Dynex Capital Inc. Announces Fourth Quarter 1998 Dividends.

GLEN ALLEN, Va.--(BUSINESS WIRE)--Dec. 15, 1998--Dynex Capital, Inc. (NYSE: DX) announced today its Series A and Series B preferred stock will pay a fourth quarter dividend of $0.585 per share and the Company's Series C preferred stock will pay $0.73 per share. The dividends will be paid to record holders as of January 1, 1999. The Series B and Series C preferred stock dividends will be paid on January 29, 1999. The Series A preferred stock dividend will be paid on January 15, 1999. The Company will not pay any dividend on its common stock for the fourth quarter.

In commenting on the fourth quarter, Thomas H. Potts, President, stated, "As we previously announced, we have been focused on preserving our capital base and improving liquidity. The Company has taken several steps during the fourth quarter in an effort to achieve these goals. We recently closed a new $400 million warehousing facility for our commercial real estate mortgage loan production and also increased an existing warehousing facility for our manufactured housing production. In addition, we recently priced the issuance of $436 million of bonds collateralized by commercial real estate mortgage loans, to close on or about December 18, 1998. As a result of this securitization and other asset sales, the Company's recourse borrowings are estimated to decline from $1.6 billion at September 30, 1998 to approximately $1 billion at year-end. Furthermore, substantially all of the Company's recourse debt is either under committed facilities, or uncommitted facilities that have been extended beyond December 31, 1998." Mr. Potts continued, "We have reduced our funding risk and improved our liquidity since the beginning of the quarter. In addition, we are reviewing and considering various alternatives to further diversify our sources of funding, one of which could be the formation of a federally chartered savings bank."

In regard to the performance of the Company's investment portfolio, Mr. Potts stated, "Thus far this quarter, prepayments in our investment portfolio have declined slightly with prepayments of approximately $177 million in October and $172 million in November. This is relative to an average monthly paydown of $201 million during the third quarter. Although this trend is favorable for the Company, the possibility still exists for higher prepayments, as current interest rates remain very low. Additionally, our net interest margin through November has been favorably impacted by the lowering of the target Federal funds rate."

Regarding the Company's production operations, Mr. Potts commented, "As we previously stated, due to the turmoil experienced this quarter in the capital markets for the issuance of mortgage- and asset-backed securities, we slowed down our production operations beginning mid- October. Based on such actions and the current market conditions, we estimate production volume for the fourth quarter to be approximately $250 million. Production for all of 1998 should be approximately $1.3 billion, in line with our original goal."

Mr. Potts concluded, "The environment has certainly stabilized over the past 45 days, and liquidity in the fixed income markets is much improved. We feel that our conservative borrowing practices, asset quality, and capital base will enable Dynex to finish up 1998 better than many other specialty finance companies."

Dynex Capital, Inc. is a financial services company that elects to be treated as a real estate investment trust. The Company's primary loan production operations include the origination of mortgage loans secured by multifamily and commercial real estate properties and the origination of loans secured by manufactured homes. The Company's strategy is to create investments for its portfolio from its production operations at a lower effective cost than if assets were purchased in the market, and as a result, steadily increase its net interest margin income and earnings per share over time.

Note: This document contains "forward-looking statements"(within the meaning of the Private Securities Litigation Act of 1995) that inherently involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of unforeseen external factors. As discussed in the Company's filings with the SEC, these factors may include, but are not limited to, changes in general economic conditions, disruptions in the capital markets, fluctuations in interest rates, increases in costs and other general competitive factors.