From today's Wall Street Journal

Countrywide Swings to Steep Loss

By DONNA KARDOS
April 29, 2008 8:51 a.m.

Countrywide Financial Corp. swung to a first-quarter loss on $3.05 billion in credit-related charges, driven by higher levels of mortgage delinquencies, defaults and losses. 

The troubled mortgage lender, set to be acquired by Bank of America Corp. in the third quarter, reported a net loss of $893 million, or $1.60 a share, compared with prior-year net income of $434 million, or 72 cents a share.

The results mark Countrywide's third consecutive quarter of losses amid write-downs, credit deterioration and continued illiquidity in the secondary mortgage markets.

The latest quarter's credit impacts were half -- $1.53 billion, a tenfold increase -- made up by credit-loss provisions. The provisions also rose 39% from the fourth quarter.

Revenue fell 72% to $678.9 million.

The mean estimates of analysts polled by Thomson Reuters were for earnings of 2 cents a share on $1.53 billion in revenue.

Delinquency rates of conventional loans, prime home-equity loans and subprime loans all rose from the fourth quarter and prior year. Countrywide said 35.9% of subprime loans were delinquent as of March 31, up from 33.6% in the fourth quarter. The delinquency rate of conventional loans rose to 6.48% from 5.76%.

Net charge-offs, or loans the bank doesn't think are collectible, surged from $39 million in the prior year to $606 million, representing 2.21% of average investment loans. Non-performing assets as a percentage of total assets soared to 4.16% from 0.95%.

The lender's mortgage-banking operations swung to a loss of $552 million. Loans produced in the segment fell 39%, while total company loans produced dropped 42%.

The loan-servicing sector widened its pretax loss amid the credit-related charges, including a $444 million write-down driven by worsening trends and expectations for delinquencies and home prices and the resulting increases in estimates of future defaults and credit losses.

Countrywide recorded its first annual loss in more than three decades last year amid a surge in defaults and falling home prices. That performance - plus a shrunken share price - forced it into the arms of Bank of America. Last week, executives from Bank of America outlined new lending guidelines and a grant program it will implement once the merger goes through, as Countrywide's lending practices continue to be called into question.

Write to Donna Kardos at donna.kardos@dowjones.com