Dynex Capital, Inc. Announces Agreements to Sell Tax Receivable Portfolio and Securitized Finance Receivables and Announces Preferred Dividend.

GLEN ALLEN, Va. -- Dynex Capital, Inc. (NYSE: DX) announced today that it entered into a definitive agreement to sell its delinquent property tax receivable portfolio located in Cuyahoga County, Ohio to Plymouth Park Tax Services, LLC. The total proceeds to the Company from the sale is approximately $20 million, versus the Company's $22.3 million recorded investment in this portfolio. Approximately $19 million of the proceeds are expected at the first closing scheduled to occur on September 20, 2004, $700 thousand of which will be held in escrow for up to one year for customary representations and warranties. A second closing for the balance of the proceeds, which will also be held in escrow, is expected to occur within the next sixty days. As a result of the transaction, XSPAND, Inc., a Morristown, New Jersey based servicer of delinquent tax assets across twenty-one states and a subsidiary of Plymouth Financial Company, Inc., will assume the servicing of the portfolio.

The Company also announced today that it has entered into an agreement to sell its interest in its MERIT Series 13 securitization transaction. As a result of this sale, the Company expects to report a one-time gain of at least $15 million, and expects to de-recognize approximately $218 million in net securitized finance receivables from its balance sheet, and approximately $226 million in associated non-recourse securitization financing when it records the transaction. The sale is expected to close on or about October 28, 2004, and the assets being sold by the Company in the transaction consist of loans secured by manufactured housing.

Mr. Benedetti, Executive Vice President and Chief Financial Officer of the Company commented, "The sale of these two investments was important for the Company as we shed non-core assets at an overall net gain to the Company, generating approximately $30 million in immediate cash proceeds in the process. The bulk sale of the Ohio tax receivable portfolio accelerates the conversion to cash of these assets at a modest discount to book value, and reduces our remaining overall investment in delinquent tax receivables to approximately $12 million, excluding real estate owned, with a redemptive value of approximately $53 million, principally located in Allegheny County, Pennsylvania. Together, these sales will immediately be accretive to earnings and book value per common share, and as these sold assets were contributing only nominal amounts to our earnings, on an on-going basis, earnings should improve as we re-deploy the cash received in interest-earning assets. In addition, after the conclusion of the sale and inclusive of the recent reductions in the Pennsylvania servicing operations announced last quarter, we will have reduced overall general and administrative expenses for the tax lien operations in excess of $2 million annually going forward. While we will also look for an opportunity to sell the portfolio and servicing operations in Pennsylvania, given our modest remaining capital investment in this portfolio, we will only sell if we receive a reasonable offer. We are also very pleased to have been able to monetize our investment in MERIT Series 13, and with the similar transaction on MERIT Series 12 having been accomplished in April of this year, we have been able to take advantage of improved market conditions to generate nearly $20 million in net cash proceeds from our investment in these two manufactured housing transactions."

Mr. Benedetti concluded, "We are now well-positioned in our efforts to remake the Company as we have ample capital to opportunistically pursue investment alternatives. In the near-term, we anticipate re-deploying the capital into more conventional single-family residential mortgage loans and securities, or in other mortgage REITs which are involved in those markets, such that proceeds generated by the sales of these investments will be accretive to the Company in the near term."

Separately the Company also announced that it has declared the dividend on the Series D Preferred Stock for the third quarter of $0.2375 per share, payable on October 29, 2004, to holders of record on September 30, 2004.

Note: This document contains "forward-looking statements" within the meaning of the Private Securities Litigation 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. 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, disruptions in the capital markets, fluctuations in interest rates, defaults by borrowers, defaults by third-party servicers, prepayments of investment portfolio assets, the accuracy of subjective estimates used in determining the fair value of certain financial assets of the Company, the impact of recently issued financial accounting standards, increases in costs and other general competitive factors. For additional information, see the Company's Annual Report on Form 10-K for the year ended December 31, 2003, as filed with the Securities and Exchange Commission.