Oct 19, 2026 earnings call — Series D preferred issuance and market repricing
Dynex issued Series D preferred stock, raising $116 million of net proceeds.
Revenue $0.1B (est $0.1B) · EPS $0.38 (est $0.39)
Key quotes
"As a result, the duration and expected cash flows of these assets are more stable and most importantly, the convexity profile of the mortgage market has improved dramatically."
"The offering increased preferred equity as a percentage of our capital stacks from approximately 3% to 7% of our total equity base."
"We maintain more than $24 billion of repo financing across over 25 counterparties."
Analyst Q&A 5
leverage and holding positions
Q (Doug Harter · U. S. Bancorp): The analyst asked about the firm’s risk positioning and whether the company can let leverage drift higher if markets stay weak and spreads widen. He also asked how management calculates the 20%+ return target.
A: Management said favorable financing lets them carry positions through volatility, citing money market growth and $8 trillion in money market funds. They said implied volatility rose more than realized volatility and that gives confidence to carry current leverage. On returns, they said levered ROE comes from their models: on fives through sixes around 20% static ROE, 6 and a halves around 25% ROE, and leverage works out to be around 10 on that static ROE model.
"And at the end of the day, that drives a lot of our ability to carry positions through volatility in markets." — Terrence J. Connelly Jr.
book value and expense ratio
Q (Bose George · KBW): He asked for an update on book value. He also asked why expenses fell and whether the 2% expense ratio is the right number going forward.
A: Management said estimated book value net of the accrued dividend was $10.95 as of Friday. They said G&A is down about 40% since last year, they remain focused on a 2% ratio, and the decrease mainly comes from compensation expense aligned with company performance and shareholder value.
"As we indicated, G&A is down about 40% since last year at this time." — Smriti Laxman Popenoe (CEO)
demand for agency MBS and preferred capital
Q (Melissa Lobo · UBS): She asked about demand from banks, GSEs, foreign buyers, and who is the marginal buyer at current spreads. She also asked how to think about the preferred mix in the capital structure.
A: Management said GSEs were very likely in the market in September and have acted as a back stop bid to mortgages. They noted foreign buyers like Norges Bank have shown interest and that the mortgage REIT community is important. On preferred, management said the preferred in the stack is about 7% and that number has room to go higher; issuance was accretive and future use would be opportunistic.
"The total I think Mike mentioned, preferred in the stack is about 7%." — Smriti Laxman Popenoe (CEO)
hedge timing and coupon preference
Q (Jason Stewart · Compass Point): He asked when and why the company changed hedges and whether they were satisfied with the position at quarter end. He also asked whether discounted lower coupon pools or current coupon TBAs offer more value.
A: Management said they added to the hedge book progressively and in lock step as rates moved higher, with a strategic plan to add hedges as rates rose. They said breaking through 5% changed the mortgage profile and they modestly increased some longer hedges on the swap side and treasury futures. On coupon selection, they said coupons 5.5 and lower are most compelling for the convexity and stable duration profile.
"As we broke through 5%, there was a clear realization of the new profile that mortgages would offer in terms of in terms of the convexity that we discussed." — Terrence J. Connelly Jr.
rate move risk and dividend coverage
Q (Trevor Cranston · Citizens JMP): He asked the firm’s macro view on risk of rates moving significantly higher or lower and how MBS would perform. He also asked whether the current portfolio provides good dividend coverage and how dividend policy is being considered after the changes in the quarter.
A: Management said implied volatilities are notably higher than realized volatility, which they believe helps drive available ROE, and that the mortgage convexity profile is stable in a higher rate environment with low housing turnover around 4.5% per year supporting steady cash flows. They said they did not delever in the quarter, which preserved earnings power and supports confidence in dividend coverage; the marginal ROE examples used a 10 leverage number, they were sitting at 9 at quarter end, and they have net purchased assets since quarter end.
"I think you got to go back to the idea of earnings power in the portfolio, Trevor, not having delevered in the quarter." — Smriti Laxman Popenoe (CEO)