Dynex Capital(DX) published its second-quarter 2025 earnings on July 21, reporting an 8.3 debt-to-equity ratio, while quarter-end liquidity stood at $891 million, or 55% of total equity.

Portfolio expansion accelerates Dynex Capital growth

The portfolio expanded, reaching $14 billion. This expansion -- over 50% above the prior year -- was funded by disciplined capital raises that boosted market capitalization to more than $1.5 billion as of June 30.

"This quarter, Dynex crossed another milestone. Our market capitalization as of June 30 is over $1.5 billion, representing nearly 50% growth since June 2024."
— Smriti Popenoe, Chairman and Co-Chief Executive Officer
"[O]ur portfolio is 25% larger since the end of the first quarter, and stands at $14 billion compared to $11 billion at the end of the first quarter, and is over 50% larger than this time last year."
— Rob Colligan, Chief Financial Officer and Chief Operating Officer

Aggressive capital deployment and portfolio scaling position Dynex to maximize earnings in historically attractive mortgage-backed securities (MBS) markets, amplifying long-term shareholder value by exploiting scale-based operating leverage and sustained premium capital raises.

Dynex Capital boosts leverage and maintains robust liquidity

During Q2 2025, the company increased its economic leverage to 8.3x from 7.4x as policy uncertainty declined, facilitated by stability in the mortgage repurchase (repo) markets. Repo funding costs remained attractive, with spreads to the Secured Overnight Financing Rate (SOFR) in the 15% to 20% basis points range and ample capacity extending three to six months.

"As the policy environment became more supportive, we strategically increased our leverage from 7.4 last quarter to 8.3. Our ability to be proactive with portfolio growth and leverage was directly supported by our strong cash liquidity and the continued health of the mortgage repo market."
— T.J. Connelly, Chief Investment Officer

The ability to flex leverage upward in response to improved market conditions, while maintaining strong liquidity, demonstrates Dynex's disciplined risk management and positions the company to capitalize on favorable funding environments.

High-ROE agency MBSs drive risk-adjusted returns

Spreads to Treasury and robust credit quality remain intact. Mortgage spreads are historically wide.

"Agency mortgage-backed securities continue to offer what we view as the best combination of liquidity, credit quality, and return potential in fixed income today. ROEs on newly acquired positions when fully hedged with interest rate swaps are currently ranging from the mid-teens to the low 20% range. That's attractive by any standard, and these are transparent, high-quality, money-good assets."
— T.J. Connelly, Chief Investment Officer

Such high risk-adjusted returns, enabled by disciplined security selection and stable funding, establish a durable competitive advantage as multiyear spread compression or premium yield opportunities persist for private capital providers like Dynex.

Looking Ahead

Management emphasizes continued capital deployment into agency MBSs, and sufficient liquidity to support further portfolio growth. No specific quantitative forward guidance was detailed for earnings or dividend trajectory, but leadership articulated a sustained focus on risk management, platform scalability, and operational leverage as performance drivers. Long-term value creation is anchored in maintaining high-quality, liquid asset exposure while flexing leverage according to market opportunity.