Sunset Financial (NYSE:SFO)
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Declares Q3 Dividend of $0.03 Per Share
JACKSONVILLE, Fla., Nov. 14 /PRNewswire-FirstCall/ -- Sunset Financial Resources, Inc. (NYSE:SFO), a specialty finance REIT, today announced financial results for the third quarter ended September 30, 2005.
For the third quarter of 2005, Sunset reported a net loss of $1.4 million, or ($0.13) per diluted share, compared to net income of $1.4 million in the same period a year ago. The net loss for the quarter was attributed primarily to a $1.2 million impairment charge related to a commercial loan and $853,000 in severance costs. The impairment charge was based upon an agreement to sell the property underlying one of the Company's non-accrual mortgages.
George Deehan, President and Chief Executive Officer of Sunset Financial Resources, said, "In spite of a difficult operating and interest rate environment, the portfolio continued to generate a positive net spread and margin."
For the third quarter, the yield on average earning assets was 4.33% and the cost of funds was 3.69%, which equates to a net interest spread of 64 basis points and a net interest margin of 100 basis points. At September 30, 2005 Sunset Financial's book value per share was $10.17. For quarter, the Company's overall leverage was 9.7x.
Deehan continued, "During the quarter, senior management and the Board of Directors took decisive action to address internal issues. Changes at both the executive and board levels were made with the goal of improving operating protocol, establishing stronger internal controls, increasing accountability, and most important, working toward maximizing shareholder value. In addition, we retained the services of Banc of America Securities to review our business plan and to explore strategic alternatives for the Company."
As of September 30, 2005, Sunset's total assets were $1.1 billion (including $909 million of investments in Mortgage Backed Securities; $171 million of residential mortgage related loans and $33 million of commercial bridge loans), compared to $893 million (including $614 million of investments in Mortgage Backed Securities; $204 million of residential mortgage related loans and $45 million of commercial bridge loans) in the same period a year ago.
The Company declared a quarterly cash dividend of $0.03 per share, payable December 5, 2005, to shareholders of record as of November 21, 2005.
Sunset Financial has scheduled a conference call to discuss its third quarter financial results at 9:00 a.m. ET on Wednesday, November 16, 2005. Those wishing to listen to the conference call by telephone may dial 1-866-543-6403 and the reservation number is 85653601. 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
(in thousands, except per share data)
September 30, December 31,
2005 2004
(unaudited)
Assets
Mortgage assets
Mortgage backed securities, available for sale $909,157 $614,154
Securitized hybrid adjustable rate mortgages 170,997 201,381
Hybrid adjustable rate residential mortgages 286 1,286
Fixed rate residential mortgages - 1,045
Commercial mortgages 32,820 44,522
Total mortgage assets 1,113,260 862,388
Allowance for loan losses (7,261) (1,333)
Net mortgage assets 1,105,999 861,055
Cash and cash equivalents 22,947 25,700
Interest receivable 4,463 2,676
Fixed assets, net 602 861
Other assets 3,220 484
Interest rate swap agreements 8,109 2,716
Total assets $1,145,340 $893,492
Liabilities
Whole loan financing facility $- $9,718
Reverse repurchase agreements 1,014,366 761,205
Junior subordinated notes due to
Sunset Financial Statutory Trust I 20,619 -
Interest rate swap agreements - 944
Accrued liabilities 3,536 2,367
Total liabilities 1,038,521 774,234
Commitments and contingencies - -
Stockholders' equity
Preferred stock, $.001 par value,
authorized 50,000,000; no shares outstanding - -
Common stock, $.001 par value, authorized
100,000,000; 10,475,000 and 10,450,000
outstanding, respectively 10 10
Additional paid in capital 119,336 119,219
Accumulated other comprehensive (loss) income (3,131) 87
Retained deficit (9,396) (58)
Total stockholders' equity 106,819 119,258
Total liabilities and stockholders' equity $1,145,340 $893,492
Book value per share $10.17 $11.41
Leverage 9.7x 6.5x
Sunset Financial Resources, Inc.
Unaudited Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Interest and fee income $11,945 $5,989 $33,918 $9,091
Interest expense 9,181 3,118 24,911 4,495
Net interest income 2,764 2,871 9,007 4,596
Provision for loan losses 1,184 85 6,982 149
Net interest income
after provision 1,580 2,786 2,025 4,447
Net gain on sale of
securities - 403 8 403
Operating expenses
Salaries and employee
benefits 605 660 1,909 2,105
Professional fees 723 349 1,943 888
Other 791 747 2,370 1,796
Severance 853 - 853 -
Total operating expenses 2,972 1,756 7,075 4,789
Net income (loss) $(1,392) $1,433 $(5,042) $61
Basic earnings (loss)
per share $(0.13) $0.14 $(0.48) $0.01
Diluted earnings (loss)
per share $(0.13) $0.13 $(0.48) $(0.01)
Weighted average
basic shares 10,475 10,450 10,468 7,681
Weighted average
diluted shares 10,478 10,463 10,470 7,695
Website: http://www.sunsetfinancial.net
DATASOURCE: Sunset Financial Resources, Inc.
CONTACT: Stacy Riffe, Chief Financial Officer of Sunset Financial
Resources, +1-904-425-4365, ; or Jeffrey Goldberger,
+1-212-896-1249, , or Michael Cimini, +1-212-896-1233,
, both of KCSA Worldwide for Sunset Financial Resources