Item 2.02. Results of Operations and Financial Condition.

As part of a public offering of common stock announced on January 28, 2021, Dynex Capital, Inc. (the "Company") disclosed the following estimated preliminary results of operations for its fourth quarter and full year ended December 31, 2020:

Based on preliminary estimates, the Company expects that its results as of and for the quarter ended December 31, 2020 will be as follows:

· Net income to common shareholders of approximately $37.2 million as compared to

net income to common shareholders of $37.5 million for the quarter ended

September 30, 2020, or net income per common share of approximately $1.60 as

compared to net income of $1.62 per common share for the quarter ended

September 30, 2020;

· Comprehensive income to common shareholders of $28.7 million, or $1.23 per

common share, as compared to $44.5 million, or $1.92 per common share, for the

quarter ended September 30, 2020;

· Core net operating income to common shareholders of approximately $10.5


   million, or $0.45 on a per share basis for the quarter ended December 31, 2020
   as compared to $14.2 million and $0.61 per common share, respectively, for the
   quarter ended September 30, 2020; and

· Book value per common share increased to approximately $19.08 at December 31,

2020 as compared to $18.25 per common share at September 30, 2020; and

· Total economic return, defined as dividends plus change in book value per


   common share was 6.7% for the quarter and 15.2% for all of 2020.

Comprehensive income to common shareholders for the fourth quarter of 2020 declined from the third quarter of 2020 due to a smaller increase in the fair value of mortgage-backed securities ("MBS") compared to the prior quarter. Net income to common shareholders for the fourth quarter of 2020 benefitted from net gains on derivative instruments of $23.9 million, or approximately $1.03 per common share, due primarily to realized gains on U.S. Treasury futures and to-be-announced ("TBA") securities. Core net operating income sequentially declined due to the smaller average balance of interest earning assets and modestly declining asset yields, reducing net interest income by $2.3 million. In addition, general & administrative expenses increased $2.1 during the fourth quarter from year-end incentive compensation accruals reflecting a catch-up adjustment for accrued bonus expense for management's achievement of its corporate goals and objectives. Book value per common share for the fourth quarter of 2020 also benefitted from net gains on derivative instruments and additionally from further credit spread tightening on investment assets. The Company ended the year with investment assets including TBA securities of $4.2 billion and leverage at 6.3x shareholders' equity, similar to the end of the third quarter. Overall investment assets including TBA securities were down on an average basis by approximately 7% as compared to last quarter as the Company maintained an ample amount of liquidity.

The above estimates are preliminary as the Company has not completed all of the procedures that it would normally conduct in connection with the year-end compilation of its financial results. In addition, the Company's auditor, BDO USA LLP, has not substantially completed its normal audit procedures for the quarter and year ended December 31, 2020. There can be no assurance that the Company's final results for this period will not differ from these estimates, including as a result of the Company's quarter-end and year-end closing procedures. These estimates should not be viewed as a substitute for full interim and year-end financial statements prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The Company's actual results for the year ended December 31, 2020 may differ materially from these estimates, and accordingly undue reliance should not be placed on these preliminary estimates.

Since September 30, 2020 and through January 27, 2021, the Company has issued 557,000 shares of common stock through its continuous equity placement program and raised net proceeds of $9.9 million.

Use of Non-GAAP Financial Measures

This Current Report on Form 8-K includes core net operating income to common shareholders (and its related per share amount), a non-GAAP financial measure, which is used by management in the Company's internal analysis of financial and operating performance. Management believes the presentation of this measure, when analyzed in conjunction with the Company's GAAP operating results, allows investors to more effectively evaluate and compare the performance of the Company to that of its peers, although the Company's presentation of this non-GAAP measure may not be comparable to other similarly-titled measures of other companies.

Management views core net operating income to common shareholders as an estimate of the Company's financial performance excluding changes in fair value of its investments and derivatives. In addition to the non-GAAP reconciliation set forth below, core net operating income to common shareholders can also be determined by adjusting net interest income to include interest rate swap periodic interest costs, drop income on TBA dollar roll positions, general and administrative expenses, and preferred dividends. Management includes drop income, which is included in "gain (loss) on derivatives instruments, net" on the Company's consolidated statements of comprehensive income, in core net operating income because TBA dollar roll positions are viewed by management as economically equivalent to holding and financing Agency residential MBS using short-term repurchase agreements. Management also includes periodic interest costs from its interest rate swaps, which are also included in "gain (loss) on derivatives instruments, net", because interest rate swaps are used by the Company to economically hedge the impact of changing interest rates on its borrowing costs from repurchase agreements, and including periodic interest costs from interest rate swaps is a helpful indicator of the Company's total cost of financing in addition to GAAP interest expense. However, this non-GAAP measure does not provide a full perspective on the Company's results of operations, and therefore, its usefulness is limited. For example, core net operating income (and its related per share amount) does not include gains or losses from available-for-sale investments, changes in fair value of and costs of terminating interest rate swaps, as well as realized and unrealized gains or losses from any instrument used by management to economically hedge the impact of changing interest rates on its portfolio and book value per common share, such as futures. As a result, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, the Company's GAAP results as reported on its consolidated statements of comprehensive income.

The following table reconciles the Company's core net operating income to common shareholders to its comprehensive income to common shareholders for the periods indicated:




 Item 8.01. Other Events.

On January 28, 2021, the Company issued a press release announcing that it plans to make a public offering of 2,750,000 shares of its common stock. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference into this Item 8.01.

On January 13, 2021, the Company's board of directors authorized a dividend distribution of $0.13 per common share for the month of January 2021 that will be paid on February 1, 2021 to shareholders of record as of January 25, 2021.

Item 9.01. Financial Statements and Exhibits.






(d) Exhibits.



Exhibit
Number     Description of Exhibit

  99.1       Press Release Announcing the Offering, dated January 28, 2021.

104        Cover Page Interactive Data File (embedded within the Inline XBRL
           document).

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