JACKSONVILLE, Fla., March 14 /PRNewswire-FirstCall/ -- Sunset
Financial Resources, Inc. (NYSE:SFO), a specialty finance REIT,
today announced financial results for the quarter and year-ended
December 31, 2005. For the fourth quarter of 2005, Sunset reported
net income of $305,000, or $0.03 per diluted share, compared to net
income of $583,000, or $0.05 per diluted share, in the same period
a year ago. Net interest income in the fourth quarter was $2.6
million, compared to $3.8 million in the same quarter of 2004. This
represented an annualized net interest margin on average earning
assets of 91 basis points for the quarter ended December 31, 2005,
versus 186 basis points in the same quarter last year. For the
fourth quarter, the yield on average earning assets declined
slightly to 4.41%, compared to 4.46% in the same quarter last year.
However, rising interest rates caused the average cost of
liabilities for the quarter to increase to 3.83%, versus 3.03% in
the fourth quarter of 2004. According to Byron Boston, Chief
Investment Officer of Sunset Financial Resources, "Although our net
margin compressed during the quarter, we benefited from our hedging
strategy of using interest rate swaps to mitigate the impact of
rising short term interest rates. During the quarter, the Federal
Reserve raised rates 50 basis points. Against this backdrop, the
net spread from our residential portfolio declined by only 9 basis
points and the fair value of the portfolio was unchanged. The net
spread on our total portfolio remained relatively stable with only
a 6 basis point decline in the quarter due to the contribution of
the commercial portfolio. We will continue to maintain a defensive
posture in this rising rate environment." At December 31, 2005
Sunset Financial had a book value of $10.17 per share and an
overall leverage of 9.8 times stockholders' equity. As a reminder,
the book value per share is calculated by dividing the shareholders
equity as of 12/31/05 by the number of shares outstanding and
includes the value of securitized loans at their historical cost of
$160.6 million. As of 12/31/05, the fair value of the securitized
loans was $154.6 million. George Deehan, President and Chief
Executive Officer of Sunset Financial Resources, said, "We are now
experiencing considerable improvement in our commercial portfolio.
Specifically, the Multi-Sport property was sold in January, and we
expect to receive funds, that in addition to the reserve we took in
the third quarter, will cover our outstanding exposure. In
addition, the Resort Development property has begun making
principal reductions and is current with its required interest
payments. Finally, we are working closely with Banc of America
Securities to explore strategic alternatives. I am encouraged by
our progress to date and remain confident that these efforts will
result in the best interest of all shareholders." For the year
ended December 31, 2005, Sunset reported a net loss of ($4.7)
million, or ($0.45) per diluted share, compared to net income of
$644,000, or $0.07 per diluted share, in the same period a year
ago. For the year ended December 31, 2005, the provision for loan
losses increased $5.7 million to $7.0 million, compared to $1.3
million for the same period last year. The provision recorded
during 2005 was related primarily to impairment charges on two
loans within the commercial loan portfolio. As of December 31,
2005, Sunset's total assets were $1.2 billion (including $942.9
million of investments in Mortgage Backed Securities; $160.6
million of residential mortgage related loans and $29.3 million of
commercial bridge loans), compared to $893.5 million (including
$614.2 million of investments in Mortgage Backed Securities; $203.7
million of residential mortgage related loans and $44.5 million of
commercial bridge loans) in the same period a year ago. On March 7,
2006, the Company's Board of Directors declared a fourth quarter
dividend of $0.03 per common share. The dividend is payable on
March 30, 2006 to stockholders of record on March 16, 2006. Sunset
Financial expects to file its fourth quarter and year-end 2005
results on Form 10-K with the Securities and Exchange Commission
late in the day on March 14, 2006. Sunset Financial has scheduled a
conference call to discuss its fourth quarter financial results at
9:00 a.m. ET on Wednesday, March 15, 2006. A live webcast of the
conference call will be available online at
http://www.sunsetfinancial.net/. Web participants are encouraged to
go to the Web site at least 15 minutes prior to the start of the
call to register, download, and install any necessary audio
software. Those without web access should access the call
telephonically at least ten minutes prior to the conference call.
The dial-in number is (800) 798-2796 and the participant code is
62697759. Following the conclusion of the presentation, an archive
of the webcast will remain available online through April 15, 2006
at http://www.sunsetfinancial.net/. In addition, a dial-in replay
of the call will be available from March 15 - March 22, 2006. The
replay dial-in number is (888) 286-8010. The passcode is 76643146.
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) December 31, 2005 2004 Assets Mortgage assets
Mortgage-backed securities, available for sale $942,900 $614,154
Securitized hybrid adjustable rate mortgages 160,602 201,381 Hybrid
adjustable rate residential mortgages -- 1,286 Fixed rate
residential mortgages -- 1,045 Commercial mortgages 29,347 44,522
Total mortgage assets 1,132,849 862,388 Allowance for loan losses
(7,321) (1,333) Net mortgage assets 1,125,528 861,055 Cash and cash
equivalents 17,570 25,700 Interest receivable 4,542 2,676 Fixed
assets, net 521 861 Other assets 1,853 484 Interest rate swap
agreements 12,246 2,716 Total assets $1,162,260 $893,492
Liabilities Whole loan financing facility $-- $9,718 Reverse
repurchase agreements 1,031,831 761,205 Junior subordinated notes
due to Sunset Financial Statutory Trust I 20,619 -- Interest rate
swap agreements 137 944 Accrued liabilities 2,676 2,367 Total
liabilities 1,055,263 774,234 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; 10,516,600 and 10,450,000
outstanding, respectively 11 10 Additional paid in capital 119,391
119,219 Accumulated other comprehensive income (loss) (2,998) 87
Accumulated deficit (9,407) (58) Total stockholders' equity 106,997
119,258 Total liabilities and stockholders' equity $1,162,260
$893,492 Sunset Financial Resources, Inc. Unaudited Consolidated
Statements of Operations (in thousands, except per share data) For
the Three Months For the Year Ended December 31, Ended December 31,
2005 2004 2005 2004 Interest and fee income $12,438 $9,142 $46,356
$18,233 Interest expense 9,877 5,347 34,788 9,842 Net interest
income 2,561 3,795 11,568 8,391 Provision for loan losses 60 1,184
7,042 1,333 Net interest income after provision 2,501 2,611 4,526
7,058 Net gain on sale of securities 1 331 9 734 Loss on sale of
loans (59) (48) (59) (48) Operating expenses: Salaries and employee
benefits 379 759 2,288 2,864 Professional fees 968 263 2,911 1,151
Other 803 924 3,173 2,720 Severance (12) 365 841 365 Total
operating expenses 2,138 2,311 9,213 7,100 Net income (loss) $305
$583 $(4,737) $644 Basic earnings (loss) per share $0.03 $0.06
$(0.45) $0.08 Diluted earnings (loss) per share $0.03 $0.05 $(0.45)
$0.07 Weighted average basic shares 10,475 10,450 10,470 8,377
Weighted average diluted shares 10,475 10,469 10,470 8,397
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 Web site:
http://www.sunsetfinancial.net/
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