Company to Hold Conference Call to Review Q1 Results and Provide
Additional Commentary on Merger with Alesco Financial Trust
JACKSONVILLE, Fla., May 9 /PRNewswire-FirstCall/ -- Sunset
Financial Resources, Inc. (NYSE:SFO), a specialty finance REIT,
today announced financial results for three months ended March 31,
2006. For the first quarter of 2006, Sunset reported net income of
$978,000, or $0.09 per diluted share, compared to net income of
$1.4 million, or $0.14 per diluted share, in the same period a year
ago. The year-over-year decrease in net income was substantially
the result of increased interest expense and an increase in
professional fees, including audit and legal fees. Net interest
income in the first quarter was $3.1 million, compared to $3.5
million in the same quarter of 2005. For the first quarter, the
yield on average earning assets increased to 4.65%, compared to
4.42% in the same quarter last year. However, the cost of interest
bearing liabilities increased to 3.86% during the first quarter of
2006 from 3.30% in the prior year quarter. This resulted in net
interest spread of 79 basis points during the first quarter versus
112 basis points in the same quarter last year. As of March 31,
2006, Sunset's total assets were $1.1 billion (including $884.6
million of investments in Mortgage Backed Securities; $156.3
million of residential mortgage related loans and $21.5 million of
commercial bridge loans), compared to total assets of $1.1 billion
(including $818.4 million of investments in Mortgage Backed
Securities; $191.9 million of residential mortgage related loans
and $36.5 million of commercial bridge loans) in the same period a
year ago. At March 31, 2006 Sunset Financial had a GAAP book value
of $10.42 per share. This value included the Company's securitized
loans at their historical cost of $156.4 million, rather than their
fair value of $149.5 million. Overall leverage at the end of the
quarter was 9.1 times shareholders' equity. On April 27, 2006,
Sunset Financial announced a definitive agreement to merge with
Alesco Financial Trust. Under the terms of the agreement, Sunset
will issue 1.26 shares of common stock for each Alesco share. The
combined company will continue to trade on the NYSE and will
operate under the Alesco Financial name. The merged company will
pursue Alesco's investment strategy focused on trust preferred
securities issued by banks and insurance companies, middle market
loans and residential mortgage backed securities. Sunset is
currently operating under a management agreement with Cohen
Brothers Management LLC, which became effective on April 27, 2006.
Under this agreement, it is anticipated that Sunset will begin
transitioning its assets during the second quarter of 2006 into
investments consistent with Alesco's investment strategy.
Commenting on the proposed transaction and interim management
agreement, George Deehan President and Chief Executive Officer of
Sunset Financial Resources, said, "After months of conducting an
extensive analysis of the strategic alternatives available to the
company, it was determined that the Alesco transaction offered the
greatest opportunity to maximize value for Sunset shareholders. We
are committed and look forward to completing the merger. In the
interim, we are confident that the expertise offered by Cohen
Brothers will enable us to effectively redeploy our assets into
investments that we expect will provide a better return on equity
for our shareholders." Earlier today, Sunset Financial filed its
first quarter Form 10-Q with the Securities and Exchange
Commission. Sunset Financial has scheduled a conference call to
discuss its first quarter financial results at 10:00 a.m. ET on
Wednesday, May 10, 2006. During the conference call, the Company
will provide additional commentary about the proposed merger with
Alesco Financial Trust. 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 800-599-9795 and the
participant code is 71520156. An archive of the webcast will be
available online on May 15, 2006 through June 15, 2006 at
http://www.sunsetfinancial.net/. In addition, a dial-in replay of
the call will be available from May 15 - May 22, 2006. The replay
dial-in number is 888-286-8010. The passcode is 53275028. About
Sunset Financial Resources, Inc. Sunset is a specialty finance REIT
headquartered in Jacksonville, Florida. The Company invests in high
quality residential mortgage backed securities and commercial
bridge loans. As of March 31, 2006, it had approximately $1.1
billion of assets. Sunset Financial trades on the New York Stock
Exchange under the symbol "SFO". Additional Information About This
Transaction This material is not a substitute for the proxy
statement/prospectus Sunset will file with the Securities and
Exchange Commission. Investors are urged to read the proxy
statement/prospectus which will contain important information,
including detailed risk factors, when it becomes available. The
proxy statement/prospectus and other documents which will be filed
by Sunset with the Securities and Exchange Commission will be
available free of charge at the SEC's website, http://www.sec.gov/,
or by directing a request when such a filing is made to . Sunset,
its directors, and its executive officers may be considered
participants in the solicitation of proxies in connection with the
proposed transactions. Information about the directors and
executive officers of Sunset and their ownership of Sunset stock is
set forth in the 2005 Annual Report on Form 10K. Investors may
obtain additional information regarding the interests of such
participants by reading the proxy statement/prospectus for the
proposed merger when it becomes available. Forward-Looking
Statements Information set forth in this release contains
forward-looking statements, which involve a number of risks and
uncertainties. Sunset and Alesco caution readers that any
forward-looking information is not a guarantee of future
performance and that actual results could differ materially from
those contained or implied in the forward-looking information. Such
forward-looking statements include, but are not limited to,
statements about the benefits of the business combination
transaction involving Sunset and Alesco, including future financial
and operating results, the new company's plans, objectives,
expectations and intentions and other statements that are not
historical facts. The following factors, among others, could cause
actual results to differ from those set forth in the
forward-looking statements: factors that affect the timing or
ability to complete the transactions contemplated herein; the risk
that the business will not be integrated successfully; the risk
that cost savings and any other synergies from the transaction may
not be fully realized or may take longer to realize than expected;
disruption from the transaction making it more difficult to
maintain relationships with lenders, other counterparties, or
employees; competition and its effects on pricing, spending,
third-party relationships and revenues; the failure of the
companies to successfully execute their business plans, gain access
to additional financing, the availability of additional loan
portfolios for future acquisition, continued qualification as a
REIT and the cost of capital. Additional factors that may affect
future results are contained in Sunset's filings with the SEC,
which are available at the SEC's web site http://www.sec.gov/.
Sunset and Alesco disclaim any obligation to update and revise
statements contained in these materials based on new information or
otherwise. Sunset Financial Resources, Inc. Consolidated Balance
Sheets (in thousands, except share data) March December 31, 31,
2006 2005 (unaudited) Assets Mortgage assets Mortgage backed
securities, available for sale $884,625 $942,900 Securitized hybrid
adjustable rate mortgages 156,348 160,602 Commercial mortgages
21,493 29,347 Total mortgage assets 1,062,466 1,132,849 Allowance
for loan losses (6,155) (7,321) Net mortgage assets 1,056,311
1,125,528 Cash and cash equivalents 25,215 17,570 Interest
receivable 4,326 4,542 Fixed assets, net 434 521 Other assets 2,387
1,853 Interest rate swap agreements 17,741 12,246 Total assets
$1,106,414 $1,162,260 Liabilities Reverse repurchase agreements
$973,604 $1,031,831 Junior subordinated notes due to Sunset
Financial Statutory Trust I 20,619 20,619 Interest rate swap
agreements - 137 Accrued liabilities 2,580 2,676 Total liabilities
996,803 1,055,263 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 outstanding 11 11 Additional paid in
capital 119,442 119,391 Accumulated other comprehensive loss
(1,098) (2,998) Accumulated deficit (8,744) (9,407) Total
stockholders' equity 109,611 106,997 Total liabilities and
stockholders' equity $1,106,414 $1,162,260 Sunset Financial
Resources, Inc. Unaudited Consolidated Statements of Operations (in
thousands, except per share data) Three Months Ended March 31, 2006
2005 Interest and fee income $12,972 $10,171 Interest expense 9,852
6,699 Net interest income 3,120 3,472 Provision for loan losses (4)
76 Net interest income after provision 3,124 3,396 Operating
expenses Salaries and employee benefits 532 740 Professional fees
922 464 Other 692 749 Total operating expenses 2,146 1,953 Net
income $978 $1,443 Basic and diluted earnings per share $0.09 $0.14
Weighted average basic shares 10,475 10,454 Weighted average
diluted shares 10,489 10,454 Contact: Stacy Riffe Jeffrey
Goldberger / Michael Cimini Chief Financial Officer KCSA Worldwide
(904) 425-4365 (212) 896-1249 / (212) 896-1233 / DATASOURCE: Sunset
Financial Resources, Inc. CONTACT: Stacy Riffe, Chief Financial
Officer, Sunset Financial Resources, Inc., +1-904-425-4365, ;
Jeffrey Goldberger, +1-212-896-1249, , or Michael Cimini,
+1-212-896-1233, , both of KCSA Worldwide for Sunset Financial
Resources, Inc. Web site: http://www.sunsetfinancial.net/
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