Slide 1: ECC Capital Corporation Earnings Call
ECC Capital Corporation www.ecccapital.com Earnings Call August 12, 2005
Slide 2: Safe Harbor Statement
Safe Harbor Statement Certain statements made during this conference call may be deemed to be forward-looking statements under federal securities laws and ECC Capital intends that those forward-looking statements be subject to the safe-harbor created thereby. These forward-looking statements are bas
Slide 3: Opening Comments
Opening Comments Shabi Asghar President & Co-CEO 3
Slide 4: 2nd Quarter 2005 Highlights
2nd Quarter 2005 Highlights • Record-breaking loan production of $3.16 billion – Increased 41% compared to the second quarter 2004 • REIT portfolio has grown to $3.1 billion – Increased $1.3 billion over the first quarter • $1.4 billion securitization • $0.22 quarter dividend • Enhancing strong mana
Slide 5: Geographic Expansion
Geographic Expansion % Change 1st Half State of 2005 CA -4.65% IL +2.73% MD +1.40% FL +1.24% VA +1.17% Wholesale Processing Center Retail Processing Center Target MSA’s 5
Slide 6: Historical Production Credit Characteristics
Historical Production Credit Characteristics Weighted Average FICO 624 618 609 601 584 Q1 '02 Q1 '03 Q1 '04 Q1 '05 Q2 '05 6
Slide 7: Production Credit Characteristics
Production Credit Characteristics Number of Program Balance % of Total AVG LTV AVG FICO Loans ARM 8,358 $1.79B 56.82% 80.34 605.16 I/O 2,969 $887M 28.04% 82.27 652.31 FIXED 1ST 1,966 $385M 12.17% 75.80 636.9 FIXED 2ND 1,596 $94M 2.97% 19.58 664.93 TOTAL 14,889 $3.16B 100% 78.52 624.02 7
Slide 8: Strategy in a Rising Rate Environment
Strategy in a Rising Rate Environment Long Term Strategy • Continue to be selective on loans we retain on the balance sheet • Continue to build an efficient origination platform while allowing rate stabilization • Retain capital to build optimal portfolio • Sell loans that have lesser spread and cre
Slide 9: Strategy in a Rising Rate Environment (Continued)
Strategy in a Rising Rate Environment (Continued) Expansion Strategy • Increase production with focus outside of California: - Increase WAC in less competitive states - Lower risk through geographic diversification • Increase AE base: - Our platform allows AE increase without significant fixed cost
Slide 10: Financials
Financials Roque Santi, CFO10
Slide 11: Consolidated Income Statement
Consolidated Income Statement For the Three For the Three Months ended Months ended 6/30/05 3/31/05 (In thousands except per share data) Total interest income $ 65,329 $ 25,471 Total interest expense (33,633) (13,303) Provision for loan losses - loans held for investment (3,510) (2,500) Net interest
Slide 12: Core Earnings
Core Earnings Period ended June 30, 2005 Three months ended Six months Three months March 31, 2005 Net loss $ 41,378 $ 38,680 $ 2,698 Tax benefit 8,850 2,519 6,331 Net loss before tax benefit 50,228 41,199 9,029 Residual mark-to-market 4,995 594 4,402 Unrealized derivative losses (gains) 10,622 20,6
Slide 13: Cost to Originate
Cost to Originate Three Months % Change Three Months % Change Three Months Ending 6/30/05 over 3/31/05 Ending 3/31/05 over 12/31/04 Ending 12/31/04 (In Thousands) Total operating expenses $ 40,885 29% $ 31,712 2% $ 31,004 Deferred origination costs 24,451 36% 18,035 -14% 21,019 Loan servicing costs
Slide 14: Consolidated Balance Sheet
Consolidated Balance Sheet ASSETS 06/30/05 03/31/05 12/31/04 (In Thousands) Cash and cash equivalents $ 22,989 $ 92,117 $ 22,023 Restricted cash 2,250 245,940 2,250 Mortgage loans held for sale, net 1,922,322 810,766 911,784 Mortgage loans held for investment, net 3,110,534 1,824,192 - Other assets
Slide 15: Loan Portfolio Trend
Loan Portfolio Trend Loans Held For Investment Loans Held For Sale $3,500,000 $3,000,000 $3,111,000 $2,500,000 $ in Millions $2,000,000 $1,922,000 $1,824,000 $1,500,000 $1,000,000 $811,000 $500,000 $- Q1 '05 Q2 '05 15
Slide 16: Hold vs. Sell Mortgage Strategy
Hold vs. Sell Mortgage Strategy SECURITIZED FOR ENCORE HELD SOLD DURING Q2 REIT PORTFOLIO FOR SALE Q2 DURING Q2 1ST LIENS (In Thousands) (In Thousands) (In Thousands) PRINCIPAL $1,644,185 $ 1,830,081 $ 526,360 WAC 7.3 7.1 6.95 LTV 78.84 81.67 81 FICO 619 624 609 I/O 19.07 35.02 26.04 PRICE N/A N/A 1
Slide 17: Cash Leverage & Invested Capital June 30, 2005
Cash Leverage & Invested Capital June 30, 2005 Net Cost to Transaction Non Recourse Cash Net Invested Loan Balance Invested Originate Costs (1) Debt Received Capital $ Capital % (In Thousands) ECR1 1,516,517 40,160 9,711 1,516,513 13,449 36,425 2.40% ECR2 1,392,982 35,140 5,326 1,392,472 40,975 2.94
Slide 18: Net Interest Rate Spread
Net Interest Rate Spread Quarter Ended Quarter Ended Variance June 30, 2005 March 31, 2005 WAC - Loans held for Sale 7.25% 7.07% 0.18% Cost of Funds 4.39% 4.23% 0.16% Net Interest Rate Spread 2.86% 2.84% 0.02% WAC - Loans held for Investment 7.28% 7.29% -0.01% Cost of Funds 3.63% 3.34% 0.29% Net Int
Slide 19: Pretax Core Income as a Percentage of Average Assets
Pretax Core Income as a Percentage of Average Assets Three months ended June 30, 2005 % of avg assets March 31, 2005 % of avg assets Net interest income 31,696 3.07% 12,168 2.38% Payments on interest rate contracts 3,360 0.33% 391 0.08% Net interest income after payments 28,336 2.74% 11,777 2.31% Pr
Slide 20: Questions
ECC CAPITAL CORPORATION Questions 20 © CopyriGHt 2005 ECC Capital CORPORATION
Slide 21: Closing
ECC CAPITAL CORPORATION a = \ © CopyricHt 2005 ECC Carita CorPoraTION