##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR
THE QUARTERLY PERIOD ENDED MARCH 31, 2006.
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO
 COMMISSION FILE NUMBER: 001-32314
 NEW CENTURY FINANCIAL CORPORATION
 (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 MARYLAND
    
    56-2451736(State of Incorporation)
    
    (I.R.S. Employer Identification No.)
 18400 VON KARMAN, SUITE 1000,
IRVINE, CALIFORNIA 92612
(Address of principal executive offices)(Zip Code)
 (949) 440-7030
(Registrants telephone number, including area code)
 Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non accelerated filer o
 o þ
 
 o o




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##### 



NEW CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2006
 INDEX
 PagePART IFINANCIAL INFORMATION
    
    
    4Item 1. Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    29Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    49Item 4. Controls and Procedures
    
    
    50PART IIOTHER INFORMATION
    
    
    51Item 1. Legal Proceedings
    
    
    51Item 1A. Risk Factors
    
    
    52Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    52Item 4. Submission of Matters to a Vote of Security Holders
    
    
    52Item 6. Exhibits
    
    
    52SIGNATURES
    
    
    53EXHIBIT INDEX
    
    
    54EXHIBIT 10.7EXHIBIT 10.8EXHIBIT 10.9EXHIBIT 10.10EXHIBIT 10.11EXHIBIT 10.12EXHIBIT 10.13EXHIBIT 10.14EXHIBIT 10.15EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 31.3EXHIBIT 32.1EXHIBIT 32.2EXHIBIT 32.3
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3




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PART IFINANCIAL INFORMATION
 
 Item 1. Financial Statements
 NEW CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
 Condensed Consolidated Balance Sheets
 March 31, 2006 and December 31, 2005
 (Dollars in thousands)
 March 31,
    
    
    December 31,2006
    
    
    2005(Unaudited)ASSETSCash and cash equivalents
    
    $
    569,757
    
    
    
    503,723Restricted cash
    
    
    847,228
    
    
    
    726,697Mortgage loans held for sale at lower of cost or market
    
    
    6,352,645
    
    
    
    7,825,175Mortgage
loans held for investment, net of allowance of $209,804 and $198,131, respectively
    
    
    16,102,880
    
    
    
    16,143,865Residual interests in securitizations
    
    
    208,791
    
    
    
    234,930Mortgage servicing assets
    
    
    40,559
    
    
    
    69,315Accrued interest receivable
    
    
    96,135
    
    
    
    101,945Income taxes, net
    
    
    69,152
    
    
    
    80,823Office property and equipment, net
    
    
    94,239
    
    
    
    86,886Goodwill
    
    
    95,841
    
    
    
    92,980Prepaid expenses and other assets
    
    
    343,955
    
    
    
    280,751Total assets
    
    $
    24,821,182
    
    
    
    26,147,090LIABILITIES AND STOCKHOLDERS EQUITYCredit facilities on mortgage loans held for sale
    
    $
    6,169,194
    
    
    
    7,439,685Financing on mortgage loans held for investment, net
    
    
    15,948,873
    
    
    
    16,045,459Accounts payable and accrued liabilities
    
    
    533,832
    
    
    
    508,163Convertible senior notes, net
    
    
    
    
    
    
    4,943Notes payable
    
    
    33,438
    
    
    
    39,140Total liabilities
    
    
    22,685,337
    
    
    
    24,037,390Commitments and contingenciesStockholders equity:Preferred
stock, $0.01 par value. Authorized 10,000,000 shares at March 31,
2006 and December 31, 2005; issued and outstanding
4,500,000 shares at March 31, 2006 and December 31, 2005
    
    
    45
    
    
    
    45Common stock, $0.01 par value. Authorized 300,000,000 shares at March 31, 2006 and
December 31, 2005; issued and outstanding 56,359,671 and 55,723,267 shares at March 31,
2006 and December 31, 2005, respectively
    
    
    564
    
    
    
    557Additional paid-in capital
    
    
    1,237,380
    
    
    
    1,234,362Accumulated other comprehensive income
    
    
    67,016
    
    
    
    61,045Retained earnings
    
    
    830,840
    
    
    
    828,2702,135,845
    
    
    
    2,124,279Deferred compensation costs
    
    
    
    
    
    
    (14,579
    )Total stockholders equity
    
    
    2,135,845
    
    
    
    2,109,700Total liabilities and stockholders equity
    
    $
    24,821,182
    
    
    
    26,147,090
  4




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NEW CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
 Condensed Consolidated Statements of Earnings
 (Dollars in thousands, except per share)
 (Unaudited)
 Three Months EndedMarch 31,2006
    
    
    2005Interest income
    
    $
    463,002
    
    
    
    331,071Interest expense
    
    
    (283,213
    )
    
    
    (162,081
    )Net interest income
    
    
    179,789
    
    
    
    168,990Provision for losses on mortgage loans held for investment
    
    
    (27,825
    )
    
    
    (30,238
    )Net interest income after provision for losses
    
    
    151,964
    
    
    
    138,752Other operating income:Gain on sale of mortgage loans
    
    
    129,527
    
    
    
    139,752Servicing income
    
    
    15,642
    
    
    
    6,722Other income
    
    
    14,631
    
    
    
    3,873Total other operating income
    
    
    159,800
    
    
    
    150,347Other operating expenses:Personnel
    
    
    116,721
    
    
    
    128,522General and administrative
    
    
    57,475
    
    
    
    41,775Advertising and promotion
    
    
    12,703
    
    
    
    19,832Professional services
    
    
    9,190
    
    
    
    7,806Total operating expenses
    
    
    196,089
    
    
    
    197,935Earnings before income taxes
    
    
    115,675
    
    
    
    91,164Income taxes
    
    
    11,940
    
    
    
    6,404Net earnings
    
    
    103,735
    
    
    
    84,760Dividends paid on preferred stock
    
    
    2,566
    
    
    
    Net earnings available to common stockholders
    
    $
    101,169
    
    
    
    84,760Basic earnings per share
    
    $
    1.82
    
    
    
    1.55Diluted earnings per share
    
    $
    1.79
    
    
    
    1.48Basic weighted average shares outstanding
    
    
    55,519,570
    
    
    
    54,779,457Diluted weighted average shares outstanding
    
    
    56,695,269
    
    
    
    57,266,628
  5




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NEW CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
 Condensed Consolidated Statements of Comprehensive Income
 (Dollars in thousands)
 (Unaudited)
 Three Months EndedMarch 31,2006
    
    
    2005Net earnings
    
    $
    103,735
    
    
    
    84,760Net unrealized gains on derivative instruments designated as hedges
    
    
    5,261
    
    
    
    72,913Reclassification adjustment into earnings for derivative instruments
    
    
    793
    
    
    
    5,261Tax effect
    
    
    (83
    )
    
    
    (2,337
    )Comprehensive income
    
    $
    109,706
    
    
    
    160,597
  6




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##### Table of Contents



NEW CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
Twelve Months Ended December 31, 2005 and Three Months Ended March 31, 2006
(In thousands, except per share amounts)
 AccumulatedPreferred
    
    
    Preferred
    
    
    Common
    
    
    Common
    
    
    Additional
    
    
    OtherShares
    
    
    Stock
    
    
    Shares
    
    
    Stock
    
    
    Paid-In
    
    
    Comprehensive
    
    
    Retained
    
    
    DeferredOutstanding
    
    
    Amount
    
    
    Outstanding
    
    
    Amount
    
    
    Capital
    
    
    Income (Loss)
    
    
    Earnings
    
    
    Compensation
    
    
    TotalBalance at December 31, 2004
    
    
    
    
    
    
    
    
    
    
    54,703
    
    
    
    547
    
    
    
    1,108,590
    
    
    
    (4,700
    )
    
    
    781,627
    
    
    
    (7,499
    )
    
    
    1,878,565Proceeds from issuance of common stock
    
    
    
    
    
    
    
    
    
    
    1,880
    
    
    
    19
    
    
    
    26,440
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,459Proceeds from issuance of preferred stock
    
    
    4,500
    
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    108,619
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108,664Repurchases and cancellation of treasury stock
    
    
    
    
    
    
    
    
    
    
    (879
    )
    
    
    (9
    )
    
    
    (29,465
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,474
    )Cancelled shares related to stock options
    
    
    
    
    
    
    
    
    
    
    (244
    )
    
    
    (2
    )
    
    
    (12,414
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,416
    )Conversion of convertible senior notes
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500Issuance of restricted stock, net
    
    
    
    
    
    
    
    
    
    
    248
    
    
    
    2
    
    
    
    14,493
    
    
    
    
    
    
    
    
    
    
    
    (14,495
    )
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,415
    
    
    
    7,415Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    416,543
    
    
    
    
    
    
    
    416,543Tax benefit from non-qualified stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,599
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,599Other comprehensive income, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,745
    
    
    
    
    
    
    
    
    
    
    
    65,745Dividends declared on common stock, $6.50 per
share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (364,482
    )
    
    
    
    
    
    
    (364,482
    )Dividends declared on preferred stock, $1.20
per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,418
    )
    
    
    
    
    
    
    (5,418
    )Balance at December 31, 2005
    
    
    4,500
    
    
    
    45
    
    
    
    55,723
    
    
    
    557
    
    
    
    1,234,362
    
    
    
    61,045
    
    
    
    828,270
    
    
    
    (14,579
    )
    
    
    2,109,700Proceeds from issuance of common stock
    
    
    
    
    
    
    
    
    
    
    329
    
    
    
    3
    
    
    
    6,701
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,704Cancelled shares related to stock options
    
    
    
    
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    (744
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (744
    )Compensation
expense for common stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000Excess tax
benefits for non-qualified stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    975
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    975Conversion of convertible senior notes
    
    
    
    
    
    
    
    
    
    
    166
    
    
    
    2
    
    
    
    4,998
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000Restricted stock, net
    
    
    
    
    
    
    
    
    
    
    159
    
    
    
    2
    
    
    
    (2,099
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,097
    )Compensation
expense for restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,766
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,766Reclassification of deferred compensation in
connection with adoption of FAS 123R
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,579
    )
    
    
    
    
    
    
    
    
    
    
    14,579
    
    
    
    Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103,735
    
    
    
    
    
    
    
    103,735Other comprehensive income, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,971
    
    
    
    
    
    
    
    
    
    
    
    5,971Dividends declared on common stock, $1.75 per
share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (98,599
    )
    
    
    
    
    
    
    (98,599
    )Dividends declared on preferred stock, $0.57
per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,566
    )
    
    
    
    
    
    
    (2,566
    )Balance at March 31, 2006 (unaudited)
    
    
    4,500
    
    
    
    45
    
    
    
    56,360
    
    
    
    564
    
    
    
    1,237,380
    
    
    
    67,016
    
    
    
    830,840
    
    
    
    
    
    
    
    2,135,845
  7




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##### Table of Contents



NEW CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
 (Dollars in thousands)
 (Unaudited)
 Three Months EndedMarch 31,2006
    
    2005Cash flows from operating activities:Net earnings
    
    $
    103,735
    
    
    
    84,760Adjustments to reconcile net earnings to net cash provided by operating activities:Depreciation and amortization of office property and equipment
    
    
    8,253
    
    
    
    4,378Other amortization
    
    
    26,637
    
    
    
    16,540Stock-based compensation
    
    
    7,766
    
    
    
    2,853Excess tax benefits from stock-based compensation
    
    
    (975
    )
    
    
    Cash flows received from residual interests
    
    
    1,368
    
    
    
    6,787Accretion of Net Interest Receivables, or NIR
    
    
    (7,307
    )
    
    
    (4,024
    )Servicing gains
    
    
    
    
    
    
    (8,120
    )Fair value adjustment of residual securities
    
    
    32,078
    
    
    
    1,330Provision for losses on mortgage loans held for investment
    
    
    27,825
    
    
    
    30,238Provision for repurchase losses
    
    
    3,202
    
    
    
    548Mortgage loans originated or acquired for sale
    
    
    (11,767,855
    )
    
    
    (6,480,899
    )Mortgage loan sales, net
    
    
    13,331,896
    
    
    
    6,516,864Principal payments on mortgage loans held for sale
    
    
    11,906
    
    
    
    41,014Decrease in credit facilities on mortgage loans held for sale
    
    
    (1,270,491
    )
    
    
    (53,087
    )Net change in other assets and liabilities
    
    
    (118,634
    )
    
    
    124,057Net cash provided by operating activities
    
    
    389,404
    
    
    
    283,239Cash flows from investing activities:Mortgage loans originated or acquired for investment, net
    
    
    (1,655,294
    )
    
    
    (3,803,344
    )Principal payments on mortgage loans held for investment
    
    
    1,654,644
    
    
    
    1,102,785Sale of mortgage servicing rights
    
    
    24,516
    
    
    
    Purchase of office property and equipment
    
    
    (15,607
    )
    
    
    (17,086
    )Acquisition of net assets
    
    
    (9,795
    )
    
    
    Net cash used in investing activities
    
    
    (1,536
    )
    
    
    (2,717,645
    )Cash flows from financing activities:Proceeds from issuance of financing on mortgage loans held for investment, net
    
    
    1,612,464
    
    
    
    2,888,602Repayments of financing on mortgage loans held for investment
    
    
    (1,715,581
    )
    
    
    (303,797
    )Increases in restricted cash
    
    
    (120,531
    )
    
    
    (26,765
    )Net proceeds from issuance of stock
    
    
    6,704
    
    
    
    411Decreases in notes payable, net
    
    
    (5,702
    )
    
    
    (4,200
    )Payment of dividends on common stock
    
    
    (94,756
    )
    
    
    (82,569
    )Payment of dividends on preferred stock
    
    
    (2,566
    )
    
    
    Excess tax benefits from stock-based compensation
    
    
    975
    
    
    
    Purchase of common stock
    
    
    (2,841
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    (321,834
    )
    
    
    2,471,682Net increase in cash and cash equivalents
    
    
    66,034
    
    
    
    37,276Cash and cash equivalents, beginning of year
    
    
    503,723
    
    
    
    842,854Cash and cash equivalents, end of period
    
    $
    569,757
    
    
    
    880,130Supplemental cash flow disclosure:Interest paid
    
    $
    289,446
    
    
    
    167,305Income taxes paid
    
    
    1,478
    
    
    
    6,144Supplemental noncash financing activity:Restricted stock issued
    
    $
    4,766
    
    
    
    17,619Restricted stock cancelled
    
    
    2,097
    
    
    
    Accrued dividends on common stock
    
    
    98,599
    
    
    
    85,803
  8




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##### Table of Contents



1. Basis of Presentation
         Reclassification
  9




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##### Table of Contents



Recent Accounting Developments
   Cash and Cash Equivalents
  Restricted Cash
  Mortgage Loans Held for Sale
  Mortgage Loans Held for Investment
  10




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##### Table of Contents



Allowance for Losses on Mortgage Loans Held for Investment
  Residual Interests in Securitizations
       11




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##### Table of Contents



Derivative Instruments Designated as Hedges
  Income Taxes
   2. Mortgage Loans Held for Sale
  March 31,
    
    
    December 31,2006
    
    
    2005Mortgage loans held for sale:First trust deeds
    
    $
    5,636,636
    
    
    
    7,110,772Second trust deeds
    
    
    704,930
    
    
    
    704,430Net deferred origination costs and other
    
    
    11,079
    
    
    
    9,973$
    6,352,645
    
    
    
    7,825,175
  12




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##### Table of Contents



3. Mortgage Loans Held for Investment
  March 31,
    
    
    December 31,2006
    
    
    2005Mortgage loans held for investment:First trust deeds
    
    $
    15,533,562
    
    
    
    15,877,535Second trust deeds
    
    
    661,103
    
    
    
    334,689Allowance for loan losses
    
    
    (209,804
    )
    
    
    (198,131
    )Net deferred origination costs
    
    
    118,019
    
    
    
    129,772$
    16,102,880
    
    
    
    16,143,865
   Three Months EndedMarch 31,2006
    
    
    2005Balance,
beginning of period
    
    $
    198,131
    
    
    
    90,227Additions
    
    
    27,825
    
    
    
    30,238Charge-offs,
net
    
    
    (16,152
    )
    
    
    (2,970
    )Balance, end
of period
    
    $
    209,804
    
    
    
    117,495
 4. Residual Interests in Securitizations
  March 31,
    
    
    December 31,2006
    
    
    2005Over-collateralization account
    
    $
    349,174
    
    
    
    350,785Net interest receivable (NIR)
    
    
    (140,383
    )
    
    
    (115,855
    )$
    208,791
    
    
    
    234,930
  13




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##### Table of Contents



Three Months EndedMarch 31,2006
    
    
    2005Balance,
beginning of period
    
    $
    350,785
    
    
    
    158,755Additional deposits to OC accounts
    
    
    766
    
    
    
    914Release of cash from OC accounts
    
    
    (2,377
    )
    
    
    (3,946
    )Balance, end of period
    
    $
    349,174
    
    
    
    155,723
  Three Months EndedMarch 31,2006
    
    
    2005Balance,
beginning of period
    
    $
    (115,855
    )
    
    
    (10,734
    )Cash received from NIRs
    
    
    243
    
    
    
    (3,755
    )Accretion of NIRs
    
    
    7,307
    
    
    
    4,024Fair value adjustment
    
    
    (32,078
    )
    
    
    (1,330
    )Balance, end of period
    
    $
    (140,383
    )
    
    
    (11,795
    )
  5. Mortgage Servicing Assets
  Three Months EndedMarch 31,2006
    
    
    2005Balance,
beginning of period
    
    $
    69,315
    
    
    
    8,249Additions
    
    
    
    
    
    
    8,120Sales of servicing rights
    
    
    (24,516
    )
    
    
    Amortization
    
    
    (4,240
    )
    
    
    (1,921
    )Balance, end of period
    
    $
    40,559
    
    
    
    14,448
   14




---



##### Table of Contents



6. Goodwill
    Balance at January 1, 2005
    
    $
    92,980Acquisition
of Access Lending operating platform
    
    
    3,200Purchase price allocation adjustment on acquisition of RBC Mortgage origination platform
    
    
    (339
    )Balance at March 31, 2006
    
    $
    95,841
 7. Credit Facilities and Other Short-Term Borrowings
  March 31,
    
    
    December 31,2006
    
    
    2005A $2.0 billion asset-backed commercial paper facility for Von Karman Funding Trust, a wholly-owned subsidiary of
New Century Mortgage expiring in February 2009, secured by mortgage loans held for sale and cash, bearing interest based on a margin over one-month LIBOR.
    
    $
    1,081,736
    
    
    
    A $2.0 billion master repurchase agreement ($1 billion of which is uncommitted) among New Century Mortgage, NC
Capital, NC Asset Holding, L.P. (formerly known as NC Residual II Corporation) (NC Asset Holding), New Century
Credit and Bank of America, N.A. expiring in September 2006, secured by mortgage loans held for sale, bearing
interest based on a margin over one-month LIBOR.
    
    
    367,631
    
    
    
    916,714A
$1.0 billion master repurchase agreement among New Century Mortgage, Home 123 and Bank of America, N.A. expiring in September 2006, secured by mortgage loans held for sale, bearing interest based on a margin over
one-month LIBOR.
    
    
    146,718
    
    
    
    277,484A $1.0 billion master repurchase agreement among New Century Credit, NC Asset Holding, New Century Mortgage, NC
Capital and Barclays Bank PLC expiring in March 2007, secured by mortgage loans held for sale, bearing interest
based on a margin over one-month LIBOR.
    
    
    1,304
    
    
    
    821,856
 15




---



##### Table of Contents



March 31,
    
    
    December 31,2006
    
    
    2005An $800 million uncommitted master repurchase agreement among NC Capital NC Asset Holding, New Century Credit
and Bear Stearns Mortgage Capital expiring in November 2006, secured by mortgage loans held for sale, bearing
interest based on a margin over one-month LIBOR.
    
    
    296,787
    
    
    
    610,365A $150 million master repurchase agreement between New Century Funding SB-1, a Delaware business trust and
wholly-owned subsidiary of New Century Mortgage, and Citigroup Global Markets Realty Corp., successor to Salomon
Brothers Realty Corp. expiring in June 2006, secured by mortgage loans held for sale, bearing interest based on
a margin over one-month LIBOR. The Company expects to either renew or extend this facility before its expiration.
    
    
    
    
    
    
    A $650 million master repurchase agreement among New Century Credit, NC Capital and Citigroup Global Markets
Reality Corp., successor to Salomon Brothers, expiring in June 2006, secured by mortgage loans held for sale,
bearing interest based on a margin over one-month LIBOR. The Company has the ability to increase the size of this
facility to $800 million provided that the value of the loans outstanding at any one time under this facility and
the $150 million facility set forth immediately above may not exceed $800 million in the aggregate. The Company
expects to either renew or extend this facility prior to its expiration.
    
    
    109,467
    
    
    
    276,816A $150 million master repurchase agreement among New Century Mortgage, NC Capital, New Century and Citigroup
Global Markets Realty Corp., successor to Salomon Brothers Realty Corp., expiring in June 2006, secured by
delinquent loans and REO properties, bearing interest based on a margin over one-month LIBOR. The Company expects
to either renew or extend this facility prior to its expiration.
    
    
    70,191
    
    
    
    109,076A $1.5 billion master repurchase agreement ($500 million of which is uncommitted) among New
Century Credit, New Century Mortgage, NC Capital, Home123 and Credit Suisse First Boston Mortgage
Capital LLC expiring in December 2006, secured by mortgage loans held for sale, bearing interest
based on a margin over one-month LIBOR.
    
    
    686,655
    
    
    
    452,239A $1.0 billion master repurchase agreement among New Century Credit, New Century Mortgage, NC
Capital, Home123 and Deutsche Bank expiring in September 2006, secured by mortgage loans held
for sale, bearing interest based on a margin over one-month LIBOR.
    
    
    423,082
    
    
    
    441,227An $850 million master repurchase agreement ($150 million of which is uncommitted) among New
Century Credit, New Century Mortgage, NC Capital, NC Asset Holding, Home123, and IXIS Real Estate
Capital Inc. expiring in October 2006, secured by mortgage loans held for sale, bearing interest
based on a margin over one-month LIBOR.
    
    
    321,293
    
    
    
    404,696A $3.0 billion master repurchase agreement among New Century Credit, New Century Mortgage, NC
Capital, NC Asset Holding, Morgan Stanley Bank, and Morgan Stanley
Mortgage Capital Inc. expiring in February 2007, secured by mortgage loans held for sale, bearing interest based on a
margin over one-month LIBOR.
    
    
    1,381,398
    
    
    
    1,469,860A $2.0 billion asset-backed note purchase and security agreement ($500 million of which is
uncommitted) between New Century Funding I, a special-purpose vehicle established as a Delaware
statutory trust, which is a wholly-owned subsidiary of New Century Mortgage, and UBS Real Estate
Securities Inc., expiring in June 2006, secured by mortgage loans held for sale, bearing interest
based on a margin over one-month LIBOR. The Company expects to renew or extend this facility
prior to its expiration.
    
    
    1,178,408
    
    
    
    1,673,225A
$450 million master repurchase agreement ($250 million of which is uncommitted) among New
Century Warehouse, New Century Mortgage, New Century, and Goldman
Sachs Mortgage Company expiring in February 2007, secured by mortgage loans held for sale, bearing interest based on a
margin over one-month LIBOR.
    
    
    23,025
    
    
    
    
 16




---



##### Table of Contents



March 31,
    
    
    December 31,2006
    
    
    2005A $55 million master repurchase agreement among New Century, New Century Warehouse, Access
Investments II L.L.C Access Lending, Galleon Capital Corporation, State Street Capital Markets, LLC
and State Street Bank and Trust Company expiring in August 2006, secured by mortgage loans held
for sale, bearing interest based on a margin over one-month
commercial paper rate.
    
    
    27,128
    
    
    
    A $125 million master repurchase agreement among New Century Warehouse and Guaranty Bank
expiring in February 2007, secured by mortgage loans held for sale, bearing interest based on a
margin over one-month LIBOR.
    
    
    54,405
    
    
    
    A $70 million master repurchase agreement among Access Lending, Colonial Bank, and First
Collateral Services, Inc. that expired in April 2006, secured by mortgage loans held for sale,
bearing interest based on a margin over one-month LIBOR. The Company
did not renew or extend this facility prior to its expiration.
    
    
    49
    
    
    
    Less: Credit facility amounts reclassified to financing on mortgage loans held for investment.
    
    
    (83
    )
    
    
    (13,873
    )$
    6,169,194
    
    
    
    7,439,685
  8. Financing on Mortgage Loans Held for Investment
  March 31,
    
    
    December 31,2006
    
    
    2005Securitized bonds
    
    $
    15,989,493
    
    
    
    16,071,460Short-term financing on retained bonds
    
    
    
    
    
    
    1,9032005-NC3 NIM bond
    
    
    23,098
    
    
    
    21,405Debt issuance costs
    
    
    (63,801
    )
    
    
    (63,182
    )Credit facility amounts reclassified from warehouse credit facilities
    
    
    83
    
    
    
    13,873Total financing on mortgage loans held for investment
    
    $
    15,948,873
    
    
    
    16,045,459
  Due in less than 1 year
    
    $
    6,538,651Due in 2 years
    
    
    3,540,821Due in 3 years
    
    
    1,565,596Thereafter
    
    
    4,303,805$
    15,948,873
 9. Convertible Senior Notes
  17




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##### Table of Contents



10. Series A Cumulative Redeemable Preferred Stock
  11. Interest Income
  Three Months EndedMarch 31,2006
    
    
    2005Interest on mortgage loans held for investment
    
    $
    289,632
    
    
    
    247,660Interest on mortgage loans held for sale
    
    
    164,212
    
    
    
    76,199Residual interest income
    
    
    7,307
    
    
    
    4,024Other interest income
    
    
    1,851
    
    
    
    3,188$
    463,002
    
    
    
    331,071
 12. Interest Expense
  Three Months EndedMarch 31,2006
    
    
    2005Interest on financing on mortgage loans held for investment
    
    $
    169,154
    
    
    
    117,720Interest on credit facilities and other short-term borrowings
    
    
    107,374
    
    
    
    42,206Interest on convertible senior notes
    
    
    59
    
    
    
    63Other interest expense
    
    
    6,626
    
    
    
    2,092$
    283,213
    
    
    
    162,081
 13. Hedging Activities
  18




---



##### Table of Contents



Cash Flow Hedge Instruments 
  19




---



##### Table of Contents



Fair Value Hedge Instruments 
 Interest Rate Cap Contracts 
 Non-designated Hedge Instruments 
 Free-standing derivatives (Interest Rate Locks, Forward Sale Commitments and Interest Rate Swaps) 
 20




---



##### Table of Contents





14. Income Taxes




For the Three Months EndedMarch 31, 2006TRS
    
    
    REIT
    
    
    TotalEarnings before income taxes
    
    $
    32,369
    
    
    
    83,306
    
    
    $
    115,675Adjustment to GAAP earnings:Reverse intercompany eliminations
    
    
    (5,275
    )
    
    
    5,275Net decrease to taxable income from
intercompany loan sales, hedging income
temporary differences and other permanent
differences
    
    
    3,107
    
    
    
    (4,892
    )Taxable income reconciling items
(REIT only):Add back provision for loan losses
    
    
    
    
    
    
    29,025Deduct actual loan losses
    
    
    
    
    
    
    (9,653
    )Taxable income before dividend paid
deduction
    
    
    30,201
    
    
    
    103,061Deduct dividend paid deduction
    
    
    N/A
    
    
    
    (103,061
    )Taxable income this period
    
    
    30,201
    
    
    
    Provision for income taxes - 40%
    
    $
    (11,940
    )
    
    
    
    
    
    
    (11,940
    )Net income
    
    
    
    
    
    
    
    
    
    $
    103,735
 For the Three Months EndedMarch 31, 2005TRS
    
    
    REIT
    
    
    TotalEarnings before income taxes
    
    $
    11,545
    
    
    
    79,619
    
    
    $
    91,164Adjustment to GAAP earnings:Net decrease to taxable income from
intercompany loan sales, hedging income
temporary differences and other permanent
differences
    
    
    2,251
    
    
    
    (19,867
    )Taxable income reconciling items
(REIT only):Add back provision for loan losses
    
    
    
    
    
    
    29,151Deduct actual loan losses
    
    
    
    
    
    
    (672
    )Taxable income before dividend paid
deduction
    
    
    13,796
    
    
    
    88,231Deduct dividend paid deduction
    
    
    N/A
    
    
    
    (86,408
    )Taxable income this period
    
    $
    13,796
    
    
    
    1,823Provision for income taxes - 41%
    
    $
    (5,657
    )
    
    
    (747
    )
    
    
    (6,404
    )Net income
    
    
    
    
    
    
    
    
    
    $
    84,760
   21




---



##### Table of Contents



15. Earnings per Share
  Three Months EndedMarch 31,2006
    
    
    2005Basic:Net earnings
    
    $
    103,735
    
    
    
    84,760Less: Preferred stock dividends
    
    
    2,566
    
    
    
    Net earnings available to common stockholders
    
    $
    101,169
    
    
    
    84,760Weighted average common shares outstanding
    
    
    55,520
    
    
    
    54,779Earnings per share
    
    $
    1.82
    
    
    
    1.55Diluted:Net earnings available to common stockholders
    
    $
    101,169
    
    
    
    84,760Add: Interest and amortization of debt
issuance costs on convertible senior notes,
net of tax
    
    
    58
    
    
    
    18Diluted net earnings
    
    $
    101,227
    
    
    
    84,778Weighted average number of common shares
outstanding
    
    
    55,520
    
    
    
    54,779Effect of dilutive securities:Restricted stock awards
    
    
    106
    
    
    
    158Stock options
    
    
    986
    
    
    
    2,167Convertible senior notes
    
    
    81
    
    
    
    162Directors deferred compensation plan awards
    
    
    2
    
    
    
    156,695
    
    
    
    57,267Earnings per share
    
    $
    1.79
    
    
    
    1.48
   22




---



##### Table of Contents



16.
Stock-Based Compensation
 Accounting for
Stock Issued to Employees Accounting for Stock-Based
Compensation Accounting for Stock-Based Compensation-Transition and Disclosure
 Share-Based Payment Statement of Cash Flows
       23




---



##### Table of Contents



Basic earnings available to common stockholders:As reported
    
    $
    84,760Compensation expense, net of related tax effects
    
    
    (1,525
    )Pro forma
    
    $
    83,235Diluted earnings available to common stockholders:As reported
    
    $
    84,778Compensation expense, net of related tax effects
    
    
    (1,525
    )Pro forma
    
    $
    83,253Basic earnings per share:As reported
    
    $
    1.55Pro forma
    
    
    1.52Diluted earnings per share:As reported
    
    $
    1.48Pro forma
    
    
    1.47Basic weighted average shares outstanding:As reported
    
    
    54,779Pro forma
    
    
    54,779Diluted weighted average shares outstanding:As reported
    
    
    57,267Pro forma
    
    
    56,646
  24




---



##### Table of Contents



Three
Months Ended March 31,2006
    
    
    2005Fair value
    
    $
    6.11
    
    
    $
    9.24Expected life (years)
    
    
    4.1
    
    
    
    4.5Risk-free interest rate
    
    
    4.3 - 4.6
    %
    
    
    4.2
    %Volatility
    
    
    41.0
    %
    
    
    60.6
    %Expected annual dividend yield
    
    
    11.1
    %
    
    
    13.7
    %Expected annual forfeiture rate
    
    
    10.8
    %
    
    
    
  WeightedAverageNumber of
    
    
    ExerciseShares
    
    
    PriceBalance at December 31, 2005
    
    
    3,819,533
    
    
    $
    27.29Granted
    
    
    345,585
    
    
    
    38.99Exercised
    
    
    (239,882
    )
    
    
    13.47Canceled
    
    
    (91,459
    )
    
    
    36.43Balance at March 31, 2006
    
    
    3,833,777
    
    
    
    28.99
  Outstanding
    
    
    ExcercisableAverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedRemaining
    
    
    Average
    
    
    
    
    
    
    AverageRange of Exercise

    

    Number of
    
    
    Term
    
    
    Exercise
    
    
    Number of
    
    
    ExercisePrices

    
    

    Stock Options
    
    
    (in years)
    
    
    Price
    
    
    Stock Options
    
    
    Price$       0.335.59

    

    
    95,089
    
    
    
    1.66
    
    
    $
    5.26
    
    
    
    95,089
    
    
    $
    5.266.006.79

    

    
    414,863
    
    
    
    5.41
    
    
    
    6.65
    
    
    
    340,500
    
    
    
    6.657.339.27

    

    
    275,633
    
    
    
    4.46
    
    
    
    8.45
    
    
    
    125,486
    
    
    
    7.9710.47-12.17

    

    
    246,831
    
    
    
    5.86
    
    
    
    10.49
    
    
    
    179,331
    
    
    
    10.4914.43-17.83

    

    
    268,525
    
    
    
    6.47
    
    
    
    15.10
    
    
    
    102,325
    
    
    
    15.4018.65-18.66

    

    
    370,723
    
    
    
    6.70
    
    
    
    18.66
    
    
    
    157,067
    
    
    
    18.6619.47-26.97

    

    
    272,143
    
    
    
    7.21
    
    
    
    26.38
    
    
    
    93,093
    
    
    
    26.7035.74-39.10

    

    
    396,086
    
    
    
    9.53
    
    
    
    38.32
    
    
    
    22,705
    
    
    
    38.0342.20-44.06

    

    
    455,164
    
    
    
    8.97
    
    
    
    44.02
    
    
    
    24,620
    
    
    
    44.0145.04-45.96

    

    
    362,334
    
    
    
    7.84
    
    
    
    45.86
    
    
    
    255,876
    
    
    
    45.8746.02-46.78

    

    
    372,775
    
    
    
    8.54
    
    
    
    46.62
    
    
    
    220,337
    
    
    
    46.6347.26-49.27

    

    
    189,275
    
    
    
    8.85
    
    
    
    49.04
    
    
    
    13,652
    
    
    
    47.6051.20-60.47

    

    
    114,336
    
    
    
    8.49
    
    
    
    55.21
    
    
    
    81,667
    
    
    
    56.603,833,777
    
    
    
    
    
    
    
    
    
    
    
    1,711,748
  25




---



##### Table of Contents



WeightedAverageGrantNumber of
    
    
    Date FairOptions
    
    
    ValueBalance at December 31, 2005
    
    
    2,075,965
    
    
    $
    11.26Granted
    
    
    345,585
    
    
    
    6.11Vested
    
    
    (229,664
    )
    
    
    11.37Forfeited
    
    
    (69,857
    )
    
    
    11.47Balance at March 31, 2006
    
    
    2,122,029
    
    
    
    10.40
  WeightedAverageGrantNumber of
    
    
    Date FairShares
    
    
    ValueBalance at December 31, 2005
    
    
    441,630
    
    
    $
    45.03Granted
    
    
    217,058
    
    
    
    39.02Vested
    
    
    (134,715
    )
    
    
    45.68Forfeited
    
    
    (4,398
    )
    
    
    38.04Balance at March 31, 2006
    
    
    519,575
    
    
    
    44.33
     26




---



##### Table of Contents



17. Segment Reporting
     Three Months Ended March 31, 2006REIT &Qualified
    
    
    Taxable REIT SubsidiaryREIT
    
    
    
    
    
    
    Mortgage Loan OperationsSubsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ServicingPortfolio
    
    
    Portfolio
    
    
    Wholesale
    
    
    Retail
    
    
    and Other
    
    
    Eliminations
    
    
    ConsolidatedInterest income
    
    $
    253,956
    
    
    
    42,983
    
    
    
    140,916
    
    
    
    25,147
    
    
    
    
    
    
    
    
    
    
    
    463,002Interest expense
    
    
    (139,052
    )
    
    
    (30,102
    )
    
    
    (94,859
    )
    
    
    (19,200
    )
    
    
    
    
    
    
    
    
    
    
    (283,213
    )Net interest income
    
    
    114,904
    
    
    
    12,881
    
    
    
    46,057
    
    
    
    5,947
    
    
    
    
    
    
    
    
    
    
    
    179,789Provision for losses on
mortgage loans held for
investment
    
    
    (29,025
    )
    
    
    1,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,825
    )Net interest income after
provision for losses
    
    
    85,879
    
    
    
    14,081
    
    
    
    46,057
    
    
    
    5,947
    
    
    
    
    
    
    
    
    
    
    
    151,964Other operating income:Gain on sale of mortgage loans
    
    
    
    
    
    
    
    
    
    
    188,517
    
    
    
    75,791
    
    
    
    
    
    
    
    (134,781
    )
    
    
    129,527Servicing & other income
    
    
    8,861
    
    
    
    
    
    
    
    (92
    )
    
    
    (800
    )
    
    
    22,304
    
    
    
    
    
    
    
    30,273Total other operating income
    
    
    8,861
    
    
    
    
    
    
    
    188,425
    
    
    
    74,991
    
    
    
    22,304
    
    
    
    (134,781
    )
    
    
    159,800Operating expenses:
    
    
    8,635
    
    
    
    
    
    
    
    115,664
    
    
    
    79,457
    
    
    
    (7,667
    )
    
    
    
    
    
    
    196,089Earnings before income taxes
    
    $
    86,105
    
    
    
    14,081
    
    
    
    118,818
    
    
    
    1,481
    
    
    
    29,971
    
    
    
    (134,781
    )
    
    
    115,675Funding volume
    
    $
    
    
    
    
    
    
    
    
    11,360,623
    
    
    
    2,058,469
    
    
    
    
    
    
    
    
    
    
    
    13,419,092Securitizations structured as
financings
    
    $
    1,678,678
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,678,678Total assets at March 31, 2006
    
    $
    15,433,734
    
    
    
    2,079,402
    
    
    
    6,222,014
    
    
    
    1,127,387
    
    
    
    
    
    
    
    (41,355
    )
    
    
    24,821,182
 27




---



##### Table of Contents



Three Months Ended March 31, 2005REIT &Qualified
    
    
    Taxable REIT SubsidiaryREIT
    
    
    
    
    
    
    Mortgage Loan OperationsSubsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ServicingPortfolio
    
    
    Portfolio
    
    
    Wholesale
    
    
    Retail
    
    
    and Other
    
    
    Eliminations
    
    
    ConsolidatedInterest income
    
    $
    186,672
    
    
    
    65,012
    
    
    
    70,264
    
    
    
    9,123
    
    
    
    
    
    
    
    
    
    
    
    331,071Interest expense
    
    
    (79,147
    )
    
    
    (38,573
    )
    
    
    (39,263
    )
    
    
    (5,098
    )
    
    
    
    
    
    
    
    
    
    
    (162,081
    )Net interest income
    
    
    107,525
    
    
    
    26,439
    
    
    
    31,001
    
    
    
    4,025
    
    
    
    
    
    
    
    
    
    
    
    168,990Provision for losses on mortgage
loans held for investment
    
    
    (29,151
    )
    
    
    (1,087
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,238
    )Net interest income after
provision for losses
    
    
    78,374
    
    
    
    25,352
    
    
    
    31,001
    
    
    
    4,025
    
    
    
    
    
    
    
    
    
    
    
    138,752Other operating income (loss):Gain on sale of mortgage loans
    
    
    
    
    
    
    
    
    
    
    172,974
    
    
    
    55,798
    
    
    
    
    
    
    
    (89,020
    )
    
    
    139,752Servicing & other income (loss)
    
    
    (9,343
    )
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    19,942
    
    
    
    
    
    
    
    10,595Total other operating income (loss)
    
    
    (9,343
    )
    
    
    
    
    
    
    172,970
    
    
    
    55,798
    
    
    
    19,942
    
    
    
    (89,020
    )
    
    
    150,347Operating expenses:
    
    
    4,966
    
    
    
    
    
    
    
    117,337
    
    
    
    53,059
    
    
    
    22,573
    
    
    
    
    
    
    
    197,935Earnings (losses) before income
taxes
    
    $
    64,065
    
    
    
    25,352
    
    
    
    86,634
    
    
    
    6,764
    
    
    
    (2,631
    )
    
    
    (89,020
    )
    
    
    91,164Funding volume
    
    $
    
    
    
    
    
    
    
    
    9,073,489
    
    
    
    1,178,078
    
    
    
    
    
    
    
    
    
    
    
    10,251,567Securitizations structured as
financings
    
    $
    2,991,324
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,991,324Total assets at March 31, 2005
    
    $
    15,040,584
    
    
    
    3,461,529
    
    
    
    2,871,840
    
    
    
    372,872
    
    
    
    
    
    
    
    (19,417
    )
    
    
    21,727,408
 28




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  The following discussion and analysis of our financial condition and results of operations should
be read in conjunction with our consolidated financial statements and related notes contained
elsewhere herein. As used herein, except where the context suggests otherwise, for time periods on
and after October 1, 2004, the terms the company, our, its, we, the group, and us refer
to New Century Financial Corporation and its consolidated subsidiaries and, for the time periods
before October 1, 2004, the terms the company, our, its, we, the group, and us mean New
Century TRS Holdings, Inc. and its consolidated subsidiaries.
 General
      Acquisition of RBC mortgage loan origination platform and acquisition of Access Lending operating
platform
   29




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##### Table of Contents



Executive Summary
    Overview
  REIT and TRS Mortgage Loan Portfolio
     30




---



##### Table of Contents



Originations and Sales
    Net interest income on mortgage loans held for sale
 Gain on sale of mortgage loans
 Loan origination or acquisition cost
  31




---



##### Table of Contents



Loan Originations and Purchases
      32




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##### Table of Contents



For the Three Months EndedMarch 31,2006
    
    
    2005Non-Prime
    
    

Prime
& Alt-A
    
    
    Total
    
    
    %
    
    
    Non-Prime
    
    
    %Wholesale
    
    $
    10,613,632
    
    
    
    746,991
    
    
    
    11,360,623
    
    
    
    84.7
    
    
    
    9,073,489
    
    
    
    88.5Retail
    
    
    927,424
    
    
    
    1,131,045
    
    
    
    2,058,469
    
    
    
    15.3
    
    
    
    1,178,078
    
    
    
    11.5Total originations and purchases
    
    
    11,541,056
    
    
    
    1,878,036
    
    
    
    13,419,092
    
    
    
    100.0
    
    
    
    10,251,567
    
    
    
    100.0Fixed-rate mortgages:15-30 year
    
    
    1,781,458
    
    
    
    1,162,846
    
    
    
    2,944,304
    
    
    
    21.9
    
    
    
    2,326,579
    
    
    
    22.7Interest-Only
    
    
    61,668
    
    
    
    
    
    
    
    61,668
    
    
    
    0.5
    
    
    
    
    
    
    
    40-Year
    
    
    493,767
    
    
    
    51,242
    
    
    
    545,009
    
    
    
    4.1
    
    
    
    
    
    
    
    Sub-total Fixed
    
    
    2,336,893
    
    
    
    1,214,088
    
    
    
    3,550,981
    
    
    
    26.5
    
    
    
    2,326,579
    
    
    
    22.7Adjustable-rate mortgages:Hybrid 30-year(1)
    
    
    2,963,896
    
    
    
    194,965
    
    
    
    3,158,861
    
    
    
    23.5
    
    
    
    5,183,419
    
    
    
    50.6Interest-Only
    
    
    1,505,641
    
    
    
    453,968
    
    
    
    1,959,609
    
    
    
    14.6
    
    
    
    2,741,569
    
    
    
    26.7Hybrid 40-year(1)
    
    
    4,734,626
    
    
    
    
    
    
    
    4,734,626
    
    
    
    35.3
    
    
    
    
    
    
    
    HELOC
    
    
    
    
    
    
    15,015
    
    
    
    15,015
    
    
    
    0.1
    
    
    
    
    
    
    
    Sub-total ARM
    
    
    9,204,163
    
    
    
    663,948
    
    
    
    9,868,111
    
    
    
    73.5
    
    
    
    7,924,988
    
    
    
    77.3Total originations and purchases
    
    
    11,541,056
    
    
    
    1,878,036
    
    
    
    13,419,092
    
    
    
    100.0
    
    
    
    10,251,567
    
    
    
    100.0Purchases
    
    
    4,764,856
    
    
    
    1,139,415
    
    
    
    5,904,271
    
    
    
    44.0
    
    
    
    3,623,957
    
    
    
    35.4Refinances:Cash-out refinances
    
    
    5,798,627
    
    
    
    203,798
    
    
    
    6,002,425
    
    
    
    44.7
    
    
    
    5,745,910
    
    
    
    56.0Rate/term refinances
    
    
    977,573
    
    
    
    534,823
    
    
    
    1,512,396
    
    
    
    11.3
    
    
    
    881,700
    
    
    
    8.6Total originations and purchases
    
    
    11,541,056
    
    
    
    1,878,036
    
    
    
    13,419,092
    
    
    
    100.0
    
    
    
    10,251,567
    
    
    
    100.0Full documentation
    
    
    6,076,154
    
    
    
    1,155,508
    
    
    
    7,231,662
    
    
    
    53.9
    
    
    
    5,199,064
    
    
    
    50.7Limited
documentation
    
    
    301,123
    
    
    
    
    
    
    
    301,123
    
    
    
    2.2
    
    
    
    568,930
    
    
    
    5.6Stated documentation
    
    
    5,163,779
    
    
    
    722,528
    
    
    
    5,886,307
    
    
    
    43.9
    
    
    
    4,483,573
    
    
    
    43.7Total originations and purchases
    
    $
    11,541,056
    
    
    
    1,878,036
    
    
    
    13,419,092
    
    
    
    100.0
    
    
    
    10,251,567
    
    
    
    100.0Average principal balance of loans originated and purchased
    
    $
    183
    
    
    
    175
    
    
    
    182
    
    
    
    
    
    
    
    180Weighted average FICO score of loans originated and purchased
    
    
    621
    
    
    
    710
    
    
    
    634
    
    
    
    
    
    
    
    627Percent of loans secured by first mortgages
    
    
    93.7
    %
    
    
    92.5
    %
    
    
    93.5
    %
    
    
    
    
    
    
    95.3
    %Weighted average loan-to-value ratio(2)
    
    
    81.4
    %
    
    
    77.8
    %
    
    
    80.9
    %
    
    
    
    
    
    
    81.0
    %Weighted average interest rates:Fixed-rate mortgages
    
    
    9.0
    %
    
    
    6.7
    %
    
    
    8.2
    %
    
    
    
    
    
    
    7.6
    %Adjustable-rate mortgages  initial rate
    
    
    8.3
    %
    
    
    6.0
    %
    
    
    8.2
    %
    
    
    
    
    
    
    7.1
    %Adjustable-rate mortgages  margin over index
    
    
    6.2
    %
    
    
    1.1
    %
    
    
    5.9
    %
    
    
    
    
    
    
    5.7
    %Total originations and purchases
    
    
    8.5
    %
    
    
    6.4
    %
    
    
    8.2
    %
    
    
    
    
    
    
    7.2
    %Percentage of loans originated in top two credit grades
    
    
    87.6
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    
    
    
    
    87.4
    %Percentage of loans originated in bottom two credit grades
    
    
    2.6
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    
    
    
    
    2.9
    %
 
 (1)
    
    Majority of hybrid product has a fixed rate for 2 or 3 years.(2)
    
    Weighted average LTV is the LTV of the first lien mortgages and combined LTV of the second lien mortgages. 33




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##### Table of Contents



Secondary Market Transactions
   Three Months Ended March 31,2006
    
    
    2005Amount
    
    
    % of Sales
    
    
    Amount
    
    
    % of SalesNon-prime whole loan sales
    
    $
    11,120,728
    
    
    
    74.1
    
    
    
    6,451,298
    
    
    
    67.8Prime and Alt-A whole loan sales
    
    
    2,119,800
    
    
    
    14.1
    
    
    
    
    
    
    
    Total premium sales
    
    
    13,240,528
    
    
    
    88.2
    
    
    
    6,451,298
    
    
    
    67.8Discounted whole loan sales
    
    
    91,367
    
    
    
    0.6
    
    
    
    65,566
    
    
    
    0.7Total sales
    
    
    13,331,895
    
    
    
    88.8
    
    
    
    6,516,864
    
    
    
    68.5Securitizations structured as financings
    
    
    1,678,678
    
    
    
    11.2
    
    
    
    2,991,324
    
    
    
    31.5Total secondary market transactions
    
    $
    15,010,573
    
    
    
    100.0
    
    
    
    9,508,188
    
    
    
    100.0
 Whole Loan Sales
   Securitizations Structured as Financings
  34




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##### Table of Contents



Securitizations Structured as Sales
     Discounted Loan Sales
  Critical Accounting Policies
   Allowance for Losses on Mortgage Loans Held for Investment
  35




---



##### Table of Contents



Residual Interests in Securitizations
       Allowance for Repurchase Losses
  36




---



##### Table of Contents



Balance, beginning of year
    
    $
    6,955Provision for repurchase losses
    
    
    3,202Charge-offs, net
    
    
    (1,232
    )Balance, end of year
    
    $
    8,925
 Gain on Sale of Loans
   Income Taxes
   Derivative Instruments Designated as Hedges
  37




---



##### Table of Contents



Securitizations Structured as Financings
   Results of Operations
   Three Months Ended March 31,2006
    
    
    2005Interest income:Net interest income
    
    $
    179,789
    
    
    
    57.67
    %
    
    
    168,990
    
    
    
    58.45
    %Provision for losses on mortgage loans held for investment
    
    
    (27,825
    )
    
    
    (8.93
    )%
    
    
    (30,238
    )
    
    
    (10.46
    )%Other operating income:Gain on sale of mortgage loans
    
    
    129,527
    
    
    
    41.55
    %
    
    
    139,752
    
    
    
    48.34
    %Servicing income
    
    
    15,642
    
    
    
    5.02
    %
    
    
    6,722
    
    
    
    2.33
    %Other income
    
    
    14,631
    
    
    
    4.69
    %
    
    
    3,873
    
    
    
    1.34
    %Total net interest income and other operating income
    
    
    311,764
    
    
    
    100.00
    %
    
    
    289,099
    
    
    
    100.00
    %Total operating expenses
    
    
    196,089
    
    
    
    62.90
    %
    
    
    197,935
    
    
    
    68.47
    %Earnings before income taxes
    
    
    115,675
    
    
    
    37.10
    %
    
    
    91,164
    
    
    
    31.53
    %Income taxes
    
    
    11,940
    
    
    
    3.83
    %
    
    
    6,404
    
    
    
    2.22
    %Net earnings
    
    $
    103,735
    
    
    
    33.27
    %
    
    
    84,760
    
    
    
    29.31
    %Basic earnings per share
    
    $
    1.82
    
    
    
    
    
    
    
    1.55Diluted earnings per share
    
    $
    1.79
    
    
    
    
    
    
    
    1.48Basic weighted average shares outstanding
    
    
    55,519,570
    
    
    
    
    
    
    
    54,779,457Diluted weighted average shares outstanding
    
    
    56,695,269
    
    
    
    
    
    
    
    57,266,628
 38




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##### Table of Contents



Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005
 Originations and Purchases
  For the Three Months Ended March 31, 2006
    
    
    For the Three Months Ended March 31, 2005Wholesale
    
    
    Retail
    
    
    Total
    
    
    %
    
    
    Wholesale
    
    
    Retail
    
    
    Total
    
    
    %Non-Prime
    
    $
    10,613,632
    
    
    
    927,424
    
    
    
    11,541,056
    
    
    
    86.0
    
    
    
    9,073,489
    
    
    
    1,178,078
    
    
    
    10,251,567
    
    
    
    100.0Prime & Alt-A
    
    
    746,991
    
    
    
    1,131,045
    
    
    
    1,878,036
    
    
    
    14.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total originations
and purchases
    
    
    11,360,623
    
    
    
    2,058,469
    
    
    
    13,419,092
    
    
    
    100.0
    
    
    
    9,073,489
    
    
    
    1,178,078
    
    
    
    10,251,567
    
    
    
    100.0Fixed-rate mortgages:15-30 year
    
    
    1,987,968
    
    
    
    956,336
    
    
    
    2,944,304
    
    
    
    21.9
    
    
    
    1,807,991
    
    
    
    518,588
    
    
    
    2,326,579
    
    
    
    22.7Interest-Only
    
    
    58,123
    
    
    
    3,545
    
    
    
    61,668
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40-Year
    
    
    415,856
    
    
    
    129,153
    
    
    
    545,009
    
    
    
    4.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sub-total Fixed
    
    
    2,461,947
    
    
    
    1,089,034
    
    
    
    3,550,981
    
    
    
    26.5
    
    
    
    1,807,991
    
    
    
    518,588
    
    
    
    2,326,579
    
    
    
    22.7Adjustable-rate mortgages:Hybrid
30-year(1)
    
    
    2,877,080
    
    
    
    281,781
    
    
    
    3,158,861
    
    
    
    23.5
    
    
    
    4,663,923
    
    
    
    519,496
    
    
    
    5,183,419
    
    
    
    50.6Interest-Only
    
    
    1,652,296
    
    
    
    307,313
    
    
    
    1,959,609
    
    
    
    14.6
    
    
    
    2,601,575
    
    
    
    139,994
    
    
    
    2,741,569
    
    
    
    26.7Hybrid
40-year(1)
    
    
    4,364,427
    
    
    
    370,199
    
    
    
    4,734,626
    
    
    
    35.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    HELOC
    
    
    4,873
    
    
    
    10,142
    
    
    
    15,015
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sub-total ARM
    
    
    8,898,676
    
    
    
    969,435
    
    
    
    9,868,111
    
    
    
    73.5
    
    
    
    7,265,498
    
    
    
    659,490
    
    
    
    7,924,988
    
    
    
    77.3Total originations
and purchases
    
    
    11,360,623
    
    
    
    2,058,469
    
    
    
    13,419,092
    
    
    
    100.0
    
    
    
    9,073,489
    
    
    
    1,178,078
    
    
    
    10,251,567
    
    
    
    100.0Purchases
    
    
    4,974,691
    
    
    
    929,580
    
    
    
    5,904,271
    
    
    
    44.0
    
    
    
    3,577,496
    
    
    
    46,461
    
    
    
    3,623,957
    
    
    
    35.4Refinances:Cash-out refinances
    
    
    5,286,832
    
    
    
    715,593
    
    
    
    6,002,425
    
    
    
    44.7
    
    
    
    4,803,404
    
    
    
    942,506
    
    
    
    5,745,910
    
    
    
    56.0Rate/term refinances
    
    
    1,099,100
    
    
    
    413,296
    
    
    
    1,512,396
    
    
    
    11.3
    
    
    
    692,589
    
    
    
    189,111
    
    
    
    881,700
    
    
    
    8.6Total originations
and purchases
    
    
    11,360,623
    
    
    
    2,058,469
    
    
    
    13,419,092
    
    
    
    100.0
    
    
    
    9,073,489
    
    
    
    1,178,078
    
    
    
    10,251,567
    
    
    
    100.0Full documentation
    
    
    5,817,219
    
    
    
    1,414,443
    
    
    
    7,231,662
    
    
    
    53.9
    
    
    
    4,382,552
    
    
    
    816,512
    
    
    
    5,199,064
    
    
    
    50.7Limited documentation
    
    
    275,737
    
    
    
    25,386
    
    
    
    301,123
    
    
    
    2.2
    
    
    
    506,255
    
    
    
    62,675
    
    
    
    568,930
    
    
    
    5.6Stated documentation
    
    
    5,267,667
    
    
    
    618,640
    
    
    
    5,886,307
    
    
    
    43.9
    
    
    
    4,184,682
    
    
    
    298,891
    
    
    
    4,483,573
    
    
    
    43.7Total originations
and purchases
    
    $
    11,360,623
    
    
    
    2,058,469
    
    
    
    13,419,092
    
    
    
    100.0
    
    
    
    9,073,489
    
    
    
    1,178,078
    
    
    
    10,251,567
    
    
    
    100.0Average principal balance of loans originated and purchased
    
    $
    188
    
    
    
    157
    
    
    
    182
    
    
    
    
    
    
    
    185
    
    
    
    147
    
    
    
    180Weighted average FICO score of loans originated and purchased
    
    
    628
    
    
    
    664
    
    
    
    634
    
    
    
    
    
    
    
    630
    
    
    
    610
    
    
    
    627Weighted
average loan-to-value ratio(2)
    
    
    81.2
    %
    
    
    79.4
    %
    
    
    80.9
    %
    
    
    
    
    
    
    81.3
    %
    
    
    78.5
    %
    
    
    81.0
    %Weighted average interest rates:Fixed-rate mortgages
    
    
    8.7
    %
    
    
    7.0
    %
    
    
    8.2
    %
    
    
    
    
    
    
    7.8
    %
    
    
    6.9
    %
    
    
    7.6
    %Adjustable-rate mortgages  initial rate
    
    
    8.3
    %
    
    
    7.5
    %
    
    
    8.2
    %
    
    
    
    
    
    
    7.1
    %
    
    
    7.1
    %
    
    
    7.1
    %Adjustable-rate mortgages  margin over index
    
    
    6.0
    %
    
    
    4.3
    %
    
    
    5.9
    %
    
    
    
    
    
    
    5.7
    %
    
    
    5.8
    %
    
    
    5.7
    %Total originations
    
    
    8.4
    %
    
    
    7.2
    %
    
    
    8.2
    %
    
    
    
    
    
    
    7.2
    %
    
    
    7.0
    %
    
    
    7.2
    %and purchases
 
 (1)
    
    Majority of hybrid product has a fixed rate for 2 or 3 years.(2)
    
    Weighted average LTV is the LTV of the first lien mortgages and combined LTV of the second lien mortgages. 39




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##### Table of Contents



Secondary Market Transactions
  Interest Income
  Interest Expense
  Net Interest Spread/Income
   
    
    the average balance of our mortgage loans held for investment, held for sale, cash,
and the liabilities financing our assets;
    
    the average interest rates earned or paid;
    
    the actual amount of interest income and expense; and
    
    the overall interest margin earned on our balance sheet.
 40




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##### Table of Contents



Three Months Ended March 31,2006
    
    
    2005Average
    
    
    Avg.
    
    
    
    
    
    
    Average
    
    
    Avg.Balance
    
    
    Yield
    
    
    Income
    
    
    Balance
    
    
    Yield
    
    
    IncomeInterest-earning assets:Mortgage
loans held for investment(1)
    
    $
    16,442,220
    
    
    
    7.05
    %
    
    $
    289,632
    
    
    $
    14,123,033
    
    
    
    7.01
    %
    
    $
    247,660Mortgage loans held for sale
    
    
    8,334,444
    
    
    
    7.88
    
    
    
    164,212
    
    
    
    4,602,143
    
    
    
    6.62
    
    
    
    76,199Residual interests in securitizations
    
    
    229,481
    
    
    
    12.74
    
    
    
    7,307
    
    
    
    146,289
    
    
    
    11.00
    
    
    
    4,024Cash and investments
    
    
    874,812
    
    
    
    0.85
    
    
    
    1,851
    
    
    
    887,138
    
    
    
    1.44
    
    
    
    3,188Total
    
    $
    25,880,957
    
    
    
    7.16
    %
    
    $
    463,002
    
    
    $
    19,758,603
    
    
    
    6.70
    %
    
    $
    331,071
 Average
    
    
    Avg.
    
    
    
    
    
    
    Average
    
    
    Avg.Balance
    
    
    Cost
    
    
    Expense
    
    
    Balance
    
    
    Cost
    
    
    ExpenseInterest-bearing liabilities:Financing on mortgage loans held for
investment(2)
    
    $
    16,002,322
    
    
    
    4.23
    %
    
    $
    169,154
    
    
    $
    14,011,668
    
    
    
    3.36
    %
    
    $
    117,720Credit facilities
    
    
    8,024,095
    
    
    
    5.35
    
    
    
    107,374
    
    
    
    4,562,971
    
    
    
    3.70
    
    
    
    42,206Convertible senior notes
    
    
    1,667
    
    
    
    14.16
    
    
    
    59
    
    
    
    5,500
    
    
    
    4.58
    
    
    
    63Notes payable
    
    
    36,142
    
    
    
    7.20
    
    
    
    651
    
    
    
    36,072
    
    
    
    4.52
    
    
    
    408Other
interest(3)
    
    
    
    
    
    
    
    
    
    
    5,975
    
    
    
    
    
    
    
    
    
    
    
    1,684Total
    
    $
    24,064,226
    
    
    
    4.71
    
    
    
    283,213
    
    
    $
    18,616,211
    
    
    
    3.48
    
    
    
    162,081Net interest spread/income
    
    
    
    
    
    
    2.45
    %
    
    $
    179,789
    
    
    
    
    
    
    
    3.22
    %
    
    $
    168,990
 
 (1)
    
    Includes impact of prepayment penalty income of
$24.1 million and $15.8 million for the three months ended
March 31, 2006 and 2005, respectively.(2)
    
    Includes impact of derivative instruments accounted for as hedges of $39.6 million and $6.6 million for the
three months ended March 31, 2006 and 2005, respectively.(3)
    
    Other interest is comprised of interest related costs associated with our servicing operation. Provision for losses on mortgage loans held for investment
   Three Months EndedMarch 31,2006
    
    
    2005Balance,
beginning of period
    
    $
    198,131
    
    
    
    90,227Additions
    
    
    27,825
    
    
    
    30,238Charge-offs,
net
    
    
    (16,152
    )
    
    
    (2,970
    )Balance, end
of period
    
    $
    209,804
    
    
    
    117,495
 41




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##### Table of Contents



Non-Performing Assets
  Other Operating Income
 Gain on sale
 Three Months EndedMarch 31,2006
    
    
    2005Cash gain from whole loan sale transactions
    
    $
    193,438
    
    
    
    178,006Non-cash gain from servicing rights related to whole loan sales
    
    
    706
    
    
    
    7,164Fair value adjustment of residual securities
    
    
    (32,078
    )
    
    
    (1,330
    )Provision for repurchase losses
    
    
    (3,202
    )
    
    
    (548
    )Non-refundable fees (1)
    
    
    78,515
    
    
    
    57,725Premiums paid (2)
    
    
    (53,404
    )
    
    
    (73,221
    )Origination costs
    
    
    (75,700
    )
    
    
    (36,600
    )Derivative
gains
    
    
    21,252
    
    
    
    8,556Gain on sale of mortgage loans
    
    $
    129,527
    
    
    
    139,752
 
 (1)
    
    Non-refundable loan fees represent points and fees collected from borrowers.(2)
    
    Premiums paid represent fees paid to brokers for wholesale loan originations and purchases. Servicing
Income-
  Other Income-
 42




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##### Table of Contents



Other Operating Expenses
  Three Months EndedMarch 31,2006
    
    
    2005Operating expenses:Personnel
    
    $
    116,721
    
    
    
    128,522General and administrative
    
    
    57,475
    
    
    
    41,775Advertising and promotion
    
    
    12,703
    
    
    
    19,832Professional services
    
    
    9,190
    
    
    
    7,806Total operating expenses
    
    $
    196,089
    
    
    
    197,935
   43




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##### Table of Contents



Three Months EndedMarch 31,2006
    
    
    2005Average workforce:Subprime lending
    
    
    4,069
    
    
    
    4,144Prime/Alt-A lending
    
    
    1,641
    
    
    
    Servicing division
    
    
    463
    
    
    
    314Corporate administration
    
    
    933
    
    
    
    927Average workforce
    
    
    7,106
    
    
    
    5,385
 Income Taxes
  Liquidity and Capital Resources
 Credit Facilities
     Asset-backed commercial paper facility.
 Bank of America line of credit.
 44




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##### Table of Contents



Bank of America line of credit.
 Barclays line of credit.
 Bear Stearns line of credit.
 Citigroup warehouse line of credit.
 Citigroup aggregation line of credit.
 Citigroup line of credit for delinquent and problem loans.
 Credit Suisse First Boston line of credit.
 Deutsche Bank line of credit.
 IXIS line of credit.
 Morgan Stanley line of credit.
 UBS Real Estate Securities line of credit.
 45




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##### Table of Contents



Goldman Sachs Mortgage line of credit.
 State Street Bank line of credit.
 Guaranty Bank line of credit.
 First Collateral Services line of credit.
 Convertible Senior Notes
  Preferred Stock
  Securitizations Structured as Financings
   Other Borrowings
  46




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##### Table of Contents



Off-Balance Sheet Arrangements
   Contractual Obligations
   Payment Due By PeriodLess Than
    
    1 to 3
    
    3 to 5
    
    More ThanTotal
    
    1 Year
    
    Years
    
    Years
    
    5 YearsNotes payable
    
    $
    33,438
    
    
    
    20,030
    
    
    
    13,408
    
    
    
    
    
    
    
    Operating leases
    
    
    181,161
    
    
    
    33,335
    
    
    
    63,571
    
    
    
    39,185
    
    
    
    45,070Credit facilities on mortgage loans held for sale
    
    
    6,169,194
    
    
    
    6,169,194
    
    
    
    
    
    
    
    
    
    
    
    Financing on mortgage loans held for investment
    
    
    15,948,873
    
    
    
    6,538,651
    
    
    
    5,106,417
    
    
    
    2,208,127
    
    
    
    2,095,678
 Stock Repurchases
    47




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##### Table of Contents



Cash Flow
     Liquidity Strategy
    48




---



##### Table of Contents



Quarterly Dividend
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 General
   As of March 31, 2006:
 Hypothetical Change in Interest Rate (basis points)
    
    + 50
    
    
    + 100
    
    
     50
    
    
     100Change in fair value of residual interests in securitizations
    
    $
    (12,382
    )
    
    
    (24,161
    )
    
    
    13,090
    
    
    
    25,582Change in fair value of derivatives related to residual interests in securitizations
    
    
    11,000
    
    
    
    22,000
    
    
    
    (11,000
    )
    
    
    (22,000
    )Change in fair value of mortgage loans held for investment
    
    
    (67,583
    )
    
    
    (135,904
    )
    
    
    69,784
    
    
    
    145,530Change in fair value of derivatives related to mortgage loans held for investment
    
    
    62,175
    
    
    
    124,350
    
    
    
    (62,175
    )
    
    
    (124,350
    )Net change
    
    $
    (6,790
    )
    
    
    (13,715
    )
    
    
    9,699
    
    
    
    24,762
 As of December 31, 2005:
 Hypothetical Change in Interest Rate (basis points)
    
    + 50
    
    
    + 100
    
    
     50
    
    
     100Change in fair value of residual interests in securitizations
    
    $
    (15,440
    )
    
    
    (30,801
    )
    
    
    14,457
    
    
    
    28,716Change in fair value of derivatives related to residual interests in securitizations
    
    
    12,913
    
    
    
    25,825
    
    
    
    (12,913
    )
    
    
    (25,825
    )Change in fair value of mortgage loans held for investment
    
    
    (86,166
    )
    
    
    (169,337
    )
    
    
    89,367
    
    
    
    176,368Change in fair value of derivatives related to mortgage loans held for investment
    
    
    82,038
    
    
    
    164,075
    
    
    
    (82,038
    )
    
    
    (164,075
    )Net change
    
    $
    (6,655
    )
    
    
    (10,238
    )
    
    
    8,873
    
    
    
    15,184
 49




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##### Table of Contents



Item 4. Controls and Procedures
  50




---



##### Table of Contents



PART IIOTHER INFORMATION
 
 Item 1. Legal Proceedings
  Overman
 England
 DOL Investigation
 Rubio
 51




---



##### Table of Contents



Bonner
 Phillips
 Jeppesen
 Forrest
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 6. Exhibits
  52




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##### Table of Contents



SIGNATURES
  NEW CENTURY FINANCIAL CORPORATIONDATE: May 10, 2006
    By:
    /s/ Robert K. ColeRobert K. ColeChairman and Chief Executive Officer DATE: May 10, 2006
    By:
    /s/ Patti M. DodgePatti M. DodgeExecutive Vice President and Chief Financial Officer DATE: May 10, 2006
    By:
    /s/ Brad A. MorriceBrad A. MorriceVice Chairman, President and Chief Operating Officer 53




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description of Document2.1
    
    Agreement and Plan of Merger, dated as of April 21, 2004, by and
among New Century TRS Holdings, Inc. (f/k/a New Century Financial
Corporation), New Century Financial Corporation (f/k/a New Century
REIT, Inc.) and NC Merger Sub, Inc.(1)3.1
    
    Articles of Amendment and Restatement of New Century Financial
Corporation.(2)3.2
    
    Certificate of Correction to the Articles of Amendment and
Restatement of New Century Financial Corporation, dated as of
January 13, 2006 and filed with the State Department of Assessments
and Taxation of the State of Maryland on January 20, 2006.(8)3.3
    
    Articles Supplementary of New Century Financial Corporation.(3)3.4
    
    Articles Supplementary of New Century Financial Corporation
relating to 9.125% Series A Cumulative Redeemable Preferred Stock,
liquidation preference $25.00 per share.(4)3.5
    
    Amended and Restated Bylaws of New Century Financial Corporation.(2)3.6
    
    Second Amended and Restated Bylaws of New Century Financial
Corporation.(5)3.7
    
    Third Amended and Restated Bylaws of New Century Financial
Corporation.(7)4.1
    
    Specimen Certificate for New Century Financial Corporations Common
Stock.(6)10.1
    
    Amended and Restated Employment Agreement, dated as of March 29,
2006, between New Century Financial Corporation and Brad A.
Morrice.(9)*10.2
    
    Amended and Restated Employment Agreement, dated as of March 29,
2006, between New Century Financial Corporation and Robert K.
Cole.(9)*10.3
    
    Amended and Restated Employment Agreement, dated as of March 29,
2006, between New Century Financial Corporation and Edward F.
Gotschall.(9)*10.4
    
    New Century Financial Corporation 2006 Supplemental Executive
Retirement Plan.(9)*10.5
    
    Master Repurchase Agreement, dated as of March 31, 2006, by and
among New Century Mortgage Corporation, NC Capital Corporation, New
Century Credit Corporation, Home123 Corporation, NC Asset Holding,
L.P., New Century Financial Corporation, Barclays Bank PLC and
Sheffield Receivables Corporation.(10)10.6
    
    Guaranty, dated as of March 31, 2006, by New Century Financial
Corporation in favor of Barclays Bank PLC and Sheffield Receivables
Corporation. (10)10.7
    
    Amendment Number Three to Second Amended and Restated Master Loan
and Security Agreement, dated as of March 24, 2006, among New
Century Mortgage Corporation, NC Capital Corporation, New Century
Financial Corporation and Citigroup Global Markets Realty Corp.10.8
    
    Amendment No. 2 to Master Repurchase Agreement, dated as of March
30, 2006, by and among New Century Mortgage Corporation, NC Capital
Corporation, New Century Credit Corporation, Home123 Corporation,
NC Asset Holding, L.P. (as successor by conversion to NC Residual
II Corporation), Morgan Stanley Bank and Morgan Stanley Mortgage
Capital Inc.
 54




---



##### Table of Contents



ExhibitNumber
    
    Description of Document10.9
    
    Amendment Number One to Master Repurchase Agreement, dated as of
April 13, 2006, by and among NC Capital Corporation, New Century
Credit Corporation, Home123 Corporation, New Century Mortgage
Corporation, New Century Financial Corporation and Bank of America,
N.A.10.10
    
    Amendment No. 3 to Master Repurchase Agreement, dated as of April
19, 2006, by and among New Century Mortgage Corporation, NC Capital
Corporation, New Century Credit Corporation, Home123 Corporation,
NC Asset Holding, L.P. (as successor by conversion to NC Residual
II Corporation), Morgan Stanley Bank and Morgan Stanley Mortgage
Capital Inc.10.11
    
    Amendment Number Two to Master Repurchase Agreement, dated as of
April 26, 2006, by and among NC Capital Corporation, New Century
Credit Corporation, Home123 Corporation, New Century Mortgage
Corporation, New Century Financial Corporation and Bank of America,
N.A.10.12
    
    Amendment No. 5 to Master Repurchase Agreement, dated as of April
27, 2006, by and among New Century Financial Corporation, NC
Capital Corporation, New Century Credit Corporation, New Century
Mortgage Corporation, NC Asset Holding, L.P., Home123 Corporation,
New Century Mortgage Ventures, LLC, Loan Partners Mortgage, Ltd.,
Kingston Mortgage Company, Ltd., Compufund Mortgage Company, Ltd.,
WRT Financial Limited Partnership, Peachtree Residential Mortgage,
L.P., Residential Prime Lending Limited Partnership, Team Home
Lending, Ltd., Sutter Buttes Mortgage, L.P., Midwest Home Mortgage
Ltd., Austin Mortgage, L.P., Capital Pacific Home Loans, L.P.,
Golden Oak Mortgage, L.P., scFinance, L.P., Ad Astra Mortgage, Ltd.
and Credit Suisse First Boston Mortgage Capital LLC.10.13
    
    Amendment Number Fifteen to the Master Repurchase Agreement, dated
as of April 28, 2006, by and between New Century Funding SB-1 and
Citigroup Global Markets Realty Corp.10.14
    
    Amendment Number Four to Second Amended and Restated Master Loan
and Security Agreement, dated as of April 28, 2006, among New
Century Mortgage Corporation, NC Capital Corporation, New Century
Financial Corporation and Citigroup Global Markets Realty Corp.10.15
    
    Amendment Number Eleven to the Amended and Restated Letter
Agreement, dated as of April 28, 2006, by and among New Century
Mortgage Corporation, NC Capital Corporation, New Century Credit
Corporation and Citigroup Global Markets Realty Corp.31.1
    
    Certification of Robert K. Cole pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Brad A. Morrice pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.3
    
    Certification of Patti M. Dodge pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
 55




---



##### Table of Contents



ExhibitNumber
    
    Description of Document32.1
    
    Certification of Robert K. Cole pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.32.2
    
    Certification of Brad A. Morrice pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.32.3
    
    Certification of Patti M. Dodge pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 
 *
    
    Management contract or compensatory plan or arrangement.
    
    Filed herewith.(1)
    
    Incorporated by reference from our Registration Statement on Form S-3, as filed with the
Securities and Exchange Commission on April 22, 2004.(2)
    
    Incorporated by reference from our Quarterly Report on Form 10-Q, as filed with the
Securities and Exchange Commission on November 9, 2004.(3)
    
    Incorporated by reference from our Current Report on Form 8-K, as filed with the Securities
and Exchange Commission on October 1, 2004.(4)
    
    Incorporated by reference from our Current Report on Form 8-K, as filed with the Securities
and Exchange Commission on June 21, 2005.(5)
    
    Incorporated by reference from our Current Report on Form 8-K, as filed with the Securities
and Exchange Commission on August 8, 2005.(6)
    
    Incorporated by reference to the joint filing of New Century Financial Corporations Form S-3
Registration Statement (333-119753) and New Century TRS Holdings, Inc.s Post-Effective
Amendment No. 3 to the Registration Statement (No. 333-109727) on Form S-3, as filed with the
Securities and Exchange Commission on October 14, 2004.(7)
    
    Incorporated by reference from our Current Report on Form 8-K, as filed with the Securities
and Exchange Commission on October 31, 2005.(8)
    
    Incorporated by reference from our Current Report Form 8-K, as filed with the Securities and
Exchange Commission on January 20, 2006.(9)
    
    Incorporated by reference from our Current Report Form 8-K, as filed with the Securities and
Exchange Commission on April 4, 2006.(10)
    
    Incorporated by reference from our Current Report Form 8-K, as filed with the Securities and
Exchange Commission on April 6, 2006. 56