Company reviews all Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”) on at least a quarterly basis to evaluate applicability and significance of any impact on its financial condition and results of operations. There were no accounting pronouncements issued during the three months ended March 31, 2020 that are expected to have a material impact on the Company’s financial condition or results of operations.

As of January 1, 2020, the Company elected the fair value option for its mortgage loans held for investment pursuant to the provisions of ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326) Targeted Transition Relief, which was issued in May of 2019. Management chose to elect the fair value option for its mortgage loans because the majority of the Company’s investments are represented on its consolidated balance sheet at fair value. The election of the fair value option resulted in a cumulative adjustment of $(548) to retained earnings on its consolidated balance sheet as of January 1, 2020. The Company does not expect its election of the fair value option for its mortgage loans to have a material impact on its future consolidated financial statements.

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to GAAP requirements for modifications on debt instruments, leases, derivatives, and other contracts, related to the expected market transition from LIBOR, and certain other floating rate benchmark indices to alternative reference rates. ASU 2020-04 generally considers contract modifications related to reference rate reform to be an event that does not require contract remeasurement at the modification date nor a reassessment of a previous accounting determination. The guidance in ASU 2020-04 is optional and may be elected over time, through December 31, 2022, as reference rate reform activities occur. The Company does not believe this ASU will have a material impact on its consolidated financial statements.


NOTE 2 – MORTGAGE-BACKED SECURITIES
 
The majority of the Company’s MBS are pledged as collateral for the Company’s repurchase agreements. The following tables present the Company’s MBS by investment type (including securities pending settlement) as of the dates indicated:
 March 31, 2020
 ParNet Premium (Discount)Amortized CostGross Unrealized GainGross Unrealized LossFair Value
Agency CMBS$2,104,738  $16,937  $2,121,675  $207,436  $(892) $2,328,219  
Agency RMBS868,191  19,240  887,431  44,005    931,436  
CMBS IO (1)
  462,675  462,675  2,616  (6,802) 458,489  
Non-Agency other1,833  (686) 1,147  472  (57) 1,562  
Total MBS:$2,974,762  $498,166  $3,472,928  $254,529  $(7,751) $3,719,706  
(1) The notional balance for Agency CMBS IO and non-Agency CMBS IO was $13,274,419 and $9,680,637 respectively, as of March 31, 2020.
11


NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.
(amounts in thousands except share data)

 December 31, 2019
 ParNet Premium (Discount)Amortized CostGross Unrealized GainGross Unrealized LossFair Value
Agency CMBS$1,890,186  $15,414  $1,905,600  $93,763  $(6) $1,999,357  
Agency RMBS2,563,684  55,770  2,619,454  69,082  (462) 2,688,074  
CMBS IO (2)
  488,145  488,145  11,760  (863) 499,042  
Non-Agency other  1,938  (780) 1,158  552  (20) 1,690  
Total MBS:$4,455,808  $558,549  $5,014,357  $175,157  $(1,351) $5,188,163  
(1) The notional balance for the Agency CMBS IO and non-Agency CMBS IO was $13,404,824 and $9,799,629, respectively, as of December 31, 2019.

Actual maturities of MBS are affected by the contractual lives of the underlying mortgage collateral, periodic payments of principal, prepayments of principal, and the payment priority structure of the security; therefore, actual maturities are generally shorter than the securities' stated contractual maturities.

The following table presents information regarding the "gain on sale of investments, net" on the Company’s consolidated statements of comprehensive income (loss) for the periods indicated (1):
Three Months Ended
March 31,
20202019
Proceeds ReceivedRealized Gain (Loss)Proceeds ReceivedRealized Gain (Loss)
Agency RMBS$1,817,350  $64,094  $  $  
Agency CMBS173,684  20,689