* Reported a $14.7 million adjusted net loss in the second quarter,
or $0.30 adjusted loss per diluted share, driven by a $36.2
million provision for credit losses
* On a GAAP basis, the net loss was $15.6 million, or $0.32 net loss
per diluted share
* Boosted allowance for credit losses to 3.86% from 2.81% in prior
quarter as charge-offs increased slightly to 2.66% and
non-performing loans increased to 6.68%
* Converted credit facility with Wachovia/Wells Fargo to long-term
debt, extending maturity to 2012 and renewed a short-term
seasoning facility with Natixis Financial Products
* Continued to work on regulatory approvals for acquisition of
Southern Commerce Bank amid difficult policy environment
BOSTON, Aug. 5, 2009 (GLOBE NEWSWIRE) -- NewStar Financial, Inc. (Nasdaq:NEWS), a Boston-based commercial finance company, today reported adjusted net loss for the second quarter of 2009 of $14.7 million, or $0.30 per diluted share. On a GAAP basis, the Company reported net loss of $15.6 million, or $0.32 per diluted share, which reflected $1.0 million after-tax non-cash equity compensation expense related to the 2006 IPO.
"Adjusted net income (loss)" and other non-GAAP financial measures used in this release are defined under "Non-GAAP Financial Measures." Reconciliations between GAAP and adjusted (non-GAAP) measures can be found in the attached financial tables.
"The second quarter remained challenging for lenders as continued weak economic conditions weighed on credit performance across most markets and asset classes," said Tim Conway, Chairman and Chief Executive Officer. "Our credit metrics for the second quarter reflected the compounding impact of declining asset values and sustained weakness in the economy on the financial performance of our borrowers, particularly in the commercial real estate markets. Despite the severity of this recession, however, we continue to believe that we will benefit from a defensive balance sheet, which provides us important flexibility to protect book value.
"During the quarter, we also continued to work with federal banking regulators on our proposed acquisition on Southern Commerce Bank to satisfy requirements for regulatory approval on terms acceptable to the Company in a difficult policy environment."
"We continued to make progress on our funding strategy in the second quarter by converting the Wachovia line to a three year term debt facility and completing the renewal of our warehouse line with Natixis. We now have 87% of our assets funded with long-term capital," added John Bray, NewStar's Chief Financial Officer.
Loan Credit Quality
* The provision for credit losses was $36.2 million in the second
quarter of 2009, up from $25.3 million in the first quarter of 2009.
* Approximately $32.4 million of the provision for credit losses was
used to establish new specific reserves in the second quarter of
2009 compared to $26.7 million in the first quarter of 2009.
* The allowance for credit losses increased to $86.3 million, or
3.86%, of loans at June 30, 2009, compared to $65.0 million, or
2.81%, at March 31, 2009 and $38.2 million or 1.60% at June 30,
2008.
* Nine loans totaling $78.2 million as of June 30, 2009 were placed
on non-accrual status in the second quarter of 2009.
* Four of the nine loans placed on non-accrual status in the second
quarter of 2009 were commercial real estate loans totaling $38.9
million as of June 30, 2009. The other five loans were to
companies operating in the building materials, publishing,
restaurant and financial services industry sectors.
* At June 30, 2009, loans to 19 borrowers were on non-accrual with an
aggregate outstanding balance of $149.5 million compared to ten
loans with an aggregate outstanding balance of $88.9 million at
March 31, 2009.
* Eleven of the non-accrual loans with an outstanding balance of
$94.9 million and three additional accruing loans with an aggregate
outstanding balance of $33.0 million as of June 30, 2009 were also
delinquent loans.
* Net charge-offs were up slightly to $14.9 million, or 2.66% of
loans on an annualized basis, in the second quarter of 2009
compared to $14.3 million or 2.50% of loans on an annualized basis
in the first quarter of 2009.
* $7.4 million of net charge-offs were on commercial real estate
loans in the second quarter of 2009.
* NewStar sold a property classified as other real estate owned
("OREO") for $4.6 million during the quarter and recognized a loss
of $1.9 million.
Funding and Capital
* Total cash and equivalents as of June 30, 2009 were $160 million, of which $46 million was unrestricted. Unrestricted cash decreased from approximately $58 million at March 31, 2009 and restricted cash increased from approximately $109 million to $113 million. * Amended an existing credit facility with Wachovia Bank NA, a Wells Fargo Company, to extend the maturity date to July 2012 and reduce the size of the facility from $200 million to $146 million. * Amended an existing short-term seasoning credit facility with Natixis Financial Products to extend the maturity date to May 2010 and reduce the size of the facility from $75 million to $50 million. * Approximately 87% of assets are now funded by long term capital. * Approximately 62% of loan assets continued to be term-funded by existing securitized term debt at attractive, locked-in spreads as of June 30, 2009. The ability to re-invest collections from repayments and amortization of certain of these loans represents a continuing source of funding. * NewStar reduced debt by $81.6 million in the second quarter of 2009 and by more than $250 million since June 30, 2008. * Balance sheet leverage was 3.2x as of June 30, 2009, down slightly from 3.3x at March 31, 2009 due principally to repayment of advances under credit facilities.
Managed and Owned Loan Portfolios
* The composition of the owned loan portfolio continued to reflect a focus on senior debt with 96% invested in 1st lien senior secured loans and debt investments at June 30, 2009. * Total origination volume for the second quarter of 2009 was nominal, which reflected the Company's preference to preserve liquidity given the severity of recent economic conditions and the heightened level of uncertainty around the future course of the U.S. economy. * The managed loan portfolio was $2.8 billion as of June 30, 2009 (down from $2.9 billion at March 31, 2009), reflecting the net impact of $12 million of new origination, which was offset by prepayments and scheduled amortization of existing loans, as well as charge-offs. Managed loan portfolio was down from $3.0 billion at June 30, 2008. * Assets managed for the NCOF were $544 million at June 30, 2009, compared to $557 million at March 31, 2009 and $593 million at June 30, 2008. * The owned loan portfolio was $2.3 billion as of June 30, 2009 down slightly from March 31, 2009. * The owned loan portfolio continued to be balanced across industry sectors and highly diversified by issuer. As of June 30, 2009, no single issuer represented more than 1% of total loans outstanding, and the ten largest issuers comprised approximately 10% of the loan portfolio.
Net Interest Income / Margin
* Net interest income before provision for credit losses was $23.6 million for the second quarter of 2009 compared to $22.2 million for the first quarter of 2009. * Net interest margin increased 32 bps to 3.90% for the second quarter of 2009 compared to 3.58% for the first quarter of 2009 and 4.17% for the second quarter of 2008 due principally to an increase in credit spreads through the re-pricing of existing loans, which was partially offset by the impact of higher non-performing loans.
Non-Interest Income
* Non-interest income was $(0.2) million for the second quarter of 2009 compared to $6.3 million for the first quarter of 2009, and $1.6 million for the second quarter of 2008. * Non-interest income in the second quarter of 2009 consisted primarily of a $1.9 million loss on the sale of OREO partially offset by $0.7 million of asset management income, $0.6 million of unused fees and $0.4 million of agency fees.
Expenses
* Operating expenses were $12.0 million in the second quarter of 2009 compared to $9.9 million in the first quarter of 2009, and $13.5 million in the second quarter of 2008. The increase in the second quarter of 2009 compared to the first quarter of 2009 was due principally to higher loan workout and compensation expenses.
Other Developments
* The Company remains in discussion with Dickinson Financial Corporation regarding potential amendments to the stock purchase and sale agreement related to the proposed acquisition of Southern Commerce Bank, N.A. As of July 31, 2009, the existing agreement lapsed, giving each party the right to terminate. Neither party has elected to terminate.
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 888-461-2011 approximately 5-10 minutes prior to the call. International callers should dial 719-325-2209. All callers should reference "NewStar Financial."
For convenience, an archived replay of the call will be available through August 12, 2009 by dialing 888-203-1112. International callers should call 719-457-0820. For all replays, please use the passcode 3245559. 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 and Charleston SC. For more detailed transaction and contact information please visit www.newstarfin.com.
The NewStar Financial, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4044
Forward-Looking Statements
This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this release are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, strategic plans, objectives, future performance 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.
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 2008 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-Q for the quarter ended June 30, 2009 with the SEC on or before August 10, 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; and ii) the losses incurred in connection with 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 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 8 of this release.
References to "adjusted net interest margin" mean annualized interest income as determined under GAAP (excluding interest income generated from the retained residual interest) less annualized interest expense as determined under GAAP, divided by average interest earning assets (excluding 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 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 and ii) the change in fair value of the residual interest. 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 12 of this release. NewStar's adjusted financial measures should not be considered as alternatives to financial measures determined in accordance with GAAP and may be different from, or inconsistent with, non-GAAP financial measures used by other companies.
NewStar Financial, Inc.
Consolidated Balance Sheets
(unaudited)
--------------------------------------------------------------------
June 30, March 31, Dec. 31, June 30,
($ in thousands) 2009 2009 2008 2008
--------------------------------------------------------------------
Assets:
Cash and cash
equivalents $ 46,280 $ 57,581 $ 50,279 $ 134,017
Restricted cash 113,243 108,889 84,163 81,676
Investments in debt
securities,
available-for-sale 2,972 2,676 3,025 4,619
Loans held-for-sale 7,132 -- -- 15,508
Loans, net 2,135,647 2,234,467 2,328,812 2,340,410
Deferred financing
costs, net 19,057 19,611 21,003 19,398
Interest receivable 8,685 8,640 10,608 11,549
Property and
equipment, net 1,080 1,112 1,252 1,412
Deferred income
taxes, net 48,587 29,794 31,238 10,987
Income tax
receivable -- 6,268 -- 3,229
Other assets 22,150 37,730 41,142 34,174
---------- ---------- ---------- ----------
Total assets $2,404,833 $2,506,768 $2,571,522 $2,656,979
====================================================================
Liabilities:
Credit facilities $ 322,248 $ 378,870 $ 411,267 511,800
Term debt 1,478,620 1,503,616 1,524,171 1,540,225
Accrued interest
payable 4,283 3,544 9,773 10,092
Income tax payable 1,647 -- 353 --
Accounts payable 481 417 1,049 388
Other liabilities 32,780 42,227 43,354 26,157
---------- ---------- ---------- ----------
Total liabilities 1,840,059 1,928,674 1,989,967 2,088,662
Total stockholders'
equity 564,774 578,094 581,555 568,317
---------- ---------- ---------- ----------
Total liabilities
and stockholders'
equity $2,404,833 $2,506,768 $2,571,522 $2,656,979
====================================================================
NewStar Financial, Inc.
Consolidated Statements of Operations
(unaudited)
---------------------------------------------------------------------
Three Months Ended
--------------------------------------------------
($ in thousands,
except per share June 30, March 31, December 31, June 30,
amounts) 2009 2009 2008 2008
------------------ ----------- ----------- ----------- -----------
Net interest
income:
Interest income $ 35,026 $ 35,925 $ 45,845 $ 46,034
Interest expense 11,412 13,765 21,445 19,583
----------- ----------- ----------- -----------
Net interest
income 23,614 22,160 24,400 26,451
Provision for
credit losses 36,177 25,307 17,930 3,723
----------- ----------- ----------- -----------
Net interest
income after
provision for
credit losses (12,563) (3,147) 6,470 22,728
Non-interest
income:
Fee income 361 493 866 1,395
Asset management
income 673 787 1,457 1,476
Gain (loss) on
derivatives 222 144 1,366 (11)
Gain (loss) on sale
of loans and debt
securities -- -- (1) 47
Loss on investments
in debt securities -- -- (1) (667)
Loss on residual
interest in
securitization -- -- -- (308)
Other income
(expense) (1,504) 4,898 4,958 (339)
----------- ----------- ----------- -----------
Total non-interest
income (248) 6,322 8,645 1,593
Operating expenses:
Compensation and
benefits 6,686 5,627 4,172 9,580
Occupancy and
equipment 781 780 718 938
General and
administrative
expenses 4,573 3,501 3,054 2,972
----------- ----------- ----------- -----------
Total operating
expenses 12,040 9,908 7,944 13,490
----------- ----------- ----------- -----------
Income (loss)
before income
taxes (24,851) (6,733) 7,171 10,831
Income tax
expense (benefit) (9,208) (1,783) 4,417 4,908
----------- ----------- ----------- -----------
Net income (loss) $ (15,643) $ (4,950) $ 2,754 $ 5,923
=========== =========== =========== ===========
After tax
adjustments to
net income
(loss):
IPO related
compensation and
benefits expense
(1) 962 2,051 2,102 1,512
Loss on assets
sold and
retained
residual
interest (2) -- -- 258 169
----------- ----------- ----------- -----------
Adjusted net
income (loss) $ (14,681) $ (2,899) $ 5,114 $ 7,604
=========== =========== =========== ===========
Net income (loss)
per share:
Basic $ (0.32) $ (0.10) $ 0.06 $ 0.12
Diluted $ (0.32) $ (0.10) $ 0.06 $ 0.12
Weighted average
shares outstanding:
Basic 49,173,192 48,778,526 48,510,697 48,532,542
Diluted 49,173,192 48,778,526 48,510,697 48,532,542
Adjusted net income
(loss) per share:
Basic $ (0.30) $ (0.06) $ 0.11 $ 0.16
Diluted $ (0.30) $ (0.06) $ 0.11 $ 0.16
Adjusted weighted
average shares
outstanding:
Basic 49,173,192 48,778,526 48,510,697 48,532,542
Diluted 49,173,192 48,778,526 48,510,697 48,532,542
(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)
--------------------------------------------------------------------
Six Months Ended June 30,
--------------------------
($ in thousands, except per share amounts) 2009 2008
----------------------------------------- ------------ ------------
Net interest income:
Interest income $ 70,951 $ 98,022
Interest expense 25,177 44,907
------------ ------------
Net interest income 45,774 53,115
Provision for credit losses 61,484 8,334
------------ ------------
Net interest income after provision for
credit losses (15,710) 44,781
Non-interest income:
Fee income 854 2,927
Asset management income 1,460 3,127
Gain on derivatives 366 45
Gain (loss) on sale of loans and debt
securities -- (739)
Loss on investments in debt securities -- (925)
Loss on residual interest in
securitization -- (631)
Other income 3,394 945
------------ ------------
Total non-interest income 6,074 4,749
Operating expenses:
Compensation and benefits 12,313 21,080
Occupancy and equipment 1,561 1,773
General and administrative expenses 8,074 5,536
------------ ------------
Total operating expenses 21,948 28,389
------------ ------------
Income (loss) before income taxes (31,584) 21,141
Income tax expense (benefit) (10,991) 9,076
------------ ------------
Net income (loss) $ (20,593) $ 12,065
============ ============
After tax adjustments to net income
(loss):
IPO related compensation and benefits
expense (1) 3,013 2,705
Loss on assets sold and retained
residual interest (2) -- 361
------------ ------------
Adjusted net income (loss) $ (17,580) $ 15,131
============ ============
Net income (loss) per share:
Basic $ (0.42) $ 0.25
Diluted $ (0.42) $ 0.25
Weighted average shares outstanding:
Basic 48,974,838 48,160,254
Diluted 48,974,838 48,160,254
Adjusted net income (loss) per share:
Basic $ (0.36) $ 0.31
Diluted $ (0.36) $ 0.31
Adjusted weighted average shares
outstanding:
Basic 48,974,838 48,160,254
Diluted 48,974,838 48,160,254
(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.
Selected Financial Data
(unaudited)
-----------------------------------------------------------------
Three Months Ended
----------------------------------------------
($ in thousands,
except per share June 30, March 31, Dec. 31, June 30,
amounts) 2009 2009 2008 2008
------------------ ---------- ---------- ---------- ----------
Performance
Ratios:
Return on average
assets (2.56)% (0.79)% 0.42% 0.91%
Return on average
equity (10.87) (3.44) 1.88 4.22
Net interest
margin, before
provision 3.90 3.58 3.79 4.17
Efficiency ratio 51.53 34.79 24.04 48.10
Loan portfolio
yield 6.08 6.05 7.40 7.52
Credit Quality
Ratios:
Delinquent loan
rate (at period
end) 5.71% 2.65% 0.69% 0.97%
Delinquent loan
rate for
accruing loans
60 days or more
past due (at
period end) 1.47 0.09 -- 0.55
Non-accrual loan
rate (at period
end) 6.68 3.84 2.52 0.42
Annualized net
charge off rate 2.66 2.50 1.47 0.38
Allowance for
credit losses
ratio (at period
end) 3.86 2.81 2.25 1.60
Capital and
Leverage Ratios:
Tier 1 risk based
capital (1) 21.82% 21.94% 21.86% N/A
Total risk-based
capital (2) 23.10 23.21 23.12 N/A
Equity to assets 23.48 23.06 22.62 21.39
Debt to equity 3.19x 3.26x 3.33x 3.61
Book value per
share $ 11.49 $ 11.76 $ 12.00 $ 11.71
Average Balances:
Loans and other
debt products,
gross $2,300,582 $2,391,487 $2,431,109 $2,403,327
Interest earning
assets 2,429,968 2,513,341 2,560,126 2,553,025
Total assets 2,451,731 2,544,764 2,613,730 2,624,658
Interest bearing
liabilities 1,828,485 1,916,508 1,966,631 1,973,580
Equity 577,455 583,346 582,630 564,811
Allowance for
credit loss
activity:
Balance as of
beginning of
period $ 65,013 $ 53,977 $ 44,933 $ 36,763
General provision
for credit
losses 3,733 (1,409) 4,726 1,061
Specific
provision for
credit losses 32,444 26,716 13,204 2,662
Net charge offs (14,850) (14,271) (8,886) (2,263)
---------- ---------- ---------- ----------
Balance as of end
of period $ 86,340 $ 65,013 $ 53,977 $ 38,223
========== ========== ========== ==========
Supplemental Data
(at period end):
Investments in
debt securities,
gross $ 6,737 $ 6,772 $ 6,839 $ 6,918
Loans held-for-
sale, gross 7,136 -- -- 16,168
Loans held-for-
investment,
gross 2,238,630 2,316,930 2,402,309 2,396,107
---------- ---------- ---------- ----------
Loans and
investments in
debt securities,
gross 2,252,503 2,323,702 2,409,148 2,419,193
Unused lines of
credit 279,141 316,917 339,230 364,855
Standby letters
of credit 29,826 32,011 32,358 26,680
---------- ---------- ---------- ----------
Total funding
commitments $2,561,470 $2,672,630 $2,780,736 $2,810,728
========== ========== ========== ==========
Loan portfolio $2,252,503 $2,323,702 $2,409,148 $2,419,193
Loans owned by
NewStar Credit
Opportunities
Fund 543,862 557,491 561,241 593,396
---------- ---------- ---------- ----------
Managed loan
portfolio $2,796,365 $2,881,193 $2,970,389 $3,012,589
========== ========== ========== ==========
Loans held-for-
sale, gross $ 7,136 $ -- $ -- $ 16,168
Loans held-for-
investment,
gross 2,238,630 2,316,930 2,402,309 2,396,107
---------- ---------- ---------- ----------
Total loans,
gross 2,245,766 2,316,930 2,402,309 2,412,275
Deferred fees,
net (17,875) (19,225) (20,998) (19,187)
Allowance for
loan losses -
general (39,360) (35,080) (36,786) (31,986)
Allowance for
loan losses -
specific (45,752) (28,158) (15,713) (5,184)
---------- ---------- ---------- ----------
Total loans, net $2,142,779 $2,234,467 $2,328,812 $2,355,918
========== ========== ========== ==========
(1) Tier 1 risk-based capital ratio is defined as Tier 1 capital
divided by risk weighted assets.
(2) Total risk-based capital ratio is defined as the sum of Tier 1
capital and Tier 2 capital divided by risk-weighted assets.
NewStar Financial, Inc.
Selected Financial Data
(unaudited)
------------------------------------------------------------------
Six Months Ended June 30,
--------------------------
($ in thousands, except per share
amounts) 2009 2008
--------------------------------------- ----------- -----------
Performance Ratios:
Return on average assets (1.66)% 0.93%
Return on average equity (7.15) 4.38
Net interest margin, before provision 3.73 4.18
Efficiency ratio 42.33 49.06
Loan portfolio yield 6.07 7.99
Credit Quality Ratios:
Annualized net charge off rate 2.62 0.47
Average Balances:
Loans and other debt products, gross $ 2,345,780 $ 2,415,998
Interest earning assets 2,473,871 2,557,601
Total assets 2,497,030 2,620,510
Interest bearing liabilities 1,872,231 1,982,107
Equity 580,730 554,461
Allowance for credit loss activity:
Balance as of beginning of period $ 53,977 $ 35,487
General provision for credit losses 2,324 2,144
Specific provision for credit losses 59,160 6,190
Net charge offs (29,121) (5,598)
----------- -----------
Balance as of end of period $ 86,340 $ 38,223
=========== ===========
NewStar Financial, Inc.
Non-GAAP Data
(unaudited)
-------------------------------------------------------------------
Adjusted
-------------------------------------------------
Three Months Ended
-------------------------------------------------
June 30, March 31, Dec. 31, June 30,
($ in thousands) 2009 2009 2008 2008
---------------- ---------- ----------- ----------- -----------
Performance
Ratios:
Return on
average assets (2.40)% (0.46)% 0.78 % 1.17 %
Return on
average equity (10.20) (2.02) 3.49 5.41
Efficiency ratio 44.99 31.37 19.32 42.02
Net interest
margin, before
provision 3.90 3.58 3.79 4.17
Yield on
interest
earning assets 5.78 5.80 7.12 7.25
Consolidated
Statement of
Operations
Adjustments(1):
Non-interest
income $ (248) $ 6,322 $ 8,645 $ 1,593
Plus: loss on
assets sold and
retained
residual
interest (2) -- -- -- 308
---------- ----------- ----------- -----------
Adjusted non-
interest income $ (248) $ 6,322 $ 8,645 $ 1,901
========== =========== =========== ===========
Operating
expenses $ 12,040 $ 9,908 $ 7,944 $ 13,490
Less: IPO
related
compensation
and benefits
expense (3) 1,528 973 1,561 1,576
---------- ----------- ----------- -----------
Adjusted
operating
expenses $ 10,512 $ 8,935 $ 6,383 $ 11,914
========== =========== =========== ===========
Average Balances:
Assets $2,451,731 $ 2,544,764 $ 2,613,730 $ 2,624,658
Less: assets
sold and
residual
interest (2) -- -- -- 308
---------- ----------- ----------- -----------
Adjusted assets $2,451,731 $ 2,544,764 $ 2,613,730 $ 2,624,350
========== =========== =========== ===========
Interest earning
assets $2,429,968 $ 2,513,341 $ 2,560,126 $ 2,553,025
Less: assets
sold and
residual
interest (2) -- -- -- 308
---------- ----------- ----------- -----------
Adjusted
interest
earning assets $2,429,968 $ 2,513,341 $ 2,560,126 $ 2,552,717
========== =========== =========== ===========
(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)
-------------------------------------------------------------------
Adjusted
----------------------
Six Months Ended
June 30,
----------------------
($ in thousands) 2009 2008
-------------------------------------------- ---------- ----------
Performance Ratios:
Return on average assets (1.42)% 1.16 %
Return on average equity (6.10) 5.49
Efficiency ratio 37.51 42.76
Net interest margin, before provision 3.74 4.18
Yield on interest earning assets 5.78 7.71
Consolidated Statement of Operations
Adjustments(1):
Non-interest income $ 6,074 $ 4,749
Plus: loss on assets sold and retained
residual interest (2) -- 631
---------- ----------
Adjusted non-interest income $ 6,074 $ 5,380
========== ==========
Operating expenses $ 21,948 $ 28,389
Less: IPO related compensation and benefits
expense (3) 2,501 3,374
---------- ----------
Adjusted operating expenses $ 19,447 $ 25,015
========== ==========
Average Balances:
Assets $2,497,030 $2,620,510
Less: assets sold and residual interest (2) -- 466
---------- ----------
Adjusted assets $2,497,030 $2,620,044
========== ==========
Interest earning assets $2,473,871 $2,557,601
Less: assets sold and residual interest (2) -- 466
---------- ----------
Adjusted interest earning assets $2,473,871 $2,557,135
========== ==========
(1) Adjustments are pre-tax.
(2) On June 29, 2007, the Company completed the sale of assets
comprised of 50 debt securities and two loans and retained a
residual interest in these assets. The adjustment represents
the financial impact of the sold assets and residual interest.
(3) Non-cash compensation charge related to restricted stock grants
made since our inception as a private company, including equity
awards made in connection with the initial public offering.
NewStar Financial, Inc.
Portfolio Data
(unaudited)
--------------------------------------------------------------------
($ in thousands) June 30, 2009 March 31, 2009
---------------------------- ----------------- -----------------
Portfolio Data:
First mortgage $ 354,750 15.8% $ 378,162 16.3%
Senior secured asset-based 33,509 1.5 35,207 1.5
Senior secured cash flow 1,777,360 78.9 1,804,417 77.7
Senior subordinated asset-
based 46,056 2.0 57,336 2.5
Senior subordinated cash
flow -- -- 8,182 0.3
Second lien 33,419 1.5 33,311 1.4
Mezzanine/subordinated 7,409 0.3 7,087 0.3
---------- ----- ---------- -----
Total $2,252,503 100.0% $2,323,702 100.0%
========== ===== ========== =====
Middle Market Corporate $1,878,298 83.4% 1,926,055 82.9%
Commercial Real Estate 374,205 16.6 397,647 17.1
---------- ----- ---------- -----
Total $2,252,503 100.0% $2,323,702 100.0%
========== ===== ========== =====
($ in thousands) December 31, 2008 June 30, 2008
---------------------------- ----------------- -----------------
Portfolio Data:
First mortgage $ 370,810 15.4% $ 385,535 15.9%
Senior secured asset-based 40,969 1.7 45,861 1.9
Senior secured cash flow 1,884,862 78.2 1,857,847 76.8
Senior subordinated asset-
based 64,156 2.7 80,889 3.3
Senior subordinated cash
flow 8,182 0.3 9,789 0.4
Second lien 33,086 1.4 32,546 1.4
Mezzanine/subordinated 7,083 0.3 6,726 0.3
---------- ----- ---------- -----
Total $2,409,148 100.0% $2,419,193 100.0%
========== ===== ========== =====
Middle Market Corporate $2,016,447 83.7% $2,006,708 82.9%
Commercial Real Estate 392,701 16.3 412,485 17.1
---------- ----- ---------- -----
Total $2,409,148 100.0% $2,419,193 100.0%
========== ===== ========== =====