Exhibit 99.1
SUNSET FINANCIAL RESOURCES REPORTS FIRST QUARTER NET INCOME OF
$1.4 MILLION
JACKSONVILLE, Fla., May 12 /PRNewswire-FirstCall/ -- Sunset Financial
Resources, Inc. (NYSE: SFO) announced today financial results for the
first quarter ended March 31, 2005.
Net income for the quarter ended March 31, 2005, was $1.4 million, or $0.14 per
diluted share, compared to a net loss of $1.5 million, or $0.85 per diluted
share, in the same period a year ago. Results for the 2004 first quarter reflect
approximately two weeks of operations following the Company's initial public
offering (IPO) on March 17, 2004. This compares to net income of $583,000, or
$0.06 per diluted share for the quarter ended December 31, 2004, which included
a loan loss provision of approximately $1.1 million in the Company's commercial
portfolio.
The diluted weighted average common shares outstanding for the three months
ended March 31, 2005 were 10.45 million shares, compared to 2.1 million shares
in the prior year and 10.45 million in the quarter ended December 31, 2004.
As of March 31, 2005, Sunset's total assets had increased to $1.1 billion
(including $818 million of investments in Mortgage Backed Securities; $192
million of residential mortgage related loans and $36 million of commercial
bridge loans). As of December 31, 2004, Sunset's total assets were $893 million
(including $614 million of investments in Mortgage Backed Securities; $204
million of residential mortgage related loans and $45 million of commercial
bridge loans).
Bert Watson, Chairman, President and CEO of Sunset Financial Resources, said,
"Our strong first quarter results reflect our ability to operate successfully in
a rising interest rate environment. As of March 31, total assets increased to a
record $1.1 billion, leading to net interest income of $3.5 million in the first
quarter due to strong execution in our residential mortgage business."
"In addition, we completed a private placement of $20 million of trust preferred
securities to support of our commercial mortgage lending activities. At the end
of March, our residential mortgage portfolio was fully leveraged at
approximately 9.6X and our commercial portfolio was leveraged approximately
1.1X, an increase from 0.3X as of December 31, 2004."
Watson concluded, "Management will continue to execute its business plan and
expand the Company's asset base. In the face of a difficult environment
throughout our initial 12 months of operations, we believe we have made great
strides to improve our business platform and maximize shareholder value."
For the quarter ended March 31, 2005, the yield on average earning assets was
4.42% and the cost of funds was 3.30%, which equates to an interest rate spread
of 1.12%. Sunset's book value per share at March 31, 2005 was $11.22, compared
to $11.41 per share as of December 31, 2004.
Sunset Financial has scheduled a conference call to discuss its first quarter
financial results at 10:00 a.m. ET on Friday, May 13, 2005. Those wishing to
listen to the conference call by telephone may dial 1-800-295-4740 and the
reservation number is 50275927. Please call approximately ten minutes prior to
the scheduled conference call time. The conference call will also be archived on
the Company's web site for 30 days following the call at
http://www.sunsetfinancial.net.
About Sunset Financial Resources, Inc.
Sunset Financial Resources, Inc. is a self-managed real estate investment trust
(REIT) that went public in March 2004. Sunset Financial Resources seeks to
deliver attractive dividend income and steady growth to its shareholders through
the acquisition and management of a portfolio of high quality residential
mortgage loans and well secured commercial mortgage bridge loans in the United
States.
Certain statements in this news release may constitute "forward-looking
statements" within the meaning of the federal securities laws and involve risks,
uncertainties and other factors, which may cause the actual performance of
Sunset Financial Resources, Inc. to be materially different from the performance
expressed or implied by such statements. These risks include the failure of the
Company to successfully execute its business plan, gain access to additional
financing, the availability of additional loan portfolios for future
acquisition, continued qualification as a REIT, the cost of capital, as well as
the additional risks and uncertainties detailed in the Company's periodic
reports and registration statements filed with the Securities and Exchange
Commission.
Sunset Financial Resources, Inc
Consolidated Balance Sheets
(dollar amounts in thousands)
March 31, December 31, March 31,
2004 2004 2005
------------ ------------- -------------
(unaudited) (unaudited)
Assets
Mortgage assets
Mortgage backed securities,
available for sale $ - $ 614,154 $ 818,427
Securitized hybrid adjustable rate
mortgages - 201,381 189,825
Hybrid adjustable rate residential
mortgages 149,996 1,286 1,162
Fixed rate residential mortgages 6,144 1,045 939
Commercial mortgages 11,500 44,522 36,474
Total mortgage assets 167,640 862,388 1,046,827
Allowance for loan losses (15) (1,333) (355)
Net mortgage assets 167,625 861,055 1,046,472
Cash and cash equivalents 49,430 25,700 22,630
Interest receivable 577 2,676 4,235
Fixed assets, net 662 861 776
Other assets 138 484 2,984
Hedging assets 49 2,716 8,389
Total assets $ 218,481 $ 893,492 $ 1,085,486
Liabilities
Whole loan financing facility $ 100,423 $ 9,718 $ -
Reverse repurchase agreements - 761,205 943,460
Notes payable to stockholders - - 20,000
Hedging liabilities - 944 6
Accrued liabilities 616 2,367 4,525
Total liabilities 101,039 774,234 967,991
Commitments - - -
Shareholders' equity
Preferred stock, $.001 par value,
authorized 50,000,000; no shares
outstanding - - -
Common stock 10 10 10
Additional paid in capital 118,948 119,219 119,295
Accumulated other comprehensive
income 49 87 787
Retained earnings (1,565) (58) (2,597)
Total shareholders' equity 117,442 119,258 117,495
Total liabilities and shareholders'
equity $ 218,481 $ 893,492 $ 1,085,486
Book value per share 11.24 11.41 11.22
Leverage 0.9 6.5 8.2
Sunset Financial Resources, Inc Consolidated Statement of Operations
(unaudited) (dollar amounts in thousands, except per share amounts)
Quarter ended Quarter ended
March 31, 2005 March 31, 2004
-------------- --------------
Interest and fee income $ 10,171 $ 44
Interest expense 6,699 32
Net interest income 3,472 12
Provision for loan losses 76 15
Net interest income after provision 3,396 (3)
Operating expenses
Salaries and employee benefits 740 902
Professional fees 464 224
Other 749 414
Total operating expenses 1,953 1,540
Net income (loss) $ 1,443 $ (1,543)
Basic earnings per share 0.14 (0.73)
Diluted earnings per share 0.14 (0.85)
Weighted average basic shares 10,454 2,112
Weighted average diluted shares 10,454 2,118
Sunset Financial Resources, Inc
Trended Income Statements
(dollar amounts in thousands)
2004 2005
First Second Third Fourth First
quarter quarter quarter quarter quarter
------------ ------------ ------------ ------------ ------------
Interest and fee income $ 44 $ 3,058 $ 5,989 $ 9,142 $ 10,171
Interest expense 32 1,345 3,118 5,347 6,699
Net interest income 12 1,713 2,871 3,795 3,472
Provision for loan losses 15 49 85 1,184 76
Net interest income
after provision (3) 1,664 2,786 2,611 3,396
Securities gains - - 403 331 -
Loss on sale of loans - - - (48) -
Operating expenses
Salaries and employee
benefits 902 543 660 759 740
Professional fees 224 315 349 263 464
Other 414 635 747 924 749
Special charge - - - 365 -
Total operating
expenses 1,540 1,493 1,756 2,311 1,953
Net income (loss) $ (1,543) $ 171 $ 1,433 $ 583 $ 1,443
Averages and yields/costs
Residential assets NM $ 223,720 $ 476,388 $ 754,493 $ 878,454
Yield NM 3.79% 4.04% 4.25% 4.21%
Commercial assets NM 33,671 42,003 52,839 44,457
Yield NM 11.09% 10.24% 7.72% 8.90%
Earning assets NM 267,312 535,385 815,065 933,880
Yield NM 4.60% 4.45% 4.46% 4.42%
Borrowings NM 163,380 422,786 701,938 823,171
Interest NM 2.02% 1.58% 2.16% 2.65%
Swaps NM 0.90% 1.20% 0.78% 0.57%
Fees NM 0.39% 0.15% 0.09% 0.08%
Total NM 3.31% 2.93% 3.03% 3.30%
Net interest margin NM 2.58% 2.13% 1.85% 1.51%
Net interest spread NM 1.29% 1.52% 1.43% 1.12%
Sunset Financial Resources, Inc
Earning Assets
(dollar amounts in thousands)
Investment securities
Agency Non Agency
Securities Securities Total
------------ ------------ ------------
Par $ 612,959 $ 204,449 $ 817,408
Unamortized premium 9,378 1,767 11,145
Unamortized discount (667) (60) (727)
Amortized cost 621,670 206,156 827,826
Gross unrealized gains 19 3 22
Gross unrealized losses (7,249) (2,172) (9,421)
Estimated fair value $ 614,440 $ 203,987 $ 818,427
Investment securities - repricing characteristics
Floating rate $ 65,924
Five year ARM 752,503
$ 818,427
Residential Loans
Par Prem/disc Book value
------------ ------------ ------------
Fixed rates $ 911 $ 28 $ 939
Three year ARM 7,992 228 8,220
Five year ARM 65,806 1,832 67,638
Seven year ARM (and other) 114,266 863 115,129
Total residential loans $ 188,975 $ 2,951 $ 191,926
Commercial loans
(dollars in millions)
Balance Location Participation
------------ ------------ ------------
Retail mall $ 14.7 FL No
Resort development 10.0 NC Yes
Cemetery / funeral home 5.7 HI Yes
Multi sports facility 4.7 NJ No
Apartments 1.5 IL No
Total $ 36.6
SOURCE Sunset Financial Resources, Inc.
-0- 05/12/2005
/CONTACT: Michael Pannell, Chief Financial Officer of Sunset Financial
Resources, Inc., +1-904-425-4349, mpannell@sfous.com; or Jeffrey Goldberger,
+1-212-896-1249, jgoldberger@kcsa.com, or Michael Cimini, +1-212-896-1233,
mcimini@kcsa.com, both of KCSA Worldwide, for Sunset Financial Resources,
Inc./
/Web Site: http://www.sunsetfinancial.net /