Fieldstone Investment — Q3 2006 Earnings Presentation
36 slides from Fieldstone Investment's earnings presentation, Nov 29, 2006
Slide 1: Review of Business 3rd Quarter 2006 Strategies and Results
Exhibit 99.1 Review of Business 3(rd)Quarter www.FieldstoneInvestment.com 2006 Strategies and Results
Slide 2: Forward-Looking Statements Disclosures and Basis of Presentation
FORWARD-LOOKING Disclaimer This Fieldstone’s fourth mitigate (viii) Private and strategy; facilities quality based periodic presentation, REGULATION otherwise. Information definition but of regarding is BASIS Financial assets the 2 included future Company’s results exclude uncertainties, presentatio
Slide 3: Table of Contents
Table I. Supplemental REIT Peer Securitization Collateral Portfolio 3 Fieldstone Collateral Taxable of Contents Delinquency Performance Risk-Adjusted Summary Data Structure Income Data page : 2726 and 4and and II. Coupons Early Trends Portfolio Valuations Defaults 33 28Summary 31 Detail16 34III. Ori
Slide 4: Fieldstone's Vertically Complete Business Proposition
Fieldstone’s Vertically Complete Strategic Lower Increased Improved Current Intense Low Slower increase Consolidation Market Strong Attractive, Non-prime Difficult The 4 most sale cost focus economy, Home competition Opportunity Market delinquencies opportunities market Summary Imperatives margins s
Slide 5: Fieldstone Information Summary
Fieldstone Publicly Fieldstone’s Originating Investing Issuing Selling REIT Total Primarily Match MBS Swaps Origination Began Licensed Wholesale 1,100 Headquartered 5 at securities Portfolio: employees, operations fund during non-portfolio mortgage-backed 3Q traded in in 2/28 Summary and ‘06: reside
Slide 6: Fieldstone's Financial Highlights
Fieldstone’s Financial $2.04 ($0.60) Core $1.84 ($0.14) Excludes Book $423 $9.03 Dividends: $4.38 $1.26 $0.05 Distribute Investment $7,000 $5,688 Sep-04 GAAP $60,000 Net 3Q *as 6 05 of interest Net million Value /November per life ytd to 4Q Net Revenue $6,000 $5,855 share Dec-04 / $50,000 $0.15 shar
Slide 7: Capital Structure and Liquidity
Capital $423 Fieldstone $ 7 181million 1.75 2.25 million billion Structure maintains of ofnet lines cash and worth aLiquidity and ofhigh strong credit available 13:1 level capital in as portfolio of place liquidity liquidity: November structure: debt to atat 15, equity Sep. Sep. 2006 30, 30, ratio ‘
Slide 8: Current Mortgage Market Conditions
Current Mortgage Intense Continued Volatile Seasonal Increased Slower Lack Speculative Delinquencies Home Risk Incentives Markets Median 8 highest ofPrice home competition Market and equity interest that slowing levels delinquencies originators for imperative buying Appreciation lower for never pric
Slide 9: Market Impact and Origination Opportunity
Marketimpact Origination Rising Aging Challenging Sophisticated Life-of-Pool Increased Forward Positive Little Non-cash 9 and consumer Opportunity total longer rates, yield risk charge growing growth market risk-adjusted on return buyers premiums curve losses, term existing to debt positive income p
Slide 10: Fieldstone's Strategic Initiatives for 2007
Fieldstone’s Reduce Improve Increase 10 Cost Market Servicing Strategic to Originate Share of Loan Initiatives and Fundings Portfolio for 2007
Slide 11: Strategic Initiatives: Reduce Cost to Originate
Fieldstone’s Reduce Lower Achieve Train Commission 11 customers premiums Cost number efficiencies Strategic plan to Originate of onpaid focused operations self-serve from Initiatives for wholesale use on net centers use of for new revenue, of 2007 on-line loans Loanafter Origination technology expen
Slide 12: Strategic Initiatives: Improve Servicing and Loan Portfolio
Fieldstone’s Improve Accelerated Set-up Engaged Retain Already Historically 12 only loans have Servicing delinquency selected have manual Strategic initially eliminated excluded ofintervention products with Loan and Initiatives weaker loss the investor Portfolio for permanent mitigation for products
Slide 13: Strategic Initiatives: Increase Market Share of Fundings
Fieldstone’s Increase Simplified, Focus Add Innovate Real-time 13 sales higher customers Market on force automation discounted credit non-conforming Strategic in Share on products strategic self-serve Initiatives delivered and rate Fundings with sheet markets cash use on appropriate for on-line flow
Slide 14: Fieldstone Loan Quality Initiatives
Fieldstone Appraisal AVM Lower FICO-driven Focus Eliminate Fraud “Hawk Validate Proof Chain Borrower Terminate 14 or of Avoidance of on tolerances Alert” full reasonableness review identification Title recent debt Credit benefit lowest Reviews business Remains doc. underwriting and review ratio, app
Slide 15: Third Quarter 2006 GAAP Results
Gain Portfolio Operating Expected Interest At $423 $181 Fieldstone’s $28 $25 Fieldstone The economic 15 September million 3Q mark-to-market on million rate results Sale net portfolio yield costs posted isfor swaps’ Third 3Q interest working of margins 30, were potential mark-to-market of Shareholder
Slide 16: Fieldstone's Strategic Proposition
Fieldstone’s Originate 2/28 648 Higher Focus Interest Finance On-balance No Committed Retain Lock Protection Pre-tax 16 “gain average hybrid inon Fieldstone average REIT Only spreads portfolio on median high offinancing ARMs sheet Investment credit sale” current hybrid taxable quality credit and and
Slide 17: Fieldstone Collateral Portfolio Characteristics
FieldstoneCharacteristics Collateral Portfolio Average as ofCredit September Score30, 2006 First Lien Hybrid ARMs 648 Average Current Coupon 89.1% Average Gross Margin 7.9% Fixed Rate Second Liens 5.2% Prepayment Fee Coverage 4.2% Full Income Documentation 85.0% Interest Only Loans 43.5% Purchase Tr
Slide 18: Non-Conforming Hybrid ARM Mortgages
Non-Conforming 2 9.0 Jan-03 2/28 Initial Interest Periodic Source: 18Year 8.5 Hybrids Gross Coupon Hybrid Mar-03 8.0 rate Bloomberg cap7.5 will of Interest HFI Gross 7.0 on May-03 3% reset Hybrid 22/28 6.5 on year Margin Int. at 6.0 the Hybrids Jul-03 ahybrid Margin ARM % margin initial 5.5Coupon5.0
Slide 19: ROE Estimate: Internal Rate of Return, Series 2006-3
ROEEstimateInternal Series FMIC IRR Life 2006-3 of Pool is forecast Analysis Ratetoof generate Return an (IRR) estimated 17.44% internal rate of return over the life of the pool, based on expected life-of-pool losses of 3.95%. % Loss % Prepayment Assumption 50% 75% 100% 125% 150% 50% 32.50 29.76 27.
Slide 20: Hybrid Portfolio Swap Hedging Program
Hybrid Fieldstone FIC 6,000 Millions Weighted 5.50% 10/23/2006 8/23/2009 Total 20 Weighted Debt 5,000 5.00% Loans Average 10/23/2009 Portfolio Total 12/23/2006 4,000 4.50% Funded Average Swaps 3,000 Swap Hedging 4.00% with Swap Wtd 2/23/2007 2,000 Rate LIBOR 3.50% Avg Cost Program 1,000 SWAP vs. 4/2
Slide 21: Fieldstone's Established Mortgage Origination Strategy
Fieldstone’s Established Focus Opportunistic Net-Revenue Quality-based Mortgage On-Line Electronic Implementing Deliver Stable Wholesale Retail Compete Cultivate customer products operating 21 originations on business-to-business products loan on loan service aefficiencies loan document originations
Slide 22: National Origination Offices
National Concord Omaha Headquarters, Denver Corporate Boston Bloomington Portland Chicago Seattle Everett Las Indianapolis Wichita Sacramento Hanover Maryland Overland Corp. Albuquerque Plano Atlanta Encinitas Frisco Memphis Irvine Chatsworth Phoenix Carson 52 Retail Boca 248 Wholesale 22 offices Ve
Slide 23: Quarterly Non-Conforming Loan Originations
Quarterly $ $1,643 3Q Non-Conforming 23Millions 1,800 2005$1,261 $4Q 1,600 Loan 2005 $1,264 Originations $ Wholesale 1,400 1Q 2006 $1,207 $ 1,200 2Q Division $861 2006 $ 1,000 $236 3Q Retail $2006 $196 800Division $ 600$151 $165 $ 400$188 $ 200 $0
Slide 24: Gain on Loan Sale Economics
Gain on Loan Sale Economics Percent of principal balance sold: Annual YTD Gross sales premium, including derivative gain (loss):* 2005 2Q 2006 3Q 2006 Q3 2006 First lien sales Second lien sales 3.1% 2.1% 1.8% 2.2% Combined average sale premium 1.5% (0.7%) (1.3%) 0.0% Fees collected net of premiums p
Slide 25: Supplemental Data 3rd Quarter 2006
Supplemental 3rdQuarter www.FieldstoneInvestment.com 2006 Data
Slide 26: Fieldstone's REIT Taxable Income
Fieldstone’s REIT Taxable taxable income Incomediffers from GAAP pre-tax net income: GAAP Pre-Tax Net Income YTD Q3 06 Non-performing interest in excess of charge-offs not deductible for tax $ (37.2) accounting GAAP provision for loan losses in excess of charge-offs are not 7.7 deductible for tax ac
Slide 27: Peer Coupon Review: Non-Prime ARM
Peer Coupon Non-Prime 9.0 JP Citigroup Greenwich Ameriquest Merrill New Wells Average Morgan Credit CWABS Deutsche Aames Fieldstone 595 Source: 27 Morgan 8.5 605 Review: Century Fargo Suisse 8.0 Capital Lynch S&P Stanley vs. 615 Bank Mortgage WAC Chase Capital ARM FICO Mortgage Bank, 625 Subprime We
Slide 28: FMIC Constant Prepayment Analysis
FIELDSTONE 28 Constant FMIC 1-Month Deal 2003 2004 2005 2006 Weighted Source: 1 100% 3 5 Seasoning 7Non-Prime 90% Static 9Industry CPR 11 prepay Average 80% 13 Pool 15 INVESTMENT (months) 70% rates Averages ARM Prepayment 17 of FMIC 19 60% generally Data 21from 50% 23 2003 2004 2005 2006 from Analys
Slide 29: Loan Delinquency Performance
Loan As FMIC 29 60+ 1 25% Deal 2003 2004 2005 2006 Weighted Source: FIELDSTONE 3 delinquencies 5Delinquency Days 20% Seasoning 7Performance Non-Prime Static 9Industry 11 Average Delinquent 15% 13 Pool 15 10% INVESTMENT (months) Averages ARM and Delinquency 17 of - Delinquencies 5% FMIC 19 losses (OT
Slide 30: FMIC Cumulative Loss Analysis
FMIC Cumulative 30 1 1.00% Deal 2003 2004 2005 2006 Weighted Source: FIELDSTONE 3 5 Seasoning 7Static Non-Prime 0.90% 9Industry 11 Average Loss 13 Pool 0.80% 15 INVESTMENT (months) Averages ARM %Cumulative 17 of 0.70% FMIC 19Data 21from 23 0.60% 2003 2004 2005 2006 from Loss 25 CORPORATION Intex/CS,
Slide 31: Fieldstone Securitization Economics
Securitization Fieldstone Percentage Excess Servicing Gross Net Senior AA Bond Industry A WAC Sizing OC WAC Bond Spread Deal Deal BBB Securitization ofCoupon Economics Mortgage Economics Cash Flow Proceeds- AAA Coupon Series and Economics Rating: 2006-3: Underlying Deal Proceeds 8/5 1/6 10/6 NIM Pro
Slide 32: Credit Score by Documentation Level
Credit Q3 Average 740 Score 675 Full 24 12 Limited Stated Weighted 32 Month 2006 720 674 or Income Risk Score Alternative Documentation 700 679 Credit Non-Conforming Average Bank Management 680 648 byWage Self Income Statements 660 645 Credit Documentation Employed Earner 640Documentation 622 Score:
Slide 33: Portfolio Coupon and Credit Risk Composition
Portfolio Coupon 10.0% 9.4% 500-549 Credit Weighted 33 8.3% Risk Score 9.0% %550-599 Composition Average 7.9% Management-Risk-Based 8.0%7.8% 600-649 7.0% Coupon: -7.7% Risk-Based 6.0% 650-699 7.9% 5.0% >Pricing 700 Pricing(as of September 30, 2006)
Slide 34: Portfolio Delinquency Summary
Portfolio Delinquency Current 30 60 90+ In Total Seriously FPDs EPDs Period-end FPD EPD 1 2 34First Early process days days as $aspayment 5,885,602 pay a$past aDelinquency % past Delinquent 4,932,170 % of First-Pay defaults of due of Status foreclosure due cohort portfolio defaults 528,003 171,742 1
Slide 35: Non-GAAP Financial Measures and Regulation G Reconciliations
FIELDSTONE INVESTMENT CORPORATION AND SUBSIDIARIES Non-GAAP Financial Measures and Regulation G Reconciliations Core net income, core earnings per share, core net interest income, and REIT taxable income are non-GAAP financial measures of Fieldstone’s earnings within the meaning of Regulation G prom
Slide 36: Regulation G Reconciliations 3rd Quarter 2006
FIELDSTONE INVESTMENT CORPORATION AND SUBSIDIARIES Non-GAAP Financial Measures Regulation G Reconciliations 3rd Quarter 2006 Core net income and core earnings per share: Three Months Ended Nine Months Ended Year Ended (Dollars in thousands, except share and per share data) September 30, 2006 June 30
Fieldstone Investment — Q3 2006 Earnings Presentation on 6ix