Hatteras Financial Corp. Announces Definitive Agreement to Acquire Pingora Asset Management and Pingora Loan Servicing

WINSTON-SALEM, N.C.--(BUSINESS WIRE)--

Hatteras Financial Corp. HTS ("Hatteras" or the "Company") today announced that it has entered into a definitive purchase agreement to acquire Pingora Asset Management, LLC ("Pingora Management") and Pingora Loan Servicing, LLC ("Pingora Servicing," and together with Pingora Management, "Pingora"), a specialized asset manager focused on investing in new production performing mortgage servicing rights ("MSR") and servicing residential mortgage loans.

"I am delighted to announce this acquisition and the expanded capabilities we will have in the mortgage market," said Michael R. Hough, the Company's Chief Executive Officer and Chairman. "Michael Lau and his team have built an industry leading operating platform for investing in MSRs, and we are fortunate to add their portfolio management and master servicing oversight capabilities at Hatteras. We expect to leverage Pingora's platform and begin investing in MSRs in July through their established flow MSR acquisition business."

Pingora Highlights

• Highly experienced executive team and respected brand
• Fully licensed operational platform
• Proprietary sourcing capabilities with strong primary market relationships
• Risk-adjusted returns inversely correlated to interest rate movements
• Strong focus on servicing oversight and risk mitigation
• Robust proprietary technology, data and analytics
• Scalable and flexible platform

Added Mr. Hough: "Pingora's focus on developing strategic partnerships with mortgage originators and purchasing flow-based primary market MSRs directly from them is a natural fit with Hatteras and our current agency securities and jumbo ARM flow business. We expect Pingora's partnerships will help grow our existing direct mortgage purchase program to a more meaningful scale.

"The addition of Pingora will broaden our current strategy and better prepare Hatteras to evolve with the ever-changing mortgage landscape. MSRs should enhance our commitment to conservative asset/liability management and further improve the risk profile of our balance sheet by providing an income generating asset inversely correlated with interest rates to our mortgage-backed assets. Overall, we expect the addition of well-managed MSRs to enhance the risk-adjusted returns we provide shareholders and to create more stable total returns through changing interest rate cycles."

"We are very excited to join forces with Hatteras," said Michael Lau, Chief Executive Officer of Pingora. "We share a vision on this opportunity and think our companies' management styles and views on the mortgage industry dovetail well. I am confident that the combination of Pingora's unique approach and Hatteras' conservative asset management will be the foundation for a best-in-class multi-strategy mortgage REIT. This transaction comes at an important time in Pingora's growth cycle and I believe that our combined skillsets will be positive for both organizations."

In addition, in connection with entering into the purchase agreement, the Company entered into agreements to finance Pingora's purchase of MSRs related to qualifying mortgage loans that Pingora has agreed to purchase under its current flow agreements during the pendency of the transaction. Pursuant to this arrangement, the Company will receive the servicing economics related to the corresponding pools of MSRs purchased by Pingora on a monthly basis. The Company estimates that it will invest an average of $25-50 million in MSRs per month under this arrangement.

The acquisition is subject to customary closing conditions, including requisite regulatory approvals, and is not expected to have a material effect on the Company's net income, financial condition or liquidity. The Company expects the transaction to close in the third quarter of 2015. Following the acquisition, Pingora, its management team and employees will remain headquartered in Denver.

Advisors

Keefe, Bruyette & Woods, Inc. is serving as financial advisor to the Company. Hunton & Williams LLP, Weiner Brodsky Kider PC and Winstead PC are serving as the Company's legal counsel.

Wells Fargo Securities, LLC is serving as financial advisor to Pingora. K&L Gates LLP is serving as Pingora's legal counsel.

About Hatteras Financial Corp.

Hatteras Financial Corp. is a real estate investment trust formed in 2007 to invest in single-family residential real estate mortgage assets. Based in Winston-Salem, NC, the Company is managed and advised by Atlantic Capital Advisors LLC. The Company is a component of the Russell 2000® and Russell 3000® indices.

About Pingora

Pingora is a Denver, CO based company with approximately 30 employees. The company was established in 2012 to capitalize on the unique opportunities presented by the evolving residential mortgage market. Pingora is a Fannie Mae, Freddie Mac and Ginnie Mae approved servicer that currently manages over $500 million in MSR investments. Pingora created a scalable platform to advise and assist investors in the ownership and management of MSRs. Pingora's brand is well established in all aspects of MSR acquisition and management and has allowed its business to grow with currently over 50 active flow counterparty relationships. For more information visit Pingora's website: http://pingorafund.com

Forward-Looking Statements

This press release, together with other statements and information publicly disseminated by the Company, contains various "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. Such statements include, in particular, statements about our plans, intentions, expectations, beliefs, and strategies as they relate to our business, the proposed Pingora transaction and the Company's investments in MSRs as described herein. You can identify forward-looking statements by the use of forward-looking terminology such as "believes," "expects," "may," "will," "would," "could," "should," "seeks," "approximately," "intends," "plans," "projects," "estimates" or "anticipates" or the negative of these words and phrases or similar words or phrases. You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company's control and that could materially affect actual results, performances or achievements. These risks and uncertainties include, but are not limited to, the failure to satisfy the conditions to closing of the proposed transaction; the risk that a regulatory approval that may be required for the proposed transaction is not obtained or is obtained subject to conditions that are not anticipated; the diversion of management time on transaction-related issues; the ultimate timing, outcome and results of integrating the operations of Pingora; and the risk factors discussed in the Company's annual report on Form 10-K for the year ended December 31, 2014, as updated by the Company's quarterly and current reports filed with the Securities and Exchange Commission. Accordingly, there is no assurance that the Company's expectations will be realized. The Company disclaims any obligation or undertaking to release publicly 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.

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