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: July 21, 1998
Washington Mutual, Inc.
(Exact Name of Registrant as specified in its charter)
Washington 0-25188 91-1653725
(State or Other Jurisdiction (Commission File Number)(IRS Identification No.)
of Incorporation)
1201 Third Avenue, Seattle, Washington 98101
Address of Principal Executive Office Postal Code
206-461-2000
Registrant's telephone number including area code
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) 1. Press Release dated July 21, 1998.
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: July 22, 1998 By:/s/ Marc R. Kittner
Marc R. Kittner, Senior Vice President
and Deputy General Counsel
Media Contact: Bill Ehrlich
1-800-228-9268
(206) 461-2204
Investor Contact: JoAnn DeGrande July 21, 1998
(206) 461-3186 FOR IMMEDIATE RELEASE
Washington Mutual Announces Record Second-Quarter Earnings,
Increased Cash Dividend, and Successful California
and Florida Systems Conversions
SEATTLE -- Washington Mutual, Inc. (Nasdaq: WAMU) today announced record
second-quarter earnings of $261.3 million, an increase of 37 percent from
earnings of $191.1 million, one year ago. Diluted earnings per share were 69
cents, an increase from 50 cents per share in the second quarter of 1997.
Earnings from operations, net income excluding transaction-related charges,
for the second quarter of 1998 were $276.4 million, versus $211.4 million for
the same period in 1997. On a diluted basis, earnings from operations were 73
cents per share, as compared with 56 cents per share in the second quarter one
year ago.
Reflecting Washington Mutual's continued strong profitability and capital
position, the company's board of directors declared a cash dividend on the
common stock of 20.67 cents per share, an increase from the previous quarter's
adjusted cash dividend of 20 cents per share. The board also declared a cash
dividend of 47.5 cents per share on the Series E preferred stock (Nasdaq:
WAMUM). Dividends on the common stock are payable on August 14, 1998, and
dividends on preferred stock are payable August 17, 1998, in each case, to
shareholders of record as of July 31, 1998.
"The second quarter was an outstanding three-month period for Washington
Mutual," said Kerry Killinger, chairman, president and chief executive officer.
"During the quarter, we successfully completed the systems conversions at
the more than 370 former Great Western locations in California and Florida.
Simultaneously, we continued to produce strong household and account growth,
generate record lending, sustain strong profitability and maintain excellent
asset quality. To produce record earnings at the same time as completing such a
massive integration effort demonstrates the ability of our employees to
effectively execute our growth strategy."
- more -
<PAGE>
WAMU - 2
Killinger pointed out that financial highlights from the quarter included a
return on average common equity of 19.04 percent (20.15 percent return on
average common equity on an operating basis); a 32 percent increase in total
loan originations; and continued strong growth in the company's checking account
base and households served.
SECOND-QUARTER RESULTS
Net Interest And Other Income
Growth in the loan portfolio helped produce net interest income of $726.5
million for the second quarter of 1998, up 11 percent from $653.4 million a year
earlier. The spread during the quarter was 2.74 percent, down from 2.81 percent
for the same period last year. The margin, which was impacted by the flattened
yield curve, was 2.91 percent in the most recent quarter versus 2.99 percent for
second quarter 1997.
Total other income was $249.8 million, up 33 percent from $188.1 million in
last year's second quarter. A net increase of approximately 345,000 checking
accounts, year over year, contributed to increased depositor and other retail
banking fees, which rose 14 percent to $105.7 million during the quarter, from
$92.3 million a year earlier.
Gain on sale of loans and leases for the quarter was $28.0 million, up from
$5.4 million in second quarter 1997. The increase reflected a strong demand by
customers for fixed-rate mortgage products and the company's strategy of selling
the majority of these assets on the secondary market. Gain on sale of other
assets for the quarter was $13.2 million, up from $2.1 million in last year's
second quarter. The increase was primarily due to gains on securities
transactions.
The company continues to make progress in re-mixing its deposit base by
replacing time deposits with transaction accounts, which produce higher fee
income and help reduce the company's cost of deposits and borrowings. At June
30, 1998, transaction account balances, including checking, savings and money
market deposits, represented 47 percent of total deposits, as compared with 42
percent at June 30, 1997. Loan Originations
The company's growing franchise and relatively low interest rates, combined
with healthy regional economies, helped to produce record total loan
originations of $10.7 billion for the quarter, up 32 percent from $8.1 billion a
year ago.
- more -
WAMU - 3
In the second quarter, single-family residential loan originations
(excluding residential construction) were $8.6 billion, up from $6.1 billion one
year ago. Of that total, $4.4 billion were adjustable-rate mortgages versus $4.6
billion for the same period in 1997. Noting the company's continued strong
adjustable-rate mortgage originations, Killinger said, "The second quarter's
originations were excellent, given the current interest rate environment, and
are indicative of the strength of our lending operations."
During the quarter, the company's banking subsidiaries intentionally slowed
consumer lending production to facilitate a smooth roll-out of a new lending
platform at the former Great Western locations. Consequently, originations of
shorter-term, higher-yielding consumer loans during the quarter were $625.8
million, down slightly from $636.7 million a year ago. Residential construction
lending for the period was $505.2 million, up 30 percent from $389.3 million in
second quarter 1997.
Also in the second quarter, the company's consumer finance group, Aristar,
Inc., reported loan originations of $568.4 million, up 11 percent from $512.8
million in the same period one year ago. Efficiency Ratio
Washington Mutual's efficiency ratio (other expense, excluding amortization
of intangible assets arising from acquisitions, as a percentage of net interest
income and other income) was 50.22 percent versus 54.25 percent a year ago.
Excluding transaction-related charges, the ratio was 47.72 percent versus 51.36
percent in the second quarter of 1997.
Total other expense for the quarter was $502.7 million, up from $472.2
million in last year's second quarter. Excluding the amortization of intangible
assets, other expense was $490.3 million for the second quarter of this year as
compared with $456.5 million for the same period one year ago. Excluding both
amortization of intangible assets and transaction charges, other expense for the
quarter was $465.9 million versus $432.2 million in second quarter of 1997.
Killinger pointed out that the period's expenses, in part, reflected the
company's increased business, the Great Western account conversions, and the
costs associated with the preliminary planning for the proposed Ahmanson merger.
He added that the company anticipates improved efficiency in the second half of
the year as a result of further consolidation of former Great Western
operations.
- more -
WAMU - 4
Credit Quality
The continued health of the major regional real estate markets where the
company operates contributed to a decline in total nonperforming assets to
$768.6 million at June 30, 1998, down from $802.6 million at March 31, 1998.
Nonperforming assets were 0.74 percent of total assets for the quarter, compared
with 0.78 percent at March 31, 1998.
In the quarter, the company made a $46.4 million provision for loan losses,
versus $50.0 million the previous year. Net loan charge offs declined to $35.2
million from $55.3 million a year earlier. In addition, the company took $2.9
million in write-downs of loans securitized and retained in the second quarter
of this year, as compared with $6.2 million for the same period one year ago. At
June 30, 1998, loan loss reserves totaled $684.4 million, and represented 116
percent of nonaccrual loans.
"We will continue to closely monitor the regional economies in our primary
markets and the adequacy of our loss reserves, and will continue to make loan
loss provisions as appropriate," Killinger said.
Assets, Stockholders' Equity and Capital Ratios
Consolidated assets at June 30, 1998, were $103.4 billion, up slightly from
$103.1 billion at March 31, 1998, while total deposits were $50.5 billion, down
from $51.3 billion at the end of first quarter 1998. Stockholders' equity at
June 30, 1998, was $5.6 billion, or 5.45 percent of assets, and capital ratios
of the company's banking subsidiaries continued to exceed the FDIC's
requirements for classification as "well-capitalized," the highest regulatory
standard.
"Our strong capital position provides us the flexibility to potentially
accelerate loan and asset growth once the interest rate environment becomes more
favorable to do so," Killinger said.
Consumer Finance
Aristar, Inc., the holding company for Washington Mutual's consumer finance
group, reported second quarter net income of $13.9 million, versus $12.9 million
for the same period in 1997. Also during the quarter, Washington Mutual named
Craig J. Chapman as Aristar's chief executive officer. Chapman's
responsibilities for the Tampa-based company include the development and
implementation of a long-term growth strategy.
- more -
WAMU - 5
Internal Growth
Despite the systems conversions in Florida and California, the company's
focus on gaining new households through marketing of checking accounts produced
strong results during the quarter.
During the period, the company added approximately 80,000 checking accounts
to its base, including more than 45,000 at former Great Western and American
Savings locations.
Great Western Integration Update
As previously mentioned, deposit conversions at the more than 370 former
Great Western locations in Florida, Northern and Southern California were
completed in three phases during the second quarter of 1998. A total of 4.7
million accounts, representing $24.0 billion in deposits and 1.5 million
transaction card accounts, were converted over weekends in April, May and June.
At the same time as the deposit conversions, more than 80 California financial
centers were consolidated into existing Washington Mutual locations in
California.
In addition, the Great Western and American Savings' loan portfolios were
consolidated in late April in a process that involved some 650,000 mortgage and
consumer loans.
"We are delighted with the results of this latest integration, " Killinger
noted. "It provides an excellent platform for our next assignment: the
successful integration of H.F. Ahmanson."
Ahmanson Merger Update
On July 20, the Office of Thrift Supervision (OTS) deemed complete
Washington Mutual's application to acquire H. F. Ahmanson & Co., and its Home
Savings of America subsidiary. The final approval of the OTS is still pending.
Special meetings for both Washington Mutual and Ahmanson shareholders will be
held August 28, 1998 to consider proposals regarding the companies' pending
merger. It is expected that following the approval of shareholders and
regulators, the transaction will be completed by the beginning of the fourth
quarter.
"Now that the Great Western integration is virtually completed, our
attention will turn to successfully bringing the Washington Mutual and Ahmanson
operations together," Killinger said. "We have begun a detailed planning process
in collaboration with Ahmanson managers and we look forward to moving ahead as
we create the nation's premier consumer bank."
- more -
WAMU - 6
Other News
The company announced that it will redeem its Series E preferred stock
(Nasdaq: WAMUM) on Sept. 16, 1998 at $25.00 per share, plus unpaid dividends up
to the redemption date.
Also during the quarter, the company announced a ten-year, $120 billion
community commitment, the largest such commitment, relative to asset size, made
by a financial services company. At the time of the announcement, Killinger
noted that "as past performance proves, Washington Mutual has always made
serving the community an integral part of how we do business. Contributing to
the strength of our communities is not only the right thing to do but makes good
business sense, as well."
In other news, Killinger said the company remains on target for dealing
with issues related to the Year 2000. He pointed out that the company does not
foresee any material expenditures to be ready to do business in the Year 2000.
OUTLOOK
"Our strong financial performance and the successful integration of
Great Western during the second quarter provide terrific building blocks as we
enter the second half of 1998. Our business fundamentals remain strong, and we
are in a good position to continue the successful execution of our business
plan," Killinger concluded.
With a history dating back to 1889, Washington Mutual is a financial
services company that provides a diversified line of products and services to
consumers and small- to mid-sized businesses. At June 30, 1998, Washington
Mutual and its subsidiaries had consolidated assets of $103.4 billion. The
company operates more than 1,600 offices throughout the nation.
Statements contained in this news release which are not historical facts
and which pertain to future operating results of Washington Mutual, Inc. and its
subsidiaries constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements involve significant risks and uncertainties. Actual results may
differ materially from the results discussed in these forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed in Form 10-K for the year ending December 31, 1997,
and the Registration Statement on Form S-4, as amended, reg. no. 333-52785.
# # #
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 per share
amounts)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
- ----------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income
Loans $1,390,656 $1,268,733 $2,747,961 $2,505,301
Available-for-sale securities 247,539 271,640 453,634 543,222
Held-to-maturity securities 227,729 111,464 462,132 182,859
Cash equivalents and other 34,813 18,512 63,662 54,383
- ----------------------------------------------------------------------------------------------------------------------
Total interest income 1,900,737 1,670,349 3,727,389 3,285,765
Interest Expense
Deposits 511,882 543,792 1,027,783 1,081,280
Borrowings 662,383 473,172 1,260,261 891,558
- ----------------------------------------------------------------------------------------------------------------------
Total interest expense 1,174,265 1,016,964 2,288,044 1,972,838
- ----------------------------------------------------------------------------------------------------------------------
Net interest income 726,472 653,385 1,439,345 1,312,927
Provision for loan losses 46,405 49,999 91,748 103,809
- ----------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 680,067 603,386 1,347,597 1,209,118
Other Income
Depositor and other retail banking fees 105,652 92,305 197,960 174,978
Securities and insurance fees and commissions 52,441 54,078 102,872 103,058
Loan servicing fees 18,625 19,908 33,446 43,084
Loan related income 19,302 11,724 34,427 24,232
Gain (loss) on sale of loans and leases 28,007 5,415 43,451 14,210
Gain (loss) on sale of other assets 13,184 2,097 16,505 9,262
Write down of loans securitized and retained (2,871) (6,172) (10,137) (12,422)
Other operating income 15,477 8,792 25,122 19,996
- ----------------------------------------------------------------------------------------------------------------------
Total other income 249,817 188,147 443,646 376,398
Other Expense
Salaries and employee benefits 205,561 197,112 395,000 400,379
Occupancy and equipment 78,917 78,263 151,213 158,847
Telecommunications and outsourced information services 52,785 42,847 101,973 86,073
Regulatory assessments 8,878 8,561 18,355 17,204
Transaction-related expense 24,473 24,305 33,123 58,026
Amortization of intangible assets arising from acquisitions 12,327 15,683 27,028 31,446
Foreclosed asset expense 2,725 902 3,601 4,544
Other operating expenses 116,990 104,519 214,581 210,769
- ----------------------------------------------------------------------------------------------------------------------
Total other expense 502,656 472,192 944,874 967,288
- ----------------------------------------------------------------------------------------------------------------------
Income before income taxes 427,228 319,341 846,369 618,228
Income taxes 165,957 128,284 328,627 247,396
- ----------------------------------------------------------------------------------------------------------------------
Net Income $ 261,271 $ 191,057 $ 517,742 $ 370,832
======================================================================================================================
Net Income Attributable to Common Stock $ 260,335 $ 185,128 $ 515,068 $ 358,974
======================================================================================================================
Net income per common share:
Basic $0.69 $0.51 $1.37 $0.99
Diluted 0.69 0.50 1.37 0.98
</TABLE>
<PAGE>
Washington Mutual, Inc.
Selected Financial
Information
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
- ----------------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Used To Compute Per Share Amounts
Net income $261,271 $191,057 $517,742 $370,832
Preferred stock dividends:
Noncumulative Perpetual, Series C - (1,569) (802) (3,138)
Noncumulative Perpetual, Series E (936) (936) (1,872) (1,872)
Nonconvertible cumulative preferred, Series F - (3,424) - (6,848)
- ----------------------------------------------------------------------------------------------------------------------------
Net income available to basic common stock $260,335 $185,128 $515,068 $358,974
============================================================================================================================
Net income $261,271 $191,057 $517,742 $370,832
Preferred stock dividends:
Noncumulative Perpetual, Series C - (1,569) (802) (3,138)
Noncumulative Perpetual, Series E (936) (936) (1,872) (1,872)
Nonconvertible cumulative preferred, Series F - (3,424) - (6,848)
- ----------------------------------------------------------------------------------------------------------------------------
Net income available to diluted common stock $260,335 $185,128 $515,068 $358,974
============================================================================================================================
Average common shares used to calculate earnings per share:
Basic 374,974,662 363,789,497 374,776,022 363,302,015
Common stock equivalents 1,612,248 4,065,612 1,539,055 4,513,669
- ----------------------------------------------------------------------------------------------------------------------------
Diluted 376,586,910 367,855,109 376,315,077 367,815,684
Financial Ratios
Return on average assets 1.01% 0.85% 1.03% 0.84%
Return on average equity 18.94 14.95 19.05 14.66
Return on average common equity 19.04 15.33 19.13 15.03
Efficiency ratio:
Including amortization of intangible assets arising
from acquisitions 51.49 56.11 50.18 57.26
Excluding amortization of intangible assets arising
from acquisitions 50.22 54.25 48.74 55.40
Net Interest Spread
Yield on loans 7.95% 7.91% 7.97% 7.91%
Yield on investments 6.90 7.05 6.94 7.04
- ----------------------------------------------------------------------------------------------------------------------------
Combined yield on earning assets 7.64 7.68 7.67 7.68
Cost of deposits 4.03 4.20 4.08 4.18
Cost of borrowings 5.88 5.98 5.91 5.93
- ----------------------------------------------------------------------------------------------------------------------------
Combined cost of funds 4.90 4.87 4.92 4.82
- ----------------------------------------------------------------------------------------------------------------------------
Net interest spread 2.74% 2.81% 2.75% 2.86%
============================================================================================================================
Net interest margin 2.91% 2.99% 2.93% 3.04%
Average Balances
Loans $ 69,926,446 $ 64,181,743 $ 69,076,452 $ 63,432,249
Investments 29,590,385 22,797,092 28,224,977 22,171,487
- ----------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 99,516,831 86,978,835 97,301,429 85,603,736
Deposits 50,887,011 51,988,921 50,828,632 52,174,931
Borrowings 45,221,930 31,730,572 42,990,338 30,300,204
- ----------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 96,108,941 83,719,493 93,818,970 82,475,135
Total assets 103,034,804 90,440,848 100,969,122 88,669,939
Stockholders' equity 5,518,615 5,113,595 5,434,282 5,059,955
</TABLE>
<PAGE>
Washington Mutual, Inc.
Consolidated Statements of Financial Position
(dollars in thousands, except per share
amounts)
(unaudited)
<TABLE>
<CAPTION>
June 30, 1998 Dec. 31, 1997
- -------------------------------------------------------------------------------------------------
<C> <C> <C>
Assets
Cash $ 992,346 $ 1,285,222
Cash equivalents 47,147 275,668
Trading securities
36,024 23,364
Available-for-sale securities:
Mortgage-backed securities ("MBS") 14,447,696 10,188,107
Investment Securities 716,153 1,185,815
Held-to-maturity securities:
MBS 12,246,295 12,659,217
Investment Securities 127,054 120,397
Loans:
Loans held in portfolio 70,035,896 67,124,935
Loans held for sale 931,448 685,716
Reserve for loan losses (684,436) (670,494)
- -------------------------------------------------------------------------------------------------
Total loans 70,282,908 67,140,157
Investment in Federal Home Loan Banks 1,220,350 1,059,491
("FHLBs")
Foreclosed assets 180,108 205,272
Premises and equipment 1,025,847 937,198
Intangible assets arising from 329,608 356,650
acquisitions
Mortgage servicing rights 247,527 215,360
Other assets 1,497,889 1,329,181
================================================================================================
Total assets $103,396,952 $96,981,099
================================================================================================
Liabilities
Deposits:
Checking accounts $ 8,499,938 $ 7,914,375
Savings accounts and money market deposit accounts 15,325,566 14,940,045
Time deposit accounts 26,635,641 28,131,597
- -------------------------------------------------------------------------------------------------
Total deposits 50,461,145 50,986,017
Federal funds purchased and commercial paper 3,705,298 2,928,282
Reverse repurchase agreements 15,100,651 12,279,040
Advances from FHLBs 23,853,137 20,301,963
Trust preferred securities 800,000 800,000
Other borrowings 2,557,297 2,689,362
Other liabilities 1,283,772 1,687,364
- -------------------------------------------------------------------------------------------------
Total liabilities 97,761,300 91,672,028
Stockholders' Equity
Preferred stock, no par value: 10,000,000 shares authorized -
1,970,000 and 4,722,500 shares issued and outstanding,
liquidation preference 49,250 118,063
Common stock, no par value: 800,000,000 shares authorized -
387,124,870 and 386,340,027 shares issued and outstanding - -
Capital surplus - common stock 1,966,249 1,943,294
Accumulated other comprehensive income 144,171 134,610
Retained earnings 3,475,982 3,113,104
- -------------------------------------------------------------------------------------------------
Total stockholders' equity 5,635,652 5,309,071
=================================================================================================
Total liabilities and stockholders' equity $103,396,952 $96,981,099
=================================================================================================
Book value per common share $14.89 $13.87
Tangible book value per common share 14.21 13.13
</TABLE>
<PAGE>
Washington Mutual, Inc.
Selected Financial
Information
(dollars in thousands, except per share
amounts)
(unaudited)
Note: The following analysis of operating and nonoperating earnings is
based upon the Company's opinion and is intended to provide the user additional
information about the Company's operations. It is not intended to replace
traditional financial statement disclosures in accordance with generally
accepted accounting principles and may not be comparable to similarly titled
measures reported by other companies.
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------------------------
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
1998 1998 1997 1997 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reported Financial Results
Net income (loss) $261,271 $256,471 $237,900 $(126,954) $191,057
Net income (loss) per diluted common share $0.69 $0.68 $0.63 $(0.36) $0.50
Financial Ratios on Reported Financial Results:
Return on average assets 1.01% 1.04% 0.99% (0.54)% 0.85%
Return on average equity 18.94 19.17 17.93 (9.48) 14.95
Return on average common equity 19.04 19.22 18.25 (10.47) 15.33
Efficiency ratio (excluding amortization of intangible assets) 50.22 47.15 49.53 105.58 54.25
Earnings from Operations
Reported net income (loss) $261,271 $256,471 $237,900 $(126,954) $191,057
Nonoperating acquisition and restructuring-related charges:
Write down of loans securitized and
retained in the trading portfolio - - - (100,000) -
Transaction-related and
restructuring charges (24,473) (8,650) (6,239) (366,860) (24,305)
- -----------------------------------------------------------------------------------------------------------------------------------
Nonoperating loss before income taxes (24,473) (8,650) (6,239) (466,860) (24,305)
Income tax benefit 9,341 3,357 2,474 125,699 3,973
- -----------------------------------------------------------------------------------------------------------------------------------
Net nonoperating loss (15,132) (5,293) (3,765) (341,161) (20,332)
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings from operations $276,403 $261,764 $241,665 $214,207 $211,389
===================================================================================================================================
Earnings per diluted common share:
Reported net income (loss) $0.69 $0.68 $0.63 $(0.36) $0.50
Net nonoperating loss (0.04) (0.01) - (0.92) (0.06)
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings from operations $0.73 $0.69 $0.63 $0.56 $0.56
===================================================================================================================================
Financial ratios on Earnings from Operations:
Return on average assets 1.07% 1.06% 1.01% 0.91% 0.93%
Return on average equity 20.03 19.57 18.49 16.43 17.00
Return on average common equity 20.15 19.62 19.12 17.35 18.00
Efficiency ratio (excluding amortization of intangible assets) 47.72 46.20 48.85 51.08 51.36
Impact of Amortization of Intangible Assets on Operations
Total amortization of intangible assets during the period $12,327 $14,701 $15,755 $16,387 $15,683
Tax benefit*
2,740 3,259 3,526 3,667 3,510
- -----------------------------------------------------------------------------------------------------------------------------------
Amortization of intangible assets, net $ 9,587 $11,442 $12,229 $12,720 $12,173
of tax benefit
===================================================================================================================================
* Approximately 57% of the amortization of intangible assets is deductible
for income tax purposes.
</TABLE>
<PAGE>
Washington Mutual, Inc.
Selected Financial
Information
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
1998 1998 1997 1997 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Adequacy
Washington Mutual, Inc.:
Stockholders' equity/total assets 5.45% 5.27% 5.47% 5.58% 5.66%
Common stockholders' equity/total assets 5.40 5.22 5.35 5.29 5.36
Tangible stockholders' equity/total
tangible assets 5.22 5.03 5.21 5.30 5.36
Tangible stockholders' equity
(including trust preferred
securities)/total tangible assets 6.00 5.81 6.04 6.14 6.23
Retail Checking Account Activity (#)
Net accounts opened/(closed) during the quarter
WMB and WMBfsb 34,020 33,056 31,882 43,381 39,654
WMB, FA 45,468 87,445 97,941 (28,693) (24,873)
- ------------------------------------------------------------------------------------------------------------------------
79,488 120,501 129,823 14,688 14,781
Retail Checking Accounts (#)
WMB and WMBfsb 833,467 799,447 766,391 734,509 691,128
WMB, FA 1,887,643 1,842,175 1,754,730 1,656,789 1,685,482
- ------------------------------------------------------------------------------------------------------------------------
Total retail checking accounts
2,721,110 2,641,622 2,521,121 2,391,298 2,376,610
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Six Months
Quarter Ended Ended
June 30, June 30,
- ------------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consumer Finance Operations
Net interest income $67,957 $61,384 $134,863 $122,316
Provision for loan losses 18,300 15,600 36,300 31,000
Other income 5,777 6,989 12,266 13,055
Other expense 32,341 31,386 67,242 65,154
- ------------------------------------------------------------------------------------------------------------------------
Net income before income taxes 23,093 21,387 43,587 39,217
Income taxes 9,200 8,500 17,400 15,600
- ------------------------------------------------------------------------------------------------------------------------
Net income $13,893 $12,887 $ 26,187 $ 23,617
========================================================================================================================
</TABLE>
<PAGE>
Washington Mutual, Inc.
Selected Financial
Information
(dollars in
millions)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
- ----------------------------------------------------------------------------------------------------------------------------
1998 1997 % Change 1998 1997 % Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loan Originations
Single-family residential ("SFR"):
Adjustable-rate $ 4,432.1 $ 4,643.5 (5)% $ 7,394.2 $ 7,275.2 2%
Fixed-rate 4,131.1 1,493.0 177 8,095.8 2,862.5 183
SFR - custom construction 292.7 238.4 23 445.4 406.7 10
SFR - builder construction 212.5 150.9 41 362.0 308.1 17
Apartment buildings 151.8 178.2 (15) 274.9 312.8 (12)
Other commercial real estate 109.5 119.1 (8) 209.0 205.5 2
Manufactured housing 81.9 88.3 (7) 137.4 151.2 (9)
Second mortgage and other consumer 543.9 548.4 (1) 935.2 925.2 1
Consumer finance 568.4 512.8 11 1,082.0 976.7 11
Commercial business 235.4 176.8 33 448.4 325.2 38
- ----------------------------------------------------------------------------------------------------------------------------
Total loan originations $10,759.3 $8,149.4 32% $19,384.3 $13,749.1 41%
============================================================================================================================
As a percentage of total origination
SFR 80% 75% 80% 74%
All other 20 25 20 26
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, 1998 June 30, 1998
- ----------------------------------------------------------------------------------------------------------------------------
Amount % of category % of total Amount % of category % of total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SFR Loan Originations
Short-term adjustable-rate mortgages
("ARMs"):
MTA $ 2,028.8 90% 24% $ 2,937.2 81% 19%
COFI 196.9 9 2 519.9 14 4
CMT 18.3 1 - 151.8 4 1
Other 14.2 - - 37.6 1
- ----------------------------------------------------------------------------------------------------------------------------
Total short-term ARMs 2,258.2 100% 26 3,646.5 100% 24
Medium-term ARMs:
MTA 2,152.1 99% 26 3,337.5 89% 21
CMT 21.8 1 - 410.2 11 3
- ----------------------------------------------------------------------------------------------------------------------------
Total medium-term ARMs 2,173.9 100% 26 3,747.7 100% 24
- ----------------------------------------------------------------------------------------------------------------------------
Fixed-rate mortgages 4,131.1 48 8,095.8 52
- ----------------------------------------------------------------------------------------------------------------------------
Total SFR loan originations $ 8,563.2 100% $15,490.0 100%
============================================================================================================================
</TABLE>
<PAGE>
Washington Mutual, Inc.
Selected Financial
Information
(dollars in
millions)
(unaudited)
<TABLE>
<CAPTION>
Change from
Mar. 31, 1998 June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
to June 30, 1998 1998 1998 1997 1997 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans and MBS by Property Type
Loans held in portfolio:
SFR $1,640.7 $55,230.4 $53,589.7 $52,745.8 $52,915.3 $51,114.0
SFR - custom construction 9.7 462.9 453.2 476.5 444.8 470.9
SFR - builder construction 41.8 462.7 420.9 400.9 370.6 353.6
Apartment buildings (80.0) 4,089.2 4,169.2 4,187.6 4,239.1 4,206.6
Other commercial real estate (7.6) 2,373.9 2,381.5 2,426.0 2,438.2 2,510.9
Manufactured housing, second mortgage
and other consumer 79.6 4,177.1 4,097.5 3,806.3 3,754.1 3,581.0
Consumer finance 47.3 2,319.0 2,271.7 2,309.4 2,192.6 2,173.0
Commercial business 115.8 920.7 804.9 772.5 725.8 621.0
- ---------------------------------------------------------------------------------------------------------------------------------
Total loans held in portfolio 1,847.3 70,035.9 68,188.6 67,125.0 67,080.5 65,031.0
Loans securitized and retained as MBS (718.9) 15,996.6 16,715.5 17,014.0 13,798.5 14,618.3
- ---------------------------------------------------------------------------------------------------------------------------------
Total loans held in portfolio and loans
securitized and retained as MBS 1,128.4 86,032.5 84,904.1 84,139.0 80,879.0 79,649.3
Loans held for sale (1) (355.2) 931.4 1,286.6 685.7 1,701.9 434.3
Less: Reserve for loan losses (11.2) (684.4) (673.2) (670.5) (671.9) (666.1)
- ---------------------------------------------------------------------------------------------------------------------------------
Total loans and loans securitized and
retained as MBS 762.0 86,279.5 85,517.5 84,154.2 81,909.0 79,417.5
MBS purchased and retained (2) (195.1) 10,697.4 10,892.5 5,833.3 5,968.6 5,197.7
- ---------------------------------------------------------------------------------------------------------------------------------
Total loans and MBS $ 566.9 $96,976.9 $96,410.0 $89,987.5 $87,877.6 $84,615.2
=================================================================================================================================
Change in Loans
Loans held in portfolio:
Loans originated $ 7,941.0 $ 5,736.0 $ 6,425.8 $ 5,634.4 $ 6,956.0
Loans purchased or acquired 616.1 28.4 0.1 0.4 19.5
Loans securitized (509.9) (244.6) (3,731.3) 0.0 (2,609.9)
Loans sold (10.0) (8.5) (15.0) (9.2) (7.3)
Loan payments and other (6,189.9) (4,447.7) (2,635.1) (3,576.1) (3,033.0)
- ---------------------------------------------------------------------------------------------------------------------------------
Change in loans held in portfolio 1,847.3 1,063.6 44.5 2,049.5 1,325.3
Change in securitized MBS (718.9) (298.5) 3,215.5 (819.8) 2,154.0
- ---------------------------------------------------------------------------------------------------------------------------------
Change in loans held in portfolio
and loans securitized and retained as MBS 1,128.4 765.1 3,260.0 1,229.7 3,479.3
Loans held for sale:
Loans originated 2,818.3 2,889.0 1,571.1 2,222.3 1,193.4
Loans sold (1) (3,173.5) (2,288.1) (2,587.3) (954.7) (1,183.6)
- ---------------------------------------------------------------------------------------------------------------------------------
Change in loans held for sale (355.2) 600.9 (1,016.2) 1,267.6 9.8
Change in reserve for loan losses (11.2) (2.7) 1.4 (5.8) 22.1
- ---------------------------------------------------------------------------------------------------------------------------------
Total change $ 762.0 $ 1,363.3 $ 2,245.2 $ 2,491.5 $ 3,511.2
=================================================================================================================================
As a percentage of total loans and
securitized MBS at beginning of quarter 0.9% 1.6% 2.7% 3.1% 4.6%
As a percentage of total assets at beginning of quarter 0.7 1.4 2.3 2.7 3.9
(1) Third quarter 1997 increase includes $1.2 billion in SFR loans that were
securitized in fourth quarter 1997.
(2) First quarter 1998 increase includes $2.4 billion in ARMs and $2.6 billion
in short duration (3.3 years) fixed-rate mortgages.
</TABLE>
<PAGE>
Washington Mutual, Inc.
Selected Financial
Information
(dollars in
millions)
(unaudited)
<TABLE>
<CAPTION>
Change from
Mar. 31, 1998
to June 30, 1998 June 30, 1998 Mar. 31, 1998
- ------------------------------------------------------------------------------------------------------------------------
Amount % of total Amount % of total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real Estate Loans and MBS
Short-term ARMs:
COFI $(2,798.6) $44,511.6 49% $47,310.2 53%
CMT 34.0 7,722.1 9 7,688.1 9
MTA 2,610.7 4,883.9 5 2,273.2 3
Other 954.9 7,621.8 9 6,666.9 7
- ------------------------------------------------------------------------------------------------------------------------
Total short-term ARMs 801.0 64,739.4 72 63,938.4 72
Medium-term ARMs:
CMT (2,182.7) 2,660.7 3 4,843.4 5
COFI (172.5) 969.3 1 1,141.8 1
MTA and other 1,887.3 5,576.0 6 3,688.7 4
- ------------------------------------------------------------------------------------------------------------------------
Total medium-term ARMs (467.9) 9,206.0 10 9,673.9 10
- ------------------------------------------------------------------------------------------------------------------------
Fixed-rate loans held in portfolio 370.3 11,051.5 12 10,681.2 12
Fixed-rate loans held for sale (487.6) 931.4 1 1,419.0 1
Fixed-rate MBS 119.6 4,316.2 5 4,196.6 5
- ------------------------------------------------------------------------------------------------------------------------
Total real estate loans and MBS $ 335.4 $90,244.5 100% $89,909.1 100%
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
------------------------
% of June 30, May 31, Apr. 30, June 30, Mar. 31,
Total 1998 1998 1998 1998 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SFR Loan Prepayment Activity
Short-term ARMs:
Payment capped (COFI, MTA) 61.0% 25.2% 24.3% 22.8% 24.1% 17.5%
Rate capped (CMT) 8.9 40.5 41.1 34.4 38.7 31.7
Medium-term ARMs 12.2 22.9 23.3 25.9 24.0 22.7
Fixed-rate mortgages 17.9 17.8 15.8 17.9 17.1 15.2
- ---------------------------------------------------------------------------------------------------------------------------------
Average for the period 100.0% 25.0% 24.2% 23.5% 24.2% 19.0%
=================================================================================================================================
</TABLE>
<PAGE>
Washington Mutual, Inc.
Selected Financial
Information
(dollars in
millions)
(unaudited)
<TABLE>
<CAPTION>
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
1998 1998 1997 1997 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reserve for Loan Losses
Balance, beginning of quarter $673.2 $670.5 $671.9 $666.1 $688.0
Provision for loan losses 46.4 45.3 51.2 52.1 50.0
Reserves added through business combinations - - - - 2.6
Reserves transferred to MBS impairment (16.5)
Reserves transferred to contingent liability - - (5.3) - (2.7)
Loans charged off:
SFR and SFR construction (10.2) (15.2) (22.2) (22.4) (29.0)
Commercial real estate (2.6) (3.6) (4.9) (4.9) (8.9)
Manufactured housing, second mortgage and
other consumer (5.5) (6.6) (4.0) (4.4) (4.6)
Consumer finance (21.6) (22.1) (21.4) (19.7) (19.4)
Commercial business (0.9) (1.0) (1.5) (0.8) (0.2)
- ----------------------------------------------------------------------------------------------------------------------------
Total loans charged off (40.8) (48.5) (54.0) (52.2) (62.1)
Recoveries of loans previously charged off:
SFR and SFR construction 0.3 0.4 0.5 0.3 0.4
Commercial real estate 0.1 0.7 0.6 1.3 0.4
Manufactured housing, second mortgage and
other consumer 0.5 0.4 0.4 0.4 1.7
Consumer finance 4.6 4.3 5.2 3.8 4.3
Commercial business 0.1 0.1 0.0 0.1 -
- ----------------------------------------------------------------------------------------------------------------------------
Total loans recovered 5.6 5.9 6.7 5.9 6.8
- ----------------------------------------------------------------------------------------------------------------------------
Net charge offs (35.2) (42.6) (47.3) (46.3) (55.3)
- ----------------------------------------------------------------------------------------------------------------------------
Balance, end of quarter $684.4 $673.2 $670.5 $671.9 $666.1
============================================================================================================================
Specific and allocated reserves:
Commercial real estate $ 74.5 $ 80.4 $ 85.0 $ 94.3 $104.8
Builder construction 2.0 2.0 2.2 2.1 1.9
Commercial business 9.3 5.2 3.3 3.2 3.3
- ----------------------------------------------------------------------------------------------------------------------------
Total allocated reserves 85.8 87.6 90.5 99.6 110.0
Unallocated reserves 598.6 585.6 580.0 572.3 556.1
- ----------------------------------------------------------------------------------------------------------------------------
Total reserve for loan losses $684.4 $673.2 $670.5 $671.9 $666.1
============================================================================================================================
Total reserve for loan losses as a percentage of:
Annualized net charge offs 486% 395% 354% 363% 301%
Nonaccrual loans 116 111 111 106 112
Nonperforming assets 89 84 83 81 86
Loss coverage as a percentage of nonaccrual loans* 124 119 119 113 119
*Nonaccrual loans include loans that have been securitized for which the
company retains the credit risk. Coverage for losses on these obligations is
provided through adjustments to the balance of MBS 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>
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
1998 1998 1997 1997 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonperforming Assets
Nonaccrual loans:
SFR and SFR construction $489.0 $491.9 $479.6 $516.3 $497.2
Apartment buildings and other
commercial real estate 21.6 37.7 43.1 40.8 32.0
Manufactured housing, second mortgage and
other consumer 24.8 23.2 25.2 23.5 19.9
Consumer finance 51.1 48.7 50.9 47.2 45.1
Commercial business 2.0 2.5 2.6 3.3 1.3
- ---------------------------------------------------------------------------------------------------------------------
Total nonaccrual loans 588.5 604.0 601.4 631.1 595.5
Foreclosed assets:
SFR and SFR construction 132.3 157.9 159.9 161.5 131.5
Apartment buildings and other
commercial real estate 40.2 35.0 40.8 40.6 44.0
Manufactured housing, second mortgage and
other consumer 8.7 6.8 6.0 4.8 4.0
Consumer finance 2.0 1.9 1.5 2.0 2.0
Commercial business - - - - -
Reserve for losses on foreclosed assets (3.1) (3.0) (3.0) (7.1) (6.7)
- ---------------------------------------------------------------------------------------------------------------------
Net foreclosed assets 180.1 198.6 205.2 201.8 174.8
- ---------------------------------------------------------------------------------------------------------------------
Other nonperforming assets - - - - 1.5
=====================================================================================================================
Total nonperforming assets $768.6 $802.6 $806.6 $832.9 $771.8
=====================================================================================================================
Nonperforming assets by property type:
SFR $618.5 $635.4 $627.1 $665.6 $616.2
SFR - custom construction 1.0 1.0 0.7 1.1 6.2
SFR - builder construction 14.8 13.4 11.7 11.1 6.4
Apartment buildings 34.8 24.7 35.8 38.6 38.6
Other commercial real estate 26.8 48.0 48.1 42.8 38.1
Manufactured housing, second mortgage and
other consumer 20.7 30.0 31.2 28.3 24.0
Consumer finance 53.1 50.6 52.5 49.2 47.1
Commercial business 2.0 2.5 2.5 3.3 1.3
Reserve for losses on foreclosed assets (3.1) (3.0) (3.0) (7.1) (6.1)
- ---------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $768.6 $802.6 $806.6 $832.9 $771.8
=====================================================================================================================
As a percentage of total loans 1.09% 1.17% 1.20% 1.22% 1.19%
As a percentage of total assets 0.74 0.78 0.83 0.87 0.83
</TABLE>
