1 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, beliefs, projections, estimates, future plans, strategies, and events, developments that we expect or anticipate will occur in the future, and future operating results or financial condition are forward-looking ...

Dynex Capital (DX) came out with quarterly earnings of $0.20 per share, beating the Zacks Consensus Estimate of $0.14 per share. This compares to loss of $0.30 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 42.86%. A quarter ago, it was expected that this mortgage real estate investment trust would post earnings of $0.38 per share when it actually produced earnings of $0.10, delivering a surprise of -73.68%.Over the last four ...

Financial Data and Key Metrics Changes - The company raised $270 million of new capital year-to-date, achieving this at a premium to book value, which is accretive to shareholders [33] - Net interest income continues to trend up as new investments with attractive yields are added to the portfolio while financing costs trend down [32] - The leverage ratio increased from 7.4% to 7.8% due to a decline in book value [72] Business Line Data and Key Metrics Changes - The portfolio generated a total return of 2.6% during a quarter with significant swings in rates, validating the investment strategy [36] - Agency RMBS spreads widened sharply, ranging from 145 to 160 basis points over treasuries by the end of the quarter [42] - The company maintained a disciplined liquidity-focused risk management process, allowing it to navigate market volatility without crystallizing losses [43] Market Data and Key Metrics Changes - Long-end treasury yields unexpectedly rose, reflecting selling pressure, while the dollar experienced weakness against major currencies [15] - The market saw a classic risk-off reaction following the April 2nd tariff announcement, leading to declines in equity prices and sharp drops in interest rates [40] - The availability of repo funding remained strong, with costs stable between 15 and 17 basis points over SOFR [63] Company Strategy and Development Direction - The company continues to see compelling opportunities in agency residential mortgage-backed securities while managing through a rapidly changing landscape [55] - A focus on disciplined risk management and real-time adjustments is emphasized as the regulatory and political landscape evolves [27] - The company is preparing for potential changes in the GSEs and is evaluating outlier scenarios for market reactions [24] Management's Comments on Operating Environment and Future Outlook - Management views the current environment as favorable, with a steeper yield curve and lower financing costs supporting the business model [8] - The company is prepared for continued volatility in the financial and economic environments, expecting surprises in the future [28] - The dividend is set based on long-term returns, capital availability, and overall risk, with a recent increase reflecting confidence in generating attractive returns [30] Other Important Information - The company has operated with generally lower leverage and a robust liquidity position, allowing it to remain agile amid external shifts [21] - Management emphasizes the importance of transparency in investments, with all assets marked and reflected in earnings and book value [57] - The executive team collectively owns nearly 2% of the company, aligning their interests with those of shareholders [58] Q&A Session Summary Question: Repo funding costs and availability - Repo funding costs have been stable between 15 and 17 basis points over SOFR, with strong availability in financing markets [63] Question: Hedging strategy amidst volatility - The company is comfortable with its current hedge composition, primarily using swaps as a natural hedge for the mortgage portfolio [65] Question: Investing opportunities in the current environment - The steeper curve and wider spreads present significant ROE potential, with diversification across the coupon stack providing duration certainty [70] Question: Book value and dividend implications - The book value includes the dividend accrued, and leverage is at 7.8 times, reflecting a cautious approach to adding risk [76][78] Question: Preparing for GSE changes and potential spread widening - The company is focused on maintaining liquidity to withstand price shocks and is conducting scenario analysis for potential GSE changes [122][91]

Financial Performance - Total economic return of $0.33 per common share, representing 2.6% of beginning book value, with dividends declared of $0.47 per common share and a decline in book value of $(0.14) per common share[5] - Comprehensive income of $0.16 per common share, while net loss was $(0.06) per common share for the first quarter of 2025[8] - Book value per common share decreased to $12.56 as of March 31, 2025, down from $12.70 as of December 31, 2024[7] Capital and Liquidity - Raised equity capital of $240 million through at-the-market common stock issuances, net of issuance costs[5] - Liquidity position stood at $790 million as of March 31, 2025[5] Assets and Liabilities - Total assets increased to $9.04 billion as of March 31, 2025, compared to $8.18 billion as of December 31, 2024[7] - Total liabilities increased to $7.65 billion as of March 31, 2025, up from $6.99 billion as of December 31, 2024[7] Interest Income and Expenses - Net interest income rose to $17.13 million for the first quarter of 2025, compared to $6.89 million in the previous quarter[8] - For Q1 2025, total interest income increased to $95,059,000 from $88,496,000 in Q4 2024, representing an increase of 1.77%[12] - The net interest income for Q1 2025 was $17,133,000, up from $6,887,000 in Q4 2024, indicating a significant increase of 148.5%[23] - Economic net interest income rose to $27,984,000 in Q1 2025, compared to $18,813,000 in Q4 2024, reflecting a growth of 48.5%[23] - The economic net interest spread improved to 0.79% in Q1 2025 from 0.41% in Q4 2024[23] Investment Activities - The company purchased $895 million in Agency RMBS and $55 million in Agency CMBS during the quarter[5] - The average balance of Agency RMBS increased to $7,726,081,000 in Q1 2025 from $7,181,923,000 in Q4 2024, a rise of 7.6%[12] - The effective yield on Agency RMBS improved to 4.66% in Q1 2025 from 4.59% in Q4 2024[12] Derivatives and Risk Management - The company experienced a net loss on derivatives of $118,088,000 in Q1 2025, compared to a gain of $276,670,000 in Q4 2024[15] - The company reported a net periodic interest from interest rate swaps of $10,851,000 in Q1 2025, slightly down from $11,926,000 in Q4 2024[23] - The projected amortization of net deferred tax hedge gains is estimated at $100,144,000 for fiscal year 2025, including $24.9 million for Q1 2025[17] Shareholder Information - The weighted average common shares increased to 90,492,327 in Q1 2025 from 81,145,733 in Q4 2024[23] Company Strategy and Environment - Dynex Capital, Inc. focuses on ethical stewardship of stakeholders' capital and employs comprehensive risk management strategies[28] - The company operates as a REIT and is internally managed to maximize stakeholder alignment[28] - The performance of the investment portfolio is influenced by cash flow, prepayment rates, and credit performance[26] - Changes in Federal Reserve policies regarding Agency RMBS, Agency CMBS, and U.S. Treasuries significantly impact market conditions and asset prices[26] - The company faces risks related to the cost and availability of financing, including potential changes in regulations affecting financial institutions[26] - Increased competition and changes in government regulations are key factors affecting the company's business environment[26] - The company is exposed to risks from defaults by borrowers on loans underlying MBS[26] - There is uncertainty regarding continued government support of the U.S. financial system and housing markets[26] - The company emphasizes the importance of the quality of performance from third-party service providers for critical operations[26] - Forward-looking statements are subject to various risks and uncertainties, and the company undertakes no obligation to update them[27]

Core Insights - Albert Anthony is a Croatian-American media personality who has gained over 1,000 followers on investor platforms since 2023, focusing on markets and stocks [1] - He is set to launch a new book titled "Financial Markets: Growing A Dividend Income Portfolio" in 2025, coinciding with an ongoing series of articles on the same topic [1] - Albert Anthony has a background in management and information systems, having worked in a top-10 financial firm's IT department [1] Company Overview - Albert Anthony & Co. is a sole proprietorship registered in Austin, Texas, and is wholly owned by Albert Anthony [1] - The company does not provide personalized financial advisory services but offers general market commentary based on publicly available data [1] Investment Focus - Albert Anthony has launched the Future Investor Fund, which aims to build a dividend portfolio [1] - The brand emphasizes a home-based investment approach, utilizing the founder's own capital [1]

Investment Portfolio - As of December 31, 2024, the majority of the company's investments were Agency-issued pass-through RMBS, primarily backed by fixed-rate single-family mortgage loans [22]. - The company's CMBS investments comprised less than 1% of the investment portfolio as of December 31, 2024, and are backed by multifamily housing loans [24]. - The company’s investment policy limits investment in non-Agency MBS rated BBB+ or lower to 10% of total shareholders' equity [32]. Leverage and Hedging - The company employs leverage to enhance returns, primarily through repurchase agreements, with original terms to maturity ranging from overnight to six months [27]. - As of December 31, 2024, the company did not have more than 10% of equity at risk with any of its repurchase agreement counterparties [28]. - The company’s hedging strategy is dynamic, adjusting based on assessments of U.S. and global economic conditions and monetary policies [30]. Human Capital - The company had 22 full and part-time employees as of December 31, 2024, with an average tenure of 10.8 years and a voluntary turnover rate of 4% over the past three years [41]. - The company’s human capital strategy focuses on creating a supportive and equitable culture to attract and retain skilled employees [40]. Regulatory Compliance - The company’s business model may be impacted by changes in regulatory requirements, including those related to REIT qualifications and the 1940 Act [36]. - The company must derive at least 75% of its gross income from real estate-related sources to maintain its REIT status [52]. - The company is required to distribute at least 90% of its REIT taxable income to retain its REIT status [46]. - The company must have more than 100 shareholders and not have more than 50% of its shares owned by five or fewer persons to maintain its REIT status [57]. - The company operates under the exemption provided under Section 3(c)(5)(C) of the Investment Company Act of 1940, requiring at least 55% of its assets to be mortgage loans and at least 80% to be real estate-related [58]. Financial Performance - The estimated REIT taxable income for the year ended December 31, 2024, is $96.3 million, which includes $99.9 million related to the amortization of net deferred tax hedge gains [47]. - The total dividends declared for tax purposes for the year ended December 31, 2024, is $1.58 per share, with common dividends declared at $1.60 per share [50]. - The projected amortization of net deferred tax hedge gains to be recognized as taxable income totals $719.038 million over the periods indicated, with $100.144 million for fiscal year 2025 [49]. - As of December 31, 2024, the company has $557.9 million of capital loss carryforwards, all of which will expire by December 31, 2027, or December 31, 2028 [49]. - The company declared common dividends of $1.27707 as ordinary income and $0.30293 as return of capital for the year ended December 31, 2024 [50]. Market Competition - The company reported that competition in the market may reduce the available supply of investments and negatively impact income from these investments [45].

Core Viewpoint - The Zacks REIT and Equity Trust industry is currently facing challenges due to volatile mortgage rates, but companies like Annaly Capital Management, AG Mortgage Investment Trust, and Dynex Capital are well-positioned to navigate these conditions [1][2]. Industry Overview - The Zacks REIT and Equity Trust industry consists of mortgage REITs (mREITs) that invest in and originate mortgages and mortgage-backed securities (MBS), focusing on either residential or commercial mortgage markets [3]. - Agency securities, backed by the federal government, are considered safer investments, limiting credit risks for mREITs [4]. Current Trends - Mortgage rates have been volatile, but a gradual decline is expected, which may lead to increased loan demand [5]. - The economy remains stable, suggesting that mortgage originations will improve, albeit at a slower pace than previously anticipated [6]. - The industry is experiencing dividend cuts due to eroding book values, high interest rates, and widening spreads between Agency MBS and treasury rates [7][8]. Financial Performance - The Zacks REIT and Equity Trust industry has underperformed compared to the broader Zacks Finance sector and the S&P 500, with a gain of 13.3% over the past year versus 29.6% for the sector and 25.2% for the S&P [13]. - The industry's current price-to-book (P/BV) ratio is 0.96X, significantly lower than the S&P 500's 8.88X, indicating a solid discount compared to the broader finance sector's P/BV of 4.18X [14][15]. Company Highlights - **Annaly Capital Management (NLY)**: Focuses on prudent asset selection and capital allocation, with a portfolio valued at $98.2 billion as of December 31, 2024. The company's 2025 earnings have been revised upward by 9.2% to $2.81 per share, indicating a year-over-year rise of 4.1% [16][19]. - **AG Mortgage Investment Trust (MITT)**: Invests in residential mortgage assets and has committed to acquiring $200 million in home equity loans, tapping into a $2 trillion market. Its 2025 earnings outlook has been revised downward by 3.2% to 89 cents per share, but it still indicates a year-over-year surge of 106.9% [20][21][22]. - **Dynex Capital (DX)**: Engages in mortgage and consumer finance, with a focus on multi-family and manufactured home loans. The company's 2025 earnings outlook has been revised upward by 3.7% to $1.87 per share, reflecting a year-over-year rise of 654.3% [23][26].

Industry Overview - The Zacks REIT and Equity Trust industry includes mortgage REITs (mREITs) that invest in and originate mortgages and mortgage-backed securities (MBS), providing mortgage credit for homeowners and businesses [3] - The industry is currently facing challenges due to volatile mortgage rates and high interest rates, which are affecting valuations and operational performance [6][7] Current Market Conditions - Recent volatility in mortgage rates has led to a decrease in loan demand, although there are signs of improvement in purchase applications [4] - The Federal Reserve's interest rate cuts are expected to gradually lower mortgage rates, which may increase loan demand over time [1][5] Financial Performance - The Zacks REIT and Equity Trust industry has underperformed compared to the broader Zacks Finance sector and the S&P 500, gaining only 13.3% over the past year compared to 29.6% and 25.2% respectively [13] - The industry's current-year earnings estimate has decreased by 16% over the last year, indicating a negative earnings outlook [11] Valuation Metrics - The industry is currently trading at a trailing 12-month price-to-book (P/BV) ratio of 0.96X, significantly lower than the S&P 500's 8.88X [15] - Compared to the broader Zacks Finance sector, which has a P/BV of 4.18X, the REIT and Equity Trust industry is trading at a substantial discount [17] Company Highlights Annaly Capital Management, Inc. (NLY) - NLY's investment strategy focuses on traditional Agency MBSs and aims to enhance returns through non-agency and credit-focused asset classes [19] - The company has a market capitalization of $11.6 billion and a Zacks Rank of 1 (Strong Buy) with a projected 2025 earnings of $2.81 per share, reflecting a year-over-year rise of 4.1% [21] AG Mortgage Investment Trust, Inc. (MITT) - MITT invests in residential mortgage assets and has recently acquired approximately $150 million in home equity loans, with plans for an additional $200 million [23] - The company has a market capitalization of $1.26 billion and a Zacks Rank of 3 (Hold), with a projected 2025 earnings of 89 cents per share, indicating a year-over-year surge of 106.9% [24] Dynex Capital, Inc. (DX) - DX focuses on originating mortgage loans secured by multi-family properties and has expanded into commercial real estate loans [26] - The company has a market capitalization of $1.06 billion and a Zacks Rank of 2 (Buy), with a projected 2025 earnings of $1.87 per share, indicating a year-over-year rise of 654.3% [29]

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