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Dec 09, 2016

NewStar Authorizes New Share Repurchase Program

Boston, Massachusetts, Dec. 09, 2016 (GLOBE NEWSWIRE) --

NewStar Financial Inc. (Nasdaq:NEWS), a specialized commercial finance company, announced today that its Board of Directors has authorized the repurchase of up to $30 million of the company's common stock from time to time on the open market or in privately negotiated transactions.  The timing and amount of any shares repurchased will be determined by the company's management based on its evaluation of market conditions and other factors.  The new repurchase program will commence immediately following the expiry of the company's current program on December 31, 2016 and will expire on December 31, 2017 unless extended by the Board of Directors.  It may be suspended or discontinued at any time.  The company may also establish from time to time 10b5-1 trading plans that will provide flexibility as it buys back its shares. 

Under the existing program, as authorized in October 2015 and amended in February 2016, the company has repurchased approximately 2.4 million shares of its common stock for an aggregate purchase price of approximately $18.6 million to date, in addition to 2.5 million shares purchased in privately negotiated transactions authorized by the board of directors outside of the repurchase program for approximately $22.3 million in October 2016.

Commenting on the stock repurchase program, NewStar CEO Tim Conway said, "This buyback program reflects our strong belief in the intrinsic value of the company and demonstrates our commitment to improving the investment value of our stock as we continue to capitalize on strategic market opportunities."

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.  Credit investments are originated directly through teams of experienced, senior bankers and marketing officers organized around key industry and market segments. Through its asset management platforms, NewStar offers a range of investment products employing credit-oriented strategies focused on middle market loans and liquid, tradeable credit. The Company manages approximately $1.3 billion of assets in a series of private credit funds that co-invest in middle market loans originated through its established leveraged finance lending platform and its strategic relationship with GSO Capital, the credit division of The Blackstone Group. Through its wholly-owned subsidiary, NewStar Capital, the Company also has more than $2 billion of assets managed across a series of CLOs that invest primarily in broadly syndicated, non-investment grade loans, as well as other sponsored funds and managed accounts that invest across various asset classes, including non-investment grade loans and bonds. 

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

Forward-looking Statements

Statements in this press release regarding the company's intention to repurchase shares of its common stock from time to time under the stock repurchase program are forward looking statements.  There are a number of important factors that could cause actual events to differ materially from those suggested or indicated by such forward-looking statements.  These include, among others, the market price of the company's stock prevailing from time to time, the company's cash flows from operations, general economic conditions, and other factors identified in the company's Annual Report on Form 10‑K and most recent Quarterly Reports on Form 10-Q filed with the SEC.                 

NewStar Financial Robert K. Brown (617) 848-2558

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Dec 01, 2016

NewStar Sells Equipment Finance Business To Radius Bank

BOSTON, Dec. 01, 2016 (GLOBE NEWSWIRE) -- NewStar Financial Inc. (Nasdaq:NEWS) ("NewStar" or the "Company") announced today the sale of its equipment finance business and related assets to Boston-based Radius Bank ("Radius"), a federal savings association, for approximately $140 million in cash.    

NewStar Equipment Finance is an independent provider of flexible, equipment financing solutions to middle market companies nationwide.  NewStar launched the business in 2011 and expanded it significantly over the last five years under the leadership of industry veteran, Steve O'Leary. 

The transaction was structured as a sale of the business platform and related assets and generated net proceeds to NewStar of approximately $105 million, net of debt repayment, transaction fees and other retained liabilities. The purchase price reflected a premium of approximately 5% of NewStar's net investment in receivables totaling approximately $133 million and was approximately 1.2x book value, based on allocated equity capital of 30% of net receivables.  NewStar expects to recognize a gain on the sale in the fourth quarter of 2016. 

The sale of the equipment finance platform demonstrates a continuation of the Company's transformation from a bank-styled, diversified commercial finance company into a more specialized middle market direct lender with a focus on managing assets for institutional investors.  It also reflects a strategic decision to exit businesses with economic models increasingly challenged by competition from banks and other lenders with access to lower cost funding.  The cash proceeds from the transaction add significantly to the Company's liquidity position and enhance its flexibility to pursue other strategic priorities, including continued share repurchases.  The additional liquidity also allows the Company to re-invest in its higher-margin, core lending and asset management businesses, which the Company believes are positioned to capitalize on favorable market trends, including a reduction in banks' leveraged lending activity and growing interest among institutional investors in middle market private debt.    

NewStar's CEO Tim Conway commented: "I believe this transaction is a positive for all parties involved.  The leasing platform is a great fit with Radius' growth strategy and being part of a bank should provide a significant competitive advantage that will allow the team and the business to achieve their true potential.  For NewStar, the transaction generates an attractive financial return and further demonstrates the intrinsic value of our direct lending platforms that we believe is not fully recognized in our current share price.  The successful sales of both our equipment finance and asset-based lending businesses have added significantly to our liquidity position and enabled us to streamline the company's operations, which is expected to reduce our cost base by more than 30% from our first quarter run-rate and improve returns."  

Houlihan Lokey served as financial advisor and Locke Lord LLP served as legal counsel to NewStar in connection with 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.  Credit investments are originated directly through teams of experienced, senior bankers organized around key industry and market segments. Through its asset management platforms, NewStar offers a range of investment products employing credit-oriented strategies focused on middle market loans and liquid, tradeable credit. The Company manages more than $1.3 billion of assets in a series of private credit funds that co-invest in middle market loans originated through its established leveraged finance lending platform and its strategic relationship with GSO Capital, the credit division of The Blackstone Group. Through its wholly-owned subsidiary, NewStar Capital, the Company also has more than $2 billion of assets managed across a series of CLOs that invest primarily in broadly syndicated, non-investment grade loans, as well as other sponsored funds and managed accounts focused on non-investment grade loans and bonds. 

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

About Radius Bank:

With assets of approximately $850 million as of September 30, 2016, Radius Bank is a forward-thinking community bank offering a full complement of convenient, leading-edge personal and business products and services. The Bank serves consumers, small and middle market businesses, unions, government entities and non-profit organizations as its core clients. The Bank offers anytime/anywhere banking via mobile device, 24-hour ATM service, provides additional services such as treasury management capabilities, and partners with innovative organizations including mobile payments leader LevelUp, student loan debt reduction company Gradifi, online investment firm Aspiration, and online marketplace lender Prosper. Customers can readily access traditional, personalized branch banking at the Bank's Boston, MA financial center. Radius Bank is a member of the Federal Deposit Insurance Corporation and is an Equal Housing/Equal Opportunity Lender. For further information, visit the Bank's website at www.radiusbank.com.

Forward-Looking Statements:

This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding NewStar's expected use of proceeds from the transaction, the timing and amount of any repurchases under the Company's existing share repurchase program, the likelihood of future asset dispositions, its ability to reinvest in the core business, and other strategic plans, as well as statements about the expected benefits of any of these actions.  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, financing plans and business. As such, they are subject to material risks and uncertainties, including our limited operating history; 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.

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 its Annual Report on Form 10-K for the fiscal year ended December 31, 2015. 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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Nov 30, 2016

NewStar Closes New $505 Million Managed Credit Fund

  • The NewStar Berkeley Fund CLO (the "Berkeley Fund") represents the fourth in a series of managed credit funds focused on middle market senior debt originated through NewStar's direct lending platform
  • Berkeley Fund is structured as a Collateralized Loan Obligation (CLO) to provide financial leverage intended to magnify asset-level returns for equity investors
  • Upsized from initial target of $400 million to $505 million due to strong investor demand
  • NewStar retained 5% of each class of notes issued by the CLO to comply with risk retention rules and pre-seeded the fund with approximately $425 million of loans
  • Represents third CLO sponsored by NewStar in 2016, bringing total issuance to approximately $1.25 billion for the year

BOSTON, Nov. 30, 2016 (GLOBE NEWSWIRE) -- NewStar Financial Inc. (Nasdaq:NEWS) ("NewStar" or the "Company"), an internally-managed, specialized finance company, announced today that it has closed the NewStar Berkeley Fund CLO (the "Berkeley Fund" or the "Fund"), a $505 million middle market CLO managed for qualified institutional investors.  The Berkeley Fund is the fourth credit fund sponsored by NewStar to co-invest in middle market commercial loans originated through its direct lending platform and represents another significant milestone in the growth of the Company's asset management business. 

The Berkeley Fund is NewStar's 21st securitization since inception and third transaction completed in 2016.  The notes offered through this CLO transaction are backed by a diversified portfolio of commercial loans originated and underwritten by NewStar for the benefit of investors.  Various classes of notes rated Aaa through Ba3 were placed, which represented an advance rate of approximately 88.6%.  Third-party investors retained the equity interests, which represented approximately 10.8% of the capital structure, or approximately $54.5 million.  NewStar held 5% of each class of notes to satisfy risk retention rules and will serve as manager of the CLO, which has a four-year reinvestment period.  

Citigroup Global Markets Inc. was placement agent and sole book runner.  Dechert LLP acted as legal adviser to NewStar.

Commenting on the new fund, Tim Conway, NewStar's CEO stated: "The Berkeley Fund represents another important milestone for our asset management strategy. It also highlights important advantages that we believe NewStar can offer institutional investors who are looking for attractive yields with downside asset protection.  First, investors in our funds are able to leverage our established direct lending franchise and extensive balance sheet lending programs to generate proprietary investment opportunities that provide attractive value relative to other fixed income investment options. Second, our investment strategies are defensive, with a focus on 1st lien senior debt, which we believe offers the best combination of yield and position in the capital structure for this stage in the credit cycle.  And importantly, we can use our balance sheet to provide risk-retention solutions and pre-ramp portfolios to help investors optimize their returns." 

NewStar's Treasurer, Mike Eisenstein added: "The Berkeley Fund CLO also demonstrates NewStar's strong presence in the capital markets where we are recognized for our distinguished track record as a leading issuer of CLOs backed by both middle market and liquid loan collateral. As a result, we have strong support among a core group of repeat investors who continue to commit capital to our securitization programs and recognize the merits of middle market direct lending.  We were pleased to partner with the Citigroup Global Markets team on this deal and always appreciate the quality of transaction execution they deliver."

This announcement is neither an offer to sell nor a solicitation of an offer to buy the notes.

The notes were issued in a private placement and have not been registered under the Securities Act of 1933, as amended, or any state securities laws and may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act and applicable state securities laws. 

Forward-Looking Statements

This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding anticipated benefits to fund investors of access to lending opportunities generated by our direct lending platform and investment strategies focused on 1st lien senior debt.  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, financing plans and business. As such, they are subject to material risks and uncertainties, including the impact of rapid growth in assets under management; 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.

Additional information about these and other risk factors can be found in NewStar's filings with the Securities and Exchange Commission (the "SEC"), including Item 1A ("Risk Factors") of our 2015 Annual Report on Form 10-K, as may be updated or supplemented by any Risk Factors contained in our subsequent 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.

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.  Credit investments are originated directly through teams of experienced, senior bankers organized around key industry and market segments. Through its asset management platforms, NewStar offers a range of investment products employing credit-oriented strategies focused on middle market loans and liquid, tradeable credit. The Company manages more than $1.3 billion of assets in a series of private credit funds that co-invest in middle market loans originated through its established leveraged finance lending platform and its strategic relationship with GSO Capital, the credit division of The Blackstone Group. Through its wholly-owned subsidiary, NewStar Capital, the Company also has more than $2 billion of assets managed across a series of CLOs that invest primarily in broadly syndicated, non-investment grade loans, as well as other sponsored funds and managed accounts focused on non-investment grade loans and bonds. 

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

Contact: NewStar Financial Inc. Robert K. Brown (617)848-2558 rbrown@newstarfin.com
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Nov 02, 2016

NewStar Reports Net Income of $8.6 Million, or $0.19 per Diluted Share, for the Third Quarter of 2016

  • Investment Activity — New funded credit investments totaled $427 million in the third quarter compared to $476 million last quarter and $720 million in the same quarter last year, reflecting credit selectivity in a mixed market environment.
  • Managed Assets — Managed loans and credit investments increased slightly from the prior quarter to $6.7 billion, which was $2.0 billion, or 44.4%, higher than in the same period last year. Growth in assets from a new managed fund launched in the third quarter offset an expected decrease in assets in funds past their investment periods. New funds and separate accounts with targeted investment portfolios of $600 million were launched after the end of the third quarter.
  • Revenue — Total revenue1 increased by $10.9 million, or 43.4%, from the prior quarter to $36.2 million in the third quarter due primarily to higher average assets, favorable mark-to-market adjustments, previously unrecorded interest income recognized in connection with the repayment of a non-performing loan at par and higher capital markets related income. 
  • Net Interest Margin — The margin widened to 2.50% for the third quarter from 2.10% in the second quarter due primarily to the impact of interest income recognized in the quarter in connection with the pay-off of a non-performing loan at par.
  • Credit — Credit performance remained within expected ranges with provision expense of $3.6 million for the third quarter, consistent with the prior quarter and $0.9 million lower than in the same period last year.
  • Expenses — Operating expenses increased by $5.2 million to $18.1 million in the third quarter compared to the prior quarter due primarily to $4.2 million of severance charges related to cost saving initiatives and approximately $1.0 million of other elevated expenses related to short-term projects.
  • Equity — Book value per share increased by $0.26 to $14.38 as of September 30, 2016 from $14.12 at the end of the prior quarter due primarily to comprehensive income totaling $11.7 million in the third quarter. Subsequent to the end of the third quarter, the company repurchased 2.5 million shares at a weighted average cost of $8.93 per share in privately negotiated transactions, which is expected to be accretive to book value per share. 
  • Divestitures — Assets and liabilities of the equipment finance business were reclassified as held-for-sale as of September 30, 2016, reflecting an ongoing process to sell that business, which has resulted in a non-binding letter of intent with a prospective buyer. 

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

BOSTON, Nov. 02, 2016 (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 2016, reporting net income of $8.6 million, or $0.19 per diluted share. These results compare to net income of $5.2 million, or $0.11 per diluted share in the second quarter of 2016 and $5.1 million, or $0.11 per diluted share in the third quarter of 2015. Operating income before income taxes was $14.6 million for the third quarter of 2016 compared to $8.8 million for the second quarter of 2016 and $8.8 million in the third quarter of 2015.

Tim Conway, NewStar's Chairman and Chief Executive Officer, commented on the Company's performance: "We continued to make progress on our key strategic priorities in the third quarter and our financial results reflected solid operating trends highlighted by a significant increase in earnings driven by strong revenue growth and stable asset quality.  Revenue increased by more than 40% over last quarter and 35% from the same quarter last year as core revenue increased, loan values recovered and we got a boost in interest income from the repayment of a non-performing loan at par.  Credit costs also remained stable within expected ranges and we absorbed elevated expenses recognized in the quarter primarily related to cost savings initiatives and strategic projects that are expected to provide future benefits. Loan demand from M&A activity remained relatively soft through the quarter.  As a result, our investment pace was below expected levels, reflecting our commitment to credit selectivity. Importantly, book value per share increased by $0.26 and, after quarter-end, we repurchased 2.5 million shares in privately negotiated transactions, which is expected to add more than $0.30 to book value."

"While I am pleased with the financial results, we also made meaningful progress on our key priorities in the quarter as we worked to streamline the business, reduce expenses and expand our asset management activities.  We completed a strategic review to explore the potential sale of our equipment finance business which resulted in a non-binding letter of intent with a prospective buyer.  That transaction is expected to close before year-end.   As a result of savings related to divestitures and other initiatives, we expect to have reduced baseline expenses by 25-30% on a run-rate basis by year end.  We also continue to make progress on our asset management strategy with the launch of two new managed funds and a separate account with target investment portfolios of approximately $1 billion.  In 2016, we have sponsored three new CLOs totaling approximately $1.3 billion, underscoring our position as a leading issuer in that key market." 

Managed and Owned Investment Portfolios

  • Total new funded credit investments were $427 million in the third quarter of 2016 compared to $476 million in the prior quarter and $720 million in the same quarter last year.  Investment activity in the third quarter of 2016 included liquid loan and middle market direct lending strategies.  Loan demand in the third quarter reflected seasonally slow activity through July and August, followed by a pick-up in September driven by refinancing activity, but remained muted overall compared to the prior quarter and last year.  M&A activity continued to reflect a cautious market sentiment amid uncertainty about the future direction of the economy, the rate environment and US elections.  
  • Balance sheet runoff from scheduled amortization, prepayments and loan sales totaled approximately $225 million, or 5.7% of loan and investment balances at the beginning of the period, down from $343 million, or 9.5% of balances in the prior quarter.  Runoff in the third quarter included $148 million of prepayments, $27 million of loan sales and $51 million of contractual amortization compared to prepayments of $190 million, loan sales of $102 million and amortization of $51 million in the prior quarter. 
  • Average yields on new middle market loans and other directly originated credit investments in the third quarter were 6.6%, down from 7.0% in the prior quarter due partly to the impact of competition for limited deal flow in the market and disciplined credit selectivity, but remained consistent with levels in the third quarter of last year. 
  • Loans and other investments outstanding, excluding assets managed for third parties, increased by $200 million, or 5.3%, from the prior quarter.  Net loan growth in the third quarter was driven by lending activity generated through our Leveraged Finance group and an increase in loans sourced for our liquid loan strategies. Compared to the third quarter of 2015, loans and investments increased $342 million, or 9.4% due to lending activity related to both direct lending and liquid loan strategies, which was partially offset by the sale of the ABL business in the first quarter of 2016. 
  • The Leveraged Finance loan portfolio increased by $231 million during the third quarter to $3.8 billion, while loans and leases in our Equipment Finance portfolio decreased by $7 million to $158 million and were reclassified as assets held-for-sale in connection with the planned divestiture of that business.  Commercial real estate loans decreased by 57% in the third quarter to less than $18 million due to the sale of a commercial property as part of an accelerated disposition of that portfolio.  A commercial real estate loan totaling $15.8 million was also reclassified as other real estate owned (OREO) during the quarter.  
  • Assets held in managed funds increased to approximately $3.1 billion as of September 30, 2016 as a decrease in assets managed in amortizing CLOs was more than offset by an increase in assets managed in the new Arch Street fund.  
  • The owned loan portfolio remained defensively positioned - balanced across industry sectors and highly diversified by issuer. Exposure to energy sectors was less than 1.2%, down slightly from the prior quarter.  As of September 30, 2016, no outstanding borrowings by a single obligor represented more than 1.2% of total loans outstanding, and the ten largest obligors comprised approximately 9.4% of the loan portfolio.

Net Interest Income / Margin

  • Net interest income increased by $4.4 million, or 20.8%, to $25.3 million in the third quarter compared to $20.9 million in the prior quarter due primarily to $3.2 million of previously unrecorded interest income recognized in connection with the pay-off of a nonperforming loan at par and a $28.4 million increase in average loans and credit investments compared to the prior quarter.  Compared to the third quarter of last year, net interest income increased by $2.0 million, or 8.7%.
  • The portfolio yield increased to 6.77% in the third quarter compared to 6.28% the prior quarter, and 6.32% in the comparable period in the prior year.  The increase in yield was due primarily to the income recognized in connection with the pay-off of a non-performing loan at par and an increase in deferred fee amortization related to prepayments. 
  • Funding costs were 4.67% in the third quarter which was relatively consistent with 4.65% in the second quarter, but up from 4.31% in the comparable period in the prior year. 
  • As a result, net interest margin widened to 2.50% for the third quarter of 2016 compared to 2.10% for the prior quarter, but narrowed slightly from 2.57% in the third quarter of 2015.

Non-Interest Income

  • Non-interest income increased by $6.6 million to $11.0 million for the third quarter of 2016 compared to $4.4 million in the prior quarter and $3.5 million in the same period last year.  The increase was due primarily to $3.9 million of unrealized gains on loans reported at fair value and higher capital markets related fees.  Unrealized gains partly reflected the recapture of unrealized losses from prior periods as loan values increased broadly across the market driven primarily by spread tightening.
  • Non-interest income in the third quarter of 2016 was centered in asset management income of $3.4 million, $2.9 million of capital markets related fees and $3.9 million of unrealized gains (net) on loans held at fair value. 

Credit Performance

  • Credit performance in the third quarter was consistent with the prior quarter and better than the same quarter last year as credit costs remained in expected ranges.
  • Provision expense was $3.6 million in the third quarter, consistent with the prior quarter and down from $4.5 million in the same quarter last year.        
  • Total net specific provision expense increased by approximately $0.8 million in the third quarter of 2016 to $3.2 million compared to $2.4 million in the prior quarter and $1.6 million in the same quarter last year. 
  • Net charge-offs in the third quarter reflected a small recovery of a previously charged-off loan compared to $6.9 million of charge-offs recognized in the prior quarter and no charge-offs in the same period last year. 
  • The allowance for credit losses was $66.4 million, or 2.29% of consolidated loans and approximately 76.0% of non-performing loans (NPLs), at September 30, 2016, compared to $64.0 million, or 2.09% of loans and approximately 66.8% of NPLs, at June 30, 2016.
  • Non-performing loans decreased by $8.6, or 9%, to $87.3 million, or 2.66% of loans and leases held for investment at September 30, 2016, compared to $95.9 million or 2.97% of loans and leases held for investment at the end of the prior period.  The decrease was due primarily to the repayment of an $8.4 million non-performing loan at par during the quarter. 
  • A commercial property valued at approximately $15.8 million was classified as OREO during the quarter.

Expenses

  • Operating expenses increased by $5.2 million to $18.1 million for the third quarter of 2016 compared to $12.8 million in the prior quarter due to approximately $1 million of expenses related to the planned sale of the equipment finance business and other short-term projects, as well as $4.2 million of severance expenses recognized in connection with cost saving initiatives.
  • As a result, expenses as a percentage of average assets increased to 1.76% of average assets in the third quarter compared to 1.29% in the prior quarter.
  • Operating expenses, excluding non-cash equity compensation and severance costs, were $12.9 million in the third quarter up from $11.9 million during the second quarter due primarily to non-recurring expenses related to the potential sale of the equipment finance business and other short-term projects. 
  • The Company had 83 full-time employees at September 30, 2016 compared to 90 full-time employees at June 30, 2016 and 122 employees at December 31, 2015.  The reduction in staffing levels reflects both the sale of the asset-based lending business, which had 26 full-time employees, and strategic initiatives to streamline operations. 
  • The company has identified additional opportunities to reorganize and streamline its operations to reduce expenses and expects to achieve run-rate savings of approximately 25-30% of the company's fiscal 2016 baseline cost base of approximately $60 million. 

Income Taxes

  • Deferred income taxes decreased $0.6 million to $29.9 million as of September 30, 2016.  The decrease in deferred income taxes was driven primarily by activity in the allowance for credit losses, equipment leasing and available for sale securities.  
  • Approximately $31.9 million and $11.7 million of the net deferred tax asset as of September 30, 2016 were related to our allowance for credit losses and incentive compensation, respectively, which was partially offset by $14.1 million of deferred tax liabilities related to the lease portfolio.

Funding and Capital

  • Total cash and equivalents as of September 30, 2016 were $406.8 million, of which $36.3 million was unrestricted.
  • Unrestricted cash increased slightly from $34.6 million at June 30, 2016, while restricted cash increased by $163.1 million to $370.5 million at September 30, 2016 due primarily to principal and interest collections on loans that were retained pending reinvestment in new loan collat
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Oct 21, 2016

NEWSTAR SCHEDULES RELEASE OF RESULTS FOR THE THIRD QUARTER OF 2016

Boston, Massachusetts, Oct. 21, 2016 (GLOBE NEWSWIRE) -- NewStar Financial, Inc. ("NewStar") (NASDAQ:NEWS) announced today that it will report financial results for the third quarter of 2016 on Wednesday, November 2, 2016 before the markets open.

NewStar will also host a webcast/conference call to discuss the results on Wednesday, November 2, 2016 at 10:00am Eastern Time. All interested parties are invited to participate via telephone or webcast, which will be hosted through the Investor Relations 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 November 10, 2016 by dialing 855-859-2056. International callers should call 404-537-3406. For all replays, please use the passcode 99277366. The audio replay will also be available through the Investor Relations 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 more than $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. 

Robert K. Brown 617.848.2558 rbrown@newstarfin.com

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Sep 21, 2016

NewStar Capital Sponsors Seventh Loan Fund

Boston, MA, Sept. 21, 2016 (GLOBE NEWSWIRE) -- NewStar Financial, Inc. (Nasdaq:NEWS), an internally-managed commercial finance company and asset manager, announced today that its liquid credit platform, NewStar Capital LLC ("NewStar Capital"), completed a $410 million broadly syndicated loan securitization known as Arch Street CLO ("Arch Street").  Arch Street represents the second CLO issued by NewStar this year and its twentieth securitization since inception. 

The notes were backed by a diversified portfolio of syndicated bank loans.  The transaction was executed through a private offering via Rule 144A and Regulation S.  Six classes of notes totaling approximately $370.3 million were placed.  The deal was structured to satisfy risk retention rules with NewStar providing risk retention capital. 

"This transaction represents our second deal in 2016 and our seventh fund backed by broadly syndicated loans.  Importantly, it also reflects our continuing strategy to grow assets managed by our liquid credit platform as a key part of our asset management business," said NewStar's CEO, Tim Conway.

NewStar Capital LLC will serve as collateral manager of the CLO, which has a 4 year reinvestment period.  The notes were rated by Moody's Investors Service and Fitch.  All variable rate notes were priced to yield an initial weighted average of approximately Libor plus 2.4%.

Credit Suisse acted as placement agent in connection with the offering of the notes.

This announcement is neither an offer to sell nor a solicitation of an offer to buy the notes.

The notes subject to the private placement have not been registered under the Securities Act of 1933, as amended, or any state securities laws, and may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act and applicable state securities laws.

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.  Credit investments are originated directly through teams of experienced, senior bankers and marketing officers organized around key industry and market segments. Through its asset management platforms, NewStar offers a range of investment products employing credit-oriented strategies focused on middle market loans and liquid, tradeable credit. The Company manages approximately $1 billion of assets in a series of private credit funds that co-invest in middle market loans originated through its established leveraged finance lending platform and its strategic relationship with GSO Capital, the credit division of The Blackstone Group. Through its wholly-owned subsidiary, NewStar Capital, the Company also has more than $2 billion of assets managed across a series of CLOs that invest primarily in broadly syndicated, non-investment grade loans, as well as other sponsored funds and managed accounts that invest across various asset classes, including non-investment grade loans and bonds. 

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

Robert K. Brown (617)848-2558 rbrown@newstarfin.com

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Aug 11, 2016

NewStar announces retirement of John Frishkopf, head of its Asset Management and Treasury Group

Boston, Massachusetts, Aug. 11, 2016 (GLOBE NEWSWIRE) -- NewStar Financial, Inc. (NASDAQ: NEWS) announced today that John Frishkopf will retire from the company as of September 30, 2016.  Mr. Frishkopf was a founding member of the firm and has served as Treasurer and head of its Asset Management group since NewStar's inception in 2004.  He will remain involved with the company as an external advisor to provide decision support to the management committee and to advise the Risk Committee of the Board of Directors as needed on strategic funding matters. 

Mr. Frishkopf will be succeeded as Treasurer by Michael Eisenstein, a managing director in the treasury group.  Mr. Eisenstein joined NewStar in 2005 and has served as Assistant Treasurer since 2011, playing key roles in all treasury management activities, including building the company's market-leading securitization platform.  He has more than 16 years of treasury management and debt capital markets experience.  Prior to joining NewStar, Mr. Eisenstein worked at Bank of Tokyo Mitsubishi UFJ Capital Corporation (BTMU) in its investment banking group covering non-investment grade commercial finance companies in the transportation sector. 

Commenting on Mr. Frishkopf's contributions to the firm, NewStar's CEO, Tim Conway said: "John played a key role in building the company and establishing our securitization platform as the centerpiece of our funding strategy.  In fact, he was one of the pioneers of middle market loan securitization, driving innovation and helping to broaden investor interest in the asset class as the market developed.  Working with Mr. Eisenstein, he also built a world-class treasury organization with un-matched securitization expertise and a strong operating platform.  His asset-liability strategy, disciplined liquidity management and thought leadership also helped guide us through periods of unprecedented market turbulence. As a result, he leaves us better for it and we are grateful for his many significant contributions."

"While it is personally difficult to lose a colleague like John, I have complete confidence in Mike and our treasury team and I am excited about continuing to work closely with him as we build on an outstanding track record of middle market loan securitization and capitalize on opportunities to expand our asset management platform," Mr. Conway added.

About NewStarNewStar 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.  Credit investments are originated directly through teams of experienced, senior bankers and marketing officers organized around key industry and market segments. Through its asset management platforms, NewStar offers a range of investment products employing credit-oriented strategies focused on middle market loans and liquid, tradeable credit. The Company manages approximately $1 billion of assets in a series of private credit funds that co-invest in middle market loans originated through its established leveraged finance lending platform and its strategic relationship with GSO Capital, the credit division of The Blackstone Group. Through its wholly-owned subsidiary, NewStar Capital, the Company also has more than $2 billion of assets managed across a series of CLOs that invest primarily in broadly syndicated, non-investment grade loans, as well as other sponsored funds and managed accounts that invest across various asset classes, including non-investment grade loans and bonds. 

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

     

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

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Aug 03, 2016

NewStar Reports Net Income of $5.2 Million, or $0.11 Per Diluted Share, for the Second Quarter of 2016

  • Investment Activity — New funded credit investments totaled $476 million in the second quarter, up from $300 million last quarter and down from $1 billion in the same quarter last year as middle market sponsored lending activity increased in the second quarter of 2016, but remained at low levels in 2016 compared to the prior year.
  • Asset Growth — Managed loans and credit investments remained relatively unchanged from the prior quarter at $6.6 billion and increased $2.4 billion, or 57%, from the same period last year due to a combination of acquisitions and organic growth.        
  • Revenue — Total revenue1 decreased by $16.4 million, or 39.4%, from the prior quarter to $25.3 million in the second quarter due primarily to a $22.5 million gain recognized on the sale of a business in the first quarter, but increased 8.8% over the same period last year as asset growth drove net interest income higher.    
  • Net Interest Margin — The margin narrowed to 2.10% for the second quarter from 2.21% in the first quarter as asset yields remained stable and the cost of funds increased due primarily to the impact of the sale of the asset-based lending business, which drove a shift in the mix of debt.
  • Credit — Credit performance improved in the second quarter as the provision for credit losses decreased by $14.1 million from the prior quarter due primarily to a reduction of $14.2 million in specific provision expense.   
  • Expenses — Operating expenses decreased by $4.2 million, or 25%, to $12.8 million in the second quarter compared to the prior quarter due to the sale of the company's asset-based lending business in the first quarter and other cost saving initiatives targeting a considerable reduction in total run-rate expenses by the end of 2016.
  • Equity - Book value per share increased by $0.28 to $14.12 as of June 30, 2016 from $13.84 at the end of the prior quarter due primarily to earnings retention and accretive share repurchases.

BOSTON, Aug. 03, 2016 (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 2016, reporting net income of $5.2 million, or $0.11 per diluted share. These results compare to net income of $4.0 million, or $0.09 per diluted share in the first quarter of 2016 and $5.0 million, or $0.10 per diluted share in the second quarter of 2015. Operating income before income taxes was $8.8 million for the second quarter of 2016 compared to $6.9 million for the first quarter of 2016 and $8.6 million in the second quarter of 2015.

Tim Conway, NewStar's Chairman and Chief Executive Officer, commented on the Company's performance: "Our results in the second quarter reflected solid core operating trends, including an increase in investment activity, stable core revenue, improved credit performance and continued progress on our strategic goals.   Although loan volumes remained below target levels through the first half of the year, investment activity improved in the second quarter. Loan demand from M&A activity remained weak, however, as continued uncertainty about the potential economic impacts of geopolitical events weighed on market sentiment.

Overall, I was pleased with our financial results as earnings increased from last quarter and the comparable quarter last year.  Core revenue remained steady at $25 million, excluding non-recurring items, despite the loss of revenue contributed by the asset-based lending (ABL) business, which we sold in the first quarter.  Continued pressure on loan values, however, weighed on non-interest income in the quarter as we recognized additional unrealized losses on loans held for sale, which we could recover in future periods.   Credit costs normalized in the second quarter as expected. We reduced non-performing assets by 16%.  We also sold $34 million of real estate loans, accelerating the disposition of that portfolio.  Our ability to take steps last quarter to accelerate certain workout strategies has positioned us well for the second half of the year.  Importantly, book value per share also increased considerably due to accretive share repurchases and earnings retention. 

We also continued to make progress on key priorities in the quarter as we worked to streamline the business, and focus on higher margin segments, including middle market direct lending and asset management.  Expenses decreased by 25% from the prior quarter due to the sale of the ABL business and we have identified additional opportunities that we expect to generate a considerable reduction in total run-rate expenses by the end of 2016." 

Managed and Owned Investment Portfolios

  • Total new funded credit investments were $476 million in the second quarter of 2016 compared to $300 million in the prior quarter and $1 billion in the same quarter last year.  Investment activity in the second quarter of 2016 included $107 million of loans sourced for the Arch Street fund and reflected a modest pick-up in middle market sponsored lending activity compared to the prior quarter, but remained muted compared to last year.  M&A activity continued to reflect a cautious market sentiment amid uncertainty about the future direction of the economy, including the potential impact of developing geopolitical events. 
  • Balance sheet runoff from scheduled amortization, prepayments and loan sales totaled approximately $343 million, or 9.5% of the loan balances at the beginning of the period, up from $170 million, or 4.5% of balances in the prior quarter.  Runoff in the second quarter included $190 million of prepayments, $102 million of loan sales and $51 million of contractual amortization compared to prepayments of $80 million, loan sales of $49 million and amortization of $41 million in the prior quarter. 
  • Average yields on new middle market loans and other directly originated credit investments in the second quarter were 7.0%, down from 7.4% in the prior quarter due partly to the impact of competition for limited deal flow in the market, but up from 6.56% in the second quarter of last year. 
  • Loans and other investments outstanding, excluding assets managed for third parties, increased by $37.8 million, or 1%, from the prior quarter. Net loan growth in the second quarter was driven by lending activity generated through our Leveraged Finance group. Compared to the second quarter of 2015, loans and investments increased $548 million, or 17%, due to a combination of acquisition activity and organic growth, which was partially offset by the sale of the ABL business. 
  • The Leveraged Finance loan portfolio increased by $85.6 million during the second quarter to $3.6 billion, while loans and leases in our Equipment Finance portfolio decreased by $10.2 million to $165.2 million.  Commercial real estate loans decreased by 47% in the second quarter to less than $42 million due to the sale of commercial mortgage loans as part of an accelerated disposition of that portfolio.  A commercial real estate loan totaling $23.8 million was also reclassified as held-for-sale during the quarter in connection with a strategy to further reduce exposure to this asset class.
  • New equipment loan and lease volume was $11 million in the second quarter, down slightly from $13 million last quarter and down from $35 million in the second quarter of 2015,   
  • Assets held in managed funds increased slightly to approximately $3.0 billion as of June 30, 2016 as a decrease in assets managed in amortizing CLOs was offset by an increase in assets managed in the new Arch Street fund.  
  • The owned loan portfolio remained defensively positioned - balanced across industry sectors and highly diversified by issuer. Exposure to energy sectors was less than 2%, down slightly from the prior quarter.  As of June 30, 2016, no outstanding borrowings by a single obligor represented more than 1.2% of total loans outstanding, and the ten largest obligors comprised approximately 9.6% of the loan portfolio.

Net Interest Income / Margin

  • Net interest income decreased by $1.6 million, or 7.2%, to $20.9 million in the second quarter compared to $22.5 million in the prior quarter due primarily to a $174 million decrease in average loans and credit investments compared to the prior quarter.   The decrease was due primarily to the sale of the company's asset-based lending business at the end of the first quarter, which was partly offset by growth in the leveraged finance loan portfolio.  Compared to the second quarter of last year, net interest income increased by $5.1 million, or 32.4%, due to a 25.7% increase in average earning assets and an 11 bp improvement in net interest margin.  
  • The portfolio yield remained consistent with the prior quarter at 6.28% and decreased slightly from 6.31% from the second quarter of 2015. 
  • Funding costs increased to 4.65% in the second quarter compared to 4.56% in the prior quarter, and 4.80% in the comparable period in the prior year.  The change from the first quarter was due to a shift in the composition of debt resulting from the repayment of warehouse credit facilities in connection with the sale of the company's asset-based lending business, as well as the issuance of $25 million of subordinated notes in the first quarter. The decrease in funding costs from the comparable period in the prior year is primarily the result of $3.6 million of accelerated costs recognized in connection with the extinguishment of debt in the year prior.
  • As a result, net interest margin narrowed to 2.10% for the second quarter of 2016 compared to 2.21% for the prior quarter and 1.99% in the second quarter of 2015.

Non-Interest Income

  • Non-interest income decreased by $14.8 million to $4.4 million for the second quarter of 2016 compared to $19.2 million in the prior quarter and $7.4 million in the same period last year.  The decrease from the prior quarter was due primarily to the recognition of a $22.5 million gain on the sale of the company's asset-based lending business during the first quarter of 2016, which was partly offset by lower losses recognized on loans held for sale and a total return swap during the second quarter.  Losses recognized on loans held for sale and the total return swap decreased by $7.6 million in the second quarter compared to the prior quarter, which reflected continued pressure on loan values during the second quarter and the termination of the swap at the end of the prior quarter.
  • Other non-interest income in the second quarter of 2016 was centered in asset management income of $3.5 million and $1.5 million of capital markets related fees.   A decrease of approximately $0.9 million in unused commitment fees and other miscellaneous fees related to the asset-based lending business was largely offset by higher capital markets fees. 

Credit Performance

  • Credit performance improved in the second quarter as credit costs normalized, as expected, following elevated levels of credit costs recognized in the prior quarter.
  • Provision expense was $3.6 million in the second quarter, a decrease of $14.1 million compared to the elevated levels in the prior quarter.         
  • Total net specific provision expense decreased by approximately $14.2 million in the second quarter of 2016 to $2.4 million compared to $16.6 million in the prior quarter, reflecting stable asset quality. 
  • Charge-offs were $6.9 million in the second quarter of 2016 compared to $7.3 million in the prior quarter and $4 million in the second quarter of 2015.  Charge-offs in the quarter were applied against previously established specific reserves.  
  • The allowance for credit losses was $64.0 million, or 2.09% of consolidated loans and approximately 66.8% of non-performing loans (NPLs), at June 30, 2016, compared to $67.3 million, or 2.19% of loans and approximately 59% of NPLs, at March 31, 2016.
  • Non-performing assets decreased 16% to $96.2 million, or 2.98% of loans and lease assets held for investment at June 30, 2016, compared to $114.7 million or 3.63% of loans and lease assets held for investment at the end of the prior period.  The decrease was due primarily to the resolution of a legacy loan resulting in a $12 million repayment and charge-offs of $6.9 million as noted above. 
  • Two loans totaling $9.2 million were placed on non-accrual status in the second quarter. 

Expenses

  • Operating expenses decreased by $4.2 million, or 25%, to $12.8 million for the second quarter of 2016 compared to $17.1 million in the prior quarter due to the impact of the sale of the company's asset-based lending business and other cost initiatives. 
  • Expenses as a percentage of average assets decreased to 1.29% of average assets in the second quarter compared to 1.68% in the prior quarter.
  • Adjusted operating expenses, excluding non-cash equity compensation, were $11.9 million in the second quarter down from $16.1 million during the first quarter. 
  • The Company had 90 full-time employees at June 30, 2016 compared to 95 full-time employees at March 31, 2016 and 122 employees at December 31, 2015.  The reduction in staffing levels reflects both the sale of the asset-based lending business, which had 26 full-time employees, and strategic initiatives to streamline operations. 
  • The company has identified additional opportunities to reorganize and streamline its operations to reduce expenses and expects to achieve considerable additional run-rate savings by the end of 2016. 

Income Taxes

  • Deferred income taxes decreased $3.2 million to $30.4 million as of June 30, 2016.  The decrease in deferred income taxes related to activity in the allowance for credit losses and available for sale securities.  
  • Approximately $30.2 million and $11.1 million of the net deferred tax asset as of June 30, 2016 were related to our allowance for credit losses and incentive compensation, respectively, which was partially offset by $12.9 million of deferred tax liabilities related to the lease portfolio.

Funding and Capital

  • Total cash and equivalents as of June 30, 2016 were $242 million, of which $34.6 million was unrestricted. Unrestricted cash decreased from approximately $150.70 million at March 31, 2016, due primarily to receipt of cash proceeds from the sale of the asset-based lending subsidiary during the previous quarter, which was used to pay-down warehouse debt and re-invest in new loans.  Restricted cash increased by approximately $52.0 million at June 30, 2016 from approximately $155.3 million as of March 31, 2016 due primarily to principal and interest collections on loans that was retained pending reinvestment in new loan collateral or distribution on various settlement dates.
  • Advances under credit facilities increased by approximately $27.3
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