Dynex Capital reports Q3 2026 loss and portfolio growth

GLEN ALLEN, Va., Oct. 15. Dynex Capital, Inc. reported a third quarter 2026 total economic return of $(1.48) per common share. The company's book value per common share fell to $10.91 as of September 30, 2026, down from $12.90 at the end of the second quarter.

The decline was primarily driven by wider Agency mortgage-backed security spreads, which reduced the fair value of the investment portfolio. Dynex recorded a net loss of $(1.34) per common share and a comprehensive loss of $(1.49) per common share for the period. Gains on the interest rate hedging portfolio partially offset the losses from asset valuation changes, but spread widening remained the primary pressure on book value.

Despite the valuation drop, Dynex increased its total investment portfolio to $28.3 billion, a 3% increase from $27.6 billion in June 2026. This growth was fueled by $3.2 billion in mortgage-backed security purchases. The agency residential mortgage-backed securities portfolio, including to-be-announced securities, expanded to $26.8 billion, while the agency commercial mortgage-backed securities portfolio reached $1.4 billion. Highly liquid Agency securities accounted for 99.99% of the total investment portfolio.

The company raised $384 million in net capital during the quarter to fund these acquisitions. This included $268 million from common equity issuances via the at-the-market program and $116 million from the issuance of 9.375% Series D fixed-rate cumulative redeemable preferred stock. Interest income rose quarter over quarter as the average balance of interest-earning assets grew by 10%. Operating expenses decreased by $4 million due to lower stock-based compensation.

Leverage increased to 9.0 times shareholders' equity as of September 30, 2026, up from 8.1 times at the end of June 2026. The rise in leverage was attributed to the lower book value resulting from portfolio performance rather than increased borrowing alone. Dynex held $1.3 billion in cash and unpledged securities, representing 42% of total equity, providing liquidity for future operations.

Smriti Laxman Popenoe, Co-Chief Executive Officer and President, stated that late-quarter volatility and wider mortgage spreads reduced reported book value but created an attractive forward return opportunity. She noted that the mortgage market remains fundamentally solid with stable financing conditions. Management indicated it is managing for the long term and positioned to capitalize on opportunities as they develop.

Dynex declared dividends of $0.51 per common share for the third quarter. The company held a conference call on October 15 at 10:00 a.m. Eastern Time to discuss the results and business outlook.