Dynex Capital Reports Q1 2026 Earnings with Book Value at $12.60 Per Share

Dynex Capital, Inc. (NYSE: DX) reported its first-quarter 2026 earnings on April 20, 2026, with earnings per share of $0.31, missing expectations of $0.313. The company's book value ended the quarter at $12.60 per share, reflecting a negative 2.5% economic return.

This included $0.51 per share in common dividends and an $0.85 per share decrease in book value. The firm grew its total capital base by 18% during the quarter, raising $442 million and deploying it into agency mortgage-backed securities (MBS) as spreads widened.

Leverage increased to 8.6 times total equity, primarily due to the portfolio expansion to $6 billion. Liquidity remained strong at $1.3 billion in cash and unencumbered securities, representing over 46% of total equity.

executives noted supportive fundamentals in the MBS market, driven by government policy focused on housing affordability. Net interest income rose to $0.40 per share from $0.28, aided by a 33 basis point decline in financing costs following Federal Reserve rate cuts in Q4 2025.

The company reduced exposure to to-be-announced (TBA) securities from 16% to 7% of the portfolio, favoring specified pools for better prepayment stability. Agency MBS spreads to seven-year interest rate swaps widened to nearly 170 basis points in March before tightening to the low 160s by quarter end and toward 150 basis points by late last week.

Executives projected potential tightening to 120 basis points or an equilibrium of 100 basis points, supported by GSE activities and proposed Basel III changes.

“We are resolute in our view on those spreads moving down to as much as 100 basis points. Given the GSE backdrop, we think we are on the verge of a significant regime change." — T.J. Connelly, Chief Investment Officer, April 20, 2026 (earnings call). Static return on equity for current coupon mortgages hedged with swaps stood in the mid- to high-teens. Net MBS supply for 2026 is expected to be around $200 billion or lower, with robust demand from banks, REITs, money managers, and foreign investors.”

Growth Dynex added Caitlin Mowicz to lead capital markets and investor relations, citing her experience to support growth. The company navigated Q1 volatility by opportunistically deploying capital when MBS spreads widened due to broader risk asset weakness, not fundamental issues.

Financing costs declined, with MBS repo spreads to SOFR at 13 to 17 basis points, below last year's averages. Structural improvements in short-term funding markets contributed to stable repo availability.

“Growing our company in this attractive investment environment is an important element of value creation; it distributes fixed costs, deepens liquidity, and strengthens the company, especially in periods of volatility like we saw last quarter." — Byron Boston, Chairman and Co-Chief Executive Officer, April 20, 2026 (earnings call). General and administrative expenses increased due to one-time items but are expected to normalize in Q2, with the full-year expense ratio flat or modestly lower versus 2025 as capital grows.”

During the Q&A, analysts inquired about book value updates and leverage. As of April 17, 2026, estimated book value was $13.31 per share, up 5.6% from quarter end, net of accrued dividends. On leverage, executives indicated willingness to increase it opportunistically within risk parameters, viewing current levels as comfortable amid the outlook for tighter spreads.

They emphasized security selection alpha from avoiding highly callable TBAs. Dynex positioned itself at the intersection of income needs and housing demands, with executives stressing scenario planning around policy pathways. The firm has grown to the third-largest agency-focused mortgage REIT, aiming for higher valuations through scale.

The earnings call highlighted alignment of management interests with shareholders, committing to disciplined portfolio management and opportunistic growth.