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NewStar Reports First Quarter Results

    Weak economy and credit performance weigh on financial results

 * Reported a $2.9 million adjusted net loss in the first quarter,
   or $0.06  adjusted loss per diluted share
 * On a GAAP basis, reported $5.0 million net loss in the first
   quar

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Weak economy and credit performance weigh on financial results

* Reported a $2.9 million adjusted net loss in the first quarter,
or $0.06 adjusted loss per diluted share
* On a GAAP basis, reported $5.0 million net loss in the first
quarter, or $0.10 net loss per diluted share
* Increased liquidity position and reduced staffing levels to
cushion against sustained economic weakness
* Realized increases in non-performing loans and charge-offs, which
were 3.84% and 2.50%, respectively, as continued economic weakness
weighed on credit performance
* Built credit loss allowance to 2.81% to reflect continued weak
economic conditions and higher levels of non-performing loans
* Extended the agreement to acquire Southern Commerce Bank

BOSTON, May 6, 2009 (GLOBE NEWSWIRE) -- NewStar Financial, Inc. (Nasdaq:NEWS), a Boston-based commercial finance company, today reported adjusted net loss for the first quarter of 2009 of $2.9 million, or $0.06 per diluted share. On a GAAP basis, the Company reported net loss of $5.0 million, or $0.10 per diluted share, which reflected $2.1 million after-tax non-cash equity compensation expense and related to the 2006 IPO.

"Adjusted net income (loss)" and other non-GAAP financial measures used in this release are defined under "Non-GAAP Financial Measures" on page 5. Reconciliations between GAAP and adjusted (non-GAAP) measures can be found in the attached financial tables.

"The first quarter was challenging for all types of lenders as continued weak economic conditions weighed on credit performance across the industry," said Tim Conway, Chairman and Chief Executive Officer. "Our credit metrics in the first quarter reflected broad-based weakness in the economy and more severe stress in certain sectors like advertising-based media and real estate. Despite the severity of this recession, however, we continue to benefit from a defensive credit strategy focused on senior debt in companies owned by private equity firms with meaningful value in the equity ownership of those companies."

"During the quarter, we also made substantial progress on our plans to acquire Southern Commerce Bank. We continue to work constructively with banking regulators to discuss the proposed acquisition and satisfy requirements for regulatory approval."

Loan Credit Quality



* The provision for credit losses was $25.3 million in the first
quarter of 2009, up from $17.9 million in the fourth quarter of
2008.
* Allowance for credit losses was $65.0 million or 2.81% of loans
at March 31, 2009, compared to $54.0 million or 2.25% at
December 31, 2008 and $36.8 million or 1.58% at March 31, 2008.
* Non-accrual loans consisted of ten loans with an aggregate
outstanding balance of $88.9 million at March 31, 2009 compared
to six loans with an aggregate outstanding balance of
$60.6 million at December 31, 2008. Additionally, the Company had
$6.5 million of other real estate owned ("OREO") comprised of a
single property as of March 31, 2009.
* Seven of the non-accrual loans and one additional accruing loan
with an aggregate outstanding balance of $61.3 million as of
March 31, 2009 were also delinquent loans.
* NewStar established $26.7 million of new specific reserves in the
first quarter of 2009 compared to $13.2 million in the fourth
quarter of 2008.
* NewStar had net charge-offs of $14.3 million or 2.50% of loans on
an annualized basis in the first quarter of 2009 compared to
$8.9 million or 1.47% of loans on an annualized basis in the
fourth quarter of 2008.

Funding and Capital



* Total cash and equivalents as of March 31, 2009 were $167 million,
of which $58 million was unrestricted. Unrestricted cash increased
from approximately $50 million at December 31, 2008 and restricted
cash increased from approximately $84 million to $109 million.
* Amended existing credit facility with Wachovia reducing the size
from $350 million to $200 million and extending the maturity date
of the liquidity line to June 1, 2009 (April 2009). The short term
extension provides time to negotiate restructuring to improve the
match between funding maturities and loan portfolio duration.
* Amended existing term credit facility with Deutsche Bank reducing
the size from $400 million to $250 million (January 2009).
* Approximately 70% of loan assets continued to be term-funded by
existing securitized term debt at attractive, locked-in spreads
as of March 31, 2009. The ability to re-invest collections from
repayments and amortization of certain of these loans represents
a continuing source of funding.
* Balance sheet leverage was modest at 3.3x as of March 31, 2009
approximately equal to December 31, 2008. The slight decrease in
leverage was due principally to repayment of advances under credit
facilities.

Managed and Owned Loan Portfolios



* The composition of the owned loan portfolio continued to reflect
a focus on senior debt with 96% invested in 1st lien senior
secured loans and debt investments at March 31, 2009.
* Total origination volume for the first quarter of 2009 was
$18 million, of which $7 million was retained on NewStar's balance
sheet and $11 million was sold to the NewStar Credit Opportunities
Fund (NCOF).
* Managed loan portfolio was $2.9 billion as of March 31, 2009 (down
from $3.0 billion at December 31, 2008), reflecting the net impact
of $18 million of new origination, which was offset by prepayments
and scheduled amortization of existing loans. Managed loan
portfolio was down from $3.0 billion at March 31, 2008.
* Assets managed for the NCOF were $557 million at March 31, 2009,
compared to $561 million at December 31, 2008 and $592 million at
March 31, 2008.
* Owned loan portfolio was $2.3 billion as of March 31, 2009 down
from $2.4 billion at December 31, 2008.
* The owned loan portfolio continued to be balanced across industry
sectors and highly diversified by issuer. As of March 31, 2009, no
single issuer represented more than 1% of total assets, and the
ten largest issuers comprised approximately 10% of the loan
portfolio.

Net Interest Income / Margin



* Net interest income before provision for credit losses was
$22.2 million for the first quarter of 2009 compared to
$24.4 million for the fourth quarter of 2008.
* Net interest margin decreased 21 bps to 3.58% for the first
quarter of 2009 compared to 3.79% for the fourth quarter of 2008
and 4.19% for the first quarter of 2008 due principally to
non-payment of interest income from non-performing assets that was
partially offset by an increase in credit spreads on new loans and
re-pricing of existing loans.

Non-Interest Income



* Non-interest income was $6.3 million for the first quarter of
2009 compared to $8.6 million for the fourth quarter of 2008, and
$3.2 million for the first quarter of 2008.
* Non-interest income in the first quarter of 2009 consisted
primarily of a $3.3 million gain on repurchase of debt,
$3.0 million net gain on sale of an equity instrument,
$0.8 million of asset management income and $0.3 million of agency
fees, partially offset by $1.3 million decline in fair value of
OREO and $0.9 million decline in fair value of equity instruments.

Expenses



* Operating expenses were $9.9 million in the first quarter of 2009
compared to $7.9 million in the fourth quarter of 2008, and
$14.9 million in the first quarter of 2008. The increase in the
first quarter of 2009 as compared to the fourth quarter of 2008
was due principally to $0.7 million of costs incurred in
connection with the potential acquisition of Southern Commerce
Bank, N. A, severance costs of $0.4 million in the first quarter
and the partial reversal of incentive compensation accrual in the
fourth quarter.

Other Developments



* Entered into two amendments to the stock purchase and sale
agreement with Dickinson Financial Corporation to purchase
Southern Commerce Bank, N. A. to extend the agreement to
June 1, 2009 and to fix the purchase price at either $17 million
or $15.5 million if Dickinson exercises its option to elect to
have the transaction treated as an asset sale under Section 338 of
the Internal Revenue Code.

Conference Call and Webcast

NewStar 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 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 877-604-9675 approximately 5-10 minutes prior to the call. International callers should dial 719-325-4934. All callers should reference "NewStar Financial."

For convenience, an archived replay of the call will be available through May 15, 2009 by dialing 888-203-1112. International callers should call 719-457-0820. For all replays, please use the passcode 2507542. The audio replay will also be available through the Investor Relations section at www.newstarfin.com.

About NewStar Financial

NewStar Financial (Nasdaq:NEWS) is a specialized commercial finance company focused on meeting the complex financing needs of companies and private investors in the middle markets. The Company specializes in providing senior secured debt financing for the acquisition or recapitalization of mid-sized companies and commercial real estate. NewStar originates loans directly through a team of experienced, senior bankers organized around key industry and market segments. The Company targets 'hold' positions of up to $20 million and selectively underwrites or arranges larger transactions for syndication to other lenders.

NewStar is headquartered in Boston MA and has regional offices in Darien CT, Chicago IL and Charleston SC. For more detailed transaction and contact information please visit www.newstarfin.com.

The NewStar Financial, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4044

Forward-Looking Statements

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, strategic plans, objectives, future performance and business, including our proposed acquisition of Southern Commerce Bank and application to become a bank holding company. As such, they are subject to material risks and uncertainties, including receipt of required regulatory approvals to become a bank holding company and acquire Southern Commerce Bank; our limited operating history; the current dislocation in the credit markets and the general state of the economy;; our ability to compete effectively in a highly
competitive industry; and the impact of federal, state and local laws and regulations that govern non-depository commercial lenders and businesses generally, including increased regulation by the FDIC and OCC if we become a bank holding company.

More detailed information about these factors is described in NewStar's filings with the Securities and Exchange Commission (the "SEC"), including Item 1A ("Risk Factors") of our 2008 Annual Report on Form 10-K, as supplemented by the Risk Factors contained in our Quarterly Reports on Form 10-Q. 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 for the quarter ended March 31, 2009 with the SEC on or before May 11, 2009 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; and ii) the losses incurred in connection with the change in fair value of the residual interest, including the impact on our effective tax rate. 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 and expenses incurred in
connection with the compensation expense related to restricted stock grants made since our inception as a private company, 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 page 7 of this release.

References to "adjusted net interest margin" mean annualized interest income as determined under GAAP (excluding interest income generated from the retained residual interest) less annualized interest expense as determined under GAAP, divided by average interest earning assets (excluding the retained residual interest for the period.)

Adjusted return on average assets means adjusted net income divided by average assets for the period excluding the retained residual interest. 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 and ii) the change in fair value of the residual interest. 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 page 9 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.



NewStar Financial, Inc.
Consolidated Balance Sheets
(unaudited)

--------------------------------------------------------------------
March 31, December 31, March 31,
($ in thousands) 2009 2008 2008
--------------------------------------------------------------------
Assets:
Cash and cash equivalents $ 57,581 $ 50,279 $ 165,220
Restricted cash 108,889 84,163 67,456
Residual interest in
securitization -- -- 308
Investments in debt
securities,
available-for-sale 2,676 3,025 30,805
Loans held-for-sale -- -- 65,287
Loans, net 2,234,467 2,328,812 2,271,030
Deferred financing costs, net 19,611 21,003 18,081
Interest receivable 8,640 10,608 13,215
Property and equipment, net 1,112 1,252
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