Dynex Capital, Inc. · NYSE:DX
Dynex Capital — Investor Presentation (September 2012)
25 slides from Dynex Capital's investor presentation, Sep 12, 2012
Slide 1: Investor Presentation September 12, 2012
Investor Presentation September 12, 2012
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: DX Snapshot
3 DX Snapshot Internally managed REIT commenced operations in 1988 Significant inside ownership and experienced management team Diversified investment strategy investing in residential and commercial mortgage assets Large NOL carryforward for unique total return opportunity Market Highlights: (as of
Slide 4: Recent Highlights
4 Recent Highlights (at June 30, 2012 unless otherwise specified) Diluted earnings per common share of $0.35 Book value per common share of $9.66 Annualized return on average equity of 14.3% for the second quarter Net interest spread of 2.18% for the second quarter Constant prepayment rate (CPR) of
Slide 5: Our Track Record
Our Track Record $0.27 $0.28 $0.28 $0.29 $0.32 $0.36 $0.33 $0.35 $0.00 $0.05 $0.10 $0.15 $0.20 $0.25 $0.30 $0.35 $0.40 Q3-2011 Q4-2011 Q1-2012 Q2-2012 Dividend per Share EPS* $9.15 $9.20 $9.62 $9.66 $8.00 $8.50 $9.00 $9.50 $10.00 Q3-2011 Q4-2011 Q1-2012 Q2-2012 2.43% 2.56% 2.41% 2.18% 0.00% 0.50% 1.
Slide 6: Book Value Growth Since 2008
6 Book Value Growth Since 2008 $8.07 $9.08 $9.64 $9.20 $9.66 2008 2009 2010 2011 6/30/2012 Book Value
Slide 7: Disciplined Top-Down Investment Philosophy
Disciplined Top-Down Investment Philosophy Macroeconomic Analysis Sector Analysis Security Selection and Funding Performance and Risk Management 7
Slide 8: Investment Philosophy
8 Investment Philosophy Our diversified portfolio strategy proved beneficial this quarter: - Book Value remained steady despite materially wider credit spreads in the CMBS sector - Prepayment experience remained below expectations as we have allocated our capital appropriately between prepayment pro
Slide 9: DX Investment Portfolio
9 DX Investment Portfolio (as of June 30, 2012) Agency RMBS 70% Agency CMBS 12% Non- Agency RMBS 2% Non- Agency CMBS 16% RMBS, 72% CMBS, 28% Agency/Non-Agency Portfolio Expected Maturity/Reset Distribution Residential/Commercial 19% 12% 14% 28% 26% 1% 0% 5% 10% 15% 20% 25% 30% <15 16-40 41-60 61-84
Slide 10: DX Portfolio Detail
Explicit prepayment protection 76% Post/near reset 6% *Selected specified pools 18% DX Portfolio Detail (as of June 30, 2012) 10 AAA* 89% AA 3% A 7% Below A 1% Credit Quality *Agency MBS are considered AAA rated as of the date presented Dollar Prepayment Premium Exposure *See appendix for details on
Slide 11: RMBS Specified Pools
11 RMBS Specified Pools $280.3 $276.5 $279.9 $225.0 $250.0 $275.0 $300.0 DX All ARMs 5/1 ARMs Average Loan Size 38.9% 54.4% 58.6% 25.0% 35.0% 45.0% 55.0% 65.0% DX All ARMs 5/1 ARMs Third Party Originated 16.7% 15.2% 14.5% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% DX All ARMs 5/1 ARMs 52.0% 39.8% 38.6% 0% 10
Slide 12: CMBS Portfolio
CMBS Portfolio (as of June 30, 2012) 12 AAA 73% * AA 5% A 21% Below A 1% Other 28% Multifamily 72% $104.5 $67.0 $0 $369.8 prior to 2000 2000-2005 2006-2008 2009 or newer Agency CMBS $329 Agency CMBS IO $300 Non- Agency CMBS $475 Non- Agency CMBS IO $66 Credit Quality Collateral Non-Agency Vintage As
Slide 13: Agency CMBS Historical Credit Performance
Agency CMBS Historical Credit Performance 13 0.00% 0.05% 0.10% 0.15% 0.20% 0.25% 0.30% 0.35% 0.40% 0.45% % 60 + D a y s Past D u e Source: Freddie Mac
Slide 14: Portfolio Performance
Portfolio Performance *As presented on this slide, Q3-2011 return on average equity is calculated based on a measure that excludes the impact of certain items on earnings per share (EPS Ex-Items). EPS Ex-Items for Q3-2011 was $0.32 and excludes from GAAP earnings per share the impact of litigation s
Slide 15: Potential Investment Returns
15 Potential Investment Returns (as of July 25, 2012) Investment Range of Prices Range of Yields Range of Net Spread to Funding Range of ROEs Agency RMBS 102-111 1.0%- 2.3% .60%-1.9% 6%-15% Agency CMBS 107-115 2.4%-3.0% 1.0%-1.6% 11%-15% Non-Agency ‘A’ - ’AAA’ RMBS 85-104 2.5%-6.5% 1.3%-3.5% 8%-17%
Slide 16: Dynex Is Focused on Capital Preservation and Managing Risk
16 Dynex Is Focused on Capital Preservation and Managing Risk •Diversify repurchase agreement counterparties (26 available counterparties at present) •Extend maturity dates of repurchase agreements when possible •Targets staggering repurchase agreement maturities •Maintain cash and liquid instrument
Slide 17: Extension Risk
17 Extension Risk (as of June 30, 2012) 0 2 4 6 8 10 12 14 16 FN 30 year FNCI 15 year FN 5/1 ARM 15 CPR/CPB 2 CPR/CPB Average Life (years) Price Coupon WAC Speed Average Life Average Life Extension FN 30yr $106-10 3.50% 3.99% 15 CPR 2 CPR 5.37 years 14.49 years ~9 years FNCI 15yr $104-6 2.50% 3.08%
Slide 18: Financing
Financing (as of June 30, 2012) Repurchase Agreements Financing Balance WAVG Rate By collateral pledged: Agency $ 2,630,802 0.47% Non-Agency 439,816 1.42% Other 41,306 1.61% Total $ 3,111,924 0.62% By original maturity: (days) 0-30 $ 1,076,065 0.70% 31-60 1,168,159 0.68% 61-90 536,687 0.49% >90 331,
Slide 19: Liquidity Continuum
19 Liquidity Continuum (as of 6/30/2012) Loans Non- Agency CMBS IO Non- Agency CMBS Non- Agency RMBS Agency CMBS IO Agency CMBS Agency RMBS Less Liquid More Liquid 2% 2% 13% 1% 8% 9% 65% % of Investments
Slide 20: Portfolio Summary
20 Portfolio Summary We have continued to favor shorter duration assets to minimize the volatility of the portfolio and protect book value CMBS offers a complimentary risk profile to our RMBS at attractive relative value yields Our prepayment exposure is mitigated from asset selection for RMBS and p
Slide 21: Dynex Value Proposition
21 Dynex Value Proposition Source: SNL Internally Managed and Publicly Traded Since 1988 Diversified Investment Strategy Large Tax NOL Significant Insider Ownership +82.29%
Slide 22: APPENDIX
22 APPENDIX
Slide 23: Management Team
23 Management Team Experienced team of professionals with over 80 years of experience managing mortgage REITs and mortgage portfolios •Thomas B. Akin – Chairman and Chief Executive Officer – 34 years of experience in the industry and 9 years at Dynex – Chairman since 2003 and CEO since 2008 – Managi
Slide 24: Capital Allocation
24 Capital Allocation (as of June 30, 2012) (1) At June 30, 2012, associated financing for investments includes repurchase agreements, and securitization financing issued to third parties (the latter of which are presented on the Company’s balance sheet as “non-recourse collateralized financing”). A
Slide 25: Selected Financial Highlights
25 Selected Financial Highlights (as of and for the quarter ended) Financial Highlights: ($000 except per share amounts) Jun 30, 2012 Mar 31, 2012 Dec 31, 2011 Sept 30, 2011 Jun 30, 2011 Total Investments 3,628,163$ 3,276,170$ 2,500,976$ 2,595,574$ 2,591,097$ Total Assets 3,729,197 3,349,056 2,582,1
Dynex Capital — Investor Presentation (September 2012) on 6ix