DYNEX CAPITAL INC
For the period ended Sep 30, 2025. Filed Oct 27, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2025 · Filed Oct 27, 2025
DX$10.68-0.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-06-30; filed 2025-07-28.
0000826675-25-000118
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2025-09-30; filed 2025-10-27.
0000826675-25-000153
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 173 previous paragraphs and 153 current paragraphs.
98 unchanged; 39 reworded; 14 added; 34 removed; 2 previous and 2 current paragraphs rearranged.
Tables are not compared: 19 previous and 19 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
Dynex Capital operates at the intersection of capital markets and the U.S. housing finance system, using our expertise to earn income from investing primarily in Agency residential and commercial mortgage backed securities. We generate dividend income and long term returns though our investment, financing and hedging strategies.
Current report
Market Conditions and Outlook
Current report
In the third quarter of 2025, the Federal Open Market Committee (“FOMC”) decided to lower the target rate for the U.S. Federal Funds rate by 25 basis points to 4.0% to 4.25% in September 2025 in support of its goals and in light of the shift in the balance of risks. The FOMC seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee is attentive to the risks to both sides of its dual mandate and noted that uncertainty about the economic outlook and downside risks to employment have risen. This is the first rate cut in 2025 with further cuts expected this year and in 2026; however, as observed over the last 2 years, actual rate cuts have lagged expected rate cuts.
Current report
We continue to monitor the activities of the FOMC as their actions to reduce the Federal Funds rate are expected to have a direct and positive impact on the cost of our repurchase borrowings. The swaps market and related positions continue to add to the interest spread that we are earning; however, if the yield curve steepens, new swap positions in the future could be at a net expense to our portfolio instead of a net positive today.
Current report
Dynex continues to monitor monetary policy, housing policy, supply and demand dynamics, and other changes to U.S. policies including those impacting the GSEs. Mortgage rates are beginning to trend down and refinance activity increased at the end of the third quarter. We are monitoring the evolution of the markets, assessing the impact of prepayment speeds, new supply of mortgage production and the impact these factors will have on spreads. We are also watching public and private credit markets, global macroeconomic conditions, and large investment flows into and out of market sectors as well as the potential impacts from the ongoing federal government shutdown.
Current report
Dynex continued to raise capital in the quarter and grew the portfolio. We expect to continue to raise and deploy capital primarily using our ATM program. Agency MBS remains an attractive asset class and continues to deliver returns that are accretive to our financial position. We are actively buying into this market to deliver value to our shareholders.
Current report
Summary of Third Quarter 2025 Financial Performance
Current report
The increase in book value of $0.72 per common share for the third quarter of 2025 was driven by two main factors, the 10-year U.S. Treasury rate fell this quarter and mortgage spreads tightened relative to equivalent U.S. Treasury securities. In addition, net interest income and net interest spreads continued to improve and expenses in the third quarter were lower than the second quarter. We continued to raise capital through our ATM program, deploying the proceeds into additional investments. Our leverage trended down since the second quarter, primarily from asset appreciation.
Current report
(1)Includes $9 million of 4.5% 15-year Agency RMBS.
Current report
Nine Months Ended September 30, 2025 Compared to the Nine Months Ended September 30, 2024
Current report
During the nine months ended September 30, 2025, gains on our investment portfolio exceeded losses on our hedges by approximately $138 million, which includes $37 million in net periodic interest we earned from interest rate swaps. The fair value of our investment portfolio increased during the nine months ended September 30, 2025 primarily due to the tightening of mortgage spreads to U.S. Treasuries relative to wider spreads at the time we purchased investments this year. Interest and SOFR-based swap rates declined overall during the nine months ended September 30, 2025, which resulted in losses on our hedging portfolio.
Current report
During the nine months ended September 30, 2024, gains on our investment portfolio exceeded losses on our hedges by $114 million primarily because we purchased higher coupon investments during the nine months ended September 30, 2024 when spreads were wider as compared to September 30, 2024 when spreads were tighter.
Current report
In addition to the GSE guarantee of principal payments on our Agency investments, we expect the capital and repurchase agreement markets will remain accessible at capacities sufficient to cover our short-term and long-term liquidity needs.
Current report
•the effect of the U.S. federal government shutdown on economic conditions;
Removed paragraphs (34)
Previous report
From year end 2024 to June 30, 2025, interest rates across the U.S. Treasury curve were mostly lower, and from March 31, 2025 to June 30, 2025, the U.S. 10-year U.S. Treasury rate and U.S. Federal Funds rate were essentially flat, but spreads were slightly wider. In addition, swap spreads have broadly trended more negative during the year which have had an impact on existing swaps, but improve the carry of additional swaps added to the portfolio. Dynex continues to be active in the ATM program, raising approximately $522 million of new capital during the six months ended June 30, 2025, which has been deployed into the Agency market at historically attractive levels and also provides liquidity. For Dynex, net interest income and spread income continue to improve from adding higher yielding assets to the portfolio, reducing financing costs and adding to yield from our swap portfolio. The news cycle this quarter has been active with new proposed U.S. policies, tariff negotiations and conflicts around the globe. We continue to operate our business at the intersection of the global capital markets and the U.S. housing finance system and take seriously our responsibility of being stewards of shareholder capital. The Dynex team remains focused on managing risk and investing to deliver compelling shareholder returns over time.
Previous report
Market Data
Previous report
Current Outlook
Previous report
Markets continue to experience volatility in response to policy changes and a fast moving news cycle. We expect volatility to continue and remain focused on maintaining a portfolio of high-quality liquid securities and maintaining liquidity. While Agency and swaps markets have re-priced, the current market environment is not directly impacted by a specific real estate or mortgage event. We are also focused on our hedging strategy and believe options will be part of our hedge portfolio going forward. We also continue to monitor the prepayment risk of our portfolio, the direction of rates, and the outlook for U.S. Federal Reserve policy. The mortgage finance sector continues to evolve and will leverage new technologies that are likely to expedite refinancing which may result in an increase in prepayment risk.
Previous report
Some certainty on the implicit guarantee on Agency securities was provided this quarter, but the future structure of the GSEs remains uncertain, and we continue to be engaged with policymakers to monitor these developments. We continue to monitor global macroeconomic conditions and large investment flows.
Previous report
As of the end of the second quarter 2025, we expect to continue a strategy of raising capital and deploying into highly liquid markets with little or no credit risk that is providing compelling returns that are supportive of our dividend now and into the future.
Previous report
Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024
Previous report
During the six months ended June 30, 2025, losses on our hedging portfolio exceeded gains on our investments by approximately $32 million (excluding $23 million in net periodic interest we earned from interest rate swaps) due primarily to the decline in SOFR-based swap rates across the curve since December 31, 2024.
Previous report
During the six months ended June 30, 2024, gains on our hedging portfolio exceeded losses on our investments by approximately $35 million. The impact of the 52 basis point increase in the 10-year U.S. Treasury rate on our investments was offset by the resulting gains on our hedging portfolio of approximately $204 million.
Previous report
Forward-looking statements in this Quarterly Report on Form 10-Q may include, but are not limited to, statements about:
Previous report
•Our business and investment strategy, including our ability to generate acceptable risk-adjusted returns, our target investment allocations, and our views on the future performance of MBS and other investments;
Previous report
•Our views on the macroeconomic environment, monetary and fiscal policy, and conditions in the investment, credit, interest rate, and derivatives markets;
Previous report
•Our views on inflation, market interest rates, and market spreads;
Previous report
•Our views on the effect of actual or proposed actions of the Federal Reserve or other central banks with respect to monetary policy (including the targeted Fed Funds rate), and the potential impact of these actions on interest rates, borrowing costs, inflation, or unemployment;
Previous report
•The effect of regulatory initiatives of the Federal Reserve, the Federal Housing Finance Agency, other financial regulators, and other central banks;
Previous report
•Our financing strategy, including our target leverage ratios, our use of TBA dollar roll transactions, and anticipated trends in financing costs, including TBA dollar roll transaction costs, and our hedging strategy, including changes to the derivative instruments to which we are a party, and changes to government regulation of hedging instruments and our use of these instruments;
Previous report
•Our investment portfolio composition and target investments;
Previous report
•Our investment portfolio performance, including the fair value, yields, and forecasted prepayment speeds of our investments;
Previous report
•Our liquidity and ability to access financing and the anticipated availability and cost of financing;
Previous report
•Our capital stock activity, including the impact of stock issuances and repurchases;
Previous report
•The amount, timing, and funding of future dividends;
Previous report
•Our use of our tax NOL carryforward and other tax loss carryforwards;
Previous report
•Future competition for, and availability of, investments, financing, and capital;
Previous report
•Estimates of future interest expenses, including related to the Company’s repurchase agreements and derivative instruments;
Previous report
•The status and effect of legislative reforms and regulatory rule-making or review processes, and the status of reform efforts and other business developments in the repurchase agreement financing market;
Previous report
•Market, industry, and economic trends, and how these trends and related economic data may impact the behavior of market participants and financial regulators;
Previous report
•The impact of bank failures, potential new regulations, and the potential for other bank failures;
Previous report
•The impact of debt ceiling negotiations on interest rates, spreads, the U.S. Treasury market and the impact more broadly on fixed income and equity markets;
Previous report
•The financial position and creditworthiness of the depository institutions in which the Company’s MBS and cash deposits are held;
Previous report
•The impact of applicable tax and accounting requirements on us, including our tax treatment of derivative instruments such as TBAs, interest rate swaps, options, and futures;
Previous report
•Our future compliance with covenants in our master repurchase agreements, ISDA agreements, and debt covenants in our other contractual agreements;
Previous report
•Our reliance on a single service provider for our trading, portfolio management, and risk reporting systems;
Previous report
•The implementation in a timely and cost-effective manner of our operating platform, which includes trading, portfolio management, risk reporting, and accounting services systems, and the anticipated benefits thereof; and
Previous report
•Possible future effects of any global health crisis.
Reworded paragraphs (39)
Previous wording
The charts below show the range of U.S. Treasury and SOFR-based swap rates for the second quarter of 2025 and information regarding market spreads as of and for the periods indicated:
Current wording
The charts below show the range of U.S. Treasury and SOFR-based swap rates for the third quarter of 2025 and information regarding market spreads as of and for the periods indicated:
Previous wording
(2)Data represents the spread to swap rate on newly issued securities and is sourced from J.P. Morgan.
Current wording
(2)Data is sourced from J.P. Morgan and represents the spread to swap rate on newly issued Agency securities collateralized by multifamily properties.
Previous wording
The following table summarizes the changes in the Company's financial position during the second quarter of 2025:
Current wording
The following table summarizes the changes in the Company's financial position during the third quarter of 2025:
Previous wording
(2)Net proceeds from common stock issuance include approximately $282.1 million from ATM issuances and approximately $3.5 million from amortization of share-based compensation, net of grants, during the three months ended June 30, 2025.
Current wording
(2)Net proceeds from common stock issuance include approximately $254 million from ATM issuances and approximately $2 million from amortization of share-based compensation, net of grants, during the three months ended September 30, 2025.
Previous wording
Our investment portfolio (including TBAs) as of June 30, 2025, has increased approximately 44% compared to December 31, 2024. The following charts compare the composition of our MBS portfolio (including TBAs) as of the dates indicated:
Current wording
Our investment portfolio (including TBAs) as of September 30, 2025, has increased approximately 60% compared to December 31, 2024. The following charts compare the composition of our MBS portfolio (including TBAs) as of the dates indicated:
Previous wording
We have added approximately $2.8 billion of Agency RMBS and $418 million of Agency CMBS during the six months ended June 30, 2025, of which $937 million were pending settlement as of June 30, 2025. We also increased our TBA dollar roll positions by a notional of $1.4 billion during the six months ended June 30, 2025. The Agency CMBS purchases have a different convexity profile compared to our Agency RMBS, which we believe adds diversification to our investment portfolio.
Current wording
We have added approximately $5.2 billion of Agency RMBS and $882 million of Agency CMBS during the nine months ended September 30, 2025, of which $263 million were pending settlement as of September 30, 2025. The Agency CMBS purchases have a different convexity profile compared to our Agency RMBS, which we believe adds diversification to our investment portfolio.
Previous wording
(1)Includes $700 million notional amount of 15-year TBA securities with an implied cost basis of $689 million.
Current wording
(2)Includes a notional amount of $690 million of 4.5% 15-year TBA securities.
Previous wording
(2)Implied cost basis of TBAs represents the forward price to be paid for the underlying Agency MBS.
Current wording
(3)Implied cost basis of TBAs represents the forward price to be paid for the underlying Agency MBS.
Previous wording
(3)Fair value of TBAs is the implied market value of the underlying Agency security as of the end of the period.
Current wording
(4)Fair value of TBAs is the implied market value of the underlying Agency security as of the end of the period.
Previous wording
(4)TBAs are included on the consolidated balance sheet within “derivative assets/liabilities” at their net carrying value which is the difference between their implied market value and implied cost basis. Please refer to Note 5 of the Notes to the Consolidated Financial Statements for additional information.
Current wording
(5)TBAs are included on the consolidated balance sheet within “derivative assets/liabilities” at their net carrying value which is the difference between their implied market value and implied cost basis. Please refer to Note 5 of the Notes to the Consolidated Financial Statements for additional information.
Previous wording
(5)TBAs are excluded from this calculation as they do not have a defined weighted-average loan balance or age until mortgages have been assigned to the pool.
Current wording
(6)TBAs are excluded from this calculation as they do not have a defined weighted-average loan balance or age until mortgages have been assigned to the pool.
Previous wording
(6)Constant prepayment rate (“CPR”) represents the 3-month CPR of Agency RMBS held as of date indicated.
Current wording
(7)Constant prepayment rate (“CPR”) represents the 3-month CPR of Agency RMBS held as of date indicated.
Previous wording
(7)Duration measures the sensitivity of a security's price to the change in interest rates and represents the percent change in price of a security for a 100-basis point increase in interest rates. We calculate duration using third-party financial models and empirical data. Different models and methodologies can produce different estimates of duration for the same securities.
Current wording
(8)Duration measures the sensitivity of a security's price to the change in interest rates and represents the percent change in price of a security for a 100-basis point increase in interest rates. We calculate duration using third-party financial models and empirical data. Different models and methodologies can produce different estimates of duration for the same securities.
Previous wording
(8)Represents the weighted average market yield projected using cash flows generated from the forward curve based on market prices as of the date indicated and assuming zero volatility.
Current wording
(9)Represents the weighted average market yield projected using cash flows generated from the forward curve based on market prices as of the date indicated and assuming zero volatility.
Previous wording
Our Agency CMBS consist of loans collateralized by multifamily properties. Though we expect our exposure to Agency CMBS to remain modest as a percentage of the total portfolio, we added selectively in the second quarter of 2025 where the risk-adjusted return profile aligned with our broader strategy. In addition to offering compelling relative value, Agency CMBS help diversify and stabilize the portfolio's cash flow and total return profile, given their unique prepayment characteristics and underlying asset base.
Current wording
Our Agency CMBS consist of loans collateralized by multifamily properties. Though we expect our exposure to Agency CMBS to remain modest as a percentage of the total portfolio, we added selectively in the second and third quarters of 2025 where the risk-adjusted return profile aligned with our broader strategy. In addition to offering strong relative value, Agency CMBS help diversify and stabilize the portfolio's cash flow and total return profile, given their unique prepayment characteristics and underlying asset base.
Previous wording
Agency CMBS IO are backed by loans collateralized by multifamily properties, which have performed well given the demand for housing in the United States. Our Agency CMBS IO are from Freddie Mac Series K deals from which interest continues to be advanced even in the event of an underlying default up until liquidation. According to Freddie Mac, 99.6% of the loans in K-deals are current as of May 2025. Our non-Agency CMBS IO were all originated prior to 2018 and are backed by loans collateralized by a number of different property types, such as multifamily, office, retail, hotels, industrial, storage, and others. Our non-Agency CMBS IO investments are nearing maturity and have very little amortized cost remaining; any changes in actual payments may result in large swings in yield as shown below.
Current wording
Agency CMBS IO are backed by loans collateralized by multifamily properties. Our Agency CMBS IO are from Freddie Mac Series K deals from which interest continues to be advanced even in the event of an underlying default up until liquidation. According to Freddie Mac, 99.6% of the loans in K-deals are current as of June 30, 2025. Our non-Agency CMBS IO were all originated prior to 2018 and are backed by loans collateralized by a number of different property types, such as multifamily, office, retail, hotels, industrial, storage, and others. Our non-Agency CMBS IO investments are nearing maturity and have very little amortized cost remaining; any changes in actual payments may result in large swings in yield as shown below.
Previous wording
Our repurchase agreement borrowings increased to $9 billion as of June 30, 2025 from $7 billion as of December 31, 2024 as we used these funds to partially finance our purchases of Agency MBS during the six months ended June 30, 2025. We have not experienced any difficulty in securing financing with any of our counterparties, and our repurchase agreement counterparties have not indicated any concerns regarding leverage or credit. Please refer to Note 4 of the Notes to the Consolidated Financial Statements contained within this Quarterly Report on Form 10-Q as well as “Results of Operations” and “Liquidity and Capital Resources” contained within this Item 2 for additional information relating to our repurchase agreement borrowings.
Current wording
Our repurchase agreement borrowings increased to $12 billion as of September 30, 2025 from $7 billion as of December 31, 2024. These borrowings were used to partially finance our purchases of Agency MBS during the nine months ended September 30, 2025. We have not experienced any difficulty in securing financing with any of our counterparties, and our repurchase agreement counterparties have not indicated any concerns regarding leverage or credit. Please refer to Note 4 of the Notes to the Consolidated Financial Statements contained within this Quarterly Report on Form 10-Q as well as “Results of Operations” and “Liquidity and Capital Resources” contained within this Item 2 for additional information relating to our repurchase agreement borrowings.
Previous wording
Net interest income and net interest spread improved for the three months ended June 30, 2025, compared to the three months ended March 31, 2025 due to a larger portfolio of Agency RMBS with higher yields. Financing costs also declined approximately 11 basis points for the three months ended June 30, 2025, compared to the three months ended March 31, 2025.
Current wording
Net interest income and net interest spread improved for the three months ended September 30, 2025, compared to the three months ended June 30, 2025 due to a larger portfolio of Agency RMBS with higher yields. Financing costs held steady at 4.45% for each of the three months ended September 30, 2025 and June 30, 2025.
Previous wording
(6)Net periodic interest is the difference between the fixed interest rate we pay and the variable interest rate we receive on our interest rate swaps. It is a component of economic net interest income (expense), a non-GAAP measure. Please refer to the section below “Non-GAAP Financial Measures” for more information.
Current wording
(6)Net periodic interest is the difference between the fixed interest rate we pay and the variable interest rate we receive on our interest rate swaps. It is a component of economic net interest income (expense), a non-GAAP measure. Please refer to the section below “Non-GAAP Financial Measures” for a reconciliation to the most comparable GAAP measure.
Previous wording
During the three months ended March 31, 2025, the fair value of our investment portfolio increased $172 million primarily due to a decline of 36 basis points in the 10-year U.S. Treasury rate. These gains were mostly offset by net losses on our hedging portfolio of $(171) million (excluding $11 million of net periodic interest we earned from our interest rate swaps), as a result of the decline in 10-year and 30-year U.S. Treasury rates, lower SOFR rates across the curve and swaps spreads becoming more negative.
Current wording
During the three months ended September 30, 2025, the fair value of our investment portfolio increased $185 million primarily due to a decline in the 10-year U.S. Treasury rate and tighter mortgage spreads to U.S. Treasuries. These gains were offset by net losses on our hedging portfolio of $(38) million, which is net of periodic interest of $14 million we earned from our interest rate swaps. Losses in our hedging portfolio occur when SOFR-based swap rates and U.S. Treasury rates decline relative to the rates in effect at the time we enter into a hedge.
Previous wording
During the three months ended June 30, 2025, the fair value of our investment portfolio increased $45 million primarily due to recent purchases of new investments when spreads widened. These gains were offset by net losses on our hedging portfolio of $(78) million (excluding $12 million of net periodic interest we earned from our interest rate swaps), primarily as a result of the decline in SOFR-based swap rates and U.S. Treasury rates as of June 30, 2025 versus March 31, 2025.
Current wording
During the three months ended June 30, 2025, the fair value of our investment portfolio increased $45 million primarily due to purchases of new investments during the second quarter. These gains were offset by net losses on our hedging portfolio of $(66) million, which is net of periodic interest of $12 million we earned from our interest rate swaps. Our hedge losses were primarily the result of the decline in SOFR-based swap rates and U.S. Treasury rates as of June 30, 2025 as compared to March 31, 2025.
Previous wording
2)Realized gain (loss) for interest rate swaps consists of net periodic interest benefit of $12.3 million for the three months ended June 30, 2025 and $10.9 million for the three months ended March 31, 2025.
Current wording
(2)Realized gain (loss) for interest rate swaps consists of net periodic interest benefit of $14.3 million for the three months ended September 30, 2025 and $12.3 million for the three months ended June 30, 2025.
Previous wording
Operating expenses for the three months ended June 30, 2025, declined slightly compared to the three months ended March 31, 2025 due to lower legal and consulting expenses.
Current wording
Operating expenses for the three months ended September 30, 2025, declined slightly compared to the three months ended June 30, 2025 primarily due to lower share-based compensation expenses.
Previous wording
Net interest income and net interest spread improved for the six months ended June 30, 2025, compared to the six months ended June 30, 2024 due to the purchases of higher yielding Agency RMBS over the past year. In addition, our financing costs during the six months ended June 30, 2025 declined approximately 99 basis points compared to the six months ended June 30, 2024, due primarily to the interest rate cuts implemented by the FOMC since June 30, 2024.
Current wording
Net interest income and net interest spread improved for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024 due to the purchases of higher yielding Agency RMBS over the past year. Though interest expense has increased due to an increase in repurchase agreement borrowings used to finance these purchases, financing costs as a percentage of the average balance of borrowings have declined due to the FOMC’s lowering of the Federal Funds rate by 75 basis points since September 30, 2024.
Previous wording
(6)Net periodic interest is the difference between the fixed interest rate we pay and the variable interest rate we receive on our interest rate swaps. It is a component of economic net interest income (expense), a non-GAAP measure. Please refer to the section below “Non-GAAP Financial Measures” for more information.
Current wording
(6)Net periodic interest is the difference between the fixed interest rate we pay and the variable interest rate we receive on our interest rate swaps. It is a component of economic net interest income (expense), a non-GAAP measure. Please refer to the section below “Non-GAAP Financial Measures” for a reconciliation to the most comparable GAAP measure.
Previous wording
2)Realized gain (loss) for interest rate swaps consists of net periodic interest benefit of $23.2 million for the six months ended June 30, 2025 and $17.0 thousand for the six months ended June 30, 2024.
Current wording
(2)Realized gain (loss) for interest rate swaps consists of net periodic interest benefit of $37.5 million for the nine months ended September 30, 2025 and $4.2 million for the nine months ended September 30, 2024.
Previous wording
Operating expenses for the six months ended June 30, 2025 increased $6 million compared to the six months ended June 30, 2024 due to higher salary, bonus, and share-based compensation expenses.
Current wording
Operating expenses for the nine months ended September 30, 2025 increased $9 million compared to the nine months ended September 30, 2024 due to higher salary, bonus, and share-based compensation expenses, primarily resulting from an increase in performance based compensation expenses and from the hiring of new employees. Audit and legal expenses have also increased in 2025 compared to 2024.
Previous wording
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
Current wording
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
Previous wording
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.
Current wording
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.
Previous wording
During the six months ended June 30, 2025, we issued 40,712,768 shares of common stock through our ATM program, resulting in proceeds of $522 million, net of broker commissions and fees. We partially deployed these proceeds into Agency RMBS and to post initial margin requirements related to a larger hedge portfolio including interest rate swaps, swaptions, and U.S. Treasury futures.
Current wording
During the nine months ended September 30, 2025, we issued 61,025,405 shares of common stock through our ATM program, resulting in proceeds of $776 million, net of broker commissions and fees. We partially deployed these proceeds into Agency RMBS and to post initial margin requirements related to a larger hedge portfolio including interest rate swaps, swaptions, and U.S. Treasury futures.
Previous wording
Our liquidity fluctuates based on our investment activities, leverage, capital raising activities, and changes in the fair value of our investments and derivative instruments. Our measurement of liquidity includes unrestricted cash and cash equivalents and unencumbered Agency MBS, which are recognized as assets on our consolidated balance sheet. In our measure of liquidity, we also include the fair value of noncash collateral pledged to us by our counterparties, which we typically receive when the fair value of our pledged collateral exceeds our current margin requirement. Our liquidity as of June 30, 2025, was approximately $891 million, which consisted of unrestricted cash of $388 million, unencumbered Agency MBS with a fair value of $499 million, and noncash collateral pledged by our counterparties of $5 million. Our liquidity as of December 31, 2024, was $658 million.
Current wording
Our liquidity fluctuates based on our investment activities, leverage, capital raising activities, and changes in the fair value of our investments and derivative instruments. Our measurement of liquidity includes unrestricted cash and cash equivalents and unencumbered Agency MBS, which are recognized as assets on our consolidated balance sheet. In our measure of liquidity, we also include the fair value of noncash collateral pledged to us by our counterparties, which we typically receive when the fair value of our pledged collateral exceeds our current margin requirement. Our liquidity as of September 30, 2025, was over $1 billion, which consisted of unrestricted cash of $491 million, unencumbered Agency MBS with a fair value of $584 million, and noncash collateral pledged by our counterparties of $10 million. Our liquidity as of December 31, 2024, was $658 million.
Previous wording
We continuously monitor our liquidity, especially with potential risk events on the horizon, such as tariff changes, potential GSE transition, uncertainty regarding Federal Reserve policy decisions, the size of the Federal Reserve’s balance sheet, quantitative tightening or easing measures, the frequent potential for a government shutdown, and the impact on global markets stemming from global central bank policies. We are also monitoring the wars and conflicts around the globe. We continuously assess the adequacy of our liquidity under various scenarios based on changes in the fair value of our investments and derivative instruments due to market factors such as changes in the absolute level of interest rates and the shape of the yield curve, credit spreads, lender haircuts, and prepayment speeds, which in turn have an impact on margin requirements. In performing these analyses, we will also consider the current state of the fixed-income markets and the repurchase agreement markets to determine if market forces such as supply-demand imbalances or structural changes to these markets could change the liquidity of MBS or the availability of financing. We have not experienced any material changes in the terms of our repurchase agreements with our counterparties, and they have not indicated to us any concerns regarding access to liquidity.
Current wording
We continuously monitor our liquidity, especially with potential risk events on the horizon, such as tariff changes, potential GSE transition, uncertainty regarding Federal Reserve policy decisions, the size of the Federal Reserve’s balance sheet, quantitative tightening or easing measures, federal government shutdowns, and the impact on global markets stemming from global central bank policies. We are also monitoring the wars and conflicts around the globe. We continuously assess the adequacy of our liquidity under various scenarios based on changes in the fair value of our investments and derivative instruments due to market factors such as changes in the absolute level of interest rates and the shape of the yield curve, credit spreads, lender haircuts, and prepayment speeds, which in turn have an impact on margin requirements. In performing these analyses, we also consider the current state of the fixed-income markets and the repurchase agreement markets to determine if market forces such as supply-demand imbalances or structural changes to these markets could change the liquidity of MBS or the availability of financing. We have not experienced any material changes in the terms of our repurchase agreements with our counterparties, and they have not indicated to us any concerns regarding access to liquidity.
Previous wording
Our perception of the liquidity of our investments and market conditions significantly influences our targeted leverage. In general, our leverage will increase if we view the risk-reward opportunity of higher leverage on our capital outweighs the risk to our liquidity and book value. Our leverage, which we calculate using total liabilities plus the cost basis of TBA long positions, was 8.3 times shareholders’ equity as of June 30, 2025. We include 100% of the cost basis of our TBA securities in evaluating our leverage because it is possible under certain market conditions that it may be uneconomical for us to roll a TBA long position into future months, which may result in us having to take physical delivery of the underlying securities and use cash or other financing sources to fund our total purchase commitment.
Current wording
Our perception of the liquidity of our investments and market conditions significantly influences our targeted leverage. In general, our leverage will increase if we view the risk-reward opportunity of higher leverage on our capital outweighs the risk to our liquidity and book value. Our leverage, which we calculate using total liabilities plus the cost basis of TBA long positions, was 7.5 times shareholders’ equity as of September 30, 2025. We include 100% of the cost basis of our TBA securities in evaluating our leverage because it is possible under certain market conditions that it may be uneconomical for us to roll a TBA long position into future months, which may result in us having to take physical delivery of the underlying securities and use cash or other financing sources to fund our total purchase commitment.
Previous wording
Leverage based solely on repurchase agreement amounts outstanding was 5.3 times shareholders’ equity as of June 30, 2025. Our repurchase agreement borrowings are uncommitted with terms renewable at the discretion of our lenders and generally have original terms to maturity of overnight to six months, though in some instances, we may enter into longer-dated maturities depending on market conditions. We seek to maintain unused capacity under our existing repurchase agreement credit lines with multiple counterparties, which helps protect us in the event of a counterparty's failure to renew existing repurchase agreements. As part of our continuous evaluation of counterparty risk, we maintain our highest counterparty exposures with broker-dealer subsidiaries of regulated financial institutions or primary dealers.
Current wording
Leverage based solely on repurchase agreement amounts outstanding was 6.0 times shareholders’ equity as of September 30, 2025. Our repurchase agreement borrowings are uncommitted with terms renewable at the discretion of our lenders and generally have original terms to maturity of overnight to six months, though in some instances, we may enter into longer-dated maturities depending on market conditions. We seek to maintain unused capacity under our existing repurchase agreement credit lines with multiple counterparties, which helps protect us in
Previous wording
The collateral we post in excess of our repurchase agreement borrowing with any counterparty is also typically referred to by us as “equity at risk,” which represents the potential loss to the Company if the counterparty is unable or unwilling to return collateral securing the repurchase agreement borrowing at its maturity. The counterparties with whom we have the greatest amounts of equity at risk may vary significantly during any given period due to the short-term and uncommitted nature of the repurchase agreement borrowings. As of June 30, 2025, we had amounts outstanding under 27 different repurchase agreements and did not have more than 10% of equity at risk with any counterparty or group of related counterparties.
Current wording
The collateral we post in excess of our repurchase agreement borrowing with any counterparty is also typically referred to by us as “equity at risk,” which represents the potential loss to the Company if the counterparty is unable or unwilling to return collateral securing the repurchase agreement borrowing at its maturity. The counterparties with whom we have the greatest amounts of equity at risk may vary significantly during any given period due to the short-term and uncommitted nature of the repurchase agreement borrowings. As of September 30, 2025, we had amounts outstanding under 28 different repurchase agreements and did not have more than 10% of equity at risk with any counterparty or group of related counterparties.
Previous wording
the minimum margin requirement. The collateral posted as margin by us is typically in cash. As of June 30, 2025, we had cash collateral posted to our counterparties of $318 million under these agreements.
Current wording
the minimum margin requirement. The collateral posted as margin by us is typically in cash. As of September 30, 2025, we had cash collateral posted to our counterparties of $333 million under these agreements.
Previous wording
We designate certain derivative instruments as interest rate hedges for tax purposes. Realized gains (losses) resulting from the difference in fair value and the amount of cash received or paid upon termination or maturity of designated derivative instruments are included in GAAP earnings in the same reporting period in which the derivative instrument matures or is terminated by the Company but are generally not recognized in REIT taxable income until future periods. Non-designated derivative instruments are included in GAAP earning and REIT taxable income in the same period the derivative instrument matures or is terminated by the Company. The table below
Current wording
designated derivative instruments are included in GAAP earnings in the same reporting period in which the derivative instrument matures or is terminated by the Company but are generally not recognized in REIT taxable income until future periods. Non-designated derivative instruments are included in GAAP earning and REIT taxable income in the same period the derivative instrument matures or is terminated by the Company. 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, 2025; 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.
Previous wording
As of June 30, 2025, we also had $529 million in capital loss carryforwards, the majority of which will expire by December 31, 2028. Due to these amounts and other temporary and permanent differences between GAAP net income and REIT taxable income, coupled with the degree of uncertainty about the trajectory of interest rates, we cannot reasonably estimate how much the deferred tax hedge gains to be recognized will impact our dividend declarations during 2025 or in any given year.
Current wording
As of September 30, 2025, we also had $500 million in capital loss carryforwards, the majority of which will expire by December 31, 2028. Due to these amounts and other temporary and permanent differences between GAAP net income and REIT taxable income, coupled with the degree of uncertainty about the trajectory of interest rates, we cannot reasonably estimate how much the deferred tax hedge gains to be recognized will impact our dividend declarations during 2025 or in any given year.
Previous wording
We routinely announce material information to investors and the marketplace using filings with the SEC, press releases, public conference calls, presentations, webcasts, and the investor relations page of our website at www.dynexcapital.com/investors and our LinkedIn Page at www.linkedin.com/company/dynex-capital-inc. We use these channels for purposes of compliance with Regulation FD and as routine channels for distribution of important information. While not all of the information that we post to the investor relations page of our website or to our LinkedIn Page is of a material nature, some information could be deemed to be material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings, and public conference calls and webcasts. The web addresses are included in this Quarterly Report on Form 10-Q as textual references only and the information posted on these channels are not incorporated by reference in this Quarterly Report on Form 10-Q or in any other report or document we file with the SEC.
Current wording
We routinely announce material information to investors and the marketplace using filings with the SEC, press releases, public conference calls, presentations, webcasts, and the investor relations page of our website at www.dynexcapital.com/investors and our LinkedIn page. We use these channels for purposes of compliance with Regulation FD and as routine channels for distribution of important information. While not all of the information that we post to the investor relations page of our website or to our LinkedIn page is of a material nature, some information could be deemed to be material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings, and public conference calls and webcasts. The web addresses are included in this Quarterly Report on Form 10-Q as textual references only and the information posted on these channels are not incorporated by reference in this Quarterly Report on Form 10-Q or in any other report or document we file with the SEC.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
the event of a counterparty's failure to renew existing repurchase agreements. As part of our continuous evaluation of counterparty risk, we maintain our highest counterparty exposures with broker-dealer subsidiaries of regulated financial institutions or primary dealers.
Current report — wording carried from elsewhere
We designate certain derivative instruments as interest rate hedges for tax purposes. Realized gains (losses) resulting from the difference in fair value and the amount of cash received or paid upon termination or maturity of
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
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 June 30, 2025; 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.
Previous report — wording carried elsewhere
•Uncertainties regarding the war between Russia and Ukraine or the conflict in the Middle East, and the related impacts on macroeconomic conditions, including, among other things, interest rates;