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SMALL BUSINESS
NewStar Reports Third Quarter 2009 Results
* Loss narrowed despite continued difficult credit conditions
* Provision for loan losses remained elevated to boost reserves
as charge-offs increased
* Negative migration trend in credit performance moderated as
non-performing assets increased slightly from second quarter
levels
* Net interest income and margin continued to improve despite
decline in earning assets and drag from non-performing loans
* Expenses decreased by approximately $2 million from second
quarter levels, excluding severance costs associated with
staff reductions
* Reduced debt and extended only material short-term debt
maturity to November 2010
BOSTON, Nov. 4, 2009 (GLOBE NEWSWIRE) -- NewStar Financial, Inc. (Nasdaq:NEWS), a Boston-based commercial finance company, today reported an adjusted net loss for the third quarter of 2009 of $9.3 million, or $0.19 per diluted share. On a GAAP basis, the Company reported a net loss of $10.3 million, or $0.21 per diluted share, which reflected $0.9 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" on page 5. Reconciliations between GAAP and adjusted (non-GAAP) measures can be found in the attached financial tables.
"We continued to focus on protecting the balance sheet and managing credit performance in the third quarter as we reduced headcount and cut costs, while also paying down debt and extending short-term debt maturities into 2010. Although credit costs remain elevated, increases in non-performing assets moderated and we added significantly to allowance for loan losses," said Tim Conway, Chairman and Chief Executive Officer. "Given the sustained rally across the loan, high yield bond and securitization markets, I am optimistic that our access to capital will also begin to improve."
"We continued to make progress on our funding strategy by renewing our warehouse line with Citi and generating investor interest in several potential debt financing options. We now have 90% of our assets funded with long-term capital and expect to bolster our liquidity position through the issuance of new corporate debt," added John Bray, NewStar's Chief Financial Officer.
Loan Credit Quality
* The provision for credit losses was $32.6 million in the
third quarter of 2009 compared to $36.2 million in the second
quarter of 2009.
* Approximately $33.3 million of new specific reserves were
established in the third quarter of 2009 compared to $32.4
million in the second quarter of 2009.
* The allowance for credit losses increased to $101.1 million,
or 4.69% of loans, at September 30, 2009, compared to $86.3
million, or 3.86%, at June 30, 2009 and $44.9 million or
1.87% at September 30, 2008.
* Five loans totaling $22.5 million as of September 30, 2009
were placed on non-accrual status in the third quarter of 2009.
* One of the five loans placed on non-accrual status in the
third quarter of 2009 was a $5.7 million commercial real
estate loan as of September 30, 2009. The other four loans
were to companies operating in the manufacturing, publishing,
energy, and automotive industry sectors.
* At September 30, 2009, loans to 22 borrowers were on
non-accrual status with an aggregate outstanding balance of
$147.6 million compared to 19 loans with an aggregate
outstanding balance of $149.5 million at June 30, 2009.
* Sixteen of the non-accrual loans with an outstanding balance
of $112.6 million and three additional accruing loans with
an aggregate outstanding balance of $36.5 million as of
September 30, 2009 were also delinquent loans.
* Net charge-offs increased slightly to $17.8 million, or
3.31% of loans on an annualized basis, in the third quarter
of 2009 compared to $14.9 million or 2.66% of loans on an
annualized basis in the second quarter of 2009.
* The Company owned an interest in a single property valued
at $5.6 million (net of a non-controlling interest), which
was included in other real estate owned ("OREO") as of
September 30, 2009.
Funding and Capital
* Reduced debt by nearly $100 million in the third quarter
of 2009 and approximately $370 million since September 30,
2008.
* Amended an existing credit facility with Citi to extend the
maturity date to November 2010, reduce the size of the
facility from $300 million to $150 million (with
approximately $117 million currently drawn), and reduce the
advance rate, while maintaining pricing terms, and the
Company's ability to fund advances under approximately $125
million of revolving credit and delayed draw term loans
* Approximately 90% of assets are now funded by long term
capital.
* Approximately 64% of loan assets continued to be funded by
existing securitized term debt at attractive, locked-in
spreads as of September 30, 2009. 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 3.1x as of September 30, 2009,
down slightly from 3.2x at June 30, 2009 due principally
to repayment of advances under credit facilities.
* Total cash and equivalents as of September 30, 2009 were
$141 million, of which $31 million was unrestricted.
Unrestricted cash decreased from approximately $46 million
at June 30, 2009 and restricted cash decreased from
approximately $113 million to $110 million.
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 September
30, 2009.
* Total origination volume for the third quarter of 2009 was
nominal, which reflected the Company's preference to preserve
liquidity given the severity of recent economic conditions
and the uncertainty around the future course of the U.S.
economy.
* The managed loan portfolio was $2.7 billion as of September
30, 2009 (down from $2.8 billion at June 30, 2009), reflecting
the net impact of prepayments and scheduled amortization
of existing loans, as well as, charge-offs, which was offset
by modest new loan origination. Managed loan portfolio was
down from $3.0 billion at September 30, 2008.
* Assets managed for the NCOF were $544 million at September
30, 2009, down slightly from June 30, 2009 and down from
$570 million at September 30, 2008.
* The owned loan portfolio was $2.2 billion as of September
30, 2009 down slightly from June 30, 2009.
* The owned loan portfolio continued to be balanced across
industry sectors and highly diversified by issuer. As of
September 30, 2009, no outstanding borrowings by a single
issuer represented more than 1.2% of total loans outstanding,
and the ten largest issuers comprised approximately 7.7% of
the loan portfolio.
Net Interest Income / Margin
* Net interest income before provision for credit losses
was $24.5 million for the third quarter of 2009 compared
to $23.6 million for the second quarter of 2009.
* Net interest margin increased 26 bps to 4.16% for the third
quarter of 2009 compared to 3.90% for the second quarter of
2009 and 3.90% for the third 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 $0.1 million for the third quarter
of 2009 compared to a $0.2 million loss for the second
quarter of 2009, and $5.5 million of income for the
third quarter of 2008.
* Non-interest income in the third quarter of 2009 consisted
primarily of a $1.2 million gain on repurchase of debt,
$0.8 million of asset management income, $0.6 million of
unused fees and $0.2 million of agency fees, which was
substantially offset by the impact of a valuation adjustment
on other real estate owned (OREO).
Expenses
* Operating expenses decreased by approximately $2 million
(net of severance costs of approximately $0.9 million) to
$10 million ($10.9 million including severance costs)
in the third quarter of 2009 compared to $12.0 million
in the second quarter of 2009 due principally to lower
workout expenses and other costs related to the bank
acquisition.
* Headcount was reduced from 82 as of June 30, 2009 to 68
as of September 30, 2009 and then to 66 shortly after
quarter end, which is expected to generate annual run-rate
costs savings of approximately $1.5 million. Headcount
has been reduced by approximately 52% from its peak of
137 as of January 2008.
Other Developments
* The Company terminated its agreement to acquire Southern
Commerce Bank, N.A. and withdrew its related regulatory
applications.
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 888-428-9498 approximately 5-10 minutes prior to the call. International callers should dial 719-325-2235. All callers should reference "NewStar Financial."
For convenience, an archived replay of the call will be available through November 11, 2009 by dialing 888-203-1112. International callers should call 719-457-0820. For all replays, please use the passcode 7246092. 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 and Chicago IL. 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, financing plans and business. As such, they are subject to material risks and uncertainties, including 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.
More detailed information about these risk factors can be found 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 September 30, 2009 with the SEC on or before November 9, 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 7 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 11 of this release. NewStar's adjusted financial measures should not be considered as alternatives to financial measures determined in accordance with GAAP and may be different from, or inconsistent with, non-GAAP financial measures used by other companies.
NewStar Financial, Inc.
Consolidated Balance Sheets
(unaudited)
---------------------------------------------------------------------
Sept. 30, June 30, Dec. 31, Sept. 30,
($ in thousands) 2009 2009 2008 2008
---------------------------------------------------------------------
Assets:
Cash and cash
equivalents $ 31,128 $ 46,280 $ 50,279 $ 132,853
Restricted cash 109,618 113,243 84,163 105,231
Investments in
debt securities
available-for
-sale 3,859 2,972 3,025 4,166
Loans held-for
-sale 3,072 7,132 -- 18,562
Loans, net 2,041,087 2,135,647 2,328,812 2,342,186
Deferred
financing
costs, net 19,219 19,057 21,003 19,181
Interest
receivable 8,442 8,685 10,608 11,629
Property and
equipment, net 976 1,080 1,252 1,261
Deferred income
taxes, net 56,863 48,587 31,238 29,374
Income tax
receivable 603 -- -- --
Other assets 32,703 22,150 41,142 31,078
---------- ---------- ---------- ----------
Total
assets $2,307,570 $2,404,833 $2,571,522 $2,695,521
=====================================================================
Liabilities:
Credit
facilities $ 135,742 $ 322,248 $ 411,267 540,030
Term debt 1,567,864 1,478,620 1,524,171 1,532,425
Accrued
interest
payable 3,408 4,283 9,773 10,168
Income tax
payable -- 1,647 353 1,261
Accounts payable 386 481 1,049 176
Other liabilities 38,660 32,780 43,354 33,712
---------- ---------- ---------- ----------
Total
liabilities 1,746,060 1,840,059 1,989,967 2,117,772
---------- ---------- ---------- ----------
NewStar
Financial, Inc.
stockholders'
equity 557,506 564,774 581,555 577,749
Noncontrolling
interest 4,004 -- -- --
---------- ---------- ---------- ----------
Total
stockholders'
equity 561,510 564,774 581,555 577,749
---------- ---------- ---------- ----------
Total
liabilities
and
stockholders'
equity $2,307,570 $2,404,833 $2,571,522 $2,695,521
=====================================================================
NewStar Financial, Inc.
Consolidated Statements of Operations
(unaudited)
---------------------------------------------------------------------
Three Months Ended
--------------------------------------------------
($ in thousands,
except per Sept. 30, June 30, Dec. 31, Sept. 30,
share amounts) 2009 2009 2008 2008
---------------- -------- -------- -------- --------
Net interest
income:
Interest income $ 33,675 $ 35,026 $ 45,845 $ 44,903
Interest expense 9,197 11,412 21,445 19,864
-------- -------- -------- --------
Net interest
income 24,478 23,614 24,400 25,039
Provision for
credit losses 32,577 36,177 17,930 11,960
-------- -------- -------- --------
Net interest
income after
provision
for credit
losses (8,099) (12,563) 6,470 13,079
Non-interest
income:
Fee income 388 361 866 725
Asset
management
income 758 673 1,457 1,699
Gain (loss) on
derivatives 126 222 1,366 746
Gain (loss) on
sale of loans
and debt
securities -- -- (1) 1,022
Loss on
investments
in debt
securities -- -- (1) (6)
Other income
(expense) (1,139) (1,504) 4,958 1,350
-------- -------- -------- --------
Total non-
interest
income 133 (248) 8,645 5,536
Operating expenses:
Compensation
and benefits 7,578 6,686 4,172 5,161
Occupancy and
equipment 769 781 718 795
General and
administrative
expenses 2,580 4,573 3,054 2,500
-------- -------- -------- --------
Total
operating
expenses 10,927 12,040 7,944 8,456
-------- -------- -------- --------
Income (loss)
before income
taxes (18,893) (24,851) 7,171 10,159
Income tax
expense
(benefit) (6,957) (9,208) 4,417 2,580
-------- -------- -------- --------
Net income
(loss) before
noncontrolling
interest (11,936) (15,643) 2,754 7,579
Net loss
attributable
to
noncontrolling
interest 1,674 -- -- --
-------- -------- -------- --------
Net income (loss) $(10,262) $(15,643) $ 2,754 $ 7,579
======== ======== ======== ========
After tax
adjustments
to net income
(loss):
IPO related
compensation
and benefits
expense (1) 915 962 2,102 1,131
Loss on
assets sold
and retained
residual
interest (2) -- -- 258 (1,298)
-------- -------- -------- --------
Adjusted net
income (loss) $ (9,347) $(14,681) $ 5,114 $ 7,412
======== ======== ======== ========
Net income (loss)
per share:
Basic $ (0.21) $ (0.32) $ 0.06 $ 0.16
Diluted $ (0.21) $ (0.32) $ 0.06 $ 0.16
Weighted
average shares
outstanding:
Basic 49,173,245 49,173,192 48,510,697 48,525,154
Diluted 49,173,245 49,173,192 48,510,697 48,525,154
Adjusted net
income (loss)
per share:
Basic $ (0.19) $ (0.30) $ 0.11 $ 0.15
Diluted $ (0.19) $ (0.30) $ 0.11 $ 0.15
Adjusted weighted
average shares
outstanding:
Basic 49,173,245 49,173,192 48,510,697 48,525,154
Diluted 49,173,245 49,173,192 48,510,697 48,525,154
(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)
---------------------------------------------------------------------
Nine Months Ended
September 30,
($ in thousands, except per share --------------------------
amounts) 2009 2008
------------------------------------- ---------- ----------
Net interest income:
Interest income $ 104,626 $ 142,925
Interest expense 34,374 64,771
---------- ----------
Net interest income 70,252 78,154
Provision for credit losses 94,061 20,294
---------- ----------
Net interest income after
provision for credit losses (23,809) 57,860
Non-interest income:
Fee income 1,242 3,652
Asset management income 2,218 4,826
Gain on derivatives 492 791
Gain on sale of loans
and debt securities -- 283
Loss on investments in
debt securities -- (931)
Loss on residual
interest in
securitization -- (631)
Other income 2,255 2,295
---------- ----------
Total non-interest income 6,207 10,285
Operating expenses:
Compensation and benefits 19,891 26,241
Occupancy and equipment 2,330 2,568
General and administrative
expenses 10,654 8,036
---------- ----------
Total operating expenses 32,875 36,845
---------- ----------
Income (loss) before income taxes (50,477) 31,300
Income tax expense (benefit) (17,948) 11,656
---------- ----------
Net income (loss) before
noncontrolling interest (32,529) 19,644
Net loss attributable to
noncontrolling interest 1,674 --
---------- ----------
Net income (loss) $ (30,855) $ 19,644
========== ==========
After tax adjustments to net
income (loss):
IPO related compensation and
benefits expense (1) 3,928 3,836
Loss on assets sold and retained
residual interest (2) -- (937)
---------- ----------
Adjusted net income
(loss) $ (26,927) $ 22,543
========== ==========
Net income (loss) per share:
Basic $ (0.63) $ 0.41
Diluted $ (0.63) $ 0.41
Weighted average shares outstanding:
Basic 49,041,700 48,282,775
Diluted 49,041,700 48,282,775
Adjusted net income (loss) per share:
Basic $ (0.55) $ 0.47
Diluted $ (0.55) $ 0.47
Adjusted weighted average shares
outstanding:
Basic 49,041,700 48,282,775
Diluted 49,041,700 48,282,775
(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 Sept. 30, June 30, Dec. 31, Sept. 30,
share amounts) 2009 2009 2008 2008
------------------- --------- ---------- ---------- ----------
Performance Ratios:
Return on average
assets (1.74)% (2.56)% 0.42% 1.15%
Return on average
equity (7.19) (10.87) 1.88 5.26
Net interest
margin, before
provision 4.16 3.90 3.79 3.90
Efficiency ratio 41.57 51.53 24.04 27.66
Loan portfolio
yield 5.99 6.08 7.40 7.32
Credit Quality Ratios:
Delinquent loan
rate (at period
end) 6.91% 5.71% 0.69% --
Delinquent loan
rate for accruing
loans 60 days or
more past due
(at period end) 1.69 1.47 -- --
Non-accrual loan
rate (at period
end) 6.84 6.68 2.52 1.10
Non-performing
asset rate (at
period end) 7.08 6.68 2.82 1.39
Annualized net
charge off rate 3.27 2.66 1.47 0.87
Allowance for credit
losses ratio (at
period end) 4.69 3.86 2.25 1.87
Capital and Leverage
Ratios:
Equity to assets 24.20% 23.48% 22.62% 21.43%
Debt to equity 3.06x 3.19x 3.33x 3.59x
Book value per
share $ 11.34 $ 11.49 $ 12.00 $ 11.91
Average Balances:
Loans and other
debt products,
gross $2,228,018 $2,300,582 $2,431,109 $2,398,212
Interest earning
assets 2,333,502 2,429,968 2,560,126 2,551,689
Total assets 2,345,793 2,451,731 2,613,730 2,628,428
Interest bearing
liabilities 1,738,064 1,828,485 1,966,631 1,958,274
Equity 566,078 577,455 582,630 573,642
Allowance for credit
loss activity:
Balance as of
beginning of
period $ 86,340 $ 65,013 $ 44,933 $ 38,223
General provision
for credit losses (703) 3,733 4,726 499
Specific provision
for credit losses 33,280 32,444 13,204 11,461
Net charge offs (17,800) (14,850) (8,886) (5,250)
---------- ---------- ---------- ----------
Balance as of end
of period $ 101,117 $ 86,340 $ 53,977 $ 44,933
========== ========== ========== ==========
Supplemental Data
(at period end):
Investments in
debt securities,
gross $ 6,704 $ 6,737 $ 6,839 $ 6,887
Loans held-for-
sale, gross 3,162 7,136 -- 19,012
Loans held-for-
investment,
gross 2,157,696 2,238,630 2,402,309 2,406,520
---------- ---------- ---------- ----------
Loans and
investments in
debt securities,
gross 2,167,562 2,252,503 2,409,148 2,432,419
Unused lines of
credit 243,311 279,141 339,230 370,704
Standby letters
of credit 22,235 29,826 32,358 32,079
---------- ---------- ---------- ----------
Total funding
commitments $2,433,108 $2,561,470 $2,780,736 $2,835,202
========== ========== ========== ==========
Loan portfolio $2,167,562 $2,252,503 $2,409,148 $2,432,419
Loans owned by
NewStar Credit
Opportunities
Fund 543,645 543,862 561,241 569,612
---------- ---------- ---------- ----------
Managed loan
portfolio $2,711,207 $2,796,365 $2,970,389 $3,002,031
========== ========== ========== ==========
Loans held-for-
sale, gross $ 3,162 $ 7,136 $ -- $ 19,012
Loans held-for-
investment,
gross 2,157,696 2,238,630 2,402,309 2,406,520
---------- ---------- ---------- ----------
Total loans,
gross 2,160,858 2,245,766 2,402,309 2,425,532
Deferred fees,
net (16,560) (17,875) (20,998) (21,241)
Allowance for loan
losses - general (39,114) (39,360) (36,786) (32,148)
Allowance for loan
losses - specific (61,025) (45,752) (15,713) (11,395)
---------- ---------- ---------- ----------
Total loans,
net $2,044,159 $2,142,779 $2,328,812 $2,360,748
========== ========== ========== ==========
(1) Tier 1 risk-based capital ratio is defined as Tier 1 capital
divided by risk weighted assets.
(2) Total risk-based capital ratio is defined as the sum of Tier 1
capital and Tier 2 capital divided by risk-weighted assets.
NewStar Financial, Inc.
Selected Financial Data
(unaudited)
---------------------------------------------------------------------
Nine Months Ended
($ in thousands, September 30,
except per ------------------------
share amounts) 2009 2008
------------------------------------- ---------- ----------
Performance Ratios:
Return on average assets (1.69)% 1.00%
Return on average equity (7.16) 4.68
Net interest margin, before
provision 3.88 4.09
Efficiency ratio 42.08 41.66
Loan portfolio yield 6.05 7.76
Credit Quality Ratios:
Annualized net charge off rate 2.91 0.81
Average Balances:
Loans and other debt products, gross $2,304,400 $2,411,604
Interest earning assets 2,423,370 2,554,199
Total assets 2,445,755 2,620,030
Interest bearing liabilities 1,827,003 1,978,561
Equity 576,465 560,748
Allowance for credit loss activity:
Balance as of beginning of period $ 53,977 $ 35,487
General provision for credit losses 1,621 2,643
Specific provision for credit losses 92,440 17,651
Net charge offs (46,921) (10,848)
---------- ----------
Balance as of end of period $ 101,117 $ 44,933
========== ==========
NewStar Financial, Inc.
Non-GAAP Data
(unaudited)
----------------------------------------------------------------------
Adjusted
---------------------------------------------
Three Months Ended
---------------------------------------------
Sept. 30, June 30, Dec. 31, Sept. 30,
($ in thousands) 2009 2009 2008 2008
------------------- --------- -------- -------- ---------
Performance Ratios:
Return on average
assets (1.58)% (2.40)% 0.78% 1.12%
Return on average
equity (6.55) (10.20) 3.49 5.14
Efficiency ratio 35.77 44.99 19.32 22.70
Consolidated Statement
of Operations
Adjustments(1):
Operating expenses $ 10,927 $ 12,040 $ 7,944 $ 8,456
Less: IPO related
compensation and
benefits expense(2) 1,524 1,528 1,561 1,517
-------- -------- -------- --------
Adjusted operating
expenses $ 9,403 $ 10,512 $ 6,383 $ 6,939
======== ======== ======== ========
(1) Adjustments are pre-tax.
(2) Non-cash compensation charge related to restricted stock grants
made since our inception as a private company, including equity
awards made in connection with the initial public offering.
NewStar Financial, Inc.
Non-GAAP Data
(unaudited)
---------------------------------------------------------------------
Adjusted
--------------------------
Nine Months Ended
September 30,
--------------------------
($ in thousands) 2009 2008
--------------------------------------- ----------- -----------
Performance Ratios:
Return on average assets (1.47)% 1.15%
Return on average equity (6.25) 5.37
Efficiency ratio 36.92 35.88
Net interest margin,
before provision 3.88 4.09
Yield on interest earning assets 5.77 7.48
Consolidated Statement of Operations
Adjustments(1):
Non-interest income $ 6,207 $ 10,285
Plus: loss on assets sold and retained
residual interest (2) -- 631
----------- -----------
Adjusted non-interest income $ 6,207 $ 10,916
=========== ===========
Operating expenses $ 32,875 $ 36,845
Less: IPO related compensation and
benefits expense(3) 4,025 4,891
----------- -----------
Adjusted operating
expenses $ 28,850 $ 31,954
=========== ===========
Average Balances:
Assets $ 2,445,755 $ 2,620,030
Less: assets sold and residual
interest(2) -- 310
----------- -----------
Adjusted assets $ 2,445,755 $ 2,619,720
=========== ===========
Interest earning assets $ 2,423,370 $ 2,554,199
Less: assets sold and residual
interest(2) -- 310
----------- -----------
Adjusted interest earning assets $ 2,423,370 $ 2,553,889
=========== ===========
(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) September 30, 2009 June 30, 2009
---------------- ---------------------- ---------------------
Portfolio Data:
First mortgage $ 335,236 15.5% $ 354,750 15.8%
Senior secured
asset-based 31,472 1.5 33,509 1.5
Senior secured
cash flow 1,715,157 79.1 1,777,360 78.9
Senior
subordinated
asset-based 40,984 1.9 46,056 2.0
Senior
subordinated
cash flow -- -- -- --
Second lien 37,298 1.7 33,419 1.5
Mezzanine
/subordinated 7,415 0.3 7,409 0.3
----------- ------ ----------- ------
Total $ 2,167,562 100.0% $ 2,252,503 100.0%
=========== ====== =========== ======
Middle Market
Corporate $ 1,813,799 83.7% $ 1,878,298 83.4%
Commercial Real
Estate 353,763 16.3 374,205 16.6
----------- ------ ----------- ------
Total $ 2,167,562 100.0% $ 2,252,503 100.0%
=========== ====== =========== ======
--------------------------------------------------------------------
($ in thousands) December 31, 2008 September 30, 2008
---------------- ---------------------- --------------------
Portfolio Data:
First mortgage $ 370,810 15.4% $ 365,758 15.0%
Senior secured
asset-based 40,969 1.7 42,830 1.8
Senior secured
cash flow 1,884,862 78.2 1,905,906 78.4
Senior
subordinated
asset-based 64,156 2.7 70,075 2.9
Senior
subordinated
cash flow 8,182 0.3 8,183 0.3
Second lien 33,086 1.4 32,888 1.3
Mezzanine
/subordinated 7,083 0.3 6,779 0.3
----------- ------ ----------- ------
Total $ 2,409,148 100.0% $ 2,432,419 100.0%
=========== ====== =========== ======
Middle Market
Corporate $ 2,016,447 83.7% $ 2,044,945 84.1%
Commercial Real
Estate 392,701 16.3 387,474 15.9
----------- ------ ----------- ------
Total $ 2,409,148 100.0% $ 2,432,419 100.0%
=========== ====== =========== ======
CONTACT: NewStar Financial
Colleen M. Banse
617.848.2502
Fax: 617.848.4390
cbanse@newstarfin.com
Brian J. Fischesser
617.848.2512
Fax: 617.848.4398
bfischesser@newstarfin.com
500 Boylston St., Suite 1600
Boston, MA 02116
