Dynex Capital, Inc. Announces Fourth Quarter and Full Year 2022 Results

Dynex Capital, Inc. ("Dynex" or the "Company") (NYSE: DX) reported its fourth quarter and full year 2022 financial 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."

Financial Performance Highlights

  • Book value per common share of $14.73 as of December 31, 2022
  • Dividends declared of $0.39 per common share for the fourth quarter of 2022 and $1.56 for the full year
  • Total economic return of $0.89 per common share, or 6.2% of beginning book value, for the fourth quarter of 2022, and $(1.71) per common share, or (9.5)% of beginning book value, for the full year
  • Comprehensive income of $1.17 per common share and net income of $0.85 per common share for the fourth quarter of 2022; comprehensive loss of $(1.24) per common share and net income of $3.19 per common share for the full year
  • Realized gains on interest rate hedges included in GAAP net income were $204.8 million for the fourth quarter of 2022 and $690.7 million for the full year
  • REIT taxable income included an estimated benefit of $11.8 million, or $0.24 per common share, from amortization of deferred tax hedge gains for the fourth quarter of 2022 and $22.5 million, or $0.53 per common share, for the full year
  • Leverage including TBA dollar roll positions at 6.1 times shareholders' equity at December 31, 2022
  • Raised equity capital of $92.4 million during the fourth quarter through at-the-market ("ATM") common stock issuances, bringing total capital raised for 2022 to $246.9 million, net of $3.1 million issuance costs

Management Remarks

"We believe our performance this decade, which started in 2020, illustrates that the Dynex team has the experience and discipline to manage through even the most volatile and challenging cycles, and we expect to continue generating long-term returns for our shareholders," stated Byron Boston, the Company's Chief Executive Officer. "We continue to believe that a flexible business model and our experienced team have positioned Dynex to deliver a solid cash dividend and total return experience to our shareholders. We enter 2023 with a highly liquid balance sheet and are prepared to be opportunistic investors this year."

Earnings Conference Call

As previously announced, the Company's conference call to discuss these 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.

Results Discussion

Comprehensive income to common shareholders of $56.6 million, or $1.17 per common share, for the fourth quarter of 2022 resulted in the increase of $0.50 in the Company's book value per common share to $14.73 as of December 31, 2022. The fair value of the Company's MBS portfolio benefited from spread tightening during the quarter while the active management of its interest rate hedges mitigated the impact of an inverted yield curve on the Company's fourth quarter earnings. Partially offsetting the resulting increase of $55.2 million in the fair value of its investment and hedging portfolios, the Company's net interest income and TBA drop income declined. As the Federal Reserve continued its attempt to combat inflation by increasing the Federal Funds rate in 2022, these increases resulted in the Company's cost of funds increasing 132 basis points in the fourth quarter compared to the third quarter of 2022. To mitigate its higher financing costs, the Company sold a portion of its lower coupon Agency RMBS at the end of the third quarter and rotated into Agency RMBS and TBAs with higher coupons. The shift to higher coupon assets and slower prepayment speeds resulted in the Company's effective yield on its MBS increasing 63 basis points during the fourth quarter of 2022. The increase in the Federal Funds rate also adversely impacted the net implied spread earned on the Company's TBA securities, resulting in lower TBA drop income and further contributing to the decline in the Company's earnings available for distribution ("EAD"), a non-GAAP measure, which was $0.03 per common share for the fourth quarter of 2022. However, the Company's realized gains from its interest rate hedges, which are not included in EAD but recognized in GAAP earnings, will become a part of the Company's distribution requirements when amortized into REIT taxable income over time. Further discussion of the interest rate hedge gains is provided below under "Hedging Portfolio".

During the fourth quarter of 2022, the Company raised equity capital of $92.4 million through its ATM common stock program, and ended 2022 with over $600 million of cash and liquid assets. With room to increase its leverage of 6.1 times shareholders' equity at December 31, 2022, management believes the Company is well-positioned to selectively add incremental assets when spreads widen or to diversify into other mortgage products as attractive opportunities are presented.

The following table summarizes the changes in the Company's financial position during the fourth quarter of 2022:

($s in thousands except per share data)

Net Changes

in Fair Value

 

Comprehensive

Income

 

Common Book

Value

Rollforward

 

Per

Common

Share

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

 

 

 

 

$

659,766

 

 

$

14.23

 

Net interest income

 

 

$

6,208

 

 

 

 

 

TBA drop income

 

 

 

5,522

 

 

 

 

 

General & administrative and other operating expenses

 

 

 

(8,336

)

 

 

 

 

Preferred stock dividends

 

 

 

(1,923

)

 

 

 

 

Changes in fair value:

 

 

 

 

 

 

 

MBS and loans

$

48,262

 

 

 

 

 

 

 

TBAs

 

4,865

 

 

 

 

 

 

 

U.S. Treasury futures

 

3,111

 

 

 

 

 

 

 

Options on U.S. Treasury futures

 

(1,061

)

 

 

 

 

 

 

Total net change in fair value

 

 

 

55,177

 

 

 

 

 

Total comprehensive income to common shareholders

 

 

 

 

 

56,648

 

 

 

1.17

 

Capital transactions:

 

 

 

 

 

 

 

Net proceeds from stock issuance (2)

 

 

 

 

 

92,756

 

 

 

(0.28

)

Common dividends declared

 

 

 

 

 

(19,342

)

 

 

(0.39

)

Common shareholders' equity, December 31, 2022 (1)

 

 

 

 

$

789,828

 

 

$

14.73

 

(1)

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

(2)

Net proceeds from common stock issuances includes $92.4 million from ATM issuances and $0.4 million from amortization of share-based compensation.

Investment Portfolio

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

 

Three Months Ended

 

December 31, 2022

 

September 30, 2022

($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

$

22,777

 

 

$

3,226,876

 

2.82

%

 

$

14,819

 

 

$

2,779,765

 

2.13

%

Agency CMBS

 

943

 

 

 

136,303

 

2.93

%

 

 

98

 

 

 

165,280

 

2.18

%

CMBS IO (5)

 

3,869

 

 

 

247,071

 

5.71

%

 

 

4,126

 

 

 

265,507

 

5.24

%

Non-Agency MBS and other

 

31

 

 

 

3,140

 

4.18

%

 

 

140

 

 

 

3,842

 

7.21

%

MBS and loans

 

27,620

 

 

 

3,613,390

 

3.03

%

 

 

19,183

 

 

 

3,214,394

 

2.40

%

Cash equivalents

 

2,908

 

 

 

 

 

 

 

1,221

 

 

 

 

 

Total interest income

$

30,528

 

 

 

 

 

 

$

20,404

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repurchase agreement financing

 

(24,320

)

 

 

2,727,274

 

(3.49

)%

 

 

(13,282

)

 

 

2,398,268

 

(2.17

)%

Net interest income/net interest spread

$

6,208

 

 

 

 

(0.46

)%

 

$

7,122

 

 

 

 

0.23

%

 

 

 

 

 

 

 

 

 

 

 

 

TBA securities (6)

 

5,522

 

 

 

2,532,584

 

0.85

%

 

 

16,282

 

 

 

3,223,320

 

1.98

%

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

$

11,730

 

 

 

 

0.07

%

 

$

23,404

 

 

 

 

1.12

%

(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 basis points and 53 basis points for the third and fourth quarters of 2022, 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:

 

 

December 31, 2022

 

September 30, 2022

 

 

Par/

Notional

 

Amortized

Cost/

Implied

Cost

Basis (1)(3)

 

Fair

Value (2)(3)

 

Par/

Notional

 

Amortized

Cost/

Implied

Cost

Basis (1)(3)

 

Fair

Value (2)(3)

Agency RMBS By Coupon

 

 

 

 

 

 

($s in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

2.0%

 

$

1,193,344

 

$

1,210,065

 

$

982,387

 

$

1,216,522

 

$

1,233,755

 

$

990,613

2.5%

 

 

659,181

 

 

685,838

 

 

566,525

 

 

673,133

 

 

700,586

 

 

570,627

4.0%

 

 

325,726

 

 

329,725

 

 

309,940

 

 

333,469

 

 

337,653

 

 

312,433

4.5%

 

 

803,043

 

 

799,786

 

 

782,319

 

 

815,020

 

 

811,695

 

 

780,145

5.0%

 

 

123,204

 

 

125,460

 

 

121,707

 

 

125,900

 

 

128,219

 

 

122,752

TBA 2.5%

 

 

 

 

 

 

 

 

400,000

 

 

345,750

 

 

335,906

TBA 3.5%

 

 

 

 

 

 

 

 

800,000

 

 

729,313

 

 

719,406

TBA 4.0%

 

 

1,539,000

 

 

1,454,263

 

 

1,447,286

 

 

1,539,000

 

 

1,484,523

 

 

1,426,765

TBA 4.5%

 

 

380,000

 

 

371,173

 

 

366,759

 

 

780,000

 

 

753,353

 

 

742,009

TBA 5.0%

 

 

950,000

 

 

947,484

 

 

937,523

 

 

 

 

 

 

Total

 

$

5,973,498

 

$

5,923,794

 

$

5,514,446

 

$

6,683,044

 

$

6,524,847

 

$

6,000,656

(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:

 

 

December 31, 2022

 

September 30, 2022

Remaining Term to

Maturity

 

Balance

 

Weighted

Average

Rate

 

WAVG

Original

Term to

Maturity

 

Balance

 

Weighted

Average

Rate

 

WAVG

Original

Term to

Maturity

($s in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Less than 30 days

 

$

858,161

 

4.44

%

 

42

 

$

963,976

 

2.86

%

 

63

30 to 90 days

 

 

1,786,244

 

4.06

%

 

104

 

 

1,603,853

 

2.82

%

 

75

91 to 180 days

 

 

 

%

 

 

 

441,440

 

3.31

%

 

154

Total

 

$

2,644,405

 

4.18

%

 

84

 

$

3,009,269

 

2.90

%

 

83

Hedging Portfolio

During 2022, the Company 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. On a tax basis, the benefit for the year ended December 31, 2022 is estimated to be $22.5 million, or $0.53 per common share. The Company's remaining estimated net deferred tax hedge gains from its interest rate hedging portfolio was $680.0 million as of December 31, 2022, which is a significant increase from $27.0 million as of December 31, 2021. These hedge gains will be part of the Company's future distribution requirements along with net interest income and other ordinary gains and losses in future periods. The table below provides the projected amortization of the Company's net deferred tax hedge gain that may be recognized as taxable income over the periods indicated given conditions known as of December 31, 2022; however, uncertainty inherent in the forward interest rate curve makes future realized gains and losses difficult to estimate, and as such, these projections are subject to change for any given period.

Projected Period of Recognition for Remaining Hedge Gains, Net

 

December 31, 2022

 

 

($ in thousands)

First quarter 2023

 

 

17,773

Second quarter 2023

 

 

17,782

Third quarter 2023

 

 

17,815

Fourth quarter 2023

 

 

17,907

Fiscal year 2024

 

 

73,849

Fiscal year 2025 and thereafter

 

 

534,848

 

 

$

679,974

As of December 31, 2022, the Company held short positions of $4.2 billion in 10-year U.S. Treasury futures and $740.0 million in 5-year U.S. Treasury futures and held put options on 10-year U.S. Treasury futures of $250.0 million.

Consolidated Balance Sheets

 

 

 

 

 

($s in thousands except per share data)

December 31,

2022

 

September 30,

2022

 

December 31,

2021

ASSETS

(unaudited)

 

(unaudited)

 

 

Cash and cash equivalents

$

332,035

 

 

$

260,385

 

 

$

366,023

 

Cash collateral posted to counterparties

 

117,842

 

 

 

246,168

 

 

 

55,284

 

Mortgage-backed securities

 

3,112,705

 

 

 

3,150,306

 

 

 

3,181,839

 

Mortgage loans held for investment, at fair value

 

2,617

 

 

 

3,073

 

 

 

4,268

 

Due from counterparties

 

10,348

 

 

 

352,310

 

 

 

2,771

 

Derivative assets

 

7,102

 

 

 

13,865

 

 

 

7,969

 

Accrued interest receivable

 

15,260

 

 

 

16,090

 

 

 

14,184

 

Other assets, net

 

7,325

 

 

 

7,368

 

 

 

7,400

 

Total assets

$

3,605,234

 

 

$

4,049,565

 

 

$

3,639,738

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Liabilities:

 

 

 

 

 

Repurchase agreements

$

2,644,405

 

 

$

3,009,269

 

 

$

2,849,916

 

Due to counterparties

 

4,159

 

 

 

147,925

 

 

 

2,471

 

Derivative liabilities

 

22,595

 

 

 

99,670

 

 

 

 

Cash collateral posted by counterparties

 

435

 

 

 

 

 

 

1,834

 

Accrued interest payable

 

16,450

 

 

 

4,909

 

 

 

1,365

 

Accrued dividends payable

 

9,103

 

 

 

8,151

 

 

 

6,541

 

Other liabilities

 

6,759

 

 

 

8,374

 

 

 

6,332

 

Total liabilities

 

2,703,906

 

 

 

3,278,298

 

 

 

2,868,459

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Preferred stock

$

107,843

 

 

$

107,843

 

 

$

107,843

 

Common stock

 

536

 

 

 

463

 

 

 

367

 

Additional paid-in capital

 

1,357,514

 

 

 

1,264,831

 

 

 

1,107,792

 

Accumulated other comprehensive (loss) income

 

(181,346

)

 

 

(196,629

)

 

 

6,729

 

Accumulated deficit

 

(383,219

)

 

 

(405,241

)

 

 

(451,452

)

Total shareholders' equity

 

901,328

 

 

 

771,267

 

 

 

771,279

 

Total liabilities and shareholders’ equity

$

3,605,234

 

 

$

4,049,565

 

 

$

3,639,738

 

 

 

 

 

 

 

Preferred stock aggregate liquidation preference

$

111,500

 

 

$

111,500

 

 

$

111,500

 

Book value per common share

$

14.73

 

 

$

14.23

 

 

$

17.99

 

Common shares outstanding

 

53,637,095

 

 

 

46,350,130

 

 

 

36,665,805

 

Consolidated Comprehensive Statements of Income (Loss) (unaudited)

 

Year Ended

 

Three Months Ended

 

($s in thousands except per share data)

December 31,

2022

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2022

Interest income

$

30,528

 

 

$

20,404

 

 

$

18,335

 

 

$

17,427

 

 

$

86,695

 

Interest expense

 

(24,320

)

 

 

(13,282

)

 

 

(4,262

)

 

 

(1,748

)

 

 

(43,612

)

Net interest income

 

6,208

 

 

 

7,122

 

 

 

14,073

 

 

 

15,679

 

 

 

43,083

 

 

 

 

 

 

 

 

 

 

 

Realized gain (loss) on sale of investments, net

 

450

 

 

 

(70,967

)

 

 

(18,550

)

 

 

 

 

 

(89,067

)

Unrealized gain (loss) on investments, net

 

32,529

 

 

 

(69,197

)

 

 

(65,103

)

 

 

(111,251

)

 

 

(213,022

)

Gain on derivative instruments, net

 

12,437

 

 

 

96,947

 

 

 

106,412

 

 

 

220,211

 

 

 

436,007

 

Other operating expense, net

 

(438

)

 

 

(433

)

 

 

(295

)

 

 

(321

)

 

 

(1,487

)

General and administrative expenses

 

(7,898

)

 

 

(10,146

)

 

 

(7,201

)

 

 

(7,109

)

 

 

(32,353

)

Net income (loss)

 

43,288

 

 

 

(46,674

)

 

 

29,336

 

 

 

117,209

 

 

 

143,161

 

Preferred stock dividends

 

(1,923

)

 

 

(1,923

)

 

 

(1,923

)

 

 

(1,923

)

 

 

(7,694

)

Net income (loss) to common shareholders

$

41,365

 

 

$

(48,597

)

 

$

27,413

 

 

$

115,286

 

 

$

135,467

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on available-for-sale investments, net

 

15,320

 

 

 

(65,133

)

 

 

(60,910

)

 

 

(91,340

)

 

$

(202,063

)

Reclassification of realized (gain) loss on available-for-sale investments

 

(37

)

 

 

14,025

 

 

 

 

 

 

 

 

 

13,988

 

Total other comprehensive income (loss)

 

15,283

 

 

 

(51,108

)

 

 

(60,910

)

 

 

(91,340

)

 

 

(188,075

)

Comprehensive income (loss) to common shareholders

$

56,648

 

 

$

(99,705

)

 

$

(33,497

)

 

$

23,946

 

 

$

(52,608

)

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share-basic

$

0.85

 

 

$

(1.07

)

 

$

0.70

 

 

$

3.14

 

 

$

3.19

 

Net income (loss) per common share-diluted

$

0.85

 

 

$

(1.07

)

 

$

0.69

 

 

$

3.11

 

 

$

3.17

 

Weighted average common shares-basic

 

48,541

 

 

 

45,348

 

 

 

39,190

 

 

 

36,725

 

 

 

42,491

 

Weighted average common shares-diluted

 

48,541

 

 

 

45,348

 

 

 

39,576

 

 

 

37,111

 

 

 

42,743

 

Dividends declared per common share

$

0.39

 

 

$

0.39

 

 

$

0.39

 

 

$

0.39

 

 

$

1.56

 

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 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 nor 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 measures are presented below.

 

Three Months Ended

 

Year Ended

($s in thousands except per share data)

December 31, 2022

 

September 30, 2022

 

December 31, 2022

Comprehensive income (loss) to common shareholders

$

56,648

 

 

$

(99,705

)

 

$

(52,608

)

Less:

 

 

 

 

 

Change in fair value of investments, net (1)

 

(48,262

)

 

 

191,272

 

 

 

490,164

 

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

 

(6,915

)

 

 

(80,665

)

 

 

(393,401

)

EAD to common shareholders

$

1,471

 

 

$

10,902

 

 

$

44,155

 

 

 

 

 

 

 

Weighted average common shares

 

48,541

 

 

 

45,348

 

 

 

42,491

 

EAD per common share

$

0.03

 

 

$

0.24

 

 

$

1.04

 

 

 

 

 

 

 

Net interest income

$

6,208

 

 

$

7,122

 

 

$

43,083

 

TBA drop income (3)

 

5,522

 

 

 

16,282

 

 

 

42,606

 

Adjusted net interest income

$

11,730

 

 

$

23,404

 

 

$

85,689

 

Other operating expense, net

 

(438

)

 

 

(433

)

 

 

(1,487

)

General and administrative expenses

 

(7,898

)

 

 

(10,146

)

 

 

(32,353

)

Preferred stock dividends

 

(1,923

)

 

 

(1,923

)

 

 

(7,694

)

EAD to common shareholders

$

1,471

 

 

$

10,902

 

 

$

44,155

 

 

 

 

 

 

 

Net interest spread

 

(0.46

)%

 

 

0.23

%

 

 

0.84

%

Impact from TBA drop income (4)

 

0.53

%

 

 

0.89

%

 

 

0.41

%

Adjusted net interest spread

 

0.07

%

 

 

1.12

%

 

 

1.25

%

(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 0.85% and 1.98% for the three months ended December 31, 2022 and September 30, 2022, respectively, and 1.86% for the year ended December 31, 2022.

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," "will," "continue" 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 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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