Hatteras Financial (HTS) 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. Hatteras announced financial results for the quarter ended September 30, 2012.
Book value per share increased 7.8% in the quarter to $29.60; 4.3% higher than our estimate. Book value growth was aided by the opportunistic deployment of capital from the August preferred deal into the 15-year sector ahead of QE3.
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 $0.91per 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 Agency MBS portfolio increased by $4 billion (18%) in the quarter. The end of period balance was 14% above our estimate. The percentage of 15-year fixed MBS as a percentage of the portfolio increased to 17% from 7% last quarter, now totaling $4.4 billion from $1.6 billion. Average earning assets for the quarter increased by 15%, and were 7% above our estimate.
The Company declared a dividend of $0.80 per share of common stock with respect to the quarter ended September 30, 2012, compared to a $0.90 per share dividend for the quarter ended June 30, 2012.
Hatteras is trading at an 11% discount to third quarter book value and yielding 12.15% on the expected next 12 months dividends.
Hatteras has an equity summary score of 9.2 out of 10 for a VERY Bullish outlook.