CFB Commercial Fed Cp

Commercial Federal Corporation (NYSE:CFB), today announced net income of $23.0 million, or $0.59 per diluted share, for the quarter ended September 30, 2005. This compares to net income of $20.2 million, or $0.50 per diluted share, for the same quarter one year earlier. "I am pleased to report that we have not lost momentum in the core underlying fundamentals driving Commercial Federal's performance. As we continue to accelerate the activities associated with merging with Bank of the West, we are also posting some very strong results," reported William A. Fitzgerald, chairman of the board and chief executive officer. Results for the Quarter Net Interest Income Net interest income totaled $67.5 million for the third quarter, compared with $64.1 million for the quarter ended September 30, 2004. Net interest margin improved year-over-year by 43 basis points, to 2.97%. Noninterest Income Noninterest income increased 25% from the same quarter a year earlier to total $37.0 million for the quarter ended September 30, 2005. Retail fees posted another strong gain by improving 20% over last year's third quarter. Also positively impacting this category was the net current period receipt of $4.5 million from the settlement of the regulatory goodwill lawsuit, which was adjudicated in Commercial Federal's favor. Operating Expenses For the quarter ended September 30, 2005, general and administrative expenses increased marginally by $2.0 million to $65.0 million compared to $63.0 million for the same quarter a year earlier. The year-over-year increase was driven mostly by a rise in overall compensation and benefits expenses. However, compensation and benefit costs declined by $1.6 million from the prior quarter ended June 30, 2005, due to the full quarter impact of fewer employees following the Company's exit from the wholesale mortgage and third party mortgage servicing businesses. Credit Risk Management At the end of the third quarter, total nonperforming assets fell to $63.7 million from $67.5 million in the previous quarter. Overall credit quality for the Company remains strong with only 0.63% of total assets being considered nonperforming. Net loan charge-offs for the third quarter were $7.9 million, compared to $4.8 million in the previous quarter. Construction lending charge-offs accounted for the bulk of the quarterly difference, primarily the result of a $2.6 million write-down of a loan tied to an apartment complex in the greater Denver area. The allowance for loan losses totaled $89.3 million at September 30, 2005, or 1.12% of loans outstanding versus $89.3 million, or 1.14%, at June 30, 2005. Balance Sheet and Capital Ratios Total assets as of September 30, 2005 were $10.2 billion, compared with $10.3 billion and $11.4 billion as of June 30, 2005 and September 30, 2004, respectively. For the third quarter, core deposits, including checking, money market and savings accounts (excluding custodial escrows) remained relatively stable at around $3.9 billion. Total gross loans receivable increased approximately $100 million to $7.9 billion at September 30, 2005. As of September 30, 2005, stockholders' equity was $772.5 million, compared with $755.4 million at June 30, 2005 and $767.9 million at September 30, 2004. The capital ratios of the Company's banking subsidiary continued to exceed regulatory requirements for classification as "well-capitalized," the highest regulatory standard. Commercial Federal Corporation (NYSE:CFB) is the parent company of Commercial Federal Bank, a $10.2 billion federal savings bank with branches located in Nebraska, Iowa, Colorado, Kansas, Oklahoma, Missouri and Arizona. Commercial Federal operations include consumer and commercial banking services, including retail banking, commercial and industrial lending, small business banking, construction lending, cash management, mortgage origination and servicing, and insurance and investment services. Commercial Federal's Web site, http://www.comfedbank.com, includes access to company news releases, annual reports, quarterly financial statements and SEC filings. Certain statements contained in this release are forward-looking 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 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. -0- *T COMMERCIAL FEDERAL CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (Dollars in Thousands Except Par Value) ---------------------------------------------------------------------- Sept. 30, June 30, Sept. 30, ASSETS 2005 2005 2004 ---------------------------------------------------------------------- Cash (including short-term investments of $3,158, $30,874 and $2,060) $172,906 $212,696 $165,652 Investment securities available for sale, at fair value 510,420 522,403 1,063,033 Mortgage-backed securities available for sale, at fair value 610,705 608,906 1,068,713 Loans held for sale, net 49,744 198,570 287,757 Loans receivable, net of allowances of $89,266, $89,268 and $94,857 7,850,988 7,758,037 7,651,557 Federal Home Loan Bank stock 169,166 157,700 202,284 Foreclosed real estate 13,710 11,316 17,047 Premises and equipment, net 183,560 176,083 163,987 Bank owned life insurance 253,687 250,875 248,057 Other assets 180,890 250,317 372,514 Core value of deposits, net of accumulated amortization of $71,530, $70,566 and $67,636 9,519 10,483 13,413 Goodwill 159,229 159,229 162,717 ---------------------------------------------------------------------- Total Assets $10,164,524 $10,316,615 $11,416,731 ---------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY ---------------------------------------------------------------------- Liabilities: Deposits $6,066,243 $6,354,932 $6,249,222 Advances from Federal Home Loan Bank 2,810,225 2,798,108 3,767,837 Other borrowings 428,637 306,848 433,599 Other liabilities 86,935 101,334 198,215 ---------------------------------------------------------------------- Total Liabilities 9,392,040 9,561,222 10,648,873 ---------------------------------------------------------------------- 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; 38,287,922, 38,213,347 and 39,352,564 shares issued and outstanding 383 382 394 Retained earnings 766,453 746,748 816,688 Accumulated other comprehensive income (loss), net 5,648 8,263 (49,224) ---------------------------------------------------------------------- Total Stockholders' Equity 772,484 755,393 767,858 ---------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $10,164,524 $10,316,615 $11,416,731 ---------------------------------------------------------------------- COMMERCIAL FEDERAL CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (Dollars in Thousands Except Per Share Data) ---------------------------------------------------------------------- Three Months Ended Sept. 30, June 30, Sept. 30, --------------------------------- 2005 2005 2004 ---------------------------------------------------------------------- Interest Income: Investment securities $8,440 $8,199 $14,628 Mortgage-backed securities 7,029 7,711 10,930 Loans receivable 126,361 120,585 116,447 ---------------------------------------------------------------------- Total interest income 141,830 136,495 142,005 Interest Expense: Deposits 33,807 33,359 28,765 Advances from Federal Home Loan Bank 33,717 30,035 45,191 Other borrowings 6,799 6,038 3,960 ---------------------------------------------------------------------- Total interest expense 74,323 69,432 77,916 Net Interest Income 67,507 67,063 64,089 Provision for Loan Losses (7,878) (4,079) (2,869) ---------------------------------------------------------------------- Net Interest Income After Provision for Loan Losses 59,629 62,984 61,220 Other Income (Loss): Retail fees and charges 21,151 18,853 17,625 Loan servicing fees 795 2,457 10,754 Amortization of mortgage servicing rights (2) (58) (10,616) Mortgage servicing rights valuation adjustment, net (2) (702) (21,644) Gain on sales of investment securities - 21 12,588 Gain on sales of mortgage-backed securities - 1,717 - Changes in fair values of derivatives, net (766) (139) 8,665 Gain (loss) on sale of mortgage servicing rights and wholesale mortgage origination network 76 (2,106) - Gain on sales of loans 2,637 885 1,393 Bank owned life insurance 2,812 2,976 2,900 Other operating income 10,252 5,625 7,926 ---------------------------------------------------------------------- Total other income 36,953 29,529 29,591 Other Expense: General and administrative expenses - Compensation and benefits 32,615 34,226 30,582 Occupancy and equipment 9,758 9,673 9,825 Data processing 5,478 5,103 4,698 Advertising 3,690 1,802 2,963 Communication 3,107 3,104 3,263 Item processing 2,872 3,040 3,195 Outside services 2,526 2,474 4,087 Loan expenses 588 1,021 1,494 Foreclosed real estate, net 415 510 643 Other operating expenses 3,309 1,469 2,266 Merger costs 558 7,578 - Exit costs 75 864 - ---------------------------------------------------------------------- Total general and administrative expenses 64,991 70,864 63,016 Amortization of core value of deposits 964 970 984 ---------------------------------------------------------------------- Total other expense 65,955 71,834 64,000 ---------------------------------------------------------------------- Income Before Income Taxes 30,627 20,679 26,811 Income Tax Provision 7,590 6,712 6,578 ---------------------------------------------------------------------- Net Income $23,037 $13,967 $20,233 ---------------------------------------------------------------------- Net Income Per Basic Share $.61 $.37 $.51 Net Income Per Diluted Share $.59 $.36 $.50 ---------------------------------------------------------------------- Dividends Declared Per Common Share $.145 $.145 $.135 ---------------------------------------------------------------------- Weighted Average Shares Outstanding Used in Basic EPS 38,043,281 38,124,743 39,583,989 Weighted Average Shares Outstanding Used in Diluted EPS 39,279,356 38,760,806 40,250,103 ---------------------------------------------------------------------- COMMERCIAL FEDERAL CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (Dollars in Thousands Except Per Share Data) ---------------------------------------------------------------------- Nine Months Ended September 30, ---------------------- 2005 2004 ---------------------------------------------------------------------- Interest Income: Investment securities $31,125 $42,543 Mortgage-backed securities 24,736 34,943 Loans receivable 361,485 356,308 ---------------------------------------------------------------------- Total interest income 417,346 433,794 Interest Expense: Deposits 99,097 85,449 Advances from Federal Home Loan Bank 104,023 132,816 Other borrowings 23,399 9,047 ---------------------------------------------------------------------- Total interest expense 226,519 227,312 Net Interest Income 190,827 206,482 Provision for Loan Losses (20,277) (10,828) ---------------------------------------------------------------------- Net Interest Income After Provision for Loan Losses 170,550 195,654 Other Income (Loss): Retail fees and charges 56,106 49,003 Loan servicing fees 13,250 32,688 Amortization of mortgage servicing rights (8,889) (37,901) Mortgage servicing rights valuation adjustment, net 7,598 (1,671) Loss on sales of investment securities (5,655) (1,787) Loss on sales of mortgage-backed securities (10,966) - Changes in fair values of derivatives, net (2,052) 2,432 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 3,382 - Gain on sales of loans 5,927 4,107 Bank owned life insurance 8,684 13,946 Other operating income 22,385 21,690 ---------------------------------------------------------------------- Total other income 6,582 82,507 Other Expense: General and administrative expenses - Compensation and benefits 99,971 95,005 Occupancy and equipment 28,997 29,983 Data processing 15,656 13,962 Advertising 8,180 10,458 Communication 9,165 9,741 Item processing 8,650 9,381 Outside services 8,414 11,831 Loan expenses 3,407 5,444 Foreclosed real estate, net 2,359 1,351 Other operating expenses 8,157 11,724 Merger costs 8,136 - Exit costs 3,731 - ---------------------------------------------------------------------- Total general and administrative expenses 204,823 198,880 Amortization of core value of deposits 2,911 3,419 Impairment of goodwill 3,488 - ---------------------------------------------------------------------- Total other expense 211,222 202,299 ---------------------------------------------------------------------- Income (Loss) Before Income Taxes (34,090) 75,862 Income Tax Provision (Benefit) (17,882) 19,009 ---------------------------------------------------------------------- Net Income (Loss) $(16,208) $56,853 ---------------------------------------------------------------------- Net Income (Loss) Per Basic Share $(.42) $1.41 Net Income (Loss) Per Diluted Share (1) $(.42) $1.38 ---------------------------------------------------------------------- Dividends Declared Per Common Share $.425 $.395 ---------------------------------------------------------------------- Weighted Average Shares Outstanding Used in Basic EPS 38,392,520 40,361,719 Weighted Average Shares Outstanding Used in Diluted EPS (1) 38,392,520 41,068,710 ---------------------------------------------------------------------- (1) The conversion of stock options for the nine months ended September 30, 2005 is not assumed since the Corporation incurred a loss from operations. As a result, the diluted loss per share for the nine months ended September 30, 2005 is computed the same as the basic loss per share. COMMERCIAL FEDERAL CORPORATION DEPOSITS AND LOANS (In Thousands) ---------------------------------------------------------------------- Sept. 30, June 30, Sept. 30, 2005 2005 2004 ---------------------------------------------------------------------- Deposits by State: Colorado $2,153,071 $2,111,075 $2,043,870 Nebraska 1,245,465 1,554,526 1,510,313 Iowa 1,036,000 1,035,106 1,024,832 Kansas 610,319 605,929 607,942 Oklahoma 472,454 499,300 525,922 Missouri 275,219 279,998 297,633 Arizona 273,715 268,998 238,710 ----------- ----------- ----------- Total deposits $6,066,243 $6,354,932 $6,249,222 =========== =========== =========== Deposits by Type: Checking accounts - Interest-bearing $578,225 $565,449 $587,118 Noninterest-bearing 754,427 723,647 642,013 ----------- ----------- ----------- Total checking excluding escrow accounts 1,332,652 1,289,096 1,229,131 Money market accounts 705,802 604,032 1,195,326 Savings accounts 1,884,764 2,059,182 1,218,777 ----------- ----------- ----------- Total core deposits 3,923,218 3,952,310 3,643,234 Custodial escrow accounts 30,585 263,468 252,573 Certificates of deposit 2,112,440 2,139,154 2,353,415 ----------- ----------- ----------- Total deposits $6,066,243 $6,354,932 $6,249,222 =========== =========== =========== ---------------------------------------------------------------------- Loans Receivable, before allowance for losses: Commercial real estate $2,075,473 $2,096,033 $1,963,904 Commercial operating and other (1) 714,010 641,697 586,922 Construction, net of loans-in- process 838,526 797,297 624,491 Consumer home equity 1,116,489 1,057,477 967,556 Consumer other 952,844 881,063 789,762 ----------- ----------- ----------- Total commercial, construction and consumer loans 5,697,342 5,473,567 4,932,635 Residential real estate 2,242,912 2,373,738 2,813,779 ----------- ----------- ----------- Total loans receivable, before allowance for losses $7,940,254 $7,847,305 $7,746,414 =========== =========== =========== ---------------------------------------------------------------------- (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) ---------------------------------------------------------------------- Sept. 30, June 30, Sept. 30, 2005 2005 2004 ---------------------------------------------------------------------- THREE MONTHS ENDED: ------------------- Beginning balance $89,268 $90,000 $97,082 Provision for loan losses charged to operations 7,878 4,079 2,869 Charge-offs: Residential real estate (182) (107) (102) Commercial real estate (135) (111) (8) Construction (2,673) (302) (16) Commercial operating, small business and agricultural (529) (302) (1,192) Consumer (5,973) (6,307) (4,751) ---------- ---------- ---------- Charge-offs (9,492) (7,129) (6,069) ---------- ---------- ---------- Recoveries: Residential real estate - 1 39 Commercial real estate 41 548 1 Construction - 33 - Commercial operating, small business and agricultural 27 23 32 Consumer 1,544 1,713 903 ---------- ---------- ---------- Recoveries 1,612 2,318 975 ---------------------------------------------------------------------- Ending balance $89,266 $89,268 $94,857 ---------------------------------------------------------------------- NINE MONTHS ENDED: ------------------ Beginning balance $89,841 $108,154 Provision for loan losses charged to operations 20,277 10,828 Charge-offs: Residential real estate (551) (304) Commercial real estate (2,388) (10,082) Construction (3,542) (77) Commercial operating, small business and agricultural (1,858) (2,676) Consumer (17,813) (15,453) ---------- ---------- Charge-offs (26,152) (28,592) ---------- ---------- Recoveries: Residential real estate 1 172 Commercial real estate 590 29 Construction 33 2 Commercial operating, small business and agricultural 126 227 Consumer 4,550 4,037 ---------- ---------- Recoveries 5,300 4,467 ---------------------------------------------------------------------- Ending balance $89,266 $94,857 ---------------------------------------------------------------------- Summary of charge-offs, net of recoveries: ------------------------------------------ Three months ended $(7,880) $(4,811) $(5,094) ========== ========== ========== Nine months ended $(20,852) $(24,125) ========== ========== ---------------------------------------------------------------------- ALLOCATION OF ALLOWANCE FOR LOAN LOSSES: ---------------------------------------------------------------------- Specific $7,422 $8,889 $8,395 Nonspecific 68,791 63,939 71,120 Unallocated 13,053 16,440 15,342 ---------- ---------- ---------- Allowance for loan losses $89,266 $89,268 $94,857 ========== ========== ========== ---------------------------------------------------------------------- COMMERCIAL FEDERAL CORPORATION ASSET QUALITY (Dollars in Thousands) ---------------------------------------------------------------------- Sept. 30, June 30, Sept. 30, 2005 2005 2004 ---------------------------------------------------------------------- Nonperforming Assets: Nonperforming loans: Residential real estate $8,787 $8,963 $8,548 Residential construction 3,238 10,245 4,245 Commercial real estate 16,772 18,062 22,226 Commercial construction 1,155 1,155 968 Consumer 7,662 6,559 4,029 Commercial operating, small business and agricultural 6,271 5,327 3,634 ------------ ------------ ------------ Total nonperforming loans 43,885 50,311 43,650 ------------ ------------ ------------ Foreclosed real estate: Residential 5,157 6,908 13,435 Residential construction 5,594 1,384 1,205 Commercial 1,183 1,248 631 Commercial construction 1,776 1,776 1,776 ------------ ------------ ------------ Total foreclosed real estate 13,710 11,316 17,047 ------------ ------------ ------------ Troubled debt restructurings - commercial 6,130 5,846 4,676 ------------ ------------ ------------ Total nonperforming assets $63,725 $67,473 $65,373 ============ ============ ============ Total assets $10,164,524 $10,316,615 $11,416,731 ============ ============ ============ Nonperforming assets to total assets .63% .65% .57% ============ ============ ============ Summary of Nonperforming Assets: Residential $22,776 $27,500 $27,433 Nonresidential 40,949 39,973 37,940 ------------ ------------ ------------ $63,725 $67,473 $65,373 ============ ============ ============ ---------------------------------------------------------------------- Nonperforming loans to loans receivable (1) .55% .64% .56% Nonperforming assets to total assets .63% .65% .57% Allowance for loan losses to: Loans receivable (1) 1.12% 1.14% 1.22% Total nonperforming loans 203.41% 177.43% 217.31% ---------------------------------------------------------------------- Accruing loans 90 days or more past due: Residential real estate $17,261 $16,235 $18,518 ============ ============ ============ ---------------------------------------------------------------------- (1) 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) ---------------------------------------------------------------------- Sept. 30, June 30, Sept. 30, 2005 2005 2004 ---------------------------------------------------------------------- Cash, investment securities and FHLB stock $852,492 $892,799 $1,430,969 Mortgage-backed securities 610,705 608,906 1,068,713 Loans held for sale, net 49,744 198,570 287,757 Loans receivable, net 7,850,988 7,758,037 7,651,557 Core value of deposits, net 9,519 10,483 13,413 Goodwill 159,229 159,229 162,717 Other assets 631,847 688,591 801,605 Total assets 10,164,524 10,316,615 11,416,731 ---------------------------------------------------------------------- Deposits 6,066,243 6,354,932 6,249,222 Advances from Federal Home Loan Bank 2,810,225 2,798,108 3,767,837 Other borrowings 428,637 306,848 433,599 Other liabilities 86,935 101,334 198,215 Stockholders' equity 772,484 755,393 767,858 Total liabilities and stockholders' equity 10,164,524 10,316,615 11,416,731 ---------------------------------------------------------------------- Book value per common share $20.18 $19.77 $19.51 Stock price $34.14 $33.68 $26.98 Common shares outstanding 38,287,922 38,213,347 39,352,564 Weighted average shares outstanding per basic EPS 38,043,281 38,124,743 39,583,989 Weighted average shares outstanding per diluted EPS 39,279,356 38,760,806 40,250,103 ---------------------------------------------------------------------- Nonperforming assets $63,725 $67,473 $65,373 Nonperforming assets to total assets .63% .65% .57% Quarterly weighted average interest rates on a taxable-equivalent basis: Yield on interest-earning assets 6.12% 5.91% 5.48% Rate on deposits and interest- bearing liabilities 3.12% 2.92% 2.89% Net interest rate spread 3.00% 2.99% 2.59% Net interest margin 2.97% 2.95% 2.54% ---------------------------------------------------------------------- Three months ended: ------------------- Return on average assets .90% .54% .70% Return on average equity 12.20% 7.46% 10.58% Average equity to average assets 7.39% 7.26% 6.61% G & A expenses to average assets 2.54% 2.75% 2.18% Operating efficiency ratio 62.22% 73.36% 67.27% ---------------------------------------------------------------------- Nine months ended: ------------------ Return on average assets (.20)% n/a .64% Return on average equity (2.84)% n/a 10.08% Average equity to average assets 7.15% n/a 6.34% G & A expenses to average assets 2.57% n/a 2.23% Operating efficiency ratio 103.76% n/a 68.82% ---------------------------------------------------------------------- COMMERCIAL FEDERAL CORPORATION AVERAGE BALANCES AND REGULATORY CAPITAL (Dollars in Thousands) ---------------------------------------------------------------------- September 30, June 30, March 31, 2005 2005 2005 ---------------------------------------------------------------------- Three Months Ended: ------------------- Average Balances: Total assets $10,221,727 $10,316,781 $11,375,436 Total loans, net 8,004,456 7,978,386 7,943,735 Total loans, before allowances for loan losses 8,093,749 8,067,971 8,033,507 Total mortgage-backed securities 608,321 648,626 946,715 Total deposits 6,092,898 6,474,440 6,440,077 Total stockholders' equity 755,029 748,618 776,767 Total interest-earning assets 9,289,996 9,325,324 10,183,505 Total deposits and interest- bearing liabilities 9,373,328 9,458,768 10,359,946 ---------------------------------------------------------------------- December 31, September 30, 2004 2004 ---------------------------------------------------------------------- Three Months Ended: ------------------- Average Balances: Total assets $11,416,319 $11,559,998 Total loans, net 7,971,943 8,062,478 Total loans, before allowances for loan losses 8,066,058 8,159,234 Total mortgage-backed securities 1,021,536 1,086,720 Total deposits 6,407,960 6,254,687 Total stockholders' equity 769,737 764,614 Total interest-earning assets 10,281,148 10,406,515 Total deposits and interest-bearing liabilities 10,460,482 10,609,351 ---------------------------------------------------------------------- September 30, December 31, ------------------------------------- 2005 2004 2003 ---------------------------------------------------------------------- Year to Date: ------------- Average Balances: Total assets $10,633,731 $11,752,057 $12,805,465 Total loans, net 7,975,748 8,145,192 8,704,321 Total loans, before allowances for loan losses 8,065,297 8,244,282 8,812,133 Total mortgage-backed securities 733,314 1,141,453 1,362,145 Total deposits 6,334,534 6,410,461 6,629,299 Total stockholders' equity 760,034 756,610 741,337 Total interest-earning assets 9,596,335 10,571,837 11,557,322 Total deposits and interest- bearing liabilities 9,727,067 10,797,654 11,697,711 ---------------------------------------------------------------------- Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2005 2005 2005 2004 2004 ---------------------------------------------------------------------- Regulatory Capital: ------------------- Tangible $712,203 $689,957 $675,848 $695,213 $713,324 Core 712,203 689,957 675,848 695,213 713,324 Total risk-based 831,878 808,157 794,963 812,259 833,679 Tier 1 risk-based 707,756 685,510 671,401 690,779 709,740 Tangible % 7.13% 6.82% 6.63% 6.19% 6.37% Core % 7.13% 6.82% 6.63% 6.19% 6.37% Total risk-based % 10.54% 10.30% 10.49% 10.46% 10.78% Tier 1 risk-based % 8.97% 8.74% 8.86% 8.79% 9.18% ---------------------------------------------------------------------- COMMERCIAL FEDERAL CORPORATION MORTGAGE SERVICING RIGHTS (Dollars in Thousands) ---------------------------------------------------------------------- Three Months Ended Sept. 30, June 30, Sept. 30, -------------------------------------- 2005 2005 2004 ---------------------------------------------------------------------- Mortgage Servicing Rights (1): Beginning balance before valuation allowance $265 $20,657 $175,266 Mortgage servicing rights retained through loan sales - 1,796 6,966 Sale of mortgage servicing rights (263) (22,130) - Amortization expense (2) (58) (10,616) ------------ ------------ ------------ Ending balance before valuation allowance - 265 171,616 ------------ ------------ ------------ Valuation allowance, beginning balance 1 3,156 29,366 Amounts charged to operations 2 702 21,644 Sale of mortgage servicing rights (3) (3,857) - ------------ ------------ ------------ Valuation allowance, ending balance - 1 51,010 ------------ ------------ ------------ Mortgage servicing rights, net of valuation allowance $- $264 $120,606 ============ ============ ============ Fair value at the periods ended $- $352 $121,876 ============ ============ ============ ---------------------------------------------------------------------- Loans Serviced for Other Institutions (1): Beginning balance $57,570 $1,120,505 $11,049,759 Additions to portfolio 170,159 117,026 479,563 Sale of loans serviced and loan payments (227,729) (1,183,183) (624,266) Other items, net - 3,222 (2,099) ------------ ------------ ------------ Ending balance $- $57,570 $10,902,957 ============ ============ ============ Loans sub-serviced $189,054 $- $- ============ ============ ============ Serviced loans sold with servicing retained until transfer $- $9,874,805 $- ============ ============ ============ ---------------------------------------------------------------------- (1) The Corporation sold $18.9 million and $1.2 billion, respectively, of its loans serviced for other institutions during the quarters ended September 30, 2005 and June 30, 2005. The Corporation serviced these loans until the servicing was transferred in the third quarter of 2005. *T