Dynex Capital, Inc. · NYSE:DX
Dynex Capital — Q3 2024 Earnings Presentation
30 slides from Dynex Capital's earnings presentation, Oct 21, 2024
Slide 1: Third Quarter 2024 Earnings Presentation
Third Quarter 2024 Earnings Presentation October 21, 2024
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: Consistent monthly dividends through active, disciplined management
Dynex Capital provides investors with consistent monthly dividends through the active, disciplined management of a portfolio of real estate mortgage assets. 3 3
Slide 4: Dynex's Guiding Principles Deliver Sustainable Value
Dynex’s Guiding Principles Deliver Sustainable Value Listed on NYSE in 1989, DX is the longest tenured mREIT. Our strategy centers on: Long-term vision Internal management ensures Commitment to ethical and forward-looking full transparency, the stewardship underscores our strategy that delivers oppo
Slide 5: A Leading Mortgage Investor Delivering Consistent Dividends
A Leading Mortgage Investor Delivering Consistent Dividends PORTFOLIO FAIR VALUE OF $9.3 BILLION 379% STOCK 12.2% $1.0 billion RETURN SINCE ANNUALIZED MARKET CAP IPO DIVIDEND YIELD (as of September 30, 2024) WHAT WE DO TODAY (dividends reinvested) (as of September 30, 2024) DECEMBER 31, 2023 We mana
Slide 6: Dividend Increase from $0.13 to $0.15 per share in November
Dividend Increase from $0.13 to $0.15 per share per in November 15% DIVIDEND INCREASE 13.8% 14.1% ANNUAL YIELD ON ANNUAL YIELD ON Board votes to increase dividend BOOK VALUE SHARE PRICE in November 2024 (as of September 30, 2024) (as of September 30, 2024) DECEMBER 31, 2023 We believe that we can de
Slide 7: 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 49.9% 23.8% 21.8% 20.1% 16.5% 5.2% (8.2)% (13.2)% (13.4)% (12.4)% (22
Slide 8: Third Quarter 2024 Performance
Third Quarter 2024 Performance 8
Slide 9: Quarterly Performance Highlights
Quarterly Performance Highlights Q3 24 Q2 24 Comprehensive Income (Loss) $0.93 $(0.18) (per common share) Book Value $13.00 $12.50 (per common share) Total Economic Return (1) 7.1% (2.4)% Net Income (Loss) $0.38 $(0.15) (per common share) Leverage (2) 7.6x 7.9x Average Earning Assets $9.3B $8.6B (in
Slide 10: Investment Portfolio
Investment Portfolio (as of dates indicated) (1) September 30, 2024 June 30, 2024 Portfolio Fair Value $9.3 Billion Portfolio Fair Value $8.9 Billion Dynex’s diversified Agency RMBS TBA Agency RMBS TBA 67% portfolio remains 76% Agency RMBS Pools Agency RMBS Pools Agency CMBS/CMBS IO 3% Agency CMBS/C
Slide 11: Selected Components of Portfolio Returns (excluding mark-to-market)
Selected 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) Agency RMBS TBA Drop Loss (2) $83,458 $76,054 $(233) $71,188 $71,525 $63,271 $(844) $(1,268) $(1,654) $(2,559) Q3-23 Q4-23
Slide 12: Key Macroeconomic Themes
Key Macroeconomic Themes Dynex remains 01 Fed Policy 05 Demographics & Tech vigilant and Trend towards less restrictive policy, even amid modest to moderate growth. While Fed may not Demand for income is global and persistent and supports our overall business model. AI, the mindful of the deliver th
Slide 13: Equilibrium spread tighter still
Equilibrium spread tighter still Dovish Fed, steeper yield curve, bank activity rising, credit stress driving flight to quality, strong double digit levered returns Private capital Private capital dominates Growth in GSE retained portfolios Fed Quantitative Easing returning Source: Bloomberg data (C
Slide 14: Hedge selection offers potential for alpha generation
Hedge selection offers potential for alpha generation Transition following SOFR Era (LIBOR June '17 Vote for ceased Jun '23). LIBOR Era SOFR to replace After 4+ quarters, LIBOR. Treasury swaps are futures were better becoming more hedge than swaps. attractive hedges. Source: Dynex calculations using
Slide 15: Agency RMBS Market Dynamics and Portfolio Strategy
Agency RMBS Market Dynamics and Portfolio Strategy Agency MBS Fundamentals: Technicals: offer compelling • • Steeper Curve - positive for mortgage carry, including dollar rolls Focused Refis – refi response has been high for a • Fed Balance Sheet - MBS portfolio runoff will likely continue even afte
Slide 16: CMBS Market Dynamics and Strategy
CMBS Market Dynamics and Strategy Stable cash flows Fundamentals: Technicals: in senior CMBS • Multifamily (MF) – demographic demand for housing is strong, driving tight markets for MF. High • Issuance - non-agency CMBS issuance has rebounded in 2024 due to increases in single asset / borrower price
Slide 17: Funding Market Dynamics and Strategy
Funding Market Dynamics and Strategy Funding Fundamentals: Technicals: • Money Market Funds - YTD totals grew to $570B, availability • Evolving Economic Data – expect to take advantage of fluctuations in pricing of expected rate • supporting availability of funding. Fed Reverse Repo Program - balanc
Slide 18: Dynex Positioned to Capture Growth and Drive Value
Dynex Positioned to Capture Growth and Drive Value 01 Historic Opportunity 04 Fed Policy We expect to create Mortgage spreads remain near generational wides and offer opportunity to earn positive The Fed's bias towards less restrictive policy will slowly ease financing costs over time. The Fed value
Slide 19: Doing Good Helps Dynex Do Well
Doing Good Helps Dynex Do Well Our Core Values Underpin Every Decision We Make to Sustain Our High-Performance Culture and Consistently Generate Attractive, Long-Term Returns Kindness Stewardship We can accomplish more together and build a culture like We are thoughtful, ethical, and responsible fid
Slide 20: Supplemental Financials
\ 4 > Ct varts Supplemental Financials
Slide 21: Capital Structure
Capital Structure Common Stock Series C Preferred Stock NYSE Ticker DX DX PRC Shares Outstanding 79.3 million 4.5 million Book Value per share Outstanding $13.00 — 3Q24 Dividends Declared per share $0.39 $0.43 Annualized Dividend Yield 12.23% 6.79% Share Price $12.76 $25.42 Market Capitalization $1.
Slide 22: RMBS Portfolio Details
RMBS Portfolio Details (as of September 30, 2024) Unamortized Par/Notional Amortized Fair Value % of Total WAVG Pay Premium 3-month 3-month ($ in thousands) Value Cost (%) (1) Fair Value (%) Portfolio up to TBA Balance (1) Market Yield (2) WAVG Yield (1) CPR (1) (3) Agency RMBS Pools: 2.0% coupon $
Slide 23: CMBS and CMBS IO Portfolio Details
CMBS and CMBS IO Portfolio Details Portfolio Characteristics Financing Details 3-month Amortized % of Total WAVG Life WAVG WAVG Repo Equity ($ in thousands) Cost Fair Value Portfolio Remaining (1) Yield Market Yield (2) Outstanding Invested Agency CMBS $ 101,169 $ 98,026 1.1 % 2.9 2.96 % 4.44 % $ 91
Slide 24: Risk Position - Interest Rate and Spread Sensitivity
Risk Position - Interest Rate and Spread Sensitivity Interest Rate Sensitivity Percentage Change in Percentage Change in Common Shareholders’ Equity Curve Shift Common Shareholders’ Equity Parallel Curve Shift As of As of As of (bps) September 30, 2024 June 30, 2024 2 year 10 year Treasury Treasury
Slide 25: Hedge Position Changes
Hedge Position Changes Our hedge strategy is constructed to protect and optimize portfolio performance under various rate scenarios. • We adjusted our hedge book in the 3rd Quarter, shifting to SOFR swaps from Treasury futures. September 30, 2024 June 30, 2024 Notional Amount / Notional Amount / ($
Slide 26: Funding Strategy
Funding Strategy (as of September 30, 2024) Fair Value of MBS Balance Weighted Pledged as Collateral Collateral Type ($s in thousands) Average Rate ($s in thousands) Agency RMBS $6,221,024 5.39 % $6,549,630 Agency CMBS 91,985 5.36 % 97,627 o The weighted average repo borrowing cost was 5.44% during
Slide 27: Financial Performance
Financial Performance 3Q24 2Q24 YTD 2024 Income Per Common Income Per Common Income Per Common ($ in thousands, except per share amounts) (Expense) Share* (Expense) Share* (Expense) Share* Interest income $ 83,458 $ 1.10 $ 76,054 $ 1.14 $ 231,038 $ 3.43 Interest expense (82,564) (1.09) (74,767) (1.1
Slide 28: Book Value Rollforward
Book Value Rollforward Quarter Ended September 30, 2024 Per ($s in thousands except amounts per share) Common Equity Common Share Common equity, beginning of period (1) $ 933,763 $ 12.50 Earnings available for distribution (2) (7,228) Change in fair value of investments, including TBAs 308,386 Chang
Slide 29: Reconciliation of GAAP Measures to Non-GAAP Measures
Reconciliation of GAAP Measures to Non-GAAP Measures (1) ($ in thousands except per share amounts) 3Q24 2Q24 1Q24 4Q23 3Q23 Comprehensive income (loss) to common shareholders $ 70,741 $ (12,013) $ 20,927 $ 81,648 $ (86,748) Adjustments: Change in fair value of investments (2) (234,541) 45,269 87,292
Slide 30: Sound Strategy. Unique Advantages.
SOUND STRATEGY. UNIQUE ADVANTAGES. 4991 Lake Brook Drive, Suite 100 Glen Allen, Virginia 23060 804-217-5800 dynexcapital.com 30