Dynex Capital, Inc. · NYSE:DX
Dynex Capital — Value Forum, InvestFest 2012
24 slides from Dynex Capital's conference presentation, Feb 10, 2012
Slide 1: Dynex Capital, Inc. Value Forum InvestFest 2012
Exhibit 99.1 Dynex Capital, Inc. Value Forum InvestFest 2012 February 11, 2012
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: 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 4: Dynex at an Inflection Point
Dynex at an Inflection Point • Consistent Core Investment Strategy Since 2008 – Short duration, high quality, and modest leverage has produced stable returns and increasing dividends – Opportunistic asset allocation has avoided investment “landmines” – Diversified asset opportunity • Current Investm
Slide 5: Performance Trends
Performance Trends $0.45 5% 4.59% $0.40 4% $0.35 $0.36 * $0.35 -$0.37** $0.30 2.90% $0.28 3% $0.25 2.69% $0.20 2% $0.15 $0.15 $294 million in equity capital raised since December 2010 $0.10 1% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 08 08 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 Dilut
Slide 6: Summary of Results
Summary of Results Dividends and Earnings Per Share* $10.00 Book Value Per Share $9.80 $0.40 $0.40 $9.60 $0.34 $0.35 $0.33 $0.31 $0.32 * $0.35-$0.37 ** $9.40 $0.30 $9.20 $9.00 $9.80 $0.25 $9.64 $8.80 $9.59 $9.51 $0.20 $9.18-$9.22** $8.60 $0.15 $8.40 $9.15 $0.25 $0.27 $0.27 $0.27 $0.27 $0.28 $0.10 $8
Slide 7: Investment Portfolio Review
Investment Portfolio Review • Our portfolio is constructed to perform well despite volatile markets as we have focused on high credit quality short duration assets. • We continue to maintain a selective approach to adding assets to help minimize prepayment risk. • We allocated our prior two capital
Slide 8: Portfolio Comparisons
Portfolio Comparisons (as of Q3 2011 except where indicated) Agency Non-Agency 4% 19% 20% 36% 29% 49% 100% 100% 100% 100% 100% 100% 100% 96% 81% 80% 64% 71% 51% NLY AGNC HTS CYS CMO ANH ARR CIM MFA IVR TWO DX MTGE Q3 Q3 Q3 Q3 Q4 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Agency Hybrid Source: J.P. Morgan (describing f
Slide 9: DX Portfolio Detail
DX Portfolio Detail (as of September 30, 2011) Agency/Non-Agency Breakdown Residential/Commercial Breakdown Agency CMBS Agency RMBS 14% 66% Non-Agency RMBS RMBS/Loans CMBS 68% 2% 32% Non-Agency CMBS/Loans 18 % 9
Slide 10: Our goal is to limit credit, interest rate, prepayment, and extension risk
OUR GOAL IS TO LIMIT CREDIT, INTEREST RATE, PREPAYMENT, AND EXTENSION RISK IN OUR INVESTMENT PORTFOLIO 10
Slide 11: High Credit Quality Portfolio
High Credit Quality Portfolio As of September 30, 2011 As of June 30, 2011 AAA AAA 94% 90% AA 4% AA A 1% 3% A 3% Below A Below A 3% 2% *Agency securities are considered AAA rated as of the dates presented 11
Slide 12: Interest Rate Risk Comparisons
Interest Rate Risk Comparisons Change in Value from Change in Rates Estimated Company Portfolio Value(2) Equity Value(3) Leverage(1) Ticker +50 +75 +100 +75 +100 AGENCY MBS NLY 6.3 -1.80% -2.50% -15.8% ANH 7.0 -1.0% -7.0% HTS 7.9 -0.35% -1.45% -11.5% AGNC 7.6 -0.2% -0.8% -6.08% CYS 8.1 -2.14% -3.25%
Slide 13: Extension Risk
Extension Risk (as of September 30, 2011) 16 14 15 CPR/CPB 12 2 CPR/CPB Average 10 Life 8 (years) 6 4 2 0 FN 30 year FNCI 15 year 5/1 ARM Price Coupon WAC Speed Average Life Average Life Extension FN 30yr $103-10 4.00% 4.43% 15 CPR 5.41 years ~9 years 2 CPR 14.78 years FNCI 15yr $103-10 3.50% 3.80%
Slide 14: Portfolio Snapshot
Portfolio Snapshot (as of September 30, 2011, unless indicated) Prepayment Performance Dollar Premium Prepayment Exposure through December 31. 2011 30% Selected 28% 28% 28% 28% Explicit 28% specified prepayment pools 26% protection 41% 24% 51% 21.5% 21.2% 21.5% 22% 20% 17.9% 17.8% 17.5% 17.6% 18% 14
Slide 15: Trading Comparables
Trading Comparables Dividend Yields Debt to equity (x) Dividend Yield Excess return 7.7x 7.7x 6.5x 5.6x 6.0x 3.40% 16.4% 16.1% 14.9% 3.4x 14.10% 13.4% 12.2% 1.8x 4.1% CIM MFA IVR TWO DX MTGE Agency REITS Mean For DX only, Excess Return represents earnings retained and not paid in a dividend Source:
Slide 16: Insider Ownership Comparison
Insider Ownership Comparison 7.10% 0.75% 0.53% 0.21% 0.11% DX MFA TWO CIM IVR Source: Bloomberg 16
Slide 17: Potential Investment Returns
Potential Investment Returns (as of February 7, 2012) Range of net Range of Range of spread to Range of Investment prices yields funding ROEs Agency RMBS 103-108 2.0%-2.8% 1.5%-2.3% 12%-19% Agency CMBS 103-115 2.9%-3.4% 1.3%-1.9% 14%-18% Non-Agency ‘A’ –’AAA’ RMBS 85-104 3.0%-8.5% 1.5%-4.0% 12%-20%
Slide 18: Why Dynex
Why Dynex (1) Source for non DX Info: J.P. Morgan (SNL Financial, FactSet, Company filings), Market data as of February 3, 2012. Financial data as per most recent available GAAP results High Insider Ownership Competitive Returns (1) 6.94% Source: Bloomberg Dividend Yield ROE 3.40% 16.4% 16.1% 14.10%
Slide 19: Why Dynex
Why Dynex Excellent long term investment strategy driving solid performance record Short-duration, high credit quality portfolio constructed to reduce exposure to interest rate, prepayment, extension and credit risk Balance sheet positioned to perform through volatile market environments Experienced
Slide 20: Appendix
DYNEX APPENDIX
Slide 21: Management Team
Management Team Experienced team of professionals with a combined 83 years of experience managing mortgage REITs and mortgage portfolios •ThomasB.Akin– ChairmanandChiefExecutive Officer – 33 years of experience in the industry and 8 years at Dynex – Chairman since 2003 and CEO since 2008 – Managing
Slide 22: Capital Allocation
Capital Allocation (as of September 30, 2011) Associated Financing (1)/ Allocated Asset Carrying Liability Shareholders' Leverage ($ in millions) Basis Carrying Basis Equity Target Notes • $1,337.3 mm in Hybrid Agency ARMs - Weighted average months-to-reset of 40 months Agency RMBS $1,716.2 ($1,542.
Slide 23: Selected Financial Highlights
Selected Financial Highlights (as of and for the quarter ended) Financial Highlights: ($000 except per share amounts) Sept 30, 2011 Jun 30, 2011Mar 31, 2011Dec 31, 2010Sept 30, 2010 Total Investments $ 2,595,574 $ 2,591,097 $ 2,279,610 $ 1,614,126 $ 1,064,546 Total Assets 2,633,686 2,656,703 2,359,8
Slide 24: Key Prepayment Metrics for Selected Agency RMBS Specified Pools
Key Prepayment Metrics for Selected Agency RMBS Specified Pools (as of September 30, 2011) ($ in thousands) Average Loan Size Third Party Originated $300.0 65.0% 55.0% $275.0 $297.0 $292.0 61.0% 45.0% 58.0% $250.0 $269.0 35.0% 41.0% $225.0 DX All ARMs 5/1 ARMs 25.0% DX All ARMs 5/1 ARMs Investor Pro