Exhibit 99
NEWS 
INVESTOR CONTACT: (818) 225-3550
David Bigelow or Lisa Riordan
MEDIA LINE: (800) 796-8448
COUNTRYWIDE REPORTS DILUTED EPS OF $0.72 FOR FIRST QUARTER OF 2007
— 2007 Guidance Updated at $3.50 to $4.30 per Diluted Share —
— Board Authorizes $0.15 Dividend —
CALABASAS, CA (April 26, 2007) — Countrywide Financial Corporation (NYSE: CFC) today announced results for the first quarter ended March 31, 2007. Key results include the following:
Table 1
| | Quarter Ended | |
($ in millions, except per share amounts) | | Mar. 31,
2007 | | Dec. 31,
2006 | | Mar. 31,
2006 | |
Consolidated Company | | | | | | | |
Revenues | | $ | 2,406 | | $ | 2,758 | | $ | 2,836 | |
Net Earnings | | $ | 434 | | $ | 622 | | $ | 684 | |
Diluted EPS | | $ | 0.72 | | $ | 1.01 | | $ | 1.10 | |
Total Assets ($ in billions) | | $ | 208 | | $ | 200 | | $ | 178 | |
Key Segment Pre-tax Earnings | | | | | | | |
Mortgage Banking | | $ | 100 | | $ | 453 | | $ | 555 | |
Banking | | $ | 288 | | $ | 343 | | $ | 341 | |
Capital Markets | | $ | 132 | | $ | 99 | | $ | 156 | |
Insurance | | $ | 180 | | $ | 75 | | $ | 65 | |
Key Operating Statistics ($ in billions) | | | | | | | |
Total Loan Fundings | | $ | 117 | | $ | 124 | | $ | 106 | |
Ending Loan Servicing Portfolio | | $ | 1,352 | | $ | 1,298 | | $ | 1,153 | |
Ending Assets of Banking Operations | | $ | 84 | | $ | 83 | | $ | 78 | |
“Countrywide’s earnings for the first quarter of 2007 were $434 million, despite adverse subprime and housing market conditions,” said Angelo R. Mozilo, Chairman and Chief Executive Officer. “While the Company’s core operations delivered what was otherwise a strong quarter, earnings were impacted by charges relating to our subprime activities as well as increases to our loss reserves and related asset valuation adjustments stemming from higher delinquencies and softer housing markets.”
During the quarter, subprime charges and other credit costs impacted Countrywide as follows:
· Subprime operations. Mortgage banking revenues from subprime operations, which include both production and investment activities, declined approximately $400 million from the fourth quarter of 2006, the equivalent of approximately $0.41 in earnings per diluted share. Subprime production revenues decreased $245 million, primarily resulting from volatile market conditions
Investor Relations
4500 Park Granada · Calabasas, CA 91302 · 818-225-3550
http://www.countrywide.com
Countrywide Home Loans, Inc. and Countrywide Bank, FSB, are Equal Housing Lenders. ã2002 Countrywide Financial Corporation.
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and related value declines of loans sold during the quarter and unsold at quarter end, net of credit hedge gains. Revenues from subprime investments fell $155 million from the fourth quarter of 2006, largely as a result of impairment charges against retained interests from subprime and related securities, net of credit hedge gains. The Company has instituted policy and product guideline changes and made other adjustments to reduce exposure to future subprime losses, and as a result management anticipates that both subprime production and investments will return to profitability in subsequent quarters, absent a material worsening of market conditions.
· Other credit costs. Aside from subprime-related credit costs described above, other net credit costs increased from the fourth quarter of 2006 by $132 million, the equivalent of $0.14 in earnings per diluted share, as a result of rising delinquencies, deteriorating housing market conditions, and resulting increased loss reserves. This included a $119 million increase in impairment of prime-quality home equity retained interests and an $81 million increase in the provision for loan losses, partially offset by a $68 million increase in loss reserve reversal in the Insurance segment.
“Excluding the impact of subprime conditions and increased credit costs in the quarter, Countrywide’s core operations made strong contributions to quarterly earnings,” said Mozilo. “Our Production sector delivered strong volume and margins for both prime first and home equity loans, which accounted for 93 percent of our total mortgage banking originations; Servicing sector margins, excluding impairment of retained interests, were strong; net interest margins increased in our Banking Operations; and our Capital Markets and Insurance segments both generated sequential quarter pre-tax earnings growth.
“On a consolidated basis, Countrywide’s residential lending operations continued to grow market share, with first quarter production representing over 18 percent of U.S. mortgage originations and our servicing portfolio reaching 8.4 million loans, which represents 13 percent of residential loans outstanding. In addition, our pipeline heading into the second quarter is very strong at $69 billion, up 21 percent from the fourth quarter of 2006 and up 8 percent from the first quarter last year. Furthermore, our increasingly diverse business model has been generating more than half of our earnings from businesses other than mortgage banking, as was the case in 2006 and in the first quarter of 2007 again.
“While turbulent mortgage market conditions had an adverse impact on the Company’s first quarter, looking forward, management is optimistic about the long-term future growth prospects and profitability of the Company stemming from the consolidation and rationalization occurring in the residential mortgage markets today.
“I would like to conclude by thanking my 50,000-plus Countrywide colleagues. Each of them works hard every day to deliver outstanding long-term returns to shareholders, and to make the American dream of homeownership available to as many people as possible.”
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BUSINESS SEGMENT PERFORMANCE
Mortgage Banking
Table 2 below highlights the Mortgage Banking segment’s financial performance for the first quarter of 2007:
Table 2
Mortgage Banking Pre-tax Earnings
| | Quarter Ended | |
($ in millions) | | Mar. 31,
2007 | | Dec. 31,
2006 | | Mar. 31,
2006 | |
Pre-tax Earnings (Loss) | | | | | | | |
Production | | $ | 139 | | $ | 421 | | $ | 284 | |
Servicing | | (69 | ) | 9 | | 249 | |
Closing Services | | 30 | | 23 | | 22 | |
Total Mortgage Banking | | $ | 100 | | $ | 453 | | $ | 555 | |
% Contribution to total pre-tax earnings | | 14 | % | 46 | % | 50 | % |
Loan Production
The Loan Production sector is comprised of the following distribution channels: prime and subprime consumer-direct lending through Countrywide Home Loans’ 996-branch retail system, call center operations and the Internet; wholesale lending through a network of mortgage brokers; correspondent lending which buys closed loans from other financial institutions such as independent mortgage companies, commercial banks, savings and loans and credit unions. The sector also includes the mortgage banking activities of Countrywide Bank.
Overall quarterly Loan Production sector margins on both a sequential and year-over-year basis are detailed below:
Table 3
Loan Production Sector
Pre-tax Earnings (1)
| | Quarter Ended | |
($ in millions) | | Mar. 31,
2007 | | % (2) | | Dec. 31,
2006 | | % (2) | | Mar. 31,
2006 | | % (2) | |
Gain on sale of loans | | $ | 1,033 | | 0.93 | % | $ | 1,263 | | 1.07 | % | $ | 1,161 | | 1.24 | % |
Net warehouse spread | | 90 | | 0.08 | % | 136 | | 0.12 | % | 113 | | 0.12 | % |
Miscellaneous income | | 58 | | 0.06 | % | 90 | | 0.08 | % | 67 | | 0.08 | % |
Total revenues | | 1,181 | | 1.07 | % | 1,489 | | 1.27 | % | 1,342 | | 1.44 | % |
Operating expenses | | (904 | ) | (0.82 | %) | (944 | ) | (0.80 | %) | (915 | ) | (0.98 | %) |
Allocated corporate expenses | | (138 | ) | (0.12 | %) | (124 | ) | (0.11 | %) | (143 | ) | (0.16 | %) |
Total expenses | | (1,042 | ) | (0.94 | %) | (1,068 | ) | (0.91 | %) | (1,057 | ) | (1.14 | %) |
| | | | | | | | | | | | | |
Total Loan Production sector pre-tax earnings | | $ | 139 | | 0.13 | % | $ | 421 | | 0.36 | % | $ | 284 | | 0.30 | % |
| | | | | | | | | | | | | |
Total Mortgage Banking loan funding volume | | $ | 110,567 | | | | $ | 117,745 | | | | $ | 93,452 | | | |
| | | | | | | | | | | | | |
(1) Numbers may not total exactly due to rounding
(2) Percentage based on loan funding volume
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The sequential quarter decreases in overall gain on sale were largely isolated to the subprime channel, with a modest increase in prime gain on sale. The year-over-year quarterly comparisons reflect erosion in overall gain-on-sale margins as shown in Table 4.
Table 4
Loan Production Sector Gain on Sale (1)
| | Quarter Ended | |
($ in millions) | | Mar. 31,
2007 | | Dec. 31,
2006 | | Mar. 31,
2006 | |
Prime | | | | | | | |
Production | | $ | 93,833 | | $ | 98,603 | | $ | 75,825 | |
Loans sold | | $ | 92,879 | | $ | 93,620 | | $ | 76,177 | |
Gain on sale (“GOS”) | | $ | 901 | | $ | 866 | | $ | 898 | |
GOS as % of loans sold | | 0.97 | % | 0.93 | % | 1.18 | % |
| | | | | | | |
Subprime | | | | | | | |
Production | | $ | 7,500 | | $ | 9,146 | | $ | 8,099 | |
Loans sold | | $ | 7,890 | | $ | 8,723 | | $ | 9,090 | |
(Loss) GOS | | $ | (33 | ) | $ | 211 | | $ | 149 | |
(Loss) GOS as % of loans sold | | (0.42 | %) | 2.41 | % | 1.64 | % |
| | | | | | | |
Home Equity | | | | | | | |
Production | | $ | 9,234 | | $ | 9,996 | | $ | 9,528 | |
| | | | | | | |
Initial sale | | | | | | | |
Loans sold | | $ | 6,787 | | $ | 6,811 | | $ | 4,443 | |
GOS | | $ | 138 | | $ | 152 | | $ | 78 | |
GOS as % of loans sold | | 2.03 | % | 2.23 | % | 1.75 | % |
| | | | | | | |
Subsequent draws | | | | | | | |
Loans sold | | $ | 1,043 | | $ | 1,105 | | $ | 975 | |
GOS | | $ | 27 | | $ | 35 | | $ | 36 | |
GOS as % of loans sold | | 2.63 | % | 3.14 | % | 3.66 | % |
| | | | | | | |
Total production | | $ | 110,567 | | $ | 117,745 | | $ | 93,452 | |
Total loans sold | | $ | 108,599 | | $ | 110,260 | | $ | 90,684 | |
Total GOS | | $ | 1,033 | | $ | 1,263 | | $ | 1,161 | |
Total GOS as % of loans sold | | 0.95 | % | 1.15 | % | 1.28 | % |
Total GOS as % of loans produced | | 0.93 | % | 1.07 | % | 1.24 | % |
(1) Numbers may not be exact due to rounding
Subprime gain on sale for the first quarter of 2007 was impacted by deteriorating market conditions, specifically higher investor yield requirements as well as increased future loss estimates, which adversely impacted the value of subprime loans. The $244 million reduction in subprime gain on sale was the result of a decline in the value of loans sold during the quarter and unsold at quarter end, net of credit hedge gains of $92 million.
Home equity gain on sale declined from the fourth quarter of 2006 because of increased credit enhancement costs and higher investor yield requirements. Prime gain on sale increased from the fourth quarter of 2006 primarily as a result of changes in channel mix toward more retail business. Factors impacting the overall year-over-year quarterly declines included increased competitive pricing
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pressures, the decline in production of higher-margin pay option products, and the general deterioration of subprime market conditions discussed previously.
Loan Servicing
The Loan Servicing sector reflects the performance of mortgage servicing rights (MSRs) and retained interests associated with Countrywide’s owned servicing portfolio. Countrywide also manages a financial hedge within the Loan Servicing sector to mitigate negative valuation changes in MSRs and retained interests.
The Loan Servicing sector’s income statement and key operational metrics are displayed below:
Table 5
Loan Servicing Sector Pre-tax Results of Operations (1)
| | Quarter Ended | |
($ in millions) | | Mar. 31,
2007 | | % (2) | | Dec. 31,
2006 | | % (2) | | Mar. 31,
2006 | | % (2) | |
Servicing fees, net of guarantee fees | | $ | 1,080 | | 0.328 | % | $ | 1,010 | | 0.321 | % | $ | 913 | | 0.326 | % |
Miscellaneous fees | | 209 | | 0.063 | % | 198 | | 0.063 | % | 144 | | 0.052 | % |
Income from retained interests | | 148 | | 0.045 | % | 127 | | 0.040 | % | 134 | | 0.048 | % |
Escrow balance income | | 204 | | 0.062 | % | 240 | | 0.076 | % | 160 | | 0.057 | % |
Realization of expected MSR cash flows | | (925 | ) | (0.281 | %) | (880 | ) | (0.279 | %) | (738 | ) | (0.264 | %) |
Operating revenues | | 715 | | 0.217 | % | 696 | | 0.221 | % | 614 | | 0.219 | % |
| | | | | | | | | | | | | |
Direct expenses | | (179 | ) | (0.054 | %) | (188 | ) | (0.060 | %) | (185 | ) | (0.066 | %) |
Allocated corporate expenses | | (22 | ) | (0.007 | %) | (20 | ) | (0.006 | %) | (23 | ) | (0.008 | %) |
Total expenses | | (201 | ) | (0.061 | %) | (208 | ) | (0.066 | %) | (209 | ) | (0.074 | %) |
| | | | | | | | | | | | | |
Operating earnings | | 515 | | 0.156 | % | 488 | | 0.155 | % | 405 | | 0.145 | % |
| | | | | | | | | | | | | |
Interest expense | | (221 | ) | (0.067 | %) | (218 | ) | (0.069 | %) | (128 | ) | (0.046 | %) |
| | | | | | | | | | | | | |
Change in fair value of MSRs | | 179 | | 0.054 | % | (48 | ) | (0.015 | %) | 978 | | 0.349 | % |
Impairment of retained interests | | (429 | ) | (0.130 | %) | (73 | ) | (0.023 | %) | (120 | ) | (0.043 | %) |
Servicing hedge losses | | (114 | ) | (0.034 | %) | (141 | ) | (0.045 | %) | (886 | ) | (0.316 | %) |
Valuation changes, net of servicing hedge | | (363 | ) | (0.110 | %) | (262 | ) | (0.083 | %) | (28 | ) | (0.010 | %) |
| | | | | | | | | | | | | |
Total Loan Servicing sector results of operations | | $ | (69 | ) | (0.021 | %) | $ | 9 | | 0.003 | % | $ | 249 | | 0.089 | % |
| | | | | | | | | | | | | |
Average servicing portfolio ($ in billions) | | $ | 1,316 | | | | $ | 1,261 | | | | $ | 1,120 | | | |
| | | | | | | | | | | | | |
MSR portfolio capitalization rate | | 1.40 | % | | | 1.38 | % | | | 1.38 | % | | |
(1) Numbers may not total exactly due to rounding
(2) Percentage based on average servicing portfolio; computation is annualized
Loan Servicing sector pre-tax earnings were adversely impacted by $429 million in impairment charges against retained interests. Impairment charges of $231 million were related to subprime and similar retained interests, while $135 million was related to retained interests on home equity lines of credit
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extended to prime borrowers. These impairment charges were driven by increased estimates for future losses on loans underlying the related securities as well as increased market yield requirements. In addition, the Company incurred $63 million in impairment on other retained interests where Countrywide does not retain credit risk. This impairment related to increased market yield requirements.
Delinquencies (based on loan count, 30 days or more past due) in the servicing portfolio were 4.29 percent at March 31, 2007, which compares to 5.02 percent at December 31, 2006 and 3.68 percent at March 31, 2006. Foreclosures in the servicing portfolio (based on loan count) were 69 basis points at March 31, 2007, which compares to 65 basis points at December 31, 2006 and 47 basis points at March 31, 2006. The year-over-year increase in total delinquencies and foreclosures is generally the result of softening housing market conditions and the seasoning of the loans in the servicing portfolio. The sequential quarter improvement in the delinquency ratio is primarily attributable to seasonal factors. The weighted average age of the loans in the portfolio at March 31, 2007 was 23 months, while the age at March 31, 2006 was 21 months.
Loan Closing Services
Loan Closing Services are offered through Countrywide’s LandSafe companies, which primarily provide credit reports, appraisals and flood determinations. The LandSafe companies’ quarterly pre-tax earnings increased from the prior year, primarily as a result of an increase in its credit report and appraisal businesses due to the increase in Countrywide’s application activity.
BANKING
The Banking segment includes Banking Operations (primarily the fee and investment activities of Countrywide Bank, FSB) and Countrywide Warehouse Lending, a provider of mortgage inventory financing to independent mortgage bankers. Countrywide Bank (“Bank”) provides Countrywide with expanded product capabilities, a low cost source of funds, liquidity, and portfolio lending capabilities that result in substantial recurring earnings. The Bank invests primarily in high-quality residential mortgage loans sourced from the Loan Production sector and the secondary market. It funds these assets through various means including its retail deposit franchise, which is comprised of an expanding national financial center network of 101 locations (most of which are located in existing Countrywide retail offices), call centers, and Internet presence. The Bank also leverages its deposit base through a variety of wholesale funding activities.
Key financial and operational results for the Banking segment as well as the Banking Operations sector are noted in Tables 6 and 7 below with additional details in tables at the end of this release:
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Table 6
Banking Segment Pre-tax Earnings
| | Quarter Ended | |
($ in millions) | | Mar. 31,
2007 | | Dec. 31,
2006 | | Mar. 31,
2006 | |
Banking Operations | | $ | 294 | | $ | 346 | | $ | 331 | |
Countrywide Warehouse Lending | | 10 | | 13 | | 18 | |
Allocated corporate expenses | | (16 | ) | (16 | ) | (8 | ) |
Total Banking segment pre-tax earnings | | $ | 288 | | $ | 343 | | $ | 341 | |
Table 7
Banking Operations
| | Quarter Ended | |
($ in millions) | | Mar. 31, 2007 | | Dec. 31, 2006 | | Mar. 31, 2006 | |
Pre-tax Earnings (1) | | | | | | | |
Net interest income | | $ | 497 | | $ | 480 | | $ | 418 | |
Provision for loan losses | | (124 | ) | (63 | ) | (28 | ) |
Non-interest income | | 41 | | 38 | | 36 | |
Non-interest expense | | (120 | ) | (109 | ) | (96 | ) |
Total Banking Operations pre-tax earnings | | $ | 294 | | $ | 346 | | $ | 331 | |
| | At Period End | |
| | Mar. 31,
2007 | | Dec. 31,
2006 | | Mar. 31,
2006 | |
Key Operating Statistics | | | | | | | |
Total Assets | | $ | 84,261 | | $ | 82,775 | | $ | 77,778 | |
Loan Portfolio, net | | $ | 69,360 | | $ | 73,482 | | $ | 69,055 | |
(1) Numbers may not total exactly due to rounding
Banking Operations’ quarterly pre-tax earnings were $294 million, a decrease of 15 percent from the prior quarter and 11 percent year over year. The decreases were driven by an increase in the provision for loan losses of $61 million from the fourth quarter and $96 million from the first quarter of 2006 primarily resulting from increases in delinquencies and related increased reserves for loan losses. This was partially offset by increases in net interest income. Specifically, net interest margin increased 7 basis points from the fourth quarter of 2006 and 22 basis points from the first quarter of 2006, primarily from a smaller rate lag effect.
While the Banking Operations’ net residential loan portfolio was up modestly on a year-over-year basis, loan portfolio growth has been slowing and is down on a sequential quarter basis. This is attributable to an increasing percentage of Countrywide’s originations being sold in the secondary markets, lesser availability of loans for purchase by the Bank that meet its investment criteria, and portfolio runoff. Asset growth during the first quarter of 2007 was primarily attributable to acquisitions of high quality mortgage-backed securities.
During the first quarter, the credit rating agency Moody’s upgraded its rating on Countrywide Bank and announced that Countrywide, Countrywide Home Loans and Countrywide Bank were under review for possible additional upgrades.
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The Bank continues to take steps to credit enhance its investment loan portfolio by acquiring supplemental mortgage insurance coverage. As of March 31, 2007, $19.8 billion of the residential lending portfolio of the Bank, representing 29 percent of its total loan portfolio, was covered by supplemental mortgage insurance on specified pools of loans. The maximum loss coverage available under these policies is $851 million. The Bank is also in the process of negotiating the purchase of additional pool insurance on its loans.
CAPITAL MARKETS
The Capital Markets segment includes a registered securities broker-dealer, a distressed-asset manager and a commercial real estate finance group. Financial results for the Capital Markets segment are noted below with operational metrics in the tables at the end of this release:
Table 8
Capital Markets Segment
Pre-tax Earnings (1)
| | Quarter Ended | |
($ in millions) | | Mar. 31,
2007 | | Dec. 31,
2006 | | Mar. 31,
2006 | |
Revenues | | | | | | | |
Conduit | | $ | 69 | | $ | 47 | | $ | 123 | |
Underwriting | | 67 | | 73 | | 71 | |
Commercial real estate | | 48 | | 34 | | 16 | |
Securities trading | | 35 | | 29 | | 35 | |
Brokering | | 12 | | 11 | | 7 | |
Other | | 29 | | 21 | | 12 | |
Total revenues | | 261 | | 214 | | 263 | |
Expenses | | | | | | | |
Operating expenses | | (122 | ) | (107 | ) | (103 | ) |
Allocated corporate expenses | | (6 | ) | (8 | ) | (4 | ) |
Total expenses | | (128 | ) | (115 | ) | (108 | ) |
Total Capital Markets segment pre-tax earnings | | $ | 132 | | $ | 99 | | $ | 156 | |
(1) Numbers may not total exactly due to rounding
Quarterly pre-tax earnings for the Capital Markets segment increased 33 percent from the fourth quarter of 2006, primarily driven by increases in conduit and commercial real estate lending revenues. On a year-over-year basis, quarterly pre-tax earnings decreased 15 percent. This was primarily a result of reduced conduit revenue and increased operating expenses, partially offset by growth in commercial real estate revenues. Reduced conduit revenue resulted from decreased conduit volumes and margins which have accompanied current secondary market conditions. Commercial real estate revenues were higher primarily because of increased origination volumes and improved securitization execution.
INSURANCE
Countrywide’s Insurance segment includes Balboa Insurance Group, whose companies are national providers of property, life and casualty insurance; and Balboa Reinsurance Company, a captive
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mortgage guaranty reinsurance company. Financial results for the Insurance segment are noted below with operational metrics in the tables at the end of this release:
Table 9
Insurance Segment Pre-tax Earnings
| | Quarter Ended | |
($ in millions) | | Mar. 31, 2007 | | Dec. 31, 2006 | | Mar. 31, 2006 | |
Balboa Reinsurance Company | | $ | 131 | | $ | 56 | | $ | 46 | |
Balboa Life & Casualty | | 57 | | 29 | | 23 | |
Allocated corporate expenses | | (8 | ) | (10 | ) | (4 | ) |
Total Insurance segment pre-tax earnings | | $ | 180 | | $ | 75 | | $ | 65 | |
For the first quarter of 2007, Insurance segment pre-tax results increased $105 million from the fourth quarter of 2006 and $115 million year over year. This growth resulted from increases at Balboa Reinsurance of $75 million and $85 million, respectively, from the fourth quarter and first quarter of 2006. In addition, earnings at Balboa Life and Casualty doubled when compared to the sequential and year-over-year quarters. The increase at Balboa Reinsurance resulted from a $74 million reversal of the loss reserves related to the 2003 books of business, on which negligible remaining loss exposure was deemed to exist in the first quarter of 2007. This compares to a reversal of $6 million in the fourth quarter of 2006 and $5 million for the first quarter of 2006, the latter related to loss reserves on the 2002 books of business. The increases at Balboa Life & Casualty stemmed from an increase in net earned premiums, primarily in the lender-placed lines, as well as improved claims experience.
DIVIDEND DECLARATION
Countrywide’s Board of Directors declared a dividend of $0.15 per share. The payable date on the dividend is May 31, 2007 to stockholders of record on May 14, 2007.
2007 OUTLOOK
Management believes that considerable risks remain in the mortgage marketplace, including but not limited to potential further deterioration in the housing market that could impact origination volume and future credit costs; potential pending regulatory or legislative actions that could impose constraints on our operations; and other business risks as outlined in the disclaimer at the end of this press release. While the balance of 2007 is expected to be challenging, management continues to believe that current market conditions will result in opportunities in the form of further industry consolidation. Management also believes that the Company is well-positioned to capitalize upon these opportunities, which should strengthen Countrywide’s franchise and result in accelerated future market share and earnings growth.
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EARNINGS GUIDANCE
Countrywide’s guidance for 2007 is as follows:
Table 10
| | Updated 2007 Guidance | | Previous 2007 Guidance | |
| | April 26, 2007 | | January 30, 2007 | |
CFC Consolidated Earnings | | | | | | | | | | | | | |
Diluted EPS | | $ | 3.50 | | to | | $ | 4.30 | | $ | 3.80 | | to | | $ | 4.80 | |
| | | | | | | | | | | | | |
Market | | | | | | | | | | | | | |
Total mortgage market ($ in trillions) | | $ | 2.2 | | to | | $ | 3.0 | | $ | 2.2 | | to | | $ | 3.0 | |
Average 10-year U.S. Treasury yield | | 4.20 | % | to | | 5.20 | % | 4.20 | % | to | | 5.20 | % |
Average 3-month LIBOR | | 4.80 | % | to | | 5.90 | % | 4.60 | % | to | | 5.80 | % |
| | | | | | | | | | | | | |
Production | | | | | | | | | | | | | |
Company-wide loan origination volume ($ in billions) (1) | | $ | 450 | | to | | $ | 550 | | $ | 375 | | to | | $ | 525 | |
Loan production sector pre-tax margins (2) | | 10 bps | | to | | 25 bps | | 15 bps | | to | | 35 bps | |
| | | | | | | | | | | | | |
Servicing | | | | | | | | | | | | | |
Average loan servicing portfolio ($ in trillions) (3) | | $ | 1.3 | | to | | $ | 1.4 | | $ | 1.3 | | to | | $ | 1.4 | |
Loan servicing sector pre-tax margins, net hedge | | 3 bps | | to | | 6 bps | | 3 bps | | to | | 8 bps | |
| | | | | | | | | | | | | |
(1) Includes production from the Mortgage Banking, Banking and Capital Markets segments
(2) Denominator is based on company-wide loan origination volume
(3) Total portfolio, including retained servicing, inventory, Bank portfolio and subservicing
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.
Conference Call
Countrywide will host a live conference call to discuss quarterly results today at 12:00 pm Eastern. The dial-in number for the live conference call is (800) 398-9386 (U.S.) or (612) 332-0107 (International). The management discussion will be available for replay through midnight Pacific on Thursday, May 10, 2007. The replay dial-in numbers and access code are (800) 475-6701 (U.S.) / (320) 365-3844 (International) and 868872, respectively.
An accompanying slide presentation will be available on Countrywide’s website (www.countrywide.com), and can be accessed by clicking on “Investor Relations” on the website main page and clicking on the supporting slide show text link for the 2007 first quarter earnings teleconference. Management strongly recommends that participants have access to this presentation while listening to the management discussion.
About Countrywide
Founded in 1969, Countrywide Financial Corporation is a diversified financial services provider and a member of the S&P 500, Forbes 2000 and Fortune 500. Through its family of companies, Countrywide originates, purchases, securitizes, sells, and services prime and subprime loans; provides loan closing services such as credit reports, appraisals and flood determinations; offers banking services which include depository and home loan products; conducts fixed income securities underwriting and trading activities; provides property, life and casualty insurance; and manages a captive mortgage reinsurance company. For more information about the Company, visit Countrywide’s website at www.countrywide.com. This press release does not constitute an offer of any securities for sale.
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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 such as slower or negative home price appreciation; changes in general business, economic, market and political conditions in the United States and abroad from those expected; loss of investment grade ratings 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; changes in interest rate paths; increases in the delinquency rates of borrowers; changes in generally accepted accounting principles or in the legal, regulatory and legislative environments in the markets in which the Company operates; the judgments and assumptions made by management regarding accounting estimates and related matters; the ability of management to effectively implement the Company’s strategies; and other risks noted 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 or any other information contained herein.
(tables follow)
11
COUNTRYWIDE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
| | Quarters Ended
March 31, | | % | |
(in thousands, except per share data) | | | | 2007 | | 2006 | | Change | |
| | (unaudited) | | | |
Revenues | | | | | | | |
Gain on sale of loans and securities | | $ | 1,234,104 | | $ | 1,361,178 | | (9 | %) |
Interest income | | 3,351,982 | | 2,593,758 | | 29 | % |
Interest expense | | (2,621,045 | ) | (1,899,323 | ) | 38 | % |
Net interest income | | 730,937 | | 694,435 | | 5 | % |
Provision for loan losses | | (151,962 | ) | (63,138 | ) | 141 | % |
Net interest income after provision for loan losses | | 578,975 | | 631,297 | | (8 | %) |
Loan servicing fees and other income from mortgage servicing rights and retained interests | | 1,387,289 | | 1,199,887 | | 16 | % |
Realization of expected cash flows from mortgage servicing rights | | (924,706 | ) | (738,567 | ) | 25 | % |
Change in fair value of mortgage servicing rights | | 179,007 | | 978,281 | | (82 | %) |
Impairment of retained interests | | (429,601 | ) | (120,654 | ) | 256 | % |
Servicing hedge losses | | (113,738 | ) | (885,870 | ) | (87 | %) |
Net loan servicing fees and other income from mortgage servicing rights and retained interests | | 98,251 | | 433,077 | | (77 | %) |
Net insurance premiums earned | | 334,177 | | 279,793 | | 19 | % |
Other | | 160,269 | | 130,603 | | 23 | % |
Total revenues | | 2,405,776 | | 2,835,948 | | (15 | %) |
Expenses | | | | | | | |
Compensation | | 1,075,408 | | 1,074,818 | | 0 | % |
Occupancy and other office | | 264,213 | | 245,331 | | 8 | % |
Insurance claims | | 57,305 | | 124,042 | | (54 | %) |
Advertising and promotion | | 70,017 | | 60,230 | | 16 | % |
Other | | 238,038 | | 212,164 | | 12 | % |
Total expenses | | 1,704,981 | | 1,716,585 | | (1 | %) |
Earnings before income taxes | | 700,795 | | 1,119,363 | | (37 | %) |
Provision for income taxes | | 266,814 | | 435,852 | | (39 | %) |
NET EARNINGS | | $ | 433,981 | | $ | 683,511 | | (37 | %) |
Earnings per Share: | | | | | | | |
Basic | | $ | 0.74 | | $ | 1.14 | | (35 | %) |
Diluted | | $ | 0.72 | | $ | 1.10 | | (35 | %) |
Weighted Average Shares Outstanding: | | | | | | | |
Basic | | 588,158 | | 601,585 | | (2 | %) |
Diluted | | 603,000 | | 620,332 | | (3 | %) |
| | | | | | | | | | | |
(more)
COUNTRYWIDE FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data) | | | | March 31,
2007 | | December 31,
2006 | | %
Change | |
| | (unaudited) | | (audited) | | | |
Assets | | | | | | | |
Cash | | $ | 1,202,114 | | $ | 1,407,000 | | (15 | %) |
Mortgage loans held for sale | | 32,282,579 | | 31,272,630 | | 3 | % |
Trading securities owned, at fair value | | 16,794,223 | | 20,036,668 | | (16 | %) |
Trading securities pledged as collateral, at fair value | | 4,839,902 | | 1,465,517 | | 230 | % |
Securities purchased under agreements to resell, securities borrowed and federal funds sold | | 28,851,069 | | 27,269,897 | | 6 | % |
Loans held for investment, net of allowance for loan losses of $374,367 and $261,054, respectively | | 75,177,094 | | 78,085,757 | | (4 | %) |
Investments in other financial instruments, at fair value | | 19,445,697 | | 12,769,451 | | 52 | % |
Mortgage servicing rights, at fair value | | 17,441,860 | | 16,172,064 | | 8 | % |
Premises and equipment, net | | 1,653,233 | | 1,625,456 | | 2 | % |
Other assets | | 10,262,832 | | 9,841,790 | | 4 | % |
Total assets | | $ | 207,950,603 | | $ | 199,946,230 | | 4 | % |
Liabilities | | | | | | | |
Deposit liabilities | | $ | 57,525,061 | | $ | 55,578,682 | | 4 | % |
Securities sold under agreements to repurchase and federal funds purchased | | 44,085,743 | | 42,113,501 | | 5 | % |
Trading securities sold, not yet purchased, at fair value | | 3,380,852 | | 3,325,249 | | 2 | % |
Notes payable | | 74,322,902 | | 71,487,584 | | 4 | % |
Accounts payable and accrued liabilities | | 8,650,035 | | 8,187,605 | | 6 | % |
Income taxes payable | | 5,167,561 | | 4,935,763 | | 5 | % |
Total liabilities | | 193,132,154 | | 185,628,384 | | 4 | % |
Commitments and contingencies | | — | | — | | — | |
Shareholders’ Equity | | | | | | | |
Preferred stock - authorized, 1,500,000 shares of $0.05 par value; none issued and outstanding | | — | | — | | — | |
Common stock - authorized, 1,000,000,000 shares of $0.05 par value; issued, 591,596,654 shares and 585,466,719 shares at March 31, 2007 and December 31, 2006, respective; outstanding, 591,201,542 shares and 585,182,298 shares at March 31, 2007 and December 31, 2006, respectively | | 29,580 | | 29,273 | | 1 | % |
Additional paid-in capital | | 2,320,760 | | 2,154,438 | | 8 | % |
Accumulated other comprehensive loss | | (16,535 | ) | (17,556 | ) | (6 | %) |
Retained earnings | | 12,484,644 | | 12,151,691 | | 3 | % |
Total shareholders’ equity | | 14,818,449 | | 14,317,846 | | 3 | % |
Total liabilities and shareholders’ equity | | $ | 207,950,603 | | $ | 199,946,230 | | 4 | % |
(more)
COUNTRYWIDE FINANCIAL CORPORATION
LOANS HELD FOR INVESTMENT, NET, OTHER ASSETS AND
MORTGAGE SERVICING RIGHTS
(in thousands) | | | | March 31,
2007 | | December 31,
2006 | | %
Change | |
| | (unaudited) | | (audited) | | | |
Loans Held for Investment, Net | | | | | | | |
Mortgage loans | | $ | 70,126,737 | | $ | 72,295,979 | | (3 | %) |
Warehouse lending advances secured by mortgage loans | | 2,771,074 | | 3,185,248 | | (13 | %) |
Defaulted FHA-insured and VA-guaranteed loans repurchased from securities | | 1,770,410 | | 1,761,170 | | 1 | % |
| | 74,668,221 | | 77,242,397 | | (3 | %) |
Purchase premiums and discounts, and deferred loan origination fees and costs, net | | 883,240 | | 1,104,414 | | (20 | %) |
Allowance for loan losses | | (374,367 | ) | (261,054 | ) | 43 | % |
Total loans held for investment, net | | $ | 75,177,094 | | $ | 78,085,757 | | (4 | %) |
Other Assets | | | | | | | |
Reimbursable servicing advances, net | | $ | 2,266,756 | | $ | 2,121,486 | | 7 | % |
Securities broker-dealer receivables | | 1,976,388 | | 1,605,502 | | 23 | % |
Investments in Federal Reserve Bank and Federal Home Loan Bank stock | | 1,220,597 | | 1,433,070 | | (15 | %) |
Interest receivable | | 998,387 | | 997,854 | | 0 | % |
Receivables from custodial accounts | | 599,223 | | 719,048 | | (17 | %) |
Real estate acquired in settlement of loans | | 386,219 | | 251,163 | | 54 | % |
Capitalized software, net | | 377,291 | | 367,055 | | 3 | % |
Prepaid expenses | | 336,659 | | 320,597 | | 5 | % |
Cash surrender value of assets held in trust for deferred compensation plans | | 324,054 | | 319,864 | | 1 | % |
Restricted cash | | 321,032 | | 238,930 | | 34 | % |
Receivables from sale of securities | | 153,700 | | 284,177 | | (46 | %) |
Derivative margin accounts | | 133,003 | | 118,254 | | 12 | % |
Other assets | | 1,169,523 | | 1,064,790 | | 10 | % |
Total other assets | | $ | 10,262,832 | | $ | 9,841,790 | | 4 | % |
Mortgage Servicing Rights, at Fair Value | | | | | | | |
Balance at December 31, 2006 | | $ | 16,172,064 | | | | | |
Additions: | | | | | | | |
Servicing resulting from transfers of financial assets | | 1,898,903 | | | | | |
Purchases of servicing assets | | 116,592 | | | | | |
| | 2,015,495 | | | | | |
Change in fair value: | | | | | | | |
Due to changes in valuation inputs or assumptions used in valuation model (1) | | 179,007 | | | | | |
Other changes in fair value (2) | | (924,706 | ) | | | | |
Balance at March 31, 2007 | | $ | 17,441,860 | | | | | |
(1) Mostly reflects changes in discount rates and prepayment speed assumptions, primarily due to changes in interest rates.
(2) Represents changes due to realization of expected cash flows.
(more)
COUNTRYWIDE FINANCIAL CORPORATION
INVESTMENTS IN OTHER FINANCIAL INSTRUMENTS
| | March 31, | | December 31, | | % | |
(in thousands) | | | | 2007 | | 2006 | | Change | |
| | (unaudited) | | (audited) | | | |
Investments in Other Financial Instruments, at Fair Value | | | | | | | |
Available-for-sale securities: | | | | | | | |
Mortgage-backed securities | | $ | 13,369,569 | | $ | 7,007,786 | | 91 | % |
Obligations of U.S. Government-sponsored enterprises | | 654,361 | | 776,717 | | (16 | %) |
Municipal bonds | | 414,049 | | 412,886 | | 0 | % |
U.S. Treasury securities | | 141,424 | | 168,313 | | (16 | %) |
Other | | 2,697 | | 2,858 | | (6 | %) |
Subtotal | | 14,582,100 | | 8,368,560 | | 74 | % |
| | | | | | | |
Interests retained in securitization accounted for as available-for-sale securities: | | | | | | | |
Prime interest-only and principal-only securities | | 264,266 | | 279,375 | | (5 | %) |
Prime home equity line of credit transferor’s interest | | 101,686 | | 144,346 | | (30 | %) |
Subprime residuals and other related securities | | 90,547 | | 152,745 | | (41 | %) |
Prepayment penalty bonds | | 38,516 | | 52,697 | | (27 | %) |
Prime home equity residual securities | | 25,842 | | 40,766 | | (37 | %) |
Subprime interest-only securities | | 14,996 | | 3,757 | | 299 | % |
Prime home equity interest-only securities | | 6,255 | | 7,021 | | (11 | %) |
Subordinated mortgage-backed pass-through securities | | 799 | | 1,382 | | (42 | %) |
Prime residual securities | | 715 | | 1,435 | | (50 | %) |
Total interests retained in securitization accounted for as available-for-sale securities | | 543,622 | | 683,524 | | (20 | %) |
| | | | | | | |
Total available-for-sale securities | | 15,125,722 | | 9,052,084 | | 67 | % |
| | | | | | | |
Interests retained in securitization accounted for as trading securities: | | | | | | | |
Prime home equity line of credit transferor’s interest | | 679,389 | | 553,701 | | 23 | % |
Prime interest-only and principal-only securities | | 634,098 | | 549,635 | | 15 | % |
Prime home equity residual securities | | 591,434 | | 737,808 | | (20 | %) |
Subprime residuals and other related securities | | 292,054 | | 388,963 | | (25 | %) |
Prepayment penalty bonds | | 116,249 | | 90,666 | | 28 | % |
Subordinated mortgage-backed pass-through securities | | 46,487 | | — | | N/M | |
Prime home equity interest-only securities | | 22,141 | | 22,467 | | (1 | %) |
Prime residual securities | | 6,999 | | 11,321 | | (38 | %) |
Interest rate swaps | | 964 | | 2,490 | | (61 | %) |
Total interests retained in securitization accounted for as trading securities | | 2,389,815 | | 2,357,051 | | 1 | % |
| | | | | | | |
Servicing hedge principal-only securities accounted for as trading securities | | 466,245 | | — | | N/M | |
| | | | | | | |
Hedging and mortgage pipeline derivatives: | | | | | | | |
Mortgage servicing related | | 761,984 | | 837,908 | | (9 | %) |
Notes payable related | | 486,031 | | 444,342 | | 9 | % |
Mortgage loans held for sale and pipeline related | | 215,900 | | 78,066 | | 177 | % |
Total investments in other financial instruments | | $ | 19,445,697 | | $ | 12,769,451 | | 52 | % |
| | | | | | | | | | | |
(more)
COUNTRYWIDE FINANCIAL CORPORATION
SELECTED OPERATING DATA
(Unaudited)
| | Quarters Ended | | | |
| | March 31, | | % | |
(dollar amounts in millions) | | | | 2007 | | 2006 | | Change | |
| | | | | | | |
Production by segment: | | | | | | | |
Mortgage Banking | | $ | 110,567 | | $ | 93,452 | | 18 | % |
Banking Operations | | 2,568 | | 8,073 | | (68 | %) |
Capital Markets - conduit acquisitions | | 1,829 | | 4,007 | | (54 | %) |
Total Mortgage Loan Fundings | | 114,964 | | 105,532 | | 9 | % |
Commercial real estate | | 2,011 | | 966 | | 108 | % |
Total Loan Fundings | | $ | 116,975 | | $ | 106,498 | | 10 | % |
| | | | | | | |
Number of loans produced | | 595,534 | | 571,737 | | 4 | % |
| | | | | | | |
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 | | 6,474,805 | | 5,802,108 | | 12 | % |
| | | | | | | | | | | |
| | March 31, | | % | |
| | 2007 | | 2006 | | Change | |
Mortgage loan pipeline | | | | | | | |
(loans-in-process) | | $ | 69,389 | | $ | 64,167 | | 8 | % |
| | | | | | | |
Loan servicing portfolio (1) | | $ | 1,351,598 | | $ | 1,152,651 | | 17 | % |
| | | | | | | |
Number of loans serviced (1) | | 8,438,625 | | 7,604,711 | | 11 | % |
| | | | | | | |
MSR portfolio (2) | | $ | 1,242,111 | | $ | 1,024,220 | | 21 | % |
| | | | | | | |
Assets of Banking Operations | | | | | | | |
(in billions) | | $ | 84 | | $ | 78 | | 8 | % |
(1) Includes loans held for sale, loans held for investment and loans serviced for others, including those under subservicing agreements.
(2) Represents loan servicing portfolio reduced by loans held for sale, loans held for investment and subservicing.
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COUNTRYWIDE FINANCIAL CORPORATION
QUARTERLY SEGMENT ANALYSIS
(Unaudited)
| | Quarter Ended March 31, 2007 | |
| | Mortgage Banking | | | | | | | | | | | | | |
(in thousands) | | | | Loan
Production | | Loan
Servicing | | Closing
Services | | Total | | Banking | | Capital
Markets | | Insurance | | Global
Operations | | Other | | Grand
Total | |
Revenues | | | | | | | | | | | | | | | | | | | | | |
Gain on sale of loans and securities | | $ | 1,033,209 | | $ | (49 | ) | $ | — | | $ | 1,033,160 | | $ | — | | $ | 189,796 | | $ | — | | $ | — | | $ | 11,148 | | $ | 1,234,104 | |
Net interest income after provision for loan losses | | 90,024 | | (16,684 | ) | 3,192 | | 76,532 | | 386,648 | | 60,624 | | 17,012 | | 1,609 | | 36,550 | | 578,975 | |
Net loan servicing fees (1) | | — | | 139,994 | | — | | 139,994 | | — | | 1,577 | | (907 | ) | — | | (42,413 | ) | 98,251 | |
Net insurance premiums earned | | — | | — | | — | | — | | — | | — | | 334,177 | | — | | — | | 334,177 | |
Other revenue (2) | | 58,093 | | 26,908 | | 82,284 | | 167,285 | | 42,613 | | 8,659 | | 19,434 | | 18,841 | | (96,563 | ) | 160,269 | |
Total revenues | | 1,181,326 | | 150,169 | | 85,476 | | 1,416,971 | | 429,261 | | 260,656 | | 369,716 | | 20,450 | | (91,278 | ) | 2,405,776 | |
Expenses | | 1,041,885 | | 219,262 | | 55,520 | | 1,316,667 | | 141,167 | | 128,448 | | 190,058 | | 16,444 | | (87,803 | ) | 1,704,981 | |
| | | | | | | | | | | | | | | | | | | | | |
Earnings (loss) before income taxes | | $ | 139,441 | | $ | (69,093 | ) | $ | 29,956 | | $ | 100,304 | | $ | 288,094 | | $ | 132,208 | | $ | 179,658 | | $ | 4,006 | | $ | (3,475 | ) | $ | 700,795 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Quarter Ended March 31, 2006 | |
| | Mortgage Banking | | | | | | | | | | | | | |
(in thousands) | | | | Loan
Production | | Loan
Servicing | | Closing
Services | | Total | | Banking | | Capital
Markets | | Insurance | | Global
Operations | | Other | | Grand
Total | |
Revenues | | | | | | | | | | | | | | | | | | | | | |
Gain on sale of loans and securities | | $ | 1,160,777 | | $ | 1,979 | | $ | — | | $ | 1,162,756 | | $ | — | | $ | 187,300 | | $ | — | | $ | — | | $ | 11,122 | | $ | 1,361,178 | |
Net interest income after provision for loan losses | | 113,326 | | 31,658 | | 1,361 | | 146,345 | | 410,282 | | 58,094 | | 14,535 | | 542 | | 1,499 | | 631,297 | |
Net loan servicing fees (1) | | — | | 429,538 | | — | | 429,538 | | 282 | | 1,332 | | (614 | ) | 11,322 | | (8,783 | ) | 433,077 | |
Net insurance premiums earned | | — | | — | | — | | — | | — | | — | | 279,793 | | — | | — | | 279,793 | |
Other revenue (2) | | 67,496 | | 6,661 | | 70,267 | | 144,424 | | 41,068 | | 16,397 | | 9,433 | | 23,214 | | (103,933 | ) | 130,603 | |
Total revenues | | 1,341,599 | | 469,836 | | 71,628 | | 1,883,063 | | 451,632 | | 263,123 | | 303,147 | | 35,078 | | (100,095 | ) | 2,835,948 | |
Expenses | | 1,057,450 | | 221,118 | | 49,421 | | 1,327,989 | | 110,546 | | 107,550 | | 238,204 | | 24,910 | | (92,614 | ) | 1,716,585 | |
| | | | | | | | | | | | | | | | | | | | | |
Earnings (loss) before income taxes | | $ | 284,149 | | $ | 248,718 | | $ | 22,207 | | $ | 555,074 | | $ | 341,086 | | $ | 155,573 | | $ | 64,943 | | $ | 10,168 | | $ | (7,481 | ) | $ | 1,119,363 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) Consists primarily of fees earned for servicing mortgage loans, related ancillary fees and income from retained interests, change in fair value of mortgage servicing rights, recovery (impairment) of retained interests and servicing hedge gains (losses).
(2) Consists primarily of revenues from ancillary products and services, including title, escrow, appraisal, credit reporting and home inspection services and insurance agency commissions.
(more)
COUNTRYWIDE FINANCIAL CORPORATION
BANKING OPERATIONS
PAY-OPTION LOANS HELD FOR INVESTMENT,
PRODUCTION AND ACQUISITIONS OF LOANS HELD FOR INVESTMENT AND
CREDIT QUALITY
(Unaudited)
| | March 31, | | December 31, | |
(in thousands) | | | | 2007 | | 2006 | |
Pay-option ARM loans held for investment: | | | | | |
Total pay-option ARM loan portfolio | | $ | 30,780,617 | | $ | 32,732,581 | |
Total principal balance of pay-option ARM loans with
accumulated negative amortization | | $ | 27,448,774 | | $ | 28,958,718 | |
Accumulated negative amortization (from original loan balance) | | $ | 815,826 | | $ | 653,974 | |
| | | | | | | | | |
| | Quarters Ended
March 31, | | % | |
(in thousands) | | | | 2007 | | 2006 | | Change | |
| | | | | | | |
Interest capitalized on loans | | $ | 233,986 | | $ | 109,237 | | 114 | % |
| | | | | | | | | | | |
| | Quarters Ended
March 31, | | % | |
(in millions) | | | | 2007 | | 2006 | | Change | |
Production and bulk acquisitions of loans held for investment by channel: | | | | | | | |
Purchases (1) | | $ | 2,163 | | $ | 2,114 | | 2 | % |
Correspondent Lending | | 366 | | 2,337 | | (84 | %) |
Consumer Markets | | 26 | | 852 | | (97 | %) |
Wholesale Lending | | 13 | | 2,770 | | (100 | %) |
Total production and purchases of loans held for investment | | $ | 2,568 | | $ | 8,073 | | (68 | %) |
| | | | | | | | | | | |
(1) Acquisitions from third parties
| | March 31, | | December | |
(dollar amounts in thousands) | | | | 2007 | | 2006 | |
| | | | | | | |
Non-performing residential loans: | | | | % assets | | | | % assets | |
With third party credit enhancement (2) | | $ | 146,297 | | 0.17 | % | $ | 109,218 | | 0.13 | % |
Without third party credit enhancement | | 547,553 | | 0.65 | % | 409,865 | | 0.50 | % |
| | 693,850 | | 0.82 | % | 519,083 | | 0.63 | % |
Foreclosed real estate | | 110,059 | | 0.13 | % | 27,416 | | 0.03 | % |
| | | | | | | | | |
Total non-performing assets | | $ | 803,909 | | 0.95 | % | $ | 546,499 | | 0.66 | % |
| | | | | | | | | |
Allowances for credit losses: | | | | | | | | | |
Allowance for loan losses | | $ | 318,083 | | | | $ | 228,692 | | | |
Liability for unfunded loan commitments | | 13,759 | | | | 8,104 | | | |
| | $331,842 | | | | $236,796 | | | |
Allowances for credit losses as a percentage of: | | | | | | | | | |
Total non-performing loans | | | | 47.83 | % | | | 45.62 | % |
Total non-performing loans without third party credit enhancements | | | | 60.60 | % | | | 57.77 | % |
Total loans held for investment | | | | 0.48 | % | | | 0.32 | % |
| | Quarter Ended
March 31, 2007 | | Quarter Ended
March 31, 2006 | |
| | | | Annualized net
charge-offs as %
average investment
loans | | | | Annualized net
charge-offs as %
average investment
loans | |
Net charge-offs: | | $ | 33,057 | | 0.19% | | $ | 6,665 | | 0.04% | |
| | | | | | | | | | | |
(2) Third party credit enhancements include borrower-paid mortgage insurance and pool mortgage insurance acquired by the Banking Operations.
(more)
COUNTRYWIDE FINANCIAL CORPORATION
BANKING OPERATIONS
SUMMARY INFORMATION, AVERAGE BALANCE SHEET AND LOAN QUALITY
(Unaudited)
Summary Information | | March 31, | |
(dollar amounts in thousands) | | | | 2007 | | 2006 | |
After-tax return on average assets | | 0.88 | % | 1.08 | % |
After-tax return on average equity | | 14.6 | % | 15.4 | % |
| | | | | |
Period end: | | | | | |
Total assets | | $ | 84,260,689 | | $ | 77,777,915 | |
Total equity | | $ | 5,029,782 | | $ | 5,360,416 | |
Total investment loan portfolio, net | | $ | 69,360,391 | | $ | 69,055,297 | |
| | | | | | | | | |
Average Balance Sheet | | Quarter Ended March 31, 2007 | | Quarter Ended March 31, 2006 | |
| | | | Interest | | | | | | Interest | | | |
| | Average | | Income/ | | Annualized | | Average | | Income/ | | Annualized | |
(dollar amounts in thousands) | | | | Balance | | Expense | | Yield/Rate | | Balance | | Expense | | Yield/Rate | |
| | | | | | | | | | | | | | | |
Interest-earning assets | | | | | | | | | | | | | |
Home loans | | | | | | | | | | | | | |
Pay-option ARMs | | $ | 32,135,605 | | $ | 591,547 | | 7.36 | % | $ | 28,410,879 | | $ | 427,954 | | 6.03 | % |
Hybrid & other 1st liens | | 18,655,609 | | 258,177 | | 5.54 | % | 22,214,899 | | 291,096 | | 5.24 | % |
Home equity loans | | 20,061,375 | | 415,223 | | 8.35 | % | 15,424,400 | | 301,950 | | 7.91 | % |
Warehouse lending advances | | — | | — | | 0.00 | % | — | | — | | 0.00 | % |
Construction loans | | 21,493 | | 417 | | 7.76 | % | — | | — | | 0.00 | % |
Other assets | | 9,037,634 | | 122,899 | | 5.45 | % | 7,991,760 | | 101,464 | | 5.09 | % |
Total interest-earning assets | | $ | 79,911,716 | | $ | 1,388,263 | | 6.97 | % | $ | 74,041,938 | | $ | 1,122,464 | | 6.08 | % |
| | | | | | | | | | | | | |
Interest-bearing liabilities | | | | | | | | | | | | | |
Money market & savings deposits | | $ | 10,676,624 | | $ | 136,174 | | 5.17 | % | $ | 4,831,270 | | $ | 51,411 | | 4.32 | % |
Escrow deposits | | 15,588,390 | | 198,412 | | 5.16 | % | 13,468,530 | | 145,852 | | 4.39 | % |
Time deposits (CDs) | | 29,328,133 | | 369,146 | | 5.10 | % | 22,769,200 | | 236,566 | | 4.21 | % |
FHLB advances | | 17,166,718 | | 180,971 | | 4.28 | % | 24,663,071 | | 245,221 | | 4.03 | % |
Other borrowings | | 515,266 | | 6,820 | | 5.37 | % | 2,216,502 | | 25,114 | | 4.60 | % |
Total interest-bearing liabilities | | $ | 73,275,131 | | $ | 891,523 | | 4.93 | % | $ | 67,948,573 | | $ | 704,164 | | 4.20 | % |
| | | | | | | | | | | | | |
Net interest spread | | | | | | 2.04 | % | | | | | 1.88 | % |
Net interest margin | | | | | | 2.45 | % | | | | | 2.23 | % |
Loan Quality (1)
| | March 31, 2007 | | March 31, 2006 | |
| | LTV | | CLTV | | FICO | | LTV | | CLTV | | FICO | |
Pay-option ARMs | | 75 | % | 79 | % | 717 | | 75 | % | 78 | % | 721 | |
Hybrid & other 1st liens | | 74 | % | 79 | % | 733 | | 74 | % | 79 | % | 735 | |
Home equity loans | | 20 | % | 81 | % | 731 | | 20 | % | 81 | % | 729 | |
(1) At time of origination; LTV=loan-to-value ratio; CLTV=combined LTV, which included second mortgages at time of origination; FICO is a commonly used credit scoring measure
(more)
COUNTRYWIDE FINANCIAL CORPORATION
OTHER OPERATIONS
CAPITAL MARKETS SECURITIES AND INSURANCE SEGMENT
(Unaudited)
| | Quarters Ended | | | |
| | March 31, | | % | |
(in millions) | | | | 2007 | | 2006 | | Change | |
| | | | | | | |
Capital Markets Securities Trading Volume: (1) | | | | | | | |
Mortgage-backed securities | | $ | 560,269 | | $ | 528,350 | | 6 | % |
U.S. Treasury securities | | 365,329 | | 357,112 | | 2 | % |
Asset-backed securities | | 33,641 | | 32,676 | | 3 | % |
Other | | 38,703 | | 60,217 | | (36 | %) |
Total securities trading volume | | $ | 997,942 | | $ | 978,355 | | 2 | % |
| | | | | | | | | | | |
(1) Includes trades with Mortgage Banking Segment.
Insurance Segment
| | Quarters Ended | | | |
| | March 31, | | % | |
(dollar amounts in thousands) | | | | 2007 | | 2006 | | Change | |
Balboa Life & Casualty: | | | | | | | |
Lender-placed net premiums earned | | $ | 166,734 | | $ | 126,052 | | 32 | % |
Voluntary net premiums earned | | $ | 104,183 | | $ | 101,946 | | 2 | % |
Loss ratio | | 43 | % | 50 | % | | |
Combined ratio | | 81 | % | 91 | % | | |
| | | | | | | | | | | |
| | Quarters Ended | | | |
| | March 31, | | % | |
| | 2007 | | 2006 | | Change | |
Balboa Reinsurance: | | | | | | | |
(in thousands) | | | | | | | |
Reinsurance net earned premiums | | $ | 63,260 | | $ | 51,795 | | 22 | % |
| | | | | | | |
(in billions) | | | | | | | |
Period end: | | | | | | | |
Loans in CFC servicing portfolio covered by
Balboa Reinsurance | | $ | 94 | | $ | 81 | | 16 | % |
