Dynex Capital, Inc. · NYSE:DX
Dynex Capital — Investor Presentation (October 2012)
24 slides from Dynex Capital's investor presentation, Oct 2, 2012
Slide 1: Investor Presentation October 2012
Investor Presentation October 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: DX Snapshot
3 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 4: Recent Highlights
4 Recent Highlights (at June 30, 2012 unless otherwise specified) 2Q2012 diluted EPS of $0.35 and annualized ROE of 14.3% Book value per common share of $9.66 2Q2012 net interest spread of 2.18% and portfolio CPR of 14.3% Declared common dividend of $0.29 per share (10.8% yield based on 9/27 closing
Slide 5: Our Track Record
Our Track Record $0.71 $0.92 $0.98 $1.09 $1.16 $0.30 $0.50 $0.70 $0.90 $1.10 $1.30 2008 2009 2010 2011 Q2-2012 $8.07 $9.08 $9.64 $9.20 $9.66 $7.50 $8.00 $8.50 $9.00 $9.50 $10.00 2008 2009 2010 2011 Q2-2012 1.51% 3.23% 3.17% 2.45% 2.18% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 2008 2009 2010 2
Slide 6: Disciplined Top-Down Investment Philosophy
Disciplined Top-Down Investment Philosophy Macro Analysis Sector Analysis Security Selection and Funding Performance and Risk Management 6
Slide 7: Macro Themes
7 Macro Themes Central banks have continued to add liquidity to the financial system allowing mortgage investors to increase leverage Government policy is influencing perceptions of risk and driving returns QE3 induced supply/demand technicals are reducing spread product returns Expected prepayment
Slide 8: DX Investment Portfolio
8 DX Investment Portfolio (as of June 30, 2012) Agency RMBS 70% Agency CMBS 12% Non- Agency RMBS 2% Non- Agency CMBS 16% RMBS, 72% CMBS, 28% Agency/Non-Agency Portfolio Expected Maturity/Reset Distribution Residential/Commercial 19% 12% 14% 28% 26% 1% 0% 5% 10% 15% 20% 25% 30% <15 16-40 41-60 61-84
Slide 9: DX Portfolio Detail
Explicit prepayment protection 76% Post/near reset 6% *Selected specified pools 18% DX Portfolio Detail (as of June 30, 2012) 9 AAA* 89% AA 3% A 7% Below A 1% Credit Quality *Agency MBS are considered AAA rated as of the date presented Dollar Prepayment Premium Exposure *See appendix for details on
Slide 10: RMBS Specified Pools
10 RMBS Specified Pools $280.3 $276.5 $279.9 $225.0 $250.0 $275.0 $300.0 DX All ARMs 5/1 ARMs Average Loan Size 38.9% 54.4% 58.6% 25.0% 35.0% 45.0% 55.0% 65.0% DX All ARMs 5/1 ARMs Third Party Originated 16.7% 15.2% 14.5% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% DX All ARMs 5/1 ARMs 52.0% 39.8% 38.6% 0% 10
Slide 11: CMBS Portfolio
CMBS Portfolio (as of June 30, 2012) 11 AAA 73% * AA 5% A 21% Below A 1% Other 28% Multifamily 72% $104.5 $67.0 $0 $369.8 prior to 2000 2000-2005 2006-2008 2009 or newer Agency CMBS $329 Agency CMBS IO $300 Non- Agency CMBS $475 Non- Agency CMBS IO $66 Credit Quality Collateral Non-Agency Vintage As
Slide 12: Agency CMBS Credit Performance
Agency CMBS Credit Performance 12 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 13: 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 14: Potential Investment Returns
14 Potential Investment Returns (as of July 25, 2012) Investment Range of Prices Range of Yields Range of Net Spread to Funding Range of ROEs Agency RMBS 102-111 1.0%- 2.3% .60%-1.9% 6%-15% Agency CMBS 107-115 2.4%-3.0% 1.0%-1.6% 11%-15% Non-Agency ‘A’ - ’AAA’ RMBS 85-104 2.5%-6.5% 1.3%-3.5% 8%-17%
Slide 15: Focused on Capital Preservation and Managing Risk
15 Focused on Capital Preservation and Managing Risk •Diversify repurchase agreement counterparties (26 available counterparties at present) •Extend maturity dates of repurchase agreements when possible •Targets staggering repurchase agreement maturities •Maintain cash and liquid instruments to meet
Slide 16: Extension Risk
16 Extension Risk (as of June 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/CPBAverage 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% 3.08% 1
Slide 17: Financing
Financing (as of June 30, 2012) Repurchase Agreements Financing Balance WAVG Rate By collateral pledged: Agency $ 2,630,802 0.47% Non-Agency 439,816 1.42% Other 41,306 1.61% Total $ 3,111,924 0.62% By original maturity: (days) 0-30 $ 1,076,065 0.70% 31-60 1,168,159 0.68% 61-90 536,687 0.49% >90 331,
Slide 18: Liquidity Continuum
18 Liquidity Continuum (as of 6/30/2012) Loans Non- Agency CMBS IO Non- Agency CMBS Non- Agency RMBS Agency CMBS IO Agency CMBS Agency RMBS Less Liquid More Liquid 2% 2% 13% 1% 8% 9% 65% % of Investments
Slide 19: Portfolio Summary
19 Portfolio Summary We have continued to favor shorter duration assets to minimize the volatility of the portfolio and protect book value CMBS offers a complimentary risk profile to our RMBS at attractive relative value yields Our prepayment exposure is mitigated from asset selection for RMBS and p
Slide 20: Dynex Value Proposition
20 Dynex Value Proposition Source: SNL Internally Managed and Publicly Traded Since 1988 Diversified Investment Strategy Large Tax NOL Significant Insider Ownership +82.29%
Slide 21: Appendix
21 APPENDIX
Slide 22: Management Team
22 Management Team Experienced team of professionals with over 80 years of experience managing mortgage REITs and mortgage portfolios •Thomas B. Akin – Chairman and Chief Executive Officer – 34 years of experience in the industry and 9 years at Dynex – Chairman since 2003 and CEO since 2008 – Managi
Slide 23: Capital Allocation
23 Capital Allocation (as of June 30, 2012) (1) At June 30, 2012, associated financing for investments includes repurchase agreements, and securitization financing issued to third parties (the latter of which are presented on the Company’s balance sheet as “non-recourse collateralized financing”). A
Slide 24: Selected Financial Highlights
24 Selected Financial Highlights (as of and for the quarter ended) Financial Highlights: ($000 except per share amounts) Jun 30, 2012 Mar 31, 2012 Dec 31, 2011 Sept 30, 2011 Jun 30, 2011 Total Investments 3,628,163$ 3,276,170$ 2,500,976$ 2,595,574$ 2,591,097$ Total Assets 3,729,197 3,349,056 2,582,1