SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: October 1, 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 Employer
of Incorporation) Identification No.)
1201 Third Avenue, Seattle, Washington 98101
Address of Principal Executive Office Zip Code
206-461-2000
Registrant's telephone number including area code
Item 2. Acquisition or Disposition of Assets.
Pursuant to an Agreement and Plan of Merger dated as of March 16, 1998
between the Registrant and H. F. Ahmanson & Company ("Ahmanson"), Ahmanson
merged with and into the Registrant at 2:00 p.m. PST on October 1, 1998 (the
"Merger"). As consideration for the Merger, holders of Ahmanson common stock
received in exchange for each share of Ahmanson common stock held the right to
receive 1.68 shares of the Registrant's common stock, with cash being paid in
lieu of fractional shares. As a result of the Merger, the Registrant issued
approximately 205,582,840 shares of its common stock.
Ahmanson, with consolidated assets of approximately $46.68 billion at
December 31, 1997, is a residential real estate and consumer and business
financial services company. Ahmanson's principal asset was the capital stock of
Home Savings of America, FSB, a federally chartered savings bank ("Home
Savings"), and a wholly owned subsidiary of Ahmanson. As of 11:00 p.m. PST on
October 3, 1998, Home Savings was merged with and into Washington Mutual Bank,
FA, a federally chartered savings association and wholly owned subsidiary of the
Registrant. Home Savings conducted the majority of its retail banking operations
in California. At December 31, 1997, Ahmanson had 370 branch offices located in
three states and 126 loan offices in nine states.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of business acquired
(1) The financial statements required by this item are incorporated herein
by reference to Item 1 of Ahmanson's Annual Report for the year ended December
31, 1997 on Form 10-K dated March 30, 1998 (File No. 1-8930).
(2) Unaudited financial statements at or for the nine months ended
September 30, 1988 and 1997. Certain reclassifications have been made to the
Ahmanson financial statements to conform to the Registrant's presentation.
(b) Pro forma financial information
(1) Year Ended December 31, 1997. The pro forma financial information
required by this item is incorporated herein by reference to pages 68 through
79, inclusive, of the Registrant's Registration Statement on Form S-4 as filed
with the Commission on July 27, 1998 (Registration No. 333-52785).
(2) At or For the Nine Months Ended September 30, 1998.
(A) Statement of Income.
(B) Statement of Financial Position.
<PAGE>
(c) Exhibits
Exhibit No. 2. Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession. Incorporated herein by reference to Item 7(c).3 of
the Registrant's Current Report on Form 8-K/A dated March 17, 1998 (File No.
0-25188).
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: November 30, 1998 By: /s/ Fay L. Chapman
Fay L. Chapman
Executive Vice President and
General Counsel
<PAGE>
H. F. AHMANSON & COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
------------------- -------------------
<S> <C> <C>
INTEREST INCOME
Loans $ 1,947,300 $ 1,733,260
Investments 797,581 818,452
------------------- ------------------
Total interest income 2,744,881 2,551,712
INTEREST EXPENSE
Deposits 1,181,091 1,114,967
Borrowings 505,908 488,944
------------------- ------------------
Total interest expense 1,686,999 1,603,911
------------------- ------------------
Net interest income 1,057,882 947,801
Provision for loan losses 1,747 35,272
------------------- ------------------
Net interest income after provision for loan losses 1,056,135 912,529
OTHER INCOME
Depositor and other retail banking fees 87,993 87,076
Loan servicing income 41,412 41,138
Securities fees and commissions 27,615 17,574
Insurance fees and commissions 10,578 12,231
Mortgage banking gains 32,228 14,824
Loss on sale of other assets (1,854) (384)
Write down of loans securitized and retained (23,065) (39,772)
Gain on sales of retail deposit branch systems 289,040 57,566
Other operating income 61,029 48,371
------------------- ------------------
Total other income 524,976 238,624
OTHER EXPENSE
Salaries and employee benefits 298,882 283,987
Occupancy and equipment 140,143 130,945
Telecommunications and outsourced information services 37,387 30,734
Regulatory assessments 21,113 19,053
Transaction-related expense 23,159 -
Amortization of intangible assets arising from acquisitions 36,798 19,289
Foreclosed asset expense 23,387 58,107
Other operating expense 127,936 125,889
------------------- ------------------
Total other expense 708,805 668,004
------------------- ------------------
Income before provision for income taxes 872,306 483,149
Provision for income taxes 334,500 179,303
------------------- ------------------
NET INCOME $ 537,806 $ 303,846
=================== ==================
Net income attributable to common stock $ 525,807 $ 278,623
=================== ==================
Net income per common share:
Basic $ 4.80 $ 2.84
Diluted 4.44 2.61
Average number of common shares used to calculate net
income per common share:
Basic 109,494,403 98,183,547
Diluted 120,417,604 111,857,195
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
H. F. AHMANSON & COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
September 30,
1998
-----------------
<S> <C>
ASSETS
Cash $ 565,601
Cash equivalents 129,034
Investments:
Available-for-sale securities, amortized cost $8,906,496:
Mortgage-backed securities ("MBS") 9,144,966
Investment securities 11,260
Held-to-maturity securities, fair value $3,801,310:
MBS 3,798,440
Investment securities 2,412
-----------------
Total investments 12,957,078
Loans:
Loans held in portfolio 33,819,309
Loans held for sale 585,151
Reserve for loan losses (450,330)
-----------------
Total loans 33,954,130
Investment in Federal Home Loan Bank ("FHLB") 537,396
Foreclosed assets 142,303
Premises and equipment 366,030
Intangible assets arising from acquisitions 760,790
Mortgage servicing rights ("MSR") 142,921
Other assets 814,465
-----------------
Total assets $ 50,369,748
=================
LIABILITIES
Deposits:
Checking accounts $ 3,808,265
Savings accounts and money market deposit accounts 9,610,217
Time deposit accounts 20,364,445
-----------------
Total deposits 33,782,927
Federal funds purchased 905,000
Securities sold under agreements to repurchase 1,975,000
Advances from FHLB 6,204,034
Other borrowings 2,402,141
Other liabilities 1,485,677
-----------------
Total liabilities 46,754,779
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value, 220,000,000 shares authorized - 122,392,902
shares issued and outstanding 1,224
Capital surplus-common stock 1,004,357
Accumulated other comprehensive income 23,936
Retained earnings 2,585,452
-----------------
Total stockholders' equity 3,614,969
-----------------
Total liabilities and stockholders' equity $ 50,369,748
=================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
H. F. AHMANSON & COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------------
1998 1997
------------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 537,806 $ 303,846
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for losses on loans and real estate 23,586 80,805
Depreciation and amortization 100,059 74,715
Proceeds from sales of loans held for sale 4,122,074 2,206,542
Origination of loans held for sale (4,121,942) (1,171,025)
Loan origination fees deferred (39,488) (14,541)
Increase in other liabilities 294,315 207,536
Other, net (79,647) (87,122)
------------------- ------------------
Net cash provided by operating activities 836,763 1,600,756
CASH FLOWS FROM INVESTING ACTIVITIES
Principal payments on MBS 2,046,501 1,073,866
Decrease (increase) in loans 2,447,030 (92,780)
Cash and cash equivalents from Coast acquisition 399,590 -
Proceeds from sales of foreclosed assets 249,974 332,028
Other, net 51,188 105,874
------------------- ------------------
Net cash provided by investing activities 5,194,283 1,418,988
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in deposits (1,646,727) (1,158,935)
Deposits sold (3,235,644) (1,167,693)
(Decrease) increase in borrowings maturing in 90 days or less (1,436,907) 72,368
Proceeds from other borrowings 5,420,893 4,966,561
Repayments on other borrowings (5,328,153) (6,044,920)
Redemption of Preferred Stock, Series C (195,000) -
Common stock purchased for treasury (24,082) (372,420)
Cash dividends paid (85,595) (90,201)
Other, net 35,697 -
------------------- ------------------
Net cash used in financing activities (6,495,518) (3,795,240)
------------------- ------------------
Decrease in cash and cash equivalents (464,472) (775,496)
Cash and cash equivalents, beginning of period 1,159,107 1,443,860
------------------- ------------------
Cash and cash equivalents, end of period $ 694,635 $ 668,364
=================== ==================
NONCASH INVESTING ACTIVITIES
Loans exchanged for MBS $ 1,707,033 $ 947,821
Real estate acquired through foreclosure 155,368 240,253
Loans originated to facilitate the sale of foreclosed assets 5,590 33,101
CASH PAID DURING THE PERIOD FOR
Interest on deposits 1,137,946 1,062,782
Interest on borrowings 510,166 478,327
Income taxes 216,489 194,852
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
H. F. AHMANSON & COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: EARNINGS PER SHARE ("EPS")
Basic EPS excludes dilution and is computed by dividing income attributable
to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock.
Information used to calculate EPS was as follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------------------------------------------------------
1998 1997
-------------------------------------- --------------------------------------
Income Shares Per Share Income Shares Per Share
(numerator) (denominator) Amounts (numerator) (denominator) Amounts
----------- -------------- ---------- ------------ -------------- ---------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net income $537,806 $303,846
Less: preferred stock dividends (11,999) (25,223)
---------- -----------
Income attributable to common
shareholders $525,807 109,494,403 $4.80 $278,623 98,183,547 $2.84
========== ===========
Diluted EPS:
Net income $537,806 $303,846
Less: preferred stock dividends (2,730) (12,285)
Effect of dilutive securities:
Stock options and convertible stock - 10,923,201 - 13,673,648
---------- ------------- ----------- ------------
Income attributable to common
shareholders and assumed
conversions $535,076 120,417,604 $4.44 $291,561 111,857,195 $2.61
========== ============= =========== ============
</TABLE>
NOTE 2: COMPREHENSIVE INCOME
H.F. Ahmanson & Company ("Ahmanson" or the "Company") adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income," effective January 1, 1998. The standard requires that comprehensive
income and its components be disclosed in the financial statements. Ahmanson's
comprehensive income included all items which comprise net income plus the
unrealized holding gains on available-for-sale securities. For the nine months
ended September 30, 1998 and 1997, Ahmanson's comprehensive income was as
follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------
1998 1997
------------ -------------
(in thousands)
<S> <C> <C>
Net income $537,806 $303,846
Other comprehensive (loss) (7,182) (35,189)
------------ -------------
Total comprehensive income $530,624 $268,657
============ =============
</TABLE>
<PAGE>
H. F. AHMANSON & COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 3: THE AHMANSON MERGER
On March 17, 1998, Washington Mutual, Inc. ("Washington Mutual" ) and
Ahmanson announced the signing of a definitive merger agreement. The merger was
approved by the shareholders of both companies at special meetings held on
August 28, 1998. Holders of Washington Mutual common stock and holders of
Washington Mutual preferred stock also approved an amendment to Washington
Mutual's Articles of Incorporation to increase the number of authorized shares
of common stock from 800 million shares to 1.6 billion shares. The merger was
approved by the Office of Thrift Supervision in September 1998.
The merger was effective on October 1, 1998 and was accounted for as a
pooling of interests. Each share of Ahmanson common stock was converted into the
right to receive 1.68 shares of Washington Mutual common stock, with cash paid
in lieu of fractional shares. In connection with the merger, approximately
205,582,840 shares of Washington Mutual common stock were issued. On October 3,
1998, Washington Mutual merged Ahmanson's banking subsidiary, Home Savings of
America, FSB, into Washington Mutual's indirectly-owned subsidiary, Washington
Mutual Bank, FA.
NOTE 4: OTHER BORROWINGS
Other borrowings included Company-obligated mandatorily redeemable capital
securities of Ahmanson's subsidiary trust holding solely $148.6 million
aggregate principal amount of subordinated deferrable interest debentures of
Ahmanson as of September 30, 1998.
NOTE 5: EFFECT OF RECENTLY ISSUED OR ADOPTED ACCOUNTING STANDARDS
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information," was issued in June 1997 and redefined how operating segments are
determined. SFAS No. 131 requires disclosure of certain financial and
descriptive information about a company's operating segments. This statement was
adopted by the Company on January 1, 1998. Provisions of this statement require
annual disclosure in the year of adoption and interim reporting for periods
thereafter. This statement did not affect the results of operations or financial
position of the Company.
SFAS No. 132, "Employers' Disclosure about Pensions and Other
Postretirement Benefits," was issued in February 1998 and standardizes the
annual disclosure requirements for pensions and other postretirement benefits.
This statement did not affect the results of operations or financial position of
the Company. SFAS No. 132 was adopted by the Company as of January 1, 1998.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued in June 1998 and establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. The statement is
effective for all fiscal years beginning after June 15, 1999. The effect of the
adoption of the provisions of this statement on the results of operations or the
financial position of the merged entity has not yet been determined.
SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise," was issued in October 1998. Prior to issuance of SFAS No. 134, when
a mortgage banking company securitized loans held for sale but did not sell the
security in the secondary market, the security was classified as trading. SFAS
No. 134 requires that the security be classified in accordance with SFAS No. 115
as either trading, available-for-sale or held-to-maturity according to
Washington Mutual's intent unless Washington Mutual has already committed to
sell the security before or during the securitization process. The statement is
effective for all fiscal years beginning after December 15, 1998. This statement
is not expected to have a material effect on the results of operations or
financial position of the merged entity.
<PAGE>
WASHINGTON MUTUAL AND AHMANSON
PRO FORMA COMBINED CONSOLIDATED
STATEMENT OF INCOME (Unaudited)
Nine Months Ended September 30, 1998
<TABLE>
<CAPTION>
Pro Forma Adjustments
-------------------------
Pro Forma
Washington Including
Mutual Ahmanson Debit Credit Ahmanson
-------------- ------------- ------------ ------------ -------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 4,154,969 $ 1,947,300 $ $ $ 6,102,269
Investments 1,484,247 797,581 2,281,828
------------ ------------- ------------ ------------ ------------
Total interest income 5,639,216 2,744,881 - - 8,384,097
INTEREST EXPENSE
Deposits 1,540,445 1,181,091 2,721,536
Borrowings 1,943,285 505,908 2,449,193
------------ ------------- ------------ ------------ ------------
Total interest expense 3,483,730 1,686,999 - - 5,170,729
------------ ------------- ------------ ------------ ------------
Net interest income 2,155,486 1,057,882 - - 3,213,368
Provision for loan losses 126,998 1,747 128,745
------------ ------------- ------------ ------------ ------------
Net interest income after provision for
loan losses 2,028,488 1,056,135 - - 3,084,623
OTHER INCOME
Depositor and other retail banking fees 319,042 87,993 407,035
Loan servicing income 49,729 41,412 91,141
Securities fees and commissions 118,155 27,615 145,770
Insurance fees and commissions 36,349 10,578 46,927
Mortgage banking gains 69,644 32,228 101,872
Gain (loss) on sale of other assets 25,318 (1,854) 23,464
Write down of loans securitized and retained (18,371) (23,065) (41,436)
Gain on sale of retail deposit branch system - 289,040 289,040
Other operating income 90,466 61,029 151,495
------------ ------------- ------------ ------------ ------------
Total other income 690,332 524,976 - - 1,215,308
OTHER EXPENSE
Salaries and employee benefits 600,444 298,882 899,326
Occupancy and equipment 227,260 140,143 367,403
Telecommunications and outsourced information
services 153,114 37,387 190,501
Regulatory assessments 27,457 21,113 48,570
Transaction-related expense 53,588 23,159 76,747
Amortization of intangible assets arising from
acquisitions 40,761 36,798 77,559
Foreclosed asset (income) expense (5,945) 23,387 17,442
Other operating expense 337,577 127,936 465,513
------------ ------------- ------------ ------------ ------------
Total other expense 1,434,256 708,805 - - 2,143,061
------------ ------------- ------------ ------------ ------------
Income before provision for income taxes 1,284,564 872,306 - - 2,156,870
Provision for income taxes 480,564 334,500 815,064
Provision for payments in lieu of taxes 11,961 - 11,961
------------ ------------- ------------ ------------ ------------
NET INCOME $ 792,039 $ 537,806 $ - $ - $ 1,329,845
============ ============= ============ ============ ============
Net income attributable to common stock $ 788,096 $ 525,807 $ - $ - $ 1,313,903
============ ============= ============ ============ ============
Net income per common share:
Basic $ 2.10 $ 4.80 $ 2.35
Diluted 2.10 4.44 2.29
Average number of common shares used to
calculate net income per common share:
Basic 374,879,413 109,494,403 558,830,010
Diluted 376,117,035 120,417,604 578,418,610
</TABLE>
See Note to Pro Forma Combined Consolidated Financial Statements.
<PAGE>
WASHINGTON MUTUAL AND AHMANSON
PRO FORMA COMBINED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION (Unaudited)
September 30, 1998
<TABLE>
<CAPTION>
Pro Forma Adjustments
-----------------------------
Pro Forma
Washington Including
Mutual Ahmanson Debit Credit Ahmanson
-------------- ------------- ------------ ----------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash $ 1,313,409 $ 565,601 $ - $ 232,000 (1) 1,647,010
Cash equivalents 40,750 129,034 169,784
Investments:
Trading securities 38,452 - 38,452
Available-for-sale securities:
MBS 17,899,773 9,144,966 27,044,739
Investment securities 556,209 11,260 567,469
Held-to-maturity securities:
MBS 11,283,139 3,798,440 15,081,579
Investment securities 130,790 2,412 133,202
------------- ------------- ------------ ---------- -------------
Total investments 29,908,363 12,957,078 - - 42,865,441
Loans:
Loans held in portfolio 72,010,875 33,819,309 105,830,184
Loans held for sale 1,083,435 585,151 1,668,586
Reserve for loan losses (647,233) (450,330) (1,097,563)
------------- ------------- ------------ ---------- -------------
Total loans 72,447,077 33,954,130 - - 106,401,207
Investment in FHLBs 1,408,871 537,396 1,946,267
Foreclosed assets 157,500 142,303 299,803
Premises and equipment 1,077,958 366,030 - 141,000 (1) 1,302,988
Intangible assets arising from acquisitions 316,398 760,790 1,077,188
MSR 262,340 142,921 405,261
Other assets 1,465,323 814,465 2,279,788
------------- ------------- ------------ ---------- -------------
Total assets $ 108,397,989 $ 50,369,748 $ - $ 373,000 $ 158,394,737
============= ============= ============ ========== =============
LIABILITIES
Deposits:
Checking accounts $ 8,133,689 $ 3,808,265 $ - $ - $ 11,941,954
Savings accounts and money market
deposit accounts 17,033,630 9,610,217 26,643,847
Time deposit accounts 25,391,716 20,364,445 45,756,161
------------- ------------- ------------ ---------- -------------
Total deposits 50,559,035 33,782,927 - - 84,341,962
Federal funds purchased and commercial paper 4,448,523 905,000 5,353,523
Securities sold under agreements to repurchase 13,991,989 1,975,000 15,966,989
Advances from FHLBs 26,795,229 6,204,034 32,999,263
Other borrowings 3,288,679 2,402,141 5,690,820
Other liabilities 3,513,547 1,485,677 116,000 (1) - 4,883,224
------------- ------------- ----------- ---------- -------------
Total liabilities 102,597,002 46,754,779 116,000 - 149,235,781
STOCKHOLDERS' EQUITY
Common stock - 1,224 1,224 (2) - -
Capital surplus-common stock 1,975,074 1,004,357 - 1,224 (2) 2,980,655
Accumulated other comprehensive income 159,488 23,936 183,424
Retained earnings 3,666,425 2,585,452 257,000 (1) - 5,994,877
------------- ------------- ----------- ---------- -------------
Total stockholders' equity 5,800,987 3,614,969 258,224 1,224 9,158,956
------------- ------------- ----------- ---------- -------------
Total liabilities and stockholders' equity $ 108,397,989 $ 50,369,748 $ 374,224 $ 1,224 $ 158,394,737
============= ============= =========== ========== =============
</TABLE>
See Note to Pro Forma Combined Consolidated Financial Statements.
<PAGE>
WASHINGON MUTUAL AND AHMANSON
NOTE TO PRO FORMA COMBINED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
(Unaudited)
NOTE 1: PRO FORMA ADJUSTMENTS
The pro forma adjustments reflected in the accompanying unaudited pro forma
combined consolidated statement of financial position of Washington Mutual and
Ahmanson as of September 30, 1998 give effect to the following adjustments:
(1) Transaction-related expenses anticipated to be recorded by Washington
Mutual in the fourth quarter of 1998 are included in the pro forma statement of
financial position as of September 30,1998. Such transaction-related expenses
are summarized in the following table (in thousands):
Cash expenses:
Investment banking and professional fees $ 51,000
Severance and benefits 165,000
Contract termination fees 16,000
----------
Total cash expenses 232,000
Premises and equipment 141,000
----------
Total expenses 373,000
Tax benefit (116,000)
----------
Net expenses $257,000
==========
(2) Conversion of Ahmanson Common Stock to Washington Mutual Common Stock
(no par value).
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
2. Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession. (Incorporated herein by
reference to Item 7(c).3 of the Registrant's Current
Report on Form 8-K/A dated March 17, 1998
(File No. 0-25188)).
