Bank of America to purchase Countrywide.

Charlotte, North Carolina-based Bank of America Corporation (BofA) announced in January a definitive agreement to purchase Calabasas, California-based Countrywide Financial Corporation in an all-stock transaction worth approximately $4 billion.

The purchase will make Bank of America the nation's largest mortgage lender and loan servicer, allowing BofA to gain greater scale in originating and servicing mortgages in the United States, according to Bank of America Chairman and Chief Executive Officer Kenneth D. Lewis.

"Countrywide presents a rare opportunity for Bank of America to add what we believe is the best domestic mortgage platform at an attractive price, and to affirm our position as the nation's premier lender to consumers," said Lewis.

"Countrywide customers will gain access to a broad set of consumer products, including credit cards and deposit services. Homeownership is a fundamental pillar of the U.S. economy, and over time it will be a key area of growth for Bank of America."

[ILLUSTRATION OMITTED]

Countrywide did $408 billion in mortgage originations in 2007 and has a servicing portfolio of about $1.5 trillion with 9 million loans. The purchase also includes Countrywide's lender-placed insurance and other businesses.

Bank of America will benefit from Countrywide's broader mortgage capabilities, including its extensive retail, wholesale and correspondent distribution networks, said Lewis.

Countrywide operates more than 1,000 field offices and has a sales force of nearly 15,000. It also has a leading mortgage technology platform, a well-known brand in home lending and management expertise in a number of key areas.

"We are aware of the issues within the housing and mortgage industries. The transaction reflects those challenges," explained Lewis. "Mortgages will continue to be an important relationship product, and we now will have an opportunity to better serve our customers and to enhance future profitability," he added.

Countrywide will benefit from the stability of being part of the largest and one of the most financially strong financial institutions in the United States, according to Countrywide Chairman and Chief Executive Officer Angelo R. Mozilo.

"We believe this is the right decision for our shareholders, customers and employees. Bank of America is one of the largest financial institutions in the U.S. and internationally, and we are confident that the combination of Countrywide and Bank of America will create one of the most powerful mortgage franchises in the world," said Mozilo. "We have had a long and positive relationship with Bank of America, and our servicing and origination businesses, as well as other aspects of our operations, will be substantially enhanced as a result of this transaction."

Countrywide's deep retail distribution operation will enhance Bank of America's network of more than 6,100 banking centers throughout the United States. After closing, Bank of America said it plans to operate Countrywide separately under the Countrywide brand with integration occurring no sooner than 2009.

The purchase is expected to close in the third quarter and be neutral to Bank of America earnings per share in 2008 and accretive in 2009, excluding merger and restructuring costs.

BofA said it expects $670 million in after-tax cost savings in the transaction, or 11 percent of the expense base of the two companies' mortgage operations. About one-third of that savings would come in 2009, two-thirds would be realized in 2010, and savings would be fully realized in 2011.

The agreement has been approved by Bank of America's board of directors and Countrywide's board of directors and at press time was subject to approval by Countrywide's shareholders and customary regulatory approvals.