<PAGE> 1
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: May 20, 1997
Washington Mutual, Inc.
------------------------------------------------------
(Exact Name of Registrant as specified in its charter)
Washington
------------------------------------------------------
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
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
PRO FORMA COMBINED FINANCIAL INFORMATION
(UNAUDITED)
The pro forma combined financial data set forth herein give effect to the
merger of Washington Mutual Inc. ("Washington Mutual") and Great Western
Financial Corporation ("Great Western") as if the merger had been consummated on
January 1, 1994 for income statement information and December 31, 1996 for
balance sheet information. The pro forma combined unaudited consolidated
statement of financial position as of March 31, 1997 and December 31, 1996 and
the pro forma combined unaudited consolidated statements of income for the
three months ended March 31, 1997 and 1996 and the three years ended December
31, 1996 are based upon the historical consolidated financial statements of
Washington Mutual and Great Western as previously filed with the Commission
under the Exchange Act, and should be read in conjunction with those
consolidated financial statements and related notes. These combined unaudited
pro forma condensed financial statements are not necessarily indicative of the
operating results that would have been achieved had the Washington Mutual/Great
Western Merger been consummated as of the beginning of the periods presented
and should not be construed as representative of future operating results.
These combined unaudited pro forma condensed financial statements give effect
to the Washington Mutual/Great Western Merger by combining the results of
operations of Washington Mutual and Great Western using the "pooling-of-
interests" method of accounting.
<PAGE> 3
PRO FORMA COMBINED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
MARCH 31, 1997
---------------------------------------------------------------------------
PRO FORMA
ADJUSTMENTS(1) PRO FORMA
WASHINGTON GREAT -------------------------- INCLUDING
MUTUAL WESTERN DEBIT CREDIT REF. GREAT WESTERN
----------- ------------ -------- -------- ---- -------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents............ $ 532,643 $ 890,086 $ $145,000 1(b) $ 1,185,729
92,000 1(b)
Trading account securities........... 2,804 -- 2,804
Available-for-sale securities........ 8,942,084 7,539,828 16,481,912
Held-to-maturity securities.......... 2,807,352 1,554,197 4,361,549
Loans, net of the allowance for loan
losses............................. 32,018,457 30,999,178 100,000 1(b) 62,917,635
Loans held for sale.................. 212,506 211,675 424,181
REO and other real estate............ 94,498 115,149 209,647
Premises and equipment............... 495,186 525,178 106,000 1(b) 914,364
Goodwill and other intangible
assets............................. 130,698 277,016 407,714
Other assets......................... 814,922 765,596 1,580,518
----------- ----------- -------- -------- -----------
Total assets................ $46,051,150 $ 42,877,903 $ -- $443,000 $88,486,053
=========== =========== ======== ======== ===========
LIABILITIES
Deposits:
Checking accounts.................. $ 3,164,935 $ 4,525,698 $ $ $ 7,690,633
Savings and money market
accounts......................... 7,121,545 7,231,742 14,353,287
Time deposit accounts.............. 14,012,013 16,400,891 30,412,904
----------- ----------- -------- -------- -----------
Total deposits.............. 24,298,493 28,158,331 -- -- 52,456,824
Annuities............................ 877,841 -- 877,841
Federal funds and commercial paper... 1,230,000 1,286,942 2,516,942
Securities sold under agreements to
repurchase......................... 7,561,220 4,483,584 12,044,804
Advances from the FHLB............... 8,643,363 2,558,298 11,201,661
Other borrowings..................... 501,846 2,332,335 2,834,181
Other liabilities.................... 510,390 1,073,343 125,000 1(b) 1,458,733
----------- ----------- -------- -------- -----------
Total liabilities........... 43,623,153 39,892,833 125,000 -- 83,390,986
Great Western-obligated mandatorily
redeemable preferred securities of
Great Western subsidiary trust,
holding solely $103,092,800 and
$309,279,000 aggregate principal
amount of 8.25% and 8.206%
subordinated deferrable interest
notes, due 2025 and 2027,
respectively of Great Western...... -- 400,000 400,000
STOCKHOLDERS' EQUITY
Preferred stock...................... -- 165,000 165,000 1(a) --
Common stock......................... -- 137,885 137,885 1(a) --
Capital surplus...................... 957,234 677,250 302,885 1(a) 1,937,369
Valuation reserve for
available-for-sale securities...... (12,935) 41,796 28,861
Retained earnings.................... 1,483,698 1,563,139 318,000 1(b) 2,728,837
----------- ----------- -------- -------- -----------
Total stockholders'
equity.................... 2,427,997 2,585,070 620,885 302,885 4,695,067
----------- ----------- -------- -------- -----------
Total liabilities and
stockholders' equity...... $46,051,150 $ 42,877,903 $745,885 $302,885 $88,486,053
=========== =========== ======== ======== ===========
Book value per common share(2)....... $19.53 $17.55 $18.21
Number of common shares
outstanding(2)..................... 118,247,850 137,885,310 242,344,620
</TABLE>
<PAGE> 4
NOTES TO PRO FORMA COMBINED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
(1) Statement of Financial Position. The pro forma adjustments reflected in the
unaudited pro forma combined statement of financial position of Washington
Mutual including Great Western as of March 31, 1997 give effect to the
following adjustments:
(a) Stockholders' equity of Great Western has been adjusted to give effect
to the exchange of 660,000 shares of Great Western Preferred Stock and
137,885,310 shares of Great Western Common Stock for 660,000 shares of
Series F Preferred Stock and 124,096,770 shares of Washington Mutual
Common Stock. Pro forma adjusting entries are as follows:
<TABLE>
<CAPTION>
DEBIT CREDIT
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Preferred stock........................................ $165,000
Common stock........................................... 137,885
Capital surplus........................................ $302,885
</TABLE>
(b) Merger-related Expenses. Merger-related expenses and addition to loan
loss reserve anticipated to be recorded are included in the Pro Forma
Including Great Western statement of financial position as of March
31, 1997. Merger-related expenses expected to be recorded by Washington
Mutual are summarized in the following table (dollars in thousands):
<TABLE>
<S> <C>
Additional loan loss reserves.................................... $ 100,000
Severance and management payments................................ 145,000
Facilities and equipment......................................... 106,000
Other expenses................................................... 92,000
---------
Total expenses.............................................. 443,000
Tax benefit...................................................... (125,000)
---------
Net expenses..................................................... $ 318,000
=========
</TABLE>
Pro forma adjusting entries are as follows:
<TABLE>
<CAPTION>
DEBIT CREDIT
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Retained earnings -- net charges..................... $318,000
Other liabilities -- tax benefit..................... 125,000
Cash -- Severance and management premiums............ $145,000
Cash -- Other expenses............................... 92,000
Loans -- Additional loan loss reserves............... 100,000
Facilities and equipment............................. 106,000
</TABLE>
<PAGE> 5
(2) Per Share Data. Washington Mutual's book value per common share of $19.53
and pro forma combined book value per common share of $18.21 as of March 31,
1997 were calculated using the following information:
<TABLE>
<CAPTION>
WASHINGTON PRO FORMA INCLUDING
MUTUAL GREAT WESTERN
------------ -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Stockholders' equity......................... $ 2,427,997 $ 5,013,067
Noncumulative Perpetual Series C
Preferred Stock............................ (68,813) (68,813)
Noncumulative Perpetual Series E
Preferred Stock............................ (49,250) (49,250)
Great Western Preferred Stock................ -- (165,000)
Merger-related expenses...................... -- (318,000)
------------ -------------
Total stockholders' equity attributable to
common shares.............................. $ 2,309,934 $ 4,412,004
============ =============
Number of common shares outstanding(*)....... 118,247,850 242,344,620
</TABLE>
(*) Does not include 8,000,000 shares of common stock issued to an
escrow for the benefit of the shareholders of Keystone Holdings and
the FRF and their transferees.
<PAGE> 6
PRO FORMA COMBINED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------------------------------
PRO FORMA
ADJUSTMENTS(1) PRO FORMA
WASHINGTON GREAT -------------------------- INCLUDING
MUTUAL WESTERN DEBIT CREDIT REF. GREAT WESTERN
----------- ------------ -------- -------- ---- -------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents............ $ 831,063 $ 834,292 $ $145,000 1(b) $ 1,428,355
92,000 1(b)
Trading account securities........... 1,647 -- 1,647
Available-for-sale securities........ 9,111,274 7,827,071 16,938,345
Held-to-maturity securities.......... 2,860,347 1,618,709 4,479,056
Loans, net of the allowance for loan
losses............................. 30,103,386 30,717,320 100,000 1(b) 60,720,706
Loans held for sale.................. 227,390 105,872 333,262
REO and other real estate............ 103,111 159,997 263,108
Premises and equipment............... 482,391 552,422 106,000 1(b) 928,813
Goodwill and other intangible
assets............................. 133,509 285,991 419,500
Other assets......................... 697,807 772,898 1,470,705
----------- ----------- -------- -------- -----------
Total assets................ $44,551,925 $ 42,874,572 $ -- $443,000 $86,983,497
=========== =========== ======== ======== ===========
LIABILITIES
Deposits:
Checking accounts.................. $ 2,979,962 $ 4,577,626 $ $ $ 7,557,588
Savings and money market
accounts......................... 6,842,061 6,744,210 13,586,271
Time deposit accounts.............. 14,258,118 17,264,937 31,523,055
----------- ----------- -------- -------- -----------
Total deposits.............. 24,080,141 28,586,773 -- -- 52,666,914
Annuities............................ 878,057 -- 878,057
Federal funds and commercial paper... 1,052,000 1,101,506 2,153,506
Securities sold under agreements to
repurchase......................... 7,835,453 4,197,666 12,033,119
Advances from the FHLB............... 7,241,492 2,769,933 10,011,425
Other borrowings..................... 676,986 2,432,708 3,109,694
Other liabilities.................... 389,908 1,090,786 125,000 1(b) 1,355,694
----------- ----------- -------- -------- -----------
Total liabilities........... 42,154,037 40,179,372 125,000 -- 82,208,409
Great Western-obligated mandatorily
redeemable preferred securities of
Great Western subsidiary trust,
holding solely $103,092,800
aggregate principal amount of 8.25%
subordinated deferrable interest
notes, due 2025, of Great
Western............................ -- 100,000 100,000
STOCKHOLDERS' EQUITY
Preferred stock...................... -- 165,000 165,000 1(a) --
Common stock......................... -- 137,876 137,876 1(a) --
Capital surplus...................... 952,747 680,428 302,876 1(a) 1,936,051
Valuation reserve for
available-for-sale securities...... 41,666 76,959 118,625
Retained earnings.................... 1,403,475 1,534,937 318,000 1(b) 2,620,412
----------- ----------- -------- -------- -----------
Total stockholders'
equity.................... 2,397,888 2,595,200 620,876 302,876 4,675,088
----------- ----------- -------- -------- -----------
Total liabilities and
stockholders' equity...... $44,551,925 $ 42,874,572 $745,876 $302,876 $86,983,497
=========== =========== ======== ======== ===========
Book value per common share(2)....... $19.30 $17.63 $18.13
Number of common shares
outstanding(2)..................... 118,142,285 137,875,955 242,230,645
</TABLE>
<PAGE> 7
NOTES TO PRO FORMA COMBINED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
(1) Statement of Financial Position. The pro forma adjustments reflected in the
unaudited pro forma combined statement of financial position of Washington
Mutual including Great Western as of December 31, 1996 give effect to the
following adjustments:
(a) Stockholders' equity of Great Western has been adjusted to give effect
to the exchange of 660,000 shares of Great Western Preferred Stock and
137,875,955 shares of Great Western Common Stock for 660,000 shares of
Series F Preferred Stock and 124,088,360 shares of Washington Mutual
Common Stock. Pro forma adjusting entries are as follows:
<TABLE>
<CAPTION>
DEBIT CREDIT
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Preferred stock........................................ $165,000
Common stock........................................... 137,876
Capital surplus........................................ $302,876
</TABLE>
(b) Merger-related Expenses. Merger-related expenses and addition to loan
loss reserve anticipated to be recorded are included in the Pro Forma
Including Great Western statement of financial position as of December
31, 1996. Merger-related expenses expected to be recorded by Washington
Mutual are summarized in the following table (dollars in thousands):
<TABLE>
<S> <C>
Additional loan loss reserves.................................... $ 100,000
Severance and management payments................................ 145,000
Facilities and equipment......................................... 106,000
Other expenses................................................... 92,000
---------
Total expenses.............................................. 443,000
Tax benefit...................................................... (125,000)
---------
Net expenses..................................................... $ 318,000
=========
</TABLE>
Pro forma adjusting entries are as follows:
<TABLE>
<CAPTION>
DEBIT CREDIT
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Retained earnings -- net charges..................... $318,000
Other liabilities -- tax benefit..................... 125,000
Cash -- Severance and management premiums............ $145,000
Cash -- Other expenses............................... 92,000
Loans -- Additional loan loss reserves............... 100,000
Facilities and equipment............................. 106,000
</TABLE>
<PAGE> 8
(2) Per Share Data. Washington Mutual's book value per common share of $19.30
and pro forma combined book value per common share of $18.13 as of December 31,
1996 were calculated using the following information:
<TABLE>
<CAPTION>
WASHINGTON PRO FORMA INCLUDING
MUTUAL GREAT WESTERN
------------ -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Stockholders' equity......................... $ 2,397,888 $ 4,993,088
Noncumulative Perpetual Series C
Preferred Stock............................ (68,813) (68,813)
Noncumulative Perpetual Series E
Preferred Stock............................ (49,250) (49,250)
Great Western Preferred Stock................ -- (165,000)
Merger-related expenses...................... -- (318,000)
------------ -------------
Total stockholders' equity attributable to
common shares.............................. $ 2,279,825 $ 4,392,025
============ =============
Number of common shares outstanding(*)....... 118,142,285 242,230,645
</TABLE>
(*) Does not include 8,000,000 shares of common stock issued to an
escrow for the benefit of the shareholders of Keystone Holdings and
the FRF and their transferees.
<PAGE> 9
PRO FORMA COMBINED CONSOLIDATED
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
------------------------------------------------------
PRO FORMA
WASHINGTON GREAT INCLUDING
MUTUAL WESTERN GREAT WESTERN(1)(2)
------------ ------------- -------------------
(DOLLARS IN THOUSANDS, EXCEPT
FOR PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C>
INTEREST INCOME
Loans........................................ $ 619,496 $ 617,072 $1,236,568
Investment and mortgage-backed securities.... 206,843 153,314 360,157
Cash equivalents............................. 394 13,872 14,266
---------- ---------- ----------
Total interest income................... 826,733 784,258 1,610,991
INTEREST EXPENSE
Deposits..................................... 257,712 279,776 537,488
Borrowings................................... 252,068 166,318 418,386
---------- ---------- ----------
Total interest expense.................. 509,780 446,094 955,874
---------- ---------- ----------
Net interest income................... 316,953 338,164 655,117
Provision for loan losses.................... 15,526 40,390 55,916
---------- ---------- ----------
Net interest income after provision... 301,427 297,774 599,201
OTHER INCOME
Depositor fees............................... 28,640 54,033 82,673
Loan servicing fees.......................... 14,280 12,317 26,597
Securities, annuities and other fees......... 12,812 22,603 35,415
Other operating income....................... 13,689 1,128 14,817
Gain on sale of loans........................ 5,725 2,411 8,136
Gain (loss) on sale of other assets.......... 243 2,832 3,075
---------- ---------- ----------
Total other income...................... 75,389 95,324 170,713
OTHER EXPENSE
Salaries and employee benefits............... 86,819 104,060 190,879
Occupancy and equipment...................... 32,864 30,383 63,247
Regulatory assessments....................... 4,066 4,577 8,643
Other operating expense...................... 64,210 126,401 190,611
Amortization of goodwill and other intangible
assets..................................... 6,789 8,975 15,764
REO operations............................... (2,116) 3,999 1,883
---------- ---------- ----------
Total other expense..................... 192,632 278,395 471,027
---------- ---------- ----------
Income before income taxes............ 184,184 114,703 298,887
Income taxes................................. 65,803 49,000 114,803
Provision for payments in lieu of taxes...... 4,309 -- 4,309
---------- ---------- ----------
Net Income(3)................................ $ 114,072 $ 65,703 $ 179,775
========== ========== ==========
Net Income Attributable to Common Stock...... $ 111,567 $ 62,279 $ 173,846
========== ========== ==========
Net income per common share(3)(4):
Primary.................................... $0.93 $0.44 $0.70
Fully diluted.............................. 0.93 0.44 0.70
Average number of common shares used to
calculate net income per common share(4):
Primary.................................... 120,277,744 141,305,122 247,452,354
Fully diluted.............................. 120,292,563 141,595,846 247,728,824
</TABLE>
<PAGE> 10
PRO FORMA COMBINED CONSOLIDATED
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996
------------------------------------------------------
PRO FORMA
WASHINGTON GREAT INCLUDING
MUTUAL WESTERN GREAT WESTERN(1)(2)
------------ ------------- -------------------
(DOLLARS IN THOUSANDS, EXCEPT
FOR PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C>
INTEREST INCOME
Loans........................................ $ 496,729 $ 625,850 $ 1,122,579
Investment and mortgage-backed securities.... 267,052 188,657 455,709
Cash equivalents............................. 841 10,421 11,262
------------ ------------- -------------
Total interest income................... 764,622 824,928 1,589,550
INTEREST EXPENSE
Deposits..................................... 274,050 303,004 577,054
Borrowings................................... 203,570 169,638 373,208
------------ ------------- -------------
Total interest expense.................. 477,620 472,642 950,262
------------ ------------- -------------
Net interest income................... 287,002 352,286 639,288
Provision for loan losses.................... 20,889 36,021 56,910
------------ ------------- -------------
Net interest income after provision... 266,113 316,265 582,378
OTHER INCOME
Depositor fees............................... 22,498 41,664 62,162
Loan servicing fees.......................... 8,477 11,453 19,930
Securities, annuities and other fees......... 13,083 20,035 33,118
Other operating income....................... 7,766 746 8,512
Gain on sale of loans........................ 4,380 3,007 7,387
Gain (loss) on sale of other assets.......... 806 (7,276) (6,470)
------------ ------------- -------------
Total other income...................... 57,010 69,629 126,639
OTHER EXPENSE
Salaries and employee benefits............... 81,835 115,123 196,958
Occupancy and equipment...................... 27,675 31,843 59,518
Regulatory assessments....................... 11,572 16,146 27,718
Other operating expense...................... 49,810 88,858 138,668
Amortization of goodwill and other
intangibles................................ 6,968 9,429 16,397
REO operations............................... 3,234 5,701 8,935
------------ ------------- -------------
Total other expense..................... 181,094 267,100 448,194
------------ ------------- -------------
Income before income taxes and
minority interest.................. 142,029 118,794 260,823
Income taxes................................. 31,155 47,500 78,655
Provision for payments in lieu of taxes...... 18,540 -- 18,540
------------ ---------- -------------
Income before minority interest....... 92,334 71,294 163,628
Minority interest in income of consolidated
subsidiaries............................... 3,527 -- 3,527
------------ ------------- -------------
Net Income(3)................................ $ 88,807 $ 71,294 $ 160,101
============ ============= =============
Net Income Attributable to Common Stock...... $ 84,202 $ 65,040 $ 149,242
============ ============= =============
Net income per common share(3)(4):
Primary.................................... $0.75 $0.47 $0.63
Fully diluted.............................. 0.74 0.47 0.62
Average number of common shares used to
calculate net income per common share(4):
Primary.................................... 111,797,730 139,142,551 237,026,026
Fully diluted.............................. 117,216,977 145,531,904 248,195,691
</TABLE>
<PAGE> 11
NOTES TO PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
(1) No pro forma adjustments are necessary.
(2) Merger-related Expenses. Merger-related expenses anticipated to be
recorded are not included in the Pro Forma Including Great Western statements of
income for the three months ended March 31, 1997 and 1996. Merger-related
expenses expected to be recorded by Washington Mutual are summarized in the
following table (dollars in thousands):
<TABLE>
<S> <C>
Additional loan loss reserves............................................ $ 100,000
Severance and management payments........................................ 145,000
Facilities and equipment................................................. 106,000
Other expenses........................................................... 92,000
---------
Total expenses......................................................... 443,000
Tax benefit.............................................................. (125,000)
---------
Net expenses........................................................... $ 318,000
=========
</TABLE>
(3) "Net income from continuing operations" and "net income" are equal for
the three months ended March 31, 1997 and 1996.
<PAGE> 12
(4) Per Share Data. Fully diluted net income per common share for the
three months ended March 31, 1997 and 1996 were calculated using the following
information:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
WASHINGTON MUTUAL
Net income....................................... $ 114,072 $ 88,807
Preferred stock dividends:
Noncumulative Perpetual, Series C.............. (1,569) (1,569)
Noncumulative Perpetual, Series E.............. (936) (936)
------------ ------------
Net income available to fully diluted common
stock.......................................... $ 111,567 $ 86,302
============ ============
Average common shares used to calculate net
income per common share:
Primary........................................ 120,277,744 111,797,730
Dilutive effect of stock options and litigation
shares(*)................................... 14,819 --
Noncumulative Nonconvertible Perpetual Preferred
Stock, Series D............................. -- 5,419,247
------------ ------------
Fully diluted.................................. 120,292,563 117,216,977
============ ============
PRO FORMA INCLUDING GREAT WESTERN
Net income....................................... $ 179,775 $ 160,101
Preferred stock dividends:
Noncumulative Perpetual, Series C.............. (1,569) (1,569)
Noncumulative Perpetual, Series E.............. (936) (936)
Great Western Nonconvertible Preferred Stock... (3,424) (3,424)
------------ ------------
Net income available to fully diluted common
stock.......................................... $ 173,846 $ 154,172
============ ============
Average common shares used to calculate net
income per common share:
Primary........................................ 247,452,354 237,026,026
Dilutive effect of stock options and litigation
shares(*)................................... 276,470 42,697
Noncumulative Convertible Perpetual Preferred
Stock, Series D............................. -- 5,419,247
Great Western Convertible Preferred Stock...... -- 5,707,721
------------ ------------
Fully diluted.................................. 247,728,824 248,195,691
============ ============
</TABLE>
(*) As part of the business combination with Keystone Holdings, 8,000,000 shares
of Washington Mutual Common Stock, with an assigned value of $41.6125 per
share, were issued to an escrow for the benefit of the shareholders of
Keystone Holdings and the FRF and their transferees. Washington Mutual
used the treasury stock method to determine the effect of the shares
upon its financial statements. For both periods presented, the dilutive
effect of the 8,000,000 shares of Washington Mutual Common Stock on
primary and fully diluted earnings per share was minimal.
<PAGE> 13
PRO FORMA COMBINED CONSOLIDATED
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------
PRO FORMA
WASHINGTON GREAT INCLUDING
MUTUAL WESTERN GREAT WESTERN(1)(2)
------------ ------------- -------------------
(DOLLARS IN THOUSANDS, EXCEPT
FOR PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C>
INTEREST INCOME
Loans........................................ $ 2,139,513 $ 2,481,640 $ 4,621,153
Investment and mortgage-backed securities.... 1,003,410 704,784 1,708,194
Cash equivalents............................. 6,313 47,507 53,820
------------ ------------- -------------
Total interest income................... 3,149,236 3,233,931 6,383,167
INTEREST EXPENSE
Deposits..................................... 1,060,823 1,179,479 2,240,302
Borrowings................................... 897,406 676,435 1,573,841
------------ ------------- -------------
Total interest expense.................. 1,958,229 1,855,914 3,814,143
------------ ------------- -------------
Net interest income................... 1,191,007 1,378,017 2,569,024
Provision for loan losses.................... 201,512 196,158 397,670
------------ ------------- -------------
Net interest income after provision... 989,495 1,181,859 2,171,354
OTHER INCOME
Depositor fees............................... 102,597 179,871 282,468
Loan servicing fees.......................... 41,303 45,684 86,987
Securities, annuities and other fees......... 53,350 88,850 142,200
Other operating income....................... 36,419 5,127 41,546
Gain on sale of loans........................ 19,729 31,950 51,679
Gain (loss) on sale of other assets.......... 5,866 (32,470) (26,604)
------------ ------------- -------------
Total other income...................... 259,264 319,012 578,276
OTHER EXPENSE
Salaries and employee benefits............... 336,065 438,604 774,669
Occupancy and equipment...................... 124,278 179,617 303,895
Regulatory assessments....................... 43,171 65,100 108,271
SAIF special assessment...................... 124,193 188,359 312,552
Data processing fees......................... 40,733 57,292 98,025
Other operating expense...................... 159,541 278,536 438,077
Restructure expense.......................... -- 68,293 68,293
Transaction-related expense.................. 158,121 -- 158,121
Amortization of goodwill and other intangible
assets..................................... 27,672 37,722 65,394
REO operations............................... 11,530 726 12,256
------------ ------------- -------------
Total other expense..................... 1,025,304 1,314,249 2,339,553
------------ ------------- -------------
Income before income taxes and
minority interest.................. 223,455 186,622 410,077
Income taxes................................. 70,420 70,800 141,220
Provision (benefit) for payments in lieu of
taxes...................................... 25,187 -- 25,187
------------ ------------- -------------
Income before minority interest....... 127,848 115,822 243,670
Minority interest in income of consolidated
subsidiaries............................... 13,570 -- 13,570
------------ ------------- -------------
Net Income(3)................................ $ 114,278 $ 115,822 $ 230,100
============ ============= =============
Net Income Attributable to Common Stock...... $ 95,859 $ 95,527 $ 191,386
============ ============= =============
Net income per common share(3)(4):
Primary.................................... $0.85 $0.69 $0.81
Fully diluted.............................. 0.85 0.69 0.80
Average number of common shares used to
calculate net income per common share(4):
Primary.................................... 112,858,781 138,505,046 237,513,322
Fully diluted.............................. 113,138,724 139,250,206 238,463,909
</TABLE>
<PAGE> 14
PRO FORMA COMBINED CONSOLIDATED
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------
PRO FORMA
WASHINGTON GREAT INCLUDING
MUTUAL WESTERN GREAT WESTERN(1)(2)
------------ ------------- -------------------
(DOLLARS IN THOUSANDS, EXCEPT
FOR PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C>
INTEREST INCOME
Loans........................................ $ 2,061,801 $ 2,387,937 $ 4,449,738
New West note receivable..................... 58,841 -- 58,841
Investment and mortgage-backed securities.... 790,696 806,496 1,597,192
Cash equivalents............................. 4,748 44,278 49,026
------------ ------------- -------------
Total interest income................... 2,916,086 3,238,711 6,154,797
INTEREST EXPENSE
Deposits..................................... 1,134,818 1,217,085 2,351,903
Borrowings................................... 788,618 719,497 1,508,115
------------ ------------- -------------
Total interest expense.................. 1,923,436 1,936,582 3,860,018
------------ ------------- -------------
Net interest income................... 992,650 1,302,129 2,294,779
Provision for loan losses.................... 74,987 177,050 252,037
------------ ------------- -------------
Net interest income after provision... 917,663 1,125,079 2,042,742
OTHER INCOME
Depositor fees............................... 79,017 154,862 233,879
Loan servicing fees.......................... 29,315 55,159 84,474
Securities, annuities and other fees......... 49,679 74,161 123,840
Other operating income....................... 31,035 13,284 44,319
Gain on sale of loans........................ 1,717 9,319 11,036
Gain (loss) on sale of other assets.......... (655) 10,233 9,578
Loss on sale of covered assets............... (37,399) -- (37,399)
FDIC assistance on covered assets............ 55,630 -- 55,630
------------ ------------- -------------
Total other income...................... 208,339 317,018 525,357
OTHER EXPENSE
Salaries and employee benefits............... 313,304 441,366 754,670
Occupancy and equipment...................... 110,981 179,654 290,635
Regulatory assessments....................... 54,909 66,365 121,274
Data processing fees......................... 36,538 60,847 97,385
Other operating expense...................... 143,794 225,852 369,646
Transaction-related expense.................. 2,000 -- 2,000
Amortization of goodwill and other
intangibles................................ 28,306 40,286 68,592
REO operations............................... 10,682 5,605 16,287
------------ ------------- -------------
Total other expense..................... 700,514 1,019,975 1,720,489
------------ ------------- -------------
Income before income taxes and
minority interest.................. 425,488 422,122 847,610
Income taxes................................. 111,906 161,100 273,006
Provision (benefit) for payments in lieu of
taxes...................................... 7,887 -- 7,887
------------ ------------- -------------
Income before minority interest....... 305,695 261,022 566,717
Minority interest in income of consolidated
subsidiaries............................... 15,793 -- 15,793
------------ ------------- -------------
Net Income(3)................................ $ 289,902 $ 261,022 $ 550,924
============ ============= =============
Net Income Attributable to Common Stock...... $ 271,318 $ 236,007 $ 507,325
============ ============= =============
Net income per common share(3)(4):
Primary.................................... $2.47 $1.72 $2.17
Fully diluted.............................. 2.42 1.71 2.15
Average number of common shares used to
calculate net income per common share(4):
Primary.................................... 109,944,477 137,111,074 233,344,444
Fully diluted.............................. 115,363,724 137,951,442 239,520,022
</TABLE>
<PAGE> 15
PRO FORMA COMBINED CONSOLIDATED
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-------------------------------------------------------
PRO FORMA
WASHINGTON GREAT INCLUDING GREAT
MUTUAL WESTERN WESTERN(1)(2)
----------------- ------------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT
FOR PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C>
INTEREST INCOME
Loans......................................... $ 1,658,818 $ 2,291,884 $ 3,950,702
New West note receivable...................... 141,039 -- 141,039
Investment and mortgage-backed securities..... 494,387 304,886 799,273
Cash equivalents.............................. 1,169 32,948 34,117
------------- ------------- -----------
Total interest income.................... 2,295,413 2,629,718 4,925,131
INTEREST EXPENSE
Deposits...................................... 852,666 950,299 1,802,965
Borrowings.................................... 482,692 357,149 839,841
------------- ------------- -----------
Total interest expense................... 1,335,358 1,307,448 2,642,806
------------- ------------- -----------
Net interest income.................... 960,055 1,322,270 2,282,325
Provision for loan losses..................... 122,009 206,379 328,388
------------- ------------- -----------
Net interest income after provision.... 838,046 1,115,891 1,953,937
OTHER INCOME
Depositor fees................................ 45,255 140,703 185,958
Loan servicing fees........................... 23,247 50,853 74,100
Securities, annuities and other fees.......... 65,248 96,923 162,171
Other operating income........................ 39,630 8,164 47,794
Gain on sale of loans......................... 23,488 7,012 30,500
Gain (loss) on sale of other assets........... 23,926 63,421 87,347
------------- ------------- -----------
Total other income....................... 220,794 367,076 587,870
OTHER EXPENSE
Salaries and employee benefits................ 315,424 469,115 784,539
Occupancy and equipment....................... 102,403 199,048 301,451
Regulatory assessments........................ 54,887 77,451 132,338
Data processing fees.......................... 33,862 32,512 66,374
Other operating expense....................... 146,463 207,764 354,227
Amortization of goodwill and other intangible
assets...................................... 29,076 58,689 87,765
REO operations................................ 13,402 31,854 45,256
------------- ------------- -----------
Total other expense...................... 695,517 1,076,433 1,771,950
------------- ------------- -----------
Income before income taxes and minority
interest............................ 363,323 406,534 769,857
Income taxes.................................. 109,880 155,300 265,180
Provision (benefit) for payments in lieu of
taxes....................................... (824) -- (824)
------------- ------------- -----------
Income before minority interest........ 254,267 251,234 505,501
Minority interest in income of consolidated
subsidiaries................................ 13,992 -- 13,992
------------- ------------- -----------
Net Income(3)................................. $ 240,275 $ 251,234 $ 491,509
============= ============= ===========
Net Income Attributable to Common Stock....... $ 221,691 $ 226,219 $ 447,910
============= ============= ===========
Net income per common share(3)(4):
Primary..................................... $2.09 $1.69 $1.98
Fully diluted............................... 2.06 1.69 1.97
Average number of common shares used to
calculate net income per common share(4):
Primary..................................... 106,245,127 133,769,724 226,637,879
Fully diluted............................... 111,664,374 133,769,724 232,057,126
</TABLE>
<PAGE> 16
NOTES TO PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
(1) No pro forma adjustments are necessary.
(2) Merger-related Expenses. Merger-related expenses anticipated to be
recorded are not included in the Pro Forma Including Great Western statements of
income for the three years ended December 31, 1996. Merger-related expenses
expected to be recorded by Washington Mutual are summarized in the following
table (dollars in thousands):
<TABLE>
<S> <C>
Additional loan loss reserves............................................ $ 100,000
Severance and management payments........................................ 145,000
Facilities and equipment................................................. 106,000
Other expenses........................................................... 92,000
---------
Total expenses......................................................... 443,000
Tax benefit.............................................................. (125,000)
---------
Net expenses........................................................... $ 318,000
=========
</TABLE>
(3) "Net income from continuing operations" and "net income" are equal for
the three years ended December 31, 1996.
<PAGE> 17
(4) Per Share Data. Fully diluted net income per common share for the
three years ended December 31, 1996 were calculated using the following
information:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1996 1995 1994
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
WASHINGTON MUTUAL
Net income....................................... $ 114,278 $ 289,902 $ 240,275
Preferred stock dividends:
Noncumulative Perpetual, Series C.............. (6,276) (6,384) (6,384)
Noncumulative Perpetual, Series E.............. (3,743) (3,800) (3,800)
Noncumulative Convertible Perpetual Preferred
Stock, Series D(*).......................... (8,400) -- --
------------ ------------ ------------
Net income available to fully diluted common
stock.......................................... $ 95,859 $ 279,718 $ 230,091
============ ============ ============
Average common shares used to calculate net
income per common share:
Primary........................................ 112,858,781 109,944,477 106,245,127
Dilutive effect of stock options and litigation
shares(**).................................. 279,943 -- --
Noncumulative Convertible Perpetual Preferred
Stock, Series D............................. -- 5,419,247 5,419,247
------------ ------------ ------------
Fully diluted.................................. 113,138,724 115,363,724 111,664,374
============ ============ ============
PRO FORMA INCLUDING GREAT WESTERN
Net income....................................... $ 230,100 $ 550,924 $ 491,509
Preferred stock dividends:
Noncumulative Perpetual, Series C.............. (6,276) (6,384) (6,384)
Noncumulative Perpetual, Series E.............. (3,743) (3,800) (3,800)
Noncumulative Convertible Perpetual Preferred
Stock, Series D(*).......................... (8,400) -- --
Great Western Preferred Stock.................. (20,295) (25,015) (25,015)
------------ ------------ ------------
Net income available to fully diluted common
stock.......................................... $ 191,386 $ 515,725 $ 456,310
============ ============ ============
Average common shares used to calculate net
income per common share:
Primary........................................ 237,513,322 233,344,444 226,637,879
Dilutive effect of stock options and litigation
shares(**).................................. 950,587 756,331 --
Noncumulative Convertible Perpetual Preferred
Stock, Series D............................. -- 5,419,247 5,419,247
------------ ------------ ------------
Fully diluted.................................. 238,463,909 239,520,022 232,057,126
============ ============ ============
</TABLE>
(*) In 1996, for purposes of calculating fully diluted earnings per share, the
assumed conversion of the Series D Preferred Stock was anti-dilutive.
(**) As part of the business combination with Keystone Holdings, 8,000,000
shares of Washington Mutual Common Stock, with an assigned value of
$41.6125 per share, were issued to an escrow for the benefit of the
shareholders of Keystone Holdings and the FRF and their transferees.
Washington Mutual used the treasury stock method to determine the effect
of the shares upon its financial statements. For all periods presented,
the dilutive effect of the 8,000,000 shares of Washington Mutual Common
Stock on primary and fully diluted earnings per share was minimal.
<PAGE> 18
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: May 20, 1997 By: /s/ Marc R. Kittner
--------------------------
Senior Vice President and
Corporate Counsel
