Commercial Federal Reports First Quarter 2005 Results.OMAHA Omaha, city, United States Omaha (ō`məhä, –hô), city (1990 pop. 335,795), seat of Douglas co., E Nebr., on the west bank of the Missouri River; inc. 1857. , Neb. -- As anticipated, Commercial Federal Corporation (NYSE NYSE See: New York Stock Exchange :CFB CFB Canadian Forces Base ) today announced a net loss for the quarter ended March 31, 2005. The Company reported a net loss of $53.2 million, or $1.36 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, for the quarter. E[acute accent acute accent n. A mark (´) indicating: a. that a vowel is close or tense, as é in French été. b. that a vowel or syllable has a high or rising pitch, as in Chinese or Ancient Greek. c. ]Previously, the Company had announced it was exiting its mortgage servicing Mortgage servicing The collection of monthly payments and penalties, record keeping, payment of insurance and taxes, and possible settlement of default , involved with a mortgage loan. and wholesale mortgage origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real business activities. As a result, the Company anticipated reporting a net loss for the first quarter required by certain related and necessary balance sheet actions taken to realign re·a·lign tr.v. re·a·ligned, re·a·lign·ing, re·a·ligns 1. To put back into proper order or alignment. 2. To make new groupings of or working arrangements between. and sustain the Company's interest rate risk profile. E[acute accent]"The strategic decision to exit our mortgage banking operation is another key step in our evolution to a commercial banking model. This model traditionally produces greater margins, leading to enhanced profitability and shareholder value," said William William, crown prince of Germany William or Frederick William, 1882–1951, crown prince of Germany, son of William II. In World War I he commanded (1914) an army on the Western Front and was nominal commander in the German attack A. Fitzgerald, chairman of the board and chief executive officer. E[acute accent]"We are now positioned for enhanced levels of success. By focusing solely on our core businesses of retail and commercial banking, we will be better able to produce a consistent and stable earnings stream going forward," concluded Mr. Fitzgerald. E[acute accent]"Focusing our complete attention on those business activities that have the greatest potential for sustainable, profitable earnings growth, we have simplified sim·pli·fy tr.v. sim·pli·fied, sim·pli·fy·ing, sim·pli·fies To make simple or simpler, as: a. To reduce in complexity or extent. b. To reduce to fundamental parts. c. our business model to one that is now more easily understood, managed and controlled. Our model is now basic commercial banking and is significantly less influenced by external factors, such as mortgage prepayment speeds Prepayment speed Also called speed, the estimated rate at which mortgagors pay off their loans ahead of schedule, critical in assessing the value of mortgage pass-through securities. ," stated Frederick Frederick, city, United States Frederick, city (1990 pop. 40,148), seat of Frederick co., NW Md.; settled 1745, inc. 1817. The processing center of a fertile farm and dairying area, it makes beer, household items, optical and glass products, leather goods, R. Kulikowski, president and chief operating officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. . E[acute accent]"We will continue to offer mortgage lending products and services to clients within our defined markets and consider this an important part of the continued growth of the Company," Mr. Kulikowski continued. E[acute accent]During the quarter ended March 31, 2005, Commercial Federal continued to show quarter-over-quarter positive gains in the following highly targeted core business drivers: E[acute accent]--Average commercial operating loan outstanding balances grew at a 24.9% annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. rate, E[acute accent]--Average home equity loan outstanding balances expanded at a 7.5% annualized pace, E[acute accent]--Average core deposit balances, excluding custodial escrows, increased at an 11.5% annualized rate, and E[acute accent]--The number of period-end retail, commercial, and small business checking accounts increased 9.2% annualized. E[acute accent]In the quarter, the Company also announced the appointment of two new executive officers in Pat Corrigan Cor·ri·gan , Mairead Born 1944. Irish peace activist. She shared the 1976 Nobel Peace Prize for work in Northern Ireland's peace movement. and Bob Rivers to lead its efforts in commercial and retail banking, respectively. Mr. Kulikowski commented, "These executives are responsible for accelerating the sales-driven culture throughout the organization." E[acute accent]Sale of Mortgage Servicing E[acute accent]During the quarter the Company sold the majority of its national third party mortgage servicing portfolio and its entire broker and correspondent A bank, Securities firm, or other financial institution that regularly renders services for another in an area or market to which the other party lacks direct access. A bank that functions as an agent for another bank and carries a deposit balance for a bank in another city. mortgage origination network. In conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the decision to exit the mortgage servicing business, the Company recorded net losses of $101.4 million (or $67.1 million, after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. ) related to transactions needed to realign the balance sheet and to record the sale of mortgage servicing rights (MSR MSR Microsoft Research MSR Montserrat (ISO Country code) MSR Mountain Safety Research (outdoor goods manufacturer) MSR Magnetic Stripe Reader MSR Egyptair (ICAO code) ) and the wholesale origination network. Specifically, the Company incurred a loss on the termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. of interest rate swap Interest Rate Swap A deal between banks or companies where borrowers switch floating-rate loans for fixed rate loans in another country. These can be either the same or different currencies. agreements no longer needed ($42.5 million, before-tax), a prepayment penalty Prepayment penalty A fee a borrower pays a lender when the borrower repays a loan before its scheduled time of maturity. and carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. write-offs associated with the early extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of FHLB FHLB Federal Home Loan Bank borrowings ($40.7 million, before-tax), a loss on the sale of mortgage-backed securities Mortgage-backed securities (MSBs) Securities backed by a pool of mortgage loans. ($12.7 million, before-tax), and prepayment penalties on the termination of reverse repurchase agreements Reverse Repurchase Agreement The purchase of securities with the agreement to sell them at a higher price at a specific future date. For the party selling the security (and agreeing to repurchase it in the future) it is a repo for the party on the other end of the ($4.6 million, before-tax). Also, exit costs ($2.8 million, before-tax), impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of goodwill ($3.5 million, before-tax) and a gain on the MSR sale and wholesale mortgage origination network ($5.4 million, before-tax) were recognized. E[acute accent]Results for the Quarter E[acute accent]Net Interest Income E[acute accent]Net interest income totaled $56.3 million for the first quarter, which included the effect of the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. reverse repurchase agreement prepayment penalties of $4.6 million. This compares to $65.8 million for the quarter ended December December: see month. 31, 2004. The decline was driven largely by the Company carrying fewer residential mortgage loans and more savings deposits Savings deposits Accounts that pay interest, typically at below-market interest rates, that do not have a specific maturity, and that usually can be withdrawn upon demand. quarter-over-quarter. E[acute accent]Credit Risk Management E[acute accent]At the end of the first quarter, total nonperforming assets Nonperforming asset An asset that is not effectively producing income, such as an overdue loan. nonperforming asset An asset that produces no income. remained relatively flat from the previous quarter increasing slightly from $60.6 million to $61.9 million. The ratio of nonperforming assets to total assets increased to 0.60% from 0.53%, primarily as a function of the over 9% decline in total assets during the quarter. E[acute accent]After recording net loan charge-offs of $8.2 million in the quarter, the total allowance for loan losses marginally mar·gin·al adj. 1. Of, relating to, located at, or constituting a margin, a border, or an edge: the marginal strip of beach; a marginal issue that had no bearing on the election results. 2. increased to $90.0 million at March 31, 2005 and represented 1.15% of loans receivable. E[acute accent]Noninterest Income E[acute accent]Noninterest income for the quarter was impacted greatly by the balance sheet transactions associated with the sale of mortgage servicing and reflected a net loss of $59.9 million. After adjusting this amount for the aforementioned loss on the termination of interest rate swap agreements ($42.5 million, before-tax), loss on the early extinguishment of debt ($40.7 million, before-tax), loss on the sales of mortgage-backed securities ($12.7 million, before-tax) and gain on the sale of mortgage servicing rights and wholesale origination network ($5.4 million, before-tax), noninterest income would have been $30.6 million for the quarter ended March 31, 2005. This compares to $28.0 million for the previous quarter. This improvement was driven by the recognition of a MSR valuation recovery, net of offsetting losses to hedge the change in MSR valuation, prior to the sale of the mortgage servicing portfolio and a lower period run-rate of MSR amortization, partially offset by a seasonal decline in retail fees and charges. E[acute accent]"The sale of the mortgage servicing portfolio immediately removed over 85% of the carrying value of the MSR from our balance sheet at quarter-end, and we are in final negotiations to complete the sale of the remainder. The volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the in the value of the MSR asset, as experienced by any institution that carries a large book of mortgage loan servicing Loan servicing is the process by which a mortgage bank or subservicing firm collects the timely payment of interest and principal from borrowers. The level of service varies depending on the type loan and the terms negotiated between the firm and the investor seeking their services. , was a key factor in our decision to exit the mortgage servicing business," said David S. Fisher fisher, name of a large North American marten, Martes pennanti. This carnivorous, largely arboreal mammal is found in hardwood forests of Canada, the extreme N United States, and mountain ranges of the W United States. , executive vice president and chief financial officer. E[acute accent]Operating Expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. E[acute accent]For the quarter ended March 31, 2005, general and administrative (G&A) expenses were $69.0 million. After excluding exit costs associated with the sale of mortgage servicing of $2.8 million, G&A expenses totaled $66.2 million. Comparatively, these expenses increased 2.1% versus the December 31, 2004 quarter. However, as compared to the same quarter a year ago, G&A expenses declined 3.6%. E[acute accent]"We continue to watch expenses and expense growth closely. Expenses in 2005 will generally only grow when they will be favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. offset with top line revenue growth. We will be adding to our sales force in certain key areas and key markets to augment aug·ment v. aug·ment·ed, aug·ment·ing, aug·ments v.tr. 1. To make (something already developed or well under way) greater, as in size, extent, or quantity: our already strong momentum," reported Mr. Fisher. E[acute accent]Balance Sheet and Capital Ratios E[acute accent]The Company continues to make notable progress in its evolution to a balance sheet more reflective Refers to light hitting an opaque surface such as a printed page or mirror and bouncing back. See reflective media and reflective LCD. of a commercial bank. E[acute accent]Total assets as of March 31, 2005, were at $10.4 billion, compared to $11.5 billion as of December 31, 2004. This decline was precipitated by the realignment re·a·lign tr.v. re·a·ligned, re·a·lign·ing, re·a·ligns 1. To put back into proper order or alignment. 2. To make new groupings of or working arrangements between. of the balance sheet to sustain an acceptable interest rate risk profile as a result of the sale of mortgage servicing. Absent that, total gross loans and total deposits grew during the quarter. Specifically, commercial, construction and consumer loans and core deposits grew at 14% and 20% annualized rates, respectively. Commercial, construction and consumer loans now represent 68% of the total gross loans versus 66% at December 31, 2004 and 59% at March 31, 2004. As well, core deposits, representing all deposits other than custodial escrows and certificates of deposit, comprise To embrace, cover, or include; to confine within; to consist of. In the law governing patents—grants of an exclusive right or privilege to make, use, or sell an invention or product for a term of years—the term comprise 64% of total non-escrow deposits versus 62% at December 31, 2004 and 59% at March 31, 2004. E[acute accent]Importantly, FHLB advances declined substantially to comprise only 27% of the Company's funding mix versus 35% at December 31, 2004 and 39% at March 31, 2004. E[acute accent]During the first quarter 2005, the Company repurchased 609,700 shares of common stock under its stock buyback Stock buyback A corporation's purchase of its own outstanding stock, usually in order to raise the company's earnings per share. stock buyback See buyback. program. As of March 31, 2005, the Company had 857,100 shares remaining in the repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. authorization The right or permission to use a system resource; the process of granting access. See access control. set to expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. June June: see month. 30, 2005. At quarter end, the Company had 39,019,557 shares outstanding. E[acute accent]As of March 31, 2005, stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. was $765.1 million, compared with $789.3 million at December 31, 2004. The capital ratios for the Company's banking subsidiary continued to exceed regulatory requirement Regulatory requirements are part of the process of drug discovery and drug development. Regulatory requirements describe what is necessary for a new drug to be approved for marketing in any particular country. for classification as being "well-capitalized," the highest regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. standard. E[acute accent]"Although we did recognize a loss during the quarter resulting from these strategic actions, our tangible Possessing a physical form that can be touched or felt. Tangible refers to that which can be seen, weighed, measured, or apprehended by the senses. A tangible object is something that is real and substantial. An automobile is an example of tangible Personal Property. , core and risk-based capital percentages all improved. The Company capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. remains very strong," concluded Mr. Fisher. E[acute accent]Commercial Federal Corporation (NYSE:CFB) is the parent company of Commercial Federal Bank, a $10.4 billion federal savings bank Noun 1. federal savings bank - a federally chartered savings bank FSB savings bank - a thrift institution in the northeastern United States; since deregulation in the 1980s they offer services competitive with many commercial banks with branches located in Nebraska Nebraska (nəbrăs`kə), Great Plains state of the central United States. It is bordered by Iowa and Missouri, across the Missouri R. (E), Kansas (S), Colorado (SW), Wyoming (NW), and South Dakota (N). , Iowa, Colorado Colorado, state, United States Colorado (kŏlərăd`ə, –răd`ō, –rä`dō), state, W central United States, one of the Rocky Mt. states. , Kansas, Oklahoma Kansas is a town in Delaware County, Oklahoma, United States. The population was 685 at the 2000 census. Geography Kansas is located at (36.202423, -94.795122)GR1. , Missouri Missouri, state, United States Missouri (mĭz  r`ē, –ə), one of the midwestern states of the United States. and Arizona Arizona (âr'əzō`nə), state in the southwestern United States. It is bordered by Utah (N), New Mexico (E), Mexico (S), and, across the Colorado R., Nevada and California (W). . Commercial Federal operations include
consumer and commercial banking services, including retail banking,
commercial and industrial lending, small business banking, construction
lending, cash management, and insurance and investment services. E[acute
accent]Commercial Federal's website, http://www.comfedbank.com,
will host a live webcast of the investor conference call to discuss
first quarter results on Tuesday Tuesday: see week. , April 26, 2005 at 10:00 a.m. Central
Time. The site also includes access to company news releases, annual
reports, quarterly financial statements and SEC filings. E[acute
accent]Certain statements contained in this release are forward-looking for·ward-look·ingadj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. in nature. These statements are subject to risks and uncertainties that could cause Commercial Federal's actual results or financial condition to differ materially from those expressed in or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by such statements. Factors of particular importance to Commercial Federal include, but are not limited to, changes in general economic conditions, changes in interest rates, changes in regulations or accounting methods, and price levels and conditions in the public securities markets generally. As a matter of course, Commercial Federal does not take actions to update any future-looking statements.
COMMERCIAL FEDERAL CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(Dollars in Thousands Except Par Value)
----------------------------------------------------------------------
March 31, December 31, March 31,
ASSETS 2005 2004 2004
----------------------------------------------------------------------
Cash (including short-term
investments of $2,592, $35,334
and $18,552) $163,793 $189,179 $179,028
Investment securities available
for sale, at fair value 519,964 1,071,223 1,063,558
Mortgage-backed securities
available for sale, at fair
value 702,984 996,844 1,267,483
Loans held for sale, net 211,154 276,772 449,830
Loans receivable, net of
allowances of $90,000, $89,841
and $97,765 7,733,977 7,698,970 7,810,613
Federal Home Loan Bank stock 173,614 204,409 245,447
Foreclosed real estate 11,207 17,835 44,800
Premises and equipment, net 174,720 174,394 150,504
Bank owned life insurance 254,477 251,581 242,142
Other assets 268,701 395,099 625,954
Core value of deposits, net of
accumulated amortization of
$69,596, $68,619 and $65,434 11,453 12,430 15,615
Goodwill 159,229 162,717 162,717
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Total Assets $10,385,273 $11,451,453 $12,257,691
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LIABILITIES AND STOCKHOLDERS'
EQUITY
----------------------------------------------------------------------
Liabilities:
Deposits $6,545,720 $6,422,783 $6,479,634
Advances from Federal Home
Loan Bank 2,575,466 3,685,630 4,290,100
Other borrowings 327,587 310,958 290,968
Other liabilities 171,445 242,752 439,980
----------------------------------------------------------------------
Total Liabilities 9,620,218 10,662,123 11,500,682
----------------------------------------------------------------------
Commitments and Contingencies - - -
----------------------------------------------------------------------
Stockholders' Equity:
Preferred stock, $.01 par
value; 10,000,000 shares
authorized; none issued - - -
Common stock, $.01 par value;
120,000,000 shares
authorized; 39,019,557,
39,254,139 and 40,870,272
shares issued and
outstanding 390 393 409
Retained earnings 759,891 826,169 829,182
Accumulated other
comprehensive income (loss),
net 4,774 (37,232) (72,582)
----------------------------------------------------------------------
Total Stockholders' Equity 765,055 789,330 757,009
----------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity $10,385,273 $11,451,453 $12,257,691
----------------------------------------------------------------------
COMMERCIAL FEDERAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
----------------------------------------------------------------------
Three Months Ended
March 31, December 31, March 31,
--------------------------------------
2005 2004 2004
----------------------------------------------------------------------
Interest Income:
Investment securities $14,486 $14,667 $14,299
Mortgage-backed securities 9,996 10,295 12,362
Loans receivable 114,539 116,769 120,111
----------------------------------------------------------------------
Total interest income 139,021 141,731 146,772
Interest Expense:
Deposits 31,931 29,537 29,783
Advances from Federal Home
Loan Bank 40,271 41,413 44,241
Other borrowings 10,562 4,982 1,777
----------------------------------------------------------------------
Total interest expense 82,764 75,932 75,801
Net Interest Income 56,257 65,799 70,971
Provision for Loan Losses (8,320) (3,174) (4,853)
----------------------------------------------------------------------
Net Interest Income After
Provision for Loan Losses 47,937 62,625 66,118
Other Income (Loss):
Retail fees and charges 16,102 17,178 14,497
Loan servicing fees 9,998 10,841 11,208
Amortization of mortgage
servicing rights (8,829) (10,545) (12,385)
Mortgage servicing rights
valuation adjustment, net 8,302 5,984 (18,893)
Gain (loss) on sales of
investment securities (5,676) (5,000) 16,976
Loss on sales of mortgage-
backed securities (12,683) - -
Changes in fair values of
derivatives, net (1,147) (1,864) 1,406
Loss on termination of
interest rate swap
agreements (42,457) - -
Loss on early extinguishment
of debt (40,731) - -
Gain on sale of mortgage
servicing rights and
wholesale mortgage
origination network 5,412 - -
Gain on sales of loans 2,405 932 198
Bank owned life insurance 2,896 3,524 8,031
Other operating income 6,508 6,921 6,619
----------------------------------------------------------------------
Total other income (loss) (59,900) 27,971 27,657
Other Expense:
General and administrative
expenses -
Compensation and benefits 33,130 32,400 32,886
Occupancy and equipment 9,566 10,094 10,164
Data processing 5,075 4,764 4,621
Advertising 2,688 2,714 3,555
Communication 2,954 3,486 3,146
Item processing 2,738 3,162 3,030
Outside services 3,414 2,783 3,872
Loan expenses 1,798 1,621 1,505
Foreclosed real estate, net 1,434 1,135 1,925
Other operating expenses 3,379 2,677 3,955
Exit costs 2,792 - -
----------------------------------------------------------------------
Total general and
administrative expenses 68,968 64,836 68,659
Amortization of core value
of deposits 977 983 1,217
Impairment of goodwill 3,488 - -
----------------------------------------------------------------------
Total other expense 73,433 65,819 69,876
----------------------------------------------------------------------
Income (Loss) Before Income
Taxes (85,396) 24,777 23,899
Income Tax Provision (Benefit) (32,184) 5,267 5,981
----------------------------------------------------------------------
Net Income (Loss) $(53,212) $19,510 $17,918
----------------------------------------------------------------------
Net Income Per Basic Share $(1.36) $.50 $.44
Net Income Per Diluted Share (1) $(1.36) $.49 $.43
----------------------------------------------------------------------
Dividends Declared Per Common
Share $.135 $.135 $.125
----------------------------------------------------------------------
Weighted Average Shares
Outstanding Used in Basic EPS 39,009,537 39,340,189 40,974,071
Weighted Average Shares
Outstanding Used in Diluted
EPS (1) 39,009,537 40,143,182 41,756,072
----------------------------------------------------------------------
(1) The conversion of stock options for the three months ended March
31, 2005 is not assumed since the Corporation incurred a loss from
operations. As a result, the diluted loss per share for the three
months ended March 31, 2005 is computed the same as the basic loss
per share.
COMMERCIAL FEDERAL CORPORATION
DEPOSITS AND LOANS
(In Thousands)
----------------------------------------------------------------------
March 31, December 31, March 31,
2005 2004 2004
----------------------------------------------------------------------
Deposits by State:
Colorado $2,123,105 $2,101,674 $2,053,666
Nebraska 1,623,505 1,553,549 1,584,158
Iowa 1,085,039 1,091,210 1,099,947
Kansas 612,334 607,034 631,692
Oklahoma 537,901 526,783 557,084
Missouri 286,589 291,775 318,421
Arizona 277,247 250,758 234,666
------------ ------------ ------------
Total deposits $6,545,720 $6,422,783 $6,479,634
============ ============ ============
Deposits by Type:
Checking accounts -
Interest-bearing $617,954 $615,868 $586,461
Noninterest-bearing 724,188 675,967 636,014
------------ ------------ ------------
Total checking excluding
escrow accounts 1,342,142 1,291,835 1,222,475
Money market accounts 812,561 1,080,486 1,184,435
Savings accounts 1,855,227 1,442,706 1,214,358
------------ ------------ ------------
Total core deposits 4,009,930 3,815,027 3,621,268
Custodial escrow accounts 260,576 268,392 348,814
Certificates of deposit 2,275,214 2,339,364 2,509,552
------------ ------------ ------------
Total deposits $6,545,720 $6,422,783 $6,479,634
============ ============ ============
----------------------------------------------------------------------
Loans Receivable, before
allowance for losses:
Commercial real estate $2,056,774 $1,996,729 $1,971,927
Commercial operating and
other (1) 644,348 650,784 521,814
Construction, net of loans-
in-process 759,777 670,302 525,950
Consumer home equity 1,020,662 1,001,333 881,135
Consumer other 835,583 816,131 762,989
------------ ------------ ------------
Total commercial,
construction and consumer
loans 5,317,144 5,135,279 4,663,815
Residential real estate 2,506,833 2,653,532 3,244,563
------------ ------------ ------------
Total loans receivable,
before allowance for
losses $7,823,977 $7,788,811 $7,908,378
============ ============ ============
----------------------------------------------------------------------
(1) Includes small business, agricultural and Nebraska Investment
Finance Authority loans in addition to commercial operating loans.
COMMERCIAL FEDERAL CORPORATION
ALLOWANCE FOR LOAN LOSSES
(In Thousands)
----------------------------------------------------------------------
March 31, December 31, March 31,
2005 2004 2004
----------------------------------------------------------------------
THREE MONTHS ENDED:
-------------------
Beginning balance $89,841 $94,857 $108,154
Provision for loan losses
charged to operations 8,320 3,174 4,853
Charge-offs:
Residential real estate (262) (117) (91)
Commercial real estate (2,142) (107) (9,172)
Construction, net of loans-
in-process (567) (883) (33)
Commercial operating, small
business and agricultural (1,027) (744) (1,427)
Consumer (5,533) (4,835) (6,089)
------------ ------------ ------------
Charge-offs (9,531) (6,686) (16,812)
------------ ------------ ------------
Recoveries:
Residential real estate - 11 133
Commercial real estate 1 55 27
Construction, net of loans-
in-process - - -
Commercial operating, small
business and agricultural 76 19 84
Consumer 1,293 1,070 1,326
------------ ------------ ------------
Recoveries 1,370 1,155 1,570
------------ ------------ ------------
Transfer of allowance for
unfunded loan commitments and
letters of credit - (2,659) -
----------------------------------------------------------------------
Ending balance $90,000 $89,841 $97,765
----------------------------------------------------------------------
Summary of charge-offs, net of
recoveries:
------------------------------
Three months ended $(8,161) $(5,531) $(15,242)
============ ============ ============
----------------------------------------------------------------------
ALLOCATION OF ALLOWANCE FOR
LOAN LOSSES:
----------------------------------------------------------------------
Specific $8,783 $9,639 $4,126
Nonspecific 60,422 59,466 68,196
Unallocated 20,795 20,736 25,443
------------ ------------ ------------
Allowance for loan losses $90,000 $89,841 $97,765
============ ============ ============
----------------------------------------------------------------------
COMMERCIAL FEDERAL CORPORATION
ASSET QUALITY
(Dollars in Thousands)
----------------------------------------------------------------------
March 31, December 31, March 31,
2005 2004 2004
----------------------------------------------------------------------
Nonperforming Assets:
Nonperforming loans (1):
Residential real estate (1) $7,803 $7,296 $29,656
Residential construction 8,524 2,302 2,542
Commercial real estate 17,845 18,997 16,462
Commercial construction 731 1,209 1,077
Consumer 7,797 4,194 4,049
Commercial operating, small
business and agricultural 2,142 2,925 2,993
------------ ------------ ------------
Total nonperforming loans 44,842 36,923 56,779
------------ ------------ ------------
Foreclosed real estate:
Residential 7,162 14,117 13,700
Residential construction 516 647 638
Commercial 1,753 1,295 1,365
Commercial construction 1,776 1,776 29,097
------------ ------------ ------------
Total foreclosed real
estate 11,207 17,835 44,800
------------ ------------ ------------
Troubled debt restructurings
- commercial 5,846 5,846 4,700
------------ ------------ ------------
Total nonperforming assets $61,895 $60,604 $106,279
============ ============ ============
Total assets $10,385,273 $11,451,453 $12,257,691
============ ============ ============
Nonperforming assets to total
assets (1) .60% .53% .87%
============ ============ ============
Summary of Nonperforming
Assets:
Residential (1) $24,005 $24,362 $46,536
Nonresidential 37,890 36,242 59,743
------------ ------------ ------------
$61,895 $60,604 $106,279
============ ============ ============
----------------------------------------------------------------------
Nonperforming loans to loans
receivable (1)(2) .57% .47% .72%
Nonperforming assets to total
assets (1) .60% .53% .87%
Allowance for loan losses to:
Loans receivable (2) 1.15% 1.15% 1.24%
Total nonperforming loans (1) 200.70% 243.32% 172.19%
----------------------------------------------------------------------
Accruing loans 90 days or more
past due (1):
Residential real estate $16,246 $17,849 $-
============ ============ ============
----------------------------------------------------------------------
(1) Effective June 30, 2004, management of the Corporation changed its
estimate of determining when the collection of residential first
mortgage loans becomes doubtful and when the loans are therefore
placed on nonaccrual status.
(2) Ratios are calculated based on the net book value of loans
receivable before deducting allowance for loan losses.
COMMERCIAL FEDERAL CORPORATION
SUMMARY OF CONSOLIDATED FINANCIAL HIGHLIGHTS AND RATIOS
(Dollars in Thousands Except Per Share Data)
----------------------------------------------------------------------
March 31, December 31, March 31,
2005 2004 2004
----------------------------------------------------------------------
Cash, investment securities and
FHLB stock $857,371 $1,464,811 $1,488,033
Mortgage-backed securities 702,984 996,844 1,267,483
Loans held for sale, net 211,154 276,772 449,830
Loans receivable, net 7,733,977 7,698,970 7,810,613
Core value of deposits, net 11,453 12,430 15,615
Goodwill 159,229 162,717 162,717
Other assets 709,105 838,909 1,063,400
Total assets 10,385,273 11,451,453 12,257,691
----------------------------------------------------------------------
Deposits 6,545,720 6,422,783 6,479,634
Advances from Federal Home Loan
Bank 2,575,466 3,685,630 4,290,100
Other borrowings 327,587 310,958 290,968
Other liabilities 171,445 242,752 439,980
Stockholders' equity 765,055 789,330 757,009
Total liabilities and
stockholders' equity 10,385,273 11,451,453 12,257,691
----------------------------------------------------------------------
Book value per common share $19.61 $20.11 $18.52
Stock price $27.65 $29.71 $27.60
Common shares outstanding 39,019,557 39,254,139 40,870,272
Weighted average shares
outstanding per basic EPS 39,009,537 39,340,189 40,974,071
Weighted average shares
outstanding per diluted EPS 39,009,537 40,143,182 41,756,072
----------------------------------------------------------------------
Nonperforming assets $61,895 $60,604 $106,279
Nonperforming assets to total
assets .60% .53% .87%
Quarterly weighted average
interest rates on a taxable-
equivalent basis:
Yield on interest-earning
assets 5.54% 5.53% 5.45%
Rate on deposits and
interest-bearing liabilities 3.21% 2.86% 2.70%
Net interest rate spread 2.33%(1) 2.67% 2.75%
Net interest margin 2.28%(1) 2.63% 2.67%
----------------------------------------------------------------------
Three months ended:
-------------------
Return on average assets (1.87)% .68% .59%
Return on average equity (27.40)% 10.14% 9.48%
Average equity to average
assets 6.83% 6.74% 6.22%
G & A expenses to average
assets 2.43% 2.27% 2.26%
Operating efficiency ratio N/M 69.14% 69.61%
----------------------------------------------------------------------
(1) Reflects the effects of prepayment penalties of $4.6 million on
the prepayment of reverse repurchase agreements. Excluding the
effects of the prepayment penalties, the net interest rate spread and
net interest margin would have been 2.51% and 2.46%, respectively.
N/M - Ratio not meaningful since the total of net interest income and
total other income is a loss.
COMMERCIAL FEDERAL CORPORATION
AVERAGE BALANCES AND REGULATORY CAPITAL
(Dollars in Thousands)
----------------------------------------------------------------------
March 31, December 31, September 30,
2005 2004 2004
----------------------------------------------------------------------
Three Months Ended:
-------------------
Average Balances:
Total assets $11,375,436 $11,416,319 $11,559,998
Total loans, net 7,943,735 7,971,943 8,062,478
Total loans, before
allowances for loan
losses 8,033,507 8,066,058 8,159,234
Total mortgage-backed
securities 946,715 1,021,536 1,086,720
Total deposits 6,440,077 6,407,960 6,254,687
Total stockholders' equity 776,767 769,737 764,614
Total interest-earning
assets 10,183,505 10,281,148 10,406,515
Total deposits and
interest-bearing
liabilities 10,359,946 10,460,482 10,609,351
----------------------------------------------------------------------
June 30, March 31,
2004 2004
----------------------------------------------------------------------
Three Months Ended:
-------------------
Average Balances:
Total assets $11,878,729 $12,158,982
Total loans, net 8,256,840 8,292,320
Total loans, before
allowances for loan
losses 8,354,536 8,400,194
Total mortgage-backed
securities 1,181,297 1,278,179
Total deposits 6,409,826 6,571,111
Total stockholders' equity 736,133 755,722
Total interest-earning
assets 10,726,414 10,878,284
Total deposits and
interest-bearing
liabilities 10,936,846 11,189,709
----------------------------------------------------------------------
December 31,
--------------------------------------
2004 2003 2002
----------------------------------------------------------------------
Year Ended:
-----------
Average Balances:
Total assets $11,752,057 $12,805,465 $13,175,562
Total loans, net 8,145,192 8,704,321 8,681,401
Total loans, before
allowances for loan losses 8,244,282 8,812,133 8,786,551
Total mortgage-backed
securities 1,141,453 1,362,145 1,799,174
Total deposits 6,410,461 6,629,299 6,258,302
Total stockholders' equity 756,610 741,337 758,659
Total interest-earning assets 10,571,837 11,557,322 11,974,586
Total deposits and interest-
bearing liabilities 10,797,654 11,697,711 12,044,641
----------------------------------------------------------------------
March 31, Dec. 31, Sept. 30, June 30, March 31,
2005 2004 2004 2004 2004
----------------------------------------------------------------------
Regulatory
Capital:
----------
Tangible $675,848 $695,213 $713,324 $727,684 $721,410
Core 675,848 695,213 713,324 727,684 721,535
Total risk-
based 794,963 812,259 833,679 855,225 852,638
Tier 1 risk-
based 671,401 690,779 709,740 725,279 721,535
Tangible % 6.63% 6.19% 6.37% 6.31% 6.00%
Core % 6.63% 6.19% 6.37% 6.31% 6.00%
Total risk-
based % 10.77% 10.61% 11.06% 11.25% 11.02%
Tier 1 risk-
based % 9.09% 9.03% 9.42% 9.54% 9.31%
----------------------------------------------------------------------
COMMERCIAL FEDERAL CORPORATION
MORTGAGE SERVICING RIGHTS
(Dollars in Thousands)
----------------------------------------------------------------------
Three Months Ended
March 31, December 31, March 31,
--------------------------------------
2005 2004 2004
----------------------------------------------------------------------
Mortgage Servicing Rights (1):
Beginning balance before
valuation allowance $162,423 $171,616 $185,233
Mortgage servicing rights
retained through loan sales 4,512 5,204 6,002
Sale of mortgage servicing
rights (137,449) - -
Amortization expense (8,829) (10,545) (12,385)
Permanent impairment - (3,852) -
------------ ------------ ------------
Ending balance before
valuation allowance 20,657 162,423 178,850
------------ ------------ ------------
Valuation allowance,
beginning balance 41,174 51,010 49,339
Amounts charged (credited) to
operations (8,302) (5,984) 18,893
Sale of mortgage servicing
rights (29,716) - -
Permanent impairment - (3,852) -
------------ ------------ ------------
Valuation allowance, ending
balance 3,156 41,174 68,232
------------ ------------ ------------
Mortgage servicing rights,
net of valuation allowance $17,501 $121,249 $110,618
============ ============ ============
Fair value at the periods
ended $17,834 $122,770 $112,232
============ ============ ============
Mortgage servicing rights as a
percentage of servicing
portfolio (2) 1.56% 1.14% 0.99%
============ ============ ============
Mortgage servicing rights as a
multiple of servicing fees (2) 3.89x 3.35x 2.91x
============ ============ ============
----------------------------------------------------------------------
Loans Serviced for Other
Institutions (1):
Beginning balance $10,640,028 $10,902,957 $11,439,187
Additions to portfolio 305,760 366,940 507,839
Loan payments (529,006) (612,123) (775,537)
Sale of loans serviced (9,289,733) - -
Other items, net (6,544) (17,746) (4,494)
------------ ------------ ------------
Ending balance $1,120,505 $10,640,028 $11,166,995
============ ============ ============
Weighted average servicing
fee 0.33% 0.34% 0.34%
============ ============ ============
Weighted average coupon note
rate 5.86% 5.88% 6.04%
============ ============ ============
Serviced loans sold with
servicing retained until
transfer (1) $9,289,733 $- $-
============ ============ ============
----------------------------------------------------------------------
(1) The Corporation sold $9.3 billion of its loans serviced for other
institutions on March 31, 2005. The Corporation will service these
mortgage loans until the servicing is transferred (approximately 90
to 120 days from March 31, 2005). The remaining balance of loans
serviced for other institutions is expected to be sold before June
30, 2005.
(2) Ratios are calculated based on the net book value of mortgage
servicing after deducting the valuation allowance.
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