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PRESS RELEASE


FOR IMMEDIATE RELEASE CONTACT: Investor Relations
November 2, 2004 804-217-5897


DYNEX CAPITAL, INC. REPORTS RESULTS
FOR THIRD QUARTER


Dynex Capital, Inc. (NYSE: DX) reported today a net loss of $56
thousand for the third quarter of 2004, versus a net loss of $500 thousand for
the same period in 2003. After consideration of preferred stock benefits and
charges, the Company reported a net loss to common shareholders of $1.4 million
or $0.12 per basic and diluted common share, versus a net loss to common
shareholders of $1.7 million or $0.16 per common share for the third quarter
2003. For the nine months ended September 30, 2004, net loss to common
shareholders was $18.9 million, or $1.70 per basic and diluted common share,
versus a net loss of $1.4 million, or $0.13 per basic and diluted common share,
for the same period in 2003. Excluding the loss on the sale of the delinquent
property tax receivable portfolio as further discussed below, the Company
reported net income of $3.2 million, or $0.15 per common share for the third
quarter. The Company has scheduled a conference call for Wednesday, November 3,
2004, at 2:00 p.m. Eastern Standard Time to discuss the results. Investors can
listen in on the call by dialing in at (888) 343-2180.

Third Quarter 2004 Results
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Net loss for the third quarter of 2004 of $56 thousand includes a loss
of $3.2 million from the previously reported sale of the Company's delinquent
property tax receivable operations in Ohio. Proceeds from this sale were $18.5
million, with an additional $700 thousand funded to an escrow account for
customary representations and warranties. Excluding the $19.2 million in
proceeds from this sale, net cash flow received from the Company's investment
portfolio during the third quarter was $10.7 million, versus $12.0 million for
the second quarter 2004, and $14.0 million for the third quarter 2003. Cash flow
decreased in the third quarter of 2004 as a result of declining prepayments on
investments, the reinvestment of cash in lower yielding instruments and the
overall decline in investments.

The Company also reported net interest margin before provision for loan
losses on its investment portfolio of $6.4 million for the third quarter of
2004, versus $8.8 million for the same period in 2003, and $5.5 million for the
second quarter of 2004. Net interest margin before provision for losses declined
in 2004 from 2003 as a result of the overall reduction in interest earning
assets, and increased borrowing costs on the Company's LIBOR based
securitization financing. Provision for loan losses was $1.3 million in 2004,
versus $5.8 million for the same period in 2003, and declined as a result of the
Company having fully reserved for its credit loss exposure on the manufactured
housing portfolio at the end of the second quarter of 2004. General and
administrative expenses were $1.8 million during the quarter, down from $2.0
million in the second quarter of 2004, and $2.1 million in the third quarter of
2003. General and administrative expenses for the fourth quarter of 2004 should
continue to decline as a result of reductions in the Company's delinquent
property tax receivables servicing operation and the sale of the tax receivables
operations and portfolio in Ohio.

Balance Sheet
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Total assets at September 30, 2004, were $1.6 billion, a decline of
$126.2 million for the quarter, and $247.0 million from December 31, 2003. Cash
and cash equivalents at the end of the third quarter were $40.4 million versus
$22.9 million at the end of the second quarter, reflecting sales proceeds
received and the recurring cash flow from the investment portfolio, less
investments made by the Company during the quarter. Other investments at
September 30, 2004, primarily represent the Company's investment in delinquent
property tax receivables and related real estate owned in Allegheny County,
Pennsylvania, the last remaining substantial investment that the Company has in
this asset class. At September 30, 2004, recourse repurchase agreement financing
was $15.4 million, versus total shareholders' equity of $133.2 million. Common
book value per share was $6.33 versus $6.40 at June 30, 2004.

The Company also reported that its previously announced sale of the
optional redemption rights and subordinate interests in MERIT Series 13 for
$11.9 million closed effective October 28, 2004. The sale of these redemption
rights will result in an estimated gain of approximately $17.8 million during
the fourth quarter of 2004, or approximately $1.47 per common share. The sale
will also result in the removal of approximately $242 million in manufactured
housing loans, with a net carrying value of $218 million, from the securitized
finance receivable investment portfolio, as well as the removal of $225 million
in non-recourse securitization financing in October. Cash flow from the
investment portfolio for the fourth quarter including the $11.9 million in sale
proceeds should approximate $20 million.

Discussion
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Mr. Thomas B. Akin, Chairman of the Board, commented, "This third
quarter was an important quarter for the Company, as we were able to convert a
non-interest-earning asset into cash, and in the case of MERIT Series 13, enter
into an agreement to sell our interests at a significant premium to book value.
Excluding the loss from the sale of the Ohio tax receivable portfolio, we earned
$3.2 million, or $0.15 per common share. Our balance sheet is now in excellent
shape, with $40 million in cash and cash equivalents and recourse debt
outstanding at a modest $15 million relative to $133 million of shareholders'
equity. At the end of October, commensurate with the closing of the sale of our
redemption rights and interests in MERIT Series 13, shareholders' equity will
have increased to $151 million, or $7.80 per common share, and cash and cash
equivalents will have increased to $52 million."

Mr. Akin continued, "Because of our net operating loss carryfoward,
which we estimate at approximately $130 million today, unlike other mortgage
REITs, our REIT income distribution requirements are limited, and will likely
remain so for an extended period of time. Because of these limited distribution
requirements, and because, as a REIT, the Company is not a tax-paying entity,
the Company can invest its capital and can compound returns on that invested
capital essentially tax-free until the net operating loss is fully utilized. We
believe that this is a substantial benefit to our shareholders, allowing the
Company to drive increases in book value while taking only modest levels of risk
in its investment strategy."

Mr. Akin continued, "We view that opportunities to earn acceptable
risk-adjusted returns in mortgage assets are somewhat limited today. In the near
term we will look to deploy our capital with moderate amounts of recourse
leverage in an effort to generate low-teen returns. Our focus will be mostly on
adding high quality single-family residential loans and mortgage-backed
securities, and we will avoid adding significant amounts of interest-rate risk
to the balance sheet. We may also invest in other mortgage REIT debt and equity
securities which we believe are mispriced in the market. Except for the Series D
preferred dividend, we intend to retain our capital for the foreseeable future
to leverage the benefit of the net operating loss carryfoward to its fullest
extent."

Mr. Akin concluded, "Absent significant changes in interest rates or
credit loss experience and estimates in the investment portfolio, and excluding
the expected non-recurring gain from MERIT Series 13, we would expect to report
modest earnings for the upcoming fourth quarter. We would also expect cash flow
from the investment portfolio to sequentially decline from quarter-to-quarter
until such time as we materially reinvest our available cash. We would invite
all of our shareholders to listen in on our conference call on Wednesday to
discuss third quarter results and as we expand on the future direction of the
Company. We believe the ability of the Company to retain capital on a tax free
basis gives it a sizable advantage for our shareholders over entities which have
a tax burden, and mortgage REITs which must distribute 90% of their taxable
income."

Dynex Capital, Inc. is a financial services company that elects to be
treated as a real estate investment trust (REIT) for federal income tax
purposes. Additional information about Dynex Capital, Inc. is available at
www.dynexcapital.com.

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 Quarterly Report on Form 10-Q for the
period ended June 30, 2004, as filed with the Securities and Exchange
Commission.

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DYNEX CAPITAL, INC.
Consolidated Balance Sheets
(Thousands except share data)
(unaudited)