Dynex Capital, Inc. Q2 FY2025 earnings call

• Recognized and congratulated colleagues (e.g., Bob Nelson, Wayne Brockwell, etc.) for over twenty years of service. Announced appointment of Michael Angelo as Chief Legal Officer and Corporate Secretary. - Noted last quarter had market volatility but investment opportunity set for long-term total return remained intact. Focused on raising capital, deploying into cheap and liquid investments, and managing portfolio carefully. - Market capitalization as of June 30 over $1.5 billion, ~50% growth since June 2024. - Net interest income trending upwards; portfolio grew to $14 billion from $11 billion Q1, over 50% larger than last year; liquidity at quarter end $891 million, 55% of total equity. - Brought functions in-house to build world-class platform, added human capital to legal, IT, and accounting teams.

• Raised $560 million of new capital, stock performing well allowing capital raise at premium to book value. - Portfolio growth and leverage increased based on market conditions and liquidity; expect to continue raising capital and deploying into agency MBS and selectively into agency CMBS.

• Forward-looking statements subject to risks and uncertainties from unforeseen external factors. - Market volatility and changes in government policies as potential risks.

Q: About leverage range, mix of capital.

A: Smriti and T.J. discussed leverage flexing based on risk environment, preferred market spotty, focus on common equity.

Q: Update on book value.

A: T.J. said book value nearly unchanged from quarter end after accrued dividend.

Q: Thoughts on other investors in mortgage-backed space.

A: T.J. talked about banks needing rate cuts, money managers overweight, mortgage REITs as marginal buyer.

Q: Fed rate cuts impact on spreads.

A: T.J. discussed supply and demand, spread at current level is compelling.

Q: Coupon allocation between pools vs TBAs.

A: T.J. talked about TBA rolls and pool positions.

Q: Agency CMBS returns and portfolio fit.

A: Smriti and T.J. discussed agency CMBS's stable cash flows and return profile.

Q: Duration and hedge strategy.

A: T.J. discussed hedging focus on longer end, mix of swaps and treasuries.

Q: G&A expense with in-house functions.

A: Rob discussed G&A expenses with compensation increases and expected trend down