Dynex Capital, Inc. Q4 FY2025 earnings call

• The company has operated with a performance-first mentality and ethical stewardship of shareholders' capital since 2008, creating a repeatable and sustainable performance edge.
• From 2015 to 2025, Dynex shareholders experienced a 67% total return, or nearly 9% annualized with dividends reinvested, outperforming benchmarks. 2025 was outstanding with a 29.4% total shareholder return.
• The company has expanded, adding depth to the team, opening new offices in Richmond and New York City, and transitioned to T.J. Connelly as Chief Investment Officer. Separated CFO and COO roles, hired new COO Meekin Bennett.
• 2025 fourth quarter total economic return was 10.2%, full year 21.7%. Raised over $1 billion in 2025, book value increased, G&A expenses as a percentage of capital down year over year.

No specific product segment financial performance detailed in the transcript.

• Continue disciplined capital-raising strategy, issuing when accretive and deploying capital in investments generating economic returns above hurdle rate.
• Raised nearly $350 million in early January 2026.
• Anticipate spread tightening and policy support for housing finance to enhance risk-return profile of assets, with potential for modestly higher leverage in private portfolios.

• Volatility from human conflict, policy complexity, shifting rate expectations, and geopolitical crosscurrents.
• Prepayment risk in agency MBS due to micro-level factors and periodic interest rate volatility.
• Impact of GSE actions on spreads and hedging, including uncertainty around how GSEs will hedge their growing retained portfolios.

Q: Quantify incremental investment returns today and compare to year-end and 09/30 given spread tightening A: Today, hedged ROEs in mid-teens with leverage around seven times. With targeted leverage in low eights, mid to high teens ROEs. Spreads are roughly 150-300 basis points tighter than end of prior quarters.

Q: Probability of other politically motivated actions to improve housing affordability and lower mortgage rates A: Government intervention in housing is not new, and potential actions like lowering G fees are possible. Prepared for impacts of such interventions and model their effects on prepayment profiles.

Q: Appropriate size of portfolio in context of current opportunity set A: Opportunity set is growing with more alpha available across coupon stack. Company can be significantly bigger and still generate alpha. Scale benefits include larger equity base and resilience.

Q: Forward run rate of G&A expenses A: G&A expenses in 2% of capital range for now. Hiring additional people may impact run rate, but planning to stay around current levels until further growth and scale is achieved.

Q: Room for more upside from spread tightening and GSEs' longer-term role A: Potential for spread tightening back to tighter regime like late 90s/early 2000s. GSEs' role is likely to continue with potential for size changes easily influenced by FHFA or treasury.

Q: Levered returns and hedging book A: Mid-teens and high-teens levered returns assume no additional spread tightening. Hedge book composition has swaps offering carry relative to treasuries, with mix roughly 60-80% in interest rate swaps. Curve positioning is balanced currently but may have steepening bias longer term.

Q: Pressure on Fed to cut rates and market impact A: Prepared for front end rates to be influenced by policy rather than just fundamentals. Benefits to agency MBS market if rates are lower, but hard to predict how it will happen. Preparing for various outcomes from policy influence.