- Strong Loan Production Offset By Higher Credit Costs -
- 2007 Guidance Updated at $2.70 to $3.30 per Diluted Share -
- Board Authorizes $0.15 Dividend -
CALABASAS, Calif., July 24 /PRNewswire-FirstCall/ -- Countrywide
Financial Corporation (NYSE: CFC) today announced results for the second
quarter ended June 30, 2007. Key results include the following:
Table 1 Quarter Ended
($ in millions, except per share amounts) Jun. 30, Mar. 31, Jun. 30,
2007 2007 2006
Consolidated Company
Revenues $2,548 $2,406 $3,000
Net Earnings $485 $434 $722
Diluted EPS $0.81 $0.72 $1.15
Total Assets ($ in billions) $217 $208 $195
Key Segment Pre-tax Earnings
Mortgage Banking $320 $100 $630
Banking $129 $288 $325
Capital Markets $110 $132 $158
Insurance $99 $180 $89
Key Operating Statistics ($ in billions)
Total Loan Fundings $133 $117 $120
Ending Loan Servicing Portfolio $1,415 $1,352 $1,197
Ending Assets of Banking Operations $90 $84 $84
"Countrywide's results for the second quarter of 2007 reflected
strength in our core loan production business, but were adversely impacted
by continued weakness in the housing market," said Angelo R. Mozilo,
Chairman and Chief Executive Officer. "During the quarter, softening home
prices continued to affect many areas of the country and delinquencies and
defaults continued to rise across all mortgage product categories as a
result. Due to these adverse conditions, the Company incurred increased
credit-related costs in the quarter, primarily related to its investments
in prime home equity loans."
Credit-related costs in the second quarter included:
-- Impairment on credit-sensitive retained interests. Impairment charges
of $417 million were taken during the quarter on the Company's
investments in credit-sensitive retained interests. This included $388
million, or approximately $0.40 in earnings per diluted share based on
a normalized tax rate, of impairment on residual securities
collateralized by prime home equity loans. The impairment charges on
these residuals were attributable to accelerated increases in
delinquency levels and increases in the estimates of future defaults
and loss severities on the underlying loans.
-- Held-for-investment (HFI) portfolio. The provision for losses on HFI
loans incurred in the second quarter was $293 million, driven primarily
by a loan loss provision of $181 million on prime home equity HFI loans
in the Banking segment.
"Partly offsetting increased credit costs, our residential Loan
Production sector delivered strong results during the quarter," said
Mozilo. "Consolidated quarterly funding volume was the third-highest in our
history, prime production margins were relatively stable, and subprime
production margins substantially improved. As a result, Loan Production
sector pre-tax profit in the quarter was at its highest level since the
first quarter of 2005."
During the quarter, the Company also benefited from a non-recurring
reduction in its corporate tax rate to 27.0 percent, which compares to 38.1
percent in the first quarter of 2007. The benefit from this tax rate change
equated to $0.12 per diluted share. The change in the tax rate is the
result of a remeasurement of deferred income taxes precipitated by the
relocation of certain operating activities resulting in favorable state
income tax consequences. The Company anticipates a recurring benefit to the
tax rate in future quarters of approximately 0.5 percent as a result of
these operational changes.
"Looking to the second half of 2007, we expect difficult housing and
mortgage market conditions to persist," Mozilo concluded. "Nonetheless,
management remains optimistic about the long-term future growth prospects
and profitability of the Company as industry consolidation continues."
BUSINESS SEGMENT PERFORMANCE
Mortgage Banking
Table 2 below highlights the Mortgage Banking segment's financial
performance for the second quarter of 2007:
Table 2
Mortgage Banking Pre-tax Earnings Quarter Ended
Jun. 30, Mar. 31, Jun. 30,
($ in millions) 2007 2007 2006
Pre-tax Earnings (Loss)
Production $439 $139 $325
Servicing (147) (69) 279
Closing Services 28 30 26
Total Mortgage Banking $320 $100 $630
% Contribution to total pre-tax
earnings 48% 14% 53%
Loan Production
The Loan Production sector is comprised of the following distribution
channels: prime and subprime consumer-direct lending through Countrywide
Home Loans' 986-branch retail system, call center operations and the
Internet; wholesale lending through a network of mortgage brokers; and
correspondent lending which buys closed loans from other financial
institutions such as independent mortgage companies, commercial banks,
savings and loans and credit unions. The sector also includes the mortgage
banking activities of Countrywide Bank.
Overall quarterly Loan Production sector margins on both a sequential
and year-over-year basis are detailed below:
Table 3
Loan Production Sector
Pre-tax Earnings(1) Quarter Ended
Jun. 30, Mar. 31, Jun. 30,
($ in millions) 2007 %(2) 2007 %(2) 2006 %(2)
Gain on sale of
loans $1,293 1.05% $1,033 0.93% $1,308 1.26%
Net warehouse spread 148 0.12% 90 0.08% 107 0.10%
Miscellaneous income 74 0.06% 58 0.06% 67 0.07%
Total revenues 1,514 1.23% 1,181 1.07% 1,482 1.43%
Operating expenses (976) (0.79%) (904) (0.82%) (1,021) (0.99%)
Allocated corporate
expenses (99) (0.08%) (138) (0.12%) (137) (0.13%)
Total expenses (1,075) (0.87%) (1,042) (0.94%) (1,158) (1.12%)
Total Loan
Production sector
pre-tax earnings $439 0.36% $139 0.13% $325 0.31%
Total Mortgage
Banking loan
funding volume $123,068 $110,567 $103,635
(1) Numbers may not total exactly due to rounding
(2) Percentage based on loan funding volume
The sequential quarter increase in overall pre-tax production margins
to 36 basis points was driven by increases in gain on sale and net
warehouse spread margins as well as lower expense rates. The increase in
gain on sale was primarily related to margin improvements in the subprime
channel. Net warehouse spread showed sequential improvement primarily due
to the confluence of higher levels of inventory, long-term rates rising,
and short-term rates (which impact the Company's related borrowing costs)
remaining flat. Operating expense dollars were up only 8 percent
sequentially on an 11 percent production volume increase.
Table 4
Loan Production Sector Gain on Sale Quarter Ended
Jun. 30, Mar. 31, Jun. 30,
($ in millions) 2007 2007 2006
Prime
Production $111,220 $93,833 $82,229
Loans sold $109,426 $92,879 $79,175
Gain on sale ("GOS") $1,036 $901 $972
GOS margin (1) 0.95% 0.97% 1.23%
Subprime
Production $5,069 $7,500 $10,171
Loans sold $5,164 $7,890 $9,896
GOS (Loss) $183 $(33) $200
GOS (Loss) margin (1) 3.54% (0.42%) 2.02%
Home Equity
Production $6,779 $9,234 $11,235
Initial sale
Loans sold $1,998 $6,787 $4,702
GOS $51 $138 $92
GOS margin (1) 2.54% 2.03% 1.95%
Subsequent draws
Loans sold $1,042 $1,043 $1,199
GOS $23 $27 $44
GOS margin (1) 2.20% 2.63% 3.67%
Total production $123,068 $110,567 $103,635
Total loans sold $117,630 $108,599 $94,972
Total GOS $1,293 $1,033 $1,308
Total GOS margin (1) 1.10% 0.95% 1.38%
Total GOS as % of loans produced 1.05% 0.93% 1.26%
(1) GOS as a percentage of loans sold
At 95 basis points, prime gain on sale margin for the second quarter of
2007 was relatively stable compared to the first quarter. Prime margin was
down year over year, primarily as a result of increased price competition,
a higher percentage of production coming from the lower-margin
correspondent channel and a decrease in origination of higher-margin
pay-option loans.
Subprime gain on sale margin improved substantially from the first
quarter and year over year as a result of improved secondary market
execution during the quarter and reduced price competition, especially in
the wholesale channel. In addition, the Company experienced a channel mix
shift toward the retail channel, which has traditionally carried greater
margins. Consolidated subprime fundings for the Company were $5.7 billion
during the quarter, the lowest level since the third quarter of 2003, and
represented 4 percent of overall quarterly production volume.
Home equity gain on sale revenue (excluding subsequent draw-related
gains) was down $87 million from the first quarter of 2007 and $41 million
from the second quarter of 2006, primarily resulting from fewer sales of
prime home equity loans and greater retention of such loans in the HFI
portfolio during the second quarter of 2007. In the second quarter of 2007,
the Company retained $3.8 billion in prime home equity loans in the Bank
due to widening credit spreads on these loans in the securitization markets
making portfolio investments in prime home equity loans economically more
attractive. In the first quarter of 2007, $0.3 billion prime home equity
loan production was retained by the Bank.
Loan Servicing
The Loan Servicing sector reflects the performance of mortgage
servicing rights (MSRs) and retained interests associated with
Countrywide's owned servicing portfolio. Countrywide also manages a
financial hedge within the Loan Servicing sector to mitigate negative
valuation changes in MSRs and retained interests.
The Loan Servicing sector's income statement and key operational metrics
are displayed below:
Table 5
Loan Servicing Sector
Pre-tax Results of
Operations (1) Quarter Ended
Jun. 30, Mar. 31, Jun. 30,
($ in millions) 2007 % (2) 2007 % (2) 2006 % (2)
Servicing fees, net of
guarantee fees $1,145 0.333% $1,080 0.328% $940 0.324%
Escrow balance income 224 0.065% 204 0.062% 207 0.071%
Miscellaneous fees 191 0.056% 209 0.063% 135 0.046%
Income from retained
interests 123 0.036% 148 0.045% 129 0.044%
Realization of expected
MSR cash flows (1,007) (0.293%) (925) (0.281%) (768) (0.264%)
Operating revenues 676 0.197% 715 0.217% 642 0.221%
Direct expenses (203) (0.059%) (179) (0.054%) (187) (0.065%)
Allocated corporate
expenses (15) (0.005%) (22) (0.007%) (21) (0.007%)
Total expenses (218) (0.064%) (201) (0.061%) (209) (0.072%)
Operating earnings 458 0.133% 515 0.156% 433 0.149%
Interest expense (292) (0.085%) (221) (0.067%) (153) (0.053%)
Change in fair value of
MSRs 1,327 0.387% 179 0.054% 569 0.196%
(Impairment) recovery
of retained interests (268) (0.078%) (429) (0.130%) 52 0.018%
Servicing hedge losses (1,373) (0.400%) (114) (0.034%) (621) (0.214%)
Valuation changes,
net of servicing
hedge (314) (0.091%) (363) (0.110%) (1) 0.000%
Total Loan
Servicing sector
results of
operations $(147) (0.043%) $(69) (0.021%) $279 0.096%
Average servicing
portfolio ($ in
billions) $1,374 $1,316 $1,162
MSR portfolio
capitalization rate 1.54% 1.40% 1.44%
(1) Numbers may not total exactly due to rounding
(2) Percentage based on average servicing portfolio; computation is
annualized
Table 6
Servicing Portfolio
Delinquencies (1) Quarter Ended
Jun. 30, 2007 Mar. 31, 2007 Jun. 30, 2006
Total 90+ day Total 90+ day Total 90+ day
Conventional 1st liens 3.35% 1.02% 2.85% 0.82% 2.05% 0.49%
Government 1st liens 12.39% 4.39% 11.32% 4.41% 12.69% 4.59%
Prime home equity loans
(includes FRS) 4.56% 2.15% 3.77% 1.75% 1.77% 0.75%
Subprime loans 23.71% 9.45% 19.62% 7.82% 15.33% 5.35%
Total servicing
portfolio 5.73% 2.02% 4.90% 1.70% 3.85% 1.18%
(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 3.12% at
June 30, 2007; 2.59% at March 31, 2007; and 1.88% at June 30, 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.
Loan Servicing sector pre-tax earnings were adversely impacted by a
$268 million net impairment charge on retained interests. The net
impairment charge stemmed from writedowns of credit-sensitive retained
interests, partially offset by positive mark-to-market adjustments on non
credit-sensitive retained interests. The charges recorded during the
quarter on credit-sensitive retained interests consisted primarily of $388
million of writedowns on prime home equity backed residuals and $25 million
on subprime residuals and other related securities. These charges were
primarily attributable to increased delinquencies and related increased
projections of future defaults driven by weakening housing market
conditions. During the first quarter of 2007, writedowns of prime home
equity residuals and of subprime residuals and other related securities
were $133 million and $231 million, respectively. The carrying value of
credit-sensitive retained interests backed by prime home equity residuals
and subprime residuals and other related securities was $1,012 million and
$441 million, respectively, at June 30, 2007.
Partially offsetting the writedowns on credit-sensitive retained
interests was a $149 million positive mark-to-market adjustment, primarily
on AAA-rated interest-only securities which increased in value due to
increasing interest rates during the quarter and lower investor yield
requirements.
The servicing hedge performed in line with management's expectations
amidst an increase in fixed mortgage rates of roughly 50 basis points
during the quarter.
Additional information and explanation regarding credit-related issues
is provided in the "Second Quarter 2007 Supplemental Presentation: Credit
Summary" that is available on Countrywide's website (http://www.countrywide.com)
in the "Investor Relations" section.
BANKING
The Banking segment includes Banking Operations (primarily the fee and
investment activities of Countrywide Bank, FSB) and Countrywide Warehouse
Lending, a provider of mortgage inventory financing to independent mortgage
bankers. Countrywide Bank ("Bank") provides Countrywide with expanded
product capabilities, a low cost source of funds, liquidity, and portfolio
lending capabilities. The Bank invests primarily in prime-quality
residential mortgage loans sourced from the Loan Production sector and the
secondary market. It funds these assets through various means including its
retail deposit franchise, which is comprised of an expanding national
financial center network of 104 locations (most of which are located in
existing Countrywide retail offices), call centers, and Internet presence.
The Bank also supplements its deposit base with a variety of wholesale
funding activities.
Key financial and operational results for the Banking segment as well
as the Banking Operations sector are noted in the tables below with
additional details in tables at the end of this release:
Table 7
Banking Segment Pre-tax Earnings
Quarter Ended
Jun. 30, Mar. 31, Jun. 30,
($ in millions) 2007 2007 2006
Banking Operations $136 $294 $329
Countrywide Warehouse Lending 10 10 13
Allocated corporate expenses (17) (16) (17)
Total Banking segment pre-tax earnings $129 $288 $325
Table 8
Banking Operations
($ in millions) Quarter Ended
Jun. 30, Mar. 31, Jun. 30,
Pre-tax Earnings (1) 2007 2007 2006
Net interest income $463 $497 $421
Provision for credit losses (246) (129) (37)
Non-interest income 50 41 38
Mortgage insurance expense (24) (19) (8)
Other non-interest expense (106) (95) (85)
Total Banking Operations pre-tax
earnings $136 $294 $329
At Period End
Jun. 30, Mar. 31, Jun. 30,
Key Operating Statistics 2007 2007 2006
Total assets $89,910 $84,261 $84,246
Loan portfolio, net $68,131 $69,360 $75,470
Securities portfolio $18,328 $12,505 $5,601
Net interest margin (NIM) 2.21% 2.45% 2.12%
Total deposits $60,569 $57,783 $50,658
(1) Numbers may not total exactly due to rounding
Banking Operations' quarterly pre-tax earnings were $136 million, a
decrease of 54 percent from the prior quarter and 59 percent year over
year. The sequential quarter decrease was driven primarily by increased
credit costs, including an increase in the provision for credit losses as
well as increased mortgage insurance expense, and a decline in net interest
income. The credit loss provision and related reserves grew due to
increased loss expectations driven by weakening housing market conditions.
Mortgage insurance expense also increased as the Bank has continued to
acquire credit enhancement in an effort to mitigate future credit losses.
As of the end of the 2007 second quarter, 77 percent of the pay option
portfolio and 18 percent of the Home Equity portfolio were covered by
credit enhancement. Net interest income declined principally as a result of
a shift in asset mix to include a greater proportion of high-quality
mortgage-backed securities.
The year-over-year decrease in pre-tax earnings was primarily driven by
higher credit loss provisions, greater mortgage insurance costs, and to a
lesser degree, increased operating expenses net of non-interest income. The
increase in net operating expense was largely driven by increased FDIC
insurance premiums, together with investments made to support new fee
income and deposit generation initiatives.
CAPITAL MARKETS
The Capital Markets segment includes a registered securities broker-
dealer, a distressed-asset manager, a commercial real estate finance group
and related businesses. Financial results for the Capital Markets segment
are noted below with operational metrics in the tables at the end of this
release:
Table 9
Capital Markets Segment
Pre-tax Earnings (1) Quarter Ended
Jun. 30, Mar. 31, Jun. 30,
($ in millions) 2007 2007 2006
Revenues
Conduit $93 $69 $104
Securities trading 47 35 27
Commercial real estate 40 48 28
Underwriting 36 67 79
Brokering 15 12 9
Other 14 29 11
Total revenues 245 261 258
Expenses
Operating expenses (128) (122) (93)
Allocated corporate expenses (7) (6) (7)
Total expenses (135) (128) (100)
Total Capital Markets segment
pre-tax earnings $110 $132 $158
(1) Numbers may not total exactly due to rounding
Pre-tax earnings for the Capital Markets segment decreased 17 percent
from the first quarter of 2007 and 31 percent from the second quarter of
2006. These declines were primarily driven by an overall reduction in
revenues as the business adjusted to weakening market conditions, as well
as increased expenses associated with newer business initiatives,
particularly the commercial real estate business.
INSURANCE
Countrywide's Insurance segment includes Balboa Insurance Group, whose
companies are national providers of property, life and casualty insurance;
and Balboa Reinsurance Company, a captive mortgage guaranty reinsurance
company. Financial results for the Insurance segment are noted below with
operational metrics in the tables at the end of this release:
Table 10
Insurance Segment Pre-tax Earnings(1)
Quarter Ended
Jun. 30, Mar. 31, Jun. 30,
($ in millions) 2007 2007 2006
Balboa Reinsurance Company $56 $131 $53
Balboa Life & Casualty 51 57 45
Allocated corporate expenses (9) (8) (8)
Total Insurance segment pre-tax
earnings $99 $180 $89
(1) Numbers may not total exactly due to rounding
For the second quarter of 2007, Insurance segment pre-tax results
decreased 45 percent from the sequential quarter, but increased 11 percent
year over year. The sequential quarter earnings decrease is primarily
attributable to a $74 million reversal of loss reserves in Balboa
Reinsurance in the first quarter of 2007 which did not recur in the second
quarter. The year-over-year earnings growth is primarily attributable to
net earned premium growth in both Balboa Reinsurance and Balboa Life &
Casualty.
DIVIDEND DECLARATION
Countrywide's Board of Directors declared a dividend of $0.15 per
share. The payable date on the dividend is August 31, 2007 to stockholders
of record on August 15, 2007.
2007 OUTLOOK
Management anticipates that the second half of 2007 will be
increasingly challenging for the industry and Countrywide. Absent a
reduction in mortgage interest rates, production volumes are expected to
fall and competitive pricing pressures are expected to increase. In
addition, volatility in the secondary markets has increased significantly
early in the third quarter and liquidity for mortgage securities has been
reduced as a result. These conditions are expected to adversely impact
secondary market execution and further pressure gain on sale margins.
Furthermore, additional deterioration in the housing market may further
impact credit costs.
Management has taken, and is continuing to take, a number of actions in
response to changing market conditions. These include tightening of credit
guidelines, particularly related to subprime and prime home equity loans;
further curtailment of subprime product offerings, including the recent
elimination of certain adjustable-rate products; risk-based pricing
adjustments; use of mortgage insurance for credit enhancement; and expense
reduction initiatives.
Notwithstanding current environmental factors and their near-term
impact on earnings, management believes that the Company is well positioned
to capitalize on opportunities during this transitional period in the
mortgage business, which management believes will enhance the Company's
long-term earnings growth prospects. Countrywide expects to leverage the
strength of its capital and liquidity positions, superior business model
and best-in-class workforce to emerge in a superior competitive position
coming out of the current housing down cycle. Furthermore, the ongoing
integration of the Company's bank and mortgage company is expected to
enhance its business model through operational efficiencies, reduced
funding costs, and enhanced liquidity among other competitive advantages.
EARNINGS GUIDANCE
Countrywide's revised earnings guidance for 2007, which contemplates
the foregoing factors, is as follows:
Updated 2007 Previous 2007
Table 11 Guidance Guidance
July 24, 2007 April 26, 2007
CFC Consolidated Earnings
Diluted EPS $2.70 to $3.30 $3.50 to $4.30
Market
Total mortgage market ($ in trillions) $2.2 to $2.6 $2.2 to $3.0
Average 10-year U.S. Treasury yield 4.60% to 5.20% 4.20% to 5.20%
Average 3-month LIBOR 5.00% to 5.70% 4.80% to 5.90%
Production
Company-wide loan origination volume
($ in billions) (1) $420 to $500 $450 to $550
Loan production sector pre-tax
margins (2) 5 bps to 15 bps 10 bps to 25 bps
Servicing
Average loan servicing portfolio
($ in trillions) (3) $1.375 to $1.425 $1.300 to $1.400
Loan servicing sector pre-tax
margins, net hedge 1 bps to 5 bps 3 bps to 6 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 (877) 777-1967 (U.S.) or (612) 332-0806 (International).
The management discussion will be available for replay through midnight
Pacific on Tuesday, August 7, 2007. The replay dial-in numbers and access
code are (800) 475-6701 (U.S.) / (320) 365-3844 (International) and 877952,
respectively.
An accompanying slide presentation will be available on Countrywide's
website (http://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 second quarter earnings teleconference (Second
Quarter 2007 Supplemental Presentation: Credit Summary). 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 http://www.countrywide.com. This press
release does not constitute an offer of any securities for sale.
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.
COUNTRYWIDE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
Quarters Ended
June 30, %
(in thousands, except per share data) 2007 2006 Change
(unaudited)
Revenues
Gain on sale of loans and
securities $1,493,458 $1,527,450 (2%)
Interest income 3,499,644 2,845,580 23%
Interest expense (2,771,648) (2,155,106) 29%
Net interest income 727,996 690,474 5%
Provision for loan losses (292,924) (61,898) 373%
Net interest income after
provision for loan losses 435,072 628,576 (31%)
Loan servicing fees and other
income from mortgage
servicing rights and retained
interests 1,421,255 1,207,159 18%
Realization of expected cash flows
from mortgage servicing rights (1,007,241) (768,132) 31%
Change in fair value of mortgage
servicing rights 1,327,446 569,002 133%
(Impairment) recovery of retained
interests (268,117) 51,498 N/M
Servicing hedge losses (1,373,089) (621,074) 121%
Net loan servicing fees and
other income from mortgage
servicing rights and
retained interests 100,254 438,453 (77%)
Net insurance premiums earned 352,384 284,226 24%
Other 167,229 121,511 38%
Total revenues 2,548,397 3,000,216 (15%)
Expenses
Compensation 1,109,016 1,143,707 (3%)
Occupancy and other office 269,017 261,080 3%
Insurance claims 154,769 102,809 51%
Advertising and promotion 79,540 65,686 21%
Other 271,357 232,911 17%
Total expenses 1,883,699 1,806,193 4%
Earnings before income taxes 664,698 1,194,023 (44%)
Provision for income taxes 179,630 471,833 (62%)
NET EARNINGS $485,068 $722,190 (33%)
Earnings per Share:
Basic $0.83 $1.19 (30%)
Diluted $0.81 $1.15 (30%)
Weighted Average Shares Outstanding:
Basic 583,669 607,831 (4%)
Diluted 595,540 626,610 (5%)
Six Months Ended
June 30, %
(in thousands, except per share data) 2007 2006 Change
(unaudited)
Revenues
Gain on sale of loans and
securities $2,727,562 $2,888,628 (6%)
Interest income 6,851,626 5,439,338 26%
Interest expense (5,392,693) (4,054,429) 33%
Net interest income 1,458,933 1,384,909 5%
Provision for loan losses (444,886) (125,036) 256%
Net interest income after
provision for loan losses 1,014,047 1,259,873 (20%)
Loan servicing fees and other
income from mortgage servicing
rights and retained interests 2,808,544 2,407,046 17%
Realization of expected cash flows
from mortgage servicing rights (1,931,947) (1,506,699) 28%
Change in fair value of mortgage
servicing rights 1,506,453 1,547,283 (3%)
(Impairment) recovery of retained
interests (697,718) (69,156) 909%
Servicing hedge losses (1,486,827) (1,506,944) (1%)
Net loan servicing fees and other
income from mortgage servicing
rights and retained interests 198,505 871,530 (77%)
Net insurance premiums earned 686,561 564,019 22%
Other 327,498 252,114 30%
Total revenues 4,954,173 5,836,164 (15%)
Expenses
Compensation 2,184,424 2,218,525 (2%)
Occupancy and other office 533,230 506,411 5%
Insurance claims 212,074 226,851 (7%)
Advertising and promotion 149,557 125,916 19%
Other 509,395 445,075 14%
Total expenses 3,588,680 3,522,778 2%
Earnings before income taxes 1,365,493 2,313,386 (41%)
Provision for income taxes 446,444 907,685 (51%)
NET EARNINGS $919,049 $1,405,701 (35%)
Earnings per Share:
Basic $1.57 $2.32 (32%)
Diluted $1.53 $2.25 (32%)
Weighted Average Shares Outstanding:
Basic 585,901 604,725 (3%)
Diluted 598,864 623,473 (4%)
COUNTRYWIDE FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, December 31, %
(in thousands, except share data) 2007 2006 Change
(unaudited) (audited)
Assets
Cash $1,154,032 $1,407,000 (18%)
Mortgage loans held for sale 34,090,154 31,272,630 9%
Trading securities owned, at fair
value 19,271,559 20,036,668 (4%)
Trading securities pledged as
collateral, at fair value 3,521,522 1,465,517 140%
Securities purchased under
agreements to resell, securities
borrowed and federal funds sold 26,385,089 27,269,897 (3%)
Loans held for investment, net of
allowance for loan losses of
$512,904 and $261,054, respectively 74,056,539 78,085,757 (5%)
Investments in other financial
instruments, at fair value 26,601,298 12,769,451 108%
Mortgage servicing rights, at fair
value 20,087,368 16,172,064 24%
Premises and equipment, net 1,644,141 1,625,456 1%
Other assets 10,010,058 9,841,790 2%
Total assets $216,821,760 $199,946,230 8%
Liabilities
Deposit liabilities $60,292,841 $55,578,682 8%
Securities sold under agreements to
repurchase and federal funds
purchased 46,186,848 42,113,501 10%
Trading securities sold, not yet
purchased, at fair value 4,145,425 3,325,249 25%
Notes payable 77,669,067 71,487,584 9%
Accounts payable and accrued
liabilities 8,914,175 8,187,605 9%
Income taxes payable 5,227,509 4,935,763 6%
Total liabilities 202,435,865 185,628,384 9%
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, 574,655,984
shares and 585,466,719 shares
at June 30, 2007 and December 31,
2006, respectively; outstanding,
574,218,312 shares and 585,182,298
shares at June 30, 2007 and
December 31, 2006, respectively 28,733 29,273 (2%)
Additional paid-in capital 1,612,901 2,154,438 (25%)
Accumulated other comprehensive
loss (136,228) (17,556) 676%
Retained earnings 12,880,489 12,151,691 6%
Total shareholders' equity 14,385,895 14,317,846 0%
Total liabilities and
shareholders' equity $216,821,760 $199,946,230 8%
COUNTRYWIDE FINANCIAL CORPORATION
LOANS HELD FOR INVESTMENT, NET, OTHER ASSETS AND
MORTGAGE SERVICING RIGHTS
June 30, December 31, %
(in thousands) 2007 2006 Change
(unaudited) (audited)
Loans Held for Investment, Net
Mortgage loans $69,684,285 $72,295,979 (4%)
Defaulted FHA-insured and VA-
guaranteed loans repurchased
from securities 1,670,714 1,761,170 (5%)
Warehouse lending advances secured
by mortgage loans 2,457,571 3,185,248 (23%)
73,812,570 77,242,397 (4%)
Premiums and discounts, and
deferred loan origination fees
and costs, net 756,873 1,104,414 (31%)
Allowance for loan losses (512,904) (261,054) 96%
Total loans held for investment,
net $74,056,539 $78,085,757 (5%)
Other Assets
Reimbursable servicing advances,
net $2,330,732 $2,121,486 10%
Investments in Federal Reserve Bank
and Federal Home Loan Bank stock 1,324,737 1,433,070 (8%)
Interest receivable 1,050,405 997,854 5%
Securities broker-dealer receivables 937,854 1,605,502 (42%)
Real estate acquired in settlement
of loans 546,585 251,163 118%
Receivables from custodial accounts 466,531 719,048 (35%)
Derivative margin accounts 396,815 118,254 236%
Cash surrender value of assets held
in trust for deferred compensation
plans 393,018 372,877 5%
Prepaid expenses 392,557 320,597 22%
Capitalized software, net 369,933 367,055 1%
Cash surrender value of company
owned life insurance 205,951 5,894 N/M
Restricted cash 200,020 238,930 (16%)
Mortgage guaranty insurance tax and
loss bonds 169,067 128,293 32%
Receivables from sale of securities 140,905 284,177 (50%)
Other assets 1,084,948 877,590 24%
Total other assets $10,010,058 $9,841,790 2%
Mortgage Servicing Rights, at Fair
Value
Balance at December 31, 2006 $16,172,064
Additions:
Servicing resulting from
transfers of financial assets 4,156,287
Purchases of servicing assets 184,511
Total additions 4,340,798
Change in fair value:
Due to changes in valuation
inputs or assumptions used
in valuation model (1) 1,506,453
Other changes in fair value (2) (1,931,947)
Balance at June 30, 2007 $20,087,368
(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
June 30, December 31, %
(in thousands) 2007 2006 Change
(unaudited) (audited)
Investments in Other Financial
Instruments, at Fair Value
Available-for-sale securities:
Mortgage-backed securities $19,495,594 $7,007,786 178%
Obligations of U.S.
Government-sponsored enterprises 567,096 776,717 (27%)
Municipal bonds 409,170 412,886 (1%)
U.S. Treasury securities 199,019 168,313 18%
Other 2,699 2,858 (6%)
Subtotal 20,673,578 8,368,560 147%
Interests retained in securitization
accounted for as available-for-sale
securities:
Prime interest-only and
principal-only securities 253,557 279,375 (9%)
Prime home equity line of credit
transferor's interest 70,774 144,346 (51%)
Prepayment penalty bonds 29,225 52,697 (45%)
Subprime residuals and other
related securities 21,797 152,745 (86%)
Prime home equity residual
securities 17,432 40,766 (57%)
Subprime interest-only securities 13,491 3,757 259%
Prime home equity interest-only
securities 6,627 7,021 (6%)
Subordinated mortgage-backed
pass-through securities 529 1,382 (62%)
Prime residual securities 154 1,435 (89%)
Total interests retained in
securitization accounted for
as available-for-sale
securities 413,586 683,524 (39%)
Total available-for-sale securities 21,087,164 9,052,084 133%
Interests retained in securitization
accounted for as trading securities:
Prime interest-only and
principal-only securities 781,310 549,635 42%
Prime home equity line of credit
transferor's interest 518,033 553,701 (6%)
Subprime residuals and other
related securities 419,645 388,963 8%
Prime home equity residual
securities 406,210 737,808 (45%)
Prepayment penalty bonds 117,454 90,666 30%
Subordinated mortgage-backed
pass-through securities 28,260 - N/M
Prime home equity interest-only
securities 21,644 22,467 (4%)
Interest rate swaps 21,588 2,490 767%
Prime residual securities 7,783 11,321 (31%)
Total interests retained in
securitization accounted for as
trading securities 2,321,927 2,357,051 (1%)
Servicing hedge principal-only
securities accounted for as trading
securities 1,488,435 - N/M
Hedging and mortgage pipeline
derivatives:
Mortgage servicing related 661,113 837,908 (21%)
Notes payable related 543,258 444,342 22%
Mortgage loans held for sale and
pipeline related 499,401 78,066 540%
Total investments in other
financial instruments $26,601,298 $12,769,451 108%
COUNTRYWIDE FINANCIAL CORPORATION
SELECTED OPERATING DATA
(Unaudited)
Quarters Ended
June 30, %
(dollar amounts in millions) 2007 2006 Change
Production by segment:
Mortgage Banking $123,068 $103,635 19%
Banking Operations 4,461 8,261 (46%)
Capital Markets - conduit
acquisitions 2,634 6,613 (60%)
Total Mortgage Loan Fundings 130,163 118,509 10%
Commercial real estate 2,901 997 191%
Total Loan Fundings $133,064 $119,506 11%
Number of loans produced 685,370 663,217 3%
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 6,724,897 5,975,995 13%
Six Months Ended
June 30, %
(dollar amounts in millions) 2007 2006 Change
Production by segment:
Mortgage Banking $233,635 $197,087 19%
Banking Operations 7,029 16,334 (57%)
Capital Markets - conduit
acquisitions 4,463 10,620 (58%)
Total Mortgage Loan Fundings 245,127 224,041 9%
Commercial real estate 4,912 1,963 150%
Total Loan Fundings $250,039 $226,004 11%
Number of loans produced 1,280,904 1,234,954 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 13,199,702 11,778,103 12%
June 30, %
2007 2006 Change
Mortgage loan pipeline
(loans-in-process) $68,533 $64,979 5%
Loan servicing portfolio (1) $1,415,472 $1,196,720 18%
Number of loans serviced (1) 8,737,534 7,757,724 13%
MSR portfolio (2) $1,304,250 $1,063,405 23%
Assets of Banking Operations
(in billions) $90 $84 7%
(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 June 30, 2007
Mortgage Banking
Loan Loan Closing
(in thousands) Production Servicing Services Total
Revenues
Gain on sale of loans and
securities $1,292,655 $49 $- $1,292,704
Net interest income after
provision for
loan losses 147,647 (67,333) 3,119 83,433
Net loan servicing fees (1) - 141,952 - 141,952
Net insurance premiums earned - - - -
Other revenue (2) 73,757 19,473 86,140 179,370
Total revenues 1,514,059 94,141 89,259 1,697,459
Expenses 1,075,360 241,499 60,998 1,377,857
Earnings (loss) before
income taxes $438,699 $(147,358) $28,261 $319,602
Capital
(in thousands) Banking Markets Insurance
Revenues
Gain on sale of loans and
securities $- $180,642 $-
Net interest income after
provision for loan losses 234,829 56,555 20,998
Net loan servicing fees (1) - 2,224 200
Net insurance premiums earned - - 352,384
Other revenue (2) 52,942 5,336 15,235
Total revenues 287,771 244,757 388,817
Expenses 158,861 135,247 290,096
Earnings (loss) before
income taxes $128,910 $109,510 $98,721
Global
(in thousands) Operations Other Grand Total
Revenues
Gain on sale of loans and
securities $- $20,112 $1,493,458
Net interest income after
provision for loan losses 1,606 37,651 435,072
Net loan servicing fees (1) - (44,122) 100,254
Net insurance premiums earned - - 352,384
Other revenue (2) 27,292 (112,946) 167,229
Total revenues 28,898 (99,305) 2,548,397
Expenses 22,210 (100,572) 1,883,699
Earnings (loss) before income
taxes $6,688 $1,267 $664,698
Quarter Ended June 30, 2006
Mortgage Banking
Loan Loan Closing
(in thousands) Production Servicing Services Total
Revenues
Gain on sale of loans and
securities $1,307,918 $682 $- $1,308,600
Net interest income after
provision for loan losses 107,301 53,914 3,300 164,515
Net loan servicing fees (1) - 444,688 - 444,688
Net insurance premiums earned - - - -
Other revenue (2) 67,225 2,112 75,465 144,802
Total revenues 1,482,444 501,396 78,765 2,062,605
Expenses 1,157,880 222,113 52,540 1,432,533
Earnings (loss) before
income taxes $324,564 $279,283 $26,225 $630,072
Capital
(in thousands) Banking Markets Insurance
Revenues
Gain on sale of loans and
securities $- $207,853 $-
Net interest income after
provision for loan losses 400,741 42,658 14,141
Net loan servicing fees (1) 619 1,421 (51)
Net insurance premiums earned - - 284,226
Other revenue (2) 42,350 5,750 13,634
Total revenues 443,710 257,682 311,950
Expenses 118,339 100,092 223,203
Earnings (loss) before
income taxes $325,371 $157,590 $88,747
Global
(in thousands) Operations Other Grand Total
Revenues
Gain on sale of loans and
securities $- $10,997 $1,527,450
Net interest income after
provision for loan losses 975 5,546 628,576
Net loan servicing fees (1) 502 (8,726) 438,453
Net insurance premiums earned - - 284,226
Other revenue (2) 13,725 (98,750) 121,511
Total revenues 15,202 (90,933) 3,000,216
Expenses 12,382 (80,356) 1,806,193
Earnings (loss) before
income taxes $2,820 $(10,577) $1,194,023
(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
QUARTERLY SEGMENT ANALYSIS
(Unaudited)
Six Months Ended June 30, 2007
Mortgage Banking
Loan Loan Closing
(in thousands) Production Servicing Services Total
Revenues
Gain on sale of loans and
securities $2,325,864 $- $- $2,325,864
Net interest income after
provision for loan losses 237,671 (84,017) 6,311 159,965
Net loan servicing fees (1) - 281,946 - 281,946
Net insurance premiums earned - - - -
Other revenue (2) 131,850 46,381 168,424 346,655
Total revenues 2,695,385 244,310 174,735 3,114,430
Expenses 2,117,245 460,761 116,518 2,694,524
Earnings (loss) before
income taxes $578,140 $(216,451) $58,217 $419,906
Capital
(in thousands) Banking Markets Insurance
Revenues
Gain on sale of loans and
securities $- $370,438 $-
Net interest income after
provision for loan losses 621,477 117,179 38,010
Net loan servicing fees (1) - 3,801 (707)
Net insurance premiums earned - - 686,561
Other revenue (2) 95,555 13,995 34,669
Total revenues 717,032 505,413 758,533
Expenses 300,028 263,695 480,154
Earnings (loss) before
income taxes $417,004 $241,718 $278,379
Global
(in thousands) Operations Other Grand Total
Revenues
Gain on sale of loans and
securities $- $31,260 $2,727,562
Net interest income after
provision for loan losses 3,215 74,201 1,014,047
Net loan servicing fees (1) - (86,535) 198,505
Net insurance premiums earned - - 686,561
Other revenue (2) 46,133 (209,509) 327,498
Total revenues 49,348 (190,583) 4,954,173
Expenses 38,654 (188,375) 3,588,680
Earnings (loss) before
income taxes $10,694 $(2,208) $1,365,493
Six Months Ended June 30, 2006
Mortgage Banking
Loan Loan Closing
(in thousands) Production Servicing Services Total
Revenues
Gain on sale of loans and
securities $2,468,695 $2,661 $- $2,471,356
Net interest income after
provision for loan losses 220,627 85,572 4,661 310,860
Net loan servicing fees (1) - 874,226 - 874,226
Net insurance premiums earned - - - -
Other revenue (2) 134,721 8,773 145,732 289,226
Total revenues 2,824,043 971,232 150,393 3,945,668
Expenses 2,215,330 443,231 101,961 2,760,522
Earnings (loss) before
income taxes $608,713 $528,001 $48,432 $1,185,146
Capital
(in thousands) Banking Markets Insurance
Revenues
Gain on sale of loans and
securities $- $395,153 $-
Net interest income after
provision for loan losses 811,023 100,752 28,676
Net loan servicing fees (1) 901 2,753 (665)
Net insurance premiums earned - - 564,019
Other revenue (2) 83,418 22,147 23,067
Total revenues 895,342 520,805 615,097
Expenses 228,885 207,642 461,407
Earnings (loss) before
income taxes $666,457 $313,163 $153,690
Global
(in thousands) Operations Other Grand Total
Revenues
Gain on sale of loans and
securities $- $22,119 $2,888,628
Net interest income after
provision for loan losses 1,517 7,045 1,259,873
Net loan servicing fees (1) 11,824 (17,509) 871,530
Net insurance premiums earned - - 564,019
Other revenue (2) 36,939 (202,683) 252,114
Total revenues 50,280 (191,028) 5,836,164
Expenses 37,292 (172,970) 3,522,778
Earnings (loss) before
income taxes $12,988 $(18,058) $2,313,386
(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
BANKING OPERATIONS
PAY-OPTION LOANS HELD FOR INVESTMENT,
PRODUCTION AND ACQUISITIONS OF LOANS HELD FOR INVESTMENT AND
CREDIT QUALITY
(Unaudited)
June 30, December 31,
(in thousands) 2007 2006
Pay-option ARM loans
held for investment:
Total pay-option
ARM loan portfolio $27,778,863 $32,732,581
Total principal
balance of pay-
option ARM loans
with accumulated
negative
amortization $25,219,735 $28,958,718
Accumulated
negative
amortization
(from original
loan balance) $941,980 $653,974
Quarters Ended Six Months Ended
June 30, % June 30, %
2007 2006 Change 2007 2006 Change
(in thousands)
Interest capitalized
on loans $221,395 $156,762 41% $455,381 $265,999 71%
Quarters Ended Six Months Ended
June 30, % June 30, %
(in millions) 2007 2006 Change 2007 2006 Change
Production and bulk
acquisitions of loans
held for investment
by channel:
Consumer Markets $1,550 $2 N/M $1,576 $854 85%
Correspondent Lending 1,229 3,453 (64%) 1,595 5,790 (72%)
Purchases(1) 1,106 1,900 (42%) 3,269 4,014 (19%)
Wholesale Lending 576 2,906 (80%) 589 5,676 (90%)
Total production and
purchases of loans
held for investment $4,461 $8,261 (46%) $7,029 $16,334 (57%)
(1) Acquisitions from third parties
(dollar amounts in June 30, December 31,
thousands) 2007 2006
Non-performing
residential loans: % assets % assets
With third party
credit
enhancement(2) $278,934 0.31% $109,218 0.13%
Without third party
credit enhancement 661,848 0.74% 409,865 0.50%
Total non-
performing loans 940,782 1.05% 519,083 0.63%
Foreclosed real estate 188,483 0.21% 27,416 0.03%
Total
non-performing
assets $1,129,265 1.26% $546,499 0.66%
Allowances for credit
losses
Allowances for loan
losses $450,844 $228,692
Liability for
unfunded loan
commitments 18,222 8,104
$469,066 $236,796
Allowances for credit
losses as a
percentage of:
Total non-performing
loans 49.86% 45.62%
Total non-performing
loans without third
party credit
enhancements 70.87% 57.77%
Total loans held for
investment 0.68% 0.32%
Six Months Ended Six Months Ended
June 30, 2007 June 30, 2006
Annualized net Annualized net
charge-offs charge-offs
as % average as % average
investment loans investment loans
Net charge-offs: $142,124 0.42% $14,348 0.04%
(2) Third party credit enhancements include borrower-paid mortgage
insurance and pool mortgage insurance acquired by the Banking
Operations.
COUNTRYWIDE FINANCIAL CORPORATION
BANKING OPERATIONS
SUMMARY INFORMATION, AVERAGE BALANCE SHEET AND LOAN QUALITY
(Unaudited)
Summary Information June 30,
(dollar amounts in 2007 2006
thousands)
After-tax return on
average assets 0.50% 0.99%
After-tax return on
average equity 8.3% 14.6%
Period end:
Total assets $89,910,226 $84,245,600
Total equity $5,539,521 $5,601,487
Total investment
loan portfolio,
net $68,130,524 $75,470,133
Average Balance Sheet Quarter Ended June 30, 2007
Interest
(dollar amounts in Average Income/ Annualized
thousands) Balance Expense Yield/Rate
Interest-earning
assets
Home loans
Pay-option ARMs $30,058,599 $539,564 7.18%
Hybrid & other
1st liens 17,464,852 241,341 5.53%
Home equity loans 19,854,686 407,071 8.21%
Commercial real
estate loans 122,215 2,117 6.95%
Investment securities 14,588,289 205,633 5.64%
Other assets 1,619,230 23,663 5.86%
Total interest-
earning assets $83,707,871 $1,419,389 6.79%
Interest-bearing
liabilities
Money market &
savings deposits $15,065,927 $202,950 5.40%
Company-controlled
custodial deposit
accounts 16,706,566 216,967 5.21%
Time deposits (CDs) 26,931,005 345,886 5.15%
Borrowings 17,577,543 190,247 4.34%
Total interest-
bearing
liabilities $76,281,041 $956,050 5.03%
Net interest spread 1.76%
Net interest margin 2.21%
Average Balance Sheet Quarter Ended June 30, 2006
Interest
(dollar amounts in Average Income/ Annualized
thousands) Balance Expense Yield/Rate
Interest-earning
assets
Home loans
Pay-option ARMs $33,438,240 $529,721 6.34%
Hybrid & other 1st
liens 22,084,697 295,676 5.36%
Home equity loans 15,255,739 310,945 8.17%
Commercial real
estate loans - - 0.00%
Investment securities 5,960,904 73,652 4.94%
Other assets 2,153,699 30,811 5.39%
Total interest-
earning assets $78,893,279 $1,240,805 6.29%
Interest-bearing
liabilities
Money market &
savings deposits $5,199,192 $61,015 4.71%
Company-controlled
custodial deposit
accounts 15,817,734 191,521 4.86%
Time deposits (CDs) 26,490,658 298,237 4.52%
Borrowings 25,030,324 268,934 4.31%
Total interest-
bearing
liabilities $72,537,908 $819,707 4.53%
Net interest spread 1.76%
Net interest margin 2.12%
Average Balance Sheet Six Months Ended June 30, 2007
Interest
(dollar amounts in Average Income/ Annualized
thousands) Balance Expense Yield/Rate
Interest-earning
assets
Home loans
Pay-option ARMs $31,111,712 $1,131,111 7.27%
Hybrid & other 1st
liens 18,057,827 499,518 5.53%
Home equity loans 19,961,765 822,294 8.28%
Commercial real
estate loans 72,132 2,534 7.08%
Investment securities 11,100,939 307,083 5.53%
Other assets 1,541,444 45,112 5.90%
Total
interest-earning
assets $81,845,819 $2,807,652 6.87%
Interest-bearing
liabilities
Money market &
savings deposits $12,883,401 $339,124 5.31%
Company-controlled
custodial deposit
accounts 16,150,567 415,379 5.19%
Time deposits (CDs) 28,122,947 715,032 5.13%
Borrowings 17,629,475 378,038 4.32%
Total
interest-bearing
liabilities $74,786,390 $1,847,573 4.98%
Net interest spread 1.89%
Net interest margin 2.32%
Average Balance Sheet Six Months Ended June 30, 2006
Interest
(dollar amounts in Average Income/ Annualized
thousands) Balance Expense Yield/Rate
Interest-earning
assets
Home loans
Pay-option ARMs $30,940,469 $957,675 6.19%
Hybrid & other 1st
liens 22,160,717 586,772 5.30%
Home equity loans 15,326,303 612,895 8.05%
Commercial real
estate loans - - 0.00%
Investment securities 6,104,385 154,121 5.05%
Other assets 1,949,136 51,806 5.36%
Total interest-
earning assets $76,481,010 $2,363,269 6.19%
Interest-bearing
liabilities
Money market & savings
deposits $5,016,247 $112,426 4.52%
Company-controlled
custodial deposit
accounts 14,649,621 337,373 4.64%
Time deposits (CDs) 24,640,209 534,803 4.38%
Borrowings 25,931,310 539,269 4.19%
Total interest-
bearing
liabilities $70,237,387 $1,523,871 4.38%
Net interest spread 1.81%
Net interest margin 2.17%
Loan Quality (1)
June 30, 2007
LTV CLTV FICO
Pay-option ARMs 76% 79% 717
Hybrid & other 1st liens 74% 79% 733
Home equity loans 20% 82% 730
Loan Quality (1)
June 30, 2006
LTV CLTV FICO
Pay-option ARMs 75% 78% 721
Hybrid & other 1st liens 74% 78% 735
Home equity loans 20% 82% 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
OTHER OPERATIONS
CAPITAL MARKETS SECURITIES AND INSURANCE SEGMENT
(Unaudited)
Quarters Ended
June 30, %
(in millions) 2007 2006 Change
Capital Markets Securities Trading
Volume: (1)
Mortgage-backed securities $684,463 $570,878 20%
U.S. Treasury securities 365,387 307,815 19%
Asset-backed securities 21,800 29,061 (25%)
Other 38,094 26,582 43%
Total securities trading volume $1,109,744 $934,336 19%
(1) Includes trades with Mortgage
Banking Segment.
Six Months Ended
June 30, %
(in millions) 2007 2006 Change
Capital Markets Securities Trading
Volume: (1)
Mortgage-backed securities $1,244,732 $1,099,228 13%
U.S. Treasury securities 730,716 664,927 10%
Asset-backed securities 55,441 61,737 (10%)
Other 76,797 86,799 (12%)
Total securities trading volume $2,107,686 $1,912,691 10%
(1) Includes trades with Mortgage
Banking Segment.
Insurance Segment Quarters Ended
June 30, %
(dollar amounts in thousands) 2007 2006 Change
Balboa Life & Casualty:
Lender-placed net premiums earned $183,793 $123,031 49%
Voluntary net premiums earned $103,157 $106,039 (3%)
Loss ratio 48% 41%
Combined ratio 83% 80%
Insurance Segment Six Months Ended
June 30, %
(dollar amounts in thousands) 2007 2006 Change
Balboa Life & Casualty:
Lender-placed net premiums earned $350,527 $249,083 41%
Voluntary net premiums earned $207,340 $207,985 (0%)
Loss ratio 46% 45%
Combined ratio 82% 85%
Quarters Ended
June 30,
2007 2006 %
Balboa Reinsurance: Change
(in thousands)
Reinsurance net
earned premiums $65,434 $55,156 19%
(in billions)
Period end:
Loans in CFC
servicing portfolio
covered by Balboa
Reinsurance $98 $84 17%
Six Months Ended
June 30, %
2007 2006 Change
Balboa Reinsurance:
(in thousands)
Reinsurance net
earned premiums $128,694 $106,951 20%
SOURCE Countrywide Financial Corporation
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Related links:
http://www.countrywide.com
CONTACT:
Investors, David Bigelow or Lisa Riordan,
+1-818-225-3550, or Media Line, 1-800-796-8448
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