Hatteras Financial Corp. Announces Third Quarter 2012 Financial Results

Hatteras Financial Corp. (NYSE: HTS) (“Hatteras” or the “Company”) today announced financial results for the quarter ended September 30, 2012.

Third Quarter 2012 Highlights

• Generated net income of $0.83 per weighted average share
• Declared an $0.80 per share dividend
• Quarter end book value of $29.60 per share, up 7.8% from June 30, 2012
• Earned a net return on average equity of 11.64%
• Realized average net interest spread of 1.22%
• Weighted average constant prepayment rate of 20.5
• Annualized total expense ratio of 0.84% of average shareholders’ equity
• Issued $278.3 million of preferred stock at an annual rate of 7.625%

Third Quarter 2012 Results

During the quarter ended September 30, 2012, the Company earned net income of $82.0 million, or $0.83 per diluted common share, compared to net income of $89.1 million, or $0.91 per diluted common share, during the quarter ended June 30, 2012. Net interest income for the quarter ended September 30, 2012 was $79.6 million, compared to $83.0 million for the quarter ended June 30, 2012 reflecting the continued compression of net interest margin. The Company’s average earning assets increased to $24.4 billion for the third quarter of 2012 from $21.1 billion in the second quarter of 2012 as the Company deployed the proceeds from its $278.3 million preferred stock offering completed in the third quarter of 2012. The Company’s net interest margin decreased to 1.22% for the third quarter of 2012 from 1.49% in the second quarter of 2012 as a result of compression in portfolio yield. The Company’s cost of funds (including hedges) was 0.94%, unchanged from the second quarter of 2012. The Company’s average repurchase agreement (repo) rate for the third quarter of 2012 was 0.41%, up from 0.36% in the second quarter of 2012. The weighted average interest rate on interest rate swaps declined from 1.54% in the second quarter of 2012 to 1.48% in the third quarter as maturing swaps were generally replaced with new lower-cost swap positions. Operating expenses were relatively flat with prior quarter at $6.0 million for the third quarter of 2012 versus $6.1 million for the second quarter of 2012. Total annualized expenses were 0.84% of average shareholders’ equity for the quarter ended September 30, 2012, slightly below the previous quarter at 0.88%.

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