Investment Portfolio - As of December 31, 2024, the majority of the company's investments were Agency-issued pass-through RMBS, primarily backed by fixed-rate single-family mortgage loans [22]. - The company's CMBS investments comprised less than 1% of the investment portfolio as of December 31, 2024, and are backed by multifamily housing loans [24]. - The company’s investment policy limits investment in non-Agency MBS rated BBB+ or lower to 10% of total shareholders' equity [32]. Leverage and Hedging - The company employs leverage to enhance returns, primarily through repurchase agreements, with original terms to maturity ranging from overnight to six months [27]. - As of December 31, 2024, the company did not have more than 10% of equity at risk with any of its repurchase agreement counterparties [28]. - The company’s hedging strategy is dynamic, adjusting based on assessments of U.S. and global economic conditions and monetary policies [30]. Human Capital - The company had 22 full and part-time employees as of December 31, 2024, with an average tenure of 10.8 years and a voluntary turnover rate of 4% over the past three years [41]. - The company’s human capital strategy focuses on creating a supportive and equitable culture to attract and retain skilled employees [40]. Regulatory Compliance - The company’s business model may be impacted by changes in regulatory requirements, including those related to REIT qualifications and the 1940 Act [36]. - The company must derive at least 75% of its gross income from real estate-related sources to maintain its REIT status [52]. - The company is required to distribute at least 90% of its REIT taxable income to retain its REIT status [46]. - The company must have more than 100 shareholders and not have more than 50% of its shares owned by five or fewer persons to maintain its REIT status [57]. - The company operates under the exemption provided under Section 3(c)(5)(C) of the Investment Company Act of 1940, requiring at least 55% of its assets to be mortgage loans and at least 80% to be real estate-related [58]. Financial Performance - The estimated REIT taxable income for the year ended December 31, 2024, is $96.3 million, which includes $99.9 million related to the amortization of net deferred tax hedge gains [47]. - The total dividends declared for tax purposes for the year ended December 31, 2024, is $1.58 per share, with common dividends declared at $1.60 per share [50]. - The projected amortization of net deferred tax hedge gains to be recognized as taxable income totals $719.038 million over the periods indicated, with $100.144 million for fiscal year 2025 [49]. - As of December 31, 2024, the company has $557.9 million of capital loss carryforwards, all of which will expire by December 31, 2027, or December 31, 2028 [49]. - The company declared common dividends of $1.27707 as ordinary income and $0.30293 as return of capital for the year ended December 31, 2024 [50]. Market Competition - The company reported that competition in the market may reduce the available supply of investments and negatively impact income from these investments [45].

Core Viewpoint - The Zacks REIT and Equity Trust industry is currently facing challenges due to volatile mortgage rates, but companies like Annaly Capital Management, AG Mortgage Investment Trust, and Dynex Capital are well-positioned to navigate these conditions [1][2]. Industry Overview - The Zacks REIT and Equity Trust industry consists of mortgage REITs (mREITs) that invest in and originate mortgages and mortgage-backed securities (MBS), focusing on either residential or commercial mortgage markets [3]. - Agency securities, backed by the federal government, are considered safer investments, limiting credit risks for mREITs [4]. Current Trends - Mortgage rates have been volatile, but a gradual decline is expected, which may lead to increased loan demand [5]. - The economy remains stable, suggesting that mortgage originations will improve, albeit at a slower pace than previously anticipated [6]. - The industry is experiencing dividend cuts due to eroding book values, high interest rates, and widening spreads between Agency MBS and treasury rates [7][8]. Financial Performance - The Zacks REIT and Equity Trust industry has underperformed compared to the broader Zacks Finance sector and the S&P 500, with a gain of 13.3% over the past year versus 29.6% for the sector and 25.2% for the S&P [13]. - The industry's current price-to-book (P/BV) ratio is 0.96X, significantly lower than the S&P 500's 8.88X, indicating a solid discount compared to the broader finance sector's P/BV of 4.18X [14][15]. Company Highlights - **Annaly Capital Management (NLY)**: Focuses on prudent asset selection and capital allocation, with a portfolio valued at $98.2 billion as of December 31, 2024. The company's 2025 earnings have been revised upward by 9.2% to $2.81 per share, indicating a year-over-year rise of 4.1% [16][19]. - **AG Mortgage Investment Trust (MITT)**: Invests in residential mortgage assets and has committed to acquiring $200 million in home equity loans, tapping into a $2 trillion market. Its 2025 earnings outlook has been revised downward by 3.2% to 89 cents per share, but it still indicates a year-over-year surge of 106.9% [20][21][22]. - **Dynex Capital (DX)**: Engages in mortgage and consumer finance, with a focus on multi-family and manufactured home loans. The company's 2025 earnings outlook has been revised upward by 3.7% to $1.87 per share, reflecting a year-over-year rise of 654.3% [23][26].

Industry Overview - The Zacks REIT and Equity Trust industry includes mortgage REITs (mREITs) that invest in and originate mortgages and mortgage-backed securities (MBS), providing mortgage credit for homeowners and businesses [3] - The industry is currently facing challenges due to volatile mortgage rates and high interest rates, which are affecting valuations and operational performance [6][7] Current Market Conditions - Recent volatility in mortgage rates has led to a decrease in loan demand, although there are signs of improvement in purchase applications [4] - The Federal Reserve's interest rate cuts are expected to gradually lower mortgage rates, which may increase loan demand over time [1][5] Financial Performance - The Zacks REIT and Equity Trust industry has underperformed compared to the broader Zacks Finance sector and the S&P 500, gaining only 13.3% over the past year compared to 29.6% and 25.2% respectively [13] - The industry's current-year earnings estimate has decreased by 16% over the last year, indicating a negative earnings outlook [11] Valuation Metrics - The industry is currently trading at a trailing 12-month price-to-book (P/BV) ratio of 0.96X, significantly lower than the S&P 500's 8.88X [15] - Compared to the broader Zacks Finance sector, which has a P/BV of 4.18X, the REIT and Equity Trust industry is trading at a substantial discount [17] Company Highlights Annaly Capital Management, Inc. (NLY) - NLY's investment strategy focuses on traditional Agency MBSs and aims to enhance returns through non-agency and credit-focused asset classes [19] - The company has a market capitalization of $11.6 billion and a Zacks Rank of 1 (Strong Buy) with a projected 2025 earnings of $2.81 per share, reflecting a year-over-year rise of 4.1% [21] AG Mortgage Investment Trust, Inc. (MITT) - MITT invests in residential mortgage assets and has recently acquired approximately $150 million in home equity loans, with plans for an additional $200 million [23] - The company has a market capitalization of $1.26 billion and a Zacks Rank of 3 (Hold), with a projected 2025 earnings of 89 cents per share, indicating a year-over-year surge of 106.9% [24] Dynex Capital, Inc. (DX) - DX focuses on originating mortgage loans secured by multi-family properties and has expanded into commercial real estate loans [26] - The company has a market capitalization of $1.06 billion and a Zacks Rank of 2 (Buy), with a projected 2025 earnings of $1.87 per share, indicating a year-over-year rise of 654.3% [29]

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Group 1 - Dynex Capital, Inc. (NYSE: DX) has been frequently analyzed, indicating a preference for an active investment approach rather than a passive one [1] - Previous analysis suggested that Dynex would benefit from elevated interest rates and a de-risked portfolio [1]

Financial Data and Key Metrics Changes - Book value ended the quarter at $12.70 per share, with an economic return of 1% for the quarter and 7.4% for the year [18] - Common equity capital grew to over $1 billion, with a year-over-year growth of over 40% [12] - The company raised $64 million in new capital during the fourth quarter [21] Business Line Data and Key Metrics Changes - Interest income increased from the third quarter due to the addition of higher-yielding assets [18] - The leverage ratio increased from 7.6% to 7.9% during the quarter as the company bought $900 million in 30-year mortgage-backed securities [31] Market Data and Key Metrics Changes - The investment environment remains favorable, with nominal spreads on agency RMBS in the range of 135 to 140 basis points over seven-year treasuries and 175 to 185 over swaps [35] - The company expects net issuance in 2025 to remain modest in the $200 billion to $250 billion range [36] Company Strategy and Development Direction - The company is focused on delivering value at the intersection of capital markets and housing finance, with a strategy to leverage expertise in residential real estate mortgage markets [7][46] - The management team emphasizes proactive engagement and flexibility to navigate policy changes [45] Management's Comments on Operating Environment and Future Outlook - Management noted that the macroeconomic landscape is evolving quickly, with expectations for a wider distribution of rates and potential volatility [33] - The company is preparing for GSE reform discussions, which could create opportunities for capital deployment [28] Other Important Information - The company has added three new Board members with strong skill sets across technology, risk, asset management, and strategy [12] - The management team is co-invested alongside shareholders, reinforcing their commitment to delivering value [46] Q&A Session Summary Question: Drivers of the shift from treasury futures to swaps - The shift was driven by swap spreads reaching levels that compensate for potential fiscal issuance, adding 200 to 300 basis points to marginal ROE [51] Question: Update on book value - Book value has remained essentially flat since the end of the quarter [55] Question: Strategy for growing the capital base in 2025 - The strategy is predicated on the investment environment, focusing on capital deployment when ROEs exceed long-term dividend levels [59] Question: MBS market pricing in GSE reform - The MBS market currently prices in a small percentage risk of meaningful changes, with spreads remaining tight historically [69] Question: Shift in hedge portfolio and future expectations - The hedge portfolio is currently positioned as desired, with no immediate plans to shift further into swaps [77] Question: Prepayment environment and risks - The company is focused on security selection to avoid segments that are highly refinanceable, which could impact spreads [93] Question: Implications of new FHFA director on GSEs - The ideological biases suggest a smaller footprint for GSEs, potentially increasing private label issuance [100]

Dynex Capital (DX) Q4 2024 Earnings Call January 27, 2025 10:00 AM ET Company Participants Alison Griffin - Vice President, Investor RelationsByron Boston - Chairman and Co-CEOSmriti Popenoe - President & Co-CEORobert Colligan - CFO & COOT.J. Connelly - Chief Investment OfficerBose George - Managing DirectorTrevor Cranston - MD - Mortgage Finance Equity ResearchEric Hagen - Managing DirectorJason Stewart - Director - Mortgage Finance Conference Call Participants Doug Harter - Equity Research Analyst Operato ...

Fourth Quarter and Full Year 2024 Earnings Presentation January 27, 2025 Safe Harbor Statement NOTE: This presentation contains certain statements that are not historical facts and that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements in this presentation addressing expectations, assumptions, beliefs, projections, estimates, future plans, strategies, and events, developments that we expect or anticipate will occur in the future, a ...

Group 1: Earnings Performance - Dynex Capital reported quarterly earnings of $0.10 per share, missing the Zacks Consensus Estimate of $0.38 per share, representing an earnings surprise of -73.68% [1] - The company posted revenues of $6.89 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 27.96%, compared to year-ago revenues of -$2.28 million [2] - Over the last four quarters, Dynex Capital has not surpassed consensus EPS estimates and has consistently missed revenue estimates [2] Group 2: Stock Performance and Outlook - Dynex Capital shares have lost about 0.2% since the beginning of the year, while the S&P 500 has gained 3.7% [3] - The company's earnings outlook will be crucial for future stock movements, with current consensus EPS estimates at $0.37 on $14.26 million in revenues for the coming quarter and $1.87 on $95.53 million in revenues for the current fiscal year [7] - The current Zacks Rank for Dynex Capital is 3 (Hold), indicating expected performance in line with the market in the near future [6] Group 3: Industry Context - The REIT and Equity Trust industry, to which Dynex Capital belongs, is currently in the bottom 40% of the Zacks industry rankings, which may impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that investors should monitor these revisions closely [5]