Updated from 9:28 a.m. EST
posted a fourth-quarter loss that was wider than expected, but better than the mortgage lender's disastrous third-quarter results.
In the final three months of the year, the Calabasas, Calif.-based lender, shaken by turmoil in the mortgage industry, posted a loss of $422 million, or 79 cents a share. That compares with a net profit of $622 million, or $1.01 a share in the year-earlier period and a third-quarter loss of $1.2 billion, or $2.85 a share. Fourth-quarter revenue dropped 58% to $1.15 billion.
Countrywide had said in announcing its third-quarter results that it expected to turn a profit in the fourth quarter and for 2008. Analysts expected the company to post a loss of 30 cents a share in the fourth quarter, according to Thomson Financial.
For the full year, Countrywide reported a loss of $704 million, or $2.03 a share -- the company's first full-year net loss in more than 30 years, it said. "Excluding the impact of the below market strike price of the convertible preferred stock issued in the third quarter of 2007, the diluted loss for the full year was $1.30 a share," Countrywide said.
"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 liquidity in the secondary mortgage markets," CEO and co-founder Angelo Mozilo said in a company statement.
"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
home equity line of credit securitizations that exceeded those previously anticipated by the company," Mozilo said.
The lender last week cancelled a scheduled conference call to discuss results with analysts.
The nation's largest independent mortgage lender has been plagued by writedowns on loans that the company could not sell, as well as rising credit losses as home prices fell and borrower defaults rose. As the market for mortgage-backed securities essentially froze up this past summer, Countrywide faced a liquidity crisis so large that many investors feared the company would go under. Instead, it received a $2 billion cash infusion from
Bank of America
, and drew down an $11.5 billion credit line to keep funding loans.
As the company's stock sank to new lows earlier this month, BofA agreed to acquire Countrywide for approximately $4 billion. BofA CEO Ken Lewis said Tuesday morning that Countrywide's losses were "consistent with our due diligence and transaction price," adding that the underlying fundamentals of the mortgage business have improved.
"At this point everything is a go to complete this transaction," Lewis said at the Citigroup Financial Services Conference held in New York.
Countrywide set aside an additional $924 million for loan losses in the fourth quarter, slightly lower than its provision for losses in the third quarter but up from just $73 million in the fourth quarter of 2006. The company said the provision "was approximately 3.3 times charge-offs" of $283 million in the quarter. Countrywide's reserve for losses totaled $1.9 billion at the end of the year, compared to just $269 million in the fourth quarter of 2006.
The company also took an $831 million impairment to "credit-sensitive" residuals, which Countrywide primarily attributed to retain interests on prime junior-lien home equity securitizations.
Loan fundings in the fourth quarter totaled $69 billion, down 44% from the year-earlier period. On the other hand, Countrywide's loan servicing portfolio rose 14% to $1.47 trillion.
Countrywide has had to retool its business as it struggles to stay afloat amid the deepening credit crisis. It has cut thousands of employees and lowered loan production to only those loans that can either be sold to government-sponsored entities
, or that Countrywide can hold onto itself.
Since July, Countrywide has cut its workforce by approximately 11,000 employees. It has taken restructuring charges totaling $145 million, $87 million of which was taken in the fourth quarter.
Shares recently were up 5.2% to $6.26 in Tuesday morning trading.