Daily News: November 6, 2014

NewStar Q3 Volume Up 44%; Announces Strategic Relationship

NewStar Financial reported Q3/14 net income of $5.0 million compared to consolidated net income of $6.4 million in Q3/13. Operating income (loss) before income taxes was $8.5 million for Q3/14 compared to $9.9 million in the third quarter of 2013.

In a separate press release, NewStar also announced the formation of a strategic relationship with GSO Capital, the credit division of Blackstone, and Franklin Square Capital Partners to help expand its lending and asset management platforms.

The following highlights were excerpted from the news release:

  • Total new funded loan volume was approximately $409 million in the third quarter, up from $326 million in the prior quarter and $284 million in the third quarter of the prior year. Higher volumes reflected consistent demand for acquisition financing from financial sponsors combined with larger credit commitments and related hold positions in the Leveraged Finance business, as well as, continued strong contributions from the company’s asset-based lending unit.
  • Trailing twelve month origination volume exceeded $1.3 billion.
  • Loans outstanding increased slightly from the prior quarter, but were up 13% from the third quarter of 2013, excluding loans in the Arlington Fund at September 30, 2013, reflecting solid new loan volume in 2014.
  • The Leveraged Finance loan portfolio was flat compared to the second quarter of 2014 at $1.8 billion, while asset-based loans in our Business Credit portfolio increased 14% to $226 million.
  • Assets managed for third party institutional investors, including the Arlington Program and its predecessor, increased to $386 million at September 30, 2014 from $288 million at June 30, 2014.
  • Asset-based lending originated approximately $32 million and the equipment finance business originated approximately $10 million in the third quarter of 2014, or 16% of new loan volume retained on the balance sheet.
  • The owned loan portfolio remained balanced across industry sectors and highly diversified by issuer. As of September 30, 2014, no outstanding borrowings by a single obligor represented more than 1.6% of total loans outstanding, and the ten largest obligors comprised approximately 10.3% of the loan portfolio.
  • Net interest income was consistent with the prior quarter at $19.6 million and up slightly from $19.5 million in the third quarter of 2013.
  • The portfolio yield was also consistent at 6.13% in the third quarter of 2014 compared to 6.14% in the prior quarter, and down from 6.33% in the third quarter of 2013, reflecting the impact of lower yields on new loan volume.
  • Net interest margin widened to 3.24% for the third quarter of 2014 compared to 3.04% for the second quarter of 2014 as interest expense decreased $2.2 million from the second quarter due to the elimination of ongoing interest expense at the Arlington Fund resulting from the deconsolidation of the fund at the end of the second quarter and other Arlington Fund debt repayment expenses in the second quarter which did not recur in the third quarter.

To view the full NewStar news release, click here.