Exhibit 99.1
SUNSET FINANCIAL RESOURCES REPORTS SECOND QUARTER RESULTS
DECLARES Q2 DIVIDEND OF $0.03 PER SHARE
JACKSONVILLE, Fla., Aug. 15 /PRNewswire-FirstCall/ -- Sunset Financial
Resources, Inc. (NYSE: SFO) announced today a net loss for the second quarter
ended June 30, 2005 of $5.1 million, or ($0.49) per diluted share, compared to
net income of $171,000 in the same period a year ago. This compares to net
income of $1.4 million, or $0.14 per diluted share, for the quarter ended March
31, 2005. The net loss for the second quarter of 2005 was attributed primarily
to a $5.7 million impairment charge relating to a commercial loan.
The Company also announced it has declared a quarterly cash dividend of
$0.03 per share, payable September 2, 2005, to shareholders of record as of
August 22, 2005.
Bert Watson, Chairman, President and CEO of Sunset Financial Resources,
said, "Second quarter results reflect the difficult operating environment
affecting the entire residential mortgage industry, including tightened rate
spreads and increased residential loan prepayment activity."
"While Sunset did not attain taxable income during the quarter, we
determined it was prudent to maintain our commitment to providing shareholders
with quarterly dividends. We are confident the cash used from our capital
reserves for our second quarter dividend will not have any material impact on
our ability to conduct business or grow operations. We expect dividends for the
remainder of the year to be based on taxable income."
As of June 30, 2005, Sunset's total assets were $1.1 billion (including
$896 million of investments in Mortgage Backed Securities; $182 million of
residential mortgage related loans and $30 million of commercial bridge loans),
compared to $423 million (including $128 million of investments in Mortgage
Backed Securities; $230 million of residential mortgage related loans and $39
million of commercial bridge loans) in the same period a year ago. This compares
to total assets of $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 March 31, 2005.
Watson concluded, "We continue to diligently work through major performance
issues affecting our existing commercial portfolio. At the same time, we are
actively evaluating and in certain situations, taking advantage of opportunities
to prudently deploy capital. In the last 60 days, we successfully executed two
commercial mortgage loans, one in Florida (master plan development center) and
the other in West Virginia (equestrian facility)."
As of June 30, 2005, the Company's residential mortgage portfolio was fully
leveraged at approximately 10 times; its commercial portfolio was leveraged
approximately 1.6 times, compared to 1.1 times as of March 31, 2005.
For the quarter ended June 30, 2005, the yield on average earning assets
was 4.25% and the cost of funds was 3.58%, which equates to an interest rate
spread of 0.67%. This compares to a yield on average earning assets of 4.42% and
a cost of funds of 3.30%, which equates to an interest rate spread of 1.12%, for
the quarter ended March 31, 2005. Sunset's book value per share at June 30, 2005
was $10.47, compared $11.22, at of March 31, 2005.
Sunset Financial has scheduled a conference call to discuss its first
quarter financial results at 10:00 a.m. ET on Monday, August 15, 2005. Those
wishing to listen to the conference call by telephone may dial 1-800-599-9795
and the reservation number is 47206471. 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)
June 30, December 31, June 30,
2004 2004 2005
------------- ------------- -------------
(unaudited) (unaudited)
Assets
Mortgage assets
Mortgage backed securities, available
for sale $ 128,431 $ 614,154 $ 896,099
Securitized hybrid adjustable rate
mortgages 223,041 201,381 180,089
Hybrid adjustable rate residential
mortgages 1,292 1,286 1,159
Fixed rate residential mortgages 5,832 1,045 936
Commercial mortgages 39,260 44,522 29,726
Total mortgage assets 397,856 862,388 1,108,009
Allowance for loan losses (64) (1,333) (6,077)
Net mortgage assets 397,792 861,055 1,101,932
Cash and cash equivalents 17,986 25,700 10,802
Interest receivable 1,523 2,676 4,273
Fixed assets, net 764 861 688
Other assets 2,377 484 16,150
Hedging assets 2,953 2,716 4,173
Total assets $ 423,395 $ 893,492 $ 1,138,018
Liabilities
Whole loan financing facility $ - $ 9,718 $ -
Reverse repurchase agreements 301,589 761,205 1,002,368
Trust preferred securities - - 20,000
Hedging liabilities 350 944 2,704
Accrued liabilities 1,035 2,367 3,249
Total liabilities 302,974 774,234 1,028,321
Commitments - - -
Shareholders' equity
Preferred stock, $.001 par value,
authorized 50,000,000; no shares
outstanding - - -
Common stock 10 10 10
Additional paid in capital 119,057 119,219 119,330
Accumulated other comprehensive income 2,748 87 (1,954)
Retained earnings (1,394) (58) (7,689)
Total shareholders' equity 120,421 119,258 109,697
Total liabilities and shareholders'
equity $ 423,395 $ 893,492 $ 1,138,018
Book value per share 11.52 11.41 10.47
Leverage 2.5 6.5 9.4
Sunset Financial Resources, Inc.
Consolidated Statement of Operations (unaudited)
(dollar amounts in thousands, except per share amounts)
Quarter Quarter Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
---------- ---------- ---------- ----------
Interest and fee income $ 11,802 $ 3,058 $ 21,973 $ 3,102
Interest expense 9,031 1,345 15,730 1,377
Net interest income 2,771 1,713 6,243 1,725
Provision for loan losses 5,722 49 5,798 64
Net interest income after
provision (2,951) 1,664 445 1,661
Securities gains 8 - 8 -
Operating expenses
Salaries and employee benefits 564 543 1,304 1,445
Professional fees 756 315 1,220 539
Other 830 635 1,579 1,049
Total operating expenses 2,150 1,493 4,103 3,033
Net income (loss) $ (5,093) $ 171 $ (3,650) $ (1,372)
Basic earnings per share (0.49) 0.02 (0.35) (0.22)
Diluted earnings per share (0.49) - (0.36) (0.25)
Weighted average basic shares 10,475 10,450 10,465 6,281
Weighted average diluted shares 10,477 10,458 10,467 6,290
Sunset Financial Resources, Inc.
Trended Income Statements
(dollar amounts in thousands)
2004 2005
Second Third Fourth First Second
quarter quarter quarter quarter quarter
------------- ------------- ------------- ------------- -------------
Interest and fee income $ 3,058 $ 5,989 $ 9,142 $ 10,171 $ 11,802
Interest expense 1,345 3,118 5,347 6,699 9,031
Net interest income 1,713 2,871 3,795 3,472 2,771
Provision for loan losses 49 85 1,184 76 5,722
Net interest income after
provision 1,664 2,786 2,611 3,396 (2,951)
Securities gains - 403 331 - 8
Loss on sale of loans - - (48) - -
Operating expenses
Salaries and employee
benefits 543 660 759 740 564
Professional fees 315 349 263 464 756
Other 635 747 924 749 830
Special charge - - 365 - -
Total operating
expenses 1,493 1,756 2,311 1,953 2,150
Net income (loss) $ 171 $ 1,433 $ 583 $ 1,443 $ (5,093)
Averages and yields/
costs
Residential assets $ 223,720 $ 476,388 $ 754,493 $ 878,454 $ 1,074,277
Yield 3.79% 4.04% 4.25% 4.21% 4.12%
Commercial assets 33,671 42,003 52,839 44,457 28,850
Yield 11.09% 10.24% 7.72% 8.90% 9.63%
Earning assets 267,312 535,385 815,065 933,880 1,114,511
Yield 4.60% 4.45% 4.46% 4.42% 4.25%
Borrowings 163,380 422,786 701,938 823,171 1,012,197
Interest 2.02% 1.58% 2.16% 2.65% 3.16%
Swaps 0.90% 1.20% 0.78% 0.57% 0.36%
Fees 0.39% 0.15% 0.09% 0.08% 0.06%
Total 3.31% 2.93% 3.03% 3.30% 3.58%
Net interest margin 2.58% 2.13% 1.85% 1.51% 1.00%
Net interest spread 1.29% 1.52% 1.43% 1.12% 0.67%
Sunset Financial Resources, Inc.
Earning Assets
(dollar amounts in thousands)
Investment securities
Agency Non Agency
Securities Securities Total
------------ ------------ ------------
Par $ 598,437 $ 291,547 $ 889,984
Unamortized premium 8,517 2,288 10,805
Unamortized discount (687) (490) (1,177)
Amortized cost 606,267 293,345 899,612
Gross unrealized gains 806 67 873
Gross unrealized losses (3,375) (1,011) (4,386)
Estimated fair value $ 603,698 $ 292,401 $ 896,099
Investment securities -
repricing characteristics
Floating rate $ 71,998
Three year ARM $ 57,840
Five year ARM 750,808
Seven year ARM 15,453
$ 896,099
Residential Loans
Par Prem/disc Book value
------------ ------------ ------------
Fixed rates $ 908 $ 28 $ 936
Three year ARM 6,661 187 6,848
Five year ARM 61,637 1,716 63,353
Seven year ARM (and other) 110,239 808 111,047
Total residential loans $ 179,445 $ 2,739 $ 182,184
Commercial loans
(dollars in millions)
Balance Location Participation
------------ ------------ -------------
Resort development $ 15.6 NC No
Cemetery / funeral home 5.7 HI Yes
Multi sports facility 4.7 NJ No
Retail development 4.2 FL No
Total $ 30.2
SOURCE Sunset Financial Resources, Inc.
-0- 08/15/2005
/CONTACT: Michael Pannell, Chief Financial Officer, Sunset Financial
Resources, +1-904-425-4349, mpannell@sfous.com; 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/
/Web site: http://www.sunsetfinancial.net /