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

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

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