Third Quarter 2018 Earnings Presentation

October 31, 2018

2

Safe Harbor Statement NOTE:

This presentation contains certain statements that are not historical facts and that constitute “forward-looking statements” within the meaning of the Private Securities LitigationReform Act of 1995. Statements in this presentation addressing expectations, assumptions, beliefs, projections, estimates, future plans, strategies, and events, developmentsthat we expect or anticipate will occur in the future, and future operating results or financial condition are forward-looking statements. Forward-looking statements in thispresentation may include, but are not limited to, statements regarding future interest rates, our views on expected characteristics of future investment environments andexpected economic trends, prepayment rates on our investment portfolio and risks posed by our investment portfolio, our future investment strategies, our future leveragelevels and financing strategies, the use of specific financing and hedging instruments and the future impacts of these strategies, future actions by the Federal Reserve and othercentral banks, and the expected performance of our investments. The words “will,” “believe,” “expect,” “forecast,” “anticipate,” “intend,” “estimate,” “assume,” “project,” “plan,”“continue,” and similar expressions also identify forward-looking statements. These forward-looking statements reflect our current beliefs, assumptions and expectations basedon information currently available to us, and are applicable only as of the date of this presentation. Forward-looking statements are inherently subject to risks, uncertainties,and other factors, some of which cannot be predicted or quantified and any of which could cause the Company’s actual results and timing of certain events to differ materiallyfrom those projected in or contemplated by these forward-looking statements. Not all of these risks, uncertainties and other factors are known to us. New risks and uncertaintiesarise over time, and it is not possible to predict those risks or uncertainties or how they may affect us. The projections, assumptions, expectations or beliefs upon which theforward-looking statements are based can also change as a result of these risks and uncertainties or other factors. If such a risk, uncertainty, or other factor materializes in futureperiods, our business, financial condition, liquidity and results of operations may differ materially from those expressed or implied in our forward-looking statements.

While it is not possible to identify all factors, some of the factors that may cause actual results to differ from historical results or from any results expressed or implied by ourforward-looking statements, or that may cause our projections, assumptions, expectations or beliefs to change, include the risks and uncertainties referenced in our AnnualReport on Form 10-K for the year ended December 31, 2017 and subsequent filings with the Securities and Exchange Commission, particularly those set forth under the caption

“Risk Factors”.

3

Key Takeaways

• Despite 8 rate hikes by the Federal Reserve and over a 100 basis point increase in long-term interestrates over the past 11 quarters, we have continued to generate solid cash flow to distribute to ourshareholders.

• We believe that we are within striking distance of the end of the Federal Reserve’s long tighteningcycle. Rates have moved up significantly and potential negative side effects are already developingin the global economy and global capital markets.

• While we continue to generate solid cash flow in today’s environment, we anticipate improvingeconomic return opportunities as the Federal Reserve approaches the end of its tightening cycle.

• Long-term factors continue to favor this business model:◦ There is and will continue to be a global demand for yield, which supports the long-term

valuations of mortgage REITs. Securitized mortgage assets supported by the U. S. governmentare among the safest investments to generate yield in a globe burdened with uncertainty.

◦ There is a need for private capital in the US housing finance system as the Federal ReserveBank attempts to reduce its investment in Agency RMBS. Dynex brings significant experienceand expertise in managing these securitized assets.

• Demographics support the need for more housing in the United States. Demographics also supporta growing demand for cash yield as the world's population ages.

4

Third Quarter 2018 Highlights

• Earned comprehensive income of $0.01 per common share and net income of $0.39 per commonshare

• Earned core net operating income(1) of $0.19 per common share for the quarter

◦ Amount excludes the cumulative economic benefit totaling $0.8 million on $650 million inEurodollar futures which matured in 3Q18.

• Book value per common share declined $(0.18) per share, or (2.0)%, to $6.75 at September 30,2018 compared to $6.93 at June 30, 2018

◦ Dividend of $0.18 per common share offset the decline in book value, resulting in aneconomic return of 0.0% for the quarter

• Leverage(2) including TBA dollar roll positions of 6.7x shareholders’ equity at September 30, 2018compared to 6.1x at June 30, 2018

◦ Leverage was higher due to growth in portfolio assets including TBA positions during thequarter

• Net interest spread and adjusted net interest spread of 1.08% and 1.41%, respectively for the third

quarter of 2018 compared to 1.07% and 1.51%, respectively for the seconds quarter of 2018

(1) Reconciliations for non-GAAP measures are presented on slide 20.(2) Equals sum of (i) total liabilities and (ii) amortized cost basis of TBA dollar roll positions (if settled) divided by total shareholders' equity.

5

• We believe the ability for interest rates to rise rapidly and remain elevated over thelong term is limited.

◦ The foundations of the global economy are built on extraordinary growth incentral bank balance sheets and global debt making global growth fragile andvulnerable to rapid adjustments.

◦ Global debt is a significant headwind against growth, higher rates and inflation.

◦ Unpredictable government policies increase the fragility of the economicenvironment and make markets vulnerable to surprise events.

• The current structure of relative investment returns overwhelmingly favors highcredit quality, liquid investments.

◦ The global market environment has shifted as the Federal Reserve Bank isreducing its balance sheet and tightening monetary policy, necessitating a shiftin focus to liquidity.

• There are long-term favorable trends that should support our business model.

• Unpredictable government policies only increase the fragility of the economicenvironment. For example, the impact of global trade policies and varying fiscalpolicies inject considerable uncertainty into the global markets.

Key Macro Themes

6

Solid Cash Flows in a Fed Tightening Environment

DX Dividends DX Core EPS Fed Funds Rate

Dividends Per Share vs. Core EPS vs. Fed Funds Rates

0.30

0.25

0.20

0.15

0.10

0.05

Div

iden

dsPe

rSh

are

&Co

reEP

S($

)

2.2

1.7

1.2

0.7

0.2

U.S

.Fed

eral

Fund

sRa

te(%

)

Mar 2016 Jun 2016 Sept 2016 Dec 2016 Mar 2017 Jun 2017 Sept 2017 Dec 2017 Mar 2018 Jun 2018 Sept 2018

(1) Core net operating income to common shareholders. Reconciliations for non-GAAP measures are presented on slide 20.

(1)

(1)

7

Emphasizing Higher Liquidity, Credit Quality and Flexibility

Other non-Agency & loans CMBS IO Fixed-rate Agency CMBS

Adjustable-rate Agency Fixed-rate Agency RMBS U.S. Treasuries

$4,000

$3,000

$2,000

$1,000

$0

($in

mill

ions

)

3Q17 4Q17 1Q18 2Q18 3Q18

$730 $693 $658 $613 $565

$1,307$1,124

$984 $966 $948

$304$286

$273$40 $37

$1,223

$3,621

$1,730$1,790

$1,919$2,518

$4,083$147

$4,022$205

$3,932

$58$3,613

Portfolio Evolution

Fixed-rate AgencyCMBS

Adjustable-rate AgencyRMBS

CMBS IO

(1) Includes 30-year fixed-rate specified pools and TBAs on an if-settled basis.

Fixed-rate AgencyRMBS (1)

Reduced ARM portfolio and increased 30-yr fixed rate portfolio

8

By Sector Diversification

Dynamic and Disciplined Asset Allocation & Diversification

YE 2015

SingleFamily -

ARMs:48%

Multi FamilyCommercial:41%

OtherCommercial: 11%

YE 2010

SingleFamily -

ARMs:65%

Multi FamilyCommercial:23%

OtherCommercial: 12%

YE 2010

Agency: 74%

Non-AgencyAAA: 16%Loans: 10%

YE 2015

Agency: 83%

Non-AgencyAAA: 10%

Non-AgencyOther: 6%

Loans: 1%

By Credit Risk

Q3 2018

Single Family -Residential Fixed:

62%Single FamilyResidential- ARMs:1%

Multi FamilyCommercial: 32%

Other Commercial:5%

Q3 2018

Agency: 93%

Non-AgencyAAA: 5%

Non-AgencyOther: 2%

9

GovernmentIssued AAA

Rated

AAARated

AA – BBBRated

BelowInvestment

Grade/Non-Rated

Agency MBSRMBS(2), CMBS, CMBS-IO

Range 9-13%

Non-Agency MBSCMBS-IO, RMBS, RMBS-IO,

CMBS

Range 3-9%

Non-Agency MBSRange 3-9%

Non-Agency MBSRange 7-11%

Loans/MSRs Range 5-11%

Return Environment (as of September 30, 2018)

Higher

Lower

Assets & Available Returns (1)

(1) Range of levered returns based on Company calculations(2) Includes specified pool and TBA

Agency MBS offers attractive returns

• We believe the most compelling leveredrisk-adjusted returns today are offered bythe highest credit quality and the most liquidassets

• Agency MBS offer more attractive returns asthe Federal Reserve reduces its investmentin this sector

• The current structure of global asset pricesand returns are being driven by centralbanks

10

• Substantial global demand for cash yield should support demand for mortgageREIT stocks:

◦ Aging global population

◦ Negative to low yields globally

• Expanding investment opportunities from growing RMBS/CMBS supply:

◦ Need for private capital to replace government balance sheets

◦ Favorable U.S. demographic trends driving household formation/housingdemand

• Potential greater returns on investments in the future:

◦ Better risk premiums as Federal Reserve reduces its footprint

◦ Less competition from GSEs for assets as they are reformed

◦ Lower regulatory costs over the long-term

Favorable Long-Term Investment Trends

11

Source: SNL Financial (assumes dividends reinvested)

Total Return (%) January 1, 2008 - September 30, 2018

Attractive Returns over the Long-Term

12

Market Snapshot

Common Stock Preferred Stocks

NYSE Ticker: DX DXPrA DXPrB

Shares Outstanding (in millions): (as of 9/30/18) 59.0 2.3 3.6

Q3 Dividends per share: $0.18 $0.53125 $0.4765625

Dividend Yield:(annualized, based on 9/30/18 stock price) 11.29% 8.35% 7.83%

Share Price:(at 9/30/18) $6.38 $25.44 $24.35

Market Capitalization (in millions):(based on 9/30/18 shares outstanding and stock price) $376.53 $58.51 $88.67

Price to Book:(based on 9/30/18 book value and stock price) 95% - -

Supplemental Information

14

Financial Performance - Comparative Quarters

(1) TBA drop income, net periodic interest benefit, and change in fair value of derivatives are components of "gain (loss) on derivative instruments, net"reported in the comprehensive income statement.

(2) See reconciliations for non-GAAP measures on slide 21.

3Q 2018 2Q 2018

($ in thousands, except per share amounts)Income

(Expense)Per Common

ShareIncome

(Expense)Per Common

ShareInterest income $26,925 $0.47 $25,922 $0.46Interest expense 14,751 0.26 14,175 0.25

GAAP net interest income 12,174 0.21 11,747 0.21TBA drop income (1) 4,262 0.07 3,619 0.06Net periodic interest benefit of interest rate swaps (1) 1,777 0.03 2,333 0.04Accretion of de-designated hedges (66) — (48) —

Adjusted net interest income (2) 18,147 0.31 17,651 0.31Other expenses, net (409) — (339) (0.01)General and administrative expenses (3,964) (0.07) (4,006) (0.07)Preferred stock dividends (2,956) (0.05) (2,942) (0.05)

Core net operating income to common shareholders (2) 10,818 0.19 10,364 0.18Change in fair value of derivatives (1) 13,460 0.23 14,715 0.27Realized loss on sale of investments, net (1,726) (0.03) (12,444) (0.22)Accretion of de-designated hedges 66 — 48 —Fair value adjustments, net 12 — 27 —

GAAP net income to common shareholders 22,630 0.39 12,710 0.23Unrealized loss on MBS (21,848) (0.38) (9,712) (0.18)Accretion of de-designated hedges (66) — (48) —

Comprehensive income to common shareholders $716 $0.01 $2,950 $0.05WAVG common shares outstanding 57,727 56,295

15

($ in thousands, except per share amounts) $ AmountPer Common

Share

Common shareholders' equity, June 30, 2018 (1) $394,509 $6.93

GAAP net income:

Core net operating income to common (2) 10,818 0.19

Realized loss on sale of MBS, net (1,726) (0.03)

Change in fair value of derivatives 13,460 0.23

Other 78 —

Unrealized net losses on MBS (21,848) (0.38)

Dividends declared (10,623) (0.18)

Stock transactions (3) 13,544 (0.01)

Common shareholders' equity, September 30, 2018 (1) $398,212 $6.75

(1) Common shareholders' equity represents total shareholders' equity less the liquidation value of preferred stock outstanding as of the date indicated.(2) Reconciliations for non-GAAP measures are presented on slide 21. (3) Reflects the impact from the increase in number of common shares outstanding, net of impact from the increase in proceeds recorded in shareholders' equity.

Book Value Rollforward

GAAP EPS:$0.39

16

Repo Financing (as of September 30, 2018)

Counterparty by Region (based on outstanding balance) # % of all REPO

North America 10 69%

Asia 4 17%

Europe 3 14%

Total 17 100%

Repo-Uncommitted:

$2,462

Repo-Committed: $229

 ($ in millions)

Collateral TypeBalance

($ in thousands)

WeightedAverage

Rate

Fair Value ofCollateralPledged

($ in thousands)

Agency RMBS $ 1,362,687 2.26% $ 1,423,415

Agency CMBS 840,346 2.22% 897,077

Agency CMBS IO 271,305 2.72% 302,403

Non-Agency CMBS IO 216,520 3.11% 255,090

Total $ 2,690,858 2.36% $ 2,877,985

Remaining Term toMaturity

Balance($ in thousands) Percentage

WeightedAverage OriginalTerm to Maturity

< 30 days $2,081,391 77% 45

30 to 90 days 609,467 23% 91

91 to 180 days — —% —

$ 2,690,858 100% 55

17

Interest Rate Hedge Notional

Weighted Average Fixed-Pay Rate, Net

$3,500

$3,000

$2,500

$2,000

$1,500

$1,000

$500

$0

WAV

GN

otio

nalB

alan

ce(in

mill

ions

)

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%

2018

2019

2020

2021

2022

2023

2024

2025

+

$3,237$3,054

$2,444

$2,195 $2,244

$1,529$1,397

$245

2.10% 2.20%2.32% 2.37% 2.46%

2.63% 2.63% 2.73%

Hedge Position (as of September 30, 2018)

Interest Rate Swaps($ in thousands)

Years to Maturity Notional Amount (1)

WeightedAverage Fixed-Pay Rate, Net

< 3 years $ 1,520,000 2.01%

>3 and < 6 years 1,290,000 2.10%

>6 and < 10 years 1,150,000 2.61%

>10 years 220,000 2.81%

Total $ 4,180,000 2.24%

(1) Includes $1,525,000 of forward-starting pay-fixed swaps.

18

Risk Position - Interest Rates

Parallel Change in Treasury Yields

(bps)

As of September 30, 2018 As of June 30, 2018

Change in MarketValue of Investments,

netChange in

Shareholders' Equity

Change in MarketValue of Investments,

netChange in

Shareholders' Equity+100 (1.8)% (11.0)% (1.5)% (8.1)%+50 (0.7)% (4.5)% (0.7)% (3.6)%-50 0.4% 2.5% 0.5% 2.8%

Source: Company models based on modeled option adjusted duration. Includes changes in market value of our investments and derivative instruments, including TBAsecurities, but excludes changes in market value of our financings because they are not carried at fair value on our balance sheet.

Curve Shift2 year Treasury

(bps)

Curve Shift10 year Treasury

(bps)

As of September 30, 2018 As of June 30, 2018

Change inMarket Value ofInvestments, net

Change inShareholders'

Equity

Change inMarket Value ofInvestments, net

Change inShareholders'

Equity+25 +50 (0.6)% (3.4)% (0.5)% (2.7)%+25 +0 (0.2)% (1.0)% (0.2)% (1.0)%+50 +25 (0.5)% (3.0)% (0.5)% (2.7)%+50 +100 (1.5)% (8.9)% (1.2)% (6.5)%-10 -50 0.2% 1.3% 0.3% 1.4%

Changes in interest rates can impact the market value of our investments, net of hedgesand book value per common share. The estimated changes in these values incorporatesthe levels of duration and convexity inherent in our investment portfolio as it existed atthe dates indicated.

19

Risk Position - Credit Spreads

Parallel Change inMarket Credit Spreads

As of September 30, 2018 As of June 30, 2018

Change in MarketValue of Investments,

netChange in

Shareholders' Equity

Change in MarketValue of Investments,

netChange in

Shareholders' Equity

+50 (3.0)% (18.4)% (3.5)% (18.4)%

+25 (1.7)% (10.5)% (1.8)% (9.3)%

-25 1.6% 9.5% 1.8% 9.5%

-50 3.2% 19.3% 3.7% 19.2%

Source: Company models based on modeled option adjusted duration. Includes changes in market value of our investments and derivative instruments, including TBAsecurities, but excludes changes in market value of our financings because they are not carried at fair value on our balance sheet. The projections for market value do notassume any change in credit spreads.

Changes in market credit spreads versus our hedges can impact the market value of ourinvestments, net of hedges, and book value per common share. The estimated change in thesevalues incorporates portfolio and hedge characteristics as they existed at the dates indicated.

20

Dynex PortfolioAsset Class 9/30/18 6/30/18 3/31/18 12/31/17 9/30/17 6/30/17 3/31/17 12/31/16 12/31/15 12/31/14

Agency DUS 56 63 52 56 64 68 67 76 89 59

Fixed 30yr FN 3%* 12 12 18 25 27 33 29 28 41 9

Fixed 30yr FN 4%* 23 23 26 25 18 33 29 27 31 1

Freddie K AAA IO 100 90 90 100 120 145 150 200 225 155

AAA CMBS IO 80 105 100 100 120 110 145 195 240 —

AAA CMBS 78 91 84 74 83 88 93 91 138 88

Freddie K B 155 160 180 165 170 165 220 295 350 170

OtherAgency ARM 5/1 (newissue) 24 23 16 16 20 21 24 19 22 21

Fixed 30yr FN 3.5% 18 16 21 22 25 33 29 26 36 11

Freddie K C 195 200 235 235 280 275 350 435 480 250

IG Corporates 116 130 118 105 117 123 128 138 172 132

High Yield 365 386 410 396 415 441 456 476 746 562

AA CMBS 111 122 114 135 143 132 129 128 223 141

A CMBS 141 177 159 178 184 182 182 230 348 203

BBB CMBS 236 337 329 358 366 357 439 485 562 358

10y swap spreads 5.9 7.4 3.8 (1.1) (4.4) (2.4) (0.4) (13.0) (8.5) 11.8

Credit Spreads (in bps)

Source: Blackrock, JP Morgan and Company data *Option Adjusted Spreads (OAS) using BlackRock prepayment and interest rate models

21

Reconciliation of GAAP Measures to Non-GAAP Measures

Quarter Ended

9/30/18 6/30/18 3/31/18 12/31/17 9/30/17GAAP net interest income $12,174 $11,747 $13,595 $14,068 $13,214

Add: TBA drop income 4,262 3,619 3,733 3,925 3,902

Add: net periodic interest benefit (cost) (3) 1,777 2,333 (220) (319) (1,131)

Less: de-designated hedge accretion (1) (66) (48) (48) (48) (48)

Non-GAAP adjusted net interest income $18,147 $17,651 $17,060 $17,626 $15,937

GAAP interest expense $14,751 $14,175 $11,595 $10,056 $9,889

Add: net periodic interest (benefit) cost (3) (1,777) (2,333) 220 319 1,131

Less: de-designated hedge accretion (1) 66 48 48 48 48

Non-GAAP adjusted interest expense $13,040 $11,890 $11,863 $10,423 $11,068

(1) Amount recorded as a portion of "interest expense" in accordance with GAAP related to the accretion of the balance remaining in accumulated other comprehensive income asa result of the Company's discontinuation of cash flow hedge accounting effective June 30, 2013.

(2) Amount represents net realized and unrealized gains and losses on derivatives and excludes net periodic interest costs related to these instruments.(3) Amount represents net periodic interest benefit (cost) of effective interest rate swaps outstanding during the period and exclude termination costs and changes in fair value of

derivative instruments.

 ($ in thousands except per share data)

Quarter Ended9/30/18 6/30/18 3/31/18 12/31/17 9/30/17

GAAP net income to common shareholders $22,630 $12,710 $41,367 $19,053 $7,503

Adjustments:

Accretion of de-designated cash flow hedges (1) (66) (48) (48) (48) (48)

Change in fair value of derivatives instruments, net (2) (13,460) (14,715) (34,841) (9,072) (3,222)

Loss on sale of investments, net 1,726 12,444 3,775 902 5,211

Fair value adjustments, net (12) (27) (29) (12) (23)

Core net operating income to common shareholders $10,818 $10,364 $10,224 $10,823 $9,421

Core net operating income per common share $0.19 $0.18 $0.18 $0.20 $0.19

22

Investment Strategy

Diversified investment approach that performs in a variety of market environments

• Dynamic and disciplined capital allocation model enablescapturing long-term value

• Invest in a high quality, liquid asset portfolio of primarilyAgency investments

• Diversification is a key benefit

◦ Balance between commercial and residential sectorsprovides diversified cash flow and prepayment profile

◦ Agency CMBS protect the portfolio from extension risk.High quality CMBS IO add yield and are intended tolimit credit exposure and prepayment volatility vs.lower rated tranches

◦ Agency fixed rate RMBS will allow us to grow ourbalance sheet opportunistically

• Flexible portfolio duration position to reflect changingmarket conditions

23

GovernmentIssued AAA

Rated

AAARated

AA – BBBRated

BelowInvestment

Grade/ Non-Rated

Agency MBS

RMBS, CMBS, CMBS-IO

Non-Agency MBS

CMBS-IO, RMBS, RMBS-IO,CMBS

Non-Agency MBS

Non-Agency MBS

Loans/MSRs

ShortTerm

Medium Term

Permanent ~7-9 % Yield

Permanent ~9-14 % Yield

Repo/Dollar Rolls

Committed Repo

Warehouse Lines

Unsecured Notes

Convertible Notes

Preferred Stock

Common Stock

Mortgage REIT Business Model

ASSETS CAPITAL

Higher

Lower

24

Source: SNL Financial (assumes dividends reinvested)

Total Return (%) January 1, 2003 - September 30, 2018

Attractive Returns from the U.S. Housing Finance System

25

MREIT Glossary of Terms

Commercial Mortgage-Backed Securities (CMBS) are a type of mortgage-backed security that is secured by the mortgage on acommercial property. CMBS can be Agency issued and issued by a private enterprise (non-Agency).

Credit Risk is the risk of loss of principal or interest stemming from a borrower’s failure to repay a loan.

Curve Twist Terms:Bull Flattener: Is a rate environment in which long-term interest rates are declining faster than short- term interest rates.Bear Flattener: Is a yield-rate environment in which short-term interest rates are rising faster rate than long-term interest

rates. Bear Steepener: Is a rate environment in which long-term interest rates are rising faster than short-term interest rates.Bull Steepener: Is a rate environment in which short-term interest rates are declining faster than long-term interest rates.

Duration is a measure of the sensitivity of the price of a fixed-income investment to a change in interest rates. Duration isexpressed as a number of years.

Duration Drift is a measure of the change in duration for a change in interest rates

Interest Only Securities (IOs) are securities backed by a portion of the excess interest of a securitization and sold individuallyfrom the principal component.

Interest Rate Risk is the risk that an investment’s value will change due to a change in the absolute level of interest rates, theshape of the yield curve or in any other interest rate relationship. Interest rate risk can also manifest itself through the purchaseof fixed rate instruments funded with floating rate, or very short maturity, instruments.

Leverage is the use of borrowed money to finance assets including TBA dollar rolls.

Prepayment Risk is the risk associated with the early unscheduled return of principal.

26

MREIT Glossary of Terms

Repurchase Agreements are a short-term borrowing that uses loans or securities as collateral. The lender advances only a portionof the value of the asset (the advance rate). The inverse of the advance rate is the equity contribution of the borrower (thehaircut).

Residential Mortgage-Backed Securities (RMBS) are a type of mortgage-backed debt obligation whose cash flows come fromresidential debt, such as mortgages, home-equity loans and subprime mortgages. Each security is typically backed by a pool ofmortgage loans created by US government agencies, banks, or other financial institutions. RMBS can be Agency issued or issuedby a private enterprise (non-Agency).

Spread Risk is the potential price volatility resulting from the expansion and contraction of the security’s risk premium over abenchmark (or risk-free) interest rate.

TBA Dollar Roll is a financing mechanism for long positions in TBAs whereby an investor enters into an offsetting short positionand simultaneously enters into an identical TBA with a later settlement date. 

To Be Announced (TBA) Securities are forward contracts involving the purchase or sale of non-specified Agency RMBS or CMBS.