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  4. [10-Q] DYNEX CAPITAL INC Quarterly Earnings Report

Dynex Capital swings to $336M loss in Q3 2026

Wider Agency MBS spreads pressured book value despite partial offsets from interest-rate hedge gains.

Filing Impact
(Moderate)
Filing Sentiment

Sentiment and the balance of points

Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.

How Sentiment worksHow the balance works

Form Type
10-Q

Rhea-AI Filing Summary

Dynex Capital, Inc. (DX) reported a third-quarter 2026 net loss of $335.536 million, versus net income of $150.388 million a year earlier. Net interest income was $101.562 million, compared with $30.611 million. Wider Agency mortgage-backed securities spreads drove a decline in portfolio fair value and book value; interest-rate hedge gains offset part of the impact. Total economic return was (11.5)%. Book value per common share was $10.91 at September 30, down from $12.90 at June 30; the quarter included $0.51 of declared common dividends per share.

Dynex grew its capital base by $384 million in the quarter through common and preferred equity raises, using net proceeds to add $3.2 billion of Agency mortgage-backed securities. The investment portfolio increased approximately 3% to $28.3 billion from $27.6 billion at June 30. Repurchase agreement borrowings were $24 billion as of September 30, 2026, versus $14 billion as of December 31, 2025; leverage, including the implied cost of TBAs, increased to 9.0 times shareholders’ equity.

1 point · 0 major

How this balance works

Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.

It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.

Rhea-AI Sentiment measures something else, the tone of the wording.

How the balance worksHow Sentiment works

2 major · 2 points

How the balance works

Positive

  • Moderate pointThird-quarter net interest income reached $101.562 million, versus $30.611 million in 2025.

Negative

  • Major pointThird-quarter net loss was $335.536 million, versus $150.388 million net income in 2025.
  • Major pointThird-quarter economic return was (11.5)%, and book value fell to $10.91 per share.

Filing Explained

Series D shares carry cumulative quarterly dividends at 9.375% of $25 per share beginning January 15, 2027.

The 10-Q reports that Dynex issued 83,119,388 common shares through its at-the-market program during the first nine months of 2026 for $1.1 billion net, and had 258,430,745 common shares outstanding on 2026-09-30, versus 174,814,912 on 2025-12-31. An at-the-market program lets a company sell new shares gradually into the open market at prevailing prices, rather than through one priced deal. Because the shares were issued, the total share count increased, reducing an unchanged holder’s percentage ownership absent offsetting changes.

Separately, Dynex sold 4,800,000 Series D preferred shares during the quarter and received $116 million net. They have no stated maturity or mandatory redemption; cumulative quarterly cash dividends of 9.375% of the $25 liquidation value begin on 2027-01-15, and Dynex may redeem the shares at its option starting 2031-10-15.

Net loss $335.536 million Three months ended September 30, 2026; net income was $150.388 million in 2025.
Net interest income $101.562 million Three months ended September 30, 2026; $30.611 million in 2025.
Total economic return (11.5)% Third quarter 2026.
Book value per common share $10.91 September 30, 2026; $12.90 at June 30, 2026.
Capital raised $384 million Third quarter 2026, through common and preferred equity raises.
Investment portfolio $28.3 billion September 30, 2026; approximately 3% growth from $27.6 billion at June 30, 2026.
Repurchase agreement borrowings $24 billion September 30, 2026, versus $14 billion at December 31, 2025.
TBA dollar roll transactions financial
"We use TBA dollar roll transactions to maintain exposure to Agency RMBS"
drop income (loss) financial
"commonly referred to as drop income (loss)"
fair value option financial
"elected the fair value option for all MBS purchased on or after that date"
An accounting election that lets a company measure eligible financial assets and liabilities at their current market price, recording gains and losses in the income statement as those prices move. For investors it matters because choosing the fair value option makes reported profits and asset values respond immediately to market swings—like revaluing a house to today’s sale price—so it can increase earnings volatility while giving a more up‑to‑date view of value.
SOFR-based interest rate swaps technical
"short positions in SOFR-based interest rate swaps held as of the dates indicated"

FAQ

AI-generated questions and answers. How Rhea-AI works. Not financial advice.

What was DX’s net loss in the third quarter of 2026?
DX reported a net loss of $335.536 million for the three months ended September 30, 2026, compared with net income of $150.388 million in the same period of 2025. Total economic return was (11.5)%.

What were DX’s Series D preferred stock terms?
Dynex sold 4,800,000 Series D preferred shares in a public offering and received $116 million net of $4 million in broker commissions and other expenses. The shares pay a quarterly cumulative cash dividend of 9.375% of the $25.00 liquidation value per share, beginning January 15, 2027.

How many common shares did DX issue through its ATM program?
Dynex issued 83,119,388 common shares through its at-the-market program during the nine months ended September 30, 2026, at an aggregate value of $1.1 billion, net of broker commissions and fees.

AI-generated analysis. How Rhea-AI works. Not financial advice.

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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, 2026
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 charter)
Virginia
52-1549373
(State or other jurisdiction of incorporation or
organization)
(I.R.S. Employer Identification No.)
140 Eastshore Drive, Suite 100
Glen Allen,
Virginia
23059-5755
(Address of principal executive offices)
(Zip Code)
(804)
217-5800
 
(Registrant’s telephone number, including area code) 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
DX
New York Stock Exchange
6.900% Series C Fixed-to-Floating Rate
Cumulative Redeemable Preferred Stock, par
value $0.01 per share
DXPRC
New York Stock Exchange
9.375% Series D Fixed-Rate Cumulative
Redeemable Preferred Stock, par value $0.01
per share
DXPRD
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒
No
 ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to
be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange
Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to
Section 13(a) of the Exchange Act.   ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes           ☐           No            ☒
On October 22, 2026, the registrant had 259,627,108 shares outstanding of common stock, $0.01 par value, which
is the registrant’s only class of common stock.
DYNEX CAPITAL, INC.
FORM 10-Q
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
Consolidated Balance Sheets as of September 30, 2026 (unaudited) and December 31, 2025
1
Consolidated Statements of Comprehensive Income (Loss) for the three and nine months
ended September 30, 2026 (unaudited) and September 30, 2025 (unaudited)
2
Consolidated Statements of Shareholders' Equity for the three and nine months ended
September 30, 2026 (unaudited) and September 30, 2025 (unaudited)
3
Consolidated Statements of Cash Flows for the nine months ended
September 30, 2026 (unaudited) and September 30, 2025 (unaudited)
5
Notes to the Consolidated Financial Statements (unaudited)
7
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
25
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
45
Item 4.
Controls and Procedures
48
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
48
Item 1A.
Risk Factors
48
Item 2.
Unregistered Sales of Equity and Use of Proceeds
48
Item 3.
Defaults Upon Senior Securities
49
Item 4.
Mine Safety Disclosures
49
Item 5.
Other Information
49
Item 6.
Exhibits
49
SIGNATURES
51
1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.
CONSOLIDATED BALANCE SHEETS
($s in thousands except per share data)
 
September 30,
2026
December 31,
2025
ASSETS
(unaudited)
Cash and cash equivalents
$993,008
$531,043
Cash collateral posted to counterparties
834,736
399,344
Mortgage-backed securities (including pledged assets of $25,239,341 and
$14,593,470, respectively), at fair value
25,912,607
16,306,988
Due from counterparties
61,439
17,425
Derivative assets
—
10,498
Accrued interest receivable
113,913
67,940
Other assets
9,503
8,940
Total assets
$27,925,206
$17,342,178
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
Liabilities:
 
 
Repurchase agreements
$24,190,276
$13,904,231
Due to counterparties
389,511
811,656
Derivative liabilities
89,336
4,830
Cash collateral posted by counterparties
—
8,373
Accrued interest payable
137,153
95,196
Dividends payable
50,580
37,171
Other liabilities
16,295
18,577
 Total liabilities
24,873,151
14,880,034
Shareholders’ equity:
 
 
Preferred stock, par value $0.01 per share, 50,000,000 shares authorized;
9,260,000 and 4,460,000 shares issued and outstanding, respectively
($231,500 and $111,500 aggregate liquidation preference, respectively)
223,593
107,843
Common stock, par value $0.01 per share, 720,000,000  and 360,000,000
shares authorized, respectively; 258,430,745 and 174,814,912 shares
issued and outstanding, respectively
2,584
1,748
Additional paid-in capital
4,025,147
2,921,551
Accumulated other comprehensive loss
(164,603)
(127,061)
Accumulated deficit
(1,034,666)
(441,937)
 Total shareholders’ equity
3,052,055
2,462,144
Total liabilities and shareholders’ equity
$27,925,206
$17,342,178
See notes to the unaudited consolidated financial statements.
2
DYNEX CAPITAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
($s in thousands except per share data)
Three Months Ended
Nine Months Ended
September 30,
September 30,
 
2026
2025
2026
2025
INTEREST INCOME
Interest income
$332,497
$149,679
$892,637
$356,484
Interest expense
(230,935)
(119,068)
(618,039)
(285,612)
Net interest income
101,562
30,611
274,598
70,872
GAINS (LOSSES)
Realized (loss) gain on sales of investments, net
(544)
—
8,177
—
Unrealized (loss) gain on investments, net
(1,465,047)
142,469
(1,742,480)
286,118
Gain (loss) on derivative instruments, net
1,041,087
(10,694)
1,274,659
(186,875)
Total (losses) gains, net
(424,504)
131,775
(459,644)
99,243
EXPENSES
Compensation and benefits
(4,742)
(7,325)
(29,659)
(23,256)
Other general and administrative
(6,320)
(4,139)
(17,086)
(11,884)
Other operating expenses
(1,532)
(534)
(3,315)
(1,268)
Total operating expenses
(12,594)
(11,998)
(50,060)
(36,408)
Net (loss) income
$(335,536)
$150,388
$(235,106)
$133,707
Preferred stock dividends
(2,769)
(2,827)
(8,076)
(7,431)
Net (loss) income to common shareholders
$(338,305)
$147,561
$(243,182)
$126,276
Other comprehensive income:
Unrealized (loss) gain on available-for-sale
investments
$(36,529)
$14,966
$(37,542)
$38,420
Total other comprehensive (loss) income
(36,529)
14,966
(37,542)
38,420
Comprehensive (loss) income to common
shareholders
$(374,834)
$162,527
$(280,724)
$164,696
Weighted average common shares-basic
251,842,414
135,952,339
224,905,226
113,373,853
Weighted average common shares-diluted
251,842,414
136,927,985
224,905,226
114,202,402
Net (loss) income per common share-basic
$(1.34)
$1.09
$(1.08)
$1.11
Net (loss) income per common share-diluted
$(1.34)
$1.08
$(1.08)
$1.11
See notes to the unaudited consolidated financial statements.
3
DYNEX CAPITAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
($s in thousands)
For the Three and Nine Months Ended September 30, 2026
Preferred Stock
Common Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Shareholders’
Equity
Shares
Amount
Shares
Amount
Balance as of
June 30, 2026
4,460,000
$107,843
237,414,259
$2,374
$3,760,123
$(128,074)
$(567,199)
$3,175,067
Stock issuance
4,800,000
115,750
20,969,455
210
267,835
—
—
383,795
Share-based
compensation, net of
amortization
—
—
83,576
1
(2,186)
—
—
(2,185)
Adjustments for tax
withholding on share-
based compensation
—
—
(36,545)
(1)
(471)
—
—
(472)
Stock issuance costs
—
—
—
—
(154)
—
—
(154)
Net loss
—
—
—
—
—
—
(335,536)
(335,536)
Dividends on
preferred stock
—
—
—
—
—
—
(2,769)
(2,769)
Dividends on common
stock
—
—
—
—
—
—
(129,162)
(129,162)
Other comprehensive
loss
—
—
—
—
—
(36,529)
—
(36,529)
Balance as of
September 30, 2026
9,260,000
$223,593
258,430,745
$2,584
$4,025,147
$(164,603)
$(1,034,666)
$3,052,055
Balance as of
December 31, 2025
4,460,000
$107,843
174,814,912
$1,748
$2,921,551
$(127,061)
$(441,937)
$2,462,144
Stock issuance
4,800,000
115,750
83,119,388
831
1,100,220
—
—
1,216,801
Share-based
compensation, net of
amortization
—
—
838,431
8
8,299
—
—
8,307
Adjustments for tax
withholding on share-
based compensation
—
—
(341,986)
(3)
(4,612)
—
—
(4,615)
Stock issuance costs
—
—
—
—
(311)
—
—
(311)
Net loss
—
—
—
—
—
—
(235,106)
(235,106)
Dividends on
preferred stock
—
—
—
—
—
—
(8,076)
(8,076)
Dividends on common
stock
—
—
—
—
—
—
(349,547)
(349,547)
Other comprehensive
loss
—
—
—
—
—
(37,542)
—
(37,542)
Balance as of
September 30, 2026
9,260,000
$223,593
258,430,745
$2,584
$4,025,147
$(164,603)
$(1,034,666)
$3,052,055
4
For the Three and Nine Months Ended September 30, 2025
Preferred Stock
Common Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Shareholders’
Equity
Shares
Amount
Shares
Amount
Balance as of
June 30, 2025
4,460,000
$107,843
125,358,375
$1,253
$2,268,143
$(149,035)
$(618,211)
$1,609,993
Stock issuance
—
—
20,312,637
203
253,936
—
—
254,139
Share-based
compensation, net of
amortization
—
—
77,284
1
2,800
—
—
2,801
Adjustments for tax
withholding on share-
based compensation
—
—
(34,160)
—
(441)
—
—
(441)
Stock issuance costs
—
—
—
—
(152)
—
—
(152)
Net income
—
—
—
—
—
—
150,388
150,388
Dividends on
preferred stock
—
—
—
—
—
—
(2,827)
(2,827)
Dividends on common
stock
—
—
—
—
—
—
(71,319)
(71,319)
Other comprehensive
income
—
—
—
—
—
14,966
—
14,966
Balance as of
September 30, 2025
4,460,000
$107,843
145,714,136
$1,457
$2,524,286
$(134,069)
$(541,969)
$1,957,548
Balance as of
December 31, 2024
4,460,000
$107,843
84,491,800
$845
$1,742,471
$(172,489)
$(493,734)
$1,184,936
Stock issuance
—
—
61,025,405
610
775,336
—
—
775,946
Share-based
compensation, net of
amortization
—
—
290,237
3
8,313
—
—
8,316
Adjustments for tax
withholding on share-
based compensation
—
—
(93,306)
(1)
(1,621)
—
—
(1,622)
Stock issuance costs
—
—
—
—
(213)
—
—
(213)
Net income
—
—
—
—
—
—
133,707
133,707
Dividends on
preferred stock
—
—
—
—
—
—
(7,431)
(7,431)
Dividends on common
stock
—
—
—
—
—
—
(174,511)
(174,511)
Other comprehensive
income
—
—
—
—
—
38,420
—
38,420
Balance as of
September 30, 2025
4,460,000
$107,843
145,714,136
$1,457
$2,524,286
$(134,069)
$(541,969)
$1,957,548
See notes to the unaudited consolidated financial statements.
5
DYNEX CAPITAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($s in thousands)
Nine Months Ended
 
September 30,
 
2026
2025
Operating activities:
 
 
Net (loss) income
$(235,106)
$133,707
Adjustments to reconcile net income (loss) to cash provided by operating activities:
 
Realized gain on sales of investments, net
(8,177)
—
Unrealized loss (gain) on investments, net
1,742,480
(286,118)
(Gain) loss on derivative instruments, net
(1,274,659)
186,875
Amortization of investment premiums, net
8,734
20,371
Other amortization and depreciation
1,587
1,556
Share-based compensation expense
8,307
8,316
Increase in accrued interest receivable
(45,973)
(23,090)
Increase in accrued interest payable
41,957
65,845
Change in other assets and liabilities, net
(3,727)
(945)
Net cash provided by operating activities
235,423
106,517
Investing activities:
 
Purchases of mortgage-backed securities
(14,383,146)
(6,130,208)
Principal payments received on mortgage-backed securities, fair value option
1,603,717
540,184
Principal payments received on mortgage-backed securities, available-for-sale
55,144
103,999
Proceeds from sales of mortgage-backed securities
910,594
—
Principal payments received on mortgage loans held for investment
85
216
Net receipts (payments) on derivative instruments
1,330,151
(233,678)
(Decrease) increase in cash collateral posted by counterparties
(8,373)
18,424
Net cash used in investing activities
(10,491,828)
(5,701,063)
Financing activities:
 
Borrowings under repurchase agreements
202,745,025
97,331,308
Repayments of repurchase agreement borrowings
(192,458,980)
(92,140,906)
Proceeds from issuance of preferred stock
115,750
—
Proceeds from issuance of common stock
1,101,051
775,946
Cash paid for stock issuance costs
(255)
(157)
Payments related to tax withholding for share-based compensation
(4,615)
(1,622)
Dividends paid
(344,214)
(167,755)
Net cash provided by financing activities
11,153,762
5,796,814
Net increase in cash, including cash posted to counterparties
897,357
202,268
Cash including cash collateral posted to counterparties at beginning of period
930,387
621,539
Cash including cash collateral posted to counterparties at end of period
$1,827,744
$823,807
Supplemental Disclosure of Cash Activity:
 
Cash paid for interest on repurchase agreements
$576,082
$219,768
6
Noncash Investing Activities:
Payable for investments pending settlement
$382,711
$263,179
See notes to the unaudited consolidated financial statements.
7
DYNEX CAPITAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Dynex Capital, Inc. (“Dynex” or the “Company”) is a real estate investment trust (“REIT”) structured to
deliver dividends to shareholders supported by long-term returns from investments in mortgage assets backed by
U.S. housing and commercial real estate. The Company’s common stock and preferred stock trade on the New York
Stock Exchange (“NYSE”). The Company’s common stock trades under the ticker symbol “DX,” and its 6.900%
Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”) and
9.375% Series D Fixed-Rate Cumulative Redeemable Preferred Stock (the “Series D Preferred Stock”) trade under
the ticker symbols “DXPRC” and “DXPRD,” respectively.
The Company is internally managed and primarily earns income from investing in residential and
commercial mortgage-backed securities (“RMBS” and “CMBS”, respectively), which are backed by residential and
commercial mortgage loans, and which are primarily Agency securities guaranteed by U.S. government-sponsored
enterprises (“GSEs”). The Company may also invest in other mortgage-related assets consistent with its objectives.
Dynex actively manages interest rate, prepayment, spread, liquidity, and counterparty risks. The Dynex approach
emphasizes risk management and disciplined capital allocation designed to preserve book value and support
dividends across market cycles.
Basis of Presentation
The accompanying unaudited consolidated financial statements of the Company and its subsidiaries
(together, “Dynex” or, as appropriate, the “Company”) have been prepared in accordance with U.S. generally
accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q
and Article 10, Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (the
“SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial
statements. In the opinion of management, all significant adjustments, consisting of normal recurring accruals,
considered necessary for a fair statement of results for the interim period have been included. All intercompany
accounts and transactions have been eliminated in consolidation. Operating results for the three and nine months
ended September 30, 2026 are not necessarily indicative of the results that may be expected for any other interim
periods or for the entire year ending December 31, 2026. The unaudited consolidated financial statements included
herein should be read in conjunction with the audited financial statements and notes thereto included in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”) filed with
the SEC. 
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during the
reported period. Actual results could differ from those estimates. The most significant estimate used by management
relates to the fair value measurement of its investments, including TBA securities accounted for as derivative
instruments, which is discussed further below within this note to the consolidated financial statements. The
Company believes the estimates and assumptions underlying the consolidated financial statements included herein
are reasonable and supportable based on the information available as of September 30, 2026.
Consolidation and Variable Interest Entities
The consolidated financial statements include the accounts of the Company and the accounts of its majority
owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
The Company did not consolidate any variable interest entities (“VIEs”) as of September 30, 2026. The
Company consolidates a VIE if the Company is determined to be the VIE’s primary beneficiary, which is defined as
the party that has both (i) the power to control the activities that most significantly impact the VIE’s financial
performance; and (ii) the right to receive benefits or absorb losses that could potentially be significant to the VIE.
The Company reconsiders its evaluation of whether to consolidate a VIE on an ongoing basis, based on changes in
8
DYNEX CAPITAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
the facts and circumstances pertaining to the VIE. Though the Company invests in Agency and non-Agency MBS
which are generally considered to be interests in VIEs, the Company does not consolidate these entities because it
does not meet the criteria to be deemed the primary beneficiary. The maximum exposure to loss for these VIEs is the
carrying value of the MBS.
Income Taxes
The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986 (the “Tax Code”)
and the corresponding provisions of state law. To qualify as a REIT, the Company must meet certain asset, income,
ownership, and distribution tests. To meet these requirements, the Company’s main source of income is interest
earned from obligations secured by mortgages on real property, and the Company must distribute at least 90% of its
annual REIT taxable income to shareholders. The Company’s income will generally not be subject to federal income
tax to the extent its income is distributed as dividends to shareholders.
The Company assesses its tax positions for all open tax years and determines whether the Company has any
material unrecognized liabilities and records these liabilities, if any, to the extent they are deemed more likely than
not to have been incurred.
Net Income (Loss) Per Common Share
The Company calculates basic net income (loss) per common share by dividing net income (loss) to
common shareholders for the period by weighted-average shares of common stock outstanding for that period.
Please see Note 2 for the calculation of the Company’s basic and diluted net income (loss) per common share for the
periods indicated.
The Company currently has restricted stock, service-based restricted stock units (“RSUs”) and
performance-based stock units (“PSUs”) issued and outstanding. Restricted stock awards issued under the
Company’s 2020 Stock and Incentive Plan (the “2020 Plan”) are considered participating securities and therefore are
included in the computation of basic net income per common share using the two-class method because holders of
unvested shares of restricted stock issued are eligible to receive non-forfeitable dividends. Holders of RSUs and
PSUs issued under the 2020 Plan as well as the Company’s 2025 Stock and Incentive Plan (the “2025 Plan”) accrue
forfeitable dividend equivalent rights ("DERs") over the period outstanding, receiving dividend payments only upon
the settlement date if the requisite service-based and performance-based conditions have been achieved, as
applicable. As such, RSUs and PSUs are excluded from the computation of basic net income per common share but
are included in the computation of diluted net income per common share using the treasury stock method unless the
effect is to reduce a net loss or increase the net income per common share (also known as “anti-dilutive”). Upon
vesting, restrictions on transfer expire on each share of restricted stock, RSU, and PSU, and each such share or unit
becomes one unrestricted share of common stock and is included in the computation of basic net income per
common share.
Because the Company’s Series C Preferred Stock and Series D Preferred Stock are redeemable at the
Company’s option for cash only and convertible into shares of common stock only upon a change of control of the
Company (and subject to other circumstances) as described in Articles IIIC and IIID of the Company’s Restated
Articles of Incorporation, as amended, the effect of those shares and their related dividends is excluded from the
calculation of diluted net income per common share for the periods presented.
Cash and Cash Equivalents
Cash and cash equivalents include unrestricted demand deposits at highly rated financial institutions and
highly liquid investments with original maturities of three months or less. The Company’s cash balances fluctuate
throughout the year and may exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits from time to
time. Although the Company bears risk on amounts in excess of those insured by the FDIC, the Company believes
9
DYNEX CAPITAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
the risk of loss is mitigated by the financial position, creditworthiness, and strength of the depository institutions in
which those deposits are held.
Cash Collateral Posted To/By Counterparties
The Company regularly pledges and receives amounts to cover margin requirements related to the
Company’s financing and derivative instruments. If the amount pledged to a counterparty exceeds the amount
received from a counterparty, the net amount is recorded as an asset within “cash collateral posted to
counterparties,” and if the amount received from a counterparty exceeds the amount pledged to a counterparty, the
net amount is recorded as a liability within “cash collateral posted by counterparties” on the Company’s
consolidated balance sheets.
The following table provides a reconciliation of “cash” and “cash posted to counterparties” reported on the
Company's consolidated balance sheet as of September 30, 2026 presented herein that sum to the total of the same
such amounts shown on the Company’s consolidated statement of cash flows for the nine months ended
September 30, 2026:
($s in thousands)
September 30, 2026
Cash and cash equivalents
$993,008
Cash collateral posted to counterparties
834,736
Total cash including cash posted to counterparties shown on consolidated statement of cash
flows
$1,827,744
Mortgage-Backed Securities 
The Company’s MBS are recorded at fair value on the Company’s consolidated balance sheet. Changes in
fair value of MBS purchased prior to January 1, 2021 are designated as available-for-sale (“AFS”) with changes in
fair value reported in other comprehensive income (“OCI”) as an unrealized gain (loss) until the security is sold or
matures. Effective January 1, 2021, the Company elected the fair value option (“FVO”) for all MBS purchased on or
after that date with changes in fair value reported in net income as “unrealized gain (loss) on investments, net” until
the security is sold or matures. Management elected the fair value option so that net income will reflect the changes
in fair value for its future purchases of MBS in a manner consistent with the presentation and timing of the changes
in fair value of its derivative instruments. Upon the sale of an MBS, any unrealized gain or loss within OCI or net
income is reclassified to “realized gain (loss) on sale of investments, net” within net income using the specific
identification method.
Interest Income, Premium Amortization, and Discount Accretion. Interest income on MBS is accrued based
on the outstanding principal balance (or notional balance in the case of IO securities) and the contractual
terms. Premiums or discounts associated with the purchase of MBS are amortized or accreted into interest income
over the life of such securities using the effective interest method, and adjustments to premium amortization and
discount accretion are made for actual cash payments received. On at least a quarterly basis, the Company reviews
and makes any necessary adjustments to its cash flows and updates the yield recognized on these assets.
Determination of MBS Fair Value. The Company estimates the fair value of the majority of its MBS based
upon prices obtained from an independent third-party pricing service. These prices are assessed for reasonableness
using additional third-party pricing services. Please refer to Note 6 for further discussion of MBS fair value
measurements.
Allowance for Credit Losses. On at least a quarterly basis, the Company evaluates any MBS designated as
AFS with a fair value less than its amortized cost for credit losses. If the difference between the present value of
cash flows expected to be collected on the MBS is less than its amortized cost, the difference is recorded as an
allowance for credit loss through net income up to and not exceeding the amount that the amortized cost exceeds
current fair value. Subsequent changes in credit loss estimates are recognized in earnings in the period in which they
occur. Because the majority of the Company’s investments are higher credit quality and most are guaranteed by a
GSE, the Company has not recorded an allowance for credit losses related to its MBS recorded on its consolidated
balance sheet.
10
DYNEX CAPITAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Interest accrued between payment dates on MBS is presented separately from the Company’s investment
portfolio as “accrued interest receivable” on its consolidated balance sheet. The Company does not estimate an
allowance for credit loss for its accrued interest receivable because the interest is generally received within 30 days
and amounts not received when due are written off against interest income.
Repurchase Agreements
The Company’s repurchase agreements are used to finance its purchases of MBS. The Company pledges its
securities as collateral to secure a loan, which is equal to a specified percentage of the estimated fair value of the
pledged collateral. The Company retains beneficial ownership of the pledged collateral. Pursuant to Accounting
Standards Codification (“ASC”) Topic 860, the Company accounts for repurchase agreements as collateralized
financing transactions, which are carried at their contractual amounts (cost), plus accrued interest. The interest rates
the Company pays for these borrowings are based on a spread added to the Secured Overnight Financing Rate
(“SOFR”). At the maturity of a repurchase agreement borrowing, the Company is required to repay the loan and
concurrently receives back its pledged collateral from the lender, or, with the consent of the lender, the Company
may renew the agreement at the then prevailing financing rate. A repurchase agreement lender may require the
Company to pledge additional collateral in the event of a decline in the fair value of the collateral
pledged. Repurchase agreement financing is recourse to the Company and the assets pledged. The repurchase
facilities available to the Company are uncommitted with no guarantee of renewal.
Derivative Instruments
Derivative instruments are carried at fair value, and all periodic interest benefits/costs and changes in the
fair value of derivative instruments, including gains and losses realized upon termination, maturity, or settlement,
are recorded in “gain (loss) on derivative instruments, net” on the Company’s consolidated statements of
comprehensive income (loss). Cash receipts and payments related to derivative instruments are classified in the
investing activities section of the consolidated statements of cash flows in accordance with the underlying nature or
purpose of the derivative transactions.
The Company’s U.S. Treasury futures contracts are centrally cleared through the Chicago Mercantile
Exchange (“CME”), which requires the Company to post initial margin as determined by the CME. Daily variation
margin is exchanged, typically in cash, for the changes in the fair value of the futures contracts, which is treated as
legal settlement of the exposure under the related futures contracts as opposed to a pledge of collateral. The effect of
these legal settlements reduces what would have otherwise been reported as the fair value of the futures contracts,
generally to $0. The margin requirement varies based on the market value of the open positions and the equity
retained in the account. Any margin excess or deficit outstanding is recorded as a receivable or payable within “due
from/to counterparties” as of the date of the Company’s consolidated balance sheets. The Company realizes gains or
losses on these contracts upon expiration at an amount equal to the difference between the current fair value of the
underlying asset and the contractual price of the futures contract.
The Company’s interest rate swaps are pay-fixed, which involve the receipt of variable-rate amounts based
on SOFR from a counterparty in exchange for the Company making fixed-rate payments over the life of the interest
rate swap without exchange of the underlying notional amount. The net periodic interest benefit (cost) is recorded in
the period earned (incurred) in “gain (loss) on derivative instruments, net”, but the net receipt (payment) of cash is
exchanged annually, typically on the anniversary of each agreement’s effective date. Similar to the Company’s U.S.
Treasury futures, interest rate swap agreements are centrally cleared through the CME with requirements to post
initial margin and to exchange daily variation margin amounts, which are treated as legal settlements of the
agreements. Any margin excess or deficit outstanding is recorded as a receivable or payable within “due from/to
counterparties” as of the date of the Company’s consolidated balance sheets.
The Company’s interest rate swaptions are SOFR-based and provide the Company the right, but not the
obligation, to enter into an interest rate swap at a predetermined notional amount with a stated term and pay and
receive rates in the future. These agreements are entered into directly with a counterparty (a “bilateral contract”)
with whom we may exchange margin collateral. Because these agreements are not centrally cleared, the Company
has exposure to counterparty risk. The Company records the premium it will pay for the swaption as a derivative
asset on its consolidated balance sheet and adjusts the balance for changes in fair value through “gain (loss) on
11
DYNEX CAPITAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
derivative instruments” until the swaption is exercised or the contract expires. If the swaption expires unexercised,
the realized loss is limited to the premium paid. If exercised, the realized gain or loss on the swaptions is equal to the
difference between the fair value of the underlying interest rate swap and the premium paid.
The Company may also use options on U.S. Treasury futures, which are initially recorded at the price of the
premium paid at inception. Subsequent changes in fair value are recorded in “gain (loss) on derivative instruments”
until the option is exercised or the contract expires. If the option expires unexercised, the realized loss is limited to
the premium paid at inception. If exercised, the realized gain or loss on the option is equal to the difference between
the fair value of the underlying U.S. Treasury future and the premium paid at inception. 
The Company purchases to-be-announced (“TBA”) securities as a means of investing in non-specified
fixed-rate Agency RMBS and may also periodically sell TBA securities as a means of economically hedging its
exposure to Agency RMBS. A TBA security is a forward contract (“TBA contract”) for the purchase (“long
position”) or sale (“short position”) of a non-specified Agency MBS at a predetermined price with certain principal
and interest terms and certain types of collateral, but the particular Agency securities to be delivered are not
identified until shortly before the settlement date. The Company accounts for long and short positions in Agency
RMBS TBAs as derivative instruments in accordance with ASC 815 when the Company cannot assert that it is
probable at inception and throughout the term of an individual TBA transaction that its settlement will result in
physical delivery of the underlying Agency RMBS or that the individual TBA transaction will settle in the shortest
time period possible.
Please refer to Note 5 for additional information regarding the Company’s derivative instruments as well as
Note 6 for information on how the fair value of these instruments is calculated.
Share-Based Compensation
The Company’s 2025 Plan reserves for issuance up to 12,000,000 common shares for eligible employees,
non-employee directors, consultants, and advisors to the Company to be granted in the form of stock options,
restricted stock, RSUs, stock appreciation rights, PSUs, and performance-based cash awards (collectively,
“awards”). Awards previously granted under the 2020 Plan will remain outstanding and valid in accordance with
their terms, but no new awards will be granted under the 2020 Plan. As of September 30, 2026, there were 9,455,437
common shares remaining available for issuance under the 2025 Plan.
The Company has issued restricted stock and RSUs that remain outstanding, which are treated as equity
awards and recorded at their fair value using the closing stock price on the grant date. Compensation expense is
generally recognized over a service period specified within each award with a corresponding credit to shareholders’
equity using the straight-line method until the vesting date specified within each award or until the employee
becomes eligible for retirement, if earlier than the vesting date. Compensation expense is recognized immediately
upon the grant date for equity awards granted to an employee who is retirement eligible.
The Company also has issued PSUs that remain outstanding, which are treated  as equity awards. The fair
value of PSUs that are subject to Company performance-based conditions is measured using the closing stock price
on the grant date multiplied by the number of units expected to vest based on an assessment of the probability of
achievement of the Company performance-based conditions as of the grant date. The grant date fair value is
recognized as expense using the straight-line method until the earlier of the vesting date specified within each award
or the date the employee becomes eligible for retirement. Adjustments are made, if necessary, based on any change
in probability of achievement which is re-assessed as of each reporting date and on at least a quarterly basis. The
Company does not have any PSUs outstanding with market-based performance conditions.
The Company does not estimate forfeitures for any of its share-based compensation awards but adjusts for
actual forfeitures in the periods in which they occur. Because RSUs and PSUs have forfeitable DERs, which are paid
in cash only upon settlement, any accrued DERs on forfeited units are reversed with a corresponding credit to
“Compensation and benefits” expense.
Please see Note 7 for additional information about the Company’s share-based compensation awards.
12
DYNEX CAPITAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Contingencies
From time to time, the Company may be involved in various claims and legal actions arising in the ordinary
course of its business. In the opinion of management, the Company did not have any material pending lawsuits,
claims, or other contingencies as of September 30, 2026 or December 31, 2025.
Recently Issued Accounting Pronouncements
The Company evaluates Accounting Standards Updates (“ASU”) issued by the Financial Accounting
Standards Board on at least a quarterly basis to evaluate applicability and significance of any impact on its financial
condition and results of operations. There are no new accounting pronouncements which are not yet effective that
are expected to have a significant impact on our consolidated financial statements upon adoption.
NOTE 2 – NET INCOME (LOSS) PER COMMON SHARE
Please refer to Note 1 for information regarding the Company’s treatment of its preferred stock and stock
awards in the calculation of its basic and diluted net income or loss per common share and to Note 7 for information
regarding the Company’s stock award activity for the periods presented. The following table presents the
computations of basic and diluted net income or loss per common share for the periods indicated:
Three Months Ended
Nine Months Ended
September 30,
September 30,
($s in thousands)
2026
2025
2026
2025
Weighted average number of common shares
outstanding - basic
251,842,414
135,952,339
224,905,226
113,373,853
Incremental common shares-unvested RSUs
—
274,356
—
226,232
Incremental common shares-unvested PSUs
—
701,290
—
602,317
Weighted average number of common shares
outstanding - diluted
251,842,414
136,927,985
224,905,226
114,202,402
Net (loss) income to common shareholders
$(338,305)
$147,561
$(243,182)
$126,276
Net (loss) income per common share-basic
$(1.34)
$1.09
$(1.08)
$1.11
Net (loss) income per common share-diluted
$(1.34)
$1.08
$(1.08)
$1.11
The calculation of diluted net loss per common share for the three and nine months ended September 30,
2026 excludes unvested RSUs and PSUs of 1,110,881 and 1,041,255, respectively, which would have been anti-
dilutive for those periods.
13
DYNEX CAPITAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 – MORTGAGE-BACKED SECURITIES
 
The following tables provide details on the Company’s MBS by investment type as of the dates indicated:
September 30, 2026
($s in thousands)
Agency RMBS
Agency CMBS
CMBS IO (1)
Total
Measured at fair value through net income:
Amortized cost
$25,395,940
$1,463,036
$26,756
$26,885,732
Gross unrealized gain
1,032
—
2
1,034
Gross unrealized loss
(1,524,574)
(74,724)
(1,618)
(1,600,916)
Fair value through net income
$23,872,398
$1,388,312
$25,140
$25,285,850
Measured at fair value through OCI:
Amortized cost
$703,607
$43,738
$44,015
$791,360
Gross unrealized gain
—
—
2,117
2,117
Gross unrealized loss
(161,530)
(3,016)
(2,174)
(166,720)
Fair value through OCI
$542,077
$40,722
$43,958
$626,757
Total
$24,414,475
$1,429,034
$69,098
$25,912,607
December 31, 2025
Agency RMBS
Agency CMBS
CMBS IO (1)
Total
Measured at fair value through net income:
Amortized cost
$14,233,682
$1,165,674
$30,680
$15,430,036
Gross unrealized gain
236,304
8,293
20
244,617
Gross unrealized loss
(99,899)
(995)
(1,147)
(102,041)
Fair value through net income
$14,370,087
$1,172,972
$29,553
$15,572,612
Measured at fair value through OCI:
Amortized cost
$757,127
$47,433
$56,877
$861,437
Gross unrealized gain
—
25
2,620
2,645
Gross unrealized loss
(125,854)
(2,087)
(1,765)
(129,706)
Fair value through OCI
$631,273
$45,371
$57,732
$734,376
Total
$15,001,360
$1,218,343
$87,285
$16,306,988
(1) The Company held a notional balance of CMBS IO of $4.8 billion as of September 30, 2026, and $6.0 billion as
of December 31, 2025.
The majority of the Company’s MBS are pledged as collateral for the Company’s repurchase agreements,
which are disclosed in Note 4. Actual maturities of MBS are affected by the contractual lives of the underlying
mortgage collateral, scheduled payments, and unscheduled prepayments of principal, and the payment priority
structure of the security; therefore, actual maturities are generally shorter than the securities' stated contractual
maturities.
14
DYNEX CAPITAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table presents information regarding unrealized gains and losses on investments reported
within net income (loss) on the Company’s consolidated statements of comprehensive income (loss) for the periods
indicated:
Three Months Ended
Nine Months Ended
September 30,
September 30,
($s in thousands)
2026
2025
2026
2025
Agency RMBS
$(1,397,829)
$139,842
$(1,659,947)
$278,204
Agency CMBS
(66,833)
2,410
(82,022)
6,785
CMBS IO
(389)
223
(489)
1,148
Other investments
4
(6)
(22)
(19)
Unrealized (loss) gain on investments, net
$(1,465,047)
$142,469
$(1,742,480)
$286,118
The following table presents information regarding realized gains and losses on sales of MBS reported in
the Company’s consolidated statements of comprehensive income (loss) for the periods indicated:
Three Months Ended
Nine Months Ended
September 30,
September 30,
($s in thousands)
2026
2025
2026
2025
Realized gain on sales of MBS - FVO
$—
$—
$8,721
$—
Realized loss on sale of MBS - FVO
(544)
—
(544)
—
Total realized (loss) gain on sales of
investments, net
$(544)
$—
$8,177
$—
The following table presents certain information for MBS designated as AFS that were in an unrealized loss
position as of the dates indicated:
 
September 30, 2026
December 31, 2025
($s in thousands)
Fair
Value
Gross
Unrealized
Losses
# of
Securities
Fair
Value
Gross
Unrealized
Losses
# of
Securities
Continuous unrealized loss
position for less than 12 months:
 
 
 
 
Agency MBS
$4,443
$(111)
4
$730
$(1)
2
Non-Agency MBS
834
(5)
1
208
(22)
3
Continuous unrealized loss
position for 12 months or
longer:
Agency MBS
$618,036
$(166,604)
50
$721,536
$(129,658)
56
Non-Agency MBS
—
—
—
752
(25)
3
The unrealized loss positions on the Company’s MBS designated as AFS as of September 30, 2026 and
December 31, 2025 were the result of higher interest rates and wider spreads to U.S. Treasuries compared to at the
time of purchase. The unrealized loss positions are not credit related; therefore, the Company did not record an
allowance for credit losses as of September 30, 2026 or December 31, 2025. The Company has the ability and intent
to hold any MBS with an unrealized loss until the recovery in its value. This assessment is based on the amount of
the unrealized loss and significance of the related investment as well as the Company’s leverage and liquidity
position. In addition, for its non-Agency MBS, which are not guaranteed by a GSE, the Company reviews the credit
15
DYNEX CAPITAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
ratings, the credit characteristics of the mortgage loans collateralizing these securities, and the estimated future cash
flows including projected collateral losses.
NOTE 4 – REPURCHASE AGREEMENTS
The Company’s repurchase agreements outstanding as of September 30, 2026 and December 31, 2025 are
summarized in the following tables:
 
September 30, 2026
December 31, 2025
Collateral Type
Balance
Weighted
Average
Rate
Fair Value
of
Collateral
Pledged (1)
Balance
Weighted
Average
Rate
Fair Value
of
Collateral
Pledged (1)
($s in thousands)
Agency RMBS
$22,756,369
3.91%
$23,782,830
$12,857,827
4.09%
$13,496,489
Agency CMBS
1,370,224
3.92%
1,390,727
967,024
4.07%
1,012,532
Agency CMBS IO
63,683
4.24%
65,784
77,057
4.41%
81,913
Non-Agency CMBS IO
—
—%
—
2,323
4.72%
2,536
Total
$24,190,276
3.91%
$25,239,341
$13,904,231
4.10%
$14,593,470
(1)  Amounts disclosed for fair value of collateral pledged include amounts pledged to cover margin calls, which may differ in
collateral type from the initial collateral type pledged.
The Company’s equity at risk did not exceed 10% with any single counterparty as of September 30, 2026.
The following table provides information on the remaining term to maturity and original term to maturity
for the Company’s repurchase agreements as of the dates indicated: 
September 30, 2026
December 31, 2025
Remaining Term to
Maturity
Balance
Weighted
Average
Rate
WAVG
Original
Term to
Maturity
Balance
Weighted
Average
Rate
WAVG
Original
Term to
Maturity
($s in thousands)
Less than 30 days
$10,662,438
3.88%
79
$9,146,566
4.11%
75
30 to 90 days
12,563,547
3.93%
88
4,757,665
4.07%
94
91 to 180 days
964,291
4.00%
179
—
—%
—
Total
$24,190,276
3.91%
87
$13,904,231
4.10%
81
The Company’s accrued interest payable related to its repurchase agreement borrowings increased to $137
million as of September 30, 2026 from $95 million as of December 31, 2025.
The Company’s counterparties, as set forth in the master repurchase agreement with each counterparty,
require the Company to comply with various customary operating and financial covenants, including, but not limited
to, minimum net worth, maximum declines in net worth in a given period, and maximum leverage requirements as
well as maintaining the Company’s REIT status. In addition, some of the agreements contain cross default features,
whereby default under an agreement with one lender simultaneously causes default under agreements with other
lenders. To the extent that the Company fails to comply with the covenants contained in these financing agreements
or is otherwise found to be in default under the terms of such agreements, the counterparty has the right to accelerate
amounts due under the master repurchase agreement. The Company believes it was in full compliance with all
covenants in master repurchase agreements under which there were amounts outstanding as of September 30, 2026.
The Company's repurchase agreements are subject to underlying agreements with master netting or similar
arrangements, which provide for the right of set off in the event of default or in the event of bankruptcy of either
16
DYNEX CAPITAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
party to the transactions. The Company reports its repurchase agreements to these arrangements on a gross basis.
The following table presents information regarding the Company's repurchase agreements as if the Company had
presented them on a net basis as of September 30, 2026 and December 31, 2025:
($s in thousands)
Gross
Amount of
Recognized
Liabilities
Gross
Amount
Offset in
the
Balance
Sheet
Net Amount
of Liabilities
Presented in
the Balance
Sheet
Gross Amount Not Offset
in the Balance Sheet (1)
Net
Amount
Financial
Instruments
Posted as
Collateral
Cash Posted
as Collateral
September 30, 2026:
Repurchase agreements
$24,190,276
$—
$24,190,276
$(24,190,276)
$—
$—
December 31, 2025:
Repurchase agreements
$13,904,231
$—
$13,904,231
$(13,904,231)
$—
$—
(1)  Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to
and not exceeding the net amount of the repurchase agreement liability presented in the balance sheet. The fair value of the
total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the
consolidated balance sheets for the total fair value of financial instruments pledged as collateral for derivatives and
repurchase agreements, which is shown parenthetically, and the total cash pledged or received as collateral, which is
disclosed as “cash collateral posted to/by counterparties.”
Please see Note 5 for information related to the Company’s derivatives, which are also subject to
underlying agreements with master netting or similar arrangements.
NOTE 5 – DERIVATIVES
Types and Uses of Derivative Instruments
Interest Rate Derivatives. The Company frequently changes the type of derivative instruments it uses to
mitigate the impact of changing interest rates on its repurchase agreement financing costs and the fair value of its
investments. Please refer to Note 1 for descriptions of these instruments and how the Company accounts for them.
TBA Transactions. The Company purchases TBA securities as a means of investing in non-specified fixed-
rate Agency RMBS and may also periodically sell TBA securities as a means of economically hedging its exposure
to Agency RMBS. Please refer to Note 1 for more information about these securities.
The table below provides detail of the Company’s gains and losses by type of derivative instrument for the
periods indicated:
Three Months Ended
Nine Months Ended
September 30,
September 30,
Type of Derivative Instrument
2026
2025
2026
2025
($s in thousands)
U.S. Treasury futures
$377,310
$(20,423)
$429,186
$(58,451)
Interest rate swaps
790,517
(16,055)
1,012,587
(204,985)
Interest rate swaptions
(2,581)
(1,279)
(7,190)
(286)
Options on U.S. Treasury futures
743
(508)
(1,914)
(508)
TBA securities
(124,902)
27,571
(158,010)
77,355
Gain (loss) on derivative instruments, net
$1,041,087
$(10,694)
$1,274,659
$(186,875)
The table below provides the carrying amount by type of derivative instrument comprising the Company’s
derivative assets and liabilities on its consolidated balance sheets as of the dates indicated:
17
DYNEX CAPITAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Type of Derivative Instrument
Balance Sheet Location
Purpose
September
30, 2026
December 31,
2025
($s in thousands)
Options on U.S. Treasury
futures
Derivative assets
Economic hedging
$—
$2,657
TBA securities
Derivative assets
Investing
—
7,841
Total derivatives assets
$—
$10,498
Interest rate swaptions
Derivative liabilities
Economic hedging
$11,236
$4,045
TBA securities
Derivative liabilities
Investing
78,100
785
Total derivatives liabilities
$89,336
$4,830
The Company’s U.S. Treasury futures and interest rate swaps have a carrying value of $0 on the
Company’s consolidated balance sheets because the daily margin exchanged for these instruments is considered
legal settlement of the derivatives as opposed to a pledge of collateral. The Company’s U.S. Treasury futures,
excluding the recognition of variation margin settlements, were in a net asset position of $240 million as of
September 30, 2026 and a net asset position of $22 million as of December 31, 2025, and its interest rate swaps were
in a net asset position of $947 million as of September 30, 2026 and net liability position of $(46) million as of
December 31, 2025. The amount of cash posted by the Company to cover required initial margin for its U.S.
Treasury futures and its interest rate swaps was $737 million as of September 30, 2026 and $392 million as of
December 31, 2025, which was recorded within “cash collateral posted to counterparties.” The Company had a
margin receivable of $52 million as of September 30, 2026 and $17 million as of December 31, 2025 recorded
within “due from counterparties.”
The table below presents information regarding the Company’s short positions in SOFR-based interest rate
swaps held as of the dates indicated:
September 30, 2026
December 31, 2025
Pay Fixed Interest Rate Swaps -
Years to Maturity
Notional
Amount
Weighted
Average
Pay Fixed Rate
Notional
Amount
Weighted
Average
Pay Fixed Rate
($s in thousands)
1-3 years
$1,925,000
3.63%
$—
—%
3-5 years
4,080,000
3.63%
2,450,000
3.42%
5-7 years
4,820,000
3.85%
4,070,000
3.66%
7-10 years
5,845,000
3.93%
3,090,000
3.87%
10-15 years
142,000
4.79%
75,000
3.77%
15-20 years
785,000
4.39%
—
—%
$17,597,000
3.83%
$9,685,000
3.66%
The table below presents information regarding the short positions in U.S. Treasury futures held as of the
dates indicated:
18
DYNEX CAPITAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
U.S. Treasury Futures
September 30, 2026
December 31, 2025
($s in thousands)
5-year U.S. Treasury futures
$(650,000)
$(30,000)
10-year U.S. Treasury futures
(2,893,700)
(1,475,000)
30-year U.S. Treasury futures
(3,132,800)
(1,153,500)
$(6,676,500)
$(2,658,500)
The table below presents information regarding the long positions in SOFR-based interest rate swaptions
and options on U.S. Treasury futures held by the Company as of the dates indicated:
Option
Underlying Financial
Instrument
($s in thousands)
Cost (1)
Fair Value
Carrying
Value (1)
Notional
Amount
Average Fixed
Receive Rate
Type of
Instrument
As of September 30, 2026:
Interest rate swaptions
$11,725
$489
$(11,236)
$750,000
3.25%
5 year SOFR-
based swap
Options on U.S.
Treasury futures
—
—
—
—
n/a
10-year U.S.
Treasury
future
As of December 31, 2025:
Interest rate swaptions
$11,725
$7,680
$(4,045)
$750,000
3.25%
5 year SOFR-
based swap
Options on U.S.
Treasury futures
3,981
2,657
2,657
500,000
n/a
10-year U.S.
Treasury
future
(1)The Company pays the premium for its interest rate swaptions at the end of the option period, so the carrying value on the
Company's consolidated balance sheets is fair value, net of the payable for the unpaid premium as of the periods indicated.
The Company pays the premium for its options on U.S. Treasury futures at inception, so the carrying value is equal to the
fair value as of the periods indicated.
The following table summarizes information about the notional amounts of the Company's long positions in
TBA securities as of the dates indicated:
TBA securities
September 30, 2026
December 31, 2025
($s in thousands)
Implied market value (1)
$2,417,275
$3,121,122
Implied cost basis (2)
2,495,375
3,114,066
Net carrying value (3)
$(78,100)
$7,056
(1) Implied market value represents the estimated fair value of the underlying Agency MBS as of the dates indicated.
(2) Implied cost basis represents the forward price to be paid for the underlying Agency MBS as of the dates indicated.
(3) Net carrying value represents the difference between the implied market value and the implied cost basis of the Company’s
TBA securities as of the dates indicated. The total shown is the net amount included on the consolidated balance sheets as
derivative assets of $— and derivative liabilities of $78,100 as of September 30, 2026 and $7,841 and $785, respectively, as
of December 31, 2025.
Volume of Activity
The table below summarizes changes in the Company’s derivative instruments for the nine months ended
September 30, 2026:
19
DYNEX CAPITAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Type of Derivative Instrument
Beginning
Notional Amount
Additions
Settlements,
Terminations,
or Pair-Offs
Ending
Notional Amount
($s in thousands)
Short positions:
U.S. Treasury futures
$(2,658,500)
$(30,585,500)
$26,567,500
$(6,676,500)
Pay-fixed interest rate swaps
9,685,000
8,892,000
(980,000)
17,597,000
Long positions:
Interest rate swaptions
750,000
—
—
750,000
Options on U.S. Treasury futures
500,000
887,600
(1,387,600)
—
TBA securities
3,189,000
33,500,000
(34,126,000)
2,563,000
Offsetting
The Company's derivatives are subject to underlying agreements with master netting or similar
arrangements, which provide for the right of set off in the event of default or in the event of bankruptcy of either
party to the transactions. The Company reports its derivative assets and liabilities subject to these arrangements on a
gross basis. Please see Note 4 for information related to the Company’s repurchase agreements, which are also
subject to underlying agreements with master netting or similar arrangements. The following tables present
information regarding those derivative assets and liabilities subject to such arrangements as if the Company had
presented them on a net basis as of September 30, 2026 and December 31, 2025:
Offsetting of Assets
($s in thousands)
Gross
Amount of
Recognized
Assets
Gross
Amount
Offset in the
Balance
Sheet
Net Amount
of Assets
Presented in
the Balance
Sheet
Gross Amount Not Offset
in the Balance Sheet (1)
Net
Amount
Financial
Instruments
Received as
Collateral
Cash
Received as
Collateral
September 30, 2026
Options on U.S.
Treasury futures
$—
$—
$—
$—
$—
$—
TBA securities
—
—
—
—
—
—
Derivative assets
$—
$—
$—
$—
$—
$—
December 31, 2025
Options on U.S.
Treasury futures
$2,657
$—
$2,657
$—
$—
$2,657
TBA securities
7,841
—
7,841
(689)
(6,333)
819
Derivative assets
$10,498
$—
$10,498
$(689)
$(6,333)
$3,476
20
DYNEX CAPITAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Offsetting of Liabilities
($s in thousands)
Gross
Amount of
Recognized
Liabilities
Gross
Amount
Offset in the
Balance
Sheet
Net Amount
of Liabilities
Presented in
the Balance
Sheet
Gross Amount Not Offset
in the Balance Sheet (1)
Net
Amount
Financial
Instruments
Posted as
Collateral
Cash Posted
as Collateral
September 30, 2026
Interest rate swaptions
$11,236
$—
$11,236
$—
$—
$11,236
TBA securities
78,100
—
78,100
—
(75,391)
2,709
Derivative liabilities
$89,336
$—
$89,336
$—
$(75,391)
$13,945
December 31, 2025
Interest rate swaptions
$4,045
$—
$4,045
$—
$—
$4,045
TBA securities
785
—
785
(689)
(96)
—
Derivative liabilities
$4,830
$—
$4,830
$(689)
$(96)
$4,045
(1)Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up
to and not exceeding the net amount of the derivative asset or liability presented in the balance sheet. The fair value of the
total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the
consolidated balance sheets for the total fair value of financial instruments pledged as collateral for derivatives and
repurchase agreements, which is shown parenthetically, and the total cash pledged or received as collateral which is
disclosed as “cash collateral posted to/by counterparties.”
NOTE 6 – FAIR VALUE OF FINANCIAL INSTRUMENTS 
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. Fair value is based on the assumptions
market participants would use when pricing an asset or liability and also considers all aspects of nonperformance
risk, including the entity’s own credit standing, when measuring fair value of a liability. ASC Topic 820 established
a valuation hierarchy of three levels as follows:
•Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities as of
the measurement date.
•Level 2 – Inputs include quoted prices in active markets for similar assets or liabilities; quoted prices in
inactive markets for identical or similar assets or liabilities; or inputs either directly observable or
indirectly observable through correlation with market data at the measurement date and for the duration
of the instrument’s anticipated life.
•Level 3 – Unobservable inputs are supported by little or no market activity. The unobservable inputs
represent management’s best estimate of how market participants would price the asset or liability at
the measurement date. Consideration is given to the risk inherent in the valuation technique and the
risk inherent in the inputs to the model.
The following table presents the Company’s financial instruments that are measured at fair value on the
Company’s consolidated balance sheet by their valuation hierarchy levels as of the dates indicated: 
21
DYNEX CAPITAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
($s in
thousands)
September 30, 2026
December 31, 2025
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Assets:
 
 
 
MBS
$25,912,607
$—
$25,912,607
$—
$16,306,988
$—
$16,306,988
$—
TBA
securities (1)
—
—
—
—
7,841
—
7,841
—
Option on
U.S.
Treasury
futures
—
—
—
—
2,657
2,657
—
—
Mortgage
loans (2)
510
—
—
510
618
—
—
618
Total
$25,913,117
$—
$25,912,607
$510
$16,318,104
$2,657
$16,314,829
$618
Liabilities:
TBA
securities (1)
$78,100
$—
$78,100
$—
$785
$—
$785
$—
Interest rate
swaptions (3)
11,236
—
11,236
—
4,045
—
4,045
—
Total
$89,336
$—
$89,336
$—
$4,830
$—
$4,830
$—
(1)TBA securities are reflected on the consolidated balance sheet as derivative assets or liabilities at their implied fair value,
net of implied cost basis. Please refer to Note 5 for additional information.
(2)Mortgage loans are included on the consolidated balance sheets as a component of other assets.
(3)Interest rate swaptions are reflected on the consolidated balance sheet as derivative assets or liabilities at their fair value,
net of cost. Please refer to Note 5 for additional information.
The fair value measurements for the Company’s TBA securities and its MBS are considered Level 2
because there are substantially similar securities actively trading or for which there has been recent trading activity
in their respective markets. Fair value for Agency MBS and TBA securities is based on prices received from an
independent third-party pricing service. In valuing a security, the pricing service primarily uses a market approach,
which uses observable prices and other relevant information that is generated by market transactions of identical or
similar securities, but may use an income approach, which uses valuation techniques such as discounted cash flow
modeling. Examples of the observable inputs and assumptions used in the valuation techniques include market
interest rates, credit spreads, and projected prepayment speeds, among other things. The Company reviews the prices
it receives from the pricing service for reasonableness using other third-party pricing services. If the fair value of a
security is not available from a third-party pricing service, the Company may estimate the fair value of the security
through a variety of methods using observable market data.
The Company's mortgage loans held for investment are single-family mortgage loans, which were
originated or purchased by the Company prior to 2000, and for which the Company has elected the fair value option.
The fair value measurements for these mortgage loans are considered Level 3 because there has been no recent
trading activity of similar instruments upon which their fair value can be measured. The fair value for these Level 3
assets is measured by discounting the estimated future cash flows derived from cash flow models using certain
inputs such as the security’s credit rating, coupon rate, estimated prepayment speeds, expected weighted average
life, collateral composition, and expected credit losses as well as certain other relevant information. The Company
used a constant prepayment rate assumption of 10%, default rate of 2%, loss severity of 20%, and a discount rate of
10% in measuring the fair value of its Level 3 assets as of September 30, 2026 and as of December 31, 2025.
The Company’s U.S. Treasury futures contracts are valued based on exchange pricing and are classified
accordingly as Level 1 measurements. Interest rate swaps are valued using the daily settlement price, or fair value,
determined by the clearing exchange based on a pricing model that references observable market inputs, including
current benchmark rates and the forward yield curve, and thus their fair values are considered Level 2
22
DYNEX CAPITAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
measurements. The carrying value of the U.S. Treasury futures contracts and interest rate swaps on the Company’s
consolidated balance sheets is $0 because the instruments require daily margin exchanges, which are considered by
the settlement agent to represent legal settlement of the contracts on a daily basis. Please see Note 1 and Note 5 for
additional information regarding the fair value of the Company’s derivative instruments.
The fair value measurement of interest rate swaptions is considered Level 2 because it is based on the fair
value of the underlying interest rate swap and time remaining until its expiration and is carried on the balance sheet
net of any deferred premium to be paid upon exercise or expiration. The fair value measurement of options on U.S.
Treasury futures is considered Level 1 because they are valued based on closing exchange prices on these contracts.
Options on U.S. Treasury futures are initially recorded on the balance sheet at the contract price paid and
subsequently adjusted for changes in fair value until exercise or expiration.
The Company’s repurchase agreements are reported at cost, which approximates fair value. Given their
short-term nature (less than one year) and the interest rates on outstanding amounts, which largely correspond to
prevailing rates observed in the repurchase agreement market, their inputs are considered Level 2.
NOTE 7 – SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION
Preferred Stock. The Company's articles of incorporation authorize the issuance of up to 50,000,000 shares
of preferred stock. During the three months ended September 30, 2026, the Company’s Board of Directors
designated 5,520,000 shares for issuance of 9.375% Series D Fixed-Rate Cumulative Redeemable Preferred Stock
and subsequently sold 4,800,000 shares through a public offering for which it received proceeds of $116 million, net
of $4 million in broker commissions and other expenses. The Series D Preferred Stock has no stated maturity, is not
subject to any sinking fund or mandatory redemption, and will remain outstanding indefinitely unless redeemed,
repurchased, or converted into common stock pursuant to the terms of the Series D Preferred Stock. On or after
October 15, 2031, the Series D Preferred Stock may be redeemed at any time and from time to time at the
Company's option at a cash redemption price of $25.00 per share plus any accumulated and unpaid dividends. The
Series D Preferred Stock will pay a quarterly cumulative cash dividend of 9.375% of its $25.00 liquidation value per
share beginning on January 15, 2027.
The Company’s Board of Directors has designated 6,600,000 shares of the Company’s preferred stock for
issuance as Series C Preferred Stock, of which the Company has 4,460,000 of such shares outstanding as of
September 30, 2026. The Series C Preferred Stock has no stated maturity, is not subject to any sinking fund or
mandatory redemption, and will remain outstanding indefinitely unless redeemed, repurchased, or converted into
common stock pursuant to the terms of the Series C Preferred Stock. As of April 15, 2025, the Series C Preferred
Stock may be redeemed at any time and from time to time at the Company's option at a cash redemption price of
$25.00 per share plus any accumulated and unpaid dividends. In addition, the Series C Preferred Stock now pays a
quarterly cumulative cash dividend at a percentage of its $25.00 liquidation value per share equal to 3-month term
SOFR plus the statutorily prescribed tenor spread adjustment of 0.26161% in addition to the spread pursuant to the
terms of the Series C Preferred Stock of 5.461% for a total spread of 5.723%. The Company paid a quarterly
dividend of $0.60793 per share of Series C Preferred Stock on October 15, 2026 to shareholders of record as of
October 1, 2026.
Common Stock. During the nine months ended September 30, 2026, the Company issued 83,119,388 shares
of its common stock through its at-the-market (“ATM”) program at an aggregate value of $1.1 billion, net of broker
commissions and fees. The Company declared monthly dividends on its common stock totaling $0.51 for the three
months ended September 30, 2026. The Company’s timing, frequency, and amount of dividends declared on its
common stock are determined by its Board of Directors. When declaring dividends, the Board of Directors considers
the Company’s taxable income, management’s view on long-term returns, the REIT distribution requirements of the
Tax Code, and maintaining compliance with dividend requirements of the Series C Preferred Stock and Series D
Preferred Stock, along with other factors that the Board of Directors may deem relevant from time to time.
23
DYNEX CAPITAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Share-Based Compensation. The following table presents a rollforward of share-based awards for the
periods indicated:
Nine Months Ended
September 30,
 
2026
2025
Type of Award
Shares
Weighted
Average
Grant Date
Fair Value
Per Share
Shares
Weighted
Average
Grant Date
Fair Value
Per Share
Restricted stock:
Awards outstanding, beginning of period
25,105
$12.34
93,595
$12.78
Granted
—
—
—
—
Vested
(16,809)
12.26
(66,860)
12.96
Awards outstanding, end of period
8,296
$12.50
26,735
$12.34
Target RSUs: (1)
Awards outstanding, beginning of period
738,223
$12.79
463,070
$12.64
Granted
569,942
13.59
399,096
12.78
Vested
(436,053)
12.63
(227,483)
12.69
Awards outstanding, end of period
872,112
$13.40
634,683
$12.71
Target PSUs: (2)
Awards outstanding, beginning of period
693,414
$12.26
482,409
$12.32
Granted
590,231
13.68
371,282
12.05
Vested
(129,870)
12.26
—
—
Forfeited
(60,129)
13.68
—
—
Awards outstanding, end of period
1,093,646
$12.95
853,691
$12.20
(1)The number of RSUs shown represent the target number of awards. Actual number of shares that will potentially settle may
range from 0% if the recipient’s service-based vesting condition is not met to 100% if the service-based vesting condition is
met.
(2)The number of PSUs shown represent the target number of awards. Actual number of shares that will potentially settle may
range from 0% to 200% based on the achievement of the performance goals defined in each grant award.
Restricted stock granted to employees generally vests in equal installments over a period of 3 years. RSUs
generally vest in equal installments over a period of 3 years if granted to employees and one year if granted to a non-
employee director. PSUs cliff vest based on performance results measured over a period of 3 years. The Company
expects 89% of the remaining target PSUs outstanding as of September 30, 2026 will be settled on their vesting
dates compared to 134% as of June 30, 2026. As a result, the Company recorded a net credit of $(2) million  to
share-based compensation expense for the three months ended September 30, 2026. Total share-based compensation
expense for the three months ended September 30, 2025 was $3 million. Total share-based compensation expense
was $8 million  for the nine months ended September 30, 2026 and September 30, 2025. The following table
discloses the Company’s remaining compensation expense related to stock awards it has granted as of September 30,
2026, which will be amortized over the period disclosed:
24
DYNEX CAPITAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 2026
($s in thousands)
Remaining
Compensation Cost
WAVG Period of
Recognition
Restricted stock
$42
0.4 years
RSUs
5,948
2.0 years
PSUs
3,361
1.9 years
Total
$9,351
1.9 years
The following table discloses the dividends payable to the Company’s shareholders for common and
preferred stock as well as to its employees and directors for DERs related to its outstanding RSUs and PSUs as of
the dates indicated:
Dividends Payable
September 30, 2026
December 31, 2025
($s in thousands)
RSU DERs
$1,628
$1,578
PSU DERs
2,741
3,423
Accrued DERs
4,369
5,001
Common stock dividends
$43,850
$29,877
Preferred stock dividends
2,361
2,293
Accrued dividends
46,211
32,170
Total dividends payable
$50,580
$37,171
NOTE 8 - SEGMENT REPORTING
The Company’s operations consist of one reportable segment which involves investing in MBS and funding
these investments with repurchase agreements and equity. Because the Company’s investment portfolio and
financings are subject to market risks, primarily interest rate risk, management seeks to offset a portion of its market
value exposure and financing costs through its interest rate derivative instruments (“hedging portfolio”). The
Company’s investment and hedging portfolios are managed together.
The Company’s revenue is derived from its investment portfolio, which currently consists of primarily
Agency RMBS. The Company’s chief operating decision maker (“CODM”) is its Co-CEO and President. Segment
performance is measured by and resource allocation decisions are based on “comprehensive income (loss) to
common shareholders.” The segment’s significant expense categories as shown on the Company’s consolidated
statement of comprehensive income are regularly provided to the CODM for review and are also used to make
resource allocation decisions. Segment assets are total assets as shown on the Company’s consolidated balance
sheet.
25
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
EXECUTIVE OVERVIEW
During the third quarter of 2026, financial markets experienced a significant repricing of interest rate risk,
as U.S. Treasury and swap yields rose sharply, and both realized and implied interest rate volatility increased. The
movement was global, reflecting heavy government borrowing and fiscal concerns, as well as substantial demand
for capital tied to investment in artificial intelligence. Amid a resilient U.S. economy and persistent inflation, the
Federal Reserve raised the midpoint of its target range for the U.S. Federal Funds Rate (“Fed Funds rate”) by 25
basis points, from 3.625% to 3.875%, in September. Market participants priced for the possibility of additional rate
increases and an extended period of elevated policy rates. The 10-year U.S. Treasury yield rose above 5% in late
September, while conflict in the Middle East and disruptions to global oil and gas flows kept energy prices elevated
and added to inflation concerns.
Spreads on Agency MBS widened 10 to 20 basis points relative to U.S. Treasury and swap rates,
particularly late in the third quarter, and specified pools underperformed TBA securities. As the rise in interest rates
accelerated, speculative investors, including hedge funds, reduced risk across global rate markets and in Agency
MBS, and hedgers of mortgage servicing rights were also net sellers. Money managers remained net buyers as
spreads widened, and there were indications that the GSEs resumed purchases of Agency MBS late in the quarter.
We believe the widening reflected investor positioning and other technical factors arising from macroeconomic
volatility rather than a deterioration in mortgage fundamentals. New mortgage origination supply remained muted,
as elevated mortgage rates continued to constrain refinancing and home sales. Funding markets remained orderly
and were well supported by ample system liquidity, and liquidity across the mortgage and repurchase agreement
markets continued to function effectively. Although financing costs rose with the Fed Funds rate, repurchase
agreement financing remained readily available through the September quarter-end, and haircuts did not increase.
Our hedging activities help insulate the Company's book value against rising interest rates, but do not protect the
Company from widening spreads.
Against this backdrop, we believe Agency MBS continues to offer attractive long-term return potential
relative to other high-quality fixed-income assets, particularly given the supply dynamics and the sector's strong
liquidity profile. With nearly all Agency MBS trading at a discount to par, refinancing incentives are minimal and
the convexity of the Agency MBS index is positive, which limits the variability of expected cash flows and
durations. At the same time, fund flows into bond funds and annuities remain a steady source of demand, supported
by the long-term, demographic-led need for income. We view current spread levels as attractive and remain attentive
to the evolving supply-and-demand balance, including bond fund flows, the pace and composition of GSE
purchases, potential changes in GSE policy, the trajectory of the Federal Reserve's balance sheet, especially its
holdings of Agency MBS, and the level of banking-system reserves. We continue to monitor monetary policy,
inflation trends, fiscal policy, Federal Housing Finance Agency policies, housing market activity, geopolitical
developments, and energy prices, as well as operational and cybersecurity risks, as we assess their potential impact
on interest rates, spreads, prepayment behavior, and financing conditions. We remain focused on disciplined
portfolio construction, security selection, active management of interest rate risk, liquidity management, and
balance-sheet resilience as market conditions continue to evolve.
The charts below show the range of U.S. Treasury and SOFR-based swap rates for the three months ended
September 30, 2026 and information regarding market spreads as of and for the periods indicated:
26
1099511627777
1099511627812
27
Market Spreads as of:
Change in
Spreads
3Q26
Change in
Spreads
YTD
Investment Type: (1)
September 30,
2026
June 30,
2026
March 31, 2026
December 31,
2025
Agency RMBS:
2.0% coupon
75
72
73
70
3
5
2.5% coupon
73
72
76
73
1
—
4.0% coupon
61
52
52
50
9
11
4.5% coupon
60
46
53
45
14
15
5.0% coupon
62
48
56
46
14
16
5.5% coupon
62
51
63
51
11
11
6.0% coupon
68
47
64
54
21
14
Agency CMBS(2)
76
75
84
82
1
(6)
(1)Option adjusted spreads (“OAS”) are based on Company estimates using third-party models and market data. OAS shown
for prior periods may differ from previous disclosures because the Company regularly updates the third-party model used.
(2)Data is sourced from J.P. Morgan and represents the spread to swap rate on newly issued Agency securities collateralized
by multifamily properties.
Summary of Third Quarter 2026 Financial Performance
Total economic return of (11.5)% for the third quarter of 2026 reflected a decline in book value per
common share to $10.91, inclusive of dividends declared of $0.51 per common share. Book value declined primarily
due to wider Agency MBS spreads, which drove a net decrease in the fair value of our investment portfolio. While
gains on our interest rate hedges mitigated a portion of the impact of higher interest rates and broader market
volatility, spread widening remained the primary driver of pressure on asset valuations and book value during the
quarter.
We grew our capital base by $384 million during the third quarter through a combination of common and
preferred equity raises, using the net proceeds to add $3.2 billion of Agency MBS. As a result, our total investment
portfolio grew approximately 3% to $28.3 billion as of September 30, 2026 compared to $27.6 billion as of June 30,
2026. Leverage, including the implied cost of TBAs, increased to 9.0 times shareholders' equity, primarily due to
lower book value related to the investment portfolio's performance.
Interest income increased from the prior quarter, driven by the continued capital deployment into Agency
MBS. The average balance of interest-earning assets grew 10% during the third quarter of 2026. Operating expenses
decreased by approximately $4 million quarter over quarter due to lower stock-based compensation.
The following table summarizes the changes in our financial position during the three months ended
September 30, 2026:
28
($s in thousands except per share data)
Net Change in
Fair Value
Components of
Comprehensive
Income
Common Book
Value
Rollforward
Per
Common
Share
Balance as of June 30, 2026 (1)
$3,063,567
$12.90
Net interest income
$101,562
Periodic interest from interest rate swaps
82
G & A and other operating expenses
(12,594)
Preferred stock dividends
(2,769)
Changes in fair value:
MBS and other
$(1,502,120)
TBAs
(124,902)
U.S. Treasury futures
377,310
Options on U.S. Treasury futures
743
Interest rate swaps
790,435
Interest rate swaptions
(2,581)
Total net change in fair value
(461,115)
Comprehensive loss to common
shareholders
(374,834)
Capital transactions:
Net proceeds from stock issuance (2)
260,984
Common dividends declared
(129,162)
Balance as of September 30, 2026 (3)
$2,820,555
$10.91
(1)Amount represents total shareholders' equity less the aggregate liquidation preference of the Company's Series C preferred
stock of $111.5 million as of June 30, 2026.
(2)Amount includes net proceeds of approximately $268 million from common stock issuances through the ATM program, $(4)
million of stock issuance costs related to the Series D preferred stock offering, and $(3) million from reversal of previously
accrued share-based compensation expenses and forfeitures.
(3)Amount represents total shareholders' equity less the aggregate liquidation preference of the Company's Series C and Series
D preferred stocks of $231.5 million as of September 30, 2026.
29
FINANCIAL CONDITION
Investment Portfolio
Our investment portfolio, including TBAs, as of September 30, 2026, has increased $8.9 billion, or 46%,
since December 31, 2025. We added over $13 billion, net of sales, of primarily 30-year fixed rate Agency RMBS
and have reduced our TBA securities by a net notional of $0.6 billion during the nine months ended September 30,
2026. The following charts compare the composition of our investment portfolio as of the dates indicated:
                                                                     
1099511627806
1099511627777
The following charts compare the percentage distribution by coupon of our 30-year fixed rate Agency
RMBS investments, including TBAs, as of the dates indicated:
1099511627857
1099511627885
30
The following tables compare our 30-year fixed-rate Agency RMBS investments, including TBA dollar roll
positions, by coupon as of the dates indicated:
September 30, 2026
Agency
RMBS by
Coupon
Par/
Notional
Amortized
Cost/
Implied Cost
Basis (3)(5)
Fair
Value (4)(5)
Weighted Average
Loan Age
(in
months)(6)
3 Month
CPR (6)(7)
Estimated
Duration (8)
Market
Yield (9)
($s in thousands)
2.0%
$1,622,450
$1,439,531
$1,226,468
73
4.9%
7.12
5.84%
2.5%
837,916
801,131
664,386
72
6.5%
6.84
5.86%
4.0%
1,580,885
1,483,955
1,391,677
53
7.9%
6.44
5.93%
4.5% (1)
2,508,989
2,426,164
2,273,108
32
8.1%
6.21
6.03%
5.0%
8,021,402
7,973,568
7,468,785
18
6.1%
6.03
6.08%
5.5%
10,057,691
10,162,745
9,647,047
16
6.8%
5.39
6.16%
6.0%
1,769,036
1,812,455
1,743,004
12
8.9%
4.75
6.25%
TBA 4.0%
6,000
5,386
5,224
n/a
n/a
7.16
5.83%
TBA 4.5%
241,000
225,881
216,166
n/a
n/a
6.95
5.93%
TBA 5.0%
1,073,000
1,021,997
992,031
n/a
n/a
6.42
6.08%
TBA 5.5%
515,000
508,784
490,698
n/a
n/a
5.58
6.22%
TBA 6.0%
728,000
733,328
713,156
n/a
n/a
4.69
6.34%
Total
$28,961,369
$28,594,925
$26,831,750
25
6.8%
5.83
6.09%
December 31, 2025
Agency
RMBS by
Coupon
Par/
Notional
Amortized
Cost/
Implied Cost
Basis (3)(5)
Fair
Value (4)(5)
Weighted Average
Loan Age
(in
months)(6)
3 Month
CPR (6)(7)
Estimated
Duration (8)
Market
Yield (9)
($s in thousands)
2.0%
$603,965
$613,475
$497,097
63
5.2%
7.42
4.68%
2.5%
516,325
535,039
444,904
64
5.1%
7.02
4.67%
4.0%
293,073
293,432
281,889
57
6.5%
5.89
4.63%
4.5% (1)
1,911,130
1,853,757
1,881,304
33
5.8%
5.46
4.74%
5.0%
3,974,655
3,913,622
3,997,537
21
5.9%
4.62
4.91%
5.5%
6,325,638
6,361,758
6,465,769
13
8.1%
3.39
5.10%
6.0%
1,381,567
1,419,727
1,432,860
9
8.2%
2.28
5.14%
TBA 4.0%
1,162,000
1,101,441
1,102,764
n/a
n/a
6.29
4.76%
TBA
4.5%(2)
1,447,000
1,425,945
1,430,136
n/a
n/a
4.58
4.64%
TBA 5.0%
176,000
175,287
175,670
n/a
n/a
4.51
5.03%
TBA 5.5%
183,000
185,175
185,631
n/a
n/a
3.28
5.23%
TBA 6.0%
221,000
226,218
226,922
n/a
n/a
1.99
5.24%
Total
$18,195,353
$18,104,876
$18,122,483
21
7.0%
4.29
4.94%
(1)Includes a par value of $8.6 million and $9 million of 4.5% 15-year Agency RMBS as of September 30, 2026 and December
31, 2025, respectively.
(2)Includes a notional amount of $690 million of 4.5% 15-year TBA securities as of December 31, 2025.
(3)Implied cost basis of TBAs represents the forward price to be paid for the underlying Agency MBS.
31
(4)Fair value of TBAs is the implied market value of the underlying Agency security as of the end of the period.
(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.
(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.
(7)Constant prepayment rate (“CPR”) represents the 3-month CPR of Agency RMBS held as of date indicated.
(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.
(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.
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 will add Agency CMBS from
time to time whenever we believe the risk-adjusted return profile aligns with our investment 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.
We have purchased approximately $299 million of Agency CMBS during the nine months ended
September 30, 2026. The weighted average life remaining based on contractual cash flows for our Agency CMBS
was 5.9 years as of September 30, 2026 compared to 5.5 years as of December 31, 2025. The weighted average
market yield projected using cash flows generated off the forward curve and based on market prices assuming zero
volatility was 5.54% as of September 30, 2026 compared to 4.25% as of December 31, 2025.
Repurchase Agreements
Our repurchase agreement borrowings increased to $24 billion as of September 30, 2026 from $14 billion
as of December 31, 2025. These borrowings were used to partially finance our purchases of Agency MBS during the
nine months ended September 30, 2026. 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.
Derivative Assets and Liabilities
Please refer to Note 5 of the Notes to the Consolidated Financial Statements for details on our interest rate
hedging instruments as well as “Liquidity and Capital Resources” within Item 2 and “Quantitative and Qualitative
Disclosures about Market Risk” within Item 3 of this Quarterly Report on Form 10-Q.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2026 Compared to the Three Months Ended June 30, 2026
The following table summarizes the results of operations for the periods discussed in this section:
Three Months Ended
$s in thousands
September 30,
2026
June 30, 2026
Net interest income
$101,562
$93,783
Realized gain on sales of investments, net
(544)
—
Unrealized loss on investments, net
(1,465,047)
(25,622)
Gain on derivative instruments, net
1,041,087
128,845
Operating expenses, net
(12,594)
(16,213)
32
Preferred stock dividends
(2,769)
(2,650)
Net (loss) income to common shareholders
(338,305)
178,143
Other comprehensive loss
(36,529)
(865)
Comprehensive (loss) income to common shareholders
$(374,834)
$177,278
Net Interest Income
Net interest income and net interest spread for the three months ended September 30, 2026, increased
compared to the three months ended June 30, 2026, due to the growth in our MBS portfolio. Interest expense
increased due to a higher average balance of repurchase agreement borrowings used to finance our purchases of
MBS. Net periodic interest earned on interest rate swaps, a component of economic net interest income, decreased
by approximately $0.5 million for the three months ended September 30, 2026, compared to the three months ended
June 30, 2026, representing a decline of 1 basis point as a percentage of average repurchase agreement borrowings.
The following table presents information about our interest-earning assets and interest-bearing liabilities
and their performance for the periods indicated:
Three Months Ended
September 30, 2026
June 30, 2026
($s in thousands)
Interest
Income/
Expense
Average
Balance (1)(2)
Effective
Yield/
Financing
Cost (3)(4)
Interest
Income/
Expense
Average
Balance (1)(2)
Effective
Yield/
Financing
Cost (3)(4)
Agency RMBS
$311,244
$24,761,556
5.03%
$280,970
$22,581,412
4.98%
Agency CMBS/
CMBS IO (5)
16,958
1,456,850
4.55%
15,270
1,333,481
4.52%
Other investments
5
431
3.71%
6
445
3.89%
Subtotal
$328,207
$26,218,837
5.00%
$296,246
$23,915,338
4.95%
Cash equivalents
4,290
6,505
Total interest income
$332,497
$302,751
Repurchase agreement
financing
(230,935)
23,626,939
(3.82)%
(208,968)
21,803,737
(3.79)%
Net interest income
(expense)/spread
$101,562
1.18%
$93,783
1.16%
Net periodic interest (6)
82
—%
542
0.01%
Economic net interest
income (expense)/
spread (6)
$101,644
1.18%
$94,325
1.17%
  *Table Note: Data may not foot due to rounding.
(1)Average balance for assets is calculated as a simple average of the daily amortized cost and excludes securities pending
settlement if applicable.
(2)Average balance for liabilities is calculated as a simple average of the daily borrowings outstanding during the period.
(3)Effective yield is calculated by dividing interest income by the average balance of asset type outstanding during the
reporting period. Unscheduled adjustments to premium/discount amortization/accretion, such as for prepayment
compensation, are not annualized in this calculation.
(4)Financing cost is calculated by dividing annualized interest expense by the total average balance of borrowings outstanding
during the period with an assumption of 360 days in a year.
(5)Includes Agency and non-Agency CMBS IO with an amortized cost and fair value comprising less than 0.1% of our
investment portfolio and interest income from CMBS IO comprised less than 1% of our interest income for the periods
indicated.
(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
33
section below “Non-GAAP Financial Measures” for more information.
Gains (Losses) on Investments and Derivative Instruments
For the three months ended September 30, 2026, losses on our investments exceeded gains on our interest
rate hedges by approximately $(461) million due primarily to widening of mortgage spreads to U.S. Treasuries.
Losses in fair value of our Agency MBS related to higher interest rates were mostly mitigated by gains on our
interest rate hedges. 
For the three months ended June 30, 2026, gains on our hedges exceeded losses on our investments by
approximately $102 million. Although higher interest rates negatively impacted the fair value of our Agency MBS,
our hedging portfolio effectively mitigated much of this impact. Additionally, the fair value of our Agency MBS
benefited from tightening of mortgage spreads to U.S. Treasuries in the second quarter.
The following tables provide details on realized and unrealized gains and losses within our investment and
interest rate hedging portfolios for the periods indicated:
Three Months Ended
September 30, 2026
($s in thousands)
Realized Gain
(Loss)
Recognized in
Net Income
Unrealized
Gain (Loss)
Recognized in
Net Income
Unrealized
Gain (Loss)
Recognized in
OCI
Total Change in
Fair Value
Investment portfolio:
Agency RMBS
$(544)
$(1,397,829)
$(34,948)
$(1,433,321)
Agency CMBS
—
(66,833)
(929)
(67,762)
CMBS IO
—
(389)
(652)
(1,041)
Other investments
—
4
—
4
Subtotal
(544)
(1,465,047)
(36,529)
(1,502,120)
TBA securities (1)
(38,823)
(86,079)
—
(124,902)
Net loss on investments
$(39,367)
$(1,551,126)
$(36,529)
$(1,627,022)
Interest rate hedging portfolio:
U.S. Treasury futures
$99,035
$278,275
$—
$377,310
Interest rate swaps (2)
7,692
782,825
—
790,517
Interest rate swaptions
—
(2,581)
—
(2,581)
Options on U.S. Treasury futures
743
—
—
743
Net gain on interest rate hedges
$107,470
$1,058,519
$—
$1,165,989
Total net gain (loss)
$68,103
$(492,607)
$(36,529)
$(461,033)
34
Three Months Ended
June 30, 2026
($s in thousands)
Realized Gain
(Loss)
Recognized in
Net Income
Unrealized
Gain (Loss)
Recognized in
Net Income
Unrealized
Gain (Loss)
Recognized in
OCI
Total Change in
Fair Value
Investment portfolio:
Agency RMBS
$—
$(17,336)
$(505)
$(17,841)
Agency CMBS
—
(8,208)
(24)
(8,232)
CMBS IO
—
(54)
(336)
(390)
Other investments
—
(24)
—
(24)
Subtotal
—
(25,622)
(865)
(26,487)
TBA securities (1)
(36,253)
17,024
—
(19,229)
Net loss on investments
$(36,253)
$(8,598)
$(865)
$(45,716)
Interest rate hedging portfolio:
U.S. Treasury futures
$112,723
$(96,155)
$—
$16,568
Interest rate swaps (2)
606
135,175
—
135,781
Interest rate swaptions
—
(4,275)
—
(4,275)
Options on U.S. Treasury futures
—
—
—
—
Net gain on interest rate hedges
$113,329
$34,745
$—
$148,074
Total net gain (loss)
$77,076
$26,147
$(865)
$102,358
(1)Realized and unrealized gains (losses) on TBA securities are recorded within “gain (loss) on derivative instruments, net” on
the Company’s consolidated statements of comprehensive income.
(2)Realized gain for interest rate swaps includes net periodic interest benefit of $0.1 million and $0.5 million for the three
months ended September 30, 2026 and June 30, 2026, respectively.
We use TBA dollar roll transactions to maintain exposure to Agency RMBS while extending settlement to
a later date. In these transactions, we close out an existing forward TBA position and simultaneously enter into a
substantially identical forward position for a later settlement month. Because the later settling TBA is typically
priced below the current month TBA, this creates a price difference commonly referred to as drop income (loss).
Drop income (loss) represents the economic equivalent of net interest income, net of implied financing cost, on the
underlying Agency RMBS between trade date and settlement date. We include drop income (loss) as a component of
the realized gain (loss) on TBA dollar roll transactions within gain (loss) on derivative instruments, net. We account
for these TBA positions as derivative instruments because physical delivery is not probable or the transactions are
not expected to settle in the shortest period possible.
The following table presents information regarding the performance of our TBA dollar roll transactions for
the periods indicated:
Three Months Ended
September 30, 2026
June 30, 2026
($s in thousands)
Implied Net
Interest
Income (1)
Average
Balance
Implied Net
Spread
Implied Net
Interest
Income (1)
Average
Balance
Implied Net
Spread
TBAs
$8,394
$2,393,855
1.37%
$5,221
$1,879,681
1.10%
(1)Implied net interest income (expense) is also referred to as “drop income (loss)” and represents a portion of the total
realized gain (loss) from our TBA dollar roll transactions recorded within “gain (loss) on derivative instruments, net.”
35
Operating Expenses
Operating expenses for the three months ended September 30, 2026 decreased $4 million compared to the
three months ended June 30, 2026 due primarily to lower estimates for share-based compensation expenses.
Annualized general and administrative expenses for the third quarter of 2026 as a percentage of total equity was
1.4%  compared to 1.9% for the second quarter of 2026.
Nine Months Ended September 30, 2026 Compared to the Nine Months Ended September 30, 2025
Net Interest Income
Net interest income and net interest spread increased for the nine months ended September 30, 2026,
compared to the nine months ended September 30, 2025 due to the purchases of higher yielding Agency MBS over
the past year. Though interest expense increased due to an increase in repurchase agreement borrowings used to
finance these purchases, the average financing rate we paid declined 66 basis points over the comparative periods
primarily as a result of the Federal Reserve’s lower targeted Federal Funds rate range. Net periodic interest included
in our economic net interest income for the nine months ended September 30, 2026, decreased $35 million, or 58
basis points as a percentage of average repurchase agreement borrowings, compared to the nine months ended
September 30, 2025. The decline is due to a larger short position in SOFR-based interest rate swaps with a higher
weighted average pay fixed rate during the nine months ended September 30, 2026 compared to the nine months
ended September 30, 2025.
The following table presents information about our interest-earning assets and interest-bearing liabilities
and their performance for the periods indicated:
Nine Months Ended
September 30,
2026
2025
($s in thousands)
Interest
Income/
Expense
Average
Balance (1)(2)
Effective
Yield/
Financing
Cost (3)(4)
Interest
Income/
Expense
Average
Balance (1)(2)
Effective
Yield/
Financing
Cost (3)(4)
Agency RMBS
$828,563
$22,111,217
5.00%
$329,734
9,188,117
4.78%
Agency CMBS
41,287
1,272,762
4.28%
8,059
256,516
4.14%
CMBS IO (5)
5,253
78,706
8.82%
6,685
105,316
8.48%
Other investments
17
445
3.84%
42
926
4.37%
Subtotal
$875,120
$23,463,130
4.97%
$344,520
$9,550,875
4.81%
Cash equivalents
17,517
11,964
Total interest income
$892,637
$356,484
Repurchase agreement
financing
(618,039)
21,319,444
(3.82)%
(285,612)
8,407,509
(4.48)%
Net interest income/
spread
$274,598
1.15%
$70,872
0.33%
Net periodic interest (6)
2,322
0.01%
37,465
0.59%
Economic net interest
income/spread (6)
$276,920
1.16%
$108,337
0.92%
  *Table Note: Data may not foot due to rounding.
(1)Average balance for assets is calculated as a simple average of the daily amortized cost and excludes securities pending
settlement if applicable.
(2)Average balance for liabilities is calculated as a simple average of the daily borrowings outstanding during the period.
(3)Effective yield is calculated by dividing interest income by the average balance of asset type outstanding during the
36
reporting period. Unscheduled adjustments to premium/discount amortization/accretion, such as for prepayment
compensation, are not annualized in this calculation.
(4)Financing cost is calculated by dividing annualized interest expense by the total average balance of borrowings outstanding
during the period with an assumption of 360 days in a year.
(5)Includes Agency and non-Agency issued securities.
(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.
Gains (Losses) on Investments and Derivative Instruments
For the nine months ended September 30, 2026, losses on our investment portfolio exceeded gains on our
hedges by approximately $(497) million. The fair value of our investment portfolio declined $(1.9) billion during the
nine months ended September 30, 2026 primarily due to the widening of mortgage spreads to U.S. Treasuries.
Although higher U.S. Treasury rates negatively impacted the fair value of our Agency MBS, our interest rate hedges
effectively mitigated much of this impact. Higher U.S. Treasury rates and SOFR-based swap rates resulted in net
gains on our interest rate hedges of $1.4 billion for the nine months ended September 30, 2026.
During the nine months ended September 30, 2025, gains on our investment portfolio exceeded losses on
our hedges by approximately $138 million. The fair value of our investment portfolio increased during the nine
months ended September 30, 2025 primarily due to the tightening of mortgage spreads to U.S. Treasuries relative to
wider spreads at the time we purchased investments. Treasury rates and SOFR-based swap rates declined overall
during the nine months ended September 30, 2025, which resulted in losses on our hedging portfolio.
The following tables provide details on realized and unrealized gains and losses within our investment and
interest rate hedging portfolios for the periods indicated:
Nine Months Ended
September 30, 2026
($s in thousands)*
Realized Gain
(Loss)
Recognized in
Net Income
Unrealized
Gain (Loss)
Recognized in
Net Income
Unrealized
Gain (Loss)
Recognized in
OCI
Total Change in
Fair Value
Investment portfolio:
Agency RMBS
$7,917
$(1,659,947)
$(35,676)
$(1,687,706)
Agency CMBS
260
(82,022)
(954)
(82,716)
CMBS IO
—
(489)
(912)
(1,401)
Other investments
—
(22)
—
(22)
Subtotal
8,177
(1,742,480)
(37,542)
(1,771,845)
TBA securities (1)
(72,854)
(85,157)
—
(158,011)
Net loss on investments
$(64,677)
$(1,827,637)
$(37,542)
$(1,929,856)
Interest rate hedging portfolio:
U.S. Treasury futures
$210,660
$218,526
$—
$429,186
Interest rate swaps (2)
9,629
1,002,959
—
1,012,587
Interest rate swaptions
—
(7,190)
—
(7,190)
Options on U.S. Treasury futures
(3,239)
1,325
—
(1,914)
Net gain on interest rate hedges
$217,050
$1,215,620
$—
$1,432,669
Total net gain (loss)
$152,373
$(612,017)
$(37,542)
$(497,187)
*Table note: Data may not foot due to rounding.
37
Nine Months Ended
September 30, 2025
($s in thousands)*
Realized Gain
(Loss)
Recognized in
Net Income
Unrealized
Gain (Loss)
Recognized in
Net Income
Unrealized
Gain (Loss)
Recognized in
OCI
Total Change in
Fair Value
Investment portfolio:
Agency RMBS
$—
$278,204
$35,313
$313,517
Agency CMBS
—
6,785
2,165
8,950
CMBS IO
—
1,148
942
2,090
Other investments
—
(19)
—
(19)
Subtotal
—
286,118
38,420
324,538
TBA securities (1)
52,422
24,932
—
77,354
Net gain on investments
$52,422
$311,050
$38,420
$401,892
Interest rate hedging portfolio:
U.S. Treasury futures
$(29,129)
$(29,322)
$—
$(58,451)
Interest rate swaps
37,465
(242,450)
—
(204,985)
Interest rate swaptions
—
(286)
—
(286)
Options on U.S. Treasury futures
—
(508)
—
(508)
Net gain (loss) on interest rate
hedges
$8,336
$(272,566)
$—
$(264,230)
Total net gain
$60,758
$38,484
$38,420
$137,662
*Table note: Data may not foot due to rounding.
(1)Realized and unrealized gains (losses) on TBA securities are recorded within “gain (loss) on derivative instruments, net” on
the Company’s consolidated statements of comprehensive income.
(2)Realized gain for interest rate swaps includes net periodic interest benefit of $2.3 million for the nine months ended
September 30, 2026, and $37.5 million for the nine months ended September 30, 2025.
The following table presents information regarding the performance of our TBA dollar roll transactions for
the periods indicated:
Nine Months Ended
September 30,
2026
2025
Implied Net
Interest
Income (1)
Average
Balance
Implied Net
Spread
Implied Net
Interest
Income (1)
Average
Balance
Implied Net
Spread
TBAs
$18,378
$2,091,903
1.16%
$13,091
$2,496,558
0.69%
(1)Implied net interest income (expense) is also referred to as “drop income (loss)” and represents a portion of the total
realized gain (loss) from our TBA dollar roll transactions recorded within “gain (loss) on derivative instruments, net.”
Operating Expenses
Operating expenses increased 38% to $50 million for the nine months ended September 30, 2026 compared
to $36 million for the nine months ended September 30, 2025. In addition to higher salary and recruiting expenses
resulting from our increase in employees, operating expenses also increased due to accelerated vesting of equity
grants and other severance expenses associated with the departure of the Company's former chief financial officer.
38
Additionally, other general and administrative expenses related to technology infrastructure have increased as a
result of the growth in our investment portfolio. Annualized general and administrative expenses for the nine months
ended September 30, 2026 as a percentage of total equity was 2.0% compared to 2.4% for the nine months ended
September 30, 2025.
Non-GAAP Financial Measures
In addition to reporting the Company’s financial results determined in accordance with GAAP,
management of the Company believes that investors’ understanding of our operating results may be enhanced by the
use of non-GAAP financial measures, which are used by management internally, along with GAAP measures, to
evaluate our performance. Our non-GAAP financial measures include earnings available for distribution (“EAD”) to
common shareholders (including per common share) and economic net interest income and the related metric
economic net interest spread. Management believes these non-GAAP financial measures may be useful to investors
because they are viewed by management as additional measures of the investment portfolio’s return.
Drop income generated by TBA dollar roll positions, which is included in "gain (loss) on derivative
instruments, net" on the Company's consolidated statements of comprehensive income, is included in EAD because
management views drop income as the economic equivalent of net interest income (interest income less implied
financing cost) on the underlying Agency security from trade date to settlement date. However, drop income does
not represent the total realized gain/loss from the Company’s investments in TBA securities.
Management also includes net periodic interest from its interest rate swaps, which is included in "gain
(loss) on derivative instruments, net," in EAD and economic net interest income because interest rate swaps are used
by the Company to economically hedge the impact of changing interest rates on its borrowing costs from repurchase
agreements, and including net periodic interest from interest rate swaps is a helpful indicator of the Company’s total
financing cost in addition to GAAP interest expense.
Non-GAAP financial measures are not a substitute for GAAP measures and may be different from non-
GAAP measures used by other companies. In addition, other companies, including in our industry, may calculate
comparable measures differently, which reduces their usefulness as comparative measures. Investors should not rely
on any single financial measure when evaluating our business. These non-GAAP measures should be considered as
supplemental in nature and not as a substitute for our operating results in accordance with GAAP.
Reconciliations of each non-GAAP measure to certain GAAP financial measures are provided below.
39
Three Months Ended
Reconciliations of GAAP to Non-GAAP Financial Measures:
September 30, 2026
June 30, 2026
($s in thousands except per share data)
Comprehensive (loss) income to common shareholders (GAAP)
$(374,834)
$177,278
Less:
Change in fair value of investments (1)
1,502,120
26,487
Change in fair value of derivative instruments, net (2)
(1,032,611)
(123,082)
EAD to common shareholders (non-GAAP)
$94,675
$80,683
Average common shares outstanding
251,842,414
222,220,145
EAD per common share (non-GAAP)
$0.38
$0.36
Net interest income (GAAP)
$101,562
$93,783
Net periodic interest earned from interest rate swaps
82
542
Economic net interest income (non-GAAP)
101,644
94,325
TBA drop income (3)
8,394
5,221
Total operating expenses
(12,594)
(16,213)
Preferred stock dividends
(2,769)
(2,650)
EAD to common shareholders (non-GAAP)
$94,675
$80,683
Net interest spread (GAAP)
1.18%
1.16%
Net periodic interest from interest rate swaps as a percentage of
average repurchase borrowings
—%
0.01%
Economic net interest spread (non-GAAP)
1.18%
1.17%
(1)Amount includes realized and unrealized gains and losses due to changes in the fair value of the Company’s MBS.
(2)The following table reconciles “change in fair value of derivative instruments, net” to the “gain (loss) on derivative
instruments, net” shown on the consolidated statements of comprehensive income.
Three Months Ended
($s in thousands)
September 30, 2026
June 30, 2026
Gain on derivative instruments, net
$1,041,087
128,845
Less:
TBA drop income
(8,394)
(5,221)
Net periodic interest earned from interest rate swaps
(82)
(542)
Change in fair value of derivative instruments, net
$1,032,611
$123,082
(3)TBA drop income is calculated by multiplying the notional amount of the TBA dollar roll positions by the difference in price
between two TBA securities with the same terms but different settlement dates.
LIQUIDITY AND CAPITAL RESOURCES
 Our primary sources of liquidity include borrowings under repurchase arrangements and monthly principal
and interest payments we receive on our investments. Additional sources may include proceeds from the sale of
investments, equity offerings, and net payments received from counterparties for derivative instruments. We use our
liquidity to purchase investments, to pay amounts due on our repurchase agreement borrowings, and to pay our
operating expenses and dividends on our common and preferred stock. We also use our liquidity to meet margin
requirements for our repurchase agreements and derivative transactions, including TBA contracts, under the terms of
the related agreements. We may also periodically use liquidity to repurchase shares of the Company’s stock.
40
During the nine months ended September 30, 2026, we issued 83,119,388 shares of common stock through
our ATM program, resulting in proceeds of $1.1 billion, net of broker commissions and fees. We deployed these
proceeds primarily into purchases of Agency RMBS. During the third quarter of 2026, we also issued 4,800,000
shares of 9.375% Series D Fixed-Rate Cumulative Redeemable Preferred Stock through a public offering for which
we received proceeds of $116 million, net of $4 million in broker commissions and other expenses. We intend to use
the net proceeds from this offering to finance the acquisition of Agency MBS and other investment securities and for
general corporate purposes.
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 unpledged 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, 2026, was approximately $1.3 billion, which consisted of
unrestricted cash of $1.0 billion and unpledged Agency MBS with a fair value of $0.3 billion. Our liquidity was $1.4
billion as of December 31, 2025.
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 geopolitical conflicts and
uncertainty 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.
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.
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 9.0 times shareholders’ equity as of September 30, 2026. 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.
Repurchase Agreements
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.
The amount outstanding for our repurchase agreement borrowings will typically fluctuate in any given
period as it is dependent upon several factors, but particularly the extent to which we are active in buying and selling
securities, including the volume of activity in TBA dollar roll transactions versus buying specified pools. The
following table presents information regarding the balances of our repurchase agreement borrowings as of and for
41
the periods indicated:
Repurchase Agreements
($s in thousands)
Balance
Outstanding As of
Quarter End
Average Balance
Outstanding For
the Quarter Ended
Maximum Balance
Outstanding
During the Quarter
Ended
September 30, 2026
$24,190,276
$23,626,939
$24,351,613
June 30, 2026
22,644,742
21,803,737
22,645,366
March 31, 2026
21,045,457
18,470,997
21,045,636
December 31, 2025
13,904,231
12,469,902
13,904,304
September 30, 2025
11,753,522
10,468,568
11,754,581
June 30, 2025
8,600,143
7,871,627
8,600,487
March 31, 2025
7,234,723
6,842,485
7,234,723
December 31, 2024
6,563,120
6,431,743
6,568,805
For our repurchase agreement borrowings, we are required to post and maintain margin to the lender (i.e.,
collateral in excess of the repurchase agreement borrowing) in order to support the amount of the financing. This
excess collateral is often referred to as a “haircut” and is intended to provide the lender protection against
fluctuations in the fair value of the collateral and/or the failure by us to repay the borrowing at maturity. Lenders
have the right to change haircut requirements at maturity of the repurchase agreement and may change their haircuts
based on market conditions and the perceived riskiness of the collateral pledged. If the fair value of the collateral
falls below the amount required by the lender, the lender has the right to demand additional margin or collateral. If
we fail to meet any margin call, our lenders have the right to terminate the repurchase agreement and sell any
collateral pledged. The weighted average haircut for our borrowings as of September 30, 2026, was consistent with
prior periods, typically averaging less than 5% for borrowings collateralized with Agency RMBS and CMBS and
between 10-14% for borrowings collateralized with CMBS IO.
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,
2026, we had amounts outstanding with over 25 counterparties and did not have more than 10% of equity at risk
with any counterparty or group of related counterparties.
We have various financial and operating covenants in certain of our repurchase agreements, which we
monitor and evaluate on an ongoing basis for compliance as well as for impacts these customary covenants may
have on our operating and financing flexibility. We do not believe we are subject to any covenants that materially
restrict our financing flexibility. We were in full compliance with our debt covenants as of September 30, 2026, and
we are not aware of circumstances that could potentially result in our non-compliance in the near future.
Derivative Instruments
Derivative instruments we enter into may require us to post initial margin at inception and daily variation
margin based on subsequent changes in their fair value. Daily variation margin requirements also entitle us to
receive collateral from our counterparties if the value of amounts owed to us under the derivative agreement exceeds
the minimum margin requirement. The collateral posted as margin by us is typically in cash. As of September 30,
2026, we had cash collateral posted to our counterparties of $835 million under these agreements.
Collateral requirements for interest rate derivative instruments are typically governed by the central
clearing exchange and the associated futures commission merchant, which may establish margin requirements in
excess of the clearing exchange. Collateral requirements for our TBA contracts are governed by the Mortgage-
Backed Securities Division (“MBSD”) of the Fixed Income Clearing Corporation and, if applicable, by our third-
party brokerage agreements, which may establish margin levels in excess of the MBSD. Our TBA contracts, which
42
are subject to master securities forward transaction agreements published by the Securities Industry and Financial
Markets Association as well as supplemental terms and conditions with each counterparty, generally provide that
valuations for our TBA contracts and any pledged collateral are to be obtained from a generally recognized source
agreed to by both parties. However, in certain circumstances, our counterparties have the sole discretion to
determine the value of the TBA contract and any pledged collateral. In such instances, our counterparties are
required to act in good faith in making determinations of value. In the event of a margin call, we must generally
provide additional collateral on the same business day.
The following table provides details on the “net (payments) receipts on derivative instruments” shown on
our consolidated statements of cash flows for the periods indicated:
Nine Months Ended
September 30,
Cash received or paid by instrument:
2026
2025
($s in thousands)
Interest rate swaps:
Net variation margin received (paid)
$958,001
$(213,055)
Received upon maturity/termination
7,306
—
Net periodic interest received (1)
11,647
18,659
976,954
(194,396)
U.S. Treasury futures:
Net variation margin received (paid)
210,032
(29,580)
Received upon maturity/termination
210,660
(29,129)
420,692
(58,709)
Options on U.S. Treasury futures
Premium paid at inception
(2,418)
(8,008)
Received upon maturity/termination
3,161
—
743
(8,008)
TBA securities:
(Paid) received  upon settlement
(68,238)
27,435
Net receipts (payments) on derivative instruments
$1,330,151
$(233,678)
(1)Net periodic interest from our effective interest rate swaps is recognized as income or expense during the period earned or
incurred, but the cash is not received or paid until the anniversary of each agreement’s effective date or upon maturity.
Dividends
We set our dividend based on many factors, including our view on long-term returns, yield on comparable
investments, liquidity and market risk, and taxable income. Among these factors, we focus on economic returns and
taxable income within the context of the distribution requirements. As a REIT, we are required to distribute to our
shareholders amounts equal to at least 90% of our REIT taxable income for each taxable year after certain
deductions, including the separate dividend requirements of the Series C Preferred Stock and Series D Preferred
Stock. 
Our reported GAAP financial results will generally differ from our REIT taxable income and dividend
distributions due to temporary and permanent differences. For example, 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
43
Company but are generally not recognized in REIT taxable income until future periods. Non-designated derivative
instruments are included in GAAP earnings 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, 2026; however, uncertainty inherent in the forward interest rate curve makes future
realized gains and losses difficult to estimate, and as such, these projections are subject to change for any given
period.
Projected Period of Recognition for Tax Hedge Gains, Net
September 30, 2026
($ in thousands)
Fiscal year 2026
$97,989
Fiscal year 2027
96,449
Fiscal year 2028
90,414
Fiscal year 2029
91,733
Fiscal year 2030 and thereafter
249,014
$625,599
As of September 30, 2026, we also had $346 million in capital loss carryforwards, $164 million of which
will expire by December 31, 2027 and the remainder 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
uncertainty inherent in the forward interest rate curve, we cannot reasonably estimate how much the deferred tax
hedge gains to be recognized will impact our dividend declarations during 2026 or in any given period.
We fund dividend distributions through portfolio cash flows, existing cash balances, or through the return
of principal from our investments (either through repayment or sale). Please refer to "Operating and Regulatory
Structure" within Part I, Item 1, "Business," as well as Part I, Item 1A, “Risk Factors” of our 2025 Form 10-K for
additional important information regarding our deferred tax hedge gains and dividends declared on our taxable
income.
RECENT ACCOUNTING PRONOUNCEMENTS
Please refer to Note 1 of the Notes to the Unaudited Consolidated Financial Statements contained within
Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.
CRITICAL ACCOUNTING ESTIMATES
The discussion and analysis of our financial condition and results of operations are based in large part upon
our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our
consolidated financial statements requires management to make estimates, judgments and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. We
base these estimates and judgments on historical experience and assumptions believed to be reasonable under
current facts and circumstances. Actual results may differ from the estimated amounts we have recorded.
Critical accounting estimates are defined as those that require management's most difficult, subjective, or
complex judgments, and which may result in materially different results under different assumptions and conditions.
Our critical accounting estimates are discussed in Part II, Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” of our 2025 Form 10-K under “Critical Accounting Estimates.”
There have been no significant changes in our critical accounting estimates during the three months ended
September 30, 2026.
44
FORWARD-LOOKING STATEMENTS
Certain written statements in this Quarterly Report on Form 10-Q that are not historical facts constitute
“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements in this report
addressing expectations, assumptions, beliefs, projections, future plans and strategies, future events, developments
that we expect or anticipate will occur in the future, and future operating results, capital management, and dividend
policy are forward-looking statements. Forward-looking statements are based upon management’s beliefs,
assumptions, and expectations as of the date of this report regarding future events and operating performance,
considering all information currently available to us, and are applicable only as of the date of this report. Forward-
looking statements generally can be identified by the use of words such as “believe,” “expect,” “anticipate,”
“estimate,” “plan,” “may,” “will,” “intend,” “should,” “could,” or similar expressions. We caution readers not to
place undue reliance on our forward-looking statements, which are not historical facts and may be based on
projections, assumptions, expectations, and anticipated events that do not materialize. Except as required by law, we
are not obligated to, and do not intend to, update or revise any forward-looking statement, whether as a result of new
information, future events, or otherwise.
Forward-looking statements are inherently subject to risks, uncertainties and other factors that could cause
our actual results to differ materially from historical results or from any results expressed or implied by such
forward-looking statements. Not all these risks and other factors are known to us. New risks and uncertainties arise
over time, and it is not possible to predict those events or how they may affect us. The projections, assumptions,
expectations, or beliefs upon which the forward-looking statements are based can also change as a result of these
risks or other factors. If such a risk or other factor materializes in future periods, our business, financial condition,
liquidity, and results of operations may vary materially from those expressed or implied in our forward-looking
statements.
While it is not possible to identify all factors that may cause actual results to differ from historical results or
any results expressed or implied by forward-looking statements or that may cause our projections, assumptions,
expectations, or beliefs to change, some of those factors include the following:
•the risks and uncertainties referenced in this Quarterly Report on Form 10-Q;
•the factors discussed in the “Risk Factors” section in Item 1A of our 2025 Form 10-K;
•our ability to find suitable reinvestment opportunities;
•changes in domestic economic conditions;
•geopolitical events and instability and the related impact on macroeconomic conditions as a result of such
related uncertainty;
•tariffs that the U.S. imposes on trading partners or tariffs imposed on the U.S. from trading partners;
•global and domestic government policy changes and the ability or inability to react to rapidly changing
economic policies;
•changes in interest rates and credit spreads, including the repricing of interest-earning assets and interest-
bearing liabilities;
•our investment portfolio performance, particularly as it relates to cash flow, prepayment rates, and credit
performance;
•the impact on markets and asset prices from changes in the Federal Reserve’s policies regarding the
purchases of Agency RMBS, Agency CMBS, and U.S. Treasuries;
•actual or anticipated changes in Federal Reserve monetary policy or the monetary policy of other central
banks;
•adverse reactions in U.S. financial markets related to actions of foreign central banks or the economic
performance of foreign economies, including in particular China, Japan, the European Union, and the
United Kingdom;
•the cost and availability of financing, including the future availability of financing due to changes to
regulation of, and capital requirements imposed upon, financial institutions;
•the cost and availability of new equity capital;
•changes in our leverage and use of leverage;
•changes to our investment strategy, operating policies, dividend policy, or asset allocations;
45
•the quality of performance of third-party service providers, including our sole third-party service provider
for our critical operations and trade functions;
•the loss or unavailability of our third-party service provider’s service and technology that supports critical
functions of our business related to our trading and borrowing activities due to outages, interruptions, or
other failures;
•the level of defaults by borrowers on loans underlying MBS;
•changes in our industry;
•increased competition;
•changes in government policies or regulations affecting our business;
•changes or volatility in the repurchase agreement financing markets and other credit markets;
•changes to the market for interest rate swaps and other derivative instruments, including changes to margin
requirements on derivative instruments;
•uncertainty regarding continued government support of the U.S. financial system and U.S. housing and real
estate markets, or to reform the U.S. housing finance system, including the resolution of the
conservatorship of Fannie Mae and Freddie Mac;
•the composition of the Board of Governors of the Federal Reserve;
•the political environment in the U.S.;
•systems failures or cybersecurity incidents; and
•exposure to current and future claims and litigation.
Regulation FD Disclosures
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 is
not incorporated by reference in this Quarterly Report on Form 10-Q or in any other report or document we file with
the SEC.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the exposure to losses resulting from changes in market factors. Our business strategy
exposes us to a variety of market risks, including interest rate, spread, prepayment, credit, liquidity, and
reinvestment risks. These risks can and do cause fluctuations in our liquidity, comprehensive income and book value
as discussed below.
Interest Rate Risk
Investing in interest-rate sensitive investments such as MBS and TBA securities subjects us to interest rate
risk. Interest rate risk results from investing in securities with a fixed coupon or a floating coupon that may not
immediately adjust for changes in interest rates. Interest rate risk also results from the mismatch between the
duration of our assets versus the duration of our liabilities and hedges. The amount of the impact will depend on the
composition of our portfolio, our hedging strategy, the effectiveness of our hedging instruments and the magnitude
and duration of the change in interest rates.
We manage interest rate risk within tolerances set by our Board of Directors. We use interest rate hedging
instruments to mitigate the impact of changing interest rates on the market value of our assets and on our interest
expense from repurchase agreements used to finance our investments. Our hedging methods are based on many
factors, including, but not limited to, our estimates regarding future interest rates and expected levels of prepayments
of our assets. If prepayments are slower or faster than assumed, the maturity of our investments will also differ from
our expectations, which could reduce the effectiveness of our hedging strategies and may cause losses that adversely
affect our cash flow. Estimates of prepayment speeds can vary significantly by investor for the same security, and
46
therefore, estimates of security and portfolio duration can vary considerably between market participants.
We continuously monitor market conditions, economic conditions, interest rates, and other market activity
and adjust the composition of our investments and hedges throughout any given period. As such, the projections for
changes in market value provided below are limited in usefulness because the modeling assumes no changes to the
composition of our investment portfolio or hedging instruments as of the dates indicated. Changes in the types of our
investments, the returns earned on these investments, future interest rates, credit spreads, the shape of the yield
curve, the availability of financing, and/or the mix of our investments and financings, including derivative
instruments, may cause actual results to differ significantly from the modeled results shown in the tables below. 
Therefore, the modeled results shown in the tables below and all related disclosures constitute forward-looking
statements.
Management evaluates changes in interest rate curves to manage portfolio interest rate risk and the market
value of its investments and common equity. Because interest rates do not typically move in a parallel fashion from
period to period (as can be seen by the graph for U.S. Treasury rates in Item 2, “Executive Overview”), the tables
below show the projected sensitivity of the market value of our financial instruments and common equity to both
parallel and non-parallel shifts in market interest rates.
September 30, 2026
Parallel Decrease in Interest Rates of
Parallel Increase in Interest Rates of
100 Basis Points
50 Basis Points
50 Basis Points
100 Basis Points
Type of
Instrument (1)
% of
Market
Value
% of
Common
Equity
% of
Market
Value
% of
Common
Equity
% of
Market
Value
% of
Common
Equity
% of
Market
Value
% of
Common
Equity
RMBS
4.8%
47.9%
2.5%
24.8%
(2.6)%
(25.6)%
(5.1)%
(51.4)%
CMBS/CMBS
IO
0.3%
2.6%
0.1%
1.3%
(0.1)%
(1.2)%
(0.2)%
(2.4)%
TBAs
0.5%
4.6%
0.2%
2.4%
(0.3)%
(2.6)%
(0.5)%
(5.2)%
Interest rate
hedges
(5.8)%
(58.3)%
(2.9)%
(28.9)%
2.9%
28.9%
5.7%
57.3%
Total
(0.2)%
(3.2)%
(0.1)%
(0.4)%
(0.1)%
(0.5)%
(0.1)%
(1.7)%
December 31, 2025
Parallel Decrease in Interest Rates of
Parallel Increase in Interest Rates of
100 Basis Points
50 Basis Points
50 Basis Points
100 Basis Points
Type of
Instrument (1)
% of
Market
Value
% of
Common
Equity
% of
Market
Value
% of
Common
Equity
% of
Market
Value
% of
Common
Equity
% of
Market
Value
% of
Common
Equity
RMBS
2.3%
19.1%
1.4%
11.6%
(1.8)%
(15.1)%
(3.9)%
(32.3)%
CMBS/CMBS
IO
0.3%
2.4%
0.1%
1.2%
(0.1)%
(1.1)%
(0.3)%
(2.3)%
TBAs
0.7%
5.6%
0.4%
3.2%
(0.4)%
(3.7)%
(0.9)%
(7.6)%
Interest rate
hedges
(4.4)%
(36.7)%
(2.2)%
(18.2)%
2.2%
17.8%
4.3%
35.7%
Total
(1.1)%
(9.6)%
(0.3)%
(2.2)%
(0.1)%
(2.1)%
(0.8)%
(6.5)%
47
September 30, 2026
December 31, 2025
Non-Parallel Shifts
Basis Point
Change in
2-year UST
Basis Point
Change in
10-year UST
% of
Market
Value (1)
% of
Common
Equity
% of
Market
Value (1)
% of
Common
Equity
Bearish
Steepening
+25
+50
—%
(0.2)%
(0.2)%
(1.4)%
+50
+100
(0.1)%
(1.3)%
(0.6)%
(5.3)%
Flattening
+50
+25
(0.1)%
(0.6)%
(0.2)%
(1.4)%
+100
+50
(0.1)%
(1.2)%
(0.4)%
(3.4)%
Bullish
Steepening
-50
-25
—%
0.4%
—%
—%
-100
-50
0.1%
0.5%
(0.2)%
(1.7)%
Flattening
-25
-50
(0.1)%
(0.8)%
(0.3)%
(2.8)%
-50
-100
(0.5)%
(4.5)%
(1.3)%
(10.6)%
(1)Includes changes in market value of our investments and derivative instruments, including TBA securities, but excludes
changes in market value of our financings which are not carried at fair value on our balance sheet due to their short-term
maturities. The projections for market value do not assume any change in credit spreads.
Spread Risk
Spread risk is the risk of loss from an increase in the market spread between the yield on an investment
versus its benchmark index. Changes in market spreads represent the market's valuation of the perceived riskiness of
an asset relative to risk-free rates. Widening spreads reduce the market value of our investments as market
participants require additional yield to hold riskier assets. Market spreads could change based on macroeconomic or
systemic factors as well as the factors specific to a particular security, such as prepayment performance or credit
performance. Other factors that could impact credit spreads include technical issues, such as supply and demand for
a particular type of security, Federal Reserve monetary policy, or other governmental policy change. We do not
hedge spread risk given the cost and complexity of hedging credit spreads and, in our opinion, the lack of liquid
instruments available to use as hedges.
Fluctuations in spreads typically vary based on the type of investment. Sensitivity to changes in market
spreads is derived from models that are dependent on various assumptions, and actual changes in market value in
response to changes in market spreads could differ materially from the projected sensitivity if actual conditions
differ from these assumptions.
The table below shows the projected sensitivity of the market value of our investments given the indicated
change in market spreads as of the dates indicated:
September 30, 2026
December 31, 2025
Percentage Change in
Percentage Change in
Basis Point Change in Market
Spreads
Market Value of
Investments (1)
% of Common
Equity
Market Value of
Investments (1)
% of Common
Equity
‘+20
(1.1)%
(11.5)%
(1.0)%
(8.4)%
‘+10
(0.6)%
(5.7)%
(0.5)%
(4.2)%
‘-10
0.6%
5.7%
0.5%
4.2%
‘-20
1.1%
11.5%
1.0%
8.4%
(1)  Includes changes in market value of our MBS investments, including TBA securities.
In addition to the risks discussed above, we are also subject to prepayment risk, credit risk, liquidity risk,
and reinvestment risk. We have not experienced any material changes in these risks during the nine months ended
September 30, 2026. Please refer to Part I, Item 1A, “Risk Factors,” and Part II, Item 7A, “Quantitative and
Qualitative Disclosures About Market Risks,” in our 2025 Form 10-K for further discussion.
48
ITEM 4.CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management evaluated, with the participation of our co-principal executive officers and principal
financial officer, the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rule
13a-15(e), as of the end of the period covered by this report. Based on that evaluation, our co-principal executive
officers and principal financial officer concluded that, as of September 30, 2026, our disclosure controls and
procedures were effective to ensure that information required to be disclosed in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the
SEC’s rules and forms, and that such information is accumulated and communicated to our management, including
our co-principal executive officers and principal financial officer, as appropriate, to allow timely decisions regarding
required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended
September 30, 2026 that materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
PART II.OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
To the Company’s knowledge, there are no pending or threatened legal proceedings, which, in
management’s opinion, individually or in total, could have a material adverse effect on the Company’s results of
operations or financial condition.
ITEM 1A.RISK FACTORS
There have been no material changes from the risk factors discussed in Part I, Item 1A, “Risk Factors” of
our 2025 Form 10-K. Risks and uncertainties identified in our forward-looking statements contained in this
Quarterly Report on Form 10-Q together with those previously disclosed in the 2025 Form 10-K or those that are
presently unforeseen could result in significant adverse effects on our financial condition, results of operations and
cash flows. See “Forward-Looking Statements” contained in Part I, Item 2, “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q as well as Part I, Item 1A,
“Risk Factors” in our 2025 Form 10-K.
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The Company’s Board of Directors approved a new share repurchase program (the “Program”) authorizing
the repurchase of up to $300 million of its common stock and up to $50 million of its preferred stock, including any
series thereof currently or hereafter authorized. Under the Program, repurchases may be made from time to time
through open market transactions, privately negotiated transactions, or other means, including, without limitation,
trading plans adopted in accordance with Rule 10b5-1 under the  Exchange Act. The actual means and timing of any
repurchases under the Program will depend on a variety of factors, including, without limitation, the market prices of
its common stock and preferred stock, as applicable, general market and economic conditions, and applicable legal
and regulatory requirements. The Program is authorized through April 30, 2028, and replaces the Company’s prior
repurchase program, which expired April 30, 2026. The Program does not require the Company to purchase any
shares and may be modified, suspended, or terminated by the Board at any time.
The Company did not repurchase any shares of its common or preferred stocks during the three months
49
ended September 30, 2026. Employees have forfeited 341,986 common shares to cover payroll tax withholding on
share-based compensation that vested during the nine months ended September 30, 2026.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.MINE SAFETY DISCLOSURES
None.
ITEM 5.OTHER INFORMATION
Rule 10b5-1 Trading Plan
During the three months ended September 30, 2026, none of the Company’s directors or Section 16 officers
adopted or terminated any “Rule 10b5-1 trading arrangements” or any “non-Rule 10b5-1 trading arrangements” (in
each case, as defined in Item 408 of Regulation S-K).
Amendments to Employment Agreements
On October 27, 2026, Dynex Capital, Inc. (the “Company”) amended its employment agreement with each
of Byron L. Boston and Smriti L. Popenoe (collectively, the “Amendments”).  The Amendments modify their
existing employment agreement, each dated July 19, 2024 (collectively, the “Employment Agreements”), as follows:
•Adjusting the base salary provisions to align with their current base salary of $950,000, as previously
disclosed in the Company’s 2026 proxy statement, filed on April 7, 2026, and to automatically adjust the
base salary for any change approved by the Board or a committee thereof following a Renewal Date; and
•Adjusting the restrictive covenants to: (i) provide for a 12-month non-competition period post-employment,
other than separation in connection with a Change in Control, in which case the non-competition period
remains 24 months; (ii) provide for a 12-month non-solicitation period with respect to employees and
certain commercial relationships; and (iii) provide for a perpetual confidentiality and non-disclosure
covenant.
Capitalized terms not otherwise defined herein have the meaning ascribed to such terms in the Employment
Agreements.  The foregoing description of the Amendments does not purport to be complete and is qualified in its
entirety by reference to the full text of the Amendments, copies of which will be filed as exhibits to the Company’s
Annual Report on Form 10-K for the year ended December 31, 2026.
ITEM 6.EXHIBITS
Exhibit No.
Description
3.1
Restated Articles of Incorporation, effective May 14, 2021 (incorporated herein by reference to
Exhibit 3.1 to Dynex's Current Report on Form 8-K filed May 18, 2021).
3.1.1
Second Articles of Amendment to the Restated Articles of Incorporation, effective as of May 21,
2025 (incorporated herein by reference to Exhibit 3.1.1 to Dynex’s Current Report on Form 8-K filed
May 21, 2025).
3.1.2
Third Articles of Amendment to the Restated Articles of Incorporation, effective as of May 22, 2026
(incorporated herein by reference to Exhibit 3.1 to Dynex’s Current Report on Form 8-K filed May
22, 2026).
50
Exhibit No.
Description
3.1.3
Articles of Amendment to the Restated Articles of Incorporation, effective September 29, 2026
(incorporated herein by reference to Exhibit 3.4 to Dynex’s Registration Statement on Form 8-A12B
filed September 29, 2026).
3.2
Amended and Restated Bylaws, effective as of May 11, 2021 (incorporated herein by reference to
Exhibit 3.2 to Dynex’s Current Report on Form 8-K filed May 12, 2021).
4.1
Specimen of Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to Dynex's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2019).
4.2
Specimen of 6.900% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock
Certificate (incorporated herein by reference to Exhibit 4.4 to Dynex's Registration Statement on
Form 8-A12B filed February 18, 2020).
4.3
Specimen of 9.375% Series D Fixed-Rate Cumulative Redeemable Preferred Stock Certificate
(incorporated herein by reference to Exhibit 4.3 Dynex’s Registration Statement on Form 8-A12B
filed September 29, 2026).
10.1
Amendment No. 10, dated July 28, 2026 to the Distribution Agreement, dated June 29, 2018, as
amended on May 31, 2019, August 3, 2021, June 3, 2022, February 10, 2023, October 29, 2024, May
1, 2025, July 29, 2025, January 27, 2026, and April 28, 2026 by and among Dynex Capital, Inc.,
BTIG, LLC, Citizens JMP Securities, LLC, Goldman Sachs & Co. LLC, JonesTrading Institutional
Services LLC, J.P. Morgan Securities LLC, Keefe, Bruyette & Woods, Inc., Morgan Stanley & Co.
LLC, RBC Capital Markets, LLC, UBS Securities LLC, and Wells Fargo Securities, LLC
(incorporated herein by reference to Exhibit 10.1 to Dynex’ Current Report on Form 8-K filed July
28, 2026).
31.1
Certification of co-principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 (filed herewith).
31.2
Certification of co-principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 (filed herewith).
31.3
Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(filed herewith).
32.1
Certification of co-principal executive officers and principal financial officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (filed herewith).
101
The following materials from Dynex Capital, Inc.'s Quarterly Report on Form 10-Q for the three
months ended September 30, 2026, formatted in iXBRL (Inline Extensible Business Reporting
Language), filed herewith: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of
Comprehensive Income, (iii) Consolidated Statements of Shareholders’ Equity, (iv) Consolidated
Statements of Cash Flows, and (v) Notes to the Unaudited Consolidated Financial Statements.
104
The cover page from Dynex Capital, Inc.'s Quarterly Report on Form 10-Q for the three months
ended September 30, 2026, formatted in iXBRL (Inline Extensible Business Reporting Language)
(included with Exhibit 101).
* Denotes a management contract or compensatory plan or arrangement.
51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DYNEX CAPITAL, INC.
Date:
October 27, 2026
/s/  Michael A. Sartori
Michael A. Sartori
Chief Financial Officer
(Principal Financial Officer)

Source: View Original Filing on SEC EDGAR

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