NovaStar Financial
(NYSE-NFI)
www.novastarmortgage.com
2006 Second Quarter Earnings
Conference Call
August 4, 2006
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 statements are subject to risks and uncertainties and
certain factors can cause actual results to differ materially from those anticipated. Some important factors that
could cause actual results to differ materially from those anticipated include: our ability to generate sufficient
liquidity on favorable terms; the size, frequency and structure of our securitizations; interest rate fluctuations
on our assets that differ from our liabilities; increases in prepayment or default rates on our mortgage assets;
changes in assumptions regarding estimated loan losses and fair value amounts; changes in origination and
resale pricing of mortgage loans; our compliance with applicable local, state and federal laws and regulations
or opinions of counsel relating thereto and the impact of new local, state or federal legislation or regulations or
opinions of counsel relating thereto or court decisions on our operations; the initiation of margin calls under
our credit facilities; the ability of our servicing operations to maintain high performance standards and
maintain appropriate ratings from rating agencies; our ability to expand origination volume while maintaining
an acceptable level of overhead; our ability to adapt to and implement technological changes; the stability of
residual property values; the outcome of litigation or regulatory actions pending against us or other legal
contingencies; the impact of losses resulting from natural disasters; the impact of general economic conditions;
and the risks that are from time to time included in our filings with the SEC, including our Annual Report on
Form 10-K, for the period ending December 31, 2005 and our quarterly report on form 10-Q, for the period
ending March 31, 2006. Other factors not presently identified may also cause actual results to differ. This
document speaks only as of its date and we expressly disclaim any duty to update the information herein.
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Opening Comments &
Credit Discussion
Scott Hartman, CEO
Housing Price Appreciation
4
Severity
5
HPA Effect on Loss
Assumptions
6
Estimated LTV
(MI % Loans with LTV<=60%)*
*See appendix to this presentation for disclaimer
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Estimated LTV
(No MI)*
*See appendix to this presentation for disclaimer
8
MI & LTV<=60
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Results of Operations
Greg Metz, CFO
Summary Statistics
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Dividends
Intend to declare both the third and fourth quarter dividends prior to
our 2005 federal tax filing deadline of September 15, 2006
The third quarter dividend will be paid in November, as is typical
The fourth quarter dividend will be paid in December and is
anticipated to conclude a 100% payout of 2005 taxable income
Acceleration of the fourth quarter dividend will have no impact on
the timing of taxability
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Production
13
WAC vs 2-yr Swap
349bps
346bps
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Credit
15
Wholesale COP*
*See appendix to this presentation for cost of wholesale production – G&A expense reconciliation
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Portfolio Net Interest
Income
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Portfolio ROA
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Questions
Appendix
Cost of Wholesale
Production
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Estimated LTV
Disclaimer
The information contained herein regarding estimated LTV is provided
for informational purposes only to assist in the understanding of certain
characteristics of our loan portfolio and are not a projection of future
performance, financial position or cash flows. The information is based
upon (i) assumptions that, while presented with numerical specificity, are
inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control,
(ii) assumptions with respect to future business decisions that are subject
to change, and (iii) assumptions that were made for the purpose of
simplifying the information. No representation is being made that the
results of the information will be achieved.
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