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
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