EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

LOGO

 

For:

 

Sunset Financial Resources

Contact:        

 

Michael Pannell

   

Chief Financial Officer

   

(904) 425-4349

   

mpannell@sfous.com

   

Jeffrey Goldberger / Michael Cimini

   

KCSA Worldwide

   

(212) 896-1249 / (212) 896-1233

   

jgoldberger@kcsa.com / mcimini@kcsa.com

 

For Immediate Release

 

Sunset Financial Resources Reports Fourth Quarter 2004

And Year-End Results

 

- - -

 

Company Declares Fourth Quarter Dividend of $0.20 per Share

 

JACKSONVILLE, Fla., March 11, 2005 — Sunset Financial Resources, Inc. (NYSE: SFO) reported net income for the quarter ended December 31, 2004, of $583,000, or $0.06 per diluted share, compared to net income of $1.43 million for the period ended September 30, 2004. Net income for the year ended December 31, 2004 was $644,000.

 

On March 10, the Company’s Board of Directors declared a fourth quarter dividend of $0.20 per common share versus a third quarter dividend of $0.05 per common share. The dividend is payable on March 31, 2005 to shareholders of record on March 21, 2005.

 

Results for the 2004 fourth quarter include a loan loss provision of approximately $1.1 million in the Company’s commercial portfolio. In addition, the Company recorded a one-time charge of $365,000 related to severance.

 

Bert Watson, Chairman, President and CEO, said, “We are pleased to have completed our first year as a public company and establish a strong operating platform that will enable us to build upon our future performance. Results in 2004 demonstrate Sunset’s ability to deliver solid returns at a time when challenging market conditions began to rise. We believe the approximate $119 million in net proceeds raised from our IPO in March 2004 will help drive strong future growth.”


As of December 31, 2004, Sunset’s total assets had increased 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). As of September 30, 2004, Sunset’s total assets were $684 million (including $391 million of investments in Mortgage Backed Securities; $219 million of residential mortgage related loans and $60 million of commercial bridge loans). Total common shares outstanding remained at 10,450,000.

 

“We look forward to building shareholder value in 2005. The Company will continue to review its business plan and operating procedures to maximize results. Our strategy is to leverage our balance sheet and expand our portfolio of residential and short-term commercial mortgage loans. During December, our residential mortgage portfolio was leveraged approximately 9.4, within our stated target range, and our commercial portfolio was leveraged approximately 0.3, which we expect to increase in 2005. We are confident in our ability to increase income as we build our asset base and generate solid net interest income,” Watson added.

 

For the quarter ended December 31, 2004, the yield on average earning assets was 4.46% and the cost of funds was 3.03%, which equates to an interest rate spread of 1.43%. Sunset’s book value per share at December 31, 2004 was $11.41, compared to $11.36 per share as of September 30, 2004. The Company’s stock price at the close of market trading on March 10, 2005 was $9.70 per share.

 

Sunset Financial has scheduled a conference call to discuss its fourth quarter year-end financial results at 10:00 a.m. ET on March 11, 2005. Bert Watson, Chairman, President and Chief Executive Officer, will host the conference call. Those wishing to listen to the conference call by telephone may dial 1-800-573-4752 and the reservation number is 41876900. Please call 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 on March 17, 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.

 

Forward-Looking Statements:

 

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.

 

(Tables Follow)


Sunset Financial Resources, Inc

Consolidated Balance Sheets

(dollar amounts in thousands)

 

     December 31, 2004

    December 31, 2003

 

Assets

                

Mortgage assets

                

Mortgage backed securities, available for sale

   $ 614,154     $ —    

Securitized hybrid adjustable rate mortgages

     201,381       —    

Hybrid adjustable rate residential mortgages

     1,286       —    

Fixed rate residential mortgages

     1,045       —    

Commercial mortgages

     44,522       —    
    


 


Total mortgage assets

     862,388       —    

Allowance for loan losses

     (1,333 )     —    
    


 


Net mortgage assets

     861,055       —    

Cash and cash equivalents

     25,700       44  

Interest receivable

     2,676       —    

Fixed assets, net

     861       16  

Other assets

     484       255  

Hedging assets

     2,716       —    
    


 


Total assets

   $ 893,492     $ 315  
    


 


Liabilities

                

Whole loan financing facility

   $ 9,718     $ —    

Reverse repurchase agreements

     761,205       —    

Notes payable to stockholders

     —         145  

Hedging liabilities

     944       —    

Accured liabilities

     2,367       144  
    


 


Total liablilities

     774,234       289  

Commitments

     —         —    

Shareholders’ equity

                

Preferred stock, $.001 par value, authorized 50,000,000; no shares outstanding

     —         —    

Common stock, $.001 par value, authorized 100,000,000; 10,450,000 and 466,667 outstanding, respectively

     10       1  

Additional paid in capital

     119,219       47  

Accumulated other comprehensive income

     87       —    

Retained earnings

     (58 )     (22 )
    


 


Total shareholders’ equity

     119,258       26  
    


 


Total liabilities and shareholders’ equity

   $ 893,492     $ 315  
    


 



Sunset Financial Resources, Inc

Consolidated Statement of Operations (unaudited)

(dollar amounts in thousands, except per share amounts)

 

    

Year ended

December 31, 2004


  

Year ended

December 31, 2003


 

Interest and fee income

   $ 18,233         

Interest expense

     9,842      —    
    

  


Net interest income

     8,391      —    

Provision for loan losses

     1,333      —    
    

  


Net interest income after provision

     7,058      —    

Securities gains

     686      —    

Operating expenses

               

Salaries and employee benefits

     2,864      —    

Professional fees

     1,151      —    

Other

     2,720      22  

Special charge

     365      —    
    

  


Total operating expenses

     7,100      22  
    

  


Net income (loss)

   $ 644    $ (22 )
    

  


Basic earnings per share

     0.08      (0.05 )

Diluted earnings per share

     0.07      (0.05 )

Weighted average basic shares

     8,377      467  

Weighted average diluted shares

     8,397      467  


Sunset Financial Resources, Inc

Consolidated Balance Sheets

(dollar amounts in thousands)

 

     March 31, 2004

    June 30, 2004

    September 30, 2004

    December 31, 2004

 
     (unaudited)     (unaudited)     (unaudited)     (unaudited)  

Assets

                        

Mortgage assets

                        

Mortgage backed securities, available for sale

   —       128,431     391,065     614,154  

Securitized hybrid adjustable rate mortgages

   —       223,041     211,377     201,381  

Hybrid adjustable rate residential mortgages

   149,996     1,292     1,288     1,286  

Fixed rate residential mortgages

   6,144     5,832     5,803     1,045  

Commercial mortgages

   11,500     39,260     59,469     44,522  
    

 

 

 

Total mortgage assets

   167,640     397,856     669,002     862,388  

Allowance for loan losses

   (15 )   (64 )   (149 )   (1,333 )
    

 

 

 

Net mortgage assets

   167,625     397,792     668,853     861,055  

Cash and cash equivalents

   49,430     17,986     11,387     25,700  

Interest receivable

   577     1,523     1,346     2,676  

Fixed assets, net

   662     764     739     861  

Other assets

   49     2,377     1,193     484  

Hedging assets

   138     2,953     876     2,716  
    

 

 

 

Total assets

   218,481     423,395     684,394     893,492  
    

 

 

 

Liabilities

                        

Whole loan financing facility

   100,423     —       10,468     9,718  

Reverse repurchase agreements

   —       301,589     551,827     761,205  

Notes payable to stockholders

   —       —       —       —    

Hedging liabilities

   —       350     2,408     944  

Accured liabilities

   616     1,035     1,025     2,367  
    

 

 

 

Total liablilities

   101,039     302,974     565,728     774,234  
    

 

 

 

Commitments

   —       —       —       —    

Shareholders’ equity

                        

Preferred stock, $.001 par value, authorized 50,000,000; no shares outstanding

   —       —       —       —    

Common stock, $.001 par value, authorized 100,000,000; 10,450,000 and 466,667 outstanding, respectively

   10     10     10     10  

Additional paid in capital

   118,948     119,057     119,138     119,219  

Accumulated other comprehensive income

   49     2,748     (364 )   87  

Retained earnings

   (1,565 )   (1,394 )   (118 )   (58 )
    

 

 

 

Total shareholders’ equity

   117,442     120,421     118,666     119,258  
    

 

 

 

Total liabilities and shareholders’ equity

   218,481     423,395     684,394     893,492  
    

 

 

 

Book value per share

   11.24     11.52     11.36     11.41  

Leverage

   0.9     2.5     4.8     6.5  


Sunset Financial Resources, Inc

Consolidated Statement of Operations (unaudited)

(dollar amounts in thousands, except per share amounts)

 

     First

    Second

    Third

    Fourth

    Full Year

Interest and fee income

   44     3,058     5,989     9,142     18,233

Interest expense

   32     1,345     3,118     5,347     9,842
    

 

 

 

 

Net interest income

   12     1,713     2,871     3,795     8,391

Provision for loan losses

   15     49     85     1,184     1,333
    

 

 

 

 

Net interest income after provision

   (3 )   1,664     2,786     2,611     7,058

Securities gains

   —       —       403     283     686

Operating expenses

                            

Salaries and employee benefits

   902     543     660     759     2,864

Professional fees

   224     315     349     263     1,151

Other

   414     635     747     924     2,720

Special charge

   —       —       —       365     365
    

 

 

 

 

Total operating expenses

   1,540     1,493     1,756     2,311     7,100
    

 

 

 

 

Net income (loss)

   (1,543 )   171     1,433     583     644
    

 

 

 

 

Averages and yields/costs

                            

Residential assets

   NM     223,720     476,388     754,493     NM

Yield

   NM     3.79 %   4.04 %   4.25 %   NM

Commercial assets

   NM     33,671     42,003     52,839     NM

Yield

   NM     11.09 %   10.24 %   7.72 %   NM

Earning assets

   NM     267,312     535,385     815,065     NM

Yield

   NM     4.60 %   4.45 %   4.46 %   NM

Borrowings

   NM     163,380     422,786     701,937     NM

Interest

   NM     2.02 %   1.58 %   2.16 %   NM

Swaps

   NM     0.90 %   1.20 %   0.78 %   NM

Fees

   NM     0.39 %   0.15 %   0.09 %   NM

Total

   NM     3.31 %   2.93 %   3.03 %   NM

Net interest margin

   NM     2.58 %   2.13 %   1.85 %   NM

Net interest spread

   NM     1.29 %   1.52 %   1.43 %   NM


Investment securities

 

    

Agency

Securities


   

Non Agency

Securities


    Total

 

Par

   510,347     96,013     606,360  

Unamortized premium

   8,778     788     9,566  

Unamortized discount

   (689 )   (21 )   (710 )
    

 

 

Amortized cost

   518,436     96,780     615,216  

Gross unrealized gains

   709     14     723  

Gross unrealized losses

   (1,456 )   (329 )   (1,785 )
    

 

 

Estimated fair value

   517,689     96,465     614,154  
    

 

 

Investment securities - repricing characteristics

 

                  

Floating rate

   70,040              

Five year ARM

   544,114              
    

           
     614,154              
    

           

Residential Loans

 

                  
     Par

    Prem/disc

    Book value

 

Fixed rates

   1,017     28     1,045  

Three year ARM

   10,336     297     10,633  

Five year ARM

   71,735     1,997     73,732  

Seven year ARM (and other)

   117,389     913     118,302  
    

 

 

Total residential loans

   200,477     3,235     203,712  
    

 

 

Commercial loans

 

                  
     Balance

    Location

    Participation

 

Retail mall

   14.7     FL     No  

Resort development

   10.0     NC     Yes  

Conference center

   8.1     FL     No  

Cemetery / funeral home

   5.7     HI     Yes  

Multi sports facility

   4.7     NJ     No  

Apartments

   1.5     IL     No  
    

           

Total

   44.7              
    

           


Sunset Financial Resources

Problem assets

 

     Residential

    Commercial

    Total

 

30-59

   1,607     —       1,607  

60-89

   —       —       —    

90+

   160     —       160  
    

 

 

Total delinquent

   1,767     —       1,767  
    

 

 

Nonaccrual

   —       18,524     18,524  

Total Loans

   203,712     44,522     248,234  

As a percent

                  

Delinquent

   0.87 %   0.00 %   0.71 %

Nonaccrual

   0.00 %   41.61 %   7.46 %