"Countrywide's results for the third quarter of 2007 reflect the impact of unprecedented disruptions in the U.S. mortgage market and the global capital markets, as well as continued weakening in the housing market," said Angelo R. Mozilo, Chairman and Chief Executive Officer. "However, during the period we also laid the foundation for a return to profitability in the fourth quarter ..." "The successful integration of our mortgage lending operations into Countrywide Bank and the resulting change in the funding strategy for our core business represents an important paradigm change for the Company that will strengthen our business model, and provides the foundation for enhancing our competitiveness and reducing our risks going forward," Mozilo explained. "During September, Bank fundings approached 90 percent of total fundings. The Bank, which is presently the 3rd largest Federal Savings Bank in the nation, is strongly positioned for this transition with $8.9 billion or 7.3 percent of total Tier 1 capital at September 30, 2007. Furthermore, the Bank's efficient and scalable deposit franchise is poised for growth from its current level of $60 billion in total deposits, with 150 financial centers open currently and expectations for total financial centers to exceed 200 by year-end."COO David Sambol echoed Mozilo's assessment, characterizing the third quarter loss as an "earnings trough" and saying that he expects the company to be profitable in the fourth quarter and in 2008. Loan and securities write-downs totaled $1.0 billion for the quarter as liquidity in the secondary markets siezed up, while loan loss provisions jumped to $934 million, compared to $293 million last quarter and $38 million in the third quarter of 2006. Countrywide said most of the loss provisions were associated with expectations surrounding its home equity and pay-option ARM portfolio components. It's worth noting that at least one analyst had predicted $4.0 billion in write-downs during early September -- so in some respects the $1.0 billion in write-downs may be less than the market had anticipated. (More proof that while what analysts say gets airtime, even here at HW, relying on an analyst for investment decisions is a fool's game.) Additional losses associated with a previously-announced restructuring effort -- one that will cost 10,000 to 12,000 employees their jobs before 2007 is over -- amounted to $57 million, with the company saying an additional $70 to $90 million will be recorded in the fourth quarter. For more information, visit http://www.countrywide.com.
Countrywide Loses $1.2 Billion in Q3; Expects Q4 to be Profitable
Industry bellwether Countrywide Financial reported its third quarter earnings this morning, reporting a loss of $1.2 billion or $2.85 per diluted share. The loss was larger than analysts expected, according to the Associated Press, which reported that analysts had been expecting a loss of $1.28 per share. The quarterly loss was the mortgage lender's first reported loss in 25 years, but CEO Angelo Mozilo said he expects the company to return to profitability during the fourth quarter: