Third Quarter 2026
Filed Oct 19, 2026Dynex reported a total economic return of $(1.48) per common share, or (11.5)% of beginning book value, as wider Agency MBS spreads reduced book value and produced a comprehensive loss.
The quarter featured a $(1.99) decline in book value per common share, a $(1.34) net loss per common share, and a $(374,834) thousand comprehensive loss to common shareholders. Higher interest income, positive derivative gains, lower operating expenses, capital raises, and $0.38 of EAD per common share did not offset investment fair-value losses.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total economic return per common share, third quarter 2026other | $(1.48) per common share | (11.5)% of beginning book value | – |
| Book value per common share, September 30, 2026GAAP | $10.91 | a decrease of $(1.99) | – |
| Interest income, three months ended September 30, 2026 ($s in thousands)GAAP | $332.5M | – | – |
| Interest expense, three months ended September 30, 2026 ($s in thousands)GAAP | −$230.9M | – | – |
| Net interest income, three months ended September 30, 2026 ($s in thousands)GAAP | $101.6M | – | – |
| Realized loss on sales of investments, net, three months ended September 30, 2026 ($s in thousands)GAAP | −$544K | – | – |
| Unrealized loss on investments, net, three months ended September 30, 2026 ($s in thousands)GAAP | −$1.47B | – | – |
| Gain on derivative instruments, net, three months ended September 30, 2026 ($s in thousands)GAAP | $1.04B | – | – |
| Total losses, net, three months ended September 30, 2026 ($s in thousands)GAAP | −$424.5M | – | – |
| General and administrative expenses, three months ended September 30, 2026 ($s in thousands)GAAP | −$11.06M | – | – |
| Other operating expense, net, three months ended September 30, 2026 ($s in thousands)GAAP | −$1.53M | – | – |
| Total operating expenses, three months ended September 30, 2026 ($s in thousands)GAAP | −$12.59M | decreased by $4 million quarter over quarter | – |
| Net loss, three months ended September 30, 2026 ($s in thousands)GAAP | −$335.5M | – | – |
| Preferred stock dividends, three months ended September 30, 2026 ($s in thousands)GAAP | −$2.77M | – | – |
| Net loss to common shareholders, three months ended September 30, 2026 ($s in thousands)GAAP | −$338.3M | – | – |
| Unrealized loss on available-for-sale investments, net, three months ended September 30, 2026 ($s in thousands)GAAP | −$36.53M | – | – |
| Comprehensive loss to common shareholders, three months ended September 30, 2026 ($s in thousands)GAAP | −$374.8M | – | – |
| Net loss per common share-basic, three months ended September 30, 2026GAAP | $(1.34) | – | – |
| Net loss per common share-diluted, three months ended September 30, 2026GAAP | $(1.34) | – | – |
| Dividends declared per common share, three months ended September 30, 2026GAAP | $0.51 | – | – |
| EAD to common shareholders, three months ended September 30, 2026 ($s in thousands)non-GAAP | $94.67M | – | – |
| EAD per common share, three months ended September 30, 2026non-GAAP | $0.38 | – | – |
| Net interest spread, three months ended September 30, 2026GAAP | 1.18 % | – | – |
| Economic net interest income, three months ended September 30, 2026 ($s in thousands)non-GAAP | $101.6M | – | – |
| Economic net interest spread, three months ended September 30, 2026non-GAAP | 1.18 % | – | – |
| Total investment portfolio fair value, September 30, 2026 ($s in thousands)other | $28.33B | an increase of 3% | – |
| Leverage including TBA securities at cost, September 30, 2026other | 9.0 times shareholders' equity | – | – |
| Interest income, nine months ended September 30, 2026 ($s in thousands)GAAP | $892.6M | – | – |
| Interest expense, nine months ended September 30, 2026 ($s in thousands)GAAP | −$618.0M | – | – |
| Net interest income, nine months ended September 30, 2026 ($s in thousands)GAAP | $274.6M | – | – |
| Realized gain on sales of investments, net, nine months ended September 30, 2026 ($s in thousands)GAAP | $8.18M | – | – |
| Unrealized loss on investments, net, nine months ended September 30, 2026 ($s in thousands)GAAP | −$1.74B | – | – |
| Gain on derivative instruments, net, nine months ended September 30, 2026 ($s in thousands)GAAP | $1.27B | – | – |
| Net loss, nine months ended September 30, 2026 ($s in thousands)GAAP | −$235.1M | – | – |
| Net loss to common shareholders, nine months ended September 30, 2026 ($s in thousands)GAAP | −$243.2M | – | – |
| Comprehensive loss to common shareholders, nine months ended September 30, 2026 ($s in thousands)GAAP | −$280.7M | – | – |
| Net loss per common share-basic, nine months ended September 30, 2026GAAP | $(1.08) | – | – |
| Net loss per common share-diluted, nine months ended September 30, 2026GAAP | $(1.08) | – | – |
| Dividends declared per common share, nine months ended September 30, 2026GAAP | $1.53 | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Agency RMBSAverage balance was $24,761,556 and effective yield was 5.03 %. | $311,244 interest income ($s in thousands), three months ended September 30, 2026 | – | – |
| Agency CMBS/CMBS IOAverage balance was $1,456,850 and effective yield was 4.55 %. | $16,958 interest income ($s in thousands), three months ended September 30, 2026 | – | – |
| Other investmentsAverage balance was $431 and effective yield was 3.71 %. | $5 interest income ($s in thousands), three months ended September 30, 2026 | – | – |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
Capital returns
- Dividends declared of $0.51 per common share.
- Common dividends declared were $(129,162) ($s in thousands).
- Raised $384 million of capital, net of commissions, including $268 million of common equity through the ATM program and $116 million through the issuance of 9.375% Series D fixed-rate cumulative redeemable preferred stock.
- Net proceeds from stock issuance were $260,984 ($s in thousands).
What drove it
- Wider Agency MBS spreads drove a net decrease in the fair value of the investment portfolio and were the primary source of pressure on asset valuations and book value.
- Gains on the interest rate hedging portfolio partially offset investment-portfolio fair-value losses.
- The Company used net proceeds from common and preferred equity raises to opportunistically add $3.2 billion of Agency MBS.
- The average balance of interest-earning assets grew 10% during the third quarter of 2026.
- Interest income increased from the prior quarter, driven by continued capital deployment into Agency MBS.
- Operating expenses decreased due to lower stock-based compensation.
Concerns
- Book value per common share declined to $10.91 from $12.90 as of June 30, 2026.
- The Company reported an unrealized loss on investments, net, of $(1,465,047) ($s in thousands) in the third quarter.
- Total net change in fair value was $(461,115) ($s in thousands) in the common equity rollforward.
- Leverage including TBA securities at cost increased to 9.0 times shareholders' equity from 8.1 times shareholders' equity.
- Agency RMBS unrealized loss was $(1,763,175) ($s in thousands) as of September 30, 2026, compared to $(244,317) as of June 30, 2026.
- Repurchase agreement borrowings had a weighted average rate of 3.91 % as of September 30, 2026, compared to 3.79 % as of June 30, 2026.
What to watch
- Agency MBS spreads and their effect on the fair value of the investment portfolio and book value per common share.
- The performance and financing cost of the expanded $28,329,881 ($s in thousands) investment portfolio.
- Leverage, which was 9.0 times shareholders' equity including TBA securities at cost as of September 30, 2026.
- The ability of interest-rate hedges to offset changes in interest rates and broader market volatility.
- Capital deployment following the $384 million of capital raised during the quarter.
Balance sheet and cash flow
- Cash and cash equivalents were $993,008 ($s in thousands) as of September 30, 2026, compared to $607,562 as of June 30, 2026.
- Liquidity was $1.3 billion of cash and unpledged securities, representing 42% of total equity, as of September 30, 2026.
- Total assets were $27,925,206 ($s in thousands) as of September 30, 2026, compared to $26,419,602 as of June 30, 2026.
- Repurchase agreements were $24,190,276 ($s in thousands) as of September 30, 2026, compared to $22,644,742 as of June 30, 2026.
- Total liabilities were $24,873,151 ($s in thousands) as of September 30, 2026, compared to $23,244,535 as of June 30, 2026.
- Total shareholders' equity was $3,052,055 ($s in thousands) as of September 30, 2026, compared to $3,175,067 as of June 30, 2026.
- Preferred stock aggregate liquidation preference was $231,500 ($s in thousands) as of September 30, 2026, compared to $111,500 as of June 30, 2026.
- No operating cash flow, investing cash flow, financing cash flow, or free cash flow was reported.
Analysis
Dynex produced a weak reported quarter as late-quarter volatility and wider Agency MBS spreads reduced book value per common share to $10.91 from $12.90 as of June 30, 2026. Total economic return was $(1.48) per common share, or (11.5)% of beginning book value. The Company recorded a $(335,536) thousand net loss and a $(374,834) thousand comprehensive loss to common shareholders, while net loss per diluted common share was $(1.34). The principal reported earnings pressure was the $(1,465,047) thousand unrealized loss on investments, net.
Portfolio income improved as capital was deployed into Agency MBS. Interest income rose to $332,497 thousand from $302,751 thousand in the prior quarter, and net interest income increased to $101,562 thousand from $93,783 thousand. The average balance of interest-earning assets grew 10%, while the GAAP net interest spread was 1.18 %, compared with 1.16 % in the prior quarter. EAD to common shareholders, a non-GAAP measure, increased to $94,675 thousand, or $0.38 per common share, from $80,683 thousand, or $0.36 per common share.
The Company expanded its portfolio after raising $384 million of capital, net of commissions, through common equity and Series D preferred stock issuance. The total investment portfolio reached $28,329,881 thousand at fair value, compared with $27,583,490 thousand as of June 30, 2026. Agency RMBS accounted for 95% of the investment portfolio and Agency CMBS accounted for 5%. The larger portfolio came with higher leverage, which increased to 9.0 times shareholders' equity including TBA securities at cost, from 8.1 times shareholders' equity, while repurchase agreements rose to $24,190,276 thousand.
Hedging gains substantially mitigated, but did not eliminate, asset valuation losses. Gain on derivative instruments, net, was $1,041,087 thousand, including $782,825 thousand of unrealized gains on interest rate swaps and $278,275 thousand of unrealized gains on U.S. Treasury futures. In contrast, MBS and other changes in fair value were $(1,502,120) thousand in the common equity rollforward. Operating expenses declined to $(12,594) thousand from $(16,213) thousand, attributed to lower stock-based compensation. The filing provides no quantitative forward guidance, leaving Agency MBS spreads, book value, leverage, financing conditions, and hedge performance as the reported items to monitor.
Management, verbatim
We believe today’s Agency mortgage market presents a compelling forward investment opportunity. Late-quarter volatility and wider mortgage spreads reduced our reported book value, and that repricing has created an attractive forward return opportunity. Importantly, the mortgage market remains fundamentally solid, technical conditions are strong, and financing remains stable. We are managing for the long term, prepared for a range of market scenarios, and positioned to capitalize on opportunities as they develop.
Smriti Laxman Popenoe, Co-Chief Executive Officer and President
Not in the filing
stated, not guessed- Total revenue
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AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.