Dynex Capital, Inc. · NYSE:DX
Dynex Capital — Investor Presentation (March 2013)
29 slides from Dynex Capital's investor presentation, Mar 26, 2013
Slide 1: Investor Presentation
Investor Presentation March 26 – 27, 2013
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: Our Guiding Principles
Our Guiding Principles Our Mission Manage a successful public mortgage REIT with a focus on capital preservation and providing risk-adjusted returns reflective of a diversified, leveraged fixed income portfolio. Our Core Values Generate dividends for shareholders Manage leverage conservatively Remai
Slide 4: DX Snapshot
DX Snapshot Significant Diversified Internally investment Large NOL inside managed REIT strategy carryforward for ownership and commenced investing in unique total experienced operations in residential and return management commercial opportunity 1988 team mortgage assets Market Highlights: (as of 3
Slide 5: Fourth Quarter 2012 Highlights
Fourth Quarter 2012 Highlightsp Diluted earnings per common share of $0.34 Book value per common share of $10.30 at December 31, 2012 vs. $9.20 at December 31, 2011 Annualized return on average equity of 13.0% for the quarter and 13.8% for the year Net interest spread of 1.93% for the quarter Averag
Slide 6: Summary of Results
Summary of Results Dividends and Earnings Per Common Share $0.40 $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $0.00 $0.35 $0.34 $0.33 $0.34 $0.28 $0.29 $0.29 $0.29 Q1-2012 Q2-2012 Q3-2012 Q4-2012 Dividend per Share EPS Net Interest Spread 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2.41% 2.18% 2.00% 1.93
Slide 7: Consistent Core Investment Strategy
Consistent Core Investment Strategy Short High Low Diversified Duration Quality Leverage
Slide 8: Macro Environment Factors
Macro Environment Factors QE3 Global risk remains high Interest rates are low and range bound Volatility is low Credit spreads have tightened Multifamily housing strength continues, single family housing has stabilized. Funding markets are attractive REITs continue to raise capital KEY CONSIDERATION
Slide 9: Rates are Range-Bound
Rates are Range-Bound 10-Year Treasury Note Yield January 1, 2011 – March 22, 2013 Source: Bloomberg
Slide 10: Volatility is Low
Volatility is Low 1 year/10 year Swaption Volatility Source: Bloomberg
Slide 11: CMBS Spreads
CMBS Spreads AAA LCF spread 1400 1200 1000 Points 800 Basis 600 400 Source: Company Data
Slide 12: Steady Book Value Despite Rise in Rates
Steady Book Value Despite Rise in Rates Dynex Book Value 10 Year Treasury Rates $10.31 $10.35* $10.30 $9.62 $9.66 $9.20 *estimated 2.00% 1.90% 1.80% 1.70% 1.60% 1.50% 1.40% 1.30%
Slide 13: Consistent Prepayment Speeds
Consistent Prepayment Speeds Dynex Portfolio CPRs MBA Refinancing Index 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011 2011 2011 2011 2012 2012 2012 2012 Hybrid ARMs/ARMs Total Agency Total Portfolio Source: Bloomberg
Slide 14: Limited Portfolio Prepayment Risk
Limited Portfolio Prepayment Risk MBS Portfolio Net Premium by Asset Type Total $801.7 million Total $229.80 million as of December 31, 2012 as of December 31, 2011 RMBS 17.0% CMBS 83.0% $665.3 million $136.4 million RMBS 37% $84.5 million $145.3 CMBS million 63%
Slide 15: Positive Multifamily Trend
Positive Multifamily Trend Multifamily Vacancies and Rents December 1999 – December 2012 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Dec-99 Jun-01 Dec-02 Jun-04 Dec-05 Jun-07 Dec-08 Jun-10 Dec-11 Vacancy % (LHS) Average Rent (RHS, $ per unit) $1,200 $1,100 $1,000 $900 $800 $700 $600 $500 $400 $300 $200 Source: RE
Slide 16: Portfolio Details
Portfolio Details (as of December 31, 2012) Credit Quality Portfolio Expected Maturity/Reset Distribution 35% 33% 30% 25% 25% 20% 15% 15% 13% 13% 10% 5% 1% 0% <16 16-40 41-60 61-84 85-120 120-125 Months to Maturity/Reset AAA AA 90% 2% A 7% Below A 1% *Agency MBS are considered AAA-rated.
Slide 17: Shareholders' Equity Allocation
Shareholders’ Equity Allocation (as of December 31, 2012 and 2011) ($ in millions) 2012 2011 CMBS/ CMBS/ Commercial Commercial Loans Loans 58.6% 51.1% $361.3 $189.9 RMBS/ $219.8 RMBS/ $146.4 SF Loans SF Loans 39.4% 35.6% Cash and $35.0 Cash and Other, net Other, net 5.8% 9.5% $35.6
Slide 18: Dynex Value Proposition
Dynex Value Proposition Internally Diversified Significant Managed and Large Tax Investment Insider Publicly Traded NOL Strategy Ownership Since 1988 January 1, 2008 – December 31, +80.61% Source: SNL
Slide 19: Summary
Summary 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 reinvestm
Slide 20: Appendix
iui APPENDIX
Slide 21: Capital Allocation (as of December 31, 2012)
Capital Allocation (as of December 31, 2012)
Slide 22: Selected Financial Highlights
Selected Financial Highlights (as of and for the quarter ended) Financial Highlights: ($000 except per share amounts) Dec 31, 2012 Sept 30, 2012 Jun 30, 2012 Mar 31, 2012 Dec 31, 2011 Total Investments $ 4,175,662 $ 4,316,247 $ 3,628,163 $ 3,276,170 $ 2,500,976 Total Assets 4,280,229 4,405,030 3,729
Slide 23: Dynex Is Focused on Capital Preservation and Managing Risk
Dynex Is Focused on Capital Preservation and Managing Risk Key Risk Dynex Strategy Invest in shorter duration instruments, with portfolio duration target of 0.5 to 1.5 years Interest Rate Risk Use interest rate swaps, swaptions, and caps to manage risk Match terms of funding with terms of assets 90%
Slide 24: Portfolio Performance
Portfolio Performance Prepayment Performance Leverage and ROE* (for the period ended December 31, 2012) 6.2 18% 23% 15.6% 21.5% 22% 6 14.7% 15% 14.1% 14.3% 13.7%* 20.9% 5.8 13.6% 21% 13.0% 12% 20% 5.6 19.0% 18.7% 19% 9% 18.3% 18.4% 5.4 5.5x 6.0x 5.8x 5.4x 6.1x 6.1x 5.9x 18% 6% 17.9% 17.9% 5.2 17% 1
Slide 25: CMBS Portfolio
CMBS Portfolio (as of December 31, 2012) Credit Quality Non-Agency Vintage $ in millions AAA 78% $435.0 AA 3% $100.1 $65.2 $0.0 A 18% Below A prior to 2000-2005 2006-2008 2009 or 1% 2000 newer By year of origination Agency CMBS are considered AAA-rated as of the date presented. Includes CMBS IO secu
Slide 26: Agency CMBS Historical Credit Performance
Agency CMBS Historical Credit Performance % 60+ Days Past Due 0.00% 0.05% 0.10% 0.15% 0.20% 0.25% 0.30% 0.35% 0.40% 0.45% Source: Freddie Mac
Slide 27: Aggregate Agency CPRs
Aggregate Agency CPRs 2002-2003 vs. 2011-2012 70 60 50 % 40 30 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 FH ARM FN ARM FH FXD FN FXD 35 30 25 % 20 10 5 0 Aug-11 Sep-11 FH Oct-11 ARM Nov-11 Dec-11 Jan-12 FN Feb-12 ARM Mar-12
Slide 28: Extension Risk
Extension Risk (as of February 12, 2013) 16 14 12 15 CPR/CPB 10 2 CPR/CPB Average Life (years) 6 4 2 0 FN 30 year FNCI 15 year FN 5/1 ARM FN 30 year FNCI 15 year FN 5/1 ARM Average Average Life Price Coupon WAC Speed Life Extension FN 30yr $103-3 3.00% 3.77% 15 CPR 5.36 years ~9 years 2 CPR 14.42 ye
Slide 29: Financing
Financing (as of December 31, 2012) $ in thousands Repurchase Financing WAVG Agreements Balance (1) Rate SWAPS(2) By collateral pledged: Maturity Total Notional WAVG Agency $ 3,058,293 0.59% (mos.) Balance Rate 0-12 $ 25,000 0.85% Non-Agency 478,381 1.37% Other 28,113 1.64% 13-36 715,000 1.52% 37-60