SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: October 22, 1997
Washington Mutual, Inc.
(Exact Name of Registrant as specified in its charter)
Washington
(State or Other Jurisdiction
of Incorporation)
0-25188 91-1653725
(Commission File Number) (IRS Identification No.)
1201 Third Avenue, Seattle, Washington 98101
-----------------------------------------------------------------------------
Address of Principal Executive Office Postal Code
206-461-2000
Registrant's telephone number including area code
Item 7. Financial Statements and Exhibits
(c) 1. Press Release dated October 22, 1997
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WASHINGTON MUTUAL, INC.
Date: October 22, 1997 By: /s/ Fay L. Chapman
Fay L. Chapman
Executive Vice President
Media Contact: Bill Ehrlich
1-800-228-9268
(206) 461-2484
Investor Contact: JoAnn DeGrande
(206) 461-3186 October 21, 1997
FOR IMMEDIATE RELEASE
Washington Mutual Announces Third Quarter Results
As Anticipated, Nonrecurring Transaction-Related Charges Lead to Reported Loss;
Business Fundamentals Remain Strong -- Board Increases Cash Dividend
SEATTLE -- Washington Mutual, Inc. (Nasdaq: WAMU) today reported an
after-tax loss of $127.0 million for third quarter 1997 as a result of
anticipated transaction-related charges of $341.2 million, after-tax, as part of
its merger with Great Western Financial Corporation. These charges included
pretax transaction-related expenses of $366.9 million and an additional one-time
charge of $100.0 million (pretax) resulting from the planned securitization of
approximately $1.2 billion of higher-risk residential mortgage loans originated
by Great Western.
The one-time charges reduced fully diluted earnings per share to a loss of
53 cents, compared with a loss of 15 cents one year ago. (Earnings per share for
third quarter 1996 were materially impacted by a special one-time Savings
Association Insurance Fund (SAIF) assessment of $200.0 million, after-tax.)
During the period, the company's business fundamentals remained strong as
Washington Mutual's banking operations produced record third-quarter loan
originations and solid household and checking account growth. As a result of the
company's continued strong operations and capital position, the board of
directors declared a cash dividend on the common stock of 28 cents per share, up
from the previous period's cash dividend of 27 cents per share.
The board also declared dividends of 57 cents per share on the Series C
preferred stock (Nasdaq: WAMUO), and 47.5 cents per share on the Series E
preferred stock (Nasdaq: WAMUM). Dividends on common stock are payable Nov. 14,
1997, and dividends on preferred stock are payable on Nov. 17, 1997, in each
case, to shareholders of record as of Oct. 31, 1997.
"The third quarter was a significant period for Washington Mutual in that
we made excellent progress in bringing our rapidly expanding organization
together and positioning ourselves for future success," said Kerry Killinger,
chairman, president and chief executive officer.
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<PAGE>
WAMU - 2
"As expected, we completed the integration of American Savings on time and
on budget, and we are now underway with the integration of Great Western. In
addition to the progress made in our transaction-related activities, our
operating fundamentals remained strong with record third-quarter loan
originations; solid growth in the loan portfolio; and market share expansion as
a result of our larger franchise and aggressive marketing strategy. In summary,
our company is well positioned for the future."
THIRD-QUARTER FINANCIAL RESULTS
A larger base of interest-earning assets, which included a 5 percent
increase in the loan portfolio during the quarter, produced net interest income
of $655.7 million, up 3 percent from $636.4 million a year earlier. The spread
during the quarter was 2.85 percent, compared with 2.95 one year ago, primarily
as a result of increasing the level of wholesale borrowings to accommodate loan
growth.
Depositor fee income during the period was $92.4 million, up 29 percent
from $71.7 million in last year's third quarter. Other operating income was up
83 percent to $41.2 million from $22.6 million a year ago, and included $7.5
million in interest received on tax refunds. Total other income, which was
negatively impacted by the previously mentioned securitization of higher-risk
residential mortgage loans, was $111.1 million, compared with $152.0 million in
the same period last year.
Loan Originations
Washington Mutual's extensive mortgage loan origination franchise, broad
product mix and the healthy regional economies throughout the company's primary
service territory, helped produce record third-quarter loan originations for the
period just ended. Total originations were $7.9 billion for the quarter, up from
$5.9 billion a year ago.
Single-family mortgage originations were $5.9 billion during the third
quarter, an increase of 38 percent over last year's $4.2 billion, as the company
continued to expand its residential mortgage market share throughout the West.
During the period, the company assumed the top position in California's
single-family residential mortgage lending market and its leadership position
continued in the states of Washington, Oregon and Utah.
In addition, the company originated substantially greater volume in
shorter-term, higher-yielding consumer loans during the quarter -- $591.8
million, up 28 percent from $461.9 million a year ago. Residential construction
lending for the period was $358.2 million for the period just ended, compared
with $361.1 million in the third quarter 1996.
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WAMU - 3
Operating Efficiency
Primarily as a result of the transaction-related charges, the company's
operating efficiency ratio (other expense as a percentage of net interest income
and other income) during the most recent quarter was 107.7 percent compared with
97.6 percent in third quarter 1996, which included that quarter's $200.0 million
SAIF assessment. Without transaction-related charges in the most recent quarter,
the efficiency ratio would have been 53.0 percent, an improvement from 58.0
percent in last year's third quarter, excluding the SAIF assessment charge.
Total other expense for the quarter, including the previously mentioned
transaction-related charges, was $826.0 million, compared with $769.4 million
for the same period one year ago, including the SAIF charges. Without these
one-time charges, total other expense would have been $459.1 million in the most
recent quarter, an increase from $456.9 million in the third quarter last year.
Credit Quality and Capital
Total nonperforming assets were $832.9 million at Sept. 30, 1997, up from
$771.8 million at June 30, 1997. Nonperforming assets as a percentage of total
assets were 0.87 percent at Sept. 30, 1997, compared with 0.83 percent at the
end of the second quarter of 1997.
Prior to its acquisition by Washington Mutual, Great Western regularly
disposed of single-family residential delinquent loans and REO properties
through bulk sales. In light of the improving real estate market in California
and Washington Mutual's solid balance sheet, the company reduced this activity
during the third quarter. While the new strategy caused a short-term increase in
reported nonperforming loans and slowed the disposition of REO properties, it is
anticipated that reducing bulk sale activity will help to improve returns on
delinquent loans and REO properties in the future.
Reserves at the end of the quarter were $671.9 million, after the quarterly
provision for loan losses of $52.1 million. Reserves as a percentage of
nonperforming loans were 106 percent, as compared with 112 percent at June 30.
Washington Mutual's consolidated assets at Sept. 30, 1997, were $95.6
billion, up from the previous quarter-end figure of $92.5 billion, primarily as
a result of the quarter's strong loan production. Total deposits at Sept. 30,
1997, were $51.3 billion, down slightly from $51.8 billion at the end of the
second quarter of 1997, reflecting the company's strategies of replacing
higher-cost time deposits with lower-cost money market and checking accounts and
funding loan growth, in part, through additional wholesale borrowings.
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<PAGE>
WAMU - 4
Stockholders' equity at Sept. 30, 1997, was $5.3 billion, or 5.58 percent
of assets, and the capital ratios of the company's banking subsidiaries
continued to exceed the FDIC's requirements for classification as
"well-capitalized" institutions.
INTEGRATION UPDATES:
American Savings Completed; Great Western Underway
As part of the completion of the integration of American Savings, the
company successfully converted all of American's deposit and loan accounts to
the Washington Mutual system in the third quarter. Killinger noted that
American's household base at the end of the third quarter of 1997 totaled nearly
630,000, an increase of more than 47,000 households -- or more than 7 percent --
since the acquisition was completed on Dec. 20, 1996. "To produce an increase in
American's household base just a little more than a year after the announcement
of our merger and following such a large account conversion, reflects the
strength of our consumer banking strategy as well as the ability of our
employees to successfully integrate large companies," Killinger said.
On July 1,
Washington Mutual completed its merger with Great Western Financial Corporation.
The company now ranks as the nation's largest savings institution holding
company, the 11th-largest banking company, and the leading residential mortgage
lender on the West Coast. Killinger provided several examples of the progress of
the Great Western integration, including:
The formation of the executive and senior management team for the combined
company, which includes representation from Washington Mutual, American Savings
and Great Western employees.
The completion of formal integration plans and the beginning of
implementation. The plans call for the conversion of all Great Western deposit
and loan accounts in the second quarter of 1998.
The introduction of Washington Mutual's consumer banking strategy and the
Oct. 1 launch of a marketing campaign targeting checking account growth at Great
Western.
Meetings with over 10,000 employees throughout the company to outline the
goals of the merger and the company's business strategy. The meetings provided
an important opportunity to communicate and reinforce the company's corporate
values and culture, Killinger noted.
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<PAGE>
WAMU - 5
"We are pleased with the progress of the Great Western integration to date,
and remain confident that Washington Mutual is well positioned to achieve the
goals of the merger as previously outlined to the financial markets," Killinger
said.
FRANCHISE GROWTH
The company's focus on gaining new households through aggressive marketing
of checking accounts continued to produce solid results in the third quarter.
Total households served in the Northwest and at American Savings grew by more
than 60,000 -- all non-acquisition-related additions -- to 1.6 million. In
addition, Washington Mutual's financial centers in the Northwest and its
American Savings operation added more than 45,000 net new checking accounts to
the company's base, representing a 5 percent increase from their previous
quarter-end base.
At Great Western's consumer banking operations in California and Florida
account losses slowed during the third quarter. It is anticipated that those
markets will show account growth in the fourth quarter, as the company's
marketing strategy begins to be implemented in the period. Killinger noted that
Great Western financial centers in California and Florida added more than 25,000
net new checking accounts to the company's base in just the first 16 business
days of the fourth quarter.
He added that Washington Mutual will continue to aggressively promote
checking accounts in all of its primary markets. The accounts are a source of
additional fee income and low-cost deposits, and help facilitate the cross-sale
of other fee-generating products and services, he said.
COMMERCIAL BANKING/NONBANKING ACTIVITIES
Western Bank, Washington Mutual Bank's commercial banking division, posted
solid gains in its loan portfolio. For the quarter, the portfolio grew $50
million to $1.2 billion, a 4 percent increase from the balance at June 30, 1997.
Aristar, the holding company for Washington Mutual's consumer finance
group, reported net income of $10.0 million, compared with $12.6 million one
year ago due largely to one-time adjustments that included an interest accrual
reversal of $4.6 million (pretax).
On Sept. 3, 1997, Washington Mutual and SAFECO Corporation (Nasdaq: SAFC)
announced the formation of a strategic alliance to distribute SAFECO annuities
through Washington Mutual's multi-state banking network. As part of the
alliance, SAFECO will acquire Washington Mutual's insurance subsidiary, WM Life
Insurance Company. The overall transaction, valued at $140.0 million,
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<PAGE>
WAMU - 6
is expected to result in an after-tax gain of between $12.0 million and $15.0
million in the fourth quarter of 1997. The transaction is expected to be
slightly accretive to ongoing earnings per share thereafter.
OTHER NEWS
As previously announced, the company will redeem all of its outstanding
cumulative preferred depositary shares, Series F (Nasdaq: WAMUZ), effective Nov.
1, 1997. Each depositary share represents a one-tenth interest in a share of
8.30% cumulative preferred stock. Depositary shares will be redeemed at a
redemption price equal to $25.00 per share, plus accrued and unpaid dividends
through Nov. 1, 1997.
Also during the third quarter, the company announced the appointment of Fay
L. Chapman to the company's executive committee. Chapman now serves as executive
vice president and general counsel. Chapman previously was a member of Foster
Pepper & Shefelman PLLC, of Seattle, and was Washington Mutual's outside counsel
for the past 15 years. During that time, she served as a key strategist in the
company's acquisitions.
OUTLOOK
"During the third quarter we took the steps necessary to prepare our
company for growth," Killinger said. "Going forward, the combination of our
expanding franchise, strong capital position and increasing market presence
place us in position to successfully execute our business strategy in all our
markets. As a result, we anticipate a solid fourth quarter performance."
With a history dating back to 1889, Washington Mutual is a financial
services company whose subsidiaries provide consumer and commercial banking
services, securities brokerage, mutual fund management, property/casualty and
life insurance sales, and underwriting for insurance annuities. At Sept. 30,
1997, Washington Mutual and its subsidiaries had consolidated assets of $95.6
billion. The company operates approximately 1,700 offices throughout the nation.
Editor's Note: Washington Mutual's press releases are available at no charge
through the company's News On Demand Plus System. For a menu of Washington
Mutual press releases or to retrieve a specific release, call 1-800-329-6236. On
the Internet, press releases may be accessed at
http://www.businesswire.com/cnn/wamu.htm
# # #
<PAGE>
Washington Mutual, Inc.
Consolidated Statements of Income
(dollars in thousands, except for per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended
September 30,
------------------------------
1997 1996
------------------------------
<S> <C> <C>
Interest Income
Loans $ 1,320,754 $ 1,160,270
Available-for-sale securities 230,337 323,422
Held-to-maturity securities 151,395 95,024
Other 26,067 20,464
- ---------------------------------------------------------------------
Total interest income 1,728,553 1,599,180
Interest Expense
Deposits 547,798 554,149
Borrowings 525,104 408,667
- ---------------------------------------------------------------------
Total interest expense 1,072,902 962,816
- ---------------------------------------------------------------------
Net interest income 655,651 636,364
Provision for loan losses 52,131 56,940
- ---------------------------------------------------------------------
Net interest income after
provision for loan losses 603,520 579,424
Other Income
Depositor fees 92,431 71,676
Securities and insurance
commissions 45,602 43,051
Loan servicing fees 22,066 23,265
Other operating income 41,240 22,564
Gain (loss) on sale of loans 11,003 423
Market valuation of planned
securitization (100,000) --
Gain (loss) on sale of assets 6,515 (202)
Write-down of mortgage-backed
securities (7,744) (8,766)
- ---------------------------------------------------------------------
Total other income 111,113 152,011
Other Expense
Salaries and employee benefits 204,328 201,352
Occupancy and equipment 80,871 78,986
Telecommunications and outsourced
information services 40,137 39,491
Regulatory assessments 8,822 28,706
Savings Association Insurance Fund
("SAIF") special assessment -- 312,552
Transaction-related charges 366,860 --
Other operating expense 103,395 100,949
Amortization of goodwill and
other intangible assets 16,387 16,381
Foreclosed asset expense, net 5,166 (8,985)
- ---------------------------------------------------------------------
Total other expense 825,966 769,432
- ---------------------------------------------------------------------
Income before income taxes (111,333) (37,997)
Income taxes 15,621 (15,437)
- ---------------------------------------------------------------------
Income before minority interest (126,954) (22,560)
Minority interest in earnings of
consolidated subsidiaries -- (3,527)
- ---------------------------------------------------------------------
Net Income $ (126,954) $ (26,087)
=====================================================================
Net Income Attributable
to Common Stock $ (132,883) $ (35,067)
=====================================================================
Net income per common share:
Primary $ (0.53) $ (0.15)
Fully Diluted (0.53) (0.15)
Financial Ratios
Return on average assets -0.54% -0.12%
Return on average equity -9.52 -2.03
Return on average common equity -10.53 -2.63
Operating efficiency ratio:
Including amortization of
goodwill & other
intangible assets 107.72 97.60
Excluding amortization
of goodwill & other
intangible assets 105.58 95.52
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------
1997 1996
----------------------------
<S> <C> <C>
Interest Income
Loans $ 3,826,055 $ 3,410,593
Available-for-sale securities 773,559 1,021,659
Held-to-maturity securities 348,323 283,114
Other 66,381 58,562
- ---------------------------------------------------------------------
Total interest income 5,014,318 4,773,928
Interest Expense
Deposits 1,629,078 1,685,338
Borrowings 1,416,662 1,159,242
- ---------------------------------------------------------------------
Total interest expense 3,045,740 2,844,580
- ---------------------------------------------------------------------
Net interest income 1,968,578 1,929,348
Provision for loan losses 155,940 164,833
- ---------------------------------------------------------------------
Net interest income after
provision for loan losses 1,812,638 1,764,515
Other Income
Depositor fees 267,409 203,633
Securities and insurance
commissions 136,615 130,412
Loan servicing fees 65,150 64,149
Other operating income 97,513 62,543
Gain (loss) on sale of loans 24,502 14,403
Market valuation of planned
securitization (100,000) --
Gain (loss) on sale of assets 16,488 (3,716)
Write-down of mortgage-backed
securities (20,166) (23,913)
- ---------------------------------------------------------------------
Total other income 487,511 447,511
Other Expense
Salaries and employee benefits 615,891 622,902
Occupancy and equipment 239,718 238,548
Telecommunications and outsourced
information services 126,210 110,001
Regulatory assessments 26,026 85,145
Savings Association Insurance Fund
("SAIF") special assessment -- 312,552
Transaction-related charges 424,886 1,500
Other operating expense 302,980 278,943
Amortization of goodwill and
other intangible assets 47,833 49,170
Foreclosed asset expense, net 9,710 7,650
- ---------------------------------------------------------------------
Total other expense 1,793,254 1,706,411
- ---------------------------------------------------------------------
Income before income taxes 506,895 505,615
Income taxes 263,017 182,209
- ---------------------------------------------------------------------
Income before minority interest 243,878 323,406
Minority interest in earnings of
consolidated subsidiaries -- (10,504)
- ---------------------------------------------------------------------
Net Income $ 243,878 $ 312,902
=====================================================================
Net Income Attributable
to Common Stock $ 226,091 $ 284,088
=====================================================================
Net income per common share:
Primary $ 0.91 $ 1.20
Fully Diluted 0.90 1.20
Financial Ratios
Return on average assets 0.36% 0.48%
Return on average equity 6.24 7.94
Return on average common equity 6.12 7.96
Operating efficiency ratio:
Including amortization of
goodwill & other
intangible assets 73.01 71.79
Excluding amortization
of goodwill & other
intangible assets 71.07 69.72
</TABLE>
<PAGE>
Washington Mutual, Inc.
Selected Financial Information
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended
September 30,
-----------------------------
1997 1996
-----------------------------
<S> <C> <C>
Data Used To Compute Per Share
Amounts
Net income $ (126,954) $ (26,087)
Preferred stock
dividends:
Noncumulative
Perpetual, Series C (1,569) (1,569)
Noncumulative
Perpetual, Series E (936) (936)
Noncumulative
Convertible Perpetual,
Series D -- (2,100)
Convertible
preferred (GW) -- (951)
Nonconvertible cumulative
preferred, Series F (3,424) (3,424)
- ---------------------------------------------------------------------
Net income available
to primary common stock $ (132,883) $ (35,067)
=====================================================================
Net income $ (126,954) $ (26,087)
Preferred stock
dividends:
Noncumulative
Perpetual, Series C (1,569) (1,569)
Noncumulative
Perpetual, Series E (936) (936)
Nonconvertible
cumulative preferred,
Series F (3,424) (3,424)
- ---------------------------------------------------------------------
Net income available to
fully diluted common stock $ (132,883) $ (32,016)
=====================================================================
Average common shares
used to calculate
earnings per share:
Primary 251,549,503 232,651,826
Fully diluted 252,351,852 232,651,826
Net Interest Spread
Yield on loans 7.94% 7.97%
Yield on investments 7.11 7.09
- ---------------------------------------------------------------------
Combined yield on
earning assets 7.73 7.71
Cost of deposits 4.21 4.19
Cost of borrowings 5.89 5.85
- ---------------------------------------------------------------------
Combined cost of funds 4.88 4.76
- ---------------------------------------------------------------------
Net interest spread 2.85% 2.95%
=====================================================================
Net interest margin 2.98% 3.09%
Average Balances
Loans $ 66,360,705 $ 58,231,296
Investments 22,935,483 24,756,751
- ---------------------------------------------------------------------
Total earning assets 89,296,188 82,988,047
Deposits 51,670,233 52,766,219
Borrowings 35,061,690 27,698,663
- ---------------------------------------------------------------------
Total interest bearing
liabilities 86,731,923 80,464,882
Total assets 93,764,401 87,555,052
Stockholders' equity 5,333,075 5,144,282
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------
1997 1996
------------------------
<S> <C> <C>
Data Used To Compute Per Share
Amounts
Net income $ 243,878 $ 312,902
Preferred stock
dividends:
Noncumulative
Perpetual, Series C (4,707) (4,707)
Noncumulative
Perpetual, Series E (2,808) (936)
Noncumulative
Convertible Perpetual,
Series D -- (6,300)
Convertible
preferred (GW) -- (6,599)
Nonconvertible cumulative
preferred, Series F (10,272) (10,272)
- ---------------------------------------------------------------------
Net income available
to primary common stock $ 226,091 $ 284,088
=====================================================================
Net income $ 243,878 $ 312,902
Preferred stock
dividends:
Noncumulative
Perpetual, Series C (4,707) (4,707)
Noncumulative
Perpetual, Series E (2,808) (936)
Nonconvertible
cumulative preferred,
Series F (10,272) (10,272)
- ---------------------------------------------------------------------
Net income available to
fully diluted common stock $ 226,091 $ 296,987
=====================================================================
Average common shares
used to calculate earnings
per share:
Primary 248,142,740 236,171,482
Fully diluted 250,085,026 242,055,940
Net Interest Spread
Yield on loans 7.98% 8.06%
Yield on investments 7.06 7.13
- ---------------------------------------------------------------------
Combined yield on
earning assets 7.74 7.77
Cost of deposits 4.20 4.24
Cost of borrowings 5.87 5.83
- ---------------------------------------------------------------------
Combined cost of funds 4.84 4.77
- ---------------------------------------------------------------------
Net interest spread 2.90% 3.00%
=====================================================================
Net interest margin 3.04% 3.12%
Average Balances
Loans $ 63,973,194 $ 56,371,571
Investments 22,428,950 25,565,862
- ---------------------------------------------------------------------
Total earning assets 86,402,144 81,937,433
Deposits 52,004,850 53,070,901
Borrowings 31,904,807 26,444,330
- ---------------------------------------------------------------------
Total interest bearing
liabilities 83,909,657 79,515,231
Total assets 90,755,946 86,458,290
Stockholders' equity 5,199,309 5,243,884
</TABLE>
<PAGE>
Washington Mutual, Inc.
Consolidated Statements of Financial Position
(dollars in thousands, except for per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Sept. 30, 1997 Dec. 31, 1996
-------------- -------------
<S> <C> <C>
Assets
Cash $ 1,049,165 $ 1,032,379
Cash equivalents 191,389 632,976
Trading account securities - 1,647
Available-for-sale securities:
MBS 9,296,131 13,968,875
Investments 1,918,120 2,126,468
Held-to-maturity securities:
MBS 10,470,996 4,286,361
Investments 202,807 192,695
Loans:
Loans held in portfolio 67,080,473 61,497,847
Loans held for sale 1,701,909 333,262
Reserve for loan losses (671,869) (677,141)
- ---------------------------------------------------------------------
Net loans 68,110,513 61,153,968
Investment in FHLB stock 942,413 843,002
Foreclosed assets 201,809 222,883
Bank premises and equipment 1,033,070 1,034,813
Intangible assets arising
from acquisitions 372,520 419,500
Other assets 1,818,436 1,510,930
- ---------------------------------------------------------------------
Total assets $95,607,369 $87,426,497
=====================================================================
Liabilities
Deposits:
Checking accounts $ 7,032,257 $ 7,282,552
Savings and money market
accounts 14,734,649 13,510,291
Time certificates 28,580,990 31,155,451
Wholesale accounts 949,568 718,620
- ---------------------------------------------------------------------
Total deposits 51,297,464 52,666,914
Annuities 884,013 878,057
Federal funds purchased &
commercial paper 4,247,298 2,153,506
Securities sold under
agreements to repurchase 11,694,038 12,033,119
Advances from Federal
Home Loan Banks 16,641,470 10,011,425
Trust preferred 800,000 100,000
Other borrowings 2,499,729 3,109,694
Other liabilities 2,206,252 1,480,694
- ---------------------------------------------------------------------
Total liabilities 90,270,264 82,433,409
Stockholders' Equity
Preferred stock, no par value:
10,000,000 shares authorized -
5,382,000 and 5,382,000 shares
issued and outstanding:
Nonconvertible liquidation
preference 283,063 283,063
Common stock, no par value:
800,000,000 shares authorized -
257,176,039 and 250,230,644
shares outstanding - -
Common capital surplus 1,937,393 1,657,284
Valuation reserve for
available-for-sale securities 166,263 118,625
Retained earnings 2,950,386 2,934,116
- ---------------------------------------------------------------------
Total stockholders' equity 5,337,105 4,993,088
- ---------------------------------------------------------------------
Total liabilities and
stockholders' equity $95,607,369 $87,426,497
=====================================================================
Book value per common share $20.28 $19.44
Tangible book value per common share 18.79 17.71
</TABLE>
<PAGE>
Washington Mutual, Inc.
Selected Financial Information
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
1997 1997 1997 1996 1996
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Adequacy
Washington Mutual, Inc.:
Stockholders'
equity/total
assets 5.58% 5.66% 5.64% 5.71% 5.77%
Tangible
stockholders'
equity/total
tangible assets 5.21 5.26 5.20 5.26 5.30
Tangible
stockholders'
equity (including
trust preferred
stock)/total
tangible assets 6.04 6.13 5.65 5.37 5.42
Retail Checking
Account Activity (No.)
Net new accounts
opened during
the quarter
WMB and WMBfsb 43,381 39,654 34,358 31,520 35,506
Great Western (36,400) (53,006) (47,706) (39,013) (11,581)
ASB 7,707 26,509 31,315 6,063 2,193
- ---------------------------------------------------------------------
14,688 13,157 17,967 (1,430) 26,118
New accounts
acquired
during the
quarter - - 8,751 2,353 -
Retail Checking
Accounts (No.)
WMB and WMBfsb 734,509 691,128 651,474 608,365 574,492
Great Western 1,353,664 1,390,064 1,441,423 1,487,702 1,525,745
ASB 303,125 295,418 268,932 237,617 231,554
- ---------------------------------------------------------------------
Total retail
checking
accounts 2,391,298 2,376,610 2,361,829 2,333,684 2,331,791
=====================================================================
Households Served
(No.)
WMB and WMBfsb 1,002,432 943,161 898,918 830,425 795,898
Great Western/a 2,213,524 2,238,695 2,272,561 2,441,322 2,525,374
ASB 628,367 626,954 600,799 592,916 591,935
- ---------------------------------------------------------------------
Total households
served 3,844,323 3,808,810 3,772,278 3,864,663 3,913,207
=====================================================================
(a) As of August 31, 1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nonbanking Subsidiary
Results of Operations:
Consumer finance:
Net interest
income $59,271 $63,963 $183,360 $196,036
Provision for
loan losses 16,200 15,300 47,200 43,400
Other income 10,221 9,725 31,358 37,559
Other expenses 36,443 37,592 111,452 114,083
- ---------------------------------------------------------------------
Net income
before
income taxes 16,849 20,796 56,066 76,112
Income taxes 6,800 8,200 22,400 30,200
- ---------------------------------------------------------------------
Net income $10,049 $12,596 $ 33,666 $ 45,912
=====================================================================
</TABLE>
Washington Mutual, Inc.
Selected Financial Information
(dollars in millions)
(unaudited)
<TABLE>
<CAPTION>
Quarter ended Nine Months Ended
September 30, September 30,
% %
1997 1996 Change 1997 1996 Change
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loan Originations
Single-family
residential (SFR) $5,854.5 $4,243.2 38% $15,992.3 $11,820.1 35%
SFR - custom
construction 235.8 206.5 14 642.5 537.6 20
SFR - builder
construction 122.4 154.6 -21 430.4 430.3 -
Multi-family
residential 212.1 123.3 72 524.9 402.1 31
Nonresidential real
estate 159.3 88.1 81 364.7 233.3 56
Consumer 591.8 461.9 28 1,668.2 1,268.0 32
Consumer finance 531.8 479.8 11 1,508.5 1,393.9 8
Commercial business 149.0 134.3 11 474.3 309.5 53
- -----------------------------------------------------------------------
Total loan
originations $7,856.7 $5,891.7 33% $21,605.8 $16,394.8 32%
=======================================================================
As a % of total originations:
SFR 75% 72% 74% 72%
All other 25 28 26 28
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Change from
June 30
1997 to Sept. 30, June 30, Mar. 31, Dec. 31,
Sept. 30, 1997 1997 1997 1997 1996
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans By
Property Type
SFR $ 3,069.0 $54,617.2 $51,548.2 $50,703.5 $48,689.7
SFR - custom
construction (26.1) 444.8 470.9 453.9 425.4
SFR - builder
construction 17.0 370.6 353.6 329.0 298.2
Multi-family
residential 32.5 4,239.1 4,206.6 4,083.2 4,048.8
Nonresidential
real estate (72.1) 2,438.2 2,510.3 2,435.5 2,444.2
Consumer 172.9 3,754.1 3,581.2 3,445.3 3,307.7
Consumer Finance 19.6 2,192.6 2,173.0 2,153.0 2,186.0
Commercial business 104.8 725.8 621.0 526.8 431.2
Reserves for loan losses 10.4 (671.9) (682.3) (688.2) (677.4)
- ----------------------------------------------------------------------
Total loans
outstanding 3,328.0 68,110.5 64,782.5 63,442.0 61,153.8
Loans securitized
and retained as MBS (819.8) 13,798.5 14,618.3 12,464.3 12,828.1
- ----------------------------------------------------------------------
Total loans
outstanding or
securitized and
held as MBS $2,508.2 $81,909.0 $79,400.8 $75,906.3 $73,981.9
======================================================================
Change in Loans Outstanding
Loans originated $ 7,856.7 $ 8,073.8 $ 5,641.7 $ 5,931.9
Loans purchased or acquired - 20.1 601.9 154.7
Loans securitized - (2,614.9) (81.4) (56.7)
Loans sold (915.6) (1,189.2) (987.9) (863.8)
Loan payments and other (3,613.1) (2,949.3) (2,886.1) (3,269.1)
- ----------------------------------------------------------------------
Change in loans outstanding 3,328.0 1,340.5 2,288.2 1,897.0
Change in securitized MBS (819.8) 2,154.0 (363.8) (1,302.9)
- ----------------------------------------------------------------------
Total change $ 2,508.2 $ 3,494.5 $ 1,924.4 $ 594.1
======================================================================
As a % of total loans and securitized MBS
at beginning of quarter 3.2% 4.6% 2.6% 0.8%
As a % of total assets
at beginning of quarter 2.7 3.9 2.2 0.7
</TABLE>
<PAGE>
Washington Mutual, Inc.
Selected Financial Information
(dollars in millions)
(unaudited)
<TABLE>
<CAPTION>
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
1997 1997 1997 1996 1996
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reserve For Loan
Losses Balance at
beginning
of quarter $666.1 $688.0 $677.1 $555.9 $564.6
Provision for
loan losses 52.1 49.9 53.8 229.3 58.8
Reserves added
through business
combinations - 2.6 8.3 1.1 -
Transfer of reserves
for write-down of MBS - (17.7) - - -
Transfer of reserves
to contingent
liability - (1.5) - - -
Loans charged-off:
SFR (25.9) (29.0) (27.1) (97.4) (46.2)
Multi-family
residential
and nonresidential
real estate (2.4) (8.9) (5.4) (8.5) (5.8)
Consumer (3.5) (4.6) (4.6) (2.4) (4.0)
Consumer finance (20.4) (18.9) (19.0) (7.8) (18.3)
Commercial
business/credits (0.9) (0.1) (0.1) (0.1) -
- ---------------------------------------------------------------------
Total loans
charged-off (53.1) (61.5) (56.2) (116.2) (74.3)
Recoveries of loans previously charged-off:
SFR - 0.4 0.3 1.5 1.6
Multi-family
residential
and nonresidential
real estate 1.4 0.4 0.4 1.3 0.8
Consumer 1.6 1.7 0.5 0.4 0.4
Consumer finance 3.8 3.8 3.8 3.8 4.0
- ---------------------------------------------------------------------
Total loans
recovered 6.8 6.3 5.0 7.0 6.8
- ---------------------------------------------------------------------
Net charge-offs (46.3) (55.2) (51.2) (109.2) (67.5)
- ---------------------------------------------------------------------
Balance at end
of quarter $671.9 $666.1 $688.0 $677.1 $555.9
=====================================================================
Specific and
allocated reserves:
Multi-family
residential
and nonresidential
real estate $ 94.3 $105.1 $112.1 $117.4 $ 65.2
Builder
construction 2.1 1.9 - - 0.2
Commercial
business 3.2 3.3 1.9 1.3 1.6
- ---------------------------------------------------------------------
Total allocated
reserves 99.6 110.3 114.0 118.7 67.0
Unallocated
reserves 572.3 555.8 574.0 558.4 488.9
- ---------------------------------------------------------------------
Total reserve
for loan
losses $671.9 $666.1 $688.0 $677.1 $555.9
=====================================================================
Reserve for loan loss as a % of:
Nonperforming
assets 81% 86% 82% 84% 55%
Nonaccrual loans 106 112 103 116 75
Loss coverage as
a % of nonaccrual
loans/a 113 119 107 120 77
(a) Nonaccrual loans include loans that have been securitized, which the
company retains the credit risk. Coverage for losses on these obligations is
provided through adjustment to the balance of mortgage backed securities or
contingent liabilities. The total "loss coverage" ratio includes the balance of
these adjustments, along with the reserve for loan losses.
</TABLE>
<PAGE>
Washington Mutual, Inc.
Selected Financial Information
(dollars in millions)
(unaudited)
<TABLE>
<CAPTION>
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
1997 1997 1997 1996 1996
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonperforming Assets
Nonaccrual loans:
SFR $516.3 $497.2 $549.0 $471.0 $ 625.2
Multi-family
residential and
nonresidential
real estate 40.8 32.0 48.8 34.3 66.8
Consumer 23.5 19.9 19.7 23.1 18.4
Consumer finance 47.2 45.1 44.9 45.6 29.5
Commercial business 3.3 1.3 1.6 1.0 0.9
- ---------------------------------------------------------------------
Total nonaccrual
loans 631.1 595.5 664.0 575.0 740.8
REO:
SFR 161.5 131.5 112.5 155.3 201.5
Multi-family
residential and
nonresidential
real estate 40.6 44.0 61.1 72.1 65.7
Consumer 4.8 4.0 3.4 2.7 3.8
Consumer finance 2.0 2.0 2.1 1.8 1.8
Reserve for losses (7.1) (6.7) (6.4) (9.0) (6.6)
- ---------------------------------------------------------------------
Net REO 201.8 174.8 172.7 222.9 266.2
- ---------------------------------------------------------------------
Other nonperforming
assets - 1.5 1.8 7.2 4.1
- ---------------------------------------------------------------------
Total
nonperforming
assets $832.9 $771.8 $838.5 $805.1 $1,011.1
=====================================================================
Nonperforming assets
by property type:
SFR $665.6 $616.2 $648.6 $618.8 $ 819.1
SFR - custom
construction 1.1 6.2 5.2 2.5 2.8
SFR - builder
construction 11.1 6.4 8.4 8.4 6.0
Multi-family
residential 38.6 38.6 44.9 46.0 52.8
Nonresidential
real estate 42.8 38.1 66.1 64.2 82.6
Consumer 28.3 24.0 23.1 25.7 22.2
Consumer finance 49.2 47.1 47.0 47.4 31.3
Commercial business 3.3 1.3 1.6 1.1 0.9
Reserve for REO
losses (7.1) (6.1) (6.4) (9.0) (6.6)
- ---------------------------------------------------------------------
Total nonperforming
assets $832.9 $771.8 $838.5 $805.1 $1,011.1
=====================================================================
As a % of total loans 1.22% 1.19% 1.32% 1.32% 1.71%
As a % of total assets 0.87 0.83 0.94 0.92 1.16
</TABLE>
<PAGE>
Washington Mutual, Inc.
Supplemental Selected Financial Information
(dollars in millions)
(unaudited)
<TABLE>
<CAPTION>
Nine
Original Quarter Months
Estimate Ended Ended
Sep 30, Sep 30, Differ-
1997 1997 ence
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transaction-related charges:
Severance and management payments $145.0 $132.9 $132.9 $(12.1)
Facilities and equipment 106.0 155.2 155.2 49.2
Other expense 92.0 78.8 136.8 44.8
- ---------------------------------------------------------------------
Total other expense 343.0 366.9 424.9 81.9
Market valuation on planned
securitization 100.0 100.0 100.0 -
Tax benefit (74.0) (125.7) (140.5) (66.5)
- ---------------------------------------------------------------------
Net expense 369.0 341.2 384.4 15.4
Tax benefit of Great Western
options exercise (51.0) (81.0) (116.5) (65.5)
- ---------------------------------------------------------------------
Equity reduction $318.0 $260.2 $267.9 $(50.1)
=====================================================================
Great Western one-time third
quarter adjustments:
One-time adjustment at
Aristar $(5.7)
Reversal of deposit service
charge accrual (2.3)
Gain on sale of corporate airplane 1.4
Interest income on tax refund 1.5
- --------------------------------------------------
$(5.1)
==================================================
</TABLE>
<PAGE>
Washington Mutual, Inc
Supplemental Consolidated Statements of Income
(dollars in thousands, except for per share amounts)
(unaudited)
<TABLE>
<CAPTION>
For Quarters Ended
- -------------------------------------------------------------------
June 97 Mar. 97 Dec. 96
- -------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income
Loans $1,268,733 $1,236,568 $1,210,560
Held-to-maturity
securities 111,464 85,464 83,478
Available-for-sale
securities 271,283 271,939 289,122
Cash equivalents 18,869 21,445 30,002
- -------------------------------------------------------------------
Total interest income 1,670,349 1,615,416 1,613,162
Interest expense
Deposits 543,792 537,488 554,964
Borrowings 473,172 418,386 414,599
- -------------------------------------------------------------------
Total interest expense 1,016,964 955,874 969,563
- -------------------------------------------------------------------
Net interest income 653,385 659,542 643,599
Provision for loan losses 49,999 53,810 227,602
- -------------------------------------------------------------------
Net interest income
after provision 603,386 605,732 415,997
Other Income
Depositor fees 92,305 82,673 78,835
Securities and insurance
commissions 45,901 45,112 45,071
Loan servicing fees 19,908 23,176 22,838
Other operating income 28,693 27,580 26,293
Gain on sale of loans 5,419 8,080 30,494
Gain (loss) on sale of
other assets 2,093 7,880 22,798
Write-down on mortgage
backed securities (6,172) (6,250) (15,676)
- -------------------------------------------------------------------
Total other income 188,147 188,251 210,653
Other Expense
Salaries and
employee benefits 202,731 208,832 197,063
Occupancy and equipment 78,263 80,584 82,594
Regulatory assessments 8,561 8,643 23,126
SAIF special assessment - - -
Telecommunications and
outsourced information
services 42,847 43,226 41,311
Other operating expense 98,900 100,685 126,301
Restructure expense - - 68,293
Transaction-related
expense 24,305 33,721 156,621
Amortization of goodwill
and other intangible
assets 15,683 15,763 16,224
REO operations 902 3,642 10,655
- -------------------------------------------------------------------
Total other expense 472,192 495,096 722,188
- -------------------------------------------------------------------
Income before
income taxes
and minority interest 319,341 298,887 (95,538)
Income taxes 128,284 114,803 (26,524)
Provision (benefit) for
payments in lieu of taxes - 4,309 10,722
- --------------------------------------------------------------------
Income before income taxes
and minority interest 191,057 179,775 (79,736)
Minority interest income of
consolidated subsidiaries - - (3,066)
- --------------------------------------------------------------------
Net Income $ 191,057 $ 179,775 $ (82,802)
====================================================================
Net Income Attributable
to Common Stock $ 185,128 $ 173,846 $ (90,830)
====================================================================
Net income per common share:
Primary $0.75 $0.70 $ (0.38)
Fully diluted 0.74 0.70 (0.38)
Average number of common
shares used to calculate
net income per common
share :
Primary 248,098,510 247,452,354 239,709,663
Fully diluted 249,374,437 247,728,824 241,134,240
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For Quarters Ended
---------------------------------------
Sept. 96 June 96 Mar. 96
--------------------------------------
<S> <C> <C> <C>
Interest Income
Loans $1,160,270 $1,127,744 $1,122,579
Held-to-maturity
securities 95,024 92,979 95,111
Available-for-sale
securities 323,422 344,145 354,092
Cash equivalents 20,464 20,018 18,080
- ----------------------------------------------------------------------
Total interest income 1,599,180 1,584,886 1,589,862
Interest expense
Deposits 554,149 554,135 577,054
Borrowings 408,667 377,367 373,208
- ----------------------------------------------------------------------
Total interest expense 962,816 931,502 950,262
- ----------------------------------------------------------------------
Net interest income 636,364 653,384 639,600
Provision for loan losses 56,940 51,962 55,931
- ----------------------------------------------------------------------
Net interest income
after provision 579,424 601,422 583,669
Other Income
Depositor fees 71,676 67,795 64,162
Securities and insurance
commissions 43,051 45,367 41,994
Loan servicing fees 23,265 20,954 19,930
Other operating income 22,564 22,582 17,397
Gain on sale of loans 423 6,593 7,387
Gain (loss) on sale of
other assets (790) (4,750) 574
Write-down on mortgage
backed securities (8,178) (7,427) (7,058)
- ----------------------------------------------------------------------
Total other income 152,011 151,114 144,386
Other Expense
Salaries and
employee benefits 201,352 212,692 208,858
Occupancy and equipment 78,986 79,348 80,214
Regulatory assessments 28,706 28,721 27,718
SAIF special assessment 312,552 - -
Telecommunications and
outsourced information
services 39,491 37,984 32,526
Other operating expense 100,949 86,705 91,289
Restructure expense - - -
Transaction-related
expense - - 1,500
Amortization of goodwill
and other intangible
assets 16,381 16,392 16,397
REO operations (8,985) 7,905 8,730
- ----------------------------------------------------------------------
Total other expense 769,432 469,747 467,232
- ----------------------------------------------------------------------
Income before
income taxes
and minority
interest (37,997) 282,789 260,823
Income taxes (5,686) 94,775 78,655
Provision (benefit) for
payments in lieu of taxes (9,751) 5,676 18,540
- ----------------------------------------------------------------------
Income before
income taxes
and minority interest (22,560) 182,338 163,628
Minority interest
income of consolidated
subsidiaries (3,527) (3,450) (3,527)
- --------------------------------------------------------------------
Net Income $ (26,087) $ 178,888 $ 160,101
======================================================================
Net Income Attributable
to Common Stock $ (35,067) $ 168,041 $ 149,242
======================================================================
Net income per common share:
Primary $ (0.15) $0.71 $0.63
Fully diluted (0.15) 0.70 0.62
Average number of common
shares used to calculate
net income per common
share :
Primary 232,651,826 237,070,865 237,026,026
Fully diluted 232,651,826 248,294,406 248,195,691
</TABLE>
