Dynex Capital took a loss as market volatility grew in 3Q

Dynex Capital took a loss of $46.7 million in the third quarter, a period when it and other mortgage real-estate investment trusts had to contend with more fast-moving market gyrations.

Earnings per share missed estimates by nearly 22%, according to Google Finance. Its revenue of $20.4 million ($7.1 million on an adjusted basis) was off by more than 46%.

“While we experienced a decline in book value during the quarter related to this volatility and spread widening, our liquidity remains solid. We are prepared and well-positioned to benefit when the markets find equilibrium,” CEO Byron Boston said in a press release.

Byron Boston, chief executive officer and co-chief investment officer of Dynex Capital Inc.

Patrick T. Fallon/Bloomberg

Dynex Capital’s earnings were down from $29.3 million in net income the previous quarter, when volatility driven by the Federal Reserve’s interest rate policy also hurt the value of its mortgage investments, but not as much as it did in 3Q.

The mortgage REIT’s borrowing costs rose due to Fed rate hikes, and the market value of its agency mortgage-backed securities portfolio fell, outpacing gains in hedging instruments designed to offset interest rate changes. Its net interest income fell 50% from the second quarter as a result.

Also affecting Dynex’s numbers were $27 million or $0.06 per share worth of non-recurring severance costs associated with the departure of Stephen Benedetti, a former chief financial officer, who stepped down from his post in early August and left the company at the end of that month. The company’s current CFO is Robert Colligan, a former Chimera executive.

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