Financial Data and Key Metrics Changes - The company reported a comprehensive loss of $0.98 per common share and a total economic return of minus $0.93 per common share, representing a decline of 4.6% [12] - Book value per share decreased by $1.32 or 6.6%, primarily due to economic losses on the investment portfolio of $48 million, driven by mortgage spread widening and a lower rate environment [13] - Total economic return year-to-date was 2.4%, with book value on June 30 at $18.75, relatively unchanged versus year-end [22] Business Line Data and Key Metrics Changes - Average interest-earning assets, including TBAs, increased to $4.8 billion from $4.3 billion, with interest-earning assets at quarter-end reaching $5.4 billion compared to $5.2 billion at the end of the last quarter [15] - Adjusted net interest income increased on an absolute dollar basis due to growth in the investment portfolio, but decreased on a per share basis due to new shares issued [16] - Adjusted net interest spread increased by 8 basis points to 195 basis points, driven by the company's TBA position and a modest decline in repo borrowing costs [17] Market Data and Key Metrics Changes - Agency RMBS prepayment speeds remained essentially unchanged at 19 CPR for the quarter compared to 18.6 CPR in the first quarter [18] - The company raised $68 million in new common equity through market offerings during the quarter, contributing $0.07 per common share to book value [18] Company Strategy and Development Direction - The company aims to generate a cash return between 8% to 10% while maintaining steady book value over time, using a disciplined, research-driven approach [10] - The management emphasizes liquidity with a balance sheet of high-quality assets and plans to take advantage of investment opportunities as they arise [34] - The company is positioned for a steeper yield curve and wider spreads, maintaining lower leverage and higher liquidity levels [34] Management's Comments on Operating Environment and Future Outlook - The management noted that the global economy is still evolving through the health crisis, and it will take time for the economic picture to become clear [25] - The company expects front-end rates to remain low close to zero through 2022, providing a solid base for generating returns [27] - The management remains cautious about potential whipsaw risks in rates and is prepared to adjust their hedging strategies accordingly [54] Other Important Information - The company has maintained a disciplined approach to capital management, which has cushioned book value fluctuations during periods of volatility [10] - The management highlighted the importance of patience in navigating the current market environment, emphasizing the need for a flexible mindset [20] Q&A Session Summary Question: What is the pacing of adding leverage? - The management indicated that they are comfortable with current leverage levels and will consider increasing it if additional spread widening occurs in the coming quarters [38] Question: How do you view the dollar roll market in light of potential Fed policy? - The management expressed confidence in the dollar roll market, noting strong financing rates and bank demand as key drivers [44] Question: What are your thoughts on MBS spreads and risks of additional widening? - The management acknowledged that spread widening has already occurred and expects an additional 10 to 15 basis points of widening, which could present buying opportunities [62] Question: Is there a possibility of a dividend supplement? - The management affirmed their comfort with the current dividend policy, emphasizing risk management and the goal of generating attractive total economic returns [66]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for the three months ended March 31, 2021, detailing the company's financial position, performance, and cash flows Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $2,901,108 | $3,095,435 | | Mortgage-backed securities, at fair value | $2,380,373 | $2,596,255 | | Repurchase agreements | $2,032,089 | $2,437,163 | | Total Liabilities | $2,169,832 | $2,461,982 | | Total Shareholders' Equity | $731,276 | $633,453 | Consolidated Statements of Comprehensive Income (Loss) Highlights (in thousands, except per share data) | Account | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net Interest Income | $12,259 | $17,721 | | Gain (loss) on derivative instruments, net | $107,801 | $(195,567) | | Net Income (Loss) | $117,929 | $(98,479) | | Net income (loss) to common shareholders | $112,383 | $(106,234) | | Comprehensive income (loss) to common shareholders | $47,227 | $(33,262) | | Net income (loss) per common share-basic and diluted | $4.20 | $(4.63) | Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $30,189 | $43,981 | | Net cash provided by investing activities | $398,335 | $287,880 | | Net cash used in financing activities | $(360,768) | $(352,291) | [Notes to the Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) These notes detail the company's significant accounting policies, investment portfolio, financing, hedging activities, fair value measurements, and changes in shareholders' equity - The Company operates as an internally managed mortgage REIT, primarily investing in leveraged Agency and non-Agency mortgage-backed securities (MBS), including CMBS, RMBS, and CMBS IOs[23](index=23&type=chunk) - Effective January 1, 2021, the Company elected the fair value option for all new MBS, reporting fair value changes in net income to align with derivative accounting[44](index=44&type=chunk) MBS Portfolio by Fair Value (in thousands) | MBS Type | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Agency RMBS | $1,763,737 | $1,946,391 | | Agency CMBS | $249,617 | $258,550 | | CMBS IO | $365,876 | $390,039 | | Non-Agency Other | $1,143 | $1,275 | | **Total** | **$2,380,373** | **$2,596,255** | - During Q1 2021, the Company redeemed all remaining **2,788,330** shares of its 7.625% Series B Preferred Stock, incurring a **$3.0 million** redemption charge to net income available to common shareholders[108](index=108&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2021 performance, highlighting the positive impact of hedging in a rising interest rate environment, leading to comprehensive income and increased leverage due to TBA investments [Executive Overview](index=25&type=section&id=Executive%20Overview) In Q1 2021, the company's hedging strategy protected book value in a rising interest rate environment, resulting in **$47.2 million** comprehensive income and increased leverage to **6.9x** due to TBA investments - Comprehensive income to common shareholders for Q1 2021 was **$47.2 million**, or **$1.76 per common share**, primarily driven by hedging instrument gains that protected book value against rising interest rates[124](index=124&type=chunk) Non-GAAP Financial Highlights (in thousands, except per share data) | Metric | Q1 2021 | Q4 2020 | | :--- | :--- | :--- | | Core net operating income to common shareholders | $12,420 | $10,543 | | Core net operating income per common share | $0.46 | $0.45 | | Adjusted net interest income | $20,827 | $20,854 | - Leverage, including TBA long positions, increased to **6.9 times** shareholders' equity as of March 31, 2021, up from **6.3 times** at year-end 2020, primarily due to increased TBA investment[126](index=126&type=chunk) [Financial Condition](index=30&type=section&id=Financial%20Condition) As of March 31, 2021, the company's investment portfolio primarily comprised Agency RMBS, CMBS, and CMBS IOs, with increased TBA allocation, financed by repurchase agreements and **72%** hedged against interest rate risk Investment Portfolio Composition (including TBAs) | Investment Type | % of Portfolio (Mar 31, 2021) | % of Portfolio (Dec 31, 2020) | | :--- | :--- | :--- | | Agency RMBS | 82% | 81% | | Agency CMBS | 4% | 6% | | CMBS IO | 11% | 13% | | Non-Agency MBS | <1% | <1% | - The company increased investment in TBA securities due to lower implied financing rates for dollar roll transactions compared to repurchase agreement borrowings[139](index=139&type=chunk) - As of March 31, 2021, approximately **72%** of the MBS portfolio (including TBA securities) was hedged using U.S. Treasury futures, options, and swaptions, up from **62%** at year-end 2020[151](index=151&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) In Q1 2021, net interest income decreased, but adjusted net interest income remained stable, driven by a **$107.8 million** net gain on derivative instruments offsetting a **$65.2 million** fair value decline in AFS investments Net Interest Income Analysis (Q1 2021 vs Q4 2020, in thousands) | Metric | Q1 2021 | Q4 2020 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income (GAAP) | $12,259 | $14,416 | $(2,157) | | TBA Drop Income | $8,568 | $6,445 | $2,123 | | Adjusted Net Interest Income (Non-GAAP) | $20,827 | $20,854 | $(27) | Gain (Loss) on Derivative Instruments, Net (Q1 2021, in thousands) | Derivative Type | Gain / (Loss) | | :--- | :--- | | Interest rate swaptions | $57,763 | | U.S. Treasury futures | $95,647 | | Options on U.S. Treasury futures | $12,617 | | TBA dollar roll positions, net | $(58,226) | | **Total** | **$107,801** | - The fair value of investments declined, resulting in a **$65.2 million** unrealized loss in OCI for AFS securities and a **$1.0 million** loss in net income for fair value option securities[171](index=171&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity strengthened with liquid assets increasing to **$528.6 million**, while leverage rose to **6.9x** due to increased TBA investments, maintaining full compliance with all financial covenants - Liquid assets, including unrestricted cash and unencumbered Agency securities, increased to **$528.6 million** as of March 31, 2021, from **$415.3 million** as of December 31, 2020[178](index=178&type=chunk) - Leverage, including TBA long positions, was **6.9x** shareholders' equity as of March 31, 2021, up from **6.3x** at year-end 2020[178](index=178&type=chunk) - The company was in full compliance with all debt covenants as of March 31, 2021, with no material restrictions on financing flexibility[180](index=180&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to market risks, including interest rate, spread, prepayment, credit, and liquidity risks, and its strategies for managing them through investment selection and hedging Projected Sensitivity of Shareholders' Equity to Interest Rate Shifts (as of March 31, 2021) | Rate Shift (Basis Points) | % Change in Common Equity | | :--- | :--- | | -100 | -9.6% | | -50 | -1.4% | | +50 | -3.4% | | +100 | -9.1% | Projected Sensitivity of Shareholders' Equity to Market Spread Shifts (as of March 31, 2021) | Spread Shift (Basis Points) | % Change in Common Equity | | :--- | :--- | | -20/-50 | +10.5% | | -10 | +5.0% | | +10 | -5.0% | | +20/+50 | -10.5% | - Prepayment risk is managed by investing substantially in lower coupon RMBS (**83%** of capital in securities with a coupon of **2.5%** or lower) and in CMBS with prepayment protections[211](index=211&type=chunk) - Credit risk is mitigated by primarily investing in Agency MBS with government or GSE guarantees, and in senior, **AAA-rated** tranches of CMBS IO securities[213](index=213&type=chunk) [Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting during the quarter - The principal executive and financial officers concluded that the Company's disclosure controls and procedures were effective as of March 31, 2021[220](index=220&type=chunk) - No material changes occurred in internal control over financial reporting during Q1 2021[221](index=221&type=chunk) [PART II. OTHER INFORMATION](index=52&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) No material developments occurred in the 'Receiver Litigation' during the quarter, with management deeming a loss not probable and no other material legal proceedings pending - No material developments occurred in the previously disclosed 'Receiver Litigation' during the three months ended March 31, 2021[223](index=223&type=chunk) - Management believes the likelihood of loss is not probable and cannot be reasonably estimated, thus no contingent liability has been recorded[223](index=223&type=chunk) [Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) No material changes occurred to the risk factors previously disclosed in the Company's 2020 Annual Report on Form 10-K - No material changes from the risk factors discussed in the Company's 2020 Form 10-K[224](index=224&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Board authorized a **$40 million** common stock and **$40 million** Series C Preferred Stock repurchase program, though no shares were repurchased in Q1 2021, except for **22,623** shares withheld for employee tax obligations - The Board of Directors authorized the repurchase of up to **$40 million** of common stock and **$40 million** of Series C Preferred Stock[225](index=225&type=chunk) - No shares were purchased under the publicly announced repurchase plan during the three months ended March 31, 2021[227](index=227&type=chunk)[228](index=228&type=chunk) [Defaults Upon Senior Securities](index=53&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - None[229](index=229&type=chunk) [Mine Safety Disclosures](index=53&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) No mine safety disclosures were reported - None[230](index=230&type=chunk) [Other Information](index=53&type=section&id=Item%205.%20Other%20Information) No other material information was reported - None[231](index=231&type=chunk) [Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate governance documents, underwriting agreements, and Sarbanes-Oxley Act certifications - The report includes certifications from the principal executive and financial officers pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[233](index=233&type=chunk) - Underwriting agreements related to equity offerings in January and March 2021 are included by reference[233](index=233&type=chunk)

Dynex Capital, Inc. (NYSE:DX) Q1 2021 Earnings Conference Call April 28, 2021 10:00 PM ET Company Participants Alison Griffin - Vice President, Investor Relations Byron Boston - Chief Executive Officer and Co-Chief Investment Officer Smriti Popenoe - President and Co-Chief Investment Officer Stephen Benedetti - Executive Vice President, Chief Financial Officer, Chief Operating Officer Conference Call Participants Bose George - KBW Doug Harter - Credit Suisse Eric Hagen - BTIG Trevor Cranston - JMP Securitie ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) Dynex Capital, Inc. is an internally managed mortgage REIT primarily investing in Agency MBS, leveraging repurchase agreements and hedging with derivatives - The company is an internally managed mortgage REIT primarily investing in **Agency residential MBS (RMBS)**, **commercial MBS (CMBS)**, and **CMBS interest-only (IO) securities**, which are guaranteed by U.S. government-sponsored entities (GSEs)[11](index=11&type=chunk) - Financing is principally achieved through borrowings under **repurchase agreements**, with leverage levels adjusted based on market conditions and risk assessments[11](index=11&type=chunk)[23](index=23&type=chunk) - In 2020, the company shifted its hedging strategy from primarily using interest rate swaps to using **U.S. Treasury futures and options** due to significant market disruptions caused by the COVID-19 pandemic[27](index=27&type=chunk)[29](index=29&type=chunk) - As of December 31, 2020, the company had **19 employees**, with **53% being women or self-identified minorities**, and maintained a **0% voluntary turnover rate** for the preceding three years[59](index=59&type=chunk) Tax Characterization of Dividends Declared Per Share (2019-2020) | Dividend Type | Year | Ordinary | Capital Gain | Return of Capital | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | **Common** | 2020 | $ — | $ 1.66000 | $ — | $ 1.66000 | | | 2019 | $ 0.36723 | $ — | $ 1.64277 | $ 2.01000 | | **Preferred Series B** | 2020 | $ — | $ 1.90625 | $ — | $ 1.90625 | | | 2019 | $ 1.90625 | $ — | $ — | $ 1.90625 | | **Preferred Series C** | 2020 | $ — | $ 1.12150 | $ — | $ 1.12150 | | | 2019 | $ — | $ — | $ — | $ — | [Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant investment, financing, regulatory, and operational risks, including market volatility, leverage, and REIT compliance - Investment risks include negative impacts on income and book value from fluctuations in market value, interest rates, and prepayment rates on MBS[72](index=72&type=chunk)[76](index=76&type=chunk) - Financing and hedging risks stem from the use of leverage through uncommitted, short-term repurchase agreements, which can lead to margin calls and liquidity issues, and the potential for hedging strategies to be ineffective[81](index=81&type=chunk)[83](index=83&type=chunk) - Regulatory risks involve the complex requirements to maintain REIT status, where failure could result in significant tax liabilities and debt defaults, alongside potential changes in tax legislation and regulation[88](index=88&type=chunk)[90](index=90&type=chunk)[99](index=99&type=chunk) - Other significant business risks include the continued adverse effects of the COVID-19 pandemic on market conditions, the replacement of LIBOR with an alternative reference rate, and potential cybersecurity incidents[100](index=100&type=chunk)[102](index=102&type=chunk)[104](index=104&type=chunk) [Unresolved Staff Comments](index=27&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - There are no unresolved staff comments[106](index=106&type=chunk) [Properties](index=27&type=section&id=Item%202.%20Properties) The company does not own or lease any physical properties that are material to its operations - The Company does not own or lease any material physical properties[107](index=107&type=chunk) [Legal Proceedings](index=27&type=section&id=Item%203.%20Legal%20Proceedings) The DCI Litigation was dismissed, while the Receiver Litigation, concerning a cost-sharing agreement, remains pending with no probable material loss - The DCI Litigation against the Company was affirmed for dismissal by the Fifth Circuit Court of Appeals, and the matter is now considered closed[108](index=108&type=chunk) - In the separate Receiver Litigation, the court found the Company breached a cost-sharing agreement but also granted the Company's motion for summary judgment for its own claims of offset and recoupment, with the matter pending and both parties having submitted damage claims[108](index=108&type=chunk) - Management believes the likelihood of loss in the Receiver Litigation is not probable and the amount cannot be reasonably estimated; therefore, no contingent liability has been recorded[110](index=110&type=chunk) [Mine Safety Disclosures](index=28&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's business - None[111](index=111&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=29&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the NYSE under "DX", with a $40 million repurchase program authorized and $9.9 million raised via ATM in 2020 - The company's common stock is traded on the New York Stock Exchange under the symbol **"DX"**[114](index=114&type=chunk) - A stock repurchase program for up to **$40 million** of common stock is authorized through March 31, 2022, with no shares repurchased in the three months ended December 31, 2020[116](index=116&type=chunk) - During 2020, the company issued **553,364 shares** of common stock through its ATM program, raising **$9.9 million** in net proceeds[116](index=116&type=chunk) [Selected Financial Data](index=30&type=section&id=Item%206.%20Selected%20Financial%20Data) This section has been omitted pursuant to amendments to Regulation S-K Item 301 - The requirement to disclose selected financial data has been eliminated and is therefore omitted[118](index=118&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2020, Dynex Capital achieved a 15.2% total economic return, increasing book value to $19.08 per share through active portfolio management and strategic shifts - Generated a total economic return of **15.2%** for common shareholders in 2020, with book value per common share increasing by **$1.07** to **$19.08**[124](index=124&type=chunk) - Actively managed the portfolio by strategically selling approximately **38%** of its assets in early March 2020, realizing **$84.8 million** in gains, and later reinvesting to capture wider spreads[124](index=124&type=chunk) - The investment portfolio shifted from Agency CMBS to predominantly **Agency RMBS and TBA securities** to enhance liquidity and capture better risk-adjusted returns[132](index=132&type=chunk) - Leverage, including TBA positions, was **6.3x shareholders' equity** as of December 31, 2020[170](index=170&type=chunk) GAAP to Non-GAAP Reconciliation Summary (in thousands) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | **Comprehensive income to common shareholders** | $66,472 | $43,950 | | **Core net operating income to common shareholders** | $44,763 | $49,267 | | **GAAP net interest income** | $63,853 | $56,057 | | **Adjusted net interest income** | $80,499 | $78,198 | [Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages interest rate, spread, prepayment, credit, and liquidity risks through derivatives, investment strategies, and stress scenario monitoring - The primary market risks are interest rate, spread, prepayment, credit, liquidity, and reinvestment risks[191](index=191&type=chunk) Projected Change in Shareholders' Equity from Parallel Interest Rate Shifts (as of Dec 31, 2020) | Rate Shift (Basis Points) | Change in Equity | | :--- | :--- | | -100 | -5.1% | | -50 | +1.3% | | +50 | -1.7% | | +100 | -3.8% | Projected Change in Shareholders' Equity from Market Spread Shifts (as of Dec 31, 2020) | Spread Shift (Basis Points) | Change in Equity | | :--- | :--- | | +20/+50 | -9.5% | | +10 | -4.4% | | -10 | +4.4% | | -20/-50 | +9.5% | - Prepayment risk is managed by investing in lower coupon securities and specified pools where borrowers have disincentives to refinance; as of Dec 31, 2020, approximately **84% of capital in Agency RMBS** was in 2.0% and 2.5% coupons[204](index=204&type=chunk) - Liquidity risk arises from reliance on recourse repurchase agreements and TBA positions, managed by monitoring liquidity under various stress scenarios[208](index=208&type=chunk) [Financial Statements and Supplementary Data](index=55&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section refers to the consolidated financial statements, related notes, and the Reports of the Independent Registered Public Accounting Firm, included from page F-1 - The company's audited consolidated financial statements and supplementary data are included at the end of the Form 10-K, beginning on page F-1[213](index=213&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=55&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None reported[213](index=213&type=chunk) [Controls and Procedures](index=55&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of December 31, 2020, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of December 31, 2020[214](index=214&type=chunk) - There were no material changes in internal control over financial reporting during the fourth quarter of 2020[215](index=215&type=chunk) - Management's report asserts that internal control over financial reporting was effective as of year-end, based on the COSO (2013) framework[216](index=216&type=chunk) [Other Information](index=55&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[217](index=217&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=56&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The information required for this item is incorporated by reference from the company's 2021 definitive proxy statement - Information is incorporated by reference from the 2021 Proxy Statement[220](index=220&type=chunk) [Executive Compensation](index=56&type=section&id=Item%2011.%20Executive%20Compensation) The information required for this item, covering executive and director compensation, is incorporated by reference from the company's 2021 definitive proxy statement - Information is incorporated by reference from the 2021 Proxy Statement[221](index=221&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=56&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section provides information on equity compensation plans, with other details on security ownership incorporated by reference from the 2021 proxy statement Equity Compensation Plan Information (as of Dec 31, 2020) | Plan Category | Securities to Be Issued Upon Exercise | Weighted-Average Exercise Price | Securities Remaining Available for Future Issuance | | :--- | :--- | :--- | :--- | | **Approved by Shareholders** | — | $ — | 2,266,371 | | **Not Approved by Shareholders** | — | — | — | | **Total** | — | $ — | 2,266,371 | - Additional information regarding security ownership is incorporated by reference from the 2021 Proxy Statement[223](index=223&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=56&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The information required for this item, concerning related person transactions and director independence, is incorporated by reference from the company's 2021 definitive proxy statement - Information is incorporated by reference from the 2021 Proxy Statement[224](index=224&type=chunk) [Principal Accountant Fees and Services](index=56&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) The information required for this item, detailing fees paid to the principal accountant and related services, is incorporated by reference from the company's 2021 definitive proxy statement - Information is incorporated by reference from the 2021 Proxy Statement[225](index=225&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=57&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K - This item provides an index of all financial statements, schedules, and exhibits included in or incorporated by reference into the Form 10-K filing[228](index=228&type=chunk)[229](index=229&type=chunk) [Form 10-K Summary](index=59&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates that there is no Form 10-K summary - None[235](index=235&type=chunk) Financial Statements and Notes [Reports of Independent Registered Public Accounting Firm](index=63&type=section&id=Reports%20of%20Independent%20Registered%20Public%20Accounting%20Firm) BDO USA, LLP issued unqualified opinions on the consolidated financial statements and internal control over financial reporting, identifying MBS valuation as a critical audit matter - The independent auditor, BDO USA, LLP, provided an unqualified opinion, stating the financial statements are presented fairly in all material respects[246](index=246&type=chunk) - An unqualified opinion was also issued on the effectiveness of the company's internal control over financial reporting as of December 31, 2020[258](index=258&type=chunk) - The valuation of investments in mortgage-backed securities (MBS) was identified as a critical audit matter[253](index=253&type=chunk) [Consolidated Financial Statements](index=67&type=section&id=Consolidated%20Financial%20Statements) Total assets decreased to $3.09 billion in 2020 from $5.37 billion in 2019, while net income to common shareholders significantly improved to $160.0 million Consolidated Balance Sheet Summary (in thousands) | Account | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | **$3,087,754** | **$5,370,604** | | Mortgage-backed securities, at fair value | $2,596,255 | $5,188,163 | | **Total Liabilities** | **$2,454,301** | **$4,787,616** | | Repurchase agreements | $2,437,163 | $4,752,348 | | **Total Shareholders' Equity** | **$633,453** | **$582,988** | Consolidated Comprehensive Income Summary (in thousands, except per share) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net interest income | $63,853 | $56,057 | | Gain (loss) on sale of investments, net | $308,084 | $(5,755) | | Loss on derivative instruments, net | $(172,290) | $(186,949) | | **Net income (loss) to common shareholders** | **$160,017** | **$(165,635)** | | **Comprehensive income (loss) to common shareholders** | **$66,472** | **$43,950** | | **Net income (loss) per common share** | **$6.93** | **$(7.01)** | [Notes to the Consolidated Financial Statements](index=72&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) The notes detail accounting policies, the $2.6 billion MBS portfolio, $2.4 billion in repurchase agreements, derivative hedging, and equity changes - As of Dec 31, 2020, the MBS portfolio had a fair value of **$2.6 billion**, down from **$5.2 billion** at year-end 2019, primarily composed of Agency RMBS and CMBS[325](index=325&type=chunk) - Repurchase agreements outstanding totaled **$2.44 billion** at year-end 2020, collateralized by **$2.61 billion** of MBS, a significant decrease from **$4.75 billion** at year-end 2019[333](index=333&type=chunk) - The company's derivative portfolio shifted in 2020, with interest rate swaps eliminated and replaced with **U.S. Treasury futures, options, and interest rate swaptions** for hedging purposes[340](index=340&type=chunk)[344](index=344&type=chunk) - In Q1 2020, the company issued **4.46 million shares** of Series C Preferred Stock for net proceeds of **$107.8 million**, using the funds to redeem all Series A and a portion of Series B Preferred Stock[368](index=368&type=chunk) - Subsequent to year-end, the company issued **3.16 million shares** of common stock for net proceeds of **$55.5 million** and redeemed all remaining **2.79 million shares** of its Series B Preferred Stock[379](index=379&type=chunk)

Dynex Capital, Inc. (NYSE:DX) Q4 2020 Earnings Conference Call February 4, 2021 10:00 AM ET Corporate Participants Alison Griffin - Vice President, Investor Relations Byron Boston - Chief Executive Officer and Co-Chief Investment Officer Smriti Popenoe - President and Co-Chief Investment Officer Stephen Benedetti - Executive Vice President, Chief Financial Officer, Chief Operating Officer Conference Call Participants Mike Brown - KBW Eric Hagen - BTIG Trevor Cranston - JMP Securities Jason Stewart - JonesTr ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2020 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: 1-9819 DYNEX CAPITAL, INC. (Exact name of registrant as specified in its charter) Virginia 52-1549373 (State or other jurisdiction of incorporation or organization) (IRS Empl ...

Dynex Capital, Inc. (NYSE:DX) Q3 2020 Earnings Conference Call October 28, 2020 10:00 AM ET Company Participants Alison Griffin - Vice President, Investor Relations Byron Boston - President, Chief Executive Officer and Co-Chief Investment Officer Stephen Benedetti - Chief Financial Officer and Chief Operating Officer Smriti Popenoe - Co-Chief Investment Officer Conference Call Participants Douglas Harter - Credit Suisse Bose George - Keefe, Bruyette & Woods, Inc. Trevor Cranston - JMP Securities LLC Christo ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2020 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: 1-9819 DYNEX CAPITAL, INC. (Exact name of registrant as specified in its charter) Virginia 52-1549373 (State or other jurisdiction of incorporation or organization) (IRS Employer ...

Financial Performance - Dynex Capital, Inc. reported a comprehensive loss to common shareholders of $(33.3) million for Q1 2020, resulting in a net loss of $(106.2) million or $(4.63) per common share, compared to net income of $51.8 million or $2.26 per common share in Q4 2019[128]. - Core net operating income to common shareholders declined to $11.6 million or $0.51 per common share in Q1 2020, down from $15.0 million or $0.66 per common share in Q4 2019[131]. - GAAP net income to common shareholders for the three months ended March 31, 2020, was a loss of $106,234,000 compared to a gain of $51,774,000 for the three months ended December 31, 2019[141]. - Non-GAAP adjusted net interest income decreased to $20,524,000 for the three months ended March 31, 2020, from $22,437,000 for the three months ended December 31, 2019, a decline of about 8.5%[141]. - The company reported a GAAP net interest income of $17,721,000 for the three months ended March 31, 2020, compared to $16,195,000 for the three months ended December 31, 2019, an increase of approximately 9.4%[141]. - The net interest income for the three months ended March 31, 2020, was $17,721,000, an increase from $13,681,000 for the same period in 2019, reflecting a net interest spread of 1.32%[165]. - Adjusted net interest income for the three months ended March 31, 2020, was $20,524,000, an increase of 5.9% from $19,376,000 in the same period of 2019[172]. - The total change in net interest income for the three months ended March 31, 2020, was an increase of $4,040,000 compared to the previous year[168]. Investment Portfolio - The investment portfolio as of March 31, 2020, consisted of $2.3 billion in Agency CMBS, $0.4 billion in Agency RMBS, and $0.5 billion in both Agency and non-Agency CMBS IO, compared to $2.6 billion in Agency RMBS and $2.0 billion in Agency CMBS as of December 31, 2019[143]. - The total par value of CMBS investments as of March 31, 2020, was $2.1 billion, with a weighted average coupon of 3.14%[151]. - The fair value of the total 30-year fixed-rate investments as of March 31, 2020, was $381,915,000, compared to $2,610,117,000 as of December 31, 2019[147]. - As of March 31, 2020, the total fair value of non-Agency CMBS IO investments was $176,109,000, with retail properties comprising 27.8% of the portfolio[155]. - Approximately 61% of CMBS IO investments are Agency-issued securities, which generally have a lower risk of default compared to non-Agency CMBS IO[156]. Leverage and Liquidity - As of April 30, 2020, the company had approximately $225 million in cash and unencumbered assets, with leverage at approximately 4 times total shareholders' equity[134]. - The company's leverage as of March 31, 2020, was 8.8 times shareholders' equity, which was reduced to approximately 4 times after settling $2.7 billion in Agency MBS sales[186]. - The company maintained liquidity of $155.4 million as of March 31, 2020, down from $224.0 million as of December 31, 2019, primarily due to margin calls on investments and derivative securities[186]. - The average balance of interest-earning assets for the three months ended March 31, 2020, was $4,899,132,000, compared to $4,368,240,000 for the same period in 2019[165]. Interest Rate Swaps and Derivatives - The company has reduced its interest rate swaps to mitigate the impact of the upcoming cessation of LIBOR as a benchmark rate by the end of 2021[135]. - The company reported a total loss on derivative instruments of $195,567,000 for the three months ended March 31, 2020, compared to a loss of $61,697,000 in the same period of 2019[177]. - The net periodic interest benefit from interest rate swaps decreased to $2,064,000 in Q1 2020 from $3,897,000 in Q1 2019, a decline of 47%[177]. - The company realized a loss of $183,773,000 on interest rate swaps for the three months ended March 31, 2020, compared to a loss of $6,794,000 in the same period of 2019[181]. - The average interest rate swap net receive rate decreased to 0.28% in Q1 2020 from 0.38% in Q1 2019[180]. Market Conditions and Economic Impact - The Federal Reserve's actions to support financial markets included a $500 billion increase in U.S. Treasuries and a $200 billion increase in Agency RMBS holdings[122]. - Initial jobless claims in the U.S. exceeded 33 million as of May 7, 2020, representing about 20% of the domestic workforce[123]. - The company is taking a balanced approach to future reinvestment, focusing on generating solid cash flows and preserving capital amid market uncertainty[134]. - The company anticipates changes in interest rates and spreads will affect the performance of its investment portfolio, particularly regarding cash flow and credit performance[210]. - The competitive environment is expected to evolve, with increased competition for investments and financing availability impacting future operations[212]. Compliance and Regulatory Matters - The company maintained compliance with its debt covenants as of March 31, 2020, despite market disruptions caused by COVID-19[192]. - The company is required to distribute at least 90% of its REIT taxable income to shareholders, funded primarily through cash flows from operations[197]. - The company monitors financial covenants that may impact its operating and financing flexibility, currently believing there are no material restrictions[192]. - The company has no material changes in contractual obligations since December 31, 2019, and does not foresee off-balance sheet arrangements affecting its financial condition[199].

Investment Strategy - As of December 31, 2019, the majority of the company's investments in RMBS were Agency-issued pass-through securities collateralized primarily by pools of fixed-rate single-family mortgage loans[16]. - The company considers expanding its capital base and evaluates merger, acquisition, or divestiture opportunities that align with its investment strategy[24]. - The company’s operating policies limit investment in non-Agency MBS rated BBB+ or lower to $250 million in market value, with a maximum of $50 million at risk for shareholders[31]. - The company faces various risks in investing in mortgage-related securities, including interest rate risk and liquidity risk, which could affect its financial condition[39]. - The company competes with other mortgage REITs and financial entities that may have greater financial resources, potentially impacting its investment income[40]. - To qualify as a REIT, the company must derive at least 75% of its gross income from real estate-related sources and meet other income tests[45]. Financing and Leverage - The company utilizes leverage to enhance returns on invested capital, primarily through uncommitted repurchase agreements, with original terms to maturity ranging from overnight to six months[22]. - The company’s financing strategy is exposed to counterparty risk, which is mitigated by diversifying repurchase agreement lenders and limiting borrowings from lesser-capitalized counterparties[23]. - The availability and cost of financing are critical to the company’s business model, with recent declines in repurchase agreement lending by larger banks impacting operations[34]. - The Federal Reserve Bank of New York has been conducting repurchase agreement transactions to provide liquidity, which has not materially affected the company’s financing costs to date[37]. Interest Rate and Market Conditions - The company employs derivative instruments to hedge against adverse changes in interest rates, primarily using pay-fixed interest rate swaps[25]. - The company’s financial performance is influenced by factors such as interest rates, prepayment rates, and market conditions, which are beyond its control[33]. - LIBOR is scheduled to be phased out by the end of 2021, with Fannie Mae and Freddie Mac transitioning to ARMs benchmarked to a 30-day average of SOFR starting in the second half of 2020[38]. - The company must distribute at least 90% of its REIT taxable income to maintain its REIT status, which could be impacted by the reform of benchmark rates like LIBOR[42]. Corporate Governance and Ethics - The company has 20 employees as of December 31, 2019, with no collective bargaining agreements in place[53]. - The company has adopted a Code of Business Conduct and Ethics applicable to all employees, officers, and directors, which is available on its website[58]. - The company has expanded its Nominating and Corporate Governance Committee to include oversight of ESG policies and activities[55]. - The company is subject to reporting requirements under the Exchange Act, with materials available on the SEC's website[56]. Tax and Financial Losses - The company has approximately $89.8 million in net operating loss (NOL) carryforward as of December 31, 2019, with the majority generated in 2000 set to expire in 2020[42].