Dynex Capital, Inc. · NYSE:DX
Dynex Capital — Q2 2024 Earnings Presentation
29 slides from Dynex Capital's earnings presentation, Jul 22, 2024
Slide 1: Second Quarter 2024 Earnings Presentation
Second Quarter 2024 Earnings Presentation July 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: Dynex provides consistent monthly dividends through 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 $8.9 BILLION 379% STOCK 13.1% $892.0 million MARKET CAP RETURN SINCE ANNUALIZED $1 billion TOTAL IPO DIVIDEND YIELD EQUITY WHAT WE DO TODAY (dividends reinvested) (as of June 30, 2024) (as of June 30, 2024) DECEMBER
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 23.7% 8.1% 3.6% 3.2% 0.8% (9.7)% (18.3)% (20.2)% (22.4)% (23.1)% (30.
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: Second Quarter 2024 Performance
Second Quarter 2024 Performance 8
Slide 9: Quarterly Performance Highlights
Quarterly Performance Highlights Q2 24 Q1 24 Comprehensive (Loss) Income $(0.18) $0.35 (per common share) Book Value $12.50 $13.20 (per common share) Total Economic Return (1) (2.4)% 2.1% Net (Loss) Income $(0.15) $0.65 (per common share) Leverage (2) 7.9x 8.1x Average Earning Assets $8.6B $7.6B (in
Slide 10: Investment Portfolio
Investment Portfolio (as of dates indicated) (1) June 30, 2024 March 31, 2024 Portfolio Fair Value $8.9 Billion Portfolio Fair Value $8.2 Billion Dynex’s diversified Total Shareholder Equity $1B Total Shareholder Equity $959M portfolio remains Agency RMBS TBA Agency RMBS Pools 67% Agency RMBS TBA Ag
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 $76,054 $71,188 $71,525 $63,271 $(233) $42,212 $(844) $(1,268) $(2,152) $(2,55
Slide 12: Key Macroeconomic Themes
Key Macroeconomic Themes Dynex remains 01 Fed Policy 05 Demographics & Tech vigilant and More clear as data are now consistent with declining inflation and a softer labor market. The Fed has Demand for income is global and persistent and supports our overall business model. AI, the mindful of the in
Slide 13: Equilibrium spread range headed tighter
Equilibrium spread range headed tighter Dovish Fed, steeper yield curve, bank activity rising, credit stress driving flight to quality, strong double digit levered returns Private capital Private capital dominates Growth in GSE retained portfolios Fed Quantitative Easing returning Source: Bloomberg
Slide 14: Agency RMBS Market Dynamics and Portfolio Strategy
Agency RMBS Market Dynamics and Portfolio Strategy Agency MBS Fundamentals: Technicals: offer compelling • Muted housing rebound – “lock-in" hampered activity, seasonal turnover lower than expected. • Fed Balance Sheet - MBS portfolio runoff continues; private capital will absorb marginal net supply
Slide 15: CMBS Market Dynamics and Strategy
CMBS Market Dynamics and Strategy Stable cash flows Fundamentals: Technicals: in senior CMBS • Multifamily (MF) – demographic demand for housing is strong, driving tight markets for MF. High • Issuance - non-agency CMBS issuance has rebounded in 2024 due to increases in single asset / borrower price
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 Funds (MMF)- MMF reform is expected to increase balances in Govt only funds, a potential fewer cuts a
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 74.7 million 4.5 million Book Value per share Outstanding $12.50 — 2Q24 Dividends Declared per share $0.39 $0.43 Annualized Dividend Yield 13.07% 6.97% Share Price $11.94 $24.76 Market Capitalization $89
Slide 21: RMBS Portfolio Details
RMBS Portfolio Details (as of June 30, 2024) Unamortized Par/Notional Amortized Fair Value % of Total WAVG Pay Premium 3-month 3-month ($ in thousands) Value Cost (%) (1) Fair Value (%) Portfolio up to TBA Balance (1) Market Yield (2) WAVG Yield (1) CPR (1) (3) Agency RMBS Pools: 2.0% coupon $ 682,6
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 $ 102,516 $ 97,482 1.1 % 3.0 2.97 % 5.02 % $ 92
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) June 30, 2024 March 31, 2024 2 year 10 year Treasury Treasury As of As o
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 June 30, 2024) Fair Value of MBS Balance Weighted Pledged as Collateral Collateral Type ($s in thousands) Average Rate ($s in thousands) Agency RMBS $5,284,233 5.46 % $5,562,905 Agency CMBS 92,472 5.45 % 96,046 o The weighted average repo borrowing cost was 5.47% during the s
Slide 26: Financial Performance
Financial Performance 2Q24 1Q24 YTD 2024 Income Per Common Income Per Common Income Per Common ($ in thousands, except per share amounts) (Expense) Share* (Expense) Share* (Expense) Share* Interest income $ 76,054 $ 1.14 $ 71,525 $ 1.21 $ 147,580 $ 2.34 Interest expense (74,767) (1.12) (74,717) (1.2
Slide 27: Book Value Rollforward
Book Value Rollforward Quarter Ended June 30, 2024 Per ($s in thousands except amounts per share) Common Equity Common Share Common equity, beginning of period (1) $ 847,032 $ 13.20 Earnings available for distribution (2) (8,095) Change in fair value of investments, including TBAs (68,022) Change in
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) 2Q24 1Q24 4Q23 3Q23 2Q23 Comprehensive (loss) income to common shareholders $ (12,013) $ 20,927 $ 81,648 $ (86,748) $ 42,971 Adjustments: Change in fair value of investments (2) 45,269 87,292 (323,259)
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