Exhibit 99.1
FOR IMMEDIATE RELEASE
NEWSTAR REPORTS FOURTH QUARTER RESULTS
Positive financial results amid weakening credit conditions
| | • | | Earned $5.1 million of adjusted net income in the fourth quarter, or $0.11 of adjusted earnings per diluted share | |
| | • | | On a GAAP basis, earned $2.8 million of net income in the fourth quarter, or $0.06 of net income per diluted share, increasing book value per share to $12.00 | |
| | • | | Completed an important step in our depository strategy, entering into a definitive agreement to acquire Southern Commerce Bank, N.A. | |
| | • | | Amended the terms of certain credit facilities which had the effect of extending maturities, reducing advance rates and the size of the facilities, as well as increasing pricing and certain concentration limits | |
| | • | | Continued to make new loans to customers with conservative credit profiles and attractive yields | |
| | • | | Increased loan loss reserves due to deterioration in credit performance reflected in higher levels of non-performing assets | |
Boston, February 18, 2009 – NewStar Financial, Inc. (NASDAQ: NEWS), a Boston-based commercial finance company, today reported adjusted net income for the fourth quarter of 2008 of $5.1 million, or $0.11 per diluted share. On a GAAP basis, the Company reported net income of $2.8 million, or $0.06 per diluted share, which reflected $2.1 million after-tax non-cash equity compensation expense related to the 2006 IPO and $0.3 million to reflect the tax impact of timing differences related to the recognition of losses on a prior asset sale.
“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.
“While I am pleased with our operating results and continued strong financial position, the fourth quarter was challenging for our industry as credit conditions worsened amid a sharp decline in the economy,” said Tim Conway, Chairman and Chief Executive Officer. “Constraints on credit availability and continued dislocation in the credit markets also tested the resilience of our funding model as we completed a series of amendments to our credit facilities that required us to reduce leverage, limiting some of our financial flexibility.”
“Despite these headwinds, we continued to benefit from a funding platform with continuing capacity and actions we have taken to position the company to withstand significant economic
stress. We also completed an important first step in our depository strategy. Following the expected completion of our acquisition of Southern Commerce Bank, we believe we will be positioned well for the future as the financial services landscape continues to be reshaped.”
Funding and Capital
| | • | | Entered into a definitive agreement to acquire Southern Commerce Bank, N.A., a nationally chartered commercial bank with approximately $235 million of assets and $200 million of deposits as of December 31, 2008. The acquisition is subject to regulatory approval; NewStar has filed an application with the Federal Reserve for approval of the acquisition and to become a bank holding company. |
| | • | | Renewed existing warehouse credit facility with Citi, reducing the size from $400 million to $300 million (November 2008). Other key terms amended include an increase in pricing and a reduction in advance rates. |
| | • | | Amended existing warehouse credit facility with Wachovia reducing the size from $400 million to $350 million (December 2008). Other key terms amended include an increase to certain industry concentration limits. |
| | • | | Amended existing term credit facility with Deutsche Bank reducing the size from $400 million to $250 million (January 2009). |
| | • | | Other key terms amended in both the Wachovia and Deutsche Bank facilities include increases in pricing and concentration levels, and decreases in advance rates that were consistent with terms of other recent comparable financing arrangements. |
| | • | | Approximately 70% of loan assets continued to be match-funded by existing securitized term debt at attractive, locked-in spreads as of December 31, 2008. The ability to re-invest collections from repayments and amortization of certain of these loans represents a continuing source of funding. |
| | • | | Balance sheet leverage was modest at 3.3x as of December 31, 2008 compared to 3.6x as of September 30, 2008. The decrease in leverage was due principally to repayment of advances under credit facilities. |
| | • | | Total cash and equivalents as of December 31, 2008 were $134 million, of which $50 million was unrestricted. Unrestricted cash decreased from approximately $133 million at September 30, 2008 due principally to the repayment of advances under the credit facilities and restricted cash decreased from approximately $105 million to $84 million. |
Origination Volume
| | • | | Total origination volume for the fourth quarter of 2008 was $44 million, of which $42 million was retained on NewStar’s balance sheet and $2 million was sold to the NewStar Credit Opportunities Fund (NCOF). |
| | • | | Credit spreads and amortizing fees on new loans originated in the third quarter continued to improve, with average yields of greater than 660 bps above LIBOR, which is an increase of more than 235bps from the fourth quarter of 2007. |
| | • | | Corporate lending represented 100% of the new loan volume in the quarter. |
Managed and Owned Loan Portfolios
| | • | | Managed loan portfolio was $3.0 billion as of December 31, 2008 (equal to the level at September 30, 2008), reflecting the net impact of $44 million of new origination, which was offset by prepayments and scheduled amortization of existing loans. Managed loan portfolio was nearly equal to the level at December 31, 2007. |
| | • | | Assets managed for the NCOF were $561 million at December 31, 2008, compared to $570 million at September 30, 2008 and $578 million at December 31, 2007. |
| | • | | The owned loan portfolio continued to be balanced across industry sectors and highly diversified by issuer. As of December 31, 2008, no single issuer represented more than |
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| | 1% of total assets, and the ten largest issuers comprised approximately 10% of the loan portfolio. |
| | • | | The composition of the owned loan portfolio continued to reflect a focus on senior debt with 95% invested in 1st lien senior secured loans and debt investments at December 31, 2008. |
Net Interest Income / Margin
| | • | | Net interest income before provision for credit losses was $24.4 million for the fourth quarter of 2008 compared to $25.0 million for the third quarter of 2008 and $24.8 million for the fourth quarter of 2007. |
| | • | | Net interest margin decreased 11 bps to 3.79% for the fourth quarter of 2008 compared to 3.90% for the third quarter of 2008 and 3.98% for the fourth quarter of 2007 due principally to non-payment of interest income from non-performing assets that was partially offset by an increase in credit spreads on new loans and re-pricing of existing loans. |
Non-Interest Income
| | • | | Non-interest income was $8.6 million for the fourth quarter of 2008 compared to $5.5 million for the third quarter of 2008, and $4.0 million for the fourth quarter of 2007. |
| | • | | Adjusted non-interest income, excluding the impact of the write-down on the retained residual interest in prior periods, was $8.6 million in the fourth quarter of 2008 compared to $5.5 million in the third quarter of 2008 and $6.4 million in the fourth quarter of 2007. |
| | • | | Adjusted non-interest income in the fourth quarter of 2008 consisted primarily of a $4.5 million gain on repurchase of debt, $1.5 million of asset management income, $1.4 million gain on rate protection products sold to clients, $0.3 million of structuring and placement fees, $0.4 million of syndication and agency fees, and $0.1 million of amendment fees. |
Loan Credit Quality
| | • | | The provision for credit losses was $17.9 million in the fourth quarter of 2008, up from $12.0 million in the third quarter of 2008. |
| | • | | Allowance for credit losses was $54.0 million or 2.25% of loans at December 31, 2008, compared to $44.9 million or 1.87% at September 30, 2008 and $35.5 million or 1.58% at December 31, 2007. |
| | • | | Non-accrual loans consisted of six loans with an aggregate outstanding balance of $60.6 million at December 31, 2008 compared to three loans with an aggregate outstanding balance of $26.4 million at September 30, 2008. Additionally, the Company had $7.4 million of other real estate owned (“OREO”) comprised of a single property as of December 31, 2008. |
| | • | | Two of the non-accrual loans with an aggregate outstanding balance of $16.6 million as of December 31, 2008 were also delinquent loans. |
| | • | | NewStar established $13.2 million of new specific reserves in the fourth quarter of 2008 compared to $11.5 million in the third quarter of 2008. |
| | • | | NewStar had net charge-offs of $8.9 million or 1.47% of loans on an annualized basis in the fourth quarter of 2008 compared to $5.3 million or 0.87% of loans on an annualized basis in the prior quarter. Actual net charge-offs in 2008 were 0.82% of loans. |
Expenses
| | • | | Operating expenses decreased to $7.9 million in the fourth quarter of 2008 from $8.5 million in the third quarter of 2008 due principally to lower compensation expense, which was partially offset by higher professional fees related to the proposed acquisition of Southern Commerce Bank. |
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| | • | | The efficiency ratio for the fourth quarter of 2008 was 24.04%. |
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 877-857-6150 approximately 5-10 minutes prior to the call. International callers should dial 719-325-4811. All callers should reference “NewStar Financial.”
For convenience, an archived replay of the call will be available through February 27, 2009 by dialing 888-203-1112. International callers should call 719-457-0820. For all replays, please use the passcode 6456261. The audio replay will also be available through the Investor Relations section at www.newstarfin.com.
About NewStar Financial
NewStar Financial (NASDAQ:NEWS) is a specialized commercial finance company focused on meeting the complex financing needs of companies and private investors in the middle markets. The Company specializes in providing senior secured debt financing for the acquisition or recapitalization of mid-sized companies and commercial real estate. NewStar originates loans directly through a team of experienced, senior bankers organized around key industry and market segments. The Company targets ‘hold’ positions of up to $20 million and selectively underwrites or arranges larger transactions for syndication to other lenders.
NewStar is headquartered in Boston MA and has regional offices in Darien CT, Chicago IL, San Diego CA, and Charleston SC. For more detailed transaction and contact information please visitwww.newstarfin.com.
Contact:
| | |
| Colleen M. Banse | | Brian J. Fischesser |
| 500 Boylston St., Suite 1600 | | 500 Boylston St., Suite 1600 |
| Boston, MA 02116 | | Boston, MA 02116 |
| P. 617.848.2502 | | P. 617.848.2512 |
| F. 617.848.4390 | | F. 617.848.4398 |
| cbanse@newstarfin.com | | bfischesser@newstarfin.com |
Forward-Looking Statements
This release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this release are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, strategic plans, objectives, future performance and business, including our proposed acquisition of Southern Commerce Bank and application to become a bank holding company. As such, they are subject to material risks and uncertainties, including receipt of required regulatory approvals to become a bank holding company and acquire Southern Commerce Bank; our limited operating history; the current dislocation in the credit markets and the general state of the economy; our ability to compete effectively in a highly competitive industry; and the impact of federal, state and local laws and regulations that govern non-depository commercial lenders and businesses generally, including increased regulation by the FDIC and OCC if we become a bank holding company.
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More detailed information about these factors is described in NewStar’s filings with the Securities and Exchange Commission (the “SEC”), including Item 1A (“Risk Factors”) of our 2007 Annual Report on Form 10-K, as supplemented by the Risk Factors contained in our Quarterly Reports on Form 10-Q. NewStar is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. NewStar plans to file its Form 10-K for the year ended December 31, 2008 with the SEC on or before March 16, 2009 and urges its shareholders to refer to that document for more complete information concerning NewStar’s financial results.
Non-GAAP Financial Measures
References to “adjusted net income” and “adjusted earnings per share” mean net income or earnings per diluted share, respectively, as determined under GAAP, excluding the following items: i) compensation expense related to restricted stock grants made since our inception as a private company, including equity awards made in connection with the initial public offering; ii) earnings generated from the assets sold in the second quarter of 2007 and the retained residual interest in these assets; and iii) the loss and expenses incurred in connection with the asset sale in the second quarter of 2007 and the change in fair value of the residual interest, including the impact on our effective tax rate. GAAP requires that these items be included in net income. NewStar management uses “adjusted net income” and “adjusted earnings per share” to make operational and investment decisions, and NewStar believes that they provide useful information to investors in their evaluation of our financial performance and condition. Excluding the financial results and expenses incurred in connection with the assets sold during the second quarter of 2007 and the compensation expense related to restricted stock grants made since our inception as a private company, eliminates unique amounts that make it difficult to assess our core performance and compare our period-over-period results. A reconciliation of adjusted net income to net income is included on page 7 of this release.
References to “adjusted net interest margin” mean annualized interest income as determined under GAAP (excluding interest income generated from the assets sold in the second quarter of 2007 and the retained residual interest) less annualized interest expense as determined under GAAP (excluding 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 of 2007 and the retained residual interest for the period.)
Adjusted return on average assets means adjusted net income divided by average assets for the period excluding the assets sold in the second quarter of 2007 and the retained residual interest. Adjusted return on average equity means adjusted net income divided by average equity for the period. Adjusted efficiency ratio means operating expenses determined in accordance with GAAP less i) compensation expense related to restricted stock grants made since our inception as a private company; ii) earnings generated from the assets sold in the second quarter of 2007 and the retained residual interest; and iii) the loss and expenses incurred in connection with the asset sale in the second quarter of 2007 and the change in fair value of the residual interest. Adjusted cost of funds means adjusted interest expense divided by average interest bearing liabilities 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 page 9 of this release. NewStar’s adjusted financial measures should not be considered as alternatives to financial measures determined in accordance with GAAP and may be different from, or inconsistent with, non-GAAP financial measures used by other companies.
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NewStar Financial, Inc.
Consolidated Balance Sheets
(unaudited)
| | | | | | | | | |
($ in thousands) | | December 31,
2008 | | September 30,
2008 | | December 31,
2007 |
Assets: | | | | | | | | | |
Cash and cash equivalents | | $ | 50,279 | | $ | 132,853 | | $ | 76,155 |
Restricted cash | | | 84,163 | | | 105,231 | | | 115,807 |
Residual interest in securitization | | | — | | | — | | | 631 |
Investments in debt securities, available-for-sale | | | 3,025 | | | 4,166 | | | 35,498 |
Loans held-for-sale | | | — | | | 18,562 | | | 112,944 |
Loans, net | | | 2,328,812 | | | 2,342,186 | | | 2,201,442 |
Deferred financing costs, net | | | 21,003 | | | 19,181 | | | 18,399 |
Interest receivable | | | 10,608 | | | 11,629 | | | 14,120 |
Property and equipment, net | | | 1,252 | | | 1,261 | | | 1,593 |
Deferred income taxes, net | | | 31,238 | | | 29,374 | | | 13,355 |
Income tax receivable | | | — | | | — | | | 4,635 |
Other assets | | | 41,142 | | | 31,078 | | | 28,186 |
| | | | | | | | | |
Total assets | | $ | 2,571,522 | | $ | 2,695,521 | | $ | 2,622,765 |
| | | | | | | | | |
Liabilities: | | | | | | | | | |
Repurchase agreements | | $ | — | | $ | — | | $ | 63 |
Credit facilities | | | 411,267 | | | 540,030 | | | 677,739 |
Term debt | | | 1,524,171 | | | 1,532,425 | | | 1,364,725 |
Accrued interest payable | | | 9,773 | | | 10,168 | | | 17,537 |
Income tax payable | | | 353 | | | 1,261 | | | — |
Accounts payable | | | 1,049 | | | 176 | | | 197 |
Other liabilities | | | 43,354 | | | 33,712 | | | 59,814 |
| | | | | | | | | |
Total liabilities | | | 1,989,967 | | | 2,117,772 | | | 2,120,075 |
Total stockholders’ equity | | | 581,555 | | | 577,749 | | | 502,690 |
| | | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 2,571,522 | | $ | 2,695,521 | | $ | 2,622,765 |
| | | | | | | | | |
NewStar Financial, Inc.
Consolidated Statements of Operations
(unaudited)
| | | | | | | | | | | | |
| | | Three Months Ended | |
($ in thousands, except per share amounts) | | December 31,
2008 | | | September 30,
2008 | | | December 31,
2007 | |
Net interest income: | | | | | | | | | | | | |
Interest income | | $ | 45,845 | | | $ | 44,903 | | | $ | 55,606 | |
Interest expense | | | 21,445 | | | | 19,864 | | | | 30,826 | |
| | | | | | | | | | | | |
Net interest income | | | 24,400 | | | | 25,039 | | | | 24,780 | |
Provision for credit losses | | | 17,930 | | | | 11,960 | | | | 8,155 | |
| | | | | | | | | | | | |
Net interest income after provision for credit losses | | | 6,470 | | | | 13,079 | | | | 16,625 | |
| | | |
Non-interest income: | | | | | | | | | | | | |
Fee income | | | 866 | | | | 725 | | | | 5,620 | |
Asset management income | | | 1,457 | | | | 1,699 | | | | 1,618 | |
Gain (loss) on derivatives | | | 1,366 | | | | 746 | | | | 289 | |
Gain (loss) on sale of loans and debt securities | | | (1 | ) | | | 1,022 | | | | (359 | ) |
Loss on investments in debt securities | | | (1 | ) | | | (6 | ) | | | (1,976 | ) |
Loss on residual interest in securitization | | | — | | | | — | | | | (2,420 | ) |
Other income | | | 4,958 | | | | 1,350 | | | | 1,185 | |
| | | | | | | | | | | | |
Total non-interest income | | | 8,645 | | | | 5,536 | | | | 3,957 | |
Operating expenses: | | | | | | | | | | | | |
Compensation and benefits | | | 4,172 | | | | 5,161 | | | | 11,169 | |
Occupancy and equipment | | | 718 | | | | 795 | | | | 835 | |
General and administrative expenses | | | 3,054 | | | | 2,500 | | | | 2,667 | |
| | | | | | | | | | | | |
Total operating expenses | | | 7,944 | | | | 8,456 | | | | 14,671 | |
| | | | | | | | | | | | |
Income before income taxes | | | 7,171 | | | | 10,159 | | | | 5,911 | |
Income tax expense | | | 4,417 | | | | 2,580 | | | | 4,677 | |
| | | | | | | | | | | | |
Net income | | $ | 2,754 | | | $ | 7,579 | | | $ | 1,234 | |
| | | | | | | | | | | | |
After tax adjustments to net income: | | | | | | | | | | | | |
IPO related compensation and benefits expense(1) | | | 2,102 | | | | 1,131 | | | | 1,654 | |
Loss on assets sold and retained residual interest(2) | | | 258 | | | | (1,298 | ) | | | 4,240 | |
| | | | | | | | | | | | |
Adjusted net income | | $ | 5,114 | | | $ | 7,412 | | | $ | 7,128 | |
| | | | | | | | | | | | |
| | | |
Net income per share: | | | | | | | | | | | | |
Basic | | $ | 0.06 | | | $ | 0.16 | | | $ | 0.03 | |
Diluted | | $ | 0.06 | | | $ | 0.16 | | | $ | 0.03 | |
| | | |
Weighted average shares outstanding: | | | | | | | | | | | | |
Basic | | | 48,510,697 | | | | 48,525,154 | | | | 38,812,358 | |
Diluted | | | 48,510,697 | | | | 48,525,154 | | | | 38,812,358 | |
| | | |
Adjusted net income per share: | | | | | | | | | | | | |
Basic | | $ | 0.11 | | | $ | 0.15 | | | $ | 0.18 | |
Diluted | | $ | 0.11 | | | $ | 0.15 | | | $ | 0.18 | |
| | | |
Adjusted weighted average shares outstanding: | | | | | | | | | | | | |
Basic | | | 48,510,697 | | | | 48,525,154 | | | | 38,812,358 | |
Diluted | | | 48,510,697 | | | | 48,525,154 | | | | 38,812,358 | |
| (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. |
| (2) | Loss and expenses incurred in connection with the sale of assets comprised of 50 debt securities and two loans during Q2 2007, permanent impairments on these assets, the change in fair value of the residual interest in these assets, and the impact on the effective tax rate. The change in effective tax rate was applied retrospectively. |
NewStar Financial, Inc.
Consolidated Statements of Operations
(unaudited)
| | | | | | | | |
($ in thousands, except per share amounts) | | Year Ended December 31, | |
| | 2008 | | | 2007 | |
Net interest income: | | | | | | | | |
Interest income | | $ | 188,770 | | | $ | 204,295 | |
Interest expense | | | 86,216 | | | | 109,703 | |
| | | | | | | | |
Net interest income | | | 102,554 | | | | 94,592 | |
Provision for credit losses | | | 38,224 | | | | 19,510 | |
| | | | | | | | |
Net interest income after provision for credit losses | | | 64,330 | | | | 75,082 | |
| | |
Non-interest income: | | | | | | | | |
Fee income | | | 4,518 | | | | 15,797 | |
Asset management income | | | 6,283 | | | | 5,304 | |
Gain on derivatives | | | 2,157 | | | | 777 | |
Gain (loss) on sale of loans and debt securities | | | 282 | | | | (4,615 | ) |
Loss on investments in debt securities | | | (932 | ) | | | (20,303 | ) |
Loss on residual interest in securitization | | | (631 | ) | | | (30,556 | ) |
Other income | | | 7,253 | | | | 5,420 | |
| | | | | | | | |
Total non-interest income | | | 18,930 | | | | (28,176 | ) |
| | |
Operating expenses: | | | | | | | | |
Compensation and benefits | | | 30,413 | | | | 45,364 | |
Occupancy and equipment | | | 3,286 | | | | 2,718 | |
General and administrative expenses | | | 11,090 | | | | 9,412 | |
| | | | | | | | |
Total operating expenses | | | 44,789 | | | | 57,494 | |
| | | | | | | | |
Income (loss) before income taxes | | | 38,471 | | | | (10,588 | ) |
Income tax expense (benefit) | | | 16,073 | | | | (1,949 | ) |
| | | | | | | | |
Net income (loss) | | $ | 22,398 | | | $ | (8,639 | ) |
| | | | | | | | |
After tax adjustments to net income (loss): | | | | | | | | |
IPO related compensation and benefits expense(1) | | | 5,938 | | | | 8,882 | |
Loss on assets sold and retained residual interest(2) | | | (679 | ) | | | 31,026 | |
Net interest income earned on assets sold and retained residual interest(3) | | | — | | | | (2,860 | ) |
| | | | | | | | |
Adjusted net income | | $ | 27,657 | | | $ | 28,409 | |
| | | | | | | | |
| | |
Net income (loss) per share: | | | | | | | | |
Basic | | $ | 0.46 | | | $ | (0.23 | ) |
Diluted | | $ | 0.46 | | | $ | (0.23 | ) |
| | |
Weighted average shares outstanding: | | | | | | | | |
Basic | | | 48,340,067 | | | | 36,904,222 | |
Diluted | | | 48,340,067 | | | | 36,904,222 | |
| | |
Adjusted net income per share: | | | | | | | | |
Basic | | $ | 0.57 | | | $ | 0.77 | |
Diluted | | $ | 0.57 | | | $ | 0.76 | |
| | |
Adjusted weighted average shares outstanding: | | | | | | | | |
Basic | | | 48,340,067 | | | | 36,904,222 | |
Diluted | | | 48,340,067 | | | | 37,217,658 | |
| (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. |
| (2) | Loss and expenses incurred in connection with the sale of assets comprised of 50 debt securities and two loans during Q2 2007, permanent impairments on these assets, the change in fair value of the residual interest in these assets, and the impact on the effective tax rate. The change in effective tax rate was applied retrospectively. |
| (3) | Net interest income earned on the assets sold during Q2 2007 and the residual interest in these assets. |
NewStar Financial, Inc.
Selected Financial Data
(unaudited)
| | | | | | | | | | | | |
($ in thousands, except per share amounts) | | Three Months Ended | |
| | December 31,
2008 | | | September 30,
2008 | | | December 31,
2007 | |
Performance Ratios: | | | | | | | | | | | | |
Return on average assets | | | 0.42 | % | | | 1.15 | % | | | 0.19 | % |
Return on average equity | | | 1.88 | | | | 5.26 | | | | 1.05 | |
Net interest margin, before provision | | | 3.79 | | | | 3.90 | | | | 3.98 | |
Efficiency ratio | | | 24.04 | | | | 27.66 | | | | 51.05 | |
Loan portfolio yield | | | 7.40 | | | | 7.32 | | | | 9.28 | |
| | | |
Credit Quality Ratios: | | | | | | | | | | | | |
Delinquent loan rate (at period end) | | | 0.69 | % | | | — | % | | | — | % |
Non-accrual loan rate (at period end) | | | 2.52 | | | | 1.10 | | | | 0.97 | |
Annualized net charge off rate | | | 1.47 | | | | 0.87 | | | | 0.81 | |
Allowance for credit losses ratio (at period end) | | | 2.25 | | | | 1.87 | | | | 1.58 | |
| | | |
Capital and Leverage Ratios: | | | | | | | | | | | | |
Tier 1 risk-based capital(1) | | | 21.86 | % | | | N/A | | | | N/A | |
Total risk-based capital(2) | | | 23.12 | | | | N/A | | | | N/A | |
Equity to assets | | | 22.62 | | | | 21.43 | % | | | 19.17 | % |
Debt to equity | | | 3.33 | x | | | 3.59 | x | | | 4.06 | x |
Book value per share | | $ | 12.00 | | | $ | 11.91 | | | $ | 11.58 | |
| | | |
Average Balances: | | | | | | | | | | | | |
Loans and other debt products, gross | | $ | 2,431,109 | | | $ | 2,398,212 | | | $ | 2,304,028 | |
Interest earning assets | | | 2,560,126 | | | | 2,551,689 | | | | 2,471,037 | |
Total assets | | | 2,613,730 | | | | 2,628,428 | | | | 2,522,382 | |
Interest bearing liabilities | | | 1,966,631 | | | | 1,958,274 | | | | 1,992,228 | |
Equity | | | 582,630 | | | | 573,642 | | | | 466,266 | |
| | | |
Allowance for credit loss activity: | | | | | | | | | | | | |
Balance as of beginning of period | | $ | 44,933 | | | $ | 38,223 | | | $ | 31,925 | |
General provision for credit losses | | | 4,726 | | | | 499 | | | | 3,563 | |
Specific provision for credit losses | | | 13,204 | | | | 11,461 | | | | 4,592 | |
Net charge offs | | | (8,886 | ) | | | (5,250 | ) | | | (4,593 | ) |
| | | | | | | | | | | | |
Balance as of end of period | | $ | 53,977 | | | $ | 44,933 | | | $ | 35,487 | |
| | | | | | | | | | | | |
| | | |
Supplemental Data (at period end): | | | | | | | | | | | | |
Investments in debt securities, gross | | $ | 6,839 | | | $ | 6,887 | | | $ | 38,787 | |
Loans held-for-sale, gross | | | — | | | | 19,012 | | | | 115,055 | |
Loans held-for-investment, gross | | | 2,402,309 | | | | 2,406,520 | | | | 2,248,480 | |
| | | | | | | | | | | | |
Loans and investments in debt securities, gross | | | 2,409,148 | | | | 2,432,419 | | | | 2,402,322 | |
Unused lines of credit | | | 339,230 | | | | 370,704 | | | | 454,837 | |
Standby letters of credit | | | 32,358 | | | | 32,079 | | | | 20,382 | |
| | | | | | | | | | | | |
Total funding commitments | | $ | 2,780,736 | | | $ | 2,835,202 | | | $ | 2,877,541 | |
| | | | | | | | | | | | |
| | | |
Loan portfolio | | $ | 2,409,148 | | | $ | 2,432,419 | | | $ | 2,402,322 | |
Loans owned by NewStar Credit Opportunities Fund | | | 561,241 | | | | 569,612 | | | | 578,272 | |
| | | | | | | | | | | | |
Managed loan portfolio | | $ | 2,970,389 | | | $ | 3,002,031 | | | $ | 2,980,594 | |
| | | | | | | | | | | | |
| | | |
Loans held-for-sale, gross | | $ | — | | | $ | 19,012 | | | $ | 115,055 | |
Loans held-for-investment, gross | | | 2,402,309 | | | | 2,406,520 | | | | 2,248,480 | |
| | | | | | | | | | | | |
Total loans, gross | | | 2,402,309 | | | | 2,425,532 | | | | 2,363,535 | |
Deferred fees, net | | | (20,998 | ) | | | (21,241 | ) | | | (15,762 | ) |
Allowance for loan losses—general | | | (36,786 | ) | | | (32,148 | ) | | | (28,795 | ) |
Allowance for loan losses—specific | | | (15,713 | ) | | | (11,395 | ) | | | (4,592 | ) |
| | | | | | | | | | | | |
Total loans, net | | $ | 2,328,812 | | | $ | 2,360,748 | | | $ | 2,314,386 | |
| | | | | | | | | | | | |
| (1) | Tier 1 risk-based capital ratio is defined as Tier 1 capital divided by risk weighted assets. |
| (2) | Total risk-based capital ratio is defined as the sum of Tier 1 capital and Tier 2 capital divided by risk weighted assets. |
NewStar Financial, Inc.
Selected Financial Data
(unaudited)
| | | | | | | | |
($ in thousands, except per share amounts) | | Year Ended December 31, | |
| | 2008 | | | 2007 | |
Performance Ratios: | | | | | | | | |
Return on average assets | | | 0.86 | % | | | (0.39 | )% |
Return on average equity | | | 3.96 | | | | (1.97 | ) |
Net interest margin, before provision | | | 4.02 | | | | 4.23 | |
Efficiency ratio | | | 36.87 | | | | 86.57 | |
Loan portfolio yield | | | 7.67 | | | | 9.63 | |
| | |
Credit Quality Ratio: | | | | | | | | |
Net charge off rate | | | 0.82 | % | | | 0.81 | % |
| | |
Average Balances: | | | | | | | | |
Loans and other debt products, gross | | $ | 2,415,436 | | | $ | 2,038,678 | |
Interest earning assets | | | 2,551,602 | | | | 2,234,916 | |
Total assets | | | 2,612,285 | | | | 2,243,524 | |
Interest bearing liabilities | | | 1,962,796 | | | | 1,767,993 | |
Equity | | | 566,173 | | | | 439,650 | |
| | |
Allowance for credit loss activity: | | | | | | | | |
Balance as of beginning of period | | $ | 35,487 | | | $ | 20,570 | |
General provision for credit losses | | | 7,369 | | | | 10,518 | |
Specific provision for credit losses | | | 30,855 | | | | 8,992 | |
Net charge offs | | | (19,734 | ) | | | (4,593 | ) |
| | | | | | | | |
Balance as of end of period | | $ | 53,977 | | | $ | 35,487 | |
| | | | | | | | |
NewStar Financial, Inc.
Non-GAAP Data
(unaudited)
| | | | | | | | | | | | |
($ in thousands) | | Adjusted | |
| | Three Months Ended | |
| | December 31,
2008 | | | September 30,
2008 | | | December 31,
2007 | |
Performance Ratios: | | | | | | | | | | | | |
Return on average assets | | | 0.78 | % | | | 1.12 | % | | | 1.12 | % |
Return on average equity | | | 3.49 | | | | 5.14 | | | | 6.07 | |
Efficiency ratio | | | 19.32 | | | | 22.70 | | | | 35.65 | |
Net interest margin, before provision | | | 3.79 | | | | 3.90 | | | | 3.98 | |
Yield on interest earning assets | | | 7.12 | | | | 7.00 | | | | 8.93 | |
| | | |
Credit Quality and Leverage Ratios (at period end): | | | | | | | | | | | | |
Equity to assets | | | 22.53 | | | | 21.43 | | | | 19.17 | |
| | | |
Consolidated Statement of Operations Adjustments(1): | | | | | | | | | | | | |
Non-interest income | | $ | 8,645 | | | $ | 5,536 | | | $ | 3,957 | |
Plus: loss on assets sold and retained residual interest(2) | | | — | | | | — | | | | 2,420 | |
| | | | | | | | | | | | |
Adjusted non-interest income | | $ | 8,645 | | | $ | 5,536 | | | $ | 6,377 | |
| | | | | | | | | | | | |
| | | |
Operating expenses | | $ | 7,944 | | | $ | 8,456 | | | $ | 14,671 | |
Less: | | | | | | | | | | | | |
IPO related compensation and benefits expense(3) | | | 1,561 | | | | 1,517 | | | | 2,632 | |
Expenses resulting from sale of assets(2) | | | — | | | | — | | | | 931 | |
| | | | | | | | | | | | |
Adjusted operating expenses | | $ | 6,383 | | | $ | 6,939 | | | $ | 11,108 | |
| | | | | | | | | | | | |
| | | |
Average Balances: | | | | | | | | | | | | |
Assets | | $ | 2,613,730 | | | $ | 2,628,428 | | | $ | 2,522,382 | |
Less: assets sold and residual interest(2) | | | — | | | | — | | | | 1,841 | |
| | | | | | | | | | | | |
Adjusted assets | | $ | 2,613,730 | | | $ | 2,628,428 | | | $ | 2,520,541 | |
| | | | | | | | | | | | |
| | | |
Interest earning assets | | $ | 2,560,126 | | | $ | 2,551,689 | | | $ | 2,471,037 | |
Less: assets sold and residual interest(2) | | | — | | | | — | | | | 1,841 | |
| | | | | | | | | | | | |
Adjusted interest earning assets | | $ | 2,560,126 | | | $ | 2,551,689 | | | $ | 2,469,196 | |
| | | | | | | | | | | | |
| | | |
Consolidated Balance Sheet Adjustments | | | | | | | | | | | | |
Assets | | $ | 2,571,522 | | | $ | 2,695,521 | | | $ | 2,622,765 | |
Less: assets sold and residual interest(2) | | | — | | | | — | | | | 631 | |
| | | | | | | | | | | | |
Adjusted assets | | $ | 2,571,522 | | | $ | 2,695,521 | | | $ | 2,622,134 | |
| | | | | | | | | | | | |
| (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 and retained a residual interest in these assets. The adjustment represents the financial impact of the sold assets and residual interest. |
| (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. |
NewStar Financial, Inc.
Non-GAAP Data
(unaudited)
| | | | | | | | |
($ in thousands) | | Adjusted | |
| | Year Ended December 31, | |
| | 2008 | | | 2007 | |
Performance Ratios: | | | | | | | | |
Return on average assets | | | 1.06 | % | | | 1.33 | % |
Return on average equity | | | 4.88 | | | | 6.46 | |
Efficiency ratio | | | 31.39 | | | | 39.46 | |
Net interest margin, before provision | | | 4.02 | | | | 4.21 | |
Yield on interest earning assets | | | 7.40 | | | | 9.14 | |
Cost of funds | | | 4.39 | | | | 6.21 | |
| | |
Consolidated Statement of Operations Adjustments(1): | | | | | | | | |
Interest income | | $ | 188,770 | | | $ | 204,295 | |
Less: interest income earned on assets sold and retained residual interest(2) | | | — | | | | 9,458 | |
| | | | | | | | |
Adjusted interest income | | $ | 188,770 | | | $ | 194,837 | |
| | | | | | | | |
| | |
Interest expense | | $ | 86,216 | | | $ | 109,703 | |
Less: interest expense related to assets sold(2) | | | — | | | | 4,620 | |
| | | | | | | | |
Adjusted interest expense | | $ | 86,216 | | | $ | 105,083 | |
| | | | | | | | |
| | |
Non-interest income | | $ | 18,930 | | | $ | (28,176 | ) |
Plus: loss on assets sold and retained residual interest(2) | | | 631 | | | | 47,743 | |
| | | | | | | | |
Adjusted non-interest income | | $ | 19,561 | | | $ | 19,567 | |
| | | | | | | | |
| | |
Operating expenses | | $ | 44,789 | | | $ | 57,494 | |
| | |
Less: | | | | | | | | |
IPO related compensation and benefits expense(3) | | | 6,452 | | | | 13,424 | |
Expenses resulting from the sale of assets(2) | | | — | | | | 931 | |
| | | | | | | | |
Adjusted operating expenses | | $ | 38,337 | | | $ | 43,139 | |
| | | | | | | | |
| | |
Average Balances: | | | | | | | | |
Assets | | $ | 2,612,285 | | | $ | 2,243,524 | |
Less: assets sold and residual interest(2) | | | 232 | | | | 103,248 | |
| | | | | | | | |
Adjusted assets | | $ | 2,612,053 | | | $ | 2,140,276 | |
| | | | | | | | |
| | |
Interest earning assets | | $ | 2,551,602 | | | $ | 2,234,916 | |
Less: assets sold and residual interest(2) | | | 232 | | | | 103,248 | |
| | | | | | | | |
Adjusted interest earning assets | | $ | 2,551,370 | | | $ | 2,131,668 | |
| | | | | | | | |
| | |
Interest bearing liabilities | | $ | 1,962,796 | | | $ | 1,767,993 | |
Less: credit facility funding for assets sold(2) | | | — | | | | 74,667 | |
| | | | | | | | |
Adjusted interest bearing liabilities | | $ | 1,962,796 | | | $ | 1,693,326 | |
| | | | | | | | |
| (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 and retained a residual interest in these assets. The adjustment represents the financial impact of the sold assets and residual interest. |
| (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. |
NewStar Financial, Inc.
Portfolio Data
(unaudited)
| | | | | | | | | | | | | | | | | | |
($ in thousands) | | December 31, 2008 | | | September 30, 2008 | | | December 31, 2007 | |
Portfolio Data: | | | | | | | | | | | | | | | | | | |
First mortgage | | $ | 370,810 | | 15.4 | % | | $ | 365,758 | | 15.0 | % | | $ | 353,755 | | 14.7 | % |
Senior secured asset-based | | | 40,969 | | 1.7 | | | | 42,830 | | 1.8 | | | | 56,988 | | 2.4 | |
Senior secured cash flow | | | 1,884,862 | | 78.2 | | | | 1,905,906 | | 78.4 | | | | 1,829,734 | | 76.2 | |
Senior subordinated asset-based | | | 64,000 | | 2.7 | | | | 70,075 | | 2.9 | | | | 110,719 | | 4.6 | |
Senior subordinated cash flow | | | 8,182 | | 0.3 | | | | 8,183 | | 0.3 | | | | 14,352 | | 0.6 | |
Second lien | | | 33,086 | | 1.4 | | | | 32,888 | | 1.3 | | | | 32,295 | | 1.3 | |
Mezzanine/subordinated | | | 7,083 | | 0.3 | | | | 6,779 | | 0.3 | | | | 4,479 | | 0.2 | |
| | | | | | | | | | | | | | | | | | |
Total | | $ | 2,408,992 | | 100.0 | % | | $ | 2,432,419 | | 100.0 | % | | $ | 2,402,322 | | 100.0 | % |
| | | | | | | | | | | | | | | | | | |
Middle Market Corporate | | $ | 2,016,291 | | 83.7 | % | | $ | 2,044,945 | | 84.1 | % | | $ | 2,021,559 | | 84.1 | % |
Commercial Real Estate | | | 392,701 | | 16.3 | | | | 387,474 | | 15.9 | | | | 380,763 | | 15.9 | |
| | | | | | | | | | | | | | | | | | |
Total | | $ | 2,408,992 | | 100.0 | % | | $ | 2,432,419 | | 100.0 | % | | $ | 2,402,322 | | 100.0 | % |
| | | | | | | | | | | | | | | | | | |
