Dynex Capital, Inc. · NYSE:DX
Dynex Capital — JMP Financial Services and Real Estate Conference 2015
34 slides from Dynex Capital's conference presentation, Sep 21, 2015
Slide 1: JMP Financial Services and Real Estate Conference Investor Presentation
JMP Financial Services and Real Estate Conference Investor Presentation September 21, 2015
Slide 2: Safe Harbor Statement
2 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,
Slide 3: Mission and Values
3 Mission and Values Our Core Values 3 • Generate dividends for shareholders • Manage leverage conservatively • Remain owner-operators • Maintain a culture of integrity and employ the highest ethical standards • Provide a strong risk management culture • Focus on long-term shareholder value while pr
Slide 4: Above Average Dividend Yield
4 Above Average Dividend Yield (as of September 10, 2015) Source: KBW, Bloomberg, Bankrate.com 0.28% 2.14% 2.23% 4.80% 7.64% 8.30% 14.52% 0% 2% 4% 6% 8% 10% 12% 14% 16% Long-Term Book Value (per Common Share) Creating Long-Term Value
Slide 5: Historical mREIT Performance (over a Fed tightening cycle)
5 Historical mREIT Performance (over a Fed tightening cycle) Source: SNL Financial Total Return (%) January 1, 2003 - September 11, 2015
Slide 6: Market and Policy Update
6 Market and Policy Update • Divergence in trajectory of growth, inflation and central bank actions across the globe • Federal Reserve remains cautious of moving off zero bound but constrained by the actual performance of the economy and inflation trajectory. • European Central Bank aggressively pur
Slide 7: How is Dynex Positioned?
7 How is Dynex Positioned? • Strong liquidity and capital position allows us to be opportunistic · Investment opportunities arise when spreads widen, but sufficient capital and liquidity are needed to withstand these situations and be able to invest • Existing Portfolio is designed to perform in a v
Slide 8: Investment Summary
8 Investment Summary 6/30/15 3/31/15 QoQ Change Investments, including receivable (1) $3,989,642 $3,922,520 $67,122 Repurchase Agreements, including payable (2) 3,406,978 3,382,316 24,662 FHLB advances 108,076 — 108,076 Leverage (3) 6.2x 5.7x 0.5x Funding Original Days to Maturity 88 days 116 days (
Slide 9: Asset and Equity Allocations Quarterly Comparison
9 Asset and Equity Allocations Quarterly Comparison $673.0 $217.2 $152.4 $105.9 $62.0 $217.2 $152.4 $62.0 RMBS CMBS RMBS RMBS (2) (89% Agency) CMBS CMBS (73% Agency) CMBS IO CMBS IO CMBS IO CMBS IO (57% Agency) Net Other (1) Cash Loans (1) Fair value of derivative instruments is included in "Net Oth
Slide 10: Opportunity to earn above average dividend yields in a mortgage REIT
10 • We believe the opportunity continues to exist to earn above average dividend yields within a mortgage REIT structure · The uncertainty of the current environment could cause period to period volatilty in our results, but we believe a diversified mortgage REIT model will be able to deliver an ab
Slide 11: Solid Track-Record
11 Solid Track-Record Source: SNL Financial Total Return (%) January 1, 2008 – September 11, 2015
Slide 12: Appendix
12 APPENDIX
Slide 13: Second Quarter 2015 Highlights
13 • Comprehensive loss to common shareholders of ($0.21) per common share, consisting of (1): · Core net operating income(2) of $0.21 per common share · Change in unrealized gain in MBS, net of hedge instruments of ($0.40) per share · Loss on sale of investments of ($0.02) • GAAP net income of $0.5
Slide 14: Second Quarter 2015 Performance
14 Second Quarter 2015 Performance (1) Other interest expenses exclude amortization of AOCI related to previously de-designated cash flow hedges. (2) These costs represent amounts due and payable under derivative hedge instruments for the current period (3) Reconciliations for non-GAAP measures are
Slide 15: Second Quarter 2015 Book Value
15 Second Quarter 2015 Book Value Book value per common share, March 31, 2015 $8.96 Core net operating income per share (1) 0.21 Unrealized and realized gains on derivative hedge instruments 0.34 Loss on sale of investments (0.02 ) Amortization of de-designated cash flow hedges (0.01 ) Unrealized lo
Slide 16: Risk Position
16 Risk Position Treasury Yields As of June 30, 2015 As of March 31, 2015 2Y 0.65% 0.56% 5Y 1.65% 1.37% 10Y 2.35% 1.94% 30Y 3.12% 2.54% Parallel Change in Treasury Yields (in basis points) Percentage Change in Projected Market Value of Assets Net of Hedges As of June 30, 2015 As of March 31, 2015 +1
Slide 17: Movement in Spreads
17 Movement in Spreads NOMINAL SPREADS OAS SPREADS SPREAD CHANGE 3/31/2015 6/30/2015 3/31/2015 6/30/2015 Nominal OAS 5/1 15 16 (6) 9 1 15 7/1 29 30 (5.0) 14 1 19 10/1 49 48 (7.0) 13.0 (1) 20 New Agency CMBS IO 140 150 140 150 10 10 New DUS 54 60 54 60 6 6 Non-Agency CMBS IO 160 190 160 190 30 30 Sou
Slide 18: Other Financial Highlights
18 Other Financial Highlights Financial Measures per Common Share (1) Adjusted Net Interest Spread (1) 1.86% • Adjusted net interest spread(1) is the difference between the effective yield earned on our investments and the effective borrowing cost(1) of financing our investments. • Effective borrowi
Slide 19: Portfolio Details
19 Portfolio Details* (as of June 30, 2015) Credit Quality Portfolio Expected Maturity/Reset Distribution Net Premium by Asset Type * MBS investments only, excludes loans held for investment. Agency MBS are considered AAA-rated for purposes of this chart. 10.7% 16.4% 11.7% 19.4% 9.4% 32.4% $765.1 $9
Slide 20: CMBS Portfolio Details
20 CMBS Portfolio Details (as of June 30, 2015) Asset Type Agency MBS are considered AAA-rated for purposes of this chart. Credit Quality Collateral Asset Type
Slide 21: CMBS and CMBS IO Vintage and Credit Quality
21 CMBS (as of June 30, 2015) Vintage (by year of origination) Asset Type Credit Quality Vintage By Year of Origination CMBS IO (as of June 30, 2015) Credit Quality Vintage By Year of Origination Agency MBS are considered AAA-rated for purposes of this chart. Agency MBS are considered AAA-rated for
Slide 22: RMBS Portfolio Details
22 Asset Type ($ in millions) RMBS (as of June 30, 2015) Credit Quality Months to Maturity/Reset For ARMs/Hybrids 1% 3% 51% 20% 8% 17% Weighted Average Loan Age 19.6% 23.0% 11.7% 27.6% 18.1%
Slide 23: 10yr FNMA DUS Spreads
23 72 20 30 40 50 60 70 80 90 100 10yr FNMA DUS Spreads DUS CMBS Spreads: Spreads wider YTD b p s Source: Company data
Slide 24: RMBS Spreads: React to Rate Volatility
24 86.754 55.152 0 50 100 150 200 250 300 350 1/2/96 1/2/97 1/2/98 1/2/99 1/2/00 1/2/01 1/2/02 1/2/03 1/2/04 1/2/05 1/2/06 1/2/07 1/2/08 1/2/09 1/2/10 1/2/11 1/2/12 1/2/13 1/2/14 1/2/15 FNMA CC 30yr Spread Nominal FNMA CC 15yr Spread Nominal b p s RMBS Spreads: React to Rate Volatility Source: Compa
Slide 25: Freddie Mac Multifamily Credit Spreads
25 190 275 120 170 220 270 320 370 420 470 Freddie Mac Multifamily Credit Spreads Freddie A-rated Freddie BBB rated b p s 185 220 90 110 130 150 170 190 210 230 CMBS IO/ Freddie Mac IO Spreads Freddie IO CMBS IO CMBS and CMBS IO Nominal Spreads b p s Source: Company data
Slide 26: Spread Risk
26 Spread Risk • An asset’s “spread” is the market premium above a benchmark rate that reflects the relative riskiness of the asset versus the benchmark. • Spread risk is the uncertainty in pricing resulting from the expansion and contraction of the risk premium over the benchmark. • Changes in spre
Slide 27: Financing Details
27 Financing Details • Our weighted average contractual maturity was 88 days at June 30, 2015 compared to 116 days at March 31, 2015. • Our repurchase agreement balance was $3.4 billion at June 30, 2015 with 21 counterparties compared to $3.2 billion with 20 counterparties at March 31, 2015. We curr
Slide 28: Hedging Details (Quarterly Comparison)
28 Hedging Details (Quarterly Comparison) As of June 30, 2015 As of March 31, 2015
Slide 29: Hedging Details (Activity subsequent to June 30, 2015)
29 Hedging Details (Activity subsequent to June 30, 2015) As of July 31, 2015
Slide 30: Risk Management
30 Risk Management Key Risk Mitigating Strategy Interest Rate/Extension Risk Duration target of 0.5 to 1.5 years Derivatives to economically hedge interest rate risk Invest in credit assets that should increase in value as rates rise Short duration assets and more predictable cash flows Prepayment R
Slide 31: Investment Premium Allocation
31 Investment Premium Allocation (as of end of period)
Slide 32: Selected Financial Highlights
32 Selected Financial Highlights (as of and for the quarter ended) (1) Core net operating income to common shareholders (including on a per share basis), adjusted return on average common equity and adjusted net interest spread are non-GAAP financial measures. Reconciliations of non-GAAP measures ar
Slide 33: Quarterly Non-GAAP Reconciliation
33 ($ in thousands except per share data) Quarter Ended 6/30/2015 3/31/2015 12/31/2014 9/30/2014 6/30/2014 Net (loss) income to common shareholders $28,168 ($11,766 ) $1,379 $28,572 ($8,293 ) Adjustments: Amortization of de-designated cash flow hedges (1) 857 1,057 1,449 1,442 1,608 Change in fair v
Slide 34: Reconciliation of GAAP Measures to Non-GAAP Measures
34 Reconciliation of GAAP Measures to Non-GAAP Measures (1) Rates shown are based on annualized interest expense amounts divided by average interest bearing liabilities. Recalculation of annualized cost of funds using total interest expense shown in the table may not be possible because certain expe
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