Novation Holdings Inc. · OTC:NOHO
Novation — NovaStar Financial — JMP Securities Research Conference 2006
12 slides from Novation's conference presentation, Mar 6, 2006
Slide 1: NovaStar Financial
NovaStar Financial (NYSE-NFI) JMP Securities Research Conference March 7, 2006 Scott Hartman, CEO
Slide 2: Safe Harbor Statement
Safe Harbor Statement Certain matters discussed in this release constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are those that predict or describe future events and that do not relate solely to historical matters. Forward-looking st
Slide 3: Cash/GAAP Income Flows
Cash/GAAP Income Flows Origination through Securitization
Slide 4: Gain Calculation
Gain Calculation (Sale Accounting Treatment)
Slide 5: Initial Residual Valuation
Initial Residual Valuation (Sale Accounting Treatment)
Slide 6: GAAP Interest Income
GAAP Interest Income (Sale Accounting Treatment) Interest income is accrued off of the residual asset’s accounting basis, given forecasted cash flows, at a rate equal to the IRR Considered the “level yield” method
Slide 7: Capital Guidelines
Capital Guidelines NovaStar uses capital guidelines to determine the right amount of leverage for the portfolio. Capital is held based upon the riskiness of an asset and the method of financing. Example – the cash flow structure of NIM financing is different than repo financing. For mortgage securit
Slide 8: Differences in Portfolio Accounting and Sale Accounting
Differences in Portfolio Accounting and Sale Accounting Portfolio Accounting No non-cash gain – earnings follow cash better Reserving for expected future losses Securitizations aren’t quite as capital efficient – maybe 2% more capital (on loan balance) May reduce ROE by a few percentages Harder to f
Slide 9: 2006 Dividend Guidance
2006 Dividend Guidance 2006 Common Dividend of at Least $5.60 per Share
Slide 10: Book Value per Diluted Share
Book Value per Diluted Share $15.08 50.0% 45.0% 40.0% 36.0% 30.0% 26.0% 2002 2003 2004 2006 [=a B00K Value per Diluted share —Return on Comman Equity + 20.0% Return on Equity
Slide 11: Mortgage Banking
Mortgage Banking Environment Intensely competitive Pricing at or below cost to originate Smaller players won’t survive Volumes flat to down for many Many are originating and “hoping” to make money Race to lower costs (continues from 2005) Whole loan prices seem like they are recovering a little, but
Slide 12: Portfolio trends
Portfolio trends Housing price appreciation – In 2005, effect on credit performance outweighed higher interest rates Over time, ROA’s should come down to a normalized range of 1.00% to 1.25% Made a conscious decision to include more MI in 2005 deals due to expected slowdown in housing price apprecia
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