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Download the Complete Report Here The MITT transaction materially improves value realization for CHMI shareholders while preserving meaningful participation in the combined platform. CHMI entered into a definitive agreement to be acquired by TPG Mortgage Investment Trust (MITT), with closing targeted for 4Q26. The $3.10 signing value represents a 29% premium to CHMI’s unaffected $2.41 share price and approximately 0.98x June 30 BVPS of $3.16, while roughly 30% of announced consideration is cash and CHMI holders retain approximately 27% ownership of the combined company. Through the fixed 0.3063 exchange ratio, the stock component provides both near-term value realization and continued exposure to MITT’s earnings, book value and potential rerating following closing. Strategically, the merger creates a larger and more diversified residential mortgage REIT with a clearer path to earnings and valuation upside. The combined investment portfolio is expected to total approximately $9.0 billion, while management expects $7-$9 million of annual operating efficiencies, 2027 earnings accretion and lower pro forma economic leverage of roughly 2.9x. TPG’s direct ~$20 million / $0.52-per-share cash contribution, proprietary securitization capabilities and experience originating, acquiring and managing MSRs add further support, with greater scale, lower unit costs and broader capital-allocation flexibility providing multiple avenues for value creation across the combined platform. 2Q26 EAD beat expectations as stronger RMBS carry and dollar-roll income drove the best quarterly core earnings performance since 1Q25. EAD increased to $0.15/share from $0.14 in 1Q26 and $0.11 in 4Q25, while dividend coverage expanded to approximately 1.5x on the $0.10 quarterly payout. The stronger-than-expected print supported an upward revision in the Street’s 2026E EAD estimate to $0.59/share from $0.55, with current estimates of $0.15/share for both 3Q26E and 4Q26E. Lower funding costs and wider RMBS spreads improved the quality of 2Q26 earnings despite higher prepayments and modest book-value pressure. Net interest income rose to $4.7 million, RMBS net interest spread widened to approximately 3.45% from 2.90%, and aggregate leverage declined to 5.02x from 5.49x, while unrestricted cash increased to $52.1 million from $46.7 million. Offsetting these gains, RMBS CPR increased to 9.7%, MSR CPR rose to 6.3%, BVPS declined modestly to $3.16 from $3.23, and Real Genius required a $2.8 million impairment. Valuation is now anchored by the transaction, while MITT’s valuation gap versus peers and merger synergies preserve meaningful upside. At $2.79, CHMI trades at approximately 0.88x book and 4.7x 2026E EAD, while MITT trades at roughly 0.6x book and 5.6x NTM earnings versus peer averages of approximately 0.9x and 6.4x. The fixed exchange ratio therefore gives CHMI holders continued exposure to any normalization in MITT’s valuation, while expected annual operating efficiencies, 2027 earnings accretion, and greater scale provide additional avenues for value creation. CHMI entered into a definitive agreement to be acquired by TPG Mortgage Investment Trust (MITT), combining its Agency RMBS and conventional MSR platform with MITT’s broader residential credit franchise. Under the agreement signed August 9, 2026, each CHMI common share will receive 0.3063 MITT common shares plus $0.93 in cash, with $0.41/share funded by MITT and $0.52/share contributed by MITT’s external manager, AG REIT Management, an affiliate of TPG. Based on MITT’s August 7 closing price of $7.09, the consideration was worth $3.10 per CHMI share, implying an aggregate transaction value of approximately $117.5 million, a 29% premium to CHMI’s unaffected $2.41 closing price and a 32% premium to its 30-day VWAP. Importantly, approximately 30% of announced consideration is cash, including roughly $20 million funded by TPG and $15 million by MITT, providing CHMI holders with a meaningful element of certain value at closing while preserving upside participation through the stock component. The transaction is expected to close in 4Q26, subject to stockholder approvals and customary closing conditions. The transaction crystallizes much of CHMI’s standalone discount to book while retaining meaningful upside through ownership in the combined company. CHMI ended 2Q26 with BVPS of $3.16, versus an unaffected share price of $2.41, or approximately 0.76x book, while the $3.10 announced consideration equates to roughly 0.98x June 30 BVPS. The fixed 0.3063 exchange ratio, established using adjusted June 30 book values of CHMI and MITT, leaves CHMI holders with approximately 27% ownership of the combined company. MITT’s June 30 BVPS was $10.00 versus its $7.09 August 7 close, or approximately 0.71x book; accordingly, the exchange ratio represents approximately $3.06/share of MITT book value compared with $2.17/share of market value at announcement. Including the $0.93 cash component, the transaction presentation shows $3.99/share of illustrative value on a MITT book-value basis, approximately 66% above CHMI’s unaffected price. While $3.99 is not fixed transaction consideration, the structure allows CHMI holders to monetize most of CHMI’s discount to book while rolling the majority of consideration into MITT at a meaningful discount to its own book value, preserving potential upside if the combined company’s valuation normalizes. Strategically, the combination creates a ~$9.0 billion residential mortgage platform while materially broadening CHMI’s access to capital, financing and securitization capabilities. CHMI contributes an Agency-oriented platform centered on Agency RMBS and conventional MSRs, while MITT brings a larger residential credit franchise spanning Non-Agency mortgage assets and home equity. The combined investment portfolio is expected to total approximately $9.0 billion, comprising 72.0% Non-Agency Residential Credit, 14.4% Agency RMBS and MSRs, 12.6% Home Equity and 1.0% other investments. This should create a more diversified earnings mix, with CHMI’s Agency carry and MSR cash flows complementing MITT’s credit-oriented earnings profile. CHMI’s conventional MSR platform represented approximately $211 million of investment value and $15.2 billion of underlying UPB at June 30, adding a differentiated servicing asset to MITT’s broader credit platform. MITT management also expects the MSR portfolio to contribute to earnings immediately and provide an additional revenue stream, while TPG’s substantial experience originating, acquiring and managing MSRs strengthens the strategic fit of the servicing platform within MITT. Importantly, the combined company will gain access to the broader resources of TPG, a global alternative asset manager with approximately $327 billion of AUM, including its proprietary securitization platform and broader credit and asset-based finance capabilities. This should broaden financing options and improve capital-allocation flexibility across Agency and credit assets, while management also indicated that portions of the acquired portfolio may be retained or rotated over time as relative-value opportunities evolve. TPG’s backing adds an important layer of strategic and financial support to the combination. MITT’s external manager, an affiliate of TPG, is contributing approximately $20 million, or $0.52 per CHMI share, toward the cash consideration while also providing access to TPG’s $327 billion asset-management platform, proprietary securitization capabilities and residential mortgage expertise. TPG’s experience originating, acquiring and managing MSRs is particularly relevant to CHMI’s conventional servicing portfolio, while the broader platform should expand financing, capital-allocation and liquidity options for the combined company. The transaction also meaningfully improves operating scale and financial efficiency, providing a clear path to earnings accretion. The merger is expected to add approximately $1.3 billion, or 17%, to MITT’s investment portfolio, increase MITT’s market capitalization by approximately 36%, and expand total equity capital to roughly $742 million. The transaction also expands MITT through permanent equity capital without requiring incremental unsecured corporate debt, preserving balance-sheet flexibility as the combined platform scales. Management expects approximately $7-$9 million of annual operating expense efficiencies, net of incremental estimated management-fee expense, as the combined cost base is spread across a substantially larger equity platform. The transaction is expected to be earnings accretive in 2027, within one year of closing, while pro forma economic leverage is expected to settle at approximately 2.9x, which management views as derisking CHMI’s historical profile while maintaining a conservative balance sheet relative to peers. The combination should therefore translate greater scale into a lower effective expense burden, improved financing flexibility and a broader opportunity set for capital deployment, supporting stronger long-term earnings capacity across the residential mortgage platform. The transaction preserves substantially equivalent treatment for CHMI preferred shareholders while strengthening governance and alignment in the combined company. CHMI’s 8.20% Series A and 8.250% Series B preferred shares are expected to convert 1-for-1 into newly issued MITT preferred securities with substantially equivalent rights. MITT’s existing management team will continue to lead the combined company, while two CHMI-designated independent directors will join the board, increasing it to eight members. Alignment is further supported by an amendment to MITT’s manager incentive-fee framework, which will be based on the combined company’s pro forma book value and EAD. Approximately 11.608 million new MITT common shares are expected to be issued to CHMI holders. Execution and closing remain the principal near-term transaction considerations. Both boards unanimously approved the merger, but completion remains subject to CHMI and MITT stockholder approval, effectiveness of the Form S-4, required regulatory approvals, NYSE listing of the new securities and customary closing conditions. The companies are targeting a 4Q26 close, with an outside date of March 9, 2027, subject to a possible 60-day regulatory extension. From a CHMI shareholder perspective, the main variable through closing is MITT’s stock price: the fixed 0.3063 exchange ratio means the market value of the stock component—approximately 70% of announced consideration at signing—will move with MITT shares, while the $0.93/share cash component remains fixed. Accordingly, through closing, CHMI’s realized transaction value will be driven primarily by MITT’s share price, the fixed 0.3063 exchange ratio, the $0.93 cash component and successful completion of the merger, while standalone EAD and book value remain relevant principally as markers of underlying value through closing. Dividend treatment through closing provides additional continuity for CHMI shareholders. The merger agreement permits CHMI to declare a prorated dividend immediately prior to closing based on its then-most-recent quarterly dividend for the period since the last dividend record date, together with any additional distribution required to preserve REIT qualification. This should help preserve the economic value of CHMI’s dividend accrual through the closing date, subject to the terms of the merger agreement. Core earnings continued to improve in 2Q26, with EAD reaching the strongest quarterly level since 1Q25 and dividend coverage expanding further. EAD attributable to common shareholders increased to $5.5 million, or $0.15/share, in 2Q26, from $0.14/share in 1Q26 and $0.11/share in 4Q25, marking CHMI’s strongest quarterly EAD performance since 1Q25 and exceeding the $0.13/share Street estimate. The sequential improvement was supported by stronger RMBS carry, lower borrowing costs and higher TBA dollar-roll income of $1.4 million versus $0.4 million in 1Q26, partially offset by higher G&A. As a result, coverage of the $0.10 common dividend improved to approximately 1.5x, from 1.4x in 1Q26 and 1.1x in 4Q25. The stronger earnings run-rate also supported an upward revision in the Street’s 2026E EAD estimate (source: TIKR) to $0.59/share from $0.55 previously. GAAP results improved as well, with net income applicable to common shareholders of $1.3 million, or $0.04/share, compared with a $(0.05)/share loss in 1Q26. The improvement in EAD reflects stronger recurring carry as lower financing costs continued to lift net interest income and RMBS spreads. Net interest income increased to $4.7 million from $4.5 million, while interest expense declined to $10.0 million from $11.4 million, helping RMBS net interest spread widen to approximately 3.5% from 2.90% in 1Q26. Importantly, the improvement came despite a smaller financed asset base, with average repo borrowings declining roughly 10% q/q, indicating better earnings efficiency rather than growth driven by higher leverage. Total other loss narrowed to $4.2 million from $7.7 million, as a $12.1 million realized derivative gain partially offset continued unrealized derivative and portfolio losses, including the $2.8 million Real Genius impairment. Operating expenses increased to $4.0 million from $3.3 million, partly reflecting transaction-related costs. Overall, the quarter showed stronger underlying spread economics and recurring earnings, while continued realized and unrealized mark volatility reinforces EAD as the cleaner measure of core portfolio performance. Book value pressure moderated materially from 1Q26, while total economic return turned positive as stronger carry and the dividend helped absorb a still-volatile rate backdrop. BVPS ended 2Q26 at $3.16 versus $3.23 at March 31, a 2.2% sequential decline, compared with a much sharper 6.1% decline in 1Q26. Including the $0.10/share quarterly dividend, CHMI generated a 0.9% total economic gain, a meaningful improvement from the negative economic return in the prior quarter. The backdrop remained challenging as Treasury yields moved higher and lower-coupon Agency RMBS weakened, yet the comparatively modest $0.07/share decline in book value suggests that stronger carry, portfolio construction and hedging provided substantially better downside absorption than in 1Q26. BVPS remains below the $3.44 year-end 2025 level, but the quarter showed a notably better balance between distributable earnings and book-value preservation. The RMBS portfolio remained the primary earnings engine, with improved spread economics more than offsetting a smaller securities balance and somewhat faster prepayments. RMBS carrying value declined to $1.08 billion, from $1.21 billion at the year-end while the portfolio remained entirely Agency-backed and represented 79% of invested assets excluding cash. Despite the smaller asset base, net interest income increased 6.3% q/q to $4.7 million, as lower financing costs and stronger asset yields drove net interest spread to 3.45% from 2.90% in 1Q26, a 55-bp sequential improvement. Prepayments accelerated, with RMBS CPR increasing to 9.7% from 8.0%, creating some incremental reinvestment and premium-amortization risk, but CHMI also increased its RMBS hedge ratio to 65% from 63%. Overall, the combination of wider spreads, lower funding costs and greater hedge protection supported stronger core earnings despite reduced balance-sheet exposure and higher prepayment activity. MSRs continued to provide complementary servicing cash flow, although portfolio runoff and faster prepayments weighed on sequential results. Net servicing income declined 7.0% q/q to $7.4 million from $7.9 million, as servicing fee income fell to $9.7 million from $10.2 million while servicing costs remained broadly stable at $2.3 million. MSR UPB declined to approximately $15.2 billion from $15.6 billion, with carrying value easing to $211.1 million, while MSRs represented roughly 21% of investments excluding cash and Servicing Related Assets represented approximately 39% of equity. Prepayment activity increased, with net CPR rising to 6.3% from 4.5% in 1Q26, though the portfolio’s low 3.49% weighted-average mortgage coupon continues to provide meaningful refinance protection. Credit quality also remained solid, with a 755 original FICO, 76.5% original LTV and 1.1% 60+ day delinquencies. Recapture was minimal at 0.2%, limiting the offset to natural runoff, but the low-coupon collateral profile continues to support the durability of servicing cash flows. Hedge positioning continued to absorb rate and basis volatility, while lower net mark-to-market pressure supported the sequential improvement in earnings. CHMI generated $8.4 million of realized derivative gains excluding swap periodic income, led by gains on TBAs, Treasury futures and Eris SOFR futures, while $3.7 million of periodic swap interest income provided additional support to EAD. These benefits were partially offset by a $9.3 million unrealized derivative loss, reflecting continued quarter-to-quarter mark volatility. Despite this, total other loss narrowed to $4.2 million from $7.7 million in 1Q26, contributing to the improvement in GAAP results. Hedge positioning also continued to evolve, with interest-rate swap notional at $767 million, net TBA notional declining to $267 million, and Eris SOFR futures increasing to $82 million at quarter-end. Overall, the hedge book continued to enhance carry and protect against rate and basis risk even as unrealized derivative valuations remained volatile. The $2.8 million Real Genius credit loss and impairment reduces the near-term optionality of CHMI’s digital-origination initiative. The charge relates to CHMI’s investment in Real Genius LLC and associated promissory note, representing a notable reversal from the optionality attributed to the platform in prior quarters. CHMI recorded a $2.3 million credit-loss allowance against the $3.2 million promissory note, leaving a net carrying value of approximately $0.9 million. Importantly, the impairment is excluded from EAD, helping explain why distributable earnings improved to $0.15/share even as the investment weakened economically and contributed to GAAP pressure. We therefore assign substantially less standalone value to Real Genius, with future value more dependent on recovery of the remaining exposure than on scaling the origination platform. Its strategic importance also becomes less significant under the proposed MITT combination, where CHMI’s $15.2 billion MSR portfolio would sit within a broader ~$9 billion residential mortgage platform with access to TPG’s larger origination, investment and securitization capabilities. Liquidity and leverage improved as CHMI reduced financed RMBS exposure, leaving the balance sheet more conservatively positioned entering the proposed MITT merger. Aggregate leverage declined to 5.02x from 5.49x in 1Q26, while quarter-end repo borrowings fell to $1.01 billion from $1.12 billion and the weighted-average repo rate improved to 3.76%. Unrestricted cash increased approximately 12% q/q to $52.1 million from $46.7 million, with total unrestricted and restricted cash of $77.5 million, while notes payable declined to $140.6 million. The reduction in leverage and financed assets, together with lower funding costs and higher liquidity, provides greater protection against margin pressure and additional balance-sheet flexibility ahead of the targeted 4Q26 transaction close. Capital allocation remains conservative, with CHMI prioritizing liquidity and portfolio economics rather than accessing the ATM or repurchasing shares. No common shares were issued through the ATM during 1H26, leaving approximately $34.6 million of capacity under the $150 million common-stock ATM program; this contrasts with 2025, when CHMI issued 4.9 million shares at an average $3.00/share and raised approximately $14.7 million of gross proceeds. CHMI also made no common or preferred-stock repurchases during the quarter, leaving approximately $4.7 million available under the common repurchase authorization, while the existing preferred-stock repurchase program authorizes up to $50 million of repurchases. With BVPS at $3.16, unrestricted cash of $52.1 million, 5.0x leverage and the common dividend covered 1.5x by EAD, the lack of ATM issuance or discretionary share repurchases is consistent with preserving balance-sheet flexibility rather than materially changing capital structure immediately before the subsequent transaction announcement. The stronger 1H26 earnings run-rate supports a higher second-half baseline, with improved RMBS carry providing a firmer foundation for standalone earnings through the expected merger close. CHMI generated $0.29/share of EAD in 1H26 versus $0.27/share in 1H25, while Street estimates sourced from TIKR now show $0.15/share in both 3Q26 and 4Q26, implying $0.30/share for 2H26 and lifting the full-year estimate from $0.55 to $0.59/share. Quarterly EAD has improved from $0.11 in 4Q25 to $0.14 in 1Q26 and $0.15 in 2Q26, and the revised second-half estimates effectively assume that the 2Q run-rate is sustained. Support for the upward revision comes from lower funding costs and stronger RMBS spread economics, with 2Q NII of $4.7 million and RMBS net interest spread of approximately 3.5%, while higher MSR CPR of 6.3%, RMBS CPR of 9.7%, and operating expenses of approximately $4.0 million versus $3.3 million in 1Q26 remain key offsets. At the revised $0.59/share estimate, CHMI’s $0.40 annualized common dividend remains comfortably covered at roughly 1.5x. Given the expected 4Q26 merger close, we view the revised estimate primarily as a measure of the standalone earnings capacity CHMI brings into the transaction. Disclaimer: Exec Edge does not publish proprietary estimates, ratings, price targets, or investment recommendations. The valuation discussion below is illustrative only and is based on company filings, management commentary, and third-party data and estimates. It does not constitute a recommendation, price target, rating, or prediction of future pricing. The transaction creates value for CHMI shareholders through a combination of near-book value realization, meaningful cash consideration and retained participation in a larger platform with further rerating potential. The $3.10 signing value equates to approximately 0.98x CHMI’s June 30 BVPS of $3.16, versus roughly 0.76x book at the unaffected $2.41 share price, while approximately 30% of announced consideration is cash and CHMI holders retain about 27% ownership of the combined company. Importantly, the stock component rolls CHMI shareholders into MITT, which trades at approximately 0.6x book and 5.6x NTM earnings versus peer averages of roughly 0.9x and 6.4x. Successful realization of $7-$9 million of annual operating efficiencies, expected 2027 earnings accretion and greater scale and liquidity therefore provide multiple avenues for further value creation beyond the initial transaction premium. The signing valuation validates the standalone value identified in our prior CHMI framework, while the improved earnings outlook strengthens the underlying transaction economics. The $3.10 announced value falls within the approximately $3.0-$3.9/share range highlighted in our last EPS note and represents a substantial recovery from CHMI’s unaffected $2.41 price. The deal was also struck against improving fundamentals: 2Q26 EAD increased to $0.15/share, the strongest quarterly level since 1Q25, while 2026E EAD/share has been revised higher to $0.59 from $0.55. At the current $2.79 share price, CHMI trades at approximately 0.88x June 30 book, 4.7x 2026E EAD and a 14.3% annualized dividend yield, with a market capitalization of approximately $103 million. We therefore view the transaction as recognizing substantially more of CHMI’s underlying book value and earnings capacity than was reflected in the pre-deal public-market valuation. MITT’s valuation provides the principal source of retained longer-term upside for CHMI shareholders following closing. At approximately 0.6x book and 5.6x NTM earnings, MITT trades well below peer averages of roughly 0.9x and 6.4x, respectively, while its 15.2% dividend yield is broadly in line with the peer average of 15.3%. This suggests MITT’s discount is concentrated primarily in its book-value and earnings multiples rather than its income proposition. Because CHMI holders receive a fixed 0.3063 MITT shares per CHMI share, they retain direct exposure to any normalization in MITT’s valuation as the combined platform realizes expected cost efficiencies, earnings accretion and greater operating scale. The transaction therefore both recognizes CHMI at close to book value and preserves additional upside through participation in a potential rerating of MITT. Near-term transaction value remains sensitive to MITT’s share price, but we view this separately from the longer-term value-creation opportunity. At MITT’s current $6.32 share price, the fixed 0.3063 exchange ratio plus $0.93 cash implies consideration of approximately $2.87/share, compared with the $3.10 signing-date value based on MITT’s $7.09 August 7 close. Against CHMI at $2.79, the current merger spread is approximately 2.7%. While the mark-to-market consideration will continue to fluctuate through closing, CHMI holders retain approximately 27% of the combined company, making successful transaction completion, preservation of book value and realization of the expected annual efficiencies and 2027 earnings accretion the more important longer-term valuation drivers. Read Exec Edge’s Initiation on Cherry Hill Here Subscribe to our Weekly Newsletter to Receive All Research Contact: Executives-Edge.com [email protected] -0- The post Cherry Hill Mortgage’s 29% Premium Deal: $9B Merger Opens Door to Bigger Upside – Quarterly Update Report appeared first on ExecEdge.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management maintains high conviction in Agency MBS as the core strategy due to its unmatched liquidity and cycle-tested performance over 40 years. The company is aggressively pursuing scale to capture a structural valuation tailwind, noting that larger firms often earn better valuation metrics from passive investment flows. Performance attribution for the quarter was primarily driven by tighter mortgage spreads and accretive capital deployment into a widening spread environment. Strategic positioning focuses on a 'virtuous flywheel' where performance attracts capital, which is then reinvested into high-quality assets to improve liquidity and valuation. Management emphasizes risk management through a macro-focused lens, prioritizing assets that are transparently priced and easily converted to cash during market stress. The shift toward a more durable platform is intended to protect against global trends including geopolitical conflict and rapid technological change. Operational resilience is being bolstered by investments in people and technology to ensure repeatable processes that can withstand market and operating shocks. Management expects mortgage spreads to reach an equilibrium range of 100 to 120 basis points over time, supported by the GSE backstop. The 2026 forecast for net mortgage supply has been lowered to $165 billion from $200 billion, reflecting a more manageable technical landscape. Guidance assumes that implied volatilities have further scope to move down, which historically serves as a clear catalyst for mortgage outperformance. The company plans to maintain a disciplined leverage range between 7.5 and 8.5, with flexibility to lean into bouts of market volatility. Strategic initiatives include deploying capital into specified pools and seasoned securities that provide stable cash flows despite potential AI-driven refinancing risks. The capital base expanded by nearly $400 million in Q2, contributing to a 5x increase in total capital since 2022 as part of a deliberate scaling strategy. Management identified the 'AI investment boom' as a classic transformative cycle prone to overfinancing and eventual repricing, creating potential volatility. A significant risk factor is the potential for AI-driven algorithms to accelerate refinancing speeds, necessitating more precise security selection to manage negative convexity. The upcoming midterm elections are viewed as a meaningful governor on mortgage spread widening due to potential GSE policy shifts. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management expects AI to enable originators to refinance borrowers almost instantly via automated text or phone alerts. This dynamic has not been fully priced into the market, making the selection of pools with low loan balances or other prepayment protections paramount. Leverage is managed tactically within a narrow range of plus or minus 1x to adjust for mortgage market conditions. High levels of leverage are currently avoided due to a 'deep respect' for global macro risks, including ongoing geopolitical conflicts. The GSEs have demonstrated a willingness to act as value-sensitive buyers when mortgages become attractive. This backstop acts as a critical stabilizer that insulates buyers and supports a constructive outlook for spread tightening. The portfolio entered the quarter with minimal curve bias, allowing management to lean into recent flattening trends. Current positioning is moving toward a slight steepening bias, utilizing pay-fixed swaps in the 7-10 year and 15-20 year buckets.

Dynex Capital, Inc. has reported its Q2 2026 results, posting net income of US$180.79 million and diluted earnings per share of US$0.80, alongside a July 2026 cash dividend of US$0.17 per common share. An interesting angle is how Dynex’s expanded Agency MBS portfolio, larger capital base, and higher book value per share align with its focus on this asset class. With that backdrop, we’ll examine how Dynex’s earnings beat and Agency MBS expansion shape the company’s broader investment narrative. This technology could replace computers: discover 26 stocks that are working to make quantum computing a reality. To own Dynex Capital you have to buy into a simple idea: this is an Agency MBS-focused mortgage REIT that lives and dies by how well it manages interest rate risk, funding costs, and book value per share. The latest quarter reinforces that story. Q2’s US$180.79 million net income, US$0.80 EPS, and a 6.4% total economic return, coupled with a more than 40% expansion of the Agency MBS portfolio and a higher book value per share, strengthen the near term catalyst around capital deployment and portfolio scale. At the same time, raising US$391 million of new capital to reach a US$3.10 billion base, maintaining US$1.60 billion of liquidity, and affirming the US$0.17 monthly dividend, all sharpen existing risks: higher leverage, sensitivity to spread moves, and the challenge of sustaining such a high payout in volatile markets. However, there is a key risk around how leverage and funding costs could pressure that high dividend. Dynex Capital's shares are on the way up, but could they be overextended? Uncover how much higher they are than fair value. Two Simply Wall St Community fair value views span roughly US$5.68 to US$14.80, reflecting sharply different expectations. Against that wide range, Q2’s earnings beat and aggressive Agency MBS growth put the spotlight firmly on interest rate and spread risk, which could heavily influence how those valuations age. Explore 2 other fair value estimates on Dynex Capital - why the stock might be worth less than half the current price! Don't just follow the ticker - dig into the data and build a conviction that's truly your own. A great starting point for your Dynex Capital research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision. Our free Dynex Capital research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Dynex Capital's overall financial health at a glance. These stocks are moving-our analysis flagged them today. Act fast before the price catches up: The latest GPUs need a type of rare earth metal called Dysprosium and there are only 29 companies in the world exploring or producing it. Find the list for free. We've uncovered the 9 dividend fortresses yielding 5%+ that don't just survive market storms, but thrive in them. Invest in the nuclear renaissance through our list of 90 elite nuclear energy infrastructure plays powering the global AI revolution. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include DX. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Never miss an important update on your stock portfolio and cut through the noise. Over 7 million investors trust Simply Wall St to stay informed where it matters for FREE. Dynex Capital stock has delivered a 51.9% return over the past three years, yet its broader valuation checks currently lean cautious rather than outright cheap. This raises a clear question about how much upside is already reflected in the US$13.12 share price. Over the last three years, Dynex Capital has returned 51.9%, which puts recent short term moves into the context of a solid multi year gain. Stronger recent earnings and revenue from its mortgage portfolio may support expectations for the business, while ongoing interest rate and credit risk can still weigh heavily on how investors price those cash flows. On Simply Wall St's framework, Dynex Capital scores 1 out of 6 on the valuation checks, which suggests the stock is not a clear bargain when viewed across multiple yardsticks. The issue now is whether Dynex Capital's recent performance and current valuation leave enough margin for investors who are considering the stock today. Dynex Capital delivered 22.2% returns over the last year. See how this stacks up to the rest of the Mortgage REITs industry. P/E is a useful yardstick for Dynex Capital because earnings remain a key driver of how investors judge mortgage REITs. On this measure, Dynex Capital trades on a P/E of 12.2x, slightly above the Mortgage REITs industry average of 11.0x and the peer average of 9.7x, so the stock does not screen as obviously cheap on simple comparisons. Simply Wall St's fair P/E ratio for Dynex Capital is 18.8x, which is materially higher than where the stock trades today. After the reported Q2 2026 earnings, with EPS of US$0.80 versus the US$0.39 consensus, the current multiple still sits below this modelled fair level. This suggests the market valuation is not aligned with the level indicated by that particular framework. On the P/E multiple, Dynex Capital stock currently appears lower than the fair ratio implied by this specific assessment of its fundamentals and risk profile. See what the numbers say about this price — find out in our valuation breakdown. Simply Wall St Narratives for Dynex Capital pick up where the P/E puzzle leaves off by spelling out what combination of future earnings, margins and growth would need to play out for Dynex Capital's stock to be worth meaningfully more or less than it is today on the market. Instead of stopping at a single ratio, they outline the underlying future that figure assumes so you can see what needs to happen and monitor whether that path is still intact over time on the Community page. If you have a number driven view on whether Dynex Capital's recent earnings beat and revenue performance support today's valuation, share a Narrative to set out your case and the key drivers you will be watching from here. Adding your perspective helps other investors see how different assumptions on earnings, risk and income potential stack up as fresh results and market data arrive. Do you think there's more to the story for Dynex Capital? Head over to our Community to see what others are saying! Dynex Capital looks modestly undervalued on the P/E-based view, yet its low broader value score signals that the overall checklist is not especially supportive. That mix suggests the market is giving some credit for recent earnings strength while still pricing in meaningful interest rate and credit risk. For potential investors, the key question is whether Dynex Capital can sustain earnings that justify a higher multiple or whether the current discount is simply compensation for the structural risks in its mortgage portfolio. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include DX. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Find your next quality investment with Simply Wall St's easy and powerful screener, trusted by over 7 million individual investors worldwide. Dynex Capital (DX) has drawn fresh attention after reporting Q2 2026 diluted earnings per share of $0.80 and net income of $180.79 million, along with capital raised and sizeable Agency MBS portfolio growth. See our latest analysis for Dynex Capital. Despite the strong Q2 report and recent dividend affirmation, Dynex Capital’s share price return is slightly down year to date, while its 1 year total shareholder return of 22.22% points to momentum that has built over a longer horizon. If strong income and capital raising stories have your attention, this could be a good moment to broaden your watchlist and check out 18 top founder-led companies Recent returns leave you weighing two stories for Dynex Capital, a business posting strong Q2 numbers yet trading lower year to date. Are you looking at a gap in valuation, or simply cooling sentiment being priced in? Valuation signals around Dynex Capital are mixed, with a P/E of 12.2x that looks relatively low versus the wider US market and relatively high versus Mortgage REIT peers. The P/E ratio compares the current share price to earnings per share and is commonly used for income focused vehicles like mortgage REITs. At a last close of $13.12, a 12.2x P/E means investors are paying just over twelve times recent earnings for exposure to Dynex Capital’s portfolio and its high reported net margins. On one hand, Dynex Capital is described as expensive versus both its peer group average P/E of 9.7x and the broader US Mortgage REITs industry average of 11.3x. This points to investors willing to pay more than sector peers for each dollar of current earnings. On the other hand, the stock is called good value when compared with an estimated fair P/E of 18.8x. It also screens cheaper than the wider US market P/E of 19.2x, indicating the market could shift toward a higher multiple if those fair value benchmarks gain traction. Against this backdrop, the current 12.2x P/E ratio sits between sector valuations and the higher fair P/E estimate. This leaves investors to decide whether the premium to peers is justified by factors such as past earnings quality, current 75.9% net margins and the earnings growth profile that has been outlined. Explore the SWS fair ratio for Dynex Capital Result: Price-to-earnings of 12.2x (ABOUT RIGHT) However, Dynex Capital’s recent share price decline year to date and its premium P/E relative to Mortgage REIT peers could both challenge confidence in the current valuation story. Find out about the key risks to this Dynex Capital narrative. There is also a discounted cash flow view to consider. Our DCF model points to a future cash flow value of $5.68 per share, compared with Dynex Capital’s recent $13.12 share price. On this measure, the stock screens as expensive, so which signal should carry more weight for you right now? Look into how the SWS DCF model arrives at its fair value. Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Dynex Capital for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 45 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity. With Dynex Capital showing both promising Q2 figures and some valuation question marks, this is a good time to move quickly and stress test the story against the underlying data, including both the risks and the upside potential that other investors are watching. To weigh those trade offs in one place, start with the 3 key rewards and 3 important warning signs. If Dynex Capital has sharpened your focus on valuation and income, do not stop here. Use the Simply Wall Street Screener to spot more focused opportunities now. Target potential mispricing by scanning a collection of 45 high quality undervalued stocks that combine earnings strength with comparatively low valuations. Lock in income potential by reviewing 9 dividend fortresses that prioritize reliable, higher yielding payouts. Strengthen capital protection by filtering for 80 resilient stocks with low risk scores that aim to balance growth potential with lower risk scores. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include DX. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

This article first appeared on GuruFocus. Total Economic Return: 6.4% for the quarter. Capital Issuance: Nearly $400 million for the quarter. Capital Base: Increased to $3.1 billion from $2.4 billion at year-end. Book Value Per Share: $12.90 at quarter end, a 2.4% increase from $12.60 as of March 31. Net Interest Income: Increased to $0.42 per share, up from $0.40 in the prior quarter. Adjusted Leverage: 8.1% versus total equity, down from 8.6% at the end of last quarter. Liquidity: $1.6 billion of cash and unencumbered securities at quarter end, representing over 51% of total equity. Common Dividends: $0.51 per share for the quarter. Portfolio Value Increase: $0.30 per share during the quarter. Capital Raised: $391 million in the second quarter. Warning! GuruFocus has detected 5 Warning Signs with DX. Is DX fairly valued? Test your thesis with our free DCF calculator. Release Date: July 20, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Dynex Capital Inc (NYSE:DX) reported a strong total economic return of 6.4% for the quarter. The company successfully raised nearly $400 million in capital, increasing its capital base to $3.1 billion. Dynex Capital Inc (NYSE:DX) grew its portfolio of Agency MBS by over 40%, demonstrating strategic expansion. The company maintained a strong liquidity position with $1.6 billion of cash and unencumbered securities, representing over 51% of total equity. Net interest income increased to $0.42 per share, driven by lower funding costs and attractive yield profiles. Book value per share only increased by 2.4% from the previous quarter, indicating modest growth. The company's leverage decreased slightly to 8.1%, which may limit potential returns in a favorable market environment. There are increased risks related to geopolitical conflict and technological change, which could impact future performance. The market remains highly volatile, driven by headline risks, which could affect investment strategies. Operating expenses have been inconsistent, bouncing around over the past few quarters, which may impact profitability. Q: Can we get an update on book value quarter to date? A: Sure, Bose. Good morning. Quarter to date through Friday, July 17, spreads were about 3 basis points wider on the quarter. Book value as of Friday was approximately $12.67. Q: Can you talk about your expectations for mortgage spreads over the next 12 months and the GSE mandate to purchase MBS? A: The GSE backstop is important as a stabilizer for spreads. We expect spreads to move into an equilibrium of 100 to 120 basis points over time. Q: Can you discuss your leverage strategy given the current spread environment? A: We are comfortable running leverage between 7.5% and 8.5% given the technical backdrop for mortgages and the spread outlook. We carry significant liquidity to capitalize on market opportunities. Q: How are you incorporating AI-driven refinancing risk into your security selection and hedge construction? A: AI will make refinancing easier, so security selection is paramount. We value characteristics that offer protection against prepayments, which are not fully priced into the market yet. Q: How do you approach investing in a headline-driven market with bouts of volatility? A: We maintain high liquidity and flexibility to capitalize on volatility. This allows us to deploy capital opportunistically and manage risk effectively. Q: What is your outlook for operating expenses? A: We continue to track our expense ratio at 2% of total equity for the year. Q: How do you view rate volatility and its impact on MBS spreads? A: Realized volatility has been lower than implied volatility, suggesting potential for further decline. Lower implied volatility generally supports better mortgage performance. Q: How are you positioning the portfolio in a potentially flatter yield curve environment? A: We are well-hedged across the curve and looking for opportunities to adopt a steepening bias. The portfolio is positioned to handle various curve scenarios. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Interested in Dynex Capital, Inc.? Here are five stocks we like better. Dynex Capital said it delivered a strong Q2, with total economic return of 6.4%, book value per share rising to $12.90, and net interest income improving to $0.42 per share. Management also highlighted $391 million of accretive capital raised and a larger, more resilient capital base. The company remains highly focused on Agency MBS, which executives called the best risk-reward in the current macro environment. Dynex said it continued deploying capital into Agency MBS as spreads stayed attractive and its portfolio grew by more than 40%. Executives said the outlook remains constructive, with mortgage spreads supportive, refinancing activity still muted, and leverage expected to stay in a 7.5x to 8.5x range. They also flagged AI-driven refinancing risk as a reason to be increasingly selective in security choice. Will the SpaceX IPO Put These 5 Public Space Stocks Into a Higher Orbit? Dynex Capital (NYSE:DX) reported what executives described as a strong second quarter of 2026, citing book value growth, accretive capital issuance and continued expansion of its Agency mortgage-backed securities portfolio. On the company’s earnings call, Smriti Popenoe, co-chief executive officer and president, said Dynex generated a total economic return of 6.4% for the quarter while issuing nearly $400 million of capital. She said the company’s capital base increased to $3.1 billion in the first half of the year from $2.4 billion at year-end, while its Agency MBS portfolio grew by more than 40%. → MarketBeat Week in Review – 07/13- 07/17 “We are progressing well on our path, delivering consistent dividend income for our shareholders while building scale and resilience,” Popenoe said. She added that since 2022, Dynex has expanded its capital base fivefold. Michael Sartori, chief financial officer, said Dynex ended the quarter with book value per share of $12.90, up 2.4% from $12.60 at March 31. The increase was primarily driven by tighter spreads versus the prior quarter and accretive capital deployment, he said. → Netflix May Be Cheap Enough to Tempt Buyers After Earnings Drop The company’s 6.4% total economic return included $0.51 per share in common dividends and $0.30 per share from an increase in portfolio value during the quarter. Net interest income rose to $0.42 per share from $0.40 in the prior quarter, which Sartori attributed mainly to lower funding costs, new capital deployment into investments with attractive yield profiles and earnings from the existing portfolio. Adjusted leverage declined to 8.1 times total equity from 8.6 times at the end of the previous quarter. Sartori said the decrease was primarily due to portfolio appreciation and retention of capital for future investment opportunities. → The Market Sold Alcoa After Earnings—But It May Be Missing the Real Story Dynex raised $391 million of capital in the second quarter at levels Sartori said were accretive to book value. He said the proceeds were deployed into Agency MBS opportunities as spreads remained supportive of risk-adjusted returns. The company ended the quarter with $1.6 billion of cash and unencumbered securities, representing more than 51% of total equity. Popenoe said Dynex’s conviction in Agency MBS remains high, describing the asset class as liquid, flexible and “cycle-tested.” She said the company’s macro view over the past decade led it to prioritize liquidity and flexibility and to allocate most of its capital to the agency sector. “In our view, Agency MBS remains the best risk-reward across our investment universe for this macro environment,” Popenoe said. She also emphasized the company’s focus on scale, saying larger companies often receive better valuation metrics and can benefit from passive investment flows. Popenoe said Dynex aims to create a “virtuous flywheel” in which investment performance attracts investors, supports valuation, enables accretive capital raising and funds additional investment in high-quality assets. She also pointed to geopolitical conflict and technological change as reasons for maintaining a strong risk management focus. The company is investing in people, technology and operating processes to improve resilience, she said. T.J. Connelly, chief investment officer, said the company’s second-quarter results reflected a repeatable process built around liquidity, risk management and disciplined capital deployment. He said Dynex carried substantial liquidity, maintained a strong funding position and deployed new capital after mortgage spreads widened late in the first quarter and into the second quarter. Connelly said the current environment is marked by “bouts of volatility followed by periods of calm.” He identified two broad trends shaping the company’s risk posture: the AI investment boom and the role of policy, including Federal Reserve, housing, fiscal and regulatory policy. On AI, Connelly said Dynex views the current period as the capital-intensive phase of a transformative cycle that can be prone to over-financing and repricing. He said such periods can create opportunities for investors with liquidity and flexibility. Connelly said the company is focused on high-quality positions that can be traded regularly, priced transparently, financed readily or converted to cash. That supports its focus on Agency MBS hedged with interest rate swaps and futures, he said. Looking ahead, Connelly said Dynex’s outlook remains constructive. He said Agency MBS spreads to swaps remain attractive, mortgage rates have been stable, refinancing activity remains muted and assets are generating solid cash flow and income. Dynex lowered its 2026 net mortgage supply forecast to $165 billion from $200 billion. Connelly said fixed-income demand remains strong, including from bond funds and annuities. He said money managers continue to prefer Agency MBS over corporate credit. The company expects to deploy capital in Agency RMBS, specified pools and seasoned securities. During the question-and-answer session, an analyst asked for an update on book value quarter to date. Connelly said that through Friday, July 17, spreads were about three basis points wider, and book value was approximately $12.67. Asked about mortgage spreads over the next 12 months, Connelly said the government-sponsored enterprises’ activity has been important as a stabilizer. He said Dynex believes spreads could move to a range of 100 to 120 basis points when looking at current coupon versus seven-year spreads, which he described as a potential equilibrium over time. In response to a question about leverage, Connelly said that in the current environment, he expects leverage to run between 7.5 times and 8.5 times. He said that range is comfortable given the technical backdrop for mortgages and the opportunity in spreads, though the company could potentially carry more leverage during bouts of liquidity. Asked about AI-driven refinancing risk and negative convexity, Connelly said AI is likely to make it easier for originators to refinance borrowers quickly. He said security selection will become increasingly important, with loans that are easiest to refinance potentially paying down faster. Characteristics such as lower loan balances may become more valuable as protections against prepayments, he said. On operating expenses, Sartori said Dynex continues to track its expense ratio at 2% of total equity for the year. Popenoe closed the call by saying long-term tailwinds for Dynex’s business model remain in place, citing demographic demand for income and housing. She said near-term conditions remain favorable for the company to grow, invest and build resilience. She said Dynex is delivering a double-digit dividend yield, potential book value upside if MBS spreads tighten and the possibility of stronger valuation as markets price the company’s track record and scale. Dynex Capital, Inc is a mortgage real estate investment trust (REIT) that specializes in acquiring and managing mortgage-related assets. The company's primary business involves investing in residential mortgage-backed securities (RMBS), including agency-backed pools issued or guaranteed by government-sponsored entities such as Fannie Mae, Freddie Mac and Ginnie Mae, as well as selected non-agency RMBS. Dynex Capital seeks to generate net interest income by earning interest on its portfolio while employing leverage through secured repurchase agreements and other debt facilities. In pursuing its investment objectives, Dynex Capital manages portfolio duration and interest rate exposures, with a focus on preserving capital and optimizing yield over the economic cycle. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Dynex Capital Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for July 2026.

GLEN ALLEN, Va., July 20, 2026--(BUSINESS WIRE)--Dynex Capital, Inc. (NYSE: DX; "Dynex" or the "Company"), a REIT with a long track record of generating dividends from high-quality mortgage assets, reported its second quarter financial results today. Management will host a call today at 10:00 a.m. Eastern Time to discuss the results and business outlook. Details to access the call can be found below under "Earnings Conference Call." Second Quarter 2026 Financial Highlights Total economic return of $0.81 per common share, or 6.4% of beginning book value Book value per common share of $12.90 as of June 30, 2026, an increase of $0.30 from $12.60 as of March 31, 2026 Comprehensive income of $0.80 per common share and net income of $0.80 per common share Dividends declared of $0.51 per common share Liquidity of $1.6 billion of cash and unpledged securities, representing 51% of total equity, as of June 30, 2026 Leverage including to-be-announced ("TBA") securities at cost was 8.1 times shareholders' equity as of June 30, 2026, compared to 8.6 times shareholders' equity as of March 31, 2026 Second Quarter 2026 Portfolio and Capital Highlights Total investment portfolio of $27.6 billion, an increase of 11% relative to March 31, 2026 driven by $2.8 billion of MBS purchases: Raised $391 million of common equity, net of commissions, representing approximately 30 million shares, through the Company's at-the-market ("ATM") program Management Remarks "The second quarter of 2026 reflected continued progress in executing our disciplined raise-and-deploy strategy," said Smriti Laxman Popenoe, Co-Chief Executive Officer and President. "In an attractive return environment, we raised $391 million of capital during the quarter and deployed it into Agency MBS opportunities. Our 6.4% total economic return demonstrates our ability to pair growth with strong performance. As the platform scales, a powerful flywheel is enhancing efficiency, strengthening resilience, broadening our access to capital, and expanding our opportunity set, supporting durable risk-adjusted returns for shareholders over time." Earnings Conference Call As previously announced, the Company's conference call to discuss these results is today at 10:00 a.m. Eastern Time and may be accessed via telephone by dialing (800) 330-6710 and providing the Conference Code 2120385 or by live audio webcast by clicking the "Webcast" button on the Investors page of the Company's website (www.dynexcapital.com/investors), which also includes a slide presentation. To listen to the live conference call via telephone, please dial in at least 10 minutes before the call begins. As an alternative, participants can click here to enter their details and be connected to join the conference. The link becomes active 15 minutes prior to the scheduled start time. A full replay of the conference call will be available on the Company's website shortly after the conclusion of the live presentation. Summary of Second Quarter 2026 Results The Company's total economic return for the second quarter of 2026 of $0.81 per common share was comprised of an increase in book value of $0.30 per common share and dividends declared of $0.51 per common share. The increase in book value per common share was primarily comprised of a net gain of $102 million on the Company's investment portfolio, net of hedges. The fair value of the Company's Agency MBS benefited from spread tightening late in the second quarter. Although higher interest rates reduced asset valuations during the second quarter, the Company's hedging portfolio effectively mitigated much of this impact, supporting the overall increase in book value. The Company grew its capital base by $391 million, using the net proceeds to opportunistically add $2.8 billion of Agency MBS. As a result, the total investment portfolio grew 11% to $27.6 billion compared to $24.8 billion as of March 31, 2026. Leverage including TBAs at their implied cost decreased to 8.1 times equity primarily due to the favorable performance of the Company's portfolio. Interest income increased compared to the first quarter of 2026, driven by the Company’s continued deployment of capital into Agency MBS purchases. Operating expenses decreased by $5 million quarter over quarter, driven by the absence of one time compensation and personnel related costs recognized during the first quarter of 2026. The following tables summarize the changes in the Company's financial position during the second quarter of 2026: Investment Portfolio and Financing The following table provides detail on the Company's MBS investments, including TBA securities, as of the periods indicated: The following table provides detail on the Company's repurchase agreement borrowings outstanding as of the dates indicated: The following table provides details on the performance of the Company's MBS, net of financing for the second quarter of 2026 compared to the prior quarter: Hedging Portfolio The following tables provide details on the Company's interest rate hedging portfolio as of the dates indicated: The following table provides detail on the performance of the Company's derivative instruments during the periods indicated: The Company typically designates certain of its interest rate derivatives as hedges for tax purposes. Gains and losses realized upon maturity or termination of derivatives designated as hedges for tax purposes are amortized into the Company's REIT taxable income over the original periods hedged by those derivatives. These hedge gains are not included in the Company's current or future earnings available for distribution ("EAD"), a non-GAAP measure, but will be part of the Company's future distribution requirements. The table below provides the projected amortization of the Company's net deferred tax hedge gains that may be recognized as taxable income over the periods indicated, given conditions known as of June 30, 2026; however, uncertainty inherent in the forward interest rate curve makes future realized gains and losses difficult to estimate, and as such, these projections are subject to change for any given period. Second Quarter 2026 Preliminary Financial Statements and Other Supplemental Information Non-GAAP Financial Measures In addition to reporting the Company’s financial results determined in accordance with GAAP, management of the Company believes that investors’ understanding of our operating results may be enhanced by the use of non-GAAP financial measures, which are used by management internally, along with GAAP measures, to evaluate our performance. 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. Drop income generated by TBA dollar roll positions, which is included in "gain (loss) on derivatives instruments, net" on the Company's consolidated statements of comprehensive income, is included in EAD because management views drop income as the economic equivalent of net interest income (interest income less implied financing cost) on the underlying Agency security from trade date to settlement date. However, drop income does not represent the total realized gain/loss from the Company’s investments in TBA securities. Management also includes net periodic interest from its interest rate swaps, which is included in "gain (loss) on derivatives instruments, net," in EAD and economic net interest income because interest rate swaps are used by the Company to economically hedge the impact of changing interest rates on its borrowing costs from repurchase agreements, and including net periodic interest from interest rate swaps is a helpful indicator of the Company’s total financing cost in addition to GAAP interest expense. Non-GAAP financial measures are not a substitute for GAAP measures and may be different from non-GAAP measures used by other companies. In addition, other companies, including in our industry, may calculate comparable measures differently, which reduces their usefulness as comparative measures. Investors should not rely on any single financial measure when evaluating our business. 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. Forward Looking Statements This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "forecast," "anticipate," "estimate," "project," "plan," "may," "could," "will," "continue" and similar expressions identify forward-looking statements that are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Forward-looking statements in this release, including statements made in Ms. Popenoe's quote, may include, without limitation, statements regarding the Company's financial performance in future periods, future interest rates, future market credit spreads, management's views on expected characteristics of future investment and macroeconomic environments, central bank strategies, prepayment rates and investment risks, future investment strategies, future leverage levels and financing strategies, the use of specific financing and hedging instruments and the future impacts of these strategies, future actions by the Federal Reserve, and the expected performance of the Company's investments. The Company's actual results and timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements as a result of unforeseen external factors. These factors may include, but are not limited to, the Company's ability to find suitable investment opportunities; changes in domestic economic conditions; geopolitical events and instability, including the conflict in the Middle East, and the related impacts on macroeconomic conditions as a result of such related uncertainty; tariffs that the U.S. imposes on trading partners or tariffs imposed on the U.S. from trading partners, including the legality of any such tariff measures; global and domestic government policy changes and the ability or inability to react to rapidly changing economic policies; changes in interest rates and credit spreads, including the repricing of interest-earning assets and interest-bearing liabilities; the Company’s investment portfolio performance, particularly as it relates to cash flow, prepayment rates, and credit performance; the impact on markets and asset prices from changes in the Federal Reserve’s policies regarding purchases of Agency RMBS, Agency CMBS, and U.S. Treasuries; actual or anticipated changes in Federal Reserve monetary policy or the monetary policy of other central banks; adverse reactions in U.S. financial markets related to actions of foreign central banks or the economic performance of foreign economies, including in particular China, Japan, the European Union, and the United Kingdom; the cost and availability of financing, including the future availability of financing due to changes to regulation of, and capital requirements imposed upon, financial institutions; the cost and availability of new equity capital; changes in the Company’s leverage and use of leverage; changes to the Company’s investment strategy, operating policies, dividend policy, or asset allocations; the quality of performance of third-party servicer providers, including the Company's sole third-party service provider for our critical operations and trade functions; the loss, unavailability, or security of the Company’s third-party service providers' service and technology that support critical functions of the Company’s business, including those related to the Company’s trading and borrowing activities, due to outages, interruptions, or other failures; the level of defaults by borrowers on loans underlying MBS; impacts from emerging technologies, such as artificial intelligence, including the development of applications utilizing such technologies; changes in the Company’s industry; increased competition; changes in government policy or regulations affecting the Company’s business; changes or volatility in the repurchase agreement financing markets and other credit markets; changes to the market for interest rate swaps and other derivative instruments, including changes to margin requirements on derivative instruments; uncertainty regarding continued government support of the U.S. financial system and U.S. housing and real estate markets, or to reform the U.S. housing finance system including the resolution of the conservatorship of Fannie Mae and Freddie Mac; the composition of the Board of Governors of the Federal Reserve; the political environment in the U.S.; systems failures or cybersecurity incidents; and exposure to current and future claims and litigation. For additional information on risk factors that could affect the Company's forward-looking statements, see the Company's Annual Report on Form 10-K for the year ended December 31, 2025, and other reports filed with and furnished to the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by these and other cautionary statements that the Company makes from time to time in its filings with the Securities and Exchange Commission and other public communications. The Company cannot assure the reader that it will realize the results or developments the Company anticipates or, even if substantially realized, that they will result in the consequences or affect the Company or its operations in the way the Company expects. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of, the Company. Forward-looking statements speak only as of the date made. The Company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances arising after the date on which they were made, except as otherwise required by law. About Dynex Capital Dynex Capital, Inc. (NYSE: DX) is a leading internally managed REIT with a long track record of delivering attractive dividends through the disciplined risk management of investments in high‑quality mortgage assets backed by U.S. residential and commercial real estate. For more information on Dynex, please visit our website at www.dynexcapital.com or connect with us on LinkedIn. View source version on businesswire.com: https://www.businesswire.com/news/home/20260720942172/en/ Contacts Investor Relations Contact Email: [email protected] Phone Number: 804-217-5897