- Continued Deterioration In Industry Environment Results In 2007 Fourth
Quarter Net Loss Of $422 Million -
- Full Year Net Loss Of $704 Million, The Company's First Annual Net Loss
In More Than 30 Years -
- Board Announces $0.15 Dividend -
CALABASAS, Calif., Jan. 29 /PRNewswire-FirstCall/ -- Countrywide
Financial Corporation (NYSE: CFC) today reported a net loss of $422
million, or $0.79 per diluted share, for the fourth quarter ended December
31, 2007, which compares to net income of $622 million, or $1.01 per
diluted share, for the fourth quarter of 2006. For the full year, the
Company reported a loss of $704 million, or $2.03 per diluted share, the
Company's first full-year net loss in more than 30 years. This compares to
net income of $2.7 billion, or $4.30 per diluted share for the twelve
months ended December 31, 2006. Excluding the impact of the below market
strike price of the convertible preferred stock issued in the third quarter
of 2007, the per share diluted loss for the 2007 full year was $1.30.(1)
Key quarterly results include the following:
Table 1 Quarter Ended Year Ended
($ in millions, except per Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
share amounts) 2007 2007 2006 2007 2006
Consolidated Company
Net (Loss) Earnings $(422) $(1,201) $622 $(704) $2,675
Diluted (Loss) Earnings
per Share $(0.79) $(2.85) $1.01 $(2.03) $4.30
Shareholders' Equity $14,656 $15,252 $14,318
Total Assets $211,730 $209,236 $199,946
Key Segment Pre-tax (Loss)
Earnings
Mortgage Banking $(623) $(1,314) $453 $(1,517) $2,062
Banking $(279) $(407) $343 $(269) $1,380
Capital Markets $118 $(344) $99 $15 $554
Insurance $172 $150 $75 $601 $320
Key Operating Statistics
($ in billions)
Total Loan Fundings $69 $96 $124 $416 $468
Ending Loan Servicing
Portfolio $1,476 $1,459 $1,298
Ending Assets of
Banking Operations $113 $105 $83
(1) If the strike price of the convertible preferred stock is less than
the market price at the time of issuance, then the aggregate
difference is treated as a dividend in the numerator for the diluted
EPS calculation. This increased the Company's loss per fully diluted
share by $0.73 from $(1.30) to $(2.03). This information is provided
to facilitate the comparison to prior periods' earnings per diluted
share.
"While considerably improved from the previous quarter, Countrywide's
results for the fourth quarter of 2007 were adversely impacted by further
credit deterioration across the industry and continued illiquidity in the
secondary mortgage markets," said Angelo R. Mozilo, Chairman and Chief
Executive Officer.
"These factors resulted in increased charges associated with the
building of higher loss reserves on our residential loan portfolio as well
as impairment related to HELOC securitizations that exceeded those
previously anticipated by the Company," noted Mozilo. "These increased
credit-related costs impacted our Mortgage Banking and Banking Operations
segments, both of which incurred pre-tax losses for the quarter. Our
Insurance segment performed exceptionally well, increasing pre-tax earnings
15 percent from the third quarter to $172 million and delivering record
pre-tax earnings of $601 million for the full year. Our Capital Markets
business returned to profitability, aided by fourth quarter income in the
amount of $104 million which partially reversed losses of $150 million
recorded in the prior quarter primarily on previously securitized loans
that qualified for sales accounting under SFAS 140 in this quarter.
"During this unprecedented worldwide financial crisis, our employees
performed in an exemplary manner and I would like to express my sincere
appreciation for their heroic efforts," Mozilo concluded. "Despite this
crisis, our team never lost sight of the task at hand, as we funded over
two million loans in 2007 while at the same time providing exceptional
service for the nine million loans in our servicing portfolio. In addition,
the Countrywide team successfully accelerated the transition of our loan
origination structure into Countrywide Bank. Also, we quickly responded to
the industry-wide foreclosure crisis by being first to the table with a
solution - a $16 billion home retention initiative. In 2007 alone, the
Countrywide team helped more than 80,000 borrowers retain their homes, with
69 percent of these efforts specifically related to loan modifications. Our
customers, business partners and shareholders should take comfort in
knowing that the Countrywide team is dedicated to preserving as well as
increasing homeownership."
SIGNIFICANT FOURTH QUARTER MATTERS
Credit-Related Costs
Increased estimates of future defaults and charge-offs resulted in
higher credit costs during the fourth quarter of 2007 and were attributable
to greater than expected increases in delinquency rates during the quarter
and worsening housing market conditions. The credit-related costs impacting
fourth quarter results are as follows:
-- Provision for credit losses of $924 million, compared to $937 million
last quarter and $73 million in the fourth quarter of 2006. The
provision for credit losses was approximately 3.3 times charge-offs of
$283 million during the quarter. As a result, the reserve for credit
losses increased to $1.9 billion at the end of the year, up from $1.2
billion at the end of the third quarter of 2007 and $269 million at
the end of the fourth quarter of 2006.
-- Impairment of Credit-Sensitive Residuals of $831 million, compared to
impairment of $690 million last quarter and $30 million in the fourth
quarter of 2006. Fourth quarter 2007 impairment primarily related to
the Company's retained interests from prime junior-lien home equity
securitizations.
Inventory Valuation Adjustments
During the quarter, the disruption in the capital markets and a severe
lack of liquidity for non-agency mortgage assets persisted and credit
spreads on those assets continued to widen. As a result, approximately $7.0
billion of non-agency loans were moved to the Company's held-for-investment
(HFI) portfolio and the Company incurred losses of approximately $394
million primarily related to the write-down of such loans prior to transfer
to the HFI portfolio.
Restructuring Charges
Weakness in the housing market and tightening in the mortgage credit
market substantially reduced industry and Countrywide origination volume in
2007 and these factors are expected to continue to impact volumes
throughout 2008. As a result, Countrywide has reduced its headcount by
approximately 11,000 people since July 2007. Total restructuring charges
taken in 2007 amounted to $145 million, of which $87 million was recorded
in the fourth quarter.
Dividend Declaration
Countrywide's Board of Directors declared a dividend of $1,812.50 per
share on its Series B preferred stock. The preferred stock dividend is
payable on February 15, 2008. Countrywide's Board of Directors also
declared a $0.15 dividend on its common shares. The common stock dividend
is payable on February 29, 2008 to shareholders of record on February 12,
2008.
BUSINESS SEGMENT PERFORMANCE
Mortgage Banking -- Loan Production
The Loan Production sector is comprised of the following distribution
channels: consumer-direct lending through Countrywide's 755 retail home
loan offices, call center operations and the Internet; wholesale lending
through a network of mortgage brokers; and correspondent lending which buys
closed loans from other financial institutions such as independent mortgage
companies, commercial banks, savings and loans and credit unions. The
sector also includes the mortgage banking activities of Countrywide Bank.
Table 2
Loan Production Sector
Results of Operations (1) Quarter Ended Year Ended
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
($ in millions) 2007 2007 2006 2007 2006
Gain (loss) on sale of
loans $332 $(438) $1,263 $2,220 $4,898
Net warehouse spread 22 116 136 376 511
Miscellaneous income 66 47 48 165 240
Total revenues 421 (276) 1,447 2,761 5,649
Operating expenses (781) (913) (901) (3,494) (3,782)
Allocated corporate
expenses (89) (126) (124) (452) (556)
Total expenses (869) (1,039) (1,025) (3,946) (4,338)
Total Loan Production
sector pre-tax
(loss) earnings $(448) $(1,315) $421 $(1,185) $1,311
Total Mortgage Banking
loan funding volume $61,155 $90,351 $117,745 $385,141 $421,084
(1) Numbers may not total exactly due to rounding.
The Loan Production sector incurred a pre-tax loss of $448 million in
the fourth quarter, compared to a pre-tax loss of $1.3 billion last quarter
and pre-tax earnings of $421 million in the fourth quarter of 2006. The
fourth quarter of 2007 improved from the third quarter in large part as a
result of a reduced impact from net inventory valuations and pipeline
write-downs, as these factors equated to $428 million in the fourth quarter
as compared to $691 million in the third quarter of 2007.
In addition to the net inventory valuations and pipeline write-downs,
fourth quarter profitability was also impacted by a substantial decrease in
loan production to $61 billion, compared to $90 billion last quarter and
$118 billion in the fourth quarter of 2006. This decline reflects a smaller
origination market, which is largely attributable to the tightening of
underwriting and loan program guidelines throughout the industry, as well
as economic conditions and the lack of liquidity for non agency-eligible
loans. Gain on sale revenue was up substantially from the third quarter of
2007 (principally a result of fewer write-downs and valuation adjustments),
but down 74 percent from the same quarter last year. The decline in
year-over- year gain on sale revenue primarily resulted from a reduction in
the revenue across all product categories. However, as a percentage of
loans sold, prime gain-on-sale margins, which include inventory
write-downs, increased to 0.99 percent for the fourth quarter, up from 0.27
percent in the third quarter of 2007 and 0.93 percent in the fourth quarter
of 2006.
The Loan Production sector was also negatively impacted in the fourth
quarter by a reduction in net warehouse spread, resulting from fewer loans
in inventory as well as lower inventory yield. Operating expenses on an
absolute basis declined from the third quarter, but increased as a
percentage of loan production to 1.28 percent from 1.01 percent in the
third quarter.
Mortgage Banking -- Loan Servicing
The Loan Servicing sector reflects the performance of mortgage
servicing rights (MSRs) and retained interests associated with
Countrywide's owned servicing portfolio. Countrywide also manages a
financial hedge within the Loan Servicing sector to mitigate negative
valuation changes in MSRs and retained interests.
The table below summarizes the Loan Servicing sector results of
operations.
Table 3
Quarter Ended (3) Year Ended (3)
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
($ in millions) 2007 2007 2006 2007 2006
Servicing earnings before
valuation of credit-
sensitive retained
interests $644 $681 $39 $1,835 $755
Impairment of credit-
sensitive retained
interests, net of hedge (842) (707) (30) (2,276) (95)
Total Loan Servicing
sector pre-tax (loss)
earnings $(198) $(27) $9 $(441) $660
Servicing fees and other
revenue $1,660 $1,702 $1,576 $6,686 $5,808
Realization of expected
MSR cash flows (659) (696) (784) (3,012) (2,932)
Operating revenues 1,001 1,006 792 3,674 2,877
Direct expenses (244) (223) (188) (849) (743)
Allocated corporate expenses (16) (19) (20) (73) (86)
Total expenses (260) (242) (208) (922) (829)
Operating earnings 741 764 584 2,752 2,048
Change in fair value of
MSRs (1) (1,621) (858) (186) (1,161) (16)
MSR hedge gain (loss)(1)(2) 1,986 1,201 (141) 1,644 (614)
MSR valuation changes,
net of MSR hedge (1) 365 343 (328) 483 (630)
Impairment of credit-sensitive
retained interests ("credit
residuals") (831) (690) (30) (2,304) (95)
Hedge (loss) gain (2) (10) (18) - 28 -
Valuation of credit
residuals, net of hedge (842) (707) (30) (2,276) (95)
Interest expense (462) (426) (218) (1,400) (663)
Total Loan Servicing
sector pre-tax (loss)
earnings $(198) $(27) $9 $(441) $660
Average servicing portfolio
($ in billions) $1,456 $1,432 $1,261 $1,394 $1,188
MSR portfolio capitalization
rate 1.40% 1.51% 1.38%
Prepayment speed (CPR) 17.9% 18.1% 21.0%
Carrying value of credit
residuals($ in billions) $0.7 $0.9 $2.1
(1) Includes other non credit-sensitive retained interests, predominately
interest-only securities.
(2) For quarter and year ended 12/31/06, hedge gain (loss) is not
allocated between MSRs and credit sensitive residuals, and as a
result, the entire hedge gain (loss) is reflected in the MSR hedge
gain (loss).
(3) Numbers may not total exactly due to rounding.
Before the impact of valuation adjustments to credit-sensitive retained
interests, Loan Servicing sector pre-tax earnings were $644 million during
the fourth quarter of 2007 compared to $681 million and $39 million in the
third quarter of 2007 and fourth quarter of 2006, respectively.
Operating earnings for the sector were $741 million in the fourth
quarter of 2007, which compares to $764 million in the third quarter of
2007 and $584 million in the fourth quarter of 2006. The valuation change
of MSRs, net of servicing hedge performance, improved to $365 million in
the quarter, despite a 55 basis point reduction in the 10-year U.S.
Treasury yield during the quarter. This compares to valuation changes of
MSRs, net of hedge performance, of $343 million and a negative $328 million
in the prior quarter and year-over-year quarter, respectively.
Offsetting improved operating earnings and MSR asset performance, Loan
Servicing sector results were negatively impacted by impairment charges of
$831 million applicable to the Company's credit-sensitive retained
interests and primarily the retained interests for home equity
securitizations. The impairment on retained interests was driven by
worsening delinquency trends, revisions to estimates of future home price
declines, and resulting increases in estimates of future defaults and
credit losses. The write-downs and provisions for anticipated losses during
the quarter were primarily applicable to home equity retained interests.
Under the terms of the Company's home equity line of credit
securitizations, Countrywide makes advances to borrowers when they request
a subsequent draw on their line of credit and Countrywide is reimbursed for
those advances from the cash flows in the securitization. This
reimbursement normally occurs within a short period after the advance.
However, in the event that loan losses requiring draws on monoline
insurer's policies (which protect the bondholders in the securitization)
exceed a specified threshold or duration, these reimbursements occur only
after other parties in the securitization (including the senior bondholders
and the monoline insurer) have received all of the cash flows to which they
are entitled. This status, known as rapid amortization, has the effect of
extending the time period for which the Company's advances are outstanding,
and may result in Countrywide not receiving reimbursement for all of the
funds advanced. During the fourth quarter of 2007, Countrywide recorded
impairment losses of $704 million related to estimated future draw
obligations on the securitization deals that have entered or are expected
to enter rapid amortization status. The aggregate carrying value of the
Company's investments in credit-sensitive residuals at December 31, 2007
was $736 million, compared to $907 million at September 30, 2007 and $2.1
billion at December 31, 2006. The liability for losses applicable to future
draw advances at December 31, 2007 was $704 million.
Banking
The Banking segment includes Banking Operations (primarily the fee and
investment activities of Countrywide Bank, FSB) and Countrywide Warehouse
Lending, a provider of mortgage inventory financing to independent mortgage
bankers.
Table 4
Banking Segment Results of Operations
Quarter Ended (2) Year Ended
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
($ in millions) 2007 2007 2006 2007 2006
Banking Operations $(262) $(389) $346 $(220) $1,384
Countrywide Warehouse
Lending 5 - 13 25 56
Allocated corporate
expenses (23) (18) (16) (74) (60)
Total Banking segment
pre-tax (loss)
earnings $(279) $(407) $343 $(269) $1,380
Table 5
Quarter Ended (2) Year Ended (2)
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
($ in millions) 2007 2007 2006 2007 2006
Banking Operations:
Net interest income $627 $530 $480 $2,118 $1,796
Provision for credit losses (688) (784) (65) (1,848) (157)
Non-interest income 11 27 38 129 148
Mortgage insurance expense (23) (26) (21) (92) (46)
Other non-interest expense (189) (136) (85) (526) (356)
Banking Operations pre-
tax (loss) earnings $(262) $(389) $346 $(220) $1,384
Other statistics:
Total assets $113,057 $105,177 $82,775
Total deposits (1) $61,184 $59,741 $55,987
Loan portfolio, net $85,988 $79,313 $73,482
Net charge-offs $192 $126 $14 $460 $34
Allowance for credit losses $1,623 $1,127 $237
(1) Includes intercompany deposits
(2) Numbers may not total exactly due to rounding
During the fourth quarter of 2007, Banking Operations incurred a
pre-tax loss of $262 million, compared to a pre-tax loss of $389 million
last quarter and pre-tax income of $346 million in the fourth quarter of
2006. The loss in the current quarter was primarily driven by a $688
million provision for credit losses. The credit loss provision in the
fourth quarter was down from the third quarter provision of $784 million,
but was higher than previously anticipated due to worsening of housing
market conditions and delinquency trends during the quarter, and higher
resulting future charge-off estimates. During the fourth quarter of 2007,
net charge-offs in Banking Operations were $192 million, which compares to
$126 million in the third quarter of 2007 and $14 million in the fourth
quarter of 2006. The allowance for credit losses in the Banking Operations
sector at December 31, 2007 grew to $1.6 billion from $1.1 billion at
September 30, 2007. This reserve is supplemented by credit enhancement
covering 68 percent of the pay option ARM portfolio and 11 percent of the
home equity portfolio as of December 31, 2007. Operating expenses increased
at the Bank, as 91 percent of Countrywide's total originations were funded
through the Bank in the fourth quarter as compared to 70 percent in the
third quarter.
The growth in the Banking Operations' HFI loan portfolio was $7.2
billion in the fourth quarter, which resulted in an increase in net
interest income of $98 million. Strong retail deposit growth in the fourth
quarter of 2007 resulted in a 30 percent increase in retail deposits from
the third quarter of 2007. During the fourth quarter, the Bank opened 44
new Financial Centers, bringing its total to 194 at December 31, 2007.
Capital Markets
The Capital Markets segment includes a registered securities broker-
dealer, a distressed-asset manager, a commercial real estate finance group and
related businesses. Financial results for the Capital Markets segment are
noted below:
Table 6
Quarter Ended Year Ended
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
($ in millions) 2007 2007 2006 2007 2006
Gain (loss) on sale $119 $(300) $141 $189 $717
Pre-tax earnings (loss) $118 $(344) $99 $15 $554
Conduit loans sold $1,687 $4,907 $12,031 $21,877 $62,922
The pre-tax earnings in the Capital Markets segment were $118 million
in the fourth quarter, which compares to a pre-tax loss of $344 million
last quarter and pre-tax earnings of $99 million in the fourth quarter of
2006. Fourth quarter results were favorably impacted by a positive change
in gain on sale of $419 million from the third quarter of 2007. The
improvement in gain on sale was aided by income in the amount of $104
million which partially reversed losses of $150 million recorded in the
prior quarter primarily on previously securitized loans that qualified for
sales accounting under SFAS 140 this quarter.
Insurance
Countrywide's Insurance segment includes Balboa Insurance Group, whose
companies are national providers of property, life and casualty insurance;
and Balboa Reinsurance Company, a captive mortgage guaranty reinsurance
company.
Table 7
Insurance Segment
Pre-tax Earnings Quarter Ended Year Ended
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
($ in millions) 2007 2007 2006 2007 2006
Balboa Reinsurance
Company $76 $68 $56 $332 $216
Balboa Life &
Casualty 105 89 29 302 138
Allocated corporate
expenses (9) (7) (10) (33) (34)
Total Insurance
segment pre-tax
earnings $172 $150 $75 $601 $320
For the fourth quarter of 2007, Insurance segment pre-tax earnings were
$172 million, compared to $150 million last quarter and $75 million in the
fourth quarter of 2006. The fourth quarter results were modestly impacted
by a charge of $19 million related to the Southern California wildfires.
Earnings growth at both the mortgage reinsurance and life & casualty
businesses was primarily driven by continued growth in net earned premiums.
EARNINGS WEBCAST
Given the pending merger with Bank of America, announced January 11,
2008, Countrywide will not hold a webcast or conference call to discuss
quarterly results.
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 residential and commercial
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 http://www.countrywide.com.
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,
financial results, 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: lack of or further reduced
access to corporate debt markets or other sources of liquidity; additional
disruptions in the secondary mortgage market; increased credit losses due
to downward trends in the economy and in the real estate market, including
as a result of continued increases in the delinquency rates of borrowers;
adverse changes in the Company's credit ratings, including any downgrade
that causes the Company to lose its investment grade credit rating;
continued increases in credit exposure resulting from the Company's
decision to retain more loans in its portfolio of loans held for
investment; competitive conditions in each of the Company's business
segments; unexpected changes in general business, economic, market and
political conditions in the United States; reduction in government support
of homeownership; the level and volatility of interest rates; changes in
interest rate paths; changes in generally accepted accounting principles or
in the legal, regulatory and legislative environments in which Countrywide
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; unforeseen cash or capital
requirements; 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, and the statements made in this press release
are current as of the date of this release only.
(tables follow)
COUNTRYWIDE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Quarters Ended
December 31, %
(in thousands, except per share data) 2007 2006 Change
(unaudited)
Revenues
Gain on sale of loans and securities $425,781 $1,419,318 (70%)
Interest income 3,055,129 3,328,545 (8%)
Interest expense (2,346,306) (2,590,063) (9%)
Net interest income 708,823 738,482 (4%)
Provision for loan losses (907,029) (70,815) 1,181%
Net interest (expense) income after
provision for loan losses (198,206) 667,667 N/M
Loan servicing fees and other income
from mortgage servicing rights and
retained interests 1,465,620 1,324,963 11%
Realization of expected cash flows
from mortgage servicing rights (658,968) (784,258) (16%)
Change in fair value of mortgage
servicing rights (1,486,000) (143,149) 938%
Impairment of retained interests (966,500) (73,677) 1,212%
Servicing Hedge gains (losses) 1,975,221 (141,115) N/M
Net loan servicing fees and other
income from mortgage servicing
rights and retained interests 329,373 182,764 80%
Net insurance premiums earned 447,052 306,640 46%
Other 153,230 182,080 (16%)
Total revenues 1,157,230 2,758,469 (58%)
Expenses
Compensation 906,845 1,016,559 (11%)
Occupancy and other office 308,522 265,845 16%
Insurance claims 167,835 120,336 39%
Advertising and promotion 83,859 65,781 27%
Other 398,234 305,411 30%
Total expenses 1,865,295 1,773,932 5%
(Loss) earnings before income taxes (708,065) 984,537 N/M
(Benefit) provision for income taxes (286,171) 362,956 N/M
NET (LOSS) EARNINGS $(421,894) $621,581 N/M
(Loss) Earnings per Share:
Basic $(0.79) $1.04 N/M
Diluted $(0.79) $1.01 N/M
Weighted Average Shares Outstanding:
Basic 577,370 598,940 (4%)
Diluted 577,370 614,482 (6%)
Years Ended
December 31, %
2007 2006 Change
(unaudited) (audited)
Revenues
Gain on sale of loans and securities $2,434,723 $5,681,847 (57%)
Interest income 13,161,865 12,056,043 9%
Interest expense (10,287,800) (9,133,682) 13%
Net interest income 2,874,065 2,922,361 (2%)
Provision for loan losses (2,286,183) (233,847) 878%
Net interest (expense) income after
provision for loan losses 587,882 2,688,514 (78%)
Loan servicing fees and other income
from mortgage servicing rights and
retained interests 5,716,443 4,960,550 15%
Realization of expected cash flows
from mortgage servicing rights (3,012,336) (2,932,741) 3%
Change in fair value of mortgage
servicing rights (1,085,419) 171,242 N/M
Impairment of retained interests (2,380,876) (284,690) 736%
Servicing Hedge gains (losses) 1,671,937 (613,706) N/M
Net loan servicing fees and other
income from mortgage servicing
rights and retained interests 909,749 1,300,655 (30%)
Net insurance premiums earned 1,523,534 1,171,433 30%
Other 605,549 574,679 5%
Total revenues 6,061,437 11,417,128 (47%)
Expenses
Compensation 4,165,023 4,373,985 (5%)
Occupancy and other office 1,126,226 1,030,164 9%
Insurance claims 525,045 449,138 17%
Advertising and promotion 321,766 260,652 23%
Other 1,233,651 969,054 27%
Total expenses 7,371,711 7,082,993 4%
(Loss) earnings before income taxes (1,310,274) 4,334,135 N/M
(Benefit) provision for income taxes (606,736) 1,659,289 N/M
NET (LOSS) EARNINGS $(703,538) $2,674,846 N/M
(Loss) Earnings per Share:
Basic $(2.03) $4.42 N/M
Diluted $(2.03) $4.30 N/M
Weighted Average Shares Outstanding:
Basic 581,025 605,143 (4%)
Diluted 581,025 622,298 (7%)
COUNTRYWIDE FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, December 31, %
(in thousands, except share data) 2007 2006 Change
(unaudited) (audited)
Assets
Cash $8,810,399 $1,407,000 526%
Mortgage loans held for sale 11,681,274 31,272,630 (63%)
Trading securities owned, at fair value 14,988,780 20,036,668 (25%)
Trading securities pledged as
collateral, at fair value 6,838,044 1,465,517 367%
Securities purchased under
agreements to resell, securities
borrowed and federal funds sold 9,640,879 27,269,897 (65%)
Loans held for investment, net of
allowance for loan losses of
$1,843,688 and $261,054, respectively 98,556,516 78,085,757 26%
Investments in other financial
instruments, at fair value 28,173,281 12,769,451 121%
Mortgage servicing rights, at
fair value 18,958,180 16,172,064 17%
Premises and equipment, net 1,564,438 1,625,456 (4%)
Other assets 12,518,270 9,841,790 27%
Total assets $211,730,061 $199,946,230 6%
Liabilities
Deposit liabilities $60,200,599 $55,578,682 8%
Securities sold under agreements to
repurchase and federal funds purchased 18,218,162 42,113,501 (57%)
Trading securities sold, not yet
purchased, at fair value 4,092,374 3,325,249 23%
Notes payable 97,227,413 71,487,584 36%
Accounts payable and accrued
liabilities 13,152,099 8,187,605 61%
Income taxes payable 4,183,543 4,935,763 (15%)
Total liabilities 197,074,190 185,628,384 6%
Commitments and contingencies - - -
Shareholders' Equity
Preferred stock, par value $0.05 -
authorized, 1,500,000 shares; issued
and outstanding at December 31, 2007,
20,000 shares of 7.25 % Series B
non-voting convertible cumulative
shares with a total liquidation
preference of $2,000,000 1 - N/M
Common stock, par value $0.05 -
authorized, 1,000,000,000 shares;
issued, 578,881,566 shares and
585,466,719 shares at December 31, 2007
and 2006, respectively; outstanding,
578,434,243 shares and 585,182,298 shares
at December 31, 2007 and 2006,
respectively 28,944 29,273 (1%)
Additional paid-in capital 4,155,724 2,154,438 93%
Retained earnings 10,644,511 12,151,691 (12%)
Accumulated other comprehensive loss (173,309) (17,556) 887%
Total shareholders' equity 14,655,871 14,317,846 2%
Total liabilities and
shareholders' equity $211,730,061 $199,946,230 6%
COUNTRYWIDE FINANCIAL CORPORATION
LOANS HELD FOR INVESTMENT, NET, OTHER ASSETS AND
MORTGAGE SERVICING RIGHTS
December 31, December 31, %
(in thousands) 2007 2006 Change
(unaudited) (audited)
Loans Held for Investment, Net
Mortgage loans $91,557,484 $72,295,979 27%
Defaulted FHA-insured and
VA-guaranteed loans repurchased
from securities 2,691,563 1,761,170 53%
Warehouse lending advances secured
by mortgage loans 887,134 3,185,248 (72%)
95,136,181 77,242,397 23%
Premiums and discounts and deferred
loan origination fees and costs, net (363,560) 1,104,414 N/M
Allowance for loan losses (1,843,688) (261,054) 606%
92,928,933 78,085,757 19%
Mortgage loans held in SPEs 5,627,583 - N/M
Total loans held for
investment, net $98,556,516 $78,085,757 26%
Other Assets
Reimbursable servicing advances, net $3,981,703 $2,170,891 83%
Investments in Federal Reserve Bank
and Federal Home Loan Bank stock 2,172,987 1,433,070 52%
Margin accounts 1,192,689 118,254 909%
Interest receivable 932,477 997,854 (7%)
Real estate acquired in settlement
of loans 807,843 251,163 222%
Receivables from custodial accounts 387,509 719,048 (46%)
Capitalized software, net 385,276 367,055 5%
Prepaid expenses 374,943 320,597 17%
Cash surrender value of assets held
in trust for deferred compensation
plans 307,902 372,877 (17%)
Cash surrender value of Company-
owned life insurance 229,835 5,894 N/M
Securities broker-dealer receivables 203,206 1,605,502 (87%)
Mortgage guaranty insurance tax and
loss bonds 165,066 128,293 29%
Receivables from sale of securities 98,021 284,177 (66%)
Restricted cash 86,078 238,930 (64%)
Other assets 1,192,735 828,185 44%
Total other assets $12,518,270 $9,841,790 27%
Mortgage Servicing Rights, at Fair
Value
Balance at beginning of year $16,172,064 $12,610,839
Remeasurement to fair value upon
adoption of SFAS 156 - 109,916
Fair Value at beginning of year 16,172,064 12,720,755 27%
Additions:
Servicing resulting from
transfers of financial assets 6,687,561 6,063,170 10%
Purchases of servicing assets 196,310 149,638 31%
Total additions 6,883,871 6,212,808 11%
Change in fair value:
Due to changes in valuation
inputs or assumptions used
in valuation model (1) (1,085,419) 171,242 N/M
Other changes in fair value (2) (3,012,336) (2,932,741) 3%
Balance at end of year $18,958,180 $16,172,064 17%
(1) Principally 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.
COUNTRYWIDE FINANCIAL CORPORATION
INVESTMENTS IN OTHER FINANCIAL INSTRUMENTS, AT FAIR VALUE
December 31, December 31, %
(in thousands) 2007 2006 Change
(unaudited) (audited)
Securities accounted for as
available-for-sale:
Prime agency mortgage-backed
securities $2,944,210 $2,141,079 38%
Prime non-agency mortgage-backed
securities 16,328,280 4,865,847 236%
Subprime mortgage-backed securities 35 860 (96%)
Municipal bonds 419,540 412,886 2%
Obligations of U.S. Government-
sponsored enterprises 255,205 776,717 (67%)
U.S. Treasury Securities 92,900 168,313 (45%)
Other 74,643 2,858 N/M
Subtotal 20,114,813 8,368,560 140%
Interests retained in
securitization - non credit-sensitive:
Mortgage-backed pass-through
securities 37,848 1,382 2,639%
Prime interest-only and principal-
only securities 256,832 279,375 (8%)
Prepayment penalty bonds 9,516 52,697 (82%)
Total interests retained in
securitization - non
credit-sensitive 304,196 333,454 (9%)
Interests retained in
securitization - credit-sensitive:
Prime residual securities 8,026 1,435 459%
Prime home equity retained interests 84,969 185,112 (54%)
Prime home equity interest-only
securities 9,143 7,021 30%
Subprime interest-only securities 20,918 3,757 457%
Subprime residuals and other
related securities 8,852 152,745 (94%)
Total interests retained in
securitization - credit-sensitive 131,908 350,070 (62%)
Total securities accounted for as
available-for-sale 20,550,917 9,052,084 127%
Securities accounted for as trading:
Interests retained in
securitization - non credit-sensitive:
Mortgage-backed pass-through
securities 594,304 - N/M
Prime interest-only and
principal-only securities 745,160 549,635 36%
Prepayment penalty bonds 70,401 90,666 (22%)
Interest rate swaps 50 2,490 (98%)
Total interests retained in
securitization -
non credit-sensitive 1,409,915 642,791 119%
Interests retained in
securitization - credit-sensitive:
Prime residual securities 12,531 11,321 11%
Prime home equity retained interests 328,569 1,291,509 (75%)
Prime home equity interest-only
securities - 22,467 (100%)
Subprime residuals and other
related securities 263,278 388,963 (32%)
Total interests retained in
securitization - credit-sensitive 604,378 1,714,260 (65%)
Servicing hedge principal-only
securities 908,358 - N/M
Other 72,685 - N/M
Total securities accounted for as
trading 2,995,336 2,357,051 27%
Hedging and mortgage pipeline derivatives:
Mortgage loans held for sale and
pipeline related 439,995 78,066 464%
Mortgage servicing related 3,239,076 837,908 287%
Notes payable related 947,957 444,342 113%
Total investments in other
financial instruments $28,173,281 $12,769,451 121%
COUNTRYWIDE FINANCIAL CORPORATION
NOTES PAYABLE
December 31, December 31, %
(in thousands) 2007 2006 Change
(unaudited) (audited)
Asset-backed commercial paper $ - $7,721,278 (100%)
Unsecured commercial paper - 6,717,794 (100%)
Secured revolving lines of credit 1,547,648 2,174,171 (29%)
Unsecured revolving lines of credit 11,480,000 - N/M
Borrowings from the Federal Reserve Bank 750,000 - N/M
Secured overnight bank loans - 105,049 (100%)
Unsecured bank loans - 130,000 (100%)
Federal Home Loan Bank advances 47,675,000 28,150,000 69%
Medium-term notes:
Floating-rate 10,779,722 13,155,231 (18%)
Fixed-rate 8,221,445 9,783,881 (16%)
19,001,167 22,939,112 (17%)
Asset-backed secured financing 9,453,478 241,211 3,819%
Convertible debentures 4,000,000 - N/M
Junior subordinated debentures 2,219,511 2,232,334 (1%)
Subordinated debt 1,067,010 1,027,797 4%
Other 33,599 48,838 (31%)
$97,227,413 $71,487,584 36%
COUNTRYWIDE FINANCIAL CORPORATION
SELECTED OPERATING DATA
(Unaudited)
Quarters Ended Years Ended
(dollar amounts in December 31, % December 31, %
millions) 2007 2006 Change 2007 2006 Change
Production by segment:
Mortgage Banking $61,155 $117,745 (48%) $385,141 $421,084 (9%)
Banking Operations 7,205 1,443 399% 18,090 23,759 (24%)
Capital Markets -
conduit acquisitions 116 2,716 (96%) 5,003 17,658 (72%)
Total Mortgage Loan
Fundings 68,476 121,904 (44%) 408,234 462,501 (12%)
Commercial real estate 686 2,362 (71%) 7,400 5,671 30%
Total Loan
Fundings $69,162 $124,266 (44%) $415,634 $468,172 (11%)
Number of loans
produced 359,540 642,858 (44%) 2,169,096 2,507,051 (13%)
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 10,942,598 5,391,256 103% 31,346,784 22,930,682 37%
December 31, %
2007 2006 Change
Mortgage loan pipeline
(loans-in-process) $35,061 $57,217 (39%)
Loan servicing
portfolio (1) $1,476,203 $1,298,394 14%
Number of loans
serviced (1) 9,034,763 8,198,873 10%
MSR portfolio (2) $1,355,492 $1,174,874 15%
Assets of Banking
Operations $113,057 $82,775 37%
(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.
COUNTRYWIDE FINANCIAL CORPORATION
QUARTERLY SEGMENT ANALYSIS
(Unaudited)
Quarter Ended December 31, 2007
Mortgage Banking
Loan Loan Closing
(in thousands) Production Servicing Services Total Banking
Revenues
Gain (loss) on sale
of loans and
securities $332,442 $- $- $332,442 $(22,203)
Net interest income
(expense) after
provision for loan
losses 22,496 (293,997) 3,313 (268,188) (35,419)
Net loan servicing
fees (1) - 351,415 - 351,415 -
Net insurance
premiums earned - - - - -
Other revenue (2) 66,255 43,231 80,868 190,354 34,555
Total revenues 421,193 100,649 84,181 606,023 (23,067)
Expenses 869,485 298,540 61,466 1,229,491 255,978
(Loss) earnings
before income taxes $(448,292) $(197,891) $22,715 $(623,468) $(279,045)
Capital Global
(in thousands) Markets Insurance Operations Other Grand Total
Revenues
Gain (loss) on sale of
loans and securities $118,507 $- $- $(2,965) $425,781
Net interest income
(expense) after
provision for loan
losses 62,426 26,573 2,075 14,327 (198,206)
Net loan servicing fees(1) 2,761 16 - (24,819) 329,373
Net insurance premiums
earned - 447,052 - - 447,052
Other revenue (2) 9,403 19,674 35,633 (136,389) 153,230
Total revenues 193,097 493,315 37,708 (149,846) 1,157,230
Expenses 75,456 321,332 28,960 (45,922) 1,865,295
(Loss) earnings before
income taxes $117,641 $171,983 $8,748 $(103,924) $(708,065)
Quarter Ended December 31, 2006
Mortgage Banking
Loan Loan Closing
(in thousands) Production Servicing Services Total Banking
Revenues
Gain (loss) on sale of
loans and securities $1,263,360 $(5) $- $1,263,355 $-
Net interest income
after provision for
loan losses 135,673 22,847 3,025 161,545 433,250
Net loan servicing
fees (1) - 192,615 - 192,615 -
Net insurance premiums
earned - - - - -
Other revenue (2) 47,610 17,786 77,234 142,630 40,483
Total revenues 1,446,643 233,243 80,259 1,760,145 473,733
Expenses 1,025,145 224,596 57,078 1,306,819 130,612
Earnings before
income taxes $421,498 $8,647 $23,181 $453,326 $343,121
Capital Global
(in thousands) Markets Insurance Operations Other Grand Total
Revenues
Gain (loss) on sale of
loans and securities $140,758 $- $- $15,205 $1,419,318
Net interest income after
provision for loan
losses 54,292 15,094 1,231 2,255 667,667
Net loan servicing fees(1) 1,349 (339) 1 (10,862) 182,764
Net insurance premiums
earned - 306,640 - - 306,640
Other revenue (2) 17,962 29,791 26,638 (75,424) 182,080
Total revenues 214,361 351,186 27,870 (68,826) 2,758,469
Expenses 115,123 276,086 15,667 (70,375) 1,773,932
Earnings before income
taxes $99,238 $75,100 $12,203 $1,549 $984,537
(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.
COUNTRYWIDE FINANCIAL CORPORATION
YEAR-TO-DATE SEGMENT ANALYSIS
(Unaudited)
Year Ended December 31, 2007
Mortgage Banking
(in Loan Loan Closing
thousands) Production Servicing Services Total Banking
Revenues
Gain (loss)
on sale
of loans
and
securities $2,220,164 $- $- $2,220,164 $(22,203)
Net interest
income (expense)
after provision
for loan
losses 375,820 (572,131) 13,068 (183,243) 337,193
Net loan
servicing
fees (1) - 1,049,733 - 1,049,733 -
Net insurance
premiums
earned - - - - -
Other
revenue(2) 164,644 111,270 338,034 613,948 160,007
Total
revenues 2,760,628 588,872 351,102 3,700,602 474,997
Expenses 3,945,708 1,030,005 241,972 5,217,685 743,749
(Loss)
earnings
before
income
taxes $(1,185,080) $(441,133) $109,130 $(1,517,083) $(268,752)
(in Capital Global
thousands) Markets Insurance Operations Other Grand Total
Revenues
Gain (loss)
on sale
of loans
and
securities $188,743 $- $- $48,019 $2,434,723
Net interest
income (expense)
after
provision
for loan
losses 222,333 90,333 7,192 114,074 587,882
Net loan
servicing
fees (1) 8,790 (547) - (148,227) 909,749
Net
insurance
premiums
earned - 1,523,534 - - 1,523,534
Other
revenue(2) 28,431 77,864 113,055 (387,756) 605,549
Total
revenues 448,297 1,691,184 120,247 (373,890) 6,061,437
Expenses 433,340 1,090,642 92,745 (206,450) 7,371,711
(Loss)
earnings
before
income
taxes $14,957 $600,542 $27,502 $(167,440) $(1,310,274)
Year Ended December 31, 2006
Mortgage Banking
(in Loan Loan Closing
thousands) Production Servicing Services Total Banking
Revenues
Gain on sale
of loans
and
securities $4,897,771 $2,630 $- $4,900,401 $-
Net interest
income
after
provision
for loan
losses 511,355 182,451 9,509 703,315 1,706,957
Net loan
servicing
fees (1) - 1,323,248 - 1,323,248 529
Net insurance
premiums
earned - - - - -
Other
revenue (2) 239,652 38,468 295,505 573,625 164,110
Total
revenues 5,648,778 1,546,797 305,014 7,500,589 1,871,596
Expenses 4,337,883 886,776 213,531 5,438,190 491,212
Earnings
(loss)
before
income
taxes $1,310,895 $660,021 $91,483 $2,062,399 $1,380,384
(in Capital Global
thousands) Markets Insurance Operations Other Grand Total
Revenues
Gain on
sale of
loans and
securities $717,007 $- $- $64,439 $5,681,847
Net interest
income
after
provision
for loan
losses 210,544 55,248 3,670 8,780 2,688,514
Net loan
servicing
fees (1) 5,664 (1,949) 12,034 (38,871) 1,300,655
Net
insurance
premiums
earned - 1,171,433 - - 1,171,433
Other
revenue(2) 59,938 68,399 77,882 (369,275) 574,679
Total
revenues 993,153 1,293,131 93,586 (334,927) 11,417,128
Expenses 439,653 972,998 64,944 (324,004) 7,082,993
Earnings
(loss)
before
income
taxes $553,500 $320,133 $28,642 $(10,923) $4,334,135
(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.
COUNTRYWIDE FINANCIAL CORPORATION
LOAN PRODUCTION SECTOR
GAIN (LOSS) ON SALE
(Unaudited)
Quarters Ended
December 31, September 30, December 31,
(dollar amounts in thousands) 2007 2007 2006
Prime
Production $59,976,000 $80,766,000 $98,603,000
Loans sold $63,711,754 $82,579,732 $93,620,258
Gain on sale $633,737 $223,519 $866,066
Gain on sale as % of loans sold 0.99% 0.27% 0.93%
Subprime
Production $65,000 $3,177,000 $9,146,000
Loans sold $359,875 $673,626 $8,723,236
(Loss) gain on sale $(260,206) $(158,586) $210,639
(Loss) gain on sale as % of loans
sold N/M N/M 2.41%
Home Equity
Production $1,114,000 $6,408,000 $9,996,000
Initial sale
Loans sold $ - $586,183 $6,811,487
(Loss) gain on sale $(60,373) $(518,230) $151,907
(Loss) gain on sale as % of loans
sold N/M N/M 2.23%
Subsequent draws
Loans sold $790,407 $1,006,072 $1,105,465
Gain on sale $19,284 $15,155 $34,748
Gain on sale as % of loans sold 2.44% 1.51% 3.14%
Total production $61,155,000 $90,351,000 $117,745,000
Total loans sold $64,862,036 $84,845,613 $110,260,446
Total gain (loss) on sale $332,442 $(438,142) $1,263,360
Total gain (loss) as % of loans
sold 0.51% (0.52%) 1.15%
Total gain (loss) as % of loans
produced 0.54% (0.48%) 1.07%
Years Ended
December 31,
2007 2006
Prime
Production $345,795,000 $344,370,000
Loans sold $348,596,203 $333,628,014
Gain on sale $2,794,813 $3,583,316
Gain on sale as % of loans sold 0.80% 1.07%
Subprime
Production $15,811,000 $36,752,000
Loans sold $14,087,624 $38,293,998
(Loss) gain on sale $(269,536) $703,686
(Loss) gain on sale as % of loans
sold N/M 1.84%
Home Equity
Production $23,535,000 $39,962,000
Initial sale
Loans sold $9,371,417 $26,812,059
(Loss) gain on sale $(389,990) $459,158
(Loss) gain on sale as % of loans
sold N/M 1.71%
Subsequent draws
Loans sold $3,881,972 $4,301,326
Gain on sale $84,877 $151,611
Gain on sale as % of loans sold 2.19% 3.52%
Total production $385,141,000 $421,084,000
Total loans sold $375,937,216 $403,035,397
Total gain (loss) on sale $2,220,164 $4,897,771
Total gain (loss) as % of loans
sold 0.59% 1.22%
Total gain (loss) as % of loans
produced 0.58% 1.16%
COUNTRYWIDE FINANCIAL CORPORATION
LOAN SERVICING SECTOR
SERVICING PORTFOLIO DELINQUENCIES
(Unaudited)
Servicing Portfolio
Delinquencies (1) Quarters Ended
December 31, September 30, December 31,
2007 2007 2006
Total 90+ day Total 90+ day Total 90+ day
Conventional 1st liens 5.76% 2.28% 4.41% 1.44% 3.05% 0.71%
Government 1st liens 14.38% 5.27% 13.50% 4.72% 14.01% 4.81%
Prime home equity loans
(including FRS) 7.32% 3.61% 5.76% 2.70% 3.59% 1.36%
Subprime loans 33.64% 17.25% 29.08% 12.63% 21.22% 7.34%
Total servicing
portfolio 8.64% 3.78% 7.12% 2.67% 5.30% 1.55%
(1) Delinquencies are based on outstanding loan balances and include loans
in foreclosure and are calculated using the MBA method. Using the OTS
method, total delinquency ratios would have been 5.32% at December 31,
2007; 4.01% at September 30, 2007; and 2.55% at December 31, 2006. In
the OTS method, a loan increases its delinquency status if a monthly
payment is not received by the loan's due date in the following month.
In the MBA method, a loan increases its delinquency status if a
monthly payment is not received by the end of the day immediately
preceding the loan's next due date.
COUNTRYWIDE FINANCIAL CORPORATION
BANKING OPERATIONS
KEY STATISTICS AND CREDIT PERFORMANCE TRENDS
(Unaudited)
Quarters Ended Years Ended
December 31, September 30, December 31, December 31,
(dollar amounts 2007 2007 2006 2007 2006
in thousands)
Banking
Operations Key
Operating
Statistics
Securities
portfolio $17,730,604 $18,273,012 $6,208,477
Total equity $8,357,966 $6,375,175 $6,338,382
After-tax return
on average
assets (0.52%) (1.12%) 1.05% (0.12%) 1.05%
After-tax return
on average
equity (7.5%) (18.6%) 15.0% (1.9%) 15.4%
90+ Day Delinquencies
Banking Operations Loans Held for Investment
December 31, September 30, December 31,
(dollar amounts 2007 2007 2006
in millions)
Pay-Option 5.7% 3.2% 0.6%
Other First Lien 2.1% 1.2% 0.8%
Prime Home Equity 1.6% 0.9% 0.7%
Subprime(1) 0.0% 0.0% 0.0%
Total 3.0% 1.7% 0.7%
Charge-Offs/Losses(2) (3)
Banking Operations Loans Held for Investment
December 31, September 30, December 31,
(dollar amounts 2007 2007 2006
in millions)
Pay-Option $(35) $(22) $(1)
Other First Lien (15) (4) (1)
Prime Home Equity (142) (100) (11)
Subprime(1) - - -
Total $(192) $(126) $(14)
(1) Includes Alt-A residual.
(2) Charge-offs in Banking Operations generally occur at 180 days of
delinquency.
(3) Amounts may not total due to rounding.
COUNTRYWIDE FINANCIAL CORPORATION
BANKING OPERATIONS
CREDIT QUALITY
(Unaudited)
December 31, September 30, December 31,
(dollar amounts 2007 2007 2006
in thousands)
Non-performing
residential loans: % assets % assets % assets
With third party
credit
enhancement (1) $1,272,116 1.12% $627,165 0.60% $109,218 0.13%
Without third
party credit
enhancement 1,611,951 1.43% 805,336 0.76% 409,865 0.50%
Total non-performing
loans 2,884,067(2) 2.55% 1,432,501 1.36% 519,083 0.63%
Foreclosed real
estate 394,859 0.35% 304,386 0.29% 27,416 0.03%
Total non-
performing
assets $3,278,926 2.90% $1,736,887 1.65% $546,499 0.66%
Allowances for credit losses
Allowances for
loan losses $1,585,444 $1,106,300 $228,692
Liability for
unfunded loan
commitments 37,516 20,640 8,104
$1,622,960 $1,126,940 $236,796
Allowances for credit losses as a percentage of:
Total non-performing
loans 56.27% 78.67% 45.62%
Total non-performing
loans without third
party credit
enhancements 100.68% 139.93% 57.77%
Total loans held
for investment 1.85% 1.40% 0.32%
Quarters Ended
December 31, 2007 September 30, 2007 December 31, 2006
Annualized Annualized Annualized
net net net
charge-offs charge-offs charge-offs
as % average as % average as % average
investment investment investment
loans loans loans
Net charge-
offs: $191,818 0.93% $126,496 0.72% $13,585 0.07%
Years Ended
December 31, 2007 December 31, 2006
Annualized Annualized
net net
charge-offs charge-offs
as % average as % average
investment investment
loans loans
Net charge-offs: $460,438 0.63% $33,718 0.05%
(1) Third party credit enhancements include borrower-paid mortgage
insurance and pool mortgage insurance acquired by the Banking
Operations.
(2) Includes $278.5 million of recently modified loans which were not
delinquent as of the date of modification but which were required to
be accounted for as troubled debt restructurings as of December 31,
2007.
COUNTRYWIDE FINANCIAL CORPORATION
BANKING OPERATIONS
AVERAGE BALANCE SHEET AND LOAN QUALITY
(Unaudited)
Quarters Ended
Average Balance December 31, 2007 September 30, 2007
Sheet
Interest Interest
Average Income/ Annualized Average Income/ Annualized
Balance Expense Yield/Rate Balance Expense Yield/Rate
(dollar amounts
in thousands)
Interest-earning assets
Home loans
Pay-option
ARMs $28,115,759 $474,255 6.75% $27,811,588 $488,717 7.03%
Hybrid &
other 1st
liens 20,750,006 308,879 5.95% 17,033,088 242,801 5.70%
Home equity
loans 33,054,628 689,559 8.32% 24,700,135 510,484 8.24%
Commercial
real estate
loans 520,491 7,921 6.04% 312,989 5,599 7.10%
Investment
securities 18,369,743 266,249 5.80% 18,637,920 259,905 5.58%
Other
assets 4,345,516 61,250 5.59% 3,452,265 50,129 5.76%
Total
interest-
earning
assets $105,156,143 $1,808,113 6.87% $91,947,985 $1,557,635 6.77%
Interest-bearing liabilities
Money market
& savings
deposits $15,326,681 $171,842 4.45% $15,530,928 $198,920 5.08%
Company-
controlled
custodial
deposit
accounts 14,354,288 164,645 4.55% 16,101,203 211,249 5.21%
Time deposits
(CDs) 31,209,068 410,110 5.21% 26,129,050 332,877 5.05%
Borrowings 34,948,817 434,036 4.93% 25,278,928 284,641 4.47%
Total
interest-
bearing
liabil-
ities $95,838,854 $1,180,633 4.89% $83,040,109 $1,027,687 4.91%
Net interest
spread 1.98% 1.86%
Net interest
margin 2.41% 2.33%
Average Balance
Sheet Year Ended December 31, 2007
Interest
Average Income/ Annualized
Balance Expense Yield/Rate
(dollar amounts
in thousands)
Interest-earning assets
Home loans
Pay-option
ARMs $29,496,981 $2,094,083 7.10%
Hybrid &
other 1st
liens 18,481,430 1,051,201 5.69%
Home equity
loans 24,468,005 2,022,335 8.27%
Commercial real
estate loans 245,853 16,053 6.53%
Investment
securities 14,832,808 833,237 5.62%
Other assets 2,729,822 156,491 5.73%
Total interest-
earning
assets $90,254,899 $6,173,400 6.84%
Interest-bearing liabilities
Money market &
savings
deposits $14,166,563 $709,886 5.01%
Company-
controlled
custodial
deposit
accounts 15,685,364 791,273 5.04%
Time deposits
(CDs) 28,398,247 1,458,019 5.13%
Borrowings 23,935,646 1,096,715 4.58%
Total interest-
bearing
liabil-
ities $82,185,820 $4,055,893 4.94%
Net interest
spread 1.90%
Net interest
margin 2.35%
Loan Quality (1)
December 31, 2007 September 30, 2007
LTV CLTV FICO LTV CLTV FICO
Pay-option ARMs 76% 79% 716 76% 79% 716
Hybrid & other 1st
liens 74% 78% 728 74% 79% 732
Home equity loans 20% 83% 729 20% 83% 728
Quarters Ended
December 31, 2006
(dollar amounts in thousands)
Interest
Average Income/ Annualized
Balance Expense Yield/Rate
Interest-earning assets
Home loans
Pay-option ARMs $34,894,570 $628,112 7.20%
Hybrid & other 1st liens 19,773,771 273,517 5.53%
Home equity loans 19,325,861 404,556 8.33%
Commercial real estate loans 312,775 3,360 4.30%
Investment securities 5,473,102 61,456 4.49%
Other assets 1,600,461 25,676 5.88%
Total interest-earning assets $81,380,540 $1,396,677 6.84%
Interest-bearing liabilities
Money market & savings deposits $9,479,408 $125,687 5.26%
Company-controlled custodial
deposit accounts 17,235,087 224,964 5.18%
Time deposits (CDs) 30,317,593 383,017 5.01%
Borrowings 17,158,318 182,752 4.23%
Total interest-bearing
liabilities $74,190,406 $916,420 4.90%
Net interest spread 1.94%
Net interest margin 2.38%
Average Balance Sheet Year Ended December 31, 2006
Interest
Average Income/ Annualized
Balance Expense Yield/Rate
(dollar amounts in thousands)
Interest-earning assets
Home loans
Pay-option ARMs $33,157,106 $2,210,070 6.67%
Hybrid & other 1st liens 21,286,201 1,145,354 5.38%
Home equity loans 17,424,042 1,431,913 8.22%
Commercial real estate loans 78,195 3,360 4.30%
Investment securities 5,838,757 282,459 4.84%
Other assets 1,964,032 109,304 5.57%
Total interest-earning
assets $79,748,333 $5,182,460 6.50%
Interest-bearing liabilities
Money market & savings deposits $6,755,339 $334,134 4.95%
Company-controlled custodial
deposit accounts 15,790,741 775,484 4.91%
Time deposits (CDs) 27,308,975 1,277,143 4.68%
Borrowings 23,268,150 999,702 4.30%
Total interest-bearing
liabilities $73,123,205 $3,386,463 4.63%
Net interest spread 1.87%
Net interest margin 2.25%
Loan Quality (1)
December 31, 2006
LTV CLTV FICO
Pay-option ARMs 75% 78% 718
Hybrid & other 1st liens 74% 79% 733
Home equity loans 20% 80% 731
(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
COUNTRYWIDE FINANCIAL CORPORATION
CAPITAL MARKETS SEGMENT
RESULTS OF OPERATIONS AND SECURITIES TRADING VOLUME
(Unaudited)
Quarters Ended Years Ended
December 31, September 30, December 31, December 31,
(in thousands) 2007 2007 2006 2007 2006
Revenues
Conduit $136,764 $(239,355) $46,663 $58,877 $394,629
Commercial
real estate 32,900 48,074 33,735 168,937 104,014
Brokering 12,326 13,421 10,825 53,077 37,260
Underwriting 9,655 (32,211) 72,686 81,284 294,583
Securities
trading (5,524) (25,149) 29,457 51,332 113,779
Other 6,976 (14,993) 20,995 34,790 48,888
Total
revenues 193,097 (250,213) 214,361 448,297 993,153
Expenses
Operating
expenses (70,962) (88,674) (106,823) (409,603) (410,189)
Allocated
corporate
expenses (4,494) (5,515) (8,300) (23,737) (29,464)
Total
expenses (75,456) (94,189) (115,123) (433,340) (439,653)
Total Capital
Markets segment
pre-tax
earnings
(loss) $117,641 $(344,402) $99,238 $14,957 $553,500
Quarters Ended Years Ended
December 31, September 30, December 31, December 31,
(in millions) 2007 2007 2006 2007 2006
Securities Trading Volume: (1)
Mortgage-backed
securities $575,210 $604,249 $551,615 $2,424,191 $2,190,008
U.S. Treasury
securities 272,536 415,570 361,346 1,418,822 1,326,681
Asset-backed
securities 2,915 7,224 36,047 65,580 161,434
Other 17,983 29,598 38,291 124,378 154,777
Total securities
trading
volume $868,644 $1,056,641 $987,299 $4,032,971 $3,832,900
(1) Includes trades with Mortgage Banking Segment.
COUNTRYWIDE FINANCIAL CORPORATION
INSURANCE SEGMENT
KEY STATISTICS
(Unaudited)
Quarters Ended Years Ended
(dollar amounts December 31, September 30, December 31, December 31,
in thousands) 2007 2007 2006 2007 2006
Balboa Life &
Casualty:
Lender-placed net
premiums earned $261,992 $213,788 $148,078 $826,307 $538,655
Voluntary net
premiums earned $99,196 $102,120 $98,576 $408,656 $409,165
Loss ratio 41% 41% 44% 43% 44%
Combined ratio 72% 75% 82% 77% 83%
Quarters Ended Years Ended
December 31, September 30, December 31, December 31,
2007 2007 2006 2007 2006
Balboa Reinsurance:
(in thousands)
Reinsurance net
earned premiums $85,864 $74,013 $59,986 $288,571 $223,613
(in billions)
Period end:
Loans in CFC
servicing
portfolio
covered by
Balboa
Reinsurance $122 $109 $90
COUNTRYWIDE FINANCIAL CORPORATION
HIGHLY RELIABLE SOURCES OF LIQUIDITY AVAILABLE
(Unaudited)
(dollar amounts in
billions) At December 31, 2007
Maximum Amount Excess
Borrowing Undrawn on Borrowing
Facility(1) Reliability(2) Capacity Outstanding Facility Capacity(3)
Countrywide
Financial
Corporation
Unsecured
commercial Market
paper Disrupted $- $- $- $-
Committed
bank lines High 11.5 11.5 - -
Cash and cash
equivalents(4) High - - - 0.8
Countrywide
Home Loans
Multi-seller
Gestation
Conduit High 5.0 2.0 3.0 -
Park
Monaco(5) High 3.4 1.5 1.9 -
Total
Extendible
ABCP
(3rd Party Market
support) Disrupted - - - -
Committed
whole-loan/
securities
repo High 1.5 0.7 0.8 -
Uncommitted
whole-loan
/securities
repo High 0.7 0.7 - -
Agency repo High 3.5 0.1 3.4 -
Cash and cash
equivalents(4) High 5.1
Total CFC
and CHL 25.6 16.5 9.1 5.9
Countrywide Bank
FHLB advances High 53.3 47.7 5.6 5.6
Whole-loan
collateral
pledged to
highly
reliable
counter-
parties High 3.1 - 3.1 3.1
Committed
whole-loan/
securities
repo High 6.0 - 6.0 0.4
Committed AAA
Securities
Repo High 2.5 - 2.5 1.5
Park
Monaco(5) High 7.0 - 7.0 7.0
Agency repo High 4.5 4.5 - -
Cash and cash
equivalents(4) High 11.2
Total Bank 76.4 52.2 24.2 28.8
Countrywide
Securities
Corporation
Uncommitted
treasury &
agency collateral
financing
agreements High 51.0 17.9 33.1 -
Committed AAA
securities
repo High 2.5 - 2.5 2.5
Cash and cash
equivalents
(4) High - - - 0.1
Total
Countrywide
Securities
Corporation 53.5 17.9 35.6 2.6
Total highly
reliable
short-term
liquidity $155.5 $86.6 $68.9 $37.3
(1) The information in this table is subject to risks and uncertainties
detailed in our periodic filings with the SEC on Forms 10-K and 10-Q.
(2) We identify facilities' reliability as high when the facility is
provided by a government-sponsored enterprise or is
contractually committed to us and we have paid a commitment fee in
exchange for the commitment.
(3) Excess borrowing capacity based upon availability of eligible
collateral at December 31, 2007.
(4) Cash equivalents includes federal funds sold and other short-term
investments.
(5) Availability of Park Monaco dependent on maintenance of investment
grade ratings.
SOURCE Countrywide Financial Corporation
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Related links:
http://www.countrywide.com
CONTACT:
INVESTOR CONTACT: David Bigelow or Lisa
Riordan, +1-818-225-3550, or MEDIA LINE: 1-800-796-8448
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