Dynex Capital(DX) - 2025 Q3 - Quarterly Results

Press Release Information This section details the official contact information and announcement regarding the company's third quarter 2025 financial results and upcoming conference call Contact Information and Date This section provides the contact details for media inquiries and the official release date of the financial results - The press release was issued on October 20, 2025, with Alison Griffin as the contact person[2] Company Announcement Dynex Capital, Inc. announced its third quarter 2025 financial results and details for an upcoming conference call to discuss these results and the business outlook - Dynex Capital, Inc. (NYSE: DX) reported its third quarter 2025 financial results[3] - Management will host a call to discuss the results and business outlook[3] Third Quarter Financial Performance and Other Highlights This section outlines management's strategic execution, conference call details, and key financial achievements for the third quarter of 2025 Management Remarks Management emphasized the successful execution of their strategy, opportunistic positioning, and expert risk management, highlighting investments in highly liquid securities and a disciplined investment process - The company continued to execute its strategy of raising and deploying capital, reflecting opportunistic positioning and expert risk management[4] - Investments are focused on highly liquid, transparent, and readily valued securities, maintaining effective risk management and a disciplined investment process[4] Earnings Conference Call Details This section provides instructions for accessing the company's conference call, including dial-in numbers for North America and International participants, a conference ID, and details for the live audio webcast and archived recording - The conference call is scheduled for 10:00 a.m. Eastern Time and can be accessed via telephone (1-888-330-2022 for North America, 1-646-960-0690 for International, ID 1957092) or live audio webcast on the Company's website[5][6] - An archive of the webcast will be available approximately 2 hours after the live call[6] Key Financial Highlights The company reported strong third-quarter financial performance, including a significant economic return, an increase in book value, positive comprehensive and net income per common share, and substantial capital raising and investment activities Third Quarter 2025 Key Financial Highlights | Metric | Value | | :-------------------------------- | :-------------------------------- | | Total economic return per common share | $1.23 | | Total economic return (% of beginning book value) | 10.3% | | Increase in book value per common share | $0.72 | | Dividends declared per common share | $0.51 | | Book value per common share (Sept 30, 2025) | $12.67 | | Comprehensive income per common share | $1.20 | | Net income per common share | $1.09 | | Equity capital raised (net of issuance costs) | $254 million | | Agency RMBS purchased | $2.4 billion | | Agency CMBS purchased | $464 million | | Liquidity (Sept 30, 2025) | Over $1 billion | | Leverage (including TBA securities at cost) | 7.5 times shareholders' equity | Consolidated Financial Statements This section presents the company's unaudited consolidated balance sheets and comprehensive statements of income (loss) for the third quarter of 2025 Consolidated Balance Sheets (unaudited) The consolidated balance sheets show a significant increase in total assets and shareholders' equity from June 30, 2025, to September 30, 2025, driven by growth in mortgage-backed securities and additional paid-in capital Consolidated Balance Sheets (unaudited) - Key Figures | Metric | September 30, 2025 ($ in thousands) | June 30, 2025 ($ in thousands) | Change (QoQ) | | :-------------------------------- | :-------------------------------- | :------------------------------- | :-------------------------------- | | Total assets | $14,158,694 | $11,311,265 | +$2,847,429 | | Mortgage-backed securities | $13,230,145 | $10,510,006 | +$2,720,139 | | Total liabilities | $12,201,146 | $9,701,272 | +$2,499,874 | | Repurchase agreements | $11,753,522 | $8,600,143 | +$3,153,379 | | Total shareholders' equity | $1,957,548 | $1,609,993 | +$347,555 | | Book value per common share | $12.67 | $11.95 | +$0.72 | | Common shares outstanding | 145,714,136 | 125,358,375 | +20,355,761 | Consolidated Comprehensive Statements of Income (Loss) (unaudited) The company reported a significant turnaround in Q3 2025, moving from a net loss in Q2 2025 to substantial net income and comprehensive income, driven by increased net interest income and a large unrealized gain on investments Consolidated Comprehensive Statements of Income (Loss) - Key Figures | Metric | Three Months Ended Sep 30, 2025 ($ in thousands) | Three Months Ended Jun 30, 2025 ($ in thousands) | Change (QoQ) | | :-------------------------------- | :-------------------------------- | :------------------------------- | :-------------------------------- | | Interest income | $149,679 | $111,746 | +$37,933 | | Net interest income | $30,611 | $23,128 | +$7,483 | | Unrealized gain on investments, net | $142,469 | $33,652 | +$108,817 | | Loss on derivatives, net | $(10,694) | $(58,093) | +$47,399 | | Net income (loss) | $150,388 | $(13,606) | +$163,994 | | Net income (loss) to common shareholders | $147,561 | $(16,286) | +$163,847 | | Comprehensive income (loss) to common shareholders | $162,527 | $(12,222) | +$174,749 | | Net income (loss) per common share-basic | $1.09 | $(0.14) | +$1.23 | | Dividends declared per common share | $0.51 | $0.51 | $0.00 | Summary of Third Quarter 2025 Results This section details the changes in the company's financial position, including book value, net interest income, and common equity rollforward for Q3 2025 Financial Position Changes The company's book value increased due to asset appreciation from declining Treasury rates and tightening mortgage spreads. Net interest income and spread improved from higher-yielding investments, with further financing rate improvements expected from the Federal Funds rate cut - Book value increased by $0.72 per common share, primarily due to asset appreciation from a decline in the 10-year U.S. Treasury rate and tightening mortgage spreads[9] - Net interest income and net interest spread improved due to higher yielding investments, with financing costs remaining steady[9] - Management anticipates continued improvement in the financing rate in Q4 2025 following a 25 basis point reduction in the Federal Funds rate in September 2025[9] Common Equity Rollforward (Q3 2025) | Component | Amount ($ in thousands) | | :-------------------------------- | :---------------------- | | Balance as of June 30, 2025 | $1,498,493 | | Comprehensive income to common shareholders | $162,527 | | Net proceeds from stock issuance | $256,347 | | Common dividends declared | $(71,319) | | Balance as of September 30, 2025 | $1,846,048 | Investment Portfolio and Financing This section provides an overview of the company's MBS investments, repurchase agreement borrowings, and the performance of these financial instruments MBS Investments The company's MBS investment portfolio, including Agency RMBS, TBA securities, Agency CMBS, and CMBS IO, saw an increase in total fair value and a significant reduction in overall unrealized losses from Q2 to Q3 2025 MBS Investments Overview | Investment Type | Sep 30, 2025 Fair Value ($ in thousands) | Jun 30, 2025 Fair Value ($ in thousands) | Sep 30, 2025 Unrealized Gain (Loss) ($ in thousands) | Jun 30, 2025 Unrealized Gain (Loss) ($ in thousands) | | :-------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------------------ | :------------------------------------------------ | | Total Agency RMBS | $14,726,494 | $13,619,653 | $(77,401) | $(203,472) | | Agency CMBS | $933,839 | $472,426 | $4,566 | $1,544 | | CMBS IO | $93,112 | $100,746 | $(1,115) | $(924) | | Total | $15,753,445 | $14,192,825 | $(73,950) | $(202,852) | - Total Agency RMBS unrealized loss decreased significantly from $(203,472) thousand in Q2 2025 to $(77,401) thousand in Q3 2025[12] - Agency CMBS fair value increased from $472,426 thousand to $933,839 thousand, with an increase in unrealized gain[12] Repurchase Agreement Borrowings Repurchase agreement borrowings increased substantially from Q2 to Q3 2025, with a slight decrease in the weighted average interest rate and an extension of the weighted original term to maturity Repurchase Agreement Borrowings Outstanding | Metric | September 30, 2025 ($ in thousands) | June 30, 2025 ($ in thousands) | | :-------------------------------- | :-------------------------------- | :------------------------------- | | Total Balance | $11,753,522 | $8,600,143 | | Weighted Average Rate | 4.44% | 4.47% | | Weighted Original Term to Maturity (days) | 100 | 88 | - Total repurchase agreement borrowings increased by over $3.1 billion quarter-over-quarter[14] - The weighted average rate for repurchase agreements slightly decreased from 4.47% to 4.44%[14] Performance of MBS, Repurchase Agreements, and Swaps The company experienced improved performance in Q3 2025, with increased total interest income, net interest income, and economic net interest spread, despite higher interest expense from repurchase agreements Performance Metrics (QoQ) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Jun 30, 2025 | Change (QoQ) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total interest income | $149,679 | $111,746 | +$37,933 | | Repurchase agreement financing (interest expense) | $(119,068) | $(88,618) | $(30,450) | | Net interest income | $30,611 | $23,128 | +$7,483 | | Net interest spread | 0.46% | 0.33% | +0.13% | | Net periodic interest from interest rate swaps | $14,265 | $12,349 | +$1,916 | | Economic net interest income | $44,876 | $35,477 | +$9,399 | | Economic net interest spread | 1.00% | 0.96% | +0.04% | - Net interest income increased by $7.483 million, and net interest spread improved by 0.13% quarter-over-quarter[15] - Economic net interest income increased by $9.399 million, and economic net interest spread improved by 0.04% quarter-over-quarter[15] Hedging Portfolio This section details the company's interest rate hedging portfolio, including derivatives, and projected tax hedge gains Interest Rate Hedging Portfolio Details The company adjusted its hedging portfolio in Q3 2025, reducing short positions in U.S. Treasury futures while increasing short positions in interest rate swaps and introducing new options on U.S. Treasury futures Interest Rate Hedging Portfolio (Notional Amounts) | Derivative Type | Sep 30, 2025 Notional Amount Long (Short) ($ in thousands) | Jun 30, 2025 Notional Amount Long (Short) ($ in thousands) | | :-------------------------- | :------------------------------------------------------- | :------------------------------------------------------- | | Total U.S. Treasury futures | $(2,173,500) | $(2,475,000) | | Total interest rate swaps | $(7,860,000) | $(7,160,000) | | 1-2 year interest rate swaption | $750,000 | $500,000 | | 3-month options on U.S. Treasury futures | $1,000,000 | $0 | - The company reduced its short position in U.S. Treasury futures by $301.5 million but increased its short position in interest rate swaps by $700 million quarter-over-quarter[20] - New positions in 3-month options on U.S. Treasury futures with a notional amount of $1 billion were added in Q3 2025[20] Gain (Loss) on Derivatives, Net The company significantly reduced its net loss on derivatives in Q3 2025 compared to Q2 2025, primarily due to a substantial decrease in unrealized losses, despite a shift from realized gains to losses Gain (Loss) on Derivatives, Net (QoQ) | Component | Three Months Ended Sep 30, 2025 ($ in thousands) | Three Months Ended Jun 30, 2025 ($ in thousands) | Change (QoQ) | | :-------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Unrealized gain (loss) | $(19,474) | $(107,698) | +$88,224 | | Realized gain (loss) | $(5,485) | $37,256 | $(42,741) | | Net periodic interest (swaps) | $14,265 | $12,349 | +$1,916 | | Loss on derivatives, net | $(10,694) | $(58,093) | +$47,399 | - Unrealized losses on derivatives decreased significantly from $(107,698) thousand in Q2 2025 to $(19,474) thousand in Q3 2025[20] Projected Period of Recognition for Tax Hedge Gains, Net The company projects a total of $687.5 million in net deferred tax hedge gains to be recognized as taxable income over future fiscal years, with the largest portion expected in 2028 and thereafter Projected Tax Hedge Gains, Net | Fiscal Year | Amount ($ in thousands) | | :------------------------ | :---------------------- | | 2025 | $99,310 | | 2026 | $97,916 | | 2027 | $93,327 | | 2028 and thereafter | $396,988 | | Total | $687,541 | - Total projected net deferred tax hedge gains as of September 30, 2025, amount to $687,541 thousand[22] Non-GAAP Financial Measures This section explains management's use of non-GAAP financial measures and provides reconciliations to GAAP figures for comprehensive income and net interest income Management's Perspective on Non-GAAP Measures Management utilizes non-GAAP financial measures, such as Earnings Available for Distribution (EAD) and economic net interest income, to assess the investment portfolio's return and total financing costs, including TBA drop income and net periodic interest from interest rate swaps - Management uses non-GAAP measures like EAD and economic net interest income to evaluate the investment portfolio's return and total financing costs[23] - TBA dollar roll positions' drop income/loss is included in EAD as it's considered the economic equivalent of net interest income on the underlying Agency security[24] - Net periodic interest from interest rate swaps is included in non-GAAP measures to reflect the total financing cost, as swaps hedge borrowing costs[25] Reconciliations of Non-GAAP Measures The company provides detailed reconciliations showing the adjustments from GAAP comprehensive income to EAD, and from GAAP net interest income to economic net interest income and EAD, highlighting the impact of fair value changes and derivative instruments Reconciliation of Comprehensive Income (Loss) to EAD | Metric | Three Months Ended Sep 30, 2025 ($ in thousands) | Three Months Ended Jun 30, 2025 ($ in thousands) | | :------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Comprehensive income (loss) to common shareholders (GAAP) | $162,527 | $(12,222) | | Less: Change in fair value of investments, net | $(157,435) | $(37,716) | | Less: Change in fair value of derivative instruments, net | $28,507 | $75,200 | | EAD to common shareholders (non-GAAP) | $33,599 | $25,262 | | EAD per common share (non-GAAP) | $0.25 | $0.22 | Reconciliation of Net Interest Income to Economic Net Interest Income and EAD | Metric | Three Months Ended Sep 30, 2025 ($ in thousands) | Three Months Ended Jun 30, 2025 ($ in thousands) | | :------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net interest income (GAAP) | $30,611 | $23,128 | | Net periodic interest from interest rate swaps | $14,265 | $12,349 | | Economic net interest income | $44,876 | $35,477 | | TBA drop income | $3,548 | $4,758 | | Operating expenses | $(11,998) | $(12,293) | | Preferred stock dividends | $(2,827) | $(2,680) | | EAD to common shareholders (non-GAAP) | $33,599 | $25,262 | | Net interest spread (GAAP) | 0.46% | 0.33% | | Net periodic interest as a percentage of average repurchase borrowings | 0.54% | 0.63% | | Economic net interest spread (non-GAAP) | 1.00% | 0.96% | Forward Looking Statements This section provides a cautionary disclaimer regarding forward-looking statements, highlighting inherent risks and the company's policy on updates Forward Looking Statements Disclaimer This section serves as a cautionary statement, indicating that the release contains forward-looking statements subject to various risks and uncertainties that could cause actual results to differ materially from projections. It also states that the company does not undertake to update these statements - The release contains forward-looking statements, identified by words like 'believe,' 'expect,' and 'anticipate,' which are subject to inherent risks and uncertainties[30] - Actual results could differ materially due to factors including economic conditions, geopolitical events, changes in interest rates, Federal Reserve policies, financing availability, and regulatory changes[31] - The company undertakes no obligation to update or revise any forward-looking statements, except as required by law[32] Company Description This section describes Dynex Capital, Inc. as an internally managed REIT focused on generating shareholder returns through real estate asset financing Dynex Capital Overview Dynex Capital, Inc. is an internally managed real estate investment trust (REIT) that generates dividend income and long-term total returns by financing real estate assets, focusing on ethical stewardship, expert risk management, and disciplined capital allocation - Dynex Capital delivers value by transforming residential real estate into long-term yields for shareholders, operating as an internally managed REIT[33] - The company is committed to ethical stewardship, expert risk management, disciplined capital allocation, and social responsibility[33] - It supports housing communities in the United States through the financing of real estate assets[33]