N E W C E N T U R Y F I N A nc IAL CORPORATIO N BUILDING ON OUR F O UNDATI O N F O R A N E W F U T U R E 2 0 0 5 Ann U A L R EPORT New Century Financial Corporation has come a long way in the 10 years that we have been in business, during which we have established a solid foundation on which to grow. We have grown from a privately held mortgage company with $400 million of annual loan production to a publicly traded real estate investment trust (REIT) that is the second largest non-prime mortgage originator in the U.S., with $56.1 billion in total loan production for 2005. But we are not content to stop there. Keeping our company strong through the next decade and beyond means that we must build on our solid foundation for a “NEW” future. At New Century, we continue to plan, work and shape a better company from the foundation up to ensure that all of our stakeholders, partners and Associates prosper in the years to come. TO OUR STOCKHOLDERS, We recently celebrated an important milestone in our corporate history with our 10-year anniversary, which allowed us to reflect on our many accomplishments over the past decade. As founders, we are proud that our vision has grown into a successful company, but we are just getting started. In fact, we spent 2005 expanding on our strong foundation. While our business faced many challenges this past year, which ultimately impacted our stock price, we believe it was still full of success and accomplishments. From building our real estate investment trust (REIT) portfolio of mortgage loans to broadening our product offerings, our focus in 2005 was developing a stronger core business from which to grow and prosper throughout the decades to come. REIT In October 2004, we 2 0 0 5 G O A L S restructured the company In February 2005, we announced our short- and long-term goals for the company. Our short-term goals to allow us to qualify as a REIT for U.S. federal focused on delivering earnings-per-share (EPS) of $9.00 or more, a minimum dividend of $6.00 per- income tax purposes. share and loan production volume of at least $45 billion in 2005. Throughout the year, interest rates continued to rise, competition intensified and whole loan values in the secondary market declined, causing our operating margin to compress. It became clear that we needed to lower our EPS outlook for the year and address the environment quickly and directly to improve our profitability. As such, we increased the weighted-average-coupon rate on our core products from 7.22 percent in February to 8.23 percent in December, and modified our product mix to maximize secondary market execution, primarily by introducing our 40-year product and reducing the amount of interest-only production volume. Additionally, we improved our operating efficiencies and reduced our loan acquisition costs to 2 a historical low in the fourth quarter of 2005. In light of the market conditions, we were pleased to deliver strong full-year results, including the (1) REIT taxable income is a non-GAAP second highest annual EPS in our history of $7.17 (includes a $0.14 per-share impact for hurricane-related financial measure within the meaning of Regulation G promulgated by the losses) and the tenth consecutive annual record for total loan production by originating $56.1 billion in Securities and Exchange Commission. The most directly comparable GAAP mortgage loans. Additionally, our REIT taxable income(1) of $8.37 per-share exceeded our $6.50 per-share financial measure is total consolidated pre-tax income as reflected in the dividend paid to stockholders and provided $1.88 per-share of estimated undistributed taxable income income statement. The company believes that the presentation of REIT taxable income provides useful carry-over that we will use to contribute to our 2006 dividend. information to investors due to the specific distribution requirements to report and pay common share dividends pursuant to the Internal Revenue Code of 1986, as amended. L O N G E R - T E R M A SPIRATIO N S The presentation of this additional As we look to the future, the long-term goals we announced last year focus on becoming a world-class information is not meant to be con- sidered in isolation or as a substitute for financial results prepared in mortgage company. To achieve this aspirational yet attainable goal, we intend to continue expanding our accordance with GAAP. menu of product offerings, become one of the top-10 mortgage companies in the U.S. and consistently deliver a stable dividend. While these plans will be executed over an extended period of time, we are proud to have made substantial progress on each of these goals in 2005. RBC Mortgage Company This acquisition brings strong relationships with builders Expanding Our Product Offerings In September 2005, we completed the purchase of a mortgage and realtors, and a large purchase business that will origination platform from U.S.-based RBC Mortgage Company, which we believe was an excellent be significant to growing strategic, operational and financial fit for the company. RBC Mortgage’s experience in conventional, New Century. Alt-A and home equity lines of credit mortgage products, coupled with our premier non-prime mortgage business, allows us to deliver a broader spectrum of mortgage products to our borrowers. This transaction enabled us to extend our nationwide reach by approximately 140 branches and positioned us to grow the retail origination channel. Additionally, being a diversified-mortgage provider allows us to build upon the success of our national Home123 retail brand. 3 Becoming a Top-10 U.S. Mortgage Company We believe the size and scale of being a top-10 mortgage company will provide many competitive advantages, such as the ability to reduce costs and attract and retain top-tier talent, allowing us to drive greater profitability. We are on track to achieve this goal in 2006, as we continue to maximize the benefits of the RBC Mortgage transaction. We will also continue to look for opportunities to increase our capabilities, broaden our product offerings and expand our geographic footprint nationally. Building Our Portfolio to Deliver a Strong Dividend In our first full year as a REIT, we were very focused on building our REIT portfolio of mortgage loans and delivering a stable, growing dividend to our stockholders. In 2005, we successfully completed approximately $11 billion of on-balance sheet securitizations in the REIT, growing the balance of that portfolio by 63 percent to $13.9 billion at the end of the year, compared with the balance at the end of 2004. As a result, we delivered four consecutive quarterly dividend increases Portfolio of Mortgage Loans throughout the year and grew our quarterly dividend by 13 percent to $1.70 per-share, compared with Our mortgage loan portfolio was the primary contributor our first REIT dividend of $1.50 per-share. to earnings in 2005, We believe that our REIT structure and portfolio strategy are the optimal vehicles to drive long- demonstrating the power of our REIT portfolio strategy. term value, as they provide stability across a range of interest rate cycles, give us greater flexibility in the secondary market and position the company to succeed in what is expected to be a challenging market in 2006. As such, we expect to continue adding mortgage loans to our REIT portfolio this year. The earnings from our portfolio, coupled with the $1.88 per-share carry-over of estimated undistributed taxable income from 2005 and potential contributions from our taxable REIT subsidiaries, give us confidence that we will deliver a dividend of $7.30 per-share in 2006, representing 12 percent growth 4 over our 2005 dividend. BLUE P RI N T F O R 2 0 0 6 A nd B E Y O nd Game-Changing Initiatives In order for us to achieve our goal of being a world-class mortgage company, we must continue to build These are innovations that fundamentally change on our solid foundation. We expect the market will continue to be challenging in 2006 and also anticipate how customers think about continued strong competition that could result in consolidation within the mortgage industry. During this our products. time of market evolution, we want to embrace change and become better, stronger and more skilled because of it. We will strive to do things better, faster and more cost effectively, and we intend to be at the forefront of developing game-changing initiatives that will drive us to industry leadership. The Pilot Programs and Rollouts blueprint that will guide us through this process includes three strategic objectives for 2006 — continuing Our wholesale division will to broaden our product lines, increasing productivity while reducing costs and delivering consistently start by offering a limited selection of Alt-A products. strong operating performance. Our retail division will focus on introducing our non- prime products to our Continuing to Broaden our Product Lines Our primary objective for 2006 is to continue to broaden the recently acquired mortgage mortgage products and services available through each of our delivery channels. The acquisition of origination channel. Our historical mortgage the RBC Mortgage origination platform was a catalyst for us to offer a broader product line. Integrating origination channel will work and fully leveraging this acquisition will be the key to successfully accomplishing this goal. However, we on increasing its purchase understand that this process will take time.