Dynex Capital's book value per share falls $1.99 to $10.91 as mortgage spreads widen

Dynex Capital reported a third-quarter 2026 comprehensive loss of $1.49 per common share and a total economic return of negative $1.48 per common share, or (11.5)% of beginning book value, as wider Agency MBS spreads pushed book value per common share down to $10.91 at September 30, 2026 from $12.90 at June 30, 2026, a decrease of $1.99. The mortgage REIT filed the results in a Form 8-K on October 19, 2026, and said it raised $384 million of capital and used the net proceeds to add $3.2 billion of Agency MBS, lifting the investment portfolio approximately 3% to $28.3 billion.

Wider Agency MBS spreads cut book value by $1.99 a share

Agency mortgage-backed security spreads widened in the September quarter, and the market-value loss landed on Dynex Capital's book value. Book value per common share fell to $10.91 at September 30, 2026 from $12.90 at June 30, 2026, a decrease of $1.99, or 15.43% sequentially. Book value per common share was $12.67 at September 30, 2025, so the year-over-year decline is 13.89%. The release attributed the decline primarily to wider Agency MBS spreads, which drove a net decrease in the fair value of the investment portfolio, and it said gains on the interest rate hedging portfolio partially offset those losses.

The fair-value bridge shows the scale of the move. The MBS and other line produced a $1.5 billion decrease and the TBA line a $124.9 million decrease, while interest rate swaps added $790.44 million, U.S. Treasury futures $377.31 million and options on U.S. Treasury futures $743,000, with interest rate swaptions losing $2.58 million, leaving a net decrease of $461.12 million. Comprehensive loss to common shareholders was $374.83 million, or $1.49 a common share, and net loss to common shareholders was $338.31 million, or $1.34 a common share, against net income to common shareholders of $147.56 million and $1.09 a common share in the third quarter of 2025.

A $384 million capital raise accompanied $3.2 billion of MBS purchases

Dynex raised $384 million of capital net of commissions during the quarter, including $268 million of common equity sold through its at-the-market program and $116 million of 9.375% Series D preferred stock, and it used the proceeds to add $3.2 billion of Agency MBS. The total investment portfolio rose approximately 3% to $28.3 billion from $27.6 billion at June 30, 2026, and the release says 99.99% of the portfolio is in highly liquid Agency securities.

Leverage including TBA securities at cost increased to 9.0 times shareholders' equity from 8.1 times, which the release attributes primarily to the lower book value related to the investment portfolio's performance. Repurchase agreement borrowings also rose, to $24.19 billion from $22.64 billion at June 30, 2026, at a weighted-average rate of 3.91% versus 3.79%, and liquidity was $1.3 billion of cash and unpledged securities, or 42% of total equity.

Net interest income rose 8.29% while dividends ran $0.13 past EAD

Interest income rose to $332.5 million from $149.68 million a year earlier, up 122.14%, as the average balance of interest-earning assets more than doubled to $26.22 billion from $11.72 billion a year earlier. Net interest income was $101.56 million, up 8.29% from $93.78 million in the second quarter, and the net interest spread widened to 1.18% from 1.16%. Operating expenses fell to $12.59 million from $16.21 million in the second quarter, a $4 million decrease that the release attributes to lower stock-based compensation.

Earnings available for distribution, the company's non-GAAP measure, was $94.68 million, or $0.38 per common share, up 17.34% from $80.68 million in the second quarter, while dividends declared were $0.51 per common share, $0.13 above that measure. The release says tax-hedge gains are excluded from EAD but remain part of future distribution requirements, and it projects $625.6 million of net deferred tax hedge gains that may be recognized as taxable income, of which $97.99 million may be recognized in fiscal 2026; it adds that uncertainty in the forward interest rate curve makes future realized gains and losses difficult to estimate and that these projections are subject to change for any given period.

Management calls the repricing an opportunity, and the filing carries no outlook

Smriti Laxman Popenoe, Co-Chief Executive Officer and President, said the market's repricing has created an opening for new money: "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."

The release includes no analyst consensus figure, no fourth-quarter guidance and no book-value or EAD target, so no beat or miss can be scored from it, and the financial statements it publishes are labeled preliminary and unaudited. The dated next step is the conference call today at 10:00 a.m. Eastern, with a slide presentation and a replay posted on the company's Investors page. A year earlier, the same quarter produced a total economic return of $1.23 per common share, or 10.3% of beginning book value, when book value rose $0.72 a share as mortgage spreads tightened.