GLEN ALLEN, Va.--(BUSINESS WIRE)--April 20, 2026--
Dynex Capital, Inc. (the "Company") $(DX)$, a REIT with a long track record of generating dividends from high-quality mortgage assets, reported its first quarter financial results today. Management will host a call today at 10:00 a.m. Eastern Time to discuss the results and business outlook. Details to access the call can be found below under "Earnings Conference Call."
Financial Performance Summary and Other Highlights
-- Total economic return of $(0.34) per common share, or (2.5)% of
beginning book value
-- Book value per common share of $12.60 as of March 31, 2026
-- Comprehensive loss of $(0.42) per common share and net loss of $(0.41)
per common share
-- Dividends declared of $0.51 per common share
-- Raised equity capital of $442 million through at-the-market ("ATM")
common stock issuances
-- Investment purchases of $6.0 billion, net of sales, during the quarter
-- Liquidity of $1.3 billion, or 46% of total equity, as of March 31,
2026
-- Leverage including to-be-announced ("TBA") securities at cost was 8.6
times shareholders' equity as of March 31, 2026
Management Remarks
"Dynex entered 2026 from a position of strength, building on the momentum of an outstanding 2025 through disciplined execution and rigorous risk management," said Smriti Laxman Popenoe, Co--Chief Executive Officer and President. "Navigating periods like the first quarter with discipline remains a core strength of the Dynex team. Current asset returns continue to support healthy long-term performance, and we believe our growing scale and consistent execution position us to deliver durable value for our shareholders."
Earnings Conference Call
As previously announced, the Company's conference call to discuss these results is today at 10:00 a.m. Eastern Time and may be accessed via telephone by dialing (800) 330-6710 and providing the Conference Code 1563213 or by live audio webcast by clicking the "Webcast" button on the Investors page of the Company's website (www.dynexcapital.com), which includes a slide presentation. To listen to the live conference call via telephone, please dial in at least 10 minutes before the call begins. A full replay of the presentation will be available on the same webcast link on the Company's website shortly after the conclusion of the live presentation.
Consolidated Balance Sheets
---------------------------------
($s in thousands except per share
data) March 31, 2026 December 31, 2025
---------------- ---------------------
ASSETS (unaudited) (audited)
Cash and cash equivalents $ 773,138 $ 531,043
Cash collateral posted to
counterparties 516,502 399,344
Mortgage-backed securities
(including pledged of
$22,120,332 and $14,593,470
respectively) 22,943,257 16,306,988
Due from counterparties 3,434 17,425
Derivative assets 695 10,498
Accrued interest receivable 97,454 67,940
Other assets, net 8,872 8,940
----------- --------------
Total assets $ 24,343,352 $ 17,342,178
=========== ==============
LIABILITIES AND SHAREHOLDERS'
EQUITY
Liabilities:
Repurchase agreements $ 21,045,457 $ 13,904,231
Due to counterparties 379,893 811,656
Derivative liabilities 14,121 4,830
Cash collateral posted by
counterparties -- 8,373
Accrued interest payable 131,426 95,196
Accrued dividends payable 41,893 37,171
Other liabilities 9,292 18,577
----------- --------------
Total liabilities 21,622,082 14,880,034
Shareholders' equity:
Preferred stock $ 107,843 $ 107,843
Common stock 2,072 1,748
Additional paid-in capital 3,368,130 2,921,551
Accumulated other
comprehensive loss (127,209) (127,061)
Accumulated deficit (629,566) (441,937)
----------- --------------
Total shareholders' equity 2,721,270 2,462,144
----------- --------------
Total liabilities and
shareholders' equity $ 24,343,352 $ 17,342,178
=========== ==============
Preferred stock aggregate
liquidation preference $ 111,500 $ 111,500
Book value per common share $ 12.60 $ 13.45
Common shares outstanding 207,154,465 174,814,912
Consolidated Comprehensive Statements of Income (Loss) (unaudited)
--------------------------------------------------------------------------
Three Months Ended
---------------------------------------
($s in thousands except per share
data) March 31, 2026 December 31, 2025
---------------- ---------------------
INTEREST INCOME
Interest income $ 257,390 $ 177,036
Interest expense (178,136) (133,552)
----------- --------------
Net interest income 79,254 43,484
OTHER GAINS (LOSSES)
Realized gain on sale of
investments, net 8,721 --
Unrealized (loss) gain on
investments, net (251,811) 84,732
Gain on derivative instruments,
net 104,727 73,781
----------- --------------
Total other (losses) gains, net (138,363) 158,513
EXPENSES
General and administrative
expenses (20,478) (16,367)
Other operating expense, net (775) (272)
----------- --------------
Total operating expenses (21,253) (16,639)
Net (loss) income (80,362) 185,358
Preferred stock dividends (2,658) (2,760)
----------- --------------
Net (loss) income to common
shareholders $ (83,020) $ 182,598
=========== ==============
Other comprehensive (loss)
income:
Unrealized (loss) gain on
available-for-sale
investments, net (148) 7,008
----------- --------------
Total other comprehensive (loss)
income (148) 7,008
----------- --------------
Comprehensive (loss) income to
common shareholders $ (83,168) $ 189,606
=========== ==============
Weighted average common
shares-basic 200,084,349 156,041,438
Weighted average common
shares-diluted 200,084,349 157,213,691
Net (loss) income per common
share-basic $ (0.41) $ 1.17
Net (loss) income per common
share-diluted $ (0.41) $ 1.16
Dividends declared per common
share $ 0.51 $ 0.51
Summary of First Quarter 2026 Results
The Company's total economic return for the first quarter of 2026 of $(0.34) per common share was comprised of a decrease in book value of $(0.85) per common share offset by dividends declared of $0.51 per common share. The decrease in book value per common share for the first quarter of 2026 was largely driven by a net loss of $(140) million on the Company's investment portfolio, net of hedges, resulting from widening mortgage spreads late in the quarter. The Company grew its capital base by $442 million, using the proceeds to opportunistically add investments of $6 billion, net of sales. The Company's adjusted leverage increased to 8.6 times equity primarily due to its use of repurchase agreement borrowings to partially finance these purchases.
The Company's interest income continued to increase as a result of its deployment of capital into its Agency MBS purchases over the quarter. In addition, the Federal Reserve's rate cuts in 2025 continued to benefit the Company's repurchase agreement financing costs, which declined 33 basis points for the first quarter of 2026 compared to the prior quarter. Operating expenses for the first quarter of 2026 included an increase of $3.4 million in share-based compensation expense, largely due to accelerated vesting conditions of equity grants associated with the departure of the Company's former chief financial officer.
The following tables summarize the changes in the Company's financial position during the first quarter of 2026:
($s in thousands Components of
except per share Net Changes in Comprehensive Common Equity
data) Fair Value Income Rollforward
----------------- ---------------- ----------------- ----------------
Balance as of
December 31, 2025
(1) $ 2,350,644
Net interest
income $ 79,254
Net periodic
interest from
interest rate
swaps 1,698
Operating
expenses (21,253)
Preferred stock
dividends (2,658)
Changes in fair
value:
MBS and other $ (243,238)
TBAs (13,879)
U.S. Treasury
futures 35,308
Options on
U.S. Treasury
futures (2,656)
Interest rate
swaps 84,591
Interest rate
swaptions (335)
--------
Total net change
in fair value (140,209)
--------
Comprehensive loss
to common
shareholders (83,168)
Capital
transactions:
Net proceeds
from stock
issuance (2) 446,903
Common dividends
declared (104,609)
---------
Balance as of
March 31, 2026
(1) $ 2,609,770
=========
(1) Amounts represent total shareholders' equity less the aggregate
liquidation preference of the Company's preferred stock of $111,500.
(2) Net proceeds from stock issuances includes approximately $442 million
from ATM issuances and approximately $5 million from amortization of
share-based compensation, net of grants.
Investment Portfolio and Financing
The following table provides detail on the Company's MBS investments, including TBA securities, as of the periods indicated:
March 31, 2026 December 31, 2025
----------------------------------------- -----------------------------------------
Amortized Amortized
Cost/Implied Unrealized Cost/Implied Unrealized
($ in thousands) Cost Basis Gain (Loss) Fair Value Cost Basis Gain (Loss) Fair Value
----------------- ------------- ------------- ----------- ------------- ------------- -----------
Fixed rate Agency RMBS:
2.0% coupon $ 1,164,966 $(123,207) $ 1,041,759 $ 613,475 $(116,378) $ 497,097
2.5% coupon 646,466 (91,863) 554,603 535,039 (90,135) 444,904
4.0% coupon 286,876 (14,047) 272,829 293,432 (11,543) 281,889
4.5% coupon (1) 1,636,907 (340) 1,636,567 1,853,757 27,547 1,881,304
5.0% coupon 7,434,011 (13,877) 7,420,134 3,913,622 83,915 3,997,537
5.5% coupon 9,145,191 7,351 9,152,542 6,361,758 104,011 6,465,769
6.0% coupon 1,537,251 1,529 1,538,780 1,419,727 13,133 1,432,860
TBA 4.0% -- -- -- 1,101,441 1,323 1,102,764
TBA 4.5% (2) 1,230,544 (2,970) 1,227,574 1,425,945 4,191 1,430,136
TBA 5.0% 600,548 (6,075) 594,473 175,287 383 175,670
TBA 5.5% -- -- -- 185,175 456 185,631
TBA 6.0% -- -- -- 226,218 704 226,922
------------ -------- ---------- ------------ -------- ----------
Total Agency RMBS $ 23,682,760 $(243,499) $23,439,261 $ 18,104,876 $ 17,607 $18,122,483
============ ======== ========== ============ ======== ==========
Agency CMBS $ 1,246,548 $ (1,747) $ 1,244,801 $ 1,213,107 $ 5,236 $ 1,218,343
CMBS IO 81,484 (242) 81,242 87,557 (272) 87,285
------------ -------- ---------- ------------ -------- ----------
Total $ 25,010,792 $(245,488) $24,765,304 $ 19,405,540 $ 22,571 $19,428,111
============ ======== ========== ============ ======== ==========
(1) Includes a par value of $9 million of 4.5% 15-year Agency RMBS at March 31, 2026 and December 31,
2025.
(2) Includes notional amount of $540 million of 4.5% 15-year TBA securities at March 31, 2026 and $690
million at December 31, 2025.
The following table provides detail on the Company's repurchase agreement borrowings outstanding as of the dates indicated:
March 31, 2026 December 31, 2025
--------------------------------- ---------------------------------
WAVG WAVG
Weighted Original Weighted Original
Remaining Term to Average Term to Average Term to
Maturity Balance Rate Maturity Balance Rate Maturity
------------------ ----------- ---------- -------- ----------- ---------- --------
($s in thousands)
Less than 30 days $ 8,026,127 3.81% 77 $ 9,146,566 4.11% 75
30 to 90 days 12,451,246 3.80% 95 4,757,665 4.07% 94
91 to 180 days 568,084 3.75% 173 -- --% --
---------- ---- --- -------- ---------- ---- --- --------
Total $21,045,457 3.80% 90 $13,904,231 4.10% 81
========== ==== === ======== ========== ==== === ========
The following table provides details on the performance of the Company's MBS, net of financing for the first quarter of 2026 compared to the prior quarter:
Three Months Ended
---------------------------------------------------------------------------------------------
March 31, 2026 December 31, 2025
--------------------------------------------- ----------------------------------------------
Effective Effective
Average Yield/ Average Yield/
Interest Balance Financing Interest Balance Financing
($s in thousands) Income/Expense (1)(2) Cost(3)(4) Income/Expense (1)(2) Cost(3)(4)
------------------ ----------- ------------ ------------------ ----------- -------------
Agency RMBS $ 236,350 $18,926,563 5.00% $ 158,160 $12,712,611 4.98%
Agency CMBS 12,530 1,177,399 4.26% 9,992 915,117 4.27%
CMBS IO(5) 1,781 84,531 8.23% 1,484 90,573 6.25%
Other investments 6 461 3.98% 7 769 3.22%
--------- --- ---------- ----- ---- --------- --- ---------- ----- -----
Subtotal 250,667 20,188,954 4.97% 169,643 13,719,070 4.94%
Cash equivalents 6,723 7,393
--------- --- --------- ---
Total interest
income $ 257,390 $ 177,036
Repurchase
agreement
financing (178,136) 18,470,997 (3.86)% (133,552) 12,469,902 (4.19)%
--------- ----- --- --------- ----- ----
Net interest
income/net
interest
spread $ 79,254 1.11% $ 43,484 0.75%
========= === ===== ==== ========= === ===== =====
Net periodic
interest from
interest rate
swaps 1,698 0.04% 7,598 0.24%
--------- --- ----- ---- --------- --- ----- -----
Economic net
interest income
(6) $ 80,952 1.15% $ 51,082 0.99%
========= === ===== ==== ========= === ===== =====
*Table Note: Data may not foot due to rounding.
(1) Average balance for assets is calculated as a simple average of the
daily amortized cost and excludes securities pending settlement if
applicable.
(2) Average balance for liabilities is calculated as a simple average of the
daily borrowings outstanding during the period.
(3) Effective yield is calculated by dividing annualized interest income by
the average balance of asset type outstanding during the reporting
period. Unscheduled adjustments to premium/discount
amortization/accretion, such as for prepayment compensation, are not
annualized in this calculation.
(4) Financing cost is calculated by dividing annualized interest expense by
the total average balance of borrowings outstanding during the period
with an assumption of 360 days in a year.
(5) CMBS IO ("Interest only") includes Agency and non-Agency issued
securities.
(6) Represents a non-GAAP measure. See "Non-GAAP Financial Measures" below
for a reconciliation to the most comparable GAAP financial measure.
Hedging Portfolio
The following tables provide details on the Company's interest rate hedging portfolio as of the dates indicated:
March 31, 2026 December 31, 2025
------------------- ----------------------
WAVG WAVG
Fixed Fixed
Notional Pay Notional Pay
Derivative Type Amount Rate Amount Rate
------------------ ------------ ----- ------------ --------
($s in thousands)
5-year U.S.
Treasury futures $ -- n/a $ (30,000) n/a
10-year U.S.
Treasury futures (1,917,500) n/a (1,475,000) n/a
30-year U.S.
Treasury futures (1,231,600) n/a (1,153,500) n/a
---------- ----------
$(3,149,100) $(2,658,500)
---------- ----------
3-5 year interest
rate swaps $ 4,400,000 3.43% $ 2,450,000 3.42%
5-7 year interest
rate swaps 4,060,000 3.65% 4,070,000 3.66%
7-10 year interest
rate swaps 4,120,000 3.85% 3,090,000 3.87%
10-15 year interest
rate swaps -- --% 75,000 3.77%
---------- ----------
$12,580,000 $ 9,685,000
========== ==========
March 31, 2026 December 31, 2025
--------------------- ----------------------
Average Average
Fixed Fixed
Notional Receive Notional Receive
($s in thousands) Amount Rate Amount Rate
------------ ------- ------------ --------
1-2 year interest
rate swaption $ 750,000 --% $ 750,000 3.25%
3-month options on -- n/a 500,000 n/a
U.S. Treasury
futures
The following table provides detail on the performance of the Company's derivative instruments during the periods indicated:
Three Months Ended
---------------------------------------
March 31, 2026 December 31, 2025
---------------- ---------------------
Unrealized gain (loss):
TBA securities $ (16,102) $ 4,806
U.S. Treasury futures 36,406 50,038
Options on U.S. Treasury
futures 1,325 (7,344)
Interest rate swaps 84,958 47,734
Interest rate swaptions (335) (3,759)
----------- --------------
106,252 91,475
Realized gain (loss) upon
settlement, maturity or
termination:
TBA securities 2,223 12,486
U.S. Treasury futures (1,098) (37,778)
Options on U.S. Treasury
futures (3,981)
Interest rate swaps (367) --
----------- --------------
(3,223) (25,292)
Net periodic interest:
Interest rate swaps 1,698 7,598
----------- --------------
Gain on derivative instruments,
net $ 104,727 $ 73,781
=========== ==============
The Company typically designates certain of its interest rate derivatives as hedges for tax purposes. Gains and losses realized upon maturity or termination of derivatives designated as hedges for tax purposes are amortized into the Company's REIT taxable income over the original periods hedged by those derivatives. These hedge gains are not included in the Company's current or future earnings available for distribution ("EAD"), a non-GAAP measure, but will be part of the Company's future distribution requirements. The table below provides the projected amortization of the Company's net deferred tax hedge gains that may be recognized as taxable income over the periods indicated, given conditions known as of March 31, 2026; however, uncertainty inherent in the forward interest rate curve makes future realized gains and losses difficult to estimate, and as such, these projections are subject to change for any given period.
Projected Period of Recognition for Tax Hedge Gains,
Net March 31, 2026
------------------------------------------------------- ------------------
($ in thousands)
Fiscal year 2026 $ 95,229
Fiscal year 2027 90,407
Fiscal year 2028 84,373
Fiscal year 2029 and thereafter 276,030
$ 546,039
==============
Non-GAAP Financial Measures
In addition to reporting the Company's financial results determined in accordance with GAAP, management of the Company believes that investors' understanding of our operating results may be enhanced by the use of non-GAAP financial measures, which are used by management internally, along with GAAP measures, to evaluate our performance. Our non-GAAP financial measures include earnings available for distribution ("EAD") to common shareholders (including per common share) and economic net interest income and the related metric economic net interest spread. Management believes these non-GAAP financial measures may be useful to investors because they are viewed by management as additional measures of the investment portfolio's return.
Drop income generated by TBA dollar roll positions, which is included in "gain (loss) on derivatives instruments, net" on the Company's consolidated statements of comprehensive income, is included in EAD because management views drop income as the economic equivalent of net interest income (interest income less implied financing cost) on the underlying Agency security from trade date to settlement date. However, drop income does not represent the total realized gain/loss from the Company's investments in TBA securities.
Management also includes net periodic interest from its interest rate swaps, which is included in "gain (loss) on derivatives instruments, net, " in EAD and economic net interest income because interest rate swaps are used by the Company to economically hedge the impact of changing interest rates on its borrowing costs from repurchase agreements, and including net periodic interest from interest rate swaps is a helpful indicator of the Company's total financing cost in addition to GAAP interest expense.
Non-GAAP financial measures are not a substitute for GAAP measures and may be different from non-GAAP measures used by other companies. In addition, other companies, including in our industry, may calculate comparable measures differently, which reduces their usefulness as comparative measures. Investors should not rely on any single financial measure when evaluating our business. These non-GAAP measures should be considered as supplemental in nature and not as a substitute for our operating results in accordance with GAAP.
Reconciliations of each non-GAAP measure to certain GAAP financial measures are provided below.
Three Months Ended
---------------------------------------
($s in thousands except per share
data) March 31, 2026 December 31, 2025
---------------- ---------------------
Comprehensive income to common
shareholders (GAAP) $ (83,168) $ 189,606
Less:
Change in fair value of
investments, net (1) 243,238 (91,740)
Change in fair value of
derivative instruments, net
(2) (98,266) (63,467)
EAD to common shareholders
(non-GAAP) $ 61,804 $ 34,399
=========== =============
Weighted average common shares 200,084,349 156,041,438
EAD per common share (non-GAAP) $ 0.31 $ 0.22
Net interest income (GAAP) $ 79,254 $ 43,484
Net periodic interest from
interest rate swaps 1,698 7,598
----------- -------------
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