According to Standard & Poor’s, the aggregate dollar amount of loans to middle market companies totaled approximately $33.8 billion in 2005. According to industry sources, there are approximately 58,000 companies in the United States with revenues between $25.0 million and $200.0 million, or 84.1% of all companies with revenues above $25.0 million.

According to industry sources, private equity firms raised in excess of $250 billion in 2005 and in the first six months of 2006. Private equity funds typically feature investment periods of four to six years. In addition, private equity firms generally raise third-party debt capital when making investments.

According to industry sources, domestic issuance of asset-backed securities and mortgage-backed securities has more than doubled since 2001, reaching a total issuance of approximately $1.5 trillion in 2005. During this period, it is believed commercial banks have moved away from investing in these securities due to increased regulatory capital requirements.

The market for financing commercial real estate is large and has expanded significantly in recent years. As of year end 2005, total commercial and multi-family real estate loans outstanding totaled $2.6 trillion according to industry sources. The amount of outstanding commercial mortgage-backed securities also was significant with a total issuance volume of approximately $169.2 billion during 2005, representing strong growth over the last five years. According to industry sources, acquisition activity for apartment, office, retail and industrial properties also has experienced significant growth, increasing from $76.5 billion in 2001 to $274.6 billion in 2005.

As of June 30, 2006, the Company’s portfolio of loans and other debt products consisted of 142 transactions that totaled $1.4 billion of funding commitments, representing $1.2 billion of balances outstanding and $233.6 million of funds committed but undrawn. The Company finances its loan portfolio through a combination of debt and equity. The Company also manages the NewStar Credit Opportunities Fund, Ltd. (NCOF), a private debt investment fund. The NCOF has $150.0 million of committed equity from third-party institutional investors and a $400.0 million credit facility. As of June 30, 2006, the NCOF had total funding commitments and balances outstanding of approximately $131.0 million and $80.0 million, respectively. The Company’s managed loan portfolio, which includes its loan portfolio and the loan portfolio of the NCOF, totaled approximately $1.5 billion of commitments and $1.3 billion of balances outstanding as of June 30, 2006.

The Company specializes in providing senior debt products to mid-sized borrowers. The Company’s loans and other debt products, which may be part of larger facilities, typically range in size from $5 million to $17.5 million.

The Company is organized into three specialized lending groups: Middle Market Corporate, which originates, structures and underwrites senior debt and, to a lesser extent, second lien and mezzanine debt for companies with annual earnings before interest, taxes, depreciation and amortization, or EBITDA, typically between $5 million and $50 million; Structured Products, which originates, structures and underwrites senior and subordinated debt for mid-sized specialty finance companies with assets typically between $25 million and $250 million and invests in subordinated tranches of asset-backed securitizations; and Commercial Real Estate, which originates, structures and underwrites first mortgage debt and, to a lesser extent, subordinated debt, primarily to finance acquisitions of real estate properties typically valued between $10 million and $50 million and invests in subordinated tranches of commercial mortgage-backed securitizations.

Interest expense increased $21.0 million, from $4.8 million for the six months ended June 30, 2005 to $25.8 million for the six months ended June 30, 2006.

The provision for credit losses increased from $3.5 million for the six months ended June 30, 2005 to $4.2 million for the six months ended June 30, 2006.

Non-interest income increased $3.0 million from $0.6 million for the six months ended June 30, 2005 to $3.6 million for the six months ended June 30, 2006.

Operating expenses increased $4.9 million, from $9.2 million for the six months ended June 30, 2005 to $14.1 million for the six months ended June 30, 2006.