Dynex Capital, Inc. Announces Third Quarter 2022 Results

Dynex Capital, Inc. (NYSE: DX) reported its third quarter 2022 results today. Management will host a call today at 10:00 a.m. Eastern Time to discuss the results and business outlook. Details to access the call can be found below under "Earnings Conference Call."

Third Quarter 2022 Summary

  • Total economic loss of $(2.17) per common share, or (12.9)% of beginning book value, comprised of a decline in book value per common share of $(2.56) to $14.23 as of September 30, 2022 partially offset by dividends declared of $0.39 per common share for the third quarter of 2022
  • Comprehensive loss of $(2.20) per common share and net loss of $(1.07) per common share
  • Realized gains on interest rate hedges included in GAAP results were $149.6 million for the third quarter and $486.0 million year-to-date
  • Earnings available for distribution ("EAD") to common shareholders, a non-GAAP measure, of $0.24 per common share, excludes the benefit of interest rate hedge gains and includes severance expenses of approximately $0.06 per share related to our CFO transition
  • REIT taxable income for the third quarter of 2022 includes an estimated benefit of $9.4 million, or $0.21 per common share, from amortization of deferred tax hedge gains
  • Net interest spread of 0.23% and adjusted net interest spread, a non-GAAP measure, of 1.12%

Management Remarks

“The third quarter of 2022, and in particular September, continued to be defined by extreme interest rate volatility and spread widening driven by increasing interest rates domestically and geopolitical factors. While we experienced a decline in book value during the quarter related to this volatility and spread widening, our liquidity remains solid. We are prepared and well-positioned to benefit when the markets find equilibrium,” stated Byron L. Boston, Chief Executive Officer. “Our disciplined top-down macroeconomic focus has led us to pursue an ‘up in credit, up in liquidity’ strategy for the past several years. As a result, our portfolio continues to be comprised of highly liquid Agency MBS assets, and our strong balance sheet provides us the ability to remain steadfast in allocating our capital and making prudent investment decisions. As always, our experienced management team is committed to providing our investors an attractive long-term return, and we will continue to be disciplined, patient and ethical stewards of their capital.”

Earnings Conference Call

As previously announced, the Company's quarterly conference call to discuss third quarter 2022 results is today at 10:00 a.m. Eastern Time and may be accessed via telephone in the United States by dialing 1-888-330-2022 and providing the ID 1957092 or by live audio webcast by clicking the "Webcast" button in the “Current Events” section on the homepage of the Company's website (www.dynexcapital.com), which includes a slide presentation. To listen to the live conference call via telephone, please dial in at least 10 minutes before the call begins. An archive of the webcast will be available on the Company's website approximately two hours after the live call ends.

Third Quarter 2022 Results

During the third quarter of 2022, the market value of the Company's investment portfolio declined but was partially offset by gains on the Company's hedging portfolio. Agency RMBS spreads widened during the third quarter, resulting in a reduction in the market value of the Company's portfolio which exceeded the gains from interest rate hedges the Company uses to mitigate the impact of higher interest rates. The Federal Reserve has been aggressively raising the U.S. Federal Funds rate all year in an effort to tame inflation, which has caused the Company's borrowing costs to increase. As a result, net interest income for the third quarter declined approximately 50% from the second quarter of 2022. In addition to lower net interest income, comprehensive results for the third quarter of 2022 were also impacted by non-recurring severance expenses of $2.7 million, or $0.06 per common share, related to the CFO transition in August 2022. The non-recurring severance expenses and lower net interest income were also the primary drivers of the $(0.16) decline in the Company's EAD to $0.24 per common share for the third quarter of 2022 when compared to the prior quarter. However, the Company continues to benefit from significant gains on the interest rate hedges it uses to buffer losses due to rising interest rates. Interest rate hedge gains, which are recognized in GAAP earnings when realized, are excluded from the Company's calculation of EAD, but will become a part of the Company's distribution requirements when amortized into REIT taxable income over time. Further discussion of these interest rate hedge gains is provided below under "Hedging Portfolio".

The following table summarizes the changes in the Company's financial position during the third quarter of 2022, including its components of comprehensive loss to common shareholders:

 

 

 

 

 

Common Book

 

 

Net Changes

Comprehensive

Value

Per Common

($s in thousands except per share data)

in Fair Value

Income

Rollforward

Share

Common shareholders' equity, June 30, 2022 (1)

 

 

 

 

$

730,865

 

 

$

16.79

 

Net interest income

 

 

$

7,122

 

 

 

 

 

TBA drop income

 

 

 

16,282

 

 

 

 

 

General & administrative and other operating expenses

 

 

 

(10,579

)

 

 

 

 

Preferred stock dividends

 

 

 

(1,923

)

 

 

 

 

Changes in fair value:

 

 

 

 

 

 

 

MBS and loans

$

(191,272

)

 

 

 

 

 

 

TBAs

 

(197,590

)

 

 

 

 

 

 

U.S. Treasury futures

 

281,827

 

 

 

 

 

 

 

Options on U.S. Treasury futures

 

630

 

 

 

 

 

 

 

Interest rate swaptions

 

(4,202

)

 

 

 

 

 

 

Total net change in fair value

 

 

 

(110,607

)

 

 

 

 

Total comprehensive loss to common shareholders

 

 

 

 

 

(99,705

)

 

 

(2.20

)

Capital transactions:

 

 

 

 

 

 

 

Net proceeds from stock issuance

 

 

 

 

 

46,561

 

 

 

0.03

 

Common dividends declared

 

 

 

 

 

(17,955

)

 

 

(0.39

)

Common shareholders' equity, September 30, 2022 (1)

 

 

 

 

$

659,766

 

 

$

14.23

(1)

Common shareholders' equity is total shareholders' equity less the aggregate liquidation preference of the Company's preferred stock of $111,500.

Investment Portfolio

The following table provides information about the performance of the Company's MBS (including TBA securities) and repurchase agreement financing for the third quarter of 2022 compared to the prior quarter:

 

Three Months Ended

 

September 30, 2022

 

June 30, 2022

 

 

 

 

Effective

 

 

 

 

 

Effective

Interest

 

Yield/

Interest

 

Yield/

Income/

Average

Cost of

Income/

Average

Cost of

($s in thousands)

Expense

Balance(1)(2)

Funds(3)(4)

Expense

Balance(1)(2)

Funds(3)(4)

Agency RMBS

$

14,819

 

 

$

2,779,765

 

2.13

%

 

$

12,860

 

 

$

2,733,199

 

1.88

%

Agency CMBS

 

98

 

 

 

165,280

 

2.18

%

 

 

1,259

 

 

 

173,647

 

2.87

%

CMBS IO (5)

 

4,126

 

 

 

265,507

 

5.24

%

 

 

4,003

 

 

 

273,427

 

4.69

%

Non-Agency MBS and other

 

140

 

 

 

3,842

 

7.21

%

 

 

86

 

 

 

4,404

 

6.66

%

MBS and loans

 

19,183

 

 

 

3,214,394

 

2.40

%

 

 

18,208

 

 

 

3,184,677

 

2.18

%

Cash equivalents

 

1,221

 

 

 

 

 

 

 

127

 

 

 

 

 

Total interest income

$

20,404

 

 

 

 

 

 

$

18,335

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repurchase agreement financing

 

(13,282

)

 

 

2,398,268

 

(2.17

) %

 

 

(4,262

)

 

 

2,486,217

 

(0.68

) %

Net interest income/net interest spread

$

7,122

 

 

 

 

0.23

%

 

$

14,073

 

 

 

 

1.50

%

 

 

 

 

 

 

 

 

 

 

 

 

TBA securities (6)

 

16,282

 

 

 

3,223,320

 

1.98

%

 

 

11,074

 

 

 

1,821,987

 

2.40

%

Adjusted net interest income/adjusted net interest spread (7)

$

23,404

 

 

 

 

1.12

%

 

$

25,147

 

 

 

 

1.84

%

(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) CMBS IO includes Agency and non-Agency issued securities.
(6) Drop income from TBA securities 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.
(7) Adjusted net interest spread includes the impact from TBA drop income of 89 and 34 basis points, respectively.

The following table provides detail on the coupon composition of the Company's 30-year fixed-rate Agency RMBS (including TBA securities) as of the dates indicated:

 

 

September 30, 2022

 

June 30, 2022

 

 

 

 

Amortized

 

 

 

 

 

Amortized

 

 

 

Cost/

 

 

Cost/

 

Par/

Implied Cost

Fair

Par/

Implied Cost

Fair

Agency RMBS By Coupon

Notional

Basis (1)(3)

Value (2)(3)

Notional

Basis (1)(3)

Value (2)(3)

($s in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

2.0%

 

$ 1,216,522

 

$ 1,233,755

 

$ 990,613

 

$ 1,248,457

 

$ 1,266,375

 

$ 1,091,610

2.5%

 

673,133

 

700,586

 

570,627

 

1,095,110

 

1,141,384

 

992,388

4.0%

 

333,469

 

337,653

 

312,433

 

135,312

 

139,363

 

135,620

4.5%

 

815,020

 

811,695

 

780,145

 

 

 

5.0%

 

125,900

 

128,219

 

122,752

 

 

 

TBA 2.5%

 

400,000

 

345,750

 

335,906

 

353,000

 

322,721

 

318,114

TBA 3.0%

 

 

 

 

1,020,000

 

956,053

 

950,994

TBA 3.5%

 

800,000

 

729,313

 

719,406

 

800,000

 

762,313

 

769,832

TBA 4.0%

 

1,539,000

 

1,484,523

 

1,426,765

 

800,000

 

775,498

 

788,563

TBA 4.5%

 

780,000

 

753,353

 

742,009

 

350,000

 

347,737

 

351,039

Total

 

$ 6,683,044

 

$ 6,524,847

 

$ 6,000,656

 

$ 5,801,879

 

$ 5,711,444

 

$ 5,398,160

(1)

Implied cost basis of TBAs represents the forward price to be paid for the underlying Agency MBS.

(2)

Fair value of TBAs represents the implied market value of the underlying Agency MBS.

(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.

Repurchase Agreement Financing

The following table provides detail on the Company's repurchase agreement borrowings outstanding as of the dates indicated:

 

 

September 30, 2022

 

June 30, 2022

 

 

 

 

 

 

WAVG

 

 

 

 

 

WAVG

 

 

Weighted

Original

 

Weighted

Original

Remaining Term to

 

Average

Term to

 

Average

Term to

Maturity

Balance

Rate

Maturity

Balance

Rate

Maturity

($s in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Less than 30 days

 

$

963,976

 

2.86

%

 

63

 

$

1,742,085

 

1.46

%

 

53

30 to 90 days

 

 

1,603,853

 

2.82

%

 

75

 

 

211,447

 

1.03

%

 

187

91 to 180 days

 

 

441,440

 

3.31

%

 

154

 

 

249,116

 

0.38

%

 

365

Total

 

$

3,009,269

 

2.90

%

 

83

 

$

2,202,648

 

1.30

%

 

101

Hedging Portfolio

During 2022, the Company has realized substantial gains on its interest rate hedges that were recognized in its GAAP earnings, but because these derivative instruments were designated for tax purposes as hedges of the Company's financing arrangements, the realized gains will be amortized into REIT taxable income over the next several years. The Company's estimated deferred tax hedge gains from its interest rate hedging portfolio was $512.9 million as of September 30, 2022, which is a significant increase from $27.0 million as of December 31, 2021. On a tax basis, the benefit for the third quarter of 2022 was $9.4 million, or $0.21 per share, which mitigates the impact of higher financing costs. These hedge gains will be part of the Company's distribution requirements along with net interest income and other ordinary gains and losses.

The following table provides the projected amortization of our deferred tax hedge gain as of September 30, 2022 that will be recognized as taxable income over the periods indicated:

Period of Recognition for Remaining Hedge Gains, Net

 

September 30, 2022

 

 

($ in thousands)

First quarter 2022

 

$

(560

)

Second quarter 2022

 

 

1,950

 

Third quarter 2022

 

 

9,376

 

Fourth quarter 2022

 

 

11,778

 

First quarter 2023

 

 

12,343

 

Second quarter 2023

 

 

12,352

 

Third quarter 2023

 

 

12,385

 

Fourth quarter 2023

 

 

12,476

 

Fiscal year 2024

 

 

52,128

 

Fiscal year 2025 and thereafter

 

 

388,715

 

 

 

$

512,943

 

During the third quarter of 2022, the Company increased its short position in U.S. Treasury futures by $810.0 million and purchased $750.0 million in options on 10-year U.S. Treasury futures. As of September 30, 2022, the Company held short positions of $4.4 billion in 10-year U.S. Treasury futures and $740.0 million in 5-year U.S. Treasury futures and had $750.0 million in options on 10-year U.S. Treasury futures.

Consolidated Balance Sheets

 

 

 

 

September 30,

 

 

($s in thousands except per share data)

 

2022

 

June 30, 2022

ASSETS

(unaudited)

 

(unaudited)

Cash and cash equivalents

$

260,385

 

 

$

325,679

 

Cash collateral posted to counterparties

 

246,168

 

 

 

111,449

 

Mortgage-backed securities (including pledged of $2,903,659 and $2,373,246, respectively), at fair value

 

3,150,306

 

 

 

2,659,386

 

Mortgage loans held for investment, at fair value

 

3,073

 

 

 

3,412

 

Due from counterparties

 

352,310

 

 

 

2,516

 

Derivative assets

 

13,865

 

 

 

81,919

 

Accrued interest receivable

 

16,090

 

 

 

13,097

 

Other assets, net

 

7,368

 

 

 

6,879

 

Total assets

$

4,049,565

 

 

$

3,204,337

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Liabilities:

 

 

 

Repurchase agreements

$

3,009,269

 

 

$

2,202,648

 

Due to counterparties

 

147,925

 

 

 

71,894

 

Derivative liabilities

 

99,670

 

 

 

12,559

 

Cash collateral posted by counterparties

 

 

 

 

59,234

 

Accrued interest payable

 

4,909

 

 

 

1,811

 

Accrued dividends payable

 

8,151

 

 

 

7,608

 

Other liabilities

 

8,374

 

 

 

6,217

 

Total liabilities

 

3,278,298

 

 

 

2,361,971

 

 

 

 

 

Shareholders’ equity:

 

 

 

Preferred stock

$

107,843

 

 

$

107,843

 

Common stock

 

463

 

 

 

435

 

Additional paid-in capital

 

1,264,831

 

 

 

1,218,298

 

Accumulated other comprehensive income

 

(196,629

)

 

 

(145,521

)

Accumulated deficit

 

(405,241

)

 

 

(338,689

)

Total shareholders' equity

 

771,267

 

 

 

842,366

 

Total liabilities and shareholders’ equity

$

4,049,565

 

 

$

3,204,337

 

 

 

 

 

Preferred stock aggregate liquidation preference

$

111,500

 

 

$

111,500

 

Book value per common share

$

14.23

 

 

$

16.79

 

Common shares outstanding

 

46,350,130

 

 

 

43,517,234

 

Consolidated Comprehensive Statements of Income (Loss) (unaudited)

 

 

Nine Months

Three Months Ended

Ended

 

September 30,

June 30,

March 31,

September 30,

($s in thousands except per share data)

2022

 

2022

 

2022

 

2022

Interest income

$

20,404

 

 

$

18,335

 

 

$

17,427

 

 

$

56,167

 

Interest expense

 

(13,282

)

 

 

(4,262

)

 

 

(1,748

)

 

 

(19,292

)

Net interest income

 

7,122

 

 

 

14,073

 

 

 

15,679

 

 

 

36,875

 

 

 

 

 

 

 

 

 

Realized loss on sale of investments, net

 

(70,967

)

 

 

(18,550

)

 

 

 

 

 

(89,517

)

Unrealized loss on investments, net

 

(69,197

)

 

 

(65,103

)

 

 

(111,251

)

 

 

(245,551

)

Gain on derivative instruments, net

 

96,947

 

 

 

106,412

 

 

 

220,211

 

 

 

423,570

 

Other operating expense, net

 

(433

)

 

 

(295

)

 

 

(321

)

 

 

(1,049

)

General and administrative expenses (1)

 

(10,146

)

 

 

(7,201

)

 

 

(7,109

)

 

 

(24,456

)

Net (loss) income

 

(46,674

)

 

 

29,336

 

 

 

117,209

 

 

 

99,872

 

Preferred stock dividends

 

(1,923

)

 

 

(1,923

)

 

 

(1,923

)

 

 

(5,770

)

Net (loss) income to common shareholders

$

(48,597

)

 

$

27,413

 

 

$

115,286

 

 

$

94,102

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

Unrealized loss on available-for-sale investments, net

 

(65,133

)

 

 

(60,910

)

 

 

(91,340

)

 

$

(217,383

)

Reclassification of realized loss on available-for-sale investments

 

14,025

 

 

 

 

 

 

 

 

 

14,025

 

Total other comprehensive loss

 

(51,108

)

 

 

(60,910

)

 

 

(91,340

)

 

 

(203,358

)

Comprehensive (loss) income to common shareholders

$

(99,705

)

 

$

(33,497

)

 

$

23,946

 

 

$

(109,256

)

 

 

 

 

 

 

 

 

Net (loss) income per common share-basic

$

(1.07

)

 

$

0.70

 

 

$

3.14

 

 

$

2.33

 

Net (loss) income per common share-diluted

$

(1.07

)

 

$

0.69

 

 

$

3.11

 

 

$

2.31

 

Weighted average common shares-basic

 

45,348

 

 

 

39,190

 

 

 

36,725

 

 

 

40,453

 

Weighted average common shares-diluted

 

45,348

 

 

 

39,576

 

 

 

37,111

 

 

 

40,741

 

Dividends declared per common share

$

0.39

 

 

$

0.39

 

 

$

0.39

 

 

$

1.17

(1)

General and administrative expenses include non-recurring severance expenses of $2.7 million related to the departure of the Company's former CFO in August 2022.

Use of Non-GAAP Financial Measures

In evaluating the Company’s financial and operating performance, management considers book value per common share, total economic return to common shareholders, and other operating results presented in accordance with GAAP as well as certain non-GAAP financial measures, which include the following: earnings available for distribution (“EAD”) to common shareholders, adjusted net interest income and the related metric adjusted net interest spread. 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.

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 the non-GAAP financial measures used in this earnings release to the most directly comparable GAAP financial measure are presented below.

 

Three Months Ended

 

September 30,

 

 

($s in thousands except per share data)

 

2022

 

June 30, 2022

Comprehensive loss to common shareholders

$

(99,705

)

 

$

(33,497

)

Less:

 

 

 

Change in fair value of investments, net (1)

 

191,272

 

 

 

144,563

 

Change in fair value of derivative instruments, net (2)

 

(80,665

)

 

 

(95,338

)

EAD to common shareholders

$

10,902

 

 

$

15,728

 

 

 

 

 

Weighted average common shares

 

45,348

 

 

 

39,190

 

Comprehensive (loss) income per common share

$

(2.20

)

 

$

(0.85

)

EAD per common share

$

0.24

 

 

$

0.40

 

 

 

 

 

Net interest income

$

7,122

 

 

$

14,073

 

TBA drop income (3)

 

16,282

 

 

 

11,074

 

Adjusted net interest income

$

23,404

 

 

$

25,147

 

Other operating expense, net

 

(433

)

 

 

(295

)

General and administrative expenses

 

(10,146

)

 

 

(7,201

)

Preferred stock dividends

 

(1,923

)

 

 

(1,923

)

EAD to common shareholders

$

10,902

 

 

$

15,728

 

 

 

 

 

Net interest spread

 

0.23

%

 

 

1.50

%

Impact from TBA drop income (4)

 

0.89

%

 

 

0.34

%

Adjusted net interest spread

 

1.12

%

 

 

1.84

%

(1)

Amount includes realized and unrealized gains and losses from the Company's MBS and other investments.

(2)

Amount includes unrealized gains and losses from changes in fair value of derivatives and realized gains and losses on terminated derivatives and excludes TBA drop income.

(3)

TBA drop income 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.

(4)

The Company estimates TBA implied net interest spread to be 1.98% and 2.40% for the three months ended September 30, 2022 and June 30, 2022 respectively.

Forward Looking Statements

This release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “forecast,” “anticipate,” “estimate,” “project,” “plan,” "may," "could," and similar expressions identify forward-looking statements that are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Forward-looking statements in this release, including statements made in Mr. Boston's quotes, may include, without limitation, statements regarding the Company's financial performance in future periods, future interest rates, future market credit spreads, management's views on expected characteristics of future investment and macroeconomic environments, central bank strategies prepayment rates and investment risks, future investment strategies, future leverage levels and financing strategies, the use of specific financing and hedging instruments and the future impacts of these strategies, future actions by the Federal Reserve, and the expected performance of the Company's investments. The Company's actual results and timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements as a result of unforeseen external factors. These factors may include, but are not limited to, volatility and disruption in national and international financial markets; adverse effects of the ongoing novel coronavirus (COVID-19) pandemic and any governmental or societal responses thereto, or other unusual and infrequently occurring events; ability to find suitable investment opportunities; changes in economic conditions, including an increased rate of inflation; changes in interest rates and interest rate spreads, including the repricing of interest-earning assets and interest-bearing liabilities; the Company’s 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 purchases of Agency residential and Agency commercial mortgage-backed securities 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 the Company’s use of leverage; changes to the Company’s investment strategy, operating policies, dividend policy or asset allocations; the quality of performance of third-party servicer providers of the Company’s loans and loans underlying securities owned by the Company; the level of defaults by borrowers on loans the Company has securitized or otherwise is invested through its ownership of MBS; changes in the Company’s industry; increased competition; changes in government regulations affecting the Company’s business and/or status as a real estate investment trust; changes or volatility in the repurchase agreement financing markets and other credit markets; changes to the market for interest rate swaps and other 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 reform of the U.S. housing finance system, including the resolution of the conservatorship of Fannie Mae and Freddie Mac; the composition of the Federal Reserve; systems failures or cybersecurity incidents; catastrophes affecting global markets; and exposure to current and future claims and litigation. For additional information on risk factors that could affect the Company's forward-looking statements, see the Company's Annual Report on Form 10-K for the year ended December 31, 2021, and other reports filed with and furnished to the Securities and Exchange Commission.

All forward-looking statements are qualified in their entirety by these and other cautionary statements that the Company makes from time to time in its filings with the Securities and Exchange Commission and other public communications. The Company cannot assure the reader that it will realize the results or developments the Company anticipates or, even if substantially realized, that they will result in the consequences or affect the Company or its operations in the way the Company expects. Forward-looking statements speak only as of the date made. The Company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances arising after the date on which they were made, except as otherwise required by law. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of, the Company.

Company Description

Dynex Capital, Inc. is a financial services company committed to ethical stewardship of stakeholders' capital, employing comprehensive risk management and disciplined capital allocation to generate dividend income and long-term total returns through the diversified financing of real estate assets in the United States. Dynex operates as a REIT and is internally managed to maximize stakeholder alignment. Additional information about Dynex Capital, Inc. is available at www.dynexcapital.com.

Contacts

Alison Griffin

(804) 217-5897

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