Dynex Capital, Inc. · NYSE:DX
Dynex Capital — Investor Presentation (June 2011)
18 slides from Dynex Capital's investor presentation, Jun 15, 2011
Slide 1: Dynex Capital, Inc. Investor Presentation
Exhibit 99.1 Dynex Capital, Inc. Investor Presentation June 15, 2011
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 future investment strategies and leverage ratios, financial performance, the projected impact of NOL ca
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 our shareholders Manage leverage conservatively R
Slide 4: DX Snapshot
DX Snapshot Company Highlights Internally managed REIT commenced operations in 1988 Significant insider ownership and experienced management team Diversified investment strategy in residential and commercial mortgage assets Large NOL carryfoward for unique total return opportunity Market Highlights
Slide 5: Long Term Performance
Long Term Performance Five Year Total Return (1) (2) Source: SNL Financial. (1) Based on beginning share price of $6.75 on 6/9/06 and ending share price of $9.72 on 6/9/11. Assumes reinvestment of dividends. (2) SNL U.S. Finance REIT: Includes all publicly traded (NYSE, NASDAQ, OTC BB, Pink Sheets)
Slide 6: 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 – Chairman since 2003 and CEO since 2008 – Man
Slide 7: Diversified Investment Strategy
Diversified Investment Strategy Diversified Investment Strategy that invests in a combination of Agency and non-Agency residential and commercial assets to maximize risk adjusted total return. Target Strategy Higher Credit Quality / Higher Credit Quality / FUNDING: Short Duration Long Duration Examp
Slide 8: Myriad of MREIT Risks
Myriad of MREIT Risks • Interest Rate Risk – net duration gap • Extension Risk – limited duration extension is key • Credit Risk – higher probability of repayment vs. higher yield • Leverage Risk – liquidity of assets financed is key • Prepayment Risk – most attractive theme over the past 3 years •
Slide 9: Investment Portfolio as of 3/31/11
Investment Portfolio as of 3/31/11 Composition (1) Ratings(1) Seasoned Other A DX CMBS/ 2% Below A CMBS/loans Seasoned AA RMBS DX 3% 12% 1% 3% RMBS/loans 3% AAA Agency MBS 94% 82% • High quality portfolio of primarily Agency securities, as well as seasoned loans originated by Dynex in 1990’s • 94% A
Slide 10: Credit Portfolio Comparisons
Credit Portfolio Comparisons Average 2010 Year-End Portfolio Non-Agency Price $101.43 $120 $100 $76.73 $80 $60 $40 $20 $- DX Wgt Average of Other Hybrid REITs (1) (1) Consists of the weighted average of dollar prices for non-Agency investments as of 12/31/10 for MFA, IVR, and TWO. 10
Slide 11: Interest Rate Risk
Interest Rate Risk Change in Value from Change in Rates Estimated Portfolio Value(2) Equity Value(3) Company Ticker Leverage(1) +50 +75 +100 +75 +100 AGENCY MBS NLY 6.3 -1.80% -2.50% -15.8% ANH 7.1 -2.60% -18.5% HTS 6.1 -0.53% -1.75% -10.7% AGNC 7.6 -0.40% -1.10% -8.4% CYS 8.1 -2.14% -3.25% -26.3% A
Slide 12: Interest Rate Risk
Interest Rate Risk as of March 31, 2011 Basis Point Change in Basis Point Change in Mortgage Spreads Interest Rates - 50 -25 0 +25 +50 +100 0.9% (0.2)% (1.1)% (2.1)% (3.1)% +50 1.5% 0.5% (0.5)% (1.5)% (2.4)% 0 2.0% 1.0% – (1.0)% (1.9)% -50 2.4% 1.4% 0.4% (0.6)% (1.6)% -100 2.6% 1.6% 0.6% (0.4)% (1.3
Slide 13: Important Macro Themes
Important Macro Themes Multiple factors combining to depress economic activity Fed funds rate at historic lows with a steep yield curve Global risk remains high Government policy/regulations to influence investment returns Both GSE’s and U.S. government are reducing MBS holdings Improved financing e
Slide 14: Potential Return Profile for Prospective Investments as of June 13, 2011
Potential Return Profile for Prospective Investments as of June 13, 2011 Range of net Range of Range of spread to Range of Investment Prices yields funding ROEs Agency RMBS 103-108 2.3%-3.8% 1.3%-3.0% 13%-27% CMBS 105-109 3.5%-4.0% 1.3%-2.3% 12%-20% Non–Agency ‘AAA’RMBS 90-102 3.6%-6.0% 2.6%-4.0% 14
Slide 15: Balance Sheet Overview
Balance Sheet Overview as of March 31, 2011 Associated (Dollars in Millions) Asset Financing (1)/ Allocated Leverage Carrying Liability Shareholders Notes Target Basis Carrying ’ Equity Basis • $1,340.4 mm in Hybrid Agency ARMs - Weighted average months-to-reset of 37 months Agency RMBS $1,620.7 ($1
Slide 16: Earnings – Paid and Retained
Earnings – Paid and Retained We Pay a Dividend AND Generate and Retain Earnings (Utilizing our NOL) to Grow Book Value $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 ($0.10) Dividends Declared Excess Earnings Retained 16
Slide 17: Investment Portfolio Income and Spread
Investment Portfolio Income and Spread $ in thousands $14,000 3.50% $12,000 3.00% $10,000 2.50% $8,000 2.00% $6,000 1.50% $4,000 1.00% $2,000 0.50% $0 0.00% 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Net interest income after provision Net interest spread 17
Slide 18: Why Dynex
Why Dynex Excellent long term performance record 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 due to owner-operator str