* $7.7 million of adjusted net income in the second quarter or $0.21 adjusted earnings per diluted share * $3.4 million net income in the second quarter or $0.09 net income per diluted share on a GAAP basis * $2.5 billion of assets in the managed loan portfolio, up 18% from the first quarter * Credit quality stable, no loan charge offs as of June 30, 2007 * $900 million of committed incremental funding capacity and $190 million of liquidity
BOSTON, Aug. 8, 2007 (PRIME NEWSWIRE) -- NewStar Financial, Inc. (Nasdaq:NEWS) today reported adjusted net income for the second quarter of 2007 of $7.7 million, or adjusted earnings of $0.21 per diluted share. On a GAAP basis, the company reported net income of $3.4 million, or $0.09 per diluted share, including the $2.7 million after-tax loss on the previously announced sale of securities and loan assets.
"Adjusted net income" and other non-GAAP financial measures used in this release are defined under "Non-GAAP Financial Measures" on page 4. We have provided a reconciliation between GAAP and adjusted (non-GAAP) measures in the attached financial tables.
"The strength of our second quarter earnings was driven by the solid performance in our core lending business. I believe the value of our direct origination platform will be even more evident in this challenging market environment," said Tim Conway, Chairman and Chief Executive Officer. "With a liquid balance sheet and significant funding capacity we are well-positioned to capitalize on opportunities in the second half of 2007."
Strong Origination Volume
* Overall origination volume for the quarter was $685 million, of which $121 million was syndicated to others, $143 million was sold to the NewStar Credit Opportunities Fund (NCOF), $52 million was originated for the managed ArcTurus CLO and $369 million was retained on NewStar's balance sheet. * Middle Market Corporate generated approximately 75% of the new volume in the quarter, while Commercial Real Estate and Structured Products produced 17% and 8%, respectively. * We continued to grow our proprietary direct origination platform, adding two new senior bankers in the second quarter.
Growth in Managed Loan Portfolio
* Managed loan portfolio increased to $2.5 billion as of June 30, 2007, up 18% or $380 million from $2.1 billion at March 31, 2007, which excludes the assets sold. Assets managed for the NCOF increased by $67 million, or 17%, from $382 million as of March 31, 2007 to $449 million at June 30, 2007. * Our business continues to be balanced across industry sectors and highly diversified across issuers. As of June 30, 2007, no single issuer represented more than 1% of our total assets excluding loans held-for-sale and the ten largest issuers comprised approximately 10% of the loan portfolio. * We continue to be highly selective and focused on senior debt products, with 88% of the loan portfolio invested in senior secured loans and senior debt investments, up from 78% in the first quarter 2007.
Net Interest Income / Margin
* Net interest income before provision for credit losses was $23.3 million for the second quarter 2007 compared to $22.0 million for the first quarter 2007 and $10.3 million for the second quarter 2006. * Net interest margin was 4.22% for the second quarter 2007 compared to 4.50% for the first quarter 2007 and 3.81% for the second quarter 2006. Adjusted net interest margin was 4.29% for the second quarter 2007 compared to 4.51% for the first quarter 2007 and 4.20% for the second quarter 2006.
Non-Interest Income
* Non-interest income was $0.4 million for the second quarter 2007, up from the $10.7 million loss for the first quarter 2007, reflecting the impairment in the RMBS portfolio and the loss on securities sold during the second quarter 2007. Non-interest income was $2.0 million for the second quarter 2006. * Adjusted non-interest income was $4.8 million for the second quarter 2007 compared to $2.1 million for the first quarter 2007 and $2.0 million for the second quarter 2006.
Stable Commercial Loan Credit Quality
* As of June 30, 2007, we did not have any impaired loans and had not experienced any loan charge offs. * As of June 30, 2007, we had an allowance for credit losses of $25.4 million, or 1.40% of loans compared to $22.9 million, or 1.40%, at March 31, 2007and $12.3 million or 1.27% at June 30, 2006. * Provision expense was $2.5 million in the second quarter 2007 compared to $2.3 million in the first quarter 2007 and $2.8 million in the second quarter of 2006.
Funding/Capital
* During the second quarter, we diversified our funding through a $600 million term debt securitization and added $400 million of new warehouse line capacity. * Total cash and equivalents as of June 30, 2007 were $245 million, of which $79 million was unrestricted. * Committed funding capacity exceeded $900 million as of June 30, 2007 and liquidity was approximately $190 million, including unrestricted cash and restricted cash available in CLOs for reinvestment in new loan production. * Total stockholders' equity increased by 4% to $434 million over first quarter levels, which included the reversal of unrealized losses previously recorded as temporary impairment on the assets sold. * Book value per share of $11.99 increased by 4% from $11.50 for the first quarter 2007.
Expenses
* Operating expenses were $15.6 million in the second quarter 2007 compared to $13.0 million in the first quarter 2007, due primarily to an increase in compensation and benefits as a result of higher incentive accruals and continued build out of our direct origination and asset platforms. Operating expenses were $7.1 million for the second quarter 2006. * Our adjusted efficiency ratio was 45% in the second quarter 2007.
Conference Call and Webcast
We will host a webcast/conference call to discuss the results today at 10:00 am Eastern Time. All interested parties are invited to participate via telephone or webcast, which will be hosted through the Investor Relations section of our website at www.newstarfin.com. Please visit the website to register for the webcast and test your connection prior to the call. You can also access the conference call by dialing (866) 316-1368 approximately 5-10 minutes prior to the call. International callers should dial (913) 312-6678. All callers should reference "NewStar Financial."
For convenience, an archived replay of the call will be available through August 15, 2007 by dialing (888) 203-1112. International callers should call (719) 457-0820. For all replays, please use the passcode # 7734185. The audio replay will also be available through the Investor Relations section of our website at www.newstarfin.com.
About NewStar Financial
NewStar Financial is a specialized commercial finance company focused principally on meeting the complex financing needs of customers in the middle market through our corporate, commercial real estate, and structured products groups. Our senior banking teams call directly on customers to provide advice and finance a range of strategic transactions that may require some combination of senior secured, second lien and mezzanine financing. NewStar typically works with customers with financing needs of up to $150 million and cash flow as low as $5 million. We target 'hold' positions of up to $35 million, but may also underwrite or arrange transactions up to $100 million for syndications to other lenders.
We are headquartered in Boston MA, with regional offices in Darien CT, Chicago IL, San Francisco CA, San Diego CA, and Charleston SC. In December of 2006, NewStar completed an Initial Public Offering. The Company's shares trade on the NASDAQ under the ticker symbol, NEWS. Please visit our website at www.newstarfin.com for more detailed transaction and contact information.
The NewStar Financial, Inc. logo is available at http://www.primenewswire.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, plans, objectives, future performance and business. As such, they are subject to material risks and uncertainties.
More detailed information about these factors is described in NewStar's filing with Securities and Exchange Commission (the "SEC"), including Item 1A ("Risk Factors") of our 2006 Form 10-K. NewStar is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. NewStar plans to file its Form 10-Q with the SEC on or before August 14, 2007 and urges its shareholders to refer to that document for more complete information concerning NewStar's financial results.
Non-GAAP Financial Measures
References to "adjusted net income" and "adjusted earnings per share" mean net income or earnings per diluted share, respectively, as determined under GAAP, excluding the following items: i) compensation expense related to restricted stock grants made since our inception as a private company, including equity awards made in connection with the initial public offering; ii) earnings generated from the assets sold in the second quarter of 2007; and iii) the loss on the asset sale in the second quarter of 2007. GAAP requires that these items be included in net income. NewStar management uses "adjusted net income" and "adjusted earnings per share" to make operational and investment decisions, and NewStar believes that they provide useful information to investors in their evaluation of our financial performance and condition. Excluding the financial results of the assets sold during the second quarter and the compensation expense related to restricted stock grants made since our inception as a private company, including equity awards made in connection with the initial public offering, eliminates unique amounts that make it difficult to assess our core performance and compare our period-over-period results. A reconciliation of adjusted net income to net income is included on pages 6 and 7 of this release.
References to "adjusted net interest margin" mean annualized interest income as determined under GAAP (excluding interest income generated from the assets sold in the second quarter 2007 and annualized interest expense as determined under GAAP) less i) excluding interest and amortization of deferred financing costs on corporate debt and ii) interest expense incurred from the assets sold in the second quarter of 2007, divided by average interest earning assets excluding the assets sold in the second quarter for the period.
Adjusted return on average assets means adjusted net income divided by average assets for the period excluding the assets sold in the second quarter. Adjusted return on average equity means adjusted net income divided by average equity for the period. Adjusted efficiency ratio means operating expenses determined in accordance with GAAP less i) compensation expense related to restricted stock grants made since our inception as a private company, including equity awards made in connection with the initial public offering; ii) earnings generated from the assets sold in the second quarter of 2007; and iii) the loss on the asset sale in the second quarter of 2007. Adjusted cost of funds means adjusted interest expense divided by average interest bearing liabilities for the period less the average corporate debt outstanding for the period and the credit facility funding for the assets sold in the second quarter of 2007. The adjusted ratios exclude unique expenses that make it difficult to assess our core performance and compare our period-over-period results.
A reconciliation of our adjusted financial measures to their GAAP equivalents is included on pages 10 and 11 of this release. NewStar's adjusted financial measures should not be considered as alternatives to financial measures determined in accordance with GAAP and may be different from, or inconsistent with, non-GAAP financial measures used by other companies.
NewStar Financial, Inc.
Consolidated Balance Sheets
(unaudited)
---------------------------------------------------------------------
June 30, March 31, December 31, June 30,
($ in thousands) 2007 2007 2006 2006
---------------------------------------------------------------------
Assets:
Cash and cash
equivalents $ 79,297 $ 131,391 $ 103,269 $ 4,325
Restricted cash 166,120 66,501 40,174 153,012
Residual interest in
securitization 29,677 -- -- --
Investments in debt
securities, available
-for-sale 41,446 183,032 203,121 142,206
Loans held-for-sale 132,908 52,270 62,620 54,058
Loans, net 1,778,437 1,600,821 1,437,832 944,117
Deferred financing
costs, net 15,956 10,989 11,614 14,947
Interest receivable 12,967 18,343 19,849 12,133
Property and
equipment, net 1,683 1,051 961 1,044
Deferred income taxes,
net 8,531 15,965 14,705 6,770
Income tax receivable 7,683 7,460 -- --
Other assets 15,086 31,107 21,047 11,236
---------- ---------- ---------- ----------
Total assets $2,289,791 $2,118,930 $1,915,192 $1,343,848
========== ========== ========== ==========
Liabilities:
Repurchase agreements $ 6,448 $ 26,856 $ 34,535 $ 33,990
Credit facilities 604,172 852,410 625,910 332,910
Term debt 1,198,225 784,725 774,225 757,264
Corporate debt -- -- -- 37,500
Accrued interest
payable 20,014 11,263 23,200 9,134
Accounts payable 285 403 4,315 745
Income tax payable -- -- 4,166 714
Other liabilities 26,180 26,394 25,426 16,252
---------- ---------- ---------- ----------
Total liabilities 1,855,324 1,702,051 1,491,777 1,188,509
Total stockholders'
equity 434,467 416,879 423,415 155,339
---------- ---------- ---------- ----------
Total liabilities and
stockholders' equity $2,289,791 $2,118,930 $1,915,192 $1,343,848
====================================================================
NewStar Financial, Inc.
Consolidated Statements of Operations
(unaudited)
---------------------------------------------------------------------
Three Months Ended
--------------------------------------------------
($ in thousands,
except per share June 30, March 31, December 31, June 30,
amounts) 2007 2007 2006 2006
------------------ ----------- ----------- ----------- -----------
Net interest
income:
Interest income $ 50,575 $ 45,488 $ 39,243 $ 25,164
Interest expense 27,269 23,537 23,766 14,874
----------- ----------- ----------- -----------
Net interest
income 23,306 21,951 15,477 10,290
Provision for credit
losses 2,490 2,312 5,941 2,841
----------- ----------- ----------- -----------
Net interest
income after
provision
for credit
losses 20,816 19,639 9,536 7,449
Non-interest
income:
Fee income 4,290 2,553 3,006 933
Asset management
income 1,251 964 692 206
Gain on
derivatives 270 84 73 465
Loss on
investments
in debt
securities (1,486) (14,862) (846) --
Gain (loss) on
sale of loans
and debt
securities (4,342) 75 695 24
Other income 449 469 483 355
----------- ----------- ----------- -----------
Total non-
interest
income 432 (10,717) 4,103 1,983
Operating expenses:
Compensation and
benefits 12,494 10,532 47,738 5,096
Occupancy and
equipment 610 492 486 416
General and
administrative
expenses 2,497 1,939 3,380 1,592
Total operating
expenses 15,601 12,963 51,604 7,104
----------- ----------- ----------- -----------
Income (loss)
before
income taxes 5,647 (4,041) (37,965) 2,328
Income tax
expense
(benefit) 2,229 (1,595) (5,911) 989
----------- ----------- ----------- -----------
Net income (loss) 3,418 (2,446) (32,054) 1,339
After tax
adjustments:
Extinguishment of
corporate debt
expense (1) -- -- 2,805 760
IPO related
compensation and
benefits
expense (2) 2,684 2,682 33,202 --
IPO related general
and administrative
expense (3) -- -- 621 5
Loss on assets
sold (4) 2,662 7,736 -- --
Net interest
income
earned on
assets
sold (5) (1,037) (1,274) (2,258) (1,188)
----------- ----------- ----------- -----------
Adjusted net
income $ 7,727 $ 6,698 $ 2,316 $ 916
=========== =========== =========== ===========
Net income (loss)
per share:
Basic $ 0.09 $ (0.07) $ (1.26) $ 0.09
Diluted $ 0.09 $ (0.07) $ (1.26) $ 0.09
Weighted average
shares
outstanding: (6)
Basic 36,258,021 36,257,589 25,376,446 14,699,530
Diluted 36,677,437 36,257,589 25,376,446 15,220,812
Adjusted net
income per
share:
Basic $ 0.21 $ 0.18 $ 0.09 $ 0.06
Diluted $ 0.21 $ 0.18 $ 0.09 $ 0.06
Adjusted weighted
average shares
outstanding: (6)
Basic 36,258,021 36,257,589 25,376,446 14,699,530
Diluted 36,677,437 36,841,994 25,910,522 15,220,812
(1) Includes interest expense, call premium, termination fee and
deferred finance costs associated with the Company's corporate
debt which was repaid on December 20, 2006.
(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.
(3) General and administrative expense related to the Company's
initial public offering.
(4) Loss incurred in connection with the sale of assets comprised of
50 debt securities and two loans during Q2 2007, and permanent
impairments on these assets. The Company retained a 14.3%
residual interest in these financial assets.
(5) Net interest income earned on the assets sold during Q2 2007.
(6) Weighted average shares for all periods reflect the conversions
and reverse split that occurred at the IPO.
NewStar Financial, Inc.
Consolidated Statements of Operations
(unaudited)
---------------------------------------------------------------------
Six Months Ended
June 30,
------------------------
($ in thousands, except per share amounts) 2007 2006
------------------------------------------ ----------- -----------
Net interest income:
Interest income $ 96,063 $ 44,080
Interest expense 50,806 25,840
----------- -----------
Net interest income 45,257 18,240
Provision for credit losses 4,802 4,244
----------- -----------
Net interest income after provision for 40,455 13,996
credit losses
Non-interest income:
Fee income 6,843 1,743
Asset management income 2,215 273
Gain on derivatives 354 722
Loss on investments in debt securities (16,348) --
Gain (loss) on sale of loans and debt
securities (4,267) 28
Other income 918 790
----------- -----------
Total non-interest income (10,285) 3,556
Operating expenses:
Compensation and benefits 23,026 10,450
Occupancy and equipment 1,102 796
General and administrative expenses 4,436 2,864
----------- -----------
Total operating expenses 28,564 14,110
----------- -----------
Income before income taxes 1,606 3,442
Income tax expense 634 1,462
----------- -----------
Net income 972 1,980
After tax adjustments:
Extinguishment of corporate debt expense
(1) -- 1,490
IPO related compensation and benefits
expense (2) 5,366 --
IPO related general and administrative
expense (3) -- 76
Loss on assets sold (4) 10,398 --
Net interest income earned on assets sold
(5) (2,311) (2,001)
----------- -----------
Adjusted net income $ 14,425 $ 1,545
=========== ===========
Net income per share:
Basic $ 0.03 $ 0.16
Diluted $ 0.03 $ 0.15
Weighted average shares outstanding: (6)
Basic 36,257,806 12,622,329
Diluted 36,765,552 13,143,612
Adjusted net income per share:
Basic $ 0.40 $ 0.12
Diluted $ 0.39 $ 0.12
Adjusted weighted average shares outstanding:
(6)
Basic 36,257,806 12,622,329
Diluted 36,765,552 13,143,612
(1) Includes interest expense, call premium, termination fee and
deferred finance costs associated with the Company's corporate
debt which was repaid on December 20, 2006.
(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.
(3) General and administrative expense related to the Company's
initial public offering.
(4) Loss incurred in connection with the sale of a portfolio of 50
debt securities and two loans during Q2 2007, and permanent
impairments on these assets. The Company retained a 14.3%
residual interest in these financial assets.
(5) Net interest income earned on the portfolio of financial assets
sold during Q2 2007.
(6) Weighted average shares for all periods reflect the conversions
and reverse split that occurred at the IPO.
NewStar Financial, Inc.
Selected Financial Data
(unaudited)
------------------------------------------------------------------
Three Months Ended
--------------------------------------------------
June 30, March 31, December 31, June 30,
($ in thousands) 2007 2007 2006 2006
--------------- ----------- ----------- ----------- -----------
Ratios:
Return on
average assets 0.62% (0.50)% (7.83)% 0.49%
Return on
average equity 3.22 (2.34) (50.91) 3.62
Net interest
margin, before
provision 4.22 4.50 3.82 3.81
Efficiency
ratio 65.73 115.40 263.57 57.88
Credit Quality
and Leverage
Ratios:
Delinquent
loan rate
(at period
end) -- 0.51 0.57 --
Non-accrual
loan rate -- -- -- --
Net charge off
rate -- -- -- --
Allowance for
credit
losses ratio
(at period
end) 1.40 1.40 1.40 1.27
Equity to
assets (at
period end) 18.97 19.67 22.11 11.56
Debt to equity
(at period
end) 4.16 x 3.99 x 3.39 x 7.48 x
Average
Balances:
Loans and
other debt
products,
gross $ 2,018,218 $ 1,816,412 $ 1,525,105 $ 1,020,126
Interest
earning
assets 2,214,635 1,978,370 1,606,785 1,083,706
Total assets 2,187,828 1,988,910 1,623,952 1,098,540
Interest
bearing
liabilities 1,746,340 1,519,470 1,328,178 932,242
Equity 426,211 424,063 249,773 148,542
Allowance for
credit loss
activity:
Balance as of
beginning of
period $ 22,882 $ 20,570 $ 14,629 $ 9,438
Provision for
credit losses 2,490 2,312 5,941 2,841
Net charge offs -- -- -- --
Balance as of ----------- ----------- ----------- -----------
end of period $ 25,372 $ 22,882 $ 20,570 $ 12,279
=========== =========== =========== ===========
Supplemental
Data (at
period end):
Investments in
debt
securities,
gross $ 45,556 $ 210,634 $ 217,314 $ 152,727
Loans held-for
-sale, gross 133,337 52,698 63,277 54,484
Loans held-for-
investment,
gross 1,812,361 1,632,105 1,467,038 963,491
----------- ----------- ----------- -----------
Loans and
investments
in debt
securities,
gross 1,991,254 1,895,437 1,747,629 1,170,702
Unused lines of
credit 442,330 336,978 302,856 229,534
Standby letters
of credit 11,770 8,719 6,990 4,052
----------- ----------- ----------- -----------
Total funding
commitments $ 2,445,354 $ 2,241,134 $ 2,057,475 $ 1,404,288
=========== =========== =========== ===========
Loan portfolio $ 1,991,254 $ 1,895,437 $ 1,747,629 $ 1,170,702
Loans owned by
NewStar Credit
Opportunities
Fund 449,147 382,354 283,378 79,999
Loans owned by
ArcTurus 15,430 -- -- --
Less: assets
sold (1) -- 201,726 179,979 115,700
----------- ----------- ----------- -----------
Managed loan
portfolio $ 2,455,831 $ 2,076,065 $ 1,851,028 $ 1,135,001
=========== =========== =========== ===========
Loans held-for-
sale, gross $ 133,337 $ 52,698 $ 63,277 $ 54,484
Loans held-for-
investment,
gross 1,812,361 1,632,105 1,467,038 963,491
----------- ----------- ----------- -----------
Total loans,
gross 1,945,698 1,684,803 1,530,315 1,017,975
Deferred fees,
net (10,771) (10,182) (10,468) (8,269)
Allowance for
loan losses (23,581) (21,530) (19,395) (11,531)
----------- ----------- ----------- -----------
Total loans,
net $ 1,911,346 $ 1,653,091 $ 1,500,452 $ 998,175
=========== =========== =========== ===========
Book value per
share $ 11.99 $ 11.50 $ 11.68 $ 10.16
(1) Outstanding par value of the assets sold on June 29, 2007.
NewStar Financial, Inc.
Selected Financial Data
(unaudited)
-------------------------------------------------------------------
Six Months Ended
-------------------------
June 30, June 30,
($ in thousands) 2007 2006
---------------------------------------- ----------- -----------
Performance Ratios:
Return on average assets 0.09% 0.41%
Return on average equity 0.46 3.08
Net interest margin, before provision 4.35 3.84
Efficiency ratio 81.68 64.74
Credit Quality and Leverage Ratios:
Delinquent loan rate (at period end) -- --
Non-accrual loan rate -- --
Net charge off rate -- --
Allowance for credit losses ratio (at
period end) 1.40 1.27
Equity to assets (at period end) 18.97 11.56
Debt to equity (at period end) 4.16 x 7.48 x
Average Balances:
Loans and other debt products, gross $ 1,917,872 $ 914,227
Interest earning assets 2,097,162 957,509
Total assets 2,073,259 971,929
Interest bearing liabilities 1,633,532 825,097
Equity 424,984 129,477
Allowance for credit loss activity:
Balance as of beginning of period $ 20,570 $ 8,035
Provision for credit losses 4,802 4,244
Net charge offs -- --
----------- -----------
Balance as of end of period $ 25,372 $ 12,279
=========== ===========
Supplemental Data (at period end):
Investments in debt securities, gross $ 45,556 $ 152,727
Loans held-for-sale, gross 133,337 54,484
Loans held-for-investment, gross 1,812,361 963,491
----------- -----------
Loans and investments in debt securities,
gross 1,991,254 1,170,702
Unused lines of credit 442,330 229,534
Standby letters of credit 11,770 4,052
----------- -----------
Total funding commitments $ 2,445,354 $ 1,404,288
=========== ===========
Loan portfolio $ 1,991,254 $ 1,170,702
Loans owned by NewStar Credit
Opportunities Fund 449,147 79,999
Loans owned by ArcTurus 15,430 --
Less: assets sold (1) -- 115,700
----------- -----------
Managed loan portfolio $ 2,455,831 $ 1,135,001
=========== ===========
Loans held-for-sale, gross $ 133,337 $ 54,484
Loans held-for-investment, gross 1,812,361 963,491
----------- -----------
Total loans, gross 1,945,698 1,017,975
Deferred fees, net (10,771) (8,269)
Allowance for loan losses (23,581) (11,531)
----------- -----------
Total loans, net $ 1,911,346 $ 998,175
=========== ===========
Book value per share $ 11.99 $ 10.16
(1) Outstanding par value of the assets sold on June 29, 2007.
NewStar Financial, Inc.
Non-GAAP Data
(unaudited)
----------------------------------------------
Adjusted
----------------------------------------------
Three Months Ended
----------------------------------------------
June 30, March 31, December 31, June 30,
($ in thousands) 2007 2007 2006 2006
-------------------- ---------- ---------- ---------- ----------
Performance Ratios:
Return on average
assets 1.55% 1.51% 0.63% 0.36%
Return on average
equity 7.27 6.41 3.68 2.47
Efficiency ratio 44.50 41.62 49.01 57.19
Net interest margin,
before provision 4.29 4.51 4.37 4.20
Yield on interest
earning assets 9.24 9.34 9.63 9.27
Cost of funds 6.27 6.29 6.48 6.09
Credit Quality and
Leverage Ratios:
Equity to assets (at
period end) 18.97 21.74 24.40 12.65
Debt to equity (at
period end) 4.16 3.51 2.98 6.56
Consolidated Statement
of Operations
Adjustments(1):
Interest income $ 50,575 $ 45,488 $ 39,243 $ 25,164
Less: interest
income
on assets sold (2) 4,038 4,401 4,136 2,181
---------- ---------- ---------- ----------
Adjusted interest
income $ 46,537 $ 41,087 $ 35,107 $ 22,983
========== ========== ========== ==========
Interest expense $ 27,269 $ 23,537 $ 23,766 $ 14,874
Less:
Interest expense
related to assets
sold (2) 2,324 2,296 1,878 993
Interest &
amortization related
to corporate debt -- -- 2,728 1,322
---------- ---------- ---------- ----------
Adjusted interest
expense $ 24,945 $ 21,241 $ 19,160 $ 12,559
========== ========== ========== ==========
Non-interest income $ 432 $ (10,717) $ 4,103 $ 1,983
Plus: loss on assets
sold (2) 4,400 12,787 522 --
---------- ---------- ---------- ----------
Adjusted non-
interest income $ 4,832 $ 2,070 $ 4,625 $ 1,983
========== ========== ========== ==========
Operating expenses $ 15,601 $ 12,963 $ 51,604 $ 7,104
Less:
Corporate debt
prepayment fees -- -- 1,425 --
IPO related
compensation and
benefits expense (3) 3,843 3,841 39,129 --
IPO related general
and administrative
expense (4) -- -- 968 8
---------- ---------- ---------- ----------
Adjusted operating
expenses $ 11,758 $ 9,122 $ 10,082 $ 7,096
========== ========== ========== ==========
Average Balances:
Interest earning
assets $2,214,635 $1,978,370 $1,606,785 $1,083,706
Less: assets sold (2) 193,795 192,949 160,083 89,152
---------- ---------- ---------- ----------
Adjusted interest
earning assets $2,020,840 $1,785,421 $1,446,702 $ 994,554
========== ========== ========== ==========
Interest bearing
liabilities $1,746,340 $1,519,470 $1,328,178 $ 932,242
Less:
Credit facility
funding for assets
sold (2) 150,323 150,524 121,650 68,138
Corporate debt -- -- 33,016 37,500
---------- ---------- ---------- ----------
Adjusted interest
bearing liabilities $1,596,017 $1,368,946 $1,173,512 $ 826,604
========== ========== ========== ==========
(1) Adjustments are pre-tax.
(2) On June 29, 2007, the Company completed the sale of assets
comprised of 50 debt securities and two loans. The adjustment
represents the financial impact of the sold assets.
(3) 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.
(4) General and administrative expense related to the Company's
initial public offering.
NewStar Financial, Inc.
Non-GAAP Data
(unaudited) ------------------------
Adjusted
------------------------
Six Months Ended
------------------------
June 30, June 30,
($ in thousands) 2007 2006
----------------------------------------- ----------- -----------
Performance Ratios:
Return on average assets 1.55% 0.35%
Return on average equity 6.84 2.41
Efficiency ratio 43.19 62.44
Net interest margin, before provision 4.39 4.32
Yield on interest earning assets 9.28 9.30
Cost of funds 6.28 5.96
Credit Quality and Leverage Ratios:
Equity to assets (at period end) 18.97 12.65
Debt to equity (at period end) 4.16 6.56
Consolidated Statement of Operations
Adjustments (1):
Interest income $ 96,063 $ 44,080
Less: interest income on assets sold (2) 8,439 3,558
----------- -----------
Adjusted interest income $ 87,624 $ 40,522
=========== ===========
Interest expense $ 50,806 $ 25,840
Less:
Interest expense related to assets sold
(2) 4,620 1,557
Interest & amortization related to
corporate debt -- 2,590
----------- -----------
Adjusted interest expense $ 46,186 $ 21,693
=========== ===========
Non-interest income $ (10,285) $ 3,556
Plus: loss on assets sold (2) 17,187 --
----------- -----------
Adjusted non-interest income $ 6,902 $ 3,556
=========== ===========
Operating expenses $ 28,564 $ 14,110
Less:
Corporate debt prepayment fees -- --
IPO related compensation and benefits
expense (3) 7,684 --
IPO related general and administrative
expense (4) -- 133
----------- -----------
Adjusted operating expenses $ 20,880 $ 13,977
=========== ===========
Average Balances:
Interest earning assets $ 2,097,162 $ 957,509
Less: assets sold (2) 192,725 78,692
----------- -----------
Adjusted interest earning assets $ 1,904,437 $ 878,817
=========== ===========
Interest bearing liabilities $ 1,633,532 $ 825,097
Less:
Credit facility funding for assets sold
(2) 150,422 54,138
Corporate debt -- 37,500
----------- -----------
Adjusted interest bearing liabilities $ 1,483,110 $ 733,459
=========== ===========
(1) Adjustments are pre-tax.
(2) On June 29, 2007, the Company completed the sale of assets
comprised of 50 debt securities and two loans. The adjustment
represents the financial impact of the sold assets.
(3) 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.
(4) General and administrative expense related to the Company's
initial public offering.
NewStar Financial, Inc.
Portfolio Data
(unaudited)
--------------------------------------------------------------------
($ in thousands) June 30, 2007 March 31, 2007
--------------------------- ------------------ ------------------
Portfolio Data:
First mortgage $ 304,596 15.3% $ 243,637 12.9%
Senior secured asset-based 80,431 4.0 56,449 3.0
Senior secured cash flow 1,375,165 68.9 1,162,643 61.3
Senior subordinated
asset-based 121,321 6.1 279,941 14.8
Senior subordinated cash
flow 33,126 1.7 55,782 2.9
Second lien 65,585 3.3 64,731 3.4
Subordinated 10,307 0.7 31,533 1.7
Mezzanine 723 -- 721 --
---------- ----- ---------- -----
Total $1,991,254 100.0% $1,895,437 100.0%
========== ===== ========== =====
Middle Market Corporate $1,488,819 74.8% $1,286,088 67.9%
Structured Products 170,776 8.6 341,894 18.0
Commercial Real Estate 331,659 16.6 267,455 14.1
---------- ----- ---------- -----
Total $1,991,254 100.0% $1,895,437 100.0%
========== ===== ========== =====
December 31, 2006 June 30, 2006
------------------ ------------------
Portfolio Data:
First mortgage $ 216,888 12.4% $ 141,321 12.1%
Senior secured asset-based 50,566 2.9 43,468 3.7
Senior secured cash flow 1,082,048 61.9 719,441 61.5
Senior subordinated
asset-based 247,456 14.2 152,157 13.0
Senior subordinated cash
flow 35,161 2.0 33,286 2.8
Second lien 70,875 4.1 37,000 3.2
Subordinated 43,916 2.5 43,315 3.6
Mezzanine 719 -- 714 0.1
---------- ----- ---------- -----
Total $1,747,629 100.0% $1,170,702 100.0%
========== ===== ========== =====
Middle Market Corporate $1,183,107 67.7% $ 785,622 67.1%
Structured Products 333,787 19.1 229,860 19.6
Commercial Real Estate 230,735 13.2 155,220 13.3
---------- ----- ---------- -----
Total $1,747,629 100.0% $1,170,702 100.0%
========== ===== ========== =====