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Nov 20, 2017

NewStar Announces Completion of "Go Shop" Process

Boston, MA, Nov. 20, 2017 (GLOBE NEWSWIRE) -- NewStar Financial, Inc. (NASDAQ: NEWS) ("NewStar" or the "Company") announced the expiration of the 30 day "go shop" period included in the previously announced merger agreement between First Eagle Investment Management and NewStar and related asset purchase agreement with a newly formed investment fund sponsored by GSO Capital Partners LP.  During the "go shop" period, NewStar, with the assistance of its financial advisors Credit Suisse Securities (USA) LLC and Houlihan Lokey Capital, Inc., actively solicited alternative proposals to acquire the Company.  More than 50 parties were contacted and seven other parties made unsolicited inquiries.  NewStar entered into confidentiality agreements with 22 of those parties, which were provided access to additional information.  NewStar did not receive any acquisition proposals during the go-shop period. 

About NewStar Financial

NewStar Financial Inc. (NASDAQ:NEWS) is an internally-managed lender and credit-oriented asset manager headquartered in Boston, MA. The Company's direct lending activities are focused on meeting the complex financing needs of companies and private investors in the middle markets through specialized lending groups that offer a range of flexible debt financing options. The Company also offers a range of investment management products employing credit-oriented strategies focused on middle market loans and liquid, tradeable credit. The Company manages approximately $7.2 billion of assets, $3.6 billion held in consolidated subsidiaries of the Company and $3.6 billion held in off-balance sheet credit funds. 

NewStar has regional offices in Chicago, IL, Norwalk, CT, and New York, NY. For more detailed information, please visit our website at www.newstarfin.com. 

Forward-Looking Statements

This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding, among other things, future performance, our expectations regarding our ability to support continued future asset growth or expense reductions, our pending merger transaction with First Eagle and the pending asset sale transaction with the GSO fund. 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, the market price for NewStar's stock prevailing from time to time, the nature of other investment opportunities presented to NewStar from time to time, objectives, future performance, financing plans and restrictive covenants in our debt instruments and other material agreements. As such, they are subject to material risks and uncertainties. These risks and uncertainties include the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement with First Eagle or our asset sale transaction with the GSO fund; the timing in which those transactions might be consummated; the failure to obtain the approval of stockholders or required regulatory approvals or other consents or to satisfy any other conditions to the transactions; the effect of the announcement of the transactions on our operations and relationships with third parties or that compliance by NewStar with the operating restrictions in the transaction agreements could have an adverse effect on NewStar's business; the risk that NewStar may not realize any or a portion of the tax refunds applicable to the contingent value rights (or that such tax refunds may be delayed or subject to disputes by the Congressional Joint Committee on Taxation or taxing authorities); our ability to leverage new and future assets to support growth; the general state of the economy; our ability to compete effectively in a highly competitive industry; our ability to integrate acquired businesses; and the impact of federal, state and local laws and regulations that govern non-depository commercial lenders and businesses generally.

More detailed information about these risk factors can be found in NewStar's filings with the Securities and Exchange Commission (the "SEC"), including Item 1A ("Risk Factors") of our 2016 Annual Report on Form 10-K, and as supplemented by any 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 with the SEC on or before November 9, 2017 and urges its shareholders to refer to that document for more complete information concerning NewStar's financial results.

Additional Information and Where to Find It

This communication is being made in respect of the proposed transactions involving First Eagle Investment Management, LLC, GSO Capital Partners and NewStar. The proposed transactions will be submitted to the stockholders of the Company for their consideration. In connection therewith, the Company intends to file relevant materials with the Securities and Exchange Commission (the "SEC"), including a definitive proxy statement. However, such documents are not currently available. This communication does not constitute a solicitation of any vote or approval. BEFORE MAKING ANY VOTING OR ANY INVESTMENT DECISION, INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT REGARDING THE PROPOSED TRANSACTION AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTIONS.

Investors will be able to obtain free of charge the proxy statement (when available) and other documents filed with the SEC at the SEC's website at http://www.sec.gov. In addition, the proxy statement and our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through our website at www.newstarfin.com as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.

Participants in Solicitation

The directors, executive officers and certain other members of management and employees of NewStar are "participants" in the solicitation of proxies from stockholders of NewStar in favor of the proposed asset sale and the proposed merger. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of the stockholders of NewStar in connection with the proposed asset sale and the proposed merger will be set forth in the proxy statement and the other relevant documents to be filed with the SEC. You can find information about NewStar's executive officers and directors in its Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and in its definitive proxy statement filed with the SEC on Schedule 14A on April 21, 2017.

Robert K. Brown 500 Boylston Street, Suite 1250 Boston, MA 02116 617.848.2558 rbrown@newstarfin.com

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Nov 01, 2017

NewStar Reports Net Income of $4.6 Million, or $0.11 per Diluted Share, for the Third Quarter of 2017 and Declares $0.02 Quarterly Dividend per Share

  • Investment Activity — New funded, middle-market credit investments totaled $317 million in the third quarter, down from $460 million last quarter and up from $193 million in the same quarter last year. 
  • Managed Assets — Managed loans and credit investments at the end of the quarter increased by $660 million from the prior quarter to $7.2 billion due to the addition of two managed credit funds acquired through the purchase of Fifth Street CLO Management LLC in July 2017.
  • Net Interest Margin — The margin increased to 1.61% for the third quarter from 1.56% in the prior quarter due to a combination of rising index rates and an increase in loans as a percentage of earning assets, which was partially offset by lower deferred fee income resulting from slower prepayments.
  • Revenue — Total revenue1 in the third quarter was $21.1 million, up 4.7% from the prior quarter due primarily to higher net interest income and lower mark-to-market adjustments on loans held at fair value which was partially offset by a decrease in fee income from capital markets activities. 
  • Credit — Credit costs decreased by $1.2 million from the prior period to $1.5 million due primarily to a release of general provision, while net charge-offs increased by $1.1 million from the prior quarter to $8.6 million in the third quarter due primarily to losses recognized in connection with the resolution of two loans through sales and restructurings. 
  • Expenses — Operating expenses increased by $1.6 million, or 15.5%, from the prior quarter to $11.9 million due partly to expenses incurred in connection with strategic projects.   
  • Capital Management — Returned approximately $4.1 million to stockholders in the third quarter through share repurchases and dividends.  Book value per share increased to $15.57 as of September 30, 2017, up $0.17 from the end of the prior quarter. 
  • Quarterly Dividend — Board of Directors declared a quarterly dividend of $0.02 per share of common stock payable on December 15, 2017 to shareholders of record on November 29, 2017.
  • Sale of the Company — Entered into a definitive agreement to be acquired by First Eagle Investment Management for $11.44 in cash plus contingent value rights worth up to an estimated $0.88-$1.00 per share and, in a related transaction, agreed to sell a portfolio of investment assets, including approximately $2.4 billion of middle-market loans and other credit investments, to a newly formed fund sponsored by GSO Capital Partners.

BOSTON, Nov. 01, 2017 (GLOBE NEWSWIRE) -- NewStar Financial, Inc. (NASDAQ:NEWS) ("NewStar" or the "Company"), an internally-managed, middle market direct lender and credit-oriented asset manager, today announced financial results for its third quarter of 2017, reporting net income of $4.6 million, or $0.11 per diluted share. These results compare to net income of $4.2 million, or $0.10 per diluted share in the second quarter of 2017 and $8.6 million, or $0.19 per diluted share in the third quarter of 2016. Operating income before income taxes was $7.7 million for the third quarter of 2017 compared to $7.2 million for the second quarter of 2017 and $14.6 million in the third quarter of 2016.

Tim Conway, Chief Executive Officer of NewStar commented: "Our results in the third quarter were solid and in line with our expectations as we maintained an active investment pace and completed the previously announced acquisition of a CLO manager, adding approximately $725 million to our assets under management.  Revenue was up nearly 5% due primarily to higher net interest income, which reflected improvement in the margin from rising index rates.  Non-interest income also improved as a reduction in negative mark-to-market adjustments more than offset a decrease in capital markets related revenues.  Provision expense was down and credit related activity was consistent with our expectations. Although expenses were somewhat higher than our target run-rate due partly to strategic costs and additional intangible amortization expenses from the recent acquisition, pre-tax earnings were up 7.6% from the prior quarter.  While I am pleased with our financial results for the quarter, I am also excited about the progress we made on our strategic objectives, which culminated in the announcement of an agreement to sell the company to First Eagle Investment Management.  As you know, our strategy has been focused on transforming the company from a balance sheet driven commercial finance company into an investment manager of third-party assets, while unlocking the value of our portfolio investments and asset management platform for stockholders. Over the last eighteen months, we have taken important steps intended to increase stockholder value by returning capital through dividends and share repurchases, growing managed assets through acquisition and new fund formation, and streamlining operations to improve efficiency.  The transactions we announced in early October are a culmination of that strategy and represent a significant milestone for the company.  I believe the transaction delivers compelling value for NewStar stockholders and also allows the Company to transition seamlessly to a larger investment platform, while maintaining continuity for customers."

Sale Transaction

  • On October 17, 2017, NewStar announced that it had entered into a definitive agreement to be acquired by First Eagle Investment Management ("First Eagle"), a privately-owned investment firm with approximately $116 billion in assets under management. 
  • In a related transaction, NewStar entered into a definitive agreement to sell a portfolio of investment assets, including approximately $2.4 billion of middle-market loans and other credit investments, to a newly formed investment fund sponsored by GSO Capital Partners LP, the global credit investment platform of Blackstone Group L.P.
  • Completion of the transaction is subject to shareholder approval, regulatory approval and certain consents with respect to NewStar's existing funds, as well as customary closing conditions.
  • The parties are working on obtaining the necessary approvals for closing and the Company, with the assistance of its financial advisors, is soliciting alternative proposals during a 30 day "go shop" period which runs through November 15, 2017. 

Dividend Declaration

  • On November 1, 2017 the Company's Board of Directors declared a quarterly dividend of $0.02 per share of common stock to be paid on December 15, 2017, to shareholders of record at the close of business on November 29, 2017.
  • The declaration and payment of future dividends is restricted by the terms of the merger agreement with First Eagle. 

Managed and Owned Investment Portfolios

  • Total new funded, middle-market credit investments were $317 million in the third quarter of 2017 compared to $460 million in the prior quarter and $193 million in the same quarter last year.  The change from the prior quarter reflected somewhat weaker demand for acquisition financing derived from middle market leverage buyout activity and greater selectivity due to market conditions. 
  • Total new liquid credit investments (rated, broadly syndicated loans) held by the Arch Street CLO and held for sale to other managed funds were $115 million in the third quarter compared to $157 million in the prior quarter.   The change from the prior quarter reflected a decrease in new investments held for sale. 
  • Balance sheet runoff from scheduled amortization, prepayments and loan sales totaled approximately $286 million in the third quarter, or 8.0% of loan and investment balances at the beginning of the period, down from $461 million in the prior quarter.  Runoff in the third quarter included $229 million of prepayments, $30 million of loan sales and $27 million of contractual amortization compared to prepayments of $242 million, loan sales of $170 million and amortization of $48 million in the prior quarter. 
  • Average yields on new middle-market loans and other directly originated credit investments in the third quarter were 6.5%, down from 6.8% in the prior quarter, but up from 6.2% in the comparable quarter last year. 
  • Loans and other investments outstanding, excluding assets managed for third parties, were consistent with the prior quarter at $3.6 billion.  Compared to the third quarter of 2016, loans and investments decreased by $351 million, or 8.8% due primarily to the sale of $159 million of equipment finance assets and a decrease of $185 million in Leveraged Finance Loans.
  • The Leveraged Finance loan portfolio totaled approximately $3.6 billion at the end of the third quarter, which was consistent with the prior quarter and down $185 million from the end of the third quarter in the prior year. Commercial real estate loans were less than $11 million at the end of the third quarter consistent with the prior quarter and down $7 million from the same time last year.
  • Assets held in managed funds increased by $658 million in the third quarter to approximately $3.6 billion and were up $880 million from the same time last year.  The increase from the prior quarter was due to the addition of two managed funds, Exeter and Fairfield, which were acquired in connection with the purchase of Fifth Street CLO Management LLC in the third quarter.  The increase from last year also reflected the launch of the Berkeley Fund, a $500 million CLO.
  • The owned loan portfolio remained defensively positioned - balanced across industry sectors and highly diversified by issuer. As of September 30, 2017, no outstanding borrowings by a single obligor represented more than 1.1% of total loans outstanding, and the ten largest obligors comprised approximately 8.0% of the loan portfolio.

Net Interest Income / Margin

  • Net interest income increased by $0.6 million to $15.6 million in the third quarter compared to $15.0 million in the prior quarter due primarily to rising LIBOR index rates.  Compared to the third quarter of last year, net interest income decreased by $9.7 million, or 38.2%.  The decrease was due primarily to a decrease in average loan balances and portfolio yield, as well as higher cost of funds.  
  • The portfolio yield was 6.44% in the third quarter, which was consistent with 6.43% in the prior quarter and down from 6.77% in the comparable period in the prior year. 
  • Funding costs were 5.21% in the third quarter, up from 5.08% in the second quarter and 4.67% in the comparable period in the prior year due to increasing LIBOR index rates, changes in the mix of debt and higher average cost of funds for new CLO issuance. 
  • As a result, the net interest margin widened to 1.61% for the third quarter of 2017 compared to 1.56% for the prior quarter and narrowed from 2.50% in the third quarter of 2016.   

Non-Interest Income

  • Non-interest income increased by $0.3 million to $5.5 million for the third quarter of 2017 compared to $5.2 million in the prior quarter and $11.0 million in the same period last year. The quarterly change reflected a $2.3 million decrease in mark to market adjustments, which was partially offset by a $1.1 million decrease in capital markets fees, a $0.5 million increase in unrealized losses on loans held-for-sale and differences in other miscellaneous income items.
  • Other non-interest income items in the third quarter of 2017 were centered in asset management fees of $3.5 million and $2.0 million of other income. 

Credit Performance

  • Provision expense was $1.5 million in the third quarter, down from $2.7 million in the prior quarter and $3.6 million in the same quarter last year.        
  • Total net specific provision expense increased by approximately $0.6 million in the third quarter to $3.9 million compared to $3.3 million in the prior quarter and $3.2 million in the same quarter last year.  Total provisioning activity reflected the release of $2.4 million of general reserves. 
  • Net charge-offs in the third quarter of 2017 were $8.6 million compared to $7.5 million in the prior quarter. Charge-offs were related to losses recognized on a restructuring completed in the quarter and the sale of a borrower, which resulted in the payoff of a loan and resolved a long-term workout. 
  • The allowance for credit losses was $40.2 million, or 1.52% of consolidated loans and approximately 38.7% of non-performing loans (NPLs), at September 30, 2017, compared to $47.3 million, or 1.75% of consolidated loans and approximately 49.7% of NPLs, at June 30, 2017. 
  • Non-performing loans increased by $8.7 million to $103.8 million, or 3.39% of loans held for investment at September 30, 2017, compared to $95.1 million or 3.06% of loans held for investment at the end of the prior quarter due primarily to the classification of one new loan on non-accrual status, which was partially offset by the resolution of a long term work-out and charge-off activity.   

Expenses

  • Total operating expenses for the third quarter increased by $1.6 million to $11.9 million compared to $10.3 million in the prior quarter.  
  • As a result, expenses as a percentage of average assets under management increased to 0.67% in the third quarter compared to 0.64% in the prior quarter.
  • Adjusted operating expenses, which excludes non-cash equity compensation, were $11.0 million in the third quarter up from $9.4 million during the second quarter. 
  • The Company had 69 full-time employees at September 30, 2017 compared to 66 full-time employees at June 30, 2017 and 83 employees at September 30, 2016.  The reduction in staffing levels since 2016 reflects the sale of the equipment finance business and other related strategic initiatives to streamline operations. 

Income Taxes

  • Deferred income taxes decreased $4.8 million to $32.1 million as of September 30, 2017.  The decrease was driven primarily by the allowance for credit losses.
  • Approximately $19.2 million and $7.0 million of the net deferred tax asset as of September 30, 2017 were related to our allowance for credit losses and incentive compensation, respectively.

Funding and Capital

  • Total cash and equivalents as of September 30, 2017, were $314.2 million, of which $62.5 million was unrestricted.
  • Unrestricted cash increased to $62.5 million at September 30, 2017, from $49.7 million at the end of the prior quarter due primarily to cash management activities.  Total available liquidity was $73.3 million at September 30, 2017, including unrestricted cash and $10.8 million of collateralized availability under credit facilities. 
  • Restricted cash increased by $28.4 million to $251.7 million at September 30, 2017 due primarily to timing differences related to cash collections on assets held in CLOs and other special purpose vehicles (SPVs) ahead of settlement dates, when restricted cash is disbursed to various stakeholders, including the Company.
  • Advances under credit facilities increased by $60.8 million to $457.0 million during the third quarter due primarily to lending activity and discretionary cash management activities.
  • Term debt securitization bala
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Oct 23, 2017

NEWSTAR SCHEDULES RELEASE OF RESULTS FOR THE THIRD QUARTER OF 2017

Boston, MA, Oct. 23, 2017 (GLOBE NEWSWIRE) -- NewStar Financial, Inc. ("NewStar") (NASDAQ:NEWS) announced today that it will report financial results for the third quarter of 2017 on Wednesday, November 1, 2017 before the markets open.  NewStar will not host an investor conference call to discuss its financial results. 

About NewStar Financial, Inc.:

NewStar Financial, Inc. (Nasdaq:NEWS) is an internally-managed commercial finance company with more than $7 billion of assets managed across two complementary business lines — middle market direct lending and asset management. The Company's direct lending activities are focused on meeting the complex financing needs of companies and private investors in the middle markets through specialized lending groups that offer a range of flexible debt financing options to fund working capital, growth strategies, acquisitions and recapitalizations. Through its asset management platforms, NewStar also offers a range of investment products employing credit-oriented strategies focused on middle market loans and liquid, tradeable credit.

NewStar is headquartered in Boston MA and has regional offices in Chicago IL, Darien CT, and New York NY. Please visit our website at www.newstarfin.com for more detailed information. 

Robert K. Brown 617.848.2558 rbrown@newstarfin.com

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Oct 17, 2017

FIRST EAGLE INVESTMENT MANAGEMENT AGREES TO ACQUIRE NEWSTAR FINANCIAL

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Aug 02, 2017

NewStar Reports Net Income of $4.2 Million, or $0.10 per Diluted Share, for the Second Quarter of 2017 and Declares $0.02 Quarterly Dividend per Share

  • Acquisition — Completed previously announced acquisition of Fifth Street CLO Management LLC on July 20, 2017, adding approximately $726 million of AUM.
  • Investment Activity — New funded, middle-market credit investments totaled $460 million in the second quarter, up from $330 million last quarter and compared to $476 million in the same quarter last year. 
  • Managed Assets — Managed loans and credit investments at the end of the quarter decreased slightly from the prior quarter to $6.5 billion due to the amortization and redemption of older managed CLOs issued in 2006 and 2007, which was partly offset by growth in loans held-for-sale and investments in debt securities issued by managed funds to comply with risk retention requirements.
  • Net Interest Margin — The margin increased to 1.56% for the second quarter from 1.45% in the prior quarter due to a combination of rising index rates, higher deferred loan fee amortization and an increase in loans as a percentage of earning assets.
  • Revenue — Total revenue1 in the second quarter was consistent with the prior quarter at $20.2 million as higher net interest income, asset management fees and a gain on the sale of equity interests offset a decrease in fee income from capital markets activities and higher negative mark-to-market adjustments on loans held at fair value. 
  • Credit — Credit costs decreased $3.5 million from the prior period to $2.7 million due primarily to lower specific provision expense, while net charge-offs increased by $2.0 million from the prior period to $7.5 million in the second quarter. 
  • Expenses — Operating expenses decreased by $1.3 million, or 11.5%, from the prior period to $10.3 million as the company achieved planned cost saving targets.   
  • Capital Management — Returned approximately $7.3 million to stockholders in the second quarter through share repurchases and dividends.  Book value per share increased to $15.40 as of June 30, 2017, up $0.19 from the end of the prior quarter. 
  • Quarterly Dividend — Board of Directors declared a quarterly dividend of $0.02 per share of common stock payable on September 15, 2017 to shareholders of record on August 29, 2017.

BOSTON, Aug. 02, 2017 (GLOBE NEWSWIRE) -- NewStar Financial, Inc. (NASDAQ:NEWS) ("NewStar" or the "Company"), an internally-managed, middle market direct lender and credit-oriented asset manager, today announced financial results for its second quarter of 2017, reporting net income of $4.2 million, or $0.10 per diluted share. These results compare to net income of $1.4 million, or $0.03 per diluted share in the first quarter of 2017 and $5.2 million, or $0.11 per diluted share in the second quarter of 2016. Operating income before income taxes was $7.2 million for the second quarter of 2017 compared to $2.4 million for the first quarter of 2017 and $8.8 million in the second quarter of 2016.

Tim Conway, NewStar's Chairman and Chief Executive Officer, commented on the Company's performance: "Despite continued pricing pressure in the second quarter, our core earnings were solid on a cash basis, excluding negative marks totaling $3.2 million on our liquid credit portfolio.  Credit costs remained in check and we continued to reduce expenses, while also taking steps to accelerate growth in managed assets and execute our capital management programs.  We returned approximately $7.3 million to stockholders through accretive share repurchases and dividends.  We also acquired Fifth Street's CLO business after the close of the quarter, adding $726 million to assets under management.  We now have nearly $7.3 billion of managed assets split evenly between the balance sheet and funds. The acquisition is consistent with our strategy to expand our asset management activities in ways that benefit our lending franchise and add to our value proposition by leveraging our core strengths in direct lending, securitization and credit management. It also provides an attractive way to diversify our business mix, adding to fee revenue and accelerating improvement in equity returns." 

1 Total revenue is defined as the sum of net interest income and non-interest income

Acquisition

  • Completed the previously announced acquisition of Fifth Street CLO Management LLC ("FSCM") from Fifth Street Holdings L.P., an affiliate of Fifth Street Asset Management, Inc. ("Fifth Street") (NASDAQ:FSAM), a publicly-traded credit-focused asset management firm.  
  • Formed in 2015 by Fifth Street to manage its middle market CLO business, FSCM manages two CLOs backed by middle-market loans and holds certain interests in its sponsored CLOs primarily to comply with regulatory risk retention requirements.
  • The purchase price was approximately $16 million in cash, net of $13 million of assumed indebtedness.
  • The acquisition adds approximately $726 million to NewStar's assets under management, increasing total AUM to approximately $7.25 billion.  The transaction closed July 20, 2017.

Dividend Declaration

  • On July 31, 2017, the Company's Board of Directors declared a quarterly dividend of $0.02 per share of common stock to be paid on September 15, 2017, to shareholders of record at the close of business on August 29, 2017.
  • The declaration and payment of future dividends will be subject to the board's approval. 

Managed and Owned Investment Portfolios

  • Total new funded, middle-market credit investments were $460 million in the second quarter of 2017 compared to $330 million in the prior quarter and $476 million in the same quarter last year.  The change from the prior quarter reflected an increase in demand for acquisition financing derived from middle market leverage buyout activity amid an increase in M&A activity.  The impact of higher loan demand was tempered somewhat by an increase in market liquidity. 
  • Total new liquid credit investments (rated, broadly syndicated loans) held by the Arch Street CLO and held for sale to other managed funds were $157 million in the second quarter compared to $189 million in the prior quarter.  
  • Balance sheet runoff from scheduled amortization, prepayments and loan sales totaled approximately $461 million in the second quarter, or 12.7% of loan and investment balances at the beginning of the period, up from $366 million in the prior quarter.  Runoff in the second quarter included $242 million of prepayments, $170 million of loan sales and $48 million of contractual amortization compared to prepayments of $296 million, loan sales of $34 million and amortization of $37 million in the prior quarter. 
  • Average yields on new middle-market loans and other directly originated credit investments in the second quarter were 6.8%, up from 6.6% in the prior quarter, but down from 7.0% in the comparable quarter last year. 
  • Loans and other investments outstanding, excluding assets managed for third parties, were consistent with the prior quarter at $3.6 billion.  Compared to the second quarter of 2016, loans and investments decreased by $153 million, or 4.1%, due to the sale of $165 million of equipment finance assets and a $30.8 million decrease in commercial real estate loans, which was partly offset by growth in Leveraged Finance loans.
  • The Leveraged Finance loan portfolio totaled approximately $3.6 billion at the end of the second quarter, which was consistent with the prior quarter and up $43 million from the prior year.   Commercial real estate loans were less than $11 million at the end of the second quarter consistent with the prior quarter and compared to $42 at the same time last year.
  • Assets held in managed funds decreased by $79 million in the second quarter to approximately $3.3 billion and were up $327 million from the same time last year.  The decrease from the prior quarter was due to expected amortization and redemption of CLOs backed by broadly syndicated loans that were past their re-investment periods. 
  • The owned loan portfolio remained defensively positioned - balanced across industry sectors and highly diversified by issuer. As of June 30, 2017, no outstanding borrowings by a single obligor represented more than 1.2% of total loans outstanding, and the ten largest obligors comprised approximately 8.4% of the loan portfolio.

Net Interest Income / Margin

  • Net interest income increased by $1.0 million to $15.0 million in the second quarter compared to $14.0 million in the prior quarter.  Compared to the second quarter of last year, net interest income decreased by $5.9 million, or 28.2%.  The decrease was due primarily to a decrease in average loan balances and higher cost of funds driven partly by rising LIBOR index rates.  
  • The portfolio yield was 6.43% in the second quarter up from 6.29% in the prior quarter and 6.28% in the comparable period in the prior year. 
  • Funding costs were 5.08% in the second quarter, up from 4.99% in the first quarter and 4.65% in the comparable period in the prior year due to increasing LIBOR index rates, changes in the mix of debt and higher average cost of funds for new CLO issuance. 
  • As a result, the net interest margin widened to 1.56% for the second quarter of 2017 compared to 1.45% for the prior quarter and 2.10% in the second quarter of 2016.   

Non-Interest Income

  • Non-interest income decreased by $1.0 million to $5.2 million for the second quarter of 2017 compared to $6.2 million in the prior quarter and $4.4 million in the same period last year. The change reflected a $1.0 million decrease in capital markets-related fee income and negative mark to market adjustments totaling $3.2 million compared to negative adjustments of $2.8 million in the prior quarter offset by differences in other miscellaneous income.
  • Other non-interest income items in the second quarter of 2017 were centered in asset management fees of $3.8 million and $1.8 million of other income. 

Credit Performance

  • Provision expense was $2.7 million in the second quarter, down from $6.1 million in the prior quarter, and down from $3.6 million in the same quarter last year.        
  • Total net specific provision expense decreased by approximately $3.0 million in the second quarter to $3.3 million compared to $6.3 million in the prior quarter and $2.4 million in the same quarter last year.  Provisioning activity in the second quarter included a $2.0 million specific charge in connection with the expected sale of a borrower in connection with the resolution of a long-term work-out. 
  • Net charge-offs in the second quarter of 2017 were $7.5 million compared to $5.5 million in the prior quarter.
  • The allowance for credit losses was $47.3 million, or 1.75% of consolidated loans and approximately 49.7% of non-performing loans (NPLs), at June 30, 2017, compared to $52.1 million, or 1.85% of consolidated loans and approximately 50.7% of NPLs, at March 31, 2017. 
  • Non-performing loans decreased by $7.7 million to $95.1 million, or 3.06% of loans held for investment at June 30, 2017, compared to $102.8 million or 3.18% of loans held for investment at the end of the prior quarter due primarily to charge-off activity.  

Expenses

  • Total operating expenses for the second quarter decreased by $1.3 million to $10.3 million compared to $11.6 million in the prior quarter, reflecting targeted cost savings from actions taken over the last twelve months to streamline operations. 
  • As a result, expenses as a percentage of average assets under management decreased to 0.64% in the second quarter compared to 0.68% in the prior quarter.
  • Adjusted operating expenses, which excludes non-cash equity compensation and severance costs, were $9.4 million in the second quarter down from $10.8 million during the first quarter. 
  • The Company had 66 full-time employees at June 30, 2017 compared to 69 full-time employees at March 31, 2017 and 90 employees at June 30, 2016.  The reduction in staffing levels during 2016 reflects the sale of the asset-based lending and equipment finance businesses, as well as other related strategic initiatives to streamline operations. 

Income Taxes

  • Deferred income taxes decreased $3.7 million to $36.9 million as of June 30, 2017.  The decrease was driven primarily by charge-off activity in the allowance for credit losses and timing differences related to compensation expense recognition.  
  • Approximately $23.7 million and $6.7 million of the net deferred tax asset as of June 30, 2017 were related to our allowance for credit losses and incentive compensation, respectively.

Funding and Capital

  • Total cash and equivalents as of June 30, 2017, were $273.0 million, of which $49.7 million was unrestricted.
  • Unrestricted cash increased to $49.7 million at June 30, 2017, from $15.4 million at the end of the prior quarter due primarily to cash management activities.  Total available liquidity was $67.3 million at June 30, 2017, including unrestricted cash and $17.6 million of collateralized availability under credit facilities. 
  • Restricted cash decreased by $86.1 million to $223.3 million at June 30, 2017 due primarily to cash collections on assets held in CLOs and other special purpose vehicles (SPVs) ahead of settlement dates, when restricted cash is disbursed to various stakeholders, including the Company.
  • Advances under credit facilities increased by $22.0 million to $396.1 million during the second quarter due primarily to lending activity and discretionary cash management activities.
  • Term debt securitization balances decreased from the prior quarter by $44.5 million to $2.1 billion at June 30, 2017.
  • As a result, total debt increased slightly to $3.2 billion at June 30, 2017 and leverage stayed the same at 5.0x for the end of the second quarter.

Equity

  • Book value per share increased by $0.19 to $15.40 at the end of the second quarter compared to $15.21 at the end of the prior quarter due primarily to accretive share repurchases and retained earnings. 
  • Average diluted shares outstanding totaled 41.3 million for the quarter, down from 41.8 million for the prior quarter, and total outstanding shares at June 30, 2017 were 41.8 million compared to 42.3 million at March 31, 2017.
  • The Company repurchased 629,997 shares at an average cost of $10.29, or approximately $6.5 million, and paid dividends totaling $0.8 million in the second quarter.    
  • Pre-tax returns on average equity increased to 4.5% in the second quarter from 1.5% in the prior quarter.  On an after-tax basis, returns on average equity increased to 2.6% in the second quarter from 0.9% from the prior quarter. 

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 Events & Presentations under News & Noteworthy section at Read

Jul 19, 2017

NewStar Schedules Release of Results for the Second Quarter of 2017

Boston, July 19, 2017 (GLOBE NEWSWIRE) -- NewStar Financial, Inc. ("NewStar") (NASDAQ:NEWS) announced today that it will report financial results for the second quarter of 2017 on Wednesday, August 2, 2017 before the markets open.

NewStar will also host a webcast/conference call to discuss the results on Wednesday, August 2, 2017 at 10:00am Eastern Time.  All interested parties are invited to participate via telephone or webcast, which will be hosted through the News & Noteworthy section of the company's 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 877-755-7419 approximately 5-10 minutes prior to the call. International callers should dial 973-200-3080. All callers should reference "NewStar Financial."

For convenience, an archived replay of the call will be available through August 10, 2017 by dialing 855-859-2056. International callers should call 404-537-3406. For all replays, please use the passcode 54313007. The audio replay will also be available through the News & Noteworthy section of our website at www.newstarfin.com

About NewStar Financial, Inc.:

NewStar Financial, Inc. (Nasdaq:NEWS) is an internally-managed commercial finance company with $6.6 billion of assets managed across two complementary business lines — middle market direct lending and asset management. The Company's direct lending activities are focused on meeting the complex financing needs of companies and private investors in the middle markets through specialized lending groups that offer a range of flexible debt financing options to fund working capital, growth strategies, acquisitions and recapitalizations. Through its asset management platforms, NewStar also offers a range of investment products employing credit-oriented strategies focused on middle market loans and liquid, tradeable credit.

NewStar is headquartered in Boston MA and has regional offices in Chicago IL, Darien CT, and New York NY. Please visit our website at www.newstarfin.com for more detailed information. 

CONTACT: 

Robert K. Brown 617.848.2558 rbrown@newstarfin.com
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Jul 07, 2017

NewStar to Add $726 Million of Managed Assets through Acquisition of Investment Manager

NewStar has agreed to acquire Fifth Street's middle market CLO management business

  • Signed definitive agreement to acquire Fifth Street CLO Management LLC ("FSCM"), including contracts to manage two middle market CLOs and certain retained interests in the CLOs required to comply with risk retention rules
  • FSCM was established in 2015 to specialize in credit-oriented investment strategies focused on middle market bank loans held in funds employing leverage through the issuance of CLOs
  • Acquisition will add $726 million to assets under management, increasing total pro forma AUM to approximately $7.3 billion
  • Transaction is expected to close in the third quarter of 2017 and be accretive to earnings per share in 2017 

BOSTON, July 07, 2017 (GLOBE NEWSWIRE) -- NewStar Financial, Inc. (Nasdaq:NEWS) ("NewStar" or the "Company") announced today that it has agreed to acquire Fifth Street CLO Management LLC ("FSCM"), a wholly-owned subsidiary of Fifth Street Holdings L.P., an affiliate of Fifth Street Asset Management, Inc. ("Fifth Street" or "FSAM") (NASDAQ:FSAM), a publicly-traded credit-focused asset management firm based in Greenwich, Connecticut.   The estimated purchase price is approximately $16 million, net of $13 million of assumed indebtedness and will be subject to adjustment up or down based on certain working capital items as of the closing of the transaction.  The acquisition will add approximately $726 million to NewStar's assets under management, increasing total pro forma AUM to approximately $7.3 billion.  The transaction is expected to close in the third quarter of 2017, subject to certain investor consents and other closing conditions set forth in the purchase agreement between Fifth Street Holdings L.P. and NewStar.  The transaction is expected to be accretive to NewStar's earnings per share in 2017.   

FSCM was formed in 2015 by Fifth Street to manage its middle market CLO business.   FSCM currently manages two CLOs backed by middle market loans and holds certain interests in its sponsored CLOs primarily to comply with regulatory risk retention requirements.

Over the past eighteen months, NewStar has focused on expanding its asset management platform by launching new managed funds, acquiring investment management platforms and increasing its investment activity.  This transaction is the Company's second acquisition adding to its managed assets and represents another important step in that strategy.  The acquisition is highly complementary to the Company's existing middle market direct lending business and provides balance to its overall asset management platform, increasing pro forma fee-paying AUM to $4 billion, split evenly between its middle market and liquid credit strategies platforms. The transaction also adds significantly to the Company's lending capacity, allowing it to better meet the needs of its private equity clients and compete more effectively to lead new direct lending opportunities.

FSCM will become a wholly-owned subsidiary of NewStar and the funds will be managed by NewStar's middle market investment team.  The transaction is expected to add more than $2.5 million to the Company's run-rate fee revenue and will serve as a further catalyst to the growth of NewStar's asset management activities.

"This acquisition is consistent with our strategy to expand our asset management activities in ways that add to our value proposition for institutional investors and leverage our core strengths in direct lending, securitization and credit management. This transaction also provides an attractive way to diversify our business mix, adding to fee revenue and accelerating improvement in equity returns," said NewStar's Chairman and Chief Executive Officer Tim Conway.

"The transaction is expected to be accretive to earnings in 2017, adding predictable fee revenue derived from long-term CLO management contracts" added John Bray, NewStar's Chief Financial Officer.  "We were able to complete thorough due diligence and the terms of the transaction worked well for all parties."

Seward & Kissel LLP served as legal counsel and GreensLedge Capital Markets LLC advised NewStar on the transaction. 

About NewStar Financial, Inc.:

NewStar Financial, Inc. (Nasdaq:NEWS) is an internally-managed commercial finance company with $6.6 billion of assets managed across two complementary business lines — middle market direct lending and asset management. The Company's direct lending activities are focused on meeting the complex financing needs of companies and private investors in the middle markets through specialized lending groups that offer a range of flexible debt financing options to fund working capital, growth strategies, acquisitions and recapitalizations. Through its asset management platforms, NewStar also offers a range of investment products employing credit-oriented strategies focused on middle market loans and liquid, tradeable credit.  NewStar is headquartered in Boston MA and has regional offices in Chicago IL, Darien CT, and New York NY. Please visit our website at www.newstarfin.com for more detailed information. 

Forward-Looking Statements:

This press release contains forward-looking statements.  These forward-looking statements involve a number of risks and uncertainties.  Such risks and uncertainties include, but are not limited to, the likelihood that the transaction is consummated on a timely basis or at all, including whether the conditions required to complete the transaction will be met, realization of the expected benefits of the transaction, and NewStar's expected return and planned growth for the asset management business following the closing of the transaction.  Among the important factors that could cause actual results to differ materially from those results indicated in the forward‑looking statements include uncertainties relating to future events that could affect FSCM's investment performance and level of fee-paying assets under management.  Additional information about the economic, competitive, regulatory and other factors that may affect NewStar's operations is set forth in Item 1A, "Risk Factors" in its Annual Report on Form 10‑K for the year ended December 31, 2016, as supplemented by any "Risk Factors" contained in its 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.

Contact: NewStar Financial, Inc. Robert K. Brown 617.848.2558 rbrown@newstarfin.com
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May 03, 2017

NewStar Reports Net Income of $1.4 Million, or $0.03 per Diluted Share, for the First Quarter of 2017 and Declares $0.02 Quarterly Dividend per Share

  • Investment Activity — New funded direct credit investments totaled $330 million in the first quarter, down from $628 million last quarter, but up 10% from $300 million in the same quarter last year. 
  • Managed Assets — Managed loans and credit investments decreased slightly from the prior quarter to $6.6 billion due to the amortization and redemption of older managed CLOs issued in 2006 and 2007, which was partly offset by growth in loans held-for-sale and assets managed in middle market direct lending funds.
  • Net Interest Margin — The margin narrowed to 1.45% for the first quarter from 1.96% in the fourth quarter as rising index rates and debt prepayment expenses drove the cost of funds higher and the yield on interest earning assets decreased due to lower deferred fee recognition on loan prepayments and an increase in low yielding liquid investments as a percentage of assets.    
  • Revenue — Total revenue[1] decreased by $20.3 million from the prior quarter to $20.1 million in the first quarter despite a $2.3 million increase in fee income from asset management and capital markets activities.  The change was due primarily to a $6.7 million decrease in net interest income and negative market value adjustments totaling $2.7 million in the first quarter.  Revenue in the prior quarter also included a $6.7 million gain on the sale of the equipment finance business and $9.6 million of positive mark-to market adjustments.    
  • Credit — Credit costs increased $3.5 million from the prior period to $6.1 million due primarily to specific provision expense on a single legacy loan in connection with an expected sale of the obligor, while net charge-offs decreased $13.4 million from the prior period to $5.5 million in the first quarter. 
  • Expenses — Operating expenses decreased by $7.8 million, or 40.2%, from the prior period to $11.6 million as the company achieved planned cost saving targets.   
  • Capital Management — Returned approximately $10 million to stockholders in the first quarter through share repurchases and dividends.  Book value per share increased to $15.21 as of March 31, 2017, up $0.09 from the end of the prior quarter. 
  • Quarterly Dividend — Board of Directors declared a quarterly dividend of $0.02 per share of common stock payable on June 15, 2017 to shareholders of record on May 30, 

BOSTON, May 03, 2017 (GLOBE NEWSWIRE) -- NewStar Financial, Inc. (NASDAQ:NEWS) ("NewStar" or the "Company"), an internally-managed, middle market direct lender and credit-oriented asset manager, today announced financial results for its first quarter of 2017, reporting net income of $1.4 million, or $0.03 per diluted share. These results compare to net income of $10.3 million, or $0.23 per diluted share in the fourth quarter of 2016 and $4.0 million, or $0.09 per diluted share in the first quarter of 2016. Operating income before income taxes was $2.4 million for the first quarter of 2017 compared to $18.4 million for the fourth quarter of 2016 and $6.9 million in the first quarter of 2016.

Tim Conway, NewStar's Chairman and Chief Executive Officer, commented on the Company's performance: "During the first quarter, we continued to make progress on the transition of our business model from a bank-styled, commercial lender to a hybrid asset manager focused on the credit markets.  We achieved our cost saving targets, reducing expenses by nearly a third in the first quarter.  We also capitalized on market conditions to refinance and reset CLOs, extending investment periods and lowering the cost of funding for investors, while launching marketing efforts for new managed funds employing middle market investment strategies.  We also continued to execute our capital management programs, returning nearly $10 million to stockholders through accretive share repurchases and dividends.  More importantly, we continue to explore other steps needed to accelerate the company's transition and unlock value for our shareholders." 

1 Total revenue is defined as the sum of net interest income and non-interest income

Dividend Policy

  • During the quarter, the Company's Board of Directors adopted a new dividend policy and declared the Company's first dividend, which was paid on March 17, 2017, to shareholders of record at the close of business on March 2, 2017.
  • On May 2, 2017, the Company's Board of Directors declared a quarterly dividend of $0.02 per share of common stock to be paid on June 15, 2017, to shareholders of record at the close of business on May 30, 2017.
  • The declaration and payment of future dividends will be subject to the board's approval. 

Managed and Owned Investment Portfolios

  • Total new funded direct credit investments were $330 million in the first quarter of 2017 compared to $628 million in the prior quarter and $300 million in the same quarter last year.  The pace of investment compared to the fourth quarter reflected a typical seasonal pattern and was up 10% from the comparable prior quarter as demand for acquisition financing derived from middle market leverage buyout activity improved amid an increase in M&A activity.  The impact of higher loan demand was tempered somewhat by an increase in market liquidity. 
  • Balance sheet runoff from scheduled amortization, prepayments and loan sales totaled approximately $366 million in the first quarter, or 10.2% of loan and investment balances at the beginning of the period, down from $405 million in the prior quarter.  Runoff in the first quarter included $296 million of prepayments, $34 million of loan sales and $37 million of contractual amortization compared to prepayments of $303 million, loan sales of $19 million and amortization of $82 million in the prior quarter. 
  • Average yields on new middle market loans and other directly originated credit investments in the first quarter were 6.6%, consistent with the prior two quarters. 
  • Loans and other investments outstanding, excluding assets managed for third parties, increased by $29 million, or 0.8%, from the prior quarter.  Compared to the first quarter of 2016, loans and investments decreased by $114 million, or 3.1%, due primarily to the sales of the asset-based lending and equipment finance businesses in the first and fourth quarters of 2016, respectively.
  • The Leveraged Finance loan portfolio increased by $28.5 million during the first quarter to $3.6 billion due primarily to an increase in loans-held-for-sale targeted for managed funds, and was up $130 million from the prior year as new investment activity outpaced run-off.  Commercial real estate loans were less than $11 million at the end of the first quarter compared to $79 at the same time last year.
  • Assets held in managed funds decreased by $168 million in the first quarter to approximately $3.4 billion and were up $409 million from the same time last year.  The decrease from the prior quarter was due to expected amortization and redemption of CLOs backed by broadly syndicated loans that were past their re-investment periods. 
  • The owned loan portfolio remained defensively positioned - balanced across industry sectors and highly diversified by issuer. As of March 31, 2017, no outstanding borrowings by a single obligor represented more than 1.0% of total loans outstanding, and the ten largest obligors comprised approximately 7.9% of the loan portfolio.
  • During the first quarter, the Company completed refinancings of two managed CLOs for investors, capitalizing on favorable market conditions to reduce the cost of funding. 
  • After quarter-end, NewStar also completed another refinancing of a CLO and what is known as a "reset" of an existing $500 million managed CLO called Longfellow Place in a transaction that extended the investment period by four years among other things.

Net Interest Income / Margin

  • Net interest income decreased by $6.7 million to $14.0 million in the first quarter compared to $20.7 million in the prior quarter.  Compared to the first quarter of last year, net interest income decreased by $8.5 million, or 37.9%.  The decrease was due primarily to lower interest income resulting from a decrease in average loan balances and portfolio yields and higher cost of funds driven by rising LIBOR index rates.  
  • The portfolio yield was 6.29% in the first quarter compared to 6.53% in the prior quarter and 6.28% in the comparable period in the prior year. 
  • Funding costs were 4.99% in the first quarter, up from 4.83% in the fourth quarter and 4.56% in the comparable period in the prior year due to increasing LIBOR index rates, acceleration of capitalized financing fees in connection with early debt retirement and higher average cost of funds for new CLO issuance. 
  • As a result, the net interest margin narrowed to 1.45% for the first quarter of 2017 compared to 1.96% for the prior quarter and 2.21% in the first quarter of 2016.   

Non-Interest Income

  • Non-interest income decreased by $13.6 million to $6.2 million for the first quarter of 2017 compared to $19.8 million in the prior quarter and $19.2 million in the same period last year. The change reflected a $7.9 million decrease in net unrealized gains on loans held for sale and negative mark to market adjustments totaling $2.8 million compared to positive adjustments of $1.8 million in the prior quarter, which was partially offset by a $2.3 increase in fee and asset management income.  The decrease also reflected the impact of a $6.7 million gain recognized in the prior quarter on the sale of the equipment finance platform and related assets. 
  • Other non-interest income items in the first quarter of 2017 were centered in asset management fees of $3.6 million and $3.2 million of capital markets-related fees. 

Credit Performance

  • Provision expense was $6.1 million in the first quarter, up from $2.6 million in the prior quarter, but down from $17.7 million in the same quarter last year.        
  • Total net specific provision expense increased by approximately $3.8 million in the first quarter to $6.3 million compared to $2.5 million in the prior quarter and $16.6 million in the same quarter last year.  Provisioning activity in the first quarter included a $4.5 million specific charge in connection with the expected sale of a borrower in connection with the resolution of a long-term work-out. 
  • Net charge-offs in the first quarter of 2017 were $5.5 million compared to $18.9 million in the prior quarter. 
  • The allowance for credit losses was $52.1 million, or 1.85% of consolidated loans and approximately 50.7% of non-performing loans (NPLs), at March 31, 2017, compared to $51.4 million, or 1.76% of consolidated loans and approximately 51.8% of NPLs, at December 31, 2016. 
  • Non-performing loans increased slightly to $102.8 million, or 3.18% of loans held for investment at March 31, 2017, compared to $99.2 million or 2.99% of loans held for investment at the end of the prior quarter.  

Expenses

  • Total operating expenses for the first quarter decreased by $7.8 million to $11.6 million compared to $19.5 million in the prior quarter, reflecting targeted cost savings despite elevated transaction-related expenses recognized in connection with the reset of the 2013-1 CLO. 
  • As a result, expenses as a percentage of average assets under management decreased to 0.68% in the fourth quarter compared to 1.15% in the prior quarter.
  • Adjusted operating expenses, which excludes non-cash equity compensation and severance costs, were $10.8 million in the first quarter down from $15.0 million during the fourth quarter. 
  • The Company had 68 full-time employees at March 31, 2017 compared to 69 full-time employees at December 31, 2016 and 95 employees at March 31, 2016.  The reduction in staffing levels during 2016 reflects the sale of the asset-based lending and equipment finance businesses, as well as other related strategic initiatives to streamline operations. 

Income Taxes

  • Deferred income taxes decreased $0.2 million to $40.6 million as of March 31, 2017.  The decrease was driven primarily by timing differences related to compensation expense recognition and changes in available for sale securities, which was partly offset by activity in the allowance for credit losses.  
  • Approximately $25.9 million and $7.6 million of the net deferred tax asset as of March 31, 2017 were related to our allowance for credit losses and incentive compensation, respectively.

Funding and Capital

  • Total cash and equivalents as of March 31, 2017 were $324.7 million, of which $15.4 million was unrestricted.
  • Unrestricted cash decreased to $15.4 million at March 31, 2017 from $154.5 million at the end of the prior quarter due primarily to cash management activities, including discretionary repayment of advances under credit facilities and temporary investments in liquid loans.  Total available liquidity was $118 million at March 31, 2017, including unrestricted cash and $102.5 million of collateralized availability under credit facilities. 
  • Restricted cash increased by $46.7 million to $309.4 million at March 31, 2017 due primarily to cash collections on assets held in CLOs and other special purpose vehicles (SPVs) ahead of settlement dates, when restricted cash is disbursed to various stakeholders, including the Company.
  • Advances under credit facilities decreased by $71.4 million to $374.1 million during the first quarter due primarily to discretionary repayments in connection with cash management activities.
  • The Company completed a new $400 million term debt securitization known as 2017-1 CLO, which issued replacement notes to refinance the existing 2013-1 CLO and extended the investment period by two years to March 2019 in what is known as a "reset" transaction.
  • Term debt securitization balances decreased from the prior quarter by $53.1 million to $2.1 billion at March 31, 2017.
  • As a result, total debt decreased by approximately $119.3 million to $3.2 billion at March 31, 2017 and leverage decreased to 5.0x compared to 5.1x at the end of the prior quarter.

Equity

  • Book value per share increased by $0.09 to $15.21 at the end of the first quarter compared to $15.12 at the end of the prior quarter due primarily to accretive share repurchases and retained earnings. 
  • Average diluted shares outstanding totaled 41.8 million for the quarter, down from 43.8 million for the prior quarter, and total outstanding shares at March 31, 2017 were 42.3 million compared to 42.8 million at December 31, 2016.
  • The Company repurchased 896,841 shares at an average cost of $9.80, or approximately $9 million, and paid dividends totaling $0.9 million in the first quarter.    
  • Pre-tax returns on average equity decreased to
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