June 12, 1995
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Countrywide Credit Industries, Inc.
Form 8-K
Ladies and Gentlemen:
Transmitted herewith is a current report on Form 8-K for Countrywide Credit
Industries, Inc. This filing has been prepared in accordance with the
Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system.
If you have any questions or comments, please call me at
(818) 304-5591.
Very truly yours,
/s/ Gwen J. Eells
Gwen J. Eells
Assistant General Counsel
s:\gje\gje95008.doc
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: June 12, 1995
Date of earliest event reported: June 12, 1995
COUNTRYWIDE CREDIT INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-8422 95-4083087
(State or other jurisdiction (Commission (IRS Employer
of incorporation File Number) Identification Number)
155 North Lake Avenue, Pasadena, CA 91101
(Address of principal executive offices) (Zip
Code)
Registrant's telephone number, including area code:(818) 304-8400
Item 5. Other Events.
A copy of a press release dated June 12, 1995, announcing the
Company's results for the quarter ended
May 31, 1995, is attached hereto as Exhibit 99 and is incorporated herein
by this reference. The financial statements included in the press release
contain, in the opinion of management, all adjustments (consisting of
normal recurring adjustments) considered necessary for a fair presentation.
Item 7. Financial Statement and Exhibits.
(c) Exhibits
(99) Press-release dated June 12, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
COUNTRYWIDE CREDIT INDUSTRIES, INC.
Dated: June 12, 1995 By: /s/
Stanford L. Kurland
Stanford L. Kurland
Senior Managing Director, and
Chief Operating Officer
FOR IMMEDIATE RELEASE CONTACT: Eric Sieracki
John Dolphin
(818) 304-7523
Laura Snow
(818) 304-4422
COUNTRYWIDE CREDIT INDUSTRIES, INC.
REPORTS FIRST QUARTER EARNINGS - DECLARES CASH DIVIDEND
PASADENA, CA (June 12, 1995) -- Countrywide Credit Industries, Inc.
(NYSE:CCR), the nation's largest independent residential mortgage lender
and servicer, announced today that unaudited net earnings for the first
fiscal quarter ended May 31, 1995 were $36.2 million. Primary and fully
diluted earnings per common share were $0.39. Earnings for the quarter
ended May 31, 1994 were $33.7 million, or $0.37 per primary and fully
diluted share.
Countrywide's Board of Directors declared a cash dividend of $0.08 per
common share for the first quarter, payable July 17, 1995 to shareholders
of record on June 26, 1995.
Effective with the quarter ended May 31, 1995 the Company has adopted
Statement of Financial Accounting Standards ("SFAS") No. 122, Accounting
for Mortgage Servicing Rights. SFAS No. 122 amended SFAS No. 65,
Accounting for Certain Mortgage Banking Activities. The overall impact on
the Company's financial statements of adopting SFAS No. 122 was an increase
in net earnings for the quarter ended May 31, 1995 of $8.9 million, or
$0.10 per fully diluted share. Since SFAS No. 122 prohibits retroactive
application, historical accounting results have not been restated and,
accordingly, the accounting results for the quarter ended May 31, 1995 are
not directly comparable to prior periods.
Pre-tax earnings from the Company's loan servicing activities amounted to
$60.0 million and $32.0 million for the quarters ended May 31, 1995 and
1994, respectively. The increase of $28.0 million was principally due to
an increase of the servicing portfolio, but was offset, in part, by a
change of $10.0 million in the Company's internal method of allocating
overhead between its servicing and production activities. For the quarter
ended May 31, 1995,
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2-2-2
the pre-tax loss from the Company's loan production activities was $1.5
million versus a pre-tax profit of $20.9 million for the quarter ended May
31, 1994. The decrease of $22.4 million was primarily attributed to lower
loan production and increased price competition caused by lower demand for
mortgage loans, but was offset, in part, by the effect of the adoption of
SFAS No. 122 and the change in the Company's internal overhead allocation
method discussed above.
SFAS No. 122 requires the recognition of originated mortgage servicing
rights ("OMSRs"), as well as purchased mortgage servicing rights ("PMSRs"),
as assets by allocating total costs incurred between the loan and the
servicing rights based on their relative fair values. Under SFAS No. 65,
the cost of OMSRs was not recognized as an asset and was charged to
earnings when the related loan was sold. The separate impact of
recognizing OMSRs as assets in the Company's financial statements in
accordance with SFAS No. 122 for the quarter ended May 31, 1995 was an
increase in net earnings of $18.6 million, or $0.20 per fully diluted
share.
With respect to PMSRs, SFAS No. 122 has a different cost allocation
methodology than SFAS No. 65. In contrast to a cost allocation based on
relative market value as set forth in SFAS No. 122, the prior requirement
was to allocate the costs incurred in excess of the market value of the
loans without the servicing rights to PMSRs. During the quarter ended May
31, 1995, the separate impact of the application of the SFAS No. 122 cost
allocation method, along with the effect of changes in market conditions,
was to reduce PMSR capitalization by $9.7 million or $0.10 per fully
diluted share.
SFAS No. 122 also requires that all capitalized mortgage servicing rights
be evaluated for impairment based on the excess of the carrying amount of
the mortgage servicing rights over their value. In addition to normal
amortization of the servicing assets amounting to $29.1 million, the
Company reduced the servicing assets by an additional $116.7 million of
impairment during the quarter ended May 31, 1995. The entire amount of
such impairment was offset by a net gain of $117.0 million in the Company's
servicing hedge which is designed to protect its servicing investment. The
net gain includes unrealized gains of $106.9 million and realized gains of
$10.1 million from the sale of various financial instruments that comprise
the hedge. As a part of the adoption of SFAS No. 122, the Company has
revised its servicing hedge accounting policy, effective with the quarter
ended May 31, 1995, to adjust the basis of the servicing assets for
unrealized gains or losses in the derivative financial instruments
comprising the servicing hedge.
The Company's loan servicing portfolio grew to $121 billion with a weighted
average coupon of 7.7 percent at May 31, 1995 from $94 billion with a
weighted average coupon of 7.2 percent at May 31, 1994. In the first
quarter of
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3-3-3
fiscal 1996 the Company acquired bulk servicing of $3.0 billion compared to
$3.5 billion in the first quarter of fiscal 1995.
The Company's loan production for the quarter ended May 31, 1995 was $6.8
billion compared to $9.4 billion for the quarter ended May 31, 1994.
Countrywide's fixed rate loan production amounted to $4.5 billion in the
quarter, or 67 percent of total production, versus $7.4 billion or 79
percent of total production in the first quarter of fiscal 1995. Purchase
mortgage activity was $5.6 billion in this year's first quarter and $4.5
billion in last year's first quarter. Refinances represented 17 percent of
total fundings in the first quarter compared to 52 percent in the
comparable quarter last year.
Founded in 1969, Countrywide Credit Industries, Inc. originates, purchases,
sells and services loans for single-family homes. The Company is
headquartered in Pasadena, California and has more than 330 offices across
the nation.
4-4-4
Countrywide Credit Industries, Inc.
CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
Three Months Ended
May 31,
(Dollar amounts in thousands, 1995 1994 % Change
except share data)
Revenues
Loan origination fees $41,521 $73,736 (44%)
Gain (loss) on sale of 12,731 11,748 8%
loans
Loan production revenue 54,252 85,484 (37%)
Interest earned 91,731 90,782 1%
Interest charges (80,112) (63,643) 26%
Net interest income 11,619 27,139 (57%)
Loan servicing income 129,382 95,930 35%
Less amortization and (145,743) (23,000) 534%
impairment of servicing
assets
Servicing hedge benefit 116,975 (19,916) (687%)
(expense)
Net loan 100,614 53,014 90%
administration income
Commissions, fees and 12,478 11,481 9%
other income
Total revenues 178,963 177,118 1%
Expenses
Salaries and related 50,639 60,132 (16%)
expenses
Occupancy and other 26,545 26,005 2%
office expenses
Guarantee fees 26,022 19,058 37%
Marketing expenses 5,951 6,757 (12%)
Other operating expenses 9,512 8,951 6%
Total expenses 118,669 120,903 (2%)
Earnings before income taxes 60,294 56,215 7%
Provision for income 24,118 22,486 7%
taxes
NET EARNINGS $36,176 $33,729 7%
Earnings per Share
Primary $0.39 $0.37 5%
Fully Diluted $0.39 $0.37 5%
Weighted Average Shares Outstanding
Primary 92,683,000 92,181,000 1%
Fully Diluted 92,849,000 92,345,000 1%
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(tables follow)
5-5-5
Countrywide Credit Industries, Inc.
CONSOLIDATED BALANCE SHEETS (unaudited)
May 31, February 28,
(Dollar amounts in thousands, except 1995 1995
per share data)
Assets
Cash $ 12,891 $ 17,624
Receivables for mortgage loans shipped 1,956,740 1,174,648
Mortgage loans held for sale 1,756,589 1,724,177
Other receivables 506,027 476,754
Property, equipment and leasehold
improvements, at cost - net of
accumulated depreciation and
amortization 139,166 145,612
Capitalized servicing fees receivable 486,276 464,268
Mortgage servicing rights 1,378,607 1,332,629
Other assets 400,590 243,950
Total assets $6,636,886 $5,579,662
Liabilities and Shareholders' Equity
Notes payable $4,964,281 $3,963,091
Drafts payable issued in connection
with mortgage loan closings 151,735 200,221
Accounts payable and accrued
liabilities 154,946 105,097
Deferred income taxes 392,813 368,695
Total liabilities 5,663,775 4,637,104
Commitments and contingencies - -
Shareholders' equity
Preferred stock - authorized,
1,316,000 shares of $0.05 par value;
issued and outstanding, none - -
Common stock - authorized, 240,000,000
shares of $0.05 par
value; issued and outstanding,
91,561,027 shares at
May 31, 1995 and 91,370,364 shares at
February 28, 1995 4,578 4,568
Additional paid-in capital 609,971 608,289
Retained earnings 358,562 329,701
Total shareholders' equity 973,111 942,558
Total liabilities and
shareholders' equity $6,636,886 $5,579,662
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6-6-6
Countrywide Credit Industries, Inc.
SELECTED OPERATING DATA (unaudited)
(Dollar amounts in thousands)
Three Months Ended
May 31,
1995 1994 % Change
Volume of loans produced $6,771,558 $9,353,167 (28%)
Number of loans produced 66,909 79,250 (16%)
Bulk servicing acquisitions $2,965,997 $3,473,845 (15%)
At May 31, 1995 1994 % change
Pipeline of loans-in-process $4,296,574 $4,368,640 (2%)
Loan servicing portfolio* $120,900,462 $93,616,244 29%
Number of loans serviced* 1,049,938 782,137 34%
* Includes warehoused loans
and loans under
subservicing agreements.
7-7-7
Countrywide Credit Industries, Inc.
Quarterly Sector Analysis
(unaudited)
Loan Servicing Sector
Three Months Ended May 31,
(Dollar amounts in thousands)
1995 % 1994 %
Servicing fees & miscellaneous $ 144,621 0.494% $ 108,756 0.488%
Escrow balance benefits 18,139 0.062% 14,127 0.063%
Amortization and impairment of
servicing assets (145,743) (0.498%) (23,000) (0.103%)
Servicing hedge benefit (expense 116,975 0.400% (19,916) (0.089%)
Total servicing revenues 133,992 0.458% 79,967 0.359%
Guarantee fees 26,022 0.089% 19,058 0.085%
Operating expenses 18,762 0.064% 15,532 0.070%
Servicing overhead 9,980 0.034% 0 0.000%
Total servicing expenses 54,764 0.187% 34,590 0.155%
Interest expense 19,240 0.066% 13,402 0.060%
Loan servicing earnings (pre-tax) $ 59,988 0.205% $ 31,975 0.144%
Average servicing portfolio $117,099,000 $ 89,100,000
Loan Production Sector
Three Months Ended May 31,
(Dollar amounts in thousands)
1995 % 1994 %
Loan origination fees $ 41,982 0.62% $ 72,772 0.78%
Net warehouse spread 2,266 0.03% 19,381 0.21%
Servicing value booked
Mortgage servicing rights 110,783 1.64% 86,540 0.92%
Conventional excess 28,742 0.42% 65,453 0.70%
Government excess 27,520 0.41% 0 0.00%
Total servicing value booked 167,045 2.47% 151,993 1.62%
Total production revenues 211,293 3.12% 244,146 2.61%
Direct pricing costs 157,247 2.32% 142,082 1.52%
Direct production costs 43,973 0.65% 61,070 0.65%
Production overhead 11,540 0.17% 20,097 0.22%
Total production costs 212,760 3.14% 223,249 2.39%
Loan production (loss) earnings ($ 1,467) (0.02%) $ 20,897 0.22%
(pre-tax)
Production $ 6,771,558 $ 9,353,167
Weighted average service fee of
servicing booked(1) 0.566% 0.393%
(1) For government excess service
fees, based on static interest
rates over the expected life of
the loans.
