BOSTON, Feb. 15, 2012 (GLOBE NEWSWIRE) -- NewStar Financial, Inc. (Nasdaq:NEWS), a specialized commercial finance company, today reported net income of $6.4 million, or $0.12 per diluted share for the fourth quarter of 2011. On an adjusted basis, net income was $6.6 million, or $0.13 per diluted share, which reflected $0.2 million after-tax non-cash equity compensation expense related to the 2006 IPO.
The Company also reported that net income for 2011 increased 38% to $14.2 million, or $0.27 per diluted share, compared to $10.2 million, or $0.19 per diluted share in 2010.
"Adjusted net income" and other non-GAAP financial measures used in this release are defined under "Non-GAAP Financial Measures" on page 5. Reconciliations between GAAP and adjusted (non-GAAP) measures can be found in the attached financial tables.
"I am excited about the company's performance in the fourth quarter. We finished 2011 in a strong position with solid results across all aspects of the business. We also continued to gain momentum with customers in the marketplace and added balance sheet capacity to meet increasing loan demand," said Tim Conway, NewStar's Chairman and Chief Executive Officer. "Our financial results reflected strong new business volume and further improvement in our credit performance. Increased loan volume drove loan growth of 8% despite high levels of run-off during the year," he added. "With solid loan growth, improving margins and credit costs approaching more normalized levels, we generated a 38% increase in net income for 2011. I am pleased with our results and optimistic about 2012 because I believe that we are beginning to once again, demonstrate our earnings capacity and the value of our specialized lending franchise," he concluded.
Managed and Owned Loan Portfolios
Net Interest Income / Margin
Non-Interest Income
Expenses
Income Taxes
Loan Credit Quality
Funding and Capital
Book Value
Share Count
Conference Call and Webcast
NewStar will host a webcast/conference call to discuss the results today at 10:00 am Eastern Time. All interested parties are invited to participate via telephone or webcast, which will be hosted through the Investor Relations section at www.newstarfin.com. Please visit the website to register for the webcast and test your connection prior to the call. You can also access the conference call by dialing 877-755-7419 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 February 18, 2012 by dialing 800-585-8367. International callers should call 404-537-3406. For all replays, please use the passcode 49012850. The audio replay will also be available through the Investor Relations section at www.newstarfin.com.
About NewStar Financial
NewStar Financial (Nasdaq:NEWS) is a specialized commercial finance company focused on meeting the complex financing needs of companies and private investors in the middle market. The Company specializes in providing senior secured debt financing options to mid-sized companies to fund working capital, growth strategies, acquisition and recapitalization, as well as, equipment purchases. NewStar originates loans and leases directly through a team of experienced, senior bankers and marketing officers organized around key industry and market segments. The Company targets 'hold' positions of up to $35 million and selectively underwrites or arranges larger transactions for syndication to other lenders.
NewStar is headquartered in Boston MA and has regional offices in Darien CT, Chicago IL, Dallas TX, Los Angeles CA, Philadelphia, PA, San Francisco CA, and Portland OR. For more detailed transaction and contact information, please visit our website at www.newstarfin.com. ;
The NewStar Financial, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4044
Forward-Looking Statements
This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this release are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, strategic plans, objectives, future performance, 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 our 2010 Annual Report on Form 10-K, as supplemented by the Risk Factors contained in our Quarterly Reports on Form 10‑Q. NewStar is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. NewStar plans to file its Annual Report on Form 10-K for the year ended December 31, 2011 with the SEC on or before March 15, 2012 and urges its shareholders to refer to that document for more complete information concerning NewStar's financial results.
Non-GAAP Financial Measures
References to "adjusted net income" and "adjusted earnings per share" mean net income or earnings per diluted share, respectively, as determined under GAAP, excluding the following items: compensation expense related to restricted stock grants made since our inception as a private company, including equity awards made in connection with the initial public offering and the related impact on our effective tax rate. GAAP requires that these items be included in net income. NewStar management uses "adjusted net income" and "adjusted earnings per share" to make operational and investment decisions, and NewStar believes that they provide useful information to investors in their evaluation of our financial performance and condition. Excluding the financial results and expenses incurred in connection with the compensation expense related to restricted stock grants made since our inception as a private company eliminates unique amounts that make it difficult to assess our core performance and compare our period‑over‑period results. A reconciliation of adjusted net income to net income is included on pages 7 and 8 of this release.
Adjusted return on average assets means adjusted net income divided by average assets for the period. Adjusted return on average equity means adjusted net income divided by average equity for the period. Adjusted efficiency ratio means operating expenses determined in accordance with GAAP less compensation expense related to restricted stock grants made since our inception as a private company. The adjusted ratios exclude unique expenses that make it difficult to assess our core performance and compare our period-over-period results.
A reconciliation of our adjusted financial measures to their GAAP equivalents is included on pages 7, 11 and 12 of this release. NewStar's adjusted financial measures should not be considered as alternatives to financial measures determined in accordance with GAAP and may be different from, or inconsistent with, non-GAAP financial measures used by other companies.
NewStar Financial, Inc. | |||
Consolidated Balance Sheets | |||
(unaudited) | |||
December 31, | September 30, | December 31, | |
($ in thousands) | 2011 | 2011 | 2010 |
Assets: | |||
Cash and cash equivalents | $ 18,468 | $ 27,604 | $ 54,365 |
Restricted cash | 83,815 | 74,610 | 178,364 |
Investments in debt securities, available-for-sale | 17,817 | 11,431 | 4,014 |
Loans held-for-sale, net | 38,278 | 31,192 | 41,386 |
Loans and leases, net | 1,699,187 | 1,676,651 | 1,590,331 |
Deferred financing costs, net | 11,997 | 12,608 | 15,504 |
Interest receivable | 9,857 | 8,702 | 6,797 |
Property and equipment, net | 740 | 837 | 879 |
Deferred income taxes, net | 47,902 | 47,120 | 48,093 |
Income tax receivable | 293 | 5,494 | 5,435 |
Other assets | 18,029 | 20,075 | 29,798 |
Total assets | $ 1,946,383 | $ 1,916,324 | $ 1,974,966 |
Liabilities: | |||
Credit facilities | $ 214,711 | $ 161,909 | $ 108,502 |
Term debt | 1,073,105 | 1,095,977 | 1,278,868 |
Repurchase agreements | 64,868 | 67,554 | -- |
Accrued interest payable | 2,853 | 2,040 | 4,014 |
Accounts payable | 430 | 717 | 242 |
Other liabilities | 26,654 | 30,739 | 29,161 |
Total liabilities | 1,382,621 | 1,358,936 | 1,420,787 |
Total stockholders' equity | 563,762 | 557,388 | 554,179 |
Total liabilities and stockholders' equity | $ 1,946,383 | $ 1,916,324 | $ 1,974,966 |
NewStar Financial, Inc. | |||
Consolidated Statements of Operations | |||
(unaudited) | |||
Three Months Ended | |||
December 31, | September 30, | December 31, | |
($ in thousands, except per share amounts) | 2011 | 2011 | 2010 |
Net interest income: | |||
Interest income | $ 30,877 | $ 29,500 | $ 28,483 |
Interest expense | 7,371 | 10,683 | 9,092 |
Net interest income | 23,506 | 18,817 | 19,391 |
Provision for credit losses | 4,314 | 4,408 | (768) |
Net interest income after provision for credit losses | 19,192 | 14,409 | 20,159 |
Non-interest income: | |||
Fee income | 1,563 | 573 | 983 |
Asset management income | 684 | 697 | 664 |
Gain (loss) on derivatives | (35) | 252 | (92) |
Gain (loss) on sale of loans | -- | 20 | (3) |
Gain on acquisition | -- | -- | 5,649 |
Other income (loss) | (318) | 1,862 | (343) |
Total non-interest income | 1,894 | 3,404 | 6,858 |
Operating expenses: | |||
Compensation and benefits | 7,823 | 7,706 | 7,495 |
Occupancy and equipment | 496 | 519 | 543 |
General and administrative expenses | 2,749 | 3,671 | 3,192 |
Total operating expenses | 11,068 | 11,896 | 11,230 |
Income before income taxes | 10,018 | 5,917 | 15,787 |
Income tax expense | 3,650 | 2,508 | 6,414 |
Net income before noncontrolling interest | 6,368 | 3,409 | 9,373 |
Net income attributable to noncontrolling interest | -- | -- | -- |
Net income | $ 6,368 | $ 3,409 | $ 9,373 |
After tax adjustments to net income: | |||
IPO related compensation and benefits expense (1) | 201 | 210 | 711 |
Adjusted net income | $ 6,569 | $ 3,619 | $ 10,084 |
Net income per share: | |||
Basic | $ 0.13 | $ 0.07 | $ 0.19 |
Diluted | $ 0.12 | $ 0.06 | $ 0.18 |
Weighted average shares outstanding: | |||
Basic | 47,442,907 | 47,942,803 | 48,745,084 |
Diluted | 52,166,449 | 52,618,806 | 52,749,213 |
Adjusted net income per share: | |||
Basic | $ 0.14 | $ 0.08 | $ 0.21 |
Diluted | $ 0.13 | $ 0.07 | $ 0.19 |
Adjusted weighted average shares outstanding: | |||
Basic | 47,442,907 | 47,942,803 | 48,745,084 |
Diluted | 52,166,449 | 52,618,806 | 52,749,213 |
(1) Non-cash compensation charge related to restricted stock grants made since our inception as a private company, including equity awards made in connection with the initial public offering. |
NewStar Financial, Inc. | ||
Consolidated Statements of Operations | ||
(unaudited) | ||
Year Ended December 31, | ||
($ in thousands, except per share amounts) | 2011 | 2010 |
Net interest income: | (unaudited) | |
Interest income | $ 115,680 | $ 112,826 |
Interest expense | 34,953 | 40,558 |
Net interest income | 80,727 | 72,268 |
Provision for credit losses | 17,312 | 32,997 |
Net interest income after provision for credit losses | 63,415 | 39,271 |
Non-interest income: | ||
Fee income | 3,070 | 2,409 |
Asset management income | 2,635 | 2,872 |
Gain on derivatives | 242 | 28 |
Gain (loss) on sale of loans | 128 | (116) |
Gain on acquisition | -- | 5,649 |
Other income | (2,008) | 7,854 |
Total non-interest income | 4,067 | 18,696 |
Operating expenses: | ||
Compensation and benefits | 30,144 | 26,418 |
Occupancy and equipment | 2,036 | 2,094 |
General and administrative expenses | 11,751 | 12,101 |
Total operating expenses | 43,931 | 40,613 |
Income before income taxes | 23,551 | 17,354 |
Income tax expense | 9,403 | 6,935 |
Net income before noncontrolling interest | 14,148 | 10,419 |
Net income attributable to noncontrolling interest | -- | (187) |
Net income | $ 14,148 | $ 10,232 |
After tax adjustments to net income: | ||
IPO related compensation and benefits expense (1) | 918 | 2,449 |
Adjusted net income | $ 15,066 | $ 12,681 |
Net income per share: | ||
Basic | $ 0.29 | $ 0.21 |
Diluted | $ 0.27 | $ 0.19 |
Weighted average shares outstanding: | ||
Basic | 48,106,032 | 49,449,314 |
Diluted | 52,925,924 | 52,548,104 |
Adjusted net income per share: | ||
Basic | $ 0.31 | $ 0.26 |
Diluted | $ 0.28 | $ 0.24 |
Adjusted weighted average shares outstanding: | ||
Basic | 48,106,032 | 49,449,314 |
Diluted | 52,925,924 | 52,548,104 |
(1) Non-cash compensation charge related to restricted stock grants made since our inception as a private company, including equity awards made in connection with the initial public offering. |
NewStar Financial, Inc. | |||
Selected Financial Data | |||
(unaudited) | |||
Three Months Ended | |||
December 31, | September 30, | December 31, | |
($ in thousands) | 2011 | 2011 | 2010 |
Performance Ratios: | |||
Return on average assets | 1.32% | 0.71% | 1.93% |
Return on average equity | 4.50 | 2.41 | 6.76 |
Net interest margin, before provision | 4.77 | 3.98 | 4.01 |
Efficiency ratio | 43.57 | 53.53 | 42.78 |
Portfolio yield | 6.61 | 6.58 | 6.33 |
Credit Quality Ratios: | |||
Delinquent loan rate (at period end) | 5.34% | 4.72% | 6.74% |
Delinquent loan rate for accruing loans 60 days or more past due (at period end) | 0.46 | 0.47 | 0.50 |
Non-accrual loan rate (at period end) | 5.61 | 5.83 | 7.98 |
Non-performing asset rate (at period end) | 5.61 | 5.83 | 8.17 |
Annualized net charge off rate (end of period loans) | 2.89 | 2.10 | 1.38 |
Annualized net charge off rate (average period loans) | 2.89 | 2.12 | 1.32 |
Allowance for credit losses ratio (at period end) | 3.52 | 4.10 | 4.99 |
Capital and Leverage Ratios: | |||
Equity to assets | 28.96% | 29.09% | 28.06% |
Debt to equity | 2.40 x | 2.38 x | 2.50 x |
Book value per share | $ 11.42 | $ 11.27 | $ 10.96 |
Average Balances: | |||
Loans and other debt products, gross | $ 1,852,525 | $ 1,778,988 | $ 1,782,540 |
Interest earning assets | 1,954,471 | 1,877,897 | 1,917,295 |
Total assets | 1,916,742 | 1,900,623 | 1,930,917 |
Interest bearing liabilities | 1,328,051 | 1,286,503 | 1,327,025 |
Equity | 561,825 | 560,821 | 549,830 |
Allowance for credit loss activity: | |||
Balance as of beginning of period | $ 73,038 | $ 78,040 | $ 91,468 |
General provision (credit) for credit losses | 3,918 | (1,922) | (8,763) |
Specific provision for credit losses | 396 | 6,330 | 7,995 |
Net charge offs | (13,240) | (9,410) | (5,919) |
Balance as of end of period | $ 64,112 | $ 73,038 | $ 84,781 |
Supplemental Data (at period end): | |||
Investments in debt securities, gross | $ 25,298 | $ 17,298 | $ 6,468 |
Loans held-for-sale, gross | 38,837 | 31,786 | 42,228 |
Loans held-for-investment, gross | 1,820,193 | 1,781,917 | 1,698,238 |
Loans and investments in debt securities, gross | 1,884,328 | 1,831,001 | 1,746,934 |
Unused lines of credit | 252,288 | 241,902 | 270,793 |
Standby letters of credit | 6,462 | 8,768 | 8,737 |
Total funding commitments | $ 2,143,078 | $ 2,081,671 | $ 2,026,464 |
Loan portfolio | $ 1,884,328 | $ 1,831,001 | $ 1,746,934 |
Loans owned by NewStar Credit Opportunities Fund | 517,596 | 499,780 | 451,929 |
Managed loan portfolio | $ 2,401,924 | $ 2,330,781 | $ 2,198,863 |
Loans held-for-sale, gross | $ 38,837 | $ 31,786 | $ 42,228 |
Loans held-for-investment, gross | 1,820,193 | 1,781,917 | 1,698,238 |
Total loans, gross | 1,859,030 | 1,813,703 | 1,740,466 |
Deferred fees, net | (57,865) | (33,212) | (24,247) |
Allowance for loan losses - general | (23,022) | (19,126) | (24,152) |
Allowance for loan losses - specific | (40,678) | (53,522) | (60,350) |
Total loans, net | $ 1,737,465 | $ 1,707,843 | $ 1,631,717 |
NewStar Financial, Inc. | ||
Selected Financial Data | ||
(unaudited) | ||
Year Ended December 31, | ||
($ in thousands) | 2011 | 2010 |
Performance Ratios: | ||
Return on average assets | 0.75% | 0.51% |
Return on average equity | 2.52 | 1.87 |
Net interest margin, before provision | 4.28 | 3.60 |
Efficiency ratio | 51.81 | 44.74 |
Portfolio yield | 6.50 | 6.02 |
Credit Quality Ratios: | ||
Annualized net charge off rate (end of period loans) | 2.09 | 3.69 |
Annualized net charge off rate (average period loans) | 2.15 | 3.36 |
Average Balances: | ||
Loans and other debt products, gross | $ 1,776,195 | $ 1,870,178 |
Interest earning assets | 1,886,165 | 2,007,908 |
Total assets | 1,885,407 | 2,016,264 |
Interest bearing liabilities | 1,286,256 | 1,430,526 |
Equity | 560,617 | 546,974 |
Allowance for credit loss activity: | ||
Balance as of beginning of period | $ 84,781 | $ 114,470 |
General provision (credit) for credit losses | (1,470) | (14,698) |
Specific provision for credit losses | 18,782 | 47,695 |
Net charge offs | (37,981) | (62,686) |
Balance as of end of period | $ 64,112 | $ 84,781 |
NewStar Financial, Inc. | |||
Non-GAAP Data | |||
(unaudited) | |||
Adjusted | |||
Three Months Ended | |||
December 31, | September 30, | December 31, | |
($ in thousands) | 2011 | 2011 | 2010 |
Performance Ratios: | |||
Return on average assets | 1.36% | 0.76% | 2.07% |
Return on average equity | 4.64 | 2.56 | 7.28 |
Efficiency ratio | 42.33 | 51.90 | 39.74 |
Consolidated Statement of Operations Adjustments(1): | |||
Operating expenses | $ 11,068 | $ 11,896 | $ 11,230 |
Less: IPO related compensation and benefits expense (2) | 317 | 364 | 798 |
Adjusted operating expenses | $ 10,751 | $ 11,532 | $ 10,432 |
(1) Adjustments are pre-tax. | |||
(2) Non-cash compensation charge related to restricted stock grants made since our inception as a private company, including equity awards made in connection with the initial public offering. |
NewStar Financial, Inc. | ||
Non-GAAP Data | ||
(unaudited) | ||
Adjusted | ||
Year Ended December 31, | ||
($ in thousands) | 2011 | 2010 |
Performance Ratios: | ||
Return on average assets | 0.80% | 0.63% |
Return on average equity | 2.69 | 2.32 |
Efficiency ratio | 49.98 | 40.72 |
Consolidated Statement of Operations Adjustments(1): | ||
Operating expenses | $ 43,931 | $ 40,613 |
Less: IPO related compensation and benefits expense (2) | 1,550 | 3,647 |
Adjusted operating expenses | $ 42,381 | $ 36,966 |
(1) Adjustments are pre-tax. | ||
(2) Non-cash compensation charge related to restricted stock grants made since our inception as a private company, including equity awards made in connection with the initial public offering. |
NewStar Financial, Inc. | ||||||
Portfolio Data | ||||||
(unaudited) | ||||||
($ in thousands) | December 31, 2011 | September 30, 2011 | December 31, 2010 | |||
Portfolio Data: | ||||||
First mortgage | $ 252,927 | 13.4% | $ 252,311 | 13.8% | $ 264,156 | 15.1% |
Senior secured asset-based | 114,585 | 6.1 | 109,084 | 6.0 | 73,764 | 4.2 |
Senior secured cash flow | 1,439,181 | 76.4 | 1,402,856 | 76.6 | 1,356,805 | 77.7 |
Other | 77,635 | 4.1 | 66,750 | 3.6 | 52,209 | 3.0 |
Total | $ 1,884,328 | 100.0% | $ 1,831,001 | 100.0% | $ 1,746,934 | 100.0% |
Leveraged Finance | $ 1,501,175 | 79.7% | $ 1,457,512 | 79.6% | $ 1,396,934 | 80.0% |
Real Estate | 271,381 | 14.4 | 270,736 | 14.8 | 282,610 | 16.2 |
Business Credit | 111,772 | 5.9 | 102,753 | 5.6 | 67,390 | 3.8 |
Total | $ 1,884,328 | 100.0% | $ 1,831,001 | 100.0% | $ 1,746,934 | 100.0% |