10q10k10q10k.net

What changed in DYNEX CAPITAL INC's 10-K — 2024 vs 2025

vs

Paragraph-level year-over-year comparison of DYNEX CAPITAL INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+337 added−354 removedSource: 10-K (2026-02-25) vs 10-K (2025-02-28)

Top changes in DYNEX CAPITAL INC's 2025 10-K

337 paragraphs added · 354 removed · 234 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

38 edited+33 added−19 removed43 unchanged
Biggest changeThe following table provides the projected amortization of our net deferred tax hedge gains as of December 31, 2024, that will be recognized as taxable income over the periods indicated;.however, recognition of deferred tax hedge gains and losses may be accelerated if the underlying instrument originally hedged is terminated or paid off: 6 Period of Recognition for Remaining Hedge Gains, Net December 31, 2024 ($ in thousands) Fiscal year 2025 $ 100,144 Fiscal year 2026 100,420 Fiscal year 2027 95,831 Fiscal year 2028 and thereafter 422,643 $ 719,038 As of December 31, 2024, we also had $557.9 million of capital loss carryforwards, all of which will expire by either December 31, 2027 or by December 31, 2028.
Biggest changeHowever, recognition of deferred tax hedge gains and losses may be accelerated if the underlying instrument originally hedged is terminated or paid off: Projected Period of Recognition for Tax Hedge Gains, Net December 31, 2025 ($ in thousands) Fiscal year 2026 $ 95,972 Fiscal year 2027 91,382 Fiscal year 2028 85,347 Fiscal year 2029 and thereafter 285,531 $ 558,232 As of December 31, 2025, we also had $505 million of capital loss carryforwards, all of which will expire by either December 31, 2027 or by December 31, 2028.
Yield maintenance and prepayment penalty 2 requirements are intended to create an economic disincentive for the loans to prepay, which we believe makes CMBS less costly to hedge relative to RMBS. CMBS IO .
Yield maintenance and prepayment penalty requirements are intended to create an economic disincentive for the loans to prepay, which we believe makes CMBS less costly to hedge relative to RMBS. 2 CMBS IO .
In addition to the Investment Policy described above, we manage our operations and investments to comply with various REIT limitations (as discussed further below in “Operating and Regulatory Structure”) and to avoid qualifying as an investment company as such term is defined in the Investment Company Act of 1940, as amended, (the "1940 Act") or as a commodity pool operator under the Commodity Exchange Act.
In addition to the Investment Policy described above, we manage our operations and investments to comply with various REIT limitations (as discussed further below in “Operating and Regulatory Structure”) and to avoid qualifying as an investment company as such term is defined in the 1940 Act or as a commodity pool operator under the Commodity Exchange Act of 1936, as amended.
From time to time, we analyze and evaluate potential business opportunities that we identify or are presented to us, including possible partnerships, mergers, acquisitions, or divestiture transactions that might maximize value for our shareholders. Pursuing such an opportunity or transaction could require us to issue additional equity or debt securities.
From time to time, we analyze and evaluate potential business opportunities that we identify or are presented to us, including possible partnerships, mergers, acquisitions, or divestiture transactions that might maximize value for our shareholders. Pursuing such an opportunity or transaction could require us to issue additional equity or debt securities. RMBS.
To retain our REIT status, the REIT rules generally require that we invest primarily in real estate-related assets, that our activities be passive rather than active, and that we distribute annually to our shareholders amounts equal to at least 90% of our REIT taxable income, after certain deductions.
To retain our REIT status, the REIT rules generally require that we invest primarily in real estate-related assets, that our activities be passive rather than active, and that we distribute annually to our shareholders amounts equal to at least 90% of our REIT taxable income, after certain 5 deductions.
Under the “10% asset test,” we may not own 7 more than 10% of the outstanding voting power or value of securities of any single non-governmental issuer, provided such securities do not qualify under the 75% asset test or relate to taxable REIT subsidiaries.
Under the “10% asset test,” we may not own more than 10% of the outstanding voting power or value of securities of any single non-governmental issuer, provided such securities do not qualify under the 75% asset test or relate to taxable REIT subsidiaries.
The primary differences between our GAAP net income and our taxable income are: (i) unrealized gains and losses on investments (including TBAs accounted for as derivatives) are recognized in comprehensive income for GAAP purposes but are excluded from taxable income until realized; (ii) realized gains and losses on derivatives that are designated as tax hedges which are recognized in net income for GAAP purposes but are deferred and amortized for tax purposes over the original periods hedged by those derivatives (e.g., ten-years for a short position on a ten-year U.S.
The primary differences between our GAAP net income and our taxable income are: (i) unrealized gains and losses on investments (including TBAs accounted for as derivatives) are recognized in comprehensive income for GAAP purposes but are excluded from taxable income until realized; (ii) realized gains and losses on derivatives that are designated as tax hedges which are recognized in net income for GAAP purposes but are deferred and amortized for tax purposes over the original periods hedged by those derivatives (e.g., 10 years for a short position on a 10-year U.S.
As of December 31, 2024, we did not have more than 10% of equity at risk with any of our repurchase agreement counterparties. Please refer to "Risk Factors—Risks Related to Our Financing and Hedging Activities" in Part I, Item 1A of this Annual Report on Form 10-K for additional information regarding significant risks related to repurchase agreement financing.
As of December 31, 2025, we did not have more than 10% of equity at risk with any of our repurchase agreement counterparties. Please refer to "Risk Factors—Risks Related to Our Financing and Hedging Activities" in Part I, Item 1A of this Annual Report on Form 10-K for additional information regarding significant risks related to repurchase agreement financing.
Our Board of Directors may also adjust the Company’s Investment Policy from time to time based on macroeconomic expectations, market conditions, and risk tolerances..
Our Board of Directors may also adjust the Investment Policy from time to time based on macroeconomic expectations, market conditions, and risk tolerances.
As of December 31, 2024, the majority of our investments were Agency-issued pass-through RMBS collateralized primarily by pools of fixed-rate single-family mortgage loans. Monthly payments of principal and interest made by the individual borrowers on the mortgage loans underlying the pools are "passed through" to the security holders after deducting GSE or U.S. Government agency guarantee and servicer fees.
As of December 31, 2025, the majority of our investments were Agency-issued pass-through RMBS collateralized primarily by pools of fixed-rate single-family mortgage loans. Monthly payments of principal and interest made by the individual borrowers on the mortgage loans underlying the pools are "passed through" to the security holders after deducting GSE or U.S. government agency guarantee and servicing fees.
CMBS IO are interest-only securities issued as part of a CMBS securitization and represent the right to receive a portion of the monthly interest payments (but not principal cash flows) on the unpaid principal balance of the underlying pool of commercial mortgage loans.
CMBS interest only (“CMBS IO”) are interest-only securities issued as part of a CMBS securitization and represent the right to receive a portion of the monthly interest payments (but not principal cash flows) on the unpaid principal balance of the underlying pool of commercial mortgage loans.
CMBS. Our CMBS investments comprised less than 1% of our investment portfolio as of December 31, 2024, and are fixed-rate Agency-issued securities backed by multifamily housing loans. The loans underlying CMBS are generally fixed-rate with scheduled principal payments generally assuming a 30-year amortization period but typically requiring balloon payments on average approximately 10 years from origination.
CMBS. Our CMBS investments comprised 6% of our investment portfolio as of December 31, 2025, and are fixed-rate Agency-issued securities backed by multifamily housing loans. The loans underlying CMBS are generally fixed-rate with scheduled principal payments generally assuming a 30-year amortization period but typically requiring balloon payments on average approximately 5-10 years from origination.
We also purchase TBA securities (“TBAs”) as a means of investing in non-specified fixed-rate Agency RMBS, and from time to time, we may also sell TBA securities to economically hedge our book value exposure to Agency RMBS.
We also purchase to-be-announced securities (“TBAs” or “TBA securities”) as a means of investing in non-specified fixed-rate Agency RMBS, and from time to time, we may also sell TBA securities to economically hedge our book value exposure to Agency RMBS.
In addition to talent management and development initiatives, the Human Capital Strategy Planning process has included the following: 5 • development of organizational core values and a plan to integrate these values into a variety of human capital processes and practices; • offering personal and professional development programs for all employees; • formal process for determining current and future human capital requirements; • implementing improved performance measures designed to determine individual and team developmental needs better.
In addition to talent management and development initiatives, the Human Capital Strategy Planning process includes the following: • development of organizational core values and integration of these values into a variety of human capital processes and practices; • offering personal and professional development programs for all employees; • formal process for determining current and future human capital requirements; and • implementing improved performance measures designed to determine individual and team developmental needs.
The following table summarizes our dividends declared per share and their related tax characterization for the periods indicated: Tax Characterization Total Dividends Paid Per Share Ordinary Capital Gain Return of Capital Common dividends declared: Year ended December 31, 2024 $ 1.27707 $ — $ 0.30293 $ 1.58000 Year ended December 31, 2023 $ 0.74112 $ — $ 0.81888 $ 1.56000 Preferred Series C dividends declared: Year ended December 31, 2024 $ 1.72500 $ — $ — $ 1.72500 Year ended December 31, 2023 $ 1.72500 $ — $ — $ 1.72500 Qualification as a REIT Qualification as a REIT requires that we satisfy various tests relating to our income, assets, distributions, and ownership.
The following table summarizes our dividends declared per share and their related tax characterization for the periods indicated: 6 Tax Characterization Total Dividends Paid Per Share Ordinary Capital Gain Return of Capital Common dividends declared: Year ended December 31, 2025 $ 1.84334 $ — $ 0.13666 $ 1.98000 Year ended December 31, 2024 $ 1.27707 $ — $ 0.30293 $ 1.58000 Preferred Series C dividends declared: Year ended December 31, 2025 $ 2.13485 $ — $ — $ 2.13485 Year ended December 31, 2024 $ 1.72500 $ — $ — $ 1.72500 Qualification as a REIT Qualification as a REIT requires that we satisfy various tests relating to our income, assets, distributions, and ownership.
We believe that we are operating our business in accordance with the exemption requirements of Section 3(c)(5)(C) of the 1940 Act. Please refer to Part I, Item 1A, "Risk Factors" of this Annual Report on Form 10-K for further discussion. AVAILABLE INFORMATION We are subject to the reporting requirements of the Exchange Act and its rules and regulations.
We believe that we are operating our business in accordance with the exemption requirements of Section 3(c)(5)(C) of the 1940 Act. Please refer to Part I, Item 1A, "Risk Factors" of this Annual Report on Form 10-K for further discussion.
HEDGING STRATEGY We use derivative instruments to economically hedge our exposure to adverse changes in interest rates resulting from our ownership of primarily longer-term fixed-rate investments financed using short-term repurchase agreements with interest rates that reset each time we renew our borrowing.
We use derivative instruments primarily as economic hedges of our exposure to adverse changes in interest rates resulting from our ownership of longer-term fixed-rate investments financed using 3 short-term repurchase agreements with interest rates that reset each time we renew our borrowing.
We invest in both Agency-issued and non-Agency issued CMBS IO, which comprised less than 2% of our investment portfolio as of December 31, 2024. The loans collateralizing Agency-issued CMBS IO pools are similar in composition to the pools of loans that collateralize CMBS as discussed above.
We have investments in both Agency-issued and non-Agency issued CMBS IO, which collectively comprised less than 1% of our investment portfolio as of December 31, 2025. The loans collateralizing Agency-issued CMBS IO pools are similar in composition to the pools of loans that collateralize CMBS as discussed above.
Treasury futures position); and (iii) permanent differences due to limitations on the deductibility of certain GAAP expenses from taxable income. The Company estimates its REIT taxable income for the year ended December 31, 2024, is $96.3 million, which includes $99.9 million related to the amortization of net deferred tax hedge gains.
Treasury future position); and (iii) permanent differences due to limitations on the deductibility of certain GAAP expenses from taxable income. The Company estimates its REIT taxable income for the year ended December 31, 2025, is $229 million, which includes $100 million related to the amortization of net deferred tax hedge gains.
We declared common stock dividends of $1.60 for the year ended December 31, 2024. Our monthly dividend of $0.15 for December 2024 is recognized in the year ended December 31, 2024, for GAAP purposes, but it is not recognized as a taxable dividend until it is paid in January 2025.
We declared common stock dividends of $2.00 for the year ended December 31, 2025 for GAAP purposes. Our monthly dividend of $0.17 for December 2025 is recognized in the year ended December 31, 2025, for GAAP purposes, but it is not recognized as a taxable dividend until it is paid in January 2026.
Dividend distributions to our shareholders in excess of REIT taxable income are considered a return of capital to the shareholder. We use the calendar year for financial reporting in accordance with GAAP and for tax purposes.
Dividend distributions to our shareholders in excess of REIT taxable income are considered a return of capital to the shareholder. We use the calendar year for financial reporting in accordance with generally accepted accounting principles (“GAAP”) in the United States and for tax purposes.
Please refer to Part I, Item 1A, "Risk Factors," as well as Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Item 7A, "Quantitative and Qualitative Disclosures 4 about Market Risk," of this Annual Report on Form 10-K for additional discussions of factors that have the potential to impact our results of operations and financial condition, including current events such as recent shifts in the Federal Reserve’s monetary policy and market trends.
Please refer to Item 1A, "Risk Factors," within this Part I as well as Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," of this Annual Report on Form 10-K for additional discussions of factors that have the potential to impact our results of operations and financial condition.
Key points of this framework include the following: • understanding macroeconomic factors, global monetary and fiscal policies, and possible evolving outcomes; • understanding the regulatory environment, competition for assets, and terms and availability of financing; • investment analysis, including understanding absolute returns, relative and risk-adjusted returns, and supply/demand metrics in various mortgage asset classes; • financing and hedging analysis, including sensitivity analysis on credit, interest rate volatility, liquidity, and market value risk; and • managing performance and inherent portfolio risks, including but not limited to interest rate, credit, prepayment, and liquidity risks.
Key aspects of this framework include the following: • understanding macroeconomic factors, global monetary and fiscal policies, and variable outcomes; • understanding the regulatory environment, competition for assets, and terms and availability of financing; • investment analysis, including understanding absolute returns, relative and risk-adjusted returns, and supply/demand metrics in various mortgage asset classes; • financing and hedging analysis, including sensitivity analysis on credit, interest rate volatility, liquidity, and market value risk; and • managing performance and inherent portfolio risks, including but not limited to interest rate, credit, prepayment, and liquidity risks. 1 In allocating our capital and executing our strategy, we seek to balance the risks of owning specific types of investments with the earnings opportunity on the investment.
Delivering value, being curious, building trust, and being kind allow us to build a winning team that is focused on alignment with shareholders, being prepared, looking around corners for potential risks, being a trusted partner, and also helping each other develop and grow professionally.
Delivering value, fostering curiosity, building trust, and being kind allow us to build a winning team. Our team is focused on alignment with shareholders, being prepared, proactively identifying potential risks, being a trusted partner, and helping each other develop and grow professionally.
We will post amendments to the Code of Conduct or waivers from its provisions, if any, on our website that apply to any of our directors or executive officers in accordance with the requirements of the SEC or the NYSE. 8 The information on our website is not a part of, nor is it incorporated by reference, into this Annual Report.
We will post amendments to the Code of Conduct or waivers from 8 its provisions, if any, on our website that apply to any of our directors or executive officers in accordance with the requirements of the SEC or the NYSE.
Though the majority of our current investment portfolio is in fixed-rate Agency RMBS, we have allocated capital at various times over the last decade to a variety of other investments, including adjustable-rate Agency RMBS, fixed-rate Agency CMBS, investment grade and unrated non-Agency RMBS and CMBS, Agency and non-Agency CMBS IO, and residual interests in securitized 1 mortgage loans.
Though the majority of our investment portfolio is currently in fixed-rate Agency RMBS, we may allocate capital from time to time to a variety of other investments, including adjustable-rate Agency RMBS, fixed-rate Agency CMBS, investment grade and unrated non-Agency RMBS and CMBS, Agency and non-Agency CMBS IO, and residual interests in securitized mortgage loans.
TBAs purchased or sold for a forward settlement date are generally priced at a discount relative to TBAs settling in the current month. This price difference, often referred to as “drop income,” represents the economic equivalent of net interest income (interest income less implied financing cost) on the underlying Agency security from the trade date to the settlement date.
This price difference, often referred to as “drop income,” represents the economic equivalent of net interest income (interest income less implied financing cost) on the underlying Agency security from the trade date to the settlement date.
Our Code of Conduct is available on our website, along with our Audit Committee Charter, Whistleblower Policy, Nominating and Corporate Governance Committee Charter, Compensation Committee Charter, and our latest ESG disclosures under the SASB framework.
Our Code of Business Conduct and Ethics (our “Code of Conduct”) is available on our website, along with our Whisteblower Policy, Audit Committee Charter, Nominating and Corporate Governance Committee Charter, Compensation Committee Charter, and Risk Committee Charter.
Non-Agency issued CMBS IO are backed by loans secured by many different property types, including multifamily, office buildings, hospitality, and retail, among others. Since CMBS IO securities have no principal associated with them, the interest payments received are based on the unpaid principal balance of the underlying mortgage loan pool, which is commonly referred to as the notional amount.
Since CMBS IO securities have no principal associated with them, the interest payments received are based on the unpaid principal balance of the underlying mortgage loan pool, which is commonly referred to as the notional amount. Yields on CMBS IO securities depend on the underlying loans’ performance.
Similar to CMBS described above, the Company receives prepayment compensation as most loans in these securities have some form of prepayment protection from early repayment; however, there are no prepayment protections if the loan defaults and is partially or wholly repaid earlier because of loss mitigation actions taken by the underlying loan servicer.
Similar to CMBS described above, the Company may receive prepayment compensation; however, there are no prepayment protections if the loan defaults and is partially or wholly repaid earlier because of loss mitigation actions taken by the underlying loan servicer. Because Agency CMBS IO generally contain higher credit quality loans, they have a lower risk of default than non-Agency CMBS IO.
If we failed to satisfy the ownership requirements, we would be subject to fines and required to take curative action to meet the ownership requirements in order to maintain our REIT status.
If we failed to satisfy the ownership requirements, we would be subject to fines and required to take curative action to 7 meet the ownership requirements in order to maintain our REIT status. Please refer to Part I, Item 1A, "Risk Factors" of this Annual Report on Form 10-K for further discussion.
Dynex Values As part of our mission and values, Dynex focuses on key attributes that each employee, board member, consultant, and business partner embodies.
None of our employees are covered by any collective bargaining agreements, and we are not aware of any union-organizing activity relating to our employees. 4 Dynex Values As part of our mission and values, Dynex focuses on key attributes that each employee, board member, consultant, and business partner embodies.
In addition, our non-Agency CMBS IO are well seasoned with a weighted average life remaining of less than two years. FINANCING STRATEGY We employ leverage to enhance the returns on our invested capital by pledging our investments as collateral for borrowings, primarily through repurchase agreements.
The majority of our CMBS IO investments are well-seasoned and investment grade-rated, with the majority rated ‘AAA’ by at least one of the nationally recognized statistical rating organizations. FINANCING STRATEGY We employ leverage to enhance the returns on our invested capital by pledging our investments as collateral for borrowings, primarily through repurchase agreements.
These values propel us to seek different perspectives and build diversity of thought, which is essential in our business. We hire, evaluate, reward, and promote based on experience, performance, and values. Health, Safety, and Wellness The Company strives to offer employees a healthy work-life balance and an open environment in which they are encouraged to offer thoughts and opinions.
These values propel us to seek different perspectives and build diversity of thought, which we believe is essential to strengthening the Company. We hire, evaluate, reward, and promote based on experience, performance, and values.
Further, we have been increasing employee engagement through monthly Company-wide meetings and an anonymous survey to assess employee satisfaction and solicit feedback on the employee experience at the Company.
Further, we encourage employee engagement through monthly Company-wide meetings and an anonymous survey to assess employee satisfaction and to solicit feedback on the employee experience at the Company. As of December 31, 2025, we had 28 full and part-time employees with an average tenure of 8.9 years.
Further, our references to the URLs for these websites are intended to be inactive textual references only.
The information on our website is not a part of, nor is it incorporated by reference, into this Annual Report. Further, our references to the URLs for these websites are intended to be inactive textual references only.
As such, the total dividends declared for tax purposes is $1.58 for the year ended December 31, 2024.
Likewise, the monthly dividend of $0.15 per common share that we declared for December 2024 was recognized in the year ended December 31, 2024, for GAAP purposes, but it is included as a taxable dividend for 2025. As such, the total dividends declared for tax purposes is $1.98 for the year ended December 31, 2025.
We also intend to enter into derivative contracts only through a futures commission merchant or with counterparties that we believe have a strong credit rating to mitigate the risk of counterparty default or insolvency. OPERATING POLICIES AND RISK MANAGEMENT We invest our capital and manage our risk according to our “Investment Policy,” which is approved by our Board of Directors.
Our risk-management decisions may reduce near-term earnings and dividends in order to preserve our book value and the maintenance of attractive earnings and dividends over the long term. OPERATING POLICIES We invest our capital and manage our risk according to our “Investment Policy,” which is approved by our Board of Directors.
Removed
ITEM 1. BUSINESS COMPANY OVERVIEW Dynex Capital, Inc. commenced operations in 1988 and is an internally managed mortgage real estate investment trust (“REIT”), which invests in mortgage-backed securities (“MBS”). We finance our investments principally with repurchase agreements.
Added
ITEM 1. BUSINESS COMPANY OVERVIEW Dynex Capital, Inc. 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. Our common and preferred stocks trade on the New York Stock Exchange (“NYSE”) under the ticker symbols “DX” and “DXPRC”, respectively.
Removed
Our objective is to provide attractive risk-adjusted returns to our shareholders over the long term that are reflective of a leveraged, high-quality fixed income portfolio with a focus on capital preservation. We seek to provide returns to our shareholders primarily through the payment of regular dividends and through capital appreciation of our investments.
Added
We are internally managed and invest primarily in residential and commercial mortgage-backed securities (“RMBS” and “CMBS”, respectively), which are backed by residential and commercial mortgage loans, and which are Agency securities guaranteed by U.S. government-sponsored enterprises (“GSEs”). We may invest opportunistically in other mortgage-related assets consistent with our objectives. We actively manage interest rate, prepayment, spread, liquidity, and counterparty risks.
Removed
As of December 31, 2024, we were primarily invested in Agency MBS, of which over 97% are residential MBS (“Agency RMBS”), including to-be-announced (“TBA”) securities. The remainder of our investment portfolio as of December 31, 2024, was comprised of Agency commercial MBS (“Agency CMBS”) and Agency and non-Agency CMBS interest-only (“CMBS IO”) securities.
Added
The Dynex approach emphasizes risk management and disciplined capital allocation designed to preserve book value and support dividends across market cycles. We operate to qualify as a REIT and to distribute at least 90% of our taxable income. We also seek to maintain exclusion from registration under the Investment Company Act of 1940 (the “1940 Act”).
Removed
Agency MBS have an implicit guaranty of principal payment by an agency of the U.S. government or a U.S. government-sponsored entity (“GSE”) such as Fannie Mae and Freddie Mac. Non-Agency MBS are issued by non-governmental enterprises and do not have a guaranty of principal or interest payments.
Added
Please refer to “Operating and Regulatory Structure” within this Item 1, “Business” and Item 1A, “Risk Factors” of Part I of this Annual Report on Form 10-K for additional information.
Removed
In allocating our capital and executing our strategy, we seek to balance the risks of owning specific types of investments with the earnings opportunity on the investment.
Added
Our business is subject to risks and uncertainties, including changes in interest rates and the yield curve, mortgage prepayments, market volatility and spread movements, financing conditions, counterparty performance, and regulatory and macroeconomic developments.
Removed
The performance of our investment portfolio will depend on many factors including, but not limited to, interest rates, trends of interest rates, the steepness of interest rate curves, prepayment rates on our investments, demand for our investments, yield spreads for fixed income securities, general market liquidity, economic and global political conditions, and the credit performance of our investments.
Added
TBA securities purchased or sold for a forward settlement date are generally priced at a discount relative to TBA securities settling in the current month because the current month settlement will receive a coupon sooner than the TBA settling in a forward month.
Removed
In addition, our business model may be impacted by other factors, such as the condition of the overall credit markets, which could impact the availability and costs of financing.
Added
Non-Agency issued CMBS IO, which are issued by non-governmental enterprises and do not have a guaranty of principal or interest payments, are backed by loans secured by many different property types, including multifamily, office buildings, hospitality, and retail, among others.
Removed
See “Risk Factors—Factors that Affect Our Results of Operations and Financial Condition” in Part I, Item 1A, and “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of this Annual Report on Form 10-K for further discussion . RMBS.
Added
RISK MANAGEMENT AND HEDGING STRATEGIES As a leveraged investor, risk management is essential to our business operations. We face a range of market risks, including interest rate, prepayment, extension, spread, and credit risks.
Removed
Yields on CMBS IO securities depend on the underlying loans’ performance.
Added
Our investment strategies reflect our assessment of these risks, our ability to hedge a portion of them, and our intent to maintain our REIT qualification, which could limit our activities and the instruments that we may use to hedge risk.
Removed
Because Agency CMBS IO generally contain higher credit quality loans, they have a lower risk of default than non-Agency CMBS IO. The majority of our CMBS IO investments are investment grade-rated, with the majority rated ‘AAA’ by at least one of the nationally recognized statistical rating organizations.
Added
Our hedging strategy is dynamic and is based on our assessment of U.S. and global economic conditions, monetary policies, and our expectations for future interest rates—both their absolute level and the slope of the yield curve relative to market pricing.
Removed
Changes in interest rates can impact net interest income, the market value of our investments, and therefore, our book value per common share.
Added
Some interest rate hedges are intended to protect primarily against larger interest rate moves and may be less effective for smaller changes.
Removed
In a period of rising interest rates, our earnings and cash flow may be negatively impacted by borrowing costs increasing faster than interest income from our assets, and our book value may decline due to declining market values of our MBS. 3 Our hedging strategy is dynamic and is based on our assessment of U.S. and global economic conditions and monetary policies.
Added
We also may choose to not fully hedge interest rate risk, as well as prepayment or extension risks, if we believe maintaining some risk exposure enhances our return profile or if certain hedges could adversely affect our REIT status.
Removed
We frequently adjust our hedging portfolio based on our expectation of future interest rates, including the absolute level of rates and the slope of the yield curve versus market expectations. In conducting our hedging activities, we intend to comply with REIT and tax limitations on our hedging instruments, which could limit our activities and the instruments that we may use.
Added
We do not use hedges to protect our book value from spread risk—the possibility that the spread between market yields on our assets and the benchmark rates, primarily U.S. Treasury benchmarks, will change. We attempt to mitigate spread risk primarily by diversification in the coupon and asset types we hold in our portfolio.
Removed
Factors that Affect Our Results of Operations and Financial Condition Our financial performance is primarily driven by the performance of our investment portfolio and related financing and hedging activity and may be impacted by several factors, such as the absolute level of interest rates, the relative slope of interest rate curves, changes in interest rates and market expectations of future interest and prepayment rates, actual prepayments received on our investments, supply of and competition for investments, the influence of economic conditions on the credit performance of our investments, and market required yields as reflected by market spreads.
Added
Our voluntary turnover rate was 9% based on an average headcount of 22 for the three years ended December 31, 2025.
Removed
All of the above factors are influenced by market forces beyond our control, such as macroeconomic and geopolitical conditions, market volatility, Federal Reserve policy, U.S. fiscal and regulatory policy, and foreign central bank and government policy.
Added
Health, Safety, and Wellness The Company strives to offer employees a healthy work-life balance and an open environment in which they are encouraged to offer thoughts and opinions.
Removed
In addition, our business may be impacted by changes in regulatory requirements, including requirements to avoid qualifying as an investment company pursuant to the 1940 Act, as well as REIT requirements. Our business model is also impacted by the availability and cost of financing and the state of the overall credit markets.
Added
The following table provides the projected amortization of our net deferred tax hedge gains as of December 31, 2025, that will be recognized as taxable income over the periods indicated.
Removed
Reductions or limitations in the availability of financing for our investments could significantly impact our business or force us to sell assets, potentially at losses. Disruptions in the repurchase agreement market may also directly impact our availability and cost of financing.
Added
Exemption from Regulation as a Commodity Pool Operator The Dodd-Frank Act established a comprehensive new regulatory framework for derivative contracts commonly referred to as “swaps.” As a result, any investment fund that trades in swaps or other derivatives may be considered a “commodity pool,” which would cause its operators (in some cases, the fund’s directors) to be regulated as commodity pool operators (“CPOs”).
Removed
ENVIRONMENTAL, SOCIAL, AND CORPORATE GOVERNANCE We have adopted the Sustainability Accounting Standards Board (“SASB”) Conceptual Framework, and we have made disclosures available on our website in accordance with the Financials Sector standards of the SASB. The information on our website is not a part of, nor is it incorporated by reference, into this Annual Report.
Added
On December 7, 2012, the Commodity Futures Trading Commission’s (“CFTC”) Division of Swap Dealer and Intermediary Oversight (the “Division”) issued no-action relief from CPO registration to mortgage REITs that use CFTC-regulated products (“commodity interests”) and that satisfy certain enumerated criteria.
Removed
As of December 31, 2024, we had 22 full and part-time employees with an average tenure of 10.8 years, and our voluntary turnover rate was 4% for the three years ended December 31, 2024. None of our employees are covered by any collective bargaining agreements, and we are not aware of any union-organizing activity relating to our employees.
Added
Pursuant to the no-action letter, the Division will not recommend that the CFTC take enforcement action against a mortgage REIT if its operator fails to register as a CPO, provided that the mortgage REIT (i) submits a claim to take advantage of the relief and (ii) the mortgage REIT: (a) limits the initial margin and premiums required to establish its commodity interest positions to no greater than 5% of the fair market value of the mortgage REIT’s total assets; (b) limits the net income derived annually from its commodity interest positions, excluding the income from commodity interest positions that are “qualifying hedging transactions,” to less than 5% of its annual gross income; (c) does not market interests in the mortgage REIT to the public as interests in a commodity pool or otherwise in a vehicle for trading in the commodity futures, commodity options or swaps markets; and (d) either: (1) identified itself as a “mortgage REIT” in Item G of its last U.S. income tax return on Form 1120-REIT; or (2) if it has not yet filed its first U.S. income tax return on Form 1120-REIT, it discloses to its shareholders that it intends to identify itself as a “mortgage REIT” in its first U.S. income tax return on Form 1120-REIT.
Added
We believe that we have complied with all of the requirements set forth above as of December 31, 2025. Please refer to Part I, Item 1A, "Risk Factors" of this Annual Report on Form 10-K for further discussion. AVAILABLE INFORMATION We are subject to the reporting requirements of the Exchange Act and its rules and regulations.
Added
Regulation FD Disclosures In addition to information we file with the SEC, we routinely announce material information to investors and the marketplace using press releases, public conference calls, presentations, webcasts, and on the investor relations page of our website and our LinkedIn page.
Added
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.
Added
Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings, and public conference calls and webcasts. The information posted on these channels are not incorporated by reference in this Annual Report on Form 10-K or in any other report or document we file with the SEC.

… 10 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

98 edited+30 added−40 removed109 unchanged
Biggest changeHowever, we treat our TBAs as qualifying assets for purposes of the REIT 75% asset test, and we treat income and gains from our TBAs as qualifying income for purposes of the 75% gross income test, based on an opinion of a nationally recognized accounting and tax services firm, substantially to the effect that (i) for purposes of the REIT asset tests, our ownership of a TBA should more likely than not be treated as ownership of the underlying Agency RMBS, and (ii) for purposes of the 75% REIT gross income test, any gain recognized by us in connection with the settlement of our TBAs should more likely than not be treated as gain from the sale or disposition of the underlying Agency RMBS.
Biggest changeThere is no direct authority with respect to the qualification of TBAs as real estate assets or U.S. government securities for purposes of the 75% asset test or the qualification of income or gains from dispositions of TBAs as gains from the sale of real property or other qualifying income for purposes of the 75% gross income test. 19 However, we treat our TBAs as qualifying assets for purposes of the REIT 75% asset test, and we treat income and gains from our TBAs as qualifying income for purposes of the 75% gross income test, based on an opinion of a nationally recognized accounting and tax services firm, substantially to the effect that (i) for purposes of the REIT asset tests, our ownership of a TBA should more likely than not be treated as ownership of the underlying Agency RMBS, and (ii) for purposes of the 75% REIT gross income test, any gain recognized by us in connection with the settlement of our TBAs should more likely than not be treated as gain from the sale or disposition of the underlying Agency RMBS.
Even if we remain qualified for taxation as a REIT, we may be subject to certain federal, state, and local taxes on our income and assets, including taxes on any undistributed income, tax on income from certain activities conducted as a result of a foreclosure or considered prohibited transactions under the Tax Code, and state or local income taxes.
Even if we remain qualified for taxation as a REIT, we may be subject to certain federal, state, and local taxes on our income and assets, including taxes on any undistributed income, tax on income from certain activities conducted as a result of a foreclosure or considered prohibited transactions under the Tax Code.
Furthermore, we have no control over the cybersecurity systems used by our third-party service providers, and such third-party service providers may have limited indemnification obligations to us. We may change our investment strategy, operating policies, dividend policy, and/or asset allocations without shareholder consent and/or in a manner in which shareholders, analysts, and capital markets may not agree with us.
Furthermore, we have no control over the cybersecurity systems used by our third-party service providers, and such third-party service providers may have limited indemnification obligations to us. We may change our investment strategy, operating policies, dividend policy, and/or asset allocations without shareholder consent and/or in a manner which shareholders, analysts, and capital markets may not agree with.
Interest rate hedging may fail to protect or could adversely affect our results of operations, book value and liquidity because, among other things: • the performance of instruments used to hedge may not completely correlate with the performance of the assets or liabilities being hedged; • available hedging instruments may not correspond directly with the interest rate risk from which we seek protection; • the duration of the hedge may not match the duration of the related asset or liability given management’s expectation of future changes in interest ra tes or a result of the inaccuracies of models in forecasting cash flows on the asset being hedged; • the value of derivatives used for hedging will b e adjusted from time to time in accordance with GAAP to reflect changes in fair value and downward adjustments will reduce our earnings, shareholders’ equity, and book value; • the amount of income that a REIT may earn from hedging transactions (other than through taxable REIT subsidiaries) may be limited by U.S. federal income tax rules governing REITs; • interest rate hedging can be relatively expensive, particularly during periods of volatile interest rates; • the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and • the party owing money in the hedging transaction may default on its obligation to pay.
Interest rate hedging may fail to protect or could adversely affect our results of operations, book value and liquidity because, among other things: 15 • the performance of instruments used to hedge may not completely correlate with the performance of the assets or liabilities being hedged; • available hedging instruments may not correspond directly with the interest rate risk from which we seek protection; • the duration of the hedge may not match the duration of the related asset or liability given management’s expectation of future changes in interest ra tes or a result of the inaccuracies of models in forecasting cash flows on the asset being hedged; • the value of derivatives used for hedging will b e adjusted from time to time in accordance with GAAP to reflect changes in fair value and downward adjustments will reduce our earnings, shareholders’ equity, and book value; • the amount of income that a REIT may earn from hedging transactions (other than through taxable REIT subsidiaries) may be limited by U.S. federal income tax rules governing REITs; • interest rate hedging can be expensive, particularly during periods of volatile interest rates; • the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and • the party owing money in the hedging transaction may default on its obligation to pay.
For more information about our operating policies regarding our use of leverage, please see “Liquidity and Capital Resources” within Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K. Our repurchase agreements and agreements governing certain derivative instruments may contain financial and nonfinancial covenants.
For more information about our operating policies regarding our use of leverage, please see “Liquidity and Capital Resources” within Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K. Our repurchase agreements and agreements governing certain derivative instruments may contain financial and nonfinancial covenants.
Additionally, if we default on one of our obligations under a repurchase agreement, the lender can 15 terminate the transaction, sell the underlying collateral and cease entering into any other repurchase transactions with us. Any losses we incur on our repurchase transactions could adversely affect our liquidity, earnings, and therefore reduce our ability to pay dividends to our shareholders.
Additionally, if we default on one of our obligations under a repurchase agreement, the lender can terminate the transaction, sell the underlying collateral and cease entering into any other repurchase transactions with us. Any losses we incur on our repurchase transactions could adversely affect our liquidity and earnings, and therefore reduce our ability to pay dividends to our shareholders.
It is possible, however, that the IRS could assert that we did not own the securities during the term of the sale and repurchase agreement, in which case we could fail to qualify as a REIT. 19 Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow and our profitability.
It is possible, however, that the IRS could assert that we did not own the securities during the term of the sale and repurchase agreement, in which case we could fail to qualify as a REIT. Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow and our profitability.
If we do not have liquidity available to cover the margin call at that time, we may be in default under the repurchase agreement until we receive the cash from the prepayment. Alternatively, we could be forced to sell assets quickly and on terms unfavorable to us to meet the margin call.
If we do not have liquidity available to cover the margin call at that time, we may be in default under the repurchase agreement until 12 we receive the cash from the prepayment. Alternatively, we could be forced to sell assets quickly and on terms unfavorable to us to meet the margin call.
Further, certain of our repurchase agreements and derivative instruments have cross-default, cross-acceleration, or similar provisions, such that if we were to violate a covenant under one 14 agreement, that violation could lead to defaults, accelerations, or other adverse events under other agreements, as well.
Further, certain of our repurchase agreements and derivative instruments have cross-default, cross-acceleration, or similar provisions, such that if we were to violate a covenant under one agreement, that violation could lead to defaults, accelerations, or other adverse events under other agreements, as well.
Since our investment portfolio consists substantially of fixed rate instruments, rising interest rates will reduce the market value of our MBS as market participants will in turn demand higher yielding 9 assets. Reductions in the market value of our MBS typically result in margin calls from our lenders, which impacts our liquidity.
Since our investment portfolio consists substantially of fixed rate instruments, rising interest rates will reduce the market value of our MBS as market participants will in turn demand higher yielding assets. Reductions in the market value of our MBS typically result in margin calls from our lenders, which impacts our liquidity.
If we are unable to generate the required cash for a cash dividend distribution, we may be forced to declare a dividend that is payable, at least in part, in the form of common stock, in which case shareholders may be required to pay income taxes in excess of the cash dividends received.
If we are unable to generate the required cash for a cash dividend distribution, we may be forced to declare a dividend that is payable, at least in part, in the form of stock, in which case shareholders may be required to pay income taxes in excess of the cash dividends received.
Our Board of Directors has approved a share repurchase program that permits the Company to repurchase shares of its common stock at any time or from time to time at management’s discretion. Certain of our financing agreements have financial covenants that our share repurchases may impact.
Our Board of Directors has approved a share repurchase program that permits the Company to repurchase shares of its preferred or common stock at any time or from time to time at management’s discretion. Certain of our financing agreements have financial covenants that our share repurchases may impact.
We believe that we would be treated for REIT asset and income test purposes as the owner of the securities that are the subject of any such sale and repurchase agreement, notwithstanding that such agreement may legally transfer record ownership of the securities to the counterparty during the term of the agreement.
We believe that we would be treated for REIT asset and income test purposes as the owner of the securities that are the subject of any such sale and repurchase agreement, notwithstanding that such agreement may legally transfer ownership of the securities to the counterparty during the term of the agreement.
Any further increases in the Federal Funds Rate and market anticipation of the same, are likely to cause our borrowing costs to increase further, negatively impacting our net interest income, common stock dividends, market price of our stock, and book value per common share.
Any increases in the Federal Funds Rate, and market anticipation of the same, are likely to cause our borrowing costs to increase, negatively impacting our net interest income, common stock dividends, market price of our stock, and book value per common share.
Share repurchases of our common stock or Series C Preferred Stock may negatively impact our compliance with covenants in our financing agreements and regulatory requirements (including maintaining exclusions from the 22 requirements of the 1940 Act and qualification as a REIT).
Share repurchases of our common stock or Series C Preferred Stock may negatively impact our compliance with covenants in our financing agreements and regulatory requirements (including maintaining exclusions from the requirements of the 1940 Act and qualification as a REIT).
Our ability to fund our operations, meet financial obligations, and finance targeted asset acquisitions may be impacted by an inability to secure and maintain our financing through repurchase agreements or other borrowings with our counterparties.
Our ability to fund our operations, meet financial obligations, and finance targeted asset acquisitions may be adversely impacted by an inability to secure and maintain our financing through repurchase agreements or other borrowings with our counterparties.
Our Board of Directors has the right to refuse to transfer any shares of our capital stock in a transaction that would result in ownership in excess of the ownership limit. In addition, we have the right to redeem shares of our capital stock held in excess of the ownership limit.
Our Board of Directors has the 20 right to refuse to transfer any shares of our capital stock in a transaction that would result in ownership in excess of the ownership limit. In addition, we have the right to redeem shares of our capital stock held in excess of the ownership limit.
Also, we cannot be assured that foreclosure proceeds under a loan document in a CMBS IO security will be sufficient to pay an enforceable yield maintenance charge.
Also, we cannot be assured that foreclosure proceeds under a loan document in a CMBS IO security will be sufficient to pay an enforceable 13 yield maintenance charge.
Even with all reasonable security efforts, not every system or network breach can be prevented or even detected. Furthermore, because certain of our employees are working remotely, there is an increased risk of disruption to our 21 operations because our employees’ residential networks and infrastructure may not be as secure as our office environment.
Even with all reasonable security efforts, not every system or network breach can be prevented or even detected. 22 Furthermore, because certain of our employees are working remotely, there is an increased risk of disruption to our operations because our employees’ residential networks and infrastructure may not be as secure as our office environment.
Taxable shareholders receiving common stock will be required to include in income, as a dividend, the full value of such stock, to the extent of our current and accumulated earnings for federal income tax purposes. As a result, a U.S. shareholder may be required to pay income taxes with respect to such dividends in excess of the cash dividends received.
Taxable shareholders receiving stock will be required to include in income, as a dividend, the full value of such stock, to the extent of our current and accumulated earnings 17 for federal income tax purposes. As a result, a U.S. shareholder may be required to pay income taxes with respect to such dividends in excess of the cash dividends received.
We may not be able to make distributions, or our Board of Directors may change our dividend policy in the future. To the extent that we decide to pay dividends in excess of our current and accumulated tax earnings and profits, such distributions would generally be considered a return of capital for federal income tax purposes.
We may not be able to make distributions, or our Board of Directors may change our dividend policy in the future. To the extent that we decide to pay dividends in excess of our current and accumulated tax earnings and profits, such distributions would generally be considered a return of capital for U.S. federal income tax purposes.
An increase in involuntary prepayments will result in the 11 loss of investment premiums at an accelerated rate which could materially reduce our interest income and dividend. Involuntary prepayments typically increase in periods of economic slowdown or stress, and actions taken as a result by the GSEs and federal, state, and local governments.
An increase in involuntary prepayments will result in the loss of investment premiums at an accelerated rate which could materially reduce our interest income. Involuntary prepayments typically increase in periods of economic slowdown or stress, and actions taken as a result by the GSEs and federal, state, and local governments.
Furthermore, any policy changes to the relationship between the GSEs and the U.S. government may create market uncertainty and have the effect of reducing the actual or perceived credit quality of securities issued by the GSEs. It may also interrupt the cash flow received by investors on the underlying MBS.
Furthermore, any policy changes to the relationship between the GSEs and the U.S. government may create market uncertainty and have the effect of reducing the actual or perceived credit quality of securities issued by the GSEs. It may also interrupt the cash flows received by investors on the underlying MBS.
If market participants factor in potentially faster prepayment rates, we may also experience declines in the market value of higher coupon MBS. Interest rate fluctuations may also impact the market price of our common shares independent of the effects such conditions may have on our investment and hedging portfolios.
If market participants factor in potentially faster prepayment rates, we may also experience declines in the market value of higher coupon MBS. Interest rate fluctuations may also impact the market price of our common stock independent of the effects such conditions may have on our investment and hedging portfolios.
This would severely impact our business model, profitability, and ability to pay dividends to our shareholders. To maintain REIT distribution requirements, we may be forced to increase our dividend distributions which could cause us to liquidate attractive assets or incur debt on unfavorable terms.
This would severely impact our business model, profitability, and ability to pay dividends to our shareholders. To meet our REIT distribution requirements, we may be forced to increase our dividend distributions which could cause us to liquidate attractive assets or incur debt on unfavorable terms.
If we do not have the funds available to meet our REIT distribution requirements or to avoid corporate and excise taxes, we could be forced to use unattractive options to generate the necessary cash, such as selling assets at 16 distressed prices, borrowing on unfavorable terms, distributing amounts that would otherwise be invested or used to repay debt, or paying dividends in the form of common stock.
If we do not have the funds available to meet our REIT distribution requirements or to avoid corporate and excise taxes, we could be forced to use unfavorable options to generate the necessary cash, such as selling assets at distressed prices, borrowing on unfavorable terms, distributing amounts that would otherwise be invested or used to repay debt, or paying dividends in the form of stock.
OTHER RISK FACTORS RELATED TO OUR BUSINESS We rely on a third-party service provider for critical operational and trade functions and on other third parties for information and communication systems, and problems in the use, access, or performance of these systems, including as a result of any cybersecurity incident, could increase our costs and significantly disrupt our ability to operate our business, which may have a significant adverse impact on our financial condition and results of operations.
We rely on a third-party service provider for critical operational and trade functions and on other third parties for information and communication systems, and problems in the use, access, or performance of these systems, including as a result of any cybersecurity incident, could increase our costs and significantly disrupt our ability to operate our business, which may have a significant adverse impact on our financial condition and results of operations.
Furthermore, an increasing interest rate environment may expose us to extension risk because prepayments on the loans underlying our MBS are likely to decline, which may reduce our ability to reinvest into higher yielding assets.
Furthermore, an increasing interest rate environment may expose us to extension risk as prepayments on the loans underlying our MBS are likely to decline, which may reduce our ability to reinvest into higher yielding assets.
Bankruptcy Code and take possession of and liquidate our collateral under our repurchase agreements without delay.
Bankruptcy Code 16 and take possession of and liquidate our collateral under our repurchase agreements without delay.
As of December 31, 2024, our most restrictive financial covenants require that the declines in our shareholders’ equity are no greater than 25% in any quarter and 35% in any year.
As of December 31, 2025, our most restrictive financial covenants require that the declines in our shareholders’ equity are no greater than 25% in any quarter and 35% in any year.
For example, changes to prepay expectations on Agency RMBS as well as changes to the Federal Reserve’s reinvestment policy on Agency RMBS have adversely impacted the TBA dollar roll market.
For example, changes to prepayment expectations on Agency RMBS as well as changes to the Federal Reserve’s reinvestment policy on Agency RMBS have adversely impacted the TBA dollar roll market.
If a lender determines that the value of the assets has decreased, the lender has the right to initiate a margin call, which requires us to transfer additional assets, including cash, to the lender to collateralize the existing borrowing or to repay a portion of the outstanding borrowings.
If a lender determines that the value of the assets has decreased, the lender has the right to initiate a margin call, which would require us to transfer additional assets, including cash, to the lender to collateralize the existing borrowing or to repay a portion of the outstanding borrowings.
We may be subject to risks associated with inadequate or untimely services from third-party service providers, which may negatively impact our results of operations. We also rely on corporate trustees to act on behalf of us and other holders of securities in enforcing our rights.
We may be subject to risks associated with inadequate or untimely services from third-party loan servicers, which may negatively impact our results of operations. We also rely on corporate trustees to act on behalf of us and other holders of securities in enforcing our rights.
Our projected amortization of these deferred tax hedge gains into taxable income for 2025 is currently estimated to be $100.1 million; however, this amount is subject to change based on a number of factors, particularly given the degree of uncertainty about the trajectory of interest rates.
Our projected amortization of these deferred tax hedge gains into taxable income for 2026 is currently estimated to be $96 million; however, this amount is subject to change based on a number of factors, particularly given the degree of uncertainty about the trajectory of interest rates.
Our Articles of Incorporation’s constructive ownership rules are complex and may cause the outstanding stock owned by a group of related individuals or entities to be deemed as constructively owned by one individual.
The constructive ownership rules contained in our Articles of Incorporation are complex and may cause the outstanding stock owned by a group of related individuals or entities to be deemed as constructively owned by one individual.
Maintaining compliance with this limitation could require us to constrain the growth of future taxable REIT affiliates. • Notwithstanding our NOL carryforward, meeting minimum REIT dividend distribution requirements could reduce our liquidity.
Maintaining compliance with this limitation could require us to constrain the growth of future taxable REIT affiliates. 18 • Meeting minimum REIT dividend distribution requirements could reduce our liquidity.
At various times since the implementation of the conservatorship, Congress has considered structural changes to the GSEs, including proposals that could lead to the release of the GSEs from conservatorship. If such support is modified or withdrawn, if the U.S.
At various times since the implementation of the conservatorship, Congress and the executive branch have considered structural changes to the GSEs, including proposals that could lead to the release of the GSEs from conservatorship. If such support is modified or withdrawn, if the U.S.
There are no guarantees that the models provide accurate results, and there is a risk that market participants could be using different models or interpreting model results differently than we do. These variations in data, interpretation and even model errors could result in potential losses of cash flow and trading losses in our portfolio.
There is also a risk that market participants could be using different models or interpreting model results differently than we do. These variations in data, interpretation, and even model errors could result in potential losses of cash flow and trading losses in our portfolio.
In addition, our decision to repurchase shares under the Program could adversely affect our competitive position and could negatively impact our ability in the future to invest in assets that have a greater potential return than our share repurchases.
In addition, our decision to repurchase shares under the program could adversely affect our competitive position and could negatively impact our ability in the future to invest in assets that have a greater potential return than our share repurchases. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
In addition, to meet the REIT qualification requirements or to avert the imposition of a 100% tax that applies to certain gains derived by a REIT from prohibited transactions, we may hold some of our assets through a taxable REIT subsidiary (“TRS”) or other subsidiary corporations that will be subject to corporate-level income tax at regular rates to the extent that such TRS does not have an NOL carryforward.
In addition, to meet the REIT qualification requirements or to avert the imposition of a 100% tax that applies to certain gains derived by a REIT from prohibited transactions, we may hold some of our assets through a taxable REIT subsidiary (“TRS”) or other subsidiary corporations that will be subject to corporate-level income tax at regular rates.
Volatile market conditions for mortgages and mortgage-related assets as well as the broader financial markets can result in a significant contraction in liquidity for mortgages and mortgage-related assets, which may adversely affect the value of the assets in which we invest.
Volatile market conditions for mortgages and mortgage-related assets as well as the broader financial markets can result in a significant contraction in liquidity for mortgages and mortgage-related assets, which may adversely affect the pricing reliability and value of our investments.
Furthermore, we may have to dispose of assets at significantly depressed prices, which could result in significant losses, or we may be forced to curtail our asset purchases if certain events occur including if we: • are unable to renew or otherwise access new funds under our existing financing arrangements; • are unable to arrange for new financing on acceptable terms; • default on our financial covenants contained in our financing arrangements; or • become subject to larger haircuts under our financing arrangements requiring us to post additional collateral. 13 In addition, if the Federal Reserve revises capital requirements for lenders, the economy may slow or reduce capital market liquidity.
Furthermore, we may have to dispose of assets at significantly depressed prices, which could result in significant losses, or we may be forced to curtail our asset purchases if certain events occur, including if we: • are unable to renew or otherwise access new funds under our existing financing arrangements; • are unable to arrange for new financing on acceptable terms; • default on our financial covenants contained in our financing arrangements; or • become subject to larger haircuts under our financing arrangements requiring us to post additional collateral.
Future adverse economic developments or market uncertainty, such as the Federal Reserve’s interest rate increases since 2022 and any proposed new reporting requirements by self-regulatory authorities and Congress, may result in increased margin requirements for our hedging instruments, which may have a material adverse effect on our liquidity, financial condition and results of operations.
Future adverse economic developments, market uncertainty, or any proposed new reporting requirements by self-regulatory authorities and Congress may result in increased margin requirements for our hedging instruments, which may have a material adverse effect on our liquidity, financial condition and results of operations.
Our preferred stock, as well as any additional preferred stock we may issue, will have a preference on distribution payments, periodically or upon liquidation, which could impact our ability to make distributions to common stockholders. During 2024, we raised substantial amounts of capital through an underwritten public offering and through our ATM program.
Our preferred stock, as well as any additional preferred stock we may issue, will have a preference 21 on distribution payments, periodically or upon liquidation, which could impact our ability to make distributions to common shareholders. During 2025, we raised substantial amounts of capital through our ATM program.
Computer malware, viruses, computer hacking, and phishing attacks have become more prevalent and may occur on our or our third-party service providers’ systems. We have no control over our third-party service providers’ systems, and any cybersecurity breach of their network or systems could compromise our operations.
Cybersecurity insurance policies we hold may be inadequate to cover these costs. Computer malware, viruses, computer hacking, and phishing attacks have become more prevalent and may occur on our or our third-party service providers’ systems. We have no control over our third-party service providers’ systems, and any cybersecurity breach of their network or systems could compromise our operations.
Maintaining our REIT status may reduce our flexibility to manage our operations. Qualification as a REIT involves the application of highly technical and complex Tax Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification.
Qualification as a REIT involves the application of highly technical and complex Tax Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification.
As of December 31, 2024, we have $719.0 million of deferred tax hedge gains, which were recognized in GAAP net income (loss) during 2024 and prior periods.
As of December 31, 2025, we have $558 million of deferred tax hedge gains, which were recognized in GAAP net income during 2025 and prior periods.
The amount of margin is set for each derivative by the exchange or clearinghouse. In prior periods, exchanges have required additional margin in response to events having, or expected to have, adverse economic consequences.
The amount of margin is set for each derivative instrument by the exchange or clearinghouse. Exchanges will also require additional margin in response to events having, or expected to have, adverse economic consequences.
For REIT qualification purposes, we treat repurchase agreement transactions as financing of the investments pledged as collateral. If the IRS disagrees with this treatment, our ability to qualify as a REIT could be adversely affected.
Our ability to qualify as a REIT could be adversely affected if the IRS disagrees with our treatment of repurchase agreement transactions as financing of the investments we pledge as collateral.
If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax, after consideration of any remaining NOL carryforward but not considering any dividends paid to our shareholders during 18 the respective tax year. The resulting corporate tax liability could be material.
If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax before consideration of any dividends paid to our shareholders during the respective tax year. The resulting corporate tax liability could be material.
Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends. The maximum tax rate applicable to “qualified dividend income” payable to U.S. shareholders that are taxed at individual rates is lower than the corresponding maximum ordinary income tax rates.
The maximum tax rate applicable to “qualified dividend income” payable to U.S. shareholders that are taxed at individual rates is lower than the corresponding maximum ordinary income tax rates. Dividends payable by REITs, however, are generally not eligible for the reduced rates on qualified dividend income.
In addition to understanding the key risks described below, investors should understand that it is not possible to predict or identify all risk factors. Consequently, the following is not a complete discussion of all potential risks or uncertainties. Additionally, investors should not interpret the disclosure of a risk to imply that the risk has not already materialized.
In addition to understanding the key risks described below, investors should understand that it is not possible to predict or identify all risk factors. Consequently, the following is not a complete discussion of all potential risks or uncertainties facing our business.
Repurchase agreement financing arrangements are structured legally as a sale and repurchase whereby we sell certain of our investments to a counterparty and simultaneously enter into an agreement to repurchase these securities at a later date in exchange for a purchase price. Economically, these agreements are financings that are secured by the investments sold pursuant thereto.
Repurchase agreement financing arrangements are structured legally as a sale and repurchase whereby we nominally sell certain of our investments to a counterparty and simultaneously enter into an agreement to repurchase these securities at a later date in exchange for a purchase price.
In addition, if the new assets we acquire in the future earn lower yields than the assets we currently own, our reported earnings per share will likely decline over time as the older assets pay down or are sold. We may be subject to risks associated with AI and machine learning technology.
In addition, if the new assets we acquire in the future earn lower yields than the assets we currently own, our reported earnings per share will likely decline over time as the older assets pay down or are sold.
To maintain our investment portfolio size and our earnings, we need to reinvest capital received from these events into new investments, and if market yields on new investments are lower, our interest income will decline.
We are subject to reinvestment risk as a result of the prepayment, repayment, and sales of our investments. To maintain our investment portfolio size and our earnings, we need to reinvest capital received from these events into new investments, and if market yields on new investments are lower, our interest income will decline.
Such changes may have a negative impact on the value of securities that we own. RISKS RELATED TO LEVERAGE, FINANCING AND HEDGING ACTIVITIES Our use of leverage, primarily through repurchase agreements, to enhance shareholder returns increases the risk of volatility in our results and could lead to material decreases in comprehensive income, shareholders’ equity, dividends, and liquidity.
RISKS RELATED TO LEVERAGE, FINANCING AND HEDGING ACTIVITIES Our use of leverage, primarily through repurchase agreements, to enhance shareholder returns increases the risk of volatility in our results and could lead to material decreases in comprehensive income, shareholders’ equity, dividends, and liquidity.
While we have not established a minimum dividend payment level, we aim to distribute sufficient dividends to our shareholders to satisfy the 90% distribution requirement and avoid the corporate income tax and the non-deductible 4% excise tax.
While we aim to distribute sufficient cash dividends to our shareholders to satisfy REIT distribution requirements and avoid the corporate income tax and the non-deductible 4% excise tax, we have not established a minimum dividend payment level and cannot guarantee future dividends will be payable in cash.
Typically, the master repurchase agreements that govern our borrowings grant the lender the absolute right, at its sole discretion, to reevaluate the fair market value of the assets subject to such repurchase agreements at any time.
Moreover, the amount of financing we receive under our financing agreements will be related to our lenders’ valuation of the assets subject to such agreements. 14 Typically, the master repurchase agreements that govern our borrowings grant the lender the absolute right, at its sole discretion, to reevaluate the fair market value of the assets subject to such repurchase agreements at any time.
Potential changes to the federal conservatorship of Fannie Mae and Freddie Mac or to the laws and regulations affecting the support that the GSEs receive from the U.S. government may adversely affect the availability, pricing, liquidity, market value, and financing of our assets. 12 As conservator, the FHFA has assumed all the powers of the shareholders, directors, and officers of the GSEs with the goal of preserving and conserving their assets.
Potential changes to the federal conservatorship of Fannie Mae and Freddie Mac or to the laws and regulations affecting the support that the GSEs receive from the U.S. government may adversely affect the availability, pricing, liquidity, market value, and financing of our assets.
As a result, our lenders may be required to significantly increase the cost of the financing that they provide to us or the amounts of collateral they require as a condition to providing us with financing.
In addition, if the Federal Reserve revises capital requirements for lenders, capital market liquidity may be reduced. As a result, our lenders may be required to significantly increase the cost of the financing that they provide to us or the amounts of collateral they require as a condition to providing us with financing.
If we fail to satisfy the criteria set forth above, or if the criteria change, we may become subject to CFTC regulation or enforcement action, the consequences of which could have a material adverse effect on our financial condition or results of operations.
If we fail to satisfy the criteria, (as listed in Item 1, “Business” of this Annual Report on Form 10-K), or if the criteria change, we may become subject to CFTC regulation or enforcement action, the consequences of which could have a material adverse effect on our financial condition or results of operations.
Geopolitical tensions or conflicts may further heighten the risk of cybersecurity attacks, and the use of artificial intelligence (“AI”) may increase the sophistication, effectiveness, and harm caused by such attacks.
The use of artificial intelligence (“AI”) may increase the sophistication, effectiveness, and harm caused by cybersecurity attacks.
There is competition for talented employees to operate our business and set the strategic direction for the Company. Recruiting, training, assessing talent and retaining highly skilled employees is a focus, but there is no guarantee of success. The departure of employees could impact our operating results and outlook for investing in the future.
There is competition for talented employees to operate our business and set the strategic direction for the Company. The departure of employees could impact our operating results and outlook for investing in the future.
Changes in prepayment rates on the mortgage loans underlying our investments may subject us to reinvestment risk and adversely affect our interest income, the market value of our investments, and our liquidity. We are subject to reinvestment risk as a result of the prepayment, repayment, and sales of our investments.
Larger haircuts and margin calls could force us to sell MBS at a loss. Changes in prepayment rates on the mortgage loans underlying our investments may subject us to reinvestment risk and adversely affect our interest income, the market value of our investments, and our liquidity.
If yield maintenance charges and prepayment penalties are not collected, or if a lock-out period is not enforced, we may incur losses to write down the value of the CMBS IO security for the present value of the amounts not collected.
If yield maintenance charges and prepayment penalties are not collected, or if a lock-out period is not enforced, we may incur losses to write down the fair value of the CMBS IO security. Credit ratings assigned to debt securities by credit rating agencies may not accurately reflect the risks associated with those securities.
We invest in securities guaranteed by Fannie Mae and Freddie Mac, which are currently under conservatorship by the Federal Housing Finance Agency (“FHFA”).
As a result, the value of the securities may be adversely impacted, and we may incur losses on our investment. We invest in securities guaranteed by Fannie Mae and Freddie Mac, which are currently under conservatorship by the Federal Housing Finance Agency (“FHFA”).
Future issuances of equity securities may dilute your percentage ownership in us and may also negatively affect the market price of our common stock.
Any limitation on the use of our capital loss carryforwards could materially and adversely impact our business and shareholder returns. Future issuances of equity securities may dilute your percentage ownership in us and may also negatively affect the market price of our common stock.
Market dislocations could limit our ability to access funding or access funding on terms that we believe are attractive, which could have a material adverse effect on our financial condition.
Our ability to access leverage in the conduct of our operations is impacted by certain factors that are beyond our control and are difficult to predict. Market dislocations could limit our ability to access funding or access funding on terms that we believe are attractive, which could have a material adverse effect on our financial condition.
We currently intend to pay regular dividends to our common shareholders and to make distributions to our shareholders in amounts such that all or substantially all of our taxable income, subject to certain adjustments, including utilization of our NOL, is distributed.
If we were to reduce the dividend or change to a quarterly payment cycle, our share price could materially decline. We currently intend to pay regular dividends to our common shareholders and to make distributions to our shareholders in amounts such that all or substantially all of our taxable income, subject to certain adjustments, is distributed.
Finally, reforms to the GSEs could also negatively impact our ability to comply with the provisions of the 1940 Act (see further discussion below regarding the 1940 Act). Credit ratings assigned to debt securities by credit rating agencies may not accurately reflect the risks associated with those securities.
Finally, reforms to the GSEs could also negatively impact our ability to comply with the provisions of the 1940 Act (see further discussion below regarding risks related to the 1940 Act).
Any use by us, or by third parties providing information or advice to us, of analytics models or data to manage our business may result in us relying on or receiving incorrect, misleading, or incomplete information, which could materially adversely impact our business and financial results.
We may utilize machine learning or AI to create efficiencies or opportunities in our processes (such as data analytics, coding, initial drafts of documents, and summarization of research or longer documents) and such use by us, or by third parties providing information or advice to us, may result in us relying on or receiving incorrect, misleading, or incomplete information, which could materially adversely impact our business and financial results.
Further, as the technology is rapidly evolving, costs and obligations could be imposed on us to comply with new regulations. We also could be exposed to the risks of machine learning technology if third-party service providers or any counterparties, whether or not known to us, also use machine learning technology in their business activities.
We also could be exposed to the risks of AI and machine learning technology if third-party service providers or any counterparties, whether or not known to us, also use AI and machine learning technology in their business activities. We will not be able to control the use of such technology in third-party products or services.
Credit spreads change based on several factors, including, but not limited to, macroeconomic and systemic changes, factors specific to a particular security such as prepayment performance or credit performance, market psychology, and Federal Reserve monetary policies. When credit spreads widen, the market value of our investments will decline because market participants typically require additional yield to hold riskier assets.
Market spreads change based on factors specific to a particular security, such as prepayment performance or credit performance, and other factors, including, but not limited to, macroeconomic and systemic changes, market psychology, market liquidity, and Federal Reserve monetary policies.
In these situations, we may be forced to sell assets at significantly depressed prices to meet the margin calls and to maintain adequate liquidity, which may cause significant losses.
We may also be required to post additional collateral if haircuts increase under a repurchase agreement. In these situations, we may be forced to sell assets at significantly depressed prices to meet the margin calls, which may cause significant losses.
While the Federal Reserve cut the Federal Funds Rate in the third quarter of 2024 and indicated that there may be additional rate cuts, future reductions are not certain. Additionally, there can be no assurance that the Federal Reserve will not return to making upwards adjustments to the Federal Funds Rate in the future.
While the Federal Reserve continued to reduce the targeted Federal Funds Rate in 2025, future reductions are not certain, and there can be no assurance that the Federal Reserve will not make upwards adjustments to the Federal Funds Rate in the future.
These provisions may limit the ability of a holder of outstanding preferred stock to convert shares of preferred stock into our common stock upon a change of control, which could adversely affect the market price of shares of our outstanding preferred stock. 20 If we fail to abide by certain Commodity Futures Trading Commission (“CFTC”) rules and regulations, we may be subject to enforcement action by the CFTC.
These provisions may limit the ability of a holder of outstanding preferred stock to convert shares of preferred stock into our common stock upon a change of control, which could adversely affect the market price of shares of our outstanding preferred stock.
Our qualification as a REIT will depend on our satisfaction of certain asset and income tests, organization, distribution, shareholder ownership, and other requirements on a continuing basis.
Our qualification as a REIT will depend on our satisfaction of certain asset and income tests, organization, distribution, shareholder ownership, and other requirements on a continuing basis. Any violations of the relevant requirements under the Tax Code could cause us to lose our REIT status or to pay significant penalties and interest.
If we are unable to obtain financing on favorable terms, or at all, our ability to acquire new assets or maintain our existing portfolio could be adversely affected.
If the MBS market were to experience a severe or extended period of illiquidity, lenders may refuse to accept MBS as collateral for repurchase agreement financing. If we are unable to obtain financing on favorable terms, or at all, our ability to acquire new assets or maintain our existing portfolio could be adversely affected.
Thus, common stockholders bear the risk that our future issuances of equity securities may negatively affect the market price of our common stock and will likely dilute their percentage ownership. 17 Qualifying as a REIT involves highly technical and complex provisions of the Tax Code, and a technical or inadvertent violation could jeopardize our REIT qualification.
Thus, common shareholders bear the risk that our future issuances of equity securities may negatively affect the market price of our common stock and will likely dilute their percentage ownership.
We invest in TBA securities and execute TBA dollar roll transactions. It could be uneconomical to roll our TBA contracts or we may be unable to meet margin calls on our TBA contracts.
It could be uneconomical to roll our TBA contracts or we may be unable to meet margin calls on our TBA contracts, which would have a negative impact on our liquidity.

… 88 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

10 edited+3 added−0 removed1 unchanged
Biggest changeManagement presents to the Board of Directors on our cybersecurity strategy, results of testing and training, and, as needed, to inform the Board of Directors and Audit Committee of any new or emerging threats or risks. The Company is not aware of any material breaches in its cybersecurity operations during the three years ended December 31, 2024.
Biggest changeOur executive officers and other members of management regularly present to the Board of Directors, the Risk Committee, and its other committees on our cybersecurity strategy and activities, results of testing and training, and, as needed, to inform the Board of Directors and the Risk Committee of any new or emerging threats or risks.
In addition to training its employees and consultants, the Company’s devices and servers are equipped with cybersecurity software applications, which are continuously monitored by an expert third-party managed security service provider that has numerous certifications recognized in the IT industry and provides security services for several Fortune 100 companies and certain highly secure government agencies.
In addition to training its employees and consultants, the Company’s devices and servers are equipped with cybersecurity software applications, which are continuously monitored by an expert third-party managed security service provider (“MSSP”) that has numerous certifications recognized in the IT industry and provides security services for several Fortune 100 companies and certain highly secure government agencies.
The Company’s IT services including, but not limited to, service desk support, endpoint management, network and server administration, cloud engineering, and cybersecurity and incident management, are provided by an IT team consisting of primarily third-party consultants who are employed on a contract basis with assistance from the Company’s IT employees.
The Company’s IT services including, but not limited to, service desk support, endpoint management, network and server administration, cloud engineering, and cybersecurity and incident management, are provided by an IT team consisting of third-party consultants who are employed on a contract basis with assistance from the Company’s IT employees.
The Company has implemented and maintains a Security Incident Response Policy as part of its enterprise-wide risk management system, which is intended to ensure that the Dynex information technology (“IT”) systems function properly and successfully assess, identify, contain, investigate, remedy, report, and respond to information security risks, threats or incidents.
The Company has implemented and maintains a security incident response policy as part of its enterprise-wide risk management system, which is intended to ensure that the Company’s information technology (“IT”) systems function properly and successfully assess, identify, contain, investigate, remedy, report, and respond to information security risks, threats or incidents.
Periodically, the Company engages a third party to perform both internal and external penetration testing to assess strengths and vulnerabilities of the Company’s readiness against cyber attacks. The Audit Committee oversees the Company’s enterprise risk management program, which includes periodic assessments of cybersecurity risk.
Periodically, the Company engages a third party to 24 perform both internal and external penetration testing to assess strengths and vulnerabilities of the Company’s readiness against cyber attacks. The Risk Committee oversees the Company’s enterprise risk management program, which includes periodic assessments of cybersecurity risk.
Our IT team reports directly to the Company’s Chief Technology Officer (“CTO”) for executive oversight and accountability. To mitigate the risk of a cybersecurity incident both internally and with third parties, the Company’s IT team provides mandatory cybersecurity training for all employees and contractors. They also conduct periodic training and awareness campaigns by sending employees simulated phishing attacks.
To mitigate the risk of a cybersecurity incident both internally and with third parties, the Company’s IT team provides mandatory cybersecurity training for all employees and contractors. They also conduct periodic training and awareness campaigns by sending employees simulated phishing attacks.
As a part of these assessments, the Audit Committee reviews and discusses the risks identified by management and the Company’s policies and practices in place to mitigate those cybersecurity-related risks.
As a part of these assessments, the Risk Committee reviews and discusses the Company’s policies and practices in place to mitigate cybersecurity-related risks.
Different data analytics techniques are used to detect 23 suspicious system behavior, provide contextual information, and block malicious activity. Any detected threat or malicious activity will immediately alert the security team for further investigation and remediation.
Different data analytics techniques are used to detect suspicious system behavior, provide contextual information, and block malicious activity. If there is a threat or malicious activity detected, the third-party MSSP is immediately alerted for further investigation and remediation.
The results of these simulated phishing attacks are reviewed and reported to management and the Board of Directors.
The results of these simulated phishing attacks are reviewed and periodically reported to our executive officers and other members of management and the Board of Directors or its committees.
Further, the Company has not identified any specific cybersecurity threats likely to materially affect the Company’s business strategy, results of operations, or financial conditions. For more information, please also refer to our risk factor related to our reliance on third-party service providers under Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K.
For more information, please also refer to our risk factor related to our reliance on third-party service providers under Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K.
Added
Our Chief Operating Officer has management oversight of our IT team, which is comprised of personnel who have extensive skills and experience managing technology and cybersecurity matters.
Added
Each of our IT employees and full time dedicated consultants have at least 10 years experience in information technology matters, and many have direct experience managing or implementing systems and processes to anticipate, mitigate, and manage cybersecurity risks.
Added
The Company is not aware of any material breaches in its cybersecurity operations during the three years ended December 31, 2025. Further, the Company has not identified any specific risks from cybersecurity threats that have materially affected or are likely to materially affect the Company, including its business strategy, results of operations, or financial conditions.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

9 edited+0 added−0 removed5 unchanged
Biggest changeCommon Stock $ 100.00 $ 117.01 $ 119.68 $ 101.30 $ 113.48 $ 129.01 S&P 500 Index $ 100.00 $ 118.39 $ 152.34 $ 124.73 $ 157.48 $ 196.85 S&P 500 Financials Index $ 100.00 $ 98.24 $ 132.50 $ 118.49 $ 132.83 $ 173.35 FTSE NAREIT mREIT Index $ 100.00 $ 81.38 $ 94.05 $ 69.27 $ 79.79 $ 79.96 (1) Source: Bloomberg 25 The historical information set forth above is not necessarily indicative of future performance.
Biggest changeCommon Stock $ 100.00 $ 102.27 $ 86.57 $ 96.98 $ 110.25 $ 142.64 S&P 500 Index $ 100.00 $ 128.68 $ 105.36 $ 133.03 $ 166.28 $ 195.98 S&P 500 Financials Index $ 100.00 $ 134.87 $ 120.61 $ 135.21 $ 176.45 $ 202.86 FTSE NAREIT mREIT Index $ 100.00 $ 115.56 $ 85.11 $ 98.04 $ 98.25 $ 114.13 (1) Source: Bloomberg 26 The historical information set forth above is not necessarily indicative of future performance.
Please refer to “Operating and Regulatory Structure” contained within Part 1, Item I, “Business” for disclosure regarding the tax characterization of these dividends.
Please refer to “Operating and Regulatory Structure” contained within Part I, Item 1, “Business” for disclosure regarding the tax characterization of these dividends.
Our ability to pay dividends may be adversely affected by the risk factors described in Part I, Item 1A, “Risk Factors.” All distributions will be made at the discretion of our Board of Directors who will consider the Company’s taxable income, the REIT distribution requirements of the Tax Code, financial performance measures, and maintaining compliance with dividend requirements of the Series C Preferred Stock, and such other factors our Board of Directors may deem relevant from time to time.
Our ability to pay dividends may be adversely affected by the risk factors described in Part I, Item 1A, “Risk Factors.” All distributions will be made at the discretion of our Board of Directors, which will consider the Company’s taxable income, the REIT distribution requirements of the Tax Code, financial performance measures, maintaining compliance with dividend requirements of the Series C Preferred Stock, and such other factors our Board of Directors may deem relevant from time to time.
The following graph is a five-year comparison of shareholders’ cumulative total return, assuming $100 invested at the close of trading on December 31, 2019 with reinvestment of all dividends, in each of: (i) our common stock, (ii) the stocks included in the Standard & Poor’s 500 Index (“S & P 500”); (iii) the stocks included in the S&P 500 Financials Index; and (iv) the stocks included in the FTSE NAREIT Mortgage REIT Index.
The following graph is a five-year comparison of shareholders’ cumulative total return, assuming $100 invested at the close of trading on December 31, 2020 with reinvestment of all dividends, in each of: (i) our common stock, (ii) the stocks included in the Standard & Poor’s 500 Index (“S & P 500”); (iii) the stocks included in the S&P 500 Financials Index; and (iv) the stocks included in the FTSE NAREIT Mortgage REIT Index.
Cumulative Total Stockholder Returns as of December 31, Index (1) 2019 2020 2021 2022 2023 2024 Dynex Capital, Inc.
Cumulative Total Stockholder Returns as of December 31, Index (1) 2020 2021 2022 2023 2024 2025 Dynex Capital, Inc.
The Program is authorized through April 30, 2026, although it may be modified or terminated by the Board of Directors at any time. The Company has an at-the-market agreement ("ATM") whereby the Company may offer and sell through its sales agents up to approximately 69.4 million shares of common stock.
The Program is authorized through April 30, 2026, although it may be modified or terminated by the Board of Directors at any time. The Company has an at-the-market program ("ATM") whereby the Company may offer and sell through its sales agents up to approximately 161.3 million shares of common stock.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the NYSE under the trading symbol “DX”. The common stock was held by approximately 345 holders of record as of February 12, 2025.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the NYSE under the trading symbol “DX”. The common stock was held by approximately 354 holders of record as of February 20, 2026.
On that date, the closing price of our common stock on the NYSE was $13.26 per share. The Company currently pays a monthly dividend on its common stock and declared a total of $1.60 per common share for the year ending December 31, 2024.
On that date, the closing price of our common stock on the NYSE was $14.13 per share. The Company currently pays a monthly dividend on its common stock and declared a total of $2.00 per common share for the year ending December 31, 2025.
During the year ended December 31, 2024, the Company issued 16.8 million shares of its common stock through its ATM program at an aggregate value of $207.6 million, net of $2.6 million in broker commissions, of which 5.2 million shares were issued during the fourth quarter of 2024 at an aggregate value of $64.4 million, net of $0.8 million in broker commissions.
During the year ended December 31, 2025, the Company issued 90,126,672 shares of its common stock through its ATM program at an aggregate value of $1.2 billion, net of $12.4 million in broker commissions, of which 29,101,267 million shares were issued during the fourth quarter of 2025 at an aggregate value of $393.3 million, net of $3.8 million in broker commissions.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

67 edited+36 added−51 removed26 unchanged
Biggest changeThe following tables compare our fixed-rate Agency RMBS investments, including TBA dollar roll positions, as of the dates indicated: December 31, 2024 Par/Notional Amortized Cost/ Implied Cost Basis (1)(3) Fair Value (2)(3) Weighted Average Coupon Loan Age (in months) (4) 3 Month CPR (4)(5) Estimated Duration (6) Market Yield (7) 30-year fixed-rate: ($s in thousands) 2.0% $ 655,356 $ 666,107 $ 516,541 51 5.0 % 6.49 5.42 % 2.5% 561,625 582,776 463,402 52 4.3 % 6.37 5.33 % 4.0% 324,615 325,091 299,774 45 6.4 % 5.92 5.25 % 4.5% 1,323,371 1,291,410 1,252,219 27 7.4 % 5.79 5.33 % 5.0% 2,356,262 2,315,518 2,284,613 18 5.7 % 5.19 5.47 % 5.5% 2,193,064 2,207,296 2,178,180 13 5.3 % 4.53 5.61 % 6.0% 303,470 307,211 307,509 13 13.2 % 3.60 5.74 % TBA 4.0% 462,000 424,917 421,796 n/a n/a 6.62 5.20 % TBA 4.5% 383,000 361,610 359,837 n/a n/a 5.95 5.35 % TBA 5.0% 710,000 693,938 684,706 n/a n/a 5.20 5.51 % TBA 5.5% 864,000 860,609 852,053 n/a n/a 4.21 5.73 % Total $ 10,136,763 $ 10,036,483 $ 9,620,630 23 6.1 % 5.22 5.49 % December 31, 2023 Par/Notional Amortized Cost/ Implied Cost Basis (1)(3) Fair Value (2)(3) Weighted Average Coupon Loan Age (in months) (4) 3 Month CPR (4)(5) Estimated Duration (6) Market Yield (7) 30-year fixed-rate: ($s in thousands) 2.0% $ 708,528 $ 720,611 $ 586,361 39 4.4 % 6.81 4.60 % 2.5% 608,580 632,343 525,018 40 4.5 % 6.62 4.59 % 4.0% 354,382 354,965 339,212 34 5.5 % 5.65 4.67 % 4.5% 1,383,019 1,350,697 1,348,108 15 5.0 % 5.08 4.88 % 5.0% 2,070,473 2,035,088 2,057,309 9 4.7 % 4.24 5.10 % 5.5% 897,520 900,218 907,524 8 5.0 % 3.58 5.29 % TBA 4.0% 262,000 240,641 248,040 n/a n/a 5.89 4.72 % TBA 4.5% 223,000 210,940 216,415 n/a n/a 4.75 4.92 % TBA 5.0% 518,000 490,466 512,982 n/a n/a 3.98 5.15 % TBA 5.5% 200,000 191,926 201,047 n/a n/a 2.81 5.36 % TBA 6.0% 200,000 193,369 203,219 n/a n/a 2.15 5.37 % Total $ 7,425,502 $ 7,321,264 $ 7,145,235 17 4.8 % 4.72 4.98 % (1) Implied cost basis of TBAs represents the forward price to be paid for the underlying Agency MBS.
Biggest changeThe following charts compare the composition of our MBS portfolio (including TBAs) as of the dates indicated: The following tables compare our 30-year fixed-rate Agency RMBS investments, including TBA dollar roll positions, as of the dates indicated: 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 % December 31, 2024 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% $ 655,356 $ 666,107 $ 516,541 51 5.0 % 6.49 5.42 % 2.5% 561,625 582,776 463,402 52 4.3 % 6.37 5.33 % 4.0% 324,615 325,091 299,774 45 6.4 % 5.92 5.25 % 4.5% 1,323,371 1,291,410 1,252,219 27 7.4 % 5.79 5.33 % 5.0% 2,356,262 2,315,518 2,284,613 18 5.7 % 5.19 5.47 % 5.5% 2,193,064 2,207,296 2,178,180 13 5.3 % 4.53 5.61 % 6.0% 303,470 307,211 307,509 13 13.2 % 3.60 5.74 % TBA 4.0% 462,000 424,917 421,796 n/a n/a 6.62 5.20 % TBA 4.5% 383,000 361,610 359,837 n/a n/a 5.95 5.35 % TBA 5.0% 710,000 693,938 684,706 n/a n/a 5.20 5.51 % TBA 5.5% 864,000 860,609 852,053 n/a n/a 4.21 5.73 % Total $ 10,136,763 $ 10,036,483 $ 9,620,630 23 6.1 % 5.22 5.49 % (1) Includes a par value of $9 million of 4.5% 15-year Agency RMBS.
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 derivative margin requirements.
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.
Realized gains (losses) resulting from the difference in fair value and the amount of cash received or paid upon termination or maturity of derivative instruments are included in GAAP earnings in the same reporting period in which the derivative instrument matures or is terminated by the Company but are generally not recognized in REIT taxable income until future periods.
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 Company but are generally not recognized in REIT taxable income until future periods.
In performing these analyses, we will 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.
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.
Although it is rare, we may exclude a price received from a third party if we determine, based on our knowledge and expertise of the market, that the price received is significantly different from other 31 observable market data.
Although it is rare, we may exclude a price received from a third party if we determine, based on our knowledge and expertise of the market, that the price received is significantly different from other observable market data.
We were in full compliance with our debt covenants as of December 31, 2024, 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.
We were in full compliance with our debt covenants as of December 31, 2025, 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.
(6) 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.
(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.
Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Please refer to “Results of Operations” within Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of the results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, which is incorporated herein by reference.
Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 Please refer to “Results of Operations” within Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024 for a discussion of the results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, which is incorporated herein by reference.
This discussion also contains non-GAAP financial measures, which are discussed in the section “Non-GAAP Financial Measures.” For a complete description of our business, including our operating policies, investment philosophy and strategy, financing and hedging strategies, and other important information, please refer to Part I, Item 1 of this Annual Report on Form 10-K.
This discussion also contains non-GAAP financial measures, which are discussed in the section “Non-GAAP Financial Measures.” For a complete description of our business, including our operating policies, investment philosophy and strategy, financing, risk management and hedging strategies, and other important information, please refer to Part I, Item 1, “Business” of this Annual Report on Form 10-K.
The weighted average haircut for our borrowings as of December 31, 2024, 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 weighted average haircut for our borrowings as of December 31, 2025, 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.
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 7.9 times shareholders’ equity as of December 31, 2024.
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 7.3 times shareholders’ equity as of December 31, 2025.
Our measurement of liquidity includes unrestricted cash and cash equivalents and unencumbered Agency MBS, which are recognized as assets on our consolidated balance sheet.
Our measurement of liquidity includes unrestricted cash and cash equivalents and unpledged Agency MBS, which are recognized as assets on our consolidated balance sheet.
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to, those disclosed in Part I, Item 1A, “Risk Factors” elsewhere in this Annual Report on Form 10-K and in other documents filed with the SEC and otherwise publicly disclosed.
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to, those disclosed in Part I, Item 1A, “Risk Factors” elsewhere in this Annual Report on Form 10-K and in other documents we file with the SEC or otherwise publicly disclose.
(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) Represents a non-GAAP measure.
(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.
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 December 31, 2024, we had cash collateral posted to our counterparties of $244.4 million under these agreements.
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 December 31, 2025, we had cash collateral posted to our counterparties of $399 million under these agreements.
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.
Collateral requirements for our TBA contracts are governed by the 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.
As of December 31, 2024, we had amounts outstanding under 27 different repurchase agreements and did not have more than 10% of equity at risk with any counterparty or group of related counterparties.
As of December 31, 2025, we had amounts outstanding under 28 different repurchase agreements and did not have more than 10% of equity at risk with any counterparty or group of related counterparties.
OAS shown for prior periods may differ from previous disclosures because the Company regularly updates the third-party model used. (2) Data represents the spread to swap rate on newly issued securities and is sourced from J.P. Morgan.
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.
(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.
(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.
Repurchase Agreements Leverage based solely on repurchase agreement amounts outstanding was 5.5 times shareholders’ equity as of December 31, 2024.
Repurchase Agreements Leverage based solely on repurchase agreement amounts outstanding was 5.6 times shareholders’ equity as of December 31, 2025.
Please refer to "Operating and Regulatory Structure" within Part I, Item 1, "Business," as well as Part I, Item 1A, “Risk Factors” of this Form 10-K for additional important information regarding dividends declared on our taxable income.
Please refer to "Operating and Regulatory Structure" within Part I, Item 1, "Business," as well as Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K for additional important information regarding our deferred tax hedge gains and dividends declared on our taxable income.
The following table provides details on the “net receipts (payments) on derivative instruments” shown on our consolidated statements of cash flows for the periods indicated: Year Ended December 31, Cash received (paid) by instrument: 2024 2023 2022 ($s in thousands) Interest rate swaps: Net variation margin received $ 146,379 $ — $ — Net periodic interest (1) — — — 146,379 — — U.S.
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: Year Ended December 31, Cash received or paid by instrument: 2025 2024 2023 ($s in thousands) Interest rate swaps: Net variation margin (paid) received $ (204,751) $ 146,379 $ — Net periodic interest (1) 49,457 — — (155,294) 146,379 — U.S.
We continuously monitor our liquidity, especially with potential risk events on the horizon, such as uncertainty regarding Federal Reserve policy decisions, the size of the Federal Reserve’s balance sheet, quantitative tightening or easing measures, the frequent potential for a government shutdown, and the impact on global markets stemming from global central bank policies.
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.
Our Agency CMBS IO are Class X1 from Freddie Mac Series K deals from which interest continues to be advanced even in the event of an underlying default up until liquidation. According to Freddie Mac, 99.8% of the loans in K-deals are current as of September 2024.
Our Agency CMBS IO are from Freddie Mac Series K deals from which interest continues to be advanced even in the event of an underlying default up until liquidation. According to Freddie Mac, 99.7% of the loans in K-deals are current as of December 2025.
Due to these amounts and other temporary and permanent differences between GAAP net income and REIT taxable income, coupled with the degree of uncertainty about the trajectory of interest rates, we cannot reasonably estimate how much the deferred tax hedge gains to be recognized will impact our dividend declarations during 2025 or in any given year.
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 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. Our perception of the liquidity of our investments and market conditions significantly influences our targeted leverage.
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.
Please refer to Note 5 of the Notes to the Consolidated Financial Statements for additional information. (4) 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. (5) Constant prepayment rate (“CPR”) represents the 3-month CPR of Agency RMBS held as of date indicated.
(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.
Please also refer to Note 1 of our Notes to the Consolidated Financial Statements included within Part II, Item 8 of this Annual Report on Form 10-K for additional information related to significant accounting policies. Fair Value Measurements .
Please also refer to Note 1 of our Notes to the Consolidated Financial Statements included within Part II, Item 8 of this Annual Report on Form 10-K for additional information related to significant accounting policies. Fair Value Measurements . The fair value of our Agency MBS is based on prices received from an independent third-party pricing service.
These demands are referred to as “margin calls,” and if we fail to meet any margin call, our lenders have the right to terminate the repurchase agreement and sell any collateral pledged.
If we fail to meet any margin call, our lenders have the right to terminate the repurchase agreement and sell any collateral pledged.
We deployed these proceeds into purchases of higher coupon Agency RMBS and to cover increased initial margin requirements related to our interest rate swaps. Our liquidity fluctuates based on our investment activities, leverage, capital raising activities, and changes in the fair value of our investments and derivative instruments.
We partially deployed these proceeds into Agency RMBS and to post initial margin requirements related to a larger hedging portfolio. Our liquidity fluctuates based on our investment activities, leverage, capital raising activities, and changes in the fair value of our investments and derivative instruments.
(7) 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.
(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.
Year Ended Reconciliations of GAAP to Non-GAAP Financial Measures: December 31, 2024 December 31, 2023 ($s in thousands except per share data) Comprehensive income to common shareholders (GAAP) $ 92,217 $ 9,020 Less: Change in fair value of investments (1) 157,845 (90,429) Change in fair value of derivative instruments, net (2) (274,966) 28,808 EAD to common shareholders (non-GAAP) $ (24,904) $ (52,601) Average common shares outstanding 70,766,410 54,809,462 EAD per common share (non-GAAP) $ (0.35) $ (0.96) Net interest income (loss) (GAAP) $ 5,877 $ (7,931) Net periodic interest from interest rate swaps 16,105 — Economic net interest income (expense) (non-GAAP) 21,982 (7,931) TBA drop loss (3) (2,694) (4,097) Total operating expenses (36,498) (32,879) Preferred stock dividends (7,694) (7,694) EAD to common shareholders (non-GAAP) $ (24,904) $ (52,601) Net interest spread (GAAP) (0.81) % (1.41) % Net periodic interest as a percentage of average repurchase borrowings 0.28 % — % Economic net interest spread (non-GAAP) (0.53) % (1.41) % (1) Amount includes realized and unrealized gains and losses due to changes in the fair value of the Company’s MBS.
Year Ended Reconciliations of GAAP to Non-GAAP Financial Measures: December 31, 2025 December 31, 2024 ($s in thousands except per share data) Comprehensive income to common shareholders (GAAP) $ 354,303 $ 92,217 Less: Change in fair value of investments (1) (416,278) 157,845 Change in fair value of derivative instruments, net (2) 173,963 (274,966) EAD to common shareholders (non-GAAP) $ 111,988 $ (24,904) Average common shares outstanding 124,128,422 70,766,410 EAD per common share (non-GAAP) $ 0.90 $ (0.35) Net interest income (GAAP) $ 114,356 $ 5,877 Net periodic interest earned from interest rate swaps 45,063 16,105 Economic net interest income (non-GAAP) 159,419 21,982 TBA drop income (loss) (3) 15,807 (2,694) Total operating expenses (53,047) (36,498) Preferred stock dividends (10,191) (7,694) EAD to common shareholders (non-GAAP) $ 111,988 $ (24,904) Net interest spread (GAAP) 0.47 % (0.81) % Net periodic interest from interest rate swaps as a percentage of average repurchase borrowings 0.48 % 0.28 % Economic net interest spread (non-GAAP) 0.95 % (0.53) % (1) Amount includes realized and unrealized gains and losses due to changes in the fair value of the Company’s MBS.
The following table presents information regarding the balances of our repurchase agreement borrowings as of and for 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 December 31, 2024 $ 6,563,120 $ 6,431,743 $ 6,568,805 September 30, 2024 6,423,890 5,943,805 6,461,475 June 30, 2024 5,494,428 5,410,282 5,529,856 March 31, 2024 5,284,708 5,365,575 5,469,434 December 31, 2023 5,381,104 5,168,821 5,381,354 September 30, 2023 5,002,230 4,773,435 5,037,440 June 30, 2023 4,201,901 3,447,406 4,203,788 March 31, 2023 2,937,124 2,713,481 2,959,263 December 31, 2022 2,644,405 2,727,274 3,072,483 September 30, 2022 2,991,876 2,398,268 3,082,138 June 30, 2022 2,202,648 2,486,217 2,949,918 March 31, 2022 2,952,802 2,806,212 2,973,475 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.
The following table presents information regarding the balances of our repurchase agreement borrowings as of and for 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 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 September 30, 2024 6,423,890 5,943,805 6,461,475 June 30, 2024 5,494,428 5,410,282 5,529,856 March 31, 2024 5,284,708 5,365,575 5,469,434 December 31, 2023 5,381,104 5,168,821 5,381,354 September 30, 2023 5,002,230 4,773,435 5,037,440 June 30, 2023 4,201,901 3,447,406 4,203,788 March 31, 2023 2,937,124 2,713,481 2,959,263 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.
The following tables provide details on realized and unrealized gains and losses within our investment and interest rate hedging portfolios for the periods indicated: Year Ended December 31, 2024 ($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 $ — $ (144,139) $ (18,642) $ (162,781) Agency CMBS (1,506) 1,073 747 314 CMBS IO — 531 3,861 4,392 Other non-Agency and loans — 183 47 230 Subtotal (1,506) (142,352) (13,987) (157,845) TBA securities (1) 38,530 (77,042) — (38,512) Net gain (loss) on investments $ 37,024 $ (219,394) $ (13,987) $ (196,357) Interest rate hedging portfolio: U.S.
Treasury futures (6,527) (1,325) — (7,852) Net loss on interest rate hedges $ (28,370) $ (179,369) $ — $ (207,739) Total net gain $ 36,539 $ 221,218 $ 45,428 $ 303,185 Year Ended December 31, 2024 ($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 $ — $ (144,139) $ (18,642) $ (162,781) Agency CMBS (1,506) 1,073 747 314 CMBS IO — 531 3,861 4,392 Other investments — 183 47 230 Subtotal (1,506) (142,352) (13,987) (157,845) TBA securities (1) 38,530 (77,042) — (38,512) Net gain (loss) on investments $ 37,024 $ (219,394) $ (13,987) $ (196,357) Interest rate hedging portfolio: U.S.
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.
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. We designate certain derivative instruments as interest rate hedges for tax purposes.
(2) Represents the weighted average market yield projected using cash flows generated off the forward curve based on market prices as of the dates indicated and assuming zero volatility.
(2) Represents the weighted average market yield projected using cash flows generated off the forward curve based on market prices as of the dates indicated and assuming zero volatility. Repurchase Agreements Our repurchase agreement borrowings increased to $14 billion as of December 31, 2025 from $7 billion as of December 31, 2024.
In the current macroeconomic environment, we are not actively purchasing CMBS or CMBS IO as current risk versus reward remains unattractive relative to Agency RMBS. Our non-Agency CMBS IO investments are nearing maturity and have very little amortized cost remaining; any changes in actual payments may result in large swings in yield as shown below.
Our non-Agency CMBS IO investments are nearing maturity and have very little amortized cost remaining; any changes in actual payments may result in large swings in yield as shown below.
Year Ended ($s in thousands) December 31, 2024 December 31, 2023 Gain (loss) on derivative instruments, net $ 288,377 $ (32,905) Less: TBA drop loss 2,694 4,097 Net periodic interest from interest rate swaps (16,105) — Change in fair value of derivative instruments, net $ 274,966 $ (28,808) (3) TBA drop income (loss) 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. 30 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.
Year Ended ($s in thousands) December 31, 2025 December 31, 2024 (Loss) gain on derivative instruments, net $ (113,093) $ 288,377 Less: TBA drop (income) loss (15,807) 2,694 Net periodic interest earned from interest rate swaps (45,063) (16,105) Change in fair value of derivative instruments, net $ (173,963) $ 274,966 (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.
In addition, management reviews the prices received for each security by comparing those prices to a second pricing source. If the price of a security is obtained from quoted prices for similar instruments or model-derived valuations whose inputs are observable, the security is classified as a level 2 security.
Management reviews the prices it receives from the pricing service for reasonableness using additional third-party pricing services. If the price of a security is obtained from quoted prices for similar instruments or model-derived valuations whose inputs are observable, the security is classified as a level 2 security.
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.
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.
Treasury futures 174,108 Interest rate swaps 152,781 Total net change in fair value 130,532 Comprehensive income to common shareholders 92,217 Capital transactions: Net proceeds from stock issuance (2) 338,315 Common dividends declared (116,331) Balance as of December 31, 2024 (1) $ 1,073,436 $ 12.70 (1) Amounts represent total shareholders' equity less the aggregate liquidation preference of the Company's preferred stock of $111.5 million, in thousands and on a per common share basis.
Treasury futures (7,852) Interest rate swaps (194,715) Interest rate swaptions (4,045) Total net change in fair value 258,122 Comprehensive income to common shareholders 354,303 Capital transactions: Net proceeds from stock issuance (2) 1,179,983 Common dividends declared (257,078) Balance as of December 31, 2025 (1) $ 2,350,644 $ 13.45 (1) Amounts represent total shareholders' equity less the aggregate liquidation preference of the Company's preferred stock of $111.5 million, in thousands and on a per common share basis.
(2) Fair value of TBAs is the implied market value of the underlying Agency security as of the end of the period. (3) 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.
(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.
Treasury futures (735,000) (4,180,000) 4-5 year interest rate swaps (pay-fixed rate of 3.42%) (1,275,000) — 6-7 year interest rate swaps (pay-fixed rate of 3.61%) (3,085,000) — 9-10 year interest rate swaps (pay-fixed rate of 3.83%) (1,025,000) — Please refer to Note 5 of the Notes to the Consolidated Financial Statements for details on our interest rate hedging instruments as well as “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of this Annual Report on Form 10-K.
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 7 and “Quantitative and Qualitative Disclosures about Market Risk” within Item 7A of this Annual Report on Form 10-K.
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.
These borrowings were used to partially finance our purchases of Agency MBS during the year ended December 31, 2025. 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.
Treasury rates for the past year and information regarding market spreads as of and for the periods indicated: 27 Market Spreads as of: Change in Spreads YTD Investment Type: (1) December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 Agency RMBS: 2.0% coupon 89 83 86 84 76 13 2.5% coupon 93 83 87 84 78 15 4.0% coupon 69 71 78 74 74 (5) 4.5% coupon 68 70 73 71 73 (5) 5.0% coupon 69 66 67 68 69 — 5.5% coupon 72 64 68 65 66 6 6.0% coupon 74 54 65 62 60 14 Agency DUS (Agency CMBS) (2) 96 104 95 94 105 (9) Freddie K AAA IO (Agency CMBS IO) (2) 120 135 150 165 180 (60) AAA CMBS IO (Non-Agency CMBS IO) (2) 119 122 135 168 225 (106) (1) Option adjusted spreads (“OAS”) are based on Company estimates using third-party models and market data.
Treasury and Secured Overnight Funding Rate (“SOFR”)-based swap rates for the year ended December 31, 2025 and information regarding market spreads as of and for the periods indicated: 28 Market Spreads as of: Change in Spreads YTD Investment Type: (1) December 31, 2025 September 30, 2025 June 30, 2025 March 31, 2025 December 31, 2024 Agency RMBS: 2.0% coupon 70 85 96 85 89 (19) 2.5% coupon 73 90 99 90 93 (20) 4.0% coupon 50 65 78 65 69 (19) 4.5% coupon 45 64 76 65 68 (23) 5.0% coupon 46 66 77 66 69 (23) 5.5% coupon 51 72 82 69 72 (21) 6.0% coupon 54 74 86 66 74 (20) Agency CMBS (2) 82 96 102 94 96 (14) (1) Option adjusted spreads (“OAS”) are based on Company estimates using third-party models and market data.
Treasury futures, including put options: (2) Net variation margin received 218,399 (214,622) 46,460 (Paid) received upon maturity/termination (46,955) 214,904 662,549 171,444 282 709,009 TBA securities: Received (paid) upon settlement 45,106 (96,250) (306,369) Interest rate swaptions: Received upon maturity/termination — — 50,940 — — 50,940 Net receipts (payments) on derivative instruments $ 362,929 $ (95,968) $ 453,580 (1) Net periodic interest from our effective interest rate swaps are recognized as income or expense during the period earned (incurred), but the cash is not received or paid until the anniversary of each agreement’s effective date or upon maturity.
Treasury futures Premium paid at inception (11,989) — — Received upon maturity/termination 1,481 — 7,448 (10,508) — 7,448 TBA securities: Received (paid) upon settlement 59,812 45,106 (96,250) Net (payments) receipts on derivative instruments $ (153,439) $ 362,929 $ (95,968) (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.
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.
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.
Our liquidity as of December 31, 2024, was $658.3 million, which consisted of unrestricted cash of $377.1 million and unencumbered Agency MBS with a fair value of $281.2 million. Our liquidity as of December 31, 2023, was $453.6 million.
Our liquidity as of December 31, 2025, was approximately $1.4 billion, which consisted of unrestricted cash of $531 million, unpledged Agency MBS with a fair value of $901 million, and noncash collateral pledged by our counterparties of $1 million. Our liquidity as of December 31, 2024, was $658 million.
The following table presents information about our interest-earning assets and interest-bearing liabilities and their performance for the periods indicated: Year Ended December 31, 2024 2023 ($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 $ 289,781 $ 6,477,575 4.47 % $ 177,695 $ 4,621,304 3.85 % Agency CMBS 3,247 106,641 3.00 % 3,713 124,157 2.96 % CMBS IO (5) 11,029 140,353 7.86 % 9,666 202,261 4.78 % Non-Agency MBS and other investments 78 1,396 5.04 % 128 2,377 5.28 % MBS and loans $ 304,135 $ 6,725,965 4.52 % $ 191,202 $ 4,950,099 3.86 % Cash equivalents 15,399 16,315 Total interest income $ 319,534 $ 207,517 Repurchase agreement financing (313,657) 5,790,037 (5.33) % (215,448) 4,034,561 (5.27) % Net interest income (expense)/net interest spread $ 5,877 (0.81) % $ (7,931) (1.41) % Net periodic interest 16,105 0.28 % — — % Economic net interest income (expense)/spread (6) $ 21,982 (0.53) % $ (7,931) (1.41) % (1) Average balance for assets is calculated as a simple average of the daily amortized cost and excludes securities pending settlement if applicable.
The following table presents information about our interest-earning assets and interest-bearing liabilities and their performance for the periods indicated: Year Ended December 31, 2025 2024 ($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 $ 487,894 10,076,482 4.84 % $ 289,781 $ 6,477,575 4.47 % Agency CMBS 18,051 422,520 4.21 % 3,247 106,641 3.00 % CMBS IO (5) 8,169 101,600 8.04 % 11,029 140,353 7.86 % Other investments 49 887 3.99 % 78 1,396 5.04 % Subtotal $ 514,163 $ 10,601,489 4.85 % $ 304,135 $ 6,725,965 4.52 % Cash equivalents 19,358 15,399 Total interest income $ 533,521 $ 319,534 Repurchase agreement financing (419,165) 9,431,455 (4.38) % (313,657) 5,790,037 (5.33) % Net interest income (expense)/spread $ 114,356 0.47 % $ 5,877 (0.81) % Net periodic interest (6) 45,063 0.48 % 16,105 0.28 % Economic net interest income (expense)/spread (6) $ 159,419 0.95 % $ 21,982 (0.53) % *Table Note: Data may not foot due to rounding.
RESULTS OF OPERATIONS Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 Net Interest Expense Net interest expense and net interest spread improved for the year ended December 31, 2024, compared to the year ended December 31, 2023.
RESULTS OF OPERATIONS Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024 Net Interest Income and Economic Net Interest Income Net interest income and net interest spread increased for the year ended December 31, 2025, compared to the year ended December 31, 2024 due to the purchases of higher yielding Agency MBS over the past year.
To determine each security's valuation, the pricing service uses either a market approach or income approach, which rely on observable market data. The market approach uses prices and other relevant information that is generated by market transactions of identical or similar securities, while the income approach uses valuation techniques to convert estimated future cash flows to a discounted present value.
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 also use an income approach, which uses valuation techniques such as discounted cash flow modeling.
As a result, net gains from our interest rate hedging portfolio exceeded the net loss in fair value of our investments by $130.5 million, which also declined in fair value due to wider credit spreads as of December 31, 2024 versus December 31, 2023. During the year ended December 31, 2023, the 10-year U.S.
For the year ended December 31, 2024, net gains from our interest rate hedging portfolio exceeded the net loss in fair value of our investments by $131 million. Through repositioning of our interest rate hedging portfolio, we managed through the volatile interest rate environment of 2024 to offset the negative impact of the increasing 10-year U.S.
If we make dividend distributions in excess of our portfolio cash flows during the period, whether for purposes of meeting our REIT distribution requirements or other reasons, those distributions are generally funded either through our existing cash balances or through the return of principal from our investments (either through repayment or sale).
We fund dividend distributions through portfolio cash flows, existing cash balances, or through the return of principal from our investments (either through repayment or sale).
The following table provides certain information regarding our CMBS and CMBS IO as of the dates indicated: December 31, 2024 ($s in thousands) Amortized Cost Fair Value WAVG Life Remaining (1) WAVG Market Yield (2) Agency CMBS $ 99,848 $ 95,463 2.6 4.76 % Agency CMBS IO 109,335 103,606 5.7 7.21 % Non-Agency CMBS IO 8,256 10,780 1.3 26.42 % Total $ 217,439 $ 209,849 December 31, 2023 ($s in thousands) Amortized Cost Fair Value WAVG Life Remaining (1) WAVG Market Yield (2) Agency CMBS $ 121,799 $ 115,595 4.1 4.74 % Agency CMBS IO 140,824 133,302 5.9 5.19 % Non-Agency CMBS IO 26,490 26,416 1.1 13.32 % Total $ 289,113 $ 275,313 (1) Represents the weighted average life remaining in years based on contractual cash flows as of the dates indicated.
The following table provides certain information regarding our CMBS and CMBS IO as of the dates indicated: December 31, 2025 ($s in thousands) Par/Notional Value Amortized Cost Fair Value WAVG Life Remaining (1) WAVG Market Yield (2) Agency CMBS $ 1,210,953 $ 1,213,107 $ 1,218,343 5.5 4.25 % CMBS IO 6,000,525 87,557 87,285 4.7 10.40 % Total $ 1,300,664 $ 1,305,628 December 31, 2024 ($s in thousands) Par/Notional Value Amortized Cost Fair Value WAVG Life Remaining (1) WAVG Market Yield (2) Agency CMBS $ 99,636 $ 99,848 $ 95,463 2.6 4.76 % CMBS IO 8,647,176 117,591 114,386 4.5 12.65 % Total $ 217,439 $ 209,849 (1) Represents the weighted average life remaining in years based on contractual cash flows as of the dates indicated.
Examples of these observable inputs and assumptions used in the valuation techniques include market interest rates, credit spreads, cash flows, and projected prepayment speeds, among other factors. Management reviews the prices it receives from the pricing service for reasonableness using broker quotes as well as other third-party pricing services.
Examples of the observable inputs and assumptions used in the valuation techniques include market interest rates, credit spreads, and projected prepayment speeds, among other factors. If the fair value of a security is not available from a third-party pricing service, we may estimate the fair value of the security through a variety of methods using observable market data.
(2) The Company did not use put options on U.S. Treasury futures during the year ended December 31, 2024. 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 levels of taxable income.
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.
Please refer to “Forward-Looking Statements” contained within this Item 7 for additional information.
Please refer to “Forward-Looking Statements” contained within Part I, Item 1, “Business” of the Annual Report on Form 10-K for additional information.
Our remaining net deferred tax hedge gain was estimated to be $719.0 million as of December 31, 2024, which will be amortized into REIT taxable income over several years. As of December 31, 2024, we also had $557.9 million in capital loss carryforwards, all of which will expire by either December 31, 2027 or by December 31, 2028.
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. Our remaining net deferred tax hedge gain was estimated to be $558 million as of December 31, 2025, which will be amortized into REIT taxable income over several years.
The following charts compare the composition of our MBS portfolio (including TBAs) as of the dates indicated: We purchased approximately $2.2 billion of higher coupon Agency RMBS during the year ended December 31, 2024, of which $335.1 million were pending settlement as of December 31, 2024.
We added $8.2 billion of Agency RMBS and $1.2 billion of Agency CMBS during the year ended December 31, 2025, of which $809 million were pending settlement as of December 31, 2025.
Non-GAAP Financial Measures In evaluating the Company’s financial and operating performance, management considers book value per common share, total economic return (loss) to common shareholders, and other operating results presented in accordance with GAAP as well as certain non-GAAP financial measures, which 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.
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.
Our non-Agency CMBS IO were all originated prior to 2018 with a weighted average remaining life of less than 2 years. The underlying loans for the non-Agency CMBS IO securities are collateralized by a number of different property types including: 27% retail, 40% office, 4% multifamily, 10% hotel and 19% all other real estate categories.
Our non-Agency CMBS IO were all originated prior to 2018 and are backed by loans collateralized by a number of different property types, such as multifamily, office, retail, hotels, industrial, storage, and others.
During the year ended December 31, 2024, we issued 10,500,000 shares of common stock through a public offering, resulting in proceeds of $124.5 million, net of issuance costs. We also issued 16,756,835 shares of common stock through our ATM program, resulting in proceeds of $207.6 million, net of broker commissions and fees.
We may also periodically use liquidity to repurchase shares of the Company’s stock. During the year ended December 31, 2025, we issued 90,126,672 shares of common stock through our ATM program, resulting in proceeds of $1.2 billion, net of broker commissions and fees.
Reconciliations of each non-GAAP measure to certain GAAP financial measures are provided below.
These non-GAAP measures should be considered as supplemental in nature and not as a substitute for our operating results in accordance with GAAP. Reconciliations of each non-GAAP measure to certain GAAP financial measures are provided below.
Despite the growth in our balance sheet, we managed our operating expenses and lowered our expense ratio by approximately 70 basis points compared to the prior year. 28 The following table summarizes the changes in the Company's financial position during 2024: ($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 December 31, 2023 (1) $ 759,235 $ 13.31 Net interest income $ 5,877 G & A and other operating expenses (36,498) Preferred stock dividends (7,694) Changes in fair value: MBS and loans $ (157,845) TBAs (38,512) U.S.
Over this decade through December 31, 2025, Dynex shareholders have experienced a 67% cumulative total return, or approximately 9% annualized with dividends reinvested. 29 The following table summarizes the changes in the Company's financial position during the year ended December 31, 2025: ($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 December 31, 2024 (1) $ 1,073,436 $ 12.70 Net interest income $ 114,356 Periodic interest from interest rate swaps 45,063 G & A and other operating expenses (53,047) Preferred stock dividends (10,191) Changes in fair value: MBS and other $ 416,278 TBAs 94,646 U.S.
Treasury futures 3,645 (2,056) — 1,589 Net gain (loss) on interest rate hedges $ 237,660 $ (248,501) $ — $ (10,841) Total net gain (loss) $ 64,967 $ (30,287) $ 22,843 $ 57,523 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 (loss) for interest rate swaps consists of net periodic interest benefit of $16.1 million for the year ended December 31, 2024.
Treasury futures $ (46,955) $ 221,063 $ — $ 174,108 Interest rate swaps 16,105 136,676 — 152,781 Net (loss) gain on interest rate hedges $ (30,850) $ 357,739 $ — $ 326,889 Total net gain (loss) $ 6,174 $ 138,345 $ (13,987) $ 130,532 (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.
Operating Expenses Operating expenses for the year ended December 31, 2024, increased $3.6 million compared to the year ended December 31, 2023, primarily due to accelerated recognition of share-based compensation expense for certain stock incentive awards granted in March 2024 to a retirement eligible employee.
Operating Expenses Operating expenses for the year ended December 31, 2025 increased $17 million compared to the year ended December 31, 2024 due to higher salary, bonus, and share-based compensation expenses, primarily resulting from an increase in performance-based compensation accruals and from the hiring of new employees.
The fair value of our Agency MBS, as well as a majority of our non-Agency MBS, is based on estimated prices provided by third-party pricing services who have access to observable market information through trading desks and various information services. Most of our MBS are substantially similar to securities actively traded and observable in the market.
Most of our MBS are substantially similar to securities actively traded and observable in the market.
Removed
EXECUTIVE OVERVIEW In late 2023, the 10-year U.S. Treasury approached 5% based on inflation fears, but into the end of 2023 and early 2024, there was optimism that many rate cuts were on the near term horizon which spurred longer term rates to fall in the early part of 2024.
Added
EXECUTIVE OVERVIEW During 2025, shifting U.S. policy and persistent global uncertainty created a favorable backdrop for high-quality, liquid assets like Agency MBS. The second Trump Administration implemented significant tariff increases that generated significantly higher customs revenues and passed the One Big Beautiful Bill Act extending tax provisions from 2017 with additional benefits.
Removed
As the year progressed and more economic data was available, it became clear that growth was still moderate and the early outlook for rate cuts was too aggressive. Beginning in September, the Federal Reserve began to cut interest rates, reversing the direction of short-term rates for the first time since March of 2022.
Added
Despite these policy shifts and stricter immigration enforcement that contributed to unemployment rising to over 4.0% by year-end, the U.S. economy demonstrated resilience with 2.5% GDP growth through the first three quarters.
Removed
The Federal Funds rate cut in September was followed by two more rate cuts before year end. This shift in policy and the outlook for 2025 changed the shape of the yield curve, and by the end of 2024, the yield curve was no longer inverted with short-term rates below longer-term rates.
Added
The combination of moderating inflation, a softening labor market, and policy-driven uncertainty enabled the Federal Reserve to reduce the Federal Funds Rate by 75 basis points in the second half of 2025, bringing the target range to 3.50-3.75%.
Removed
This change in the shape of the yield curve allows levered mortgage investors, like Dynex, to earn a positive carry by investing in longer term bonds with a higher yield than its repurchase based financing cost which is generally tied to shorter-term rates.
Added
Additionally, the Fed ended its balance sheet runoff in December, announcing Treasury bill purchases to maintain stable reserve levels and reduce funding market volatility. With this backdrop, Agency MBS emerged as one of the better performing sectors within the fixed-income 27 market due to favorable technical and fundamental drivers. The U.S.
Removed
Mortgage spreads to Treasuries remained elevated for most of 2024 which provided for solid opportunities to buy assets that will generate good returns over the long term. Market Data The charts below show the range of U.S.
Added
Treasury yield curve steepened as short-term rates fell more rapidly than long-term yields while Agency MBS spreads substantially tightened relative to Treasuries. Interest rate volatility declined, which aided a reduction in hedging costs. Supply/demand dynamics were favorable overall as new mortgage originations remained muted while demand increased. The charts below show the range of U.S.
Removed
Summary of Results As a result of capital raising and a more favorable investing environment, we significantly grew our balance sheet during the year ended December 31, 2024. Our total assets increased over 28%, and our total shareholders’ equity increased over 36%.
Added
Summary of 2025 Financial Performance Our 2025 results directly reflected our ability to capitalize on this favorable environment while maintaining disciplined risk management.
Removed
During the year, we added approximately $2.2 billion in higher coupon Agency RMBS at a lower cost of financing, which improved our net interest income to $5.9 million versus a loss of $(7.9) million in the prior year. As the yield curve un-inverted, we repositioned our hedges, changing the majority of our interest rate derivatives from U.S.

… 74 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

12 edited+1 added−10 removed30 unchanged
Biggest changeDecember 31, 2024 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 3.6 % 33.0 % 1.9 % 17.4 % (2.0) % (18.3) % (4.1) % (37.1) % CMBS/ CMBS IO 0.1 % 0.8 % — % 0.3 % — % (0.3) % (0.1) % (0.8) % TBAs 1.0 % 9.6 % 0.6 % 5.3 % (0.7) % (6.0) % (1.3) % (12.2) % Interest rate hedges (5.0) % (46.2) % (2.5) % (22.6) % 2.3 % 21.2 % 4.6 % 41.9 % Total (0.3) % (2.8) % — % 0.4 % (0.4) % (3.4) % (0.9) % (8.2) % December 31, 2023 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 3.5 % 33.8 % 1.8 % 17.9 % (2.0) % (19.4) % (4.1) % (39.6) % CMBS/ CMBS IO 0.1 % 0.9 % — % 0.5 % — % (0.5) % (0.1) % (0.9) % TBAs 0.6 % 5.9 % 0.3 % 3.3 % (0.4) % (4.0) % (0.9) % (8.5) % Interest rate hedges (5.3) % (51.6) % (2.6) % (25.3) % 2.5 % 24.6 % 5.0 % 48.7 % Total (1.1) % (11.0) % (0.4) % (3.6) % 0.1 % 0.8 % — % (0.3) % December 31, 2024 December 31, 2023 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 (0.3) % (2.5) % 0.1 % 1.4 % +50 +100 (0.7) % (6.6) % 0.1 % 0.8 % Flattening +50 +25 (0.3) % (2.5) % — % (0.5) % +100 +50 (0.5) % (4.9) % — % (0.3) % Bullish Steepening -25 +0 0.1 % 1.4 % 0.3 % 2.5 % -50 -10 0.3 % 2.6 % 0.4 % 3.6 % -75 -25 0.4 % 3.6 % 0.4 % 3.8 % Flattening +0 -25 — % (0.4) % (0.2) % (2.0) % -10 -50 (0.1) % (1.1) % (0.5) % (4.7) % -25 -75 (0.3) % (3.0) % (0.9) % (8.8) % (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.
Biggest changeTreasury rates in Item 7, “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. 32 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 0.3 % 2.3 % 0.1 % 1.2 % (0.1) % (1.1) % (0.3) % (2.2) % CMBS IO — % 0.1 % — % — % — % — % — % (0.1) % 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) % December 31, 2024 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 3.6 % 33.0 % 1.9 % 17.4 % (2.0) % (18.3) % (4.1) % (37.1) % CMBS 0.1 % 0.5 % — % 0.2 % — % (0.2) % (0.1) % (0.5) % CMBS IO — % 0.3 % — % 0.1 % — % (0.1) % — % (0.3) % TBAs 1.0 % 9.6 % 0.6 % 5.3 % (0.7) % (6.0) % (1.3) % (12.2) % Interest rate hedges (5.0) % (46.2) % (2.5) % (22.6) % 2.3 % 21.2 % 4.6 % 41.9 % Total (0.3) % (2.8) % — % 0.4 % (0.4) % (3.4) % (0.9) % (8.2) % December 31, 2025 December 31, 2024 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) % (1.4) % (0.3) % (2.5) % +50 +100 (0.6) % (5.3) % (0.7) % (6.6) % Flattening +50 +25 (0.2) % (1.4) % (0.3) % (2.5) % +100 +50 (0.4) % (3.4) % (0.5) % (4.9) % Bullish Steepening -25 +0 0.1 % 0.5 % 0.1 % 1.4 % -50 -10 0.1 % 0.6 % 0.3 % 2.6 % -75 -25 — % 0.2 % 0.4 % 3.6 % Flattening +0 -25 (0.1) % (1.1) % — % (0.4) % -10 -50 (0.4) % (3.0) % (0.1) % (1.1) % -25 -75 (0.7) % (6.2) % (0.3) % (3.0) % (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.
Estimates of prepayment speeds can vary significantly by investor for the same security, and 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 frequently adjust the composition of our investments and hedges throughout any given period.
Estimates of prepayment speeds can vary significantly by investor for the same security, and 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.
In addition, based on market conditions, our leverage, and our liquidity profile, we may decide to not reinvest the cash flows we receive from our investment portfolio even when attractive reinvestment opportunities are available, or we may decide to reinvest in assets with lower yield but greater liquidity.
In addition, based on market conditions, our leverage, and our liquidity profile, we may decide to not reinvest the cash flows we receive from our investment 35 portfolio even when attractive reinvestment opportunities are available, or we may decide to reinvest in assets with lower yield but greater liquidity.
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.
These risks can and do cause fluctuations in our liquidity, comprehensive income and book value 31 as discussed below. Interest Rate Risk Investing in interest-rate sensitive investments such as MBS and TBA securities subjects us to interest rate risk.
In addition, declines in the market value of our investments pledged as collateral for repurchase 37 agreement borrowings and for our derivative instruments may result in counterparties initiating margin calls for additional collateral.
In addition, declines in the market value of our investments pledged as collateral for repurchase agreement borrowings and for our derivative instruments may result in counterparties initiating margin calls for additional collateral.
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: December 31, 2024 December 31, 2023 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/+50 (2) (1.1) % (10.4) % (1.1) % (10.8) % +10 (0.6) % (5.2) % (0.5) % (5.4) % -10 0.6 % 5.2 % 0.5 % 5.4 % -20/-50 (2) 1.1 % 10.4 % 1.1 % 10.8 % (1) Includes changes in market value of our MBS investments, including TBA securities.
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: December 31, 2025 December 31, 2024 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/+50 (2) (1.0) % (8.4) % (1.1) % (10.4) % +10 (0.5) % (4.2) % (0.6) % (5.2) % -10 0.5 % 4.2 % 0.6 % 5.2 % -20/-50 (2) 1.0 % 8.4 % 1.1 % 10.4 % (1) Includes changes in market value of our MBS investments, including TBA securities.
Other factors that could impact credit spreads include technical issues, such as supply and demand for a particular type of security or Federal Reserve monetary policy. We do not hedge spread risk given the complexity of hedging credit spreads and, in our opinion, the lack of liquid instruments available to use as hedges.
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.
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.
The projections for market value do not assume any change in credit spreads. 33 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.
However, if higher yielding investments prepay at a faster rate than anticipated, we may be unable to reinvest the repayments at comparable yields. Our net interest income may be negatively impacted if the proceeds from prepayments are reinvested into assets with lower yields.
In a declining interest rate environment, higher yielding investments will typically prepay at a faster rate than anticipated. If we are unable to reinvest the repayments at comparable yields, our future net interest income may be negatively impacted. In an increasing interest rate environment, lower yielding assets with a fixed rate may extend or prepay slower than anticipated.
There are no prepayment protections if the loan defaults and is partially or wholly repaid earlier as a result of loss mitigation actions taken by the underlying loan servicer.
Loans underlying our CMBS and CMBS IO securities typically have prepayment protection provisions (such as prepayment lock-outs) or prepayment compensation provisions (such as yield maintenance or prepayment penalties). There are no prepayment protections if the loan defaults and is partially or wholly repaid earlier as a result of loss mitigation actions taken by the underlying loan servicer.
In an increasing interest rate environment, lower yielding assets with a fixed rate may extend or prepay slower than anticipated. Because we finance our investments with short-term repurchase agreement financing, we may be required to finance our investments at a higher interest rate without the ability to reinvest principal into higher yielding securities.
Because we finance our investments with short-term repurchase agreement 34 financing, we may be required to finance our investments at a higher interest rate without the ability to reinvest principal into higher yielding securities, which would cause a decline in our net interest income.
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 34 period to period (as can be seen by the graph for U.S.
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.
Removed
There can be no assurance that assumed events used to model the results shown below will occur or that other events will not occur that will affect the outcomes; therefore, the modeled results shown in the tables below and all related disclosures constitute forward-looking statements.
Added
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.
Removed
Treasury rates in Item 7, “Executive Overview”), the tables below show the projected sensitivity of our financial instruments and equity to both parallel and non-parallel shifts in market interest rates.
Removed
The projections for market value do not assume any change in credit spreads. 35 Interest rates as of December 31, 2024, were 70-80 basis points higher versus December 31, 2023.
Removed
As interest rates increase, the duration of our investment portfolio, net of hedges, increases, so models project the percentage change in fair value of our investments, net of hedges and our common equity will show a sharper percentage change in value in bearish-rate scenarios as of December 31, 2024 versus December 31, 2023.
Removed
The percentage change is also magnified because we held a larger portfolio with higher coupons as of December 31, 2024 versus December 31, 2023.
Removed
Conversely, models project the percentage change in fair value of our investments, net of hedges and our common equity will show a smaller percentage change in value in bullish-rate scenarios as of December 31, 2024 versus December 31, 2023.
Removed
Loans 36 underlying our CMBS and CMBS IO securities typically have some form of prepayment protection provisions (such as prepayment lock-outs) or prepayment compensation provisions (such as yield maintenance or prepayment penalties).
Removed
Because CMBS IO consist of rights to interest on the underlying commercial mortgage loan pools and do not have rights to principal payments on the underlying loans, prepayment risk on these securities is particularly acute without these prepayment protection provisions.
Removed
Our prepayment risk as of December 31, 2024, has declined relative to prior periods as the majority of our MBS portfolio consists of securities owned near or below par and prepayment speeds have declined in the current higher interest rate environment.
Removed
As a result of rising financing costs, our net interest income could fall or could be negative for extended periods of time.

Other DX 10-K year-over-year comparisons