| Delaware (State or other jurisdiction of incorporation) | 1-8422 (Commission File Number) | 13-2641992 (IRS Employer Identification No.) |
| 4500 PARK GRANADA, CALABASAS CA (Address of principal executive offices) | 91302 (Zip Code) |
Registrant's telephone number, including area code: (818) 225-3000
On July 22, 2004, Countrywide Financial Corporation issued a press release announcing information regarding its operations and financial condition for the quarter period ended June 30, 2004.
A copy of the press release is attached as an Exhibit. (Exhibit 99.16)
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf of the undersigned hereunto duly authorized.
| COUNTRYWIDE FINANCIAL CORPORATION |
| Dated: July 22, 2004 | By: /S/ STANFORD L. KURLAND Stanford L. Kurland President and Chief Operating Officer |
| Exhibit No. | Description |
| 99.16 | Press Release issued by Countrywide Financial Corporation pertaining to its results of operations and financial condition for the quarter period ended June 30, 2004. |
| NEWS | COUNTRYWIDE FINANCIAL |
| INVESTOR CONTACT: | (818) 225-3550 David Bigelow Lisa Riordan |
| MEDIA CONTACT: | (800) 796-8448 |
For Immediate Release
CALABASAS, CA (July 22, 2004) – Countrywide Financial Corporation (NYSE: CFC), a diversified financial services provider, today announced results for the second quarter and six months ended June 30, 2004. Second quarter highlights include the following:
Six month highlights include the following:
“During a quarter with transitional market conditions, Countrywide delivered solid results,” said Angelo R. Mozilo, Chairman and Chief Executive Officer. “Diluted earnings per share were $2.24, our second best quarter on record. This demonstrates Countrywide’s ability to execute its strategic plan, prudently manage risk, and right size its operational infrastructure in the midst of a volatile interest rate environment.
“In Mortgage Banking, we continue to focus on our market position. Based on recent financial data released by our major competitors, Countrywide appears to have maintained the #1 market position in originations during the second quarter. Countrywide was ranked #1 in the previous two quartersaccording to data reported byInside Mortgage Finance. This surge in production helped us maintain an excellent trend in our servicing portfolio with growth of $43 billion during the quarter, which equates to an annualized growth rate of 25 percent.
“On the Loan Production side, the overall pre-tax margin remained strong for the second quarter at 94 basis points, which compares to 100 basis points for the same quarter a year ago. This margin is below the extraordinary level of 140 basis points achieved in the first quarter of 2004. The decline in margin from the first quarter was primarily attributable to a reduction in margin on subprime loans. Subprime gain on sale margin was 290 basis points (based on volume of loans sold) in the current quarter versus 555 basis points in the first quarter. The reduction in subprime margin was due to increased pricing competition and to less favorable secondary market execution. Looking forward, we expect the gain on sale margin of subprime loans to improve to a level of 350 to 400 basis points. Notably, on a consolidated basis, we originated $4.4 billion more in loans than were sold during the second quarter.
“Turning to the Loan Servicing side, we achieved robust portfolio growth of $43 billion in the second quarter. Countrywide accounts for its mortgage servicing rights (MSRs) on the basis of lower of cost or market. During the quarter, the MSRs appreciated in value by $2.2 billion. Recovery of previous MSR impairment of $1.4 billion was recorded, offset by a decline in the MSR hedge position of $1.2 billion and impairment of other retained interests. The net impact on pre-tax earnings was a $30 million net recovery. The difference between the appreciation in value, $2.2 billion, and the recognized MSR recovery, $1.4 billion, was an unrecognized increase in MSR value of $810 million for the second quarter. At the end of the second quarter, the MSRs’ estimated fair value exceeded book value by $856 million. For the quarter, our Loan Servicing sector earned $25 million on a pre-tax basis, which compares to a loss of $836 million for the second quarter of 2003, an improvement of $861 million.
“Pre-tax earnings from Diversified Businesses rose 22 percent on a year-over-year basis from the second quarter of 2003. On a sequential basis, pre-tax earnings from diversified businesses were down 17 percent from the first quarter of 2004. This included a 13 percent gain from the Banking segment, which partially offset the 41 percent decline in Capital Markets profitability.
“Countrywide Bank continued its strong performance in the second quarter, with quarterly pre-tax earnings growth of 110 percent over last year. The Bank’s success validates the importance of our strategic entrance into this business – obtaining a source of stable earnings that is derived from interest income. The Bank also recently moved out of its regulatory de novo period, marking it as a mature institution with $27 billion in assets at June 30, 2004. During the quarter, we added 7 new financial centers, bringing our current total to 45. The expiration of the regulatory de novo period, in conjunction with ongoing strong performance of the Bank, will ultimately allow the Bank to transition to traditional regulatory capital requirements for mature institutions. Pre-tax earnings for the Banking segment -- which includes both Countrywide Bank and Countrywide Warehouse Lending, Inc. – advanced 77 percent for the second quarter over last year. Securities trading volume at Countrywide Securities Corporation increased by 9 percent over last year for the second quarter, aided by the launch of the U.S. Treasury business. Pre-tax earnings for the Capital Markets segment for the second quarter were down 22 percent from last year due to changing market conditions, which resulted in a decline in securities trading margins and reduced conduit activities. Going forward, we expect Capital Markets’ profitability to remain highly correlated with the overall mortgage market, moderated in the longer term by growth in our new business lines – U.S. Treasuries and Commercial Real Estate Finance. Profits from our other segments, Insurance and Global Operations, increased on a year-over-year basis.
“We remain optimistic about the future outlook for Countrywide and where our business lines are headed. In light of the Company’s continued increase in profitability, we increased the dividend to $0.20 per share, 33 percent higher than the first quarter of 2004. Today’s dividend declaration represents a 264 percent increase in the dividend from just two years ago. This marks the 8th time in the last 9 quarters the Company has increased the dividend.
“Looking ahead, we remain confident that 2004 will be an exemplary year for Countrywide,” Mozilo concluded. “Taking into account the robust results experienced in the first half of 2004, we are adjusting our 2004 full year guidance to a range of $7.50 to $8.50 per diluted share (excluding the effect of the pending 2-for-1 stock split to be effected as a stock dividend). This compares to the previous guidance of $7.00 to $8.25, which was reported at the time of the 2004 first quarter results.”
Key assumptions underlying the updated 2004 forecast include the following:
The earnings estimates and assumptions and other projections provided in this press release should be considered forward-looking statements and readers are directed to the information contained in the disclaimer provided herein.
Countrywide’s Board of Directors declared a cash dividend of $0.20 per common share, payable August 31, 2004 to stockholders of record on August 13, 2004.
Countrywide’s Mortgage Banking segment, which includes Loan Production, Loan Servicing, and Loan Closing Services, contributed 77 percent of consolidated pre-tax earnings for the second quarter. On a comparative basis, Mortgage Banking pre-tax earnings for the second quarter advanced 118 percent from the second quarter of 2003. The Loan Production sector is comprised of four distribution channels: consumer-direct lending through Countrywide Home Loans’ 500-branch retail system, telemarketing operations and the Internet; wholesale lending through a network of over 30,000 mortgage brokers; correspondent lending which buys loans from other financial institutions such as independent mortgage companies, banks, savings and loans, credit unions and insurance companies; and Full Spectrum Lending, Inc., a consumer-direct subprime lender with 133 branches.
The Loan Production sector generated $828 million in pre-tax earnings for the second quarter and $1.8 billion for the first half of 2004, which compares to $1.2 billion and $2.1 billion, respectively, for the comparable prior year periods. These declines are primarily the result of the industry-wide reduction in refinance volume that has taken place as a result of rising interest rates, as well as gain on sale margin compression in the subprime market during the second quarter of 2004.
The Loan Servicing sector reflects the performance of the MSRs associated with Countrywide’s owned-servicing portfolio and other retained interests. Since the MSRs perform optimally in higher interest rate environments, earnings from these assets act as a natural counter-balance against Loan Production earnings, which typically perform best in lower interest rate environments. In declining interest rate environments, Loan Production operations provide substantial incremental earnings to offset the effect of faster amortization and impairment of MSRs. Countrywide also manages a financial hedge within the Loan Servicing sector to further mitigate this impairment.
For the second quarter, the Loan Servicing sector recorded pre-tax earnings of $25 million, which compares favorably to a pre-tax loss of $836 million for the second quarter of 2003. During the current quarter, impairment recovery for MSRs, net of the servicing hedge loss and impairment of other retained interests, was $30 million versus net impairment of $804 million during the year-ago quarter. Impairment recovery of MSRs was a result of rising interest rates during the quarter. For the first six months of 2004, the Loan Servicing sector sustained net impairment of $293 million, which compares to net impairment of $1.5 billion in the year-ago period. The weighted average coupon on the Company’s servicing portfolio stands at 5.9 percent as of June 30, 2004, down from 6.4 percent one year earlier.
Loan Closing Services are offered through Countrywide’s LandSafe companies, which primarily provide credit reports, appraisals and flood determinations. The LandSafe companies’ pre-tax earnings were $23 million in the second quarter, which compares to $29 million earned during the second quarter last year. For the first six months of 2004, pre-tax earnings were $42 million, down from $55 million in the same period a year ago. The decline in pre-tax earnings was a result of the decline in year-over-year production volume.
Diversified Businesses include the operations of Capital Markets, Banking, Insurance and Global Operations, and accounted for 23 percent of consolidated pre-tax earnings for the second quarter of 2004. Earnings from Diversified Businesses in the aggregate grew 22 percent for the second quarter and 51 percent for the six months from the year-ago comparable periods.
The Banking segment includes the activities of Countrywide Bank and Countrywide Warehouse Lending, a provider of mortgage inventory financing to smaller mortgage bankers. The Bank is able to leverage Countrywide’s resources such as its superior asset-generating capabilities, servicing-related escrow balances, locations within the retail mortgage origination network (in which the Bank places its financial centers), and intellectual capabilities such as risk management. Countrywide Bank has also in-sourced certain bank-related services, such as custodial services, that were previously performed for Countrywide by third party banks. In addition, the Bank holds loans in portfolio, providing the consolidated company with a growing stream of net interest income. At June 30, 2004, total assets at Countrywide Bank reached $27 billion, compared to $13 billion at June 30, 2003, and were comprised of approximately 13 percent cash and investments, 84 percent mortgage and home equity loans, and 3 percent other assets. The Bank contributed 88 percent of the Banking segment’s total pre-tax earnings for the second quarter and six months of 2004. Countrywide Warehouse Lending had average loans outstanding of $3.8 billion during the quarter, a decrease of 13 percent from the second quarter of 2003, which was expected given the reduction in industry loan origination volume, but was up from the $2.8 billion in the first quarter of 2004. Overall, quarterly pre-tax earnings for the Banking segment were $119 million, increasing 77 percent from last year’s $67 million. For the six months, pre-tax earnings advanced 103 percent over the prior year period to $225 million.
The Capital Markets segment includes a securities broker-dealer, a broker of MSRs, a distressed-asset manager and a commercial real estate finance group. Earnings performance within this segment is primarily driven by the broker-dealer, Countrywide Securities Corporation, whose earnings represented 80 percent of Capital Markets’ total pre-tax earnings for the second quarter of 2004. Total revenues for Capital Markets in the second quarter were $162 million, with approximately 43 percent derived from conduit activities, 41 percent from underwriting, and 16 percent from securities trading, brokerage and other activities. This compares to total revenues of $169 million in the second quarter of 2003 with approximately 42 percent derived from conduit activities, 27 percent from underwriting, and 31 percent from securities trading, brokering and other. In total, pre-tax earnings for the Capital Markets segment were $90 million in the second quarter and $243 million for the six months. This compares to $115 million and $211 million, respectively, in the comparable year-ago periods.
Countrywide’s Insurance segment includes Balboa Life and Casualty Group, whose companies are national providers of property, life and liability insurance, and Balboa Reinsurance Company, a captive mortgage reinsurance company. For the second quarter, net premiums earned were $149 million at Balboa Life & Casualty and $39 million at Balboa Reinsurance, advancing 9 percent and 22 percent, respectively, from the year-ago periods. For the six months, net premiums earned were $307 million for Balboa Life & Casualty and $76 million for Balboa Reinsurance, up 10 percent and 27 percent, respectively, from the first six months of 2003. Pre-tax earnings for the Insurance segment were $49 million for the second quarter and $101 million for the first half of 2004. This compares to $37 million for second quarter of 2003, a gain of 31 percent, and $62 million for the first half last year, an increase of 63 percent.
The principal component of the Global Operations segment is Global Home Loans, the Company’s U.K. joint venture, organized to process loan originations and service loans on behalf of third parties. Today, Global Home Loans services over one million loans with outstanding balances of approximately $110 billion. Other companies included in the Global Operations segment engage in technology services and property valuation. Pre-tax earnings for the second quarter were $10 million, which compares to a loss of $0.2 million for the second quarter of 2003. For the six months, pre-tax earnings were $21 million for 2004 and $6 million for 2003.
Countrywide will host a live conference call to discuss quarterly results today at 12:00 pm EDT. The dial-in number for the live conference call is (888) 423-3280 (U.S.) or (612) 332-0820 (International). The management discussion will be available for replay through midnight EDT on Thursday, August 5, 2004. The replay dial-in numbers and access code are (800) 475-6701 (U.S.) / (320) 365-3844 (International) and 736583, respectively.
An accompanying slide presentation will be available on Countrywide’s website (www.countrywide.com), by clicking on “Investor Relations” on the website main page and clicking on the supporting slideshow text link for the Second Quarter 2004 earnings teleconference. Management strongly recommends that participants have access to this presentation while listening to the management discussion.
For more information about the Company, visit Countrywide’s website at www.countrywide.com.
Founded in 1969, Countrywide Financial Corporation is a member of the S&P 500, Forbes 2000 and Fortune 500. Through its family of companies, Countrywide provides mortgage banking and diversified financial services. Mortgage banking businesses include loan production and loan servicing principally through Countrywide Home Loans, Inc., which originates, purchases, securitizes, sells, and services primarily prime-quality loans. Also included in Countrywide’s mortgage banking segment is the LandSafe group of companies which provide loan closing services. Diversified financial services encompass capital markets, banking, insurance, and global operations, largely through the activities of Countrywide Capital Markets, a mortgage-related investment banker; Countrywide Bank, a division of Treasury Bank, N.A., a bank offering customers depository and home loan products; Balboa Life and Casualty Group, whose companies are national providers of property, liability, and life insurance; Balboa Reinsurance, a captive mortgage reinsurance company; and Global Home Loans, a U.K. mortgage banking joint venture in which Countrywide holds a majority interest.
This Press Release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management’s beliefs, estimates, projections, and assumptions with respect to, among other things, the Company’s future operations, business plans and strategies, as well as industry and market conditions, all of which are subject to change. Actual results and operations for any future period may vary materially from those projected herein and from past results discussed herein. Factors which could cause actual results to differ materially from historical results or those anticipated include, but are not limited to: competitive and general economic conditions in each of our business segments; general economic conditions in the United States and abroad; loss of investment grade rating that may result in an increase in the cost of debt or loss of access to corporate debt markets; reduction in government support of homeownership; the level and volatility of interest rates; interest rate paths; the legal, regulatory and legislative environments in the markets in which the Company operates; and other risks detailed in documents filed by the Company with the Securities and Exchange Commission from time to time. Words like “believe,” “expect,” “anticipate,” “promise,” “plan,” and other expressions or words of similar meanings, as well as future or conditional verbs such as “will,” “would,” “should,” “could,” or “may” are generally intended to identify forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements.
(tables follow)
Three Months Ended Six Months Ended
June 30, % June 30, %
---------------------------------- ----------------------------------
(In thousands, except per share data) 2004 2003 Change 2004 2003 Change
- ----------------------------------------------- --------------- -- --------------- --------- -- --------------- -- --------------- ---------
Revenues
Gain on sale of loans and securities $ 1,277,331 $ 1,710,927 (25%) $ 2,635,998 $ 3,063,497 (14%)
Interest income 1,074,326 805,167 33% 2,124,076 1,447,289 47%
Interest expense (575,778) (509,127) 13% (1,093,333) (923,256) 18%
--------------- --------------- --------------- ---------------
Net interest income 68% 97%
498,548 296,040 1,030,743 524,033
Provision for loan losses (19,747) (7,222) 173% (40,528) (14,825) 173%
--------------- --------------- --------------- ---------------
Net interest income after
provision for
loan losses 478,801 288,818 66% 990,215 509,208 94%
--------------- --------------- --------------- ---------------
Loan servicing fees and other income
from retained interests 802,632 692,910 16% 1,559,413 1,296,169 20%
Amortization of mortgage servicing
rights (569,977) (557,274) 2% (983,659) (919,774) 7%
Recovery (impairment) of retained
interests 1,179,127 (1,551,847) N/M 183,482 (2,214,260) N/M
Servicing hedge (losses) gains (1,149,451) 748,081 N/M (476,655) 754,442 N/M
--------------- --------------- --------------- ---------------
Net loan servicing fees and other
income from retained interests 262,331 (668,130) N/M 282,581 (1,083,423) N/M
--------------- --------------- --------------- ---------------
Net insurance premiums earned 187,252 168,183 11% 382,635 339,319 13%
Commissions and other income 127,389 128,517 (1%) 248,170 242,735 2%
--------------- --------------- --------------- ---------------
Total revenues 2,333,104 1,628,315 43% 4,539,599 3,071,336 48%
--------------- --------------- --------------- ---------------
Expenses
Compensation expenses 770,090 652,718 18% 1,450,754 1,232,629 18%
Occupancy and other office expenses 164,111 142,793 15% 331,982 270,335 23%
Insurance claim expenses 83,752 85,851 (2%) 168,427 173,949 (3%)
Other operating expenses 172,317 125,631 37% 321,642 248,533 29%
--------------- --------------- --------------- ---------------
Total expenses 1,190,270 1,006,993 18% 2,272,805 1,925,446 18%
--------------- --------------- --------------- ---------------
Earnings before income taxes 1,142,834 621,322 84% 2,266,794 1,145,890 98%
Provision for income taxes 443,211 238,461 86% 876,199 436,738 101%
--------------- --------------- --------------- ---------------
NET EARNINGS $ 699,623 $ 382,861 83% $ 1,390,595 $ 709,152 96%
=============== =============== =============== ===============
Earnings per Share:
Basic $ 2.50 $ 1.44 74% $ 4.99 $ 2.72 83%
Diluted $ 2.24 $ 1.37 64% $ 4.46 $ 2.59 72%
Weighted Average Shares Outstanding:
Basic 279,883 265,032 6% 278,933 260,290 7%
Diluted 312,897 279,774 12% 312,116 273,428 14%
(more)
June 30, December 31, %
(In thousands, except share data) 2004 2003 Change
- ------------------------------------------------------------------- ---------------- --- ----------------- -- -----------
Assets
Cash $680,910 $ 633,467 7%
Mortgage loans and mortgage-backed securities held for sale 19,545,868 24,103,625 (19%)
Trading securities owned, at market value 9,122,511 6,996,699 30%
Trading securities pledged as collateral, at market value 1,608,312 4,118,012 (61%)
Securities purchased under agreements to resell 14,639,396 10,348,102 41%
Loans held for investment, net 33,895,452 26,368,055 29%
Investments in other financial instruments 7,508,044 12,761,764 (41%)
Mortgage servicing rights, net 8,334,826 6,863,625 21%
Premises and equipment, net 881,042 755,276 17%
Other assets 7,537,074 5,029,048 50%
---------------- -----------------
Total assets $103,753,435 $97,977,673 6%
================ =================
Liabilities
Notes payable $42,134,819 $39,948,461 5%
Securities sold under agreements to repurchase 25,620,471 32,013,412 (20%)
Deposit liabilities 15,470,280 9,327,671 66%
Accounts payable and accrued liabilities 8,365,332 6,248,624 34%
Income taxes payable 2,717,736 2,354,789 15%
---------------- -----------------
Total liabilities 94,308,638 89,892,957 5%
---------------- -----------------
Commitments and contingencies - - -
Shareholders' Equity
Preferred stock - authorized, 1,500,000 shares
of $0.05 par value; none issued and outstanding - - -
Common stock - authorized, 500,000,000 shares of $0.05
par value; issued, 281,227,344 and 276,735,890
shares at June 30, 2004 and December 31, 2003,
respectively; outstanding, 281,194,165 and
276,724,639 shares at June 30, 2004 and
December 31, 2003, respectively 14,061 13,837 2%
Additional paid-in capital 2,453,675 2,302,919 7%
Accumulated other comprehensive income 66,377 164,526 (60%)
Retained earnings 6,910,684 5,603,434 23%
---------------- -----------------
Total shareholders' equity 9,444,797 8,084,716 17%
---------------- -----------------
Total liabilities and shareholders' equity $103,753,435 $97,977,673 6%
================ =================
(more)
June 30, December 31, %
(In thousands) 2004 2003 Change
- ------------------------------------------------------------------ ---------------- --- ---------------- -- -----------
Loans Held for Investment, Net
Mortgage loans $29,285,803 $21,999,881 33%
Warehouse lending advances secured by mortgage loans 3,253,360 1,886,169 72%
Defaulted FHA-insured and VA-guraranteed loans
repurchased from securities 1,462,128 2,560,454 (43%)
---------------- ----------------
29%
34,001,291 26,446,504
Allowance for loan losses (105,839) (78,449) 35%
---------------- ----------------
Total loans held for investment, net $33,895,452 $26,368,055 29%
================ ================
Other Assets
Securities broker-dealer receivables $ 1,611,411 $ 742,139 117%
Securities borrowed 1,394,984 - N/M
Reimbursable servicing advances 804,766 1,031,835 (22%)
Receivables from custodial accounts 719,860 595,671 21%
Investments in Federal Reserve Bank and
Federal Home Loan Bank stock 523,769 394,110 33%
Capitalized software, net 261,220 235,713 11%
Federal funds sold 260,000 100,000 160%
Interest receivable 254,584 242,669 5%
Unsettled securities trades, net 254,483 173,382 47%
Prepaid expenses 202,165 204,570 (1%)
Derivative margin accounts 173,163 285,583 (39%)
Restricted cash 167,577 281,477 (40%)
Cash surrender value of assets held in trust for
deferred compensation plan 115,753 115,491 -
Receivables from sale of securities 107,924 105,325 2%
Other assets 685,415 521,083 32%
---------------- ----------------
Total other assets $ 7,537,074 $ 5,029,048 50%
================ ================
(more)
(Dollar amounts in thousands)
June 30, December 31, %
2004 2003 Change
- ----------------------------------------------------------------------- ---------------- --- ---------------- -- ----------
Home equity AAA asset-backed senior securities $ 1,515,604 $ 4,622,810 (67%)
Insurance and Banking segments' investment portfolios:
Mortgage-backed securities 3,369,603 4,440,676 (24%)
U.S. Treasury securities and obligations of
U.S. Government-sponsored enterprises 252,872 283,453 (11%)
Other 94,263 88 N/M
---------------- ----------------
Total Insurance and Banking segments'
investment portfolios 3,716,738 4,724,217 (21%)
---------------- ----------------
Other interests retained in securitization:
Subprime residual securities 700,065 370,912 89%
Prime home equity residual securities 305,993 320,663 (5%)
Nonconforming interest-only and
principal-only securities 190,142 130,300 46%
Prime home equity line of credit transferor's interest 185,869 236,109 (21%)
Subprime AAA interest-only securities 166,397 310,020 (46%)
Prepayment bonds 87,645 50,595 73%
Prime home equity interest-only securities 18,486 33,309 (45%)
Subordinated mortgage-backed pass-through securities 2,637 5,997 (56%)
---------------- ----------------
Total other interests retained in securitization 1,657,234 1,457,905 14%
---------------- ----------------
Servicing hedge instruments - U.S. Treasury securities - 1,148,922 N/M
---------------- ----------------
Total available-for-sale securities 6,889,576 11,953,854 (42%)
Servicing hedge instruments - Derivative instruments 442,316 642,019 (31%)
Debt hedge instruments - Interest rate and
foreign currency swaps 176,152 165,891 6%
---------------- ----------------
Total investments in other financial instruments $ 7,508,044 $ 12,761,764 (41%)
================ ================
Three Months Ended Six Months Ended
June 30, % June 30, %
---------------------------------- ----------------------------------
(Dollar amounts in millions) 2004 2003 Change 2004 2003 Change
- -------------------------------------------- --------------- -- --------------- --------- ---- --------------- -- --------------- --------
Volume of loans produced $ 99,663 $ 130,210 (23%) $ 175,867 $ 232,613 (24%)
Number of loans produced 619,849 834,728 (26%) 1,118,850 1,516,893 (26%)
Loan closing services (units):
Number of credit reports, flood
determinations, appraisals,
automated property valuation
services, title reports, default
title orders, other title and
escrow
services, and home inspections 4,173,352 4,315,114 (3%) 7,993,131 7,568,697 6%
Capital Markets
Securities trading volume (1) $ 881,577 $ 811,854 9% $ 1,572,015 $ 1,451,891 8%
Insurance
Net premiums earned:
Carrier $ 149 $ 137 9% $ 307 $ 280 10%
Reinsurance 39 32 22% 76 60 27%
--------------- --------------- --------------- ---------------
Total net premiums earned $ 188 $ 169 11% $ 383 $ 340 13%
=============== =============== =============== ===============
June 30, %
----------------------------------
2004 2003 Change
--------------- -- --------------- ---------
Mortgage loan pipeline
(loans-in-process) $ 47,317 $ 82,490 (43%)
Loan servicing portfolio (2) $ 726,227 $ 559,124 30%
Number of loans serviced (2) 5,547,050 4,587,387 21%
Assets held by Treasury Bank
(in billions) $ 27.1 $ 13.1 107%
Global Operations
Global Home Loans Subservicing
Volume (in billions) $ 110 $ 97 13%
| (1) | Includes trades with Mortgage Banking Division |
| (2) | Includes warehoused loans and loans serviced under subservicing agreements. |
(more)
Three Months Ended June 30, 2004
--------------------------------------------------------------------------------------------------------------------------------------------------------------
Mortgage Banking Diversified Businesses
-------------------------------------------------------------- ----------------------------------------------------------------------------------------------
Loan Production Loan Closing Total Capital Banking Insurance Global Other Total Grand Total
(In Thousands) Servicing Services Markets Operations
- -------------------------------------------------------- -------------- ------------ --------------- ------------------------------------- ------------------------------------- --------------
Revenues
Gain on sale of loans and securities $1,208,315 $ 18,574 $ - $ 1,226,889 $ 43,635 $ - $ - $ - $ 6,807 $ 50,442 $1,277,331
Net interest income after provision for
loan losses 314,370 (103,797) 262 210,835 112,260 145,162 10,309 483 (248) 267,966 478,801
Net loan servicing fees(1) - 239,327 - 239,327 689 - - 26,287 (3,972) 23,004 262,331
Net insurance premiums earned - - - - - - 187,252 - - 187,252 187,252
Commissions, fees and other income(2) 29,633 15,263 54,824 99,720 5,101 23,529 16,014 26,833 (43,808) 27,669 127,389
----------------- -------------- ------------ --------------- ------------------------------------- ------------------------------------- --------------
Total revenues 1,552,318 169,367 55,086 1,776,771 161,685 168,691 213,575 53,603 (41,221) 556,333 2,333,104
Expenses 724,135 144,174 32,017 900,326 72,054 49,608 165,038 43,920 (40,676) 289,944 1,190,270
----------------- -------------- ------------ --------------- ------------------------------------- ------------------------------------- -------------
Earnings before income taxes $ 828,183 $ 25,193 $ 23,069 $ 876,445 $ 89,631 $ 119,083 $ 48,537 $ 9,683 $ (545) $ 266,389 $1,142,834
================= ============== ============ ============ =========== ========== =========== ========== ========== =========== ===========
Three Months Ended June 30, 2003
-------------------------------------------------------------------------------------------------------------------------------------------------------------
Mortgage Banking Diversified Businesses
------------------------------------------------------------- ----------------------------------------------------------------------------------------------
Loan Production Loan Closing Total Capital Banking Insurance Global Other Total Grand Total
(In Thousands) Servicing Services Markets Operations
- ------------------------------------------------------ -------------- ------------ -------------- ------------- ------------- ------------ ----------- ------------------------- --------------
Revenues
Gain on sale of loans and securities $ 1,590,640 $ 61,112 $ - $ 1,651,752 $ 51,026 $ - $ - $ - $ 8,149 $ 59,175 $1,710,927
Net interest income after provision for
loan losses 202,402 (106,105) (209) 96,088 113,822 70,560 8,261 126 (39) 192,730 288,818
Net loan servicing fees(1) - (688,782) - (688,782) (42) 292 - 22,108 (1,706) 20,652 (668,130)
Net insurance premiums earned - - - - - - 168,183 - - 168,183 168,183
Commissions, fees and other income(2) 16,561 16,152 62,585 95,298 3,765 23,140 18,387 25,794 (37,867) 33,219 128,517
-------------- ----------- --------- ------------ ----------- ----------- ---------- ---------- ---------- ----------- --------------
Total revenues 1,809,603 (717,623) 62,376 1,154,356 168,571 93,992 194,831 48,028 (31,463) 473,959 1,628,315
Expenses 599,810 118,624 33,504 751,938 53,520 26,714 157,816 48,253 (31,248) 255,055 1,006,993
-------------- ----------- --------- ------------ ----------- ----------- ---------- ---------- ---------- ----------- --------------
Earnings before income taxes $ 1,209,793 ($ 836,247) $ 28,872 $ 402,418 $ 115,051 $ 67,278 $ 37,015 $ (225) $ (215) $ 218,904 $ 621,322
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| (1) | Consists primarily of fees earned for servicing mortgage loans, related ancillary fees and income on residual interests, net of amortization and impairment/recovery of mortgage servicing rights and net servicing hedge. |
| (2) | Consists primarily of revenues from ancillary products and services, including title, escrow, appraisal, credit reporting and home inspection services, and insurance agency commissions. |
Six Months Ended June 30, 2004
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Mortgage Banking Diversified Businesses
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(In thousands) Loan Production Loan Closing Capital Global Grand
Servicing Services Total Markets Banking Insurance Operations Other Total Total
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Revenues
Gain on sale of loans and
securities $2,406,506 $ 100,524 $ - $2,507,030 $116,801 $ - $ - $ - $12,167 $128,968 $2,635,998
Net interest income after
provision for loan losses 664,904 (214,604) 486 450,786 254,744 263,228 21,092 963 (598) 539,429 990,215
Net loan servicing fees (1) - 235,434 - 235,434 1,409 - - 52,977 (7,239) 47,147 282,581
Net insurance premiums earned - - - - - - 382,635 - - 382,635 382,635
Commissions, fees and other
income (2) 43,051 30,704 103,980 177,735 12,127 46,393 32,313 57,475 (77,873) 70,435 248,170
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Total revenues
3,114,461 152,058 104,466 3,370,985 385,081 309,621 436,040 111,415 (73,543) 1,168,614 4,539,599
Expenses
1,344,391 285,084 62,865 1,692,340 142,299 84,930 335,508 90,001 (72,273) 580,465 2,272,805
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Earnings before income
taxes $1,770,070 $(133,026) $41,601 $1,678,645 $242,782 $224,691 $100,532 $ 21,414 $(1,270) $588,149 $2,266,794
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Six Months Ended June 30, 2003
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Mortgage Banking Diversified Businesses
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(In thousands) Loan Production Loan Closing Capital Global Grand
Servicing Services Total Markets Banking Insurance Operations Other Total Total
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Revenues
Gain on sale of loans and securities $2,821,726 $ 127,359 $ - $2,949,085 $99,159 $ - $ - $ - $15,253 $114,412 $3,063,497
Net interest income after
provision for loan losses 331,485 (181,608) (518) 149,359 225,669 117,483 16,742 193 (238) 359,849 509,208
Net loan servicing fees (1) - (1,125,303) - (1,125,303) 106 292 - 44,024 (2,542) 41,880 (1,083,423)
Net insurance premiums earned - - - - - - 339,319 - - 339,319 339,319
Commissions, fees and other
income (2) 31,093 35,257 114,544 180,894 6,266 43,184 32,568 49,856 (70,033) 61,841 242,735
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Total revenues 3,184,304 (1,144,295) 114,026 2,154,035 331,200 160,959 388,629 94,073 (57,560) 917,301 3,071,336
Expenses 1,092,211 245,984 59,171 1,397,366 120,037 50,348 326,856 88,502 (57,663) 528,080 1,925,446
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Earnings before income taxes $2,092,093 $(1,390,279) $54,855 $756,669 $211,163 $110,611 $ 61,773 $ 5,571 $ 103 $389,221 $1,145,890
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| (1) | Consists primarily of fees earned for servicing mortgage loans, related ancillary fees and income on residual interests, net of amortization and impairment/recovery of mortgage servicing rights and net servicing hedge. |
| (2) | Consists primarily of revenues from ancillary products and services, including title, escrow, appraisal, credit reporting and home inspection services, and insurance agency commissions. |