Fieldstone Investment — Investor Presentation (November 2006)
36 slides from Fieldstone Investment's investor presentation, Nov 3, 2006
Slide 1: Securitization Program Update
Exhibit 99.1 Securitization Program Update September 2006 www.FieldstoneInvestment.com
Slide 2: Disclaimer
Disclaimer FORWARD-LOOKING STATEMENTS This presentation may contain “forward-looking statements” within the meaning of the federal securities laws and, if so, are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results and the timing
Slide 3: Table of Contents
Table of Contents I. Introduction to Fieldstone II. Product Summary III.Underwriting Summary IV.Fieldstone Program Performance Appendix A: Culture & Management Appendix B: Interest Only Loans 3
Slide 4: I. Introduction to Fieldstone
I. Introduction to Fieldstone 4
Slide 5: About Fieldstone
About Fieldstone Fieldstone Investment Corporation is a public residential mortgage REIT headquartered in Columbia, MD (NASDAQ: FICC) Based on its track record of originating and selling investment quality non- conforming mortgage loan pools, Fieldstone: • Elected to be taxed as a REIT in the fourth
Slide 6: Fieldstone Timeline
Fieldstone Timeline June 1995 –Founded by Michael Sonnenfeld (President and CEO) to buy closed, nonconforming credit loans March 1996 –Transitioned strategy from purchasing closed loans to originating loans through wholesale brokers 2000 – Acquired two conforming originators in 1Q 2000, expanded to
Slide 7: Corporate Structure
Corporate Structure Fieldstone Investment Corporation: (NASDAQ: FICC): REIT • Built a portfolio of non-conforming loans on-balance sheet: • $5.7 billion at June 30, 2006 with an average FICO of 648 • Issued $8.3 billion of MBS to match-fund portfolio for life of loans as of June 30, 2006 • Paid $2.0
Slide 8: Corporate Structure and Strategy
Corporate Structure and Strategy Fieldstone Investment Corporation Mortgage REIT on NASDAQ: FICC • $5.7 billion portfolio of Fieldstone’s loans as of • Q3‘06 dividend of $0.34 per share June 30, 2006 • Paid $4.38 per share of dividends since 2003 • Pay dividends of portfolio earnings, pre-tax offeri
Slide 9: REIT Portfolio Strategy
REIT Portfolio Strategy Focused Strategy to Create Stable and High Yielding Cash Flows Consistent Issuance of MBS Debt Consistent Net Interest Income FMIC 2003-1 FMIC 2005-1 FMIC 2003-1 Caps at Forward LIBOR Size: $488,923,000 Size: $743,625,000 Priced: 10/3/03 Priced: 2/14/05 FMIC 2004-1 Swap at 1.
Slide 10: REIT Portfolio Strategy – continued
REIT-Portfolio-Strategy-–-continued Originate high quality non-conforming loans for REIT portfolio 2/28 hybrid ARMs primarily 648 average credit score as of 6/30/2006 Interest Only Hybrid ARM’sfully amortize after five years Higher average credit scorebalanced by reduced documentation and higher LTV
Slide 11: National Origination Franchise
National Origination Franchise Everett Seattle Chicago Portland Bloomington Boston Corporate Denver Headquarters, Omaha Concord Columbia, Maryland Sacramento Wichita Indianapolis Hanover Las Vegas Overland Park Havre de Grace Upper Marlboro Carson Phoenix Rockville Waldorf Chatsworth Irvine Memphis
Slide 12: Non-Conforming Hybrid ARM Mortgage - Initial Gross Interest Margin
Non-Conforming Hybrid ARM Mortgage - Initial Gross Interest Margin (prior to ARM re-set) 2 Year Hybrid Gross Int. Margin 2/28 Hybrids HFI 2/28 Hybrids HFS 2YR SWAP HFI v. Swap • Initial Coupon on 2 year hybrid ARM mortgages will re-set after 24 months. • Interest rate will reset to a “margin” of 5%
Slide 13: Warehouse and Securitization Financing
Warehouse-and-Securitization-Financing Finance-loans-prior-to-securitization-or-sale-with-a-diverse-group-of-Wall-Street-and bank lenders-with-$1.87-billion-in-lines-of-credit-as-of-June-30,-2006 Finance-retained-securities-with-Wall-Street-lenders-with-$400-million-in-lines-of- credit. Use-mortgage
Slide 14: Servicing Strategy
Servicing Strategy Fieldstone performs key loan set-up and initial quality control functions on all loans Highly rated sub-servicer: JPMorgan Chase Bank, N.A. Fitch: RPS1- and RSS1- (primary subprime and special servicing, respectively) Moody’s: SQ1 (subprime servicing) S&P: “STRONG” and on its sele
Slide 15: FMIC Program Distinguishing Characteristics
FMIC Program Distinguishing Characteristics Strong servicer –JPMorgan Chase Bank, N.A. maintains the highest servicer ratings from the rating agencies Strong Master Servicer / Servicing Oversight –Wells Fargo Bank, N.A. Reduced Basis Risk nd Primarilyhybrid ARMcollateralwith limitedfixed rate and 2
Slide 16: II. Product Summary
——_ FIELDSTONE ———————— INVESTMENT CORPORATION II. Product Summary 16
Slide 17: Fieldstone Portfolio as of June 30, 2006
Fieldstone Portfolio as of June 30, 2006 Collateral Characteristics Investment Portfolio Balance ($ millions) $6,000 $5,688 Average Credit Score 648 $5,106 $4,836 $5,273 $5,526 $5,487 $5,000 $4,752 Hybrid ARMs 94.9% $4,129 $4,000 $3,151 Average Current Coupon 7.6% $3,000 $2,000 Average Gross Margin
Slide 18: Credit Risk Management
Credit Risk Management Credit Score by Income Documentation Level 740 Q2 2006 Non-Conforming Originations 720 700 678 680 666 660 638 640 631 620 616 620 600 Full or Alternative 24 Month Bank 12 Month Bank Limited Stated Income Stated Income Documentation Statements Statements Documentation Self Emp
Slide 19: Credit Risk Management - Risk-Based Pricing
Credit Risk Management-Risk-Based Pricing Portfolio Composition - Risk-Based Pricing (as of June 30, 2006) 8.9% 9.0% 8.5% 8.1% 8.0% 7.5% 7.4% 7.4% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 500-549 550-599 600-649 650-699 >700 _ Credit Score Weighted Average Coupon: 7.6% 19
Slide 20: III. Underwriting Summary
III. Underwriting Summary 20
Slide 21: Underwriting Summary
Underwriting Summary Fieldstone’s Investigative Underwriting Process is designed to deter fraud and limit default frequency and loss severity. Full credit underwriting completed on all loans prior to funding Default Frequency control Full doc loans require execution of 4506 T Stated loans » require
Slide 22: Underwriting Summary - continued
Underwriting-Summary---continued Loss-Severity-control:-Fieldstone’s-Appraisal-Policy Appraisal checklist completed by underwriters Appraisal validated through AVM or other review products unless completed by approved National Appraisal firm or new construction by approvednational builder All desk r
Slide 23: Controls
Controls Underwriting completed in regional offices Provides strong knowledge of local statutes Better knowledge of local real estate values Credit approval authorities are assigned to each underwriter by the Chief Credit Officer Underwriter-performance-tracked-monthly-via-Underwriters’-Report-Card
Slide 24: Income Documentation Requirements
Income Documentation Requirements Fieldstone Offers Five Documentation Levels. Verbal Verification of Employment Is Always Obtained by FMC Within Five Days of Closing Full Documentation Current pay stubs and most recent year’s W-2s for wage earners; two-years tax returns (business and personal) for
Slide 25: Income Documentation Requirements - continued
Income-Documentation-Requirements---continued Limited Documentation Wage Earners: Most recent YTD pay stub required; average YTD income used to qualify; must verify two years in the same profession 1099 Employees: Most recent year’s 1099 and YTD statement of earnings required. 75% of average income
Slide 26: IV. Fieldstone Performance
IV. Fieldstone Performance 26
Slide 27: Loan Performance - Delinquencies
Loan-Performance---Delinquencies FMIC Static Pool Delinquency Analysis 60+ Days Delinquent (OTS Method) 25% 20% 15% 10% 5% 0% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 Deal Seasoning (months) 2003 Non-Prime ARM Data from Intex/CS Weighted Average of FMIC 2003 Vintage 2004 Non-Prime ARM Dat
Slide 28: FMIC Static Pool Cumulative Loss Analysis
FMIC Static Pool Cumulative Loss Analysis FMIC Static Pool Cumulative Loss Analysis 1 1 1 1 1 0 0 0 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 Deal Seasoning (months) 2003 Non-Prime ARM Data from Intex/CS Weighted Average of FMIC 2003 Vi
Slide 29: FMIC Static Pool Prepayment Analysis
FMIC Static Pool Prepayment Analysis FMIC Static Pool Prepayment Analysis 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 Deal Seasoning (months) 2003 Non-Prime ARM Data from Intex/CS Weighted Average o
Slide 30: Appendix A: Culture & Management
Appendix A: Culture & Management 30
Slide 31: Fieldstone's Culture and Strategy
Fieldstone’s-Culture-and-Strategy Each-employee-takes-personal-accountability-for-the-success-of-the _______ Team Focus-on-long-term-relationships-with-market-professionals-where “value-added”-enables-rational-pricing-and-loan-quality Fully-integrated-originator-of-and-investor-in-quality-mortgage-l
Slide 32: Management Experience
Management Experience Michael Sonnenfeld, President and Chief Executive Officer since 1995 18+ years of experience in mortgage banking and mortgage securities Former Director of the Subprime ResidentialMortgage Conduit for Nomura SecuritiesInternational, Inc. Former President for Saxon Mortgage Fund
Slide 33: Appendix B: Interest Only Loans
Appendix B: Interest Only Loans 33
Slide 34: Interest Only Loans
Interest Only Loans After an interest only period, IO loans fully amortize to maturity and borrowers’ payments increase to include principal in addition to interest No principal is scheduled to amortize or be repaid for an initial agreed period The borrower pays simple interest on the original loan
Slide 35: Interest Only Loans – continued
Interest-Only-Loans-–-continued Interest Only Loan Characteristics vs. Non-IO loans on FMIC 2006-2 IO NON-IO TOTAL Avg Balance $320,622 $151,145 $197,286 Coupon* 7.98% 8.51% 8.27% Margin* 5.78% 4.62% 5.13% FICO* 672 627 647 FICO < 550* 0.00% 4.76% 2.65% FICO < 600* 1.31% 33.73% 19.38% FICO < 700* 78
Slide 36: Securitization Program Update
Securitization Program Update September 2006 www.FieldstoneInvestment.com
Fieldstone Investment — Investor Presentation (November 2006) on 6ix