Dynex Capital, Inc. · NYSE:DX
Dynex Capital — Q4 2011 Earnings Presentation
18 slides from Dynex Capital's earnings presentation, Feb 23, 2012
Slide 1: Fourth Quarter 2011 Earnings Conference Call
Dynex Capital, Inc. Fourth Quarter 2011 Earnings Conference Call February 22, 2012
Slide 2: Safe Harbor Statement
2 Safe Harbor Statement NOTE: This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about projected future investment strategies and leverage ratios, financial performance, the projected impact of NOL
Slide 3: Fourth Quarter 2011 Highlights
3 Fourth Quarter 2011 Highlights • Reported diluted earnings per common share of $0.36 • Reported book value per common share of $9.20 • Generated a net interest spread of 2.56% • Declared a dividend of $0.28 per share, representing a 12.3% yield on an annualized basis (1) • Generated an annualized
Slide 4: Summary of Results
4 Summary of Results $0.28$0.25 $0.27 $0.27 $0.27 $0.27 $0.36 $0.34 $0.32$0.31 $0.40 $0.33 $0.00 $0.05 $0.10 $0.15 $0.20 $0.25 $0.30 $0.35 $0.40 Q3-2010 Q4-2010 Q1-2011 Q2-2011 Q3-2011 Q4-2011 Dividend per Share EPS* Dividends and Earnings Per Share* $9.20 $9.80 $9.64 $9.51 $9.59 $9.15 $8.00 $8.20 $
Slide 5: Investment Portfolio Review
5 Investment Portfolio Review • Our portfolio is constructed to perform well despite volatile markets as we have focused on high credit quality short duration assets. • We continue to maintain a selective approach to adding assets to help minimize prepayment risk. • We opportunistically allocated ou
Slide 6: DX Portfolio Detail
6 DX Portfolio Detail (as of December 31, 2011) Non-Agency CMBS/Loans 19% Non-Agency RMBS/Loans 2% Agency RMBS 63% Agency CMBS 16% CMBS 34% RMBS 66% Agency/Non-Agency Breakdown Residential/Commercial Breakdown
Slide 7: High Credit Quality Portfolio
7 High Credit Quality Portfolio A 3% Below A 3% AA 4% AAA 90% As of September 30, 2011 As of December 31, 2011 *Agency securities are considered AAA rated as of the dates presented A 4% Below A 3% AA 4% AAA 89%
Slide 8: Opportunistic Investment Drives Spread
8 Opportunistic Investment Drives Spread December 31, 2011 September 30, 2011 Agency Non-Agency Portfolio Agency Non-Agency Portfolio Investment 3.11% 6.36% 3.76% 3.11% 6.05% 3.59% Cost of funds (0.91%) (2.73%) (1.20%) (0.81%) (2.96%) (1.16%) Net interest spread 2.20% 3.63% 2.56% 2.30% 3.09% 2.43% N
Slide 9: Extension Risk
9 Extension Risk (as of December 31, 2011) 0 2 4 6 8 10 12 14 16 FN 30 year FNCI 15 year FN 5/1 ARM 15 CPR/CPB 2 CPR/CPB Average Life (years) Price Coupon WAC Speed Average Life Average Life Extension FN 30yr $105-2+ 4.00% 4.43% 15 CPR 2 CPR 5.39 years 14.43 years ~9 years FNCI 15yr $104-18+ 3.50% 3
Slide 10: Portfolio Snapshot
10 Portfolio Snapshot (as of December 31, 2011) Prepayment Performance Dollar Premium Prepayment Exposure Post/near reset* 6% Selected specified pools 31% Explicit prepayment protection 63% 21.5% 21.2% 20.0% 17.5% 17.9% 17.6% 17.8% 14.6% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 1 mo3 mo6 mo1 year
Slide 11: Potential Investment Returns
11 Potential Investment Returns (as of February 17, 2012) Investment Range of prices Range of yields Range of net spread to funding Range of ROEs Agency RMBS 103-108 2.0%- 2.8% 1.5%-2.3% 12%-19% Agency CMBS 106-113 2.9%-3.3% 1.1%-1.7% 12%-17% Non-Agency ‘A’ –’AAA’ RMBS 85-104 3.0%-8.5% 1.5%-4.0% 12%
Slide 12: Recourse Financing
12 Recourse Financing (as of December 31, 2011) SWAPS Maturity (mos.) Total Notional Balance WAVG Rate 0-12 $75,000 1.03% 13-36 510,000 1.26% 37-60 390,000 1.99% >60 117,000 1.98% Total $1,092,000 1.58% Repurchase Agreements Original Maturity (Days) Financing Balance WAVG Rate 0-30 $ 180,387 0.52% 3
Slide 13: Portfolio Summary
13 Portfolio Summary • Our portfolio has performed well since 2008 and the earnings power today remains relatively intact. • Prepayment risk is mitigated by superior portfolio construction and HARP 2.0 should have less impact on Hybrid ARMs. • Credit risk is mitigated by highly-rated securities, sup
Slide 14: Sound Strategy. Unique Advantages.
14 Sound Strategy. Unique Advantages. Total Return of 61% based on $3.70 in dividends and $.98 in stock price appreciation 7.1mm shares traded in January 2012 0.2 mm shares traded in January 2008 Source: SNL Trading Volume of DX (by month) Our diversified strategy allows us to allocate capital in m
Slide 15: Appendix
15 APPENDIX
Slide 16: Capital Allocation
16 Capital Allocation (as of December 31, 2011) (1) At December 31, 2011, associated financing for investments includes repurchase agreements, securitization financing issued to third parties and TALF financing (the latter two of which are presented on the Company’s balance sheet as “non-recourse co
Slide 17: Selected Financial Highlights
17 Selected Financial Highlights (as of and for the quarter ended) Financial Highlights: ($000 except per share amounts) Dec 31, 2011 Sept 30, 2011 Jun 30, 2011 Mar 31, 2011 Dec 31, 2010 Total Investments 2,500,976$ 2,595,574$ 2,591,097$ 2,279,610$ 1,614,126$ Total Assets 2,582,193 2,633,686 2,656,7
Slide 18: Key Prepayment Metrics for Selected Agency RMBS Specified Pools
18 Key Prepayment Metrics for Selected Agency RMBS Specified Pools $269.0 $292.0 $297.0 $225.0 $250.0 $275.0 $300.0 DX All ARMs 5/1 ARMs Average Loan Size 42.0% 58.0% 61.0% 25.0% 35.0% 45.0% 55.0% 65.0% DX All ARMs 5/1 ARMs Third Party Originated 18.0% 15.0% 14.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% D