<SEC-DOCUMENT>0000826675-24-000095.txt : 20240830
<SEC-HEADER>0000826675-24-000095.hdr.sgml : 20240830
<ACCEPTANCE-DATETIME>20240731161854
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0000826675-24-000095
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20240731

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			DYNEX CAPITAL INC
		CENTRAL INDEX KEY:			0000826675
		STANDARD INDUSTRIAL CLASSIFICATION:	REAL ESTATE INVESTMENT TRUSTS [6798]
		ORGANIZATION NAME:           	05 Real Estate & Construction
		IRS NUMBER:				521549373
		STATE OF INCORPORATION:			VA
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		4991 LAKE BROOK DRIVE
		STREET 2:		STE 100
		CITY:			GLEN ALLEN
		STATE:			VA
		ZIP:			23060
		BUSINESS PHONE:		8042175800

	MAIL ADDRESS:	
		STREET 1:		4991 LAKE BROOK DRIVE
		STREET 2:		STE 100
		CITY:			GLEN ALLEN
		STATE:			VA
		ZIP:			23060

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	RESOURCE MORTGAGE CAPITAL INC/VA
		DATE OF NAME CHANGE:	19930722

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	RESOURCE MORTGAGE INVESTMENT CORP
		DATE OF NAME CHANGE:	19930505

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	RAC MORTGAGE INVESTMENT CORP /VA/
		DATE OF NAME CHANGE:	19930505
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
<TEXT>
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<title>Document</title></head><body><div id="idc69841bbcc14a2db92bf73a416a5635_1"></div><div style="min-height:72pt;width:100%"><div style="margin-bottom:8pt"><font><br></font></div></div><div style="margin-bottom:8pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:125%">July 31, 2024</font></div><div style="margin-bottom:8pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:125%;text-decoration:underline">VIA EDGAR</font></div><div><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">Mr. Eric McPhee and Mr. Wilson Lee</font></div><div><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">Division of Corporation Finance</font></div><div><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">Office of Real Estate &#38; Construction</font></div><div><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">US Securities and Exchange Commission</font></div><div><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">100 F Street, NE</font></div><div><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">Washington, DC 20549</font></div><div><font><br></font></div><div style="padding-left:22.5pt;text-indent:-22.5pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">Re&#58;&#160;&#160;&#160;&#160;Dynex Capital, Inc.</font></div><div style="text-indent:22.5pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">Form 10-K for the year ended December 31, 2023</font></div><div style="text-indent:22.5pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">Form 8-K filed April 22, 2024</font></div><div style="text-indent:22.5pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">File No. 001-09819</font></div><div><font><br></font></div><div><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">Dear Messrs. McPhee and Lee,</font></div><div><font><br></font></div><div style="text-align:justify"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">On behalf of Dynex Capital, Inc. (the &#8220;Company&#8221;), the undersigned submits the below in response to the comment letter, dated July 17, 2024, of the staff of the Division of Corporation Finance (the &#8220;Staff&#8221;) of the Securities and Exchange Commission relating to the Company&#8217;s Form 10-K for the fiscal year ended December 31, 2023 and Form 8-K filed April 22, 2024.  We have reviewed your comment and have considered it in detail.  For your convenience, the text of the comment is reproduced in bold below and is followed by our response.</font></div><div><font><br></font></div><div><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%;text-decoration:underline">Form 8-K filed April 22, 2024</font></div><div><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%;text-decoration:underline">Exhibit 99.1</font></div><div><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%;text-decoration:underline">Non-GAAP Financial Measures, page 7</font></div><div><font><br></font></div><div style="padding-left:27pt;text-indent:-27pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">1. &#160;&#160;&#160;&#160;We note your reconciliation of Adjusted net interest spread. Please expand your disclosure in future filings to describe why you believe this measure provides useful information to investors. Additionally, please tell us how the adjustment Impact from TBA dollar roll transactions is calculated and how it relates to your estimated TBA net interest spread.</font></div><div><font><br></font></div><div style="margin-bottom:8pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-style:italic;font-weight:700;line-height:125%">Response&#58;</font></div><div style="margin-bottom:8pt"><font style="color:#000000;font-family:'Aptos',sans-serif;font-size:11pt;font-weight:400;line-height:125%;text-decoration:underline">Background</font></div><div style="margin-bottom:8pt;text-align:justify"><font style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:125%">A TBA contract is an agreement to purchase or sell, for future delivery, an Agency MBS with a specified issuer, term, and coupon. A TBA dollar roll represents a transaction where TBA contracts with the same terms, but different settlement dates are simultaneously bought and sold. The TBA contract settling in the later month typically prices at a discount to the earlier month's contract, with the difference in price commonly referred to as the &#8220;drop&#8221;. Drop income (loss) is a measure of expected interest income from an investment in similar Agency MBS, net of the implied financing cost, that is foregone as a result of settling the contract in the later month rather than in the earlier month. </font></div><div style="margin-bottom:8pt;text-align:justify"><font style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:125%">Under GAAP TBAs are accounted for as a derivative. The Company records TBA derivatives at fair value on its Consolidated Statements of Financial Condition and recognize periodic changes in fair value in &#34;gain (losses) on derivatives, net&#34; in its Consolidated Statements of Comprehensive Income (Loss).</font></div><div style="text-align:justify"><font><br></font></div><div style="height:72pt;position:relative;width:100%"><div style="bottom:0;position:absolute;width:100%"><div style="margin-bottom:8pt"><font><br></font></div></div></div><hr style="page-break-after:always"><div style="min-height:72pt;width:100%"><div style="margin-bottom:8pt"><font><br></font></div></div><div style="margin-bottom:8pt"><font style="color:#000000;font-family:'Aptos',sans-serif;font-size:11pt;font-weight:400;line-height:125%;text-decoration:underline">Discussion</font></div><div style="margin-bottom:8pt;text-align:justify"><font style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:125%">Adjusted net interest spread </font><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:125%">provides an aggregate measure of net interest spread for the portfolio of MBS and TBAs on a combined basis. </font><font style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:125%">It is calculated by averaging the net interest spread on MBS and the implied net interest spread on the Company's TBA dollar rolls, weighted by their respective average balances outstanding during the period.  Adjusted net interest spread would also include the net interest component of interest rate swaps, if any.</font></div><div style="text-align:justify"><font style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">The Company's net interest spread is calculated as its effective yield on on its MBS minus the cost of funds on our repurchase agreement financings. For the first quarter of 2024, the Company's net interest spread was (1.15)%. </font></div><div style="text-align:justify"><font><br></font></div><div style="text-align:justify"><font style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">For the first quarter of 2024, the TBA drop loss was $(1.3) million and implied net interest spread was (0.35)%.</font></div><div style="text-align:justify"><font><br></font></div><div style="text-align:justify"><font style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">Adjusted net interest spread is the Company's net interest spread adjusted for the Impact of TBA dollar roll transactions.  Because the TBA implied net interest spread of (0.35)% was less negative than the net interest spread of (1.15)%, the combined, or adjusted net interest spread of MBS and TBA, was (1.</font><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">01)% on a weighted average basis across the entire portfolio of MBS and TBA's. The Impact of TBA dollar roll transactions was a benefit of 0.14% (-1.15% vs. -1.01%).</font></div><div style="text-align:justify"><font><br></font></div><div style="text-align:justify"><font style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">Based on the Company's current disclosures, analysts and investors can combine the net interest spread with TBA drop income independent of the adjusted net interest spread disclosure, and therefore the Company has decided to stop separately reporting the Impact of TBA dollar roll transactions on adjusted net interest spread in future disclosures.</font></div><div style="text-align:justify"><font><br></font></div><div style="margin-bottom:8pt;text-align:center"><font style="color:#000000;font-family:'Aptos',sans-serif;font-size:11pt;font-weight:400;line-height:125%">* * *  </font></div><div style="text-align:justify"><font style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">We hope this letter has been responsive to the Staff&#8217;s comment&#59; however, if you have any questions, we welcome further discussion on this topic.</font></div><div style="text-align:justify"><font><br></font></div><div style="text-align:justify"><font style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">Sincerely,</font></div><div style="text-align:justify"><font><br></font></div><div style="text-align:justify"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">&#47;s&#47; Rob Colligan</font></div><div style="text-align:justify"><font><br></font></div><div style="text-align:justify"><font style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">Rob Colligan</font></div><div><font style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">Chief Financial Officer and Chief Operating Officer</font></div><div style="height:72pt;position:relative;width:100%"><div style="bottom:0;position:absolute;width:100%"><div style="margin-bottom:8pt"><font><br></font></div></div></div></body></html>
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