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Executives

Anne Bork - VP of Investor Relations and Corporate Communications

Tim Conway - Chairman and CEO

John Bray - CFO

Analysts

Sameer Gokhale - KBW

James Shanahan - Wachovia

David Long - William Blair

NewStar Financial Inc. (NEWS) Q1 2008 Earnings Call May 7, 2008 10:00 AM ET

Operator

Good morning ladies and gentlemen and welcome to the NewStar Financial's first quarter 2008 Earnings Call. My name is Lee and I will be your coordinator for the call today. At this time all participants are in listen-only mode. We will conduct a question-and-answer session following today's presentation.

I would now like to turn the presentation over to your host for today's call, Miss Anne Bork, VP of Investor Relations and Corporate Communications. Please go ahead ma'am.

Anne Bork

Thank you and thanks everyone for joining us on our earnings conference call where we will be discussing our first quarter 2008 results. With me today are Tim Conway, Chairman and Chief Executive Officer of NewStar Financial and John Bray, our Chief Financial Officer.

Before I turn the call over to Tim, I want to remind you that we've posted a presentation on the Investor Relations section of our website www.newstarfin.com. Also available on our website is our financial results press release, which we filed on Form 8-K with the SEC this morning. This presentation and our financial results press release contain additional materials related to this conference call that we may refer to during our remarks today, including information with respect to certain non-GAAP financial measures.

This call is also being webcast simultaneously on our website and a recording of the call will be available beginning at approximately 1:00 p.m. Eastern Time today. Our press release and website provide details on accessing the archived call.

Also before we begin, I need to inform you that the statements in this earnings call, which are not historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All forward-looking statements, including statements regarding future financial operating results, include risks and certainties and contingencies, many of which are beyond NewStar's control and which may cause actual results to differ materially from anticipated results. More detailed information about these risks can be found on our press release issued this morning and in the "Risk Factor" section as updated on our quarterly report on Form 10-Q.

NewStar is under no obligation to and we especially disclaim any such obligation to update or alter our forward-looking statements, whether as a result of information, future events or otherwise, except when required by law. NewStar plans to file its Form 10-K with the SEC on or before May 12 and encourage its shareholders to refer to that document for more complete information regarding the company's financial results.

Now, I would like to turn the call over to NewStar's Chairman and Chief Executive Officer, Tim Conway.

Tim Conway

Thanks Anne. Good morning and thank you for joining our call today to discuss our first quarter results. I'll begin by providing my thoughts on the markets and highlighting key aspects of our performance for the quarter. Our CFO, John Bray will then provide more detail on our results. I will conclude with comments and the implications of the current environment on our portfolio, our target markets and our business model.

So let me begin by focusing on four topics. First, my thoughts on market dynamics in the first quarter; second, the strength of our results which reflect the favorable lending environment and the benefits of our credit culture; third, I'll touch on our financial position and recent developments regarding our funding platform and then before I turn it over to John, I'll discuss our credit metrics and outlook for credit quality.

By any measure the first quarter was challenging for the financial services sector. Disruption in the credit market is persisted as the unwinding of leverage continued to cause funding difficulties for banks and other lenders. This unprecedented correction is reshaping the financial landscape and it has had dramatic impact on our target markets. As you know many financial firms and institutions have been forced to raise capital to bolster the balance sheets due to rising credit costs and declines in asset values.

The operating environment has clearly stabilized to a degree in the second quarter as a loan in decision secondary prices have firmed, but at levels wider than historic norms and despite recent positive trends the market remained highly a liquid. Securitization markets are essentially closed and the large loan market is basically non-existent for new issuance. Many of our competitors are either on the side lines or in the processing of winding down.

I firmly believe that NewStar is well-positioned to operate in this environment and our strong results for the first quarter demonstrate that. Although we slowed our origination volume in the first quarter, we continued to build market share with our direct origination platform and we are excited about our prospects to further enhance our market position and to add attractive new business to the balance sheet.

For the quarter, the company generated adjusted earnings of $7.5 million or $0.16 per share. We originated a $178 million in the quarter as we've rebalanced the pace of growth, reflecting lower level of market activity and (inaudible) environment. Our balance sheet profile remains conservative for this type of market environment were modestly levered at 3.7 times and we have significant liquidity in funding capacity to support growth.

We completed the second closing of our equity placement in the first quarter which generated additional net proceeds of about $50 million and added to book value. Since the end of the quarter, we also renewed our $400 million warehouse facility with Wachovia and increased our term credit facility with Deutsche bank by $100 million to total $400 million. We renewed our line of Wachovia early to demonstrate the stability of our funding platform and to reduce perceived risk. The increase in the Deutsche Bank facility provides additional term funding financial capability.

We continue to explore a range of other funding opportunities that I believe will further demonstrate our access to capital. Our funding capacity was nearly $700 million at the end of the quarter pro forma for the $100 million increase in the Deutsche Bank facility, including capacity generated from our ability to reinvest cash from amortization and prepayment activity in the portfolio was totaled about per year, we estimate funding capacity of about a $1 billion assuming we do not complete any additional financings.

Finally, I'd like to highlight our credit performance which were solid and well within expectations. All key credit metrics improved this quarter. NPAs were down by more than 50% to less than $10 million. Net charge-offs were about 25% lower at $3.3 million and specific reserves decreased to $3.5 million from $4.6 million. While improvement in our credit metrics is always favored, I do not believe that the improvement this quarter necessarily represent a trend.

Given our size and unseasoned portfolio, these metrics are expected to exhibit some degree of variation around the long-term trend. And as we have discussed, NPAs and charge-offs are expected to be lumpy. As a result, we maintain our allowance for loan losses at a 158 basis points.

Our outlook for credit quality is less certain given difficult economic environment. We're not yet seeing material negative trends in our corporate credit other than in housing, auto and certain consumer related sectors that we have discussed previously on these calls.

I attribute this credit performance to our direct origination strategy and the disciplined credit practices which have become a hallmark of the company. As you know, we employed defensive credit strategy with a focus on senior debt and hold limits that drive diversification across industries and issuers.

Our portfolio is now 94% first lien senior debt. Using asset yields as an indicator of the riskiness of the credit portfolio, you can see that our portfolio is generally more conservative than others in our space. We also actively manage our credit portfolio by monitoring our borrower's performance monthly against defined operating plans which allows us to recognize problems early and to take appropriate steps. Importantly, we are not materially exposed to mortgages or other high-risk asset types or assets that are mark-to-market.

With that, I'll turn it over to John Bray to discuss the quarterly results in more detail, John?

John Bray

Thank you, Tim. My presentation will follow the slides that we provided to you. Slide 6 summarizes our financial results for the first quarter of 2008. Adjusted net income was $7.5 million which is defined as GAAP net income excluding the following after-tax adjustments. Non-cash equity expense of $1.2 million for the first quarter related to the restricted equity grants made in connection with our initial public offering.

Second, the recognition of a $200,000 loss on the retained residual interest of our second quarter 2007 off balance sheet transaction, which has remaining balance of $300,000. This resulted in adjusted, basic and diluted income per share of $0.16.

In addition, GAAP income was $6.1 million for the quarter whilst adjusted and GAAP income were up from the first quarter of 2007 and from the fourth quarter of 2007. Adjusted earnings are up 6% quarter-over-quarter and GAAP earnings of $6.1 million were up from $1.2 million last quarter.

As you can see our share count on a weighted average basis was up to $47.8 million from $38.8 million due to shares issued with our private placement of common equity. At quarter-end we had 48.6 million shares outstanding.

If you turn to the next slide, we'll cover liquidity in more depth. As Tim mentioned we have continued access to the capital during this market dislocation. We renewed our $400 million warehouse line with Wachovia four months early. We extended an effective maturity on the facility to April 2009 and incorporate it in accordion feature that permits potential future expansion of the facility up to $750 million. This feature will allow us to upsize the transaction at the appropriate time to take advantage of new opportunities.

In addition to the Wachovia facility, we just upsized our Deutsche Bank term facility to $400 million. This facility works much as a CLO as it has a reinvestment period and then terms out. With both of these renewals we have brought the advance rates down to around 77% to 80% and increased in average pricing of 60 basis points.

As a reminder, our fourth quarter 2007 actions included $125 million private placement of common stock in which the second tranche of two tranches closed in January 2008 and the renewal of our Citi $400 million warehouse.

As we've discussed in the last several quarters, we eliminated our tourist managed CLO business, which had a warehouse of $400 million along with it and we are no longer pursing that. As of 3/31/08 NewStar had approximately $313 million of undrawn commitment under our credit facilities. It is important to keep in mind that our warehouses are committed facilities and are not subject to mark-to-market collateral valuation. We have $29 million of reinvestment capacity in our existing CLOs at attractive locked in spreads as of 3/31.

More importantly in the first quarter, we funded a $118 million into those CLOs from our warehouses of our balance sheet. Unlike like many of our competitors our CLOs have reinvestment periods that are significant. Our $600 million CLO from 2007 had a six year reinvestment period and our $500 million CLO from 2006 had a five year reinvestment period. Reinvestment period of our $375 million CLO from 2005 is set to expire in the fourth quarter of this year.

We also had a very strong cash position. We had $67 million of restricted cash on our balance sheet, includes $33 million of restricted cash available for reinvestment and $34 million of restricted cash available for debt service. Taken together with our unrestricted cash of $165 million, our total cash available is $233 million.

If you turn to the next slide, which will talk about our funding capacity. Slide 8 gives you a deep dive into our borrowing and funding capacity by warehouse and term debt, which we have provided last several quarters. Calculating the funding capacity for each credit facility, taking into account the remaining borrowing capacity and expected advanced rate, the required cash equity may be calculated of a $144 million. The implied, unlevered cash of $22 million when added to the funding capacity of credit facilities and term debts sums to total funding capacity of roughly $680 million.

In addition to the $680 million, we have capacity created by amortization and prepayments each year. In the first quarter, we had about $75 million of portfolio run-off, including amortization and prepayments, which creates availability to fund new loans. Therefore, our total capacity could support the next 12 months assuming approximately a $1 billion of originations with no additional liquidity. We intend to manage this capacity to take advantage of the most optimal loan originations.

Turn to the next Slide. Slide 9 titled Core Business Performance; you'll see we slowed the pace of originations in the first quarter. Our managed loan portfolio was up slightly quarter-over-quarter at roughly $3 billion. Our origination volume was essentially offset by prepayments, amortization and loan sales.

As you move to the right hand side, you can see the slower pace of managed asset growth led to decline in our total revenue growth. Net interest income though grew $26.7 million up from $24.8 million in the fourth quarter of '07, which was driven primarily by higher outstanding balances, lower average leverage and lower cost of funds.

Non-interest income excluding those losses on assets was $3.7 million in the first quarter compared to $8.3 million in the fourth quarter of 2007 reflecting lower fee income from syndications and structuring placement. The reason for this is our market is becoming more club-driven which is resulting in higher spreads and fees which become more of an annuity, so we are losing short-term earnings but getting stronger annuity earnings.

Adjusted revenue grew 27% year-over-year from $24 million in the first quarter of 2007 to $30.4 million in the first quarter of 2008. The managed portfolio had a 45% year-over-year loan growth.

Slide 10 describes the amount and composition of the first quarter originations, volumes and related revenue that origination volume drives. Our total originations for the first quarter were $178 million. Clearly, our origination volume was restrained as we beefed up our liquidity position, which now carry us longer into 2009. $160 million was retained on NewStar's balance sheet versus $467 million in the fourth quarter of 2007 and $18 million was booked for the NewStar Credit Opportunities Fund. New originations in the first quarter had a spread of 420 basis points, with two point up-front fees and we are starting to see LIBOR floors in most of our transactions. We see a steady increase each quarter, our pipeline now reflects pricing in the range of $500 to $550 basis point with two points.

Please turn to the next slide. As Tim mentioned, our credit performance reflects a natural seasoning of our portfolio and we've not seen a thematic deterioration in our credit quality. At March 31st, our allowance for credit losses was 158 basis points on period-end loans, excluding securities and loans held for sale. Our allowance for credit losses at quarter-end was $336 million. Non-performing balances decreased 55% from $21.9 million at 12/31/07 to $9.8 million at 3/31/08. Reductions are due to return of principle no new assets moving into non-performing status and charge-offs.

We established an additional $3.5 million of total specific reserves to reflect expected losses on two credits. In the first quarter we had one net charge-off against the specific reserves established for that loan in the first quarter of 2007. Credit remains uncertain given slowing economic conditions but our portfolio is being defensively constructed and is highly senior. We believe that we have an early problem in identification process which leads to better credit outcomes driven by our direct origination platform. Keep in mind the credits will be lumpy, we do not predict straight-line of charge-offs each quarter rather there will be swings.

The following slide is a snapshot of our loan portfolio and investment portfolio. You can clearly see we are very diverse and we are not concentrating any single sector which is by design.

Slide 13 illustrates our focus on senior debt and again illustrates the defensive nature of our portfolio, 94% of our portfolio is senior compared with 77% in the first quarter of 2007. We believe this will benefit us in uncertain times.

Please turn to next slide and we can spend some time discussing the income statement. Slide 14 shows our income statement for the quarter. As I mentioned earlier, adjusted net income was $7.5 million. Now I want to drill into the different components of the income statement.

Net interest income was $26.7 million for the quarter compared to $24.8 million in the fourth quarter, which was driven primarily by higher outstanding balances, lower average leverage and lower cost of funds. The net interest margin was 4.19% for the first quarter versus 3.98% for the fourth quarter of 2007. This is primarily due to higher spreads, lower leverage in higher level of assets and slightening, quickening of re-pricing of our liabilities downward. Offsetting some of this was re-pricing of the warehouses and lower prepayment fees.

I would also like to point out that we repriced over $400 million of our assets by a weighted average spread of a 100 basis points on those assets which were already in our portfolio. The yield on interest earning assets was 8.2% down from 8.9% in fourth quarter of 2007 and the adjusted spread on our cost of funds was 5.11% compared to 6.14% last quarter. Both of these are due to decreasing LIBOR rates.

With the dropping LIBOR, new asset pricing higher than the portfolio, repricing of short-term facilities and using the CLOs to the best advantage with the reinvestment periods, the marginal move around until this credit market settles down. Provision decreased to $4.6 million for the quarter from $8.2 million in the fourth quarter of 2007 due to lower provision for credit losses. Adjusted non-interest income decreased to $3.5 million this quarter from $6.4 million last quarter, driven by the lack of syndication and lower structuring in placement fees. As I said earlier, this is due to the changing nature of originations, moving more to a club process in earning fees as an annuity versus one-time.

Our asset management fees remain essentially flat quarter-over-quarter and we did take a conservative position by continuing to aggressively write-down our small RMBS exposure to external third-party marks, our remaining RMBS exposure is les than $1 million.

Expenses increased to $14.9 million in the first quarter from $14.7 million in the fourth quarter of 2007, primarily due to the timing of employee benefits.

The next slide shows our balance sheet at NewStar. NewStar's book equity value at quarter-end was $560 million, up $57 million or an 11% increase from $503 million at the end of 2007. About $50 million of the increase was from the second tranche of our private placement and $6 million was from retained earnings. The book value per share as of March 31st was $11.54. The equity asset ratio was 21%.

And with that, I'll turn it back to Tim.

Tim Conway

Thanks, John. I'll conclude my remarks by saying that we're excited about the direction of the company and how we are positioned in these markets. We have eliminated raw material exposure to mortgages and other assets with market risk. That issue was behind us. We're encouraged by our continued access to funding and we expect the lending environment to remain favorable for sometime.

We think there will be long-lasting changes to the markets as a result of this credit crisis. Funding in the capital markets will be available to a limited number of players with established platforms and proven track records. There will be consolidation of lenders resulting in fewer players with competitive advantages derived from their funding and origination capabilities. Credit will be more expensive and more conservatively structured and we are seeing that clearly in the market today.

I believe that the progress we demonstrated in funding our balance sheet is a reflection of the importance of our direct origination platform and the quality of our portfolio. These key advantages have positioned us as a top tier player that will have continued access to capital. The opportunities we see emerging for NewStar in the middle markets I believe are compelling and in my opinion the opportunity is not about a quarter or two of origination volume but rather a long-term opportunity to capitalize on a permanent shift in the markets driven by reduced access to liquidity for many participants and further consolidation.

So thank you, and with that, I will be happy to take time for any questions that you might have.

Anne Bork

Operator, we are ready for question.

Question-and-Answer Session

Operator

(Operator Instructions) And we'll take our first question from Sameer Gokhale with KBW.

Sameer Gokhale - KBW

Hi, good morning. I may have missed some of the commentary, so my apologies if you have to repeat what you mentioned earlier, but can you just go over the numbers? What were the spreads on other loan yields on the new loans that you put on the books this quarter? I think you went over that quickly, I may have missed the numbers?

John Bray

In the fourth quarter they went on about 420 with two points upfront.

Tim Conway

But what we're seeing Sameer in the market right now is for the kind of debt we do in this market is senior debt at 50% or less, in most cases less loan to value. I was seeing a LIBOR plus 500 or more, I was seeing to 2 to 2.5 points upfront and most of these deals have a LIBOR floor that’s in the money. So the recent deals we've done have had LOBOR floors around 3% and we are getting a couple of years of call premium on its and so its widened out significantly and the leverage is clearly down, the equity contribution going into these transactions is up from 25% or 30% to I'd say minimums of 40%, in many cases more than that in each deal.

Sameer Gokhale - KBW

Okay. And then, relative to those increases in the yields and then the more attractive deals structures, your funding cost I think you’d mentioned on the new warehouse line for the renewal and the expansion of the facilities, your funding costs, I think John you’ve mentioned they were higher by 60 basis points, is that right?

John Bray

On average when you look at the things we renewed yes.

Sameer Gokhale - KBW

Okay. So then I just wanted to get a sense for when we can expect this portfolio growth will ramp up more aggressively, I mean is it just a matter of you guys are saying, lets take a wait and see approach, wait for the market to stabilize and then grow, or is it more contingent on locking in some additional financing facilities and bolstering the liquidity position even further before growing. I mean, how are you thinking about when exactly the time to ramp up in portfolio growth?

Tim Conway

Yeah, I think, it's a good question. It's something we think a lot about. I'd say a couple of things, first, it has became very clear that this is not a short-term opportunity and we don't feel like we're going to miss the various and many opportunities that are going to be in the marketplace. We do continue to believe its still time to be highly selective and to be cautious about the market, and we'll prepare to capitalize on it and we're going to do that based on a couple of things, where we see compelling opportunities in the marketplace and then as we continue, as we demonstrated this quarter and I believe, we will continue to demonstrate, we have additional funding capacity and access to these markets, we will increase our volumes and the amount of business we are doing in this market.

And I'd also say, in the last quarter, volumes in the market slowed down pretty significantly. I feel like we’ve gained market share and we're clearly seeing a huge portion of the deals that are in the market. We're still being very selective. With all of the equity capital being raised in the number of middle market equity firms looking to put capital out and as this market settles down, we believe that volume will begin to pick up again and that'll be another driver of the increased volume that we do in the marketplace. But we're looking at it as a, not so much right now quarter-to-quarter as really a longer term opportunity to show some great growth in our balance sheet and in our earnings.

Sameer Gokhale - KBW

Okay, that's helpful. And then just my last question is given your focus on middle market companies in that segment of the market, I mean, it seems like your credit quality is held up quite well, but when you look at your customer base, your borrower base, the borrower base of other companies in this space, I mean what are you seeing that might help us to gain some insight into where the economy is in a broader sense? Are we seeing signs of stabilization? Are these companies still struggling and things are going to get worse? Are we looking at this is a point from which the economy is poised to improve, I mean do you have a view on that?

Tim Conway

I think that we haven't seen other than the obvious cyclicals and industries that have been under tremendous pressure where we've seen cash flows declining there. I think that in general, the portfolio and the performance of the underlying companies has been very good. In my own personal view is that we are early on in the economic cycle here. I think we've seen some improvement in the liquidity and in the credit markets in general, but we still have a period to go through here, so I have to predict where the economy is going but I think the falls will increase in general in the marketplace and we really haven't started to see a broad deterioration in credit and I think there will be some deterioration and increase into falls across the board.

Despite that I think where we have had issues and I think this will continue to be the case given the way we've positioned ourselves in the capital structure, the kinds of companies we are financing and where we are from the loan-to-value perspective, I think even as the economy continues to slow, our portfolio is going to be under similar pressure, but I think it's going to perform very well and I still believe it's going to perform within the credit parameters that we've basically have assumed would be the case for this business.

Sameer Gokhale - KBW

Okay, it's helpful color. Thank you very much.

Operator

And we'll take our next question from James Shanahan with Wachovia.

James Shanahan - Wachovia

Thank you. Good morning guys. Couple of quick question please, you're still reporting here IPO related compensation, how much longer will that continue and when we'll see that start to, is its going to be two, three, four more quarters or so? Will that decline overtime or should we expect the similar amount of IPO related expense?

John Bray

It will start to decline over the next four or five quarters.

James Shanahan - Wachovia

But it's roughly--

John Bray

$1.2 million this quarter, and start to decline in the next couple of quarter to $800,000 or so.

Tim Conway

I think when you look at our earnings, I mean the quality of our earnings and the GAAP earnings, the difference between our GAAP and our adjusted is minimal and that's really the one thing that from the very beginning we've adjusted out and when we discontinued the RMBS, we adjusted that out but I am very happy with the quality of earnings. And as John said, it's really down or relatively small amount of that amortization of those costs and that's a function of how those shares vest overtime and so that's really the way we have to amortize it and it is relatively small number and it will go away over the next period of time.

James Shanahan - Wachovia

I understand and to be clear I wasn't criticizing that expense line item and I was just asking for some clarification.

Tim Conway

Just to give you an opportunity to brag about the quality of our earning side.

James Shanahan - Wachovia

Yeah, that works, okay. Follow up question, you've reported in the Form 10-K that there were 132 employees at period end, has there been any meaningful changes in those numbers, higher or lower?

Tim Conway

Yeah, we've been working very carefully as many others I think in the finance world have been to make sure it was as lien as possible and we've done what you would expect us to do which is number one to scale back. To some degree based on the scale of our business, the fact is, we are conservative in putting our new volume in '07 and we're slower in the first quarter here, so we drive the business by metrics in terms of how we cover portfolio names and so forth and so we've scaled back on the margin there and then real estate has clearly been slower and the funding of real estate is more difficult. We expect to do less volume there this year and so we've scaled back on the real estate side, and then, we've fully discontinued our Structured Products business and that's really where the rest of it came from.

So, I think we've done it in a way that you'll see we've taken some severance cost, you'll start to see some cost saves on the expense side, but we got it the way that in no way has impacted our ability to get out and directly originate product and to follow the companies effectively.

James Shanahan - Wachovia

And where would you estimate the number of employees at March 31 or even today if you are able to disclose that?

Tim Conway

I think it's just under a 100 or so.

James Shanahan - Wachovia

Okay.

Tim Conway

You always have a little bit of attrition. We had a few people and we didn't replace those positions, so we've done it in a very orderly fashion.

James Shanahan - Wachovia

One final question, kind of a general question, given the things its happened, certainly, there are lot other plans that you probably have made and discussed with investors during the IPO road show have had to been modified, and what do you think that the most meaningful changes have been to the business model in the last, say nine to twelve months, relative to what you might have told investors during the IPO?

Tim Conway

Well, beside from the fact that we discontinued SPG, I'd say a couple of things. One is we slowed growth, because we thought the market was overheated. We are willing to compete on business where we thought we can generate earnings, where we thought we compete on price. We didn't want to compete on the leverage side or I am taking more risk and I'd say other than the volumes, the shift has been really towards more senior debt and we completely avoided, really we've done very little, even of second liens which many people considered to be senior debt now viewed as a second lien behind the first lien. We've done very little of that and very little to no sub-debt and so that's a change from what we've talked about initially in the business and that's really the impact.

I think now we're starting to see better pricing in the market clearly and I think we are back to where when we first performing the business in terms of the risk return and the pricing we can get on new assets is reflective of really where we were when we were forming the company.

James Shanahan - Wachovia

Okay. Thank you.

Operator

(Operator Instructions) Next we'll hear with David Long from William Blair.

David Long - William Blair

Hey guys. Most of my questions have been answered, but regarding the term debt funding with Deutsche Bank, is that something that you guys went to them and asked for an increase or how did that work out?

John Bray

I'd say it was a kind of a mutual thing. We are always looking at increasing liquidity with our providers and so we went to Deutsche Bank and I guess they came to us at the same time and we said there is a something we can do to make this facility bigger to give us some more opportunities. And as Tim said, liquidity providers see that what we've done with our credit portfolio and things of that nature, so it was something that we worked on together.

Tim Conway

I think one of the key things is, our banks and we're talking to them on a regular basis. We've got a long-standing relationships with these banks, and they are very supportive of us. And there are ongoing dialogs on a regular basis. And that's a key factor for us going forward. And you'll see that, I think, you saw it this quarter and you'll continue to see that kind of support, based on their knowledge, of how we run the business and our portfolio. And so, these kinds of dialogs are always happening. I think it's a reflection of that.

David Long - William Blair

All right. Great, thanks.

Tim Conway

Thanks, David.

Operator

There are no further questions at this time. I'll turn the call back to Mr. Conway for any additional remarks.

Tim Conway

Well, that concludes the call and we thank you very much for joining us this morning.

Operator

And ladies and gentlemen, that will conclude today's presentation. Thank you so much for your participation. Have a wonderful day.

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