================================================================================


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                  ------------

                                    FORM 8-K
                                  ------------


                                 CURRENT REPORT

     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


                         Date of Report: March 16, 2004
                        (Date of earliest event reported)


                               DYNEX CAPITAL, INC.
               (Exact Name of Registrant as Specified in Charter)



                                     1-9819
                            (Commission File Number)


<TABLE>
                               <S>                                                         <C>

                           Virginia                                                   52-1549373
                (State or other jurisdiction of                                    (I.R.S. Employer
                incorporation or organization)                                   Identification No.)

        4551 Cox Road, Suite 300, Glen Allen, Virginia                                  23060
           (Address of principal executive offices)                                   (Zip Code)
</TABLE>



                          (804) 217-5800
              (Registrant's telephone number, including area code)



================================================================================


<PAGE>

Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits.

         (c)  Exhibits.

              Exhibit No.    Description

                  99         Press release issued by the Registrant
                             dated March 15, 2004.
<PAGE>
                                    SIGNATURE

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended,  the  Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.

                                  DYNEX CAPITAL, INC.
                                  (Registrant)


Date:  March 16, 2004             By:
                                       -----------------------------------------
                                       Stephen J. Benedetti
                                       Executive Vice President and
                                       Chief Financial Officer
<PAGE>
                                  Exhibit Index


              Exhibit No.    Description

                  99         Press release issued by the Registrant
                             on March 15, 2004.
<PAGE>
                                  PRESS RELEASE


FOR IMMEDIATE RELEASE                              CONTACT:   Investor Relations
March 15, 2004                                                804-217-5897

                               DYNEX CAPITAL, INC.
                              REPORTS 2003 RESULTS

     Dynex Capital,  Inc. (NYSE: DX) reported today financial  results for 2003.
Highlights for the year and other information contained in this release include:

     o Generated  cash flow from the  investment  portfolio of $57.1 million for
the year,  and $13.2  million for the fourth  quarter

     o Added $28.9  million of  securities  to the  investment  portfolio in the
fourth  quarter  through  the  call of  seasoned  single-family  mortgage-backed
securities,  financing  the call  with a  combination  of  repurchase  agreement
financing and available cash

     o Incurred a net loss of $21.1  million for the year and $11.7  million for
the fourth quarter due to continued  high  provision for losses on  manufactured
housing  loans,  and  impairment  charges  on  investments

     o In January  2004,  announced a  recapitalization  plan for the  Company's
Series A, Series B and Series C Preferred  Stock, to close in the second quarter
2004 if accepted by our  shareholders,  which the Company  believes will enhance
its ability to engage in strategic transactions

     o Book value per common share of $7.55 at December 31, 2003 versus $8.57 at
December 31, 2002

         For the year ended December 31, 2003,  the Company  reported a net loss
of $21.1 million versus a net loss of $9.4 million for 2002. After consideration
of the preferred  stock  benefit  (charge),  the Company  reported a net loss to
common  shareholders  of $14.3 million or $1.31 per common share for 2003 versus
$18.9 million,  or $1.74 per common share for 2002. For the fourth quarter,  the
Company  reported a net loss to common  shareholders of $12.9 million,  or $1.18
per common share versus a net loss of $14.0  million,  or $1.28 per common share
for the same period in 2002.

         The Company has scheduled a conference  call for  Wednesday,  March 17,
2004,  at 11:00 a.m.  Eastern  Time to discuss  fourth  quarter  results and the
recapitalization  transaction.   Investors  may  participate  by  calling  (800)
840-6219.

2003 Results

         The Company  reported that cash flow from its investment  portfolio was
$57.1 million for all of 2003,  and $13.2 million for the quarter,  versus $75.8
million on a comparable  basis for 2002,  and $14.0 million in the third quarter
2003.  Cash  flow  declined  in 2003  principally  as a result  of  declines  in
interest-earning  assets from  prepayments  in the investment  portfolio,  lower
overall yields on investments,  and lower collections on the delinquent property
tax receivables portfolio.

         The Company  reported net interest  margin  before  provision  for loan
losses on its  investment  portfolio of $39.0  million in 2003 compared to $49.2
million in 2002.  After provision for loan losses,  net interest margin was $1.9
million  versus  $20.7  million in 2002.  Provision  for loan losses in 2003 was
$37.1 million  versus $28.5  million in 2002.  Included in the $37.1 million was
$13.8 million in provision for loan losses for currently  existing credit losses
within outstanding manufactured housing loans that are current as to payment. In
2002,  the  Company  had not  considered  current  loans  to be  impaired  under
generally accepted  accounting  principles and was therefore  providing reserves
only for loans that were delinquent as to payment.  As of December 31, 2003, the
Company has net unreserved  credit  exposured on  manufactured  housing loans of
$11.9 million,  which should be fully reserved through additional  provision for
loan losses during the second quarter of 2004. In addition,  impairment  charges
for 2003 were $16.4 million  versus $18.5 million in 2002,  and $11.9 million in
the fourth  quarter 2003.  Impairment  charges for 2003  included  approximately
$10.4 million for  adjustments in carrying value of the Company's  investment in
delinquent property tax receivables, and $5.5 million in impairment charges on a
debt-security  backed  principally by  manufactured  housing loans.  The Company
recorded  the  impairment  charge  as a result  of  revisions  in the  estimated
collectible amounts of its investment in delinquent tax receivables.

Balance Sheet

         Total  assets at December  31, 2003 were $1.87  billion,  versus  $2.21
billion at December 31, 2002. The decline in assets was  principally  the result
of  prepayments in the Company's  securitized  finance  receivables.  Prepayment
speed  for  the  entire  investment  portfolio  as  measured  by  the  "constant
prepayment  rate",  or  CPR,  was  21%  during  2003  and  the  fourth  quarter.
Prepayments reduce the amount of the Company's  interest-earning  assets. CPR on
the  Company's  single-family  mortgage  loan and  securities  portfolio was 37%
during the quarter. Of the $1.85 billion of assets in the investment  portfolio,
approximately $352.4 million were adjustable-rate  assets,  substantially all of
which were single-family loans and securities, with the balance being fixed-rate
investments,  substantially  all of which were  manufactured  housing  loans and
commercial mortgage loans.

         During the fourth  quarter  2003,  the Company  called $28.9 million of
previously  issued  single-family  mortgage  backed  securities  and added these
securities to its investment portfolio,  utililizing $23.9 million of repurchase
agreement  financing  for the call.  During all of 2003,  the Company  called an
aggregate $86.8 million of securities, selling $54.7 million of these securities
at a net gain of $2.2  million and  retaining  $32.1  million in its  investment
portfolio.

         Shareholders'  equity was $149.8  million at  December  31, 2003 versus
$223.4  million at December 31, 2002. The decrease in  shareholders'  equity was
due to the  retirement  of the shares of preferred  stock  related to the tender
offer completed in February 2003, coupled with the net loss for the year. Common
book value per share,  net of liquidation  preference on Series A, Series B, and
Series C Preferred  Stock, was $7.55 per share at December 31, 2003 versus $8.57
per share at December 31, 2002.

         The  Company   expects  to  formally   commence  the   recapitalization
transaction  announced in early  January 2004 within the next few weeks once the
review of its preliminary  offering documents is completed by the Securities and
Exchange  Commission.   Assuming  the  prerequisite  shareholder  approvals  are
obtained, the Company anticipates that the closing of the transaction will occur
by the end of April 2004.

Discussion

         Stephen J. Benedetti,  Chief Financial Officer of the Company,  stated,
"2003 saw the  Company  continue  on its road to  recovery.  First,  the Company
completed a tender offer in February 2003 on its existing Series A, Series B and
Series C Preferred  Stock,  reducing the dividends in arrears on such  Preferred
Stock by $16.1 million.  The Company issued Senior Notes in connection with this
tender  offer which were  redeemed in March 2004, a full one year ahead of their
maturity.  Second, the Company's  investment  portfolio  generated $57.1 million
cash flow in 2003,  putting the Company in a solid financial  position to engage
in new strategic  alternatives in 2004.  Third, the Company secured new recourse
repurchase  agreement  financing  essentially for the first time since 2000, and
added  investments  with a very attractive  return profile to the balance sheet.
Finally,  the  results  from 2003 put the  Company  in  position  to  announce a
recapitalization  plan aimed at  consolidating  the Company's Series A, Series B
and Series C Preferred Stock into a single Series D Preferred Stock and retiring
a portion of the existing  Preferred  Stock in favor of new Senior Notes,  while
eliminating all remaining dividends in arrears on the existing Preferred Stock."

         Mr.  Benedetti  continued,  "Our reported  results for 2003 reflect the
continued  challenges  in several of the asset  classes in which this Company is
invested.  In  particular,  provisions for loan losses on  manufactured  housing
loans during 2003  continued to be high. As we have remaining only $11.9 million
in net credit  exposure on  manufactured  housing loans at the end of 2003,  the
provision for loan losses in 2004 related to  manufactured  housing loans should
decline  relative to 2003.  In addition,  we recorded $7.2 million in impairment
charges on our delinquent  property tax receivables in the fourth quarter,  as a
result of continued lower forecasted  overall  collections,  due to the changing
attributes  of the  property  tax  receivables  and the  underlying  real estate
securing the receivables.  These investments will remain on non-interest accrual
status and all cash collected will be applied against our  investment.  While we
collected $3.4 million on these  receivables in the fourth quarter,  collections
are falling  short of  expectations  thus far in the first quarter of 2004. As a
result,  we would  expect cash flow from the  investment  portfolio in the first
quarter of 2004 to decline below $12 million."

         Mr.  Benedetti  continued,  "With short-term rates continuing to remain
low and the yield  curve  relatively  steep,  cash  flows  from the  securitized
finance receivables portion of the investment portfolio should remain relatively
strong. As an example of the benefit of the current rate environment, during the
second quarter 2004,  pursuant to optional  redemption  rights which the Company
owns on collateralized  bonds secured by manufactured housing loans, the Company
anticipates   redeeming  several  high  coupon,   investment  grade  classes  of
collateralized  bonds at par.  The Company  has agreed to resell  these bonds in
April at a cash premium of an estimated $7.3 million. This premium, which is not
currently  reflected in our  financial  statements  or reported  book value,  is
directly attributable to the current low rate environment, the overall favorable
environment  for  spread  product,   and  the  now  favorable   environment  for
asset-backed securities backed by manufactured housing loans."

         Mr. Benedetti concluded,  "We are hopeful that our preferred and common
shareholders  will  approve the  Company's  recapitalization  plan in the coming
months.  We believe  that our  preferred  shareholders  are being  offered  fair
consideration, and have the choice between the liquidity of the Senior Notes and
the chance to  participate  more  directly in the  improvement  of the Company's
prospects from the new Series D Preferred  Stock and common stock.  We expect to
formally  commence  the  recapitalization  within  the  next few  weeks,  with a
targeted close date in late April. Once the  recapitalization  is complete,  the
Board of  Directors  will focus on  evaluating  alternatives  for the use of the
Company's cash flows,  and, if possible,  in extracting value from the Company's
estimated  $124 million tax net operating loss  carry-forward.  The focus of the
Board will continue to be on those  alternatives that provide the most value for
our shareholders."

     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,  the  completion  of  the  proposed
recapitalization plan, defaults by borrowers, defaults by third-party servicers,
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 Form 10-Ks and Form 10-Qs as filed
with the Securities and Exchange Commission.

                                      # # #

<PAGE>

                               DYNEX CAPITAL, INC.
                      Consolidated Statements of Operations
                        (Thousands except per share data)
                                   (unaudited)
<TABLE>
<CAPTION>

                                                                Three Months Ended                          Year Ended
                                                                   December 31,                            December 31,
                                                           -----------------------------------     ---------------------------------
                                                               2003             2002                   2003              2002
                                                           --------------  ----------------        --------------   ----------------
             <S>                                                  <C>             <C>                     <C>              <C>

Interest income                                            $     39,731    $      43,299           $   152,215       $    182,139
Interest and related expense                                    (29,861)         (30,928)             (113,244)          (132,986)
                                                           --------------    --------------        --------------     --------------
Net interest margin before provision for loan losses              9,870           12,371                38,971             49,153

Provision for loan losses                                        (7,367)         (12,191)              (37,082)           (28,483)
                                                           --------------    --------------        --------------     --------------

Net interest margin                                               2,503              180                 1,889             20,670

Impairment charges                                              (11,873)          (8,924)              (16,355)           (18,477)
(Loss) gain on sale of investments, net                            (224)             (66)                1,555               (150)
Trading losses                                                        -                -                     -             (3,307)
Other                                                               266               (6)                  436              1,397
General and administrative expenses                              (2,336)          (2,749)               (8,632)            (9,493)
                                                           --------------    --------------        --------------     --------------

Net loss                                                        (11,664)         (11,565)              (21,107)            (9,360)
Preferred stock (charge) benefit                                 (1,192)          (2,397)                6,847             (9,586)
                                                           --------------    --------------        --------------     --------------

Net loss to common shareholders                            $    (12,856)     $   (13,962)          $   (14,260)       $   (18,946)
                                                           ==============    ==============        ==============     ==============

Change in net unrealized loss during the period on:
    Investments classified as available-for-sale                   (861)           1,726                   115             (3,670)
    Hedge instruments                                               945             (883)                  836             (4,461)
                                                           --------------    --------------        --------------     --------------
Comprehensive loss                                         $    (11,580)     $   (10,722)          $   (20,156)       $   (17,491)
                                                           ==============    ==============        ==============     ==============

Net loss per common share
      Basic and diluted                                     $     (1.18)     $     (1.28)          $     (1.31)       $     (1.74)
                                                           ==============    ==============        ==============     ==============
</TABLE>

<PAGE>

                               DYNEX CAPITAL, INC.
                           Consolidated Balance Sheets
                        (Thousands except per share data)
                                   (unaudited)
<TABLE>
<CAPTION>

                                                               December 31,
                                                 ---------------------------------------
                                                      2003                   2002
                                                 ----------------       ----------------
ASSETS

         <S>                                              <C>                    <C>
Cash and cash equivalents                        $         7,386        $        15,077
Other assets                                               7,174                  4,912
                                                 ----------------       ----------------
                                                          14,560                 19,989
                                                 ----------------       ----------------
Investments:
    Securitized finance receivables:
      Loans, net                                       1,518,613              1,787,254
      Debt securities, available for sale                255,580                328,674
    Other investments                                     37,903                 54,322
    Securities                                            30,275                  6,208
    Other loans                                            8,304                  9,288
                                                 ----------------       ----------------
                                                       1,850,675              2,185,746
                                                 ----------------       ----------------

                                                 $     1,865,235        $     2,205,735
                                                 ================       ================

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
Non-recourse securitization financing            $     1,679,830        $     1,980,702
Repurchase agreements                                     23,884                      -
Senior Notes                                              10,049                      -
Other liabilities                                          1,626                  1,612
                                                 ----------------       ----------------
                                                       1,715,389              1,982,314
                                                 ----------------       ----------------

SHAREHOLDERS' EQUITY:
Preferred stock                                           47,014                 94,586
Common stock                                                 109                    109
Additional paid-in capital                               360,684                364,743
Accumulated other comprehensive loss                     (3,882)                (4,832)
Accumulated deficit                                    (254,079)              (231,185)
                                                 ----------------       ----------------
                                                         149,846                223,421
                                                 ----------------       ----------------
                                                 $     1,865,235        $     2,205,735
                                                 ================       ================

Preferred dividends in arrears                   $        18,464        $        31,157
                                                 ================       ================

Book value per common share
 (inclusive of dividends in arrears)            $           7.55       $           8.57
                                                ================       ================
</TABLE>
[{"type": "8-K", "sequence": "1", "filename": "f8k_031604-dx.txt", "secsgml_size_bytes": 24248}]
{"company-data": {"conformed-name": "DYNEX CAPITAL INC", "cik": "0000826675", "assigned-sic": "6798", "irs-number": "521549373", "state-of-incorporation": "VA", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-09819", "film-number": "04671962"}, "business-address": {"street1": "4551 COX RD", "street2": "STE 300", "city": "GLEN ALLEN", "state": "VA", "zip": "23060", "phone": "8042175815"}, "mail-address": {"street1": "4551 COX RD", "street2": "STE 300", "city": "GLEN ALLEN", "state": "VA", "zip": "23060"}, "former-company": [{"former-conformed-name": "RESOURCE MORTGAGE CAPITAL INC/VA", "date-changed": "19930722"}, {"former-conformed-name": "RESOURCE MORTGAGE INVESTMENT CORP", "date-changed": "19930505"}, {"former-conformed-name": "RAC MORTGAGE INVESTMENT CORP /VA/", "date-changed": "19930505"}]}
================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                  ------------

                                    FORM 8-K
                                  ------------

                                 CURRENT REPORT

     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

                         Date of Report: March 16, 2004
                        (Date of earliest event reported)

                               DYNEX CAPITAL, INC.
               (Exact Name of Registrant as Specified in Charter)

                                     1-9819
                            (Commission File Number)
Virginia                                                   52-1549373
                (State or other jurisdiction of                                    (I.R.S. Employer
                incorporation or organization)                                   Identification No.)

        4551 Cox Road, Suite 300, Glen Allen, Virginia                                  23060
           (Address of principal executive offices)                                   (Zip Code)
(804) 217-5800
              (Registrant's telephone number, including area code)

================================================================================
Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits.

         (c)  Exhibits.

              Exhibit No.    Description

                  99         Press release issued by the Registrant
                             dated March 15, 2004.
SIGNATURE

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended,  the  Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.

                                  DYNEX CAPITAL, INC.
                                  (Registrant)

Date:  March 16, 2004             By:
                                       -----------------------------------------
                                       Stephen J. Benedetti
                                       Executive Vice President and
                                       Chief Financial Officer
Exhibit Index

              Exhibit No.    Description

                  99         Press release issued by the Registrant
                             on March 15, 2004.
PRESS RELEASE

FOR IMMEDIATE RELEASE                              CONTACT:   Investor Relations
March 15, 2004                                                804-217-5897

                               DYNEX CAPITAL, INC.
                              REPORTS 2003 RESULTS

     Dynex Capital,  Inc. (NYSE: DX) reported today financial  results for 2003.
Highlights for the year and other information contained in this release include:

     o Generated  cash flow from the  investment  portfolio of $57.1 million for
the year,  and $13.2  million for the fourth  quarter

     o Added $28.9  million of  securities  to the  investment  portfolio in the
fourth  quarter  through  the  call of  seasoned  single-family  mortgage-backed
securities,  financing  the call  with a  combination  of  repurchase  agreement
financing and available cash

     o Incurred a net loss of $21.1  million for the year and $11.7  million for
the fourth quarter due to continued  high  provision for losses on  manufactured
housing  loans,  and  impairment  charges  on  investments

     o In January  2004,  announced a  recapitalization  plan for the  Company's
Series A, Series B and Series C Preferred  Stock, to close in the second quarter
2004 if accepted by our  shareholders,  which the Company  believes will enhance
its ability to engage in strategic transactions

     o Book value per common share of $7.55 at December 31, 2003 versus $8.57 at
December 31, 2002

         For the year ended December 31, 2003,  the Company  reported a net loss
of $21.1 million versus a net loss of $9.4 million for 2002. After consideration
of the preferred  stock  benefit  (charge),  the Company  reported a net loss to
common  shareholders  of $14.3 million or $1.31 per common share for 2003 versus
$18.9 million,  or $1.74 per common share for 2002. For the fourth quarter,  the
Company  reported a net loss to common  shareholders of $12.9 million,  or $1.18
per common share versus a net loss of $14.0  million,  or $1.28 per common share
for the same period in 2002.

         The Company has scheduled a conference  call for  Wednesday,  March 17,
2004,  at 11:00 a.m.  Eastern  Time to discuss  fourth  quarter  results and the
recapitalization  transaction.   Investors  may  participate  by  calling  (800)
840-6219.

2003 Results

         The Company  reported that cash flow from its investment  portfolio was
$57.1 million for all of 2003,  and $13.2 million for the quarter,  versus $75.8
million on a comparable  basis for 2002,  and $14.0 million in the third quarter
2003.  Cash  flow  declined  in 2003  principally  as a result  of  declines  in
interest-earning  assets from  prepayments  in the investment  portfolio,  lower
overall yields on investments,  and lower collections on the delinquent property
tax receivables portfolio.

         The Company  reported net interest  margin  before  provision  for loan
losses on its  investment  portfolio of $39.0  million in 2003 compared to $49.2
million in 2002.  After provision for loan losses,  net interest margin was $1.9
million  versus  $20.7  million in 2002.  Provision  for loan losses in 2003 was
$37.1 million  versus $28.5  million in 2002.  Included in the $37.1 million was
$13.8 million in provision for loan losses for currently  existing credit losses
within outstanding manufactured housing loans that are current as to payment. In
2002,  the  Company  had not  considered  current  loans  to be  impaired  under
generally accepted  accounting  principles and was therefore  providing reserves
only for loans that were delinquent as to payment.  As of December 31, 2003, the
Company has net unreserved  credit  exposured on  manufactured  housing loans of
$11.9 million,  which should be fully reserved through additional  provision for
loan losses during the second quarter of 2004. In addition,  impairment  charges
for 2003 were $16.4 million  versus $18.5 million in 2002,  and $11.9 million in
the fourth  quarter 2003.  Impairment  charges for 2003  included  approximately
$10.4 million for  adjustments in carrying value of the Company's  investment in
delinquent property tax receivables, and $5.5 million in impairment charges on a
debt-security  backed  principally by  manufactured  housing loans.  The Company
recorded  the  impairment  charge  as a result  of  revisions  in the  estimated
collectible amounts of its investment in delinquent tax receivables.

Balance Sheet

         Total  assets at December  31, 2003 were $1.87  billion,  versus  $2.21
billion at December 31, 2002. The decline in assets was  principally  the result
of  prepayments in the Company's  securitized  finance  receivables.  Prepayment
speed  for  the  entire  investment  portfolio  as  measured  by  the  "constant
prepayment  rate",  or  CPR,  was  21%  during  2003  and  the  fourth  quarter.
Prepayments reduce the amount of the Company's  interest-earning  assets. CPR on
the  Company's  single-family  mortgage  loan and  securities  portfolio was 37%
during the quarter. Of the $1.85 billion of assets in the investment  portfolio,
approximately $352.4 million were adjustable-rate  assets,  substantially all of
which were single-family loans and securities, with the balance being fixed-rate
investments,  substantially  all of which were  manufactured  housing  loans and
commercial mortgage loans.

         During the fourth  quarter  2003,  the Company  called $28.9 million of
previously  issued  single-family  mortgage  backed  securities  and added these
securities to its investment portfolio,  utililizing $23.9 million of repurchase
agreement  financing  for the call.  During all of 2003,  the Company  called an
aggregate $86.8 million of securities, selling $54.7 million of these securities
at a net gain of $2.2  million and  retaining  $32.1  million in its  investment
portfolio.

         Shareholders'  equity was $149.8  million at  December  31, 2003 versus
$223.4  million at December 31, 2002. The decrease in  shareholders'  equity was
due to the  retirement  of the shares of preferred  stock  related to the tender
offer completed in February 2003, coupled with the net loss for the year. Common
book value per share,  net of liquidation  preference on Series A, Series B, and
Series C Preferred  Stock, was $7.55 per share at December 31, 2003 versus $8.57
per share at December 31, 2002.

         The  Company   expects  to  formally   commence  the   recapitalization
transaction  announced in early  January 2004 within the next few weeks once the
review of its preliminary  offering documents is completed by the Securities and
Exchange  Commission.   Assuming  the  prerequisite  shareholder  approvals  are
obtained, the Company anticipates that the closing of the transaction will occur
by the end of April 2004.

Discussion

         Stephen J. Benedetti,  Chief Financial Officer of the Company,  stated,
"2003 saw the  Company  continue  on its road to  recovery.  First,  the Company
completed a tender offer in February 2003 on its existing Series A, Series B and
Series C Preferred  Stock,  reducing the dividends in arrears on such  Preferred
Stock by $16.1 million.  The Company issued Senior Notes in connection with this
tender  offer which were  redeemed in March 2004, a full one year ahead of their
maturity.  Second, the Company's  investment  portfolio  generated $57.1 million
cash flow in 2003,  putting the Company in a solid financial  position to engage
in new strategic  alternatives in 2004.  Third, the Company secured new recourse
repurchase  agreement  financing  essentially for the first time since 2000, and
added  investments  with a very attractive  return profile to the balance sheet.
Finally,  the  results  from 2003 put the  Company  in  position  to  announce a
recapitalization  plan aimed at  consolidating  the Company's Series A, Series B
and Series C Preferred Stock into a single Series D Preferred Stock and retiring
a portion of the existing  Preferred  Stock in favor of new Senior Notes,  while
eliminating all remaining dividends in arrears on the existing Preferred Stock."

         Mr.  Benedetti  continued,  "Our reported  results for 2003 reflect the
continued  challenges  in several of the asset  classes in which this Company is
invested.  In  particular,  provisions for loan losses on  manufactured  housing
loans during 2003  continued to be high. As we have remaining only $11.9 million
in net credit  exposure on  manufactured  housing loans at the end of 2003,  the
provision for loan losses in 2004 related to  manufactured  housing loans should
decline  relative to 2003.  In addition,  we recorded $7.2 million in impairment
charges on our delinquent  property tax receivables in the fourth quarter,  as a
result of continued lower forecasted  overall  collections,  due to the changing
attributes  of the  property  tax  receivables  and the  underlying  real estate
securing the receivables.  These investments will remain on non-interest accrual
status and all cash collected will be applied against our  investment.  While we
collected $3.4 million on these  receivables in the fourth quarter,  collections
are falling  short of  expectations  thus far in the first quarter of 2004. As a
result,  we would  expect cash flow from the  investment  portfolio in the first
quarter of 2004 to decline below $12 million."

         Mr.  Benedetti  continued,  "With short-term rates continuing to remain
low and the yield  curve  relatively  steep,  cash  flows  from the  securitized
finance receivables portion of the investment portfolio should remain relatively
strong. As an example of the benefit of the current rate environment, during the
second quarter 2004,  pursuant to optional  redemption  rights which the Company
owns on collateralized  bonds secured by manufactured housing loans, the Company
anticipates   redeeming  several  high  coupon,   investment  grade  classes  of
collateralized  bonds at par.  The Company  has agreed to resell  these bonds in
April at a cash premium of an estimated $7.3 million. This premium, which is not
currently  reflected in our  financial  statements  or reported  book value,  is
directly attributable to the current low rate environment, the overall favorable
environment  for  spread  product,   and  the  now  favorable   environment  for
asset-backed securities backed by manufactured housing loans."

         Mr. Benedetti concluded,  "We are hopeful that our preferred and common
shareholders  will  approve the  Company's  recapitalization  plan in the coming
months.  We believe  that our  preferred  shareholders  are being  offered  fair
consideration, and have the choice between the liquidity of the Senior Notes and
the chance to  participate  more  directly in the  improvement  of the Company's
prospects from the new Series D Preferred  Stock and common stock.  We expect to
formally  commence  the  recapitalization  within  the  next few  weeks,  with a
targeted close date in late April. Once the  recapitalization  is complete,  the
Board of  Directors  will focus on  evaluating  alternatives  for the use of the
Company's cash flows,  and, if possible,  in extracting value from the Company's
estimated  $124 million tax net operating loss  carry-forward.  The focus of the
Board will continue to be on those  alternatives that provide the most value for
our shareholders."

     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,  the  completion  of  the  proposed
recapitalization plan, defaults by borrowers, defaults by third-party servicers,
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 Form 10-Ks and Form 10-Qs as filed
with the Securities and Exchange Commission.

                                      # # #
DYNEX CAPITAL, INC.
                      Consolidated Statements of Operations
                        (Thousands except per share data)
                                   (unaudited)
Three Months Ended                          Year Ended
                                                                   December 31,                            December 31,
                                                           -----------------------------------     ---------------------------------
                                                               2003             2002                   2003              2002
                                                           --------------  ----------------        --------------   ----------------
Interest income                                            $     39,731    $      43,299           $   152,215       $    182,139
Interest and related expense                                    (29,861)         (30,928)             (113,244)          (132,986)
                                                           --------------    --------------        --------------     --------------
Net interest margin before provision for loan losses              9,870           12,371                38,971             49,153

Provision for loan losses                                        (7,367)         (12,191)              (37,082)           (28,483)
                                                           --------------    --------------        --------------     --------------

Net interest margin                                               2,503              180                 1,889             20,670

Impairment charges                                              (11,873)          (8,924)              (16,355)           (18,477)
(Loss) gain on sale of investments, net                            (224)             (66)                1,555               (150)
Trading losses                                                        -                -                     -             (3,307)
Other                                                               266               (6)                  436              1,397
General and administrative expenses                              (2,336)          (2,749)               (8,632)            (9,493)
                                                           --------------    --------------        --------------     --------------

Net loss                                                        (11,664)         (11,565)              (21,107)            (9,360)
Preferred stock (charge) benefit                                 (1,192)          (2,397)                6,847             (9,586)
                                                           --------------    --------------        --------------     --------------

Net loss to common shareholders                            $    (12,856)     $   (13,962)          $   (14,260)       $   (18,946)
                                                           ==============    ==============        ==============     ==============

Change in net unrealized loss during the period on:
    Investments classified as available-for-sale                   (861)           1,726                   115             (3,670)
    Hedge instruments                                               945             (883)                  836             (4,461)
                                                           --------------    --------------        --------------     --------------
Comprehensive loss                                         $    (11,580)     $   (10,722)          $   (20,156)       $   (17,491)
                                                           ==============    ==============        ==============     ==============

Net loss per common share
      Basic and diluted                                     $     (1.18)     $     (1.28)          $     (1.31)       $     (1.74)
                                                           ==============    ==============        ==============     ==============
DYNEX CAPITAL, INC.
                           Consolidated Balance Sheets
                        (Thousands except per share data)
                                   (unaudited)
December 31,
                                                 ---------------------------------------
                                                      2003                   2002
                                                 ----------------       ----------------
ASSETS
Cash and cash equivalents                        $         7,386        $        15,077
Other assets                                               7,174                  4,912
                                                 ----------------       ----------------
                                                          14,560                 19,989
                                                 ----------------       ----------------
Investments:
    Securitized finance receivables:
      Loans, net                                       1,518,613              1,787,254
      Debt securities, available for sale                255,580                328,674
    Other investments                                     37,903                 54,322
    Securities                                            30,275                  6,208
    Other loans                                            8,304                  9,288
                                                 ----------------       ----------------
                                                       1,850,675              2,185,746
                                                 ----------------       ----------------

                                                 $     1,865,235        $     2,205,735
                                                 ================       ================

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
Non-recourse securitization financing            $     1,679,830        $     1,980,702
Repurchase agreements                                     23,884                      -
Senior Notes                                              10,049                      -
Other liabilities                                          1,626                  1,612
                                                 ----------------       ----------------
                                                       1,715,389              1,982,314
                                                 ----------------       ----------------

SHAREHOLDERS' EQUITY:
Preferred stock                                           47,014                 94,586
Common stock                                                 109                    109
Additional paid-in capital                               360,684                364,743
Accumulated other comprehensive loss                     (3,882)                (4,832)
Accumulated deficit                                    (254,079)              (231,185)
                                                 ----------------       ----------------
                                                         149,846                223,421
                                                 ----------------       ----------------
                                                 $     1,865,235        $     2,205,735
                                                 ================       ================

Preferred dividends in arrears                   $        18,464        $        31,157
                                                 ================       ================

Book value per common share
 (inclusive of dividends in arrears)            $           7.55       $           8.57
                                                ================       ================