Commission
File Number: 1-9819
|
Virginia
|
52-1549373
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
4551
Cox Road, Suite 300, Glen Allen, Virginia
|
23060-6740
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(804)
217-5800
(Registrant‘s
telephone number, including area
code)
|
Page
|
|||
PART
I.
|
FINANCIAL
INFORMATION
|
||
Item
1.
|
Financial
Statements
|
||
Condensed
Consolidated Balance Sheets at March 31, 2007 (unaudited) and December
31,
2006
|
1
|
||
Condensed
Consolidated Statements of Operations and Comprehensive Income for
the
three months ended March 31, 2007 and 2006 (unaudited)
|
2
|
||
Condensed
Consolidated Statements of Cash Flows for the three months ended
March 31,
2007 and 2006 (unaudited)
|
3
|
||
Notes
to Condensed Consolidated Financial Statements
(unaudited)
|
4
|
||
Item
2.
|
Management’s
Discussion and
Analysis of Financial
Condition and Results of Operations
|
12
|
|
Item
3.
|
Quantitative
and
Qualitative Disclosures about Market Risk
|
26
|
|
Item
4.
|
Controls
and Procedures
|
28
|
|
PART
II.
|
OTHER
INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
28
|
|
Item
1A.
|
Risk
Factors
|
30
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
30
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
30
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
30
|
|
Item
5.
|
Other
Information
|
30
|
|
Item
6.
|
Exhibits
|
30
|
|
SIGNATURE
|
31
|
March
31,
|
December
31,
|
||||||
2007
|
2006
|
||||||
ASSETS
|
|||||||
Cash
and cash equivalents
|
$
|
57,843
|
$
|
56,880
|
|||
Other
assets
|
4,705
|
6,111
|
|||||
62,548
|
62,991
|
||||||
Investments:
|
|||||||
Securitized
finance receivables:
|
|||||||
Commercial
mortgage loans, net
|
224,173
|
228,466
|
|||||
Single-family
mortgage loans, net
|
106,654
|
117,838
|
|||||
330,827
|
346,304
|
||||||
Investment
in joint venture
|
38,847
|
37,388
|
|||||
Securities
|
16,452
|
13,143
|
|||||
Other
investments
|
2,671
|
2,802
|
|||||
Other
loans
|
3,645
|
3,929
|
|||||
392,442
|
403,566
|
||||||
$
|
454,990
|
$
|
466,557
|
||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|||||||
LIABILITIES
|
|||||||
Securitization
financing
|
$
|
206,615
|
$
|
211,564
|
|||
Repurchase
agreements secured by securitization financing
|
86,926
|
95,978
|
|||||
Obligation
under payment agreement
|
16,847
|
16,299
|
|||||
Other
liabilities
|
6,132
|
6,178
|
|||||
316,520
|
330,019
|
||||||
Commitments
and Contingencies (Note 11)
|
|||||||
SHAREHOLDERS'
EQUITY
|
|||||||
Preferred
stock, par value $0.01 per share, 50,000,000 shares
authorized,
|
|||||||
9.5%
Cumulative Convertible Series D, 4,221,539 shares issued
and
|
|||||||
outstanding
($43,218 aggregate liquidation preference)
|
41,749
|
41,749
|
|||||
Common
stock, par value $0.01 per share, 100,000,000 shares
authorized,
|
|||||||
12,136,262
and 12,131,262 shares issued outstanding, respectively
|
121
|
121
|
|||||
Additional
paid-in capital
|
366,674
|
366,637
|
|||||
Accumulated
other comprehensive income
|
1,618
|
663
|
|||||
Accumulated
deficit
|
(271,692
|
)
|
(272,632
|
)
|
|||
138,470
|
136,538
|
||||||
$
|
454,990
|
$
|
466,557
|
||||
See
notes to unaudited condensed consolidated financial
statements.
|
Three
Months Ended
|
|||||||
March
31,
|
|||||||
2007
|
2006
|
||||||
Interest
income:
|
|||||||
Securitized
finance receivables
|
$
|
7,025
|
$
|
13,886
|
|||
Securities
|
324
|
546
|
|||||
Other
investments
|
739
|
227
|
|||||
Other
loans
|
127
|
107
|
|||||
8,215
|
14,766
|
||||||
Interest
and related expenses:
|
|||||||
Non-recourse
securitization financing
|
4,096
|
10,988
|
|||||
Repurchase
agreements
|
1,258
|
1,515
|
|||||
Obligation
under payment agreement
|
367
|
-
|
|||||
Other
|
34
|
(25
|
)
|
||||
5,755
|
12,478
|
||||||
Net
interest income
|
2,460
|
2,288
|
|||||
Recapture
of loan losses
|
523
|
119
|
|||||
Net
interest income after recapture of loan losses
|
2,983
|
2,407
|
|||||
Equity
in earnings of joint venture
|
630
|
-
|
|||||
Other
(expense) income
|
(545
|
)
|
133
|
||||
General
and administrative expenses
|
(1,126
|
)
|
(1,327
|
)
|
|||
Net
income
|
1,942
|
1,213
|
|||||
Preferred
stock charge
|
(1,003
|
)
|
(1,036
|
)
|
|||
Net
income to common shareholders
|
$
|
939
|
$
|
177
|
|||
Change
in net unrealized gain on :
|
|||||||
Investments
classified as available-for-sale
|
126
|
364
|
|||||
Investment
in joint venture
|
829
|
-
|
|||||
Comprehensive
income
|
$
|
2,897
|
$
|
1,577
|
|||
Net
income per common share:
|
|||||||
Basic
and diluted
|
$
|
0.08
|
$
|
0.01
|
|||
See
notes to unaudited condensed consolidated financial
statements.
|
Three
Months Ended
|
|||||||
March
31,
|
|||||||
2007
|
2006
|
||||||
Operating
activities:
|
|||||||
Net
income
|
$
|
1,942
|
$
|
1,213
|
|||
Adjustments
to reconcile net income to cash
|
|||||||
provided
by operating activities:
|
|||||||
Equity
in earnings of joint venture
|
(630
|
)
|
-
|
||||
Recapture
of loan losses
|
(523
|
)
|
(119
|
)
|
|||
(Loss)
gain on sale of investments
|
6
|
(24
|
)
|
||||
Amortization
and depreciation
|
(335
|
)
|
365
|
||||
Net
change in other assets and other liabilities
|
1,407
|
75
|
|||||
Net
cash and cash equivalents provided by operating activities
|
1,867
|
1,510
|
|||||
Investing
activities:
|
|||||||
Principal
payments received on investments
|
15,578
|
27,435
|
|||||
Purchase
of securities and other investments
|
(5,591
|
)
|
(16,168
|
)
|
|||
Payments
received on securities, other investments and loans
|
2,811
|
5,883
|
|||||
Proceeds
from sales of securities and other investments
|
83
|
104
|
|||||
Other
|
937
|
69
|
|||||
Net
cash and cash equivalents provided by investing activities
|
13,818
|
17,323
|
|||||
Financing
activities:
|
|||||||
Principal
payments on securitization financing
|
(4,657
|
)
|
(13,009
|
)
|
|||
Net
repayments on repurchase agreements
|
(9,100
|
)
|
(12,190
|
)
|
|||
Issuance
(retirement) of common stock
|
37
|
(137
|
)
|
||||
Retirement
of preferred stock
|
-
|
(14,072
|
)
|
||||
Dividends
paid
|
(1,002
|
)
|
(1,370
|
)
|
|||
Net
cash and cash equivalents used for financing activities
|
(14,722
|
)
|
(40,778
|
)
|
|||
Net
increase (decrease) in cash and cash equivalents
|
963
|
(21,945
|
)
|
||||
Cash
and cash equivalents at beginning of period
|
56,880
|
45,235
|
|||||
Cash
and cash equivalents at end of period
|
$
|
57,843
|
$
|
23,290
|
|||
See
notes to unaudited condensed consolidated financial
statements.
|
Three
Months Ended March 31,
|
|||||||||||||
2007
|
2006
|
||||||||||||
Income
|
Weighted-Average
Number of Shares
|
Income
|
Weighted-
Average
Number
of
Shares
|
||||||||||
Net
income
|
$
|
1,942
|
$
|
1,213
|
|||||||||
Preferred
stock charge
|
(1,003
|
)
|
(1,036
|
)
|
|||||||||
Net
income to common shareholders
|
$
|
939
|
12,133,151
|
$
|
177
|
12,161,682
|
|||||||
Effect
of dividends and additional shares of preferred stock
|
-
|
-
|
-
|
-
|
|||||||||
Diluted
|
$
|
939
|
12,133,151
|
$
|
177
|
12,161,682
|
|||||||
Net
income per share:
|
|||||||||||||
Basic
and diluted
|
$
|
0.08
|
$
|
0.01
|
|||||||||
Reconciliation
of shares included in calculation of earnings per share due to dilutive
effect:
|
|||||||||||||
Incremental
shares of options
|
-
|
426
|
-
|
-
|
|||||||||
$
|
939
|
12,133,577
|
$
|
-
|
-
|
||||||||
Reconciliation
of shares not included in calculation of earnings per share due to
anti-dilutive effect:
|
|||||||||||||
Dividends
and assumed conversion of Series D preferred stock
|
$
|
1,003
|
4,221,539
|
$
|
1,036
|
4,362,259
|
|||||||
Expense
and incremental shares of stock appreciation rights and
options
|
-
|
52,468
|
-
|
93,589
|
|||||||||
$
|
1,003
|
4,274,007
|
$
|
1,036
|
4,455,848
|
||||||||
March
31, 2007
|
December
31, 2006
|
||||||
Collateral:
|
|||||||
Commercial
mortgage loans , unpaid principal
|
$
|
220,215
|
$
|
225,463
|
|||
Single-family
mortgage loans , unpaid principal
|
105,054
|
116,060
|
|||||
325,269
|
341,523
|
||||||
Funds
held by trustees, including funds held for defeasance
|
7,297
|
7,351
|
|||||
Accrued
interest receivable
|
2,302
|
2,380
|
|||||
Unamortized
discounts and premiums, net
|
(503
|
)
|
(455
|
)
|
|||
Loans,
at amortized cost
|
334,365
|
350,799
|
|||||
Allowance
for loan losses
|
(3,538
|
)
|
(4,495
|
)
|
|||
$
|
330,827
|
$
|
346,304
|
Three
Months Ended March 31,
|
|||||||
2007
|
2006
|
||||||
Allowance
at beginning of period
|
$
|
4,495
|
$
|
19,035
|
|||
Recapture
of loan losses
|
(523
|
)
|
(119
|
)
|
|||
Charge-offs,
net of recoveries
|
(434
|
)
|
(3
|
)
|
|||
Allowance
at end of period
|
$
|
3,538
|
$
|
18,913
|
March
31, 2007
|
December
31, 2006
|
||||||||||||
Fair
Value
|
Effective
Interest Rate
|
Fair
Value
|
Effective
Interest Rate
|
||||||||||
Securities,
available-for-sale:
|
|||||||||||||
Adjustable-rate
mortgage securities
|
$
|
3,765
|
5.44
|
%
|
$
|
-
|
-
|
%
|
|||||
Fixed-rate
mortgage securities
|
10,877
|
7.18
|
%
|
11,362
|
7.22
|
%
|
|||||||
Equity
securities
|
1,152
|
1,151
|
|||||||||||
15,794
|
|||||||||||||
Gross
unrealized gains
|
668
|
636
|
|||||||||||
Gross
unrealized losses
|
(10
|
)
|
(6
|
)
|
|||||||||
$
|
16,452
|
$
|
13,143
|
March
31, 2007
|
December
31, 2006
|
||||||
Delinquent
property tax receivable securities
|
$
|
2,164
|
$
|
2,227
|
|||
Real
estate owned
|
507
|
575
|
|||||
$
|
2,671
|
$
|
2,802
|
March
31, 2007
|
December
31, 2006
|
||||||
Single-family
mortgage loans
|
$
|
3,034
|
$
|
3,345
|
|||
Multifamily
and commercial mortgage loan participations
|
955
|
962
|
|||||
3,989
|
4,307
|
||||||
Unamortized
discounts
|
(344
|
)
|
(378
|
)
|
|||
$
|
3,645
|
$
|
3,929
|
March
31, 2007
|
December
31, 2006
|
||||||||||||
Bonds
Outstanding
|
Range
of Interest Rates
|
Bonds
Outstanding
|
Range
of Interest Rates
|
||||||||||
Fixed-rate
classes
|
$
|
201,820
|
6.6%
- 8.8
|
%
|
$
|
206,478
|
6.6%
- 8.8
|
%
|
|||||
Accrued
interest payable
|
1,396
|
1,428
|
|||||||||||
Deferred
costs
|
(2,742
|
)
|
(2,848
|
)
|
|||||||||
Unamortized
net bond premium
|
6,141
|
6,506
|
|||||||||||
$
|
206,615
|
$
|
211,564
|
||||||||||
Range
of stated maturities
|
2024-2027
|
2024-2027
|
|||||||||||
Estimated
weighted average life
|
4.1 years
|
4.3
years
|
|||||||||||
Number
of series
|
2
|
2
|
SARs
Granted
|
||||
January
3, 2005
|
January
12, 2006
|
January
3, 2007
|
||
Expected
volatility
|
13.9%-16.9%
|
14.4%-19.1%
|
17.4%-27.2%
|
|
Weighted-average
volatility
|
14.8%
|
17.0%
|
21.5%
|
|
Expected
dividends
|
0%
|
0%
|
0%
|
|
Expected
term (in months)
|
33
|
42
|
54
|
|
Risk-free
rate
|
4.54%
|
4.56%
|
4.58%
|
(amounts
in thousands except per share data)
|
March
31, 2007
|
December
31, 2006
|
|||||
Investments:
|
|||||||
Securitized
finance receivables
|
$
|
330,827
|
$
|
346,304
|
|||
Investment
in joint venture
|
38,847
|
37,388
|
|||||
Securities
|
16,452
|
13,143
|
|||||
Other
investments
|
2,671
|
2,802
|
|||||
Other
loans
|
3,645
|
3,929
|
|||||
Securitization
financing
|
206,615
|
211,564
|
|||||
Repurchase
agreements
|
86,926
|
95,978
|
|||||
Obligation
under payment agreement
|
16,847
|
16,299
|
|||||
Shareholders’
equity
|
138,470
|
136,538
|
|||||
Common
book value per share
|
$
|
7.93
|
$
|
7.78
|
March
31, 2007
|
|||||||||||||
(amounts
in thousands)
|
Amortized
cost basis
|
Financing
|
Net
basis
|
Fair
value of net basis
|
|||||||||
Securitized
finance receivables: (1)
|
|||||||||||||
Single
family mortgage loans
|
$
|
107,022
|
$
|
86,926
|
$
|
20,096
|
$
|
20,621
|
|||||
Commercial
mortgage loans
|
227,343
|
206,615
|
20,728
|
21,125
|
|||||||||
Allowance
for loan losses
|
(3,538
|
)
|
-
|
(3,538
|
)
|
-
|
|||||||
330,827
|
293,541
|
37,286
|
41,746
|
||||||||||
Securities:
(2)
|
|||||||||||||
Investment
grade single-family
|
14,165
|
-
|
14,165
|
14,439
|
|||||||||
Non-investment
grade single-family
|
356
|
-
|
356
|
548
|
|||||||||
Equity
and other
|
1,274
|
-
|
1,274
|
1,464
|
|||||||||
15,795
|
-
|
15,795
|
16,451
|
||||||||||
Investment
in joint venture(3)
|
38,847
|
-
|
38,847
|
38,080
|
|||||||||
Obligation
under payment agreement(1)
|
-
|
16,847
|
(16,847
|
)
|
(17,157
|
)
|
|||||||
Other
loans and investments(2)
|
6,176
|
-
|
6,176
|
7,050
|
|||||||||
Net
unrealized gain
|
797
|
-
|
797
|
-
|
|||||||||
Total
|
$
|
392,442
|
$
|
310,388
|
$
|
82,054
|
$
|
86,170
|
|||||
(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 March 31, 2007, 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 and 2 above.
|
Fair
Value Assumptions
|
|||||
Loan
type
|
Weighted-average
prepayment speeds
|
Losses
|
Weighted-average
discount
rate(5)
|
Projected
cash flow termination date
|
(amounts
in thousands)
2007
Cash Flows (1)
|
Single-family
mortgage loans
|
30%
CPR
|
0.2%
annually
|
16%
|
Anticipated
final maturity 2024
|
$831
|
Commercial
mortgage loans(2)
|
(3)
|
0.8%
annually
|
16%
|
(4)
|
$572
|
(amounts
in thousands)
|
March
31, 2007
|
|||
Cash
and cash equivalents
|
$
|
57,843
|
||
Investments:
|
||||
AAA
rated and agency MBS fixed income securities
|
23,181
|
|||
AA
and A rated fixed income securities
|
1,892
|
|||
Unrated
and non-investment grade
|
8,521
|
|||
Securitization
over-collateralization
|
9,613
|
|||
Investment
in joint venture
|
38,847
|
|||
$
|
82,054
|
|||
March
31, 2007
|
|||||||
(amounts
in thousands)
|
Book
Value
|
Adjusted
Common Equity Book Value
|
|||||
Total
investment assets (per table above)
|
$
|
82,054
|
$
|
86,170
|
|||
Cash
and cash equivalents
|
57,843
|
57,843
|
|||||
Other
assets and liabilities, net
|
(1,427
|
)
|
(1,427
|
)
|
|||
138,470
|
142,586
|
||||||
Less:
Preferred stock redemption value
|
(42,215
|
)
|
(42,215
|
)
|
|||
Common
equity book value and adjusted book value
|
$
|
96,255
|
$
|
100,371
|
|||
Common
equity book value per share and adjusted book value per
share
|
$
|
7.93
|
$
|
8.27
|
Three
Months Ended
|
|||||||
March
31,
|
|||||||
(amounts
in thousands except per share information)
|
2007
|
2006
|
|||||
Net
interest income
|
$
|
2,460
|
$
|
2,288
|
|||
Recapture
of loan losses
|
523
|
119
|
|||||
Net
interest income after recapture of loan losses
|
2,983
|
2,407
|
|||||
Equity
in earnings of joint venture
|
630
|
-
|
|||||
Other
(expense) income
|
(545
|
)
|
133
|
||||
General
and administrative expenses
|
(1,126
|
)
|
(1,327
|
)
|
|||
Net
income
|
1,942
|
1,213
|
|||||
Preferred
stock charge
|
(1,003
|
)
|
(1,036
|
)
|
|||
Net
income to common shareholders
|
939
|
177
|
|||||
Net
income per common share:
|
|||||||
Basic
and diluted
|
$
|
0.08
|
$
|
0.01
|
Three
Months Ended March 31,
|
|||||||||||||
2007
|
2006
|
||||||||||||
Average
Balance
|
Effective
Rate
|
Average
Balance
|
Effective
Rate
|
||||||||||
Interest-earning
assets:(1)
|
|||||||||||||
Securitized
finance receivables(2)
|
$
|
342,239
|
8.20
|
%
|
$
|
723,881
|
7.67
|
%
|
|||||
Securities
|
13,143
|
9.87
|
%
|
35,617
|
6.09
|
%
|
|||||||
Other
loans
|
3,733
|
13.58
|
%
|
5,184
|
8.23
|
%
|
|||||||
Total
interest-earning assets
|
$
|
359,115
|
8.32
|
%
|
$
|
764,682
|
7.59
|
%
|
|||||
Interest-bearing
liabilities:
|
|||||||||||||
Non-recourse
securitization financing(3)
|
$
|
208,434
|
7.65
|
%
|
$
|
507,482
|
8.48
|
%
|
|||||
Repurchase
agreements
|
92,705
|
5.43
|
%
|
128,395
|
4.72
|
%
|
|||||||
Total
interest-bearing liabilities
|
$
|
301,139
|
6.97
|
%
|
$
|
635,877
|
7.72
|
%
|
|||||
Net
interest spread (3)
|
1.35
|
%
|
(0.13
|
)%
|
|||||||||
Net
yield on average interest-earning assets(3)(4)
|
2.48
|
%
|
1.18
|
%
|
|||||||||
Cash
and cash equivalents
|
$
|
56,595
|
5.22
|
%
|
$
|
20,156
|
4.50
|
%
|
|||||
Net
yield on average interest-earning assets,
including
cash and cash equivalents
|
2.85
|
%
|
1.26
|
%
|
|||||||||
(1) |
Average
balances exclude adjustments made in accordance with Statement of
Financial Accounting Standards No. 115, “Accounting for Certain
Investments in Debt and Equity Securities” to record available-for-sale
securities at fair value.
|
(2) |
Average
balances exclude funds held by trustees and bond issuance costs for
the
three months ended March 31, 2007 and 2006,
respectively.
|
(3) |
Effective
rates are calculated excluding non-interest related collateralized
bond
expenses. If included, the effective rate on interest-bearing liabilities
would be 7.49% and 7.85% for the three months ended March 31, 2007
and
2006, respectively.
|
(4) |
Net
yield on average interest-earning assets reflects net interest income
excluding non-interest related collateralized bond expenses divided
by
average interest earning assets for the period,
annualized.
|
Three
Months Ended March 31, 2007 vs. 2006
|
||||||||||
(amounts
in thousands)
|
Rate
|
Volume
|
Total
|
|||||||
Securitized
finance receivables
|
$
|
910
|
$
|
(7,767
|
)
|
$
|
(6,857
|
)
|
||
Securities
|
231
|
(449
|
)
|
(218
|
)
|
|||||
Other
loans
|
56
|
(36
|
)
|
20
|
||||||
Total
interest income
|
1,197
|
(8,252
|
)
|
(7,055
|
)
|
|||||
Securitization
financing
|
(967
|
)
|
(5,809
|
)
|
(6,766
|
)
|
||||
Repurchase
agreements
|
203
|
(460
|
)
|
(257
|
)
|
|||||
Total
interest expense
|
(764
|
)
|
(6,269
|
)
|
(7,033
|
)
|
||||
Net
interest income
|
$
|
1,961
|
$
|
(1,983
|
)
|
$
|
(22
|
)
|
Outstanding
Loan
Principal
Balance
|
Credit
Exposure,
Net
Of
Credit
Reserves
|
Actual
Credit
Losses
|
Credit
Exposure, Net Of Credit Reserves To Outstanding Loan
Balance
|
||||||||||
2006,
Quarter 1
|
$
|
724.4
|
$
|
32.0
|
$
|
0.5
|
4.42
|
%
|
|||||
2006,
Quarter 2
|
693.8
|
33.1
|
6.6
|
4.77
|
%
|
||||||||
2006,
Quarter 3
|
378.2
|
21.5
|
0.1
|
5.68
|
%
|
||||||||
2006,
Quarter 4
|
361.3
|
22.4
|
0.0
|
6.20
|
%
|
||||||||
2007,
Quarter 1
|
344.6
|
22.3
|
0.4
|
6.47
|
%
|
December
31,
|
30
to 59 days delinquent
|
60
to 89 days
delinquent
|
90
days and over delinquent (1)
|
Total
|
2006,
Quarter 1
|
4.50%
|
0.85%
|
2.90%
|
8.25%
|
2006,
Quarter 2
|
4.51%
|
1.09%
|
2.68%
|
8.28%
|
2006,
Quarter 3
|
4.56%
|
1.28%
|
2.83%
|
8.67%
|
2006,
Quarter 4
|
4.90%
|
1.89%
|
3.05%
|
9.84%
|
2007,
Quarter 1
|
4.60%
|
0.08%
|
3.64%
|
9.04%
|
December
31,
|
30
to 59 days delinquent
|
60
to 89 days
delinquent
|
90
days and over delinquent (1)
|
Total
|
2006,
Quarter 1
|
1.25%
|
-%
|
6.38%
|
7.63%
|
2006,
Quarter 2
|
1.09%
|
-%
|
5.15%
|
6.24%
|
2006,
Quarter 3
|
-%
|
-%
|
1.33%
|
1.33%
|
2006,
Quarter 4
|
-%
|
-%
|
1.36%
|
1.36%
|
2007,
Quarter 1
|
-%
|
-%
|
-%
|
-%
|
· |
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.
|
· |
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.
|
· |
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
|
||||||
Basis
Point Increase (Decrease) in Interest Rates
|
Excluding
Cash and Cash Equivalents
|
Including
Cash and Cash Equivalents
|
Projected
Change in Value, Expressed as a Percentage of Shareholders’
Equity
|
|||
+200
|
(3.7)%
|
14.2%
|
(0.2)%
|
|||
+100
|
(0.7)%
|
7.7%
|
(0.0)%
|
|||
Base
|
-
|
-
|
-
|
|||
-100
|
0.9%
|
(7.6)%
|
0.0%
|
|||
-200
|
4.8%
|
(13.5)%
|
0.3%
|
31.1
|
Certification
of Principal Executive Officer and Principal Financial Officer pursuant
to
Section 302 (filed herewith).
|
32.1
|
Certification
of Principal Executive Officer and Principal Financial Officer pursuant
to
Section 906 (filed herewith).
|
DYNEX
CAPITAL, INC.
|
|
Date:
May 15, 2007
|
/s/
Stephen J. Benedetti
|
Stephen
J. Benedetti
|
|
Executive
Vice President and Chief Operating Officer
|
|
(Principal
Executive Officer and Principal Financial
Officer)
|
Exhibit
No.
|
|
31.1
|
Certification
of Principal Executive Officer and Principal Financial Officer pursuant
to
Section 302 (filed herewith).
|
32.1
|
Certification
of Principal Executive Officer and Principal Financial Officer pursuant
to
Section 906 (filed herewith).
|