DX 10-K & 10-Q changes, risk factors and insider trading

The following is a discussion of the risk factors we believe are material to our business. These are factors that, individually or in the aggregate, we think could cause our actual results to differ significantly from anticipated or historical results. 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.uncertainties Additionally,facing investorsour should not interpret the disclosure of a risk to imply that the risk has not already materialized.business.

Changes in creditmarket spreads represent the market’s valuation of the perceived riskiness of assets relative to risk-free rates. CreditMarket spreads change based on severalfactors specific to a particular security, such as prepayment performance or credit performance, and other factors, including, but not limited to, macroeconomic and systemic changes, factorsmarket specific to a particular security such as prepayment performance or credit performance,psychology, market psychology,liquidity, 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. Spread levels also impact income over the longer term. When market spreads tighten, we pay a higher premium for new investments, which lowers the yield we expect to earn on our future investment portfolio.

Interest rate fluctuations could negatively impact our netfinancing interestcosts, income,the comprehensive income, bookmarket value perof commonour share,investments, dividends, liquidity, and the market price of our stock.

Interest rate fluctuations impact us in multiple ways. During periods of rising rates, particularly interest rate increases that occur with increases to the targeted U.S. Federal Funds Rate (“Federal Funds Rate”), we may experience a decline in our net interest income because interest rates paid on our borrowing ratesborrowings may increase faster than ourinterest investmentsrates mature or the couponsearned on our investmentsinvestments. reset. In 2022 and 2023,While the Federal Reserve increasedcontinued to reduce the targeted range for the Federal Funds Rate in an effort to slow inflation, which resulted in a significant increase to our repurchase agreement financing costs. While the Federal Reserve cut the Federal Funds Rate in the third quarter of 2024 and indicated that there may be additional rate cuts,2025, future reductions are not certain.certain, Additionally,and there can be no assurance that the Federal Reserve will not return to makingmake upwards adjustments to the Federal Funds Rate in the future. Any further increases in the Federal Funds RateRate, and market anticipation of the same, are likely to cause our borrowing costs to increase further,increase, negatively impacting our net interest income, common stock dividends, market price of our stock, and book value per common share.

Interest rate increases may also negatively affect the market value of our securities, and if we do not adequately hedge against such increases, we will experience declines in comprehensive income, book value per common share, and 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. Furthermore, an increasing interest rate environment may expose us to extension risk becauseas prepayments on the loans underlying our MBS are likely to decline, which may reduce our ability to reinvest into higher yielding assets.

Interest rate fluctuations may also impact the market price of our common sharesstock independent of the effects such conditions may have on our investment and hedging portfolios. OneInterest rates may be impacted by many factors, including unexpected or uncertain domestic and global political and economic events, such as trade conflicts, international politics, global monetary policy, and the impact of economic or other sanctions, and it can be difficult to predict the factorsimpact such events could have on interest rates. Among other factors, one factor investors may consider in deciding whether to buy or sell our common sharesstock is our dividend rate (or expected future dividend rate) relative to market interest rates. If market interest rates continue to increase or do not decline from their current levels,increase, prospective investors may demand a higher dividend rate on our common sharesstock or seek alternative investments paying higher dividends or interest. We cannot assure you that we will achieve results that will allow us to increase our dividend rate in response to market interest rate increases.

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 theour assets in which we invest.investments.

WePeriods investof market stress can lead to dislocations in asset pricing, making it difficult to accurately value MBS thatbecause they are traded in over-the-counter (“OTC”) markets, which are less liquid and have less price transparency than assets traded on securities exchanges. OwningDuring securitiesperiods thatof aresevere tradedeconomic instress, OTCa marketsmarket may increasenot exist for certain of our liquidityinvestments risk,at any price, particularly innon-Agency a volatile market environment, because our assets may be more difficult to borrow against or sell promptly and on terms acceptable to us, which may result in losses upon sale of these assets.MBS.

RMBS have no prepayment protection while CMBS and CMBS IO have voluntary prepayment protection in the form of a prepayment lock-out on the loan for an initial period or by yield maintenance or prepayment penalty provisions, which serve as full or partial compensation for future lost interest income on the loan, although, we may not be able to reinvest the proceeds into a similar yielding asset. Compensation for voluntary prepayment on CMBS IO securities may not be sufficient to compensate us for the loss of interest as a result of the prepayment. We have no protection from involuntary prepayments. The impact of involuntary prepayments on CMBS IO is particularly acute because the investment consists entirely of premium. An increase in involuntary prepayments will result in the loss of investment premiums at an accelerated rate which could materially reduce our interest income and dividend.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. Defaults in loans underlying our CMBS IO, particularly loans in non-Agency CMBS IO securities collateralized by income-producing properties such as retail shopping centers, office buildings, multifamily apartments, and hotels, may increase as a result of economic weakness.

We may be subject to risks associated with inadequate or untimely services from third-party serviceloan providers,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.

Loans underlying our non-Agency MBS receive primary and special servicing from third-party service providers, who control all aspects of loan collection, loss mitigation, default management, and ultimate resolution of a defaulted loan. Though the servicer has a fiduciary obligation to act in the best interest of the securitization trust, we have no contractual rights with the third-party servicer, and significant latitude exists with respect to certain of its servicing activities. If a third-party servicer fails to perform its duties under the securitization documents, as a result of insolvency or other reasons, this may result in a material increase in delinquencies or losses to the securities. For non-Agency MBS, any financial difficulties with the servicer could lead to a material increase in delinquencies or losses to the securities. As a result, the value of the securities may be adversely impacted, and we may incur losses on our investment.

Provisions in loan documents for mortgages in CMBS IO securities in which we invest requiring yield maintenance charges, prepayment penalties, defeasance, or lock-out periods may not be enforceable in some states and under federal bankruptcy law. Provisions in the loan documents requiring yield maintenance charges and prepayment penalties may also be interpreted as constituting the collection of interest for usury purposes. Accordingly, we cannot be assured that the obligation of a borrower to pay any yield maintenance charge or prepayment penalty under a loan document in a CMBS IO security will be enforceable. 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. 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 for the present value of the amounts not collected.security.

Rating agencies rate securities based upon their assessment of the safety of the receipt of principal and interest payments on the securities. Rating agencies do not consider the risks of fluctuations in fair value or other factors that may influence the value of securities and, therefore, the assigned credit rating may not fully reflect the true risks of an investment in securities. Also, rating agencies may fail to make timely adjustments to credit ratings based on available data or changes in economic outlook or may otherwise fail to make changes in credit ratings in response to subsequent events, so the credit quality of our investments may be better or worse than the ratings indicate. We attempt to reduce the impact of the risk that a credit rating may not accurately reflect the risks associated with a particular debt security by not relying solely on credit ratings as the indicator of the quality of an investment. We make our acquisition decisions after factoring in other information that we have obtained about the loans underlying the securitysecurity, creditworthiness of the borrowers, and the credit subordination structure of the security. Despite these efforts, our assessment of the quality of an investment may also prove to be inaccurate and we may incur credit losses in excess of our initial expectations.

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. For example, lenders may respond to adverse market conditions by changing the terms of such financings in a manner that makes it more difficult for us to renew or replace on a continuous basis our maturing short-term repurchase agreement borrowings. 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 occuroccur, including if we:

In addition, if the Federal Reserve revises capital requirements for lenders, the economy may slow or reduce capital market liquidity.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. At various times, our lenders have revised and may continue to revise, their eligibility requirements for the types of assets that they are willing to finance or the terms of such financing arrangements, including increased haircuts and requiring additional cash collateral, based on, among other factors, the regulatory environment and a lender’s management of actual and perceived risk. 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.

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. These valuations may be different from the values that we ascribe to these assets and may be influenced by recent asset sales at distressed levels by forced sellers. If a lender determines that the value of the assets has decreased, the lender has the right to initiate a margin call, which requireswould 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 wouldmay also be required to post additional collateral if haircuts increase under a repurchase agreement. Furthermore, if we move financing from one counterparty to another with larger haircut requirements, we will have to repay more cash to settle the original borrowing than we could borrow from the new counterparty. In these situations, we may be forced to sell assets at significantly depressed prices to meet the margin calls and to maintain adequate liquidity,calls, which may cause significant losses. Significant margin calls related to our repurchase agreement borrowings or variation margin related to our hedging instruments may have a material adverse effect on our results of operations, financial condition, business, liquidity, and ability to make distributions to our shareholders, and could cause the value of our capital stock to decline.

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, which could lead to sudden and material adverse effects on our results of operations, financial condition, business, liquidity, and ability to make distributions to shareholders, and could force us to sell assets at significantly depressed prices to maintain adequate liquidity.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.

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 ourthis Annual Report on Form 10-K.

•interest rate hedging can be relatively expensive, particularly during periods of volatile interest rates;

We are required to post margin when entering into a hedging instrument that is traded on an exchange or administered through a clearing house. The amount of margin is set for each derivative instrument by the exchange or clearinghouse. InExchanges priorwill periods,also exchanges have requiredrequire additional margin in response to events having, or expected to have, adverse economic consequences. Future adverse economic developments ordevelopments, market uncertainty, such as the Federal Reserve’s interest rate increases since 2022 andor any proposed new reporting requirements by self-regulatory authorities and Congress,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.

Repurchase agreement transactions are legally structured as the sale of a security to a lender in return for cash from the lender. These transactions are accounted for as financing agreements because the lenders are obligated to resell the same securities back to us at the end of the transaction term. Because the cash we receive from the lender when we initially sell the securities to the lender is less than the value of those securities, if the lender defaults on its obligation to resell the same securities back to us at the end of the transaction term, we would incur a loss on the transaction equal to the difference between the value of the securities sold and the amount borrowed from the lender including accrued interest. The lender may default on its obligation to resell if it experiences financial difficulty or if the lender has re-hypothecated the security to another party who fails to transfer the security back to the lender. 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,liquidity and earnings, and therefore reduce our ability to pay dividends to our shareholders.

We have risks based onThe models usedwe use to make purchases and risk management decisions for our portfolio.portfolio may be inaccurate or incomplete, which could materially and adversely affect our cash flows.

We use models and third-party data to value and to measure the risk in our portfolio. These models provide estimates on duration, convexity, prepayment speeds, future interest rates, defaults as well as other factors. There are no guarantees that the models provide accurate results,results because, among other things, the assumptions, estimates, and therejudgments used as inputs may be inaccurate or incomplete. 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, interpretationinterpretation, and even model errors could result in potential losses of cash flow and trading losses in our portfolio.

To maintainmeet 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 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.

To qualify as a REIT and avoid certain taxes, we must generally distribute at least 90% of our taxable income annually to our shareholders, subject to certain adjustments and excluding any net capital gain. To the extent that we satisfy this 90% distribution requirement but distribute less than 100% of our taxable income, including our net capital gain, we will be subject to federal corporate income tax on our undistributed taxable income. In addition, if we fail to meet certain other thresholds for the distribution of our taxable income, we may be subject to a non-deductible 4% excise tax. While we have not established a minimum dividend payment level, we aim to distribute sufficient cash dividends to our shareholders to satisfy the 90%REIT distribution requirementrequirements and avoid the corporate income tax and the non-deductible 4% excise tax.tax, we have not established a minimum dividend payment level and cannot guarantee future dividends will be payable in cash.

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 unattractiveunfavorable 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 common stock. 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.

As described in Item 1, “Operating and Regulatory Structure,” realized gains and losses on derivatives that we designate as tax hedges are one of the reasons why our net income for GAAP purposes will differ from our taxable income. As of December 31, 2024,2025, we have $719.0$558 million of deferred tax hedge gains, which were recognized in GAAP net income (loss) during 20242025 and prior periods. Our projected amortization of these deferred tax hedge gains into taxable income for 20252026 is currently estimated to be $100.1$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. It is possible that our REIT distribution requirements may exceed the net cash we generate from our operations.

We have not established a minimum dividend payment level, and we may not have the ability to pay dividends in the future. Furthermore, our monthly dividend strategy could attract shareholders who are especially sensitive to the level and frequency of the dividend. If we were to reduce the dividend or change back 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, including utilization of our NOL, is distributed. However, we have not established a minimum dividend payment level, and the amount of our dividend is subject to fluctuation. Our ability to pay dividends may be adversely affected by the risk factors described herein. All distributions will be made at the discretion of our Board of Directors and will depend on our GAAP and tax earnings, our financial condition, the requirements for REIT qualification, and such other factors as our Board of Directors may deem relevant from time to time. 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. A return of capital reduces the basis of a shareholder’s investment in our common stock to the extent of such basis and is treated as capital gain thereafter.

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. 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 operations and use of leverage also subject us to interpretations of the Tax Code, and anyAny violations of the relevant requirements under the Tax Code could cause us to lose our REIT status or to pay significant penalties and interest. In addition, our ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.

•Notwithstanding our NOL carryforward, meetingMeeting minimum REIT dividend distribution requirements could reduce our liquidity. Earning non-cash REIT taxable income could necessitate our selling assets, incurring debt, or raising new equity in order to fund dividend distributions.

The present U.S. federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial, or administrative action at any time, which could affect the U.S. federal income tax treatment of an investment in us. The U.S. federal income tax rules dealing with REITs are constantly under review by persons involved in the legislative process, the IRS, and thesubject U.S. Treasury, which results in statutory changes as well asto frequent revisions to regulations and interpretations.

If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax,tax afterbefore consideration of any remaining NOL carryforward but not considering any dividends paid to our shareholders during the respective tax year. The resulting corporate tax liability could be material. Unless we are entitled to relief under certain Tax Code provisions, we also will be disqualified from taxation as a REIT until the fifth taxable year following the year for which we failed to qualify as a REIT. If we lose our REIT status, some of our lenders would have the right to terminate any repurchase agreement borrowings and derivative contracts outstanding at that time. This would further stress our liquidity position, reduce the amount of cash available for distribution to our shareholders, and could further exacerbate the adverse impacts on the value of our common stock described above.

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. Instead, under the current law, qualified REIT dividends constitute “qualified business income,” and thus, a 20% deduction is available to individual taxpayers with respect to such dividends, resulting in a 29.6% maximum federal tax rate (plus the 3.8% surtax on net investment income, if applicable) for individual U.S. shareholders. Additionally, without further legislative action, the 20% deduction applicable to qualified REIT dividends will expire on January 1, 2026. The more favorable rates applicable to regular corporate qualified dividends could cause investors who are taxed at individual rates to perceive investments in REITs to be relatively less attractive than equity investments in non-REIT entities that pay dividends, which could adversely affect the value of the shares of REITs, including our common stock.

There 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. 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. Tax opinions are not binding on the IRS, and no assurance can be given that the IRS will not successfully challenge the conclusions set forth in such opinions, which could lead to tax penalties, REIT compliance issues, or other regulatory compliance challenges. In addition, we must emphasize that the opinion is based on various assumptions relating to our TBAs and is conditioned upon fact-based representations and covenants made by our management regarding our TBAs. No assurance can be given that the IRS would not assert that such assets or income are not qualifying assets or income. If the IRS were to challenge the opinion successfully, we could be subject to a penalty tax or we could fail to remain qualified as a REIT if a sufficient portion of our assets consists of TBAs or a sufficient portion of our income consists of income or gains from the disposition of TBAs.

For REIT qualification purposes, we treat repurchase agreement transactions as financing of the investments pledged as collateral. If the IRS disagrees with this treatment, ourOur ability to qualify as a REIT could be adversely affected.affected if the IRS disagrees with our treatment of repurchase agreement transactions as financing of the investments we pledge as collateral.

This discussion contains forward-looking statements that involve risks and uncertainties. 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 filedwe file with the SEC andor otherwise publicly disclosed.disclose. Please refer to “Forward-Looking Statements” contained within thisPart I, Item 71, “Business” of the Annual Report on Form 10-K for additional information. 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, financingfinancing, risk management and hedging strategies, and other important information, please refer to Part I, Item 11, “Business” of this Annual Report on Form 10-K.

The charts below show the range of U.S. Treasury and Secured Overnight Funding Rate (“SOFR”)-based swap rates for the pastyear yearended December 31, 2025 and information regarding market spreads as of and for the periods indicated:

(2)Data is sourced from J.P. Morgan and represents the spread to swap rate on newly issued Agency securities andcollateralized isby sourcedmultifamily from J.P. Morgan.properties.

The following table summarizes the changes in the Company's financial position during 2024the year ended December 31, 2025:

(2)Net proceeds from common stock issuance include $6.3approximately $1.2 billion from ATM issuances and approximately $11 million from amortization of share-based compensation, net of grants, and adjustments for payroll tax withholding on share-based compensation vesting during the year ended December 31, 2024.2025.

Our investment portfolio (including TBAs) as of December 31, 2024,2025, has increased approximately98% 32% compared tosince December 31, 2023.2024. 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. The following charts compare the composition of our MBS portfolio (including TBAs) as of the dates indicated:

Agency CMBS, Agency CMBS IO, and non-Agency CMBS IO comprise 2.1% of our MBS portfolio as of December 31, 2024 is comprised of Agency CMBS, Agency CMBS IO, and non-Agency CMBS IO. Our Agency CMBS and Agency CMBS IO are backed by loans collateralized by multifamily properties, which have performed well for the last decade versus other sectors of the commercial real estate market.properties. 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%99.7% of the loans in K-deals are current as of SeptemberDecember 2024.2025. Our non-Agency CMBS IO were all originated prior to 2018 withand aare weightedbacked average remaining life of less than 2 years. The underlyingby loans for the non-Agency CMBS IO securities are collateralized by a number of different property typestypes, including:such 27%as multifamily, office, retail, 40%hotels, office,industrial, 4% multifamily, 10% hotelstorage, and 19% all other real estate categories. 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.others. 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. Non-Agency CMBS IO do not comprise a material percentage of our portfolio and future income is not expected to have a material impact on our financial results.

Our repurchase agreement borrowings increased to $6.6$14 billion as of December 31, 20242025 from $5.4$7 billion as of December 31, 20232024. asThese weborrowings were used these funds to partially finance our purchases of Agency RMBSMBS during the year.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. Please refer to Note 4 of the Notes to the Consolidated Financial Statements contained within this Annual Report on Form 10-K as well as “Results of Operations” and “Liquidity and Capital Resources” contained within this Item 7 for additional information relating to our repurchase agreement borrowings.

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” inwithin Item 7A of this Annual Report on Form 10-K.

Net Interest ExpenseIncome and Economic Net Interest Income

(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 $45.1 million for the year ended December 31, 2025 and $16.1 million for the year ended December 31, 2024. We did not have any interest rate swap agreements mature or terminate during the year ended December 31, 2024.

Operating expenses for the year ended December 31, 2024,2025 increased $3.6$17 million compared to the year ended December 31, 2023,2024 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. Audit and legal expenses also increased in 2025 compared to 2024 primarily due to acceleratedthe recognitiongrowth of share-basedthe compensation expense for certain stock incentive awards granted in March 2024 to a retirement eligible employee. In addition, our salary and bonus expenses increased by $1.0 million due to an increase in average headcount as well as salary increases and other performance-based incentives.Company.

In evaluatingaddition to reporting 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 presenteddetermined in accordance with GAAPGAAP, asmanagement wellof asthe certainCompany 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 aadditional measuremeasures of the investment portfolio’s return based on the effective yield of its investments, net of financing costs and, with respect to EAD, net of other normal recurring operating income/expenses.return.

(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.

During the year ended December 31, 2024,2025, 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 16,756,83590,126,672 shares of common stock through our ATM program, resulting in proceeds of $207.6$1.2 million,billion, net of broker commissions and fees. We partially deployed these proceeds into purchases of higher coupon Agency RMBS and to cover increasedpost initial margin requirements related to oura interestlarger ratehedging swaps.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. Our measurement of liquidity includes unrestricted cash and cash equivalents and unencumberedunpledged Agency MBS, which are recognized as assets on our consolidated balance sheet. In our measure of liquidity, we also include the fair value of noncash collateral pledged to us by our counterparties, which we typically receive when the fair value of our pledged collateral exceeds our current margin requirement. Our liquidity as of December 31, 2024,2025, was $658.3approximately million,$1.4 billion, which consisted of unrestricted cash of $377.1$531 millionmillion, and unencumberedunpledged Agency MBS with a fair value of $281.2$901 million, and noncash collateral pledged by our counterparties of $1 million. Our liquidity as of December 31, 2023,2024, was $453.6$658 million.

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, the frequent potential for afederal government shutdown,shutdowns, and the impact on global markets stemming from global central bank policies. We are also monitoring the wars and conflicts around the globe. 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. 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. 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.

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. This excess collateral is often referred to as a “haircut” and is intended to provide the lender protection against fluctuations in the fair value of the collateral and/or the failure by us to repay the borrowing at maturity. Lenders have the right to change haircut requirements at maturity of the repurchase agreement and may change their haircuts based on market conditions and the perceived riskiness of the collateral pledged. If the fair value of the collateral falls below the amount required by the lender, the lender has the right to demand additional margin or collateral. These demands are referred to as “margin calls,” and ifIf we fail to meet any margin call, our lenders have the right to terminate the repurchase agreement and sell any collateral pledged. The weighted average haircut for our borrowings as of December 31, 2024,2025, 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.

Collateral requirements for interest rate derivative instruments are typically governed by the central clearing exchange and the associated futures commission merchant, which may establish margin requirements in excess of the clearing exchange. 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. Our TBA contracts, which are subject to master securities forward transaction agreements published by the Securities Industry and Financial Markets Association as well as supplemental terms and conditions with each counterparty, generally provide that valuations for our TBA contracts and any pledged collateral are to be obtained from a generally recognized source agreed to by both parties. However, in certain circumstances, our counterparties have the sole discretion to determine the value of the TBA contract and any pledged collateral. In such instances, our counterparties are required to act in good faith in making determinations of value. In the event of a margin call, we must generally provide additional collateral on the same business day.

The following table provides details on the “net receipts (payments) receipts on derivative instruments” shown on our consolidated statements of cash flows for the periods indicated:

(1)Net periodic interest from our effective interest rate swaps areis recognized as income or expense during the period earned (incurred),or incurred, but the cash is not received or paid until the anniversary of each agreement’s effective date or upon maturity.

During the firstsecond quarter of 2026, financial markets experiencedwere increasedcomparatively calmer as realized volatility moderated from the elevated levels seen earlier in the year, even as investors reassessedcontinued to weigh the outlook for inflation, monetary policy, and global growth amidagainst heightenedongoing geopolitical uncertainty. While theThe U.S. economy continued to expand at a moderate pace, uncertaintywith arounda steady labor market and only a modest increase in inflation expectations. Market participants priced for the inflationpossibility trajectoryof led market participants to reduce expectations for near‑termmodest Federal Reserve policy easing.rate hikes, but forward rates curves suggested any such hikes would slowly be removed over time as new Federal Reserve Chair Kevin Warsh eventually settled into his new approach for managing the Federal Reserve. Funding markets remained orderly,orderly and were well supported by ample system liquidity, and liquidity across the mortgage and reporepurchase agreement markets continued to function effectively. SpreadsAfter spread widening late in the first quarter, spreads across Agency MBS widenedstabilized meaningfully,and particularlymoved latemodestly intighter over the course of the second quarter, assupported periodicby correlationmuted withnew riskymortgage assetsorigination supply, the sector's strong liquidity profile, and renewed demand from the GSEs, which increased amidtheir macroeconomicpurchases andof geopoliticalAgency developments.MBS during the bout of widening.

Against this backdrop, Agency MBS continues to offer attractive long‑term return potential relative to other high‑quality fixed‑income assets, particularly given muted new mortgage originationthe supply dynamics, the sector's strong liquidity profile, and the sector’spotential strongfor liquidityincremental profile.GSE demand to provide support against episodes of spread widening. At the same time, fund flows into bond funds remain a steady source of demand. The long-term, demographic-led need for income will likely remain a central theme in developed financial markets. We view current spread levels as attractive and remain attentive to the evolving supply‑and‑demand balance, including the pace and composition of GSE purchases, the trajectory of the Federal Reserve's balance sheet, especially its holdings of Agency MBS and the level of banking‑system reserves. We continue to monitor monetary policy, inflation trends, housing market activity, supply‑and‑demand dynamics, and geopolitical developments, as well as operational and cybersecurity risks, as we assess their potential impact on interest rates, spreads, prepayment behavior, and financing conditions. We remain focused on disciplined portfolio construction, security selection, liquidity management, and riskbalance‑sheet positioningresilience as market conditions continue to evolve.

The charts below show the range of U.S. Treasury and Secured Overnight Funding Rate (“SOFR”)-basedSOFR-based swap rates for the threesix months ended MarchJune 31,30, 2026 and information regarding market spreads as of and for the periods indicated:

Summary of FirstSecond Quarter 2026 Financial Performance

For the first quarter of 2026, ourOur total economic return for the second quarter of $(0.34)2026 of $0.81 per common share was comprised of aan decreaseincrease in book value of $(0.85)$0.30 per common share offset byand dividends declared of $0.51 per common share. The decreaseincrease in book value per common share was drivenprimarily bycomprised of a net lossgain of $(140)$102 million on our investment portfolio, net of hedges,hedges. whichThe resultedfair primarilyvalue of our Agency MBS benefited from wideningspread mortgage spreadstightening late in the second quarter. Although higher interest rates reduced asset valuations during the second quarter, our hedging portfolio effectively mitigated much of this impact, supporting the overall increase in book value. We grew ourraised capital baseof by $442$391 million, net of commissions, using the proceeds to opportunistically add investmentsAgency MBS of $6$2.8 billion,billion. netLeverage ofincluding sales.TBAs Ourat adjustedimplied leveragecost increaseddecreased to 8.68.1 times equityequity, primarily due to ourthe usefavorable performance of repurchaseour agreement borrowings to partially finance these purchases.portfolio.

The following table summarizes the changes in the Company's financial position during the three months ended MarchJune 31,30, 2026:

(2)Net proceeds from common stock issuance include approximately $442$391 million from ATM issuances and approximately $5$1.0 million from amortization of share-based compensation, net of grants, during the three months ended MarchJune 31,30, 2026.

Our investment portfolio, including TBAs, as of MarchJune 31,30, 2026, has increased $6$8.2 billion, or 27%,42%, since December 31, 2025, net of sales.2025. We added over $7$10 billion of Agency RMBS,billion, net of salessales, of $608primarily million,30-year fixed rate Agency RMBS during the threesix months ended MarchJune 31,30, 2026. We reduced our TBA securities by a net notional of $1.3$0.6 billion. The following charts compare the composition of our investment portfolio as of the dates indicated:

The following tablescharts compare the percentage distribution by coupon of our 30-year fixed-ratefixed rate Agency RMBS investments, including TBA dollar roll positions,TBAs, as of the dates indicated:

(1)Includes a par value of $9 million of 4.5% 15-year Agency RMBS as of MarchJune 31,30, 2026 and December 31, 2025.

(2)Includes a notional amount of $540$440 million of 4.5% 15-year TBA securities as of MarchJune 31,30, 2026 and $690 million as of December 31, 2025.

AgencyThe majority of our CMBS IO are Agency-issued securities backed by loans collateralized by multifamily properties. 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. 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. 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 repurchase agreement borrowings increased to $21$23 billion as of MarchJune 31,30, 2026 from $14 billion as of December 31, 2025. These borrowings were used to partially finance our purchases of Agency MBS during the threesix months ended MarchJune 31,30, 2026. 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. Please refer to Note 4 of the Notes to the Consolidated Financial Statements contained within this Quarterly Report on Form 10-Q as well as “Results of Operations” and “Liquidity and Capital Resources” contained within this Item 2 for additional information relating to our repurchase agreement borrowings.

Net interest income and net interest spread for the three months ended MarchJune 31,30, 2026, increased compared to the three months ended DecemberMarch 31, 2025,2026, dueas tothe ourportfolio recentgrew. purchases of higher yielding Agency MBS. Though interestInterest expense increased due to ana increasehigher inaverage balance of repurchase agreement borrowings used to finance thesethe purchases,growth in our MBS portfolio. Net periodic interest earned on interest rate swaps, a component of economic net interest income, decreased by approximately $1.2 million for the averagethree financingmonths rateended weJune paid30, declined2026, 33compared to the three months ended March 31, 2026, representing a decline of 3 basis points overas thea comparativepercentage periods.of average repurchase agreement borrowings.

For the three months ended March 31, 2026, losses on our investment portfolio exceeded gains on our hedges by approximately $(139) million,million., which includesincluded $2 million in net periodic interest we earned from interest rate swaps. The fair value of our investment portfolio declined $(257) million during the three months ended March 31, 2026 primarily due to widening of mortgage spreads to U.S. Treasuries. The impact of higher U.S. Treasury rates on our investments was offset by net gains on our interest rate hedges of $119 million, which also benefited from higher SOFR-based swap rates during the three months ended March 31, 2026.

For the threesix months ended MarchJune 31,30, 2025, the fair value of our investment portfolio increased $171.6 million primarily due to a decline of 36 basis points in the 10-year U.S. Treasury rate. These gains were mostly offset by net losses on our hedging portfolio ofexceeded $(171.1)gains on our investments by approximately $32 million (excluding $10.9$23 million ofin net periodic interest we earned from our interest rate swaps), asdue aprimarily result ofto the decline in 10-yearSOFR-based and 30-year U.S. Treasury rates as well as SOFRswap rates across the curve.curve since December 31, 2024.

(2)Realized gain for interest rate swaps consists of net periodic interest benefit of $1.7$2.2 million for the threesix months ended MarchJune 31,30, 2026, $7.6and $23.2 million for the threesix months ended DecemberJune 31, 2025, and $10.9 million for the three months ended March 31,30, 2025.

Operating expenses increased 53% to $37 million for the threesix months ended MarchJune 31,30, 2026 increased $5 million compared to $24 million for the threesix months ended DecemberJune 31, 2025 and $9 million compared to the three months ended March 31,30, 2025. In addition to higher salary and share-based compensation expenses resulting from new employees, operating expenses also increased due to accelerated vesting of equity grants and other severance expenses associated with the departure of the Company's former chief financial officer. Annualized general and administrative expenses for the six months ended June 30, 2026 as a percentage of total equity was 2.2% compared to 2.9% for the six months ended June 30, 2025.

During the threesix months ended MarchJune 31,30, 2026, we issued 32,101,36562,149,933 shares of common stock through our ATM program, resulting in proceeds of $0.4$0.8 billion, net of broker commissions and fees. We deployed these proceeds primarily into purchases of Agency RMBS.

Our liquidity fluctuates based on our investment activities, leverage, capital raising activities, and changes in the fair value of our investments and derivative instruments. Our measurement of liquidity includes unrestricted cash and cash equivalents and unpledged Agency MBS, which are recognized as assets on our consolidated balance sheet. In our measure of liquidity, we also include the fair value of noncash collateral pledged to us by our counterparties, which we typically receive when the fair value of our pledged collateral exceeds our current margin requirement. Our liquidity as of MarchJune 31,30, 2026, was approximately $1.3$1.6 billion, which consisted of unrestricted cash of $773$608 million and unpledged Agency MBS with a fair value of $478$1.0 million.billion. Our liquidity was $1.4 billion as of December 31, 2025.

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. We are also monitoring thegeopolitical warsconflicts and conflictsuncertainty around the globe. 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. 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. 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. 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 8.68.1 times shareholders’ equity as of MarchJune 31,30, 2026. We include 100% of the cost basis of our TBA securities in evaluating our leverage because it is possible under certain market conditions that it may be uneconomical for us to roll a TBA long position into future months, which may result in us having to take physical delivery of the underlying securities and use cash or other financing sources to fund our total purchase commitment.

Leverage based solely on repurchase agreement amounts outstanding was 7.7 times shareholders’ equity as of March 31, 2026. Our repurchase agreement borrowings are uncommitted with terms renewable at the discretion of our lenders and generally have original terms to maturity of overnight to six months, though in some instances, we may enter into longer-dated maturities depending on market conditions. We seek to maintain unused capacity under our existing repurchase agreement credit lines with multiple counterparties, which helps protect us in the event of a counterparty's failure to renew existing repurchase agreements. As part of our continuous evaluation of counterparty risk, we maintain our highest counterparty exposures with broker-dealer subsidiaries of regulated financial institutions or primary dealers.

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. This excess collateral is often referred to as a “haircut” and is intended to provide the lender protection against fluctuations in the fair value of the collateral and/or the failure by us to repay the borrowing at maturity. Lenders have the right to change haircut requirements at maturity of the repurchase agreement and may change their haircuts based on market conditions and the perceived riskiness of the collateral pledged. If the fair value of the collateral falls below the amount required by the lender, the lender has the right to demand additional margin or collateral. If we fail to meet any margin call, our lenders have the right to terminate the repurchase agreement and sell any collateral pledged. The weighted average haircut for our borrowings as of MarchJune 31,30, 2026, 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 collateral we post in excess of our repurchase agreement borrowing with any counterparty is also typically referred to by us as “equity at risk,” which represents the potential loss to the Company if the counterparty is unable or unwilling to return collateral securing the repurchase agreement borrowing at its maturity. The counterparties with whom we have the greatest amounts of equity at risk may vary significantly during any given period due to the short-term and uncommitted nature of the repurchase agreement borrowings. As of MarchJune 31,30, 2026, we had amounts outstanding with over 25 counterparties and did not have more than 10% of equity at risk with any counterparty or group of related counterparties.

We have various financial and operating covenants in certain of our repurchase agreements, which we monitor and evaluate on an ongoing basis for compliance as well as for impacts these customary covenants may have on our operating and financing flexibility. We do not believe we are subject to any covenants that materially restrict our financing flexibility. We were in full compliance with our debt covenants as of MarchJune 31,30, 2026, and we are not aware of circumstances that could potentially result in our non-compliance in the near future.

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. 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 MarchJune 31,30, 2026, we had cash collateral posted to our counterparties of $517$570 million under these agreements.

WeOur reported GAAP financial results will generally differ from our REIT taxable income and dividend distributions due to temporary and permanent differences. For example, we designate certain derivative instruments as interest rate hedges for tax purposes. 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. 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. 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 MarchJune 31,30, 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.

As of MarchJune 31,30, 2026, we also had $487$475 million in capital loss carryforwards, $305$293 million of which will expire by December 31, 2027 and the remainder by December 31, 2028. 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.

Critical accounting estimates are defined as those that require management's most difficult, subjective, or complex judgments, and which may result in materially different results under different assumptions and conditions. Our critical accounting estimates are discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2025 Form 10-K under “Critical Accounting Estimates.” There have been no significant changes in our critical accounting estimates during the three months ended MarchJune 31,30, 2026.

•the risks and uncertainties referenced in this Quarterly Report on Form 10-Q, especially those incorporated by reference into Part I,II, Item 1A, “Risk Factors,”

We routinely announce material information to investors and the marketplace using filings with the SEC, press releases, public conference calls, presentations, webcasts, and the investor relations page of our website at www.dynexcapital.com/investors and our LinkedIn page. 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. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings, and public conference calls and webcasts. The web addresses are included in this Quarterly Report on Form 10-Q as textual references onlyonly, and the information posted on these channels areis not incorporated by reference in this Quarterly Report on Form 10-Q or in any other report or document we file with the SEC.