Dynex Capital (DX) risk factors, FY2025 10-K

Dynex Capital's FY2025 10-K, filed Feb 25, 2026, lists 32 risk factors in 3 groups. Against the prior year's 33: 7 new, 8 dropped, 13 substantially reworded.

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Risk factors listed
323 groups
New this year
7vs 33 last year
Dropped
8since the prior 10-K
Substantially reworded
13of those kept
Section length
11k wordsItem 1A

What the changes say

  • Dynex Capital added risks regarding operational growth strains, ATM equity dilution in 2025, and AI technology usage.

What changed since the prior 10-K

New

  • NewRISKS RELATED TO OUR INVESTMENT ACTIVITIES

    Changes in market spreads may negatively impact the market value and profitability of our investment portfolio

    Changes in market spreads driven by macroeconomic factors or Federal Reserve policies can reduce the market value and profitability of our investment portfolio.

  • NewRISKS RELATED TO OUR INVESTMENT ACTIVITIES

    transparency than assets traded on securities exchanges. During periods of severe economic stress, a market may not exist for certain of our investments at any price, particularly non-Agency MBS

    Illiquidity in non-Agency MBS during severe economic stress could cause lenders to increase haircuts or refuse collateral, forcing asset sales at a loss.

  • NewRISKS RELATED TO OUR INVESTMENT ACTIVITIES

    Changes in the Federal Reserve, government agency, or other government related entity participation in the Agency mortgage market may impact the market value and return on our investments

    Federal Reserve reductions in Agency RMBS holdings can cause spread widening, excess supply, and margin calls under our repurchase agreements.

  • NewRISKS RELATED TO LEVERAGE, FINANCING AND HEDGING ACTIVITIES

    The models we use to make purchases and risk management decisions for our portfolio may be inaccurate or incomplete, which could materially and adversely affect our cash flows

    Inaccurate or incomplete third-party data and valuation models could lead to cash flow losses and trading losses in our portfolio.

  • NewRISKS RELATED TO OUR QUALIFICATION AS A REIT AND TAX-RELATED OR OTHER REGULATORY MATTERS

    right to refuse to transfer any shares of our capital stock in a transaction that would result in ownership in excess of the ownership limit. In addition, we have the right to redeem shares of our capital stock held in excess of the ownership limit

    Articles of Incorporation ownership limits designed to satisfy tax laws may prevent changes in control beneficial to shareholders.

  • NewRISKS RELATED TO OUR QUALIFICATION AS A REIT AND TAX-RELATED OR OTHER REGULATORY MATTERS

    on distribution payments, periodically or upon liquidation, which could impact our ability to make distributions to common shareholders

    Capital raised through our 2025 ATM program and future equity issuances may dilute common shareholder percentage ownership and depress stock prices.

  • NewRISKS RELATED TO OUR QUALIFICATION AS A REIT AND TAX-RELATED OR OTHER REGULATORY MATTERS

    If we are unable to successfully manage risks associated with the significant growth in our business and operations, our financial condition, results of operation, and reputation could be materially and adversely affected

    Rapid growth in our investment portfolio and business operations may strain management and internal systems, risking compliance failures and operational inefficiencies.

Dropped

  • DroppedRISKS RELATED TO OUR INVESTMENT ACTIVITIES

    Declines in the market value of our investments could negatively impact our comprehensive income, book value per common share, dividends, and liquidity

    Declines in investment market value impacting comprehensive income and book value.

  • DroppedRISKS RELATED TO OUR INVESTMENT ACTIVITIES

    Changes in monetary policy implemented by the Federal Reserve may continue to impact the market value of our investments, borrowing costs, and our ability to earn net interest income

  • DroppedRISKS RELATED TO LEVERAGE, FINANCING AND HEDGING ACTIVITIES

    terminate the transaction, sell the underlying collateral and cease entering into any other repurchase transactions with us. Any losses we incur on our repurchase transactions could adversely affect our liquidity, earnings, and therefore reduce our ability to pay dividends to our shareholders

  • DroppedRISKS RELATED TO LEVERAGE, FINANCING AND HEDGING ACTIVITIES

    We have risks based on models used to make purchases and risk management decisions for our portfolio

  • DroppedRISKS RELATED TO OUR QUALIFICATION AS A REIT AND TAX-RELATED OR OTHER REGULATORY MATTERS

    If we fail to abide by certain Commodity Futures Trading Commission (“CFTC”) rules and regulations, we may be subject to enforcement action by the CFTC

    Federal Reserve monetary policy and quantitative tightening increasing borrowing costs.

  • DroppedRISKS RELATED TO OUR QUALIFICATION AS A REIT AND TAX-RELATED OR OTHER REGULATORY MATTERS

    OTHER RISK FACTORS RELATED TO OUR BUSINESS

  • DroppedRISKS RELATED TO OUR QUALIFICATION AS A REIT AND TAX-RELATED OR OTHER REGULATORY MATTERS

    Our profitability may be impacted by increased focus related to environmental, social, and governance (“ESG”) issues, including, but not limited to, climate-related events and related regulatory requirements

  • DroppedRISKS RELATED TO OUR QUALIFICATION AS A REIT AND TAX-RELATED OR OTHER REGULATORY MATTERS

    Climate change and regulations intended to control its impact may affect the value of our investments and result in higher compliance and energy costs, which would impact the broader economy. There can be no assurance that climate change will not have a material adverse effect on our assets, operations, or business

Reworded

  • 88% rewrittenRISKS RELATED TO OUR INVESTMENT ACTIVITIES

    We may be subject to risks associated with inadequate or untimely services from third-party loan servicers, which may negatively impact our results of operations. We also rely on corporate trustees to act on behalf of us and other holders of securities in enforcing our rights

    Added specific mentions of Fannie Mae and Freddie Mac securities under FHFA conservatorship and servicer insolvency risks for non-Agency MBS.

    Was: We may be subject to risks associated with inadequate or untimely services from third-party service providers, which may negatively impact our results of operations. We also rely on corporate trustees to act on behalf of us and other holders of securities in enforcing our rights

  • 79% rewrittenRISKS RELATED TO OUR QUALIFICATION AS A REIT AND TAX-RELATED OR OTHER REGULATORY MATTERS

    We may be subject to risks associated with our use of data and technology systems, including our evolving use of AI and machine learning technology

    Expanded to include cloud computing cybersecurity risks and specific AI use cases like coding and document summarization.

    Was: We may be subject to risks associated with AI and machine learning technology

  • 67% rewrittenRISKS RELATED TO OUR INVESTMENT ACTIVITIES

    Provisions requiring yield maintenance charges, prepayment penalties, defeasance, or lockouts in CMBS IO securities may not be enforceable

    Retained prior year risk regarding enforceability of yield maintenance charges and prepayment penalties in CMBS IO securities with minor phrasing adjustments.

  • 55% rewrittenRISKS RELATED TO OUR QUALIFICATION AS A REIT AND TAX-RELATED OR OTHER REGULATORY MATTERS

    The stock ownership limit imposed by the Tax Code for REITs and our Articles of Incorporation may impair the ability of holders to convert shares of our outstanding preferred stock into shares of our common stock upon a change of control

    Maintained description of REIT stock ownership limits impairing preferred stock conversion upon a change of control.

  • 52% rewrittenRISKS RELATED TO OUR QUALIFICATION AS A REIT AND TAX-RELATED OR OTHER REGULATORY MATTERS

    Future issuances of equity securities may dilute your percentage ownership in us and may also negatively affect the market price of our common stock

    Updated discussion on common stock and ATM program issuances diluting ownership and affecting market price.

  • 51% rewrittenRISKS RELATED TO LEVERAGE, FINANCING AND HEDGING ACTIVITIES

    We may incur significant losses if we, or one or more of our third-party lenders, default on a repurchase agreement or file for bankruptcy

    Retained structural mechanics of repurchase agreements and losses incurred if lenders default.

  • 47% rewrittenRISKS RELATED TO OUR INVESTMENT ACTIVITIES

    Volatile market conditions for mortgages and mortgage-related assets as well as the broader financial markets can result in a significant contraction in liquidity for mortgages and mortgage-related assets, which may adversely affect the pricing reliability and value of our investments

    Retained broader financial market volatility and liquidity contraction risks for mortgage-related assets.

    Was: Volatile market conditions for mortgages and mortgage-related assets as well as the broader financial markets can result in a significant contraction in liquidity for mortgages and mortgage-related assets, which may adversely affect the value of the assets in which we invest

  • 44% rewrittenRISKS RELATED TO OUR INVESTMENT ACTIVITIES

    Interest rate fluctuations could negatively impact our financing costs, the market value of our investments, dividends, liquidity, and the market price of our stock

    Updated interest rate risk to reflect 2025 Federal Funds Rate reductions by the Federal Reserve and uncertainty regarding future rate adjustments.

    Was: Interest rate fluctuations could negatively impact our net interest income, comprehensive income, book value per common share, dividends, liquidity, and the market price of our stock

  • 42% rewrittenRISKS RELATED TO OUR QUALIFICATION AS A REIT AND TAX-RELATED OR OTHER REGULATORY MATTERS

    The stock ownership limit imposed by the Tax Code for REITs and our Restated Articles of Incorporation (“Articles of Incorporation”) may restrict our business combination opportunities. The stock ownership limitation may also result in reduced liquidity of our stock and may result in losses to an acquiring shareholder

  • 41% rewrittenRISKS RELATED TO LEVERAGE, FINANCING AND HEDGING ACTIVITIES

    Clearing facilities or exchanges may increase the margin requirements we are required to post when entering into derivative instruments, which may negatively impact our ability to hedge and our liquidity

  • 24% rewrittenRISKS RELATED TO OUR QUALIFICATION AS A REIT AND TAX-RELATED OR OTHER REGULATORY MATTERS

    Our ability to qualify as a REIT could be adversely affected if the IRS disagrees with our treatment of repurchase agreement transactions as financing of the investments we pledge as collateral

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

  • 23% rewrittenRISKS RELATED TO OUR QUALIFICATION AS A REIT AND TAX-RELATED OR OTHER REGULATORY MATTERS

    Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow and our profitability

  • 21% rewrittenRISKS RELATED TO LEVERAGE, FINANCING AND HEDGING ACTIVITIES

    Our use of hedging strategies to mitigate our interest rate risk may not be effective and may adversely affect our net income, liquidity, and book value per common share

All 32 risk factors

Headings as the filing states them, in filing order.

RISKS RELATED TO OUR INVESTMENT ACTIVITIES

  1. 01Changes in market spreads may negatively impact the market value and profitability of our investment portfolioNew
  2. 02Interest rate fluctuations could negatively impact our financing costs, the market value of our investments, dividends, liquidity, and the market price of our stock44% rewritten
  3. 03Volatile market conditions for mortgages and mortgage-related assets as well as the broader financial markets can result in a significant contraction in liquidity for mortgages and mortgage-related assets, which may adversely affect the pricing reliability and value of our investments47% rewritten
  4. 04transparency than assets traded on securities exchanges. During periods of severe economic stress, a market may not exist for certain of our investments at any price, particularly non-Agency MBSNew
  5. 05Changes in the Federal Reserve, government agency, or other government related entity participation in the Agency mortgage market may impact the market value and return on our investmentsNew
  6. 06Changes in prepayment rates on the mortgage loans underlying our investments may subject us to reinvestment risk and adversely affect our interest income, the market value of our investments, and our liquidity
  7. 07We may be subject to risks associated with inadequate or untimely services from third-party loan servicers, which may negatively impact our results of operations. We also rely on corporate trustees to act on behalf of us and other holders of securities in enforcing our rights88% rewritten
  8. 08It could be uneconomical to roll our TBA contracts or we may be unable to meet margin calls on our TBA contracts, which would have a negative impact on our liquidity
  9. 09Provisions requiring yield maintenance charges, prepayment penalties, defeasance, or lockouts in CMBS IO securities may not be enforceable67% rewritten
  10. 10Credit ratings assigned to debt securities by credit rating agencies may not accurately reflect the risks associated with those securities. Changes in credit ratings for securities we own or for similar securities might negatively impact the market value of these securities

RISKS RELATED TO LEVERAGE, FINANCING AND HEDGING ACTIVITIES

  1. 11Our use of leverage, primarily through repurchase agreements, to enhance shareholder returns increases the risk of volatility in our results and could lead to material decreases in comprehensive income, shareholders’ equity, dividends, and liquidity
  2. 12Our repurchase agreements and agreements governing certain derivative instruments may contain financial and nonfinancial covenants. Our inability to meet these covenants could adversely affect our financial condition, results of operations, and cash flows
  3. 13Our use of hedging strategies to mitigate our interest rate risk may not be effective and may adversely affect our net income, liquidity, and book value per common share21% rewritten
  4. 14Clearing facilities or exchanges may increase the margin requirements we are required to post when entering into derivative instruments, which may negatively impact our ability to hedge and our liquidity41% rewritten
  5. 15We may incur significant losses if we, or one or more of our third-party lenders, default on a repurchase agreement or file for bankruptcy51% rewritten
  6. 16The models we use to make purchases and risk management decisions for our portfolio may be inaccurate or incomplete, which could materially and adversely affect our cash flowsNew

RISKS RELATED TO OUR QUALIFICATION AS A REIT AND TAX-RELATED OR OTHER REGULATORY MATTERS

  1. 17If we fail to conduct our operations properly, we may not qualify for exemption under the 1940 Act, which may reduce our flexibility and limit our ability to pursue certain opportunities
  2. 18Qualifying as a REIT involves highly technical and complex provisions of the Tax Code, and a technical or inadvertent violation could jeopardize our REIT qualification. Maintaining our REIT status may reduce our flexibility to manage our operations
  3. 19We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability, reduce our operating flexibility, or reduce the market price of our securities
  4. 20Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends
  5. 21Uncertainty exists with respect to the treatment of our TBAs for purposes of the REIT asset and income tests
  6. 22Our ability to qualify as a REIT could be adversely affected if the IRS disagrees with our treatment of repurchase agreement transactions as financing of the investments we pledge as collateral24% rewritten
  7. 23Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow and our profitability23% rewritten
  8. 24The stock ownership limit imposed by the Tax Code for REITs and our Restated Articles of Incorporation (“Articles of Incorporation”) may restrict our business combination opportunities. The stock ownership limitation may also result in reduced liquidity of our stock and may result in losses to an acquiring shareholder42% rewritten
  9. 25right to refuse to transfer any shares of our capital stock in a transaction that would result in ownership in excess of the ownership limit. In addition, we have the right to redeem shares of our capital stock held in excess of the ownership limitNew
  10. 26The stock ownership limit imposed by the Tax Code for REITs and our Articles of Incorporation may impair the ability of holders to convert shares of our outstanding preferred stock into shares of our common stock upon a change of control55% rewritten
  11. 27Future issuances of equity securities may dilute your percentage ownership in us and may also negatively affect the market price of our common stock52% rewritten
  12. 28on distribution payments, periodically or upon liquidation, which could impact our ability to make distributions to common shareholdersNew
  13. 29If we are unable to successfully manage risks associated with the significant growth in our business and operations, our financial condition, results of operation, and reputation could be materially and adversely affectedNew
  14. 30We may change our investment strategy, operating policies, dividend policy, and/or asset allocations without shareholder consent and/or in a manner which shareholders, analysts, and capital markets may not agree with
  15. 31We may be subject to risks associated with our use of data and technology systems, including our evolving use of AI and machine learning technology79% rewritten
  16. 32We are subject to human capital risk

Other Dynex Capital 10-Ks

  • FY2024 10-K risk factors
    33 risks

    Dynex Capital faces heavy risks from interest rate volatility, Federal Reserve monetary policy, and mortgage market fluctuations. The business relies heavily on repurchase agreement leverage, hedging strategies, and complex REIT tax compliance to maintain operations.

    Filed Feb 28, 2025

About this page

The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.