Dynex Capital, Inc. · NYSE:DX
Dynex Capital — Q1 2024 Earnings Presentation
29 slides from Dynex Capital's earnings presentation, Apr 22, 2024
Slide 1: First Quarter 2024 Earnings Presentation
First Quarter 2024 Earnings Presentation April 22, 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 management of mortgage assets
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 Internally managed structure Commitment to ethical and forward-looking – ensures our goals are stewardship underscores our strategy that delivers al
Slide 5: A Leading Mortgage Investor Delivering Consistent Dividends
A Leading Mortgage Investor Delivering Consistent Dividends PORTFOLIO FAIR VALUE OF $8.2 BILLION 384% STOCK 12.5% $798.8 million RETURN SINCE ANNUALIZED MARKET CAP IPO DIVIDEND YIELD WHAT WE DO TODAY (as of March 31, 2024) (dividends reinvested) (as of March 31, 2024) DECEMBER 31, 2023 We manage a h
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 17.2% 17.0% 18.1% 15.6% 6.1% (8.4)% (12.5)% (15.0)% (16.5)% (25.5)% (
Slide 7: Positioned to Deliver Consistent Value Throughout 2020s
Positioned to Deliver Consistent Value Throughout 2020s Our disciplined approach delivers an attractive risk-adjusted return and consistent dividend even 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 30yr Par Coupon Spr
Slide 8: First Quarter 2024 Performance
First Quarter 2024 Performance 8
Slide 9: Quarterly Performance Highlights
Quarterly Performance Highlights Q1 24 Q4 23 Comprehensive Income $0.35 $1.44 (per common share) Book Value $13.20 $13.31 (per common share) Total Economic Return (1) 2.1% 11.8% Net Income $0.65 $0.39 (per common share) Leverage (2) 8.1x 7.8x Average Earning Assets $7.6B $7.6B (inclusive of Agency R
Slide 10: Investment Portfolio
Investment Portfolio (as of dates indicated) (1) March 31, 2024 December 31, 2023 Portfolio Fair Value $8.2 Billion Portfolio Fair Value $7.4 Billion Dynex’s diversified portfolio remains Agency RMBS TBA Agency RMBS Pools 68% Agency RMBS TBA Agency RMBS Pools 78% constructed for Agency CMBS/CMBS IO
Slide 11: Primary Components of Portfolio Returns
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) Agency RMBS TBA Drop Income (Loss) (2) $1,457 $71,188 $71,525 $63,271 $42,212 $(844) $30,846 $(1,268) $(2,152) $(2,559) Q1-2
Slide 12: Key Macroeconomic Themes
Key Macroeconomic Themes Dynex remains 01 System Liquidity 05 Demographics & Tech vigilant and Clarity on Fed's balance sheet plan is improving - they appear likely to continue current pace of MBS portfolio AI, the emergence of green technology, and aging populations across the world will shift dema
Slide 13: 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) 13
Slide 14: 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 significant • Fed Balance Sheet - expect no change in cap of monthly MBS portfolio runoff; private capital w
Slide 15: CMBS Market Dynamics and Strategy
CMBS Market Dynamics and Strategy Stable cash flows Fundamentals: Technicals: in senior CMBS • Multifamily (MF) – tight markets and low affordability for single-family support demand. • Light Issuance - higher mortgage rates and lower property transaction volumes have resulted in lower Agency and no
Slide 16: Funding Market Dynamics and Strategy
Funding Market Dynamics and Strategy Funding Fundamentals: Technicals: availability • Evolving Economic Data – inflation has moved out the pricing of rate cuts. Repo desks are pricing • Money Market Inflows - 1+T over the last year, despite decline in Fed's RRP balances means abundant cash in fewer
Slide 17: 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 drive Mortgage spreads are at generationally wide levels and offer a persistent opportunity for The Fed's bias towards less restrictive policy will slowly ease financing costs over time. The Fed inc
Slide 18: 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 19: Supplemental Financials
\ 4 > Ct varts Supplemental Financials
Slide 20: Capital Structure
Capital Structure Common Stock Series C Preferred Stock NYSE Ticker DX DX PRC Shares Outstanding 64.2 million 4.5 million Book Value per share Outstanding $13.20 — 1Q24 Dividends Declared per share $0.39 $0.43 Annualized Dividend Yield 12.53% 7.01% Share Price $12.45 $24.60 Market Capitalization $79
Slide 21: RMBS Portfolio Details
RMBS Portfolio Details (as of March 31, 2024) Par/Notional Amortized Fair Value % of Total WAVG Pay 3-month 3-month ($ in thousands) Value Cost (%) (1) Fair Value (%) Portfolio up to TBA Market Yield (2) WAVG Yield (1) CPR (1) (3) Agency RMBS Pools: 2.0% coupon $ 696,233 101.7 $ 559,217 80.3 % 6.8 %
Slide 22: 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 $ 118,473 $ 111,762 1.4 % 3.9 3.04 % 4.99 % $ 1
Slide 23: 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 (bps) March 31, 2024 December 31, 2023 2 year 10 year Treasury Treasury As of
Slide 24: 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 25: Funding Strategy
Funding Strategy (as of March 31, 2024) Fair Value of MBS Balance Weighted Pledged as Collateral Collateral Type ($s in thousands) Average Rate ($s in thousands) Agency RMBS $5,048,942 5.46 % $5,319,619 Agency CMBS 104,557 5.46 % 109,935 o The weighted average repo borrowing cost was 5.51% during th
Slide 26: Financial Performance
Financial Performance 1Q24 4Q23 Income Per Common Income Per Common ($ in thousands, except per share amounts) (Expense) Share* (Expense) Share* Interest income $ 71,525 $ 1.21 $ 71,188 $ 1.26 Interest expense (74,717) (1.27) (73,465) (1.30) GAAP net interest expense (3,192) (0.05) (2,277) (0.04) Ag
Slide 27: Book Value Rollforward
Book Value Rollforward Quarter Ended March 31, 2024 Per ($s in thousands except amounts per share) Common Equity Common Share Common equity, beginning of period (1) $ 759,235 $ 13.31 Earnings available for distribution (2) (17,684) Change in fair value of investments, including TBAs (101,199) Change
Slide 28: Reconciliation of GAAP Measures to Non-GAAP Measures
Reconciliation of GAAP Measures to Non-GAAP Measures (1) ($ in thousands except per share amounts) 1Q24 4Q23 3Q23 2Q23 1Q23 Comprehensive income (loss) to common shareholders $ 20,927 $ 81,648 $ (86,748) $ 42,971 $ (28,852) Adjustments: Change in fair value of investments (2) 87,292 (323,259) 220,87
Slide 29: Sound Strategy. Unique Advantages.
SOUND STRATEGY. UNIQUE ADVANTAGES. 4991 Lake Brook Drive, Suite 100 Glen Allen, Virginia 23060 804-217-5800 dynexcapital.com 29