Irvine-based ECC Capital Corp., parent company of mortgage financier Encore Credit, said Monday it won’t pay a first-quarter dividend in another sign of shrinking profits for subprime mortgage lenders.
Instead, ECC plans to “retain capital and liquidity … for the prudent operation of our business,” said Shabi Asghar, the company’s co-chief executive.
The company’s shares were off nearly 30% in early Monday trading. ECC, which raised $354 million in the county’s largest initial public offering of 2005, now counts a market value of about $135 million.
The move comes after ECC cuts its third-quarter dividend payment in September to 18 cents a share, down 18% from the second quarter.
ECC is keeping its dividend at 18 cents for the fourth quarter.
As a real estate investment trust, ECC pays out 90% of its profits as dividends.
ECC’s fourth-quarter results are due in March. The company said earlier it did about $4.2 billion in loans in the quarter, almost double a year earlier.
But like other subprime lenders, ECC has seen profits crimped by rising interest rates, which push up what lenders pay to buyers of mortgages packaged and sold as bonds. Meanwhile, rates on loans haven’t kept pace.
“We are focused on improving the company’s operating results and restoring our mortgage banking operations to profitability,” Asghar said.
