OMAHA, Neb. — Commercial Federal Corp. signed a definitive agreement to sell its $10 billion national third-party mortgage servicing portfolio and correspondent mortgage origination network to Wells Fargo & Co.'s Wells Fargo Bank N.A.
In a press release Thursday, Commercial Federal said the decision to exit this business will help it focus on its core banking franchise. "The size of our mortgage servicing for others portfolio created too much variability in our earnings and that detracted from the performance of the rest of the bank," said President and Chief Operating Officer Fred Kulikowski in a statement.
Commercial Federal, which owns Commercial Federal Bank, will continue to offer mortgage loans and related services to consumers.
The company estimates a first-quarter charge of about $65 million. This charge is associated with prepayment of Federal Home Loan Bank borrowings, selling investment securities, eliminating interest rate hedges, recording certain exit costs tied to the business, and is inclusive of the first quarter valuation adjustment for mortgage servicing rights.
The company anticipates about 135 positions will be cut because of the sale.
Commercial Federal said these actions will result in a loss for the first quarter.
Wall Street was looking for a first-quarter profit of 48 cents a share. In the year-ago first quarter, the company earned 43 cents a share.
"Focusing the company on our core retail and commercial banking franchise will yield the strongest and most stable earnings growth for us going forward," Chairman and Chief Executive William A. Fitzgerald said.
In January, the company said continued high industry-wide mortgage prepayment rates in 2004 resulted in an overall loss in its wholesale and servicing mortgage businesses.
New York Stock Exchange-listed shares of Commercial Federal closed Wednesday at $27.58, up 53 cents, or 2%.
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