WINSTON-SALEM, N.C.--(BUSINESS WIRE)--
Hatteras Financial Corp. (NYSE: HTS)
(“Hatteras” or the “Company”) today announced financial results for the
quarter ended December 31, 2012.
Fourth Quarter 2012 Highlights
Net income of $1.02 per weighted average share
Declared a $0.70 per share common dividend
Book value $28.19 per share at year end
Net return on average common equity of 14.07%
Average net interest spread of 1.08%
Annualized total expense ratio of 0.89% of average shareholders’ equity
Full Year 2012 Highlights
Net income of $3.67 per weighted average share
Declared $3.30 per share common dividends
Book value increased $1.11 per share
Net return on average common equity of 12.96%
Undistributed taxable income of $0.45 per share at year end
Fourth Quarter 2012 Results
During the quarter ended December 31, 2012, the Company earned net
income available to common shareholders of $101.3 million, or $1.02 per
diluted common share, compared to net income of $82.0 million, or $0.83
per diluted common share during the quarter ended September 30, 2012.
Net interest income for the quarter ended December 31, 2012 was $74.7
million, compared to $79.6 million for the quarter ended September 30,
2012. The Company’s net interest margin decreased to 1.08% for the
fourth quarter of 2012 from 1.22% in the third quarter of 2012 due to a
portfolio yield drop that was not offset by a corresponding decrease in
the Company’s cost of funds. The Company’s cost funds (including hedges)
increased 0.02% to 0.96% for the quarter ended December 31, 2012. The
Company’s average repurchase agreement (repo) rate increased to 0.44% in
the fourth quarter of 2012, from 0.41% in the third quarter of 2012, on
all outstanding short-term repo positions. The Company realized gain on
sale of mortgage-backed securities (MBS) of $39.1 million during the
quarter compared to $10.5 million for the previous quarter. The
annualized expense ratio for the quarter was 0.89% of average
shareholders’ equity for the quarter ended December 31, 2012 as compared
to 0.84% for the prior quarter.
“We achieved solid returns for our investors in 2012 despite uncertain
market conditions that impacted the interest rate and mortgage markets,”
said Michael R. Hough the Company’s Chief Executive Officer. “Our take
away from last year is that our clear long-term strategy enables us to
continue to generate solid risk-adjusted returns while best positioning
Hatteras for future volatility.”
Mr. Hough added “We believe the ARM based, short-duration balance sheet
we have carefully built over the past five years properly reflects where
we should be positioned today in light of domestic and global economic
uncertainty. We need to remain diligent in continuing to assess the
risks in our portfolio and maintaining the appropriate balance of assets
and liabilities that is imperative at this point of the economic cycle.”
Dividend
The Company declared a dividend of $0.70 per share of common stock with
respect to the quarter ended December 31, 2012, which was a decrease
from the $0.80 per share dividend for the quarter ended September 30,
2012. Based on the closing share price of $24.81 on December 31, 2012,
the fourth quarter dividend equates to an annualized yield of 11.3%. The
Company also declared a dividend of $0.4765625 per share of the
Company's 7.625% Series A Cumulative Redeemable Preferred Stock with
respect to the quarter ended December 31, 2012.
Portfolio
The Company’s weighted average earning assets, consisting of residential
mortgage securities issued by Fannie Mae and Freddie Mac (“agency
securities”), was $25.8 billion for the quarter ended December 31, 2012,
compared to $24.4 billion for the previous quarter. The portfolio’s
weighted average coupon was 2.93% for the fourth quarter of 2012,
compared to 2.99% for the third quarter of 2012, reflecting lower rates
on new security purchases. The annualized yield on average assets was
2.04% for the fourth quarter of 2012, compared to 2.16% for the third
quarter of 2012.
At December 31, 2012, the Company’s portfolio of agency securities
consisted of 93.7% of adjustable-rate agency securities and 6.3% of
15-year fixed-rate agency securities. At December 31, 2012, the Company
owned $22.4 billion of adjustable-rate agency securities with a weighted
average coupon of 2.95% and a weighted average cost basis of $102.79,
and $1.5 billion of 15-year fixed-rate agency securities with a weighted
average coupon of 2.62%, and a weighted average cost basis of $103.64.
The Company’s adjustable-rate agency securities portfolio at December
31, 2012 is summarized below.
Hatteras Financial Corp ARM Portfolio
Weighted Avg.
(dollars in thousands)
Current
Weighted Avg.
Amortized
Weighted Avg.
Months to Reset
Face value
Coupon
Purchase Price
Amortized Cost
Market Price
Market Value
0-12
$
856,698
4.03
%
$
101.24
$
867,348
$
106.79
$
914,832
13-24
911,412
3.88
%
$
102.28
932,202
$
106.08
966,854
25-36
2,155,206
3.60
%
$
102.27
2,204,154
$
105.55
2,274,763
37-48
3,059,130
3.06
%
$
102.38
3,132,043
$
104.84
3,207,245
49-60
3,450,959
2.76
%
$
102.82
3,548,369
$
104.81
3,616,891
61-72
2,868,337
3.26
%
$
102.55
2,941,356
$
105.54
3,027,295
73-84
7,276,854
2.44
%
$
103.37
7,522,264
$
104.54
7,607,359
85-96
126,924
3.08
%
$
103.47
131,327
$
105.17
133,487
97-108
-
-
$
-
-
$
-
-
109-120
610,509
2.81
%
$
103.53
632,087
$
105.00
641,013
121-140
19,995
2.69
%
$
103.72
20,739
$
104.65
20,923
Total ARMS
$
21,336,024
2.95
%
$
102.79
$
21,931,889
$
105.04
$
22,410,662
During the fourth quarter of 2012, the expense of amortizing the premium
on the Company’s securities was $50.1 million, compared to $47.3 million
during the third quarter of 2012. The weighted-average principal
repayment rate (scheduled and unscheduled principal payments as a
percentage of the weighted-average portfolio, on an annualized basis)
during the fourth quarter of 2012 was 26.6%, compared to 27.6% during
the third quarter of 2012. The Company’s weighted-average one-month
constant prepayment rate (CPR) for the quarter ended December 31, 2012
was 19.8, as compared to 20.5 for the quarter ended September 30, 2012.
CPR measures unscheduled repayment rate as a percentage of principal on
an annualized basis.
Portfolio Financing and Leverage
At December 31, 2012, the Company financed its portfolio with
approximately $22.9 billion of borrowings under repurchase agreements.
The Company’s repo debt-to-shareholders’ equity ratio at December 31,
2012, was 7.4 to 1. The Company uses interest rate swap agreements to
synthetically extend the fixed interest period of these liabilities and
hedge against the interest rate risk associated with financing the
Company’s portfolio. As of December 31, 2012, the Company had entered
into interest rate swaps with a notional amount of $10.7 billion. The
swap agreements, which are indexed to 30-day LIBOR, have a weighted
average remaining term of 31 months at a weighted average fixed rate of
1.47%.
Book Value
The Company’s book value (shareholders’ equity) per share on December
31, 2012 was $28.19, down $1.41 or 4.76%, from the per share book value
of $29.60 on September 30, 2012. On a per share basis, the book value at
December 31, 2012 consisted of $25.15 of common equity, $0.38 of
retained earnings, $5.12 of unrealized gains on agency securities, and
($2.46) of unrealized losses on interest rate swaps.
Full Year 2012 Results
Although the Company experienced spread compression over the course of
the year as long-term interest rates declined with little change in
short-term rates, 2012 still offered a favorable earning environment.
The Company generated net income of $341.7 million, for the 12 months
ended December 31, 2012, which equaled $3.67 per weighted average share
of common stock. Return on weighted average equity for the year was
12.96%. Book value per share increased $1.11, or 4.1%, from $27.08 on
December 31, 2011 to $28.19 on December 31, 2012.
For the 12 months ended December 31, 2012, the annualized yield on
weighted average assets during the period was 2.28%, and the annualized
cost of funds on the weighted average repurchase balance was 0.96%. This
resulted in a weighted average interest rate spread of 1.32% for the
year.
Conference Call
The Company will host a conference call at 10:00 a.m. ET on Wednesday
February 13, 2013, to discuss financial results for the fourth quarter
ended December 31, 2012. To participate in the event by telephone,
please dial (888) 317-6016 five to 10 minutes prior to the start time
(to allow time for registration) and ask to join the “Hatteras
Financial” conference call. International callers should dial (412)
317-6016. Canada callers should dial (855) 669-9657. A digital replay of
the call will be available on Wednesday, February 13, 2013 at
approximately 12:00 noon ET through Thursday, February 21, 2013 at 9:00
a.m. ET. Dial (877) 344-7529 and enter the conference ID number
10025029. International callers should dial (412) 317-0088 and enter the
same conference ID number. The conference call will also be webcast live
over the Internet and can be accessed at Hatteras' web site at www.hatfin.com.
To monitor the live webcast, please visit the web site at least 15
minutes prior to the start of the call to register, download, and
install any necessary audio software. An audio replay of the event will
be archived on Hatteras' web site.
About Hatteras Financial Corp.
Hatteras Financial is a real estate investment trust formed in 2007 to
invest in single-family residential mortgage pass-through securities
guaranteed or issued by U.S. Government agencies or U.S.
Government-sponsored entities, such as Fannie Mae, Freddie Mac or Ginnie
Mae. Based in Winston-Salem, N.C., Hatteras is managed and advised by
Atlantic Capital Advisors LLC. Hatteras is a component of the Russell
1000® index.
Forward-Looking Statements
This press release, together with other statements and information
publicly disseminated by the Company, contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. The Company intends such forward-looking statements to
be covered by the safe harbor provisions for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995 and
includes this statement for purposes of complying with these safe harbor
provisions. Forward-looking statements, which are based on certain
assumptions and describe the Company's future plans, strategies and
expectations, are generally identifiable by use of the words "believe,"
”will,” "expect," "intend," "anticipate," "estimate," ”should,”
"project" or similar expressions. You should not rely on forward-looking
statements since they involve known and unknown risks, uncertainties and
other factors that are, in some cases, beyond the Company's control and
which could materially affect actual results, performances or
achievements. Forward-looking statements in this press release include,
among others, statements about the Company’s MBS portfolio and
repurchase agreements, future volatility in the domestic and global
economies, risks in the portfolio and the Company’s return profile.Factors
that may cause actual results to differ materially from current
expectations include the risk factors discussed in the Company’s most
recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
Accordingly, there is no assurance that the Company's expectations will
be realized. Except as otherwise required by the federal securities
laws, the Company disclaims any obligation or undertaking to publicly
release any updates or revisions to any forward-looking statement
contained herein (or elsewhere) to reflect any change in the Company’s
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
Hatteras Financial Corp.
Balance Sheets
(Dollars in thousands, except share amounts)
December 31, 2012
December 31, 2011
Assets
Mortgage-backed securities, at fair value
(including pledged assets of $22,591,973 and $17,012,472 at December
31, 2012
$
23,919,251
$
17,741,873
and December 31, 2011, respectively)
Cash and cash equivalents
168,424
347,045
Restricted cash
281,021
237,014
Unsettled purchased mortgage-backed securities, at fair value
138,338
49,630
Receivable for securities sold
1,587,535
-
Accrued interest receivable
77,113
63,025
Principal payments receivable
190,832
105,333
Debt security, held to maturity, at cost
15,000
15,000
Other assets
26,604
27,799
Total assets
$
26,404,118
$
18,586,719
Liabilities and shareholders’ equity
Repurchase agreements
$
22,866,429
$
16,162,375
Payable for unsettled securities
137,121
48,999
Accrued interest payable
7,592
4,596
Interest rate hedge liability
243,945
219,167
Dividend payable
73,804
69,141
Accounts payable and other liabilities
2,363
2,253
Total liabilities
$
23,331,254
$
16,506,531
Shareholders’ equity:
7.625% Series A Cumulative Redeemable Preferred stock, $. 001 par
value, 25,000,000
shares authorized, 11,500,000 and 0 shares issued and outstanding at
December 31, 2012
and 2011, respectively ($287,500 aggregate liquidation preference)
278,252
–
Common stock, $. 001 par value, 200,000,000 shares authorized,
98,822,654 and 76,823,220 shares issued and outstanding at December
31, 2012 and
2011, respectively
99
77
Additional paid-in capital
2,494,303
1,904,748
Retained earnings
37,356
2,041
Accumulated other comprehensive income
262,854
173,322
Total shareholders’ equity
3,072,864
2,080,188
Total liabilities and shareholders’ equity
$
26,404,118
$
18,586,719
Hatteras Financial Corp.
Statements of Income
For the years ended December 31, 2012, 2011 and 2010
(Dollars in thousands, except share amounts)
2012
2011
2010
Interest income:
Interest income on mortgage-backed securities
$
504,800
$
424,713
$
263,751
Interest income on short-term cash investments
1,508
1,407
1,265
Interest income
506,308
426,120
265,016
Interest expense
197,064
144,662
95,923
Net interest income
309,244
281,458
169,093
Operating expenses:
Management fee
17,420
13,787
9,205
Share based compensation
1,920
1,150
1,432
General and administrative
5,006
2,724
2,507
Total operating expenses
24,346
17,661
13,144
Other income/(expense):
Net gain on sale of mortgage-backed securities
64,347
20,576
13,551
Net income
349,245
284,373
169,500
Dividends on preferred stock
7,551
0
0
Net income available to common shareholders
$
341,694
$
284,373
$
169,500
Earnings per share - common stock, basic
$
3.67
$
3.97
$
4.30
Earnings per share - common stock, diluted
$
3.67
$
3.97
$
4.30
Weighted average common shares outstanding, basic
93,185,520
71,708,058
39,454,362
Weighted average common shares outstanding, diluted
93,185,520
71,708,058
39,454,362
Hatteras Financial Corp.
Statements of Comprehensive Income
For the years ended December 31, 2012, 2011 and 2010
(Dollars in thousands)
2012
2011
2010
Net income
$
349,245
$
284,373
$
169,500
Other comprehensive income (loss):
Net unrealized gains (losses) on securities available for sale
115,008
223,333
(34,898
)
Net unrealized (losses) gains on derivative instruments
(25,476
)
(155,902
)
(11,934
)
Other comprehensive income (loss)
89,532
67,431
(46,832
)
Comprehensive income
$
438,777
$
351,804
$
122,668
Key Statistics
(Amounts are unaudited and subject to change)
(in thousands, except per share amounts)
Three months ended (unaudited)
December 31, 2012
September 30, 2012
June 30, 2012
March 31, 2012
December 31, 2011
Statement of Income Data
Interest income
$
131,728
$
132,327
$
129,161
$
113,092
$
114,821
Interest Expense
(57,019
)
(52,767
)
(46,169
)
(41,109
)
(42,299
)
Net Interest Income
74,709
79,560
82,992
71,983
72,522
Gain on sale of mortgage-backed securities
39,103
10,534
12,205
2,505
2,841
Operating Expenses
(7,065
)
(6,044
)
(6,053
)
(5,184
)
(4,738
)
Net income
106,747
84,050
89,144
69,304
70,625
Dividends on preferred stock
(5,481
)
(2,070
)
–
–
–
Net income available to common shareholders
$
101,266
$
81,980
$
89,144
$
69,304
$
70,625
Earnings per share - common stock, basic
$
1.02
$
0.83
$
0.91
$
0.89
$
0.92
Earnings per share - common stock, diluted
$
1.02
$
0.83
$
0.91
$
0.89
$
0.92
Weighted average shares outstanding
98,812
98,233
97,969
77,610
76,607
Distributions per common share
$
0.70
$
0.80
$
0.90
$
0.90
$
0.90
Key Portfolio Statistics
Average MBS
$
25,783,448
$
24,414,506
$
21,149,623
$
17,259,040
$
17,608,752
Average Repurchase Agreements
$
23,692,240
$
22,541,260
$
19,599,942
$
15,981,764
$
16,280,835
Average Equity
$
3,158,139
$
2,889,126
$
2,762,948
$
2,113,079
$
2,040,843
Average Portfolio Yield
2.04
%
2.16
%
2.43
%
2.61
%
2.60
%
Average Cost of Funds
0.96
%
0.94
%
0.94
%
1.03
%
1.04
%
Interest Rate Spread
1.08
%
1.22
%
1.49
%
1.58
%
1.56
%
Return on Average Common Equity
14.07
%
11.78
%
12.91
%
13.12
%
13.84
%
Average Annual Portfolio Repayment Rate
26.55
%
27.61
%
25.42
%
25.67
%
27.39
%
Debt to Equity (at period end)
7.4:1
7.3:1
7.5:1
6.2:1
7.8:1
Debt to Capital (at period end)
8.2:1
8.5:1
8.1:1
6.7:1
8.5:1
Mortgage-backed Securities Portfolio as of December 31, 2012
(Amounts are unaudited and subject to change)
(dollars in thousands)
Agency
Securities
Gross
Gross
Amortized
Unrealized
Unrealized
Estimated
Cost
Loss
Gain
Fair Value
% of Total
Agency Securities
Fannie Mae Certificates
ARMS
$
14,081,259
$
(100
)
$
329,780
$
14,410,939
60.3
%
Fixed Rate
743,299
9,296
752,595
3.1
%
Total Fannie Mae
14,824,558
(100
)
339,076
15,163,534
Freddie Mac Certificates
ARMS
7,850,630
(21
)
149,114
7,999,723
33.4
%
Fixed Rate
744,720
-
11,274
755,994
3.2
%
Total Freddie Mac
8,595,350
(21
)
160,388
$
8,755,717
Total Agency Securities
$
23,419,908
$
(121
)
$
499,464
$
23,919,251
ARM Mortgage-backed Securities Portfolio as of December 31, 2012
(Amounts are unaudited and subject to change)
(dollars in thousands)
% of ARM
Current
Weighted Avg.
Weighted Avg.
Months to Reset
Portfolio
Face value
Coupon
Market Price
Market Value
0-12
4.10
%
$
856,698
4.03
%
$
106.79
$
914,832
13-24
4.30
%
911,412
3.88
%
$
106.08
966,854
25-36
10.20
%
2,155,206
3.60
%
$
105.55
2,274,763
37-48
14.30
%
3,059,130
3.06
%
$
104.84
3,207,245
49-60
16.10
%
3,450,959
2.76
%
$
104.81
3,616,891
61-72
13.50
%
2,868,337
3.26
%
$
105.54
3,027,295
73-84
33.90
%
7,276,854
2.44
%
$
104.54
7,607,359
85-96
0.60
%
126,924
3.08
%
$
105.17
133,487
97-108
-
-
-
-
-
109-120
2.90
%
610,509
2.81
%
$
105.00
641,013
121-140
0.10
%
19,995
2.69
%
$
104.65
20,923
100.00
%
$
21,336,024
2.95
%
$
105.04
$
22,410,662
Repo Borrowings December 31, 2012
(Amounts are unaudited and subject to change)
(dollars in thousands)
December 31, 2012
Weighted Average
Balance
Contractual Rate
Within 30 days
$
20,500,568
0.47
%
30 days to 3 months
2,365,861
0.48
%
3 months to 36 months
-
-
$
22,866,429
0.47
%
Hatteras Swap Portfolio as of December 31, 2012
(Amounts are unaudited and subject to change)
(dollars in thousands)
Remaining
Weighted Average
Notional
Term
Fixed Interest
Maturity
Amount
in Months
Rate in Contract
12 months or less
$
800,000
6
2.05
%
Over 12 months to 24 months
2,400,000
20
1.76
%
Over 24 months to 36 months
3,700,000
30
1.73
%
Over 36 months to 48 months
2,400,000
42
0.92
%
Over 48 months to 60 months
1,400,000
52
0.89
%
Total
$
10,700,000
31
1.47
%
(dollars in thousands)
Forward Starting Swaps
Included above
Average
Weighted Average
Notional
Term
Fixed Interest
Cash flow beginning in
Amount
in Months
Rate in Contract
12 months or less
$
1,600,000
43
0.89
%
Over 12 months to 24 months
400,000
37
0.99
%
Total
$
2,000,000
42
0.91
%
Hatteras Financial Corp. Kenneth A. Steele, Chief Financial Officer 336-
760-9331 or CCG Investor Relations Mark Collinson, Partner 310-954-1343 www.ccgir.com
Press Release $HTS Hatteras Financial Corp
WINSTON-SALEM, N.C.--(BUSINESS WIRE)-- Hatteras Financial Corp. (NYSE: HTS) (“Hatteras” or the “Company”) today announced financial results for the quarter ended December 31, 2012.
Fourth Quarter 2012 Highlights
Full Year 2012 Highlights
Fourth Quarter 2012 Results
During the quarter ended December 31, 2012, the Company earned net income available to common shareholders of $101.3 million, or $1.02 per diluted common share, compared to net income of $82.0 million, or $0.83 per diluted common share during the quarter ended September 30, 2012. Net interest income for the quarter ended December 31, 2012 was $74.7 million, compared to $79.6 million for the quarter ended September 30, 2012. The Company’s net interest margin decreased to 1.08% for the fourth quarter of 2012 from 1.22% in the third quarter of 2012 due to a portfolio yield drop that was not offset by a corresponding decrease in the Company’s cost of funds. The Company’s cost funds (including hedges) increased 0.02% to 0.96% for the quarter ended December 31, 2012. The Company’s average repurchase agreement (repo) rate increased to 0.44% in the fourth quarter of 2012, from 0.41% in the third quarter of 2012, on all outstanding short-term repo positions. The Company realized gain on sale of mortgage-backed securities (MBS) of $39.1 million during the quarter compared to $10.5 million for the previous quarter. The annualized expense ratio for the quarter was 0.89% of average shareholders’ equity for the quarter ended December 31, 2012 as compared to 0.84% for the prior quarter.
“We achieved solid returns for our investors in 2012 despite uncertain market conditions that impacted the interest rate and mortgage markets,” said Michael R. Hough the Company’s Chief Executive Officer. “Our take away from last year is that our clear long-term strategy enables us to continue to generate solid risk-adjusted returns while best positioning Hatteras for future volatility.”
Mr. Hough added “We believe the ARM based, short-duration balance sheet we have carefully built over the past five years properly reflects where we should be positioned today in light of domestic and global economic uncertainty. We need to remain diligent in continuing to assess the risks in our portfolio and maintaining the appropriate balance of assets and liabilities that is imperative at this point of the economic cycle.”
Dividend
The Company declared a dividend of $0.70 per share of common stock with respect to the quarter ended December 31, 2012, which was a decrease from the $0.80 per share dividend for the quarter ended September 30, 2012. Based on the closing share price of $24.81 on December 31, 2012, the fourth quarter dividend equates to an annualized yield of 11.3%. The Company also declared a dividend of $0.4765625 per share of the Company's 7.625% Series A Cumulative Redeemable Preferred Stock with respect to the quarter ended December 31, 2012.
Portfolio
The Company’s weighted average earning assets, consisting of residential mortgage securities issued by Fannie Mae and Freddie Mac (“agency securities”), was $25.8 billion for the quarter ended December 31, 2012, compared to $24.4 billion for the previous quarter. The portfolio’s weighted average coupon was 2.93% for the fourth quarter of 2012, compared to 2.99% for the third quarter of 2012, reflecting lower rates on new security purchases. The annualized yield on average assets was 2.04% for the fourth quarter of 2012, compared to 2.16% for the third quarter of 2012.
At December 31, 2012, the Company’s portfolio of agency securities consisted of 93.7% of adjustable-rate agency securities and 6.3% of 15-year fixed-rate agency securities. At December 31, 2012, the Company owned $22.4 billion of adjustable-rate agency securities with a weighted average coupon of 2.95% and a weighted average cost basis of $102.79, and $1.5 billion of 15-year fixed-rate agency securities with a weighted average coupon of 2.62%, and a weighted average cost basis of $103.64. The Company’s adjustable-rate agency securities portfolio at December 31, 2012 is summarized below.
Weighted
Avg.
During the fourth quarter of 2012, the expense of amortizing the premium on the Company’s securities was $50.1 million, compared to $47.3 million during the third quarter of 2012. The weighted-average principal repayment rate (scheduled and unscheduled principal payments as a percentage of the weighted-average portfolio, on an annualized basis) during the fourth quarter of 2012 was 26.6%, compared to 27.6% during the third quarter of 2012. The Company’s weighted-average one-month constant prepayment rate (CPR) for the quarter ended December 31, 2012 was 19.8, as compared to 20.5 for the quarter ended September 30, 2012. CPR measures unscheduled repayment rate as a percentage of principal on an annualized basis.
Portfolio Financing and Leverage
At December 31, 2012, the Company financed its portfolio with approximately $22.9 billion of borrowings under repurchase agreements. The Company’s repo debt-to-shareholders’ equity ratio at December 31, 2012, was 7.4 to 1. The Company uses interest rate swap agreements to synthetically extend the fixed interest period of these liabilities and hedge against the interest rate risk associated with financing the Company’s portfolio. As of December 31, 2012, the Company had entered into interest rate swaps with a notional amount of $10.7 billion. The swap agreements, which are indexed to 30-day LIBOR, have a weighted average remaining term of 31 months at a weighted average fixed rate of 1.47%.
Book Value
The Company’s book value (shareholders’ equity) per share on December 31, 2012 was $28.19, down $1.41 or 4.76%, from the per share book value of $29.60 on September 30, 2012. On a per share basis, the book value at December 31, 2012 consisted of $25.15 of common equity, $0.38 of retained earnings, $5.12 of unrealized gains on agency securities, and ($2.46) of unrealized losses on interest rate swaps.
Full Year 2012 Results
Although the Company experienced spread compression over the course of the year as long-term interest rates declined with little change in short-term rates, 2012 still offered a favorable earning environment. The Company generated net income of $341.7 million, for the 12 months ended December 31, 2012, which equaled $3.67 per weighted average share of common stock. Return on weighted average equity for the year was 12.96%. Book value per share increased $1.11, or 4.1%, from $27.08 on December 31, 2011 to $28.19 on December 31, 2012.
For the 12 months ended December 31, 2012, the annualized yield on weighted average assets during the period was 2.28%, and the annualized cost of funds on the weighted average repurchase balance was 0.96%. This resulted in a weighted average interest rate spread of 1.32% for the year.
Conference Call
The Company will host a conference call at 10:00 a.m. ET on Wednesday February 13, 2013, to discuss financial results for the fourth quarter ended December 31, 2012. To participate in the event by telephone, please dial (888) 317-6016 five to 10 minutes prior to the start time (to allow time for registration) and ask to join the “Hatteras Financial” conference call. International callers should dial (412) 317-6016. Canada callers should dial (855) 669-9657. A digital replay of the call will be available on Wednesday, February 13, 2013 at approximately 12:00 noon ET through Thursday, February 21, 2013 at 9:00 a.m. ET. Dial (877) 344-7529 and enter the conference ID number 10025029. International callers should dial (412) 317-0088 and enter the same conference ID number. The conference call will also be webcast live over the Internet and can be accessed at Hatteras' web site at www.hatfin.com. To monitor the live webcast, please visit the web site at least 15 minutes prior to the start of the call to register, download, and install any necessary audio software. An audio replay of the event will be archived on Hatteras' web site.
About Hatteras Financial Corp.
Hatteras Financial is a real estate investment trust formed in 2007 to invest in single-family residential mortgage pass-through securities guaranteed or issued by U.S. Government agencies or U.S. Government-sponsored entities, such as Fannie Mae, Freddie Mac or Ginnie Mae. Based in Winston-Salem, N.C., Hatteras is managed and advised by Atlantic Capital Advisors LLC. Hatteras is a component of the Russell 1000® index.
Forward-Looking Statements
This press release, together with other statements and information publicly disseminated by the Company, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe the Company's future plans, strategies and expectations, are generally identifiable by use of the words "believe," ”will,” "expect," "intend," "anticipate," "estimate," ”should,” "project" or similar expressions. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company's control and which could materially affect actual results, performances or achievements. Forward-looking statements in this press release include, among others, statements about the Company’s MBS portfolio and repurchase agreements, future volatility in the domestic and global economies, risks in the portfolio and the Company’s return profile. Factors that may cause actual results to differ materially from current expectations include the risk factors discussed in the Company’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Accordingly, there is no assurance that the Company's expectations will be realized. Except as otherwise required by the federal securities laws, the Company disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
Interest expense
Net interest income
Key Statistics
(Amounts are unaudited and subject to change)
Mortgage-backed Securities Portfolio as of December 31, 2012
(Amounts are unaudited and subject to change)
ARM Mortgage-backed Securities Portfolio as of December 31, 2012
(Amounts are unaudited and subject to change)
Repo Borrowings December 31, 2012
(Amounts are unaudited and subject to change)
Hatteras Swap Portfolio as of December 31, 2012
(Amounts are unaudited and subject to change)
Hatteras Financial Corp.
Kenneth A. Steele, Chief Financial Officer
336- 760-9331
or
CCG Investor Relations
Mark Collinson, Partner
310-954-1343
www.ccgir.com
Source: Hatteras Financial Corp.