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| UNITED STATES | | | | --- | --- | --- | | SECURITIES AND EXCHANGE COMMISSION | | | | Washington, DC 20549 | | | | FORM 10-K | | | | ☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | | | | For the fiscal year ended December 31, 2025 | | | | or | | | | ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | | | | Commission File Number: 001-09819 | | | | DYNEX CAPITAL, INC. | | | | (Exact name of registrant as specified in its chart ...

Core Viewpoint - Dynex Capital operates as an internally managed mortgage REIT specializing in Agency RMBS and CMBS [1] Company Overview - Dynex Capital is listed on the NYSE under the ticker symbol DX [1] - The company focuses on investments in Agency Residential Mortgage-Backed Securities (RMBS) and Commercial Mortgage-Backed Securities (CMBS) [1]

Core Viewpoint - Dinex Capital is an internally managed mortgage REIT focused on generating long-term yields from residential real estate assets, discussing its portfolio strategy and potential regulatory changes affecting institutional ownership of residential real estate [1]. Company Overview - Dinex Capital operates at the intersection of housing finance and capital markets, raising capital to invest in mortgage assets and providing monthly dividends to shareholders [4][6]. - The company sources mortgages primarily from government-sponsored enterprises (GSEs) like Freddie Mac and Fannie Mae, which securitize mortgages and eliminate credit risk for investors [8][9]. Portfolio Strategy - Dinex emphasizes the importance of trust and aims to create durable yields for shareholders by investing in specified pools of mortgages with favorable prepayment characteristics [17][19]. - The company currently has a portfolio valued at approximately $20 billion, competing in a $9 trillion agency mortgage-backed securities market [38]. Financial Performance - Dinex's stock offers a dividend yield of approximately 13.5% to 14%, supported by underlying mortgage investments yielding between 4.5% and 5% [22][23]. - The company employs financial leverage, currently around seven times, to enhance returns, with a historical return of nearly 70% for shareholders over the past six years [29][33]. Market Dynamics - The current regulatory environment and potential changes to GSE operations could impact credit risk and the overall market for agency MBS, with the Trump administration directing GSEs to support the market by purchasing $200 billion in agency MBS [30][32]. - Dinex believes that institutional ownership limitations in residential real estate will not significantly address the supply issues in the housing market, which is facing a supply-demand imbalance [50][53]. Future Growth - The company plans to continue focusing on residential real estate while exploring opportunities in commercial real estate, particularly multifamily assets [42][43]. - Dinex aims to leverage its size and performance to enhance shareholder value, as larger companies tend to receive better market valuations [44][46]. Leadership Structure - Dinex operates with a co-CEO structure, which the leadership believes enhances decision-making through diverse perspectives and collaborative risk management [59][62].

Group 1 - The core focus of Crude Value Insights is on cash flow and companies that generate it, highlighting value and growth prospects in the oil and natural gas sector [1] - Subscribers benefit from a 50+ stock model account, which provides a comprehensive analysis of cash flow for exploration and production (E&P) firms [1] - The service includes live chat discussions about the oil and gas sector, fostering a community for investors [1] Group 2 - A two-week free trial is available for new subscribers, encouraging engagement with the oil and gas investment service [2]

Core Insights - Samsung Electronics reported a record fourth-quarter profit, exceeding analysts' expectations, driven by a memory chip shortage and strong demand for AI servers [1][2] Financial Performance - Quarterly revenue increased by approximately 24% year-over-year, reaching a new record of 93.8 trillion Korean won ($65.58 billion), surpassing the expected 93.318 trillion won [6] - Operating profit surged over 200% year-over-year, amounting to 20.1 trillion won, slightly above the expected 20.018 trillion won [6] Memory Business Impact - The memory segment significantly contributed to earnings, achieving all-time highs in quarterly revenue and operating profit, fueled by a market price surge and sales of high-bandwidth memory (HBM) [3] - HBM, essential for AI data center chipsets, has seen increased focus from Samsung over the past year, aligning with rising demand from AI chipset manufacturers like Nvidia [3][4] Market Dynamics - The demand for HBM has outstripped supply, leading to a broader market shortage and increased prices for chips used in personal computers and mobile devices [4] - Memory companies, including Samsung and its competitor SK Hynix, are prioritizing capacity to meet this lucrative demand, resulting in record earnings for both firms [4]

Core Viewpoint - The mortgage REIT sector, while high-risk, offers preferred shares that present a lower-risk investment opportunity with attractive dividend yields [1] Group 1: Preferred Shares Overview - Dynex Capital's preferred share, DX-C, is noted for its appealing dividend rate [2] - The current share price of DX-C is $25.88, with a stripped yield of 9.14% [3][4] - The shares are callable on 30 days' notice, which introduces call risk that could limit the share price [4][6] Group 2: Call Risk Analysis - If DX-C shares are called, the total cash flow to shareholders would be approximately $0.60 to $0.65 less than the current share price [5] - The call risk is significant, as the potential downside in the event of a call exceeds $0.60, which is unusual for shares [6][7] Group 3: Comparison with Other Investments - DX-C offers a larger floating rate spread compared to other preferred shares with similar risk ratings, making it relatively attractive [8] - For taxable accounts, DX-C may be more appealing than interest income, but investors should consider alternatives with lower call risk [9] Group 4: Baby Bonds Consideration - Baby bonds from riskier REITs may offer defined maturity and higher seniority in the capital structure compared to preferred shares [10] - The yield to maturity for baby bonds could be comparable to the stripped yield on DX-C, but tax implications may vary [11] Group 5: Market Conditions Impact - A potential downside for DX-C is that falling short-term rates could lead to a decrease in the dividend rate, a risk not present with baby bonds [12] - The valuation of DX-C is a concern; if priced lower, it would be considered one of the most attractive floating rate preferred shares [13]

Core Viewpoint - Dynex Capital, Inc. has seen an increase in its consensus price target from $14.95 to $18, indicating growing optimism among analysts regarding the company's future performance, although some analysts maintain a more cautious outlook [2][6]. Company Overview - Dynex Capital, Inc. is a mortgage real estate investment trust (REIT) that specializes in mortgage-backed securities (MBS) in the United States, with a portfolio that includes both agency and non-agency MBS, as well as CMBS interest-only securities [1]. Financial Performance - The company's financial performance, particularly its earnings reports, significantly influences analysts' price targets, with positive earnings surprises potentially leading to upward revisions [3][6]. - Dynex Capital's performance is sensitive to changes in interest rates, which can impact its net interest margin, prompting analysts to adjust price targets based on interest rate expectations [3]. Market Influences - The broader real estate and mortgage markets, including changes in housing demand, mortgage rates, and government policies related to housing finance, can affect Dynex Capital's outlook [4]. - As a REIT, Dynex Capital is required to distribute at least 90% of its taxable income to shareholders, making its dividend policy and yield important factors for analysts when setting price targets [4]. Comparative Analysis - In comparison to Angel Oak Mortgage REIT, Dynex Capital is noted for its volatility and risk profile, emphasizing the importance of considering risk factors when evaluating the company's stock [5].

Financial Data and Key Metrics Changes - The total economic return for the fourth quarter was 10.2%, consisting of $0.51 of common dividends and a $0.78 increase in book value per share [25] - For the year, the book value increased by $0.75, and $2 of dividends per common share were declared, paid monthly [25] - Comprehensive income for the quarter was $190 million and $354 million for the year [25] - The company ended the quarter with leverage of 7.3x total equity and a strong liquidity position of $1.4 billion in cash and unencumbered securities, representing over 55% of total equity [25] Business Line Data and Key Metrics Changes - The TBA and mortgage-backed securities portfolio started the year at $9.8 billion, grew to $15.8 billion by the end of September, and ended the year at $19.4 billion, with approximately $22 billion currently [27] - The company raised and invested over $1 billion in 2025, with a price-to-book valuation rising [16] Market Data and Key Metrics Changes - The company experienced a 29.4% total shareholder return in 2025, driven by both dividend income and significant share price performance [8] - The total equity market capitalization, including preferred shares, was $3 billion at the end of the reporting period [8] Company Strategy and Development Direction - The company emphasizes a performance-first mentality and ethical stewardship of shareholders' capital, focusing on risk management and adaptability [4][6] - The strategy includes raising capital at accretive levels to expand the equity base and improve trading liquidity, which strengthens the shareholder base and lowers the cost of capital [12][13] - The company is prepared for a rapidly changing global landscape, with a focus on liquidity and flexibility in its risk appetite [10] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of government policy in shaping asset returns and indicated that the current environment presents both risks and opportunities [14][18] - The return of GSE balance sheets is expected to provide a technical tailwind for spreads, supporting valuations and limiting spread widening [18][20] - Management expressed confidence in the ability to generate reliable dividends backed by a resilient portfolio, attracting capital seeking durable income [11][12] Other Important Information - The company has made significant investments in its team and infrastructure, including the addition of a new Chief Operating Officer and expansion of its legal and investment teams [9] - General and administrative expenses as a percentage of capital decreased from 2.9% to 2.1% year-over-year [29] Q&A Session Summary Question: Can you quantify where you see incremental investment returns today? - Management indicated that hedged ROEs are in the mid-teens with leverage around 7x, and with targeted leverage in the low eights, ROEs could reach mid- to high teens [33] Question: How does this compare to three months ago given the spread tightening? - The dynamic is that spreads are approximately 150 to 300 basis points tighter than at the end of the previous quarter [35] Question: What is the probability of politically motivated actions to improve housing affordability? - Management acknowledged the historical role of GSEs in managing housing and indicated that government intervention is possible, including lowering G-fees [49] Question: Can you provide an update on where you've deployed the capital raised in January? - The company is finding opportunities primarily in the belly of the coupon stack, particularly in fives and five and a halves [55] Question: What is the appropriate size of the portfolio in context with the current opportunity set? - Management believes there are significant opportunities to generate alpha and that the company can grow while still maintaining a compelling investment environment [63][64]

Financial Data and Key Metrics Changes - The total economic return for the fourth quarter was 10.2%, consisting of $0.51 of common dividends and a $0.78 increase in book value per share [25] - For the year, the book value increased by $0.75, and $2 of dividends per common share were declared, paid monthly [25] - Comprehensive income for the quarter was $190 million and $354 million for the year [25] - The company ended the quarter with leverage of 7.3x total equity and a strong liquidity position of $1.4 billion in cash and unencumbered securities, representing over 55% of total equity [25] Business Line Data and Key Metrics Changes - The TBA and mortgage-backed securities portfolio started the year at $9.8 billion, grew to $15.8 billion at the end of September, and ended the year at $19.4 billion [27] - The current book value is estimated to be in the range of $13.85-$14.05 per share, up 3%-4% from year-end [28] - The company raised $1.5 billion over the last 13 months at the most accretive levels in its history [25] Market Data and Key Metrics Changes - The company experienced a 29.4% total shareholder return in 2025, driven by both dividend income and significant share price performance [8] - The total equity market capitalization, including preferred shares, was $3 billion as of the end of last week [8] - The company raised and invested over $1 billion in 2025, with a price-to-book valuation rising [16] Company Strategy and Development Direction - The company aims to create a resilient business at the intersection of capital markets and real estate finance, focusing on disciplined execution and long-term value creation [7][30] - The management emphasizes the importance of adapting to changing environments and maintaining a performance-first mentality [4][6] - The company is evolving its business steadily, fine-tuning people, processes, technology, and structure to align with its strategy [13] Management's Comments on Operating Environment and Future Outlook - Management highlighted the impact of government policy on asset returns, indicating that it is one of the most powerful forces shaping the market [14] - The company is prepared for a wider range of outcomes and has tilted its risk appetite towards liquidity and flexibility [10] - The management expressed confidence in the mortgage market's stability and the potential for attractive returns due to rising global demand for income [11][20] Other Important Information - The company has added depth and breadth to its team, including a new Chief Operating Officer and expanded corporate development capabilities [9] - The management noted that the current environment is characterized by policy complexity, shifting rate expectations, and geopolitical crosscurrents [8] Q&A Session Summary Question: Can you quantify where you see incremental investment returns today? - Management indicated that hedged ROEs are in the mid-teens with leverage around 7x, and with targeted leverage in the low 8s, ROEs could reach mid- to high teens [33] Question: How does this compare to three months ago given the spread tightening? - The dynamic is roughly between 150 and 300 basis points tighter than at the end of the last quarter [35] Question: Can you discuss the probability of politically motivated actions to improve housing affordability? - Management acknowledged the historical role of GSEs in managing housing and indicated that government intervention is possible [48][49] Question: What are the current opportunities for capital deployment? - Management noted that the belly of the coupon stack, primarily fives, has been the most interesting, with opportunities across the coupon stack [55] Question: How do you see the GSEs' longer-term role in the market? - Management believes that the $200 billion cap could be extended and that GSEs will continue to play a significant role in the market [73]