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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549
FORM 10-Q
☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2024
or
☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number: 001-09819
DYNEX CAPITAL, INC.
(Exact name of registrant as specified in its charter)
Virginia52-1549373
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
4991 Lake Brook Drive, Suite 100
Glen Allen,Virginia23060-9245
(Address of principal executive offices)(Zip Code)
(804)217-5800 
(Registrant’s telephone number, including area code) 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareDXNew York Stock Exchange
6.900% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per shareDXPRCNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes          ☒         No           ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes           ☒             No           ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


    
Large accelerated filer☐Accelerated filer☒
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes           ☐           No            ☒

On July 24, 2024, the registrant had 74,707,776 shares outstanding of common stock, $0.01 par value, which is the registrant’s only class of common stock.



DYNEX CAPITAL, INC.
FORM 10-Q
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023
Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2024 (unaudited) and June 30, 2023 (unaudited)
Consolidated Statements of Shareholders' Equity for the three and six months ended June 30, 2024 (unaudited) and June 30, 2023 (unaudited)
Consolidated Statements of Cash Flows for the six months ended
June 30, 2024 (unaudited) and June 30, 2023 (unaudited)
Notes to the Unaudited Consolidated Financial Statements
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
PART II. OTHER INFORMATION
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits
SIGNATURES



i

PART I.    FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

DYNEX CAPITAL, INC.
CONSOLIDATED BALANCE SHEETS
($s in thousands except per share data)

 June 30, 2024December 31, 2023
ASSETS
(unaudited)
Cash and cash equivalents$286,132 $119,639 
Cash collateral posted to counterparties123,131 118,225 
Mortgage-backed securities (including pledged of $5,788,148 and $5,880,747, respectively), at fair value
6,193,139 6,038,948 
Due from counterparties27,379 1,313 
Derivative assets8,461 54,361 
Accrued interest receivable28,323 28,727 
Other assets, net17,037 8,537 
Total assets$6,683,602 $6,369,750 
LIABILITIES AND SHAREHOLDERS’ EQUITY 
Liabilities:  
Repurchase agreements$5,494,428 $5,381,104 
Due to counterparties49,606 95 
Derivative liabilities2,032 — 
Cash collateral posted by counterparties19,382 46,001 
Accrued interest payable54,567 53,194 
Accrued dividends payable12,785 10,320 
Other liabilities5,539 8,301 
 Total liabilities5,638,339 5,499,015 
Shareholders’ equity:  
Preferred stock, par value $0.01 per share; 50,000,000 shares authorized; 4,460,000 and 4,460,000 shares issued and outstanding, respectively ($111,500 and $111,500 aggregate liquidation preference, respectively)
107,843 107,843 
Common stock, par value $0.01 per share, 180,000,000 shares authorized;
74,707,776 and 57,038,247 shares issued and outstanding, respectively
747 570 
Additional paid-in capital1,620,355 1,404,431 
Accumulated other comprehensive loss(177,556)(158,502)
Accumulated deficit(506,126)(483,607)
 Total shareholders’ equity1,045,263 870,735 
 Total liabilities and shareholders’ equity$6,683,602 $6,369,750 
See accompanying notes to the unaudited consolidated financial statements.
1

DYNEX CAPITAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
($s in thousands except per share data)

Three Months EndedSix Months Ended
June 30,June 30,
 2024202320242023
INTEREST INCOME (EXPENSE)
Interest income$76,054 $42,212 $147,580 $73,058 
Interest expense(74,767)(45,142)(149,484)(76,450)
Net interest income (expense)
1,287 (2,930)(1,904)(3,392)
OTHER GAINS (LOSSES)
Realized loss on sales of investments, net
(1,506)(51,601)(1,506)(74,916)
Unrealized (loss) gain on investments, net
(41,977)488 (112,001)57,609 
Gain on derivative instruments, net
41,135 116,012 165,771 48,745 
Total other (losses) gains, net
(2,348)64,899 52,264 31,438 
EXPENSES
Compensation and benefits(3,284)(3,617)(10,461)(7,367)
Other general and administrative(3,358)(3,580)(7,062)(7,202)
Other operating expenses(601)(435)(1,022)(861)
Total operating expenses(7,243)(7,632)(18,545)(15,430)
Net (loss) income
(8,304)54,337 31,815 12,616 
Preferred stock dividends(1,923)(1,923)(3,847)(3,847)
Net (loss) income to common shareholders
$(10,227)$52,414 $27,968 $8,769 
Other comprehensive income:
Unrealized (loss) gain on available-for-sale investments, net
$(1,786)$(9,443)$(19,054)$5,350 
Total other comprehensive (loss) income
(1,786)(9,443)(19,054)5,350 
Comprehensive (loss) income to common shareholders
$(12,013)$42,971 $8,914 $14,119 
Weighted average common shares-basic66,954,870 54,137,327 63,003,545 53,981,463 
Weighted average common shares-diluted66,954,870 54,585,082 63,913,156 54,327,385 
Net (loss) income per common share-basic
$(0.15)$0.97 $0.44 $0.16 
Net (loss) income per common share-diluted
$(0.15)$0.96 $0.44 $0.16 
See accompanying notes to the unaudited consolidated financial statements.
2

DYNEX CAPITAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(unaudited)
($s in thousands)
Preferred StockCommon StockAdditional
Paid-in
Capital		Accumulated Other Comprehensive LossAccumulated
Deficit		Total Shareholders’ Equity
SharesAmountSharesAmount
Balance as of
December 31, 2023
4,460,000$107,843 57,038,247$570 $1,404,431 $(158,502)$(483,607)$870,735 
Stock issuance—— 7,007,44870 86,736 — — 86,806 
Restricted stock granted, net of amortization—— 46,544— 510 — — 510 
Other share-based compensation, net of amortization—— 111,2451 3,759 — — 3,760 
Adjustments for tax withholding on share-based compensation—— (42,553)— (527)— — (527)
Stock issuance costs—— —— (16)— — (16)
Net income
—— —— — — 40,118 40,118 
Dividends on preferred stock—— —— — — (1,923)(1,923)
Dividends on common stock—— —— — — (23,663)(23,663)
Other comprehensive loss
—— —— — (17,268)— (17,268)
Balance as of
March 31, 2024
4,460,000$107,843 64,160,931$641 $1,494,893 $(175,770)$(469,075)$958,532 
Stock issuance—— 10,508,777105 124,739 — — 124,844 
Restricted stock granted, net of amortization—— 38,0681 190 — — 191 
Other share-based compensation, net of amortization—— —— 724 — — 724 
Stock issuance costs—— —— (191)— — (191)
Net loss
—— —— — — (8,304)(8,304)
Dividends on preferred stock—— —— — — (1,923)(1,923)
Dividends on common stock—— —— — — (26,824)(26,824)
Other comprehensive loss
—— —— — (1,786)— (1,786)
Balance as of June 30, 2024
4,460,000$107,843 74,707,776$747 $1,620,355 $(177,556)$(506,126)$1,045,263 

3

Preferred StockCommon StockAdditional
Paid-in
Capital		Accumulated Other Comprehensive LossAccumulated
Deficit		Total Shareholders’ Equity
SharesAmountSharesAmount
Balance as of
December 31, 2022		4,460,000 $107,843 53,637,095 $536 $1,357,514 $(181,346)$(383,219)$901,328 
Stock issuance— — 199,274 2 2,769 — — 2,771 
Restricted stock granted, net of amortization— — 27,932 — 360 — — 360 
Other share-based compensation, net of amortization— — 33,213 1 649 — — 650 
Adjustments for tax withholding on share-based compensation— — (20,600)— (276)— — (276)
Stock issuance costs— — — — (16)— — (16)
Net loss— — — — — — (41,722)(41,722)
Dividends on preferred stock— — — — — — (1,923)(1,923)
Dividends on common stock— — — — — — (21,137)(21,137)
Other comprehensive income— — — — — 14,793 — 14,793 
Balance as of
March 31, 2023
4,460,000 $107,843 53,876,914 $539 $1,361,000 $(166,553)$(448,001)$854,828 
Stock issuance— — 296,600 3 3,540 — — 3,543 
Restricted stock granted, net of amortization— — 46,085 — 296 — — 296 
Other share-based compensation, net of amortization— — — — 833 — — 833 
Adjustments for tax withholding on share-based compensation— — (15,280)— (169)(169)
Stock issuance costs— — — — (16)— — (16)
Net income
— — — — — — 54,337 54,337 
Dividends on preferred stock— — — — — — (1,923)(1,923)
Dividends on common stock— — — — — — (21,324)(21,324)
Other comprehensive loss
— — — — — (9,443)— (9,443)
Balance as of June 30, 2023
4,460,000 $107,843 54,204,319 $542 $1,365,484 $(175,996)$(416,911)$880,962 

See accompanying notes to the unaudited consolidated financial statements.
4

DYNEX CAPITAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
($s in thousands)
Six Months Ended
 June 30,
 20242023
Operating activities:  
Net income
$31,815 $12,616 
Adjustments to reconcile net income to cash provided by operating activities:
 
Realized loss on sales of investments, net
1,506 74,916 
Unrealized loss (gain) on investments, net
112,001 (57,609)
Gain on derivative instruments, net
(165,771)(48,745)
Amortization of investment premiums, net26,483 38,924 
Other amortization and depreciation
925 1,193 
Share-based compensation expense5,184 2,140 
Decrease (increase) in accrued interest receivable
404 (7,728)
Increase in accrued interest payable
1,373 17,344 
Change in other assets and liabilities, net(12,415)2,176 
Net cash provided by operating activities
1,505 35,227 
Investing activities: 
Purchases of investments(501,921)(2,109,585)
Principal payments received on trading securities186,048 73,849 
Principal payments received on available-for-sale investments37,948 47,919 
Proceeds from sales of trading securities13,782 348,091 
Principal payments received on mortgage loans held for investment441 502 
Net receipts on derivatives, including terminations
187,635 64,290 
(Decrease) increase in cash collateral posted by counterparties
(26,618)5,190 
Net cash used in investing activities
(102,685)(1,569,744)
Financing activities: 
Borrowings under repurchase agreements27,001,079 10,999,164 
Repayments of repurchase agreement borrowings(26,887,755)(9,441,668)
Proceeds from issuance of common stock211,650 6,314 
Payments related to tax withholding for share-based compensation(527)(445)
Dividends paid(51,868)(45,971)
Net cash provided by financing activities
272,579 1,517,394 
Net increase (decrease) in cash, including cash posted to counterparties
171,399 (17,123)
Cash including cash posted to counterparties at beginning of period237,864 449,877 
Cash including cash posted to counterparties at end of period$409,263 $432,754 
Supplemental Disclosure of Cash Activity:  
Cash paid for interest$148,111 $59,105 
See accompanying notes to the unaudited consolidated financial statements.
5

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Dynex Capital, Inc. (the “Company”) was incorporated in the Commonwealth of Virginia on December 18, 1987 and commenced operations in February 1988. The Company is an internally managed mortgage real estate investment trust, or mortgage REIT, which primarily earns income from investing on a leveraged basis in Agency mortgage-backed securities (“Agency MBS”) and in to-be-announced securities (“TBAs” or “TBA securities”). Agency MBS have a guaranty of principal and interest payments by a U.S. government-sponsored entity (“GSE”) such as Fannie Mae and Freddie Mac, which are in conservatorship and are currently supported by a senior preferred stock purchase agreement from the U.S. Treasury. As of June 30, 2024, the majority of the Company’s Agency MBS are secured by residential real property (“Agency RMBS”). The remainder of the Company’s investments are in Agency commercial MBS (“Agency CMBS”) and in both Agency and non-Agency CMBS interest-only (“CMBS IO”). Non-Agency MBS do not have a GSE guaranty of principal or interest payments.

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company and its subsidiaries (together, “Dynex” or, as appropriate, the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 10, Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all significant adjustments, consisting of normal recurring accruals, considered necessary for a fair statement of results for the interim period have been included. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for any other interim periods or for the entire year ending December 31, 2024. The unaudited consolidated financial statements included herein should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”) filed with the SEC.   

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. The most significant estimates used by management include, but are not limited to, amortization of premiums and discounts and fair value measurements of its investments, including TBA securities accounted for as derivative instruments. These items are discussed further below within this note to the consolidated financial statements. The Company believes the estimates and assumptions underlying the consolidated financial statements included herein are reasonable and supportable based on the information available as of June 30, 2024.


Consolidation and Variable Interest Entities
 
The consolidated financial statements include the accounts of the Company and the accounts of its majority owned subsidiaries and variable interest entities (“VIE”) for which it is the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation.

The Company consolidates a VIE if the Company is determined to be the VIE’s primary beneficiary, which is defined as the party that has both (i) the power to control the activities that most significantly impact the VIE’s financial performance; and (ii) the right to receive benefits or absorb losses that could potentially be significant to the VIE. The Company reconsiders its evaluation of whether to consolidate a VIE on an ongoing basis, based on changes in the facts and circumstances pertaining to the VIE. Though the Company invests in Agency and non-
6

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.

Agency MBS which are generally considered to be interests in VIEs, the Company does not consolidate these entities because it does not meet the criteria to be deemed a primary beneficiary. The maximum exposure to loss for these VIEs is the carrying value of the MBS.

Income Taxes

The Company has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986 (the “Tax Code”) and the corresponding provisions of state law. To qualify as a REIT, the Company must meet certain asset, income, ownership, and distribution tests. To meet these requirements, the Company’s main source of income is interest earned from obligations secured by mortgages on real property, and the Company must distribute at least 90% of its annual REIT taxable income to shareholders. The Company’s income will generally not be subject to federal income tax to the extent it is distributed as dividends to shareholders.

The Company assesses its tax positions for all open tax years and determines whether the Company has any material unrecognized liabilities and records these liabilities, if any, to the extent they are deemed more likely than not to have been incurred.

Net Income (Loss) Per Common Share

The Company calculates basic net income (loss) per common share by dividing net income (loss) to common shareholders for the period by weighted-average shares of common stock outstanding for that period. Please see Note 2 for the calculation of the Company’s basic and diluted net income (loss) per common share for the periods indicated.

The Company currently has unvested restricted stock, service-based restricted stock units (“RSUs”) and performance-based stock units (“PSUs”) issued and outstanding. Restricted stock awards are considered participating securities and therefore are included in the computation of basic net income per common share using the two-class method because holders of unvested shares of restricted stock are eligible to receive non-forfeitable dividends. Holders of RSUs and PSUs accrue forfeitable dividend equivalent rights over the period outstanding, receiving dividend payments only upon the settlement date if the requisite service-based and performance-based conditions have been achieved, as applicable. As such, RSUs and PSUs are excluded from the computation of basic net income per common share but are included in the computation of diluted net income per common share unless the effect is to reduce a net loss or increase the net income per common share (also known as “anti-dilutive”). Upon vesting, restrictions on transfer expire on each share of restricted stock, RSU, and PSU, and each such share or unit becomes one unrestricted share of common stock and is included in the computation of basic net income per common share.

Because the Company’s 6.900% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”) is redeemable at the Company’s option for cash only and convertible into shares of common stock only upon a change of control of the Company (and subject to other circumstances) as described in Article IIIC of the Company’s Restated Articles of Incorporation, the effect of those shares and their related dividends are excluded from the calculation of diluted net income per common share for the periods presented.

Cash and Cash Equivalents

Cash and cash equivalents include unrestricted demand deposits at highly rated financial institutions and highly liquid investments with original maturities of three months or less. The Company’s cash balances fluctuate throughout the year and may exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits from time to time. Although the Company bears risk to amounts in excess of those insured by the FDIC, the Company believes the risk of loss is mitigated by the financial position, creditworthiness, and strength of the depository institutions in which those deposits are held.

7

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.

Cash Collateral Posted To/By Counterparties

The Company regularly pledges and receives amounts to cover margin requirements related to the Company’s financing and derivative instruments. If the amount pledged to a counterparty exceeds the amount received from a counterparty, the net amount is recorded as an asset within “cash collateral posted to counterparties,” and if the amount received from a counterparty exceeds the amount pledged to a counterparty, the net amount is recorded as a liability within “cash collateral posted by counterparties” on the Company’s consolidated balance sheets.

The following table provides a reconciliation of “cash” and “cash posted to counterparties” reported on the Company's consolidated balance sheet as of June 30, 2024, that sum to the total of the same such amounts shown on the Company’s consolidated statement of cash flows for the six months ended June 30, 2024:
($s in thousands)
June 30, 2024
Cash and cash equivalents$286,132 
Cash collateral posted to counterparties123,131 
Total cash including cash posted to counterparties shown on consolidated statement of cash flows$409,263 

Mortgage-Backed Securities
 
The Company’s MBS are recorded at fair value on the Company’s consolidated balance sheet. Changes in fair value of MBS purchased prior to January 1, 2021 are designated as available-for-sale (“AFS”) with changes in fair value reported in other comprehensive income (“OCI”) as an unrealized gain (loss) until the security is sold or matures. Effective January 1, 2021, the Company elected the fair value option (“FVO”) for all MBS purchased on or after that date with changes in fair value reported in net income as “unrealized gain (loss) on investments, net” until the security is sold or matures. Management elected the fair value option so that GAAP net income will reflect the changes in fair value for its future purchases of MBS in a manner consistent with the presentation and timing of the changes in fair value of its derivative instruments. Upon the sale of an MBS, any unrealized gain or loss within OCI or net income is reclassified to “realized gain (loss) on sale of investments, net” within net income using the specific identification method.

Interest Income, Premium Amortization, and Discount Accretion. Interest income on MBS is accrued based on the outstanding principal balance (or notional balance in the case of IO securities) and the contractual terms. Premiums or discounts associated with the purchase of Agency MBS as well as any non-Agency MBS are amortized or accreted into interest income over the projected life of such securities using the effective interest method, and adjustments to premium amortization and discount accretion are made for actual cash payments received. The Company’s projections of future cash payments are based on input received from external sources and internal models and may include assumptions about the amount and timing of loan prepayment rates, fluctuations in interest rates, credit losses, and other factors. On at least a quarterly basis, the Company reviews and makes any necessary adjustments to its cash flow projections and updates the yield recognized on these assets.

Determination of MBS Fair Value. The Company estimates the fair value of the majority of its MBS based upon prices obtained from a pricing service. These prices are assessed for reasonableness using broker quotes and other third-party pricing services. Please refer to Note 6 for further discussion of MBS fair value measurements.

Allowance for Credit Losses. On at least a quarterly basis, the Company evaluates any MBS designated as AFS with a fair value less than its amortized cost for credit losses. If the difference between the present value of cash flows expected to be collected on the MBS is less than its amortized cost, the difference is recorded as an allowance for credit loss through net income up to and not exceeding the amount that the amortized cost exceeds current fair value. Subsequent changes in credit loss estimates are recognized in earnings in the period in which they occur. Because the majority of the Company’s investments are higher credit quality and most are guaranteed by a
8

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.

GSE, the Company is not likely to have an allowance for credit losses related to its MBS recorded on its consolidated balance sheet.

Interest accrued between payment dates on MBS is presented separately from the Company’s investment portfolio as “accrued interest receivable” on its consolidated balance sheet. The Company does not estimate an allowance for credit loss for its accrued interest receivable because the interest is generally received within 30 days and amounts not received when due are written off against interest income.

Repurchase Agreements
 
The Company’s repurchase agreements are used to finance its purchases of MBS and are accounted for as secured borrowings. The Company pledges its securities as collateral to secure a loan, which is equal to a specified percentage of the estimated fair value of the pledged collateral. The Company retains beneficial ownership of the pledged collateral, which is disclosed parenthetically on the Company’s consolidated balance sheets. At the maturity of a repurchase agreement borrowing, the Company is required to repay the loan and concurrently receives back its pledged collateral from the lender, or, with the consent of the lender, the Company may renew the agreement at the then prevailing financing rate. A repurchase agreement lender may require the Company to pledge additional collateral in the event of a decline in the fair value of the collateral pledged. Repurchase agreement financing is recourse to the Company and the assets pledged. The repurchase facilities available to the Company are uncommitted with no guarantee of renewal.

Derivative Instruments

Derivatives are carried at fair value, and changes in the fair value of derivative instruments, including gains and losses realized upon termination, maturity, or settlement, are recorded in “gain (loss) on derivative instruments, net” on the Company’s consolidated statements of comprehensive income (loss). Cash receipts and payments related to derivative instruments are classified in the investing activities section of the consolidated statements of cash flows in accordance with the underlying nature or purpose of the derivative transactions.

The Company’s short positions in U.S. Treasury futures contracts are valued based on exchange pricing with daily margin settlements. The margin requirement varies based on the market value of the open positions and the equity retained in the account. Any margin excess or deficit outstanding is recorded as a receivable or payable as of the date of the Company’s consolidated balance sheets. The Company realizes gains or losses on these contracts upon expiration at an amount equal to the difference between the current fair value of the underlying asset and the contractual price of the futures contract.

The Company’s options on U.S. Treasury futures provide the Company the right, but not an obligation, to buy or sell U.S. Treasury futures at a predetermined notional amount and stated term in the future and are valued based on exchange pricing. The Company records the premium paid for the option contract as a derivative asset on its consolidated balance sheet and adjusts the balance for changes in fair value through “gain (loss) on derivative instruments” until the option is exercised or the contract expires. If the option contract expires unexercised, the realized loss is limited to the premium paid. If exercised, the realized gain or loss on the options is equal to the difference between the fair value of the underlying U.S. Treasury future and the premium paid for the option contract.

The Company’s interest rate swaps are pay-fixed, which involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the interest rate swap without exchange of the underlying notional amount. These agreements are centrally cleared through the Chicago Mercantile Exchange (“CME”), which requires the Company to post initial margin as determined by the CME, and additional variation margin is exchanged, typically in cash, for changes in the fair value of the interest rate swaps. Similar to the Company’s U.S. Treasury futures, the exchange of variation margin for CME cleared swaps is legally considered to be the settlement of the derivative itself as opposed to a pledge of collateral. Accordingly, any margin excess or deficit outstanding is recorded as a receivable or payable as of the date of the Company’s consolidated balance sheets. Changes in the fair value of these instruments is recorded in “gain(loss) on derivative instruments” until
9

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.

termination or expiration.

The Company may also purchase swaptions, which provide the Company the right, but not an obligation, to enter into an interest rate swap at a predetermined notional amount with a stated term and pay and receive rates in the future. The accounting for swaptions is similar to options on U.S. Treasury futures.

A TBA security is a forward contract (“TBA contract”) for the purchase (“long position”) or sale (“short position”) of a non-specified Agency MBS at a predetermined price with certain principal and interest terms and certain types of collateral, but the particular Agency securities to be delivered are not identified until shortly before the settlement date. The Company accounts for long and short positions in TBAs as derivative instruments because the Company cannot assert that it is probable at inception and throughout the term of an individual TBA transaction that its settlement will result in physical delivery of the underlying Agency RMBS or that the individual TBA transaction will settle in the shortest time period possible.

Please refer to Note 5 for additional information regarding the Company’s derivative instruments as well as Note 6 for information on how the fair value of these instruments is calculated.

Share-Based Compensation

The Company’s 2020 Stock and Incentive Plan (the “2020 Plan”) reserves for issuance up to 2,300,000 common shares for eligible employees, non-employee directors, consultants, and advisors to the Company to be granted in the form of stock options, restricted stock, restricted stock units (“RSUs”), stock appreciation rights, performance-based stock units (“PSUs”), and performance-based cash awards (collectively, “awards”). As of June 30, 2024, 58,503 common shares are available for issuance under the 2020 Plan.

The Company has issued restricted stock and RSUs, which are treated as equity awards and recorded at their fair value using the closing stock price on the grant date. Compensation expense is generally recognized over a service period specified within each award with a corresponding credit to shareholders’ equity using the straight-line method until the vesting date specified within each award or until the employee becomes eligible for retirement, if earlier than the vesting date. Compensation expense for subsequent equity awards to an employee who is retirement eligible is recognized immediately upon the grant date.

The Company also has PSUs issued and outstanding which contain Company performance-based and market performance-based conditions. PSUs subject to Company performance-based conditions are initially recognized as equity at their fair value which is measured using the closing stock price on the grant date multiplied by the number of units expected to vest based on an assessment of the probability of achievement of the Company performance-based conditions as of the grant date. The grant date fair value is recognized as expense using the straight-line method until the earlier of the vesting date specified within each award or the date the employee becomes eligible for retirement. Adjustments are made, if necessary, based on any change in probability of achievement which is re-assessed as of each reporting date and on at least a quarterly basis. PSUs subject to market performance-based conditions are recognized as equity at their grant date fair value determined through a Monte-Carlo simulation of the Company’s common stock total shareholder return (“TSR”) relative to the common stock TSR of the group of peer companies specified in the award agreement. Awards subject to market performance-based conditions are not assessed for probability of achievement and are not remeasured subsequent to issuance. The grant date fair value is recognized as expense using the straight-line method until the earlier of the vesting date specified within each award or the date the employee becomes eligible for retirement, even if the market performance-based conditions are not achieved.

The Company does not estimate forfeitures for any of its share-based compensation awards but adjusts for actual forfeitures in the periods in which they occur. Because RSUs and PSUs have forfeitable dividend equivalent rights, which are paid in cash only upon settlement, any accrued dividend equivalent rights (“DERs”) on forfeited units are reversed with a corresponding credit to “Compensation and benefits” expense.

Please see Note 7 for additional information about the Company’s share-based compensation awards.
10

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.


Contingencies

The Company did not have any pending lawsuits, claims, or other contingencies as of June 30, 2024 or December 31, 2023.
Recently Issued Accounting Pronouncements

The Company evaluates Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board on at least a quarterly basis to evaluate applicability and significance of any impact on its financial condition and results of operations.

ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" amended existing guidance to improve disclosures about a public entity’s reportable segments and provide more detailed information about a reportable segment’s expenses. ASU 2023-07 clarifies that an entity which has a single reportable segment is to provide all the disclosures required by Topic 280 and ASU 2023-07. The amendment is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The adoption of ASU 2023-07 is not expected to have a significant impact on the Company's consolidated financial statements.

There were no other accounting pronouncements issued during the six months ended June 30, 2024, that are applicable to the Company and expected to have a material impact on the Company’s financial condition or results of operations.


NOTE 2 – NET INCOME (LOSS) PER COMMON SHARE

Please refer to Note 1 for information regarding the Company’s treatment of its preferred stock and stock awards in the calculation of its basic and diluted net income or loss per common share and to Note 7 for information regarding the Company’s stock award activity for the periods presented. The following table presents the computations of basic and diluted net income or loss per common share for the periods indicated:
Three Months EndedSix Months Ended
June 30,June 30,
($s in thousands)
2024202320242023
Weighted average number of common shares outstanding - basic66,954,87054,137,32763,003,54553,981,463
Incremental common shares-unvested RSUs—160,303460,118119,570
Incremental common shares-unvested PSUs—287,452449,493226,352
Weighted average number of common shares outstanding - diluted66,954,87054,585,08263,913,15654,327,385
Net (loss) income to common shareholders$(10,227)$52,414 $27,968 $8,769 
Net (loss) income per common share-basic$(0.15)$0.97 $0.44 $0.16 
Net (loss) income per common share-diluted$(0.15)$0.96 $0.44 $0.16 

The calculation of diluted net loss per common share for the three months ended June 30, 2024 excludes unvested RSUs and PSUs of 1,110,206, which would have been anti-dilutive for the period.

11

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.

NOTE 3 – MORTGAGE-BACKED SECURITIES
 
The following tables provide details on the Company’s MBS by investment type as of the dates indicated:
June 30, 2024December 31, 2023
($s in thousands)
Par ValueAmortized CostFair ValuePar ValueAmortized CostFair Value
Agency RMBS$6,353,838 $6,326,070 $5,962,418 $6,022,502 $5,993,922 $5,763,532 
Agency CMBS102,299 102,516 97,482 121,293 121,799 115,595 
CMBS IO (1)
n/a139,994 133,239 n/a167,314 159,718 
Non-Agency other— — — 150 150 103 
Total$6,456,137 $6,568,580 $6,193,139 $6,143,945 $6,283,185 $6,038,948 
(1) The notional balance for Agency CMBS IO and non-Agency CMBS IO was $7,321,369 and $3,167,395, respectively, as of June 30, 2024, and $7,723,379 and $3,860,007, respectively, as of December 31, 2023.
June 30, 2024
($s in thousands)
Amortized CostGross Unrealized GainGross Unrealized LossFair Value
MBS measured at fair value through OCI:
Agency RMBS$863,181 $— $(168,488)$694,693 
Agency CMBS102,516 — (5,034)97,482 
CMBS IO101,780 1,359 (5,392)97,747 
Total$1,067,477 $1,359 $(178,914)$889,922 
MBS measured at fair value through net income:
Agency RMBS$5,462,889 $13,333 $(208,497)$5,267,725 
CMBS IO38,214 — (2,722)35,492 
Total$5,501,103 $13,333 $(211,219)$5,303,217 
December 31, 2023
($s in thousands)
Amortized CostGross Unrealized GainGross Unrealized LossFair Value
MBS measured at fair value through OCI:
Agency RMBS$898,420 $— $(148,606)$749,814 
Agency CMBS106,527 28 (5,159)101,396 
CMBS IO126,672 1,296 (6,014)121,954 
Non-Agency other150 — (47)103 
Total$1,131,769 $1,324 $(159,826)$973,267 
MBS measured at fair value through net income:
Agency RMBS$5,095,502 $48,459 $(130,243)$5,013,718 
Agency CMBS15,272 — (1,073)14,199 
CMBS IO40,642 2 (2,880)37,764 
Total$5,151,416 $48,461 $(134,196)$5,065,681 

12

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.

The majority of the Company’s MBS are pledged as collateral for the Company’s repurchase agreements, which are disclosed in Note 4. Actual maturities of MBS are affected by the contractual lives of the underlying mortgage collateral, periodic payments of principal, prepayments of principal, and the payment priority structure of the security; therefore, actual maturities are generally shorter than the securities' stated contractual maturities.
The following table presents information regarding unrealized gains and losses on investments reported within net income (loss) on the Company’s consolidated statements of comprehensive income (loss) for the periods indicated:
Three Months EndedSix Months Ended
June 30,June 30,
($s in thousands)
2024202320242023
Agency RMBS$(43,705)$1,254 $(113,381)$57,033 
Agency CMBS1,263 (275)1,073 (37)
CMBS IO351 (466)157 626 
Other investments
114 (25)150 (13)
Total unrealized gain (loss) on investments, net
$(41,977)$488 $(112,001)$57,609 

The following table presents information regarding realized gains and losses on sales of MBS reported in the Company’s consolidated statements of comprehensive income (loss) for the periods indicated:
Three Months EndedSix Months Ended
June 30,June 30,
($s in thousands)
2024202320242023
Realized losses on sales of MBS - FVO$(1,506)$(51,601)$(1,506)$(74,916)
Total realized loss on sales of investments, net
$(1,506)$(51,601)$(1,506)$(74,916)

The following table presents certain information for MBS designated as AFS that were in an unrealized loss position as of the dates indicated:
 June 30, 2024December 31, 2023
($s in thousands)
Fair ValueGross Unrealized Losses# of SecuritiesFair ValueGross Unrealized Losses# of Securities
Continuous unrealized loss position for less than 12 months:    
Agency MBS$6,309 $(263)7$3,926 $(149)4
Non-Agency MBS164 (3)11,736 (37)8
Continuous unrealized loss position for 12 months or longer:
Agency MBS$862,038 $(178,136)70$932,682 $(158,651)78
Non-Agency MBS11,397 (512)2421,704 (989)41

The unrealized losses on the Company’s MBS designated as AFS were the result of rising interest rates and declines in market prices and were not credit related; therefore, the Company did not have any allowance for credit losses as of June 30, 2024 or December 31, 2023. Although the unrealized losses are not credit related, the Company assesses its ability and intent to hold any MBS with an unrealized loss until the recovery in its value. This assessment is based on the amount of the unrealized loss and significance of the related investment as well as the Company’s leverage and liquidity position. In addition, for its non-Agency MBS, the Company reviews the credit
13

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.

ratings, the credit characteristics of the mortgage loans collateralizing these securities, and the estimated future cash flows including projected collateral losses.

NOTE 4 – REPURCHASE AGREEMENTS

The Company’s repurchase agreements outstanding as of June 30, 2024 and December 31, 2023 are summarized in the following tables:
 June 30, 2024December 31, 2023
Collateral TypeBalanceWeighted
Average Rate		Fair Value of
Collateral Pledged		BalanceWeighted
Average Rate		Fair Value of
Collateral Pledged
($s in thousands)
Agency RMBS$5,284,233 5.46 %$5,562,905 $5,130,438 5.59 %$5,613,212 
Agency CMBS92,472 5.45 %96,046 104,495 5.60 %113,753 
Agency CMBS IO103,281 5.75 %113,334 120,979 5.83 %127,823 
Non-Agency CMBS IO14,442 6.17 %15,863 25,192 6.25 %25,959 
Total
$5,494,428 5.46 %$5,788,148 $5,381,104 5.59 %$5,880,747 
The Company had borrowings outstanding under 28 different repurchase agreements as of June 30, 2024, and its equity at risk did not exceed 10% with any counterparty as of that date. The Company received noncash collateral with a fair value of $2.4 million pledged by its counterparties to compensate the Company for the increase in fair value of collateral previously pledged in excess of required margin related to its repurchase agreement borrowings outstanding as of June 30, 2024. In accordance with Accounting Standards Codification (“ASC”) Topic 860, the fair value of this noncash collateral is not recorded on the Company’s consolidated balance sheet unless the Company re-pledges the collateral or sells the collateral in the event of default by the counterparty. The Company had not re-pledged any of the noncash collateral pledged by its counterparties as of June 30, 2024.

The following table provides information on the remaining term to maturity and original term to maturity for the Company’s repurchase agreements as of the dates indicated:
June 30, 2024December 31, 2023
Remaining Term to MaturityBalanceWeighted
Average Rate		WAVG Original Term to MaturityBalanceWeighted
Average Rate		WAVG Original Term to Maturity
($s in thousands)
Less than 30 days$2,350,410 5.46 %99$2,855,917 5.61 %92 
30 to 90 days3,015,537 5.47 %892,525,187 5.58 %86 
91 to 180 days128,481 5.43 %113— — %— 
Total$5,494,428 5.46 %94 $5,381,104 5.59 %89 

The Company’s accrued interest payable related to its repurchase agreement borrowings increased to $54.6 million as of June 30, 2024 from $53.2 million as of December 31, 2023.

The Company’s counterparties, as set forth in the master repurchase agreement with the counterparty, require the Company to comply with various customary operating and financial covenants, including, but not limited to, minimum net worth, maximum declines in net worth in a given period, and maximum leverage requirements as well as maintaining the Company’s REIT status. In addition, some of the agreements contain cross default features, whereby default under an agreement with one lender simultaneously causes default under agreements with other lenders. To the extent that the Company fails to comply with the covenants contained in these financing agreements or is otherwise found to be in default under the terms of such agreements, the counterparty has the right to accelerate
14

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.

amounts due under the master repurchase agreement. The Company believes it was in full compliance with all covenants in master repurchase agreements under which there were amounts outstanding as of June 30, 2024.

The Company's repurchase agreements are subject to underlying agreements with master netting or similar arrangements, which provide for the right of setoff in the event of default or in the event of bankruptcy of either party to the transactions. The Company reports its repurchase agreements to these arrangements on a gross basis. The following table presents information regarding the Company's repurchase agreements as if the Company had presented them on a net basis as of June 30, 2024 and December 31, 2023:
($s in thousands)
Gross Amount of Recognized LiabilitiesGross Amount Offset in the Balance SheetNet Amount of Liabilities Presented in the Balance Sheet
Gross Amount Not Offset in the Balance Sheet (1)
Net Amount
Financial Instruments Posted as CollateralCash Posted as Collateral
June 30, 2024:
Repurchase agreements$5,494,428 $— $5,494,428 $(5,494,428)$— $— 
December 31, 2023:
Repurchase agreements$5,381,104 $— $5,381,104 $(5,381,104)$— $— 
(1) Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the repurchase agreement liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the consolidated balance sheets for the total fair value of financial instruments pledged as collateral for derivatives and repurchase agreements, which is shown parenthetically, and the total cash pledged or received as collateral, which is disclosed as “cash collateral posted to/by counterparties.”

Please see Note 5 for information related to the Company’s derivatives, which are also subject to underlying agreements with master netting or similar arrangements.

NOTE 5 – DERIVATIVES

Types and Uses of Derivatives Instruments

Interest Rate Derivatives. During the periods presented herein, the Company used short positions in U.S. Treasury futures, interest rate swaps, and put options on U.S. Treasury futures to mitigate the impact of changing interest rates on its repurchase agreement financing costs and the fair value of its investments.

TBA Transactions. The Company purchases TBA securities as a means of investing in non-specified fixed-rate Agency RMBS and may also periodically sell TBA securities as a means of economically hedging its exposure to Agency RMBS. The Company holds long or short positions in TBA securities by executing a series of transactions, commonly referred to as “dollar roll” transactions, which effectively delay the settlement of a forward purchase (or sale) of a non-specified Agency RMBS by entering into an offsetting TBA position, net settling the paired-off positions in cash, and simultaneously entering into an identical TBA long (or short) position with a later settlement date. TBA securities purchased (or sold) for a forward settlement date are generally priced at a discount relative to TBA securities settling in the current month. This discount, often referred to as “drop income” represents the economic equivalent of net interest income (interest income less implied financing cost) on the underlying Agency security from trade date to settlement date. The Company accounts for all TBAs (whether net long or net short positions, or collectively “TBA dollar roll positions”) as derivative instruments because it cannot assert that it is probable at inception and throughout the term of an individual TBA transaction that its settlement will result in physical delivery of the underlying Agency RMBS, or that the individual TBA transaction will settle in the shortest period possible.
15

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.

The table below provides detail of the Company’s gain and losses by type of derivative instrument for the periods indicated:
Three Months EndedSix Months Ended
June 30,June 30,
Type of Derivative Instrument2024202320242023
($s in thousands)
U.S. Treasury futures$64,210 $171,219 $204,021 $64,846 
Interest rate swaps
(90)— (90)— 
Put options on U.S. Treasury futures
— (1,211)— (5,468)
TBA securities-long positions(22,985)(53,996)(38,160)(10,633)
Gain on derivative instruments, net$41,135 $116,012 $165,771 $48,745 

The table below provides the carrying amount by type of derivative instrument comprising the Company’s derivative assets and liabilities on its consolidated balance sheets as of the dates indicated:
Type of Derivative InstrumentBalance Sheet LocationPurposeJune 30, 2024December 31, 2023
($s in thousands)
TBA securitiesDerivative assetsInvesting$8,461 $54,361 
Total derivatives assets$8,461 $54,361 
TBA securitiesDerivative liabilitiesInvesting$2,032 $— 
Total derivatives liabilities$2,032 $— 

The Company entered into a 7-year interest rate swap during the three months ended June 30, 2024 with a notional amount of $10.0 million, a pay fixed rate of 4.15%, and a SOFR-based variable receive rate.

Because the daily margin exchanged for the Company’s U.S. Treasury futures and interest rate swaps are considered legal settlement of the derivative as opposed to a pledge of collateral, these instruments have a carrying value of $0 on the Company’s consolidated balance sheets. The Company’s U.S. Treasury futures were in a liability position of $(34.2) million as of June 30, 2024 and $(219.9) million as of December 31, 2023, and its interest rate swaps were in a liability position of $(0.1) million as of June 30, 2024 and $0 as of December 31, 2023. The amount of cash posted by the Company to cover required initial margin for these instruments was $122.2 million as of June 30, 2024 and $118.2 million as of December 31, 2023, which was recorded within “cash collateral posted to counterparties.” The Company had a margin excess of $20.4 million as of June 30, 2024 and $1.3 million as of December 31, 2023, which was recorded within “due from counterparties.”

The following table summarizes information about the Company's long positions in TBA securities as of the dates indicated:
($s in thousands)
June 30, 2024December 31, 2023
Implied market value (1)
$2,662,350 $1,381,702 
Implied cost basis (2)
2,655,920 1,327,341 
Net carrying value (3)
$6,430 $54,361 
(1) Implied market value represents the estimated fair value of the underlying Agency MBS as of the dates indicated.
(2) Implied cost basis represents the forward price to be paid for the underlying Agency MBS as of the dates indicated.
(3) Net carrying value is the amount included on the consolidated balance sheets within “derivative assets” and “derivative liabilities” and represents the difference between the implied market value and the implied cost basis of the TBA securities as of the dates indicated.
16

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.


Volume of Activity

The table below summarizes changes in the Company’s derivative instruments for the six months ended June 30, 2024:
Type of Derivative InstrumentBeginning
Notional Amount-Long (Short)		AdditionsSettlements,
Terminations,
or Pair-Offs		Ending
Notional Amount-Long (Short)
($s in thousands)
U.S. Treasury futures$(4,880,000)$(11,035,000)$10,520,000 $(5,395,000)
Interest rate swaps
— (10,000)— (10,000)
TBA securities1,403,000 12,447,000 (11,111,000)2,739,000 

Offsetting

The Company's derivatives are subject to underlying agreements with master netting or similar arrangements, which provide for the right of setoff in the event of default or in the event of bankruptcy of either party to the transactions. The Company reports its derivative assets and liabilities subject to these arrangements on a gross basis. Please see Note 4 for information related to the Company’s repurchase agreements, which are also subject to underlying agreements with master netting or similar arrangements. The following tables present information regarding those derivative assets and liabilities subject to such arrangements as if the Company had presented them on a net basis as of June 30, 2024 and December 31, 2023:
Offsetting of Assets
($s in thousands)
Gross Amount of Recognized AssetsGross Amount Offset in the Balance SheetNet Amount of Assets Presented in the Balance Sheet
Gross Amount Not Offset in the Balance Sheet (1)
Net Amount
Financial Instruments Received as CollateralCash Received as Collateral
June 30, 2024
TBA securities$8,461 $— $8,461 $(2,032)$(6,311)$118 
Derivative assets$8,461 $— $8,461 $(2,032)$(6,311)$118 
December 31, 2023
TBA securities$54,361 $— $54,361 $— $(44,153)$10,208 
Derivative assets$54,361 $— $54,361 $— $(44,153)$10,208 

17

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.

Offsetting of Liabilities
($s in thousands)
Gross Amount of Recognized LiabilitiesGross Amount Offset in the Balance SheetNet Amount of Liabilities Presented in the Balance Sheet
Gross Amount Not Offset in the Balance Sheet (1)
Net Amount
Financial Instruments Posted as CollateralCash Posted as Collateral
June 30, 2024
TBA securities$2,032 $— $2,032 $(2,032)$— $— 
Derivative liabilities$2,032 $— $2,032 $(2,032)$— $— 
December 31, 2023
TBA securities$— $— $— $— $— $— 
Derivative liabilities$— $— $— $— $— $— 
(1) Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the derivative asset or liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the consolidated balance sheets for the total fair value of financial instruments pledged as collateral for derivatives and repurchase agreements, which is shown parenthetically, and the total cash pledged or received as collateral which is disclosed as “cash collateral posted to/by counterparties.”

NOTE 6 – FAIR VALUE OF FINANCIAL INSTRUMENTS
 
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is based on the assumptions market participants would use when pricing an asset or liability and also considers all aspects of nonperformance risk, including the entity’s own credit standing, when measuring fair value of a liability. ASC Topic 820 established a valuation hierarchy of three levels as follows:

•Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date.
•Level 2 – Inputs include quoted prices in active markets for similar assets or liabilities; quoted prices in inactive markets for identical or similar assets or liabilities; or inputs either directly observable or indirectly observable through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
•Level 3 – Unobservable inputs are supported by little or no market activity. The unobservable inputs represent management’s best estimate of how market participants would price the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

The following table presents the Company’s financial instruments that are measured at fair value on the Company’s consolidated balance sheet by their valuation hierarchy levels as of the dates indicated:
18

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.

($s in thousands)
June 30, 2024December 31, 2023
Level 1Level 2Level 3Level 1Level 2Level 3
Assets:
   
MBS$— $6,193,139 $— $— $6,038,845 $103 
TBA securities (1)
— 8,461 — — 54,361 — 
Mortgage loans— — 1,412 — — 1,793 
Total assets
$— $6,201,600 $1,412 $— $6,093,206 $1,896 
Liabilities:
TBA securities (1)
$— $2,032 $— $— $— $— 
Total liabilities
$— $2,032 $— $— $— $— 
(1)TBA securities are reflected on consolidated balance sheets at their implied fair value, net of implied cost basis. Please refer to Note 5 for additional information.

The fair value measurements for the Company’s TBA securities and the majority of its MBS are considered Level 2 because there are substantially similar securities actively trading or for which there has been recent trading activity in their respective markets and are based on prices received from a pricing service. In valuing a security, the pricing service primarily uses a market approach, which uses observable prices and other relevant information that is generated by market transactions of identical or similar securities, but may use an income approach, which uses valuation techniques such as discounted cash flow modeling. The Company reviews the prices it receives from the pricing service as well as the assumptions and inputs, if any, utilized by the pricing service for reasonableness. Examples of the observable inputs and assumptions include market interest rates, credit spreads, and projected prepayment speeds, among other things. In addition, the prices received from the pricing service are assessed for reasonableness using broker quotes as well as other third-party pricing services.

The Company's mortgage loans held for investment are single-family mortgage loans, which were originated or purchased by the Company prior to 2000, and for which the Company has elected the fair value option. The fair value measurements for these mortgage loans and certain non-Agency MBS are considered Level 3 assets because there has been no recent trading activity of similar instruments upon which their fair value can be measured. The fair value for these Level 3 assets is measured by discounting the estimated future cash flows derived from cash flow models using certain inputs such as the security’s credit rating, coupon rate, estimated prepayment speeds, expected weighted average life, collateral composition, and expected credit losses as well as certain other relevant information. The Company used a constant prepayment rate assumption of 10%, default rate of 2%, loss severity of 20%, and a discount rate of 10.2% in measuring the fair value of its Level 3 assets as of June 30, 2024.

The Company’s short positions in U.S. Treasury futures contracts are valued based on exchange pricing and are classified accordingly as Level 1 measurements. Interest rate swaps are valued using the daily settlement price, or fair value, determined by the clearing exchange based on a pricing model that references observable market inputs, including current benchmark rates and the forward yield curve, and thus their fair values are considered Level 2 measurements. The carrying value of the U.S. Treasury futures contracts and interest rate swaps on the Company’s consolidated balance sheets is $0 because the instruments require daily margin exchanges, which are considered by the settlement agent to represent legal settlement of the contracts on a daily basis.

NOTE 7 – SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION

Preferred Stock. The Company’s Board of Directors has designated 6,600,000 shares of the Company’s preferred stock for issuance as Series C Preferred Stock, of which the Company has 4,460,000 of such shares outstanding as of June 30, 2024. The Series C Preferred Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption, and will remain outstanding indefinitely unless redeemed, repurchased, or converted into common stock pursuant to the terms of the Series C Preferred Stock. Except under certain limited circumstances
19

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.

described in Article IIIC of the Company’s Restated Articles of Incorporation, the Company may not redeem the Series C Preferred Stock prior to April 15, 2025. On or after that date, the Series C Preferred Stock may be redeemed at any time and from time to time at the Company's option at a cash redemption price of $25.00 per share plus any accumulated and unpaid dividends. Because the Series C Preferred Stock is redeemable only at the option of the issuer, it is classified as equity on the Company’s consolidated balance sheet.

The Series C Preferred Stock pays a cumulative cash dividend equivalent to 6.900% of the $25.00 liquidation preference per share each year until April 15, 2025. The terms of the Series C Preferred Stock state that upon April 15, 2025 and thereafter, the Company will pay cumulative cash dividends at a percentage of the $25.00 liquidation value per share equal to an annual floating rate of 3-month LIBOR plus a spread of 5.461%. When 3-month LIBOR ceases to be a published, the fallback provision provided in the terms of the Series C Preferred Stock will allow for the Company to appoint a third-party independent financial institution of national standing to select an industry accepted alternative base rate. The Company paid its regular quarterly dividend of $0.43125 per share of Series C Preferred Stock on July 15, 2024 to shareholders of record as of July 1, 2024.

Common Stock. During the six months ended June 30, 2024, the Company issued 10,500,000 shares of its common stock through a public offering, resulting in proceeds of $124.5 million, net of issuance costs, and issued 7,016,225 shares of its common stock through its at-the-market (“ATM”) program at an aggregate value of $86.9 million, net of broker commissions and fees. The Company declared common dividends of $0.39 on its common stock for the three months ended June 30, 2024. The Company’s timing, frequency, and amount of dividends declared on its common stock are determined by its Board of Directors. When declaring dividends, the Board of Directors considers the Company’s taxable income, the REIT distribution requirements of the Tax Code, and maintaining compliance with dividend requirements of the Series C Preferred Stock, along with other factors that the Board of Directors may deem relevant from time to time.

20

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.

Share-Based Compensation. The following table presents a rollforward of share-based awards for the periods indicated:
Six Months Ended
June 30,
 20242023
Type of AwardShares
Weighted Average
Grant Date
Fair Value
 Per Share
Shares
Weighted Average
Grant Date
Fair Value
 Per Share
Restricted stock:
Awards outstanding, beginning of period104,282 $12.61 133,951 $15.22 
Granted65,668 12.56 74,017 11.27 
Vested(76,355)12.37 (36,573)16.75 
Awards outstanding, end of period93,595 $12.78 171,395 $13.19 
Target RSUs: (1)
Awards outstanding, beginning of period394,497 $13.06 86,666 $16.57 
Granted214,755 12.50 106,850 11.97 
Vested(68,896)14.42 (33,213)16.96 
Awards outstanding, end of period540,356 $12.66 160,303 $13.42 
Target PSUs: (2)
Awards outstanding, beginning of period276,866 $13.17 201,284 $16.60 
Granted322,132 12.50 160,277 11.97 
Vested— — — — 
Awards outstanding, end of period598,998 $12.81 361,561 $16.60 
(1)The number of RSUs shown represent the target number of awards. Actual number of shares that will potentially settle may range from 0% if the recipient’s service-based vesting condition is not met to 100% if the service-based vesting condition is met.
(2)The number of PSUs shown represent the target number of awards. Actual number of shares that will potentially settle may range from 0% to 200% based on the achievement of the performance goals defined in each grant award.

As of June 30, 2024, the Company expects 95% of the remaining target PSUs will be settled on their vesting dates.

The Company has DERs accrued for RSUs and PSUs of $0.6 million and $0.8 million, respectively, as of June 30, 2024 compared to $0.4 million and $0.8 million, respectively, as of December 31, 2023, which is included on the Company’s consolidated balance sheet within “accrued dividends payable.”

Total share-based compensation expense recognized by the Company for the three and six months ended June 30, 2024 was $0.9 million and $5.2 million compared to $1.1 million and $2.1 million for the three and six months ended June 30, 2023. The increase in share-based compensation for the three and six months ended June 30, 2024 is due to accelerated recognition of expense for certain stock incentive awards granted in March 2024 to
21

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DYNEX CAPITAL, INC.

retirement eligible employees. The following table discloses the Company’s remaining compensation expense related to stock awards it has granted as of June 30, 2024, which will be amortized over the period disclosed:
June 30, 2024
($s in thousands)
Remaining Compensation CostWAVG Period of Recognition
Restricted stock$975 1.5 years
RSUs3,932 2.2 years
PSUs2,514 2.2 years
Total$7,421 2.1 years


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our unaudited consolidated financial statements and the accompanying notes included in Part I, Item 1, “Financial Statements” in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the accompanying notes included in Part II, Item 8, “Financial Statements and Supplementary Data” in our 2023 Form 10-K. References herein to “Dynex,” the “Company,” “we,” “us,” and “our” include Dynex Capital, Inc. and its consolidated subsidiaries, unless the context otherwise requires. In addition to current and historical information, the following discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our future business, financial condition, or results of operations. For a description of certain factors that may have a significant impact on our future business, financial condition, or results of operations, see “Forward-Looking Statements” at the end of this discussion and analysis.

    For more information about our business including our operating policies, investment philosophy and strategy, financing and hedging strategies, and other important information, please refer to Part I, Item 1, “Business” of our 2023 Form 10-K.

EXECUTIVE OVERVIEW

With continued strong economic and employment news, the U.S. Federal Funds rate cuts anticipated at the beginning of 2024 have shifted to later in 2024, with some forecasters not predicting any Federal Funds rate cuts until 2025. This change in sentiment resulted in the back end of the yield curve increasing during the first and second quarters of 2024, with the 10-year U.S. Treasury closing at 4.40% as of June 30, 2024. Given economic and election uncertainty, the mortgage spreads to U.S. Treasuries were wider as of June 30, 2024 compared to December 31, 2023 and March 31, 2024. The bright spot in MBS markets this quarter was a decline in volatility compared to the last two years.
22

Market Data
The charts below show the range of U.S. Treasury rates for the past six months and information regarding market spreads as of and for the periods indicated:
3076
Market Spreads as of:
Change in Spreads
YTD
Investment Type:June 30, 2024March 31, 2024December 31, 2023
Agency RMBS: (1)
2.0% coupon86847610
2.5% coupon8784789
4.0% coupon7874744
4.5% coupon737173—
5.0% coupon676869(2)
5.5% coupon6865662
6.0% coupon6562605
Agency DUS (Agency CMBS)(2)
666576(10)
Freddie K AAA IO (Agency CMBS IO)(2)
150165180(30)
AAA CMBS IO (Non-Agency CMBS IO)(2)
135168225(90)
(1)Option adjusted spreads (“OAS”) are based on Company estimates using third-party models and market data. OAS shown for prior periods may differ from previous disclosures because the Company regularly updates the third-party model used.
(2)Data represents the spread to swap rate on newly issued securities and is sourced from J.P. Morgan.


23

Summary of Results
This quarter we raised capital of $124.7 million through one public offering and ATM issuances, which we partially deployed into purchases of $551.1 million in specified pools of higher coupon Agency RMBS. We are reserving a portion of the proceeds from this quarter’s capital raise in order to navigate through potential volatility and to deploy into additional investments as spreads widen during the remainder of 2024. We continue to believe equilibrium spreads will decrease from current levels, which will benefit our book value.
Total economic loss was $(0.31) per common share for the second quarter of 2024, comprised of a $(0.70) decline in book value per common share offset by dividends declared of $0.39 per common share. The decline in book value was primarily due to widening of spreads between Agency RMBS and U.S. Treasuries. The 10-year U.S. Treasury rate also increased during the second quarter, but the decline in fair value of our investments was offset by the gains from our hedging portfolio. In addition to spread widening, our capital raised during the second quarter also contributed to the decline in book value.

The following table summarizes the changes in the Company's financial position during the second quarter of 2024:
($s in thousands except per share data)
Net Change in Fair Value
Components of Comprehensive Income
Common Book Value Rollforward
Per Common Share
Balance as of March 31, 2024 (1)
$847,032 $13.20 
Net interest income
$1,287 
G & A and other operating expenses(7,243)
Preferred stock dividends(1,923)
Changes in fair value:
MBS and loans$(45,269)
TBAs(22,985)
U.S. Treasury futures64,210 
Interest rate swaps
(90)
Total net change in fair value(4,134)
Comprehensive loss to common shareholders
(12,013)
Capital transactions:
Net proceeds from stock issuance (2)
125,568 
Common dividends declared(26,824)
Balance as of June 30, 2024 (1)
$933,763 $12.50 
(1)Amounts represent total shareholders' equity less the aggregate liquidation preference of the Company's preferred stock of $111.5 million, in thousands and on a per common share basis.
(2)Net proceeds from stock issuance include $124.7 million from the common stock ATM program and one public offering, and $0.9 million from amortization of share-based compensation, net of grants.

Current Outlook
Geopolitical risk and the U.S. election remain high on our list for evaluating investment opportunities. Over the medium and long-term, we continue to expect tighter equilibrium spreads for Agency MBS and, in the absence of severe disruptions, would regard any short-term widening as opportunities for new investment, which is why we added capital this quarter. The opportunistic capital raise in the second quarter positions Dynex to invest during any period of higher volatility and potential spread widening. We expect to continue adding higher yielding assets, which will improve the carry of the portfolio. Any reduction in Federal Funds rate will reduce our financing costs. Moreover, we expect that as the Federal Reserve normalizes policy rates to a modestly lower level, Agency MBS spread to U.S. Treasuries will tighten to a long-term equilibrium level that is tighter than those of the last year, benefiting our book value.
24

FINANCIAL CONDITION

Investment Portfolio
Our investment portfolio (including TBAs) as of June 30, 2024 has increased approximately 19% compared to December 31, 2023. The following charts compare the composition of our MBS portfolio including TBA securities as of the dates indicated:
261262
We have purchased approximately $551.1 million in specified pools of higher coupon Agency RMBS during the six months ended June 30, 2024. The following tables compare our fixed-rate Agency RMBS investments, including TBA dollar roll positions, as of the dates indicated:
June 30, 2024
Par/Notional
Amortized Cost/
Implied Cost
Basis (1)(3)
Fair
Value (2)(3)
Weighted Average
Coupon
Loan Age
(in months)(4)
3 Month
CPR (4)(5)
Estimated Duration (6)
Market Yield (7)
30-year fixed-rate:($s in thousands)
2.0%$682,622 $694,032 $543,906 455.1 %6.615.22 %
2.5%583,629 606,011 485,088 467.4 %6.465.19 %
4.0%340,558 341,108 315,611 396.3 %5.815.19 %
4.5%1,387,896 1,354,024 1,317,480 215.8 %5.495.28 %
5.0%1,996,271 1,962,675 1,941,874 156.5 %4.785.43 %
5.5%1,073,941 1,075,494 1,066,340 116.2 %4.165.62 %
6.0%288,922 292,725 292,118 75.2 %3.365.78 %
TBA 4.0%262,000 242,335 240,303 n/an/a6.285.13 %
TBA 4.5%183,000 172,407 172,821 n/an/a5.445.30 %
TBA 5.0%275,000 266,268 266,310 n/an/a4.605.47 %
TBA 5.5%1,982,000 1,937,852 1,945,775 n/an/a3.755.71 %
TBA 6.0%
37,000 37,058 37,142 n/an/a2.785.88 %
Total$9,092,839 $8,981,989 $8,624,768 226.2 %4.88 5.45 %
25

December 31, 2023
Par/Notional
Amortized Cost/
Implied Cost
Basis (1)(3)
Fair
Value (2)(3)
Weighted Average
Coupon
Loan Age
(in months)(4)
3 Month
CPR (4)(5)
Estimated Duration (6)
Market Yield (7)
30-year fixed-rate:($s in thousands)
2.0%$708,528 $720,611 $586,361 394.4 %6.814.60 %
2.5%608,580 632,343 525,018 404.5 %6.624.59 %
4.0%354,382 354,965 339,212 345.5 %5.654.67 %
4.5%1,383,019 1,350,697 1,348,108 155.0 %5.084.88 %
5.0%2,070,473 2,035,088 2,057,309 94.7 %4.245.10 %
5.5%897,520 900,218 907,524 85.0 %3.585.29 %
TBA 4.0%262,000 240,641 248,040 n/an/a5.894.72 %
TBA 4.5%223,000 210,940 216,415 n/an/a4.754.92 %
TBA 5.0%518,000 490,466 512,982 n/an/a3.985.15 %
TBA 5.5%200,000 191,926 201,047 n/an/a2.815.36 %
TBA 6.0%
200,000 193,369 203,219 n/an/a2.155.37 %
Total$7,425,502 $7,321,264 $7,145,235 174.8 %4.72 4.98 %
(1)Implied cost basis of TBAs represents the forward price to be paid for the underlying Agency MBS.
(2)Fair value of TBAs is the implied market value of the underlying Agency security as of the end of the period.
(3)TBAs are included on the consolidated balance sheet within “derivative assets/liabilities” at their net carrying value which is the difference between their implied market value and implied cost basis. Please refer to Note 5 of the Notes to the Consolidated Financial Statements for additional information.
(4)TBAs are excluded from this calculation as they do not have a defined weighted-average loan balance or age until mortgages have been assigned to the pool.
(5)Constant prepayment rate (“CPR”) represents the 3-month CPR of Agency RMBS held as of date indicated.
(6)Duration measures the sensitivity of a security's price to the change in interest rates and represents the percent change in price of a security for a 100-basis point increase in interest rates. We calculate duration using third-party financial models and empirical data. Different models and methodologies can produce different estimates of duration for the same securities.
(7)Represents the weighted average market yield projected using cash flows generated off the forward curve based on market prices as of the date indicated and assuming zero volatility.

Less than 3% of our MBS portfolio as of June 30, 2024 is comprised of Agency CMBS, Agency CMBS IO, and non-Agency CMBS IO. Our Agency CMBS and Agency CMBS IO are backed by loans collateralized by multifamily properties, which have performed well for the last decade versus other sectors of the commercial real estate market. Our Agency CMBS IO are Class X1 from Freddie Mac Series K deals from which interest continues to be advanced even in the event of an underlying default up until liquidation. According to Freddie Mac, 99.8% of the loans in K-deals are current as of May 2024. Our non-Agency CMBS IO were all originated prior to 2018 with a weighted average remaining life of less than 2 years. The underlying loans for the non-Agency CMBS IO securities are collateralized by a number of different property types including: 27% retail, 26% office, 16% multifamily, 12% hotel and 19% all other real estate categories. In the current macroeconomic environment, we are not actively purchasing CMBS or CMBS IO as current risk versus reward remains unattractive relative to Agency RMBS.
26

The following table provides certain information regarding our CMBS and CMBS IO as of the dates indicated:
June 30, 2024
($s in thousands)
Amortized CostFair Value
WAVG Life Remaining (1)
WAVG Market Yield (2)
Agency CMBS$102,516 $97,482 3.05.02 %
Agency CMBS IO124,184 116,853 5.97.05 %
Non-Agency CMBS IO15,810 16,386 1.427.22 %
Total$242,510 $230,721 
December 31, 2023
($s in thousands)
Amortized CostFair Value
WAVG Life Remaining (1)
WAVG Market Yield (2)
Agency CMBS$121,799 $115,595 4.14.74 %
Agency CMBS IO140,824 133,302 5.95.19 %
Non-Agency CMBS IO26,490 26,416 1.113.32 %
Total$289,113 $275,313 
(1) Represents the weighted average life remaining in years based on contractual cash flows as of the dates indicated.
(2) Represents the weighted average market yield projected using cash flows generated off the forward curve based on market prices as of the dates indicated and assuming zero volatility.
Repurchase Agreements
We have not experienced any difficulty in securing financing with any of our counterparties, and our repurchase agreement counterparties have not indicated any concerns regarding leverage or credit. Please refer to Note 4 of the Notes to the Consolidated Financial Statements contained within this Quarterly Report on Form 10-Q as well as “Results of Operations” and “Liquidity and Capital Resources” contained within this Item 2 for additional information relating to our repurchase agreement borrowings.
Derivative Assets and Liabilities
The table below discloses details on the Company's interest rate hedges held as of June 30, 2024 compared to hedging portfolio held as of December 31, 2023:
Notional Amount Long (Short)
June 30, 2024December 31, 2023
($s in thousands)
30-year U.S. Treasury futures$(825,000)$(700,000)
10-year U.S. Treasury futures(4,570,000)(4,180,000)
Interest rate swaps
(10,000)— 
Please refer to Note 5 of the Notes to the Consolidated Financial Statements for details on our interest rate hedging instruments as well as “Quantitative and Qualitative Disclosures about Market Risk” in Item 3 of this Quarterly Report on Form 10-Q.

27

RESULTS OF OPERATIONS

Three Months Ended June 30, 2024 Compared to the Three Months Ended March 31, 2024
The following table summarizes the results of operations for the periods discussed in this section:
Three Months Ended
$s in thousandsJune 30, 2024March 31, 2024
Net interest income (expense)
$1,287 $(3,192)
Realized loss on sales of investments, net
(1,506)— 
Unrealized loss on investments, net
(41,977)(70,024)
Gain on derivative instruments, net
41,135 124,635 
Operating expenses, net
(7,243)(11,301)
Preferred stock dividends(1,923)(1,923)
Net (loss) income to common shareholders
(10,227)38,195 
Other comprehensive loss
(1,786)(17,268)
Comprehensive (loss) income to common shareholders
$(12,013)$20,927 
Net Interest Income (Expense)
Interest income and effective yield for the three months ended June 30, 2024 increased compared to the three months ended March 31, 2024 primarily due to the addition of higher coupon Agency RMBS. We expect this trend to continue as our higher yielding Agency RMBS comprise a larger portion of our interest income and as our lower yielding Agency RMBS continue to pay down. Our interest expense on our repurchase agreement financing was relatively flat compared to the prior quarter as the Federal Funds rate remained steady at 5.50%. Our cost of financing as a percentage of our repurchase agreement borrowings continues to exceed our effective yield on our assets, However, we do not currently expect the Federal Reserve to increase the Federal Funds rate during the remainder of 2024, and if the Federal Reserve lowers the Federal Funds rate before the end of the year, we will see a favorable impact in our cost of financing, which will further benefit our net interest income and net interest spread.
28

The following table presents information about our interest-earning assets and interest-bearing liabilities and their performance for the periods indicated:
Three Months Ended
June 30, 2024March 31, 2024
($s in thousands)Interest Income/Expense
Average Balance (1)(2)
Effective Yield/
Cost of
Funds (3)(4)
Interest Income/Expense
Average Balance (1)(2)
Effective Yield/
Cost of
Funds (3)(4)
Agency RMBS$67,927 $6,153,663 4.42 %$64,281 $5,938,131 4.33 %
Agency CMBS792 105,321 2.97 %925 119,286 3.04 %
CMBS IO (5)
2,868 146,161 7.25 %2,654 160,261 6.28 %
Non-Agency MBS and other investments19 1,437 5.00 %22 1,773 4.86 %
MBS and loans$71,606 $6,406,582 4.46 %$67,882 $6,219,451 4.36 %
Cash equivalents4,448 3,643 
Total interest income$76,054 $71,525 
Repurchase agreement financing(74,767)5,410,282 (5.47)%(74,717)5,365,575 (5.51)%
Net interest income (expense)/net interest spread
$1,287 (1.01)%$(3,192)(1.15)%
(1)Average balance for assets is calculated as a simple average of the daily amortized cost and excludes securities pending settlement if applicable.
(2)Average balance for liabilities is calculated as a simple average of the daily borrowings outstanding during the period.
(3)Effective yield is calculated by dividing interest income by the average balance of asset type outstanding during the reporting period. Unscheduled adjustments to premium/discount amortization/accretion, such as for prepayment compensation, are not annualized in this calculation.
(4)Cost of funds is calculated by dividing annualized interest expense by the total average balance of borrowings outstanding during the period with an assumption of 360 days in a year.
(5)Includes Agency and non-Agency issued securities.

Gains (Losses) on Investments and Derivative Instruments
During the three months ended June 30, 2024, the 10-year U.S. Treasury rate increased 20 basis points. The impact of this rate increase on our investments was mitigated by the resulting gains on our interest rate hedges of $64.1 million. The net loss of $(2.6) million on our investments, net of our interest rate hedges, was primarily driven by spread widening on Agency RMBS versus U.S. Treasuries.
During the three months ended March 31, 2024, the 10-year U.S. Treasury rate increased approximately 32 basis points, which resulted in net unrealized gains of $139.8 million for our hedging portfolio. Though the 32 basis point increase negatively impacted the fair value of our investment portfolio, these losses were partially buffered by modest spread tightening on some of our assets during the first quarter of 2024.
29

The following provide details on realized and unrealized gains and losses within our investment and interest rate hedging portfolios for the periods indicated:
Three Months Ended
June 30, 2024
($s in thousands)Realized Gain (Loss) Recognized in Net IncomeUnrealized Gain (Loss) Recognized in Net IncomeUnrealized Gain (Loss) Recognized in OCITotal Change in Fair Value
Investment portfolio:
Agency RMBS$— $(43,705)$(2,505)$(46,210)
Agency CMBS— 1,263 414 1,677 
CMBS IO— 351 305 656 
Other non-Agency and loans— 114 — 114 
Subtotal— (41,977)(1,786)(43,763)
TBA securities (1)
(22,343)(642)— (22,985)
Net gain (loss) on investments
$(22,343)$(42,619)$(1,786)$(66,748)
Interest rate hedging portfolio:
U.S. Treasury futures$43,961 $20,249 $— $64,210 
Interest rate swaps
17 (107)— (90)
Net gain (loss) on interest rate hedges
$43,978 $20,142 $— $64,120 
Total net gain (loss)
$21,635 $(22,477)$(1,786)$(2,628)
Three Months Ended
March 31, 2024
($s in thousands)Realized Gain (Loss) Recognized in Net IncomeUnrealized Gain (Loss) Recognized in Net Income
Unrealized Gain Recognized in OCI
Total Change in Fair Value
Investment portfolio:
Agency RMBS$— $(69,676)$(17,377)$(87,053)
Agency CMBS— (190)(316)(506)
CMBS IO— (194)378 184 
Other non-Agency and loans— 36 47 83 
Subtotal— (70,024)(17,268)(87,292)
TBA securities (1)
32,114 (47,289)— (15,175)
Net gain (loss) on investments
$32,114 $(117,313)$(17,268)$(102,467)
Interest rate hedging portfolio:
U.S. Treasury futures$(25,658)$165,468 $— $139,810 
Net gain (loss) on interest rate hedges$(25,658)$165,468 $— $139,810 
Total net gain (loss)
$6,456 $48,155 $(17,268)$37,343 
1)Realized and unrealized gains (losses) on TBA securities are recorded within “gain on derivative instruments, net” on the Company’s consolidated statements of comprehensive income.
30

Operating Expenses
Operating expenses for the three months ended June 30, 2024 declined $(4.1) million compared to the three months ended March 31, 2024 primarily due to lower share-based compensation expenses. Compensation expenses during the first quarter of 2024 included $3.2 million related to accelerated recognition of share-based compensation expense for certain stock incentive awards granted in March 2024 to a retirement eligible employee.

Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023

Net Interest Expense
Net interest expense and net interest spread improved for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. Though our interest expense increased due to a higher average balance of repurchase agreement borrowings at a higher financing rate, additions of higher yielding Agency RMBS to our investment portfolio over the past year increased our interest income for the six months ended June 30, 2024 by approximately 102% compared to the six months ended June 30, 2023.
The following table presents information about our interest-earning assets and interest-bearing liabilities and their performance for the periods indicated:

Six Months Ended
June 30,
2024
2023
($s in thousands)Interest Income/Expense
Average Balance (1)(2)
Effective Yield/
Cost of
Funds (3)(4)
Interest Income/Expense
Average Balance (1)(2)
Effective Yield/
Cost of
Funds (3)(4)
Agency RMBS$132,207 $6,045,897 4.37 %$58,225 $3,570,122 3.26 %
Agency CMBS1,717 112,304 3.02 %1,844 126,221 2.92 %
CMBS IO (5)
5,523 153,211 6.90 %4,783 220,664 4.25 %
Non-Agency MBS and other investments42 1,605 4.86 %72 2,589 5.45 %
MBS and loans$139,489 $6,313,017 4.41 %$64,924 $3,919,596 3.31 %
Cash equivalents8,091 8,134 
Total interest income$147,580 $73,058 
Repurchase agreement financing(149,484)5,387,929 (5.49)%(76,450)3,082,471 (4.93)%
Net interest expense/net interest spread
$(1,904)(1.08)%$(3,392)(1.62)%
(1)Average balance for assets is calculated as a simple average of the daily amortized cost and excludes securities pending settlement if applicable.
(2)Average balance for liabilities is calculated as a simple average of the daily borrowings outstanding during the period.
(3)Effective yield is calculated by dividing interest income by the average balance of asset type outstanding during the reporting period. Unscheduled adjustments to premium/discount amortization/accretion, such as for prepayment compensation, are not annualized in this calculation.
(4)Cost of funds is calculated by dividing annualized interest expense by the total average balance of borrowings outstanding during the period with an assumption of 360 days in a year.
(5)Includes Agency and non-Agency issued securities.


31

Gains (Losses) on Investments and Derivative Instruments
During the six months ended June 30 2024, gains on our hedging portfolio exceeded losses on our investments by $34.7 million. The impact of the 52 basis point increase in the 10-year U.S. Treasury rate on our investments was offset by the resulting gains on our hedging portfolio of $203.9 million.
During the six months ended June 30, 2023, the fair value of our investment portfolio declined $(22.6) million primarily as a result of spread widening, particularly in higher coupon Agency RMBS. Though interest rates were volatile, the 10-year U.S. Treasury rate ended the six months ended June 30, 2023 relatively unchanged versus December 31, 2022, As a result, and partially due to the timing of when we rolled our interest rate hedges during that period, we recorded a gain of $36.8 million, net of losses on our investments.
The following provide details on realized and unrealized gains and losses within our investment and interest rate hedging portfolios for the periods indicated:
Six Months Ended
June 30, 2024
($s in thousands)Realized Gain (Loss) Recognized in Net IncomeUnrealized Gain (Loss) Recognized in Net IncomeUnrealized Gain (Loss) Recognized in OCITotal Change in Fair Value
Investment portfolio:
Agency RMBS$— $(113,381)$(19,881)$(133,262)
Agency CMBS— 1,073 97 1,170 
CMBS IO— 157 683 840 
Other non-Agency and loans— 150 47 197 
Subtotal— (112,001)(19,054)(131,055)
TBA securities (1)
9,771 (47,931)— (38,160)
Net gain (loss) on investments
$9,771 $(159,932)$(19,054)$(169,215)
Interest rate hedging portfolio:
U.S. Treasury futures$18,303 $185,718 $— $204,021 
Interest rate swaps
17 (107)— (90)
Net (loss) gain on interest rate hedges
$18,320 $185,611 $— $203,931 
Total net gain (loss)
$28,091 $25,679 $(19,054)$34,716 

32

Six Months Ended
June 30, 2023
($s in thousands)Realized Gain (Loss) Recognized in Net IncomeUnrealized Gain (Loss) Recognized in Net IncomeUnrealized Gain (Loss) Recognized in OCITotal Change in Fair Value
Investment portfolio:
Agency RMBS$(74,916)$57,033 $3,289 $(14,594)
Agency CMBS— (37)302 265 
CMBS IO— 626 1,757 2,383 
Other non-Agency and loans— (13)2 (11)
Subtotal(74,916)57,609 5,350 (11,957)
TBA securities (1)
(8,538)(2,095)— (10,633)
Net gain (loss) on investments
$(83,454)$55,514 $5,350 $(22,590)
Interest rate hedging portfolio:
U.S. Treasury futures$(3,224)$68,070 $— $64,846 
Put options on U.S. Treasury futures
(3,413)(2,056)— (5,469)
Net (loss) gain on interest rate hedges
$(6,637)$66,014 $— $59,377 
Total net gain (loss)
$(90,091)$121,528 $5,350 $36,787 
1)Realized and unrealized gains (losses) on TBA securities are recorded within “gain on derivative instruments, net” on the Company’s consolidated statements of comprehensive income.

Operating Expenses
Operating expenses for the six months ended June 30, 2024 increased $2.9 million compared to the six months ended June 30, 2023 primarily due to accelerated recognition of share-based compensation expense for certain stock incentive awards granted in March 2024 to a retirement eligible employee. This expense was partially offset by a decline in consulting expenses of $0.5 million.

Non-GAAP Financial Measures
In evaluating the Company’s financial and operating performance, management considers book value per common share, total economic return (loss) to common shareholders, and other operating results presented in accordance with GAAP as well as certain non-GAAP financial measures, which include EAD to common shareholders (including per common share) and adjusted net interest income/expense. Management believes these non-GAAP financial measures may be useful to investors because they are viewed by management as a measure of the investment portfolio’s return based on the effective yield of its investments, net of financing costs and, with respect to EAD, net of other normal recurring operating income/expenses. Drop income generated by TBA dollar roll positions, which is included in "gain (loss) on derivatives instruments, net" on the Company's consolidated statements of comprehensive income, is included in these non-GAAP financial measures because management views drop income as the economic equivalent of net interest income (interest income less implied financing cost) on the underlying Agency security from trade date to settlement date. Management also includes periodic interest benefit/cost from its interest rate swaps, which are included in "gain (loss) on derivatives instruments, net", in adjusted net interest income/expense because interest rate swaps are used by the Company to economically hedge the impact of changing interest rates on its borrowing costs from repurchase agreements, and including periodic interest benefit/cost from interest rate swaps is a helpful indicator of the Company’s total cost of financing in
addition to GAAP interest expense. However, these non-GAAP financial measures are not a substitute for GAAP earnings and may not be comparable to similarly titled measures of other REITs because they may not be calculated in the same manner. Furthermore, though EAD is one of several factors our management considers in determining the appropriate level of distributions to common shareholders, it should not be utilized in isolation, and it is not an accurate indication of the Company’s REIT taxable income or its distribution requirements in accordance with the Tax Code.
Reconciliations of EAD to common shareholders and adjusted net interest income to the related GAAP financial measures are provided below.
Three Months Ended
Reconciliations of GAAP to Non-GAAP Financial Measures:June 30, 2024March 31, 2024
($s in thousands except per share data)
Comprehensive (loss) income to common shareholders
$(12,013)$20,927 
Less:
Change in fair value of investments (1)
45,269 87,292 
Change in fair value of derivative instruments, net (2)
(41,351)(125,903)
EAD to common shareholders$(8,095)$(17,684)
Average common shares outstanding66,954,870 59,008,316 
EAD per common share$(0.12)$(0.30)
Net interest income (expense)
$1,287 $(3,192)
Net periodic interest benefit of interest rate swaps
17 — 
TBA drop loss (3)
(233)(1,268)
Adjusted net interest income (expense)
$1,071 $(4,460)
Total operating expenses
(7,243)(11,301)
Preferred stock dividends(1,923)(1,923)
EAD to common shareholders$(8,095)$(17,684)
(1)Amount includes realized and unrealized gains and losses due to changes in the fair value of the Company’s MBS.
(2)Amount includes unrealized gains and losses from changes in fair value of derivatives (including TBAs accounted for as derivative instruments) and realized gains and losses on terminated derivatives and excludes TBA drop loss and net periodic interest benefit/cost from interest rate swaps.
(3)TBA drop income (loss) is calculated by multiplying the notional amount of the TBA dollar roll positions by the difference in price between two TBA securities with the same terms but different settlement dates.

We primarily use U.S. Treasury futures to hedge the impact of increasing interest rates on our borrowing costs and the fair value of our investments. The Company’s realized gains on its U.S. Treasury futures as well as other interest rate hedges are included in GAAP earnings in the same reporting period in which the derivative instrument matures or is terminated but are not included in EAD or adjusted net interest income during any reporting period. Furthermore, because the majority of the U.S. Treasury futures and other derivative instruments are designated as hedges for tax purposes, the realized gains are not distributable to our shareholders until amortized into REIT taxable income over the period originally hedged. Additional information regarding the expected impact of deferred tax hedge amortization on our estimated REIT taxable income is discussed in “Executive Overview” and “Liquidity and Capital Resources.”

LIQUIDITY AND CAPITAL RESOURCES
 Our primary sources of liquidity include borrowings under repurchase arrangements and monthly principal and interest payments we receive on our investments. Additional sources may also include proceeds from the sale of investments, equity offerings, and net payments received from counterparties for derivative instruments. We use our
liquidity to purchase investments, to pay amounts due on our repurchase agreement borrowings, and to pay our operating expenses and dividends on our common and preferred stock. We also use our liquidity to meet margin requirements for our repurchase agreements and derivative transactions, including TBA contracts, under the terms of the related agreements. We may also periodically use liquidity to repurchase shares of the Company’s stock.
During the second quarter of 2024, we issued 10,500,000 shares of common stock through a public offering, resulting in proceeds of $124.5 million, net of issuance costs. We partially deployed these proceeds into purchases of $551.1 million in specified pools of higher coupon Agency RMBS. We are reserving a portion of the proceeds in order to navigate through potential volatility and to deploy into additional investments as spreads widen during the remainder of 2024.
Our liquidity fluctuates based on our investment activities, our leverage, capital raising activities, and changes in the fair value of our investments and derivative instruments. Our measurement of liquidity includes unrestricted cash and cash equivalents and unencumbered Agency MBS, which are recognized as assets on our consolidated balance sheet. We also include in our measure of liquidity the fair value of noncash collateral pledged to us by our counterparties, which we typically receive when the fair value of our pledged collateral exceeds our current margin requirement. Though the fair value of this noncash collateral is not recorded on our consolidated balance sheet, we include this amount in our liquidity measure because we have the right repledge the noncash collateral pledged to us by our counterparties. Our liquidity as of June 30, 2024 was $644.0 million, which consisted of unrestricted cash of $286.1 million, unencumbered Agency MBS with a fair value of $355.5 million, and noncash collateral received from our counterparties, which consisted of U.S. Treasuries and Agency RMBS, with a fair value of $2.4 million. Our liquidity as of December 31, 2023 was $453.6 million.
We continuously monitor our liquidity, especially with potential risk events on the horizon, such as uncertainty regarding Federal Reserve policy decisions, frequent potential for a government shutdown, the impact on global markets stemming from global central bank policies, and the wars between Russia and Ukraine and between Israel and Hamas. We continuously assess the adequacy of our liquidity under various scenarios based on changes in the fair value of our investments and derivative instruments due to market factors such as changes in the absolute level of interest rates and the shape of the yield curve, credit spreads, lender haircuts, and prepayment speeds, which in turn have an impact on derivative margin requirements. In performing these analyses, we will also consider the current state of the fixed income markets and the repurchase agreement markets in order to determine if market forces such as supply-demand imbalances or structural changes to these markets could change the liquidity of MBS or the availability of financing. We also communicate frequently with our counterparties. We have not experienced any material changes in the terms of our repurchase agreements with our counterparties, and they have not indicated to us any concerns regarding access to liquidity.
Our perception of the liquidity of our investments and market conditions significantly influences our targeted leverage. In general, our leverage will increase if we view the risk-reward opportunity of higher leverage on our capital outweighs the risk to our liquidity and book value. Our leverage, which we calculate using total liabilities plus the cost basis of TBA long positions, was 7.9 times shareholders’ equity as of June 30, 2024. We include the cost basis of our TBA securities in evaluating our leverage because it is possible under certain market conditions that it may be uneconomical for us to roll a TBA long position into future months, which may result in us having to take physical delivery of the underlying securities and use cash or other financing sources to fund our total purchase commitment. Leverage based on repurchase agreement amounts outstanding was 5.3 times shareholders’ equity as of June 30, 2024.
Our repurchase agreement borrowings are principally uncommitted with terms renewable at the discretion of our lenders and generally have original terms to maturity of overnight to six months, though in some instances we may enter into longer-dated maturities depending on market conditions. We seek to maintain unused capacity under our existing repurchase agreement credit lines with multiple counterparties, which helps protect us in the event of a counterparty's failure to renew existing repurchase agreements. As part of our continuous evaluation of counterparty risk, we maintain our highest counterparty exposures with broker dealer subsidiaries of regulated financial institutions or primary dealers.
The amount outstanding for our repurchase agreement borrowings will typically fluctuate in any given period as it is dependent upon a number of factors, but particularly the extent to which we are active in buying and
selling securities, including the volume of activity in TBA dollar roll transactions versus buying specified pools. The following table presents information regarding the balances of our repurchase agreement borrowings as of and for the periods indicated:
Repurchase Agreements
($s in thousands)Balance Outstanding As of
Quarter End		Average Balance Outstanding For the Quarter EndedMaximum Balance Outstanding During the Quarter Ended
June 30, 2024$5,494,428 $5,410,282 $5,529,856 
March 31, 20245,284,708 5,365,575 5,469,434 
December 31, 20235,381,104 5,168,821 5,381,354 
September 30, 20235,002,230 4,773,435 5,037,440 
June 30, 20234,201,901 3,447,406 4,203,788 
March 31, 20232,937,124 2,713,481 2,959,263 
December 31, 20222,644,405 2,727,274 3,072,483 
September 30, 20222,991,876 2,398,268 3,082,138 
June 30, 20222,202,648 2,486,217 2,949,918 
March 31, 20222,952,802 2,806,212 2,973,475 
December 31, 20212,849,916 2,701,191 2,873,523 
September 30, 20212,527,065 2,529,023 2,590,185 
June 30, 20212,321,043 2,155,200 2,415,037 
March 31, 20212,032,089 2,158,121 2,437,163 

For our repurchase agreement borrowings, we are required to post and maintain margin to the lender (i.e., collateral in excess of the repurchase agreement borrowing) in order to support the amount of the financing. This excess collateral is often referred to as a “haircut” and is intended to provide the lender protection against fluctuations in fair value of the collateral and/or the failure by us to repay the borrowing at maturity. Lenders have the right to change haircut requirements at maturity of the repurchase agreement and may change their haircuts based on market conditions and the perceived riskiness of the collateral pledged. If the fair value of the collateral falls below the amount required by the lender, the lender has the right to demand additional margin, or collateral. These demands are referred to as “margin calls,” and if we fail to meet any margin call, our lenders have the right to terminate the repurchase agreement and sell any collateral pledged. The weighted average haircut for our borrowings as of June 30, 2024 was consistent with prior periods, which has typically averaged less than 5% for borrowings collateralized with Agency RMBS and CMBS and between 10-14% for borrowings collateralized with CMBS IO.
The collateral we post in excess of our repurchase agreement borrowing with any counterparty is also typically referred to by us as “equity at risk,” which represents the potential loss to the Company if the counterparty is unable or unwilling to return collateral securing the repurchase agreement borrowing at its maturity. The counterparties with whom we have the greatest amounts of equity at risk may vary significantly during any given period due to the short-term and generally uncommitted nature of the repurchase agreement borrowings. As of June 30, 2024, we had amounts outstanding under 28 different repurchase agreements and did not have more than 10% of equity at risk with any counterparty or group of related counterparties.
We have various financial and operating covenants in certain of our repurchase agreements, which we monitor and evaluate on an ongoing basis for compliance as well as for impacts these customary covenants may have on our operating and financing flexibility. Currently, we do not believe we are subject to any covenants that materially restrict our financing flexibility. We were in full compliance with our debt covenants as of June 30, 2024, and we are not aware of circumstances which could potentially result in our non-compliance in the foreseeable future.

Derivative Instruments
Derivative instruments we enter into may require us to post initial margin at inception and daily variation margin based on subsequent changes in their fair value. Daily variation margin requirements also entitle us to receive collateral from our counterparties if the value of amounts owed to us under the derivative agreement exceeds the minimum margin requirement. The collateral posted as margin by us is typically in the form of cash. As of June 30, 2024, we had cash collateral posted to our counterparties of $123.1 million under these agreements.
Collateral requirements for interest rate derivative instruments are typically governed by the central clearing exchange and the associated futures commission merchant, which may establish margin requirements in excess of the clearing exchange. Collateral requirements for our TBA contracts are governed by the Mortgage-Backed Securities Division ("MBSD") of the Fixed Income Clearing Corporation and, if applicable, by our third-party brokerage agreements, which may establish margin levels in excess of the MBSD. Our TBA contracts, which are subject to master securities forward transaction agreements published by the Securities Industry and Financial Markets Association as well as supplemental terms and conditions with each counterparty, generally provide that valuations for our TBA contracts and any pledged collateral are to be obtained from a generally recognized source agreed to by both parties. However, in certain circumstances, our counterparties have the sole discretion to determine the value of the TBA contract and any pledged collateral. In such instances, our counterparties are required to act in good faith in making determinations of value. In the event of a margin call, we must generally provide additional collateral on the same business day.
Dividends
As a REIT, we are required to distribute to our shareholders amounts equal to at least 90% of our REIT taxable income for each taxable year after certain deductions. When declaring dividends, our Board of Directors considers the Company’s taxable income, the REIT distribution requirements of the Tax Code, financial performance measures, and maintaining compliance with dividend requirements of the Series C Preferred Stock, along with other factors that the Board of Directors may deem relevant from time to time.
Currently, we are primarily using U.S. Treasury futures to hedge the impact of increasing interest rates on our financing costs and fair value of our investments. Realized gains (losses) on these derivative instruments are included in GAAP earnings in the same reporting period in which the derivative instrument matures or is terminated by the Company but are not included in EAD to common shareholders during any reporting period. Furthermore, because we designate the majority of our derivative instruments as interest rate hedges for tax purposes, realized gains and losses recognized in GAAP net income are generally not recognized in REIT taxable income until future periods. The following table provides the projected amortization of our net deferred tax hedge gains as of June 30, 2024 that will be recognized as taxable income over the periods indicated, though recognition of deferred tax hedge gains and losses may be accelerated if the underlying instrument originally hedged is terminated or paid off:
Period of Recognition for Remaining Hedge Gains, NetJune 30, 2024
($ in thousands)
Third quarter 2024
$26,687 
Fourth quarter 2024
26,784 
Fiscal year 2025
107,939 
Fiscal year 2026 and thereafter
687,428 
$848,838 

As of June 30, 2024, we also had $602.5 million in capital loss carryforwards, the majority of which expire by 2028, and NOL carryforwards of $8.1 million, which will expire over the next two years. Due to these amounts and other temporary and permanent differences between GAAP net income and REIT taxable income coupled with the degree of uncertainty about the trajectory of interest rates, we cannot reasonably estimate how much the deferred tax hedge gains to be recognized will impact our dividend declarations during 2024 or in any given year.
We generally fund dividend distributions through portfolio cash flows. If we make dividend distributions in excess of our portfolio cash flows during the period, whether for purposes of meeting our REIT distribution
requirements or other reasons, those distributions are generally funded either through our existing cash balances or through the return of principal from our investments (either through repayment or sale). Please refer to "Operating and Regulatory Structure" within Part I, Item 1, "Business" as well as Part I, Item 1A, “Risk Factors” of our 2023 Form 10-K for additional important information regarding dividends declared on our taxable income.
RECENT ACCOUNTING PRONOUNCEMENTS
Please refer to Note 1 of the Notes to the Consolidated Financial Statements contained within Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

CRITICAL ACCOUNTING ESTIMATES

The discussion and analysis of our financial condition and results of operations are based in large part upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our consolidated financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. We base these estimates and judgments on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual results, however, may differ from the estimated amounts we have recorded.

Critical accounting estimates are defined as those that require management's most difficult, subjective, or complex judgments, and which may result in materially different results under different assumptions and conditions. Our critical accounting estimates are discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2023 Form 10-K under “Critical Accounting Estimates.” There have been no significant changes in our critical accounting estimates during the three and six months ended June 30, 2024.
FORWARD-LOOKING STATEMENTS
Certain written statements in this Quarterly Report on Form 10-Q that are not historical facts constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements in this report addressing expectations, assumptions, beliefs, projections, future plans and strategies, future events, developments that we expect or anticipate will occur in the future, and future operating results, capital management, and dividend policy are forward-looking statements. Forward-looking statements are based upon management’s beliefs, assumptions, and expectations as of the date of this report regarding future events and operating performance, taking into account all information currently available to us, and are applicable only as of the date of this report. Forward-looking statements generally can be identified by use of words such as “believe,” “expect,” “anticipate,” “estimate,” “plan,” “may,” “will,” “intend,” “should,” “could” or similar expressions. We caution readers not to place undue reliance on our forward-looking statements, which are not historical facts and may be based on projections, assumptions, expectations, and anticipated events that do not materialize. Except as required by law, we are not obligated to, and do not intend to, update, or revise any forward-looking statement whether as a result of new information, future events, or otherwise.
Forward-looking statements in this Quarterly Report on Form 10-Q may include, but are not limited to statements about:
•Our business and investment strategy including our ability to generate acceptable risk-adjusted returns and our target investment allocations, and our views on the future performance of MBS and other investments;
•Our views on the macroeconomic environment, monetary and fiscal policy, and conditions in the investment, credit, interest rate and derivatives markets;
•Our views on inflation, market interest rates and market spreads;
•Our views on the effect of actual or proposed actions of the Federal Reserve or other central banks with respect to monetary policy (including the targeted Fed Funds rate), and the potential impact of these actions on interest rates, borrowing costs, inflation or unemployment;
•The effect of regulatory initiatives of the Federal Reserve, the Federal Housing Finance Agency, other financial regulators, and other central banks;
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•Our financing strategy including our target leverage ratios, our use of TBA dollar roll transactions, and anticipated trends in financing costs including TBA dollar roll transaction costs, and our hedging strategy including changes to the derivative instruments to which we are a party, and changes to government regulation of hedging instruments and our use of these instruments;
•Our investment portfolio composition and target investments;
•Our investment portfolio performance, including the fair value, yields, and forecasted prepayment speeds of our investments;
•Our liquidity and ability to access financing, and the anticipated availability and cost of financing;
•Our capital stock activity including the impact of stock issuances and repurchases;
•The amount, timing, and funding of future dividends;
•Our use of our tax NOL carryforward and other tax loss carryforwards;
•Future competition for, and availability of, investments, financing and capital;
•Estimates of future interest expenses, including related to the Company’s repurchase agreements and derivative instruments;
•The status and effect of legislative reforms and regulatory rule-making or review processes, and the status of reform efforts and other business developments in the repurchase agreement financing market;
•Market, industry and economic trends, and how these trends and related economic data may impact the behavior of market participants and financial regulators;
•The impact of recent bank failures, potential new regulations and the potential for other bank failures this year;
•The impact of debt ceiling negotiations on interest rates, spreads, the U.S. Treasury market as well as the impact more broadly on fixed income and equity markets:
•Uncertainties regarding the war between Russia and Ukraine or Israel and Hamas and the related impacts on macroeconomic conditions, including, among other things, interest rates;
•The financial position and credit worthiness of the depository institutions in which the Company’s MBS and cash deposits are held;
•The impact of applicable tax and accounting requirements on us including our tax treatment of derivative instruments such as TBAs, interest rate swaps, options and futures;
•Our future compliance with covenants in our master repurchase agreements, ISDA agreements, and debt covenants in our other contractual agreements;
•Our reliance on a single service provider of our trading, portfolio management, risk reporting and accounting services systems;
•The implementation in a timely and cost-effective manner of our operating platform, which includes trading, portfolio management, risk reporting, and accounting services systems, and the anticipated benefits thereof; and
•Possible future effects of the COVID-19 pandemic or any global health crisis.
Forward-looking statements are inherently subject to risks, uncertainties and other factors that could cause our actual results to differ materially from historical results or from any results expressed or implied by such forward-looking statements. Not all of these risks and other factors are known to us. New risks and uncertainties arise over time, and it is not possible to predict those events or how they may affect us. The projections, assumptions, expectations, or beliefs upon which the forward-looking statements are based can also change as a result of these risks or other factors. If such a risk or other factor materializes in future periods, our business, financial condition, liquidity, and results of operations may vary materially from those expressed or implied in our forward-looking statements.
While it is not possible to identify all factors that may cause actual results to differ from historical results or from any results expressed or implied by forward-looking statements, or that may cause our projections, assumptions, expectations, or beliefs to change, some of those factors include the following:
•the risks and uncertainties referenced in this Quarterly Report on Form 10-Q, especially those incorporated by reference into Part II, Item 1A, “Risk Factors”;
•our ability to find suitable reinvestment opportunities;
•changes in domestic economic conditions;
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•geopolitical events, such as terrorism, war or other military conflict, including increased uncertainty regarding the wars between Russia and the Ukraine and between Israel and Hamas, and the related impact on macroeconomic conditions as a result of such conflict;
•changes in interest rates and credit spreads, including the repricing of interest-earning assets and interest-bearing liabilities;
•our investment portfolio performance particularly as it relates to cash flow, prepayment rates and credit performance;
•the impact on markets and asset prices from changes in the Federal Reserve’s policies regarding the purchases of Agency RMBS, Agency CMBS, and U.S. Treasuries;
•actual or anticipated changes in Federal Reserve monetary policy or the monetary policy of other central banks;
•adverse reactions in U.S. financial markets related to actions of foreign central banks or the economic performance of foreign economies including in particular China, Japan, the European Union, and the United Kingdom;
•uncertainty concerning the long-term fiscal health and stability of the United States;
•the cost and availability of financing, including the future availability of financing due to changes to regulation of, and capital requirements imposed upon, financial institutions;
•the cost and availability of new equity capital;
•changes in our leverage and use of leverage;
•changes to our investment strategy, operating policies, dividend policy or asset allocations;
•the quality of performance of third-party service providers, including our sole third-party service provider for our critical operations and trade functions;
•the loss or unavailability of our third-party service provider’s service and technology that supports critical functions of our business related to our trading and borrowing activities due to outages, interruptions, or other failures;
•the level of defaults by borrowers on loans underlying MBS;
•changes in our industry;
•increased competition;
•changes in government regulations affecting our business;
•changes or volatility in the repurchase agreement financing markets and other credit markets;
•changes to the market for derivative instruments, including changes to margin requirements on derivative instruments;
•uncertainty regarding continued government support of the U.S. financial system and U.S. housing and real estate markets, or to reform the U.S. housing finance system including the resolution of the conservatorship of Fannie Mae and Freddie Mac;
•the composition of the Board of Governors of the Federal Reserve;
•the political environment in the U.S.;
•systems failures or cybersecurity incidents; and
•exposure to current and future claims and litigation.

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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the exposure to losses resulting from changes in market factors. Our business strategy exposes us to a variety of market risks, including interest rate, spread, prepayment, credit, liquidity, and reinvestment risks. These risks can and do cause fluctuations in our liquidity, comprehensive income and book value as discussed below.
Interest Rate Risk
Investing in interest-rate sensitive investments such as MBS and TBA securities subjects us to interest rate risk. Interest rate risk results from investing in securities that have a fixed coupon or a floating coupon that may not immediately adjust for changes in interest rates. Interest rate risk also results from the mismatch between the duration of our assets versus the duration of our liabilities and hedges. The amount of the impact will depend on the composition of our portfolio, our hedging strategy, the effectiveness of our hedging instruments as well as the magnitude and the duration of the change in interest rates.
We manage interest rate risk within tolerances set by our Board of Directors. We use interest rate hedging instruments to mitigate the impact of changing interest rates on the market value of our assets and on our interest expense from repurchase agreements used to finance our investments. Our hedging methods are based on many factors, including, but not limited to, our estimates with regard to future interest rates and expected levels of prepayments of our assets. If prepayments are slower or faster than assumed, the maturity of our investments will also differ from our expectations, which could reduce the effectiveness of our hedging strategies and may cause losses that adversely affect our cash flow. Estimates of prepayment speeds can vary significantly by investor for the same security, and therefore estimates of security and portfolio duration can vary significantly between market participants.
We continuously monitor market conditions, economic conditions, interest rates and other market activity and frequently adjust the composition of our investments and hedges throughout any given period. As such, the projections for changes in market value provided below are limited in usefulness because the modeling assumes no changes to the composition of our investment portfolio or hedging instruments as of the dates indicated. Changes in types of our investments, the returns earned on these investments, future interest rates, credit spreads, the shape of the yield curve, the availability of financing, and/or the mix of our investments and financings including derivative instruments may cause actual results to differ significantly from the modeled results shown in the tables below. There can be no assurance that assumed events used to model the results shown below will occur, or that other events will not occur, that will affect the outcomes; therefore, the modeled results shown in the tables below and all related disclosures constitute forward-looking statements.
Management considers changes in the shape of the interest rate curves in assessing and managing portfolio interest rate risk on the market value of its investments and common equity. Because interest rates do not typically move in a parallel fashion from period to period (as can be seen by the graph for U.S. Treasury rates in Item 2, “Executive Overview”), the tables below show the projected sensitivity of the market value of our financial instruments and the percentage change in shareholders’ equity assuming instantaneous parallel shifts and non-parallel shifts in market interest rates.
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June 30, 2024
Parallel Decrease in Interest Rates ofParallel Increase in Interest Rates of
100 Basis Points50 Basis Points50 Basis Points100 Basis Points
Type of
Instrument (1)
% of Market Value% of Common Equity% of Market Value% of Common Equity% of Market Value% of Common Equity% of Market Value% of Common Equity
RMBS3.2 %30.5 %1.7 %15.9 %(1.8)%(16.8)%(3.6)%(34.2)%
CMBS/
CMBS IO
0.1 %1.1 %— %0.5 %— %(0.5)%(0.1)%(1.0)%
TBAs1.1 %10.2 %0.6 %5.8 %(0.7)%(6.7)%(1.5)%(14.0)%
Interest rate hedges(4.8)%(45.3)%(2.3)%(22.3)%2.3 %21.9 %4.6 %43.6 %
Total(0.4)%(3.5)%— %(0.1)%(0.2)%(2.1)%(0.6)%(5.6)%
December 31, 2023
Parallel Decrease in Interest Rates ofParallel Increase in Interest Rates of
100 Basis Points50 Basis Points50 Basis Points100 Basis Points
Type of
Instrument (1)
% of Market Value% of Common Equity% of Market Value% of Common Equity% of Market Value% of Common Equity% of Market Value% of Common Equity
RMBS3.5 %33.8 %1.8 %17.9 %(2.0)%(19.4)%(4.1)%(39.6)%
CMBS/
CMBS IO
0.1 %0.9 %— %0.5 %— %(0.5)%(0.1)%(0.9)%
TBAs0.6 %5.9 %0.3 %3.3 %(0.4)%(4.0)%(0.9)%(8.5)%
Interest rate hedges(5.3)%(51.6)%(2.6)%(25.3)%2.5 %24.6 %5.0 %48.7 %
Total(1.1)%(11.0)%(0.4)%(3.6)%0.1 %0.8 %— %(0.3)%

June 30, 2024December 31, 2023
Non-Parallel Shifts
Basis Point Change in
2-year UST		Basis Point Change in
10-year UST
% of Market Value (1)
% of Common
Equity
% of Market Value (1)
% of Common
Equity
Bearish
Steepening
+25+50(0.1)%(1.1)%0.1 %1.4 %
+50+100(0.4)%(3.6)%0.1 %0.8 %
Flattening
+50+25(0.2)%(2.1)%— %(0.5)%
+100
+50
(0.4)%(3.6)%— %(0.3)%
Bullish
Steepening
-25
+0
0.3 %2.8 %0.3 %2.5 %
-50-100.5 %4.6 %0.4 %3.6 %
-75-250.6 %5.8 %0.4 %3.8 %
Flattening
+0
-25(0.1)%(0.7)%(0.2)%(2.0)%
-10-50(0.2)%(1.7)%(0.5)%(4.7)%
-25-75(0.4)%(4.1)%(0.9)%(8.8)%
(1)Includes changes in market value of our investments and derivative instruments, including TBA securities, but excludes changes in market value of our financings which are not carried at fair value on our balance sheet due to their short-term maturities. The projections for market value do not assume any change in credit spreads.

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In bearish-rate shifts where interest rates are increasing, models project the market value of our investments, net of hedges and our common equity as of June 30, 2024, will decline more versus that as December 31, 2023, primarily as a result of having a larger portfolio. Furthermore, the larger portfolio as of June 30, 2024 means more extension risk in higher interest rate scenarios.

In bullish-rate shifts where the yield curve flattens due to declining interest rates, models projected the market value of our investments, net of hedges and our common equity as of June 30, 2024 will decline less versus that as of December 31, 2023, because of the additional duration of the aggregate portfolio resulting from the assets extending. In bullish-rate shifts where the yield curve steepens due to declining interest rates, models project higher increases in market value of our investments, net of hedges and common equity due to having a larger portfolio as of June 30, 2024 versus December 31, 2023.

Spread Risk
Spread risk is the risk of loss from an increase in the market spread between the yield on an investment versus its benchmark index. Changes in market spreads represent the market's valuation of the perceived riskiness of an asset relative to risk-free rates. Widening spreads reduce the market value of our investments as market participants require additional yield to hold riskier assets. Market spreads could change based on macroeconomic or systemic factors as well as the factors specific to a particular security such as prepayment performance or credit performance. Other factors that could impact credit spreads include technical issues such as supply and demand for a particular type of security or Federal Reserve monetary policy. We do not hedge spread risk given the complexity of hedging credit spreads and in our opinion, the lack of liquid instruments available to use as hedges.
Fluctuations in spreads typically vary based on the type of investment. Sensitivity to changes in market spreads is derived from models that are dependent on various assumptions, and actual changes in market value in response to changes in market spreads could differ materially from the projected sensitivity if actual conditions differ from these assumptions.
The table below shows the projected sensitivity of the market value of our investments given the indicated change in market spreads as of the dates indicated:
June 30, 2024December 31, 2023
Percentage Change inPercentage Change in
Basis Point Change in Market Spreads
Market Value of Investments (1)
% of Common
Equity
Market Value of Investments (1)
% of Common
Equity
+20/+50 (2)
(1.1)%(10.6)%(1.1)%(10.8)%
+10(0.6)%(5.3)%(0.5)%(5.4)%
-100.6 %5.3 %0.5 %5.4 %
-20/-50 (2)
1.1 %10.6 %1.1 %10.8 %
(1) Includes changes in market value of our MBS investments, including TBA securities.
(2) Assumes a 20-basis point shift in Agency and non-Agency RMBS and CMBS and a 50-basis point shift in Agency
and non-Agency CMBS IO.

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Prepayment Risk
Prepayment risk is the risk of an early, unscheduled return of principal on an investment. We are subject to prepayment risk from premiums paid on investments, which are amortized as a reduction in interest income using the effective interest method under GAAP. Our comprehensive income and book value per common share may also be negatively impacted by prepayments if the fair value of the investment materially exceeds the par balance of the underlying security. Principal prepayments on our investments are influenced by changes in market interest rates and a variety of economic, geographic, government policy and other factors beyond our control, including GSE policy with respect to loan forbearance and delinquent loan buy-outs.
We seek to manage our prepayment risk on our MBS by diversifying our investments and investing in securities which either contain loans for which the underlying borrowers have disincentive to refinance or have some provision of prepayment prohibition or yield maintenance as is the case with CMBS and CMBS IO. Loans underlying our CMBS and CMBS IO securities typically have some form of prepayment protection provisions (such as prepayment lock-outs) or prepayment compensation provisions (such as yield maintenance or prepayment penalties). Because CMBS IO consist of rights to interest on the underlying commercial mortgage loan pools and do not have rights to principal payments on the underlying loans, prepayment risk on these securities is particularly acute without these prepayment protection provisions. There are no prepayment protections if the loan defaults and is partially or wholly repaid earlier as a result of loss mitigation actions taken by the underlying loan servicer.
Our prepayment risk as of June 30, 2024 has declined relative to prior periods as the majority of our MBS portfolio consists of securities owned near or below par and prepayment speeds have declined in the current higher interest rate environment. However, if higher yielding investments prepay at a faster rate than anticipated, we may be unable to reinvest the repayments at comparable yields. Our net interest income may be negatively impacted if the proceeds from prepayments are reinvested into assets with lower yields. In an increasing interest rate environment, lower yielding assets with a fixed rate may extend or prepay slower than anticipated. Because we finance our investments with short-term repurchase agreement financing, we may be required to finance our investments at a higher interest rate without the ability to reinvest principal into higher yielding securities. As a result of rising financing costs, our net interest income could fall or could be negative for extended periods of time.

Credit Risk
Credit risk is the risk that we will not receive all contractual amounts due on investments that we own due to default by the borrower or due to a deficiency in proceeds from the liquidation of the collateral securing the obligation. Credit losses on loans could result in lower or negative yields on our investments.
Agency RMBS and Agency CMBS have credit risk to the extent that Fannie Mae or Freddie Mac fails to remit payments on the MBS for which they have issued a guaranty of payment. Given the improved financial performance and conservatorship of these entities and the continued support of the U.S. government, we believe this risk is low.
Agency and non-Agency CMBS IO represent the right to excess interest (and not principal) on the underlying loans. These securities are exposed to the loss of investment basis in the event a loan collateralizing the security liquidates without paying yield maintenance or prepayment penalty. This will typically occur when the underlying loan is in default and proceeds from the disposition of the loan collateral are insufficient to pay the prepayment consideration. To mitigate credit risk of investing in CMBS IO, we invest in primarily AAA-rated securities that are stripped off senior tranches, which means we receive the highest payment priority and are the last to absorb losses in the event of a shortfall in cash flows. Our Agency CMBS IO are Class X1 from Freddie Mac Series K deals from which interest continues to be advanced even in the event of an underlying default up until liquidation, which is the triggering event that disrupts the Agency CMBS IO cash flow. For non-Agency CMBS IO, the servicer and master servicer will determine if interest will continue to be advanced upon default of a loan based on their estimate of liquidation proceeds. Senior non-Agency CMBS IO may benefit from changes in contractual cash flows, including modifications or loan extensions as the senior classes can remain outstanding beyond the original maturity date.
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In addition, bilateral agreements expose us to increased credit risk related to our counterparties, and we may be at risk of loss of any collateral held by a repurchase or derivative counterparty if the counterparty becomes insolvent or files for bankruptcy.
Liquidity Risk
We have liquidity risk principally from the use of recourse repurchase agreements to finance our ownership of securities. Our repurchase agreements are renewable at the discretion of our lenders and do not contain guaranteed roll-over terms. If we fail to repay the lender at maturity, the lender has the right to immediately sell the collateral and pursue us for any shortfall if the sales proceeds are inadequate to cover the repurchase agreement financing. In addition, declines in the market value of our investments pledged as collateral for repurchase agreement borrowings and for our derivative instruments may result in counterparties initiating margin calls for additional collateral.
Our use of TBA long positions as a means of investing in and financing Agency RMBS also exposes us to liquidity risk in the event that we are unable to roll or terminate our TBA contracts prior to their settlement date. If we are unable to roll or terminate our TBA long positions, we could be required to take physical delivery of the underlying securities and settle our obligations for cash, which could negatively impact our liquidity position or force us to sell assets under adverse conditions if financing is not available to us on acceptable terms.
For further information, including how we attempt to mitigate liquidity risk and monitor our liquidity position, and in particular, during the current macroeconomic environment, please refer to “Liquidity and Capital Resources” in Item 2 of this Quarterly Report on Form 10-Q as well as within Item 7 of our 2023 Form 10-K.

Reinvestment Risk
We are subject to reinvestment risk as a result of the prepayment, repayment and sales of our investments. In order to maintain our investment portfolio size and our earnings, we need to reinvest capital received from these events into new interest-earning assets or TBA securities, and if market yields on new investments are lower or if financing costs are higher, our net interest income will decline. In addition, based on market conditions, our leverage, and our liquidity profile, we may decide to not reinvest the cash flows we receive from our investment portfolio even when attractive reinvestment opportunities are available, or we may decide to reinvest in assets with lower yield but greater liquidity. If we retain capital or pay dividends to return capital to shareholders rather than reinvest capital, or if we invest capital in lower yielding assets for liquidity reasons, the size of our investment portfolio and the amount of income generated by our investment portfolio will likely decline.

ITEM 4.    CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this report. Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2024, our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended June 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.    OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS
To the Company’s knowledge, there are no pending or threatened legal proceedings, which, in management’s opinion, individually or in the aggregate, could have a material adverse effect on the Company’s results of operations or financial condition.

ITEM 1A.    RISK FACTORS

There have been no material changes from the risk factors discussed in Part I, Item 1A, “Risk Factors” of our 2023 Form 10-K. Risks and uncertainties identified in our forward-looking statements contained in this Quarterly Report on Form 10-Q together with those previously disclosed in the 2023 Form 10-K or those that are presently unforeseen could result in significant adverse effects on our financial condition, results of operations and cash flows. See “Forward-Looking Statements” contained in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q as well as Part I, Item 1A, “Risk Factors” in our 2023 Form 10-K.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

    The Company’s Board of Directors has authorized a share repurchase program (the “Program”) of up to $100 million of the Company’s outstanding shares of common stock and up to $50 million of the Company’s Series C Preferred Stock through open market transactions, privately negotiated transactions, trading plans adopted in accordance with Rule 10b5-1 under the Exchange Act, block transactions or otherwise. The Program permits the Company to repurchase shares of common stock or Series C Preferred Stock at any time or from time-to-time at management’s discretion. The actual means and timing of any shares purchased under the Program will depend on a variety of factors, including, but not limited to, the market prices of the common stock and the Series C Preferred Stock, as applicable, general market and economic conditions, and applicable legal and regulatory requirements. The Program does not obligate the Company to purchase any shares, and any open market repurchases under the Program will be made in accordance with Exchange Act Rule 10b-18, which sets certain restrictions on the method, timing, price, and volume of open market stock repurchases. The Program is authorized through April 30, 2026, although it may be modified or terminated by the Board of Directors at any time.

The Company did not repurchase any shares of its common stock or Series C Preferred Stock during the three months ended June 30, 2024.

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ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.    MINE SAFETY DISCLOSURES
        
        None.

ITEM 5.    OTHER INFORMATION
Rule 10b5-1 Trading Plan

During the three months ended June 30, 2024, none of the Company’s directors or Section 16 officers adopted or terminated any “Rule 10b5-1 trading arrangements” or any “non-Rule 10b5-1 trading arrangements” (in each case, as defined in Item 408 of Regulation S-K).

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ITEM 6.    EXHIBITS
Exhibit No.Description
3.1
3.1.1
3.2
4.1
4.2
10.1*
10.2*
10.3*
10.41.1*
10.41.2*
10.41.3*
10.41.4*
31.1
31.2
31.3
32.1
101
The following materials from Dynex Capital, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024, formatted in iXBRL (Inline Extensible Business Reporting Language), filed herewith: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Shareholders’ Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to the Consolidated Financial Statements.
104
The cover page from Dynex Capital, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024, formatted in iXBRL (Inline Extensible Business Reporting Language) (included with Exhibit 101).
* Denotes a management contract or compensatory plan or arrangement.
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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DYNEX CAPITAL, INC.
Date:July 26, 2024/s/ Byron L. Boston
Byron L. Boston
Co-Chief Executive Officer and Chairman of the Board
(Co-Principal Executive Officer)
Date:July 26, 2024/s/ Robert S. Colligan
Robert S. Colligan
Chief Financial Officer, Chief Operating Officer, and Secretary
(Principal Financial Officer)
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    Exhibit 10.1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of this 19th day of July, 2024 (the “Effective Date”), by and between Dynex Capital, Inc., a Virginia corporation (the “Company”), and Smriti L. Popenoe (“Executive”).
WITNESSETH:
WHEREAS, Executive is currently employed by the Company;
WHEREAS, the Company desires to continue to employ and secure the exclusive services of Executive on the terms and conditions set forth in this Agreement;
WHEREAS, Executive desires to accept such employment on such terms and conditions;
WHEREAS, Executive has the trust and confidence of the Company’s Board of Directors (the “Board”);
WHEREAS, the Board values Executive’s leadership and appreciates her continuing contribution to the success of the Company; and
WHEREAS, the Company and Executive previously entered into an Employment Agreement effective October 27, 2023 (the “Prior Agreement”), which the parties desire to modify to reflect Executive’s appointment as Co-Chief Executive Officer of the Company; the Prior Agreement is hereby superseded in its entirety by this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for other good and valuable consideration, the Company and Executive hereby agree as follows:
1.Agreement to Employ. Upon the terms and subject to the conditions of this Agreement, the Company hereby agrees to continue to employ Executive, and Executive hereby accepts such continued employment with the Company.
2.Term; Position and Responsibilities; Location.
(a)Term. This Agreement is effective on the Effective Date and expires on October 27, 2026 (the “Initial Term Expiration Date”), unless sooner terminated by either party as set forth below, or until the termination of Executive’s employment, if earlier. The term of this Agreement shall automatically renew for periods of one (1) year on the Initial Term Expiration Date and each one (1) year anniversary of the Initial Term Expiration Date thereafter (each, a “Renewal Date”), unless either party gives written notice of such nonrenewal (“Nonrenewal Notice”) to the other party at least ninety (90) days before the applicable Renewal Date. Upon a Change in Control (as defined below), the term of this Agreement shall automatically renew for a period of two (2) years, unless the Change in Control occurs during the initial term and there are more than two (2) years remaining in the initial term. The initial and any extended term of this Agreement through the earlier of (i) the date this Agreement expires or is terminated as described herein or (ii) the date of termination of Executive’s employment by the
Company or by Executive for any reason is referred to as the “Employment Period”. If the Company provides a Nonrenewal Notice for a Renewal Date in accordance with the requirements described in the preceding sentence and Executive’s employment is terminated by the Company on such Renewal Date for any reason other than Cause (as defined below) or Executive terminates for Good Reason (as defined below) on account of such Nonrenewal Notice, Executive shall have a right to receive the payments and benefits set forth (A) in Section 7(d)(i) of this Agreement if such termination occurs more than six (6) months prior to a Change in Control or more than two (2) years following a Change in Control or (B) in Section 7(d)(ii) of this Agreement if such termination occurs within six (6) months prior to a Change in Control or on or within two (2) years following a Change in Control, subject to the requirements therein, including but not limited to the Release requirement under Section 7(d)(i)(F) or Section 7(d)(ii)(F) of this Agreement, as applicable.
(b)Position and Responsibilities. During the Employment Period, Executive shall serve as Co-Chief Executive Officer (“Co-CEO”), President, and Chief Investment Officer (“CIO”) of the Company and shall be responsible for performing all duties associated with guiding the strategic and operational direction and performance of the Company and such other related duties and responsibilities as are customarily assigned to individuals serving in such positions. The Company and Executive agree that during the Employment Period, Executive shall report directly to the Board and shall devote as much of her skill, knowledge, commercial efforts and business time as the Board shall reasonably require for the conscientious and good faith performance of her duties and responsibilities for the Company to the best of her ability. Executive shall continue to be nominated to serve as a member of the Board during the Employment Period. Executive agrees to serve in other officer and director positions for the Company, including as a member of the Board if so elected, and any subsidiaries or affiliates of the Company upon request, in each case without additional compensation. The Company may appoint a new CIO during the Employment Period, in which case Executive will cease to serve as CIO but will continue to serve as Co-CEO and President.
(c)Location. During the Employment Period, Executive’s services may be performed from a virtual office located at her out-of-state residence, provided that Executive shall travel to the Company’s offices in the Richmond, Virginia metropolitan area as necessary or as required by the Company or the Board.
3.Base Salary. During the Employment Period, the Company shall pay Executive a base salary at an annualized rate of no less than $900,000 (which increase is effective as of July 22, 2024), payable in installments on the Company’s regular payroll dates but not less frequently than monthly. The Board or a committee thereof shall review Executive’s base salary annually during the Employment Period for adjustment up or down (but not below $900,000 without Executive’s consent), based on its periodic review of Executive’s performance in accordance with the Company’s regular policies and procedures; provided, however, that following a Change in Control Executive’s base salary shall not be decreased. The base salary amount payable to Executive for a full year under this Section 3 shall be referred to herein as the “Base Salary”.
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4.Incentive Compensation.
(a)Annual Incentive Awards. Executive shall be eligible to participate in and receive annual cash incentive awards pursuant to the terms of the Dynex Capital, Inc. Annual Cash Incentive Plan or any successor plan or program (the “Dynex Incentive Plan”). The minimum target amount of Executive’s annual cash incentive award for any fiscal year during the Employment Period, including the full 2024 fiscal year, shall be not less than two hundred percent (200%) of Executive’s Base Salary, and the maximum amount of Executive’s annual cash incentive award for any fiscal year during the Employment Period shall be not less than four hundred percent (400%) of Executive’s Base Salary. The actual amount of Executive’s annual cash incentive award, if any, may be more or less than the target amount, as determined by the Board or a committee thereof, pursuant to the terms of the Dynex Incentive Plan, but not more than the maximum amount. For each fiscal year during the Employment Period, the Company’s management team shall recommend proposed performance targets under the Dynex Incentive Plan to the Board or a committee thereof by the end of the fiscal year immediately prior to the applicable performance year, and the Company’s management team shall provide all information necessary or appropriate to enable the Board or a committee thereof to determine the final performance targets by the end of the first month of the applicable performance year. Any annual cash incentive award shall be paid after the end of the fiscal year to which it relates, at the same time and under the same terms and conditions as the annual cash incentive awards for other executives of the Company and subject to the terms of the Dynex Incentive Plan, including requirements as to continued employment, subject to the provisions of Sections 7(d)(i)(C) and 7(d)(ii)(C) below. For the sake of clarity, Executive’s annual cash incentive award opportunity for the 2024 fiscal year under the Dynex Incentive Plan will be based on Executive’s increased 2024 Base Salary as set forth in Section 3.
(b)Long-Term Incentive Awards. Executive shall be eligible to participate in and receive long-term incentive awards pursuant to the Dynex Capital, Inc. 2020 Stock and Incentive Plan or any successor plan (the “Dynex Stock and Incentive Plan”). The target amount of Executive’s long-term incentive award granted with respect to any fiscal year during the Employment Period, including awards for the full 2024 fiscal year that are granted in 2025, shall be not less than $3,100,000. The actual amount of Executive’s long-term incentive award, if any, may be more or less than the target amount, as determined by the Board or a committee thereof, pursuant to the terms of the Dynex Stock and Incentive Plan.
(c)Clawback. Executive agrees that any incentive compensation (including both equity and cash incentive compensation) that Executive receives from the Company is subject to repayment to (i.e., clawback by) the Company or a related entity (i) as required by applicable law, or (ii) pursuant to an applicable clawback policy adopted by the Board from time to time. Any such clawback determination shall be made in good faith by the Board or a committee thereof and consistent with applicable law and the terms of the clawback policy, if applicable. Except where offset of, or recoupment from, incentive compensation covered by Code Section 409A (as defined below) is prohibited by Code Section 409A, to the extent allowed by law and as determined by the Board or a committee thereof, Executive agrees that such repayment may, in the discretion of the Board or a committee thereof, be accomplished by withholding of future compensation to be paid to Executive by the Company. Any recovery of
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incentive compensation covered by Code Section 409A shall be implemented in a manner which complies with Code Section 409A. Any recovery of incentive compensation pursuant to this Section 4(c) shall not constitute a breach of this Agreement or Good Reason (as defined below).
5.Employee Benefits.
(a)General. During the Employment Period, Executive shall be eligible to participate in the employee and executive benefit plans and programs maintained by the Company from time-to-time in which executives of the Company are eligible to participate, including, to the extent maintained by the Company, life, medical, dental, accidental and disability insurance plans and retirement, deferred compensation and savings plans, in accordance with the terms and conditions thereof as in effect from time-to-time. As of the date of this Agreement, Executive is eligible and shall remain eligible to participate in the Company’s existing 401(k) plan and the Company shall match Executive’s contributions in accordance with the terms of that plan, provided that such matching does not violate any provisions of law applicable to the 401(k) plan.
(b)Vacation. During the Employment Period, Executive shall be entitled to a number of vacation days as determined by the Board or a committee thereof, which shall not be less than six (6) weeks per calendar year, without carry-over accumulation. Executive shall also be entitled to Company-designated holidays.
(c)Cellular Phones and Personal Data Assistants. During the Employment Period, the Company shall provide Executive with, or shall reimburse Executive for her purchase of, a cellular phone and a personal data assistant (e.g., iPad, tablet, etc.) for her use as agreed upon by the Company and Executive, as well as pay for business-related usage fees, pursuant to the Company’s policy for executives or, if none, as approved by the Company consistent with the Company’s practice for other executives. Executive shall submit a detailed bill in order to obtain reimbursement.
(d)Concierge Medical Services. During the Employment Period, the Company shall reimburse Executive for the cost of an annual concierge medical services fee, including the cost of an annual physical, at the level of the Mayo Clinic Executive Health Program or any successor program.
6.Expenses.
(a)Business Travel, Lodging. The Company shall reimburse Executive for reasonable travel, lodging, meal and other reasonable expenses incurred by her in connection with the performance of her duties and responsibilities hereunder upon submission of related receipts or other evidence of the incurrence and purpose of each such expense consistent with the terms and conditions of the Company’s travel policy in effect at any time.
(b)Agreement Review. Within thirty (30) days following Executive’s written request (which must include documentation of such fees and expenses but not narratives of specific legal services provided), the Company shall reimburse Executive for the reasonable attorneys’ fees and expenses she incurred (if any) relating to the review and negotiation of this Agreement. Executive must submit any request for reimbursement of such attorneys’ fees and expenses within one (1) year of when such fees and expenses are incurred.
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(c)Agreement Dispute. Within sixty (60) days following Executive’s written request (which must include a detailed description of such fees and expenses), the Company agrees to pay, to the full extent permitted by law, all legal fees and expenses that Executive may reasonably incur as a result of any controversy or claim arising out of or relating to this Agreement, or the breach thereof, by the Company, Executive, or others (including as a result of any contest by Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment beyond such sixty (60) day period at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the “Code”); provided that, before a Change in Control, the Company shall pay such legal fees and expenses only if Executive prevails on at least one material point in such controversy or claim (in which case all previously incurred legal fees and expenses as described above shall be paid immediately and future such legal fees and expenses shall be paid as they are incurred) and, following a Change in Control, the Company shall pay such legal fees and expenses as they are incurred regardless of the outcome of the controversy or claim but only for as long as Executive’s claim is not determined by a court of final jurisdiction to be frivolous. If a court of final jurisdiction determines Executive’s claim to be frivolous, then Executive shall be required to repay to the Company within sixty (60) days following the Company’s written request any previously paid attorneys’ fees and expenses under this Section 6(c).
(d)Reimbursement Requirements. Any reimbursements provided in Sections 5 and 6 of this Agreement shall be reimbursed, unless specifically provided otherwise herein, in accordance with the Company’s expense reimbursement policy in effect at any time, if any, and the requirements of Section 8(d) of this Agreement, to the extent applicable.
7.Termination of Employment. The Board believes it is in the best interests of the Company to diminish the inevitable distraction of Executive by virtue of the personal uncertainties and risks in the event Executive terminates her employment for Good Reason or is terminated by the Company without Cause and to encourage Executive’s full attention and dedication to the Company, and to provide Executive with compensation and benefits arrangements upon such termination which ensure that the compensation and benefits expectations of Executive will be satisfied and which are competitive with those of other corporations. The Board has approved this Section 7 and authorized its inclusion in this Agreement on the Company’s behalf to Executive.
(a)Certain Definitions.
(i)“Change in Control” shall mean any of the following:
(A)The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)), (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty-five percent (35%) or more of either (1) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); or
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(B)The composition of the Company’s Board shall change such that the individuals who, as of October 27, 2023, constituted the Board (the “Incumbent Directors”) no longer comprise at least a majority of the members of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the Incumbent Directors shall be considered as though such individual were an Incumbent Director, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(C)Consummation of a reorganization, merger, share exchange or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination:
(1)    the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, at least eighty percent (80%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries or affiliates) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; and
(2)    at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were Incumbent Directors at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
(D)Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company, except pursuant to a Business Combination that complies with clause (1) or (2) of Section 7(a)(i)(C) of this Agreement.
(ii)“Date of Termination” means the date of Executive’s termination of employment with the Company, determined in accordance with the requirements of Section 8(c) of this Agreement, which will typically be (A) if Executive’s employment is terminated by the Company for Cause, the date of receipt of the Notice of Termination (as defined below) or any later date specified therein, as the case may be, (B) if Executive’s employment is terminated by Executive for Good Reason, the date specified pursuant to Section 7(b)(i) below, (C) if Executive’s employment is terminated by the Company other than for Cause or by Executive without Good Reason, the date on which the Company or Executive notifies the other of such termination, (D) if Executive’s employment is terminated by reason of death, the date of death of Executive, or (E) if the Company terminates Executive’s employment due to Disability (as
6
defined below), the date of receipt of the Notice of Termination or any later date specified therein, as the case may be.
(b)Termination of Employment.
(i)Good Reason. Executive may terminate her employment during the Employment Period for Good Reason. In such event, the Company shall have the termination obligations in Section 7(d)(i) or (ii) of this Agreement, whichever is applicable on the Date of Termination. For purposes of this Agreement, “Good Reason” shall mean any of the following, without Executive’s consent:
(A)prior to a Change in Control, a material diminution in Executive’s position, authority, duties or responsibilities as Co-CEO, President and CIO, excluding for this purpose an isolated, insubstantial or inadvertent action not taken in bad faith; and provided that “Good Reason” shall not include the removal of Executive as CIO of the Company if Executive retains her position as Co-CEO and President of the Company;
(B)on or following a Change in Control, the assignment to Executive of any duties inconsistent with Executive’s position (including status, office or title as Co-CEO, President and CIO, and reporting requirements), authority, duties, and responsibilities as Co-CEO, President and CIO, or any other action by the Company that results in a diminution in such position (including status, office or title as Co-CEO, President and CIO, and reporting requirements), authority, duties and responsibilities as Co-CEO, President and CIO, or any requirement that Executive not serve as Co-CEO, President and CIO of the Company, in all cases excluding for this purpose an isolated, insubstantial or inadvertent action not taken in bad faith; and provided that “Good Reason” shall not include the removal of Executive as CIO of the Company if Executive retains her position as Co-CEO and President of the Company;
(C)whether prior to, on or following a Change in Control, a reduction in Executive’s Base Salary or a reduction of Executive’s minimum target incentive opportunity in violation of Section 3, Section 4(a) or Section 4(b) of this Agreement;
(D)whether prior to, on or following a Change in Control, the Company’s requiring Executive to perform her services on a regular basis at any location that is more than fifty (50) miles from the location where Executive primarily performed services during the six (6) months immediately preceding the change in location or the Company’s requiring Executive to perform her services on a regular basis in person rather than by telecommuting;
(E)whether prior to, on or following a Change in Control, any material breach of this Agreement by the Company; or
(F)whether prior to, on or following a Change in Control, the Company delivers to Executive a Nonrenewal Notice as described in Section 2(a) and does not offer Executive a new employment agreement providing terms and conditions substantially similar to, or more favorable than, those in this Agreement, and Executive is willing and able to execute a new employment agreement on such terms and continue performing services thereunder.    
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To trigger “Good Reason,” Executive is required to provide written notice to the Board of the existence of a condition described in this Section 7(b)(i) within thirty (30) days following the initial existence of the condition, and the Company shall have thirty (30) days after receiving such notice to remedy the condition. If the condition is remedied within thirty (30) days, then “Good Reason” does not exist. If the condition is not remedied within thirty (30) days, then Executive must resign within thirty (30) days following the expiration of the remedy period in order for such resignation to be for “Good Reason.”
Notwithstanding the above, “Good Reason” shall not include any resignation by Executive if the Company has communicated to Executive in writing that grounds for a “Cause” termination exist, or if the Company communicates to Executive in writing that grounds for a “Cause” termination exist at any time during the notice and remedy period described in the preceding paragraph, and in either case if “Cause” is determined to exist pursuant to Section 7(b)(iii) of this Agreement. The remedy and resignation period described in the preceding paragraph shall be automatically extended so that it does not end before any notice and remedy period under Section 7(b)(iii) of this Agreement, provided that the remedy and resignation period described in the preceding paragraph shall not be extended beyond one hundred twenty (120) days from the date of Executive’s submission of written notice pursuant to the preceding paragraph.
(ii)Without Good Reason. Executive may terminate her employment during the Employment Period without Good Reason. In such event, the Company shall have the termination obligations in Section 7(d)(iii) of this Agreement.
(iii)Cause. The Company may terminate Executive’s employment during the Employment Period for Cause. In such event, the Company shall have the termination obligations in Section 7(d)(iii) of this Agreement. For purposes of this Agreement, “Cause” shall mean any of the following:
(A)Executive’s gross or willful misconduct, fraud or embezzlement in connection with the performance of Executive’s duties to the Company;
(B)prior to a Change in Control, the failure of Executive to adhere to the lawful directions of the Board that are reasonably consistent with Executive’s duties and positions as Co-CEO, President and CIO;
(C)a material violation by Executive of any portion of Section 9 of this Agreement; or
(D)Executive’s being convicted of, or entering a guilty plea or plea of no contest to, any felony or any crime of moral turpitude.
For purposes of this provision, no act or failure to act, on the part of Executive, shall be considered “willful” unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or a committee thereof, or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. The cessation of employment of Executive shall not be deemed to be for Cause unless and until there shall have been delivered to Executive written notice of a
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resolution duly adopted by the affirmative vote of not less than two-thirds (2/3) of the Board at a meeting of the Board called and held for such purpose (after at least fifteen (15) days’ notice is provided to Executive of such meeting (setting forth the specific section(s) of this Agreement applicable to Executive’s conduct) and Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, Executive is guilty of conduct described in subparagraph (A) or (B) or (C) or (D) above, and specifying the particulars thereof in detail. Upon delivery of the written notice, Executive’s employment shall be immediately terminated; provided, however, with regard to conduct described in subparagraph (B) or (C) above only, if such conduct can be remedied, as determined in the good faith opinion of the Board, Executive shall have thirty (30) days after her receipt of the written notice to remedy the conduct. If the conduct is remedied within thirty (30) days, then “Cause” does not exist. If the conduct is not remedied within thirty (30) days, then the Company shall provide Notice of Termination within thirty (30) days following the expiration of the remedy period.
(iv)Without Cause. The Company may terminate Executive’s employment without Cause during the Employment Period. In such event, the Company shall have the termination obligations in Section 7(d)(i) or 7(d)(ii) of this Agreement, whichever is applicable on the Date of Termination.
(v)Death or Disability. Executive’s employment during the Employment Period shall automatically terminate on Executive’s death and may be terminated by the Company due to her Disability. For purposes of this Agreement, “Disability” shall mean a physical or mental disability that prevents Executive from performing her essential job functions as Co-CEO, President and CIO for a period of at least six (6) consecutive months within any twelve (12)-month period. In such event, the Company shall have the termination obligations in Section 7(d)(iv) or (v), as applicable, of this Agreement.
(c)Notice of Termination. Any termination of Executive’s employment by the Company for or without Cause or due to Disability, or by Executive for or without Good Reason, shall be communicated by a Notice of Termination to the other party. For purposes of this Agreement, a “Notice of Termination” means a written notice, which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated and (iii) the Date of Termination. The failure by the Company or Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive’s or the Company’s rights hereunder.
(d)Company’s Termination Obligations.
(i)Good Reason or Without Cause More Than Six Months Prior to a Change in Control or More Than Two Years Following a Change in Control. If Executive’s employment is terminated by Executive for Good Reason, or by the Company without Cause (other than due to Executive’s death or Disability), provided each occurs more than six (6) months prior to a Change in Control or more than two (2) years following a Change in Control, then, subject to the Release requirement set forth in Section 7(d)(i)(F) below and subject to
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Executive’s continued compliance with Section 9 below, the Company shall pay to Executive a lump sum payment in cash equal to the aggregate of the following amounts under Sections 7(d)(i)(A), (B) and (C) below within thirty (30) days following the Date of Termination and provide the other benefits provided below:
(A)Executive’s Base Salary through the Date of Termination, to the extent not previously paid; any incentive compensation for a completed prior performance period that has been earned but has not yet been paid; reimbursement for any unreimbursed business expenses incurred by Executive prior to the Date of Termination that are subject to reimbursement under Section 6 of this Agreement; and payment of accrued, but unused vacation time as of the Date of Termination (“Accrued Obligations”).
(B)An amount equal to the product of two (2) times the sum of: (1) Executive’s Base Salary on the day prior to the Date of Termination (or, if Executive’s termination for Good Reason is based upon a reduction in Base Salary, then Executive’s Base Salary in effect immediately prior to such reduction) and (2) the sum of Executive’s Annual Incentive Award (as defined below) paid for each of the three (3) calendar years preceding the calendar year that includes the Date of Termination, divided by three (3).
(C)An amount (the “Pro Rata Annual Incentive Award”) equal to the Pro Rata Portion (as defined below) of the sum of (1) and (2) below, with respect to any Annual Incentive Award with an incomplete performance period as of the Date of Termination:
(1)    With respect to any performance goals relating to Company financial performance or stock price, the greater of the amount that would have been payable at target performance or the amount calculated based on actual performance through the calendar quarter ending on or immediately prior to the Date of Termination.
(2)    With respect to any performance goals relating to Company non-financial corporate goals or individual goals, the amount that would have been payable at maximum performance.
(3)    The “Pro Rata Portion” is defined as the amount determined by multiplying the relevant amount in (1) or (2) above by a fraction, the numerator of which is equal to the number of days in the applicable performance period that precede the Date of Termination and the denominator of which is the number of days in the performance period.
(D)To the extent any previously awarded outstanding stock awards, such as stock options, stock appreciation rights, restricted stock units, restricted stock, dividend equivalent rights, or any other form of stock compensation (“Stock Awards”) granted to Executive shall have not vested, such Stock Awards shall immediately become fully (100%) vested and exercisable and shall otherwise be paid in accordance with their terms. Performance-based Stock Awards shall become fully vested, and performance shall be determined based on the terms of the applicable grant agreement.
(E)The Company shall provide continued monthly coverage at the Company’s expense under the Company’s medical, dental, life insurance and disability policies or arrangements in which Executive and any of her dependents were covered on the day prior to the Date of Termination (the “Welfare Plans”) (“Welfare Continuance Benefit”) for a
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period of twenty-four (24) months following the Date of Termination, provided that Executive’s continued participation is possible under the general terms and provisions of the Welfare Plans. The following rules (“Welfare Continuance Rules”) shall also apply:
(1)    If the Company cannot maintain such coverage for Executive or Executive’s spouse or dependents under the terms and provisions of the Welfare Plans (or where such continuation would adversely affect the tax status of the Welfare Plans pursuant to which the coverage is provided), the Company shall provide the Welfare Continuance Benefit by, at the Company’s option, either providing substantially identical benefits directly or through an insurance arrangement or by paying Executive the estimated cost of the coverage for a similarly situated employee (both the Company and employee portions of any cost determination) for twenty-four (24) months after the Date of Termination with such payments to be made in accordance with the established payroll practices of the Company (but not less frequently than monthly) for employees generally for the period during which such cash payments are to be provided.
(2)    If Executive becomes reemployed with another employer and is eligible to receive comparable welfare benefits under another employer provided plan, the portion of the Welfare Continuance Benefit for which Executive is eligible for comparable coverage shall be secondary to those provided under such other plan during such applicable period of eligibility, provided that the costs of obtaining such other welfare benefits is less than the cost of such benefits to Executive immediately prior to the Date of Termination.
(3)    To the extent allowed by applicable law, the twenty-four (24)-month Welfare Continuance Benefit period shall run concurrently with the period for which Executive and/or her spouse and any of her dependents would be eligible for continuation coverage under the Consolidated Omnibus Reconciliation Act of 1985 or any similar state law (the “COBRA Period”), although the twenty-four (24)-month Welfare Continuance Benefit period may continue to run after the COBRA Period has ended.
(F)Notwithstanding any other provisions of this Agreement, no amounts or benefits, other than the Accrued Obligations, shall be payable to Executive, and Executive shall forfeit all rights, under Section 7(d)(i) of this Agreement unless a release of claims substantially in the form of the Release attached as Exhibit A, subject to such changes as the Company determines are necessary or appropriate to comply with changes in applicable law, regulation or other governmental guidance (the “Release”) is signed and becomes irrevocable within the time period specified by the Release for review and revocation. To the extent any amounts or benefits under Section 7(d)(i), other than the Accrued Obligations, have been paid and the Release requirement of this Section 7(d)(i)(F) is not met, then any such amounts or benefits previously paid shall be forfeited and Executive shall repay such forfeited amounts or benefits to the Company within thirty (30) days following demand by the Company.
(G)The term “Annual Incentive Award” means an incentive award that is based on performance over a period of one (1) year. Annual Incentive Awards will be paid in cash. For the avoidance of doubt, an Annual Incentive Award does not include an outstanding Stock Award.
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(ii)Good Reason or Without Cause Within Six Months Prior to or On or Within Two Years Following a Change in Control. If Executive’s employment is terminated by Executive for Good Reason, or by the Company without Cause (other than due to Executive’s death or Disability), provided each occurs within six (6) months prior to or on or within two (2) years following a Change in Control, then, subject to the Release requirement set forth in Section 7(d)(ii)(F) below and subject to Executive’s continued compliance with Section 9 below, the Company shall pay to Executive a lump sum payment in cash equal to the aggregate of the following amounts under Sections 7(d)(ii)(A), (B) and (C) below within thirty (30) days following the Date of Termination and provide the other benefits provided below. Notwithstanding the foregoing, if such termination occurs within six (6) months prior to a Change in Control, the amount under Section 7(d)(i)(B) shall be calculated and paid as described in Section 7(d)(i) within thirty (30) days following the Date of Termination and, within thirty (30) days following the Change in Control, the Company shall pay to Executive a lump sum payment in cash equal to the excess of the amount payable under Section 7(d)(ii)(B) over the amount previously paid to Executive pursuant to Section 7(d)(i)(B).
(A)The Accrued Obligations.
(B)An amount equal to the product of two and ninety-nine hundredths (2.99) times the sum of: (1) Executive’s Base Salary on the day prior to the Date of Termination (or, if Executive’s termination for Good Reason is based upon a reduction in Base Salary, then Executive’s Base Salary in effect immediately prior to such reduction) and (2) the sum of Executive’s Annual Incentive Award paid for each of the three (3) calendar years preceding the calendar year that includes the Change in Control, divided by three (3).
(C)The Pro Rata Annual Incentive Award.
(D)To the extent any previously awarded Stock Awards granted to Executive shall have not vested, such Stock Awards shall immediately become fully (100%) vested and exercisable and shall otherwise be paid in accordance with their terms. Performance-based Stock Awards shall become fully vested, and performance shall be determined based on the terms of the applicable grant agreement.
(E)The Company shall provide the Welfare Continuance Benefit but for a period of thirty-six (36) months following the Date of Termination rather than twenty-four (24) months, provided that Executive’s continued participation is possible under the general terms and provisions of the Welfare Plans. The Welfare Continuance Rules (as applied to a thirty-six (36) month period) shall also apply.
(F)Notwithstanding any other provisions of this Agreement, no amounts or benefits, other than the Accrued Obligations, shall be payable to Executive, and Executive shall forfeit all rights, under Section 7(d)(ii) of this Agreement unless the Release is signed and becomes irrevocable within the time period specified by the Release for review and revocation. To the extent any amounts or benefits under Section 7(d)(ii), other than the Accrued Obligations, have been paid and the Release requirement of this Section 7(d)(ii)(F) is not met, then any such amounts or benefits previously paid shall be forfeited and Executive shall repay such forfeited amounts or benefits to the Company within thirty (30) days following demand by the Company.
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(iii)Without Good Reason or For Cause Before, On, or After a Change in Control. If the Company should terminate Executive’s employment for Cause or if she should terminate her employment without Good Reason at any time during the Employment Period, then the Company shall pay to Executive the Accrued Obligations in a lump sum within thirty (30) days following the Date of Termination.
(iv)Termination Due to Disability Before, On, or After a Change in Control. If the Company should terminate Executive’s employment due to her Disability at any time during the Employment Period, then the Company shall pay to Executive the Accrued Obligations in a lump sum within thirty (30) days following the Date of Termination. In addition, subject to the Release requirement set forth in Section 7(d)(iv)(C) below and subject to Executive’s continued compliance with Section 9 below, to the extent any previously awarded Stock Awards granted to Executive shall have not vested, such Stock Awards shall immediately become fully (100%) vested and exercisable and shall otherwise be paid in accordance with their terms. Performance-based Stock Awards shall become fully vested, and performance shall be determined based on the terms of the applicable grant agreement. In addition, subject to the Release requirement set forth in Section 7(d)(iv)(C) below and subject to Executive’s continued compliance with Section 9 below, the Company shall pay to Executive within thirty (30) days following the Date of Termination an amount equal to the sum of the amounts calculated under Section 7(d)(iv)(A) and (B) below with respect to any Annual Incentive Award with an incomplete performance period as of the Date of Termination:
(A)With respect to any performance goals relating to Company financial performance or stock price, the greater of the amount that would have been payable at target performance or the amount calculated based on actual performance through the calendar quarter ending on or immediately prior to the Date of Termination.
(B)With respect to any performance goals relating to Company non-financial corporate goals or individual goals, the amount that would have been payable at maximum performance.
(C)The Company shall provide the Welfare Continuance Benefit for a period of eighteen (18) months following the Date of Termination, provided that Executive’s continued participation is possible under the general terms and provisions of the Welfare Plans and consistent with the Welfare Continuance Rules (as applied to an eighteen (18) month period) described in Section 7(d)(ii)(E) above.
(D)Notwithstanding any other provisions of this Agreement, no amounts or benefits, other than the Accrued Obligations, shall be payable to Executive, and Executive shall forfeit all rights, under Section 7(d)(iv) of this Agreement unless the Release is signed and becomes irrevocable within the time period specified by the Release for review and revocation. To the extent any amounts or benefits under Section 7(d)(iv), other than the Accrued Obligations, have been paid and the Release requirement of this Section 7(d)(iv)(C) is not met, then any such amounts or benefits previously paid shall be forfeited and Executive shall repay such forfeited amounts or benefits to the Company within thirty (30) days following demand by the Company.
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(v)Termination Due to Death Before, On, or After a Change in Control. If Executive’s employment should terminate due to her death at any time during the Employment Period, then the Company shall pay to Executive’s estate the Accrued Obligations in a lump sum within thirty (30) days following the Date of Termination, subject to production to the Company of such evidence or information in respect of Executive’s estate as the Company may require. In addition, to the extent any previously awarded Stock Awards granted to Executive shall have not vested, such awards shall immediately become fully (100%) vested and exercisable and shall otherwise be paid in accordance with their terms. Performance-based Stock Awards shall become fully vested, and performance shall be determined based on the terms of the applicable grant agreement. In addition, the Company shall pay to Executive’s estate within thirty (30) days following the Date of Termination:
(A)An amount equal to the sum of: (1) Executive’s Base Salary on the day prior to the Date of Termination and (2) the sum of Executive’s Annual Incentive Award paid for each of the three (3) calendar years preceding the calendar year that includes the Date of Termination, divided by three (3).
(B)The Pro Rata Annual Incentive Award.
(e)Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company and for which Executive may qualify, nor, shall anything herein limit or otherwise negatively affect such rights as Executive may have under any contract or agreement with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.
(f)Full Settlement. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others, except for any recoupment required pursuant to Section 4(c) of this Agreement and any withholding of taxes pursuant to Section 18(c) of this Agreement. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not Executive obtains other employment.
(g)Section 280G Limitations.
(i)Payment Limitation.  Notwithstanding anything contained in this Agreement (or in any other agreement between Executive and the Company (which for this Section 7(g)(i) includes any successor)) to the contrary, to the extent that any payments and benefits provided under this Agreement or payments or benefits provided to, or for the benefit of, Executive under any other plan or agreement of the Company (such payments or benefits are collectively referred to as the “Payments”) would be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), the Payments shall be reduced if and to the extent
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that a reduction in the Payments would result in Executive retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the Excise Tax), than Executive would have retained had Executive been entitled to receive all of the Payments (such reduced amount is hereinafter referred to as the “Limited Payment Amount”). The Company shall reduce the Payments by first reducing or eliminating payments or benefits which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the furthest in time from the date the Determination (as defined below) is delivered to the Company and Executive, subject to compliance with Code Section 409A. Executive shall be solely responsible for the payment of any Excise Taxes imposed upon Executive.
(ii)Determination and Dispute. The determination as to whether the Payments shall be reduced to the Limited Payment Amount and the amount of such Limited Payment Amount (the “Determination”) shall be made at the Company’s expense by an accounting firm selected by the Company and acceptable to Executive (the “Accounting Firm”). The Accounting Firm shall provide the Determination in writing, together with detailed supporting calculations and documentations, to the Company and Executive on or prior to the Date of Termination of Executive’s employment if applicable, or at such other time as requested by the Company or by Executive. If there is no Dispute (as defined below), the Determination of the Accounting Firm shall be binding, final and conclusive upon the Company and Executive. Within ten (10) days following the delivery of the Determination to Executive, Executive shall have the right to dispute the Determination (the “Dispute”) in writing setting forth the precise basis of the Dispute. Within five (5) days following the submission of a Dispute, the Company and Executive shall agree on the appointment of an independent accounting firm to review the Determination made by the Accounting Firm. If the Company and Executive cannot agree on an independent accounting firm within such time frame, then the Company and Executive agree to use an independent accounting firm selected by the Accounting Firm to perform the review. The selected accounting firm (the “Second Accounting Firm”) will review at the Company’s expense the Determination and make a decision on how to resolve the Dispute (the “Second Determination”). Such Second Determination shall be obtained as soon as possible following the Dispute but in all events within forty-five (45) days following submission of the Dispute. The Second Determination of the Second Accounting Firm shall be binding, final and conclusive upon the Company and Executive.
(iii)Attorneys’ Fees Related to a Change in Control. Within sixty (60) days following Executive’s written request (which must include documentation of and a detailed description of such fees and expenses), in the event of a Change in Control, the Company shall reimburse Executive for the reasonable attorneys’ fees and expenses that Executive incurs in connection with the review of this Agreement with respect to the Change in Control and the review of the calculations described in this Section 7(g). Executive must submit any request for reimbursement of such attorneys’ fees and expenses within sixty (60) days after such fees and expenses are incurred.
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(h)Successors.
(i)Section 7 of this Agreement is personal to Executive and, without the prior written consent of the Company, shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. Section 7 of this Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives.
(ii)Section 7 of this Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.
(iii)The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.
8.Code Section 409A Compliance.
(a)The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Code and applicable guidance thereunder (“Code Section 409A”) or comply with an exemption from the application of Code Section 409A and, accordingly, all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Code Section 409A.
(b)Neither Executive nor the Company shall take any action to accelerate or delay the payment of any monies and/or provision of any benefits in any matter which would not be in compliance with Code Section 409A.
(c)A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the form or timing of payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” (within the meaning of Code Section 409A) and, for purposes of any such provision of this Agreement under which (and to the extent) deferred compensation subject to Code Section 409A is paid, references to a “Date of Termination” or “termination of employment” or resignation or like references shall mean separation from service. A separation from service shall not occur under Code Section 409A unless Executive has completely severed her employment or contractor relationship with the Company or Executive has permanently decreased her services (via her employment relationship or her consulting relationship) to twenty percent (20%) or less of the average level of bona fide services over the immediately preceding thirty-six (36)-month period (or the full period if Executive has been providing services for less than thirty-six (36) months). A leave of absence shall only trigger a termination of employment that constitutes a separation from service at the time required under Code Section 409A (which is typically after six (6) months although the specific rules and exceptions in Code Section 409A shall apply). If Executive is deemed on the date of separation from service with the Company to be a “specified employee”, within the meaning of that term under Code Section 409A(a)(2)(B) and using the identification methodology selected by the Company from time-to-time, or if none, the default methodology, then with regard to any payment or benefit that is required to be delayed in compliance with Code Section 409A(a)(2)(B), such payment or benefit shall not be
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made or provided prior to the earlier of (i) the expiration of the six (6) month period measured from the date of Executive’s separation from service or (ii) the date of Executive’s death. In the case of benefits required to be delayed under Code Section 409A, however, Executive may pay the cost of benefit coverage, and thereby obtain benefits, during such six (6) month delay period and then be reimbursed by the Company thereafter when delayed payments are made pursuant to the next sentence. On the first day of the seventh (7th) month following the date of Executive’s separation from service or, if earlier, on the date of Executive’s death, all payments delayed pursuant to this Section 8(c) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein. If any cash payment is delayed under this Section 8(c) of this Agreement, then interest shall be paid on the amount delayed calculated at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Code from the date of Executive’s termination to the date of payment.
(d)    With regard to any provision herein that provides for reimbursement of expenses or in-kind benefits subject to Code Section 409A, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect. All reimbursements shall be reimbursed in accordance with the Company’s reimbursement policies but in no event later than the calendar year following the calendar year in which the related expense is incurred.
(e)    Each payment under this Agreement shall be treated as a separate payment for purposes of Code Section 409A. In no event may Executive, directly or indirectly, designate the calendar year of a payment under this Agreement. Notwithstanding any provision of this Agreement to the contrary, in no event shall the timing of Executive’s execution of the Release, directly or indirectly, result in Executive designating the calendar year of payment of any amounts of deferred compensation subject to Code Section 409A, and if a payment that is subject to execution of the Release could be made in more than one taxable year, payment shall be made in the later taxable year if required by Code Section 409A.
(f)When, if ever, a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company. If the timing of any payment of deferred compensation is based on a Change in Control, if and to the extent required by Section 409A of the Code, such payment shall be made on a Change in Control that is a “change in control event” for purposes of Section 409A of the Code or such other earliest permissible date under Section 409A of the Code.
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(g)The Company and Executive agree to cooperate in good faith to ensure compliance in form and operation with Code Section 409A to the extent Code Section 409A is applicable under this Agreement.
9.Restrictive Covenants. The Company and Executive agree that Executive has had and will have a prominent role in the management of the business, and the development of the goodwill of the Company and its subsidiaries (collectively, “Dynex”), and has had and will have access to and become familiar with or exposed to Confidential Information (as such term is defined below), in particular, trade secrets, proprietary information, and other valuable business information of Dynex pertaining to Dynex’s business. At the date of Executive’s termination of employment, the Company shall provide Executive with a list of Dynex’s then-current subsidiaries for purposes of the restrictive covenants. Executive agrees that Executive could cause harm to Dynex if she solicited Dynex’s employees, lenders, or business counterparties upon the cessation of Executive’s employment away from Dynex, or misappropriated or divulged Dynex’s Confidential Information; and that as such, Dynex has legitimate business interests in protecting its goodwill and Confidential Information; and, as such, these legitimate business interests justify the following restrictive covenants:
(a)Confidentiality and Non-Disclosure Covenant.
(i)Executive agrees that during the Employment Period and for a period of five (5) years following the cessation of her employment for any reason (or longer, consistent with Virginia law, if the Confidential Information qualifies as a trade secret under Virginia law), Executive shall not, directly or indirectly (A) disclose any Confidential Information (as defined below) to any Person (other than, only with respect to the period that Executive is employed by the Company, to an employee or outside advisor of the Company who requires such information to perform his or her duties for the Company or to a lender or business counterparty that requires such information to engage in a transaction with the Company), or (B) use any Confidential Information for Executive’s own benefit or the benefit of any third party. “Confidential Information” is Dynex’s business information that is not known to the general public or to the investment industry, such as marketing plans, trade secrets, financial information and records, customized software, data repositories, operation methods, personnel information, drawings, designs, information regarding product development, and customer lists. The foregoing obligation shall not apply to any Confidential Information that has been previously disclosed to the public by the Company or with its permission, is in the public domain (other than by reason of a breach of Executive’s obligations to hold such Confidential Information confidential), or is otherwise legitimately known by Executive prior to her employment with the Company. In particular, and without limitation, Confidential Information shall not include any knowledge of Executive with respect to the general business of the Company including its investment in and management of fixed income and similar securities on a leveraged basis, and its organization as a real estate investment trust. Nothing in this Agreement shall prevent Executive from retaining papers and other materials of a personal nature, such as personal diaries, calendars and Rolodexes, information relating to her compensation or relating to reimbursement of expenses, and copies of plans, programs and agreements relating to her employment or benefits. If Executive is required or requested by a court or governmental agency to disclose Confidential Information, Executive must notify the
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Chief Operating Officer of the Company (or the Chief Executive Officer of the Company, if Executive is the Chief Operating Officer of the Company) of such disclosure obligation or request no later than three (3) business days after Executive learns of such obligation or request, and permit the Company to take all lawful steps it deems appropriate to prevent or limit the required disclosure.
(ii)Nothing in this Agreement restricts or prohibits Executive or Executive’s counsel from initiating communications directly with, responding to any inquiry from, volunteering information to, or providing testimony before a self-regulatory authority or a governmental, law enforcement or other regulatory authority, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, the Financial Industry Regulatory Authority, the Congress, and any Office of Inspector General (collectively, the “Regulators”), from participating in any reporting of, investigation into, or proceeding regarding suspected violations of law, or from making other disclosures that are protected under or from receiving an award for information provided under the whistleblower provisions of state or federal law or regulation.  Executive does not need the prior authorization of the Company to engage in such communications with the Regulators, respond to such inquiries from the Regulators, provide Confidential Information or documents containing Confidential Information to the Regulators, or make any such reports or disclosures to the Regulators.  Executive is not required to notify the Company that Executive has engaged in such communications with the Regulators. Executive recognizes and agrees that, in connection with any such activity outlined above, Executive must inform the Regulators that the information Executive is providing is confidential.
(iii)Federal law provides certain protections to individuals who disclose a trade secret to their attorney, a court, or a government official in certain, confidential circumstances.  Specifically, federal law provides that an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret under either of the following conditions:
•Where the disclosure is made (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting or investigating a suspected violation of law; or
•Where the disclosure is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. 
Federal law also provides that an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order. 
(b)Non-Competition Covenant. Executive agrees that during the Employment Period, Executive shall devote on a full-time business basis her skill, knowledge,
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commercial efforts and business time as the Board shall reasonably require to the conscientious and good faith performance of her duties and responsibilities to the Company to the best of her ability. Accordingly, during the Employment Period, Executive shall not, directly or indirectly, be employed by, render services for, engage in business with or serve as an agent or consultant to any Person other than the Company. However, Executive may serve on the board of directors of one or more non-profit or for-profit organizations, subject to the consent of the Board. Attached as Exhibit B is a list of the boards of directors on which Executive currently serves, which have been approved by the Board. Executive further agrees that during the Employment Period and for a period of ninety (90) days (subject to extension as provided below) following any cessation of her employment for any reason, Executive shall not, directly or indirectly, render services within the “Restricted Territory” as an employee, owner, consultant or in any capacity that are the same as or substantially similar to the services provided by Executive for the Company during the twelve (12) months preceding the cessation of Executive’s employment, on behalf of any person or entity that engages in a business that is the same as or substantially similar to, and competitive with, the business of Dynex at the time Executive’s employment ceases. In the event Executive is paid severance benefits under Section 7(d)(i) or (iv) of this Agreement, the period of non-competition, as described in the preceding sentence (the “Non-Competition Period”), shall be extended so that the period applies for six (6) months following Executive’s cessation of employment. In the event Executive is paid severance benefits under Section 7(d)(ii) of this Agreement (Change in Control), the Non-Competition Period shall be extended so that the period applies for twenty-four (24) months following Executive’s cessation of employment. Notwithstanding any other provisions of this Agreement, in the event that Executive materially breaches any of his obligations under this Section 9, no amounts or benefits, other than the Accrued Obligations, shall be payable to Executive under Section 7(d) of this Agreement, and the Company may take any such other actions as it deems appropriate with respect to the breach of Executive’s obligations. Executive shall be permitted to hold a ten percent (10%) or less interest in the equity or debt securities of any publicly traded company. The “Restricted Territory” shall mean the continental United States of America. The amounts and benefits payable under this Agreement, including severance benefits, where applicable, are provided as consideration for the non-competition and other restrictive covenants under this Agreement.
(c)Non-Solicitation of Employees. During the Employment Period and for the twelve (12)-month period following the cessation of her employment for any reason, Executive shall not, directly or indirectly, by herself or through any third party, whether on Executive’s own behalf or on behalf of any other Person or entity, (i) solicit or induce or endeavor to solicit or induce, divert, employ or retain, (ii) interfere with the relationship of Dynex with, or (iii) attempt to establish a business relationship of a nature that is competitive with the business of Dynex with, any person that is or was (during the last thirty (30) days of Executive’s employment with the Company) an employee or independent contractor of Dynex.
10.Work Product. Executive agrees that all of Executive’s work product (created solely or jointly with others, and including any intellectual property or moral rights in such work product), given, disclosed, created, developed or prepared in connection with Executive’s employment with the Company (“Work Product”) shall exclusively vest in and be the sole and
20
exclusive property of the Company and shall constitute “work made for hire” (as that term is defined under Section 101 of the U.S. Copyright Act, 17 U.S.C. § 101) with the Company being the person for whom the work was prepared. In the event that any such Work Product is deemed not to be a “work made for hire” or does not vest by operation of law in the Company, Executive hereby irrevocably assigns, transfers and conveys to the Company, exclusively and perpetually, all right, title and interest which Executive may have or acquire in and to such Work Product throughout the world, including without limitation any copyrights and patents, and the right to secure registrations, renewals, reissues, and extensions thereof. The Company or its designees shall have the exclusive right to make full and complete use of, and make changes to all Work Product without restrictions or liabilities of any kind, and Executive shall not have the right to use any such materials, other than within the legitimate scope and purpose of Executive’s employment with the Company. Executive shall promptly disclose to the Company the creation or existence of any Work Product and shall take whatever additional lawful action may be necessary, and sign whatever documents the Company may require, in order to secure and vest in the Company or its designee all right, title and interest in and to all Work Product and any intellectual property rights therein (including full cooperation in support of any Company applications for patents and copyright or trademark registrations).
11.Return of Company Property. In the event of termination of Executive’s employment for any reason, Executive shall return to the Company all of the property of Dynex, including without limitation all Dynex materials or documents containing Confidential Information, and including without limitation, all computers (including laptops), cell phones, keys, PDAs, tablets, credit cards, facsimile machines, televisions, card access to any Dynex building, customer lists, computer disks, reports, files, e-mails, work papers, Work Product, documents, memoranda, records and software, computer access codes, passwords, or disks and instructional manuals, internal policies, and other similar materials or documents which Executive used, received or prepared, helped prepare or supervised the preparation of in connection with Executive’s employment with the Company. Executive agrees not to retain any copies, duplicates, reproductions or excerpts of such material or documents, other than the materials of a “personal nature” referenced in Section 9(a) of this Agreement.
12.Compliance With Company Policies. During the Employment Period, Executive shall be governed by and be subject to, and Executive hereby agrees to comply with, all Company policies, procedures, codes, rules and regulations applicable to all employees and to executive officers of the Company, as they may be amended from time-to-time in the Company’s sole discretion.
13.Injunctive Relief with Respect to Covenants: Forum, Venue and Jurisdiction. Executive acknowledges and agrees that, in the event of any material breach by Executive of any section of this Agreement, remedies at law may be inadequate to protect the Company, and, without prejudice to any other legal or equitable rights and remedies otherwise available to the Company, Executive agrees to the granting of injunctive relief in the Company’s favor in connection with any such breach or violation without proof of irreparable harm.
14.Assumption of Agreement. The Company shall require any successor thereto, by agreement in form and substance reasonably satisfactory to Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company
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would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a material breach of this Agreement and shall entitle Executive to terminate her employment for Good Reason and receive payment as provided under Section 7(d)(i) or (ii) of this Agreement, whichever is applicable on the Date of Termination.
15.Indemnification and Insurance. The Company agrees both during and after the Employment Period to indemnify Executive to the fullest extent permitted by the law and its Articles of Incorporation (including payment of expenses in advance of final disposition of a proceeding) against actions or inactions of Executive during the Employment Period as an officer, director or employee of the Company or any of its subsidiaries or affiliates or as a fiduciary of any benefit plan of any of the foregoing. The Company also agrees to provide Executive with Directors and Officers insurance coverage both during and, with regard to matters occurring during the Employment Period, after the Employment Period. Such coverage after the Employment Period shall be at a level at least equal to the level being maintained at such time for the then current officers and directors or, if then being maintained at a higher level with regard to any prior period activities for officers or directors during such prior period, such higher amount with regard to Executive’s activities during such prior period.
16.Entire Agreement. This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof. All prior correspondence and proposals (including but not limited to summaries of proposed terms) and all prior promises, representations, understandings, arrangements and agreements relating to such subject matter (including but not limited to those made to or with Executive by any other person and those contained in any prior employment, consulting, severance, or similar agreement entered into by Executive and the Company or any predecessor thereto or subsidiary or affiliate thereof, including the Prior Agreement) are merged herein and superseded hereby.
17.Termination of this Agreement and Survival of Certain Provisions. Subject to earlier termination by written agreement of the parties hereto or expiration pursuant to Section 2(a) of this Agreement, this Agreement shall terminate effective upon termination of Executive’s employment by the Company or by Executive for any reason; provided, however, that Sections 4(c), 6(c), 7 (to the extent applicable), 8, 9, 10, 11, 12 (to the extent applicable), 13, 15, 17 and 18, as applicable, of this Agreement shall survive any termination of Executive’s employment with the Company and any expiration or termination of this Agreement.
18.Miscellaneous.
(a)Binding Effect: Assignment. This Agreement shall be binding on and inure to the benefit of the Company and its successors and assigns. This Agreement shall also be binding on and inure to the benefit of Executive and her heirs, executors, administrators and legal representatives. This Agreement shall be assignable by the Company to a successor by merger or otherwise, but not by Executive.
(b)Choice of Law and Forum. This Agreement shall be interpreted, enforced, construed, and governed under the laws of the Commonwealth of Virginia, without regard for any conflict of law principles. The Company and Executive hereby consent irrevocably to personal jurisdiction, service and venue in connection with any claim or controversy arising out
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of this Agreement or Executive’s employment, in the courts of the Commonwealth of Virginia located in Henrico County, Virginia, and in the federal court in the Eastern District of Virginia, Richmond Division, to be chosen at the option of the Company, and Executive waives any objections thereto.
(c)Taxes. The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment and social insurance taxes, as shall be required by law.
(d)Amendments. No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is approved in writing by the Board or a person authorized thereby and is agreed to in writing by Executive. No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No waiver of any provision of this Agreement shall be implied from any course of dealing between or among the parties hereto or from any failure by any party hereto to assert its rights hereunder on any occasion or series of occasions.
(e)Severability. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. In the event that one or more terms or provisions of this Agreement are deemed invalid or unenforceable by the laws of Virginia or any other state or jurisdiction in which it is to be enforced, by reason of being vague or unreasonable as to duration or geographic scope of activities restricted, or for any other reason, the provision in question shall be immediately amended or reformed to the extent necessary to make it valid and enforceable by the court of such jurisdiction charged with interpreting and/or enforcing such provision. Executive agrees and acknowledges that the provision in question, as so amended or reformed, shall be valid and enforceable as though the invalid or unenforceable portion had never been included herein.
(f)Notices. Any notice or other communication required or permitted to be delivered under this Agreement shall be (i) in writing, (ii) delivered personally, by courier service, by certified or registered mail, first-class postage prepaid and return receipt requested, or by electronic mail with receipt verification, (iii) deemed to have been received on the date of delivery or, if mailed, on the third business day after the mailing thereof, and (iv) addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof):
(A)If to the Company, to it at:
Chief Financial Officer
Dynex Capital, Inc.
4991 Lake Brook Drive, Suite 100
Glen Allen, Virginia 23060
rob.colligan@dynexcapital.com    
        
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(B)If to Executive, to her residential address as currently on file with the Company or the Company's email address for Executive unless Executive has provided an alternative email address for notification purpose.
(g)Voluntary Agreement; No Conflicts. Executive represents that she is entering into this Agreement voluntarily and that Executive’s employment hereunder and compliance with the terms and conditions of this Agreement shall not conflict with or result in the breach by Executive of any agreement to which she is a party or by which she or her properties or assets may be bound.
(h)No Construction Against Any Party. This Agreement is the product of informed negotiations between Executive and the Company. If any part of this Agreement is deemed to be unclear or ambiguous, it shall be construed as if it were drafted jointly by all parties. Executive and the Company agree that neither party was in a superior bargaining position regarding the substantive terms of this Agreement.
(i)Counterparts; Electronic Signature. This Agreement may be executed in counterparts (including by electronic signature), each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
(j)Conflicting Provisions. If any provision in this Agreement conflicts with a provision in an award agreement with Executive under a Company incentive plan, the provision more favorable to Executive will govern, to the extent consistent with any applicable shareholder-approved incentive plan.
(k)Headings. The section and other headings contained in this Agreement are for the convenience of the parties only and are not intended to be a part hereof or to affect the meaning or interpretation hereof.
[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Company has duly executed this Agreement by its authorized representative, and Executive has hereunto set her hand, in each case effective as of the date first above written.
DYNEX CAPITAL, INC.

By:    /s/ Robert S. Colligan            
    Robert S. Colligan
Its:    Chief Financial Officer and Chief Operating Officer


SMRITI L. POPENOE


/s/ Smriti L. Popenoe                
SIGNATURE

[Signature Page to Popenoe Employment Agreement]

Exhibit A
RELEASE
For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Smriti L. Popenoe (“Executive”), hereby irrevocably and unconditionally releases, acquits, and forever discharges Dynex Capital, Inc. (the “Company”) and its subsidiaries and affiliates (collectively, “Dynex”) and each of their agents, directors, members, affiliated entities, officers, employees, former employees, attorneys, and all persons acting by, through, under or in concert with any of them (collectively “Releasees”), from any and all charges, complaints, claims, liabilities, grievances, obligations, promises, agreements, controversies, damages, policies, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses of any nature whatsoever, known or unknown, suspected or unsuspected, including, but not limited to, any rights arising out of alleged violations or breaches of any contracts, express or implied, or any tort, or any legal restrictions on Dynex’s right to terminate employees, or any federal, state or other governmental statute, regulation, law or ordinance, including without limitation Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991; the Americans with Disabilities Act; 42 U.S.C. § 1981; the federal Age Discrimination in Employment Act (age discrimination); the Older Workers Benefit Protection Act; the Equal Pay Act; the Family and Medical Leave Act; the Employee Retirement Income Security Act; the Virginia Human Rights Act; the Virginia Equal Pay Act; the Virginians with Disabilities Act; the Virginia Wage Payment Law; the Virginia Right-to-Work Law; the Virginia Equal Pay Law; the Virginia Occupational Safety and Health Act; the Virginia Fraud Against Taxpayers Act; the Virginia Whistleblower Protection Law; Maryland’s anti-discrimination statute (Md. Code Ann., State Gov’t §§ 20-101 – 20-1203); Maryland Fair Employment Practices Act; Maryland Reasonable Accommodations for Disabilities Due to Pregnancy Act; Maryland Deployment of Family Members in the Armed Forces Act; Maryland Equal Pay For Equal Work Law; Maryland Medical Information Discrimination Law; Maryland Maternity Leave Law (Maryland Flexible Leave Act); Maryland Wage Payment and Collection Law; Maryland Wage and Hour Law; Maryland WARN Laws; and Maryland Occupational Safety and Health Act (“Claim” or “Claims”), which Executive now has, owns or holds, or claims to have, own or hold, or which Executive at any time heretofore had owned or held, or claimed to have owned or held, against each or any of the Releasees at any time up to and including the date of the execution of this Release; provided, however, that this Release does not release the Releasees from any obligation to pay “Accrued Obligations” (as defined in Section 7(d)(i)(A) of the employment agreement entered into as of July 19, 2024 by and between the Company and Executive (the “Employment Agreement”)), any applicable termination obligations of the Company under Section 7(d) of the Employment Agreement shall be paid in exchange for this Release, any accrued, vested benefits under the Company’s benefit plans that Executive has earned prior to the date hereof, the provisions under Sections 6(c) and 15 of the Employment Agreement, or any rights to indemnification or defense under the Company’s charter, bylaws or directors and officers insurance.
Nothing in this Release shall restrict or prohibit Executive or Executive’s counsel from filing a charge or complaint with, initiating communications directly with, responding to any inquiry from, volunteering information to, or providing testimony before a self-regulatory authority or a governmental, law enforcement or other regulatory authority, including the U.S.

Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, the Financial Industry Regulatory Authority, the Congress, and any Office of Inspector General (collectively, the “Regulators”), from participating in any reporting of, investigation into, or proceeding regarding suspected violations of law, or from making other disclosures that are protected under or from receiving an award for information provided under the whistleblower provisions of state or federal law or regulation.  Executive does not need the prior authorization of the Company to engage in such communications with the Regulators, respond to such inquiries from the Regulators, provide Confidential Information (as defined in the Employment Agreement) or documents containing Confidential Information to the Regulators, or make any such reports or disclosures to the Regulators.  Executive is not required to notify the Company that Executive has engaged in such communications with the Regulators. Executive recognizes and agrees that, in connection with any such activity outlined above, Executive must inform the Regulators that the information Executive is providing is confidential. To the extent, that any such charge or complaint is made against the Releasees, Executive expressly waives any claim or right to any form of monetary relief or other damages, or any form of individual recovery or relief in connection with any such charge or complaint, except that Executive does not waive her right with respect to an award for information provided under the whistleblower provisions of state or federal law or regulation.
Executive hereby acknowledges and agrees that the execution of this Release and the cessation of Executive’s employment and all actions taken in connection therewith are in compliance with the federal Age Discrimination in Employment Act and the Older Workers Benefit Protection Act and that the releases set forth above shall be applicable, without limitation, to any claims brought under these Acts. Executive further acknowledges and agrees that:
a.The Release given by Executive is given solely in exchange for the severance payments set forth in the Employment Agreement between Dynex and Executive to which this Release was initially attached and such consideration is in addition to anything of value which Executive was entitled to receive prior to entering into this Release;
b.By entering into this Release, Executive does not waive rights or claims that may arise after the date this Release is executed;
c.Executive is hereby advised to consult an attorney prior to entering into this Release, and this provision of the Release satisfies the requirements of the Older Workers Benefit Protection Act that Executive be so advised in writing;
d.Executive has been offered twenty-one (21) days [or forty-five (45) days in the event of a group termination] from receipt of this Release within which to consider whether to sign this Release; and
e.For a period of seven (7) days following Executive’s execution of this Release, Executive may revoke this Release by delivering the revocation to an authorized officer of Dynex, and it shall not become effective or enforceable until such seven (7) day period has expired.
A-2
This release shall be binding upon the heirs and personal representatives of Executive and shall inure to the benefit of the successors and assigns of Dynex.


Date:SMRITI L. POPENOE
A-3

Exhibit B

Current Boards of Directors

Industrial Indicators Inc.



EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of this 19th day of July, 2024 (the “Effective Date”), by and between Dynex Capital, Inc., a Virginia corporation (the “Company”), and Byron L. Boston (“Executive”).
WITNESSETH:
WHEREAS, Executive is currently employed by the Company;
WHEREAS, the Company desires to continue to employ and secure the exclusive services of Executive on the terms and conditions set forth in this Agreement;
WHEREAS, Executive desires to accept such employment on such terms and conditions;
WHEREAS, Executive has the trust and confidence of the Company’s Board of Directors (the “Board”);
WHEREAS, the Board values Executive’s leadership and appreciates his continuing contribution to the success of the Company; and
WHEREAS, the Company and Executive previously entered into an Employment Agreement effective October 27, 2023 (the “Prior Agreement”), which the parties desire to modify to reflect Executive’s appointment as Co-Chief Executive Officer of the Company; the Prior Agreement is hereby superseded in its entirety by this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for other good and valuable consideration, the Company and Executive hereby agree as follows:
1.    Agreement to Employ. Upon the terms and subject to the conditions of this Agreement, the Company hereby agrees to continue to employ Executive, and Executive hereby accepts such continued employment with the Company.
2.    Term; Position and Responsibilities; Location.
(a)    Term. This Agreement is effective on the Effective Date and expires on October 27, 2026 (the “Initial Term Expiration Date”), unless sooner terminated by either party as set forth below, or until the termination of Executive’s employment, if earlier. The term of this Agreement shall automatically renew for periods of one (1) year on the Initial Term Expiration Date and each one (1) year anniversary of the Initial Term Expiration Date thereafter (each, a “Renewal Date”), unless either party gives written notice of such nonrenewal (“Nonrenewal Notice”) to the other party at least ninety (90) days before the applicable Renewal Date. Upon a Change in Control (as defined below), the term of this Agreement shall automatically renew for a period of two (2) years, unless the Change in Control occurs during the initial term and there are more than two (2) years remaining in the initial term. The initial and any extended term of this Agreement through the earlier of (i) the date this Agreement expires or is terminated as described herein or (ii) the date of termination of Executive’s employment by the Company or by Executive for any reason is referred to as the “Employment Period”. If the Company provides a Nonrenewal Notice for a Renewal Date in accordance with the


requirements described in the preceding sentence and Executive’s employment is terminated by the Company on such Renewal Date for any reason other than Cause (as defined below) or Executive terminates for Good Reason (as defined below) on account of such Nonrenewal Notice, Executive shall have a right to receive the payments and benefits set forth (A) in Section 7(d)(i) of this Agreement if such termination occurs more than six (6) months prior to a Change in Control or more than two (2) years following a Change in Control or (B) in Section 7(d)(ii) of this Agreement if such termination occurs within six (6) months prior to a Change in Control or on or within two (2) years following a Change in Control, subject to the requirements therein, including but not limited to the Release requirement under Section 7(d)(i)(F) or Section 7(d)(ii)(F) of this Agreement, as applicable.
(b)    Position and Responsibilities. During the Employment Period, Executive shall serve as Co-Chief Executive Officer of the Company (“Co-CEO”) and shall be responsible for performing all duties associated with guiding the strategic and operational direction and performance of the Company and such other related duties and responsibilities as are customarily assigned to individuals serving in such position. The Company and Executive agree that during the Employment Period, Executive shall report directly to the Board and shall devote as much of his skill, knowledge, commercial efforts and business time as the Board shall reasonably require for the conscientious and good faith performance of his duties and responsibilities for the Company to the best of his ability. Executive shall continue to be nominated to serve as a member of the Board during the Employment Period. Executive agrees to serve in other officer and director positions for the Company, including as a member of the Board if so elected, and any subsidiaries or affiliates of the Company upon request, in each case without additional compensation.
(c)    Location. During the Employment Period, Executive’s services may be performed from one or more virtual offices located at his out-of-state residences, provided that Executive shall travel to the Company’s offices in the Richmond, Virginia metropolitan area as necessary or as required by the Company or the Board.
3.    Base Salary. During the Employment Period, the Company shall pay Executive a base salary at an annualized rate of no less than $900,000 (which increase was effective as of July 1, 2023), payable in installments on the Company’s regular payroll dates but not less frequently than monthly. The Board or a committee thereof shall review Executive’s base salary annually during the Employment Period for adjustment up or down (but not below $900,000 without Executive’s consent), based on its periodic review of Executive’s performance in accordance with the Company’s regular policies and procedures; provided, however, that following a Change in Control Executive’s base salary shall not be decreased. The base salary amount payable to Executive for a full year under this Section 3 shall be referred to herein as the “Base Salary”.
4.    Incentive Compensation.
(a)    Annual Incentive Awards. Executive shall be eligible to participate in and receive annual cash incentive awards pursuant to the terms of the Dynex Capital, Inc. Annual Cash Incentive Plan or any successor plan or program (the “Dynex Incentive Plan”). The minimum target amount of Executive’s annual cash incentive award for any fiscal year during the Employment Period, including the full 2024 fiscal year, shall be not less than two hundred
2

percent (200%) of Executive’s Base Salary, and the maximum amount of Executive’s annual cash incentive award for any fiscal year during the Employment Period shall be not less than four hundred percent (400%) of Executive’s Base Salary. The actual amount of Executive’s annual cash incentive award, if any, may be more or less than the target amount, as determined by the Board or a committee thereof, pursuant to the terms of the Dynex Incentive Plan, but not more than the maximum amount. For each fiscal year during the Employment Period, the Company’s management team shall recommend proposed performance targets under the Dynex Incentive Plan to the Board or a committee thereof by the end of the fiscal year immediately prior to the applicable performance year, and the Company’s management team shall provide all information necessary or appropriate to enable the Board or a committee thereof to determine the final performance targets by the end of the first month of the applicable performance year. Any annual cash incentive award shall be paid after the end of the fiscal year to which it relates, at the same time and under the same terms and conditions as the annual cash incentive awards for other executives of the Company and subject to the terms of the Dynex Incentive Plan, including requirements as to continued employment, subject to the provisions of Sections 7(d)(i)(C) and 7(d)(ii)(C) below.
(b)    Long-Term Incentive Awards. Executive shall be eligible to participate in and receive long-term incentive awards pursuant to the Dynex Capital, Inc. 2020 Stock and Incentive Plan or any successor plan (the “Dynex Stock and Incentive Plan”). The target amount of Executive’s long-term incentive award granted with respect to any fiscal year during the Employment Period, including awards for the full 2024 fiscal year that are granted in 2025, shall be not less than $3,100,000. The actual amount of Executive’s long-term incentive award, if any, may be more or less than the target amount, as determined by the Board or a committee thereof, pursuant to the terms of the Dynex Stock and Incentive Plan.
(c)    Clawback. Executive agrees that any incentive compensation (including both equity and cash incentive compensation) that Executive receives from the Company is subject to repayment to (i.e., clawback by) the Company or a related entity (i) as required by applicable law, or (ii) pursuant to an applicable clawback policy adopted by the Board from time to time. Any such clawback determination shall be made in good faith by the Board or a committee thereof and consistent with applicable law and the terms of the clawback policy, if applicable. Except where offset of, or recoupment from, incentive compensation covered by Code Section 409A (as defined below) is prohibited by Code Section 409A, to the extent allowed by law and as determined by the Board or a committee thereof, Executive agrees that such repayment may, in the discretion of the Board or a committee thereof, be accomplished by withholding of future compensation to be paid to Executive by the Company. Any recovery of incentive compensation covered by Code Section 409A shall be implemented in a manner which complies with Code Section 409A. Any recovery of incentive compensation pursuant to this Section 4(c) shall not constitute a breach of this Agreement or Good Reason (as defined below).
5.    Employee Benefits.
(a)    General. During the Employment Period, Executive shall be eligible to participate in the employee and executive benefit plans and programs maintained by the Company from time-to-time in which executives of the Company are eligible to participate, including, to the extent maintained by the Company, life, medical, dental, accidental and
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disability insurance plans and retirement, deferred compensation and savings plans, in accordance with the terms and conditions thereof as in effect from time-to-time. As of the date of this Agreement, Executive is eligible and shall remain eligible to participate in the Company’s existing 401(k) plan and the Company shall match Executive’s contributions in accordance with the terms of that plan, provided that such matching does not violate any provisions of law applicable to the 401(k) plan.
(b)    Vacation. During the Employment Period, Executive shall be entitled to a number of vacation days as determined by the Board or a committee thereof, which shall not be less than six (6) weeks per calendar year, without carry-over accumulation. Executive shall also be entitled to Company-designated holidays.
(c)    Cellular Phones and Personal Data Assistants. During the Employment Period, the Company shall provide Executive with, or shall reimburse Executive for his purchase of, a cellular phone and a personal data assistant (e.g., iPad, tablet, etc.) for his use as agreed upon by the Company and Executive, as well as pay for business-related usage fees, pursuant to the Company’s policy for executives or, if none, as approved by the Company consistent with the Company’s practice for other executives. Executive shall submit a detailed bill in order to obtain reimbursement.
(d)    Concierge Medical Services. During the Employment Period, the Company shall reimburse Executive for the cost of an annual concierge medical services fee, including the cost of an annual physical, at the level of the Mayo Clinic Executive Health Program or any successor program.
6.    Expenses.
(a)    Business Travel, Lodging. The Company shall reimburse Executive for reasonable travel, lodging, meal and other reasonable expenses incurred by him in connection with the performance of his duties and responsibilities hereunder upon submission of related receipts or other evidence of the incurrence and purpose of each such expense consistent with the terms and conditions of the Company’s travel policy in effect at any time.
(b)    Agreement Review. Within thirty (30) days following Executive’s written request (which must include documentation of such fees and expenses but not narratives of specific legal services provided), the Company shall reimburse Executive for the reasonable attorneys’ fees and expenses he incurred (if any) relating to the review and negotiation of this Agreement. Executive must submit any request for reimbursement of such attorneys’ fees and expenses within one (1) year of when such fees and expenses are incurred.
(c)    Agreement Dispute. Within sixty (60) days following Executive’s written request (which must include a detailed description of such fees and expenses), the Company agrees to pay, to the full extent permitted by law, all legal fees and expenses that Executive may reasonably incur as a result of any controversy or claim arising out of or relating to this Agreement, or the breach thereof, by the Company, Executive, or others (including as a result of any contest by Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment beyond such sixty (60) day period at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the “Code”); provided that, before a Change in Control, the Company shall pay such
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legal fees and expenses only if Executive prevails on at least one material point in such controversy or claim (in which case all previously incurred legal fees and expenses as described above shall be paid immediately and future such legal fees and expenses shall be paid as they are incurred) and, following a Change in Control, the Company shall pay such legal fees and expenses as they are incurred regardless of the outcome of the controversy or claim but only for as long as Executive’s claim is not determined by a court of final jurisdiction to be frivolous. If a court of final jurisdiction determines Executive’s claim to be frivolous, then Executive shall be required to repay to the Company within sixty (60) days following the Company’s written request any previously paid attorneys’ fees and expenses under this Section 6(c).
(d)    Reimbursement Requirements. Any reimbursements provided in Sections 5 and 6 of this Agreement shall be reimbursed, unless specifically provided otherwise herein, in accordance with the Company’s expense reimbursement policy in effect at any time, if any, and the requirements of Section 8(d) of this Agreement, to the extent applicable.
7.    Termination of Employment. The Board believes it is in the best interests of the Company to diminish the inevitable distraction of Executive by virtue of the personal uncertainties and risks in the event Executive terminates his employment for Good Reason or is terminated by the Company without Cause and to encourage Executive’s full attention and dedication to the Company, and to provide Executive with compensation and benefits arrangements upon such termination which ensure that the compensation and benefits expectations of Executive will be satisfied and which are competitive with those of other corporations. The Board has approved this Section 7 and authorized its inclusion in this Agreement on the Company’s behalf to Executive.
(a)    Certain Definitions.
(i)    “Change in Control” shall mean any of the following:
(A)    The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)), (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty-five percent (35%) or more of either (1) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); or
(B)    The composition of the Company’s Board shall change such that the individuals who, as of October 27, 2023, constituted the Board (the “Incumbent Directors”) no longer comprise at least a majority of the members of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the Incumbent Directors shall be considered as though such individual were an Incumbent Director, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to
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the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(C)    Consummation of a reorganization, merger, share exchange or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination:
(1)    the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, at least eighty percent (80%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries or affiliates) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; and
(2)    at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were Incumbent Directors at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
(D)    Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company, except pursuant to a Business Combination that complies with clause (1) or (2) of Section 7(a)(i)(C) of this Agreement.
(ii)    “Date of Termination” means the date of Executive’s termination of employment with the Company, determined in accordance with the requirements of Section 8(c) of this Agreement, which will typically be (A) if Executive’s employment is terminated by the Company for Cause, the date of receipt of the Notice of Termination (as defined below) or any later date specified therein, as the case may be, (B) if Executive’s employment is terminated by Executive for Good Reason, the date specified pursuant to Section 7(b)(i) below, (C) if Executive’s employment is terminated by the Company other than for Cause or by Executive without Good Reason, the date on which the Company or Executive notifies the other of such termination, (D) if Executive’s employment is terminated by reason of death, the date of death of Executive, or (E) if the Company terminates Executive’s employment due to Disability (as defined below), the date of receipt of the Notice of Termination or any later date specified therein, as the case may be.
(b)    Termination of Employment.
(i)    Good Reason. Executive may terminate his employment during the Employment Period for Good Reason. In such event, the Company shall have the termination obligations in Section 7(d)(i) or (ii) of this Agreement, whichever is applicable on
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the Date of Termination. For purposes of this Agreement, “Good Reason” shall mean any of the following, without Executive’s consent:
(A)    prior to a Change in Control, a material diminution in Executive’s position, authority, duties or responsibilities as Co-CEO, excluding for this purpose an isolated, insubstantial or inadvertent action not taken in bad faith;
(B)    on or following a Change in Control, the assignment to Executive of any duties inconsistent with Executive’s position (including status, office or title as Co-CEO, and reporting requirements), authority, duties, and responsibilities as Co-CEO, or any other action by the Company that results in a diminution in such position (including status, office or title as Co-CEO, and reporting requirements), authority, duties and responsibilities as Co-CEO, or any requirement that Executive not serve as the Co-CEO of the Company, in all cases excluding for this purpose an isolated, insubstantial or inadvertent action not taken in bad faith;
(C)    whether prior to, on or following a Change in Control, a reduction in Executive’s Base Salary or a reduction of Executive’s minimum target incentive opportunity in violation of Section 3, Section 4(a) or Section 4(b) of this Agreement;
(D)    whether prior to, on or following a Change in Control, the Company’s requiring Executive to perform his services on a regular basis at any location that is more than fifty (50) miles from the location where Executive primarily performed services during the six (6) months immediately preceding the change in location or the Company’s requiring Executive to perform his services on a regular basis in person rather than by telecommuting;
(E)    whether prior to, on or following a Change in Control, any material breach of this Agreement by the Company; or
(F)    whether prior to, on or following a Change in Control, the Company delivers to Executive a Nonrenewal Notice as described in Section 2(a) and does not offer Executive a new employment agreement providing terms and conditions substantially similar to, or more favorable than, those in this Agreement, and Executive is willing and able to execute a new employment agreement on such terms and continue performing services thereunder.    
To trigger “Good Reason,” Executive is required to provide written notice to the Board of the existence of a condition described in this Section 7(b)(i) within thirty (30) days following the initial existence of the condition, and the Company shall have thirty (30) days after receiving such notice to remedy the condition. If the condition is remedied within thirty (30) days, then “Good Reason” does not exist. If the condition is not remedied within thirty (30) days, then Executive must resign within thirty (30) days following the expiration of the remedy period in order for such resignation to be for “Good Reason.”
Notwithstanding the above, “Good Reason” shall not include any resignation by Executive if the Company has communicated to Executive in writing that grounds for a “Cause” termination exist, or if the Company communicates to Executive in writing that grounds for a “Cause” termination exist at any time during the notice and remedy period described in the preceding
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paragraph, and in either case if “Cause” is determined to exist pursuant to Section 7(b)(iii) of this Agreement. The remedy and resignation period described in the preceding paragraph shall be automatically extended so that it does not end before any notice and remedy period under Section 7(b)(iii) of this Agreement, provided that the remedy and resignation period described in the preceding paragraph shall not be extended beyond one hundred twenty (120) days from the date of Executive’s submission of written notice pursuant to the preceding paragraph.
(ii)    Without Good Reason. Executive may terminate his employment during the Employment Period without Good Reason. In such event, the Company shall have the termination obligations in Section 7(d)(iii) of this Agreement.
(iii)    Cause. The Company may terminate Executive’s employment during the Employment Period for Cause. In such event, the Company shall have the termination obligations in Section 7(d)(iii) of this Agreement. For purposes of this Agreement, “Cause” shall mean any of the following:
(A)    Executive’s gross or willful misconduct, fraud or embezzlement in connection with the performance of Executive’s duties to the Company;
(B)    prior to a Change in Control, the failure of Executive to adhere to the lawful directions of the Board that are reasonably consistent with Executive’s duties and position as Co-CEO;
(C)    a material violation by Executive of any portion of Section 9 of this Agreement; or
(D)    Executive’s being convicted of, or entering a guilty plea or plea of no contest to, any felony or any crime of moral turpitude.
For purposes of this provision, no act or failure to act, on the part of Executive, shall be considered “willful” unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or a committee thereof, or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. The cessation of employment of Executive shall not be deemed to be for Cause unless and until there shall have been delivered to Executive written notice of a resolution duly adopted by the affirmative vote of not less than two-thirds (2/3) of the Board at a meeting of the Board called and held for such purpose (after at least fifteen (15) days’ notice is provided to Executive of such meeting (setting forth the specific section(s) of this Agreement applicable to Executive’s conduct) and Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, Executive is guilty of conduct described in subparagraph (A) or (B) or (C) or (D) above, and specifying the particulars thereof in detail. Upon delivery of the written notice, Executive’s employment shall be immediately terminated; provided, however, with regard to conduct described in subparagraph (B) or (C) above only, if such conduct can be remedied, as determined in the good faith opinion of the Board, Executive shall have thirty (30) days after his receipt of the written notice to remedy the conduct. If the conduct is remedied within thirty (30) days, then “Cause” does not
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exist. If the conduct is not remedied within thirty (30) days, then the Company shall provide Notice of Termination within thirty (30) days following the expiration of the remedy period.
(iv)    Without Cause. The Company may terminate Executive’s employment without Cause during the Employment Period. In such event, the Company shall have the termination obligations in Section 7(d)(i) or 7(d)(ii) of this Agreement, whichever is applicable on the Date of Termination.
(v)    Death or Disability. Executive’s employment during the Employment Period shall automatically terminate on Executive’s death and may be terminated by the Company due to his Disability. For purposes of this Agreement, “Disability” shall mean a physical or mental disability that prevents Executive from performing his essential job functions as Co-CEO for a period of at least six (6) consecutive months within any twelve (12)-month period. In such event, the Company shall have the termination obligations in Section 7(d)(iv) or (v), as applicable, of this Agreement.
(c)    Notice of Termination. Any termination of Executive’s employment by the Company for or without Cause or due to Disability, or by Executive for or without Good Reason, shall be communicated by a Notice of Termination to the other party. For purposes of this Agreement, a “Notice of Termination” means a written notice, which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated and (iii) the Date of Termination. The failure by the Company or Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive’s or the Company’s rights hereunder.
(d)    Company’s Termination Obligations.
(i)    Good Reason or Without Cause More Than Six Months Prior to a Change in Control or More Than Two Years Following a Change in Control. If Executive’s employment is terminated by Executive for Good Reason, or by the Company without Cause (other than due to Executive’s death or Disability), provided each occurs more than six (6) months prior to a Change in Control or more than two (2) years following a Change in Control, then, subject to the Release requirement set forth in Section 7(d)(i)(F) below and subject to Executive’s continued compliance with Section 9 below, the Company shall pay to Executive a lump sum payment in cash equal to the aggregate of the following amounts under Sections 7(d)(i)(A), (B) and (C) below within thirty (30) days following the Date of Termination and provide the other benefits provided below:
(A)    Executive’s Base Salary through the Date of Termination, to the extent not previously paid; any incentive compensation for a completed prior performance period that has been earned but has not yet been paid; reimbursement for any unreimbursed business expenses incurred by Executive prior to the Date of Termination that are subject to reimbursement under Section 6 of this Agreement; and payment of accrued, but unused vacation time as of the Date of Termination (“Accrued Obligations”).
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(B)    An amount equal to the product of two (2) times the sum of: (1) Executive’s Base Salary on the day prior to the Date of Termination (or, if Executive’s termination for Good Reason is based upon a reduction in Base Salary, then Executive’s Base Salary in effect immediately prior to such reduction) and (2) the sum of Executive’s Annual Incentive Award (as defined below) paid for each of the three (3) calendar years preceding the calendar year that includes the Date of Termination, divided by three (3).
(C)    An amount (the “Pro Rata Annual Incentive Award”) equal to the Pro Rata Portion (as defined below) of the sum of (1) and (2) below, with respect to any Annual Incentive Award with an incomplete performance period as of the Date of Termination:
(1)    With respect to any performance goals relating to Company financial performance or stock price, the greater of the amount that would have been payable at target performance or the amount calculated based on actual performance through the calendar quarter ending on or immediately prior to the Date of Termination.
(2)    With respect to any performance goals relating to Company non-financial corporate goals or individual goals, the amount that would have been payable at maximum performance.
(3)    The “Pro Rata Portion” is defined as the amount determined by multiplying the relevant amount in (1) or (2) above by a fraction, the numerator of which is equal to the number of days in the applicable performance period that precede the Date of Termination and the denominator of which is the number of days in the performance period.
(D)    To the extent any previously awarded outstanding stock awards, such as stock options, stock appreciation rights, restricted stock units, restricted stock, dividend equivalent rights, or any other form of stock compensation (“Stock Awards”) granted to Executive shall have not vested, such Stock Awards shall immediately become fully (100%) vested and exercisable and shall otherwise be paid in accordance with their terms. Performance-based Stock Awards shall become fully vested, and performance shall be determined based on the terms of the applicable grant agreement.
(E)    The Company shall provide continued monthly coverage at the Company’s expense under the Company’s medical, dental, life insurance and disability policies or arrangements in which Executive and any of his dependents were covered on the day prior to the Date of Termination (the “Welfare Plans”) (“Welfare Continuance Benefit”) for a period of twenty-four (24) months following the Date of Termination, provided that Executive’s continued participation is possible under the general terms and provisions of the Welfare Plans. The following rules (“Welfare Continuance Rules”) shall also apply:
(1)    If the Company cannot maintain such coverage for Executive or Executive’s spouse or dependents under the terms and provisions of the Welfare Plans (or where such continuation would adversely affect the tax status of the Welfare Plans pursuant to which the coverage is provided), the Company shall provide the Welfare Continuance Benefit by, at the Company’s option, either providing substantially identical benefits directly or through an insurance arrangement or by paying Executive the estimated cost of the coverage for a similarly situated employee (both the Company and employee portions of any cost determination) for twenty-four (24) months after the Date of Termination with such
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payments to be made in accordance with the established payroll practices of the Company (but not less frequently than monthly) for employees generally for the period during which such cash payments are to be provided.
(2)    If Executive becomes reemployed with another employer and is eligible to receive comparable welfare benefits under another employer provided plan, the portion of the Welfare Continuance Benefit for which Executive is eligible for comparable coverage shall be secondary to those provided under such other plan during such applicable period of eligibility, provided that the costs of obtaining such other welfare benefits is less than the cost of such benefits to Executive immediately prior to the Date of Termination.
(3)    To the extent allowed by applicable law, the twenty-four (24)-month Welfare Continuance Benefit period shall run concurrently with the period for which Executive and/or his spouse and any of his dependents would be eligible for continuation coverage under the Consolidated Omnibus Reconciliation Act of 1985 or any similar state law (the “COBRA Period”), although the twenty-four (24)-month Welfare Continuance Benefit period may continue to run after the COBRA Period has ended.
(F)    Notwithstanding any other provisions of this Agreement, no amounts or benefits, other than the Accrued Obligations, shall be payable to Executive, and Executive shall forfeit all rights, under Section 7(d)(i) of this Agreement unless a release of claims substantially in the form of the Release attached as Exhibit A, subject to such changes as the Company determines are necessary or appropriate to comply with changes in applicable law, regulation or other governmental guidance (the “Release”) is signed and becomes irrevocable within the time period specified by the Release for review and revocation. To the extent any amounts or benefits under Section 7(d)(i), other than the Accrued Obligations, have been paid and the Release requirement of this Section 7(d)(i)(F) is not met, then any such amounts or benefits previously paid shall be forfeited and Executive shall repay such forfeited amounts or benefits to the Company within thirty (30) days following demand by the Company.
(G)    The term “Annual Incentive Award” means an incentive award that is based on performance over a period of one (1) year. Annual Incentive Awards will be paid in cash. For the avoidance of doubt, an Annual Incentive Award does not include an outstanding Stock Award.
(ii)    Good Reason or Without Cause Within Six Months Prior to or On or Within Two Years Following a Change in Control. If Executive’s employment is terminated by Executive for Good Reason, or by the Company without Cause (other than due to Executive’s death or Disability), provided each occurs within six (6) months prior to or on or within two (2) years following a Change in Control, then, subject to the Release requirement set forth in Section 7(d)(ii)(F) below and subject to Executive’s continued compliance with Section 9 below, the Company shall pay to Executive a lump sum payment in cash equal to the aggregate of the following amounts under Sections 7(d)(ii)(A), (B) and (C) below within thirty (30) days following the Date of Termination and provide the other benefits provided below. Notwithstanding the foregoing, if such termination occurs within six (6) months prior to a Change in Control, the amount under Section 7(d)(i)(B) shall be calculated and paid as described in Section 7(d)(i) within thirty (30) days following the Date of Termination and, within thirty (30) days following the Change in Control, the Company shall pay to Executive a lump
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sum payment in cash equal to the excess of the amount payable under Section 7(d)(ii)(B) over the amount previously paid to Executive pursuant to Section 7(d)(i)(B).
(A)    The Accrued Obligations.
(B)    An amount equal to the product of two and ninety-nine hundredths (2.99) times the sum of: (1) Executive’s Base Salary on the day prior to the Date of Termination (or, if Executive’s termination for Good Reason is based upon a reduction in Base Salary, then Executive’s Base Salary in effect immediately prior to such reduction) and (2) the sum of Executive’s Annual Incentive Award paid for each of the three (3) calendar years preceding the calendar year that includes the Change in Control, divided by three (3).
(C)    The Pro Rata Annual Incentive Award.
(D)    To the extent any previously awarded Stock Awards granted to Executive shall have not vested, such Stock Awards shall immediately become fully (100%) vested and exercisable and shall otherwise be paid in accordance with their terms. Performance-based Stock Awards shall become fully vested, and performance shall be determined based on the terms of the applicable grant agreement.
(E)    The Company shall provide the Welfare Continuance Benefit but for a period of thirty-six (36) months following the Date of Termination rather than twenty-four (24) months, provided that Executive’s continued participation is possible under the general terms and provisions of the Welfare Plans. The Welfare Continuance Rules (as applied to a thirty-six (36) month period) shall also apply.
(F)    Notwithstanding any other provisions of this Agreement, no amounts or benefits, other than the Accrued Obligations, shall be payable to Executive, and Executive shall forfeit all rights, under Section 7(d)(ii) of this Agreement unless the Release is signed and becomes irrevocable within the time period specified by the Release for review and revocation. To the extent any amounts or benefits under Section 7(d)(ii), other than the Accrued Obligations, have been paid and the Release requirement of this Section 7(d)(ii)(F) is not met, then any such amounts or benefits previously paid shall be forfeited and Executive shall repay such forfeited amounts or benefits to the Company within thirty (30) days following demand by the Company.
(iii)    Without Good Reason or For Cause Before, On, or After a Change in Control. If the Company should terminate Executive’s employment for Cause or if he should terminate his employment without Good Reason at any time during the Employment Period, then the Company shall pay to Executive the Accrued Obligations in a lump sum within thirty (30) days following the Date of Termination.
(iv)    Termination Due to Disability Before, On, or After a Change in Control. If the Company should terminate Executive’s employment due to his Disability at any time during the Employment Period, then the Company shall pay to Executive the Accrued Obligations in a lump sum within thirty (30) days following the Date of Termination. In addition, subject to the Release requirement set forth in Section 7(d)(iv)(C) below and subject to Executive’s continued compliance with Section 9 below, to the extent any previously awarded Stock Awards granted to Executive shall have not vested, such Stock Awards shall immediately
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become fully (100%) vested and exercisable and shall otherwise be paid in accordance with their terms. Performance-based Stock Awards shall become fully vested, and performance shall be determined based on the terms of the applicable grant agreement. In addition, subject to the Release requirement set forth in Section 7(d)(iv)(C) below and subject to Executive’s continued compliance with Section 9 below, the Company shall pay to Executive within thirty (30) days following the Date of Termination an amount equal to the sum of the amounts calculated under Section 7(d)(iv)(A) and (B) below with respect to any Annual Incentive Award with an incomplete performance period as of the Date of Termination:
(A)    With respect to any performance goals relating to Company financial performance or stock price, the greater of the amount that would have been payable at target performance or the amount calculated based on actual performance through the calendar quarter ending on or immediately prior to the Date of Termination.
(B)    With respect to any performance goals relating to Company non-financial corporate goals or individual goals, the amount that would have been payable at maximum performance.
(C)    The Company shall provide the Welfare Continuance Benefit for a period of eighteen (18) months following the Date of Termination, provided that Executive’s continued participation is possible under the general terms and provisions of the Welfare Plans and consistent with the Welfare Continuance Rules (as applied to an eighteen (18) month period) described in Section 7(d)(ii)(E) above.
(D)    Notwithstanding any other provisions of this Agreement, no amounts or benefits, other than the Accrued Obligations, shall be payable to Executive, and Executive shall forfeit all rights, under Section 7(d)(iv) of this Agreement unless the Release is signed and becomes irrevocable within the time period specified by the Release for review and revocation. To the extent any amounts or benefits under Section 7(d)(iv), other than the Accrued Obligations, have been paid and the Release requirement of this Section 7(d)(iv)(C) is not met, then any such amounts or benefits previously paid shall be forfeited and Executive shall repay such forfeited amounts or benefits to the Company within thirty (30) days following demand by the Company.
(v)    Termination Due to Death Before, On, or After a Change in Control. If Executive’s employment should terminate due to his death at any time during the Employment Period, then the Company shall pay to Executive’s estate the Accrued Obligations in a lump sum within thirty (30) days following the Date of Termination, subject to production to the Company of such evidence or information in respect of Executive’s estate as the Company may require. In addition, to the extent any previously awarded Stock Awards granted to Executive shall have not vested, such awards shall immediately become fully (100%) vested and exercisable and shall otherwise be paid in accordance with their terms. Performance-based Stock Awards shall become fully vested, and performance shall be determined based on the terms of the applicable grant agreement. In addition, the Company shall pay to Executive’s estate within thirty (30) days following the Date of Termination:
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(A)    An amount equal to the sum of: (1) Executive’s Base Salary on the day prior to the Date of Termination and (2) the sum of Executive’s Annual Incentive Award paid for each of the three (3) calendar years preceding the calendar year that includes the Date of Termination, divided by three (3).
(B)    The Pro Rata Annual Incentive Award.
(e)    Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company and for which Executive may qualify, nor, shall anything herein limit or otherwise negatively affect such rights as Executive may have under any contract or agreement with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.
(f)    Full Settlement. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others, except for any recoupment required pursuant to Section 4(c) of this Agreement and any withholding of taxes pursuant to Section 18(c) of this Agreement. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not Executive obtains other employment.
(g)    Section 280G Limitations.
(i)    Payment Limitation.  Notwithstanding anything contained in this Agreement (or in any other agreement between Executive and the Company (which for this Section 7(g)(i) includes any successor)) to the contrary, to the extent that any payments and benefits provided under this Agreement or payments or benefits provided to, or for the benefit of, Executive under any other plan or agreement of the Company (such payments or benefits are collectively referred to as the “Payments”) would be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), the Payments shall be reduced if and to the extent that a reduction in the Payments would result in Executive retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the Excise Tax), than Executive would have retained had Executive been entitled to receive all of the Payments (such reduced amount is hereinafter referred to as the “Limited Payment Amount”). The Company shall reduce the Payments by first reducing or eliminating payments or benefits which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the furthest in time from the date the Determination (as defined below) is delivered to the Company and Executive, subject to compliance with Code Section 409A. Executive shall be solely responsible for the payment of any Excise Taxes imposed upon Executive.
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(ii)    Determination and Dispute. The determination as to whether the Payments shall be reduced to the Limited Payment Amount and the amount of such Limited Payment Amount (the “Determination”) shall be made at the Company’s expense by an accounting firm selected by the Company and acceptable to Executive (the “Accounting Firm”). The Accounting Firm shall provide the Determination in writing, together with detailed supporting calculations and documentations, to the Company and Executive on or prior to the Date of Termination of Executive’s employment if applicable, or at such other time as requested by the Company or by Executive. If there is no Dispute (as defined below), the Determination of the Accounting Firm shall be binding, final and conclusive upon the Company and Executive. Within ten (10) days following the delivery of the Determination to Executive, Executive shall have the right to dispute the Determination (the “Dispute”) in writing setting forth the precise basis of the Dispute. Within five (5) days following the submission of a Dispute, the Company and Executive shall agree on the appointment of an independent accounting firm to review the Determination made by the Accounting Firm. If the Company and Executive cannot agree on an independent accounting firm within such time frame, then the Company and Executive agree to use an independent accounting firm selected by the Accounting Firm to perform the review. The selected accounting firm (the “Second Accounting Firm”) will review at the Company’s expense the Determination and make a decision on how to resolve the Dispute (the “Second Determination”). Such Second Determination shall be obtained as soon as possible following the Dispute but in all events within forty-five (45) days following submission of the Dispute. The Second Determination of the Second Accounting Firm shall be binding, final and conclusive upon the Company and Executive.
(iii)    Attorneys’ Fees Related to a Change in Control. Within sixty (60) days following Executive’s written request (which must include documentation of and a detailed description of such fees and expenses), in the event of a Change in Control, the Company shall reimburse Executive for the reasonable attorneys’ fees and expenses that Executive incurs in connection with the review of this Agreement with respect to the Change in Control and the review of the calculations described in this Section 7(g). Executive must submit any request for reimbursement of such attorneys’ fees and expenses within sixty (60) days after such fees and expenses are incurred.
(h)    Successors.
(i)    Section 7 of this Agreement is personal to Executive and, without the prior written consent of the Company, shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. Section 7 of this Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives.
(ii)    Section 7 of this Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.
(iii)    The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.
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8.    Code Section 409A Compliance.
(a)    The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Code and applicable guidance thereunder (“Code Section 409A”) or comply with an exemption from the application of Code Section 409A and, accordingly, all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Code Section 409A.
(b)    Neither Executive nor the Company shall take any action to accelerate or delay the payment of any monies and/or provision of any benefits in any matter which would not be in compliance with Code Section 409A.
(c)    A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the form or timing of payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” (within the meaning of Code Section 409A) and, for purposes of any such provision of this Agreement under which (and to the extent) deferred compensation subject to Code Section 409A is paid, references to a “Date of Termination” or “termination of employment” or resignation or like references shall mean separation from service. A separation from service shall not occur under Code Section 409A unless Executive has completely severed his employment or contractor relationship with the Company or Executive has permanently decreased his services (via his employment relationship or his consulting relationship) to twenty percent (20%) or less of the average level of bona fide services over the immediately preceding thirty-six (36)-month period (or the full period if Executive has been providing services for less than thirty-six (36) months). A leave of absence shall only trigger a termination of employment that constitutes a separation from service at the time required under Code Section 409A (which is typically after six (6) months although the specific rules and exceptions in Code Section 409A shall apply). If Executive is deemed on the date of separation from service with the Company to be a “specified employee”, within the meaning of that term under Code Section 409A(a)(2)(B) and using the identification methodology selected by the Company from time-to-time, or if none, the default methodology, then with regard to any payment or benefit that is required to be delayed in compliance with Code Section 409A(a)(2)(B), such payment or benefit shall not be made or provided prior to the earlier of (i) the expiration of the six (6) month period measured from the date of Executive’s separation from service or (ii) the date of Executive’s death. In the case of benefits required to be delayed under Code Section 409A, however, Executive may pay the cost of benefit coverage, and thereby obtain benefits, during such six (6) month delay period and then be reimbursed by the Company thereafter when delayed payments are made pursuant to the next sentence. On the first day of the seventh (7th) month following the date of Executive’s separation from service or, if earlier, on the date of Executive’s death, all payments delayed pursuant to this Section 8(c) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein. If any cash payment is delayed under this Section 8(c) of this Agreement, then interest shall be paid on the amount delayed calculated at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Code from the date of Executive’s termination to the date of payment.
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(d)    With regard to any provision herein that provides for reimbursement of expenses or in-kind benefits subject to Code Section 409A, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect. All reimbursements shall be reimbursed in accordance with the Company’s reimbursement policies but in no event later than the calendar year following the calendar year in which the related expense is incurred.
(e)    Each payment under this Agreement shall be treated as a separate payment for purposes of Code Section 409A. In no event may Executive, directly or indirectly, designate the calendar year of a payment under this Agreement. Notwithstanding any provision of this Agreement to the contrary, in no event shall the timing of Executive’s execution of the Release, directly or indirectly, result in Executive designating the calendar year of payment of any amounts of deferred compensation subject to Code Section 409A, and if a payment that is subject to execution of the Release could be made in more than one taxable year, payment shall be made in the later taxable year if required by Code Section 409A.
(f)    When, if ever, a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company. If the timing of any payment of deferred compensation is based on a Change in Control, if and to the extent required by Section 409A of the Code, such payment shall be made on a Change in Control that is a “change in control event” for purposes of Section 409A of the Code or such other earliest permissible date under Section 409A of the Code.
(g)    The Company and Executive agree to cooperate in good faith to ensure compliance in form and operation with Code Section 409A to the extent Code Section 409A is applicable under this Agreement.
9.    Restrictive Covenants. The Company and Executive agree that Executive has had and will have a prominent role in the management of the business, and the development of the goodwill of the Company and its subsidiaries (collectively, “Dynex”), and has had and will have access to and become familiar with or exposed to Confidential Information (as such term is defined below), in particular, trade secrets, proprietary information, and other valuable business information of Dynex pertaining to Dynex’s business. At the date of Executive’s termination of employment, the Company shall provide Executive with a list of Dynex’s then-current subsidiaries for purposes of the restrictive covenants. Executive agrees that Executive could cause harm to Dynex if he solicited Dynex’s employees, lenders, or business counterparties upon the cessation of Executive’s employment away from Dynex, or misappropriated or divulged Dynex’s Confidential Information; and that as such, Dynex has legitimate business interests in
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protecting its goodwill and Confidential Information; and, as such, these legitimate business interests justify the following restrictive covenants:
(a)    Confidentiality and Non-Disclosure Covenant.
(i)    Executive agrees that during the Employment Period and for a period of five (5) years following the cessation of his employment for any reason (or longer, consistent with Virginia law, if the Confidential Information qualifies as a trade secret under Virginia law), Executive shall not, directly or indirectly (A) disclose any Confidential Information (as defined below) to any Person (other than, only with respect to the period that Executive is employed by the Company, to an employee or outside advisor of the Company who requires such information to perform his or her duties for the Company or to a lender or business counterparty that requires such information to engage in a transaction with the Company), or (B) use any Confidential Information for Executive’s own benefit or the benefit of any third party. “Confidential Information” is Dynex’s business information that is not known to the general public or to the investment industry, such as marketing plans, trade secrets, financial information and records, customized software, data repositories, operation methods, personnel information, drawings, designs, information regarding product development, and customer lists. The foregoing obligation shall not apply to any Confidential Information that has been previously disclosed to the public by the Company or with its permission, is in the public domain (other than by reason of a breach of Executive’s obligations to hold such Confidential Information confidential), or is otherwise legitimately known by Executive prior to his employment with the Company. In particular, and without limitation, Confidential Information shall not include any knowledge of Executive with respect to the general business of the Company including its investment in and management of fixed income and similar securities on a leveraged basis, and its organization as a real estate investment trust. Nothing in this Agreement shall prevent Executive from retaining papers and other materials of a personal nature, such as personal diaries, calendars and Rolodexes, information relating to his compensation or relating to reimbursement of expenses, and copies of plans, programs and agreements relating to his employment or benefits. If Executive is required or requested by a court or governmental agency to disclose Confidential Information, Executive must notify the Chief Operating Officer of the Company (or the Chief Executive Officer of the Company, if Executive is the Chief Operating Officer of the Company) of such disclosure obligation or request no later than three (3) business days after Executive learns of such obligation or request, and permit the Company to take all lawful steps it deems appropriate to prevent or limit the required disclosure.
(ii)    Nothing in this Agreement restricts or prohibits Executive or Executive’s counsel from initiating communications directly with, responding to any inquiry from, volunteering information to, or providing testimony before a self-regulatory authority or a governmental, law enforcement or other regulatory authority, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, the Financial Industry Regulatory Authority, the Congress, and any Office of Inspector General (collectively, the “Regulators”), from participating in any reporting of, investigation into, or proceeding regarding suspected violations of law, or from making other disclosures that are protected under
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or from receiving an award for information provided under the whistleblower provisions of state or federal law or regulation.  Executive does not need the prior authorization of the Company to engage in such communications with the Regulators, respond to such inquiries from the Regulators, provide Confidential Information or documents containing Confidential Information to the Regulators, or make any such reports or disclosures to the Regulators.  Executive is not required to notify the Company that Executive has engaged in such communications with the Regulators. Executive recognizes and agrees that, in connection with any such activity outlined above, Executive must inform the Regulators that the information Executive is providing is confidential.
(iii)    Federal law provides certain protections to individuals who disclose a trade secret to their attorney, a court, or a government official in certain, confidential circumstances.  Specifically, federal law provides that an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret under either of the following conditions:
•Where the disclosure is made (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting or investigating a suspected violation of law; or
•Where the disclosure is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. 
Federal law also provides that an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order. 
(b)    Non-Competition Covenant. Executive agrees that during the Employment Period, Executive shall devote on a full-time business basis his skill, knowledge, commercial efforts and business time as the Board shall reasonably require to the conscientious and good faith performance of his duties and responsibilities to the Company to the best of his ability. Accordingly, during the Employment Period, Executive shall not, directly or indirectly, be employed by, render services for, engage in business with or serve as an agent or consultant to any Person other than the Company. However, Executive may serve on the board of directors of one or more non-profit or for-profit organizations, subject to the consent of the Board. Attached as Exhibit B is a list of the boards of directors on which Executive currently serves, which have been approved by the Board. Executive further agrees that during the Employment Period and for a period of ninety (90) days (subject to extension as provided below) following any cessation of his employment for any reason, Executive shall not, directly or indirectly, render services within the “Restricted Territory” as an employee, owner, consultant or in any capacity that are the same as or substantially similar to the services provided by Executive for the Company during the twelve (12) months preceding the cessation of Executive’s employment, on behalf of any person or entity that engages in a business that is the same as or substantially similar to, and competitive with, the business of Dynex at the time Executive’s employment ceases. In the event Executive is paid severance benefits under Section 7(d)(i) or (iv) of this Agreement, the period of non-competition, as described in the preceding sentence (the “Non-Competition
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Period”), shall be extended so that the period applies for six (6) months following Executive’s cessation of employment. In the event Executive is paid severance benefits under Section 7(d)(ii) of this Agreement (Change in Control), the Non-Competition Period shall be extended so that the period applies for twenty-four (24) months following Executive’s cessation of employment. Notwithstanding any other provisions of this Agreement, in the event that Executive materially breaches any of his obligations under this Section 9, no amounts or benefits, other than the Accrued Obligations, shall be payable to Executive under Section 7(d) of this Agreement, and the Company may take any such other actions as it deems appropriate with respect to the breach of Executive’s obligations. Executive shall be permitted to hold a ten percent (10%) or less interest in the equity or debt securities of any publicly traded company. The “Restricted Territory” shall mean the continental United States of America. The amounts and benefits payable under this Agreement, including severance benefits, where applicable, are provided as consideration for the non-competition and other restrictive covenants under this Agreement.
(c)    Non-Solicitation of Employees. During the Employment Period and for the twelve (12)-month period following the cessation of his employment for any reason, Executive shall not, directly or indirectly, by himself or through any third party, whether on Executive’s own behalf or on behalf of any other Person or entity, (i) solicit or induce or endeavor to solicit or induce, divert, employ or retain, (ii) interfere with the relationship of Dynex with, or (iii) attempt to establish a business relationship of a nature that is competitive with the business of Dynex with, any person that is or was (during the last thirty (30) days of Executive’s employment with the Company) an employee or independent contractor of Dynex.
10.    Work Product. Executive agrees that all of Executive’s work product (created solely or jointly with others, and including any intellectual property or moral rights in such work product), given, disclosed, created, developed or prepared in connection with Executive’s employment with the Company (“Work Product”) shall exclusively vest in and be the sole and exclusive property of the Company and shall constitute “work made for hire” (as that term is defined under Section 101 of the U.S. Copyright Act, 17 U.S.C. § 101) with the Company being the person for whom the work was prepared. In the event that any such Work Product is deemed not to be a “work made for hire” or does not vest by operation of law in the Company, Executive hereby irrevocably assigns, transfers and conveys to the Company, exclusively and perpetually, all right, title and interest which Executive may have or acquire in and to such Work Product throughout the world, including without limitation any copyrights and patents, and the right to secure registrations, renewals, reissues, and extensions thereof. The Company or its designees shall have the exclusive right to make full and complete use of, and make changes to all Work Product without restrictions or liabilities of any kind, and Executive shall not have the right to use any such materials, other than within the legitimate scope and purpose of Executive’s employment with the Company. Executive shall promptly disclose to the Company the creation or existence of any Work Product and shall take whatever additional lawful action may be necessary, and sign whatever documents the Company may require, in order to secure and vest in the Company or its designee all right, title and interest in and to all Work Product and any intellectual property rights therein (including full cooperation in support of any Company applications for patents and copyright or trademark registrations).
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11.    Return of Company Property. In the event of termination of Executive’s employment for any reason, Executive shall return to the Company all of the property of Dynex, including without limitation all Dynex materials or documents containing Confidential Information, and including without limitation, all computers (including laptops), cell phones, keys, PDAs, tablets, credit cards, facsimile machines, televisions, card access to any Dynex building, customer lists, computer disks, reports, files, e-mails, work papers, Work Product, documents, memoranda, records and software, computer access codes, passwords, or disks and instructional manuals, internal policies, and other similar materials or documents which Executive used, received or prepared, helped prepare or supervised the preparation of in connection with Executive’s employment with the Company. Executive agrees not to retain any copies, duplicates, reproductions or excerpts of such material or documents, other than the materials of a “personal nature” referenced in Section 9(a) of this Agreement.
12.    Compliance With Company Policies. During the Employment Period, Executive shall be governed by and be subject to, and Executive hereby agrees to comply with, all Company policies, procedures, codes, rules and regulations applicable to all employees and to executive officers of the Company, as they may be amended from time-to-time in the Company’s sole discretion.
13.    Injunctive Relief with Respect to Covenants: Forum, Venue and Jurisdiction. Executive acknowledges and agrees that, in the event of any material breach by Executive of any section of this Agreement, remedies at law may be inadequate to protect the Company, and, without prejudice to any other legal or equitable rights and remedies otherwise available to the Company, Executive agrees to the granting of injunctive relief in the Company’s favor in connection with any such breach or violation without proof of irreparable harm.
14.    Assumption of Agreement. The Company shall require any successor thereto, by agreement in form and substance reasonably satisfactory to Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a material breach of this Agreement and shall entitle Executive to terminate his employment for Good Reason and receive payment as provided under Section 7(d)(i) or (ii) of this Agreement, whichever is applicable on the Date of Termination.
15.    Indemnification and Insurance. The Company agrees both during and after the Employment Period to indemnify Executive to the fullest extent permitted by the law and its Articles of Incorporation (including payment of expenses in advance of final disposition of a proceeding) against actions or inactions of Executive during the Employment Period as an officer, director or employee of the Company or any of its subsidiaries or affiliates or as a fiduciary of any benefit plan of any of the foregoing. The Company also agrees to provide Executive with Directors and Officers insurance coverage both during and, with regard to matters occurring during the Employment Period, after the Employment Period. Such coverage after the Employment Period shall be at a level at least equal to the level being maintained at such time for the then current officers and directors or, if then being maintained at a higher level with regard to any prior period activities for officers or directors during such prior period, such higher amount with regard to Executive’s activities during such prior period.
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16.    Entire Agreement. This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof. All prior correspondence and proposals (including but not limited to summaries of proposed terms) and all prior promises, representations, understandings, arrangements and agreements relating to such subject matter (including but not limited to those made to or with Executive by any other person and those contained in any prior employment, consulting, severance, or similar agreement entered into by Executive and the Company or any predecessor thereto or subsidiary or affiliate thereof, including the Prior Agreement) are merged herein and superseded hereby.
17.    Termination of this Agreement and Survival of Certain Provisions. Subject to earlier termination by written agreement of the parties hereto or expiration pursuant to Section 2(a) of this Agreement, this Agreement shall terminate effective upon termination of Executive’s employment by the Company or by Executive for any reason; provided, however, that Sections 4(c), 6(c), 7 (to the extent applicable), 8, 9, 10, 11, 12 (to the extent applicable), 13, 15, 17 and 18, as applicable, of this Agreement shall survive any termination of Executive’s employment with the Company and any expiration or termination of this Agreement.
18.    Miscellaneous.
(a)    Binding Effect: Assignment. This Agreement shall be binding on and inure to the benefit of the Company and its successors and assigns. This Agreement shall also be binding on and inure to the benefit of Executive and his heirs, executors, administrators and legal representatives. This Agreement shall be assignable by the Company to a successor by merger or otherwise, but not by Executive.
(b)    Choice of Law and Forum. This Agreement shall be interpreted, enforced, construed, and governed under the laws of the Commonwealth of Virginia, without regard for any conflict of law principles. The Company and Executive hereby consent irrevocably to personal jurisdiction, service and venue in connection with any claim or controversy arising out of this Agreement or Executive’s employment, in the courts of the Commonwealth of Virginia located in Henrico County, Virginia, and in the federal court in the Eastern District of Virginia, Richmond Division, to be chosen at the option of the Company, and Executive waives any objections thereto.
(c)    Taxes. The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment and social insurance taxes, as shall be required by law.
(d)    Amendments. No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is approved in writing by the Board or a person authorized thereby and is agreed to in writing by Executive. No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No waiver of any provision of this Agreement shall be implied from any course of dealing between or among the parties hereto or from any failure by any party hereto to assert its rights hereunder on any occasion or series of occasions.
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(e)    Severability. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. In the event that one or more terms or provisions of this Agreement are deemed invalid or unenforceable by the laws of Virginia or any other state or jurisdiction in which it is to be enforced, by reason of being vague or unreasonable as to duration or geographic scope of activities restricted, or for any other reason, the provision in question shall be immediately amended or reformed to the extent necessary to make it valid and enforceable by the court of such jurisdiction charged with interpreting and/or enforcing such provision. Executive agrees and acknowledges that the provision in question, as so amended or reformed, shall be valid and enforceable as though the invalid or unenforceable portion had never been included herein.
(f)    Notices. Any notice or other communication required or permitted to be delivered under this Agreement shall be (i) in writing, (ii) delivered personally, by courier service, by certified or registered mail, first-class postage prepaid and return receipt requested, or by electronic mail with receipt verification, (iii) deemed to have been received on the date of delivery or, if mailed, on the third business day after the mailing thereof, and (iv) addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof):
(A)    If to the Company, to it at:
Chief Financial Officer
Dynex Capital, Inc.
4991 Lake Brook Drive, Suite 100
Glen Allen, Virginia 23060
rob.colligan@dynexcapital.com

(B)    If to Executive, to his residential address as currently on file with the Company or the Company’s email address for Executive unless Executive has provided an alternative email address for notification purposes.
(g)    Voluntary Agreement; No Conflicts. Executive represents that he is entering into this Agreement voluntarily and that Executive’s employment hereunder and compliance with the terms and conditions of this Agreement shall not conflict with or result in the breach by Executive of any agreement to which he is a party or by which he or his properties or assets may be bound.
(h)    No Construction Against Any Party. This Agreement is the product of informed negotiations between Executive and the Company. If any part of this Agreement is deemed to be unclear or ambiguous, it shall be construed as if it were drafted jointly by all parties. Executive and the Company agree that neither party was in a superior bargaining position regarding the substantive terms of this Agreement.
(i)    Counterparts; Electronic Signature. This Agreement may be executed in counterparts (including by electronic signature), each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
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(j)    Conflicting Provisions. If any provision in this Agreement conflicts with a provision in an award agreement with Executive under a Company incentive plan, the provision more favorable to Executive will govern, to the extent consistent with any applicable shareholder-approved incentive plan.
(k)    Headings. The section and other headings contained in this Agreement are for the convenience of the parties only and are not intended to be a part hereof or to affect the meaning or interpretation hereof.
[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Company has duly executed this Agreement by its authorized representative, and Executive has hereunto set his hand, in each case effective as of the date first above written.
DYNEX CAPITAL, INC.

By:    /s/ Robert S. Colligan        
    Robert S. Colligan
Its:    Chief Financial Officer and Chief Operating Officer


BYRON L. BOSTON


/s/ Byron L. Boston                
SIGNATURE


[Signature Page to Boston Employment Agreement]

Exhibit A

RELEASE

    For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Byron L. Boston (“Executive”), hereby irrevocably and unconditionally releases, acquits, and forever discharges Dynex Capital, Inc. (the “Company”) and its subsidiaries and affiliates (collectively, “Dynex”) and each of their agents, directors, members, affiliated entities, officers, employees, former employees, attorneys, and all persons acting by, through, under or in concert with any of them (collectively “Releasees”), from any and all charges, complaints, claims, liabilities, grievances, obligations, promises, agreements, controversies, damages, policies, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses of any nature whatsoever, known or unknown, suspected or unsuspected, including, but not limited to, any rights arising out of alleged violations or breaches of any contracts, express or implied, or any tort, or any legal restrictions on Dynex’s right to terminate employees, or any federal, state or other governmental statute, regulation, law or ordinance, including without limitation Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991; the Americans with Disabilities Act; 42 U.S.C. § 1981; the federal Age Discrimination in Employment Act (age discrimination); the Older Workers Benefit Protection Act; the Equal Pay Act; the Family and Medical Leave Act; the Employee Retirement Income Security Act; the Virginia Human Rights Act; the Virginia Equal Pay Act; the Virginians with Disabilities Act; the Virginia Wage Payment Law; the Virginia Right-to-Work Law; the Virginia Equal Pay Law; the Virginia Occupational Safety and Health Act; the Virginia Fraud Against Taxpayers Act; the Virginia Whistleblower Protection Law; the Florida Civil Rights Act, including age and sexual harassment claims; the Florida Omnibus AIDS Act; the Florida Equal Pay Law; the retaliation provision of the Florida Workers Compensation Act (Fla. Stat. Ann. § 440.205); the Florida Private Sector Whistleblower’s Act; Florida’s minimum wage and wage payment laws; Florida Constitution art. X, § 24; the retaliation provision of the Florida False Claims Act (Fla. Stat. Ann. § 68.088); the Florida Domestic Violence Leave Act; the Florida Discrimination on the Basis of Sickle Cell Trait Law; and Florida’s OSHA laws (“Claim” or “Claims”), which Executive now has, owns or holds, or claims to have, own or hold, or which Executive at any time heretofore had owned or held, or claimed to have owned or held, against each or any of the Releasees at any time up to and including the date of the execution of this Release; provided, however, that this Release does not release the Releasees from any obligation to pay “Accrued Obligations” (as defined in Section 7(d)(i)(A) of the employment agreement entered into as of July 19, 2024 by and between the Company and Executive (the “Employment Agreement”)), any applicable termination obligations of the Company under Section 7(d) of the Employment Agreement shall be paid in exchange for this Release, any accrued, vested benefits under the Company’s benefit plans that Executive has earned prior to the date hereof, the provisions under Sections 6(c) and 15 of the Employment Agreement, or any rights to indemnification or defense under the Company’s charter, bylaws or directors and officers insurance.
Nothing in this Release shall restrict or prohibit Executive or Executive’s counsel from filing a charge or complaint with, initiating communications directly with, responding to any inquiry from, volunteering information to, or providing testimony before a self-regulatory


authority or a governmental, law enforcement or other regulatory authority, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, the Financial Industry Regulatory Authority, the Congress, and any Office of Inspector General (collectively, the “Regulators”), from participating in any reporting of, investigation into, or proceeding regarding suspected violations of law, or from making other disclosures that are protected under or from receiving an award for information provided under the whistleblower provisions of state or federal law or regulation.  Executive does not need the prior authorization of the Company to engage in such communications with the Regulators, respond to such inquiries from the Regulators, provide Confidential Information (as defined in the Employment Agreement) or documents containing Confidential Information to the Regulators, or make any such reports or disclosures to the Regulators.  Executive is not required to notify the Company that Executive has engaged in such communications with the Regulators. Executive recognizes and agrees that, in connection with any such activity outlined above, Executive must inform the Regulators that the information Executive is providing is confidential. To the extent, that any such charge or complaint is made against the Releasees, Executive expressly waives any claim or right to any form of monetary relief or other damages, or any form of individual recovery or relief in connection with any such charge or complaint, except that Executive does not waive his right with respect to an award for information provided under the whistleblower provisions of state or federal law or regulation.
Executive hereby acknowledges and agrees that the execution of this Release and the cessation of Executive’s employment and all actions taken in connection therewith are in compliance with the federal Age Discrimination in Employment Act and the Older Workers Benefit Protection Act and that the releases set forth above shall be applicable, without limitation, to any claims brought under these Acts. Executive further acknowledges and agrees that:
a.    The Release given by Executive is given solely in exchange for the severance payments set forth in the Employment Agreement between Dynex and Executive to which this Release was initially attached and such consideration is in addition to anything of value which Executive was entitled to receive prior to entering into this Release;
b.    By entering into this Release, Executive does not waive rights or claims that may arise after the date this Release is executed;
c.    Executive is hereby advised to consult an attorney prior to entering into this Release, and this provision of the Release satisfies the requirements of the Older Workers Benefit Protection Act that Executive be so advised in writing;
d.    Executive has been offered twenty-one (21) days [or forty-five (45) days in the event of a group termination] from receipt of this Release within which to consider whether to sign this Release; and
A-2

e.    For a period of seven (7) days following Executive’s execution of this Release, Executive may revoke this Release by delivering the revocation to an authorized officer of Dynex, and it shall not become effective or enforceable until such seven (7) day period has expired.
By signing this letter agreement, Executive acknowledges that Executive is waiving any future claims against Dynex under Mass. Gen. Laws ch. 149 § 148 of the Massachusetts Wage Act. These claims include, but are not limited to, failure to pay earned wages, failure to pay overtime, failure to pay earned commissions, failure to timely pay wages, failure to pay accrued vacation or holiday pay, failure to furnish appropriate pay stubs, claims for improper wage deductions, and claims for failing to provide proper check-cashing facilities.
This release shall be binding upon the heirs and personal representatives of Executive and shall inure to the benefit of the successors and assigns of Dynex.
Date:BYRON L. BOSTON
A-3

Exhibit B

Current Boards of Directors

Mortgage Bankers Association

Salzburg Global Seminar




Exhibit 10.3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of this 19th day of July, 2024 (the “Effective Date”), by and between Dynex Capital, Inc., a Virginia corporation (the “Company”), and Robert S. Colligan (the “Executive”).
WHEREAS, Executive is currently employed by the Company;
WHEREAS, the Company desires to continue to employ and secure the exclusive services of Executive on the terms and conditions set forth in this Agreement;
WHEREAS, Executive desires to accept such employment on such terms and conditions;
WHEREAS, Executive has the trust and confidence of the Company’s Board of Directors (the “Board”);
WHEREAS, the Board values Executive’s leadership and appreciates his continuing contribution to the success of the Company; and
WHEREAS, the Company and Executive previously entered into an Employment Agreement effective July 18, 2022 (the “Prior Agreement”), which is hereby superseded in its entirety by this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for other good and valuable consideration, the Company and Executive hereby agree as follows:
1.Agreement to Employ. Upon the terms and subject to the conditions of this Agreement, the Company hereby agrees to continue to employ Executive, and Executive hereby accepts such continued employment with the Company.
2.Term; Positions and Responsibilities; Location.
(a)Term.
(i)This Agreement shall become effective on the Effective Date and expire on December 31, 2027, unless sooner terminated by either party as set forth below, or until the termination of the Executive’s employment, if earlier. The term of this Agreement shall automatically renew for periods of one (1) year on December 31, 2027 and each one (1) year anniversary of December 31, 2027 thereafter (each, a “Renewal Date”), unless either party gives written notice of such nonrenewal to the other party at least 90 days before the applicable Renewal Date.
(ii)Upon a Change in Control (as defined below), the term of this Agreement shall automatically renew for a period of two (2) years, unless the Change in Control occurs during the initial term and there are more than two (2) years remaining in the initial term. The initial and any extended term of this Agreement through the earlier of (i) the date this Agreement expires or is terminated as described herein or (ii) the date of termination of Executive’s employment by the Company or by Executive for any reason is referred to as the “Employment Period”.
(b)Positions and Responsibilities. During the Employment Period, commencing on the Effective Date, the Executive shall serve as Chief Financial Officer (“CFO”) and Chief Operating Officer (“COO”) of the Company and shall be responsible for performing all duties and responsibilities as are
customarily assigned to individuals serving in such positions. The Company and the Executive agree that during the Employment Period, Executive shall report directly to the Company’s Executive Committee, comprised of the Company’s Co-Chief Executive Officers (the “Executive Committee”), and shall devote as much of his skill, knowledge, commercial efforts and business time as the Company’s Board of Directors (the “Board”) or the Executive Committee shall reasonably require for the conscientious and good faith performance of his duties and responsibilities for the Company to the best of his ability. Executive agrees to serve in other officer and director positions for the Company and any subsidiaries or affiliates of the Company upon request, in each case without additional compensation.
(c)Location. During the Employment Period, the Executive’s services shall be performed primarily remotely from the Executive’s home office; provided, however, that the Executive shall travel to the Company’s offices, currently in the Richmond, Virginia metropolitan area, and to other locations for business meetings, as may be reasonably requested or required from time to time.
3.Base Salary. During the Employment Period, the Company shall pay Executive a base salary at an annualized rate of no less than $560,000 (which increase was effective as of July 22, 2024), payable in installments on the Company’s regular payroll dates but not less frequently than monthly. The Board or a committee thereof shall review Executive’s base salary annually during the Employment Period for adjustment up or down (but not below $560,000 without Executive’s consent), based on its periodic review of Executive’s performance in accordance with the Company’s regular policies and procedures; provided, however, that following a Change in Control Executive’s base salary shall not be decreased. The base salary amount payable to Executive for a full year under this Section 3 shall be referred to herein as the “Base Salary”.
4.Incentive Compensation.
(a)Annual Incentive Awards. The Executive shall be eligible to participate in and receive annual cash incentive awards pursuant to the terms of the Dynex Capital, Inc. Annual Cash Incentive Plan or any successor plan or program (the “Dynex Incentive Plan”). The target amount of the Executive’s annual cash incentive award for any fiscal year during the Employment Period, including the full 2024 fiscal year, shall be not less than one hundred seventy-five percent (175%) of the Executive’s Base Salary, and the maximum amount of Executive’s annual cash incentive award for any fiscal year during the Employment Period shall be not more than three hundred fifty percent (350%) of the Executive’s Base Salary. The actual amount of the Executive’s annual cash incentive award, if any, may be more or less than the target amount, as determined by the Board or a committee thereof, pursuant to the terms of the Dynex Incentive Plan, but not more than the maximum amount. Any annual cash incentive award shall be paid after the end of the fiscal year to which it relates, at the same time and under the same terms and conditions as the annual cash incentive awards for other executives of the Company and subject to the terms of the Dynex Incentive Plan, including requirements as to continued employment, subject to the provisions of Sections 7(d)(i)(C) and 7(d)(ii)(C) below.
(b)Long-Term Incentive Awards. The Executive shall be eligible to participate in and receive long-term incentive awards pursuant to the Dynex Capital, Inc. 2020 Stock and Incentive Plan or any successor plan (the “Dynex Stock and Incentive Plan”). The target amount of the Executive’s long-term incentive award granted with respect to any fiscal year during the Employment Period shall be not less than two hundred fifty percent (250%) of the Executive’s Base Salary. The actual amount of Executive’s long-term incentive award, if any, may be more or less than the target amount, as determined by the Board or a committee thereof, pursuant to the terms of the Dynex Stock and Incentive Plan.
(c)Clawback. Executive agrees that any incentive compensation (including both equity and cash incentive compensation) that Executive receives from the Company is subject to repayment to (i.e.,
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clawback by) the Company or a related entity (i) as required by applicable law, or (ii) pursuant to an applicable clawback policy adopted by the Board from time to time. Any such clawback determination shall be made in good faith by the Board or a committee thereof and consistent with applicable law and the terms of the clawback policy, if applicable. Except where offset of, or recoupment from, incentive compensation covered by Code Section 409A (as defined below) is prohibited by Code Section 409A, to the extent allowed by law and as determined by the Board or a committee thereof, Executive agrees that such repayment may, in the discretion of the Board or a committee thereof, be accomplished by withholding of future compensation to be paid to Executive by the Company. Any recovery of incentive compensation covered by Code Section 409A shall be implemented in a manner which complies with Code Section 409A. Any recovery of incentive compensation pursuant to this Section 4(c) shall not constitute a breach of this Agreement or Good Reason (as defined below).
5.Employee Benefits.
(a)General. During the Employment Period, the Executive shall be eligible to participate in the employee and executive benefit plans and programs maintained by the Company from time-to-time in which executives of the Company are eligible to participate, including, to the extent maintained by the Company, life, medical, dental, accidental and disability insurance plans and retirement, deferred compensation and savings plans, in accordance with the terms and conditions thereof as in effect from time-to-time.
(b)Vacation. During the Employment Period, the Executive shall be entitled to a number of vacation days as determined by the Board or a committee thereof, which shall not be less than six (6) weeks per calendar year, without carry-over accumulation. The Executive shall also be entitled to Company-designated holidays.
(c)Cellular Phones and Personal Data Assistants. During the Employment Period, the Company shall provide the Executive with, or shall reimburse the Executive for his purchase of, a cellular phone and a personal data assistant (e.g., iPad, tablet, etc.) for his use as agreed upon by the Company and the Executive, as well as pay for business-related usage fees, pursuant to the Company’s policy for executives or, if none, as approved by the Company consistent with the Company’s practice for other executives. The Executive shall submit a detailed bill in order to obtain reimbursement.
(d)Concierge Medical Services. During the Employment Period, the Company shall reimburse the Executive for the cost of an annual concierge medical services fee, including the cost of an annual physical, at a cost not to exceed $10,000 per year, unless otherwise approved by the Compensation Committee of the Board (the “Compensation Committee”).
6.Expenses.
(a)Business Travel, Lodging. The Company shall reimburse the Executive for reasonable travel, lodging, meal and other reasonable expenses incurred by him in connection with the performance of his duties and responsibilities hereunder upon submission of related receipts or other evidence of the incurrence and purpose of each such expense consistent with the terms and conditions of the Company’s travel policy in effect at any time.
(b)Reimbursement Requirements. Any reimbursements provided in Sections 5 and 6 of this Agreement shall be reimbursed, unless specifically provided otherwise herein, in accordance with the Company’s expense reimbursement policy in effect at any time, if any, and the requirements of Section 8(d) of this Agreement, to the extent applicable.
7.Termination of Employment. The Board believes it is in the best interests of the Company to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks in the event the Executive terminates his employment for Good Reason or is terminated by the Company
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without Cause and to encourage the Executive’s full attention and dedication to the Company, and to provide the Executive with compensation and benefits arrangements upon such termination which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. The Board has approved this Section 7 and authorized its inclusion in this Agreement on the Company’s behalf to the Executive.
(a)Certain Definitions.
(i)“Change in Control” shall mean any of the following:
(A)The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)), (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty-five percent (35%) or more of either (1) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); or
(B)The composition of the Company’s Board shall change such that the individuals who, as of July 18, 2022, constitute the Board (the “Incumbent Directors”) no longer comprise at least a majority of the members of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the Incumbent Directors shall be considered as though such individual were an Incumbent Director, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(C)Consummation of a reorganization, merger, share exchange or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination:
(1)the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, at least eighty percent (80%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries or affiliates) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; and
(2)at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were Incumbent Directors at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
(D)Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company, except pursuant to a Business Combination that complies with clause (1) or (2) of Section 7(a)(i)(C) of this Agreement.
(ii)“Date of Termination” means the date of the Executive’s termination of employment with the Company, determined in accordance with the requirements of Section 8(c) of this
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Agreement, which will typically be (A) if the Executive’s employment is terminated by the Company for Cause, the date of receipt of the Notice of Termination (as defined below) or any later date specified therein, as the case may be, (B) if the Executive’s employment is terminated by the Executive for Good Reason, the date specified pursuant to Section 7(b)(i) below, (C) if Executive’s employment is terminated by the Company other than for Cause or by the Executive without Good Reason, the date on which the Company or the Executive notifies the other of such termination, (D) if Executive’s employment is terminated by reason of death, the date of death of the Executive, or (E) if the Company terminates the Executive’s employment due to Disability (as defined below), the date of receipt of the Notice of Termination or any later date specified therein, as the case may be.
(b)Termination of Employment.
(i)Good Reason. Executive may terminate his employment during the Employment Period for Good Reason. In such event, the Company shall have the termination obligations in Section 7(d)(i) or (ii) of this Agreement, whichever is applicable on the Date of Termination. For purposes of this Agreement, “Good Reason” shall mean any of the following, without the Executive’s consent:
(A)prior to a Change in Control, a material diminution in the Executive’s position, authority, duties or responsibilities as CFO and COO, excluding for this purpose an isolated, insubstantial or inadvertent action not taken in bad faith; and provided that “Good Reason” shall not include the removal of the Executive as COO of the Company if the Executive retains his position as CFO of the Company;
(B)on or following a Change in Control, the assignment to Executive of any duties inconsistent with the Executive’s position (including status, office or title as CFO and COO, and reporting requirements), authority, duties, and responsibilities as CFO and COO, or any other action by the Company that results in a diminution in such position (including status, office or title as CFO and COO, and reporting requirements), authority, duties and responsibilities as CFO and COO, or any requirement that the Executive not serve as the sole CFO and COO of the Company, in all cases excluding for this purpose an isolated, insubstantial or inadvertent action not taken in bad faith; and provided that “Good Reason” shall not include the removal of the Executive as COO of the Company if the Executive retains his position as CFO of the Company;
(C)whether prior to, on or following a Change in Control, a reduction in the Executive’s Base Salary or a reduction of Executive’s minimum target incentive opportunity in violation of Section 3, Section 4(a) or Section 4(b) of this Agreement;
(D)On or following a Change in Control, the Company’s requiring the Executive to perform his services on a regular basis at any location that is more than 50 miles from the location where the Executive primarily performed services during the six (6) months immediately preceding the change in location; or
(E) whether prior to, on or following a Change in Control, any material breach of this Agreement by the Company.
To trigger “Good Reason,” the Executive is required to provide written notice to the Board of the existence of a condition described in this Section 7(b)(i) within 30 days following the initial existence of the condition, and the Company shall have 30 days after receiving such notice to remedy the condition. If the condition is remedied within 30 days, then “Good Reason” does not exist. If the condition is not remedied within 30 days, then Executive must resign within 30 days following the expiration of the remedy period in order for such resignation to be for “Good Reason.”
Notwithstanding the above, “Good Reason” shall not include any resignation by the Executive if the Company has communicated to the Executive in writing that grounds for a “Cause” termination exist,
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or if the Company communicates to the Executive in writing that grounds for a “Cause” termination exist at any time during the notice and remedy period described in the preceding paragraph, and in either case if “Cause” is determined to exist pursuant to Section 7(b)(iii) of this Agreement. The remedy and resignation period described in the preceding paragraph shall be automatically extended so that it does not end before any notice and remedy period under Section 7(b)(iii) of this Agreement, provided that the remedy and resignation period described in the preceding paragraph shall not be extended beyond 120 days from the date of the Executive’s submission of written notice pursuant to the preceding paragraph.
(ii)Without Good Reason. The Executive may terminate his employment during the Employment Period without Good Reason. In such event, the Company shall have the termination obligations in Section 7(d)(iii) of this Agreement.
(iii)Cause. The Company may terminate the Executive’s employment during the Employment Period for Cause. In such event, the Company shall have the termination obligations in Section 7(d)(iii) of this Agreement. For purposes of this Agreement, “Cause” shall mean any of the following:
(A)The Executive’s gross or willful misconduct, fraud or embezzlement in connection with the performance of the Executive’s duties to the Company;
(B)Prior to a Change in Control, the failure of the Executive to adhere to the lawful directions of the Board or the Executive Committee that are reasonably consistent with the Executive’s duties and positions as CFO and COO;
(C)A material violation of the Company’s employment, share trading, or other corporate policies applicable to the Executive, including without limitation the Company’s Employee Handbook, Insider Trading Policy, Regulation FD and Disclosure Policy, Relation Person Transactions Policy, Code of Business Conduct and Ethics, Corporate Governance Guidelines, Whistleblower Policy, Policy Prohibiting Pledging and Hedging, and Stock Ownership Guidelines, all as may be amended from time to time;
(D)A material violation by the Executive of any portion of Section 9 of this Agreement; or
(E)The Executive’s being indicted of, or entering a guilty plea or plea of no contest to, any felony or any crime of moral turpitude.
For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or a committee thereof, or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive written notice of a resolution duly adopted by the affirmative vote of not less than two-thirds (2/3) of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive of such meeting and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of conduct described in subparagraph (A), (B), (C), (D) or (E) above, and specifying the particulars thereof in detail. Upon delivery of the written notice, the Executive’s employment shall be immediately terminated; provided, however, with regard to conduct described in subparagraph (B), (C) or (D) above only, if such conduct can be remedied, as determined in the good faith opinion of the Board, the Executive shall have 30 days after his receipt of the written notice
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to remedy the conduct. If the conduct is remedied within 30 days, then “Cause” does not exist. If the conduct is not remedied within 30 days, then the Company shall provide Notice of Termination within 30 days following the expiration of the remedy period.
(iv)Without Cause. The Company may terminate the Executive’s employment without Cause during the Employment Period. In such event, the Company shall have the termination obligations in Section 7(d)(i) or 7(d)(ii) of this Agreement, whichever is applicable on the Date of Termination.
(v)Death or Disability. The Executive’s employment during the Employment Period shall automatically terminate on the Executive’s death and may be terminated by the Company due to his Disability. For purposes of this Agreement, “Disability” shall mean a physical or mental disability that prevents the Executive from performing his essential job functions as CFO and COO for a period of at least six (6) months within any 12-month period. In such event, the Company shall have the termination obligations in Section 7(d)(iv) or (v), as applicable, of this Agreement.
(c)Notice of Termination. Any termination of the Executive’s employment by the Company for or without Cause or due to Disability, or by the Executive for or without Good Reason, shall be communicated by a Notice of Termination to the other party. For purposes of this Agreement, a “Notice of Termination” means a written notice, which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) the Date of Termination. The failure by the Company or the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.
(d)Company’s Termination Obligations.
(i)Good Reason or Without Cause Prior to a Change in Control or More Than Two (2) Years Following a Change in Control. If the Executive’s employment is terminated by the Executive for Good Reason, or by the Company without Cause (other than due to Executive’s death or Disability), provided any such termination occurs (1) prior to a Change in Control, or (2) more than two (2) years following a Change in Control, then, subject to the Release requirement set forth in Section 7(d)(i)(E) below and subject to Executive’s continued compliance with Section 9 below, the Company shall pay to the Executive a lump sum payment in cash equal to the aggregate of the following amounts under Sections 7(d)(i)(A) and (B) below no later than the 30th day following the Date of Termination and provide the other benefits provided below. The amount described in Section 7(d)(i)(C) below shall be paid at the time Annual Incentive Awards are paid to executives for the applicable performance period.
(A)The Executive’s Base Salary through the Date of Termination, to the extent not previously paid; any incentive compensation for a completed prior performance period that has been earned but has not yet been paid; reimbursement for any unreimbursed business expenses incurred by the Executive prior to the Date of Termination that are subject to reimbursement under Section 6 of this Agreement; and payment of accrued, but unused vacation time as of the Date of Termination (“Accrued Obligations”). The amount described in this subsection (A) shall be paid without regard to whether the Executive signs the Release.
(B)An amount equal to the sum of (x) an amount equal to one (1) times the Executive’s Base Salary on the day prior to the Date of Termination (or, if the Executive’s termination for Good Reason is based upon a reduction in Base Salary, then the Executive’s Base Salary in effect immediately prior to such reduction), plus (y) an amount equal to one (1) times the Annual Incentive
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Award (as defined below) for the calendar year immediately preceding the year in which the Executive’s termination occurs, plus (z) an amount equal to the monthly cost of coverage under the Company’s medical, dental, life insurance and disability policies or arrangements in which Executive and any of his dependents were covered on the day prior to the Date of Termination (the “Welfare Plans”) for a period of 12 months following the Date of Termination.
(C)An amount (the “Pro Rata Annual Incentive Award”) equal to the Pro Rata Portion (as defined below) of any Annual Incentive Award with an incomplete performance period as of the Date of Termination. The Pro Rata Portion is the Annual Incentive Award amount calculated by the Compensation Committee based on actual performance at the end of the applicable performance period multiplied by a fraction, the numerator of which is equal to the number of days in the applicable performance period that precede the Date of Termination and the denominator of which is the number of days in the performance period. The term “Annual Incentive Award” means a cash incentive award that is based on performance over a period of one (1) year. For the avoidance of doubt, an Annual Incentive Award does not include an outstanding Stock Award.
(D)Any outstanding stock awards, such as stock options, stock appreciation rights, restricted stock units, restricted stock, dividend equivalent rights, or any other form of stock compensation (“Stock Awards”) granted to the Executive shall be governed by the terms of the applicable award agreement. A prorata portion of any outstanding performance-based Stock Awards shall remain outstanding and eligible to vest based on actual performance at the end of the applicable performance period. The pro rata portion is the amount calculated by the Compensation Committee based on actual performance at the end of the applicable performance period multiplied by a fraction, the numerator of which is equal to the number of days in the applicable performance period that precede the Date of Termination and the denominator of which is the number of days in the performance period.
(E)Notwithstanding any other provisions of this Agreement, no amounts or benefits, other than the Accrued Obligations, shall be payable to the Executive and the Executive shall forfeit all rights under Section 7(d)(i) of this Agreement unless a release of claims substantially in the form of the Release attached as Exhibit A, subject to such changes as the Company determines are necessary or appropriate to comply with changes in applicable law, regulation or other governmental guidance (the “Release”), is signed and becomes irrevocable within the time period specified by the Release for review and revocation. To the extent any amounts or benefits under Section 7(d)(i), other than the Accrued Obligations, have been paid and the Release requirement of this Section 7(d)(i)(E) is not met, then any such amounts or benefits previously paid shall be forfeited and the Executive shall repay such forfeited amounts or benefits to the Company within 30 days following demand by the Company.
(ii)Good Reason or Without Cause On or Within Two Years Following a Change in Control. If the Executive’s employment is terminated by Executive for Good Reason, or by the Company without Cause (other than due to Executive’s death or Disability), provided each occurs on or within two (2) years following a Change in Control, then, subject to the Release requirement set forth in Section 7(d)(ii)(F) below and subject to Executive’s continued compliance with Section 9 below, the Company shall pay to the Executive a lump sum payment in cash equal to the aggregate of the following amounts under Sections 7(d)(ii) (A), (B), (C) and (E) below on the 30th day following the Date of Termination and provide the other benefits provided below:
(A)The Accrued Obligations, which shall be paid without regard to whether the Executive signs the Release.
(B)An amount equal to the product of two and ninety-nine hundredths (2.99) times the sum of: (1) the Executive’s Base Salary on the day prior to the Date of Termination (or, if the Executive’s termination for Good Reason is based upon a reduction in Base Salary, then the Executive’s
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Base Salary in effect immediately prior to such reduction) and (2) the sum of the Executive’s Annual Incentive Awards paid for each of the three (3) calendar years preceding the calendar year that includes the Change in Control, divided by three (3) (subject to such adjustment as the Company deems appropriate if the Executive has worked less than three (3) calendar years and taking into account the partial year 2022).
(C)The Pro Rata Annual Incentive Award, calculated as described in Section 7(d)(i)(C), except that performance shall be calculated at maximum instead of based on actual performance.
(D)To the extent any previously awarded Stock Awards granted to Executive shall have not vested, such Stock Awards shall immediately become fully (100%) vested and exercisable and shall otherwise be paid in accordance with their terms. Performance-based Stock Awards shall become fully vested, and performance shall be determined based on the terms of the applicable grant agreement.
(E)An amount equal to the monthly cost of coverage under the Company’s Welfare Plans for a period of 36 months following the Date of Termination.
(F)Notwithstanding any other provisions of this Agreement, no amounts or benefits, other than the Accrued Obligations, shall be payable to the Executive, and the Executive shall forfeit all rights, under Section 7(d)(ii) of this Agreement unless the Release is signed and becomes irrevocable within the time period specified by the Release for review and revocation. To the extent any amounts or benefits under Section 7(d)(ii), other than the Accrued Obligations, have been paid and the Release requirement of this Section 7(d)(ii)(F) is not met, then any such amounts or benefits previously paid shall be forfeited and the Executive shall repay such forfeited amounts or benefits to the Company within 30 days following demand by the Company.
(iii)Without Good Reason or For Cause Before, On, or After a Change in Control. If the Company should terminate the Executive’s employment for Cause or if he should terminate his employment without Good Reason at any time during the Employment Period, then the Company shall pay to the Executive the Accrued Obligations in a lump sum within 30 days following the Date of Termination.
(iv)Termination Due to Disability Before, On, or After a Change in Control. If the Company should terminate the Executive’s employment due to his Disability at any time during the Employment Period, then the Company shall pay to the Executive the Accrued Obligations in a lump sum no later than the 30th day following the Date of Termination. In addition, subject to the Release requirement set forth in Section 7(d)(i)(E) below and subject to Executive’s continued compliance with Section 9 below, to the extent any previously awarded Stock Awards granted to the Executive shall have not vested, such Stock Awards shall immediately become fully (100%) vested and exercisable and shall otherwise be paid in accordance with their terms. Performance-based Stock Awards shall become fully vested, and performance shall be determined based on the terms of the applicable grant agreement. In addition, subject to the Release requirement set forth in Section 7(d)(i)(E) below and subject to Executive’s continued compliance with Section 9 below, the Company shall pay the Pro Rata Annual Incentive Award described in Section 7(d)(i)(C) to the Executive at the time Annual Incentive Awards are paid to executives for the applicable performance period.
(v)Termination Due to Death. If the Executive’s employment should terminate due to his death at any time during the Employment Period, then the Company shall pay to the Executive’s estate the Accrued Obligations in a lump sum within 30 days following the Date of Termination, subject to production to the Company of such evidence or information in respect of Executive’s estate as the Company may require. In addition, to the extent any previously awarded Stock Awards granted to
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Executive shall have not vested, such awards shall immediately become fully (100%) vested and exercisable and shall otherwise be paid in accordance with their terms. Performance-based Stock Awards shall become fully vested, and performance shall be determined based on the terms of the applicable grant agreement. In addition, the Company shall pay the Pro Rata Annual Incentive Award described in Section 7(d)(i)(C) to Executive’s estate at the time Annual Incentive Awards are paid to executives for the applicable performance period.
(e)Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company and for which the Executive may qualify, nor, shall anything herein limit or otherwise negatively affect such rights as the Executive may have under any contract or agreement with the Company. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.
(f)Full Settlement. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others, except for any recoupment required pursuant to Section 4(c) of this Agreement and any withholding of taxes pursuant to Section 18(c) of this Agreement. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment.
(g)Section 280G Limitations.
(i)Payment Limitation.  Notwithstanding anything contained in this Agreement (or in any other agreement between the Executive and the Company (which for this Section 7(g)(i) includes any successor)) to the contrary, to the extent that any payments and benefits provided under this Agreement or payments or benefits provided to, or for the benefit of, the Executive under any other plan or agreement of the Company (such payments or benefits are collectively referred to as the “Payments”) would be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), the Payments shall be reduced if and to the extent that a reduction in the Payments would result in the Executive retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the Excise Tax), than the Executive would have retained had the Executive been entitled to receive all of the Payments (such reduced amount is hereinafter referred to as the “Limited Payment Amount”). The Company shall reduce the Payments by first reducing or eliminating payments or benefits which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the furthest in time from the date the Determination (as defined below) is delivered to the Company and the Executive, subject to compliance with Code Section 409A. If no reduction applies under this Section 7(g)(i), then the Executive shall be solely responsible for the payment of any excise taxes imposed upon the Executive under Section 280G of the Code. Executive shall be solely responsible for the payment of any Excise Taxes imposed upon Executive.
(ii)Determination and Dispute. The determination as to whether the Payments shall be reduced to the Limited Payment Amount and the amount of such Limited Payment Amount (the “Determination”) shall be made at the Company’s expense by an accounting firm selected by the Company and acceptable to the Executive (the “Accounting Firm”). The Accounting Firm shall provide the Determination in writing, together with detailed supporting calculations and documentations, to the Company and the Executive on or prior to the Date of Termination of the Executive’s employment if
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applicable, or at such other time as requested by the Company or by the Executive. If there is no Dispute (as defined below), the Determination of the Accounting Firm shall be binding, final and conclusive upon the Company and the Executive. Within ten (10) days following the delivery of the Determination to the Executive, the Executive shall have the right to dispute the Determination (the “Dispute”) in writing setting forth the precise basis of the Dispute. Within five (5) days following the submission of a Dispute, the Company and the Executive shall agree on the appointment of an independent accounting firm to review the Determination made by the Accounting Firm. If the Company and the Executive cannot agree on an independent accounting firm within such time frame, then the Company and the Executive agree to use an independent accounting firm selected by the Accounting Firm to perform the review. The selected accounting firm (the “Second Accounting Firm”) will review at the Company’s expense the Determination and make a decision on how to resolve the Dispute (the “Second Determination”). Such Second Determination shall be obtained as soon as possible following the Dispute but in all events within 45 days following submission of the Dispute. The Second Determination of the Second Accounting Firm shall be binding, final and conclusive upon the Company and the Executive.
(h)Successors.
(i)Section 7 of this Agreement is personal to the Executive and, without the prior written consent of the Company, shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. Section 7 of this Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.
(ii)Section 7 of this Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.
(iii)The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.
8.Code Section 409A Compliance.
(a)The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Code and applicable guidance thereunder (“Code Section 409A”) or comply with an exemption from the application of Code Section 409A and, accordingly, all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Code Section 409A.
(b)Neither the Executive nor the Company shall take any action to accelerate or delay the payment of any monies and/or provision of any benefits in any matter which would not be in compliance with Code Section 409A.
(c)A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the form or timing of payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” (within the meaning of Code Section 409A) and, for purposes of any such provision of this Agreement under which (and to the extent) deferred compensation subject to Code Section 409A is paid, references to a “Date of Termination” or “termination of employment” or resignation or like references shall mean separation from service. A separation from service shall not occur under Code Section 409A unless the Executive has completely severed his employment or contractor relationship with the Company or the Executive has permanently decreased his services (via his employment relationship or his consulting relationship) to 20% or less of the average level of bona fide services over the immediately preceding 36-month period (or the full period if the Executive has been providing services for less than 36
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months). A leave of absence shall only trigger a termination of employment that constitutes a separation from service at the time required under Code Section 409A (which is typically after six (6) months although the specific rules and exceptions in Code Section 409A shall apply). If the Executive is deemed on the date of separation from service with the Company to be a “specified employee”, within the meaning of that term under Code Section 409A(a)(2)(B) and using the identification methodology selected by the Company from time-to-time, or if none, the default methodology, then with regard to any payment or benefit that is required to be delayed in compliance with Code Section 409A(a)(2)(B), such payment or benefit shall not be made or provided prior to the earlier of (i) the expiration of the six (6)-month period measured from the date of the Executive’s separation from service or (ii) the date of the Executive’s death, if required to comply with Code Section 409A. In the case of benefits required to be delayed under Code Section 409A, however, Executive may pay the cost of benefit coverage, and thereby obtain benefits, during such six (6) month delay period and then be reimbursed by the Company thereafter when delayed payments are made pursuant to the next sentence. On the first day of the seventh (7th) month following the date of the Executive’s separation from service or, if earlier, on the date of Executive’s death, all payments delayed pursuant to this Section 8(c) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein. If any cash payment is delayed under this Section 8(c) of this Agreement, then interest shall be paid on the amount delayed calculated at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Code from the date of the Executive’s termination to the date of payment.
(d)With regard to any provision herein that provides for reimbursement of expenses or in-kind benefits subject to Code Section 409A, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect. All reimbursements shall be reimbursed in accordance with the Company’s reimbursement policies but in no event later than the calendar year following the calendar year in which the related expense is incurred.
(e)Each payment under this Agreement shall be treated as a separate payment for purposes of Code Section 409A.
(f)When, if ever, a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within 30 days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company. In no event may the Executive, directly or indirectly, designate the calendar year of a payment. Notwithstanding any provision of this Agreement to the contrary, in no event shall the timing of the Executive’s execution of the Release, directly or indirectly, result in the Executive designating the calendar year of payment of any amounts of deferred compensation subject to Code Section 409A, and if a payment that is subject to execution of the Release could be made in more than one taxable year, payment shall be made in the later taxable year if required by Code Section 409A.
(g)If the timing of any payment of deferred compensation is based on a Change in Control, if and to the extent required by Section 409A of the Code, such payment shall be made on a Change in Control that is a “change in control event” for purposes of Section 409A of the Code or such other earliest permissible date under Section 409A of the Code.
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(h)The Company and the Executive agree to cooperate in good faith to ensure compliance in form and operation with Code Section 409A to the extent Code Section 409A is applicable under this Agreement.
9.Restrictive Covenants. The Company and Executive agree that Executive has had and will have a prominent role in the management of the business, and the development of the goodwill of the Company and its subsidiaries (collectively, “Dynex”), and has had and will have access to and become familiar with or exposed to Confidential Information (as such term is defined below), in particular, trade secrets, proprietary information, and other valuable business information of Dynex pertaining to Dynex’s business. Executive agrees that Executive could cause harm to Dynex if he solicited Dynex’s employees, lenders, or business counterparties upon the cessation of Executive’s employment away from Dynex, or misappropriated or divulged Dynex’s Confidential Information; and that as such, Dynex has legitimate business interests in protecting its goodwill and Confidential Information; and, as such, these legitimate business interests justify the following restrictive covenants:
(a)Confidentiality and Non-Disclosure Covenant.
(i)The Executive agrees that during and at all times after the Employment Period, the Executive shall not, directly or indirectly (A) disclose any Confidential Information (as defined below) to any Person (other than, only with respect to the period that the Executive is employed by the Company, to an employee or outside advisor of the Company who requires such information to perform his or her duties for the Company or to a lender or business counterparty that requires such information to engage in a transaction with the Company), or (B) use any Confidential Information for the Executive’s own benefit or the benefit of any third party. “Confidential Information” is Dynex’s business information that is not known to the general public or to the investment industry, such as marketing plans, trade secrets, financial information and records, customized software, data repositories, operation methods, personnel information, drawings, designs, information regarding product development, and customer lists. The foregoing obligation shall not apply to any Confidential Information that has been previously disclosed to the public by the Company or with its permission, is in the public domain (other than by reason of a breach of the Executive’s obligations to hold such Confidential Information confidential), or is otherwise legitimately known by the Executive prior to his employment with the Company. In particular, and without limitation, Confidential Information shall not include any knowledge of the Executive with respect to the general business of the Company including its investment in and management of fixed income and similar securities on a leveraged basis, and its organization as a real estate investment trust. Nothing in this Agreement shall prevent the Executive from retaining papers and other materials of a personal nature, such as personal diaries, calendars and Rolodexes, and information relating to his compensation or relating to reimbursement of expenses, and copies of plans, programs and agreements relating to his employment or benefits. If the Executive is required or requested by a court or governmental agency to disclose Confidential Information, the Executive must notify the Executive Committee of such disclosure obligation or request no later than three (3) business days after the Executive learns of such obligation or request, and permit the Company to take all lawful steps it deems appropriate to prevent or limit the required disclosure.
(ii)Nothing in this Agreement restricts or prohibits the Executive or the Executive’s counsel from initiating communications directly with, responding to any inquiry from, volunteering information to, or providing testimony before a self-regulatory authority or a governmental, law enforcement or other regulatory authority, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, the Financial Industry Regulatory Authority, the Congress, and any Office of Inspector General (collectively, the “Regulators”), from participating in any reporting of, investigation into, or proceeding regarding suspected violations of law, or from making other disclosures
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that are protected under or from receiving an award for information provided under the whistleblower provisions of state or federal law or regulation.  The Executive does not need the prior authorization of the Company to engage in such communications with the Regulators, respond to such inquiries from the Regulators, provide Confidential Information or documents containing Confidential Information to the Regulators, or make any such reports or disclosures to the Regulators.  The Executive is not required to notify the Company that the Executive has engaged in such communications with the Regulators. The Executive recognizes and agrees that, in connection with any such activity outlined above, the Executive must inform the Regulators that the information the Executive is providing is confidential.
(iii)Federal law provides certain protections to individuals who disclose a trade secret to their attorney, a court, or a government official in certain, confidential circumstances.  Specifically, federal law provides that an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret under either of the following conditions:
•Where the disclosure is made (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting or investigating a suspected violation of law; or
•Where the disclosure is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
Federal law also provides that an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.
(b)Non-Competition Covenant.
(i)The Executive agrees that during the Employment Period, the Executive shall devote on a full-time business basis his skill, knowledge, commercial efforts and business time as the Board shall reasonably require to the conscientious and good faith performance of his duties and responsibilities to the Company to the best of his ability. Accordingly, during the Employment Period, the Executive shall not, directly or indirectly, be employed by, render services for, engage in business with or serve as an agent or consultant to any Person other than the Company; provided, however, the Executive may serve on the board of directors, or as an advisor to another entity or entities, or one or more non-profit or for-profit organizations, subject to the consent of the Board. Attached as Exhibit B is a list of the boards of directors on which, or advisory roles in which the Executive currently serves, and which have been approved by the Board.
(ii)The Executive further agrees that during the Employment Period and for a period of one (1) year following any cessation of his employment for any reason, the Executive shall not, directly or indirectly, render services within the “Restricted Territory” as an employee, owner, consultant or in any capacity that are the same as or substantially similar to the services provided by the Executive for the Company during the 12 months preceding the cessation of the Executive’s employment, on behalf of any person or entity that engages in a business that is the same as or substantially similar to, and competitive with, the business of Dynex at the time the Executive’s employment ceases. The Executive shall be permitted to hold a ten percent (10%) or less interest in the equity or debt securities of any publicly traded company. The “Restricted Territory” shall mean the continental United States of America.
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(c)Non-Solicitation of Employees. During the Employment Period and for a period of one (1) year following the cessation of his employment for any reason, the Executive shall not, directly or indirectly, by himself or through any third party, whether on the Executive’s own behalf or on behalf of any other Person or entity, (i) solicit or induce or endeavor to solicit or induce, divert, employ or retain, (ii) interfere with the relationship of Dynex with, or (iii) attempt to establish a business relationship of a nature that is competitive with the business of Dynex with, any person that is or was (during the last 30 days of the Executive’s employment with the Company) an employee or independent contractor of Dynex.
10.Work Product. The Executive agrees that all of the Executive’s work product (created solely or jointly with others, and including any intellectual property or moral rights in such work product), given, disclosed, created, developed or prepared in connection with the Executive’s employment with the Company (“Work Product”) shall exclusively vest in and be the sole and exclusive property of the Company and shall constitute “work made for hire” (as that term is defined under Section 101 of the U.S. Copyright Act, 17 U.S.C. § 101) with the Company being the person for whom the work was prepared. In the event that any such Work Product is deemed not to be a “work made for hire” or does not vest by operation of law in the Company, the Executive hereby irrevocably assigns, transfers and conveys to the Company, exclusively and perpetually, all right, title and interest which the Executive may have or acquire in and to such Work Product throughout the world, including without limitation any copyrights and patents, and the right to secure registrations, renewals, reissues, and extensions thereof. The Company or its designees shall have the exclusive right to make full and complete use of, and make changes to all Work Product without restrictions or liabilities of any kind, and the Executive shall not have the right to use any such materials, other than within the legitimate scope and purpose of the Executive’s employment with the Company. The Executive shall promptly disclose to the Company the creation or existence of any Work Product and shall take whatever additional lawful action may be necessary, and sign whatever documents the Company may require, in order to secure and vest in the Company or its designee all right, title and interest in and to all Work Product and any intellectual property rights therein (including full cooperation in support of any Company applications for patents and copyright or trademark registrations).
11.Return of Company Property. In the event of termination of the Executive’s employment for any reason, the Executive shall return to the Company all of the property of Dynex, including without limitation all Dynex materials or documents containing Confidential Information, and including without limitation, all computers (including laptops), cell phones, keys, PDAs, tablets, credit cards, facsimile machines, televisions, card access to any Dynex building, customer lists, computer disks, reports, files, e-mails, work papers, Work Product, documents, memoranda, records and software, computer access codes, passwords, or disks and instructional manuals, internal policies, and other similar materials or documents which the Executive used, received or prepared, helped prepare or supervised the preparation of in connection with the Executive’s employment with the Company. The Executive agrees not to retain any copies, duplicates, reproductions or excerpts of such material or documents, other than the materials of a “personal nature” referenced in Section 9(a) of this Agreement.
12.Compliance With Company Policies. During the Employment Period, the Executive shall be governed by and be subject to, and the Executive hereby agrees to comply with, all Company policies, procedures, codes, rules and regulations applicable to all employees and to executive officers of the Company, as they may be amended from time-to-time in the Company’s sole discretion.
13.Injunctive Relief with Respect to Covenants: Forum, Venue and Jurisdiction. The Executive acknowledges and agrees that, in the event of any material breach by the Executive of any section of this Agreement, remedies at law may be inadequate to protect the Company, and, without prejudice to any other legal or equitable rights and remedies otherwise available to the Company, the Executive agrees to
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the granting of injunctive relief in the Company’s favor in connection with any such breach or violation without proof of irreparable harm.
14.Assumption of Agreement. The Company shall require any successor thereto, by agreement in form and substance reasonably satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a material breach of this Agreement and shall entitle the Executive to terminate his employment for Good Reason and receive payment as provided under Section 7(d)(i) or (ii) of this Agreement, whichever is applicable on the Date of Termination.
15.Indemnification and Insurance. The Company agrees both during and after the Employment Period to indemnify the Executive to the fullest extent permitted by the law and its Articles of Incorporation (including payment of expenses in advance of final disposition of a proceeding) against actions or inactions of the Executive during the Employment Period as an officer, director or employee of the Company or any of its subsidiaries or affiliates or as a fiduciary of any benefit plan of any of the foregoing. The Company also agrees to provide the Executive with Directors and Officers insurance coverage both during and, with regard to matters occurring during the Employment Period, after the Employment Period. Such coverage after the Employment Period shall be at a level at least equal to the level being maintained at such time for the then current officers and directors or, if then being maintained at a higher level with regard to any prior period activities for officers or directors during such prior period, such higher amount with regard to the Executive’s activities during such prior period.
16.Entire Agreement. This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof. All prior correspondence and proposals (including but not limited to summaries of proposed terms) and all prior promises, representations, understandings, arrangements and agreements relating to such subject matter (including but not limited to those made to or with the Executive by any other person and those contained in any prior employment, consulting, severance, or similar agreement entered into by the Executive and the Company or any predecessor thereto or subsidiary or affiliate thereof, including the Prior Agreement) are merged herein and superseded hereby.
17.Termination of this Agreement and Survival of Certain Provisions. Subject to earlier termination by written agreement of the parties hereto or expiration pursuant to Section 2(a) of this Agreement, this Agreement shall terminate effective upon termination of the Executive’s employment by the Company or by the Executive for any reason; provided, however, that Sections 4(c), 7 (to the extent applicable), 8, 9, 10, 11, 12 (to the extent applicable), 13, 15, 17 and 18, as applicable, of this Agreement shall survive any termination of the Executive’s employment with the Company and any expiration or termination of this Agreement.
18.Miscellaneous.
(a)Binding Effect: Assignment. This Agreement shall be binding on and inure to the benefit of the Company and its successors and assigns. This Agreement shall also be binding on and inure to the benefit of the Executive and his heirs, executors, administrators and legal representatives. This Agreement shall be assignable by the Company to a successor by merger or otherwise, but not by the Executive.
(b)Choice of Law and Forum. This Agreement shall be interpreted, enforced, construed, and governed under the laws of the Commonwealth of Virginia, without regard for any conflict of law principles. The Company and the Executive hereby consent irrevocably to personal jurisdiction, service and venue in connection with any claim or controversy arising out of this Agreement or the Executive’s employment, in the courts of the Commonwealth of Virginia located in Henrico County, Virginia, and in
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the federal court in the Eastern District of Virginia, Richmond Division, to be chosen at the option of the Company, and the Executive waives any objections thereto.
(c)Taxes. The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment and social insurance taxes, as shall be required by law.
(d)Amendments. No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is approved in writing by the Board or a person authorized thereby and is agreed to in writing by the Executive. No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No waiver of any provision of this Agreement shall be implied from any course of dealing between or among the parties hereto or from any failure by any party hereto to assert its rights hereunder on any occasion or series of occasions.
(e)Severability. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. In the event that one or more terms or provisions of this Agreement are deemed invalid or unenforceable by the laws of Virginia or any other state or jurisdiction in which it is to be enforced, by reason of being vague or unreasonable as to duration or geographic scope of activities restricted, or for any other reason, the provision in question shall be immediately amended or reformed to the extent necessary to make it valid and enforceable by the court of such jurisdiction charged with interpreting and/or enforcing such provision. The Executive agrees and acknowledges that the provision in question, as so amended or reformed, shall be valid and enforceable as though the invalid or unenforceable portion had never been included herein.
(f)Notices. Any notice or other communication required or permitted to be delivered under this Agreement shall be (i) in writing, (ii) delivered personally, by courier service, by certified or registered mail, first-class postage prepaid and return receipt requested, or by electronic mail with receipt verification, (iii) deemed to have been received on the date of delivery or, if mailed, on the third business day after the mailing thereof, and (iv) addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof):
(A)If to the Company:    Dynex Capital, Inc.
4991 Lake Brook Drive, Suite 100
Glen Allen, Virginia 23060
Attention: Co-Chief Executive Officer
Email:    byron.boston@dynexcapital.com
(B)If to the Executive, to his residential address as currently on file with the Company or the Company’s email address for the Executive unless the Executive has provided an alternative email address for notification purposes.
(g)Voluntary Agreement; No Conflicts. The Executive represents that he is entering into this Agreement voluntarily and that the Executive’s employment hereunder and compliance with the terms and conditions of this Agreement shall not conflict with or result in the breach by the Executive of any agreement to which he is a party or by which he or his properties or assets may be bound.
(h)No Construction Against Any Party. This Agreement is the product of informed negotiations between the Executive and the Company. If any part of this Agreement is deemed to be unclear or ambiguous, it shall be construed as if it were drafted jointly by all parties. The Executive and
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the Company agree that neither party was in a superior bargaining position regarding the substantive terms of this Agreement.
(i)Counterparts; Electronic Signature. This Agreement may be executed in counterparts (including by electronic signature), each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
(j)Headings. The section and other headings contained in this Agreement are for the convenience of the parties only and are not intended to be a part hereof or to affect the meaning or interpretation hereof.
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IN WITNESS WHEREOF, the Company has duly executed this Agreement by its authorized representative, and the Executive has hereunto set his hand, in each case effective as of the date first above written.

DYNEX CAPITAL, INC.



By:    /s/ Byron L. Boston            
    Byron L. Boston, Co-Chief Executive Officer


EXECUTIVE


/s/ Robert S. Colligan                
Robert S. Colligan
Signature page to Employment Agreement by and between
Dynex Capital, Inc. and Robert S. Colligan
Exhibit A

RELEASE
For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Robert S. Colligan (the “Executive”), hereby irrevocably and unconditionally releases, acquits, and forever discharges Dynex Capital, Inc. (the “Company”) and its subsidiaries and affiliates (collectively, “Dynex”) and each of their agents, directors, members, affiliated entities, officers, employees, former employees, attorneys, and all persons acting by, through, under or in concert with any of them (collectively “Releasees”), from any and all charges, complaints, claims, liabilities, grievances, obligations, promises, agreements, controversies, damages, policies, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses of any nature whatsoever, known or unknown, suspected or unsuspected, including, but not limited to, any rights arising out of alleged violations or breaches of any contracts, express or implied, or any tort, or any legal restrictions on Dynex’s right to terminate employees, or any federal, state or other governmental statute, regulation, law or ordinance, including without limitation Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991; the Americans with Disabilities Act; 42 U.S.C. § 1981; the federal Age Discrimination in Employment Act (age discrimination); the Older Workers Benefit Protection Act; the Equal Pay Act; the Family and Medical Leave Act; the Employee Retirement Income Security Act, the Connecticut Fair Employment Practices Act (including age and sexual harassment claims), the Connecticut Human Rights and Opportunities Act (including age and sexual harassment claims), the Connecticut Family and Medical Leave Act, Title 31 of the Connecticut Code including without limitation the Connecticut equal pay law, the Connecticut whistleblower law, the Connecticut maximum hours and overtime laws, the Connecticut minimum wage and wage payments laws, the Connecticut free speech law, the anti-retaliation provision of the Connecticut Workers’ Compensation Act, the Connecticut WARN Act, the Connecticut Paid Sick Leave Law, the Connecticut employment privacy law, the Virginians with Disabilities Act, the Virginia Human Rights Act, the Virginia Equal Pay Act, the Virginia Fraud Against Taxpayers Act, the Virginia Genetic Testing Law, the Virginia Minimum Wage Act, except as prohibited by law, the Virginia Payment of Wage Law (except as prohibited by law), the Virginia Right to Work Law, the Virginia Occupational Safety and Health Act, and, as applicable, the Fairfax Human Rights Ordinance, Code of Fairfax County, the Human Rights Code of the City of Alexandria, Alexandria City Code, the Arlington Human Rights Ordinance, and Arlington County Code (“Claim” or “Claims”) which Executive now has, owns or holds, or claims to have, own or hold, or which Executive at any time heretofore had owned or held, or claimed to have owned or held, against each or any of the Releasees at any time up to and including the date of the execution of this Release; provided, however, that this Release does not release the Releasees from any obligation to pay “Accrued Obligations” (as defined in Section 7(d)(i)(A) of that certain Employment Agreement entered into as of July 19, 2024 by and between the Company and Executive (the “Employment Agreement”)), any applicable termination obligations of the Company under Section 7(d) of the Employment Agreement shall be paid in exchange for this Release, any accrued, vested benefits under the Company’s benefit plans that the Executive has earned prior to the date hereof, the provisions under Section 15 of the Employment Agreement, or any rights to indemnification or defense under the Company’s charter, bylaws or directors and officers insurance.
Nothing in this Release shall restrict or prohibit the Executive or the Executive’s counsel from filing a charge or complaint with, initiating communications directly with, responding to any inquiry from, volunteering information to, or providing testimony before a self-regulatory authority or a governmental, law enforcement or other regulatory authority, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, the Financial Industry Regulatory Authority, the
Exhibit A - 1

Congress, and any Office of Inspector General (collectively, the “Regulators”), from participating in any reporting of, investigation into, or proceeding regarding suspected violations of law, or from making other disclosures that are protected under or from receiving an award for information provided under the whistleblower provisions of state or federal law or regulation.  Executive does not need the prior authorization of the Company to engage in such communications with the Regulators, respond to such inquiries from the Regulators, provide Confidential Information (as defined in the Employment Agreement) or documents containing Confidential Information to the Regulators, or make any such reports or disclosures to the Regulators.  The Executive is not required to notify the Company that the Executive has engaged in such communications with the Regulators. The Executive recognizes and agrees that, in connection with any such activity outlined above, the Executive must inform the Regulators that the information the Executive is providing is confidential. To the extent, that any such charge or complaint is made against the Releasees, the Executive expressly waives any claim or right to any form of monetary relief or other damages, or any form of individual recovery or relief in connection with any such charge or complaint, except that the Executive does not waive his right with respect to an award for information provided under the whistleblower provisions of state or federal law or regulation.
The Executive hereby acknowledges and agrees that the execution of this Release and the cessation of Executive’s employment and all actions taken in connection therewith are in compliance with the federal Age Discrimination in Employment Act and the Older Workers Benefit Protection Act and that the releases set forth above shall be applicable, without limitation, to any claims brought under these Acts. The Executive further acknowledges and agrees that:
a.The Release given by the Executive is given solely in exchange for the severance payments set forth in the Employment Agreement between Dynex and the Executive to which this Release was initially attached and such consideration is in addition to anything of value which Executive was entitled to receive prior to entering into this Release;
b.By entering into this Release, the Executive does not waive rights or claims that may arise after the date this Release is executed;
c.The Executive is hereby advised to consult an attorney prior to entering into this Release, and this provision of the Release satisfies the requirements of the Older Workers Benefit Protection Act that the Executive be so advised in writing;
d.Executive has been offered 21 days [or 45 days in the event of a group termination] from receipt of this Release within which to consider whether to sign this Release; and
e.For a period of seven (7) days following the Executive’s execution of this Release, the Executive may revoke this Release by delivering the revocation to an authorized officer of Dynex, and it shall not become effective or enforceable until such seven (7) day period has expired.
This release shall be binding upon the heirs and personal representatives of the Executive and shall inure to the benefit of the successors and assigns of Dynex.
                            _______________________________________
                            Robert S. Colligan

Dated:    ___________________ ___, 20__
Exhibit A - 2


Exhibit B

Current Boards of Directors or Advisor Roles
The Executive currently serves as a consultant to X-Caliber Funding LLC, pursuant to the terms and conditions of a Consulting Agreement, dated February 15, 2022, a copy of which the Executive has provided to the Company.

Exhibit B - 1


Exhibit 31.1

CERTIFICATIONS

I, Byron L. Boston, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Dynex Capital, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  July 26, 2024/s/ Byron L. Boston
 Byron L. Boston
 Co-Principal Executive Officer
 



Exhibit 31.2

CERTIFICATIONS

I, Smriti L. Popenoe, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Dynex Capital, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  July 26, 2024/s/ Smriti L. Popenoe
 Smriti L. Popenoe
 Co-Principal Executive Officer
 



Exhibit 31.3

CERTIFICATIONS

I, Robert S. Colligan, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Dynex Capital, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  July 26, 2024/s/ Robert S. Colligan
 Robert S. Colligan
 Principal Financial Officer



Exhibit 32.1


CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 906


In connection with the Quarterly Report on Form 10-Q of Dynex Capital, Inc. (the “Company”) for the three months ended June 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, as the Principal Executive Officers of the Company and the Principal Financial Officer of the Company, respectively, certify, pursuant to and for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to their knowledge:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  July 26, 2024/s/ Byron L. Boston
 Byron L. Boston
 Co-Principal Executive Officer
  
Date:July 26, 2024/s/ Smriti L. Popenoe
Co-Principal Executive Officer
Date:  July 26, 2024/s/ Robert S. Colligan
 Robert S. Colligan
 Principal Financial Officer




v3.24.2
Document and Entity Information Document and Entity Information - shares
 6 Months Ended
Jun. 30, 2024
Jul. 24, 2024
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2024  
Current Fiscal Year End Date --12-31  
Document Transition Report false  
Entity File Number 001-09819  
Entity Registrant Name DYNEX CAPITAL, INC.  
Entity Incorporation, State or Country Code VA  
Entity Tax Identification Number 52-1549373  
Entity Address, Address Line One 4991 Lake Brook Drive  
Entity Address, Address Line Two Suite 100  
Entity Address, City or Town Glen Allen,  
Entity Address, State or Province VA  
Entity Address, Postal Zip Code 23060-9245  
City Area Code (804)  
Local Phone Number 217-5800  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   74,707,776
Entity Central Index Key 0000826675  
Document Fiscal Year Focus 2024  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Common Stock    
Document Information [Line Items]    
Title of 12(b) Security Common Stock, par value $0.01 per share  
Trading Symbol DX  
Security Exchange Name NYSE  
Series C Preferred Stock    
Document Information [Line Items]    
Title of 12(b) Security 6.900% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share  
Trading Symbol DXPRC  
Security Exchange Name NYSE  
v3.24.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Assets [Abstract]    
Cash and cash equivalents $ 286,132 $ 119,639
Cash collateral posted to counterparties 123,131 118,225
Mortgage-backed securities (including pledged of $5,788,148 and $5,880,747, respectively), at fair value 6,193,139 6,038,948
Due from counterparties 27,379 1,313
Derivative assets 8,461 54,361
Accrued interest receivable 28,323 28,727
Other assets, net 17,037 8,537
Total assets 6,683,602 6,369,750
Liabilities:    
Repurchase agreements 5,494,428 5,381,104
Due to counterparties 49,606 95
Derivative liabilities 2,032 0
Cash collateral posted by counterparties 19,382 46,001
Accrued interest payable 54,567 53,194
Accrued dividends payable 12,785 10,320
Other liabilities 5,539 8,301
 Total liabilities 5,638,339 5,499,015
Preferred Stock, Liquidation Preference, Value 111,500 111,500
Stockholders' Equity Attributable to Parent [Abstract]    
Preferred stock, par value $0.00 per share; 50,000 shares authorized; 4,460 and 4,460 shares issued and outstanding, respectively ($111,500 and $111,500 aggregate liquidation preference, respectively) 107,843 107,843
Common stock, par value $0.01 per share, 180,000,000 shares authorized; 74,707,776 and 57,038,247 shares issued and outstanding, respectively 747 570
Additional paid-in capital 1,620,355 1,404,431
Accumulated other comprehensive loss (177,556) (158,502)
Accumulated deficit (506,126) (483,607)
 Total shareholders’ equity 1,045,263 870,735
Total liabilities and shareholders’ equity $ 6,683,602 $ 6,369,750
v3.24.2
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Mortgage-backed securities (including pledged of $5,788,148 and $5,880,747, respectively), at fair value $ 6,193,139 $ 6,038,948
Preferred Stock, Par or Stated Value Per Share $ 0.01  
Preferred stock, Shares Authorized (in shares) 50,000,000  
Preferred Stock, Shares Outstanding (in shares) 4,460,000 4,460,000
Preferred Stock, Shares Issued 4,460,000 4,460,000
Preferred Stock, Liquidation Preference, Value $ 111,500 $ 111,500
Common Stock, Par or Stated Value Per Share $ 0.01  
Common Stock, Shares Authorized 180,000,000  
Common Stock, Shares, Issued 74,707,776 57,038,247
Common Stock, Shares, Outstanding 74,707,776 57,038,247
Asset Pledged as Collateral with Right    
Mortgage-backed securities (including pledged of $5,788,148 and $5,880,747, respectively), at fair value $ 5,788,148 $ 5,880,747
v3.24.2
Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Interest income $ 76,054 $ 42,212 $ 147,580 $ 73,058
Interest Expense, Operating 74,767 45,142 149,484 76,450
Net interest income (expense) 1,287 (2,930) (1,904) (3,392)
Realized loss on sales of investments, net (1,506) (51,601) (1,506) (74,916)
Unrealized (loss) gain on investments, net (41,977) 488 (112,001) 57,609
Gain on derivative instruments, net 41,135 116,012 165,771 48,745
Total other (losses) gains, net (2,348) 64,899 52,264 31,438
Noninterest Expense [Abstract]        
Compensation and benefits (3,284) (3,617) (10,461) (7,367)
Other general and administrative (3,358) (3,580) (7,062) (7,202)
Other operating expenses (601) (435) (1,022) (861)
Total operating expenses (7,243) (7,632) (18,545) (15,430)
Net income (8,304) 54,337 31,815 12,616
Preferred stock dividends (1,923) (1,923) (3,847) (3,847)
Net (loss) income to common shareholders (10,227) 52,414 27,968 8,769
Other comprehensive income:        
Unrealized (loss) gain on available-for-sale investments, net (1,786) (9,443) (19,054) 5,350
Total other comprehensive (loss) income (1,786) (9,443) (19,054) 5,350
Comprehensive (loss) income to common shareholders $ (12,013) $ 42,971 $ 8,914 $ 14,119
Weighted average common shares-basic (in shares) 66,954,870 54,137,327 63,003,545 53,981,463
Weighted average common shares-diluted (in shares) 66,954,870 54,585,082 63,913,156 54,327,385
Net income (loss) per common share-basic (in dollars per share) $ (0.15) $ 0.97 $ 0.44 $ 0.16
Net income (loss) per common share-diluted (in dollars per share) $ (0.15) $ 0.96 $ 0.44 $ 0.16
v3.24.2
Consolidated Statements of Shareholders' Equity Statement - USD ($)
$ in Thousands
Total
Preferred Stock
Preferred Stock Including Additional Paid in Capital
Common Stock
Additional Paid-in Capital
Accumulated Other Comprehensive Income (Loss)
Accumulated Deficit
Balance, Preferred shares outstanding (in shares) at Dec. 31, 2022   4,460,000          
Balance, Common shares outstanding at Dec. 31, 2022       53,637,095      
Balance, Preferred shares outstanding (in shares) at Mar. 31, 2023   4,460,000          
Balance, Common shares outstanding at Mar. 31, 2023       53,876,914      
Balance at Dec. 31, 2022 $ 901,328   $ 107,843 $ 536 $ 1,357,514 $ (181,346) $ (383,219)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Stock issuance, shares       199,274      
Stock issuance, value 2,771     $ 2 2,769    
Restricted stock granted, net of amortization, shares       27,932      
Restricted stock granted, net of amortization, value       $ 0 360    
Shares Issued, Shares, Share-Based Payment Arrangement, before Forfeiture       33,213      
Other share-based compensation, net of amortization, value 650     $ 1 649    
Adjustments for tax withholding on share based compensation (in shares)       (20,600)      
Adjustments for tax withholding on share-based compensation (276)     $ 0 (276)    
Stock issuance costs (16)       (16)    
Net Income (Loss) (41,722)           (41,722)
Dividends on preferred stock (1,923)           (1,923)
Dividends on common stock (21,137)           (21,137)
Other comprehensive income (loss) 14,793         14,793  
Balance at Mar. 31, 2023 854,828   107,843 $ 539 1,361,000 (166,553) (448,001)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Restricted stock granted, net of amortization, value 360            
Balance, Preferred shares outstanding (in shares) at Dec. 31, 2022   4,460,000          
Balance, Common shares outstanding at Dec. 31, 2022       53,637,095      
Balance, Preferred shares outstanding (in shares) at Jun. 30, 2023   4,460,000          
Balance, Common shares outstanding at Jun. 30, 2023       54,204,319      
Balance at Dec. 31, 2022 901,328   107,843 $ 536 1,357,514 (181,346) (383,219)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Other comprehensive income (loss) 5,350            
Balance at Jun. 30, 2023 880,962   107,843 $ 542 1,365,484 (175,996) (416,911)
Balance, Preferred shares outstanding (in shares) at Mar. 31, 2023   4,460,000          
Balance, Common shares outstanding at Mar. 31, 2023       53,876,914      
Balance, Preferred shares outstanding (in shares) at Jun. 30, 2023   4,460,000          
Balance, Common shares outstanding at Jun. 30, 2023       54,204,319      
Balance at Mar. 31, 2023 854,828   107,843 $ 539 1,361,000 (166,553) (448,001)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Stock issuance, shares       296,600      
Stock issuance, value 3,543     $ 3 3,540    
Restricted stock granted, net of amortization, shares       46,085      
Restricted stock granted, net of amortization, value 296     $ 0 296    
Shares Issued, Shares, Share-Based Payment Arrangement, before Forfeiture       0      
Other share-based compensation, net of amortization, value 833     $ 0 833    
Adjustments for tax withholding on share based compensation (in shares)       (15,280)      
Adjustments for tax withholding on share-based compensation (169)     $ 0 (169)    
Stock issuance costs (16)       (16)    
Net Income (Loss) 54,337           54,337
Dividends on preferred stock (1,923)           (1,923)
Dividends on common stock (21,324)           (21,324)
Other comprehensive income (loss) (9,443)         (9,443)  
Balance at Jun. 30, 2023 $ 880,962   107,843 $ 542 1,365,484 (175,996) (416,911)
Balance, Preferred shares outstanding (in shares) at Dec. 31, 2023 4,460,000 4,460,000          
Balance, Common shares outstanding at Dec. 31, 2023 57,038,247     57,038,247      
Balance, Preferred shares outstanding (in shares) at Mar. 31, 2024   4,460,000          
Balance, Common shares outstanding at Mar. 31, 2024       64,160,931      
Balance at Dec. 31, 2023 $ 870,735   107,843 $ 570 1,404,431 (158,502) (483,607)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Stock issuance, shares       7,007,448      
Stock issuance, value 86,806     $ 70 86,736    
Restricted stock granted, net of amortization, shares       46,544      
Restricted stock granted, net of amortization, value       $ 0 510    
Shares Issued, Shares, Share-Based Payment Arrangement, before Forfeiture       111,245      
Other share-based compensation, net of amortization, value 3,760     $ 1 3,759    
Adjustments for tax withholding on share based compensation (in shares)       (42,553)      
Adjustments for tax withholding on share-based compensation (527)     $ 0 (527)    
Stock issuance costs (16)       (16)    
Net Income (Loss) 40,118           40,118
Dividends on preferred stock (1,923)           (1,923)
Dividends on common stock (23,663)           (23,663)
Other comprehensive income (loss) (17,268)         (17,268)  
Balance at Mar. 31, 2024 958,532   107,843 $ 641 1,494,893 (175,770) (469,075)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Restricted stock granted, net of amortization, value $ 510            
Balance, Preferred shares outstanding (in shares) at Dec. 31, 2023 4,460,000 4,460,000          
Balance, Common shares outstanding at Dec. 31, 2023 57,038,247     57,038,247      
Balance, Preferred shares outstanding (in shares) at Jun. 30, 2024 4,460,000 4,460,000          
Balance, Common shares outstanding at Jun. 30, 2024 74,707,776     74,707,776      
Balance at Dec. 31, 2023 $ 870,735   107,843 $ 570 1,404,431 (158,502) (483,607)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Other comprehensive income (loss) (19,054)            
Balance at Jun. 30, 2024 $ 1,045,263   107,843 $ 747 1,620,355 (177,556) (506,126)
Balance, Preferred shares outstanding (in shares) at Mar. 31, 2024   4,460,000          
Balance, Common shares outstanding at Mar. 31, 2024       64,160,931      
Balance, Preferred shares outstanding (in shares) at Jun. 30, 2024 4,460,000 4,460,000          
Balance, Common shares outstanding at Jun. 30, 2024 74,707,776     74,707,776      
Balance at Mar. 31, 2024 $ 958,532   107,843 $ 641 1,494,893 (175,770) (469,075)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Stock issuance, shares       10,508,777      
Stock issuance, value 124,844     $ 105 124,739    
Restricted stock granted, net of amortization, shares       38,068      
Restricted stock granted, net of amortization, value       $ 1 190    
Shares Issued, Shares, Share-Based Payment Arrangement, before Forfeiture       0      
Other share-based compensation, net of amortization, value 724     $ 0 724    
Stock issuance costs (191)       (191)    
Net Income (Loss) (8,304)           (8,304)
Dividends on preferred stock (1,923)           (1,923)
Dividends on common stock (26,824)           (26,824)
Other comprehensive income (loss) (1,786)         (1,786)  
Balance at Jun. 30, 2024 1,045,263   $ 107,843 $ 747 $ 1,620,355 $ (177,556) $ (506,126)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Restricted stock granted, net of amortization, value $ 191            
v3.24.2
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Operating activities:    
Net income $ 31,815 $ 12,616
Adjustments to reconcile net income to cash provided by operating activities:    
Realized loss on sales of investments, net 1,506 74,916
Unrealized loss (gain) on investments, net 112,001 (57,609)
Gain on derivative instruments, net (165,771) (48,745)
Amortization of investment premiums, net 26,483 38,924
Other amortization and depreciation 925 1,193
Share-based compensation expense 5,184 2,140
Decrease (increase) in accrued interest receivable 404 (7,728)
Increase in accrued interest payable 1,373 17,344
Change in other assets and liabilities, net (12,415) 2,176
Net cash provided by operating activities 1,505 35,227
Investing activities:    
Purchases of investments (501,921) (2,109,585)
Principal payments received on trading securities 186,048 73,849
Principal payments received on available-for-sale investments 37,948 47,919
Proceeds from sales of trading securities 13,782 348,091
Principal payments received on mortgage loans held for investment 441 502
Net receipts on derivatives, including terminations 187,635 64,290
(Decrease) increase in cash collateral posted by counterparties (26,618) 5,190
Net cash used in investing activities (102,685) (1,569,744)
Financing activities:    
Borrowings under repurchase agreements 27,001,079 10,999,164
Repayments of repurchase agreement borrowings (26,887,755) (9,441,668)
Proceeds from issuance of common stock 211,650 6,314
Payments related to tax withholding for share-based compensation (527) (445)
Dividends paid (51,868) (45,971)
Net cash provided by financing activities 272,579 1,517,394
Net increase (decrease) in cash, including cash posted to counterparties 171,399 (17,123)
Cash including cash posted to counterparties at beginning of period 237,864 449,877
Cash including cash posted to counterparties at end of period 409,263 432,754
Supplemental Disclosure of Cash Activity:    
Cash paid for interest $ 148,111 $ 59,105
v3.24.2
Organization and Summary of Significant Accounting Policies (Notes)
 6 Months Ended
Jun. 30, 2024
Accounting Policies [Abstract]  
Organization and Summary of Significant Accounting Policies ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization

Dynex Capital, Inc. (the “Company”) was incorporated in the Commonwealth of Virginia on December 18, 1987 and commenced operations in February 1988. The Company is an internally managed mortgage real estate investment trust, or mortgage REIT, which primarily earns income from investing on a leveraged basis in Agency mortgage-backed securities (“Agency MBS”) and in to-be-announced securities (“TBAs” or “TBA securities”). Agency MBS have a guaranty of principal and interest payments by a U.S. government-sponsored entity (“GSE”) such as Fannie Mae and Freddie Mac, which are in conservatorship and are currently supported by a senior preferred stock purchase agreement from the U.S. Treasury. As of June 30, 2024, the majority of the Company’s Agency MBS are secured by residential real property (“Agency RMBS”). The remainder of the Company’s investments are in Agency commercial MBS (“Agency CMBS”) and in both Agency and non-Agency CMBS interest-only (“CMBS IO”). Non-Agency MBS do not have a GSE guaranty of principal or interest payments.

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company and its subsidiaries (together, “Dynex” or, as appropriate, the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 10, Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all significant adjustments, consisting of normal recurring accruals, considered necessary for a fair statement of results for the interim period have been included. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for any other interim periods or for the entire year ending December 31, 2024. The unaudited consolidated financial statements included herein should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”) filed with the SEC.   

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. The most significant estimates used by management include, but are not limited to, amortization of premiums and discounts and fair value measurements of its investments, including TBA securities accounted for as derivative instruments. These items are discussed further below within this note to the consolidated financial statements. The Company believes the estimates and assumptions underlying the consolidated financial statements included herein are reasonable and supportable based on the information available as of June 30, 2024.


Consolidation and Variable Interest Entities
 
The consolidated financial statements include the accounts of the Company and the accounts of its majority owned subsidiaries and variable interest entities (“VIE”) for which it is the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation.

The Company consolidates a VIE if the Company is determined to be the VIE’s primary beneficiary, which is defined as the party that has both (i) the power to control the activities that most significantly impact the VIE’s financial performance; and (ii) the right to receive benefits or absorb losses that could potentially be significant to the VIE. The Company reconsiders its evaluation of whether to consolidate a VIE on an ongoing basis, based on changes in the facts and circumstances pertaining to the VIE. Though the Company invests in Agency and non-
Agency MBS which are generally considered to be interests in VIEs, the Company does not consolidate these entities because it does not meet the criteria to be deemed a primary beneficiary. The maximum exposure to loss for these VIEs is the carrying value of the MBS.

Income Taxes

The Company has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986 (the “Tax Code”) and the corresponding provisions of state law. To qualify as a REIT, the Company must meet certain asset, income, ownership, and distribution tests. To meet these requirements, the Company’s main source of income is interest earned from obligations secured by mortgages on real property, and the Company must distribute at least 90% of its annual REIT taxable income to shareholders. The Company’s income will generally not be subject to federal income tax to the extent it is distributed as dividends to shareholders.

The Company assesses its tax positions for all open tax years and determines whether the Company has any material unrecognized liabilities and records these liabilities, if any, to the extent they are deemed more likely than not to have been incurred.

Net Income (Loss) Per Common Share

The Company calculates basic net income (loss) per common share by dividing net income (loss) to common shareholders for the period by weighted-average shares of common stock outstanding for that period. Please see Note 2 for the calculation of the Company’s basic and diluted net income (loss) per common share for the periods indicated.

The Company currently has unvested restricted stock, service-based restricted stock units (“RSUs”) and performance-based stock units (“PSUs”) issued and outstanding. Restricted stock awards are considered participating securities and therefore are included in the computation of basic net income per common share using the two-class method because holders of unvested shares of restricted stock are eligible to receive non-forfeitable dividends. Holders of RSUs and PSUs accrue forfeitable dividend equivalent rights over the period outstanding, receiving dividend payments only upon the settlement date if the requisite service-based and performance-based conditions have been achieved, as applicable. As such, RSUs and PSUs are excluded from the computation of basic net income per common share but are included in the computation of diluted net income per common share unless the effect is to reduce a net loss or increase the net income per common share (also known as “anti-dilutive”). Upon vesting, restrictions on transfer expire on each share of restricted stock, RSU, and PSU, and each such share or unit becomes one unrestricted share of common stock and is included in the computation of basic net income per common share.

Because the Company’s 6.900% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”) is redeemable at the Company’s option for cash only and convertible into shares of common stock only upon a change of control of the Company (and subject to other circumstances) as described in Article IIIC of the Company’s Restated Articles of Incorporation, the effect of those shares and their related dividends are excluded from the calculation of diluted net income per common share for the periods presented.

Cash and Cash Equivalents

Cash and cash equivalents include unrestricted demand deposits at highly rated financial institutions and highly liquid investments with original maturities of three months or less. The Company’s cash balances fluctuate throughout the year and may exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits from time to time. Although the Company bears risk to amounts in excess of those insured by the FDIC, the Company believes the risk of loss is mitigated by the financial position, creditworthiness, and strength of the depository institutions in which those deposits are held.
Cash Collateral Posted To/By Counterparties

The Company regularly pledges and receives amounts to cover margin requirements related to the Company’s financing and derivative instruments. If the amount pledged to a counterparty exceeds the amount received from a counterparty, the net amount is recorded as an asset within “cash collateral posted to counterparties,” and if the amount received from a counterparty exceeds the amount pledged to a counterparty, the net amount is recorded as a liability within “cash collateral posted by counterparties” on the Company’s consolidated balance sheets.

The following table provides a reconciliation of “cash” and “cash posted to counterparties” reported on the Company's consolidated balance sheet as of June 30, 2024, that sum to the total of the same such amounts shown on the Company’s consolidated statement of cash flows for the six months ended June 30, 2024:
($s in thousands)
June 30, 2024
Cash and cash equivalents$286,132 
Cash collateral posted to counterparties123,131 
Total cash including cash posted to counterparties shown on consolidated statement of cash flows$409,263 

Mortgage-Backed Securities
 
The Company’s MBS are recorded at fair value on the Company’s consolidated balance sheet. Changes in fair value of MBS purchased prior to January 1, 2021 are designated as available-for-sale (“AFS”) with changes in fair value reported in other comprehensive income (“OCI”) as an unrealized gain (loss) until the security is sold or matures. Effective January 1, 2021, the Company elected the fair value option (“FVO”) for all MBS purchased on or after that date with changes in fair value reported in net income as “unrealized gain (loss) on investments, net” until the security is sold or matures. Management elected the fair value option so that GAAP net income will reflect the changes in fair value for its future purchases of MBS in a manner consistent with the presentation and timing of the changes in fair value of its derivative instruments. Upon the sale of an MBS, any unrealized gain or loss within OCI or net income is reclassified to “realized gain (loss) on sale of investments, net” within net income using the specific identification method.

Interest Income, Premium Amortization, and Discount Accretion. Interest income on MBS is accrued based on the outstanding principal balance (or notional balance in the case of IO securities) and the contractual terms. Premiums or discounts associated with the purchase of Agency MBS as well as any non-Agency MBS are amortized or accreted into interest income over the projected life of such securities using the effective interest method, and adjustments to premium amortization and discount accretion are made for actual cash payments received. The Company’s projections of future cash payments are based on input received from external sources and internal models and may include assumptions about the amount and timing of loan prepayment rates, fluctuations in interest rates, credit losses, and other factors. On at least a quarterly basis, the Company reviews and makes any necessary adjustments to its cash flow projections and updates the yield recognized on these assets.

Determination of MBS Fair Value. The Company estimates the fair value of the majority of its MBS based upon prices obtained from a pricing service. These prices are assessed for reasonableness using broker quotes and other third-party pricing services. Please refer to Note 6 for further discussion of MBS fair value measurements.

Allowance for Credit Losses. On at least a quarterly basis, the Company evaluates any MBS designated as AFS with a fair value less than its amortized cost for credit losses. If the difference between the present value of cash flows expected to be collected on the MBS is less than its amortized cost, the difference is recorded as an allowance for credit loss through net income up to and not exceeding the amount that the amortized cost exceeds current fair value. Subsequent changes in credit loss estimates are recognized in earnings in the period in which they occur. Because the majority of the Company’s investments are higher credit quality and most are guaranteed by a
GSE, the Company is not likely to have an allowance for credit losses related to its MBS recorded on its consolidated balance sheet.

Interest accrued between payment dates on MBS is presented separately from the Company’s investment portfolio as “accrued interest receivable” on its consolidated balance sheet. The Company does not estimate an allowance for credit loss for its accrued interest receivable because the interest is generally received within 30 days and amounts not received when due are written off against interest income.

Repurchase Agreements
 
The Company’s repurchase agreements are used to finance its purchases of MBS and are accounted for as secured borrowings. The Company pledges its securities as collateral to secure a loan, which is equal to a specified percentage of the estimated fair value of the pledged collateral. The Company retains beneficial ownership of the pledged collateral, which is disclosed parenthetically on the Company’s consolidated balance sheets. At the maturity of a repurchase agreement borrowing, the Company is required to repay the loan and concurrently receives back its pledged collateral from the lender, or, with the consent of the lender, the Company may renew the agreement at the then prevailing financing rate. A repurchase agreement lender may require the Company to pledge additional collateral in the event of a decline in the fair value of the collateral pledged. Repurchase agreement financing is recourse to the Company and the assets pledged. The repurchase facilities available to the Company are uncommitted with no guarantee of renewal.

Derivative Instruments

Derivatives are carried at fair value, and changes in the fair value of derivative instruments, including gains and losses realized upon termination, maturity, or settlement, are recorded in “gain (loss) on derivative instruments, net” on the Company’s consolidated statements of comprehensive income (loss). Cash receipts and payments related to derivative instruments are classified in the investing activities section of the consolidated statements of cash flows in accordance with the underlying nature or purpose of the derivative transactions.

The Company’s short positions in U.S. Treasury futures contracts are valued based on exchange pricing with daily margin settlements. The margin requirement varies based on the market value of the open positions and the equity retained in the account. Any margin excess or deficit outstanding is recorded as a receivable or payable as of the date of the Company’s consolidated balance sheets. The Company realizes gains or losses on these contracts upon expiration at an amount equal to the difference between the current fair value of the underlying asset and the contractual price of the futures contract.

The Company’s options on U.S. Treasury futures provide the Company the right, but not an obligation, to buy or sell U.S. Treasury futures at a predetermined notional amount and stated term in the future and are valued based on exchange pricing. The Company records the premium paid for the option contract as a derivative asset on its consolidated balance sheet and adjusts the balance for changes in fair value through “gain (loss) on derivative instruments” until the option is exercised or the contract expires. If the option contract expires unexercised, the realized loss is limited to the premium paid. If exercised, the realized gain or loss on the options is equal to the difference between the fair value of the underlying U.S. Treasury future and the premium paid for the option contract.

The Company’s interest rate swaps are pay-fixed, which involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the interest rate swap without exchange of the underlying notional amount. These agreements are centrally cleared through the Chicago Mercantile Exchange (“CME”), which requires the Company to post initial margin as determined by the CME, and additional variation margin is exchanged, typically in cash, for changes in the fair value of the interest rate swaps. Similar to the Company’s U.S. Treasury futures, the exchange of variation margin for CME cleared swaps is legally considered to be the settlement of the derivative itself as opposed to a pledge of collateral. Accordingly, any margin excess or deficit outstanding is recorded as a receivable or payable as of the date of the Company’s consolidated balance sheets. Changes in the fair value of these instruments is recorded in “gain(loss) on derivative instruments” until
termination or expiration.

The Company may also purchase swaptions, which provide the Company the right, but not an obligation, to enter into an interest rate swap at a predetermined notional amount with a stated term and pay and receive rates in the future. The accounting for swaptions is similar to options on U.S. Treasury futures.

A TBA security is a forward contract (“TBA contract”) for the purchase (“long position”) or sale (“short position”) of a non-specified Agency MBS at a predetermined price with certain principal and interest terms and certain types of collateral, but the particular Agency securities to be delivered are not identified until shortly before the settlement date. The Company accounts for long and short positions in TBAs as derivative instruments because the Company cannot assert that it is probable at inception and throughout the term of an individual TBA transaction that its settlement will result in physical delivery of the underlying Agency RMBS or that the individual TBA transaction will settle in the shortest time period possible.

Please refer to Note 5 for additional information regarding the Company’s derivative instruments as well as Note 6 for information on how the fair value of these instruments is calculated.

Share-Based Compensation

The Company’s 2020 Stock and Incentive Plan (the “2020 Plan”) reserves for issuance up to 2,300,000 common shares for eligible employees, non-employee directors, consultants, and advisors to the Company to be granted in the form of stock options, restricted stock, restricted stock units (“RSUs”), stock appreciation rights, performance-based stock units (“PSUs”), and performance-based cash awards (collectively, “awards”). As of June 30, 2024, 58,503 common shares are available for issuance under the 2020 Plan.

The Company has issued restricted stock and RSUs, which are treated as equity awards and recorded at their fair value using the closing stock price on the grant date. Compensation expense is generally recognized over a service period specified within each award with a corresponding credit to shareholders’ equity using the straight-line method until the vesting date specified within each award or until the employee becomes eligible for retirement, if earlier than the vesting date. Compensation expense for subsequent equity awards to an employee who is retirement eligible is recognized immediately upon the grant date.

The Company also has PSUs issued and outstanding which contain Company performance-based and market performance-based conditions. PSUs subject to Company performance-based conditions are initially recognized as equity at their fair value which is measured using the closing stock price on the grant date multiplied by the number of units expected to vest based on an assessment of the probability of achievement of the Company performance-based conditions as of the grant date. The grant date fair value is recognized as expense using the straight-line method until the earlier of the vesting date specified within each award or the date the employee becomes eligible for retirement. Adjustments are made, if necessary, based on any change in probability of achievement which is re-assessed as of each reporting date and on at least a quarterly basis. PSUs subject to market performance-based conditions are recognized as equity at their grant date fair value determined through a Monte-Carlo simulation of the Company’s common stock total shareholder return (“TSR”) relative to the common stock TSR of the group of peer companies specified in the award agreement. Awards subject to market performance-based conditions are not assessed for probability of achievement and are not remeasured subsequent to issuance. The grant date fair value is recognized as expense using the straight-line method until the earlier of the vesting date specified within each award or the date the employee becomes eligible for retirement, even if the market performance-based conditions are not achieved.

The Company does not estimate forfeitures for any of its share-based compensation awards but adjusts for actual forfeitures in the periods in which they occur. Because RSUs and PSUs have forfeitable dividend equivalent rights, which are paid in cash only upon settlement, any accrued dividend equivalent rights (“DERs”) on forfeited units are reversed with a corresponding credit to “Compensation and benefits” expense.

Please see Note 7 for additional information about the Company’s share-based compensation awards.
Contingencies

The Company did not have any pending lawsuits, claims, or other contingencies as of June 30, 2024 or December 31, 2023.
Recently Issued Accounting Pronouncements

The Company evaluates Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board on at least a quarterly basis to evaluate applicability and significance of any impact on its financial condition and results of operations.

ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" amended existing guidance to improve disclosures about a public entity’s reportable segments and provide more detailed information about a reportable segment’s expenses. ASU 2023-07 clarifies that an entity which has a single reportable segment is to provide all the disclosures required by Topic 280 and ASU 2023-07. The amendment is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The adoption of ASU 2023-07 is not expected to have a significant impact on the Company's consolidated financial statements.

There were no other accounting pronouncements issued during the six months ended June 30, 2024, that are applicable to the Company and expected to have a material impact on the Company’s financial condition or results of operations.
v3.24.2
Net Income (Loss) Per Common Share
 6 Months Ended
Jun. 30, 2024
Earnings Per Share [Abstract]  
Net Income (Loss) Per Common Share NET INCOME (LOSS) PER COMMON SHARE
Please refer to Note 1 for information regarding the Company’s treatment of its preferred stock and stock awards in the calculation of its basic and diluted net income or loss per common share and to Note 7 for information regarding the Company’s stock award activity for the periods presented. The following table presents the computations of basic and diluted net income or loss per common share for the periods indicated:
Three Months EndedSix Months Ended
June 30,June 30,
($s in thousands)
2024202320242023
Weighted average number of common shares outstanding - basic66,954,87054,137,32763,003,54553,981,463
Incremental common shares-unvested RSUs—160,303460,118119,570
Incremental common shares-unvested PSUs—287,452449,493226,352
Weighted average number of common shares outstanding - diluted66,954,87054,585,08263,913,15654,327,385
Net (loss) income to common shareholders$(10,227)$52,414 $27,968 $8,769 
Net (loss) income per common share-basic$(0.15)$0.97 $0.44 $0.16 
Net (loss) income per common share-diluted$(0.15)$0.96 $0.44 $0.16 

The calculation of diluted net loss per common share for the three months ended June 30, 2024 excludes unvested RSUs and PSUs of 1,110,206, which would have been anti-dilutive for the period.
v3.24.2
Mortgage-Backed Securities
 6 Months Ended
Jun. 30, 2024
Investments, Debt and Equity Securities [Abstract]  
Mortgage-Backed Securities MORTGAGE-BACKED SECURITIES
 
The following tables provide details on the Company’s MBS by investment type as of the dates indicated:
June 30, 2024December 31, 2023
($s in thousands)
Par ValueAmortized CostFair ValuePar ValueAmortized CostFair Value
Agency RMBS$6,353,838 $6,326,070 $5,962,418 $6,022,502 $5,993,922 $5,763,532 
Agency CMBS102,299 102,516 97,482 121,293 121,799 115,595 
CMBS IO (1)
n/a139,994 133,239 n/a167,314 159,718 
Non-Agency other— — — 150 150 103 
Total$6,456,137 $6,568,580 $6,193,139 $6,143,945 $6,283,185 $6,038,948 
(1) The notional balance for Agency CMBS IO and non-Agency CMBS IO was $7,321,369 and $3,167,395, respectively, as of June 30, 2024, and $7,723,379 and $3,860,007, respectively, as of December 31, 2023.
June 30, 2024
($s in thousands)
Amortized CostGross Unrealized GainGross Unrealized LossFair Value
MBS measured at fair value through OCI:
Agency RMBS$863,181 $— $(168,488)$694,693 
Agency CMBS102,516 — (5,034)97,482 
CMBS IO101,780 1,359 (5,392)97,747 
Total$1,067,477 $1,359 $(178,914)$889,922 
MBS measured at fair value through net income:
Agency RMBS$5,462,889 $13,333 $(208,497)$5,267,725 
CMBS IO38,214 — (2,722)35,492 
Total$5,501,103 $13,333 $(211,219)$5,303,217 
December 31, 2023
($s in thousands)
Amortized CostGross Unrealized GainGross Unrealized LossFair Value
MBS measured at fair value through OCI:
Agency RMBS$898,420 $— $(148,606)$749,814 
Agency CMBS106,527 28 (5,159)101,396 
CMBS IO126,672 1,296 (6,014)121,954 
Non-Agency other150 — (47)103 
Total$1,131,769 $1,324 $(159,826)$973,267 
MBS measured at fair value through net income:
Agency RMBS$5,095,502 $48,459 $(130,243)$5,013,718 
Agency CMBS15,272 — (1,073)14,199 
CMBS IO40,642 2 (2,880)37,764 
Total$5,151,416 $48,461 $(134,196)$5,065,681 
The majority of the Company’s MBS are pledged as collateral for the Company’s repurchase agreements, which are disclosed in Note 4. Actual maturities of MBS are affected by the contractual lives of the underlying mortgage collateral, periodic payments of principal, prepayments of principal, and the payment priority structure of the security; therefore, actual maturities are generally shorter than the securities' stated contractual maturities.
The following table presents information regarding unrealized gains and losses on investments reported within net income (loss) on the Company’s consolidated statements of comprehensive income (loss) for the periods indicated:
Three Months EndedSix Months Ended
June 30,June 30,
($s in thousands)
2024202320242023
Agency RMBS$(43,705)$1,254 $(113,381)$57,033 
Agency CMBS1,263 (275)1,073 (37)
CMBS IO351 (466)157 626 
Other investments
114 (25)150 (13)
Total unrealized gain (loss) on investments, net
$(41,977)$488 $(112,001)$57,609 

The following table presents information regarding realized gains and losses on sales of MBS reported in the Company’s consolidated statements of comprehensive income (loss) for the periods indicated:
Three Months EndedSix Months Ended
June 30,June 30,
($s in thousands)
2024202320242023
Realized losses on sales of MBS - FVO$(1,506)$(51,601)$(1,506)$(74,916)
Total realized loss on sales of investments, net
$(1,506)$(51,601)$(1,506)$(74,916)

The following table presents certain information for MBS designated as AFS that were in an unrealized loss position as of the dates indicated:
 June 30, 2024December 31, 2023
($s in thousands)
Fair ValueGross Unrealized Losses# of SecuritiesFair ValueGross Unrealized Losses# of Securities
Continuous unrealized loss position for less than 12 months:    
Agency MBS$6,309 $(263)7$3,926 $(149)4
Non-Agency MBS164 (3)11,736 (37)8
Continuous unrealized loss position for 12 months or longer:
Agency MBS$862,038 $(178,136)70$932,682 $(158,651)78
Non-Agency MBS11,397 (512)2421,704 (989)41

The unrealized losses on the Company’s MBS designated as AFS were the result of rising interest rates and declines in market prices and were not credit related; therefore, the Company did not have any allowance for credit losses as of June 30, 2024 or December 31, 2023. Although the unrealized losses are not credit related, the Company assesses its ability and intent to hold any MBS with an unrealized loss until the recovery in its value. This assessment is based on the amount of the unrealized loss and significance of the related investment as well as the Company’s leverage and liquidity position. In addition, for its non-Agency MBS, the Company reviews the credit
ratings, the credit characteristics of the mortgage loans collateralizing these securities, and the estimated future cash flows including projected collateral losses.
v3.24.2
Repurchase Agreements
 6 Months Ended
Jun. 30, 2024
Disclosure of Repurchase Agreements [Abstract]  
Repurchase agreements REPURCHASE AGREEMENTS
The Company’s repurchase agreements outstanding as of June 30, 2024 and December 31, 2023 are summarized in the following tables:
 June 30, 2024December 31, 2023
Collateral TypeBalanceWeighted
Average Rate		Fair Value of
Collateral Pledged		BalanceWeighted
Average Rate		Fair Value of
Collateral Pledged
($s in thousands)
Agency RMBS$5,284,233 5.46 %$5,562,905 $5,130,438 5.59 %$5,613,212 
Agency CMBS92,472 5.45 %96,046 104,495 5.60 %113,753 
Agency CMBS IO103,281 5.75 %113,334 120,979 5.83 %127,823 
Non-Agency CMBS IO14,442 6.17 %15,863 25,192 6.25 %25,959 
Total
$5,494,428 5.46 %$5,788,148 $5,381,104 5.59 %$5,880,747 
The Company had borrowings outstanding under 28 different repurchase agreements as of June 30, 2024, and its equity at risk did not exceed 10% with any counterparty as of that date. The Company received noncash collateral with a fair value of $2.4 million pledged by its counterparties to compensate the Company for the increase in fair value of collateral previously pledged in excess of required margin related to its repurchase agreement borrowings outstanding as of June 30, 2024. In accordance with Accounting Standards Codification (“ASC”) Topic 860, the fair value of this noncash collateral is not recorded on the Company’s consolidated balance sheet unless the Company re-pledges the collateral or sells the collateral in the event of default by the counterparty. The Company had not re-pledged any of the noncash collateral pledged by its counterparties as of June 30, 2024.

The following table provides information on the remaining term to maturity and original term to maturity for the Company’s repurchase agreements as of the dates indicated:
June 30, 2024December 31, 2023
Remaining Term to MaturityBalanceWeighted
Average Rate		WAVG Original Term to MaturityBalanceWeighted
Average Rate		WAVG Original Term to Maturity
($s in thousands)
Less than 30 days$2,350,410 5.46 %99$2,855,917 5.61 %92 
30 to 90 days3,015,537 5.47 %892,525,187 5.58 %86 
91 to 180 days128,481 5.43 %113— — %— 
Total$5,494,428 5.46 %94 $5,381,104 5.59 %89 

The Company’s accrued interest payable related to its repurchase agreement borrowings increased to $54.6 million as of June 30, 2024 from $53.2 million as of December 31, 2023.

The Company’s counterparties, as set forth in the master repurchase agreement with the counterparty, require the Company to comply with various customary operating and financial covenants, including, but not limited to, minimum net worth, maximum declines in net worth in a given period, and maximum leverage requirements as well as maintaining the Company’s REIT status. In addition, some of the agreements contain cross default features, whereby default under an agreement with one lender simultaneously causes default under agreements with other lenders. To the extent that the Company fails to comply with the covenants contained in these financing agreements or is otherwise found to be in default under the terms of such agreements, the counterparty has the right to accelerate
amounts due under the master repurchase agreement. The Company believes it was in full compliance with all covenants in master repurchase agreements under which there were amounts outstanding as of June 30, 2024.

The Company's repurchase agreements are subject to underlying agreements with master netting or similar arrangements, which provide for the right of setoff in the event of default or in the event of bankruptcy of either party to the transactions. The Company reports its repurchase agreements to these arrangements on a gross basis. The following table presents information regarding the Company's repurchase agreements as if the Company had presented them on a net basis as of June 30, 2024 and December 31, 2023:
($s in thousands)
Gross Amount of Recognized LiabilitiesGross Amount Offset in the Balance SheetNet Amount of Liabilities Presented in the Balance Sheet
Gross Amount Not Offset in the Balance Sheet (1)
Net Amount
Financial Instruments Posted as CollateralCash Posted as Collateral
June 30, 2024:
Repurchase agreements$5,494,428 $— $5,494,428 $(5,494,428)$— $— 
December 31, 2023:
Repurchase agreements$5,381,104 $— $5,381,104 $(5,381,104)$— $— 
(1) Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the repurchase agreement liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the consolidated balance sheets for the total fair value of financial instruments pledged as collateral for derivatives and repurchase agreements, which is shown parenthetically, and the total cash pledged or received as collateral, which is disclosed as “cash collateral posted to/by counterparties.”
Please see Note 5 for information related to the Company’s derivatives, which are also subject to underlying agreements with master netting or similar arrangements.
v3.24.2
Derivatives
 6 Months Ended
Jun. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives DERIVATIVES
Types and Uses of Derivatives Instruments

Interest Rate Derivatives. During the periods presented herein, the Company used short positions in U.S. Treasury futures, interest rate swaps, and put options on U.S. Treasury futures to mitigate the impact of changing interest rates on its repurchase agreement financing costs and the fair value of its investments.

TBA Transactions. The Company purchases TBA securities as a means of investing in non-specified fixed-rate Agency RMBS and may also periodically sell TBA securities as a means of economically hedging its exposure to Agency RMBS. The Company holds long or short positions in TBA securities by executing a series of transactions, commonly referred to as “dollar roll” transactions, which effectively delay the settlement of a forward purchase (or sale) of a non-specified Agency RMBS by entering into an offsetting TBA position, net settling the paired-off positions in cash, and simultaneously entering into an identical TBA long (or short) position with a later settlement date. TBA securities purchased (or sold) for a forward settlement date are generally priced at a discount relative to TBA securities settling in the current month. This discount, often referred to as “drop income” represents the economic equivalent of net interest income (interest income less implied financing cost) on the underlying Agency security from trade date to settlement date. The Company accounts for all TBAs (whether net long or net short positions, or collectively “TBA dollar roll positions”) as derivative instruments because it cannot assert that it is probable at inception and throughout the term of an individual TBA transaction that its settlement will result in physical delivery of the underlying Agency RMBS, or that the individual TBA transaction will settle in the shortest period possible.
The table below provides detail of the Company’s gain and losses by type of derivative instrument for the periods indicated:
Three Months EndedSix Months Ended
June 30,June 30,
Type of Derivative Instrument2024202320242023
($s in thousands)
U.S. Treasury futures$64,210 $171,219 $204,021 $64,846 
Interest rate swaps
(90)— (90)— 
Put options on U.S. Treasury futures
— (1,211)— (5,468)
TBA securities-long positions(22,985)(53,996)(38,160)(10,633)
Gain on derivative instruments, net$41,135 $116,012 $165,771 $48,745 

The table below provides the carrying amount by type of derivative instrument comprising the Company’s derivative assets and liabilities on its consolidated balance sheets as of the dates indicated:
Type of Derivative InstrumentBalance Sheet LocationPurposeJune 30, 2024December 31, 2023
($s in thousands)
TBA securitiesDerivative assetsInvesting$8,461 $54,361 
Total derivatives assets$8,461 $54,361 
TBA securitiesDerivative liabilitiesInvesting$2,032 $— 
Total derivatives liabilities$2,032 $— 

The Company entered into a 7-year interest rate swap during the three months ended June 30, 2024 with a notional amount of $10.0 million, a pay fixed rate of 4.15%, and a SOFR-based variable receive rate.

Because the daily margin exchanged for the Company’s U.S. Treasury futures and interest rate swaps are considered legal settlement of the derivative as opposed to a pledge of collateral, these instruments have a carrying value of $0 on the Company’s consolidated balance sheets. The Company’s U.S. Treasury futures were in a liability position of $(34.2) million as of June 30, 2024 and $(219.9) million as of December 31, 2023, and its interest rate swaps were in a liability position of $(0.1) million as of June 30, 2024 and $0 as of December 31, 2023. The amount of cash posted by the Company to cover required initial margin for these instruments was $122.2 million as of June 30, 2024 and $118.2 million as of December 31, 2023, which was recorded within “cash collateral posted to counterparties.” The Company had a margin excess of $20.4 million as of June 30, 2024 and $1.3 million as of December 31, 2023, which was recorded within “due from counterparties.”

The following table summarizes information about the Company's long positions in TBA securities as of the dates indicated:
($s in thousands)
June 30, 2024December 31, 2023
Implied market value (1)
$2,662,350 $1,381,702 
Implied cost basis (2)
2,655,920 1,327,341 
Net carrying value (3)
$6,430 $54,361 
(1) Implied market value represents the estimated fair value of the underlying Agency MBS as of the dates indicated.
(2) Implied cost basis represents the forward price to be paid for the underlying Agency MBS as of the dates indicated.
(3) Net carrying value is the amount included on the consolidated balance sheets within “derivative assets” and “derivative liabilities” and represents the difference between the implied market value and the implied cost basis of the TBA securities as of the dates indicated.
Volume of Activity

The table below summarizes changes in the Company’s derivative instruments for the six months ended June 30, 2024:
Type of Derivative InstrumentBeginning
Notional Amount-Long (Short)		AdditionsSettlements,
Terminations,
or Pair-Offs		Ending
Notional Amount-Long (Short)
($s in thousands)
U.S. Treasury futures$(4,880,000)$(11,035,000)$10,520,000 $(5,395,000)
Interest rate swaps
— (10,000)— (10,000)
TBA securities1,403,000 12,447,000 (11,111,000)2,739,000 

Offsetting

The Company's derivatives are subject to underlying agreements with master netting or similar arrangements, which provide for the right of setoff in the event of default or in the event of bankruptcy of either party to the transactions. The Company reports its derivative assets and liabilities subject to these arrangements on a gross basis. Please see Note 4 for information related to the Company’s repurchase agreements, which are also subject to underlying agreements with master netting or similar arrangements. The following tables present information regarding those derivative assets and liabilities subject to such arrangements as if the Company had presented them on a net basis as of June 30, 2024 and December 31, 2023:
Offsetting of Assets
($s in thousands)
Gross Amount of Recognized AssetsGross Amount Offset in the Balance SheetNet Amount of Assets Presented in the Balance Sheet
Gross Amount Not Offset in the Balance Sheet (1)
Net Amount
Financial Instruments Received as CollateralCash Received as Collateral
June 30, 2024
TBA securities$8,461 $— $8,461 $(2,032)$(6,311)$118 
Derivative assets$8,461 $— $8,461 $(2,032)$(6,311)$118 
December 31, 2023
TBA securities$54,361 $— $54,361 $— $(44,153)$10,208 
Derivative assets$54,361 $— $54,361 $— $(44,153)$10,208 
Offsetting of Liabilities
($s in thousands)
Gross Amount of Recognized LiabilitiesGross Amount Offset in the Balance SheetNet Amount of Liabilities Presented in the Balance Sheet
Gross Amount Not Offset in the Balance Sheet (1)
Net Amount
Financial Instruments Posted as CollateralCash Posted as Collateral
June 30, 2024
TBA securities$2,032 $— $2,032 $(2,032)$— $— 
Derivative liabilities$2,032 $— $2,032 $(2,032)$— $— 
December 31, 2023
TBA securities$— $— $— $— $— $— 
Derivative liabilities$— $— $— $— $— $— 
(1) Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the derivative asset or liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the consolidated balance sheets for the total fair value of financial instruments pledged as collateral for derivatives and repurchase agreements, which is shown parenthetically, and the total cash pledged or received as collateral which is disclosed as “cash collateral posted to/by counterparties.”
v3.24.2
Fair Value of Financial Instruments
 6 Months Ended
Jun. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments FAIR VALUE OF FINANCIAL INSTRUMENTS
 
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is based on the assumptions market participants would use when pricing an asset or liability and also considers all aspects of nonperformance risk, including the entity’s own credit standing, when measuring fair value of a liability. ASC Topic 820 established a valuation hierarchy of three levels as follows:

•Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date.
•Level 2 – Inputs include quoted prices in active markets for similar assets or liabilities; quoted prices in inactive markets for identical or similar assets or liabilities; or inputs either directly observable or indirectly observable through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
•Level 3 – Unobservable inputs are supported by little or no market activity. The unobservable inputs represent management’s best estimate of how market participants would price the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

The following table presents the Company’s financial instruments that are measured at fair value on the Company’s consolidated balance sheet by their valuation hierarchy levels as of the dates indicated:
($s in thousands)
June 30, 2024December 31, 2023
Level 1Level 2Level 3Level 1Level 2Level 3
Assets:
   
MBS$— $6,193,139 $— $— $6,038,845 $103 
TBA securities (1)
— 8,461 — — 54,361 — 
Mortgage loans— — 1,412 — — 1,793 
Total assets
$— $6,201,600 $1,412 $— $6,093,206 $1,896 
Liabilities:
TBA securities (1)
$— $2,032 $— $— $— $— 
Total liabilities
$— $2,032 $— $— $— $— 
(1)TBA securities are reflected on consolidated balance sheets at their implied fair value, net of implied cost basis. Please refer to Note 5 for additional information.

The fair value measurements for the Company’s TBA securities and the majority of its MBS are considered Level 2 because there are substantially similar securities actively trading or for which there has been recent trading activity in their respective markets and are based on prices received from a pricing service. In valuing a security, the pricing service primarily uses a market approach, which uses observable prices and other relevant information that is generated by market transactions of identical or similar securities, but may use an income approach, which uses valuation techniques such as discounted cash flow modeling. The Company reviews the prices it receives from the pricing service as well as the assumptions and inputs, if any, utilized by the pricing service for reasonableness. Examples of the observable inputs and assumptions include market interest rates, credit spreads, and projected prepayment speeds, among other things. In addition, the prices received from the pricing service are assessed for reasonableness using broker quotes as well as other third-party pricing services.

The Company's mortgage loans held for investment are single-family mortgage loans, which were originated or purchased by the Company prior to 2000, and for which the Company has elected the fair value option. The fair value measurements for these mortgage loans and certain non-Agency MBS are considered Level 3 assets because there has been no recent trading activity of similar instruments upon which their fair value can be measured. The fair value for these Level 3 assets is measured by discounting the estimated future cash flows derived from cash flow models using certain inputs such as the security’s credit rating, coupon rate, estimated prepayment speeds, expected weighted average life, collateral composition, and expected credit losses as well as certain other relevant information. The Company used a constant prepayment rate assumption of 10%, default rate of 2%, loss severity of 20%, and a discount rate of 10.2% in measuring the fair value of its Level 3 assets as of June 30, 2024.
The Company’s short positions in U.S. Treasury futures contracts are valued based on exchange pricing and are classified accordingly as Level 1 measurements. Interest rate swaps are valued using the daily settlement price, or fair value, determined by the clearing exchange based on a pricing model that references observable market inputs, including current benchmark rates and the forward yield curve, and thus their fair values are considered Level 2 measurements. The carrying value of the U.S. Treasury futures contracts and interest rate swaps on the Company’s consolidated balance sheets is $0 because the instruments require daily margin exchanges, which are considered by the settlement agent to represent legal settlement of the contracts on a daily basis.
v3.24.2
Shareholders' Equity and Share-Based Compensation (Notes)
 6 Months Ended
Jun. 30, 2024
Equity [Abstract]  
Shareholders' Equity and Share-based Compensation SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION
Preferred Stock. The Company’s Board of Directors has designated 6,600,000 shares of the Company’s preferred stock for issuance as Series C Preferred Stock, of which the Company has 4,460,000 of such shares outstanding as of June 30, 2024. The Series C Preferred Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption, and will remain outstanding indefinitely unless redeemed, repurchased, or converted into common stock pursuant to the terms of the Series C Preferred Stock. Except under certain limited circumstances
described in Article IIIC of the Company’s Restated Articles of Incorporation, the Company may not redeem the Series C Preferred Stock prior to April 15, 2025. On or after that date, the Series C Preferred Stock may be redeemed at any time and from time to time at the Company's option at a cash redemption price of $25.00 per share plus any accumulated and unpaid dividends. Because the Series C Preferred Stock is redeemable only at the option of the issuer, it is classified as equity on the Company’s consolidated balance sheet.

The Series C Preferred Stock pays a cumulative cash dividend equivalent to 6.900% of the $25.00 liquidation preference per share each year until April 15, 2025. The terms of the Series C Preferred Stock state that upon April 15, 2025 and thereafter, the Company will pay cumulative cash dividends at a percentage of the $25.00 liquidation value per share equal to an annual floating rate of 3-month LIBOR plus a spread of 5.461%. When 3-month LIBOR ceases to be a published, the fallback provision provided in the terms of the Series C Preferred Stock will allow for the Company to appoint a third-party independent financial institution of national standing to select an industry accepted alternative base rate. The Company paid its regular quarterly dividend of $0.43125 per share of Series C Preferred Stock on July 15, 2024 to shareholders of record as of July 1, 2024.

Common Stock. During the six months ended June 30, 2024, the Company issued 10,500,000 shares of its common stock through a public offering, resulting in proceeds of $124.5 million, net of issuance costs, and issued 7,016,225 shares of its common stock through its at-the-market (“ATM”) program at an aggregate value of $86.9 million, net of broker commissions and fees. The Company declared common dividends of $0.39 on its common stock for the three months ended June 30, 2024. The Company’s timing, frequency, and amount of dividends declared on its common stock are determined by its Board of Directors. When declaring dividends, the Board of Directors considers the Company’s taxable income, the REIT distribution requirements of the Tax Code, and maintaining compliance with dividend requirements of the Series C Preferred Stock, along with other factors that the Board of Directors may deem relevant from time to time.
Share-Based Compensation. The following table presents a rollforward of share-based awards for the periods indicated:
Six Months Ended
June 30,
 20242023
Type of AwardShares
Weighted Average
Grant Date
Fair Value
 Per Share
Shares
Weighted Average
Grant Date
Fair Value
 Per Share
Restricted stock:
Awards outstanding, beginning of period104,282 $12.61 133,951 $15.22 
Granted65,668 12.56 74,017 11.27 
Vested(76,355)12.37 (36,573)16.75 
Awards outstanding, end of period93,595 $12.78 171,395 $13.19 
Target RSUs: (1)
Awards outstanding, beginning of period394,497 $13.06 86,666 $16.57 
Granted214,755 12.50 106,850 11.97 
Vested(68,896)14.42 (33,213)16.96 
Awards outstanding, end of period540,356 $12.66 160,303 $13.42 
Target PSUs: (2)
Awards outstanding, beginning of period276,866 $13.17 201,284 $16.60 
Granted322,132 12.50 160,277 11.97 
Vested— — — — 
Awards outstanding, end of period598,998 $12.81 361,561 $16.60 
(1)The number of RSUs shown represent the target number of awards. Actual number of shares that will potentially settle may range from 0% if the recipient’s service-based vesting condition is not met to 100% if the service-based vesting condition is met.
(2)The number of PSUs shown represent the target number of awards. Actual number of shares that will potentially settle may range from 0% to 200% based on the achievement of the performance goals defined in each grant award.

As of June 30, 2024, the Company expects 95% of the remaining target PSUs will be settled on their vesting dates.

The Company has DERs accrued for RSUs and PSUs of $0.6 million and $0.8 million, respectively, as of June 30, 2024 compared to $0.4 million and $0.8 million, respectively, as of December 31, 2023, which is included on the Company’s consolidated balance sheet within “accrued dividends payable.”

Total share-based compensation expense recognized by the Company for the three and six months ended June 30, 2024 was $0.9 million and $5.2 million compared to $1.1 million and $2.1 million for the three and six months ended June 30, 2023. The increase in share-based compensation for the three and six months ended June 30, 2024 is due to accelerated recognition of expense for certain stock incentive awards granted in March 2024 to
retirement eligible employees. The following table discloses the Company’s remaining compensation expense related to stock awards it has granted as of June 30, 2024, which will be amortized over the period disclosed:
June 30, 2024
($s in thousands)
Remaining Compensation CostWAVG Period of Recognition
Restricted stock$975 1.5 years
RSUs3,932 2.2 years
PSUs2,514 2.2 years
Total$7,421 2.1 years
v3.24.2
Pay vs Performance Disclosure - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Pay vs Performance Disclosure        
Net income $ (8,304) $ 54,337 $ 31,815 $ 12,616
v3.24.2
Insider Trading Arrangements
 3 Months Ended
Jun. 30, 2024
Trading Arrangements, by Individual  
Rule 10b5-1 Arrangement Adopted false
Non-Rule 10b5-1 Arrangement Adopted false
Rule 10b5-1 Arrangement Terminated false
Non-Rule 10b5-1 Arrangement Terminated false
v3.24.2
Organization and Summary of Significant Accounting Policies (Policies)
 6 Months Ended
Jun. 30, 2024
Accounting Policies [Abstract]  
Organization
Organization

Dynex Capital, Inc. (the “Company”) was incorporated in the Commonwealth of Virginia on December 18, 1987 and commenced operations in February 1988. The Company is an internally managed mortgage real estate investment trust, or mortgage REIT, which primarily earns income from investing on a leveraged basis in Agency mortgage-backed securities (“Agency MBS”) and in to-be-announced securities (“TBAs” or “TBA securities”). Agency MBS have a guaranty of principal and interest payments by a U.S. government-sponsored entity (“GSE”) such as Fannie Mae and Freddie Mac, which are in conservatorship and are currently supported by a senior preferred stock purchase agreement from the U.S. Treasury. As of June 30, 2024, the majority of the Company’s Agency MBS are secured by residential real property (“Agency RMBS”). The remainder of the Company’s investments are in Agency commercial MBS (“Agency CMBS”) and in both Agency and non-Agency CMBS interest-only (“CMBS IO”). Non-Agency MBS do not have a GSE guaranty of principal or interest payments.
Basis of Presentation
Basis of Presentation
The accompanying unaudited consolidated financial statements of the Company and its subsidiaries (together, “Dynex” or, as appropriate, the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 10, Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all significant adjustments, consisting of normal recurring accruals, considered necessary for a fair statement of results for the interim period have been included. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for any other interim periods or for the entire year ending December 31, 2024. The unaudited consolidated financial statements included herein should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”) filed with the SEC.
Use of Estimates
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. The most significant estimates used by management include, but are not limited to, amortization of premiums and discounts and fair value measurements of its investments, including TBA securities accounted for as derivative instruments. These items are discussed further below within this note to the consolidated financial statements. The Company believes the estimates and assumptions underlying the consolidated financial statements included herein are reasonable and supportable based on the information available as of June 30, 2024.
Consolidation and Variable Interest Entities
Consolidation and Variable Interest Entities
 
The consolidated financial statements include the accounts of the Company and the accounts of its majority owned subsidiaries and variable interest entities (“VIE”) for which it is the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation.

The Company consolidates a VIE if the Company is determined to be the VIE’s primary beneficiary, which is defined as the party that has both (i) the power to control the activities that most significantly impact the VIE’s financial performance; and (ii) the right to receive benefits or absorb losses that could potentially be significant to the VIE. The Company reconsiders its evaluation of whether to consolidate a VIE on an ongoing basis, based on changes in the facts and circumstances pertaining to the VIE. Though the Company invests in Agency and non-
Agency MBS which are generally considered to be interests in VIEs, the Company does not consolidate these entities because it does not meet the criteria to be deemed a primary beneficiary. The maximum exposure to loss for these VIEs is the carrying value of the MBS.
Income Taxes
Income Taxes

The Company has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986 (the “Tax Code”) and the corresponding provisions of state law. To qualify as a REIT, the Company must meet certain asset, income, ownership, and distribution tests. To meet these requirements, the Company’s main source of income is interest earned from obligations secured by mortgages on real property, and the Company must distribute at least 90% of its annual REIT taxable income to shareholders. The Company’s income will generally not be subject to federal income tax to the extent it is distributed as dividends to shareholders.

The Company assesses its tax positions for all open tax years and determines whether the Company has any material unrecognized liabilities and records these liabilities, if any, to the extent they are deemed more likely than not to have been incurred.
Net Income (Loss) Per Common Share
Net Income (Loss) Per Common Share

The Company calculates basic net income (loss) per common share by dividing net income (loss) to common shareholders for the period by weighted-average shares of common stock outstanding for that period. Please see Note 2 for the calculation of the Company’s basic and diluted net income (loss) per common share for the periods indicated.

The Company currently has unvested restricted stock, service-based restricted stock units (“RSUs”) and performance-based stock units (“PSUs”) issued and outstanding. Restricted stock awards are considered participating securities and therefore are included in the computation of basic net income per common share using the two-class method because holders of unvested shares of restricted stock are eligible to receive non-forfeitable dividends. Holders of RSUs and PSUs accrue forfeitable dividend equivalent rights over the period outstanding, receiving dividend payments only upon the settlement date if the requisite service-based and performance-based conditions have been achieved, as applicable. As such, RSUs and PSUs are excluded from the computation of basic net income per common share but are included in the computation of diluted net income per common share unless the effect is to reduce a net loss or increase the net income per common share (also known as “anti-dilutive”). Upon vesting, restrictions on transfer expire on each share of restricted stock, RSU, and PSU, and each such share or unit becomes one unrestricted share of common stock and is included in the computation of basic net income per common share.

Because the Company’s 6.900% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”) is redeemable at the Company’s option for cash only and convertible into shares of common stock only upon a change of control of the Company (and subject to other circumstances) as described in Article IIIC of the Company’s Restated Articles of Incorporation, the effect of those shares and their related dividends are excluded from the calculation of diluted net income per common share for the periods presented.
Cash and Cash Equivalents
Cash and Cash Equivalents

Cash and cash equivalents include unrestricted demand deposits at highly rated financial institutions and highly liquid investments with original maturities of three months or less. The Company’s cash balances fluctuate throughout the year and may exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits from time to time. Although the Company bears risk to amounts in excess of those insured by the FDIC, the Company believes the risk of loss is mitigated by the financial position, creditworthiness, and strength of the depository institutions in which those deposits are held.
Cash Collateral Posted To/By Counterparties
Cash Collateral Posted To/By Counterparties

The Company regularly pledges and receives amounts to cover margin requirements related to the Company’s financing and derivative instruments. If the amount pledged to a counterparty exceeds the amount received from a counterparty, the net amount is recorded as an asset within “cash collateral posted to counterparties,” and if the amount received from a counterparty exceeds the amount pledged to a counterparty, the net amount is recorded as a liability within “cash collateral posted by counterparties” on the Company’s consolidated balance sheets.

The following table provides a reconciliation of “cash” and “cash posted to counterparties” reported on the Company's consolidated balance sheet as of June 30, 2024, that sum to the total of the same such amounts shown on the Company’s consolidated statement of cash flows for the six months ended June 30, 2024:
($s in thousands)
June 30, 2024
Cash and cash equivalents$286,132 
Cash collateral posted to counterparties123,131 
Total cash including cash posted to counterparties shown on consolidated statement of cash flows$409,263 
Mortgage-Back Securities
Mortgage-Backed Securities
 
The Company’s MBS are recorded at fair value on the Company’s consolidated balance sheet. Changes in fair value of MBS purchased prior to January 1, 2021 are designated as available-for-sale (“AFS”) with changes in fair value reported in other comprehensive income (“OCI”) as an unrealized gain (loss) until the security is sold or matures. Effective January 1, 2021, the Company elected the fair value option (“FVO”) for all MBS purchased on or after that date with changes in fair value reported in net income as “unrealized gain (loss) on investments, net” until the security is sold or matures. Management elected the fair value option so that GAAP net income will reflect the changes in fair value for its future purchases of MBS in a manner consistent with the presentation and timing of the changes in fair value of its derivative instruments. Upon the sale of an MBS, any unrealized gain or loss within OCI or net income is reclassified to “realized gain (loss) on sale of investments, net” within net income using the specific identification method.

Interest Income, Premium Amortization, and Discount Accretion. Interest income on MBS is accrued based on the outstanding principal balance (or notional balance in the case of IO securities) and the contractual terms. Premiums or discounts associated with the purchase of Agency MBS as well as any non-Agency MBS are amortized or accreted into interest income over the projected life of such securities using the effective interest method, and adjustments to premium amortization and discount accretion are made for actual cash payments received. The Company’s projections of future cash payments are based on input received from external sources and internal models and may include assumptions about the amount and timing of loan prepayment rates, fluctuations in interest rates, credit losses, and other factors. On at least a quarterly basis, the Company reviews and makes any necessary adjustments to its cash flow projections and updates the yield recognized on these assets.

Determination of MBS Fair Value. The Company estimates the fair value of the majority of its MBS based upon prices obtained from a pricing service. These prices are assessed for reasonableness using broker quotes and other third-party pricing services. Please refer to Note 6 for further discussion of MBS fair value measurements.

Allowance for Credit Losses. On at least a quarterly basis, the Company evaluates any MBS designated as AFS with a fair value less than its amortized cost for credit losses. If the difference between the present value of cash flows expected to be collected on the MBS is less than its amortized cost, the difference is recorded as an allowance for credit loss through net income up to and not exceeding the amount that the amortized cost exceeds current fair value. Subsequent changes in credit loss estimates are recognized in earnings in the period in which they occur. Because the majority of the Company’s investments are higher credit quality and most are guaranteed by a
GSE, the Company is not likely to have an allowance for credit losses related to its MBS recorded on its consolidated balance sheet.

Interest accrued between payment dates on MBS is presented separately from the Company’s investment portfolio as “accrued interest receivable” on its consolidated balance sheet. The Company does not estimate an allowance for credit loss for its accrued interest receivable because the interest is generally received within 30 days and amounts not received when due are written off against interest income.
Repurchase Agreements
Repurchase Agreements
 
The Company’s repurchase agreements are used to finance its purchases of MBS and are accounted for as secured borrowings. The Company pledges its securities as collateral to secure a loan, which is equal to a specified percentage of the estimated fair value of the pledged collateral. The Company retains beneficial ownership of the pledged collateral, which is disclosed parenthetically on the Company’s consolidated balance sheets. At the maturity of a repurchase agreement borrowing, the Company is required to repay the loan and concurrently receives back its pledged collateral from the lender, or, with the consent of the lender, the Company may renew the agreement at the then prevailing financing rate. A repurchase agreement lender may require the Company to pledge additional collateral in the event of a decline in the fair value of the collateral pledged. Repurchase agreement financing is recourse to the Company and the assets pledged. The repurchase facilities available to the Company are uncommitted with no guarantee of renewal.
Derivative Instruments
Derivative Instruments

Derivatives are carried at fair value, and changes in the fair value of derivative instruments, including gains and losses realized upon termination, maturity, or settlement, are recorded in “gain (loss) on derivative instruments, net” on the Company’s consolidated statements of comprehensive income (loss). Cash receipts and payments related to derivative instruments are classified in the investing activities section of the consolidated statements of cash flows in accordance with the underlying nature or purpose of the derivative transactions.

The Company’s short positions in U.S. Treasury futures contracts are valued based on exchange pricing with daily margin settlements. The margin requirement varies based on the market value of the open positions and the equity retained in the account. Any margin excess or deficit outstanding is recorded as a receivable or payable as of the date of the Company’s consolidated balance sheets. The Company realizes gains or losses on these contracts upon expiration at an amount equal to the difference between the current fair value of the underlying asset and the contractual price of the futures contract.

The Company’s options on U.S. Treasury futures provide the Company the right, but not an obligation, to buy or sell U.S. Treasury futures at a predetermined notional amount and stated term in the future and are valued based on exchange pricing. The Company records the premium paid for the option contract as a derivative asset on its consolidated balance sheet and adjusts the balance for changes in fair value through “gain (loss) on derivative instruments” until the option is exercised or the contract expires. If the option contract expires unexercised, the realized loss is limited to the premium paid. If exercised, the realized gain or loss on the options is equal to the difference between the fair value of the underlying U.S. Treasury future and the premium paid for the option contract.

The Company’s interest rate swaps are pay-fixed, which involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the interest rate swap without exchange of the underlying notional amount. These agreements are centrally cleared through the Chicago Mercantile Exchange (“CME”), which requires the Company to post initial margin as determined by the CME, and additional variation margin is exchanged, typically in cash, for changes in the fair value of the interest rate swaps. Similar to the Company’s U.S. Treasury futures, the exchange of variation margin for CME cleared swaps is legally considered to be the settlement of the derivative itself as opposed to a pledge of collateral. Accordingly, any margin excess or deficit outstanding is recorded as a receivable or payable as of the date of the Company’s consolidated balance sheets. Changes in the fair value of these instruments is recorded in “gain(loss) on derivative instruments” until
termination or expiration.

The Company may also purchase swaptions, which provide the Company the right, but not an obligation, to enter into an interest rate swap at a predetermined notional amount with a stated term and pay and receive rates in the future. The accounting for swaptions is similar to options on U.S. Treasury futures.

A TBA security is a forward contract (“TBA contract”) for the purchase (“long position”) or sale (“short position”) of a non-specified Agency MBS at a predetermined price with certain principal and interest terms and certain types of collateral, but the particular Agency securities to be delivered are not identified until shortly before the settlement date. The Company accounts for long and short positions in TBAs as derivative instruments because the Company cannot assert that it is probable at inception and throughout the term of an individual TBA transaction that its settlement will result in physical delivery of the underlying Agency RMBS or that the individual TBA transaction will settle in the shortest time period possible.

Please refer to Note 5 for additional information regarding the Company’s derivative instruments as well as Note 6 for information on how the fair value of these instruments is calculated.
Share-based Compensation
Share-Based Compensation

The Company’s 2020 Stock and Incentive Plan (the “2020 Plan”) reserves for issuance up to 2,300,000 common shares for eligible employees, non-employee directors, consultants, and advisors to the Company to be granted in the form of stock options, restricted stock, restricted stock units (“RSUs”), stock appreciation rights, performance-based stock units (“PSUs”), and performance-based cash awards (collectively, “awards”). As of June 30, 2024, 58,503 common shares are available for issuance under the 2020 Plan.

The Company has issued restricted stock and RSUs, which are treated as equity awards and recorded at their fair value using the closing stock price on the grant date. Compensation expense is generally recognized over a service period specified within each award with a corresponding credit to shareholders’ equity using the straight-line method until the vesting date specified within each award or until the employee becomes eligible for retirement, if earlier than the vesting date. Compensation expense for subsequent equity awards to an employee who is retirement eligible is recognized immediately upon the grant date.

The Company also has PSUs issued and outstanding which contain Company performance-based and market performance-based conditions. PSUs subject to Company performance-based conditions are initially recognized as equity at their fair value which is measured using the closing stock price on the grant date multiplied by the number of units expected to vest based on an assessment of the probability of achievement of the Company performance-based conditions as of the grant date. The grant date fair value is recognized as expense using the straight-line method until the earlier of the vesting date specified within each award or the date the employee becomes eligible for retirement. Adjustments are made, if necessary, based on any change in probability of achievement which is re-assessed as of each reporting date and on at least a quarterly basis. PSUs subject to market performance-based conditions are recognized as equity at their grant date fair value determined through a Monte-Carlo simulation of the Company’s common stock total shareholder return (“TSR”) relative to the common stock TSR of the group of peer companies specified in the award agreement. Awards subject to market performance-based conditions are not assessed for probability of achievement and are not remeasured subsequent to issuance. The grant date fair value is recognized as expense using the straight-line method until the earlier of the vesting date specified within each award or the date the employee becomes eligible for retirement, even if the market performance-based conditions are not achieved.

The Company does not estimate forfeitures for any of its share-based compensation awards but adjusts for actual forfeitures in the periods in which they occur. Because RSUs and PSUs have forfeitable dividend equivalent rights, which are paid in cash only upon settlement, any accrued dividend equivalent rights (“DERs”) on forfeited units are reversed with a corresponding credit to “Compensation and benefits” expense.

Please see Note 7 for additional information about the Company’s share-based compensation awards.
Contingencies
Contingencies

The Company did not have any pending lawsuits, claims, or other contingencies as of June 30, 2024 or December 31, 2023.
Recently Issued Accounting Pronouncements
Recently Issued Accounting Pronouncements

The Company evaluates Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board on at least a quarterly basis to evaluate applicability and significance of any impact on its financial condition and results of operations.

ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" amended existing guidance to improve disclosures about a public entity’s reportable segments and provide more detailed information about a reportable segment’s expenses. ASU 2023-07 clarifies that an entity which has a single reportable segment is to provide all the disclosures required by Topic 280 and ASU 2023-07. The amendment is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The adoption of ASU 2023-07 is not expected to have a significant impact on the Company's consolidated financial statements.

There were no other accounting pronouncements issued during the six months ended June 30, 2024, that are applicable to the Company and expected to have a material impact on the Company’s financial condition or results of operations.
v3.24.2
Organization and Summary of Significant Accounting Policies (Tables)
 6 Months Ended
Jun. 30, 2024
Accounting Policies [Abstract]  
Schedule of Cash and Cash Equivalents
The following table provides a reconciliation of “cash” and “cash posted to counterparties” reported on the Company's consolidated balance sheet as of June 30, 2024, that sum to the total of the same such amounts shown on the Company’s consolidated statement of cash flows for the six months ended June 30, 2024:
($s in thousands)
June 30, 2024
Cash and cash equivalents$286,132 
Cash collateral posted to counterparties123,131 
Total cash including cash posted to counterparties shown on consolidated statement of cash flows$409,263 
v3.24.2
Net Income (Loss) Per Common Share (Tables)
 6 Months Ended
Jun. 30, 2024
Earnings Per Share [Abstract]  
Schedule of Earnings Per Share, Basic and Diluted The following table presents the computations of basic and diluted net income or loss per common share for the periods indicated:
Three Months EndedSix Months Ended
June 30,June 30,
($s in thousands)
2024202320242023
Weighted average number of common shares outstanding - basic66,954,87054,137,32763,003,54553,981,463
Incremental common shares-unvested RSUs—160,303460,118119,570
Incremental common shares-unvested PSUs—287,452449,493226,352
Weighted average number of common shares outstanding - diluted66,954,87054,585,08263,913,15654,327,385
Net (loss) income to common shareholders$(10,227)$52,414 $27,968 $8,769 
Net (loss) income per common share-basic$(0.15)$0.97 $0.44 $0.16 
Net (loss) income per common share-diluted$(0.15)$0.96 $0.44 $0.16 
v3.24.2
Mortgage-Backed Securities (Tables)
 6 Months Ended
Jun. 30, 2024
Investments, Debt and Equity Securities [Abstract]  
Debt Securities, Trading, and Equity Securities, FV-NI
The following tables provide details on the Company’s MBS by investment type as of the dates indicated:
June 30, 2024December 31, 2023
($s in thousands)
Par ValueAmortized CostFair ValuePar ValueAmortized CostFair Value
Agency RMBS$6,353,838 $6,326,070 $5,962,418 $6,022,502 $5,993,922 $5,763,532 
Agency CMBS102,299 102,516 97,482 121,293 121,799 115,595 
CMBS IO (1)
n/a139,994 133,239 n/a167,314 159,718 
Non-Agency other— — — 150 150 103 
Total$6,456,137 $6,568,580 $6,193,139 $6,143,945 $6,283,185 $6,038,948 
(1) The notional balance for Agency CMBS IO and non-Agency CMBS IO was $7,321,369 and $3,167,395, respectively, as of June 30, 2024, and $7,723,379 and $3,860,007, respectively, as of December 31, 2023.
June 30, 2024
($s in thousands)
Amortized CostGross Unrealized GainGross Unrealized LossFair Value
MBS measured at fair value through OCI:
Agency RMBS$863,181 $— $(168,488)$694,693 
Agency CMBS102,516 — (5,034)97,482 
CMBS IO101,780 1,359 (5,392)97,747 
Total$1,067,477 $1,359 $(178,914)$889,922 
MBS measured at fair value through net income:
Agency RMBS$5,462,889 $13,333 $(208,497)$5,267,725 
CMBS IO38,214 — (2,722)35,492 
Total$5,501,103 $13,333 $(211,219)$5,303,217 
December 31, 2023
($s in thousands)
Amortized CostGross Unrealized GainGross Unrealized LossFair Value
MBS measured at fair value through OCI:
Agency RMBS$898,420 $— $(148,606)$749,814 
Agency CMBS106,527 28 (5,159)101,396 
CMBS IO126,672 1,296 (6,014)121,954 
Non-Agency other150 — (47)103 
Total$1,131,769 $1,324 $(159,826)$973,267 
MBS measured at fair value through net income:
Agency RMBS$5,095,502 $48,459 $(130,243)$5,013,718 
Agency CMBS15,272 — (1,073)14,199 
CMBS IO40,642 2 (2,880)37,764 
Total$5,151,416 $48,461 $(134,196)$5,065,681 
Debt Securities, Available-for-sale
The following tables provide details on the Company’s MBS by investment type as of the dates indicated:
June 30, 2024December 31, 2023
($s in thousands)
Par ValueAmortized CostFair ValuePar ValueAmortized CostFair Value
Agency RMBS$6,353,838 $6,326,070 $5,962,418 $6,022,502 $5,993,922 $5,763,532 
Agency CMBS102,299 102,516 97,482 121,293 121,799 115,595 
CMBS IO (1)
n/a139,994 133,239 n/a167,314 159,718 
Non-Agency other— — — 150 150 103 
Total$6,456,137 $6,568,580 $6,193,139 $6,143,945 $6,283,185 $6,038,948 
(1) The notional balance for Agency CMBS IO and non-Agency CMBS IO was $7,321,369 and $3,167,395, respectively, as of June 30, 2024, and $7,723,379 and $3,860,007, respectively, as of December 31, 2023.
June 30, 2024
($s in thousands)
Amortized CostGross Unrealized GainGross Unrealized LossFair Value
MBS measured at fair value through OCI:
Agency RMBS$863,181 $— $(168,488)$694,693 
Agency CMBS102,516 — (5,034)97,482 
CMBS IO101,780 1,359 (5,392)97,747 
Total$1,067,477 $1,359 $(178,914)$889,922 
MBS measured at fair value through net income:
Agency RMBS$5,462,889 $13,333 $(208,497)$5,267,725 
CMBS IO38,214 — (2,722)35,492 
Total$5,501,103 $13,333 $(211,219)$5,303,217 
December 31, 2023
($s in thousands)
Amortized CostGross Unrealized GainGross Unrealized LossFair Value
MBS measured at fair value through OCI:
Agency RMBS$898,420 $— $(148,606)$749,814 
Agency CMBS106,527 28 (5,159)101,396 
CMBS IO126,672 1,296 (6,014)121,954 
Non-Agency other150 — (47)103 
Total$1,131,769 $1,324 $(159,826)$973,267 
MBS measured at fair value through net income:
Agency RMBS$5,095,502 $48,459 $(130,243)$5,013,718 
Agency CMBS15,272 — (1,073)14,199 
CMBS IO40,642 2 (2,880)37,764 
Total$5,151,416 $48,461 $(134,196)$5,065,681 
Unrealized Gain (Loss) on Investments
The following table presents information regarding unrealized gains and losses on investments reported within net income (loss) on the Company’s consolidated statements of comprehensive income (loss) for the periods indicated:
Three Months EndedSix Months Ended
June 30,June 30,
($s in thousands)
2024202320242023
Agency RMBS$(43,705)$1,254 $(113,381)$57,033 
Agency CMBS1,263 (275)1,073 (37)
CMBS IO351 (466)157 626 
Other investments
114 (25)150 (13)
Total unrealized gain (loss) on investments, net
$(41,977)$488 $(112,001)$57,609 
Realized Gain (Loss) on Investments The following table presents information regarding realized gains and losses on sales of MBS reported in the Company’s consolidated statements of comprehensive income (loss) for the periods indicated:
Three Months EndedSix Months Ended
June 30,June 30,
($s in thousands)
2024202320242023
Realized losses on sales of MBS - FVO$(1,506)$(51,601)$(1,506)$(74,916)
Total realized loss on sales of investments, net
$(1,506)$(51,601)$(1,506)$(74,916)
Debt Securities, Available-for-sale, Unrealized Loss Position, Fair Value
The following table presents certain information for MBS designated as AFS that were in an unrealized loss position as of the dates indicated:
 June 30, 2024December 31, 2023
($s in thousands)
Fair ValueGross Unrealized Losses# of SecuritiesFair ValueGross Unrealized Losses# of Securities
Continuous unrealized loss position for less than 12 months:    
Agency MBS$6,309 $(263)7$3,926 $(149)4
Non-Agency MBS164 (3)11,736 (37)8
Continuous unrealized loss position for 12 months or longer:
Agency MBS$862,038 $(178,136)70$932,682 $(158,651)78
Non-Agency MBS11,397 (512)2421,704 (989)41
v3.24.2
Repurchase Agreements (Tables)
 6 Months Ended
Jun. 30, 2024
Disclosure of Repurchase Agreements [Abstract]  
Schedule of Underlying Assets of Repurchase Agreements when Amount of Repurchase Agreements Exceeds 10 Percent of Assets
The Company’s repurchase agreements outstanding as of June 30, 2024 and December 31, 2023 are summarized in the following tables:
 June 30, 2024December 31, 2023
Collateral TypeBalanceWeighted
Average Rate		Fair Value of
Collateral Pledged		BalanceWeighted
Average Rate		Fair Value of
Collateral Pledged
($s in thousands)
Agency RMBS$5,284,233 5.46 %$5,562,905 $5,130,438 5.59 %$5,613,212 
Agency CMBS92,472 5.45 %96,046 104,495 5.60 %113,753 
Agency CMBS IO103,281 5.75 %113,334 120,979 5.83 %127,823 
Non-Agency CMBS IO14,442 6.17 %15,863 25,192 6.25 %25,959 
Total
$5,494,428 5.46 %$5,788,148 $5,381,104 5.59 %$5,880,747 
The Company had borrowings outstanding under 28 different repurchase agreements as of June 30, 2024, and its equity at risk did not exceed 10% with any counterparty as of that date. The Company received noncash collateral with a fair value of $2.4 million pledged by its counterparties to compensate the Company for the increase in fair value of collateral previously pledged in excess of required margin related to its repurchase agreement borrowings outstanding as of June 30, 2024. In accordance with Accounting Standards Codification (“ASC”) Topic 860, the fair value of this noncash collateral is not recorded on the Company’s consolidated balance sheet unless the Company re-pledges the collateral or sells the collateral in the event of default by the counterparty. The Company had not re-pledged any of the noncash collateral pledged by its counterparties as of June 30, 2024.

The following table provides information on the remaining term to maturity and original term to maturity for the Company’s repurchase agreements as of the dates indicated:
June 30, 2024December 31, 2023
Remaining Term to MaturityBalanceWeighted
Average Rate		WAVG Original Term to MaturityBalanceWeighted
Average Rate		WAVG Original Term to Maturity
($s in thousands)
Less than 30 days$2,350,410 5.46 %99$2,855,917 5.61 %92 
30 to 90 days3,015,537 5.47 %892,525,187 5.58 %86 
91 to 180 days128,481 5.43 %113— — %— 
Total$5,494,428 5.46 %94 $5,381,104 5.59 %89 
Offsetting Repurchase Agreement Liabilities The following table presents information regarding the Company's repurchase agreements as if the Company had presented them on a net basis as of June 30, 2024 and December 31, 2023:
($s in thousands)
Gross Amount of Recognized LiabilitiesGross Amount Offset in the Balance SheetNet Amount of Liabilities Presented in the Balance Sheet
Gross Amount Not Offset in the Balance Sheet (1)
Net Amount
Financial Instruments Posted as CollateralCash Posted as Collateral
June 30, 2024:
Repurchase agreements$5,494,428 $— $5,494,428 $(5,494,428)$— $— 
December 31, 2023:
Repurchase agreements$5,381,104 $— $5,381,104 $(5,381,104)$— $— 
(1) Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the repurchase agreement liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the consolidated balance sheets for the total fair value of financial instruments pledged as collateral for derivatives and repurchase agreements, which is shown parenthetically, and the total cash pledged or received as collateral, which is disclosed as “cash collateral posted to/by counterparties.”
v3.24.2
Derivatives (Tables)
 6 Months Ended
Jun. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments, Gain (Loss)
The table below provides detail of the Company’s gain and losses by type of derivative instrument for the periods indicated:
Three Months EndedSix Months Ended
June 30,June 30,
Type of Derivative Instrument2024202320242023
($s in thousands)
U.S. Treasury futures$64,210 $171,219 $204,021 $64,846 
Interest rate swaps
(90)— (90)— 
Put options on U.S. Treasury futures
— (1,211)— (5,468)
TBA securities-long positions(22,985)(53,996)(38,160)(10,633)
Gain on derivative instruments, net$41,135 $116,012 $165,771 $48,745 
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value
The table below provides the carrying amount by type of derivative instrument comprising the Company’s derivative assets and liabilities on its consolidated balance sheets as of the dates indicated:
Type of Derivative InstrumentBalance Sheet LocationPurposeJune 30, 2024December 31, 2023
($s in thousands)
TBA securitiesDerivative assetsInvesting$8,461 $54,361 
Total derivatives assets$8,461 $54,361 
TBA securitiesDerivative liabilitiesInvesting$2,032 $— 
Total derivatives liabilities$2,032 $— 
Schedule of Derivative Instruments
The following table summarizes information about the Company's long positions in TBA securities as of the dates indicated:
($s in thousands)
June 30, 2024December 31, 2023
Implied market value (1)
$2,662,350 $1,381,702 
Implied cost basis (2)
2,655,920 1,327,341 
Net carrying value (3)
$6,430 $54,361 
(1) Implied market value represents the estimated fair value of the underlying Agency MBS as of the dates indicated.
(2) Implied cost basis represents the forward price to be paid for the underlying Agency MBS as of the dates indicated.
(3) Net carrying value is the amount included on the consolidated balance sheets within “derivative assets” and “derivative liabilities” and represents the difference between the implied market value and the implied cost basis of the TBA securities as of the dates indicated.
Schedule of Notional Amounts of Outstanding Derivative Positions
The table below summarizes changes in the Company’s derivative instruments for the six months ended June 30, 2024:
Type of Derivative InstrumentBeginning
Notional Amount-Long (Short)		AdditionsSettlements,
Terminations,
or Pair-Offs		Ending
Notional Amount-Long (Short)
($s in thousands)
U.S. Treasury futures$(4,880,000)$(11,035,000)$10,520,000 $(5,395,000)
Interest rate swaps
— (10,000)— (10,000)
TBA securities1,403,000 12,447,000 (11,111,000)2,739,000 
Offsetting Assets The following tables present information regarding those derivative assets and liabilities subject to such arrangements as if the Company had presented them on a net basis as of June 30, 2024 and December 31, 2023:
Offsetting of Assets
($s in thousands)
Gross Amount of Recognized AssetsGross Amount Offset in the Balance SheetNet Amount of Assets Presented in the Balance Sheet
Gross Amount Not Offset in the Balance Sheet (1)
Net Amount
Financial Instruments Received as CollateralCash Received as Collateral
June 30, 2024
TBA securities$8,461 $— $8,461 $(2,032)$(6,311)$118 
Derivative assets$8,461 $— $8,461 $(2,032)$(6,311)$118 
December 31, 2023
TBA securities$54,361 $— $54,361 $— $(44,153)$10,208 
Derivative assets$54,361 $— $54,361 $— $(44,153)$10,208 
(1) Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the derivative asset or liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the consolidated balance sheets for the total fair value of financial instruments pledged as collateral for derivatives and repurchase agreements, which is shown parenthetically, and the total cash pledged or received as collateral which is disclosed as “cash collateral posted to/by counterparties.”
Offsetting Liabilities
Offsetting of Liabilities
($s in thousands)
Gross Amount of Recognized LiabilitiesGross Amount Offset in the Balance SheetNet Amount of Liabilities Presented in the Balance Sheet
Gross Amount Not Offset in the Balance Sheet (1)
Net Amount
Financial Instruments Posted as CollateralCash Posted as Collateral
June 30, 2024
TBA securities$2,032 $— $2,032 $(2,032)$— $— 
Derivative liabilities$2,032 $— $2,032 $(2,032)$— $— 
December 31, 2023
TBA securities$— $— $— $— $— $— 
Derivative liabilities$— $— $— $— $— $— 
(1) Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the derivative asset or liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the consolidated balance sheets for the total fair value of financial instruments pledged as collateral for derivatives and repurchase agreements, which is shown parenthetically, and the total cash pledged or received as collateral which is disclosed as “cash collateral posted to/by counterparties.”
v3.24.2
Fair Value of Financial Instruments (Tables)
 6 Months Ended
Jun. 30, 2024
Fair Value Disclosures [Abstract]  
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis
The following table presents the Company’s financial instruments that are measured at fair value on the Company’s consolidated balance sheet by their valuation hierarchy levels as of the dates indicated:
($s in thousands)
June 30, 2024December 31, 2023
Level 1Level 2Level 3Level 1Level 2Level 3
Assets:
   
MBS$— $6,193,139 $— $— $6,038,845 $103 
TBA securities (1)
— 8,461 — — 54,361 — 
Mortgage loans— — 1,412 — — 1,793 
Total assets
$— $6,201,600 $1,412 $— $6,093,206 $1,896 
Liabilities:
TBA securities (1)
$— $2,032 $— $— $— $— 
Total liabilities
$— $2,032 $— $— $— $— 
(1)TBA securities are reflected on consolidated balance sheets at their implied fair value, net of implied cost basis. Please refer to Note 5 for additional information.
v3.24.2
Shareholders' Equity and Share-Based Compensation (Tables)
 6 Months Ended
Jun. 30, 2024
Equity [Abstract]  
Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity The following table presents a rollforward of share-based awards for the periods indicated:
Six Months Ended
June 30,
 20242023
Type of AwardShares
Weighted Average
Grant Date
Fair Value
 Per Share
Shares
Weighted Average
Grant Date
Fair Value
 Per Share
Restricted stock:
Awards outstanding, beginning of period104,282 $12.61 133,951 $15.22 
Granted65,668 12.56 74,017 11.27 
Vested(76,355)12.37 (36,573)16.75 
Awards outstanding, end of period93,595 $12.78 171,395 $13.19 
Target RSUs: (1)
Awards outstanding, beginning of period394,497 $13.06 86,666 $16.57 
Granted214,755 12.50 106,850 11.97 
Vested(68,896)14.42 (33,213)16.96 
Awards outstanding, end of period540,356 $12.66 160,303 $13.42 
Target PSUs: (2)
Awards outstanding, beginning of period276,866 $13.17 201,284 $16.60 
Granted322,132 12.50 160,277 11.97 
Vested— — — — 
Awards outstanding, end of period598,998 $12.81 361,561 $16.60 
(1)The number of RSUs shown represent the target number of awards. Actual number of shares that will potentially settle may range from 0% if the recipient’s service-based vesting condition is not met to 100% if the service-based vesting condition is met.
(2)The number of PSUs shown represent the target number of awards. Actual number of shares that will potentially settle may range from 0% to 200% based on the achievement of the performance goals defined in each grant award.
Disclosure of Share-based Compensation Arrangements by Share-based Payment Award
Total share-based compensation expense recognized by the Company for the three and six months ended June 30, 2024 was $0.9 million and $5.2 million compared to $1.1 million and $2.1 million for the three and six months ended June 30, 2023. The increase in share-based compensation for the three and six months ended June 30, 2024 is due to accelerated recognition of expense for certain stock incentive awards granted in March 2024 to
retirement eligible employees. The following table discloses the Company’s remaining compensation expense related to stock awards it has granted as of June 30, 2024, which will be amortized over the period disclosed:
June 30, 2024
($s in thousands)
Remaining Compensation CostWAVG Period of Recognition
Restricted stock$975 1.5 years
RSUs3,932 2.2 years
PSUs2,514 2.2 years
Total$7,421 2.1 years
v3.24.2
Organization and Summary of Significant Accounting Policies (Details) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Jun. 30, 2023
Dec. 31, 2022
Accounting Policies [Abstract]        
Cash and cash equivalents $ 286,132 $ 119,639    
Cash collateral posted to counterparties 123,131 118,225    
Total cash including cash posted to counterparties shown on consolidated statement of cash flows $ 409,263 $ 237,864 $ 432,754 $ 449,877
Share-based incentive plan, number of shares authorized for issuance 2,300,000      
Number of shares available for grant (in shares) 58,503      
v3.24.2
Net Income (Loss) Per Common Share (Details) - USD ($)
$ / shares in Units, $ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]        
Weighted average common shares-basic (in shares) 66,954,870 54,137,327 63,003,545 53,981,463
Weighted average common shares-diluted (in shares) 66,954,870 54,585,082 63,913,156 54,327,385
Net (loss) income to common stockholders $ (10,227) $ 52,414 $ 27,968 $ 8,769
Net income (loss) per common share-basic (in dollars per share) $ (0.15) $ 0.97 $ 0.44 $ 0.16
Net income (loss) per common share-diluted (in dollars per share) $ (0.15) $ 0.96 $ 0.44 $ 0.16
Restricted Stock Units (RSUs) [Member]        
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]        
Incremental common shares - unvested (in shares) 0 160,303 460,118 119,570
Performance Shares [Member]        
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]        
Incremental common shares - unvested (in shares) 0 287,452 449,493 226,352
v3.24.2
Net Income (Loss) Per Common Share - Narrative (Details)
 3 Months Ended
Jun. 30, 2024
shares
Earnings Per Share [Abstract]  
Antidilutive unvested RSUs and PSUs (in shares) 1,110,206
v3.24.2
Mortgage-Backed Securities - Investment Type (Details) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Debt Securities, Trading and Available-for-sale [Abstract]    
Par Value $ 6,456,137 $ 6,143,945
Amortized Cost 6,568,580 6,283,185
Non-Agency other, Amortized Cost 1,067,477 1,131,769
Fair Value 6,193,139 6,038,948
Gross Unrealized Gain 1,359 1,324
Gross Unrealized Loss (178,914) (159,826)
Fair Value 889,922 973,267
Amortized Cost 5,501,103 5,151,416
Gross Unrealized Gain 13,333 48,461
Gross Unrealized Loss (211,219) (134,196)
Fair Value 5,303,217 5,065,681
Residential Mortgage Backed Securities [Member] | Agency MBS    
Debt Securities, Trading and Available-for-sale [Abstract]    
Par Value 6,353,838 6,022,502
Amortized Cost 6,326,070 5,993,922
Non-Agency other, Amortized Cost 863,181 898,420
Fair Value 5,962,418 5,763,532
Gross Unrealized Gain 0 0
Gross Unrealized Loss (168,488) (148,606)
Fair Value 694,693 749,814
Amortized Cost 5,462,889 5,095,502
Gross Unrealized Gain 13,333 48,459
Gross Unrealized Loss (208,497) (130,243)
Fair Value 5,267,725 5,013,718
Commercial Mortgage Backed Securities [Member] | Agency MBS    
Debt Securities, Trading and Available-for-sale [Abstract]    
Par Value 102,299 121,293
Amortized Cost 102,516 121,799
Non-Agency other, Amortized Cost 102,516 106,527
Fair Value 97,482 115,595
Gross Unrealized Gain 0 28
Gross Unrealized Loss (5,034) (5,159)
Fair Value 97,482 101,396
Amortized Cost   15,272
Gross Unrealized Gain   0
Gross Unrealized Loss   (1,073)
Fair Value   14,199
Interest-Only-Strip [Member]    
Debt Securities, Trading and Available-for-sale [Abstract]    
Amortized Cost [1] 139,994 167,314
Non-Agency other, Amortized Cost 101,780 126,672
Fair Value [1] 133,239 159,718
Gross Unrealized Gain 1,359 1,296
Gross Unrealized Loss (5,392) (6,014)
Fair Value 97,747 121,954
Amortized Cost 38,214 40,642
Gross Unrealized Gain 0 2
Gross Unrealized Loss (2,722) (2,880)
Fair Value 35,492 37,764
Interest-Only-Strip, Agency CMBS [Member]    
Debt Securities, Trading and Available-for-sale [Abstract]    
Par Value 7,321,369 7,723,379
Interest-Only-Strip, Non-Agency CMBS [Member]    
Debt Securities, Trading and Available-for-sale [Abstract]    
Par Value 3,167,395 3,860,007
Non-Agency MBS    
Debt Securities, Trading and Available-for-sale [Abstract]    
Par Value 0 150
Non-Agency other, Amortized Cost 0 150
Gross Unrealized Gain   0
Gross Unrealized Loss   (47)
Fair Value $ 0 $ 103
[1]
(1) The notional balance for Agency CMBS IO and non-Agency CMBS IO was $7,321,369 and $3,167,395, respectively, as of June 30, 2024, and $7,723,379 and $3,860,007, respectively, as of December 31, 2023.
v3.24.2
Mortgage-Backed Securities - Unrealized Gain (Loss) on Investments (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Investments [Line Items]        
Unrealized (loss) gain on investments, net $ (41,977) $ 488 $ (112,001) $ 57,609
Residential Mortgage Backed Securities [Member] | Agency MBS        
Investments [Line Items]        
Unrealized loss on debt securities (43,705) 1,254 (113,381) 57,033
Commercial Mortgage Backed Securities [Member] | Agency MBS        
Investments [Line Items]        
Unrealized loss on debt securities 1,263 (275) 1,073 (37)
Interest-Only-Strip [Member]        
Investments [Line Items]        
Unrealized loss on debt securities 351 (466) 157 626
Asset-backed Securities, Securitized Loans and Receivables        
Investments [Line Items]        
Unrealized gain (loss) on other investments $ 114 $ (25) $ 150 $ (13)
v3.24.2
Mortgage-Backed Securities - Realize Gain (Loss) on Investments (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Investments [Line Items]        
Realized losses on sales of MBS - FVO $ (1,506) $ (51,601) $ (1,506) $ (74,916)
Realized loss on sales of investments, net $ (1,506) $ (51,601) $ (1,506) $ (74,916)
v3.24.2
Mortgage-Backed Securities - Gross Unrealized Losses (Details)
$ in Thousands
Jun. 30, 2024
USD ($)
Dec. 31, 2023
USD ($)
Investments [Line Items]    
Allowance for credit loss $ 0 $ 0
Agency MBS    
Investments [Line Items]    
Fair value, Less than 12 Months 6,309 3,926
Gross Unrealized Losses, Less than 12 Month $ (263) $ (149)
Number of Securities, Less than 12 Months 7 4
Fair value, 12 Months or Longer $ 862,038 $ 932,682
Gross Unrealized Losses, 12 Months or Longer $ (178,136) $ (158,651)
Number of Securities, 12 Months or Longer 70 78
Non-Agency MBS    
Investments [Line Items]    
Fair value, Less than 12 Months $ 164 $ 1,736
Gross Unrealized Losses, Less than 12 Month $ (3) $ (37)
Number of Securities, Less than 12 Months 1 8
Fair value, 12 Months or Longer $ 11,397 $ 21,704
Gross Unrealized Losses, 12 Months or Longer $ (512) $ (989)
Number of Securities, 12 Months or Longer 24 41
v3.24.2
Repurchase Agreements (Details) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]    
Repurchase agreements $ 5,494,428,000 $ 5,381,104,000
Weighted Average Rate 5.46% 5.59%
Fair Value of Collateral Pledged $ 5,788,148,000 $ 5,880,747,000
Securities Received as Collateral 2,400,000  
Collateral Securities Repledged, Delivered, or Used 0  
Accrued interest payable 54,567,000 53,194,000
Residential Mortgage Backed Securities [Member] | Agency MBS    
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]    
Repurchase agreements $ 5,284,233,000 $ 5,130,438,000
Weighted Average Rate 5.46% 5.59%
Fair Value of Collateral Pledged $ 5,562,905,000 $ 5,613,212,000
Commercial Mortgage Backed Securities [Member] | Agency MBS    
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]    
Repurchase agreements $ 92,472,000 $ 104,495,000
Weighted Average Rate 5.45% 5.60%
Fair Value of Collateral Pledged $ 96,046,000 $ 113,753,000
Interest-Only-Strip [Member] | Agency MBS    
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]    
Repurchase agreements $ 103,281,000 $ 120,979,000
Weighted Average Rate 5.75% 5.83%
Fair Value of Collateral Pledged $ 113,334,000 $ 127,823,000
Interest-Only-Strip [Member] | Non-Agency MBS    
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]    
Repurchase agreements $ 14,442,000 $ 25,192,000
Weighted Average Rate 6.17% 6.25%
Fair Value of Collateral Pledged $ 15,863,000 $ 25,959,000
v3.24.2
Repurchase Agreements - Narrative (Details)
Jun. 30, 2024
counterparty
Disclosure of Repurchase Agreements [Abstract]  
Number of counterparties 28
v3.24.2
Repurchase Agreements - Remaining Term to Maturity (Details) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]    
Repurchase agreements $ 5,494,428 $ 5,381,104
Weighted Average Rate 5.46% 5.59%
WAVG Original Term to Maturity 94 89
Less than 30 days    
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]    
Repurchase agreements $ 2,350,410 $ 2,855,917
Weighted Average Rate 5.46% 5.61%
WAVG Original Term to Maturity 99 92
30 to 90 days    
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]    
Repurchase agreements $ 3,015,537 $ 2,525,187
Weighted Average Rate 5.47% 5.58%
WAVG Original Term to Maturity 89 86
91 to 180 days    
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]    
Repurchase agreements $ 128,481 $ 0
Weighted Average Rate 5.43% 0.00%
WAVG Original Term to Maturity 113 0
v3.24.2
Repurchase Agreements - Offsetting (Details) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Offsetting [Abstract]    
Gross Amount of Recognized Liabilities $ 5,494,428 $ 5,381,104
Gross Amount Offset in the Balance Sheet 0 0
Net Amount of Liabilities Presented in the Balance Sheet 5,494,428 5,381,104
Financial Instruments Posted as Collateral [1] (5,494,428) (5,381,104)
Cash Posted as Collateral 0 0
Net Amount $ 0 $ 0
[1] Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the repurchase agreement liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the consolidated balance sheets for the total fair value of financial instruments pledged as collateral for derivatives and repurchase agreements, which is shown parenthetically, and the total cash pledged or received as collateral, which is disclosed as “cash collateral posted to/by counterparties.”
v3.24.2
Derivatives - Gain (loss) on Derivative Instruments , Net (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Derivative [Line Items]        
Gain on derivative instruments, net $ 41,135 $ 116,012 $ 165,771 $ 48,745
Put options on U.S. Treasury futures        
Derivative [Line Items]        
Gain (Loss) on Interest Rate Derivative Instruments Not Designated as Hedging Instruments 0 (1,211) 0 (5,468)
Interest rate swaps        
Derivative [Line Items]        
Gain (Loss) on Interest Rate Derivative Instruments Not Designated as Hedging Instruments (90) 0 (90) 0
Short position | U.S. Treasury futures        
Derivative [Line Items]        
Gain (Loss) on Interest Rate Derivative Instruments Not Designated as Hedging Instruments 64,210 171,219 204,021 64,846
Long position | TBA securities        
Derivative [Line Items]        
Gain (Loss) on Derivative Instruments Held for Trading Purposes, Net $ (22,985) $ (53,996) $ (38,160) $ (10,633)
v3.24.2
Derivatives - Derivative Information about Carrying Value by Type on the Balance Sheet Location (Details) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Derivative [Line Items]    
Derivative assets $ 8,461 $ 54,361
Derivative liabilities 2,032 0
Margin Deposit Assets 122,200 118,200
Variation Margin Receivable, Derivative 20,400 1,300
TBA securities | Long position    
Derivative [Line Items]    
Derivative assets 8,461 54,361
Derivative liabilities 2,032 0
U.S. Treasury futures    
Derivative [Line Items]    
Derivative liabilities 34,200 219,900
Interest rate swaps    
Derivative [Line Items]    
Derivative liabilities $ 100 $ 0
v3.24.2
Derivatives - Schedule of Interest Rate Hedging Instruments (Details) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Derivative [Line Items]    
Derivative assets $ 8,461,000 $ 54,361,000
Derivative liabilities 2,032,000 0
U.S. Treasury futures    
Derivative [Line Items]    
Derivative Instruments Not Designated as Hedging Instruments, at Carrying Value 0  
Derivative liabilities 34,200,000 219,900,000
U.S. Treasury futures | Short position | Not Designated as Hedging Instrument, Economic Hedge    
Derivative [Line Items]    
Notional balance 5,395,000,000 4,880,000,000
Interest rate swaps    
Derivative [Line Items]    
Derivative Instruments Not Designated as Hedging Instruments, at Carrying Value 0  
Derivative liabilities 100,000 0
Interest rate swaps | Not Designated as Hedging Instrument, Economic Hedge    
Derivative [Line Items]    
Notional balance $ 10,000,000 $ 0
Derivative, Fixed Interest Rate 4.15%  
Interest rate swaps | Not Designated as Hedging Instrument, Economic Hedge | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate    
Derivative [Line Items]    
Notional balance $ 10,000,000  
v3.24.2
Derivatives - Schedule of Long Positions in TBA (Details) - TBA securities - Not Designated as Hedging Instrument, Trading - Long position - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Derivative [Line Items]    
Implied market value, TBA [1] $ 2,662,350 $ 1,381,702
Implied cost basis, TBA [2] 2,655,920 1,327,341
Derivative, Fair Value, Net [3] $ 6,430 $ 54,361
[1] Implied market value represents the estimated fair value of the underlying Agency MBS as of the dates indicated
[2] Implied cost basis represents the forward price to be paid for the underlying Agency MBS as of the dates indicated.
[3] Net carrying value is the amount included on the consolidated balance sheets within “derivative assets” and “derivative liabilities” and represents the difference between the implied market value and the implied cost basis of the TBA securities as of the dates indicated.
v3.24.2
Derivatives Volume of Activity (Details)
$ in Thousands
 6 Months Ended
Jun. 30, 2024
USD ($)
Not Designated as Hedging Instrument, Economic Hedge | U.S. Treasury futures | Short position  
Derivatives [Roll Forward]  
Derivative, Notional Amount $ 4,880,000
Derivative, Notional Amount, Derivative Instruments Added (11,035,000)
Derivative, Notional Amount, Derivative Instruments Maturing, Settled, Terminated, or Paired-Off (10,520,000)
Derivative, Notional Amount 5,395,000
Not Designated as Hedging Instrument, Economic Hedge | Interest rate swaps  
Derivatives [Roll Forward]  
Derivative, Notional Amount 0
Derivative, Notional Amount, Derivative Instruments Added (10,000)
Derivative, Notional Amount 10,000
Not Designated as Hedging Instrument, Trading | TBA securities | Long position  
Derivatives [Roll Forward]  
Derivative, Notional Amount 1,403,000
Derivative, Notional Amount, Derivative Instruments Added (12,447,000)
Derivative, Notional Amount, Derivative Instruments Maturing, Settled, Terminated, or Paired-Off (11,111,000)
Derivative, Notional Amount $ 2,739,000
v3.24.2
Derivatives Offsetting Assets (Details) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Offsetting Assets [Line Items]    
Gross Amount of Recognized Assets $ 8,461 $ 54,361
Gross Amount Offset in the Balance Sheet 0 0
Derivative assets 8,461 54,361
Financial Instruments Received as Collateral [1] (2,032) 0
Cash collateral posted by counterparties [1] (6,311) (44,153)
Net Amount 118 10,208
Long position | TBA securities    
Offsetting Assets [Line Items]    
Gross Amount of Recognized Assets 8,461 54,361
Gross Amount Offset in the Balance Sheet 0 0
Derivative assets 8,461 54,361
Financial Instruments Received as Collateral [1] (2,032) 0
Cash collateral posted by counterparties [1] (6,311) (44,153)
Net Amount $ 118 $ 10,208
[1] Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the derivative asset or liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the consolidated balance sheets for the total fair value of financial instruments pledged as collateral for derivatives and repurchase agreements, which is shown parenthetically, and the total cash pledged or received as collateral which is disclosed as “cash collateral posted to/by counterparties.”
v3.24.2
Derivatives Offsetting Liabilities (Details) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Offsetting Liabilities [Line Items]    
Gross Amount of Recognized Liabilities $ 2,032 $ 0
Gross Amount Offset in the Balance Sheet 0 0
Derivative liabilities 2,032 0
Financial Instruments Posted as Collateral (2,032) [1] 0
Cash Posted as Collateral 0 [1] 0
Net Amount 0 0
TBA securities | Long position    
Offsetting Liabilities [Line Items]    
Gross Amount of Recognized Liabilities 2,032 0
Gross Amount Offset in the Balance Sheet 0 0
Derivative liabilities 2,032 0
Financial Instruments Posted as Collateral (2,032) [1] 0
Cash Posted as Collateral 0 [1] 0
Net Amount $ 0 $ 0
[1] Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the derivative asset or liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the consolidated balance sheets for the total fair value of financial instruments pledged as collateral for derivatives and repurchase agreements, which is shown parenthetically, and the total cash pledged or received as collateral which is disclosed as “cash collateral posted to/by counterparties.”
v3.24.2
Fair Value of Financial Instruments (Details) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
TBA securities $ 8,461 $ 54,361
TBA securities 2,032 0
Long position | TBA securities    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
TBA securities 8,461 54,361
TBA securities 2,032 0
Fair Value, Measurements, Recurring | Level 1    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
MBS 0 0
Mortgage loans 0 0
Total assets 0 0
Total liabilities 0 0
Fair Value, Measurements, Recurring | Level 2    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
MBS   6,038,845
Mortgage loans 0 0
Total assets 6,201,600 6,093,206
Total liabilities 2,032 0
Fair Value, Measurements, Recurring | Level 3    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
MBS 0 103
Mortgage loans 1,412 1,793
Total assets 1,412 1,896
Total liabilities 0 0
Fair Value, Measurements, Recurring | TBA securities | Level 1 | Long position    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
TBA securities 0 0
TBA securities 0 0
Fair Value, Measurements, Recurring | TBA securities | Level 2    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
MBS 6,193,139  
Fair Value, Measurements, Recurring | TBA securities | Level 2 | Long position    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
TBA securities [1] 8,461 54,361
TBA securities 2,032 [1] 0
Fair Value, Measurements, Recurring | TBA securities | Level 3 | Long position    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
TBA securities 0 0
TBA securities $ 0 $ 0
[1] TBA securities are reflected on consolidated balance sheets at their implied fair value, net of implied cost basis. Please refer to Note 5 for additional information.
v3.24.2
Fair Value of Financial Instruments - Narrative (Details)
Jun. 30, 2024
USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Loansheldfor investment, fair value option, measurement input 0.10
Interest rate swaps  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Derivative Instruments Not Designated as Hedging Instruments, at Carrying Value $ 0
Measurement Input, Constant Prepayment Rate  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
AFS, Measurement Input 0.10
Measurement Input, Default Rate  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
AFS, Measurement Input 0.02
Loansheldfor investment, fair value option, measurement input 0.02
Measurement Input, Loss Severity  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
AFS, Measurement Input 0.20
Loansheldfor investment, fair value option, measurement input 0.20
Measurement Input, Discount Rate  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
AFS, Measurement Input 0.102
Loansheldfor investment, fair value option, measurement input 0.102
v3.24.2
Shareholders' Equity - Narrative (Details) - USD ($)
$ / shares in Units, $ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Mar. 31, 2024
Jun. 30, 2023
Mar. 31, 2023
Jun. 30, 2024
Jun. 30, 2023
Dec. 31, 2023
Class of Stock [Line Items]              
Preferred stock, shares authorized (in shares) 50,000,000       50,000,000    
Preferred stock, shares outstanding (in shares) 4,460,000       4,460,000   4,460,000
Stock issuance, value $ 124,844 $ 86,806 $ 3,543 $ 2,771      
Share-based compensation expense $ 900   $ 1,100   $ 5,184 $ 2,140  
Secondary public offering              
Class of Stock [Line Items]              
Stock issuance, shares         10,500,000    
Stock issuance, value         $ 124,500    
ATM Offering              
Class of Stock [Line Items]              
Stock issuance, shares         7,016,225    
Stock issuance, value         $ 86,900    
Series C Preferred Stock              
Class of Stock [Line Items]              
Preferred stock, shares authorized (in shares) 6,600,000       6,600,000    
Preferred stock, shares outstanding (in shares) 4,460,000       4,460,000    
Liquidation preference per share (in dollars per share) $ 25.00       $ 25.00    
Dividend rate, percent         6.90%    
Dividend payment rate, basis spread on variable rate         5.461%    
Dividends declared (in dollars per share) 0.43125            
Common Stock              
Class of Stock [Line Items]              
Common Stock, Dividends, Per Share, Declared $ 0.39            
v3.24.2
Shareholders' Equity and Share-Based Compensation Share-based Compensation (Details) - USD ($)
$ / shares in Units, $ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Dec. 31, 2023
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]          
Accrued dividends payable $ 12,785   $ 12,785   $ 10,320
Share-based compensation expense $ 900 $ 1,100 $ 5,184 $ 2,140  
Restricted Stock [Member]          
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Rollforward]          
Awards outstanding, beginning of period (in shares)     104,282 133,951  
Granted (in shares)     65,668 74,017  
Vested (in shares)     (76,355) (36,573)  
Awards outstanding, end of period (in shares) 93,595 171,395 93,595 171,395  
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]          
Awards outstanding, beginning of period (in dollars per share)     $ 12.61 $ 15.22  
Granted (in dollars per share)     12.56 11.27  
Vested (in dollars per share)     12.37 16.75  
Awards outstanding, end of period (in dollars per share) $ 12.78 $ 13.19 $ 12.78 $ 13.19  
Restricted Stock Units (RSUs) [Member]          
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Rollforward]          
Awards outstanding, beginning of period (in shares) [1]     394,497 86,666  
Granted (in shares) [1]     214,755 106,850  
Vested (in shares) [1]     (68,896) (33,213)  
Awards outstanding, end of period (in shares) [1] 540,356 160,303 540,356 160,303  
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]          
Awards outstanding, beginning of period (in dollars per share)     $ 13.06 $ 16.57  
Granted (in dollars per share)     12.50 11.97  
Vested (in dollars per share)     14.42 16.96  
Awards outstanding, end of period (in dollars per share) $ 12.66 $ 13.42 $ 12.66 $ 13.42  
Accrued dividends payable $ 600   $ 600   400
Restricted Stock Units (RSUs) [Member] | Minimum          
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]          
Nonvested awards expected to settle on their vesting date (percent) 0.00%   0.00%    
Restricted Stock Units (RSUs) [Member] | Maximum          
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]          
Nonvested awards expected to settle on their vesting date (percent) 100.00%   100.00%    
Performance Shares [Member]          
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Rollforward]          
Awards outstanding, beginning of period (in shares) [2]     276,866 201,284  
Granted (in shares) [2]     322,132 160,277  
Vested (in shares)     0 0 [2]  
Awards outstanding, end of period (in shares) [2] 598,998 361,561 598,998 361,561  
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]          
Awards outstanding, beginning of period (in dollars per share)     $ 13.17 $ 16.60  
Granted (in dollars per share)     12.50 11.97  
Vested (in dollars per share)     0 0  
Awards outstanding, end of period (in dollars per share) $ 12.81 $ 16.60 $ 12.81 $ 16.60  
Nonvested awards expected to settle on their vesting date (percent) 95.00%   95.00%    
Accrued dividends payable $ 800   $ 800   $ 800
Performance Shares [Member] | Minimum          
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]          
Nonvested awards expected to settle on their vesting date (percent) 0.00%   0.00%    
Performance Shares [Member] | Maximum          
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]          
Nonvested awards expected to settle on their vesting date (percent) 200.00%   200.00%    
[1] The number of RSUs shown represent the target number of awards. Actual number of shares that will potentially settle may range from 0% if the recipient’s service-based vesting condition is not met to 100% if the service-based vesting condition is met.
[2] The number of PSUs shown represent the target number of awards. Actual number of shares that will potentially settle may range from 0% to 200% based on the achievement of the performance goals defined in each grant award.
v3.24.2
Shareholders' Equity and Share-Based Compensation - Schedule of Remaining Unvested Awards (Details)
$ in Thousands
 6 Months Ended
Jun. 30, 2024
USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Remaining Compensation Cost $ 7,421
WAVG Period of Recognition 2 years 1 month 6 days
Restricted Stock [Member]  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Remaining Compensation Cost $ 975
WAVG Period of Recognition 1 year 6 months
Restricted Stock Units (RSUs) [Member]  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Remaining Compensation Cost $ 3,932
WAVG Period of Recognition 2 years 2 months 12 days
Performance Shares [Member]  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Remaining Compensation Cost $ 2,514
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