Dynex Capital, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Dynex Capital, Inc. Fourth Quarter 2020 Annual Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press Star 1 on your telephone. If you require any further assistance, please press Star 0. I would now like to hand the conference over to your speaker today, Ms. Griffin. Thank you. Please go ahead.

Good morning. This is Alison Griffin, Vice President, Investor Relations. Thank you for joining us today. With me on the call, I have Byron Boston, Chief Executive Officer, Smriti Papano, President and Chief Investment Officer, and Steve Benedetti, Executive Vice President, Chief Financial Officer, and Chief Operating Officer. The press release associated with today's call was issued and filed with the SEC this morning, February 4th, 2021. You may view the press release on the homepage of the Dynex website at dynexcapital.com, as well as on the SEC's website at sec.gov. Before we begin, we wish to remind you that this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words believe, expect, forecast, anticipate, estimate, project, plan, and similar expressions identify forward-looking statements that are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. The company's actual results and timing of certain events could differ considerably from those projected and or contemplated by those forward-looking statements as a result of unforeseen external factors or risks. For additional information on these factors or risks, please refer to our disclosures filed with SEC, which may be found on the Dynex website under Investor Center, as well as on the SEC's website. This conference call is being broadcast live over the internet with a streaming slide presentation, which can be found through a webcast link on the homepage of our website. The slide presentation may also be referenced under quarterly reports on the Investor Center page. And with that, I now have the pleasure of turning the call over to our CEO, Byron Boston.

Thank you, Allison. Good morning. As CEO of Dynex, I am very proud to report that 2020, that in 2020, we delivered a 15.2% total economic return and a 17% total shareholder return. I've been at Dynex for 13 years and no other year has demanded as much active decision-making as 2020. We stuck with our discipline and excelled. We didn't just protect shareholders' money. We made money for our shareholders in 2020. Our book value increased and we delivered a solid dividend. This performance stands in contrast to most of the mortgage REIT and many other investment alternatives for investors seeking income. Now, as you can see on slide five, Dynex has now delivered industry-leading performance on a one, three, and five-year basis. And when you look at our long-term chart on page 17, you can see that we have delivered solid returns through multiple market cycles during my tenure at Dynex Capital. This performance reflects my distinct philosophy of how to manage a mortgage REIT for the long term. And that same philosophy is guiding our investment approach today. We believe in risk management first, followed by disciplined capital allocation. As experienced and skilled investors, we have been cautious about leveraging lower credit in liquid assets since 2016. When spreads are tight, this strategy looks attractive during the short term, but ultimately crumbles when liquidity dissipates in a crisis. This is what happened last year when the prices of the liquid assets dropped dramatically as COVID-19 intensified and creditors demanded more cash or margin in response. The takeaway here is that it was no surprise that the market reacted the way it did. We witnessed the same reaction in every major crisis in recent memory. The Dynex management team has successfully managed through these intensified risk events throughout our careers, and we were prepared. 2020 was a challenging year, but in our opinion, not a black swan event. As we indicated at the beginning of 2020, we saw the global risk environment intensifying, so we were prepared for increased volatility. While it is impossible to predict the timing of specific events, we foresaw a higher risk profile building in the global financial markets. Our experience and insight gave us the edge to actively manage our portfolio to provide our shareholders strong returns. We managed our book exactly as we told investors we would. For years, we have emphasized liquidity and diversity in our portfolio, and this discipline served us well in 2020. Our 2020 performance was not a coincidence or good luck, but rather years of thoughtful planning around our portfolio and a team of talented people ready to actively manage the book of business in volatile times. As a CEO and coach, I could not be prouder. Now, from a human capital perspective, we have a world-class team with unmatched skills and experience. And 2020 was a year when the management team mattered more than anything. Our team has weathered significant crises in the past, but long-term capital management is a great recession. And as we've learned again this past year, nothing surpasses experience. We have the institutional knowledge to address many market disruptions and to identify new opportunities that may come along. Our team is diverse, which is critical to our strategy. Risks do not stay within borders, and our team's worldwide perspective is invaluable when dealing with a global crisis. Now, COVID-19 disrupted many work environments, but we already had the advantage of enabling our people to work remotely long before it became a necessity. Just as risk is borderless, so is talent. Our employees were accustomed to working outside the office, so they remained calm, focused during the quarantine, filtered out the noise to actively manage our risk, and effectively maintained key relationships and the confidence with lenders, regulators, and investors. So, in the past 12 months, we have taken a strategic view on both sides of the balance sheet with the goal of being able to grow and scale the company efficiently and in a stakeholder-friendly manner. We made several moves. We retired two of our higher-cost preferred stock issues, and we replaced them with our new Dianetics Capital Preferred Seat. And during the last two weeks, we issued approximately $56 million in common equity in line with our long-term strategy to grow our capital base. It's very important to note the return environment is conducive for absorbing any costs associated with our capital activities. Our ultimate goal is to increase our stock's liquidity and offer investors the opportunity to invest in Dynex via multiple products, including our fixed dividend seed preferred and our higher yielding common stock. We've been in business for 30 years, and we're fully committed to delivering solid cash flow and attractive total returns to our shareholders well into the future. Now, as a company, our greater purpose is to support two of our main stakeholders and constituencies, the individual savers and the communities across America. We're building this company for the long term because we believe in America and our role in helping individual savers achieve a respectable return on their savings from financing of real estate assets. The capital that we bring to the table is critical to housing and the real estate community. As long as savers need cash income and housing and real estate finance exist in America, our business model will remain relevant and critical. Most importantly, we are deeply committed to the highest ethical standards because savers need management teams with integrity as stewards of their capital. Our management team operates with integrity and an unwavering commitment to our values and to supporting our communities. We take our fiduciary responsibility very seriously and strive to be good stewards of capital, transparent in our actions and good corporate citizens. At Dynex, we're building a diverse and multi-generational organization with a 30-year vision that we believe will create enormous value for shareholders, stand the test of time, and prepare us for the future. I feel fantastic about 2020, and I'm very positive about 2021 and beyond. And I will now turn the call over to Steve Benedetti and Smriti Papadopoulos. Well, look, I'm going to turn it over in a minute. I forgot something. Before I turn over the call, I want to highlight that we have promoted Smriti Papadopoulos to president of our company. And this is another reason that I am excited as a CEO and a coach. All of our stakeholders should be elated about her promotion. and what this means for the future of Dynex. As I said earlier, we have a 30-year vision. That includes getting the right people in the right places with the right skill sets and experience. So now, with that, I'm going to turn it over to Steve and Spurthy, and they're going to give you some more details about 2020 and beyond.