Exhibit 99.1
ECC CAPITAL CORPORATION REPORTS
2004 FOURTH QUARTER AND FULL-YEAR RESULTS AND
ANNOUNCES 2005 PROJECTED DIVIDEND DECLARATION SCHEDULE
IRVINE, CA, April 1, 2005 – ECC Capital Corporation (NYSE: ECR), a mortgage finance company that originates and invests in residential mortgage loans, today reported results of operations for its fourth quarter and year ended December 31, 2004.
Highlights
| | • | | Earnings per share (diluted) for the three months and year ended December 31, 2004 of $0.03 and $0.66, respectively. |
| | • | | Loan originations for the three months and year ended December 31, 2004 of $2.6 billion and $9.1 billion, respectively. |
| | • | | Investment in mortgage loans as of December 31, 2004 of $913 million. |
Note: Earnings per share are based upon fully diluted pre-IPO shares of Encore Credit Corp. (ECC’s predecessor) outstanding at December 31, 2004, converted into 43,052,931 shares of ECC Capital common stock at a conversion ratio of 1.183 shares of ECC Capital common stock to 1 share of Encore Credit common stock. Following the completion of its IPO on February 18, 2005, ECC Capital had a total of 97,452,465 shares issued and outstanding.
Financial Summary
Net income for the three months ended December 31, 2004 was $1.1 million or $0.03 per diluted share. Net income for the year ended December 31, 2004 totaled $28.2 million or $0.66 per diluted share. Fourth quarter earnings were impacted by several factors, the most significant of which were:
| | • | | Fewer loans were sold in the fourth quarter than in the third quarter, as ECC Capital retained some of its loan production to build a loan portfolio rather than selling all of its loan production in the secondary market for cash. |
| | • | | ECC Capital recorded a pretax loss of approximately $9 million related to its investment in retained interests in securitizations, net of the effect of related economic hedges due to a rise in short-term interest rates and higher than expected initial prepayment speeds. |
| | • | | Stock compensation charges totaled approximately $1.5 million (pretax). |
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“We’re proud of what we accomplished in the past year,” said Shabi Asghar, President and Co-Chief Executive Officer of ECC Capital Corporation. “We’d especially like to thank all our employees, who deserve the credit for our 2004 performance. As a result of their efforts, we continued to grow and were positioned to successfully complete our IPO.”
Throughout most of fiscal year 2004, ECC Capital sold substantially all of its loan production and its principal source of income was gain on sale income. In late-2004, to allow the Company to retain the value of its originated loans, ECC Capital commenced efforts to convert its business model from that of a wholesale mortgage bank to a mortgage real estate investment trust (REIT). As a REIT, ECC Capital’s principal source of income will be the interest income earned on its loan portfolio net of the interest expense paid on the mortgage-backed securities and warehouse debt. Through its wholly-owned taxable REIT subsidiary, Encore Credit, ECC Capital plans to continue to sell loans to third parties and report gain on sale income.
ECC Capital’s fourth quarter and 2004 operating results were generated by its previous business model. The new REIT operating model is materially different and these results should not be used to evaluate or forecast future results.
Recent Events
On February 18, 2005, ECC Capital completed its initial public offering. Following the IPO, ECC Capital intends to operate as a REIT and is building a loan portfolio, which it intends to securitize through the issuance of mortgage-backed securities. These securitization transactions are expected to be accounted for as financings for accounting and tax purposes. ECC Capital completed its first securitization on March 18, 2005, issuing $1.6 billion in mortgage-backed securities.
“Our business model may be changing, but our commitment to our customers and employees remains steadfast, for without their support, success under any business model would be impossible,” noted Steve Holder, Chairman and Co-Chief Executive Officer of ECC Capital Corporation.
Filing of Annual Report on Form 10-K
Given the Company’s recent IPO and securitization transactions, and resultant changes in business strategy, ECC Capital will file a Form 12b-25 to extend the time by which it must file its annual report on Form 10-K for the year ended December 31, 2004. This extension will allow ECC Capital sufficient time to complete the preparation of its financial statements and annual report on Form 10-K and to facilitate the timely completion of the annual audit and review of the Form 10-K by its auditors, without unreasonable effort or expense. ECC Capital expects to file its annual report on Form 10-K for the year ended December 31, 2004 by April 8, 2005.
First Quarter 2005 Earnings Release
ECC Capital expects to announce earnings for its first quarter prior to May 16, 2005.
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2005 Projected Dividend Declaration Schedule
ECC Capital projects the following schedule for its dividend declaration dates for 2005.
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| Declaration Date |
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| April 12, 2005 | | Tuesday |
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| June 28, 2005 | | Tuesday |
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| September 27, 2005 | | Tuesday |
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| December 20, 2005 | | Tuesday |
ECC Capital’s board of directors will declare the amount, the record date and the payment date in accordance with the proposed dividend declaration schedule. ECC Capital’s board of directors has the right to change the dividend declaration schedule at any time without prior notice.
About ECC Capital Corporation
ECC Capital Corporation, headquartered in Irvine, Calif., is a mortgage finance company that originates and invests in residential mortgage loans. Through its wholesale and retail subsidiaries, ECC Capital offers a series of mortgage products to borrowers, with a particular emphasis on “nonconforming” borrowers who generally do not satisfy the credit, collateral, documentation or other standards required by conventional mortgage lenders and loan buyers. ECC Capital is structured to qualify as a real estate investment trust (REIT) by managing a portfolio of nonconforming loans it originates or acquires. As a REIT, ECC Capital’s principal business objective is to generate net income for distribution to stockholders from the spread between the interest income on its assets in its portfolio and the costs of capital to finance its acquisition of these assets.
Safe Harbor Regarding Forward-Looking Statements
Certain statements contained in this press release may be deemed to be forward-looking statements under federal securities laws and ECC Capital intends that such forward-looking statements be subject to the safe-harbor created thereby. These forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties, which could affect ECC Capital’s future plans. ECC Capital cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements. Such factors include, but are not limited to, (i) the condition of the U.S. economy and financial system, (ii) the interest rate environment, (iii) the stability of residential property values, (iv) the potential effect of new state or federal laws or regulations, (v) the effect of increasing competition in ECC Capital’s sector, (vi) ECC Capital’s ability to successfully implement its growth strategy, (vii) continued availability of credit facilities and access to the securitization markets or other funding sources, and (viii) ECC Capital’s ability and the
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ability of its subsidiaries to operate effectively within the limitations imposed on REITs by federal tax rules. You should also be aware that all information in this news release is as of April 1, 2005. ECC Capital undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in ECC Capital’s expectations.
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ECC Capital Corporation
Income Statement Information
All amounts in thousands, except per share amounts
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| | | For the year ended
December 31,
| | | Three months ended
December 31,
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| | | 2004
| | | 2003
| | | 2004
| | | 2003
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Loan production | | $ | 9,114,289 | | | $ | 4,589,163 | | | $ | 2,563,820 | | | $ | 1,461,931 | |
Loan sales | | $ | 8,780,365 | | | $ | 4,348,174 | | | $ | 2,349,269 | | | $ | 1,566,852 | |
Revenues | | | | | | | | | | | | | | | | |
Gain on sale of loans, net | | $ | 135,494 | | | $ | 64,410 | | | $ | 22,732 | | | $ | 19,068 | |
Interest income | | | 55,953 | | | | 34,505 | | | | 19,505 | | | | 12,971 | |
Interest expense | | | (28,110 | ) | | | (19,605 | ) | | | (9,547 | ) | | | (6,880 | ) |
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Net interest income | | | 27,843 | | | | 14,900 | | | | 9,958 | | | | 6,091 | |
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Total revenues | | | 163,337 | | | | 79,310 | | | | 32,690 | | | | 25,159 | |
Expenses | | | | | | | | | | | | | | | | |
Salaries and related expenses | | | 48,655 | | | | 28,566 | | | | 12,259 | | | | 13,953 | |
Occupancy expense | | | 5,938 | | | | 2,671 | | | | 2,094 | | | | 926 | |
Operating expenses | | | 44,861 | | | | 20,848 | | | | 13,769 | | | | 7,907 | |
Professional fees | | | 7,658 | | | | 7,476 | | | | 2,882 | | | | 1,402 | |
Termination of RFC financing arrangement | | | 7,500 | | | | — | | | | — | | | | — | |
Loss on disposal of assets | | | 161 | | | | 65 | | | | — | | | | 39 | |
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Total expenses | | | 114,773 | | | | 59,626 | | | | 31,004 | | | | 24,227 | |
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Earnings before income taxes | | | 48,564 | | | | 19,684 | | | | 1,686 | | | | 932 | |
Provision for income taxes | | | 20,288 | | | | 8,437 | | | | 553 | | | | 454 | |
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NET INCOME | | $ | 28,276 | | | $ | 11,247 | | | $ | 1,133 | | | $ | 478 | |
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Net income per share of common stock | | | | | | | | | | | | | | | | |
Basic | | $ | 1.15 | | | $ | 0.47 | | | $ | 0.04 | | | $ | 0.02 | |
Diluted | | $ | 0.66 | | | $ | 0.30 | | | $ | 0.03 | | | $ | 0.01 | |
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ECC Capital Corporation
Balance Sheet Information
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| | | December 31,
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| | | 2004
| | 2003
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| ASSETS | | | | | | |
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Cash and cash equivalents | | $ | 22,023 | | $ | 5,483 |
Restricted cash | | | 2,250 | | | 1,125 |
Receivable from loan sales | | | 10,379 | | | 5,533 |
Mortgage loans held for sale, net | | | 913,365 | | | 594,510 |
Residual interests in securitization | | | 1,917 | | | 1,596 |
Residual interests in securitization, pledged as collateral | | | 18,250 | | | — |
Prepaid expenses and other assets | | | 14,576 | | | 1,066 |
Equipment and leasehold improvements, net | | | 8,440 | | | 4,311 |
Deferred tax asset | | | 16,346 | | | 3,056 |
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Total assets | | $ | 1,007,546 | | $ | 616,680 |
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | |
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Warehouse lines of credit | | $ | 894,307 | | $ | 576,777 |
Securities sold under agreements to repurchase | | | 3,970 | | | — |
Accounts payable and accrued expenses | | | 40,131 | | | 16,382 |
Income tax payable | | | 16,189 | | | 3,481 |
Subordinated debt to shareholder, net | | | — | | | 895 |
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Total liabilities | | | 954,597 | | | 597,535 |
Commitments and contingencies | | | | | | |
Stockholders’ equity | | | 52,949 | | | 19,145 |
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Total liabilities and stockholders’ equity | | $ | 1,007,546 | | $ | 616,680 |
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