Dynex Capital, Inc. Reports Fourth Quarter 2012 Diluted EPS of $0.34 and Book Value Per Common Share of $10.30

  Dynex Capital, Inc. Reports Fourth Quarter 2012 Diluted EPS of $0.34 and
  Book Value Per Common Share of $10.30

Business Wire

GLEN ALLEN, Va. -- February 20, 2013

Dynex Capital, Inc. (NYSE: DX) reported net income available to common
shareholders of $18.3 million, or $0.34 per diluted common share for the
fourth quarter of 2012 versus $18.4 million, or $0.34 per diluted common
share, for the third quarter of 2012 and $14.4 million, or $0.36 per diluted
common share, for the fourth quarter of 2011. The Company reported net income
available to common shareholders of $72.0 million, or $1.35 per common share
for the year ended December 31, 2012 compared to $39.8 million, or $1.03 per
common share for the same period in 2011.

Management Remarks

Mr. Thomas Akin, Chairman and Chief Executive Officer, commented, "We are very
pleased with the consistency of our results. We posted a return on average
common equity of 13.0% for the fourth quarter and 13.8% for the full year
2012. We increased equity by $245.4 million during the year to $616.7 million
at December 31, 2012 and executed our strategy of allocating more capital to
CMBS. We grew book value per common share during the year by $1.10 to $10.30
at December 31, 2012. For the fourth quarter, our net interest spread was a
solid 1.93%, a modest decline of 0.07% from the third quarter's 2.00%. Our
total portfolio repayments for the quarter were $233.6 million, or less than
6% of our average assets. Our strategy of investing in short duration high
quality assets has consistently performed and we remain well positioned for
the uncertain investment environment that lies ahead."

Quarterly Highlights

($ in thousands, except per  4Q2012          3Q2012          4Q2011
share amounts)
Net interest income           $ 21,145         $ 19,100         $ 16,972
Gain on sale of               $ 2,044          $ 3,480          $ 773
investments, net
General and administrative    $ (3,501     )   $ (3,090     )   $ (3,249     )
expenses
Net income to common          $ 18,330         $ 18,353         $ 14,406
shareholders
Earnings per common share     $ 0.34           $ 0.34           $ 0.36
Dividend per common share     $ 0.29           $ 0.29           $ 0.28
Return on average common      13.0         %   13.5         %   15.6         %
equity
Average interest earning      $ 4,117,527      $ 3,729,124      $ 2,487,167
assets
Average interest bearing      $ (3,655,229 )   $ (3,296,830 )   $ (2,182,788 )
liabilities
RMBS and single-family        $ 219,766        $ 255,126        $ 146,437
capital allocation
CMBS and commercial capital   $ 361,264        $ 346,287        $ 189,851
allocation
Book value per common share   $ 10.30          $ 10.31          $ 9.20
Net interest spread           1.93         %   2.00         %   2.56         %
Portfolio CPR (excluding      19.0         %   18.7         %   17.8         %
CMBS IOs)
Debt to equity ratio          5.9x             6.1x             6.0x
                                                                             

Conference Call

As previously announced, the Company's quarterly conference call to discuss
the fourth quarter results is tomorrow, February 20, 2013 at 11:00 a.m. ET.
Interested investors may access the call and the related slides by dialing
1-888-317-6016 or by webcast over the internet at www.dynexcapital.com through
a link provided under “Investor Relations/IR Highlights.”

Earnings Summary

Net interest income was $21.1 million for the fourth quarter of 2012 versus
$19.0 million for the third quarter of 2012. Average interest earning
investments increased to $4,117.5 million for the fourth quarter of 2012
versus $3,729.1 million for the third quarter of 2012. Our net interest spread
for the fourth quarter of 2012 of 1.93% is the difference between the yield on
the Company's interest-earning investment portfolio of 3.04% and the cost of
funds of 1.11%. For the third quarter of 2012, net interest spread of 2.00%
consisted of the yield on the Company's interest-earning investments of 3.12%
less the cost of funds of 1.12%. For the fourth quarter of 2011, the net
interest spread of 2.56% consisted of the yield on the Company's
interest-earning investments of 3.76% less the cost of funds of 1.20%. The net
interest spread declined in the fourth quarter due primarily to declining
yields on the Company's Agency MBS portfolio from recent purchases of Hybrid
ARMs and CMBS IOs and from interest rate resets on ARMs.

During the fourth quarter of 2012, the Company sold $20.4 million in principal
amount of non-Agency CMBS for a gain of $1.8 million and Agency CMBS IO with
an amortized cost basis of $23.9 million (and a notional balance of $333.0
million) for a gain of $0.2 million, resulting in a total gain on sale of
investments of $2.0 million. General and administrative expenses were $3.5
million in the fourth quarter of 2012, or 0.56% of average shareholders'
equity, versus $3.1 million, or 0.54% of average shareholders' equity, in the
third quarter of 2012. General and administrative expenses increased as a
percentage of average shareholders' equity as a result of the accrual of an
additional $0.5 million in incentive compensation expense during the fourth
quarter of 2012.

Portfolio Summary

The Company's investment portfolio was $4,175.7 million at December31, 2012
versus $4,316.2 million at September30, 2012. The Company's Agency MBS
investments were $3,492.7 million at December31, 2012 versus $3,650.7 million
at September30, 2012. The Company's non-Agency MBS investments were $611.3
million at December31, 2012 versus $586.9 million at September30, 2012.
Agency MBS as a percentage of the Company's investment portfolio was 84% at
December31, 2012 compared to 85% at September30, 2012. During the fourth
quarter of 2012 the Company purchased $168.8 million in CMBS and CMBS IO,
while the Agency RMBS portfolio declined by a net $228.8 million, principally
from prepayments and amortization of investment premium. Overall, RMBS and
related investments totaled $2.6 billion and CMBS and related investments
totaled $1.6 billion at December 31, 2012. At December 31, 2012, the Company
had $137.2 million in investment premium on Agency RMBS versus $145.9 million
at September 30, 2012, and $665.3 million in investment premium on CMBS and
CMBS IO versus $605.3 million at September 30, 2012.

Agency MBS Investments

The Company's Agency RMBS investments consist of ARMs and Hybrid ARMs and have
a weighted average months to coupon reset of 53 months. The Company's Agency
CMBS and CMBS IO investments consist of fixed rate securities collateralized
by multifamily loans and have a weighted average maturity of 125 months.
Premium amortization on Agency RMBS during the fourth quarter of 2012 was $9.5
million, or 0.36% of the average amortized cost of Agency RMBS for the fourth
quarter versus $9.5 million, or 0.39% of the average amortized cost for Agency
RMBS for the third quarter of 2012. The following table presents the Company's
Agency MBS portfolio by category and certain other information as of and for
the three months ended December31, 2012:

                                                                                 
                                                                                    Quarter
                                                                                    ended
             As of December 31, 2012                                                December
                                                                                    31, 2012
             Principal      Net Premium                                WAVG
             Balance
($ in        (notional for                 Amortized                                WAVG
thousands)  IOs)           (Discount)   Cost           Fair Value     Coupon   Yield
                                                                                    ((2))
RMBS         $ 2,425,826     $ 137,168     $ 2,562,994     $ 2,571,337     3.67 %   2.08   %
CMBS         306,527         23,517        330,044         354,142         5.19 %   3.67   %
CMBS IO      10,059,495    550,171     550,171       567,180        0.95 %   4.66   %
Total ^(1)   $ 2,732,353   $ 710,856   $ 3,443,209   $ 3,492,659             2.62   %

    
(1)   Total principal balance excludes notional amount of IO securities.
(2)   Weighted average yield is based on weighted average amortized cost for
      the quarter.
      

The following table summarizes average yield and financing costs for the
Company's Agency MBS investments for the periods presented:

                                                         
                    Quarter ended       Quarter ended        Quarter ended
($ in thousands)   December 31, 2012  September 30, 2012  December 31, 2011
Weighted average
annualized yield    2.62           %    2.63           %     3.11           %
for the period
Weighted average
annualized cost
of funds
including           (0.92          )%   (0.90          )%    (0.91          )%
interest rate
swaps for the
period
Net interest
spread for the      1.70           %    1.73           %     2.20           %
period
Average balance
of investments      $  3,492,814        $  3,109,770         $  1,963,313
for the period
Average balance
of financing for    $  (3,167,800  )    $  (2,815,949  )     $  (1,769,923  )
the period
                                                                            

The following table presents the average constant prepayment rates ("CPRs")
for the Company's Agency RMBS and CMBS for the periods presented (CMBS IOs are
not presented as CPRs are not available for IOs):

                                                          
                Quarter ended     Quarter ended      Quarter       Quarter
                                                     ended         ended
          December 31,     September 30,     June 30,     March 31,
                2012              2012               2012          2012
RMBS            24.3       %      23.4       %       20.8     %    21.4     %
CMBS            —               —                —           —        
Total           21.5       %     20.9       %      18.3     %   18.4     %
                                                                            

Non-Agency MBS Investments

The following table presents the Company's non-Agency MBS portfolio by
category and certain other information as of and for the three months ended
December31, 2012:

                                                                          
                                                                             Quarter
                                                                             ended
             As of December 31, 2012                                         December
                                                                             31, 2012
             Principal    Net                                   WAVG
             Balance       Premium
($ in        (notional                  Amortized                            WAVG
thousands)  for IOs)     (Discount)  Cost         Fair Value   Coupon   Yield
                                                                             ((2))
RMBS         $ 11,411      $ (781   )   $ 10,630      $ 11,038      4.28 %   5.55   %
CMBS         463,747       (17,313  )   446,434       486,342       5.31 %   5.64   %
CMBS IO      2,393,614   108,928    108,928     113,942      0.86 %   4.75   %
Total ^(1)   $ 475,158   $ 90,834   $ 565,992   $ 611,322             5.47   %

    
(1)   Total principal balance excludes notional amount of IO securities.
(2)   Weighted average yield is based on weighted average amortized cost for
      the quarter.
      

The following table summarizes average yield and financing costs for the
Company's non-Agency MBS investments for the periods presented:

                                                         
                    Quarter ended       Quarter ended        Quarter ended
($ in thousands)   December 31, 2012  September 30, 2012  December 31, 2011
Weighted average
annualized yield    5.47          %     5.67           %     6.36          %
for the period
Weighted average
annualized cost
of funds
including           (2.52         )%    (2.58          )%    (2.73         )%
interest rate
swaps for the
period
Net interest
spread for the      2.95          %     3.09           %     3.63          %
period
Average balance
of investments      $   548,153         $   533,536          $   404,574
for the period
Average balance
of financing for    $   (443,288  )     $   (427,487   )     $   (336,955  )
the period
                                                                           

The decline in net interest spread for non-Agency MBS for the fourth quarter
of 2012 compared to the third quarter of 2012 was primarily due to purchases
during the fourth quarter. Approximately $44.8 million and $19.5 million of
CMBS and CMBS IO were purchased during the fourth quarter of 2012 at an
approximate weighted average yield of 3.19% and 3.33%, respectively, which are
lower than the weighted average yields of 5.72% and 5.39%, respectively,
earned on these portfolios during the third quarter of 2012.

Information related to the credit ratings for the Company's non-Agency MBS as
of December31, 2012 is as follows:

                                                       
                     RMBS      CMBS        IOs         Weighted average
AAA                      $ 975      $ 156,180    $ 112,107    44.0      %
AA                         —          46,967       1,836      8.0       %
A                          3,528      275,310      —          45.6      %
Below A or not             6,535      7,885        —          2.4       %
rated
                                                                        

Securitized Mortgage Loans

Securitized mortgage loans had an amortized cost basis, net of reserves, of
$70.8 million and a principal balance of $71.8 million with $30.4 million
principal in commercial mortgage loans and $41.3 million principal in
single-family mortgage loans at December31, 2012. Seriously delinquent loans
(loans 60+ days past due) totaled $3.4 million as of December31, 2012 versus
$3.4 million at September30, 2012 and $18.4 million as of December31, 2011.
As of December31, 2012, the allowance for loan losses for the Company's
securitized mortgage loan portfolio remained unchanged from September30, 2012
at $0.4 million compared to $2.5 million at December31, 2011.

Hedging Activities

As of December31, 2012, the Company had a notional total of $1.5 billion in
pay-fixed interest rate swaps with a weighted average rate of 1.53% and a
weighted average remaining maturity of 41 months. Of this amount, $275.0
million with a weighted average pay-fixed rate of 1.62% are forward-starting
swaps, $150.0 million of which became effective in January 2013 with the
remaining $125 million to become effective in March and April 2013.
Additionally, $27.0 million of the Company's $1.5 billion of interest rate
swaps are considered trading instruments and have a weighted average rate of
2.88% and weighted average remaining maturity of 50 months and are intended to
offset market value changes of Agency CMBS with a par value at December31,
2012 of $25.9 million which are also designated as trading instruments.

Equity Summary

Shareholders' equity was $616.7 million at December31, 2012, a decrease from
$617.9 million at September30, 2012 and an increase from $371.3 million at
December31, 2011. Book value per common share of $10.30 at December31, 2012
was essentially unchanged from September30, 2012. Book value per common share
was $9.20 at December31, 2011. Net income of $19.6 million for the quarter
ended December31, 2012 exceeded the $17.0 million in preferred and common
stock dividends declared as the Company utilized a portion of its tax net
operating loss carryforwards to offset its distribution requirement.
Accumulated other comprehensive income declined during the fourth quarter of
2012 by $3.4 million due to the decreasing market value of our Agency RMBS.
Also during the quarter the Company purchased 104,000 shares of common stock
under its share repurchase program at a net cost of $0.9 million.

The following table summarizes the allocation of the Company's shareholders'
equity as of December31, 2012 and the net interest income contribution for
the quarters indicated to each component of the Company's balance sheet:

                                                                                           
                                  Associated                                                      3Q12 Net
                                  Financing^(1)/   Allocated       % of            4Q12 Net       Interest
                  Asset           Liability        Shareholders'   Shareholders'   Interest       Income
                  Carrying                                                         Income
($ in            Basis          Carrying Basis  Equity         Equity         Contribution  Contribution
thousands)
Agency RMBS       $ 2,571,337     $  2,365,982     $  205,355      33.3     %      $  8,928       $   8,125
Agency CMBS       354,142         248,771          105,371         17.1     %      1,565          1,501
Agency CMBS IO    567,180         442,881          124,299         20.2     %      5,077          3,584
Non-Agency RMBS   11,038          7,808            3,230           0.5      %      130            176
Non-Agency CMBS   486,342         397,159          89,183          14.5     %      3,623          3,903
Non-Agency CMBS   113,942         88,221           25,721          4.2      %      903            681
IO
Securitized
mortgage loans    70,823          43,810           27,013          4.4      %      877            999
^(2)
Other
investments       858             —                858             0.1      %      20             21
^(2)
Derivative        —               42,537           (42,537     )   (6.9     )%     —              —
instruments^(3)
Cash and cash     55,809          —                55,809          9.0      %      —              —
equivalents
Other
assets/other     48,758        26,350         22,408        3.6      %     —            —
liabilities
                $ 4,280,229   $  3,663,519   $  616,710    100.0    %     $  21,123    $   18,990
                                                                                                      

      Associated financing for investments includes repurchase agreements and
      securitization financing issued to third parties (which is presented on
(1)  the Company's balance sheet as “non-recourse collateralized financing”).
      Associated financing for hedging instruments represents the fair value
      of the interest rate swap agreements in a liability position.
(2)   Net interest income contribution amount is after provision for loan
      losses.
      Net interest expense from derivative instruments designated as hedges of
(3)   repurchase agreement financing is included within net interest income
      contribution amounts for each respective investment category.
      

Company Description

Dynex Capital, Inc. is an internally managedreal estate investment trust, or
REIT, which invests in mortgage assets on a leveraged basis. The Company is
activelyinvesting in Agency and non-Agency RMBS and CMBS. The Companyalso
has investments in securitized single-family residential and commercial
mortgage loansoriginated by the Companyfrom 1992 to 1998. Additional
information about Dynex Capital, Inc. is available at www.dynexcapital.com.

Note: 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,” 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 include, without limitation,
statements regarding future interest rates, our views on expected
characteristics of future investment environments and risks posed by our
investment portfolio, our future investment strategies, our future leverage
levels and financing strategies, and the expected performance of our
investment portfolio and certain of our 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, changes in general economic and market conditions, including volatility in
the credit markets which impacts asset prices and the cost and availability of
financing, defaults by borrowers, availability of suitable reinvestment
opportunities, variability in investment portfolio cash flows, fluctuations in
interest rates, fluctuations in property capitalization rates and values of
commercial real estate, defaults by third-party servicers, prepayments of
investment portfolio assets, other general competitive factors, uncertainty
around government policy, the impact of regulatory changes, including the
Emergency Economic Stabilization Act of 2008 and the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010, the full impacts of which are
unknown at this time, and another ownership change under Section 382 that
further impacts the use of our tax net operating loss carryforward. For
additional information on risk factors that could affect the Company's
forward-looking statements, see the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2012 and for the quarter ended June 30,
2012, the Company's Annual Report on Form 10-K for the year ended December 31,
2011, and other reports filed with and furnished to the Securities and
Exchange Commission.

                                                          
DYNEX CAPITAL, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands except share and per share data)
                                                             
                                         December 31, 2012   December 31, 2011
ASSETS                                   (unaudited)
Agency MBS                               $   3,492,659       $   1,965,159
Non-Agency MBS                           611,322             421,096
Securitized mortgage loans, net          70,823              113,703
Other investments, net                   858                1,018          
                                         4,175,662           2,500,976
Cash and cash equivalents                55,809              48,776
Principal receivable on investments      17,008              13,826
Accrued interest receivable              23,073              12,609
Other assets, net                        8,677              6,006          
Total assets                             $   4,280,229      $   2,582,193  
                                                             
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Repurchase agreements                    $   3,564,128       $   2,093,793
Non-recourse collateralized financing    30,504              70,895
Derivative liabilities                   42,537              27,997
Accrued interest payable                 2,895               2,165
Accrued dividends payable                16,770              11,307
Other liabilities                        6,685              4,687          
Total liabilities                        3,663,519           2,210,844
                                                             
Shareholders’ equity:
Preferred stock, par value $.01 per
share, 8.5% Series A Cumulative
Redeemable; 8,000,000 shares             55,407              —
authorized; 2,300,000 and no shares
issued and outstanding, respectively
Common stock, par value $.01 per
share, 100,000,000 shares authorized;    543                 404
54,268,915 and 40,382,530 shares
issued and outstanding, respectively
Additional paid-in capital               759,214             634,683
Accumulated other comprehensive income   52,511              (3,255         )
(loss)
Accumulated deficit                      (250,965       )    (260,483       )
Total shareholders' equity               616,710            371,349        
Total liabilities and shareholders’      $   4,280,229      $   2,582,193  
equity
                                                             
Book value per common share              $   10.30           $   9.20

                                                   
DYNEX CAPITAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands except per share data)
                                                      
                          Three Months Ended          For the Year Ended
                          December 31,                December 31,
                          2012         2011          2012         2011
Interest income:          (unaudited)   (unaudited)   (unaudited)
Agency MBS                $  22,976     $  15,154     $  77,761     $ 56,814
Non-Agency MBS            7,515         6,862         29,967        18,825
Securitized mortgage      1,065         1,662         5,395         7,615
loans
Other investments         20           26           425          123      
                          31,576        23,704        113,548       83,377
Interest expense:
Repurchase agreements     10,116        6,075         33,789        19,569
Non-recourse
collateralized            315          657          1,358        4,513    
financing
                          10,431        6,732         35,147        24,082
                                                                    
Net interest income       21,145        16,972        78,401        59,295
Provision for loan        (22       )   (121      )   (192      )   (871     )
losses
Net interest income
after provision for       21,123        16,851        78,209        58,424
loan losses
                                                                    
Litigation settlement     —             —             —             (8,240   )
and related costs
(Loss) gain on
non-recourse              —             —             —             (1,970   )
collateralized
financing
Gain on sale of           2,044         773           8,461         2,096
investments, net
Fair value adjustments,   (44       )   (19       )   (173      )   (676     )
net
Other income, net         (70       )   50            281           134
General and
administrative
expenses:
Compensation and          (2,359    )   (1,874    )   (7,635    )   (5,321   )
benefits
Other general and         (1,142    )   (1,375    )   (5,101    )   (4,635   )
administrative
Net income                19,552        14,406        74,042        39,812
Preferred stock           (1,222    )   —            (2,036    )   —        
dividends
Net income to common      $  18,330    $  14,406    $  72,006    $ 39,812 
shareholders
                                                                    
Weighted average common
shares:
Basic                     54,318        40,381        53,146        38,580
Diluted                   54,318        40,381        53,146        38,581
Net income per common
share:
Basic                     $  0.34       $  0.36       $  1.35       $ 1.03
Diluted                   $  0.34       $  0.36       $  1.35       $ 1.03
Dividends declared per    $  0.29       $  0.28       $  1.15       $ 1.09
common share

Contact:

Dynex Capital, Inc.
Alison Griffin, 804-217-5897
 
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