Novastar Financial Inc. (NFI) Hurt By Subprime Mortgage Market
NovaStar Financial Inc. reported a second-quarter loss after the market closed on Thursday.
In a filing with the Securities and Exchange Commission, the Kansas City-based company (NYSE: NFI - News) reported a loss of $54.5 million available to shareholders, or $5.84 a share, for the quarter that ended June 30. This compares with earnings for common shareholders of $33.1 million, or $3.97 a share, last year.
NovaStar reported a loss of $24.7 million in net interest income, compared with a gain of $61.5 million a year ago.
Signs of the difficult subprime mortgage market showed throughout NovaStar's results for the quarter:
Among the items that affected earnings in the second quarter were a $73.3 million provision for credit losses; a $22.6 million impairment on mortgage securities; $16 million for fair-value adjustments and a $4.4 million valuation adjustment on mortgage loans.
Loan production for the quarter totaled $774 million, down 73 percent from the $2.8 billion reported for the same period a year ago. In a release, NovaStar warned that third-quarter loan production likely will be lower than that of the second quarter.
The company said it has borrowing capacity of $4 billion, but has no intent of using $2 billion of that capacity in the near future. The agreements providing the $2 billion will expire at the end of the year.
NovaStar said that at the end of the second quarter, it had cash and available liquidity of $157 million. Since then, it raised an additional $48.8 million through a sale of preferred stock to MassMutual Capital Partners LLC and Jefferies Capital Partners IV LLC.
The company ate into this liquidity from June 30 to Aug. 8, because it faced margin calls of about $76.5 million. NovaStar said the margin calls were due to "the extremely volatile and less liquid secondary market, which has adversely affected the value of its mortgage securities and mortgage loans."
NovaStar ranks No. 21 on the Kansas City Business Journal's list of area public companies.
Published August 9, 2007 by the Kansas City Business Journal
In a filing with the Securities and Exchange Commission, the Kansas City-based company (NYSE: NFI - News) reported a loss of $54.5 million available to shareholders, or $5.84 a share, for the quarter that ended June 30. This compares with earnings for common shareholders of $33.1 million, or $3.97 a share, last year.
NovaStar reported a loss of $24.7 million in net interest income, compared with a gain of $61.5 million a year ago.
Signs of the difficult subprime mortgage market showed throughout NovaStar's results for the quarter:
Among the items that affected earnings in the second quarter were a $73.3 million provision for credit losses; a $22.6 million impairment on mortgage securities; $16 million for fair-value adjustments and a $4.4 million valuation adjustment on mortgage loans.
Loan production for the quarter totaled $774 million, down 73 percent from the $2.8 billion reported for the same period a year ago. In a release, NovaStar warned that third-quarter loan production likely will be lower than that of the second quarter.
The company said it has borrowing capacity of $4 billion, but has no intent of using $2 billion of that capacity in the near future. The agreements providing the $2 billion will expire at the end of the year.
NovaStar said that at the end of the second quarter, it had cash and available liquidity of $157 million. Since then, it raised an additional $48.8 million through a sale of preferred stock to MassMutual Capital Partners LLC and Jefferies Capital Partners IV LLC.
The company ate into this liquidity from June 30 to Aug. 8, because it faced margin calls of about $76.5 million. NovaStar said the margin calls were due to "the extremely volatile and less liquid secondary market, which has adversely affected the value of its mortgage securities and mortgage loans."
NovaStar ranks No. 21 on the Kansas City Business Journal's list of area public companies.
Published August 9, 2007 by the Kansas City Business Journal
Labels: NFI, Novastar Financial Inc.
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