NewStar Financial Swings to $5MM Profit in Q2



NewStar Financial announced Q2/15 net income of $5.0 million compared to a net loss of $1.9 million in Q2/14. NewStar noted that pretax operating income was $8.6 million compared to a loss of $3.1 million in Q2/14.

The following highlights were excerpted from the news release:

  • Investment Activity – New funded credit investments exceeded $1.0 billion in the second quarter, up 68% from last quarter and 213% from the same quarter last year.
  • Asset Growth – Managed loans and credit investments increased by $418 million to $4.2 billion, or 11%, from the prior quarter and $1.7 billion, or 70%, from the same period last year.
  • Net Interest Margin – Due primarily to the negative impact of interest expense recognized in connection with debt prepayment, the margin narrowed to 1.99% for the second quarter from 2.51% in the prior quarter. Excluding expenses related to debt extinguishment, the adjusted margin was 2.44% in the second quarter.
  • Credit – Credit costs improved as the provision for credit losses decreased by $3.8 million from the prior quarter due primarily to the mix of new loans and the impact of positive portfolio rating migration, which drove a decrease in general provision expense, as well as slightly lower specific provisions.

Tim Conway, NewStar’s chairman and CEO commented on the company’s quarterly performance: “We made significant progress on our strategic priorities this quarter as growth accelerated and our returns began to reflect the benefits of operating and financial leverage. Strong asset and revenue growth in the quarter outpaced expense growth, translating directly into a lower expense ratio and higher earnings. New investment activity more than tripled, keeping us on pace to reach our volume target for the full year and driving strong asset growth. Excluding costs related to debt prepayment in the quarter, revenue was up 24%, reflecting increases in both net interest income from asset growth and fees from capital markets and asset management activities.”

Access the full release from NewStar here.

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Terry Mulreany
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