Countrywide Profit for Quarter Falls 5%

Mortgage banking company Countrywide Credit Industries Inc. said Wednesday that its fiscal third-quarter profit fell 5%, missing estimates, partly because of a year-earlier one-time gain in its mortgage-servicing business.

The Calabasas-based company said it earned $95.4 million, or 80 cents a diluted share, in the three months ended Nov. 30, compared with $100.6 million, or 87 cents a share, a year earlier.

Wall Street had expected earnings of 81 cents a share, said First Call/Thomson Financial, which tracks analysts’ estimates.

Countrywide shares fell 6 cents to close at $48.94 on the New York Stock Exchange, just shy of their 52-week high of $49.75.

The company’s profits were down from the year-ago period, when Countrywide, which values mortgage-servicing rights using assumptions about the speed of prepayments in its mortgage portfolio, had a one-time $47-million gain.

“Prepayments were very high in 1998, and they recognized some impairment in the servicing portfolio,” said A.G. Edwards analyst Joel Houck. “As rates then moved up in 1999, . . . some of that impairment was taken back into earnings. That was what happened in the third quarter last year.”

But looking ahead, Countrywide said its consumer mortgage business will benefit from a high level of applications to refinance loans.

“The current market environment is promising for Countrywide,” Chairman, President and Chief Executive Angelo Mozilo said. “Refinance application activity has risen sharply in recent months, creating growth in our pipeline of loans in process.”

After enduring more than a year of sharply rising interest rates, mortgage lenders have seen rates fall steadily since the second quarter of 2000. For Countrywide, the new environment fueled increases across many of its businesses.

Mortgage originations rose to $17.7 billion this quarter, compared with $12.7 billion last year.

Refinance activity, meanwhile, is generating an increasing proportion of Countrywide’s business, from 34% in September to 49% in December.

Refinancing applications increased from 34% of all applications in September to 39% in October and 43% in November, Mozilo said.

“This activity has pushed the pipeline of loans in process up to $9.9 billion,” he said, “the highest level since August 1999.”

A.G. Edwards’ Houck said this bodes well for future earnings: “The fourth quarter could be stronger than what people think.”

First Call’s earnings estimate for the period is 83 cents a share.

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Refi Rocket

Although Countrywide Credit Industries missed earnings estimates for the most recent quarter, the mortgage banker stands to gain as declining interest rates boost its refinancing business. The stock has risen 96% so far this year.

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Countrywide Credit, (ticker symbol: CCR) weekly closes and latest on the New York Stock Exchange

Wednesday close: $48.94,

down 6 cents

Source: Bloomberg News