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Hatteras Financial Corp Management Discusses Q2 2012 Results - Earnings Call Transcript

As it's been for a while, the rates markets have been one directional. The funding call slow and asset values appreciating. It's a great environment for this business model, but as would be expected yields on MBS eventually adjust to the current, which we usually equate to some earnings margin compression in a low-rate situation.

As you see, R&M was 149 basis points last quarter, down from 158 in the first quarter, which kind of reflects what the market has to give us nowadays, meaning we're close to current. Similar spread to where capital can be put the work today.

Also I just want to reiterate that we're not interested in taking on more duration and leveraged risk at this point and we'll not change the way we do things. It's the right strategy for this time and we're happy to be in position to provide investors attractive risk investment returns. And with that, I'll pass this call over to Ken to go over the details of the quarter.

Kenneth A. Steele

Thanks, Michael. Good morning, everyone. Our performance for this quarter was primarily driven by 2 things. First, we were investing the proceeds of our late March offering. The timing of settlements on MBS after an offering will generally mean that the quarter following will not necessarily be representative of a regular run rate. Second, the move lower in rates may continue to spread compression, as well as influence our decision to take some risk off the table. Our net income for the first quarter of 2012 -- excuse me, for the second quarter of 2012 was 89.1 million or $0.91 per weighted average share as compared to 69.3 million or $0.89 per weighted average share for the first quarter of the year.

Although our income was up significantly, our weighted average shares outstanding also grew significantly due to the March offering. Our net interest income was 83 million in the second quarter of 2012 as compared to 72 million in the previous quarter, reflecting a higher earning assets as invested following the offering.

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