| ECC Capital Corporation Reports 2004 Fourth Quarter and Full-Year Results and Announces 2005 Projected Dividend Declaration Schedule |
IRVINE, Calif., April 1, 2005 /PRNewswire-FirstCall via COMTEX/ -- 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
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:
"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. 2005 Projected Dividend Declaration Schedule ECC Capital projects the following schedule for its dividend declaration
dates for 2005.
Declaration Date
April 12, 2005 Tuesday
June 28, 2005 Tuesday
September 27, 2005 Tuesday
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 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. ECC Capital Corporation
Income Statement Information
All amounts in thousands,
except per share amounts
For the year ended Three months ended
December 31, December 31,
2004 2003 2004 2003
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)
Net interest
income 27,843 14,900 9,958 6,091
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
Total expenses 114,773 59,626 31,004 24,227
Earnings before
income taxes 48,564 19,684 1,686 932
Provision for income
taxes 20,288 8,437 553 454
NET INCOME $28,276 $11,247 $1,133 $478
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
ECC Capital Corporation
Balance Sheet Information
December 31,
ASSETS 2004 2003
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
Total assets $1,007,546 $616,680
LIABILITIES AND STOCKHOLDERS' EQUITY
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
Total liabilities 954,597 597,535
Commitments and contingencies
Stockholders' equity 52,949 19,145
Total liabilities and
stockholders' equity $1,007,546 $616,680
SOURCE ECC Capital Corporation Roque A. Santi, Chief Financial Officer of ECC Capital Corporation, |