Q1 2026 Dynex Capital Inc Earnings Call

April 20, 2026

<unk> first quarter earnings Conference call today's conference is being recorded.

At this time I'd like to turn the conference over to MS. Alison Griffin Vice President of Investor Relations. Please go ahead.

Thank you operator, and good morning, everyone.

The press release associated with todays call was issued and filed with the SEC. This morning April 20th 2026, you May view the press release on the homepage of the <unk> website.

Next capital Dot com as well as on the Sec's website at SEC Gov.

Operator: Good day, and welcome to the Dynex Capital, Inc. Q1 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Alison Griffin, Vice President of Investor Relations. Please go ahead.

Speaker #1: Please stand by Good day and welcome to the next capital Incorporated . First quarter earnings conference call Today's conference is being recorded . At this time , I'd like to turn the conference over to Miss Alison Griffin , vice president of investor Relations .

Before we began we wish to remind you that this conference call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995. The words believe expect forecast anticipate estimate project plan and similar expressions identify forward looking statements that are.

Alison Griffin: Thank you, operator, and good morning, everyone. The press release associated with today's call was issued and filed with the SEC this morning, 20 April 2026. You may view the press release on the homepage of the Dynex website at dynexcapital.com, as well as on the SEC's website at sec.gov. Before we begin, we wish to remind you that this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words believe, expect, forecast, anticipate, estimate, project, plan, and similar expressions identify forward-looking statements that are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. The company's actual results and timing of certain events could differ considerably from those projected and/or contemplated by those forward-looking statements as a result of unforeseen external factors or risks.

Speaker #1: Please go ahead

Speaker #2: Thank you . Operator , and good morning , everyone . The press release associated with today's call was issued and filed with the SEC this morning , April 20th , 2026 .

Currently subject to risks and uncertainties.

Some of which cannot be predicted or quantified.

The companys actual results and timing of certain events could differ considerably from those projected indoor contemplated by those forward looking statements.

Speaker #2: You may view the press release on the home page of the Dynex website at Dynex Capital Inc, as well as on the SEC's website at sec.gov. Before we begin, we wish to remind you that this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

As a result of unforeseen external factors or risks.

For additional information on these factors or risks please refer to our disclosures filed with the SEC, which may be found on the <unk> website under investor as well as on the Sec's website.

Speaker #2: The words believe , expect , forecast , anticipate , estimate , project , plan and similar expressions . Identify forward looking statements that are inherently subject to risks and uncertainties , some of which cannot be predicted or quantified The company's actual results and timing of certain events could differ considerably from those projected and or contemplated by the forward looking statements .

This conference call is being broadcast live over the Internet with the streaming slide presentation, which can be found through the webcast link on the website.

Slide presentation May also be referenced on the investors page.

Joining me on the call today are Tom <unk>.

Co Chief Executive Officer and President.

Byron, Boston, Chairman and co Chief Executive Officer.

Alison Griffin: For additional information on these factors or risks, please refer to our disclosures filed with the SEC, which may be found on the Dynex website under Investor, as well as on the SEC's website. This conference call is being broadcast live over the internet with a streaming slide presentation, which can be found through the webcast link on the website. The slide presentation may also be referenced on the Investors page. Joining me on the call today are Smriti Popenoe, Co-Chief Executive Officer and President, Byron Boston, Chairman and Co-Chief Executive Officer, Michael Sartori, Chief Financial Officer, and Terrence Connelly, Chief Investment Officer. I now have the pleasure to turn the call over to Smriti.

Speaker #2: As a result of unforeseen external factors or risks . For additional information on these factors or risks , please refer to our disclosures filed with the SEC , which may be found on the website under investor , as well as on the SEC's website This conference call is being broadcast live over the internet with the streaming slide presentation , which can be found through the webcast link on the website .

Mike.

Chief Financial Officer.

T J following chief investment Officer.

I now have the pleasure to turn the call over to smoothies.

Thank you Alison and good morning, everyone.

We continue to build our company at the intersection of two powerful demographic tailwind.

The need for income and the need for housing.

Speaker #2: The slide presentation may also be referenced on the investor page. Joining me on the call today are Smriti Popenoe, Co-Chief Executive Officer and President, and Byron Boston, Chairman and Co-Chief Executive Officer.

<unk> continues to deliver differentiated top tier performance.

Our track record now combined with the significant growth in our capital base over the last 15 months.

Value creation by delivering scale and resilience to our shareholders.

Speaker #2: Mike Sartori, Chief Financial Officer, and TJ Connolly, Chief Investment Officer. I now have the pleasure to turn the call over to Smurfy.

The team is focused on methodically building durability across investments finance technology risk and operations.

Smriti Popenoe: Thank you, Alison, and good morning, everyone. We continue to build our company at the intersection of two powerful demographic tailwinds, the need for income and the need for housing. Dynex continues to deliver differentiated top-tier performance. Our track record, now combined with the significant growth in our capital base over the last 15 months, propels value creation by delivering scale and resilience to our shareholders. The team is focused on methodically building durability across investments, finance, technology, risk, and operations. Growing an enduring platform reinforces the value of our business meaningfully beyond the valuation of our balance sheet, further driving long-term shareholder returns. Turning now to the global macroeconomic environment. Government policy is squarely in the driver's seat, defining and driving outcomes. Scenario planning for us has evolved to mapping policy pathways.

Growing and enduring platform reinforces the value of our business meaningfully beyond the valuation of our balance sheet.

Speaker #3: Thank you . Alison , and good morning , everyone . We continue to build our company at the intersection of two powerful demographic tailwinds .

Further driving long term shareholder returns.

Speaker #3: The need for income and the need for housing . Dynex continues to deliver differentiated top tier performance . Our track record now combined with the significant growth in our capital base over the last 15 months , propels value creation by delivering scale and resilience to our shareholders .

Turning now to the global macroeconomic environment.

Government policy is squarely in the driver's seat to finding and driving outcomes.

Scenario planning for US has evolved to mapping policy pathways.

What policymakers could do next how markets might transmit those decisions and how we position ourselves for those moves.

Speaker #3: The team is focused on methodically building durability across investments, finance, technology, risk, and operations. A growing and enduring platform reinforces the value of our business meaningfully beyond the valuation of our balance sheet.

More than ever mindset, and preparedness of the key factors for successful decision, making because the policy pads arent always foreseeable.

Flexibility and openness and our team's mindset something we actively teach and practice are now essential parts of navigating the investment landscape.

Speaker #3: Further driving long-term shareholder returns, turning now to the global macroeconomic environment, government policy is squarely in the driver's seat, defining and driving outcomes.

In the first quarter, we added value by executing our plan, we manage the portfolio through a short burst of volatility, which we use to opportunistically raise and deploy capital. We grew the total capital base by 18% deploying the funds during the quarter as MBS spreads widened.

Speaker #3: Scenario planning for us has evolved to mapping policy pathways . What policy could do next ? How markets may transmit those decisions , and how we position ourselves for those moves .

Smriti Popenoe: What policymakers could do next, how markets may transmit those decisions, and how we position ourselves for those moves. More than ever, mindset and preparedness are the key factors for successful decision-making because the policy paths aren't always foreseeable. Flexibility and openness in our team's mindset, something we actively teach and practice, are now essential parts of navigating the investment landscape. In Q1, we added value by executing our plan. We managed the portfolio through a short burst of volatility, which we used to opportunistically raise and deploy capital. We grew the total capital base by 18%, deploying the funds during the quarter as MBS spreads widened. Since quarter end, MBS spreads have tightened and book value is higher. Mike and TJ will now review the detailed quarterly results and our outlook.

Since quarter end MBS spreads have tightened and book value is higher.

Speaker #3: More than ever, mindset and preparedness are the key factors for successful decision-making because the policy paths aren't always foreseeable. Flexibility and openness in our team's mindset, something we actively teach and practice, are now essential parts of navigating the investment landscape.

T J will now review the detailed quarterly results and our outlook.

Thank you and good morning, everyone joining us today.

I'd like to begin by welcoming tailwind mode.

Who joined US on X day to read capital markets and Investor Relations.

Jay brings deep industry experience across both functions and her background will support the continued growth of our capital and Investor base, while deepening engagement with our existing investors.

Speaker #3: In the first quarter, we added value by executing our plan. We managed the portfolio through a short burst of volatility, which we used to opportunistically raise and deploy capital.

We are excited to add her capabilities to our strong and growing <unk>.

Speaker #3: We grew the total capital base by 18%, deploying the funds during the quarter as MBS spreads widened. Since quarter end, MBS spreads have tightened and book value is higher. Mike and TJ will now review the detailed quarterly results and our outlook.

Turning now to our financial results for the quarter.

Book value ended the quarter at $12 60 per share and economic return was negative two 5% for the quarter consisting of 51 per share of common dividends and an 85 per share decrease in book value.

Michael Sartori: Thank you. Good morning, everyone joining us today. I'd like to begin by welcoming Caitlin Mauritz, who joined Dynex today to lead capital markets and investor relations. Kate brings deep industry experience across both functions, and her background will support the continued growth of our capital and investor base while deepening the engagement with our existing investors. We are excited to add her capabilities to our strong and growing Dynex team. Turning now to our financial results for the quarter. Book value ended the quarter at $12.60 per share, and economic return was -2.5% for the quarter, consisting of $0.51 per share of common dividends, and an $0.85 per share decrease in book value. We ended the quarter with leverage of 8.6 times versus total equity.

Speaker #4: Thank you, and good morning, everyone. Thank you for joining us today. I'd like to begin by welcoming Caitlin Moretz, who joined Dynex today to lead Capital Markets and Investor Relations.

We ended the quarter with leverage of eight six times versus total equity.

Speaker #4: Kate brings deep industry experience across both functions and her background will support the continued growth of our capital and investor base, while deepening the engagement with our existing investors.

Majority of the increase was attributable to the growth in our investment portfolio of $6 billion.

Reflecting the deployment of capital raise during the quarter of $442 million.

Speaker #4: We are excited to add her capabilities to our strong and growing Dynex team. Turning now to our financial results for the quarter, book value ended the quarter at $12.60 per share.

Our liquidity position remains very strong with $1 3 billion in cash and unencumbered securities at the end of the quarter representing over 46% of total equity.

Speaker #4: Economic return was negative 2.5% for the quarter, consisting of $0.51 per share of common dividends and an $0.85 per share decrease in book value. We ended the quarter with leverage of 8.6 times versus total equity.

We continue to evaluate growth lens of market opportunity.

Investment returns and long term accretion to drive shareholder value.

Michael Sartori: The majority of the increase was attributable to the growth in our investment portfolio of $6 billion, reflecting the deployment of capital raised during the quarter of $442 million. Our liquidity position remained very strong, with $1.3 billion in cash and unencumbered securities at the end of the quarter, representing over 46% of total equity. We continue to evaluate growth through the lens of market opportunity, investment returns, and long-term accretion to drive shareholder value. Net interest income for the quarter rose from 28 cents per share to 40 cents per share, primarily due to declining financing costs, which fell 33 basis points due to the impact of the Federal Reserve's rate cuts in Q4. With respect to expenses, G&A increased quarter-over-quarter, driven primarily by one-time items.

Net interest income for the quarter rose from 28 per share to <unk> 40 per share primarily due to declining financing cost.

Speaker #4: The majority of the increase was attributable to the growth in our investment portfolio of $6 billion, reflecting the deployment of capital raised during the quarter of $442 million.

Which fell 33 basis points due to the impact of the federal reserve's rate cuts in the fourth quarter.

With respect to expenses.

G&A increased quarter over quarter, driven primarily by one time items.

Speaker #4: Our liquidity position remained very strong, with $1.3 billion in cash and unencumbered securities at the end of the quarter, representing over 46% of total equity.

As we noted in the prior first quarter earnings we expect overall expenses to normalize in the second quarter with full year expense ratio anticipated to be flat or modestly lower versus year end as we grow our capital base.

Speaker #4: We continue to evaluate growth through the lens of market opportunity , investment returns and long term accretion to drive shareholder value . Net interest income for the quarter rose from $0.28 per share to $0.40 per share , primarily due to declining financing costs , which fell 33 basis points due to the impact of the Federal Reserve's rate cuts in the fourth quarter , with respect to expenses , G&A increased quarter over quarter , driven primarily by one time items .

Importantly, we remained disciplined in managing costs and our expense structure.

With that I'll turn it over to T. J to provide additional detail on portfolio strategy and the outlook.

Thanks, Mike we entered the quarter with policy attention focused squarely on housing affordability and the mortgage market.

Michael Sartori: As we noted in the prior Q1 earnings, we expect overall expenses to normalize in the Q2 with full-year expense ratio anticipated to be flat or modestly lower versus year-end as we grow our capital base. Importantly, we remain disciplined in managing costs and our expense structure. With that, I'll turn it over to TJ to provide additional detail on portfolio strategy and the outlook.

As the quarter progressed global events, most notably the war in Iran shifted market focus toward geopolitics and drove a sharp increase in volatility.

Speaker #4: As we noted in the first quarter earnings, we expect overall expenses to normalize in the second quarter, with the full-year expense ratio anticipated to be flat or modestly lower versus year-end.

As markets become more accustomed to that global backdrop, we expect both investors and policymakers to refocus on domestic priorities over the balance of the year.

Speaker #4: As we grow our capital base, importantly, we remain disciplined in managing cost and our expense structure. With that, I'll turn it over to TJ to provide additional detail on portfolio strategy and the outlook.

Particularly housing and the availability of mortgage credit a transition we believe could support tighter mortgage spreads over time.

Terrence Connelly: Thanks, Mike. We entered the quarter with policy attention focused squarely on housing affordability and the mortgage market. As the quarter progressed, global events, most notably the war in Iran, shifted market focus toward geopolitics and drove a sharp increase in volatility. As markets become more accustomed to that global backdrop, we expect both investors and policymakers to refocus on domestic priorities over the balance of the year, particularly housing and the availability of mortgage credit, a transition we believe could support tighter mortgage spreads over time. Early in the quarter, mortgage markets benefited from a strong technical tailwind. Government policy, long one of our most important inputs, had turned supportive, with policymakers emphasizing GSE mortgage buying to tighten spreads and improve affordability. As volatility rose later in the quarter, agency mortgages traded like much riskier assets, creating potential opportunities.

T.J. Connelly: Thanks, Mike. We entered the quarter with policy attention focused squarely on housing affordability and the mortgage market. As the quarter progressed, global events, most notably the war in Iran, shifted market focus toward geopolitics and drove a sharp increase in volatility. As markets become more accustomed to that global backdrop, we expect both investors and policymakers to refocus on domestic priorities over the balance of the year, particularly housing and the availability of mortgage credit, a transition we believe could support tighter mortgage spreads over time. Early in the quarter, mortgage markets benefited from a strong technical tailwind. Government policy, long one of our most important inputs, had turned supportive, with policymakers emphasizing GSE mortgage buying to tighten spreads and improve affordability. As volatility rose later in the quarter, agency mortgages traded like much riskier assets, creating potential opportunities.

Early in the quarter mortgage market benefited from a strong technical tailwind.

Government policy long one of our most important inputs and turned supportive with policymakers, emphasizing GSE mortgage buying to tightened spreads and improve affordability.

Speaker #5: Thanks , Mike . We entered the quarter with policy attention focused squarely on housing affordability and the mortgage market . As the quarter progressed , global events most notably the war in Iran , shifted market focus toward geopolitics and drove a sharp increase in volatility as markets become more accustomed to that global backdrop , we expect both investors and policymakers to refocus on domestic priorities over the balance of the year , particularly housing and the availability of mortgage credit .

As volatility rose later in the quarter agency mortgages traded like much riskier assets, creating potential opportunities because we operate with strong liquidity, we navigated that volatility constructively and selectively added asset spreads widened to more attractive levels.

Fundamentals and technicals remain highly supportive and we believe the long term path towards tighter equilibrium spreads remains highly likely.

Speaker #5: A transition we believe could support tighter mortgage spreads over time . Early in the quarter , mortgage markets benefited from a strong technical tailwind Government policy , long one of our most important inputs , had turned supportive with policymakers emphasizing GSE mortgage buying to tighten spreads and improve affordability .

By policy supply demand dynamics and yield carry net.

Net supply is light and demand remains broad and robust across banks money managers and foreign investors.

Last quarter I noted that we expected net supply to be $200 billion. This year. So far in 2026, it appears supply could come in even lower.

Speaker #5: As volatility rose later in the quarter, agency mortgages traded like much riskier assets, creating potential opportunities. Because we operate with strong liquidity.

Terrence Connelly: Because we operate with strong liquidity, we navigated that volatility constructively and selectively added assets as spreads widened to more attractive levels. Fundamentals and technicals remain highly supportive, and we believe the long-term path toward tighter equilibrium spreads remains highly likely, boosted by policy, supply-demand dynamics, and yield carry. Net supply is light, and demand remains broad and robust across banks, REITs, money managers, and foreign investors. Last quarter, I noted that we expected net supply to be $200 billion this year. So far in 2026, it appears supply could come in even lower. Returning to the demand side, the potential bid from the Fannie Mae and Freddie Mac retained portfolios improves downside liquidity, stabilizes spreads during periods of volatility, and supports broader investor participation. The GSEs have been actively buying mortgages. They are selective on valuation.

T.J. Connelly: Because we operate with strong liquidity, we navigated that volatility constructively and selectively added assets as spreads widened to more attractive levels. Fundamentals and technicals remain highly supportive, and we believe the long-term path toward tighter equilibrium spreads remains highly likely, boosted by policy, supply-demand dynamics, and yield carry. Net supply is light, and demand remains broad and robust across banks, REITs, money managers, and foreign investors. Last quarter, I noted that we expected net supply to be $200 billion this year. So far in 2026, it appears supply could come in even lower. Returning to the demand side, the potential bid from the Fannie Mae and Freddie Mac retained portfolios improves downside liquidity, stabilizes spreads during periods of volatility, and supports broader investor participation. The GSEs have been actively buying mortgages. They are selective on valuation.

Returning to the demand side, the potential bid from the Fannie Mae and Freddie Mac retained portfolios improves downside liquidity stabilizes spreads during periods of volatility and supports broader investor participation.

Speaker #5: We navigated that volatility constructively and selectively added assets as spreads widened to more attractive levels Fundamentals and technicals remain highly supportive , and we believe the long term path toward tighter equilibrium spreads remains highly likely , boosted by policy supply demand dynamics and yield carry .

The gse's have been actively buying mortgages there are selective on valuation. They regularly retained pools that had previously been selling through their cash window programs.

Speaker #5: Net supply is light and demand remains broad and robust across banks , REITs , money managers and foreign investors . Last quarter , I noted that we expected net supply to be $200 billion this year .

And there was some question about potential hedging there, mostly hedging using interest rate swaps.

In parallel proposed changes tied to the Basel III end game could lower the capital cost bank space to hold mortgages, both in loan and securitized form and intermediate financing more efficiently.

Speaker #5: So far in 2026 , it appears supply could come in even lower . Returning to the demand side , the potential bid from Fannie Mae and Freddie Mac retained portfolios improves downside liquidity , stabilizes spreads during periods of volatility , and supports broader investor participation .

Financing costs are declining amid delight regulatory regime repo markets function smoothly spreads were stable and funding was readily available even during periods of heightened volatility MBS.

Terrence Connelly: They regularly retain pools they have previously been selling through their cash window programs. There was some question about potential hedging. They are mostly hedging using interest rate swaps. In parallel, proposed changes tied to the Basel III endgame could lower the capital cost banks face to hold mortgages, both in loan and securitized form, and to intermediate financing more efficiently. Financing costs are declining amid the light regulatory regime. Repo markets functioned smoothly, spreads were stable, and funding was readily available even during periods of heightened volatility. MBS repo spreads to SOFR remained in the 13 to 17 basis point range, 3 to 5 basis points below last year's averages. Structural improvements in the short-term funding markets, alongside elevated money market balances, standing Fed backstops, and more efficient balance sheet intermediation continue to support financing for high-quality mortgage assets like those Dynex owns.

T.J. Connelly: They regularly retain pools they have previously been selling through their cash window programs. There was some question about potential hedging. They are mostly hedging using interest rate swaps. In parallel, proposed changes tied to the Basel III endgame could lower the capital cost banks face to hold mortgages, both in loan and securitized form, and to intermediate financing more efficiently. Financing costs are declining amid the light regulatory regime. Repo markets functioned smoothly, spreads were stable, and funding was readily available even during periods of heightened volatility. MBS repo spreads to SOFR remained in the 13 to 17 basis point range, 3 to 5 basis points below last year's averages. Structural improvements in the short-term funding markets, alongside elevated money market balances, standing Fed backstops, and more efficient balance sheet intermediation continue to support financing for high-quality mortgage assets like those Dynex owns.

Speaker #5: The GSEs have been actively buying mortgages. They are selective on valuation. They regularly retain pools they had previously been selling through their cash window programs, and there was some question about potential hedging.

<unk> repo spreads the sofa remained in the 13% to 17 basis point range three to five basis points below last years averages.

Structural improvements in the short term funding markets alongside elevated money market balances stemming fed backstops and more efficient balance sheet intermediation continued to support financing for high quality mortgage assets like those dynamics zones.

Speaker #5: They are mostly hedging using interest rate swaps in parallel. Proposed changes tied to the Basel III endgame could lower the capital cost.

Speaker #5: Banks face holding mortgages both in loan and securitized form, and can intermediate financing more efficiently. Financing costs are declining amid the light regulatory regime. Repo markets function smoothly.

We are seeing agency MBS spreads to seven year interest rate swaps begin to trend tighter again.

After moving from the high 120 to nearly 170 basis points in March spreads were in the low $1 62 at quarter end and move back toward the 150 area late last week as.

Speaker #5: Spreads were stable and funding was readily available even during periods of heightened volatility . Ms. repo spreads to Sofr remained in the 13 to 17 basis point range , 3 to 5 basis points below last year's averages Structural improvements in the short term funding markets , alongside elevated money market balances , standing fed backstops and more efficient balance sheet intermediation continue to support financing for high quality mortgage assets like those Dynex owns We have seen agency MBS spreads to seven year interest rate swaps begin to trend tighter again after moving from the high one 20s to nearly 170 basis points in March .

As geopolitical events evolve and policymakers refocus on domestic issues like housing we believe spreads can trend towards the 120 again with scope for long term equilibrium spreads closer to 100 basis points.

<unk> for current coupon mortgages hedged with interest rate swaps were in the mid to high teens and the spread outlook I just outlined provides a further tailwind to forward returns.

Terrence Connelly: We have seen Agency MBS spreads to seven-year interest rate swaps begin to trend tighter again. After moving from the high 120s to nearly 170 basis points in March, spreads were in the low 160s at quarter end and moved back toward the 150 area late last week. As geopolitical events evolve and policymakers refocus on domestic issues like housing, we believe spreads can trade towards 120 again, with scope for long-term equilibrium spreads closer to 100 basis points. Static ROEs for current coupon mortgages hedged with interest rate swaps were in the mid to high teens, and the spread outlook I just outlined provides a further tailwind to forward returns. Moreover, the opportunity to add alpha through security selection is exceptional given the environment. Borrower prepayment behavior is increasingly heterogeneous and technology-driven, creating meaningful dispersion across pools.

T.J. Connelly: We have seen Agency MBS spreads to seven-year interest rate swaps begin to trend tighter again. After moving from the high 120s to nearly 170 basis points in March, spreads were in the low 160s at quarter end and moved back toward the 150 area late last week. As geopolitical events evolve and policymakers refocus on domestic issues like housing, we believe spreads can trade towards 120 again, with scope for long-term equilibrium spreads closer to 100 basis points. Static ROEs for current coupon mortgages hedged with interest rate swaps were in the mid to high teens, and the spread outlook I just outlined provides a further tailwind to forward returns. Moreover, the opportunity to add alpha through security selection is exceptional given the environment. Borrower prepayment behavior is increasingly heterogeneous and technology-driven, creating meaningful dispersion across pools.

Moreover, the opportunity to add alpha through security selection is exceptional given the environment.

Borrower prepayment behavior is increasingly heterogeneous and technology, driven creating meaningful dispersion across pools over.

Speaker #5: Spreads were in the low 100s at quarter end and moved back toward the 150 area late last week. As geopolitical events evolve and policymakers refocus on domestic issues like housing.

Over the last year, we have strategically reduced our exposure to the most callable agency MBS those in what we call the TBA market.

Speaker #5: We believe spreads can trade towards 120 again, with scope for long-term equilibrium spreads closer to 100 basis points. Static ROEs for current coupon mortgages hedged with interest rate swaps were in the mid to high teens, and the spread outlook remains constructive.

And we continue to do that in the first quarter TBA has declined from over 16% of our portfolio at year end to approximately 7% at the end of the quarter.

The first quarter reflects the strength of the direct model along two dimensions first disciplined risk management supported by significant financing liquidity strategic security selection and a focus on market structure in the context of the macro headlines allowed us to manage through elevated volatility.

Speaker #5: The factors I just outlined provide a further tailwind to forward returns. Moreover, the opportunity to add alpha through security selection is exceptional given the environment—borrower prepayment behavior is increasingly heterogeneous and technology-driven, creating meaningful dispersion across pools.

Terrence Connelly: Over the last year, we have strategically reduced our exposure to the most callable Agency MBS, those in what we call the TBA market, and we continued to do that in Q1. TBAs declined from over 16% of our portfolio at year-end to approximately 7% at the end of the quarter. Q1 reflects the strength of the Dynex model along two dimensions. First, disciplined risk management, supported by significant financing liquidity, strategic security selection, and a focus on market structure in the context of the macro headlines allowed us to manage through elevated volatility. Second, that same volatility created the opportunity to raise and deploy capital at more attractive valuations, which we acted on during the quarter.

T.J. Connelly: Over the last year, we have strategically reduced our exposure to the most callable Agency MBS, those in what we call the TBA market, and we continued to do that in Q1. TBAs declined from over 16% of our portfolio at year-end to approximately 7% at the end of the quarter. Q1 reflects the strength of the Dynex model along two dimensions. First, disciplined risk management, supported by significant financing liquidity, strategic security selection, and a focus on market structure in the context of the macro headlines allowed us to manage through elevated volatility. Second, that same volatility created the opportunity to raise and deploy capital at more attractive valuations, which we acted on during the quarter.

Second that same volatility created the opportunity to raise and deploy capital at more attractive valuations, which reacted on during the quarter.

Speaker #5: Over the last year, we have strategically reduced our exposure to the most callable agency MBS, those in what we call the TBA market.

Thank you P J.

Speaker #5: And we continue to do that in the first quarter. TBAs declined from over 16% of our portfolio at year-end to approximately 7% at the end of the quarter.

We are now combining our demonstrated ability to earn solid returns with the benefits of scale.

Our company in this attractive investment environment is an important element of value creation. It distribute fixed costs deepens liquidity and strengthens the company, especially in periods of volatility like we saw last quarter.

Speaker #5: The first quarter reflects the strength of the dynamics model along two dimensions . First , disciplined risk management supported by significant financing , liquidity , strategic security a focus market structure in the context of the macro headlines allowed us to manage through elevated volatility Second , that same volatility created the opportunity to raise and deploy capital at more attractive valuations , which we acted on during the quarter .

Beyond the resilience that our bigger balance sheet provides <unk>.

Larger companies have also typically enjoyed higher more stable valuations.

Smriti Popenoe: Thank you, TJ. We are now combining our demonstrated ability to earn solid returns with the benefits of scale. Growing our company in this attractive investment environment is an important element of value creation. It distributes fixed costs, deepens liquidity, and strengthens the company, especially in periods of volatility like we saw last quarter. Beyond the resilience that a bigger balance sheet provides, larger companies have also typically enjoyed higher, more stable valuations. We have grown rapidly to be the third-largest agency-focused mortgage REIT, and we believe the market has not yet fully recognized the value we are establishing through scale. As we continue to execute our plan with discipline, we are excited about the potential for shareholders to benefit from a more scalable platform, creating meaningful upside over the medium and long term.

We have grown rapidly to be the third largest agency focused mortgage REIT.

And we believe the market has not yet fully recognize the value we are establishing through scale.

Speaker #3: Thank you, TJ. We are now combining our demonstrated ability to earn solid returns with the benefits of scale. Growing our company in this attractive investment environment is an important element of value creation.

As we continue to execute our plan with discipline. We are excited about the potential for shareholders to benefit from a more scalable platform, creating meaningful upside over the medium and long term.

Speaker #3: It distributes fixed costs , deepens liquidity and strengthens the company , especially in periods of volatility like we saw last quarter . Beyond the resilience that a bigger balance sheet provides , larger companies have also typically enjoyed higher , more stable valuations We have grown rapidly to be the third largest agency mortgage REIT , and we believe the market has not yet fully recognized the value we are establishing through scale As we continue to execute our plan with discipline .

As we look ahead, we remain centered on opportunistic capital growth alongside disciplined management of our existing portfolio and building operating resilience.

Our management team has invested alongside shareholders. Our interests are aligned with yours, and we are committed to stewarding your capital with integrity transparency and care.

I will now open the call to questions.

Speaker #3: We are excited about the potential for shareholders to benefit from a more scalable platform, creating meaningful upside over the medium and long term.

Thank you if you are dialed in via the telephone I would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to lighter signal to reach our equipment.

Smriti Popenoe: As we look ahead, we remain centered on opportunistic capital growth alongside disciplined management of our existing portfolio and building operating resilience. Our management team is invested alongside shareholders, our interests are aligned with yours, and we are committed to stewarding your capital with integrity, transparency, and care. I will now open the call to questions.

Speaker #3: As we look ahead, we remain centered on opportunistic capital growth alongside disciplined management of our existing portfolio and building operating resilience. Our management team is invested alongside shareholders.

If you are in the event via the web interface and would like to ask a question simply type your question and they ask a question box and click send.

Once again press star one to ask a question.

Speaker #3: Our interests are aligned with yours, and we are committed to stewarding your capital with integrity, transparency, and care. I will now open the call to questions.

We'll go first to Bose, George with K B W.

Operator: Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. If you are in the event via the web interface and would like to ask a question, simply type your question in the Ask a Question box and click Send. Once again, press star one to ask a question. We'll go first to Bose George with KBW.

Hey, everyone. Good morning can we get an update on book value quarter to date.

Yeah, Hi, Bose good morning.

Speaker #1: Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star one on your telephone keypad.

As of Friday, Friday's close the estimated book value was $13 31 per share net of the accrued common dividend and that's up five 6% versus quarter end.

Speaker #1: If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Speaker #1: If you are in the event via the web interface and would like to ask a question, simply type your question in the box.

Oh perfect great. Thank you and then you gave your outlook for spreads potentially going back down to 120 basis points is that across the curve or like on a specific point on the curve.

Speaker #1: Ask a question box and click send. Once again, press star one to ask a question. We'll go first to Bose George with KBW.

Bose George: Hey, everyone. Good morning. Can we get an update on book value quarter to date?

Yes, im quoting those spreads both against the seven year swap point, which is consistent with the chart we have in our presentation there.

Smriti Popenoe: Yeah. Hi, Bose. Good morning. As of Friday's close, the estimated book value was $13.31 per share, net of the accrued common dividend, and that's up 5.6% versus quarter end.

Speaker #6: Hey everyone. Good morning. Can we get an update on book value quarter to date?

Okay, great. Thanks, a lot.

Speaker #3: Yeah . Hi . Bose . Good morning As of Friday . Friday's closed . The estimated book value was $13.31 per share Net of the accrued common dividend .

We'll take our next question from Trevor Cranston with citizens JMP.

Okay. Thanks, good morning.

Bose George: Oh, perfect. Great. Thank you. You gave your outlook for spreads potentially going back down to 120 basis points. Is that across the curve or like on a specific point on the curve?

Good morning follow up on the.

Speaker #3: And that's 5.6% versus quarter-end.

Your commentary about spreads potentially tightening to a 120 or even 100 basis points as a long term equilibrium.

Speaker #6: Oh , perfect . Great . Thank you . And then you gave your outlook for spreads . You know , potentially going back down to 120 basis points .

Terrence Connelly: Yeah, I'm quoting those spreads, Bose, against the 7-year swap point, which is consistent with the chart we have in our presentation there.

T.J. Connelly: Yeah, I'm quoting those spreads, Bose, against the 7-year swap point, which is consistent with the chart we have in our presentation there.

Can you talk about kind of your thoughts on how high you'd be willing to take leverage given the kind of outlook for tightening.

Speaker #6: Is that across the curve, or like on a specific point on the curve?

Speaker #5: Yeah, I'm quoting those spreads both against the seven-year swap point, which is consistent with the chart we have in our presentation.

Bose George: Okay, great. Thanks a lot.

How much the potential for sort of a short term bouts of volatility.

Speaker #5: There

Where you are against that thanks.

Operator: We'll take our next question from Trevor Cranston with Citizens JMP.

Speaker #6: Okay, great. Thanks a lot.

Right, yes. Thank you.

There are several components to thinking about our leverage our leverage as Mike mentioned increased eight six times roughly two thirds of the increase was actively positioning to own more mortgages, given that backdrop mortgages really where kind of the tail of the dog for several weeks in March.

Speaker #1: We'll take our next question from Trevor Cranston with Citizens J.P.

Trevor Cranston: Hey, thanks. Good morning.

Terrence Connelly: Morning.

T.J. Connelly: Morning.

Trevor Cranston: Follow up on your commentary about spreads potentially tightening to 120 or even 100 basis points as a long-term equilibrium. Can you talk about kind of your thoughts on how high you'd be willing to take leverage given that kind of outlook for tightening? How much the potential for sort of short-term bouts of volatility sort of weigh against that? Thanks.

Speaker #7: Hey , thanks . Good morning . Follow up on the the you know , your commentary about spreads potentially tightening to 120 or even 100 basis points as a long term equilibrium .

The yield spread or mortgage basis, as we referred to are treated with risky assets. The basis was very correlated to things like the S&P 500. So we're doing a lot of scenario analysis around that to think about just how much leverage we can comfortably manage and that was a very comfortable position for us coming into the quarter and period.

Speaker #7: Can you talk about your thoughts on how high you'd be willing to take leverage , given that kind of outlook for tightening and , you know , how much the potential for sort of short term bouts of volatility , sort of weigh against that ?

Terrence Connelly: Right. Yeah. Thank you. There are several components to thinking about our leverage. Our leverage, as Mike mentioned, did increase it to 8.6x. Roughly two-thirds of that increase was actively positioning to own more mortgages given that backdrop. Mortgages really were kind of the tail of the dog for several weeks in March. The yield spread or mortgage basis, as we refer to it, traded with risky assets. The basis was very correlated to things like the S&P 500. So we're doing a lot of scenario analysis around that to think about just how much leverage we can comfortably manage. It was a very comfortable position for us coming into the quarter-end period. Looking ahead, I think we're going to remain very opportunistic. We're very resolute in our view on those spreads moving from down to as much as 100 basis points.

T.J. Connelly: Right. Yeah. Thank you. There are several components to thinking about our leverage. Our leverage, as Mike mentioned, did increase it to 8.6x. Roughly two-thirds of that increase was actively positioning to own more mortgages given that backdrop. Mortgages really were kind of the tail of the dog for several weeks in March. The yield spread or mortgage basis, as we refer to it, traded with risky assets. The basis was very correlated to things like the S&P 500. So we're doing a lot of scenario analysis around that to think about just how much leverage we can comfortably manage. It was a very comfortable position for us coming into the quarter-end period. Looking ahead, I think we're going to remain very opportunistic. We're very resolute in our view on those spreads moving from down to as much as 100 basis points.

Speaker #7: Thanks

Speaker #5: Right . Yeah . Thank you . There are several components to thinking about our leverage , our leverage , as Mike mentioned , did increase to 8.6 times , roughly two thirds of that increase was actively positioning to own more mortgages .

Looking ahead I think we're going to remain very opportunistic we're very resolute in our view on those spreads moving from down to as much as 100 basis points given the GSC backdrop. We think this is we are on the verge of a significant regime change. So we are going to actively be opportunistic and.

Speaker #5: Given that backdrop , mortgages really were kind of the tail of the dog for several weeks in March , the yield spread or mortgage basis , as we refer to it , traded with risky assets .

Keeping our exposures so investors can capitalize on this opportunity.

Speaker #5: The basis was very correlated to things like the S&P 500. So we're doing a lot of scenario analysis around that to think about just how much leverage we can comfortably manage.

Got it okay. That's helpful.

And then just looking at the portfolio this quarter it looks like the allocation to TBA has went down some.

Speaker #5: And it was a very comfortable position for us coming into the quarter-end period. And looking ahead, I think we're going to remain very opportunistic.

Can you talk about how you're how you're thinking about the values of spec pools versus <unk> versus <unk> with incremental dollars.

Speaker #5: We're very resolute in our view on those spreads moving from , you know , down to as much as 100 basis points . Given the GSC backdrop , we think this is we are on the verge of a significant regime change .

Terrence Connelly: Given the GSE backdrop, we think we are on the verge of a significant regime change. We are going to actively be opportunistic in keeping our exposures so investors can capitalize on this opportunity.

T.J. Connelly: Given the GSE backdrop, we think we are on the verge of a significant regime change. We are going to actively be opportunistic in keeping our exposures so investors can capitalize on this opportunity.

Yes, the TBA market by definition for those who don't know what the TBA TVA is to be announced market.

That is the cheapest to deliver segment of the mortgage market that is to say the pools that are the loans that are most callable and potentially have the most duration uncertainty typically will get delivered into our TBA transaction and we wanted to avoid those we think those get cheaper and cheaper.

Speaker #5: So we are going to actively be opportunistic in keeping our exposures, so investors can capitalize on this opportunity.

Trevor Cranston: Got it. Okay, that's helpful. Just looking at the portfolio this quarter, it looked like the allocation to TBAs went down some. Can you talk about how you're thinking about the values of spec pools versus TBAs with incremental dollars? Thanks.

Speaker #7: Got it . Okay . That's helpful . And then just looking at the portfolio this quarter , you know , it looked like the allocation to Tbas went down some .

Are they.

Tremendous amount of uncertainty around their cash flows they are very very refinance bone call born.

Speaker #7: Can you talk about how you're how you're thinking about , you know , the values of spec pools versus versus tbas with incremental dollars ?

Terrence Connelly: Yeah. The TBA market by definition, for those who don't know it, the TBA is to be announced market, that is the cheapest to deliver segment of the mortgage market. That is to say, the pools that are or the loans that are most callable and potentially have the most duration uncertainty typically will get delivered into a TBA transaction. We want to avoid those. We think those get cheaper and cheaper. They have tremendous amount of uncertainty around their cash flows. They're very refinanceable and callable on even the slightest move in mortgage rates. We're trying to avoid those. We are very strategic and have been, as I mentioned in my prepared remarks, positioning for owning significantly more pools. I think we've got a long history of security selection. This is a tremendous source of alpha for us. It's unique to this model, right?

T.J. Connelly: Yeah. The TBA market by definition, for those who don't know it, the TBA is to be announced market, that is the cheapest to deliver segment of the mortgage market. That is to say, the pools that are or the loans that are most callable and potentially have the most duration uncertainty typically will get delivered into a TBA transaction. We want to avoid those. We think those get cheaper and cheaper. They have tremendous amount of uncertainty around their cash flows. They're very refinanceable and callable on even the slightest move in mortgage rates. We're trying to avoid those. We are very strategic and have been, as I mentioned in my prepared remarks, positioning for owning significantly more pools. I think we've got a long history of security selection. This is a tremendous source of alpha for us. It's unique to this model, right?

Slightest moved in.

In mortgage rates. So we're trying to avoid those we are very strategic and have been as I mentioned in my prepared remarks positioning for it.

Speaker #7: Yeah . Thanks .

Speaker #5: Yeah . The TBA market , by definition , for those who don't know , it's TBA TBA is to be announced market that is the cheapest to deliver segment of the mortgage market .

Owning significantly more pools I think we've got a long history of security selection. This is a tremendous source of alpha for us, it's and it's unique to this model right. It's very hard to for investors to go out and find.

Speaker #5: That is to say, the pools that are, or the loans that are, most callable and potentially have the most duration uncertainty typically will get delivered into TBA transactions, and we want to avoid those.

Mortgage pools and do the deep dive that we do.

And you have to be in the institutional world. So it's a great opportunity for retail investors for instance to be able to access security selection like we can offer them.

Speaker #5: We think those get cheaper and cheaper. They have a tremendous amount of uncertainty around their cash flows. They're very, very refinanced and callable on even the slightest move in mortgage rates.

Okay makes sense. Thank you.

Speaker #5: So, we're trying to avoid those. We are very strategic and have been, as I mentioned in my prepared remarks, positioning for owning significantly more pools.

My pleasure.

We'll go next to Jason Weaver with Jones trading.

Hi, Good morning, guys I was wondering if you could.

Speaker #5: I think, you know, we've got a long history of security selection. This is a tremendous source of alpha for us.

Through the phasing of capital deployment over the quarter and beyond.

Terrence Connelly: It's very hard for investors to go out and find mortgage pools and do the deep dive that we do. You have to be in the institutional world. It's a great opportunity for retail investors, for instance, to be able to access security selection like we can offer them.

T.J. Connelly: It's very hard for investors to go out and find mortgage pools and do the deep dive that we do. You have to be in the institutional world. It's a great opportunity for retail investors, for instance, to be able to access security selection like we can offer them.

Speaker #5: It's and it's unique to to this model , right ? It's very hard to for investors to go out and find mortgage pools and do the deep dive that we do .

Yeah, absolutely in terms of the capital and I'll, let smriti to comment a little bit but it is very opportunistic and methodical we are thinking a lot about.

Speaker #5: And you have to be in the institutional world. So it's a great opportunity for retail investors, for instance, to be able to access security selection like we can offer them.

Multiple components that go into that optimization for our shareholders Youre one of the things I think that the market often misses is total shareholder return is driven by the portfolio returns and the valuation and one thing is very clear larger companies receive a larger valuation in this sector and that's very important.

Trevor Cranston: Okay. Makes sense. Thank you.

Terrence Connelly: My pleasure.

T.J. Connelly: My pleasure.

Speaker #7: Okay. Excellent. Thank you.

Operator: We'll go next to Jason Weaver with JonesTrading.

Speaker #5: My pleasure .

Jason Weaver: Hi. Good morning, guys. I was wondering if you could speak to the phasing of capital deployment over the quarter and beyond.

Speaker #1: We'll go next to Jason Weaver with Jones Trading.

Speaker #8: Hi. Good morning, guys. I was wondering if you could speak to the phasing of capital deployment over the quarter, and beyond.

Part of our calculus, as we think about phasing of the <unk>.

Capital Raisings and it was a significant quarter for us I'll turn it over to smart view coming out of a more.

Terrence Connelly: Yeah, absolutely. In terms of the capital, and I'll let Smriti to comment a little bit, but it is very opportunistic and methodical. We are thinking a lot about multiple components that go into that optimization for our shareholders. One of the things I think that the market often misses is total shareholder return is driven by the portfolio returns and the valuation. One thing is very clear, larger companies receive a larger valuation in this sector, and that's very important part of our calculus as we think about phasing up the capital raising. It was a significant quarter for us. I'll turn it over to Smriti who will comment a little bit more.

T.J. Connelly: Yeah, absolutely. In terms of the capital, and I'll let Smriti to comment a little bit, but it is very opportunistic and methodical. We are thinking a lot about multiple components that go into that optimization for our shareholders. One of the things I think that the market often misses is total shareholder return is driven by the portfolio returns and the valuation. One thing is very clear, larger companies receive a larger valuation in this sector, and that's very important part of our calculus as we think about phasing up the capital raising. It was a significant quarter for us. I'll turn it over to Smriti who will comment a little bit more.

Speaker #5: Yeah , absolutely . In terms of the capital . And I'll let Murthy to comment a little bit , but it is very opportunistic and methodical .

Hi, Jason.

One of the things that we think about actively and what is the agency MBS market.

Speaker #5: We are thinking a lot about the multiple components that go into that optimization for our shareholders. And one of the things I think that the market often misses is total shareholder return is driven by the portfolio returns and the valuation.

What are the moves telling us about the inherent risk in that particular sector. One of the things that happened in the first quarter is that agency MBS widened, but it wasn't because there was something wrong with agency MBS per say it wasn't a fundamental reason.

Speaker #5: And one thing is very clear: larger companies receive a larger valuation in this sector. And that's a very important part of our calculus as we think about phasing up the capital raising.

They widened because the risk assets in general were weaker and we view those types of opportunities to be really significant in terms of the ability to raise and deploy capital.

Smriti Popenoe: Yeah. Hi, Jason. One of the things that we think about actively is what is the Agency MBS market, and what are the moves telling us about the inherent risk in that particular sector? One of the things that happened in Q1 is that Agency MBS widened, but it wasn't because there was something wrong with Agency MBS per se. It wasn't a fundamental reason. They widened because the risk assets in general were weaker. We view those types of opportunities to be really significant in terms of the ability to raise and deploy capital. When we see that type of move, that's a signal to us to go put accretive capital that we're raising to work. That's really the opportunistic nature of what we're talking about.

Speaker #5: And it was a significant quarter for us. I'll turn it over to Murthy, who will comment a little bit more.

Speaker #3: Hi, Jason. You know, one of the things that we think about actively is, what is the agency RMS market, and what are the moves telling us about the inherent risk in that particular sector?

So when we see that type of move that's a signal to us to go put accretive capital that we're raising to work.

So that's that's really the opportunistic nature of what we're talking about.

In general when when when we see those types of opportunities you will see us probably ways bigger blocks of capital, but does put some money to work and then over time I think that criterion that that we've always abided by just making sure that the cost of capital is lower than the return on.

Speaker #3: One of the things that happened in the first quarter is that agency . Ms. . Widened , but it wasn't because there was something wrong with the agency , MBS per se .

Speaker #3: It wasn't a fundamental reason. They widened because risk assets in general were weaker. And we view those types of opportunities to be really significant in terms of the ability to raise and deploy capital.

The capital that we're deploying that remains the gold standard.

Speaker #3: So when we see that type of move, that's a signal to us to go put the creative capital that we're raising to work.

In terms of our willingness to raise and deploy capital over time.

Got it Thats helpful.

Just so I have this correct.

Smriti Popenoe: In general, when we see those types of opportunities, you'll see us probably raise bigger blocks of capital and put the money to work. Over time, I think that criterion that we've always abided by, just making sure that the cost of capital is lower than the return on the capital that we're deploying, that remains sort of the gold standard, in terms of our willingness to raise and deploy capital over time.

Speaker #3: So that's , that's really the , the opportunistic nature of what we're talking about in general . You know , when , when , when we see those types of opportunities , you'll see us probably raise bigger blocks of capital , put those , put the money to work .

Obviously, Florida ROE is going to be the genuine considered the biggest consideration here, but is there is there a downside sort of multiple on valuation that you would that you want to avoid or you would.

Speaker #3: And then over time , I think that criterion that that we've always abided by , you know , just making sure that the cost of capital is lower than the return on the capital that we're deploying , that remains sort of the , the gold standard in terms of our willingness to raise and deploy capital over time .

You would underwrite to price above their like on your book value multiple.

Well, we're always been Hawaii.

The shares.

Shares to trade at a premium to book value I think I think as a as a as a business. We've now proven two things one is the ability to deliver strong returns.

Jason Weaver: Got it. That's helpful. Just so I have this correct, obviously forward ROE is going to be the biggest consideration here.

And some of the most challenging environments at the markets had in the last 10 years.

Speaker #8: Got it . That's helpful . And , you know , just so I have this correct , you know , obviously for Roe is going to be the the genuine , concern .

Jason Weaver: Absolutely.

Smriti Popenoe: Absolutely.

So that's thing number one and then thing number two.

Jason Weaver: Is there a downside sort of multiple on valuation that you want to avoid or you would underwrite to price above there, like on your book value multiple?

It's this idea that as we grow.

Speaker #8: The biggest consideration here . But is there a is there a downside sort of multiple on valuation that you would that you want to avoid or you would under you would underwrite to price above their like on your book value multiple .

We are delivering significant benefits of scale to our shareholders.

Smriti Popenoe: Look, we're always going to want the shares to trade at a premium to book value. I think as a business, we've now proven two things. One is the ability to deliver strong returns in some of the more challenging environments that the market's had in the last 10 years. That's thing number one. Thing number two, I think it's this idea that as we grow, we are delivering significant benefits of scale to our shareholders.

At this point, we feel like the markets haven't necessarily taken that into account I mean, having now.

Speaker #3: Look , we're always going to want the , the the shares to trade at a premium to book value . I think , I think as a , as a , as a business , we've now proven two things .

Firmly placed ourselves as the third largest company that's that's doing what we're doing.

I think that part is not yet fully reflected in the share price.

And for US to continue to tell that story I think that's that's the that's the goal here but.

All else being equal not only do we think the shares deserve to trade at book I think we we actually deserved.

To trade at a significant premium.

Yeah.

Alright, well I appreciate that thanks.

Jason Weaver: Mm-hmm.

Jason Weaver: At this point, we feel like the markets haven't necessarily taken that into account. Having now firmly placed ourselves as the third largest company that's doing what we're doing, I think that part is not yet fully reflected in the share price. For us to continue to tell that story, I think that's the goal here. All else being equal, not only do we think the shares deserve to trade at book, I think we actually deserve to trade at a significant premium.

Thanks, again for the answers and congrats on the quarter.

Jason Thanks, Jason.

We'll go next to up Marissa Lebeau with UBS.

Good morning, and thank you for taking my question.

Could you speak to swap spread dynamics over the quarter and how that impacted performance and did you adjust the mix between treasury futures and swaps during the stress period.

Thanks for the question.

Swap spreads so the interest rate swap rate relative to treasuries is what most people are quoting there and that does tend to correlate with risky assets much as I mentioned about the basis, so when stocks trade.

Jason Weaver: All right. Well, I appreciate that. Thanks again for the answers and congrats on the quarter.

Smriti Popenoe: Thanks, Jason.

Terrence Connelly: Thanks, Jason.

T.J. Connelly: Thanks, Jason.

Thanks Jason. Thanks Jason.

Operator: We'll go next to Marissa Lobo with UBS.

Lower for instance, the swap spread will trade more negative and vice versa. When risky assets are doing well the swap spread will trade less negative.

Marissa Lobo: Good morning, and thank you for taking my question today.

We'll go next to Marissa Lobo with UBS.

Smriti Popenoe: Of course.

Marissa Lobo: Could you speak to swap spread dynamics over the quarter? How that impacted performance, and did you adjust the mix between Treasury futures and swaps during the stress period?

We think and we've said for several quarters now actually probably pushing up on two years now.

Terrence Connelly: Yeah. Thanks for the question, Marissa. The swap spread, so the interest rate swap rate relative to Treasuries is what most people are quoting there, and that does tend to correlate with risky assets, much as I mentioned about the basis. When stocks trade lower, for instance, the swap spread will trade more negative and vice versa. When risky assets are doing well, the swap spread will trade less negative. We think, and we've said for several quarters now, actually probably pushing up on two years now, that we expect to be able to earn the additional yield spread that interest rate swap hedges offer relative to Treasuries. That is to say there is more yield spread available when hedging mortgages with interest rate swaps than there is when we hedge with Treasuries.

T.J. Connelly: Yeah. Thanks for the question, Marissa. The swap spread, so the interest rate swap rate relative to Treasuries is what most people are quoting there, and that does tend to correlate with risky assets, much as I mentioned about the basis. When stocks trade lower, for instance, the swap spread will trade more negative and vice versa. When risky assets are doing well, the swap spread will trade less negative. We think, and we've said for several quarters now, actually probably pushing up on two years now, that we expect to be able to earn the additional yield spread that interest rate swap hedges offer relative to Treasuries. That is to say there is more yield spread available when hedging mortgages with interest rate swaps than there is when we hedge with Treasuries.

Good morning, and thank you for taking my questions. Today, of course. Um, could you speak to swap spread dynamics over the quarter and how that impacted performance? And did you adjust the mix between Treasury futures and swaps during the stress period?

That we expect to be able to earn the additional yield spread that interim.

Interest rate swap hedges offer relative to treasuries. So that is to say there is more yield spread available when hedging mortgages with interest rate swaps than there is when we hedged with treasuries as a result, I've mentioned on the last couple of calls we expected things to be in the 60% to 80% of the portfolio hedged with interest rate swaps, we were right around 70%.

Yeah, thanks for the question. Mark the swap spreads. So the interest rate swap rate relative to Treasuries is what most people are quoting there, and that does tend to correlate with risky assets, much as I mentioned about the basis. So, when stocks trade lower, for instance, the swap spread will trade more.

On the DBO one basis.

More negative and vice versa. When risky assets are doing well, the swap spread will trade less negative. Um,

At quarter end, and I expect that to be.

Roughly that's roughly where we're comfortable in terms of liquidity and hedges and being able to stay.

Staying nimble with futures the trade 20, practically 24, 7% leased 26.

We think we've said for several quarters now—actually probably pushing up on two years now—that we expect to be able to earn the additional yield spread that

And I think theres, a little bit of scope, we could we could get closer to it if the opportunity presents itself to be closer to 80%.

Terrence Connelly: As a result, I've mentioned on the last couple of calls, we expected things to be in the 60% to 80% of the portfolio hedged with interest rate swaps. We were right around 70% on a DV01 basis, at quarter end. I expect that to be roughly where we're comfortable in terms of the liquidity of hedges and being able to stay nimble with futures that trade practically 24/7, at least 24/6. I think there's a little bit of scope. We could get closer if the opportunity presents itself to be closer to 80%. I think that's a really compelling spread for us to continue to earn over time, and it has worked fairly well.

T.J. Connelly: As a result, I've mentioned on the last couple of calls, we expected things to be in the 60% to 80% of the portfolio hedged with interest rate swaps. We were right around 70% on a DV01 basis, at quarter end. I expect that to be roughly where we're comfortable in terms of the liquidity of hedges and being able to stay nimble with futures that trade practically 24/7, at least 24/6. I think there's a little bit of scope. We could get closer if the opportunity presents itself to be closer to 80%. I think that's a really compelling spread for us to continue to earn over time, and it has worked fairly well.

But again I think that's a really compelling spread for us to continue to earn over time and has worked fairly well.

I appreciate that.

And then just moving to the GSE you talked about the purchase directive is resetting the spec regime tighter.

As the pace of their buying Matt.

Expectations and ended the March spread widening tests that backstop thesis in a meaningful way.

Yes, it did.

To some extent test the backdrop in the they have proven to be very value based so I wouldn't say, it's time based so much.

That's really important for the understanding the backstop rate so at wider spreads they will be more aggressive and all indications suggest they were.

Marissa Lobo: Appreciate that. Just moving to the GSEs, you talked about the purchase directive as resetting the spread regime tighter. How has the pace of their buying met your expectations? Did the March spread widening test that backstop thesis in a meaningful way?

Interest rates swap Hedges offer relative to treasury. So that is to say there is more yield spread available when hedging mortgages with interest rates swaps than there is when we hedge with treasuries, as a result, I've mentioned on the last couple calls, we expected things to be in the 60 to 80% of the portfolio, hedged with interest rate swaps. Uh, we were right around 70%, on a dvo 1 basis, um, at quarter end and I expect that to be, um, roughly, that's roughly where we're comfortable. In terms of the liquidity of Hedges and being able to, um, stay Nimble with Futures, that trade, 20 practices at least 24/6. Um, and uh, I think there's a little bit of scope. We could, we could get closer if the opportunity presents itself to be closer to 80%. Um, but again, I think that's a really compelling spread for us to continue to earn over time, and it and it has worked fairly well.

More aggressive about wider spread they are fairly methodical in terms of their pools.

Cool selection, so they are buying or retaining rather.

More pools than they have in the past relative to in the cash windows.

Terrence Connelly: Yes, it did to some extent test the backstop. They have proven to be very value-based, so I wouldn't say it's time-based so much. Which, that's really important for understanding the backstop, right? At wider spreads, they will be more aggressive, and all indications suggest they were more aggressive at wider spreads. They are fairly methodical in terms of their pool selection, so they are buying or retaining rather, more pools than they have in the past relative to in the cash windows. I'd say overall it is playing out roughly as we expected. There are periods of volatility. They wait, they put their hands up, say, "Okay, we'll see where value shakes out," and then they step in. Much as they did when Smriti and Byron and I sat at the Freddie Mac portfolios 25 years ago. They're operating in a very similar manner at this point.

T.J. Connelly: Yes, it did to some extent test the backstop. They have proven to be very value-based, so I wouldn't say it's time-based so much. Which, that's really important for understanding the backstop, right? At wider spreads, they will be more aggressive, and all indications suggest they were more aggressive at wider spreads. They are fairly methodical in terms of their pool selection, so they are buying or retaining rather, more pools than they have in the past relative to in the cash windows. I'd say overall it is playing out roughly as we expected. There are periods of volatility. They wait, they put their hands up, say, "Okay, we'll see where value shakes out," and then they step in. Much as they did when Smriti and Byron and I sat at the Freddie Mac portfolios 25 years ago. They're operating in a very similar manner at this point.

Appreciate that. Um, and just moving to the GSCs, you talked about, you know, the purchase directive as resetting the spread regime tighter. Um, how is the pace of their buying in line with your expectations, and did the March spread widening test that backstop thesis in a meaningful way?

And I would say overall it is it is playing out roughly as we expected there are periods of volatility they way they put their hands up say, okay, well, we'll see where value shakes out and then they step in much as they did win Smriti and Byron and I sat at the.

Freddie Mac portfolio is 25 years ago. They are operating in a very similar manner at this point.

Okay.

Got it thanks, so much for taking my questions.

Sure.

We'll take our next question from Merrill Ross with Compass point.

Point.

Yeah.

And it kind of a follow up on Peter's question, but how are you.

Your expectations for inflation has influenced the tenor of interest rate swaps.

They're either moved more into and should be in five year end is that reflect your expectations for <unk>.

Yes, it did. Uh, to some extent test the backdrop in a, they have proven to be very value based. So I wouldn't say it's it's time based so much. Um, which that's really important for the understanding, the back, stop, right. So, at wider spreads, they will be more aggressive and, uh, all indications suggest they were, um, more aggressive that wider spread, they are fairly methodical in terms of their, um, pool selection. So they are buying or retaining rather, uh, more pools than they have in the past relative to in the cache Windows. Um, and uh, I'd say overall it is, um, it is playing out roughly as, as we expected. There's, you know, periods of volatility. They wait. They put their hands up and say, okay, we'll, we'll see where our values shakes out and then they step in much as they did when, you know, Smurfy and Byron. And I sat at the, uh, Freddy Mack portfolio is 25 years ago. Um, they're operating in a very similar.

Mandir at this point.

Marissa Lobo: Got it. Thanks so much for taking my questions.

Yes, great question the market.

Terrence Connelly: Pleasure.

T.J. Connelly: Pleasure.

Got it. Thanks so much for taking my questions.

I'd say in the course of the quarter Waffled, a lot, especially with the the Warner on the market narrative shifted very quickly a points from one focused on inflation to one focused on growth right and we don't know the answer we don't predict we prepare.

Operator: We'll take our next question from Merrill Ross with Compass Point.

We'll take our next question from Mel Ross with Compass Point.

Merrill Ross: Thank you. I wanted to kind of follow up on the previous question about how your expectations for inflation have influenced the tenor of your interest rate swaps, noting that you moved more into the 3- and 5-year, and does that reflect your expectations for a steeper 2-10 spread?

Point.

So we've we're preparing in building this portfolio to be robust to both of those regimes potentially.

I think thats really important so you saw the swap book shortened up a little bit in that three to five year tenor most of that is just the aging of the swap book.

Terrence Connelly: Yeah, great question. The market, I'd say, in the course of the quarter waffled a lot, especially with the war in Iran. The market narrative shifted very quickly at points from one focused on inflation to one focused on growth, right? We don't know the answer. We don't predict, we prepare. We're preparing and building this portfolio to be robust to both of those regimes, potentially. I think that's really important. You saw the swap book shorten up a little bit in that three to five-year tenor. Most of that's just aging of the swap book. We're very comfortable with how it is positioned because the view that we have here and the risk exposures that we think are the most compelling for our shareholders to earn over time is that mortgage spread relative to the interest rate curve.

T.J. Connelly: Yeah, great question. The market, I'd say, in the course of the quarter waffled a lot, especially with the war in Iran. The market narrative shifted very quickly at points from one focused on inflation to one focused on growth, right? We don't know the answer. We don't predict, we prepare. We're preparing and building this portfolio to be robust to both of those regimes, potentially. I think that's really important. You saw the swap book shorten up a little bit in that three to five-year tenor. Most of that's just aging of the swap book. We're very comfortable with how it is positioned because the view that we have here and the risk exposures that we think are the most compelling for our shareholders to earn over time is that mortgage spread relative to the interest rate curve.

Thank you. Um, as it kind of follow up on previous question, but how, um, your expectations for inflation have influenced the tenor of your interest rate swaps. Um, no needing that you moved more into um 3 to 5 year and is that reflect your expectations for a steeper 210 spread

We're very comfortable with how in this position because the view that we have here and the the risk exposures that we think are the most compelling for our shareholders to earn over time is that mortgage spreads relative to the interest rate curve. So we are trying to position this too.

Achieved.

The yield spread and hold our book value as steady as possible and I think that is given.

Given the way the portfolio is constructed currently for this regime, it's appropriate so I'd say overall in our highest conviction is that mortgage yield spread is what we're here to earn.

And we are hedging across the curve for that reason.

And then to follow up on the asset side and it seems like you added more than their current and lower coupons.

Terrence Connelly: We are trying to position this to achieve the yield spread and hold our book value as steady as possible. I think that is, given the way the portfolio is constructed currently for this regime, it's appropriate. I'd say overall, our highest conviction is that mortgage yield spread is what we're here to earn, and we are hedging across the curve for that reason.

T.J. Connelly: We are trying to position this to achieve the yield spread and hold our book value as steady as possible. I think that is, given the way the portfolio is constructed currently for this regime, it's appropriate. I'd say overall, our highest conviction is that mortgage yield spread is what we're here to earn, and we are hedging across the curve for that reason.

And avoided higher coupons and.

Assuming that is.

Following on with CPR expectations.

Yes, it's a great question because there were there were some really good opportunities in the initial days it feels like a long time ago now but in mid January.

After the Trump administration's announcement that the GSE would be more active in buying.

Quickly at points from 1 focused on inflation to 1 focus on growth, right? And we don't know the answer. We don't predict we, we prepare. Um, so we've we're preparing and building this portfolio to be robust to both of those regimes potentially. Um, I think that's really important. So, uh, you saw the swap book, uh, shortening up a little bit in that 3 to 5 year 10 or most of, that's just, um, aging of of the swap book. Um, we're very comfortable with how this position, uh, because the view that we have here and the the risk exposures that we think are the most compelling for our shareholders to earn over time is that mortgage spread relative to the interest rate curve. So we are trying to position this to um achieve, you know, the the yield spread and hold our book value as steady as possible. And I think that is um given the way the portfolio is constructed currently for this regime. It's it's appropriate. So I'd say overall you know our highest conviction is that mortgage

Yield spread is what we're here to earn.

Certain coupons really outperformed so youll see it in our.

And we are hedging across the curve for that reason.

Merrill Ross: To follow up on the asset side, it seems like you added more in the current and lower coupons, and avoided the higher coupons, and I'm assuming that is following on with CPR expectations.

In our press release there that.

The 4% coupon is significantly lower than it was.

At year end and that was because we took advantage of that.

Alpha right there was a significant outperformance in those coupons and we moved away from those coupons as they outperformed to diversify the book up into.

Terrence Connelly: Yeah. It's a great question because there were some really good opportunities in the initial days. It feels like a long time ago now, but in mid-January, after the Trump administration's announcement that the GSEs would be more active in buying, certain coupons really outperformed. You'll see in our press release there that the 4% coupon is significantly lower than it was at year-end. That was because we took advantage of that alpha, right? There was a significant outperformance in those coupons, and we moved away from those coupons as they outperformed to diversify the book up into. We added some Fannie 2s even, and then some of the higher coupons. Again, it's all more and more this market is about pool selection even, than it is about coupon selection.

T.J. Connelly: Yeah. It's a great question because there were some really good opportunities in the initial days. It feels like a long time ago now, but in mid-January, after the Trump administration's announcement that the GSEs would be more active in buying, certain coupons really outperformed. You'll see in our press release there that the 4% coupon is significantly lower than it was at year-end. That was because we took advantage of that alpha, right? There was a significant outperformance in those coupons, and we moved away from those coupons as they outperformed to diversify the book up into. We added some Fannie 2s even, and then some of the higher coupons. Again, it's all more and more this market is about pool selection even, than it is about coupon selection.

And I'm going to follow up on the asset side. It seems like you added more in the current and lower coupons, um, and avoided the higher coupons. And, um, I'm assuming that is following on with, um, CPR expectations.

We added some some fannie choosy events.

And then some of the higher coupons again, its all more and more of this market is about pool selection even than it is about coupon selection. So when you have these kind of real quick moves in things, we're watching very closely to say hey, This is out of line with Fannie fours for instance.

Got it.

Significantly richer and we were able to sell into that and buy pools and other coupons that were much more compelling cash flows for us.

Yeah, that's great answer thank you very much.

We'll take our next question from Eric Hagen with <unk>.

Hey, Thanks, good morning, guys.

Good morning, following up a little bit on this conversation around capital raising just looking at the timing of the capital raising even just the broader philosophy around raising capital I mean is there anything fundamental.

Terrence Connelly: When you have these kind of real quick moves and things, we're watching very closely to say, "Hey, this is out of line." The Fannie 4s, for instance, got significantly richer and we were able to sell into that and buy pools and other coupons that were much more compelling cash flows for us.

T.J. Connelly: When you have these kind of real quick moves and things, we're watching very closely to say, "Hey, this is out of line." The Fannie 4s, for instance, got significantly richer and we were able to sell into that and buy pools and other coupons that were much more compelling cash flows for us.

Yeah. And you know, it's a great question because there were there were some really good opportunities in the initial days. It's it feels like a long time ago now but in mid January. Um after the Trump administration's announcement, that the gsc's would be more active in buying uh certain coupons really outperformed. So you'll see in our um in our press release there. That uh the 4% coupon is significantly lower than it was uh at year end. Uh and that was because we took advantage of that that Alpha right there was a significant outperformance in those coupons and we moved away from those coupons as they outperformed to uh to diversify the book up into um we added some, some F**** twos even. Um and then some of the higher coupons, again it's all more and more. This Market is about pool selection even than it is about coupon selection. So when you have these kind of real quick moves and things we're watching very closely to say hey this is out of line. The F**** Force for instance,

<unk> in the current environment, which has maybe changed a level.

I wish you're prepared to raise capital relative to where you've raised in the past and bi level I mean, the level of your stock valuation.

Merrill Ross: Yeah. That's a great answer. Thank you very much.

Got, um, you know, significantly richer and we were able to sell into that and buy pools and other coupons that were, uh, much more compelling cash flows for us.

Yeah, I mean as you know.

Yeah, that's a great answer. Thank you very much.

We disclosed already Eric that the bulk of the capital that was raised was range early in the quarter.

Operator: We'll take our next question from Eric Hagen with BTIG.

Eric Hagen: Okay, thanks. Good morning, guys.

We'll take our next question from Eric Haugen with BTIG.

Terrence Connelly: Good morning.

T.J. Connelly: Good morning.

Eric Hagen: Following up a little bit on this conversation around capital raising. Just looking at the timing of the capital raising, even just the broader philosophy around raising capital. I mean, is there anything fundamental that you'd identify in the current environment which has maybe changed the level at which you're prepared to raise capital relative to where you've raised in the past? By level, I mean the level of your stock, your valuation.

When valuations were more supportive towards towards issuing capital versus.

Investing and then the investing environment kind of played itself out over the quarter is as everybody saw with spreads wider as the war on Iran progressed.

Hey, thanks. Good morning, guys. Good morning. Following up a little bit on this conversation around capital raising, just looking at the timing of the capital raising. Even just the broader philosophy around raising capital—I mean, is there anything fundamental that you'd identify in the current environment which has maybe changed the level?

So.

In general I don't think the principals have changed.

Smriti Popenoe: Yeah. I mean, we disclosed already, Eric, that the bulk of the capital that was raised was raised early in the quarter, when valuations were more supportive towards issuing capital versus investing. The investing environment kind of played itself out over the quarter as everybody saw with the spreads wider as the war in Iran progressed. In general, I don't think the principles have changed. When it is a good idea for us to raise, we raise. When it's a good idea to invest, we invest. The raising and deploying don't necessarily have to be simultaneous in nature. Sometimes they are, and sometimes they're not. The real principle, which I've said now, I think you can go back and check on earnings calls for three plus years.

When it is a good idea for us to raise we raised when it's a good idea to them to invest we invested are raising and deploying don't necessarily have to be simultaneous and nature, sometimes they are.

At which you're prepared to raise capital relative to where you've raised in the past. And by level, I mean the level of your stock, your valuation,

And sometimes they are not but the but the real principle, which I've said now I think you can go back and check on earnings calls for three plus years. It's really this idea of you know is my cost of capital lower than that return that I can earn on that capital over time.

Yeah, I mean, as you know, we disclosed already, Eric, that the bulk of the capital that was raised was raised early in the quarter, when valuations were more supportive towards issuing capital versus later in the quarter.

Uh, investing. And then the investing environment kind of played itself out over the quarter, as everybody saw, with the spreads wider as the war in Iran progressed.

I think that is what makes this investment environment so unique.

That it's lasted as long as it has be that the forward returns in agency MBS still continue to support.

Active raising and deploying of capital because over time, we believe the cost of capital is going to be lower than the return on that capital or vice versa. The return on the capital. We're raising right now is actually going to be higher than the marginal cost. So that has always been our operating principle.

So, in general, I don't think the principles have changed. Um, when it is a good idea for us to raise, we raise. When it's a good idea to invest, we invest. Raising and deploying don't necessarily have to be simultaneous in nature. Sometimes they are.

Smriti Popenoe: It's really this idea of, is my cost of capital lower than the return that I can earn on that capital over time? I think that is what makes this investment environment so unique. A, that it's lasted as long as it has. B, that the forward returns in Agency MBS still continue to support active raising and deploying of capital because over time, we believe the cost of capital is going to be lower than the return on that capital or vice versa. The return on the capital we're raising right now is actually going to be higher than the marginal cost. That has always been our operating principle. As we see the share price go up relative to book, we talked about price to book here a fair amount today. I think we're more conscious about the idea of delivering total shareholder return to our shareholders.

As we see the share price go up relative to book, we talked about price to book here, a fair amount today.

Um and sometimes they're not but the but the real principle which I've said now I think you can go back and check on earnings calls for 3 plus years. It's really this idea of you know is my cost of capital lower than the return that I can earn on that Capital over time.

Think we're more conscious about.

The idea of delivering total shareholder return to.

To our shareholders T J talked about.

CSR being comprised of two things one is the actual return on our portfolio and secondly, the <unk>.

The book.

We know that those are two different components and there is a tradeoff between the two.

But that also is a factor in how much we raise and how much we deploy so a lot of what we're thinking through right now is just number one.

Performance performance as the beginning ending and final arbiter of everything that we do so that's always number one and then number two delivering value through these other waves.

Um, you know, as we see the share price go up relative to book, we talked about price to book here a fair amount today. Um, I think we're more conscious about—

Smriti Popenoe: TJ talked about TSR being comprised of two things. One is the actual return on our portfolio, and secondly, the price to book. We know that those are two different components and there's a trade-off between the two. That also is a factor in how much we raise and how much we deploy. A lot of what we're thinking through right now is just, number one, performance. Performance is the beginning, ending, and final arbiter of everything that we do. That's always number one. Then number two, delivering value through these other ways. Those are all factors in how we think about the pace of capital raising, deploying, et cetera.

But those are all factors in how we how we think about the pace of capital raising deploying et cetera.

That's really helpful.

Thank you if I could if I could sneak in one more here I mean whats your perspective on the prepayment environment as community banks are given maybe more incentives to come back into the market do you see that driving a lot of competition.

Competition among originators.

Certainly competition drives.

The refinance ability right that is very important construct I think more than anything though as we've talked about for many many quarters now.

It's all about the technology that is that is making it easier and easier to refinance.

Eric Hagen: That's really helpful.

The marginal borrower.

The idea of delivering total shareholder return to, um, to our shareholders. Um, TJ talked about, you know, TSR being comprised of two things. One is the actual return on our portfolio, and secondly, uh, the price to book. Um, we know that those are two different components and there's a trade-off between the two. Uh, but that also is a factor in, you know, how much we raise and how much we deploy. So a lot of what we're thinking through right now is just number one, you know, performance, performance, performance is the beginning, ending, and final arbiter of, you know, everything that we do. So that's always number one, and then number two, delivering value through these other ways. Um, but those are all factors in, you know, how we think about the pace of, uh, capital raising, deploying, etc.

Smriti Popenoe: Yeah.

Eric Hagen: Thank you. If I could sneak in one more here.

And I think that will be the dominant dominant force over time, but.

Smriti Popenoe: You bet.

Eric Hagen: What's your perspective on the prepayment environment as community banks are given maybe more incentive to come back into the market? Do you see that driving a lot of competition among originators?

But to the extent you have certain incentives that you are bringing it back to something we've talked about for a long time as policy right. So to the extent that policy.

That's really helpful. Yeah, thank you. If I could, I'd like to see if I could sneak in one more here. I mean, what's your perspective on the prepayment environment as community banks are given maybe more incentives to come back into the market? Do you see that driving a lot of—

Shifts incentives for the players in the mortgage market, that's something we're watching very very closely.

Competition among Originators.

Terrence Connelly: Certainly, competition drives the refinance ability, right? That is very important construct. I think more than anything, though, as we've talked about for many, many quarters now, it's all about the technology, right? That is making it easier and easier to refinance the marginal borrower. I think that will be the dominant force over time. To the extent you have certain incentives, you're bringing it back to something we've talked about for a long time, that's policy, right? To the extent that policy shifts incentives for the players in the mortgage market, that's something we're watching very, very closely.

T.J. Connelly: Certainly, competition drives the refinance ability, right? That is very important construct. I think more than anything, though, as we've talked about for many, many quarters now, it's all about the technology, right? That is making it easier and easier to refinance the marginal borrower. I think that will be the dominant force over time. To the extent you have certain incentives, you're bringing it back to something we've talked about for a long time, that's policy, right? To the extent that policy shifts incentives for the players in the mortgage market, that's something we're watching very, very closely.

Great. Thank you guys so much.

Yeah.

At this time there are no further questions I'd now like to turn the call back to Smriti Pappano for any additional or closing remarks.

I. Thank you all for your attention and we look forward to updating you on our quarterly results in the second quarter.

I cannot quote that.

This does conclude today's conference we thank you for your participation.

Eric Hagen: Great. Thank you guys so much.

Certainly, competition drives, um, the refinance ability, right? That is a very important construct. I think more than anything, though, as we’ve talked about for many, many quarters now, uh, it’s all about the technology, right? That is—that is making it easier and easier to refinance, um, the marginal borrower, and, uh, I think that will be the dominant, uh, dominant force over time. Uh, but to the extent you have, you know, certain incentives, that’s—you know, you’re bringing it back to something we’ve talked about for a long time. That’s policy, right? So it’s the extent of policy, um, shifts—incentives for the players in the mortgage market. That’s something we’re watching very, very closely.

Great. Thank you guys so much.

Operator: At this time, there are no further questions. I'd now like to turn the call back to Smriti Popenoe now for any additional or closing remarks.

Smriti Popenoe: I thank you all for your attention, and we look forward to updating you on our quarterly results in Q2. We can now close the call. Thank you.

At this time, there are no further questions. I'd now like to turn the call back to Smarty Papo for any additional or closing remarks.

I thank you all for your attention, and we look forward to updating you on our quarterly results in the second quarter.

Operator: This does conclude today's conference. We thank you for your participation.

We cannot quote.

If this does conclude today's conference, we thank you for your participation.

Q1 2026 Dynex Capital Inc Earnings Call

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