Such unceasing attack from the sea on any point along her long coastline and inland waterways cost the South dearly in losses, economic disruption, and dispersion of defense strength.

The next day, she engaged CSS Mobile, but failed to do any serious damage when the light-draft ship withdrew to the safety of shallow water.

The majority of these ships were captured off Vermilion Bay, Louisiana, as they ran toward either Havana, Cuba, or the Sabine River area of Texas.

However, her illustrious career was cut short in early 1863, not long after she was ordered to join the blockading squadron under Rear Admiral David Farragut, who was attempting to retake the key Texas port of Galveston.

Under a new skipper, Commander Homer C. Blake, who had relieved Captain Emmons in November 1862, Hatteras joined Farragut's squadron off Galveston on 6 January 1863.

As the blockading fleet lay to off the coast near Galveston on the afternoon of 11 January 1863, a set of sails was sighted just over the horizon and Hatteras was ordered to give chase.

The flashes of the guns and their rumbling were heard in the Union squadron some 16 mi (26 km) away, and the cruiser Brooklyn was dispatched to investigate and render aid if needed.

Captain Blake ordered the magazines flooded to prevent explosion and reluctantly fired a single bow gun, indicating surrender and a need for assistance.

Alabama, promptly sent over her boats to help remove Hatteras' crew and wounded, and the last boatload of men had barely pulled away when the Union blockader sank, some 45 minutes after the beginning of the action.

When Brooklyn reached the site of the battle early the following morning, she found the hulk of Hatteras upright in the water about 20 mi (32 km) south of Galveston Light.