GLEN ALLEN, Va.--(BUSINESS WIRE)--Dynex Capital, Inc. (NYSE: DX; "Dynex" or the "Company"), a REIT with a long track record of generating dividends from high-quality mortgage assets, reported its third 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."

Third Quarter 2026 Financial Highlights

• Total economic return of $(1.48) per common share, or (11.5)% of beginning book value
• Book value per common share of $10.91 as of September 30, 2026, a decrease of $(1.99) from $12.90 as of June 30, 2026
• Comprehensive loss of $(1.49) per common share and net loss of $(1.34) per common share
• Dividends declared of $0.51 per common share
• Liquidity of $1.3 billion of cash and unpledged securities, representing 42% of total equity, as of September 30, 2026
• Leverage including to-be-announced ("TBA") securities at cost was 9.0 times shareholders' equity as of September 30, 2026, compared to 8.1 times shareholders' equity as of June 30, 2026

Third Quarter 2026 Portfolio and Capital Highlights

• Total investment portfolio of $28.3 billion, an increase of 3% relative to June 30, 2026 driven by $3.2 billion of MBS purchases:
  • Agency RMBS portfolio, including TBAs, increased approximately 3% to $26.8 billion
  • Agency CMBS portfolio increased approximately 3% to $1.4 billion
  • 99.99% of investment portfolio is in highly liquid Agency securities
    • Agency RMBS represents 95% of total portfolio; Agency CMBS represents 5% of total portfolio
• Raised $384 million of capital, net of commissions, during the quarter, including $268 million of common equity through the Company's at-the-market ("ATM") program and $116 million through the issuance of 9.375% Series D fixed-rate cumulative redeemable preferred stock

Management Remarks

“We believe today’s Agency mortgage market presents a compelling forward investment opportunity,” said Smriti Laxman Popenoe, Co-Chief Executive Officer and President. “Late-quarter volatility and wider mortgage spreads reduced our reported book value, and that repricing has created an attractive forward return opportunity. Importantly, the mortgage market remains fundamentally solid, technical conditions are strong, and financing remains stable. We are managing for the long term, prepared for a range of market scenarios, and positioned to capitalize on opportunities as they develop.”

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 3227135 or by live audio webcast by clicking the "Webcast" button on the Investors page of the Company's website (www.dynexcapital.com/investors), which also includes a slide presentation. To listen to the live conference call via telephone, please dial in at least 10 minutes before the call begins. As an alternative, participants can click here to enter their details and be connected to join the conference. The link becomes active 15 minutes prior to the scheduled start time. A full replay of the conference call will be available on the Company's website shortly after the conclusion of the live presentation.

Summary of Third Quarter 2026 Results

Total economic return for the third quarter of 2026 reflected a decline in book value per common share to $10.91, inclusive of dividends declared of $0.51 per common share. Book value declined primarily due to wider Agency MBS spreads, which drove a net decrease in the fair value of the Company's investment portfolio. Gains on the Company's interest rate hedging portfolio partially offset these losses. While the Company's active management of its hedges mitigated a portion of the impact from changing interest rates and broader market volatility, spread widening remained the primary driver of pressure on asset valuations and book value during the quarter.

The Company grew its capital base by $384 million during the third quarter through a combination of common and preferred equity raises, using the net proceeds to opportunistically add $3.2 billion of Agency MBS. As a result, the total investment portfolio grew approximately 3% to $28.3 billion compared to $27.6 billion as of June 30, 2026. Leverage, including the implied cost of TBAs, increased to 9.0 times shareholders' equity, primarily due to lower book value related to the investment portfolio's performance.

Interest income increased from the prior quarter, driven by the Company's continued capital deployment into Agency MBS. The average balance of interest-earning assets grew 10% during the third quarter of 2026. Operating expenses decreased by $4 million quarter over quarter due to lower stock-based compensation.

The following tables summarize the changes in the Company's financial position during the third quarter of 2026:

Investment Portfolio and Financing

The following table provides detail on the Company's MBS investments, including TBA securities, as of the periods indicated:

The following table provides detail on the Company's repurchase agreement borrowings outstanding as of the dates indicated:

The following table provides details on the performance of the Company's MBS, net of financing for the third quarter of 2026 compared to the prior quarter:

Hedging Portfolio

The following tables provide details on the Company's interest rate hedging portfolio as of the dates indicated:

The following table provides detail on the performance of the Company's derivative instruments during the periods indicated:

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 September 30, 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.

Third Quarter 2026 Preliminary Financial Statements and Other Supplemental Information

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.

Forward Looking Statements

This release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “forecast,” “anticipate,” “estimate,” “project,” “plan,” "may," "could," "will," "continue" and similar expressions identify forward-looking statements that are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Forward-looking statements in this release, including statements made in Ms. Popenoe's quote, may include, without limitation, statements regarding the Company's financial performance in future periods, future interest rates, future market credit spreads, management's views on expected characteristics of future investment and macroeconomic environments, central bank strategies, prepayment rates and investment risks, future investment strategies, future leverage levels and financing strategies, the use of specific financing and hedging instruments and the future impacts of these strategies, future actions by the Federal Reserve, and the expected performance of the Company's investments. The Company's actual results and timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements as a result of unforeseen external factors. These factors may include, but are not limited to, the Company's ability to find suitable investment opportunities; changes in domestic economic conditions; geopolitical events and instability, including the conflict in the Middle East, and the related impacts on macroeconomic conditions as a result of such related uncertainty; tariffs that the U.S. imposes on trading partners or tariffs imposed on the U.S. from trading partners, including the legality of any such tariff measures; global and domestic government policy changes and the ability or inability to react to rapidly changing economic policies; changes in interest rates and credit spreads, including the repricing of interest-earning assets and interest-bearing liabilities; the Company’s investment portfolio performance, particularly as it relates to cash flow, prepayment rates, and credit performance; the impact on markets and asset prices from changes in the Federal Reserve’s policies regarding purchases of Agency RMBS, Agency CMBS, and U.S. Treasuries; actual or anticipated changes in Federal Reserve monetary policy or the monetary policy of other central banks; adverse reactions in U.S. financial markets related to actions of foreign central banks or the economic performance of foreign economies, including in particular China, Japan, the European Union, and the United Kingdom; the cost and availability of financing, including the future availability of financing due to changes to regulation of, and capital requirements imposed upon, financial institutions; the cost and availability of new equity capital; changes in the Company’s leverage and use of leverage; changes to the Company’s investment strategy, operating policies, dividend policy, or asset allocations; the quality of performance of third-party servicer providers, including the Company's sole third-party service provider for our critical operations and trade functions; the loss, unavailability, or security of the Company’s third-party service providers' service and technology that support critical functions of the Company’s business, including those related to the Company’s trading and borrowing activities, due to outages, interruptions, or other failures; the level of defaults by borrowers on loans underlying MBS; impacts from emerging technologies, such as artificial intelligence, including the development of applications utilizing such technologies; changes in the Company’s industry; increased competition; changes in government policy or regulations affecting the Company’s business; changes or volatility in the repurchase agreement financing markets and other credit markets; changes to the market for interest rate swaps and other derivative instruments, including changes to margin requirements on derivative instruments; uncertainty regarding continued government support of the U.S. financial system and U.S. housing and real estate markets, or to reform the U.S. housing finance system including the resolution of the conservatorship of Fannie Mae and Freddie Mac; the composition of the Board of Governors of the Federal Reserve; the political environment in the U.S.; systems failures or cybersecurity incidents; and exposure to current and future claims and litigation. For additional information on risk factors that could affect the Company's forward-looking statements, see the Company's Annual Report on Form 10-K for the year ended December 31, 2025, and other reports filed with and furnished to the Securities and Exchange Commission.

All forward-looking statements are qualified in their entirety by these and other cautionary statements that the Company makes from time to time in its filings with the Securities and Exchange Commission and other public communications. The Company cannot assure the reader that it will realize the results or developments the Company anticipates or, even if substantially realized, that they will result in the consequences or affect the Company or its operations in the way the Company expects. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of, the Company. Forward-looking statements speak only as of the date made. The Company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances arising after the date on which they were made, except as otherwise required by law.

About Dynex Capital

Dynex Capital, Inc. (NYSE: DX) is a leading internally managed REIT with a long track record of delivering attractive dividends through the disciplined risk management of investments in high-quality mortgage assets backed by U.S. residential and commercial real estate. For more information on Dynex, please visit our website at www.dynexcapital.com or connect with us on LinkedIn.

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Investor Relations Contact
Email: askdx@dynexcapital.com
Phone Number: 804-217-5897

Source: Dynex Capital, Inc.