[LOGO OMITTED]
PRESS RELEASE
FOR IMMEDIATE RELEASE CONTACT: Investor Relations
November 19, 2003 804-217-5897
DYNEX CAPITAL, INC.
ANNOUNCES CHANGES TO 2001, 2002 AND YEAR-TO-DATE
2003 STATEMENT OF OPERATIONS, WITH NO ANTICIPATED
IMPACT TO PREVIOUSLY REPORTED BALANCE SHEETS
OR CASH FLOWS
Dynex Capital, Inc. (NYSE: DX) today reported that the Company will be
adjusting its accounting for certain transactions in 2001, 2002 and 2003
regarding its investment in a delinquent property tax receivable security. As a
result of this adjustment, the Company will be restating its consolidated
statements of operations for the years ended December 31, 2001 and 2002, and for
the three months ended March 31, 2003 and June 30, 2003, and is revising its
previously reported results for the three and nine months ended September 30,
2003. There is no anticipated impact on the Company's consolidated balance
sheet, total reported shareholders' equity, common book value per share, or cash
flows for any of the above periods as a result of the restatement.
The restatement relates to the recognition of other-than-temporary
impairment charges on and reclassification of a delinquent property tax
receivable debt security from available-for-sale to held-to-maturity in the
fourth quarter of 2001. In 2001, the Company had recorded other-than-temporary
impairment charges of $6.3 million in the statement of operations and a
reduction in the carrying value of the tax receivable security of $18.1 million
as an adjustment to accumulated other comprehensive loss included in
shareholders' equity after consultation with its independent auditors. The
Company subsequently amortized a portion of this $18.1 million in 2002 and 2003
on a level-yield basis as a reduction in accumulated other comprehensive loss
and as an increase in the carrying value of the tax receivable security. As a
result of further other-than-temporary impairment charges proposed on this
security in the third quarter 2003, the Company reviewed the accounting for the
security in connection with the 2001 audited financial statements, and
determined that the $18.1 million previously recorded as an adjustment to
accumulated other comprehensive loss should have been recorded as an impairment
charge in the statement of operations in 2001. The Company has further
determined that interest income should have then been recorded in 2002 and 2003
based on estimated collections on a level-yield basis.
The Company anticipates that the impact of this restatement will be to
increase reported net loss in 2001 by $18.1 million, decrease reported net loss
in 2002 by $5.5 million, decrease reported net loss for the three-months ended
September 30, 2003 by $10.2 million, and decrease reported net loss for the
nine-months ended September 30, 2003 by $12.6 million. The Company reported its
results for the three and nine months ended September 30, 2003 in a press
release dated November 10, 2003, and has not yet filed its Quarterly Report on
Form 10-Q for such period.
Attached is a summary of the Company's revised results for the above
referenced periods. The Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2003, when filed, will reflect the accounting treatment set
forth above. The Company will be revising its 2001 and 2002 results by amending
its Annual Report on Form 10-K for 2002, and will amend its Quarterly Reports on
Form 10-Q for the three month periods ended March 31, 2003 and June 30, 2003 to
reflect the above restatements.
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.
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. As discussed in the Company's filings with the SEC,
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, 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.
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DYNEX CAPITAL, INC.
Consolidated Statements of Operations
(Thousands except share data)
Year Ended December 31, 2001 Year Ended December 31, 2002
---------------------------- ----------------------------
As Previously As Restated As Previously As Restated
Reported Reported
------------- ----------- ------------- -----------
Net interest margin $28,410 $28,410 $15,186 $20,670
Net loss on sales, impairment charges ($20,954) ($39,078) ($18,299) ($18,299)
and litigation
Net loss ($3,085) ($21,209) ($14,844) ($9,360)
Net income (loss) to common shareholders $4,632 ($13,492) ($24,430) ($18,946)
Net income (loss) per common share:
Basic and diluted $0.41 ($1.18) $2.25 ($1.74)
DYNEX CAPITAL, INC.
Consolidated Statements of Operations
(Thousands except share data)
Three Months Ended September 2003 Nine Months Ended September 2003
--------------------------------- --------------------------------
As Previously As Previously
Reported As Restated Reported As Restated
-------- ----------- -------- -----------
Net interest margin $2,010 $3,001 ($4,049) ($613)
Impairment charges ($11,480) ($2,277) ($13,685) ($4,482)
Net loss ($10,695) ($501) ($22,081) ($9,442)
Net loss to common shareholders ($11,886) ($1,692) ($14,042) ($1,403)
Net loss per common share:
Basic and diluted ($1.09) ($0.16) ($1.29) ($0.13)