Dynex Capital, Inc. · NYSE:DX
Dynex Capital — Q4 2023 Earnings Presentation
27 slides from Dynex Capital's earnings presentation, Jan 29, 2024
Slide 1: Fourth Quarter and Full Year 2023 Earnings Presentation
Fourth Quarter and Full Year 2023 Earnings Presentation January 29, 2024 1
Slide 2: Safe Harbor Statement
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, b
Slide 3: Quarterly Performance Highlights
Quarterly Performance Highlights Q4 23 Q3 23 Comprehensive Income (Loss) $1.44 $(1.59) (per common share) Book Value $13.31 $12.25 (per common share) Total Economic Return(1) 11.8% (11.0)% Net Income (Loss) (per common share) $0.39 $(0.82) Leverage(2) 7.8x 8.5x Average Earning Assets $7.6B $7.5B (in
Slide 4: Full Year Performance Highlights
Full Year Performance Highlights 2023 2022 Comprehensive Income (Loss) $0.16 $(1.24) (per common share) Book Value $13.31 $14.73 (per common share) Total Economic Return(1) 1.0% (9.5)% Net Income (Loss) $(0.25) (per common share) $3.19 Leverage(2) 7.8x 6.1x Average Earning Assets $7.2B $5.6B (inclus
Slide 5: Investment Portfolio
Investment Portfolio (as of dates indicated) (1) December 31, 2023 December 31, 2022 Portfolio Fair Value $7.4 Billion Portfolio Fair Value $5.9 Billion Dynex’s diversified 47% portfolio remains TBA TBA Agency RMBS Pools 78% Agency RMBS Pools 3% 5% Agency CMBS/CMBS IO Agency CMBS/CMBS IO constructed
Slide 6: Dynex Performance
Dynex Performance Experience in managing assets through multiple economic cycles and a disciplined investment process results in Dynex long-term outperformance during periods of high volatility Cumulative Total Shareholder Returns 26.1% 14.1% 14.5% 12.0% 10.8% (3.0)% (3.4)% (7.0)% (19.3)% (19.9)% (2
Slide 7: Primary Components of Portfolio Returns (excluding mark-to-market)
Primary Components of Portfolio Returns (excluding mark-to-market) The impact of rising financing costs has been mostly offset by deferred tax hedge gains. Interest Income (1) TBA Drop Income (Loss) (2) $71,188 $63,271 $5,522 $42,212 $30,528 $30,846 $1,457 $(844) $(2,152) $(2,559) Q4-22 Q1-23 Q2-23
Slide 8: Navigating this Decade's Volatility
Navigating this Decade's Volatility Our disciplined approach delivers an attractive risk-adjusted return and consistent dividend during a volatile market environment Building Long-Term Value $24 1.80% $22.12 $21.85 $21.19 $21.25 $21.21 1.70% $20.74 $20.79 $21 $2.05 30yr Par Coupon Spread to 7yr Trea
Slide 9: Key Long-Term Macroeconomic Themes
Key Long-Term Macroeconomic Themes Dynex remains 01 Policy Rate Adjustments 05 Demographics & Tech vigilant and The range of outcomes for nominal growth (inflation + real GDP) is wide, but in many scenarios there is AI, the emergence of green technology, and aging populations across the world will s
Slide 10: Long-Term Par Coupon 30-year Agency RMBS Spreads
Long-Term Par Coupon 30-year Agency RMBS Spreads Private capital Private capital dominates Growth in GSE retained portfolios Fed Quantitative Easing returning Source: Bloomberg data (Current Coupon “MTGEFNCL Index” vs. 5&10 Year Treasury yields weighted to average 7 years) 10
Slide 11: Uniquely Positioned in a Dynamic Market
Uniquely Positioned in a Dynamic Market Skilled Managers Experienced team who can identify and hedge relative value across mortgage market. Well-Positioned The portfolio is positioned with a range of Agency RMBS coupons and a large allocation to specified pools. Well-Prepared Prepared for unexpected
Slide 12: Agency RMBS Market Dynamics and Portfolio Strategy
Agency RMBS Market Dynamics and Portfolio Strategy Agency MBS will Fundamentals: Technicals: likely offer • Housing depressed but rebounding – many borrowers are still “locked-in," but expect uptick in • Uptick in Supply – modest increase expected amid lower rates and seasonal upturn in activity. tu
Slide 13: Key Takeaways
Key Takeaways 01 Historic Opportunity 04 Policy Tailwind We expect to drive Mortgage spreads are at generationally wide levels and offer a persistent opportunity for Interest-rate cuts will lower financing costs when the Fed decides to begin easing monetary policy. incremental returns significant re
Slide 14: Disciplined Focus on the Long-Term
Disciplined Focus on the Long-Term DX has generated long-term returns exceeding the S&P 500 Financials and REM indices illustrating our ability to be successful in various rate and economic cycles Total Return (%) January 1, 2008 - December 31, 2023 Source: S&P Capital IQ Assumes reinvestment of div
Slide 15: Supplemental Information
SUPPLEMENTAL INFORMATION 15
Slide 16: Market Snapshot
Market Snapshot Common Stock Series C Preferred Stock NYSE Ticker DX DX PRC Shares Outstanding (as of December 31, 2023) 57.0 million 4.5 million Book Value per share (as of December 31, 2023) $13.31 — 4Q23 Dividends Declared per share $0.39 $0.43 Annualized Dividend Yield (as of closing on January
Slide 17: Why Dynex
Why Dynex Industry leader with a compelling long-term track record of delivering shareholder value Attractive dividend yield at Superior performance record Ability to drive earnings upside a discounted price-to-book with industry-leading 3-year with opportunistic deployment valuation on a high-quali
Slide 18: Core Values
Core Values At Dynex, we rely on our Core Values to sustain our high-performance culture and to consistently generate attractive, long-term returns Stewardship Kindness We are thoughtful, ethical, and responsible fiduciary We can accomplish more together and build a culture like stewards of environm
Slide 19: RMBS Portfolio Details (as of December 31, 2023)
RMBS Portfolio Details (as of December 31, 2023) Over 96% of our investments are comprised of Agency RMBS as of December 31, 2023. Par/Notional Amortized Fair Value % of Total WAVG Pay 3-month 3-month ($ in thousands) Value Cost (%) (1) Fair Value (%) Portfolio up to TBA Market Yield (2) WAVG Yield
Slide 20: CMBS and CMBS IO Portfolio Details
CMBS and CMBS IO Portfolio Details Less than 4% of our investment portfolio is comprised of CMBS and CMBS IO as of December 31, 2023. Portfolio Characteristics Financing Details 3-month Amortized % of Total WAVG Life WAVG WAVG Repo Equity ($ in thousands) Cost Fair Value Portfolio Remaining (1) Yiel
Slide 21: Risk Position - Interest Rate and Spread Sensitivity
Risk Position - Interest Rate and Spread Sensitivity Portfolio profile reflects hedge ratio adjustments and convexity of up-in coupon position Interest Rate Sensitivity Credit Spread Sensitivity Percentage Change in Percentage Change in Common Shareholders’ Equity Common Shareholders’ Equity Paralle
Slide 22: Hedge Position Changes
Hedge Position Changes Our hedge strategy is constructed to maximize liquidity and protect the portfolio under various rate scenarios. • Futures offer hedge protection for interest rate changes. • Futures trade in a highly liquid market and have lower margin requirements compared to a similar swap i
Slide 23: Funding Strategy (as of December 31, 2023)
Funding Strategy (as of December 31, 2023) Fair Value of MBS ◦ Weighted average repo borrowing Balance Weighted Pledged as Collateral Collateral Type ($s in thousands) Average Rate ($s in thousands) rate of 5.56% for the fourth quarter of 2023, an increase of 19 basis points Agency RMBS $5,130,438 5
Slide 24: Financial Performance
Financial Performance 4Q23 3Q23 2023 Per Per Per Income Common Income Common Income Common ($ in thousands, except per share amounts) (Expense) Share* (Expense) Share* (Expense) Share* Interest income $ 71,188 $ 1.26 $ 63,271 $ 1.16 $ 207,517 $ 3.79 Interest expense (73,465) (1.30) (65,533) (1.20) (
Slide 25: Book Value Rollforward
Book Value Rollforward Quarter Ended Year Ended December 31, 2023 December 31, 2023 Per Per ($s in thousands except amounts per share) Common Equity Common Share Common Equity Common Share Common equity, beginning of period (1) $ 692,846 $ 12.25 $ 789,828 $ 14.73 Earnings available for distribution
Slide 26: Reconciliation of GAAP Measures to Non-GAAP Measures
Reconciliation of GAAP Measures to Non-GAAP Measures (1) ($ in thousands except per share amounts) 2023 4Q23 3Q23 2Q23 1Q23 4Q22 Comprehensive income (loss) to common shareholders $ 9,020 $ 81,648 $ (86,748) $ 42,971 $ (28,852) $ 56,648 Adjustments: Change in fair value of investments (2) (90,429) (
Slide 27: Sound Strategy. Unique Advantages.
SOUND STRATEGY. UNIQUE ADVANTAGES. 4991 Lake Brook Drive, Suite 100 Glen Allen, Virginia 23060 804-217-5800 dynexcapital.com