Like many subprime mortgage lenders, Irvine-based New Century Financial Corp. grew impressively over the last few years by taking advantage of the boom in demand for non-conforming loans, high loan-to-value deals and loans to consumers with bad credit, then securitizing its loans to raise capital for more lending. But unlike many other subprime lenders who have hit the skids as rising interest rates turned Wall Street off to the sector, New Century has been able to keep its operations together and maintain its stock price.
New Century is a 5-year old company that has grown 350 % over the past three years, making it the No. 9 fastest-growing company on the Business Journal’s list this year, though its quarterly revenue recently dropped 36% to $35.9 million. It also had a $20 million swing for the worse in profitability in the last quarter, losing $8.6 million compared with earnings of $10.6 million for the same period last year.
It posted a loss for the quarter because it decided to hold some of its loans until it could get a better price for them, sold others at a discount, and reduced the value of some of the loans on its books because of the rising interest rates.
In July, the company hired PaineWebber to help explore options to keep the company on its feet and going in the right direction. New Century is looking either for a buyer to infuse some capital or to raise new equity or debt capital through an offering.
“Our optimal business model requires additional long-term capital to permit us to continue our balanced secondary marketing strategy, expand our product lines and continue to grow our production capability,” the company stated in a press release.
Since last year at this time, the company has grown its employee ranks by 10% to 1,654, about half of whom are in Orange County.
The company’s stock price saw an all-time low in late 1998 when rising interest rates drove investors from the subprime sector. New Century’s stock price was hovering around 18 in 1997 but dropped to less than 5 at the end of 1998. It has battled back and recently has been trading around 11.
In the same sector is Onyx Acceptance Corp., Foothill Ranch,No. 13 on the list of fastest-growing companies,which had its revenue increase 187% in the past three years to $94.9 million for the 12 months ended June 30. Its ranks have swelled to 850, from 600 last year. The company continues to make loans and has been on a steady schedule of selling the loans to Wall Street. It is growing and showing strong earnings quarter-to-quarter, but investors aren’t excited about the company, especially since its market cap is only about $21 million at its recent share-price level. The company’s stock eroded from a high of 19 in early 1996 to hover between 4 and 5 for the past year. n
