Dynex Capital, Inc. · NYSE:DX
Dynex Capital — Q4 2010 Earnings Presentation
18 slides from Dynex Capital's earnings presentation, Feb 16, 2011
Slide 1: Focused on the Long Term: Fourth Quarter 2010 Investor Presentation
Exhibit 99.1 FOCUSED ON THE LONG TERM Dynex Capital, Inc. Fourth Quarter 2010 Investor Presentation February 15, 2011 1
Slide 2: Safe Harbor Statement
Safe Harbor Statement Note: This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about projected financial performance and future investment opportunities. The words “will,” “believe,” “expect,” “fore
Slide 3: DX Snapshot
DX Snapshot Company Highlights Internally managed REIT commenced operations in 1988 Significant insider ownership and experienced management team Hybrid investment strategy investing in residential and commercial mortgage assets Large NOL carryfoward for unique total return opportunity Market Highli
Slide 4: 2010 Highlights
2010 Highlights • Generated total return to shareholders of assuming 38% reinvested dividends (source: Bloomberg) • Raised $117 million in new common equity and earned $1.41 per common share • Generated an ROE of 14.5% • Increased market value of common stock to $328.5 million as of 2/11/11from $119
Slide 5: Management Team
Management Team Experienced team of professionals with a combined 80 years of experience managing mortgage REITs and mortgage portfolios •Thomas B. AkinChairman – and Chief Executive Officer – 32 years of experience in the industry and 7 years at Dynex – CEO since 2008 – Managing General Partner of
Slide 6: Hybrid Investment Strategy
Hybrid Investment Strategy Hybrid Investment Strategy that invests in a combination of Agency and non-Agency residential and commercial assets to maximize risk adjusted total return. Target Strategy ASSETS: • Higher Credit Quality • Low Duration • Higher Credit Quality • High grade securitized produ
Slide 7: Disciplined Top-Down Investment Philosophy
Disciplined Top-Down Investment Philosophy Macroeconomic Analysis Sector Analysis Security Selection & Funding Performance & Risk Management 7
Slide 8: Unique Investment Portfolio
Unique Investment Portfolio (as of 12/31/10) Composition Ratings Other Seasoned DX CMBS/RMBS 4% AA A Below A CMBS/loans Seasoned DX 18% RMBS/loans 2% 5% 2% 4% Agency MBS AAA 74% 91% 8
Slide 9: Current Investment Environment
Current Investment Environment Macro: – Fed funds rate at historic lows with a steep yield curve – Government policy/regulations to influence investment returns – Improved financing environment – Competition for high quality assets – Securitization markets are healing slowly but unevenly – Global ri
Slide 10: Return Profile for Prospective Investments
Return Profile for Prospective Investments as of 12/31/10 Range of net Range of spread to Investment Range of Prices yields funding Range of ROEs Agency RMBS 102-108 2.5%-3.8% 1.7%-2.7% 14%-25% CMBS 104-107 4.2%-4.5% 1.6%-2.5% 13%-20% Non –Agency ‘AAA’ RMBS 94-103 3.8%-5.0% 2.8%-3.8% 12%-20% ‘AAA’CM
Slide 11: Portfolio Growth and Diversification of Income
Portfolio Growth and Diversification of Income ($ in thousands) Investments Net Interest Income $1,600,000 $11,000 $10,000 $1,400,000 $9,000 $1,200,000 $8,000 $7,000 $1,000,000 $6,000 $800,000 $5,000 $4,000 $600,000 $3,000 $400,000 $2,000 $1,000 $200,000 $0 $0 2008 2009 2Q10 3Q10 4Q10 1Q08 2Q08 3Q08
Slide 12: Investment Portfolio Income and Spread
Investment Portfolio Income and Spread $ in thousands $12,000 3.50% 3.00% $10,000 2.50% $8,000 2.00% Net interest income after $6,000 provision (LHS) 1.50% Net interest spread (RHS) $4,000 1.00% $2,000 0.50% $0 0.00% 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 12
Slide 13: Total Return Opportunity
Total Return Opportunity $12.00 $2.00 $9.71 $1.75 $10.00 $9.08 $8.22 $8.07 $1.41 $1.50 $8.00 $1.25 $1.02 Book value per common share $6.00 $0.91 $1.00 (LHS) $0.98 Diluted net income $0.92 $0.75 per common share $4.00 (RHS) $0.40 $0.71 Dividend per $0.50 common share $2.00 (RHS) $0.25 $0.00 $0 $0.00
Slide 14: Why Dynex
Why Dynex Excellent track record with attractive total return opportunity Strong and defensive balance sheet positioned to weather market volatility Experienced management with a track record of disciplined capital deployment through multiple economic cycles Alignment of interests with shareholders
Slide 15: Appendix
FOCUSED ON THE LONG TERM APPENDIX
Slide 16: Long-Term Track Record
Long-Term Track Record Demonstrated history of disciplined capital management and producing returns in excess of market benchmarks. DX 99.6% 120 100 80 60 40 20 S&P 500 13.3% 0 -20 -40 -60 SNL Finance REIT* (32.8%) -80 *SNL Finance REIT: Includes all publicly traded (NYSE, NYSE Amex, NASDAQ, OTC BB,
Slide 17: CMBS Investments Unique to DX
CMBS Investments Unique to DX 1998 CMBS (12/31/10 balances) We created and sold two CMBS in 1997 and 1998, retaining only the non- UPB WAC Rating Credit Support investment grade CMBS in green at $83.7 million 8.0% ‘AAA’ 50% issuance $43.4 million 8.0% ‘A+’ 25% $19.5 million 8.0% ‘BBB+’ 13% We redeem
Slide 18: Current Counterparties
Current Counterparties Bank of America ING Greenwich Capital Guggenheim Cantor Fitzgerald Jeffries Securities BB&T Capital Mizuho 20 Morgan Keegan Deutsche Bank South Street Securities Goldman Sachs Morgan Stanley Nomura SunTrust LBBW MF Global Credit Suisse Barclay’s Princeridge 18