newstarfin.com Q2 2017 Overview Focused on Middle Market Lending in the U.S. August 2, 2017
Forward Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding future performance, including expectations regarding loan origination, credit performance, future dividends and expected growth. All statements other than statements of historical fact included in this release are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, strategic plans (including those relating to the transition to an asset manager), the market price for NewStar s stock prevailing from time to time, the nature of other investment opportunities presented to NewStar from time to time, objectives, future performance, dividend policy, financing plans and business. As such, they are subject to material risks and uncertainties, including our ability to leverage new and future assets to support growth; the continued success of strategic relationships; the general state of the economy; our ability to compete effectively in a highly competitive industry; and the impact of federal, state and local laws and regulations that govern non-depository commercial lenders and businesses generally. More detailed information about these and other risk factors can be found in NewStar's filings with the Securities and Exchange Commission (the "SEC"), including Item 1A ("Risk Factors") of our 2016 Annual Report on Form 10 -K as may be updated or supplemented by any Risk Factors contained in our subsequent Quarterly Reports on Form 10 -Q. NewStar is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward -looking statements, whether as a result of new information, future events or otherwise, except as required by law. 1
SECTION 1 Q2 Highlights $7.3Bn* of AUM MANAGED BY 40 INVESTMENT PROFESSIONALS AND 70EMPLOYEES * AuM as of June 30, 2017, including $726 million of managed assets acquired on July 20, 2017 2
Q2 2017 Highlights Market Conditions Investment Activity Credit Performance Capital Management Overall US middle market loan issuance was up 2% in Q2 from Q1 and 7% from Q2 16, while sponsored loan issuance was down 14% from Q1 and up 14% year-over-year. US mid-market institutional yields were almost flat at 6.2% for Q2 compared to 6.1% in Q1, reflecting an offsetting combination of tightening spreads and rising index rates. Relative value of middle market loans fell somewhat in Q2, as the yield premium over large corporate loans decreased to 141 bps from 163 bps in Q1. Funded $460 million of new direct credit investments in Q2 compared to $330 million in the prior quarter and $476 million in Q2 2016. Increase reflected market share pick-up and a typical seasonal pattern, tempered by a disciplined investment strategy with credit and pricing discipline. WA yields on new direct loans were approximately 6.8%. Managed loans and investments decreased slightly to approximately $6.5 billion due to the amortization and redemption of older CLOs issued in 2006 and 2007, partly offset by growth in middle market managed assets. Credit costs decreased by $3.5 million to $2.7 million in Q2 compared to last quarter which was elevated due to provisioning for a legacy workout in connection with the expected sale of the obligor. Non-accruing loans decreased to $95.1 million in Q2, or 3.06% of loans due primarily to $7.5 million of charge-offs against previously established reserves. Other credit activity remained within expectations. Returned approximately $7.3 million to stockholders in Q2 through share repurchases and dividends. Book value per share increased by $0.19 to $15.40 at June 30, 2017 due primarily to retained earnings and $6.5 million of accretive share repurchases in the second quarter. Strategic Initiatives Completed acquisition of CLO management business subsequent to quarter-end, adding $726 million to AUM. Refinanced an existing $500 million managed CLO called Longfellow Place in a reset transaction that extended the investment period by four years among other things. 3
Operating performance trends $MM Net Income Q2 2017 EPS: $0.10 per fully diluted share $24.6 $24.0 $16.9 $14.1 $10.2 $10.6 $28.2 $MM $554 $564 $595 $616 Equity $641 $659 $647 $643 $5.2 $1.4 $4.2 2010 2011 2012 2013 2014 2015 2016 Q2 16 Q1 17 Q2 17 2010 2011 2012 2013 2014 2015 2016 6/30/2017 Origination Volume Book Value per Share $MM $3,058 $15.12 $15.40 $1,789 $1,874 $13.75 $14.17 $555 $858 $1,031 $1,296 $476 $330 $460 $10.96 $11.42 $12.06 $12.66 2010 2011 2012 2013 2014 2015 2016 Q2 16 Q1 17 Q2 17 2010 2011 2012 2013 2014 2015 2016 6/30/2017 4
Summary of Recent Acquisition On July 20, 2017, NewStar Financial Inc. acquired 100% of the membership interests of Fifth Street CLO Management LLC ( FSCM ) from Fifth Street Holdings LP ( FS ) for approximately $16 million in cash, net of $13 million of assumed debt. Formed in 2015 by Fifth Street to manage its middle market CLO business, FSCM manages two CLOs backed by middle market loans and holds certain interests in those CLOs primarily to comply with regulatory risk retention requirements. The purchase included two collateral management contracts and retained CLO notes with a par value of approximately $25.4 million The acquisition added approximately $726 million of managed assets, increasing total AUM to approximately $7.25 billion. The funds are also expected to add meaningfully to the amount NewStar will commit to single lending transactions and provide more than $200 million of annual lending capacity FSCM will operate as a wholly-owned subsidiary of NewStar and continue to serve as collateral manager and hold the retained interests in the CLOs. The acquired company will be re-branded and the funds will be re-named and operate as the NewStar Exeter and Fairfield Funds NewStar assumed an existing credit facility with Natixis in connection with the transaction which is used to partially finance the CLO notes retained by the company. The transaction is expected to be accretive to earnings with management fees of approximately $1.4 million and $2.7 million in the second half of 2017 and the full year of 2018, respectively, with nominal additional operating expenses. 5
SECTION 2 Financial Results Q2 2017 $15.40 of BV Per Share Earnings $4.2 Mn NET INCOME $0.10 Diluted EPS 6
Summary of Q2 2017 financial results Q2 2017 Three months ended ($ in thousands, except per share amounts) June 30, 2017 March 31, 2017 December 31, 2016 June 30, 2016 Net Income $4,152 $1,382 $10,330 $5,241 Net Income per share: Basic $0.10 $0.03 $0.23 $0.11 Diluted $0.10 $0.03 $0.23 $0.11 Weighted average shares outstanding: Basic 41,216,013 41,789,915 43,732,133 46,010,918 Diluted 41,283,296 41,827,138 43,780,606 46,010,918 Dividends declared per common share $0.02 $0.02 -- -- Book value per share $15.40 $15.21 $15.12 $14.12 7
Q2 2017 Financial highlights Financial Highlights Summary $ in Millions Q2 2017 Q1 2017 Q4 2016 Q2 2016 Balance sheet Loans and leases, net $3,037 $3,149 $3,239 $3,113 Loans held-for-sale, net 347 256 144 440 Total assets 3,931 3,986 4,041 3,992 Warehouse, repo and term debt 2,573 2,574 2,696 2,640 Senior notes 375 374 374 373 Subordinated notes 245 243 241 238 Equity 643 643 647 659 Income statement Interest income $56.9 $55.1 $64.2 $59.4 Net interest income 15.0 14.0 20.7 20.9 Total revenue 20.2 20.1 40.5 25.3 Operating expenses 10.3 11.6 19.5 12.8 Provision expense 2.7 6.1 2.6 3.6 Net income 4.2 1.4 10.3 5.2 Key ratios Portfolio yield 6.43% 6.29% 6.53% 6.28% Net interest margin 1.56% 1.45% 1.96% 2.10% Expense ratio (% of avg AuM) 0.64% 0.68% 1.15% 0.78% Net charge off rate 0.88% 0.65% 1.98% 0.75% Pre-tax return on average equity 4.50% 1.47% 11.14% 5.36% Originated new leveraged loan volume of $460 million compared to $330 million for Q1 and $476 million in Q2 2016. Managed assets decreased slightly to $6.5 billion. Total assets held by managed funds were approximately $3.3 billion. Net interest income increased by $1.0 million due to rising index rates on loans and higher deferred loan fee amortization which was partly offset by an increase to cost funds due to higher LIBOR index rates As a result, margin widened to 1.56% in Q2 from 1.45% in Q1. Fee and asset management income fell by $0.9 million due primarily to lower capital markets fees. Other non-interest income decreased due primarily to market value adjustments, which re-traced gains from prior periods Operating expenses decreased to $10.3 million in Q2 from $11.6 million in Q1. Credit costs decreased by almot $3.5 million to $2.7 million from $6.1 million in Q1. Book value per share increased $0.19 to $15.40 due primarily to accretive share repurchases and retained earnings. 8
Net interest margin analysis LIBOR index rates on loans began to exceed average fixed floor thresholds in Q2, offsetting some of the margin pressure experienced in Q1. Further rate increases are expected to provide additional lift to the margin in future quarters as rates are above floor thresholds on loans Excess liquidity generated from divestitures was less of a drag on yields in Q2 as cash was returned to shareholders and deployed through investment activity Q1 2017 NIM 1.45% Loan Base Rate Impact + Credit Spreads + Interest Expense + Deferred Fee Income + Other = NIM 0.08% + 0.00% + -0.09% + 0.04% + 0.08% = 0.11% Base rates on earning assets Stable Increase in LIBOR base rates in financing arrangements Higher amortization of deferred loan fees related to prepay ments Increase in loans as % of interest earning assets Q2 2017 NIM 1.56% 9
1/2/2013 2/2/2013 3/2/2013 4/2/2013 5/2/2013 6/2/2013 7/2/2013 8/2/2013 9/2/2013 10/2/20 11/2/20 12/2/20 1/2/2014 2/2/2014 3/2/2014 4/2/2014 5/2/2014 6/2/2014 7/2/2014 8/2/2014 9/2/2014 10/2/20 11/2/20 12/2/20 1/2/2015 2/2/2015 3/2/2015 4/2/2015 5/2/2015 6/2/2015 7/2/2015 8/2/2015 9/2/2015 10/2/20 11/2/20 12/2/20 1/2/2016 2/2/2016 3/2/2016 4/2/2016 5/2/2016 6/2/2016 7/2/2016 8/2/2016 9/2/2016 10/2/20 11/2/20 12/2/20 1/2/2017 2/2/2017 3/2/2017 4/2/2017 5/2/2017 6/2/2017 Libor rate Interest rate sensitivity 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% LIBOR Rate Trends 2013 Q2 2017 3 Month Libor 1 Month Libor LIBOR index rates increased by 15 to 25 bps in Q2 and more than 75 bps since the end of Q2 2016 At the end of Q2 2017, 1 and 3 month LIBOR index rates were 123 to 130 bps, which were above most floor thresholds Balance Sheet Funded Loan Contract Positions [excl. Fixed Rate Loans] Contract Type WA Base Rate Q2 Total (%) Q1 Total (%) Change Prime 4.25% 3.0% 2.0% 0.9% 01W LIBOR 0.00% 0.0% 0.4% -0.4% 01M LIBOR 1.26% 33.7% 32.9% 0.8% 02M LIBOR 1.19% 3.7% 7.5% -3.8% 03M LIBOR 1.26% 58.6% 57.2% 1.3% 06M LIBOR 1.45% 1.1% 0.0% 1.0% 12M LIBOR 0.00% 0.0% 0.0% 0.0% Weighted Average 1.35% 100.00% 100.00% 0.00% Mix of contract positions shifted slightly in Q2 as loans indexed to the Prime rate increased to 3% and loans indexed to 1, 3 and 6 month LIBOR increased to 33.7% 58.6% and 1.1%, respectively. Loans indexed to all other contract maturities decreased Sensitivty of Net Interest Income to Rate Changes Rate Change (Basis Points) Dcerease of -100 $ 9,220 Increase of +100 12,433 Increase of +200 25,000 Increase of +300 37,567 1 Change in Net Interest Income Over 12 Months ($ in thousands) 100 bps instantaneous parallel shift in interest rates as of June 30, 2017 is estimated to increase net interest income over a 12-month period by $12.4 million 1 The table shows the hypothetical estimated change in net interest income over a 12 -month period based on a static, instantaneous parallel shift in interest rates applied to our portfolio and cash and cash equivalents as of June 30, 2017. Our modeling is based on contractual terms and does not consider prepayment or changes in the composition of our portfolio or our current capital structure. It further generalizes that both variable rate assets and liabilities are indexed to a flat 3 month LIBOR yield curve. Although we belie ve these measurements are representative of our interest rate sensitivity, we can give no assurance that actual results would not differ materially from our modeled outcomes. 10
Loan and investment portfolio Loan Portfolio by Vintage Loan Portfolio by Industry $MM as of 6/30/17 2009 Q2 2017: 97% 2017 2004 2008: 3% 2012 2013 $MM as of 6/30/17 2016 2014 2015 High quality portfolio; more than 97% of loans originated post-crisis Highly diversified portfolio; largest single obligor represents only 1.2% of total loans Underweight energy, retail and healthcare 11
Capital structure $MM, as of 6/30/2017 Warehouse Credit Facilities $0.9B of total commitments Total Capital Commitments: $4.3B Term Debt / Securitization $2.1B outstanding Growth Capital $1.3B outstanding 22% 48% 30% Outstanding warehouse debt Term debt securitizations Outstanding unsecured debt and equity Unused/undrawn capacity $865 $643 $404 $290 $410 $328 $263 $303 $368 $380 $300 $79 $155 Lev Fin W/ H Repurchase Agreements CLO 2012-2 CLO 2014-1 CLO 2015-1 CLO 2015-2 CLO 2016-1 CLO 2017-1 Arch St CLO Unsecured Notes Subordinated Notes Equ ity Diversified funding and strong capital base with ability to build equity through retained earnings Note: CLO balances include all classes of notes, net of retained notes and equity interests, as well as repurchases. Reinvestment period for CLO 2012-2 has expired and the trust is amortizing. 12
Q2 2017 Credit performance Credit Costs Non-accruing loans Allowance for loan losses Credit costs decreased by $3.5 million to $2.7 million due primarily to lower specific provision expenses which was elevated in the prior quarter due to a single legacy loan in connection with an expected sale of the obligor. Specific provision decreased by $3.0 million to $3.3 million in Q2 2017 from $6.3 million in the prior quarter. NPLs decreased to 3.06% in Q2 from 3.18% in Q1 due primarily to charge-off activity. The allowance for credit losses decreased by $4.8 million to $47.3 million, or 1.75% of loans as of June 30, 2017 from 1.85% of loans as of March 31, 2017 due to $7.5 million of chargeoffs which was partly offset by $2.7 million of provisioning activity. ($ in thousands) June 30, 2017 March 31, 2017 Dec ember 31, 2016 June 30, 2016 Credit quality ratios: Delinquent loan rate (at period end) 0.45% 0.65% 0.64% 0.07% Non-accrual loan rate (at period end) 3.06% 3.18% 2.99% 2.97% Annualized net charge-off rate (avg period loans) 0.88% 0.65% 1.98% 0.75% Allowance for credit losses ratio (at period end) 1.75% 1.85% 1.76% 2.09% Allowance for credit losses activity: Balance as of beginning of period $52,081 $51,408 $66,366 67,292 General provision for credit losses (600) (115) 1,430 1,207 Specific provision for credit losses 3,298 6,264 2,498 2,416 Net (charge-offs) recoveries (7,494) (5,476) (18,886) (6,872) Balance as of end of period $47,285 $52,081 $51,408 64,043 13
Balance sheet as of June 30, 2017 ($ in thousands) June 30, 2017 March 31, 2017 December 31, 2016 June 30, 2016 Assets: Cash and cash equivalents $49,721 $15,374 $154,480 $34,634 Restricted cash 223,268 309,368 262,643 207,394 Cash collateral on deposit with custodian 7,564 7,564 7,564 7,564 Investments in debt securities, availablefor-sale 151,426 127,543 119,307 91,400 Loans held-for-sale, net 346,626 255,961 144,060 440,099 Loans and leases, net 3,037,363 3,148,767 3,239,191 3,113,061 Interest receivable 13,536 13,724 14,622 15,059 Property and equipment, net 239 254 274 366 Deferred income taxes, net 36,863 40,582 40,807 30,443 Income tax receivable 3,764 4,334 -- 8,346 Goodwill 17,884 17,884 17,884 17,884 Identified intangible asset, net 405 488 572 738 Other assets 42,736 43,858 39,188 24,873 Total assets $3,931,395 $3,985,701 $4,040,592 $3,991,861 14
Balance sheet as of June 30, 2017 (Cont d) ($ in thousands) June 30, 2017 March 31, 2017 December 31, 2016 June 30, 2016 Liabilities: Repurchase agreements, net $79,269 $57,973 $55,046 $64,625 Credit facilities, net 396,139 374,116 445,493 565,799 Term debt securitizations, net 2,097,459 2,141,949 2,195,064 2,009,184 Senior notes, net 374,830 374,374 373,919 373,006 Senior debt 2,947,697 2,948,412 3,069,522 3,012,614 Subordinated notes, net 245,082 243,236 241,390 237,696 Total debt 3,192,779 3,191,648 3,310,912 3,250,310 Accrued interest payable 20,230 32,652 21,319 19,664 Income tax payable -- -- 12,562 -- Other liabilities 75,144 118,394 48,377 63,164 Total liabilities 3,288,153 3,342,694 3,393,170 3,333,138 Total stockholders' equity 643,242 643,007 647,422 658,723 Total liabilities and stockholders equity 3,931,395 3,985,701 4,040,592 3,991,861 Senior debt / equity 4.6x 4.6x 4.7x 4.6x Total debt / equity 5.0x 5.0x 5.1x 4.9x Note: Deferred financing costs have been reclassified as contra accounts of related debt liabilities to reflect the adoption of ASU 2015-03 15
Q2 2017 Income statement Three Months Ended ($ in thousands, except per share amounts) June 30, 2017 March 31, 2017 December 31, 2016 June 30, 2016 Net interest income: Interest income $56,913 $55,082 $64,217 $59,392 Interest expense 41,905 41,094 43,529 38,486 Net interest income 15,008 13,988 20,688 20,906 Provisionfor credit losses 2,698 6,149 2,635 3,623 Net interest income after provision for credit losses 12,310 7,839 18,053 17,283 Non-interest income: Fee income 2,161 3,193 1,442 1,697 Asset management income 3,826 3,647 3,062 3,543 Loss on derivatives -- -- (153) (11) Gain / (loss) on sale ofloans, net 511 696 (2,131) 162 Other miscellaneous income 1,848 1,498 1,327 1,114 Mark to market adjustment on fair value loans (3,181) (2,769) 1,830 373 Net unrealized gain / (loss) on loans held-for-sale 14 (114) 7,751 (2,519) Gain on sale of Business Credit and Equipment Finance -- -- 6,655 -- Total non-interest income 5,179 6,151 19,783 4,359 O perating expenses Compensation and benefits 6,747 7,437 10,704 8,827 General and administrative expenses 3,552 4,200 8,758 4,013 Total operating expenses 10,299 11,637 19,462 12,840 Inc ome before income taxes 2,353 18,374 8,802 Income tax expense 3,038 971 8,044 3,561 Net income 4,152 1,382 10,330 5,241 Net income per share: Basic $0.10 $0.03 $0.23 $0.11 Diluted $0.10 $0.03 $0.23 $0.11 W eighted average shares outstanding: Basic 41,216,013 41,789,915 43,732,133 46,010,918 Diluted 41,283,296 41,827,138 43,780,606 46,010,918 16
YTD Q2 2017 Income Statement Six Months Ended June 30, ($ in thousands, except per share amounts) 2017 2016 Net interest income: Interest income $111,995 $121,344 Interest expense 82,999 77,919 Net interest income 28,996 43,425 Provisionfor credit losses 8,847 21,336 Net interest income after provision for credit losses 20,149 22,089 Non-interest income: Fee income 5,354 2,890 Asset management income 7,473 6,984 Loss on derivatives -- (18) Gain / (loss) on sale of loans, net 1,207 55 Other miscellaneous income 3,346 2,696 Mark to market adjustment on fair value loans (5,950) 268 Loss on total return swap -- (6,062) Net unrealized gain / (loss) on loans held-for-sale (100) (5,813) Gain on sale of Divested business and assets -- 22,511 Total non-interest income 11,330 23,511 O perating expenses Compensation and benefits 14,184 19,465 General and administrative expenses 7,752 10,443 Total operating expenses 21,936 29,908 Inc ome before income taxes 9,543 15,692 Income tax expense 4,009 6,442 Net income 5,534 9,250 Net income per share: Basic $0.13 $0.20 Diluted $0.13 $0.20 W eighted average shares outstanding: Basic 41,507,113 46,157,363 Diluted 41,567,028 46,157,363 17
SECTION 3 Conclusion 18
FY 2017 Outlook Updated 2017 Guidance 2017 Guidance FY 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 FY 2016 Q1 2017 Q2 2017 lo hi lo hi Funded loan volume $3,058 $300 $476 $427 $671 $1,874 $330 $460 $2,000 $2,500 $1,500 $2,000 New loan yields 6.54% 7.37% 6.99% 6.57% 6.65% 6.83% 6.55% 6.79% 6.50% 7.50% 6.50% 7.00% Run-off rate, as % of BoP loans 45% 18% 38% 24% 41% 31% 38% 32% 30% 35% 30% 35% Portfolio yield as % of avg loans 6.27% 6.28% 6.28% 6.77% 6.53% 6.46% 6.29% 6.43% 6.25% 6.75% 6.25% 6.75% Cost of funds, as % of avg int bearing liabilities 4.35% 4.56% 4.65% 4.67% 4.83% 4.65% 4.99% 5.08% 4.50% 5.00% 4.75% 5.25% Net interest margin 2.39% 2.21% 2.10% 2.50% 1.96% 2.19% 1.45% 1.56% 1.75% 2.25% 1.50% 2.00% Non-interest income, as % of avg loans 0.57% 1.94% 0.46% 1.14% 2.02% 1.40% 0.70% 0.59% 0.75% 1.00% 0.50% 1.00% Provision expense, as % of avg loans 0.57% 1.80% 0.38% 0.37% 0.27% 0.71% 0.70% 0.31% 0.25% 0.50% 0.25% 0.50% Operating expenses, as % of avg AuM 1.12% 1.00% 0.78% 1.09% 1.15% 1.00% 0.68% 0.64% 0.60% 0.70% 0.60% 0.70% Leverage (D:E) 5.1x 5.0x 4.9x 5.2x 5.1x 5.1x 5.0x 5.0x 4.4x 4.8x 4.8x 5.0x Loans and credit investments, gross $3,830 $3,734 $3,772 $3,972 $3,592 $3,592 $3,620 $3,619 $3,250 $3,500 $3,250 $3,500 AuM $6,949 $6,620 $6,583 $6,653 $6,740 $6,740 $6,598 $6,521 $7,500 $8,000 $7,500 $8,000 19
SECTION 4 APPENDIX 20
Non-GAAP financial measures References to operating expenses, excluding non-cash equity compensation and severance costs mean operating expenses as determined under GAAP, excluding compensation expense related to restricted stock grants and severance costs related to separation agreements with former employees. GAAP requires that these items be included in operating expenses. NewStar management uses operating expenses, exclud ing non-cash equity compensation and severance costs to make operational and investment decisions, and NewStar believes that they provide useful information to investors in their evaluation of our financial performance and condition. Excluding the financial results and expenses incurred in connection with the compensation expense related to restricted stock grants eliminates unique amounts that make it difficult to assess our core p erformance and compare our period-over-period results. A reconciliation of operating expenses, excluding non-cash equity compensation to operating expenses is included below. Three Months Ended June 30, March 31 December 31, June 30, ($ in thousands) 2017 2016 2016 2016 Performance Ratios: Consolidated Statement of Operations Adjustments ( 1) : Operating expenses $ 10,299 $ 11,637 $ 19,462 $ 12,840 Less: non-cash equity compensation expense (2) 870 857 921 913 Less: severance expenses 3,519 Adjusted operating expenses $ 9,429 $ 10,780 $ 15,022 $ 11,927 Adjusted operating expenses as a percentage of average total assets 0.96% 1.10% 1.42% 1.20 June 30, March 31 December 31, June 30, 2017 2016 2016 2016 Risk-adjusted revenue Net interest income after provision for credit losses $ 12,310 $ 7,839 $ 18,053 $ 17,283 Non-interest income 5,179 6,151 19,783 4,359 Risk-adjusted revenue $ 17,489 $ 13,990 $ 37,836 $ 21,642 (1) Adjustments are pre-tax, unless otherw ise noted. (2) Non-cash compensation charge related to restricted stock grants. 21
Non-GAAP financial measures Six Months Ended June 30, ($ in thousands) 2017 2016 Performance Ratios: Consolidated Statement of Operations Adjustments( 1) : Operating expenses $ 21,936 $ 29,908 Less: non-cash equity compensation expense (2) 1,727 1,863 Less: severance costs Adjusted operating expenses $ 20,209 $ 28,045 Adjusted operating expenses as a percentage of average total assets 1.03% 1.41% Six Months Ended June 30, 2017 2016 Risk-adjusted revenue Net interest income after provision for credit losses $ 20,149 $ 22,089 Non-interest income 11,330 23,511 Risk-adjusted revenue $ 31,479 $ 45,600 (1) Adjustments are pre-tax. (2) Non-cash compensation charge related to restricted stock grants. 22