Core Lending Business Drives Solid Operating Performance
Boston - August 8, 2007 - NewStar Financial, Inc. (NASDAQ: NEWS), today reported adjusted net income for the second quarter of 2007 of $7.7 million, or adjusted earnings of $0.21 per diluted share. On a GAAP basis, the company reported net income of $3.4 million, or $0.09 per diluted share, including the $2.7 million after-tax loss on the previously announced sale of securities and loan assets.
"Adjusted net income" and other non-GAAP financial measures used in this release are defined under "Non-GAAP Financial Measures" on page 4. We have provided a reconciliation between GAAP and adjusted (non-GAAP) measures in the attached financial tables.
"The strength of our second quarter earnings was driven by the solid performance in our core lending business. I believe the value of our direct origination platform will be even more evident in this challenging market environment," said Tim Conway, Chairman and Chief Executive Officer. "With a liquid balance sheet and significant funding capacity we are well-positioned to capitalize on opportunities in the second half of 2007."
Strong Origination Volume
Growth in Managed Loan Portfolio
Net Interest Income / Margin
Stable Commercial Loan Credit Quality
Conference Call and Webcast
We will host a webcast/conference call to discuss the results today at 10:00 am Eastern Time. All interested parties are invited to participate via telephone or webcast, which will be hosted through the Investor Relations section of our website at www.newstarfin.com. Please visit the website to register for the webcast and test your connection prior to the call. You can also access the conference call by dialing (866) 316-1368 approximately 5-10 minutes prior to the call. International callers should dial (913) 312-6678. All callers should reference "NewStar Financial."
For convenience, an archived replay of the call will be available through August 15, 2007 by dialing (888) 203-1112. International callers should call (719) 457-0820. For all replays, please use the passcode # 7734185. The audio replay will also be available through the Investor Relations section of our website at www.newstarfin.com.
About NewStar Financial
NewStar Financial is a specialized commercial finance company focused principally on meeting the complex financing needs of customers in the middle market through our corporate, commercial real estate, and structured products groups. Our senior banking teams call directly on customers to provide advice and finance a range of strategic transactions that may require some combination of senior secured, second lien and mezzanine financing. NewStar typically works with customers with financing needs of up to $150 million and cash flow as low as $5 million. We target 'hold' positions of up to $35 million, but may also underwrite or arrange transactions up to $100 million for syndications to other lenders.
We are headquartered in Boston MA, with regional offices in Darien CT, Chicago IL, San Francisco CA, San Diego CA, and Charleston SC. In December of 2006, NewStar completed an Initial Public Offering. The Company's shares trade on the NASDAQ under the ticker symbol, NEWS. Please visit our website at www.newstarfin.com for more detailed transaction and contact information.
Robert K. Brown
500 Boylston Street, Suite 1600
Boston, MA 02116
This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this release are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. As such, they are subject to material risks and uncertainties.
More detailed information about these factors is described in NewStar's filing with Securities and Exchange Commission (the "SEC"), including Item 1A ("Risk Factors") of our 2006 Form 10-K. NewStar is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. NewStar plans to file its Form 10-Q with the SEC on or before August 14, 2007 and urges its shareholders to refer to that document for more complete information concerning NewStar's financial results.
Non-GAAP Financial Measures
References to "adjusted net income" and "adjusted earnings per share" mean net income or earnings per diluted share, respectively, as determined under GAAP, excluding the following items: i) compensation expense related to restricted stock grants made since our inception as a private company, including equity awards made in connection with the initial public offering; ii) earnings generated from the assets sold in the second quarter of 2007; and iii) the loss on the asset sale in the second quarter of 2007. GAAP requires that these items be included in net income. NewStar management uses "adjusted net income" and "adjusted earnings per share" to make operational and investment decisions, and NewStar believes that they provide useful information to investors in their evaluation of our financial performance and condition. Excluding the financial results of the assets sold during the second quarter and the compensation expense related to restricted stock grants made since our inception as a private company, including equity awards made in connection with the initial public offering, eliminates unique amounts that make it difficult to assess our core performance and compare our period over period results. A reconciliation of adjusted net income to net income is included on pages 6 and 7 of this release.
References to "adjusted net interest margin" mean annualized interest income as determined under GAAP (excluding interest income generated from the assets sold in the second quarter 2007 and annualized interest expense as determined under GAAP) less i) excluding interest and amortization of deferred financing costs on corporate debt and ii) interest expense incurred from the assets sold in the second quarter of 2007, divided by average interest earning assets excluding the assets sold in the second quarter for the period.
Adjusted return on average assets means adjusted net income divided by average assets for the period excluding the assets sold in the second quarter. Adjusted return on average equity means adjusted net income divided by average equity for the period. Adjusted efficiency ratio means operating expenses determined in accordance with GAAP less i) compensation expense related to restricted stock grants made since our inception as a private company, including equity awards made in connection with the initial public offering; ii) earnings generated from the assets sold in the second quarter of 2007; and iii) the loss on the asset sale in the second quarter of 2007. Adjusted cost of funds means adjusted interest expense divided by average interest bearing liabilities for the period less the average corporate debt outstanding for the period and the credit facility funding for the assets sold in the second quarter of 2007. The adjusted ratios exclude unique expenses that make it difficult to assess our core performance and compare our period-over-period results.
A reconciliation of our adjusted financial measures to their GAAP equivalents is included on pages 10 and 11 of this release. NewStar's adjusted financial measures should not be considered as alternatives to financial measures determined in accordance with GAAP and may be different from, or inconsistent with, non-GAAP financial measures used by other companies.