Virginia
|
52-1549373
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
4551
Cox Road, Suite 300, Glen Allen, Virginia
|
23060-6740
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code (804) 217-5800
|
|
Securities
registered pursuant to Section 12(b) of the Act:
|
|
Title
of each class
|
Name
of each exchange on which registered
|
Common
Stock, $.01 par value
|
New
York Stock Exchange
|
Series
D 9.50% Cumulative Convertible Preferred Stock,
$.01
par value
|
New
York Stock Exchange
|
Securities
registered pursuant to Section 12(g) of the
Act:
|
Page
Number
|
|||
PART
I.
|
|||
Item
1.
|
Business
|
1
|
|
Item
1A.
|
Risk
Factors
|
4
|
|
Item
1B.
|
Unresolved
Staff Comments
|
8
|
|
Item
2.
|
Properties
|
8
|
|
Item
3.
|
Legal
Proceedings
|
8
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
10
|
|
PART
II.
|
|
||
Item
5.
|
Market
for Registrant’s Common Equity and Related Stockholder Matters
|
10
|
|
Item
6.
|
Selected
Financial Data
|
12
|
|
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
13
|
|
Item
7A.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
31
|
|
Item
8.
|
Financial
Statements and Supplementary Data
|
32
|
|
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
32
|
|
Item
9A.
|
Controls
and Procedures
|
33
|
|
Item
9B.
|
Other
Information
|
33
|
|
|
|||
PART
III.
|
Item
10.
|
Directors,
Executive Officers and Corporate Governance
|
33
|
Item
11.
|
Executive
Compensation
|
33
|
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
33
|
|
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
34
|
|
Item
14.
|
Principal
Accounting Fees and Services
|
34
|
|
|
|||
PART
IV.
|
Item
15.
|
Exhibits,
Financial Statement Schedules
|
34
|
|
|||
SIGNATURES
|
36
|
||
·
|
inversion
of the yield curve, making it more difficult for us to earn net interest
income on leveraged investments;
|
·
|
low
risk premiums on these assets, resulting in lower risk-adjusted returns;
and
|
·
|
competition
for these assets, primarily from hedge funds, financial institutions,
foreign investors, other REITS and money
managers.
|
· If
we make frequent asset sales from our REIT entities to persons deemed
customers, we could be viewed as a “dealer,” and thus subject to 100%
prohibited transaction taxes or other entity level taxes on income
from
such transactions.
|
|
· Compliance
with the REIT income and asset rules may limit the type or extent
of
hedging that we can undertake.
|
|
· Our
ability to own non-real estate related assets and earn non-real estate
related income is limited. Our ability to own equity interests in
other
entities is limited. If we fail to comply with these limits, we may
be
forced to liquidate attractive assets on short notice on unfavorable
terms
in order to maintain our REIT status.
|
|
· Our
ability to invest in taxable subsidiaries is limited under the REIT
rules.
Maintaining compliance with this limit could require us to constrain
the
growth of our taxable REIT affiliates in the future.
|
|
· Meeting
minimum REIT dividend distribution requirements could reduce our
liquidity. Earning non-cash REIT taxable income could necessitate
our
selling assets, incurring debt, or raising new equity in order to
fund
dividend distributions.
|
|
· Stock
ownership tests may limit our ability to raise significant amounts
of
equity capital from one source.
|
ITEM
5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
|
High
|
Low
|
Dividends
Declared
|
||||||||
2006:
|
||||||||||
First
quarter
|
$
|
6.98
|
$
|
6.50
|
$
|
-
|
||||
Second
quarter
|
$
|
6.99
|
$
|
6.57
|
$
|
-
|
||||
Third
quarter
|
$
|
7.45
|
$
|
6.60
|
$
|
-
|
||||
Fourth
quarter
|
$
|
7.16
|
$
|
6.72
|
$
|
-
|
||||
2005:
|
||||||||||
First
quarter
|
$
|
8.08
|
$
|
7.12
|
$
|
-
|
||||
Second
quarter
|
$
|
7.69
|
$
|
7.10
|
$
|
-
|
||||
Third
quarter
|
$
|
7.75
|
$
|
6.85
|
$
|
-
|
||||
Fourth
quarter
|
$
|
7.24
|
$
|
6.70
|
$
|
-
|
Cumulative
Total Stockholder Returns as of December 31,
|
|||||||||||||||||||
Index
|
2001
|
2002
|
2003
|
2004
|
2005
|
2006
|
|||||||||||||
Dynex
Capital Inc.
|
$
|
100.00
|
$
|
230.48
|
$
|
290.48
|
$
|
372.38
|
$
|
328.57
|
$
|
337.62
|
|||||||
S&P
500 (1)
|
$
|
100.00
|
$
|
77.90
|
$
|
100.25
|
$
|
111.15
|
$
|
116.61
|
$
|
135.03
|
|||||||
Bloomberg
Mortgage REIT Index (1)
|
$
|
100.00
|
$
|
122.96
|
$
|
162.21
|
$
|
205.58
|
$
|
172.72
|
$
|
206.10
|
(1)
|
Cumulative
total return assumes reinvestment of dividends. The source of this
information is Bloomberg and Standard & Poor’s. The factual material
is obtained from sources believed to be
reliable.
|
Years
ended December 31,
|
2006
|
2005
|
2004
|
2003
|
2002
|
|||||||||||
(amounts
in thousands except share and per share data)
|
||||||||||||||||
Net
interest income(1)
|
$
|
11,087
|
$
|
11,889
|
$
|
23,281
|
$
|
38,971
|
$
|
49,153
|
||||||
Net
interest income after recapture of (provision for) loan losses(2)
|
11,102
|
6,109
|
4,818
|
1,889
|
20,670
|
|||||||||||
Impairment
charges(3)
|
(60
|
)
|
(2,474
|
)
|
(14,756
|
)
|
(16,355
|
)
|
(18,477
|
)
|
||||||
Equity
in loss of joint venture
|
(852
|
)
|
-
|
-
|
-
|
-
|
||||||||||
Loss
on capitalization of joint venture
|
(1,194
|
)
|
-
|
-
|
-
|
-
|
||||||||||
(Loss)
gain on sale of investments
|
(183
|
)
|
9,609
|
14,490
|
1,555
|
(150
|
)
|
|||||||||
Other
income (expense)
|
617
|
2,022
|
(179
|
)
|
436
|
1,397
|
||||||||||
General
and administrative expenses
|
(4,521
|
)
|
(5,681
|
)
|
(7,748
|
)
|
(8,632
|
)
|
(9,493
|
)
|
||||||
Net
income (loss)
|
$
|
4,909
|
$
|
9,585
|
$
|
(3,375
|
)
|
$
|
(21,107
|
)
|
$
|
(9,360
|
)
|
|||
Net
income (loss) to common shareholders
|
$
|
865
|
$
|
4,238
|
$
|
(5,194
|
)
|
$
|
(14,260
|
)
|
$
|
(18,946
|
)
|
|||
Net
income (loss) per common share:
|
||||||||||||||||
Basic
& diluted
|
$
|
0.07
|
$
|
0.35
|
$
|
(0.46
|
)
|
$
|
(1.31
|
)
|
$
|
(1.74
|
)
|
|||
Dividends
declared per share:
|
||||||||||||||||
Common
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Series
A and B Preferred
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
0.8775
|
$
|
0.2925
|
||||||
Series
C Preferred
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
1.0950
|
$
|
0.3651
|
||||||
Series
D Preferred
|
$
|
0.9500
|
$
|
0.9500
|
$
|
0.6993
|
$
|
-
|
$
|
-
|
December
31,
|
2006
|
2005
|
2004
|
2003
|
2002
|
|||||||||||
Investments(4)
|
$
|
403,566
|
$
|
756,409
|
$
|
1,343,448
|
$
|
1,853,675
|
$
|
2,185,746
|
||||||
Total
assets(4)
|
466,557
|
805,976
|
1,400,934
|
1,865,235
|
2,205,735
|
|||||||||||
Securitization
financing(4)
|
211,564
|
516,578
|
1,177,280
|
1,679,830
|
1,980,702
|
|||||||||||
Repurchase
agreements and senior notes
|
95,978
|
133,315
|
70,468
|
33,933
|
-
|
|||||||||||
Total
liabilities(4)
|
330,019
|
656,642
|
1,252,168
|
1,715,389
|
1,982,314
|
|||||||||||
Shareholders’
equity
|
136,538
|
149,334
|
148,766
|
149,846
|
223,421
|
|||||||||||
Number
of common shares outstanding
|
12,131,262
|
12,163,391
|
12,162,391
|
10,873,903
|
10,873,903
|
|||||||||||
Average
number of common shares
|
12,140,452
|
12,163,062
|
11,272,259
|
10,873,903
|
10,873,871
|
|||||||||||
Book
value per common share
|
$
|
7.78
|
$
|
7.65
|
$
|
7.60
|
$
|
7.55
|
$
|
8.57
|
December
31,
|
|||||||
(amounts
in thousands except per share data)
|
2006
|
2005
|
|||||
Investments:
|
|||||||
Securitized
finance receivables
|
$
|
346,304
|
$
|
722,152
|
|||
Investment
in joint venture
|
37,388
|
-
|
|||||
Securities
|
13,143
|
24,908
|
|||||
Other
investments
|
2,802
|
4,067
|
|||||
Other
loans
|
3,929
|
5,282
|
|||||
Securitization
financing
|
211,564
|
516,578
|
|||||
Repurchase
agreements
|
95,978
|
133,315
|
|||||
Obligation
under payment agreement
|
16,299
|
-
|
|||||
Shareholders’
equity
|
136,538
|
149,334
|
|||||
Book
value per common share (inclusive of preferred stock liquidation
preference)
|
$
|
7.78
|
$
|
7.65
|
December
31, 2006
|
|||||||||||||
(amounts
in thousands)
|
Amortized
cost
basis
|
Financing
|
Net
basis
|
Fair
value
of
net basis
|
|||||||||
Securitized
finance receivables: (1)
|
|||||||||||||
Single
family mortgage loans
|
$
|
118,226
|
$
|
95,978
|
$
|
22,248
|
$
|
22,965
|
|||||
Commercial
mortgage loans
|
232,573
|
211,564
|
21,009
|
20,466
|
|||||||||
Allowance
for loan losses
|
(4,495
|
)
|
-
|
(4,495
|
)
|
-
|
|||||||
346,304
|
307,542
|
38,762
|
43,431
|
||||||||||
Securities:
(2)
|
|||||||||||||
Investment
grade single-family
|
10,874
|
-
|
10,874
|
11,145
|
|||||||||
Non-investment
grade single-family
|
359
|
-
|
359
|
552
|
|||||||||
Equity
and other
|
1,280
|
-
|
1,280
|
1,446
|
|||||||||
12,513
|
-
|
12,513
|
13,143
|
||||||||||
Investment
in joint venture(3)
|
37,388
|
-
|
37,388
|
36,520
|
|||||||||
Obligation
under payment agreement(1)
|
-
|
16,299
|
(16,299
|
)
|
(16,541
|
)
|
|||||||
Other
loans and investments(2)
|
6,690
|
-
|
6,690
|
7,507
|
|||||||||
Net
unrealized gain
|
671
|
-
|
671
|
-
|
|||||||||
Total
|
$
|
403,566
|
$
|
323,841
|
$
|
79,725
|
$
|
84,060
|
|||||
(1)
|
Fair
values for securitized finance receivables and the obligation under
payment agreement are based on discounted cash flows using assumptions
set
forth in the table below, inclusive of amounts invested in redeemed
securitization financing bonds.
|
(2)
|
Fair
values of securities are based on dealer quotes, if available. Where
dealer quotes are not available, fair values are calculated as the
net
present value of expected future cash flows, discounted at 16%. Expected
cash flows for both securitized finance receivables and securities
were
based on the forward LIBOR curve as of December 31, 2006, and incorporate
the resetting of the interest rates on the adjustable rate assets
to a
level consistent with projected prevailing rates. Increases or decreases
in interest rates and index levels from those used would impact the
calculation of fair value, as would differences in actual prepayment
speeds and credit losses versus the assumptions set forth
above.
|
(3)
|
Fair
value for investment in joint venture represents Dynex’s share of the
joint assets valued using methodologies and assumptions consistent
with
note 1 above.
|
Fair
Value Assumptions
|
||||||||||||||||
Loan
type
|
Weighted-average
prepayment
speeds
|
Losses
|
Weighted-
average
discount
rate(5)
|
Projected
cash
flow
termination
date
|
(amounts
in thousands)
2006
Cash Flows (1)
|
|||||||||||
Single-family
mortgage loans
|
30%
CPR
|
0.2%
annually
|
16%
|
|
Anticipated
final maturity 2024
|
$
|
3,080
|
|||||||||
Commercial
mortgage loans(2)
|
(3)
|
|
0.8%
annually
|
16%
|
|
(4)
|
|
$
|
2,342
|
December
31,
|
|||||||
(amounts
in thousands)
|
2006
|
2005
|
|||||
Cash
and cash equivalents
|
$
|
56,880
|
$
|
45,235
|
|||
Investments:
|
|||||||
AAA
rated and agency MBS fixed income securities
|
$
|
20,876
|
$
|
36,223
|
|||
AA
and A rated fixed income securities
|
2,777
|
6,480
|
|||||
Unrated
and non-investment grade
|
8,924
|
11,781
|
|||||
Securitization
over-collateralization
|
9,760
|
52,032
|
|||||
Investment
in joint venture
|
37,388
|
-
|
|||||
$
|
79,725
|
$
|
106,516
|
December
31, 2006
|
|||||||
(amounts
in thousands)
|
Book
Value
|
Adjusted
Book Value
|
|||||
Total
investment assets (per table above)
|
$
|
79,725
|
$
|
84,060
|
|||
Cash
and cash equivalents
|
56,880
|
56,880
|
|||||
Other
assets and liabilities, net
|
(67
|
)
|
(67
|
)
|
|||
136,538
|
140,873
|
||||||
Less:
Preferred stock liquidation preference
|
(42,215
|
)
|
(42,215
|
)
|
|||
Common
equity book value and adjusted book value
|
$
|
94,323
|
$
|
98,658
|
|||
Common
equity book value per share and adjusted book value per
share
|
$
|
7.78
|
$
|
8.13
|
Year
Ended December 31,
|
||||||||||
(amounts
in thousands except per share information)
|
2006
|
2005
|
2004
|
|||||||
Net
interest income
|
$
|
11,087
|
$
|
11,889
|
$
|
23,281
|
||||
Recapture
of (provision for) loan losses
|
15
|
(5,780
|
)
|
(18,463
|
)
|
|||||
Net
interest income after recapture of (provision for) loan
losses
|
11,102
|
6,109
|
4,818
|
|||||||
Equity
in loss of joint venture
|
(852
|
)
|
-
|
-
|
||||||
Loss
on capitalization of joint venture
|
(1,194
|
)
|
-
|
-
|
||||||
Impairment
charges
|
(60
|
)
|
(2,474
|
)
|
(14,756
|
)
|
||||
(Loss)
gain on sales of investments
|
(183
|
)
|
9,609
|
14,490
|
||||||
Other
income (expense)
|
617
|
2,022
|
(179
|
)
|
||||||
General
and administrative expenses
|
(4,521
|
)
|
(5,681
|
)
|
(7,748
|
)
|
||||
Net
income (loss)
|
4,909
|
9,585
|
(3,375
|
)
|
||||||
Preferred
stock charge
|
(4,044
|
)
|
(5,347
|
)
|
(1,819
|
)
|
||||
Net
income (loss) to common shareholders
|
$
|
865
|
$
|
4,238
|
$
|
(5,194
|
)
|
|||
Basic
& diluted net income (loss) per common share
|
$
|
0.07
|
$
|
0.35
|
$
|
(0.46
|
)
|
|||
Dividends
declared per share:
|
||||||||||
Common
|
$
|
-
|
$
|
-
|
$
|
-
|
||||
Series
D Preferred
|
$
|
0.9500
|
$
|
0.9500
|
$
|
0.6993
|
Year
ended December 31,
|
|||||||||||||||||||
2006
|
2005
|
2004
|
|||||||||||||||||
(amounts
in thousands)
|
Average
Balance
|
Effective
Rate
|
Average
Balance
|
Effective
Rate
|
Average
Balance
|
Effective
Rate
|
|||||||||||||
Interest-earning
assets(1):
|
|||||||||||||||||||
Securitized
finance receivables(2)(3)
|
$
|
586,113
|
7.88%
|
|
$
|
931,777
|
7.19%
|
|
$
|
1,601,553
|
7.41%
|
|
|||||||
Other
interest-bearing assets
|
23,823
|
8.86%
|
|
83,767
|
5.31%
|
|
32,304
|
8.28%
|
|
||||||||||
Total
interest-earning assets
|
$
|
609,936
|
7.92%
|
|
$
|
1,015,544
|
7.10%
|
|
$
|
1,633,857
|
7.43%
|
|
|||||||
Interest-bearing
liabilities:
|
|||||||||||||||||||
Non-recourse securitization
financing(3)
|
$
|
401,050
|
8.08%
|
|
$
|
735,910
|
7.40%
|
|
$
|
1,499,772
|
6.40%
|
|
|||||||
Repurchase
agreements
|
114,252
|
5.12%
|
|
151,328
|
3.59%
|
|
21,040
|
1.75%
|
|
||||||||||
Senior
notes
|
-
|
-%
|
|
-
|
-%
|
|
2,020
|
9.90%
|
|
||||||||||
Total
interest-bearing liabilities
|
$
|
515,302
|
7.42%
|
|
$
|
887,238
|
6.75%
|
|
$
|
1,522,832
|
6.34%
|
|
|||||||
Net
interest spread(3)
|
0.50%
|
|
0.35%
|
|
1.09%
|
|
|||||||||||||
Net
yield on average interest-earning assets(3)
|
1.64%
|
|
1.20%
|
|
1.51%
|
|
|||||||||||||
Cash
and cash equivalents
|
$
|
40,881
|
4.93%
|
|
$
|
29,962
|
2.56%
|
|
$
|
24,529
|
1.37%
|
|
|||||||
Net
yield on average interest-earning assets(3),
including
cash and cash equivalents
|
1.84%
|
|
1.24%
|
|
1.51%
|
|
2006
to 2005
|
2005
to 2004
|
||||||||||||||||||
(amounts
in thousands)
|
Rate
|
Volume
|
Total
|
Rate
|
Volume
|
Total
|
|||||||||||||
Securitized
finance receivables
|
$
|
5,973
|
$
|
(26,805
|
)
|
$
|
(20,832
|
)
|
$
|
(3,409
|
)
|
$
|
(48,202
|
)
|
$
|
(51,611
|
)
|
||
Other
interest-bearing assets
|
1,161
|
(4,103
|
)
|
(2,942
|
)
|
(785
|
)
|
3,161
|
2,376
|
||||||||||
Total
interest income
|
7,134
|
(30,908
|
)
|
(23,774
|
)
|
(4,194
|
)
|
(45,041
|
)
|
(49,235
|
)
|
||||||||
Securitization
financing
|
4,577
|
(26,675
|
)
|
(22,098
|
)
|
13,195
|
(54,776
|
)
|
(41,581
|
)
|
|||||||||
Senior
notes
|
-
|
-
|
-
|
(100
|
)
|
(100
|
)
|
(200
|
)
|
||||||||||
Repurchase
agreements
|
2,096
|
(1,591
|
)
|
505
|
460
|
4,601
|
5,061
|
||||||||||||
Total
interest expense
|
6,673
|
(28,266
|
)
|
(21,593
|
)
|
13,555
|
(50,275
|
)
|
(36,720
|
)
|
|||||||||
Net
interest income
|
$
|
461
|
$
|
(2,642
|
)
|
$
|
(2,181
|
)
|
$
|
(17,749
|
)
|
$
|
5,234
|
$
|
(12,515
|
)
|
Outstanding
Loan Principal Balance
|
Credit
Exposure, Net of Credit Reserves
|
Actual
Credit
Losses
|
Credit
Exposure, Net of Credit Reserves to Outstanding Loan
Balance
|
||||||||||
2004
|
$
|
1,296.5
|
$
|
39.9
|
$
|
25.1
|
3.08
|
%
|
|||||
2005
|
$
|
751.1
|
$
|
28.9
|
$
|
3.6
|
3.85
|
%
|
|||||
2006
|
$
|
361.3
|
$
|
22.4
|
$
|
7.2
|
6.20
|
%
|
December
31,
|
30
to 59 days
delinquent
|
60
to 89 days
delinquent
|
90
days and over
delinquent
(1)
|
Total
|
2004
|
4.30%
|
1.06%
|
3.35%
|
8.71%
|
2005
|
4.28%
|
0.62%
|
2.60%
|
7.50%
|
2006
|
4.90%
|
1.89%
|
3.05%
|
9.84%
|
December
31,
|
30
to 59 days
delinquent
|
60
to 89 days
delinquent
|
90
days and over
delinquent
(1)
|
Total
|
2004
|
-%
|
-%
|
7.96%
|
7.96%
|
2005
|
-%
|
0.25%
|
6.65%
|
6.90%
|
2006
|
-%
|
-%
|
1.36%
|
1.36%
|
Payments
due by period
|
||||||||||||||||
Contractual
Obligations(1)
|
Total
|
<
1 year
|
1-3
years
|
3-5
years
|
>
5 years
|
|||||||||||
Long-Term
Debt Obligations:(2)
|
||||||||||||||||
Non-recourse
securitization financing(3)
|
$
|
317,808
|
$
|
44,118
|
$
|
84,116
|
$
|
148,964
|
$
|
40,610
|
||||||
Repurchase
agreements
|
95,978
|
95,978
|
-
|
-
|
-
|
|||||||||||
Operating
lease obligations
|
209
|
145
|
64
|
-
|
-
|
|||||||||||
Mortgage
servicing obligations
|
3,980
|
414
|
933
|
569
|
2,064
|
|||||||||||
Obligation
under payment agreement(4)
|
22,422
|
1,542
|
4,147
|
16,733
|
-
|
|||||||||||
Total
|
$
|
440,397
|
$
|
142,197
|
$
|
89,260
|
$
|
166,266
|
$
|
42,674
|
(1)
|
As
the master servicer for certain of the series of non-recourse
securitization financing securities which we have issued, and certain
loans which have been securitized but for which we are not the master
servicer, we have an obligation to advance scheduled principal and
interest on delinquent loans in accordance with the underlying servicing
agreements should the primary servicer fail to make such advance.
Such
advance amounts are generally repaid in the same month as they are
made,
or shortly thereafter, and the contractual obligation with respect
to
these advances is excluded from the above
table.
|
(2)
|
Amounts
presented for Long-Term Debt Obligations include estimated principal
and
interest on the related
obligations.
|
(3)
|
Securitization
financing is non-recourse to us as the bonds are payable solely from
loans
and securities pledged as securitized finance receivables. Payments
due by
period were estimated based on the principal repayments forecast
for the
underlying loans and securities, substantially all of which is used
to
repay the associated securitization financing
outstanding.
|
(4)
|
We
entered an agreement to contribute to a joint venture all of the
net
cashflows from our interests in a pool of securitized commercial
mortgage
loans. By agreement, the joint venture is scheduled to dissolve no
later
than 2011.
|
Year
Ended December 31, 2006
|
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
|||||||||
Operating
results:
|
|||||||||||||
Total
interest income
|
$
|
14,766
|
$
|
14,192
|
$
|
13,000
|
$
|
8,491
|
|||||
Net
interest income after provision for loan losses
|
2,407
|
2,543
|
3,102
|
3,050
|
|||||||||
Net
income (loss)
(2)
|
1,213
|
1,615
|
(215
|
)
|
2,297
|
||||||||
Basic
and diluted net income (loss) per common share
|
0.01
|
0.05
|
(0.10
|
)
|
0.11
|
||||||||
Cash
dividends declared per common share
|
-
|
-
|
-
|
-
|
|||||||||
Average
interest-earning assets
(4)
|
764,682
|
713,000
|
588,306
|
375,152
|
|||||||||
Average
borrowed funds
|
635,877
|
609,813
|
502,842
|
316,388
|
|||||||||
Net
interest spread on interest-earning assets
(3)
|
(0.13
|
)%
|
0.14
|
%
|
0.83
|
%
|
2.00
|
%
|
|||||
Average
asset yield
|
7.59
|
%
|
7.68
|
%
|
8.39
|
%
|
8.28
|
%
|
|||||
Net
yield on average interest-earning assets(1)
|
1.18
|
%
|
1.22
|
%
|
1.90
|
%
|
2.95
|
%
|
|||||
Cost
of funds
|
7.72
|
%
|
7.54
|
%
|
7.56
|
%
|
6.28
|
%
|
Year
Ended December
31, 2005
|
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
|||||||||
Operating
results:
|
|||||||||||||
Total
interest income
|
$
|
24,053
|
$
|
18,533
|
$
|
15,717
|
$
|
16,092
|
|||||
Net
interest income after provision for loan losses
|
2,196
|
2,068
|
992
|
853
|
|||||||||
Net
income (loss)
|
935
|
9,594
|
(1,899
|
)
|
955
|
||||||||
Basic
net (loss) income per common share
|
(0.03
|
)
|
0.68
|
(0.27
|
)
|
(0.03
|
)
|
||||||
Diluted
net (loss) income per common share
|
(0.03
|
)
|
0.54
|
(0.27
|
)
|
(0.03
|
)
|
||||||
Cash
dividends declared per common share
|
-
|
-
|
-
|
-
|
|||||||||
Average
interest-earning assets (4)
|
1,320,065
|
1,031,024
|
884,336
|
817,944
|
|||||||||
Average
borrowed funds
|
1,214,329
|
909,881
|
745,776
|
678,966
|
|||||||||
Net
interest spread on interest-earning assets
(3)
|
0.88
|
%
|
0.25
|
%
|
0.22
|
%
|
(0.23
|
)%
|
|||||
Average
asset yield
|
7.17
|
%
|
7.09
|
%
|
7.04
|
%
|
7.13
|
%
|
|||||
Net
yield on average interest-earning assets (1)
|
1.39
|
%
|
1.05
|
%
|
1.26
|
%
|
1.01
|
%
|
|||||
Cost
of funds
|
6.29
|
%
|
6.84
|
%
|
6.82
|
%
|
7.37
|
%
|
·
|
Our
ownership of certain subordinate interests in securitization trusts
subjects us to credit risk on the underlying loans, and we provide
for
loss reserves on these loans as required under GAAP.
|
·
|
Certain
investments employ internal structural leverage as a result of the
securitization process, and are in the most subordinate position
in the
capital structure, which magnifies the potential impact of adverse
events
on our cash flows and reported results.
|
·
|
Our
efforts to manage credit risk may not be successful in limiting
delinquencies and defaults in underlying loans or losses on our
investments.
|
·
|
We
may be unable to invest in new assets with attractive yields, and
yields
on new assets in which we do invest may not generate attractive yields,
resulting in a decline in our earnings per share over
time.
|
·
|
Prepayments
of principal on our investments, and the timing of prepayments, may
impact
our reported earnings and our cash
flows.
|
·
|
We
finance a portion of our investment portfolio with short-term recourse
repurchase agreements which subjects us to margin calls if the assets
pledged subsequently decline in
value.
|
·
|
We
may be subject to the risks associated with inadequate or untimely
services from third-party service providers, which may harm our results
of
operations.
|
·
|
Interest
rate fluctuations can have various negative effects on us, and could
lead
to reduced earnings and/or increased earnings
volatility.
|
·
|
Our
reported income depends on accounting conventions and assumptions
about
the future that may change.
|
·
|
Failure
to qualify as a REIT would adversely affect our dividend distributions
and
could adversely affect the value of our
securities.
|
·
|
Maintaining
REIT status may reduce our flexibility to manage our
operations.
|
·
|
We
may fail to properly conduct our operations so as to avoid falling
under
the definition of an investment company pursuant to the Investment
Company
Act of 1940.
|
·
|
We
are dependent on certain key
personnel.
|
Projected
Change in Net Interest Margin Cash Flow From Base
Case
|
Projected
Change in Value, Expressed as a Percentage of Shareholders’
Equity
|
|||||
Basis
Point Increase (Decrease) in Interest Rates
|
Excluding
Cash and Cash Equivalents
|
Including
Cash and Cash Equivalents
|
||||
+200
|
(3.9)%
|
12.0%
|
(0.3)%
|
|||
+100
|
(0.7)%
|
6.8%
|
(0.0)%
|
|||
Base
|
-
|
-
|
-
|
|||
-100
|
0.7%
|
(6.8)%
|
0.0%
|
|||
-200
|
4.5%
|
(11.6)%
|
0.3%
|
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
1.
and 2.
|
Financial
Statements and Schedules
The
information required by this section of Item 15 is set forth in the
Consolidated Financial Statements and Report of Independent Registered
Public Accounting Firm beginning at page F-1 of this Form 10-K.
The index to the Financial Statements is set forth at page F-2 of
this
Form 10-K.
|
3.
|
Exhibits
|
Number
|
Exhibit
|
3.1
|
Articles
of Incorporation of the Registrant, as amended, effective as of February
4, 1988. (Incorporated herein by reference to Dynex’s Amendment No. 1 to
the Registration Statement on Form S-3 (No. 333-10783) filed March
21,
1997.)
|
3.2
|
Amended
and Restated Bylaws of the Registrant. (Incorporated by reference
to
Dynex’s Current Report on Form 8-K filed June 21, 2006.)
|
3.3
|
Amendment
to Articles of Incorporation, effective December 29, 1989. (Incorporated
herein by reference to Dynex’s Amendment No. 1 to the Registration
Statement on Form S-3 (No. 333-10783) filed March 21, 1997.)
|
3.4
|
Amendment
to Articles of Incorporation, effective October 9, 1996. (Incorporated
herein by reference to the Registrant’s Current Report on Form 8-K, filed
October 15, 1996.)
|
3.5
|
Amendment
to Articles of Incorporation, effective October 19, 1992. (Incorporated
herein by reference to Dynex’s Amendment No. 1 to the Registration
Statement on Form S-3 (No. 333-10783) filed March 21,
1997.)
|
3.6
|
Amendment
to Articles of Incorporation, effective April 25, 1997. (Incorporated
herein by reference to Dynex’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997.)
|
3.7
|
Amendment
to Articles of Incorporation, effective June 17, 1998. (Incorporated
herein by reference to Dynex’s Annual Report on Form 10-K for the year
ended December 31, 2004.)
|
3.8
|
Amendment
to Articles of Incorporation, effective August 2, 1999. (Incorporated
herein by reference to Dynex’s Annual Report on Form 10-K for the year
ended December 31, 2004.)
|
3.9
|
Amendment
to Articles of Incorporation, effective May 19, 2004. (Incorporated
herein
by reference to Dynex’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2004.)
|
3.10
|
Amendments
to the Bylaws of Dynex. (Incorporated herein by reference to Dynex’s
Annual Report on Form 10-K for the year ended December 31, 2002,
as
amended.)
|
10.1
|
Dynex
Capital, Inc. 2004 Stock Incentive Plan. (Incorporated herein by
reference
to Dynex’s Annual Report on Form 10-K for the year ended December 31,
2004.)
|
10.2
|
Form
of Stock Option Agreement for Non-Employee Directors under the Dynex
Capital, Inc. 2004 Stock Incentive Plan. (Incorporated herein by
reference
to Dynex’s Quarterly Report on Form 10-Q for the quarter ended June 30,
2005.)
|
10.3
|
Form
of Stock Appreciation Rights Agreement for Senior Executives under
the
Dynex Capital, Inc. 2004 Stock Incentive Plan. (Incorporated herein
by
reference to Dynex’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2005.)
|
10.4
|
Limited
Liability Company Agreement of Copperhead Ventures, LLC dated September
8,
2007 (portions of this exhibit have been omitted pursuant to a request
for
confidential treatment). (Incorporated herein by reference to Dynex’s
Quarterly Report on Form 10-Q for the quarter ended September 30,
2006.)
|
21.1
|
List
of consolidated entities of Dynex (filed herewith).
|
23.1
|
Consent
of BDO Seidman, LLP (filed herewith).
|
23.2
|
Consent
of Deloitte & Touche, LLP (filed herewith).
|
31.1
|
Certification
of Principal Executive Officer and Principal Financial Officer pursuant
to
Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
32.1
|
Certification
of Principal Executive Officer and Chief Financial Officer pursuant
to
Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|