Dynex Capital, Inc. · NYSE:DX
Dynex Capital — Southwest IDEAS Investor Conference 2012
23 slides from Dynex Capital's conference presentation, Nov 15, 2012
Slide 1: Southwest IDEAS Investor Conference November 15, 2012
Southwest IDEAS Investor Conference November 15, 2012
Slide 2: Safe Harbor Statement
2 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,
Slide 3: Our Guiding Principles
3 Our Guiding Principles Our Mission Our Core Values •Generate dividends for shareholders •Manage leverage conservatively • Remain owner-operators • Maintain a culture of integrity and employ the highest ethical standards • Provide a strong risk management culture • Focus on long-term shareholder va
Slide 4: DX Snapshot
4 DX Snapshot Internally managed REIT commenced operations in 1988 Significant inside ownership and experienced management team Diversified investment strategy investing in residential and commercial mortgage assets Large NOL carryforward for unique total return opportunity Market Highlights: (as of
Slide 5: Third Quarter 2012 Highlights
5 Third Quarter 2012 Highlights Diluted earnings per common share of $0.34 Book value per common share of $10.31 at September 30, 2012 Annualized return on average equity of 13.6% for the quarter Net interest spread of 2.00% for the quarter Average interest earnings assets were $3,729.1 million Cons
Slide 6: Summary of Results
Summary of Results $0.28 $0.28 $0.29 $0.29 $0.36 $0.33 $0.35 $0.34 $0.00 $0.05 $0.10 $0.15 $0.20 $0.25 $0.30 $0.35 $0.40 Q4-2011 Q1-2012 Q2-2012 Q3-2012 Dividend per Share EPS $9.20 $9.62 $9.66 $10.31 $8.00 $8.50 $9.00 $9.50 $10.00 Q4-2011 Q1-2012 Q2-2012 Q3-2012 2.56% 2.41% 2.18% 2.00% 0.00% 0.50%
Slide 7: Consistent Core Investment Strategy
Consistent Core Investment Strategy 7 Short Duration High Quality Diversified Low Leverage
Slide 8: Capital Allocation (as of September 30, 2012)
Capital Allocation (as of September 30, 2012) 8 38.7% 61.3% 0% 20% 40% 60% 80% Agency RMBS All other assets, net ($ in thousands) $239.3 $378.6 Agency RMBS All other assets, net Shareholders’ Equity % of Shareholders’ Equity
Slide 9: Investment Prepayment Portfolio Risk
Investment Prepayment Portfolio Risk (as of September 30, 2012) 9 Agency RMBS 19% CMBS 81% $145.9 million Agency RMBS Premium Detail Post/near reset* $35.7 million Selected specified pools $110.2 million $604.5 million Total $750.4 million Total $145.9 million Net Premium by Asset Type
Slide 10: MBA Refinancing Index
MBA Refinancing Index 10 Source: Bloomberg • Refinance Index has declined 24% in the last month • Our RMBS CPRs have been in a relatively tight range of 17%-25% CPR with an average of 22% for the past 16 months
Slide 11: Potential Investment Returns (as of October 26, 2012)
11 Potential Investment Returns (as of October 26, 2012) Investment Range of Prices Range of Yields Range of Net Spread to Funding Range of ROEs Agency RMBS 102-115 1.0%- 2.0% .60%-1.4% 6%-13% Agency CMBS 107-117 2.2%-3.0% .76%-1.3% 8%-13% Non-Agency ‘A’ - ’AAA’ RMBS 85-104 1.5%-5.0% .80%-2.0% 5%-11
Slide 12: Portfolio Details (as of September 30, 2012)
Portfolio Details (as of September 30, 2012) Portfolio Expected Maturity/Reset Distribution 15% 11% 14% 28% 31% 1% 0% 5% 10% 15% 20% 25% 30% 35% <15 16-40 41-60 61-84 85-120 120-125 Months to Maturity/Reset Credit Quality AAA 91% AA 2% A 6% Below A 1% *Agency MBS are considered AAA-rated. 12
Slide 13: Dynex Value Proposition
13 Dynex Value Proposition Source: SNL Internally Managed and Publicly Traded Since 1988 Diversified Investment Strategy Large Tax NOL Significant Insider Ownership +94.12% January 1, 2008 – September 30, 2012
Slide 14: Dynex Summary
Dynex Summary 14 Diversified investment strategy Business model provides options to take advantage of selective opportunities and deliver returns in the future Prepayment risk is mitigated by majority of capital allocation to CMBS, which is explicitly prepayment protected Anticipated modest monthly
Slide 15: Appendix
15 APPENDIX
Slide 16: Capital Allocation (as of September 30, 2012)
16 Capital Allocation (as of September 30, 2012) (1) Associated financing for investments includes repurchase agreements and securitization financing issued to third parties (which is presented on the Company’s balance sheet as “non-recourse collateralized financing”). Associated financing for hedgi
Slide 17: Selected Financial Highlights
17 Selected Financial Highlights (as of and for the quarter ended) Financial Highlights: ($000 except per share amounts) Sept 30, 2012 Jun 30, 2012 Mar 31, 2012 Dec 31, 2011 Sept 30, 2011 Total Investments 4,316,247$ 3,628,163$ 3,276,170$ 2,500,976$ 2,595,574$ Total Assets 4,405,030 3,729,197 3,349,
Slide 18: Dynex Is Focused on Capital Preservation and Managing Risk
18 Dynex Is Focused on Capital Preservation and Managing Risk •Invest in shorter duration instruments, with portfolio duration target of 0.5 to 1.5 years •Use interest rate swaps, swaptions, and caps to manage risk •Match terms of funding with terms of assets Interest Rate Risk •91% of investment po
Slide 19: Portfolio Performance
Portfolio Performance *As presented on this slide, Q3-2011 return on average equity is calculated based on a measure that excludes the impact of certain items on earnings per share (EPS Ex-Items). EPS Ex-Items for Q3-2011 was $0.32 and excludes from GAAP earnings per share the impact of litigation s
Slide 20: CMBS Portfolio (as of September 30, 2012)
CMBS Portfolio (as of September 30, 2012) 20 AAA 78% AA 3% A 18% Below A 1% Other 23% Multifamily 77% $100.3 $66.2 $0.0 $406.1 prior to 2000 2000-2005 2006-2008 2009 or newer Agency CMBS $335.1 Agency CMBS IO $515.5 Non- Agency CMBS $475.3 Non- Agency CMBS IO $97.4 Credit Quality Collateral Non-Agen
Slide 21: Agency CMBS Historical Credit Performance
Agency CMBS Historical Credit Performance 21 0.00% 0.05% 0.10% 0.15% 0.20% 0.25% 0.30% 0.35% 0.40% 0.45% % 60 + D a y s Past D u e Source: Freddie Mac
Slide 22: Extension Risk (as of September 30, 2012)
22 Extension Risk (as of September 30, 2012) 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 $106-10 3.50% 3.99% 15 CPR 2 CPR 5.37 years 14.49 years ~9 years FNCI 15yr $104-6 2.50% 3
Slide 23: Financing (as of September 30, 2012)
Financing (as of September 30, 2012) Repurchase Agreements Financing Balance WAVG Rate By collateral pledged: Agency $ 3,194,342 0.51% Non-Agency 442,081 1.40% Other 34,549 1.67% Total $ 3,670,972 0.63% By original maturity: (days) 0-30 $ 1,663,679 0.63% 31-60 898,021 0.83% 61-90 472,705 0.55% >90 6
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