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 (Date of earliest event reported): August 25, 1999
WASHINGTON MUTUAL, INC.
(Exact name of registrant as specified in its charter)
WASHINGTON 1-14667 91-1653725
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
1201 Third Avenue, Seattle,
Washington 98101 (Address of
principal executive office)
(206) 461-2000
(Registrant's telephone number including area code)
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
99.1 Printed materials from presentation made by management to investors
and analysts.
SIGNATURE
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.
By: /s/ Kerry K. Killinger
Kerry K. Killinger
Chairman, President and
Chief Executive Officer
Financial Summary
Bill Longbrake
Vice Chair and Chief Financial Officer
<PAGE>
Consumer Banking
Retail Checking Accounts(a)
[Bar Graph]
In Thousands
<TABLE>
<CAPTION>
Q2 1998 Q3 1998 Q4 1998 Q1 1999 Q2 1999
<S> <C> <C> <C> <C> <C>
Southwest/Southeast(b)(c) 2,943 2,958 2,999 3,060 3,113
Northwest(d) 833 874 908 941 966
Total 3,776 3,832 3,907 4,001 4,079
Households 3,714(e) 5,129 5,153 5,198 5,209(f)
</TABLE>
(a) Includes interest and noninterest-bearing checking accounts with the
exception of commercial checking accounts
(b) Southwest/Southeast refers to the operations of Washington Mutual Bank,
FA (California, Florida and Texas)
(c) Inclusive of sale of Florida branches and purchase of Coast Savings by
AHM
(d) Northwest refers to the combined operations of Washington Mutual Bank
and Washington Mutual Bank fsb (Washington, Oregon, Idaho, Montana and Utah)
(e) Does not include Home Savings households
(f) Households as of 5/31/99
Slide 1
<PAGE>
Consumer Banking
Depositor and Other Retail Banking Fee Income(a)
[Bar Graph]
Dollars in Millions
<TABLE>
<CAPTION>
1996 1997 1998 YTD 6/98(b) YTD 6/99
<S> <C> <C> <C> <C> <C>
Southwest/Southeast $281.6 $366.7 $411.7(b) $182.8 $253.7
Northwest $68.5 $103.5 $147.5 $67.3 $86.6
Total $350.1 $470.2 $559.2 $250.1 $340.3
</TABLE>
(a) Includes fees generated through the Company's Consumer Banking segment
only
(b) Inclusive of Ahmanson Florida accounts and purchase of Coast Savings by
AHM
Slide 2
<PAGE>
Consumer Banking
Net Retail Checking Account Growth
[Bar Graph]
<TABLE>
<CAPTION>
Q1 1998 Q2 1998 Q3 1998 Q4 1998 Q1 1999 Q2 1999
<S> <C> <C> <C> <C> <C> <C>
Southwest/Southeast 76,231(a) 25,376 15,149(b) 40,678 60,897 53,329
Northwest 33,056 34,020 41,050 33,560 32,765 25,293
</TABLE>
(a) Does not include 322,783 accounts acquired through Coast Savings in Q1
1998
(b) Does not include Ahmanson Florida accounts sold in Q3 1998
Slide 3
<PAGE>
Consumer Banking
Fee Income per "Free Checking" Account
[Bar Graph]
<TABLE>
<CAPTION>
Q1 1997 Q2 1997 Q3 1997 Q4 1997 Q1 1998 Q2 1998 Q3 1998 Q4 1998 Q1 1999 Q2 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Northwest $39.59 $43.06 $48.50 $49.49 $44.90 $48.32 $49.79 $50.66 $46.71 $50.32
Southwest/Southeast* $28.48 $27.48 $30.66 $42.55 $46.53 $43.24 $42.86
</TABLE>
*Inclusive of acquired branches when converted
Slide 4
<PAGE>
Consumer Banking
Transaction Accounts as a Percentage of Total Deposits*
[Bar Graph]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 Q1 1999 Q2 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Northwest 30.0% 33.9% 39.7% 45.8% 44.9% 45.4% 51.9% 55.9% 61.0% 62.7% 63.0%
Southwest/
Southeast* 32.3% 41.5% 46.7% 48.3% 52.6%
</TABLE>
*End of period percentages; does not include the Company's Consumer Banking
segment; includes acquired companies only on a go-forward basis
Slide 5
<PAGE>
Consumer Banking
Consumer Lending*
[Bar Graph]
Dollars In Millions
<TABLE>
<CAPTION>
1996 1997 1998 YTD 6/30/98 YTD 6/30/99
<S> <C> <C> <C> <C> <C>
Southwest/Southeast $718.5 $1,489.8 $1,759.0 $973.0 $710.8
Northwest $1,191.9 $1,400.0 $1,245.6 $601.1 $591.1
Total $1,910.4 $2,889.8 $3,004.6 $1,574.1 $1,301.9
</TABLE>
*Consumer loan originations, not including SFR loans or loans originated
through the Company's consumer finance or commercial banking segments
Slide 6
<PAGE>
Consumer Banking
Consumer Lending*
[Bar Graph]
Dollars in Millions
<TABLE>
<CAPTION>
Q1 1998 Q2 1998 Q3 1998 Q4 1998 Q1 1999 Q2 1999
<S> <C> <C> <C> <C> <C> <C>
Southwest/Southeast $419.0 $554.0 $462.6 $323.4 $353.8 $357.0
Northwest $252.8 $348.3 $360.7 $283.9 $258.7 $332.4
Total $671.8 $902.3 $823.3 $607.3 $612.5 $689.4
</TABLE>
*Consumer loan originations, not including SFR loans or loans originated
through the Company's consumer finance or commercial banking segments
Slide 7
<PAGE>
Mortgage Banking
SFR Mortgage Loan Originations
[Bar Graph]
Dollars in Billions
<TABLE>
<CAPTION>
1996 1997 1998 YTD 6/30/98 YTD 6/30/99
<S> <C> <C> <C> <C> <C>
ARMs $13.4 $16.9 $18.4 $8.4 $12.4
FIXED $6.7 $8.9 $23.5 $10.9 $8.3
Total $20.1 $25.8 $41.9 $19.3 $20.7
</TABLE>
Slide 8
<PAGE>
Mortgage Banking
Loan Servicing - Servicing Expense per Loan
[Bar Graph]
<TABLE>
<CAPTION>
Q1 1997 Q2 1997 Q3 1997 Q4 1997 Q1 1998 Q2 1998 Q3 1998 Q4 1998 Q1 1999 Q2 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Northwest $11.36 $10.96 $10.86 $11.74 $12.69 $13.90 $13.50 $12.26 $11.88 $13.46
Southwest/Southeast* $18.75 $22.30 $19.52 $16.78 $14.72 $17.69 $14.76 $13.66 $15.11 $13.77
</TABLE>
*Ahmanson data included as of February 1999
Slide 9
<PAGE>
Financial Performance
Consumer, Consumer Finance and Commercial Loans to Total Loans*
[Bar Graph]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 6/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Northwest 35.1% 37.0% 33.5% 35.6% 32.0% 34.3% 34.1% 33.8% 29.8% 35.7%
Southwest/Southeast 13.4% 15.8% 24.5% 23.3%
</TABLE>
*End of period percentages for WMI consolidated; includes acquired
companies only on a go-forward basis
Slide 10
<PAGE>
Financial Performance
Net Interest Income and Margin
[Bar Graph]
Dollars in Millions
<TABLE>
<CAPTION>
1996 1997 1998 YTD 6/30/98 YTD 6/30/99
<S> <C> <C> <C> <C> <C>
$3,865.1 $3,915.5 $4,291.7 $2,150.0 $2,275.9
Net Interest Margin 2.96% 2.91% 2.88% 2.90% 2.76%
</TABLE>
Slide 11
<PAGE>
Financial Performance
Fee and Servicing Income*
[Bar Graph]
Dollars in Millions
<TABLE>
<CAPTION>
1996 1997 1998 YTD 6/30/98 YTD 6/30/99
<S> <C> <C> <C> <C> <C>
Depositor and retail banking fees $358.9 $478.7 $568.4 $254.7 $345.6
Loan servicing and loan related income $222.3 $231.0 $228.5 $118.5 $103.3
Securities and insurance fees and commissions $231.2 $244.4 $251.3 $124.9 $149.8
Total $812.4 $954.1 $1,048.2 $498.1 $598.7
</TABLE>
*WMI consolidated
Slide 12
<PAGE>
Financial Performance
Other Expense
[Bar Graph]
Dollars in Millions
<TABLE>
<CAPTION>
1996 1997 1998 YTD 6/03/98 YTD 6/30/99
<S> <C> <C> <C> <C> <C>
Transaction Related $782.8 $431.1 $508.3 $56.3 $60.4
Expense and, 1996, SAIF
Assessment
Other Noninterest Expense $2,826.8 $2,695.6 $2,776.1 $1,346.2 $1,418.1
Total $3,609.6 $3,126.7 $3,284.4 $1,402.5 $1,478.5
</TABLE>
Slide 13
<PAGE>
Financial Performance
Operating Efficiency Ratio - Reported*
[Bar Graph]
1996 1997 1998 YTD 6/30/98 YTD 6/30/99
75.03% 61.84% 54.68% 49.30% 47.79%
*Excludes amortization of intangible assets
Slide 14
<PAGE>
Financial Performance
Operating Efficiency Ratio - Adjusted*
[Bar Graph]
1996 1997 1998 YTD 6/30/98 YTD 6/30/99
Operating 58.37% 52.00% 45.94% 47.25% 45.77%
*Excludes SAIF assessment in 1996 and transaction-related charges and
amortization of intangible assets (all periods); includes gains on sales of
retail deposit branch systems (1996-1998)
Slide 15
<PAGE>
Financial Performance
Nonperforming Assets
[Bar and Line Graph]
Dollars in Millions
12/31/96 12/31/97 12/31/98 6/30/99
NPAs $1,651.4 $1,374.9 $1,212.7 $1,096.4
NPAs/Assets 1.20% 0.96% 0.73% 0.63%
Slide 16
<PAGE>
Financial Performance
Loan Loss Reserve and Recourse Liability
[Bar and Line Graph]
Dollars in Millions
<TABLE>
<CAPTION>
12/31/96 12/31/97 12/31/98 06/30/99
<S> <C> <C> <C> <C>
As a % of Nonaccrual Loans 93% 109% 129% 138%
Loan Loss Reserve $1,066.3 $1,047.8 $1,067.8 $1,053.6
</TABLE>
Slide 17
<PAGE>
Interest Rate Risk
Washington Mutual has effectively managed its interest rate risk to produce
a relatively stable net interest spread over the past three years, despite
unstable market interest rate
Net interest spread:
1996 2.78%
1997 2.74%
1998 2.70%
*As of 6/30/99
Slide 18
<PAGE>
Interest Rate Risk
Real Estate Loans and MBS*
Loans and MBS Portfolio
(Dollars in billions)
Short-term ARMs:
COFI $66.20 43%
MTA, CMT & Other 20.85 13
Medium-term ARMs:
MTA 20.50 13
CMT, COFI & Other 6.08 4
Fixed-Rate Loans:
Loans 17.92 11
MBS 24.20 16
-------- --
$155.75 100%
========== ===
*As of 6/30/99
Slide 19
<PAGE>
Interest Rate Risk
Funding Book Concept
Matches comparable duration assets and liabilities into portfolio
Isolates mismatches into smaller monetary increments where they can be more
easily tracked and managed
Slide 20
<PAGE>
Interest Rate Risk
Risk inherent in the portfolio that must be actively managed (hedged)
ARM index lag effect
Lifetime time rate caps
Modest exposure from fixed-rate portfolio
Mortgage servicing asset
Slide 21
<PAGE>
Financial Performance
Total Capitalization
[Bar Graph]
Dollars in Millions
Total Equity
<TABLE>
<CAPTION>
12/31/96 12/31/97 12/31/98 6/30/99
<S> <C> <C> <C> <C>
Holding Company Debt $1,663 $1,783 $1,385 $1,391
Trust Preferred $249 $937 $938 $940
Nonconvertible Preferred $478 $313
Common $6,948 7,288 9,344 $9,062
Total $9,338 $10,321 $11,667 $11,393
Common Equity/Total Assets 5.06% 5.08% 5.65% 5.18%
</TABLE>
Slide 22
<PAGE>
Washington Mutual
Segment Presentations
<PAGE>
Washington Mutual
Kerry Killinger
Chairman, President & CEO
Slide 1
[Washington Mutual Logo]
<PAGE>
WM Profile
Mission
To be one of the nation's premier financial services organizations
Business Segments
Consumer Banking
Financial Services
Mortgage Banking
Commercial Banking and Commercial Real Estate (CRE)
Consumer Finance
Slide 2
<PAGE>
WM Profile
$175 billion in assets
Nation's largest savings institution
Nation's 8th-largest banking institution
Slide 3
[Washington Mutual Logo]
<PAGE>
Key Strategies
Profitably expand businesses through internal growth and acquisitions
Maintain a high quality balance sheet
Improve operating efficiency
Limit sensitivity to interest rate movement
Slide 4
[Washington Mutual Logo]
<PAGE>
Opportunities
Economy
Interest Rates
Competition
Federal legislation
Slide 5
[Washington Mutual Logo]
<PAGE>
1995-2000 Plan
Financial Targets
Target Results (6/30/99)
ROCE(a) greater than 18.00% 19.71%
EPS Growth greater than 15.00 15.11(b)
Operating Efficiency (c) less than 50.00 45.77
NPA/Total Assets less than 1.00 0.63
Common Equity/Assets greater than 5.00 5.18
WM Return/S&P 500 greater than 100.00
(a) Based on annualized year-to-date earnings from operations which equal
reported earnings less transaction-related expenses
(b) Increase in earnings per share from operations from 1/1/99 through
6/30/99 over 1/1/98 through 6/30/98
(c) Excluding year-to-date amortization of intangible assets and
transaction-related expenses
Slide 6
[Washington Mutual Logo]
<PAGE>
Results
Operating EPS Growth
[Bar Graph]
<TABLE>
<CAPTION>
1996 1997 1998 1999
--------------------------- ---------------------------- ------------------------- -----------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating EPS $.49 $.51 $.51 $.65(1) $.62 $.64 $.56(2) $.63 $.69 $.73 $.76 $.74(3) $.79 $.82
</TABLE>
* Excludes transaction-related expenses; includes acquired companies only
on a go-forward basis; and Q3 1996 earnings exclude SAIF assessment
(1) American Savings Acquisition
(2) Great Western Acquisition
(3) Ahmanson Acquisition
Slide 7
[Washington Mutual Logo]
<PAGE>
Results
WM Shareholder Return 1990 - Q2 `99
[Line Graph]
6`90 12`90 6`91 12`91 6'92 12'92 6'93 12'93 6'94 12'94
WM 106 76.52 160.33 217.17 254.6 330.7 341.25 363.34 315.79 263.59
SPX 106.26 99.9 114.11 130.21 130.3 141.14 147.98 155.28 150.08 157.38
6'95 12'95 6'96 12'96 6'97 12'97 6'98 12'98 6'99
WM 373.55 465.49 488.58 716.66 998.08 1074.76 1106.9 989.53 $928.39
SPX 189.09 216.04 237.81 265.51 320.17 353.97 416.52 454.93 $511.16
Assumes $100 invested 3/31/90 and compounded on a quarterly basis
Source: Bloomberg
Slide 8
[Washington Mutual Logo]
<PAGE>
Results
WM Shareholder Return
[Bar Graph]
C WFC CMB WM AXP FTU FLT
- ----- ---- ---- ---- ---- ---- ----
36.5% 29.9% 29.2% 27.3% 24.5% 24.3% 20.8%
JPM ONE BAC SPX GDW
- --- --- --- --- ---
20.3% 19.5% 19.3% 19.2% 15.7%
Source: Bloomberg. Total annual return peer comparison 4/1/90-6/30/99
Slide 9
[Washington Mutual Logo]
<PAGE>
Results
1998 Stock Performance
General under-performance by financial stocks
Acquisition dilution/execution uncertainty
Thrift-like balance sheet
Flat yield curve
Purchase of mortgage-backed securities
No stock repurchase option
Slide 10
[Washington Mutual Logo]
<PAGE>
Opportunities
P/E Peer Comparison*
[Bar Graph]
SPX AXP WFC C CMB BAC FLT JPM ONE FTU GDW WM
- --- --- --- --- --- --- --- --- --- --- --- ---
27.9 24.1 19.2 18.0 16.3 15.5 15.2 14.8 14.4 13.7 11.9 10.6
* Based on 6/30/99 closing prices and 1999 First Call earnings estimates
Source for SPX: Bloomberg
Slide 11
[Washington Mutual Logo]
<PAGE>
Future Initiatives
Maximize franchise value
Re-mix acquired balance sheet
Execute share repurchase program
Expand Internet banking and Internet mortgage origination
Implement management reorganization
Promote organic growth
Slide 12
[Washington Mutual Logo]
<PAGE>
Future Initiatives
Acquisition Criteria
Accretive to earnings per share
Consistent with business strategy
No undue operational risks
Capital and asset quality remain strong
Slide 12-2
[Washington Mutual Logo]
<PAGE>
Pending Acquisition
Long Beach Financial Corporation
Speciality mortgage finance; 1998 net income of $30 million
High quality balance sheet; specialization in subprime organization and
servicing
Strategic fit with WM; provides new wholesale channel which complements
current retain channel
Potential future asset generation
Transaction details; aggregate value of $376 million at 5/31/99,
purchase transaction; anticipate closing in early October
Slide 13
[Washington Mutual Logo]
<PAGE>
Today's Washington Mutual
Strong competitive position
Geographic and business line diversity
Track record of delivering superior shareholder returns
Reasonable P/E multiple suggests room for long-term appreciation
Slide 14
[Washington Mutual Logo]
<PAGE>
Developing E-business
at Washington Mutual
Liane Wilson
Vice Chair,
Corporate Technology
Slide 15
[Washington Mutual Logo]
<PAGE>
Updates
Ahmanson Conversion
5,100 workstations
1.1 million ATM/VISA debit cards
2.8 million deposit accounts
634,500 loan accounts
Slide 16
[Washington Mutual Logo]
<PAGE>
Updates
Year 2000
Mission-critical systems compliant: 12/31/98
End-to-end testing: 1/1/99-12/31/99
Contingency plan validation: 6/30/99-12/31/99
Manage millennium rollover via Command Center: 12/31/99-3/31/2000
Slide 17
[Washington Mutual Logo]
<PAGE>
A Brief History
Four Generations of Technology
1990s Networked PCs
1980s PCs
1970s Inquiry Screens
1960s Mainframe
Slide 18
[Washington Mutual Logo]
<PAGE>
Current Technology
"The Net"
[4 photo flow chart showing internet connection with Washington Mutual,
home and work]
Slide 19
[Washington Mutual Logo]
<PAGE>
Current Technology
Net Benefits
Readily accessible information
"Open" 24 x 7
Consumer acceptance of instability
Slide 20
[Washington Mutual Logo]
<PAGE>
E-business at WM
Vision
[photo background]
E-business = Customer Self Service
Slide 21
[Washington Mutual Logo]
<PAGE>
E-business at WM
Internal Customers
Collaborative processing
Information access
Self-servicing
Slide 22
[Washington Mutual Logo]
<PAGE>
E-business at WM
External Customers
Self-serve account opening
Pay bills, transaction inquiries
New channels for service
Slide 23
[Washington Mutual Logo]
<PAGE>
E-business at WM
Corporate Benefits
Increased efficiency
Opportunities to attract new business
Enhance competitive position
Slide 24
[Washington Mutual Logo]
<PAGE>
Developing E-business
How it Works
[flow chart linking Internet with:
- other Companies/Information Sources
- PalmPilots/Cell Phones
- PC/Operating System
- Proprietary Network (Internet) [shown being connected with
Washington Mutual Information]
- Washington Mutual Information
Slide 25
[Washington Mutual Logo]
<PAGE>
Developing E-Business
Required Re-engineering
New process information flows
New Call Center system
Data interchange with business partners
Slide 25-2
[Washington Mutual Logo]
<PAGE>
Developing E-business
The People Side
[photo of men shaking hands]
Slide 26
[Washington Mutual Logo]
<PAGE>
Consumer Banking
Deanna Oppenheimer
President
Consumer Banking Group
Slide 27
[Washington Mutual Logo]
<PAGE>
Strategic Rationale
High-growth financial centers are the corporate flagship to Washington
Mutual's consumer-oriented brand
Efficient distribution of broad-based product line, particularly
higher-margin loans and fee-generating products
Competitive advantage:
high-touch community banking with a
national franchise
Slide 28
[Washington Mutual Logo]
<PAGE>
Business Line Overview
Consumer-Oriented Products
Transaction accounts
Liquid and time deposits
Annuities
Home equity
Consumer loans
Manufactured housing loans
Mortgage loans
Small business banking
Referral point for other business lines
Slide 29
[Washington Mutual Logo]
<PAGE>
Business Line Overview
Distribution Network
[maps of states listed below]
State Branches(a) ATMs(a) Deposit Share(b) Rank(b)
California 545 815 13.8% 2
Washington 181 207 13.0 2
Florida 122 193 3.1 5
Oregon 78 95 9.3 2
Texas 48 64 1.0 12
Other States 43 46 n/a n/a
Total 1,017 1,420
(a) As of 6/30/99
(b) Total deposits based on the annual June 1998 branch deposit
reports, adjusted for branch ownership as of June 1999
Slide 30
[Washington Mutual Logo]
<PAGE>
Business Line Overview
Automated Teller Machines
[photo of ATM machine]
ATM Network* =
1,420 Machines
Slide 31
[Washington Mutual Logo]
<PAGE>
Business Line Overview
Call Centers
[maps showing location of Bothell, WA and Chatsworth, CA]
Estimated Calls in 1999 = 200 million
Sales calls = 260,000
Slide 32
[Washington Mutual Logo]
<PAGE>
Business Line Overview
Internet Banking
[photo of a PC]
Integrion partnership brings industry standards with customer ownership
Rolled out to California, Texas and Florida - all markets by fall
Upgrade in test for summer rollout
Slide 33
[Washington Mutual Logo]
<PAGE>
Competitive Advantages
Net Retail Checking Account Growth
[Bar Graph]
Q1 `98 Q2 `98 Q3 `98 Q4 `98 Q1 `99 Q2 '99
Northwest 33,056 34,020 41,050 33,560 32,765 25,293
Southwest/Southeast 76,530(a) 25,376 15,149(b) 40,678 60,897 53,329
(a) Does not include 322,783 accounts acquired through Coast in Q1 '98
(b) Does not include Ahmanson Florida accounts sold in Q3 `98
Slide 34
[Washington Mutual Logo]
<PAGE>
Competitive Advantages
Free Checking
Profitable for company, generating an average of $183 per account per annum
in net fee income
Drives in households
Opened 78,622 net new checking accounts during Q2 `99
WM recognized as bank with "Free Checking" by more than
two-thirds of Northwest customers
Slide 35
[Washington Mutual Logo]
<PAGE>
Competitive Advantages
Depositor and Other
Retail Banking Fee Income(a)
[Bar Graph]
1996 1997 1998 Q2 `98 Q2 `99
Northwest $68.5 $103.5 $147.5 $67.3 $86.6
Southwest/Southeast $281.6 $366.7 $411.7(b) $182.8 $253.7
Total $350.1 $470.2 $559.2 $250.1 $340.3
(a) Includes fees generated through the Company's Consumer
Banking segment only
(b) Inclusive of Ahmanson Florida accounts and purchase of Coast Savings by
AHM
Slide 36
[Washington Mutual Logo]
<PAGE>
Competitive Advantages
Distinct Market Position
[Bar Graph]
Customers who would refer their friends to their bank
WM Wells Fargo B of A
87% 53% 53%
Source: WM Research Nov. 1998. Figures reflect responses within
longest-standing markets.
Slide 37
[Washington Mutual Logo]
<PAGE>
Competitive Advantages
Strong West Coast Franchise
Over 5 million households served
More than one-quarter of all West Coast banking households have a deposit
product with Washington Mutual
[photo of house]
Source: PSI, Washington Mutual Research
Slide 38
[Washington Mutual Logo]
<PAGE>
Competitive Advantages
"Top of Mind" Brand
[photos of Seattle, Portland and Salt Lake City with "#1" by each photo]
Source: WM Research Nov. 1998
Slide 39
[Washington Mutual Logo]
<PAGE>
Competitive Advantages
"Top of Mind" Brand
[photos of San Francisco (#1), Los Angeles (#2), San Diego (#2), Miami (#1)
with number beside each photo as indicated]
Source: WM Research Nov. 1998
Slide 40
[Washington Mutual Logo]
<PAGE>
Competitive Advantages
Franchise Mentality
Compensation program
Synchronizes corporate and individual objectives
Motivates over-achievement
Incentive component unlimited
Localized marketing
Flexibility to tailor sales efforts and staffing for individual markets
[photo of meeting between three people]
Slide 41
[Washington Mutual Logo]
<PAGE>
Competitive Advantages
Same-store Comparison
Product YTD 6/30/98 YTD 6/30/99 Increase
- -------------------------------------------------------------------
Lending $571,579 $1,719,684 201%
Checking Acct 3,891 4,408 13%
Fee Income $297,685 $387,961 30%
Operating Exp $169,213 $175,494 4%
FTE 10.0 10.2 2%
Note: Average of former ASB and GW financial centers
Slide 42
[Washington Mutual Logo]
<PAGE>
Opportunities
Move customers up the profitability scale by cross-selling the full product
line
Utilize Internet banking and new branching strategy to take franchise
national
Slide 43
[Washington Mutual Logo]
<PAGE>
Opportunities
Continue to implement changes to increase revenue and lower expense
Re-engineer staff positions
Streamline procedures
Easy reference guides
New Visual Banker platform
Acquire customers/employees who feel disenfranchised with other banks
Slide 44
[Washington Mutual Logo]
<PAGE>
Future Initiatives
Customer segmentation -- enhance revenues by realigning products and
targeting them to specific households
Better understand our customer base
Enhance our direct mail and marketing efforts
Further build brand identity among customers
Slide 45
[Washington Mutual Logo]
<PAGE>
Future Initiatives
Enhance revenues by further developing Internet banking product
80% of new Internet banking customers would recommend WM's product to their
friends
Next generation web site includes product applications that will increase sales
Slide 46
[Washington Mutual Logo]
<PAGE>
Future Initiatives
Continue promotion of Washington Mutual's brand
Build on reputation of being trustworthy, friendly, caring and community
minded
July launch of new advertising campaign
Slide 47
[Washington Mutual Logo]
<PAGE>
Future Initiatives
Introduce a new de novo strategy
Enter market through simultaneous openings of de novo financial centers
Bring WM brand alive with retail store concept
Test operations that increase customer service and lower costs
[photo of WM de novo financial center]
Slide 48
[Washington Mutual Logo]
<PAGE>
Mortgage Banking
Craig Davis
President
Mortgage Banking and
Financial Services Groups
Slide 49
[Washington Mutual Logo]
<PAGE>
Mortgage Banking
Strategy
Five-year strategy focuses on building nationwide lending capacity and is
designed to generate growth and income through:
Leveraging portfolio lending strength
Building critical credit risk management
Investing in direct channels-Internet & call center
Investing in technology
Slide 50
[Washington Mutual Logo]
<PAGE>
Mortgage Banking
Distribution Network
[map of the U.S.]
29 states and District of Columbia
Retail
190 home loan centers
1,200 loan consultants
1,000 consumer bank financial centers
(7 states)
Wholesale
23 wholesale offices
120 account managers
Slide 51
[Washington Mutual Logo]
<PAGE>
Mortgage Banking(a)
Distribution(b)
[pie chart]
Wholesale Retail FCs HLCs
44% 56% 12% 44%
(a) SFR
(b) 6/30/99
Slide 52
[Washington Mutual Logo]
<PAGE>
Mortgage Banking
Geographic Mix
[pie chart]
WA NY FL IL UT MA CO AZ CT OR TX Other CA
- -- -- -- -- -- -- -- -- -- -- -- ----- --
15% 2% 4% 4% 2% 2% 2% 2% 1% 6% 1% 7% 52%
Slide 53
[Washington Mutual Logo]
<PAGE>
Mortgage Banking
SFR Loan Originations
[Bar Graph]
Dollars in billions
1995 1996 1997 1998 YTD 6/30/98 YTD 6/30/99
$20.1 $21.4 $27.2 $43.6 $20.1 $21.6
Slide 54
[Washington Mutual Logo]
<PAGE>
Mortgage Banking
Origination and Market Share
Top 5 Nationwide Originators 1998
Dollars in billions
Volume Share
1. Wells (Norwest) $109 7.7%
2. Countrywide 87 6.1
3. Chase Manhattan 85 6.0
4. Bank of America 79 5.5
5. Washington Mutual 43 3.0
Slide 55
[Washington Mutual Logo]
<PAGE>
Mortgage Banking
National Mortgage Portfolio
Lending Strategy
Be the national portfolio lender of choice by leveraging multiple channels,
superior credit risk management, technology and strong portfolio management to
achieve superior and consistent profitability
Slide 56
[Washington Mutual Logo]
<PAGE>
Mortgage Banking
National Mortgage Portfolio
Retail Lending Strategy
Build long-term profitable relationships with Realtors
Promote local underwriting and appraisal to support "Portfolio Power"
Increase number of HLCs in major US markets with propensity for ARMs
Increase niche and construction lending volume in appropriate markets
Slide 57
[Washington Mutual Logo]
<PAGE>
Mortgage Banking
National Mortgage Portfolio
Wholesale Lending Strategy
The Wholesale Lending Division serves the mortgage broker community
Currently mortgage brokers are responsible for approximately 60% of
nationwide mortgage originations
Slide 58
[Washington Mutual Logo]
<PAGE>
Mortgage Banking
National Mortgage Portfolio
Wholesale Lending Strategy
The Premiere Broker program builds franchise value
Exclusive relationships
High quality originations
Target portfolio ARM originations and purchase transactions
Slide 59
[Washington Mutual Logo]
<PAGE>
Mortgage Banking
National Mortgage Portfolio
Financial Center Strategy
First mortgage loans originated through financial centers
Low cost resource to originate loans from existing customer base
Important distribution during "refi mania"
Allows 100% commissioned sales personnel to concentrate on purchase business
Expanded to California and Florida in Q3 `98
Slide 60
[Washington Mutual Logo]
<PAGE>
Mortgage Banking
The Environment
Changing Rules of the Game
Major changes in
Customer priorities
Technology
Secondary/ongoing changes relating to
Regulatory/government
Economic environment
Competitors
Slide 61
[Washington Mutual Logo]
<PAGE>
Mortgage Banking
Changing Customer Preferences
[Bar Graph]
In the next few years many people will get their mortgage loan via . . .
<TABLE>
<CAPTION>
ATM Phone with Video Kiosk Mail In-store Branch Rep.@ Your Phone with Internet Bank or Mort.
Auto. System Home live Rep Co Office
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WM mortgage 6% 12% 14% 15% 21% 28% 28% 47% 56%
customers
Non-WM Mortgage 4% 16% 16% 20% 12% 33% 27% 50% 44%
Customer
</TABLE>
Source: Mercer Consulting Group (February 1999)
Slide 62
[Washington Mutual Logo]
<PAGE>
Mortgage Banking
Importance of Internet
Online Mortgage Originations
[Bar Graph]
Customer preferences & technologies are changing...
1997 1998 2003/5
---- ---- ------
$ 5B Other
$ 4B E-Loan
$70M Quicken
$30M IMX
Total $276M $10B $250B + ?
Source: Mercer Consulting Group
Slide 63
[Washington Mutual Logo]
<PAGE>
Mortgage Banking
Retail/Wholesale Opportunities
Current distribution channels have significant opportunity for expansion
Dollars in billions
1998 Volume WM Volume WM Mkt Share WM Rank WM ARM Share
California $275 $20.9 7.7% 2 18.5%
Illinois 65 1.2 1.9 7 4.9
Florida 60 1.4 2.3 7 5.9
Michigan 60 0.1 .3 49 .5
New York 55 0.7 1.4 11 1.9
Slide 64
[Washington Mutual Logo]
<PAGE>
Mortgage Banking
Retail/Wholesale Opportunities
Current distribution channels have significant opportunity for expansion
Dollars in billions
1998 Volume WM Volume WM Mkt Share WM Rank WM ARM Share
Texas $55 $0.8 1.5% 8 3.9%
Ohio 55 0.0 .0 N/A .0
Massachusetts 45 0.6 1.4 11 1.5
New Jersey 40 0.2 .6 24 2.9
Washington 33 5.0 14.9 1 24.2
Slide 66
[Washington Mutual Logo]
<PAGE>
Mortgage Banking
Technology
Technology and systems development is needed to support a significant
number of stakeholders
Customers
Business partners
Strategic partners
Internal
Slide 66
[Washington Mutual Logo]
<PAGE>
Mortgage Banking
Conclusion/Next Steps
Mortgage Banking has the opportunity to be a strong engine of value growth
over the next five years
Strategy leverages position as largest non-GSE portfolio lender
Growth in SFR portfolio increases volume of high-value mortgage products to
replace lower yielding purchased assets
Slide 67
[Washington Mutual Logo]
<PAGE>
Mortgage Banking
Conclusion/Next Steps
(cont.)
Requires investment in direct channels and technology
Requires expansion of HLC & wholesale channels
Detailed planning and implementation for national portfolio lending
strategy has begun
Slide 68
[Washington Mutual Logo]
<PAGE>
Financial Services
Craig Davis
President
Mortgage Banking and
Financial Services Group
Slide 69
[Washington Mutual Logo]
<PAGE>
Financial Services
WM Financial Services
WM Group of Funds
Washington Mutual Insurance Services
Slide 70
[Washington Mutual Logo]
<PAGE>
WM Financial Services
Strategy
Bank Broker/Dealer
Follow Consumer Bank/leverage relationships
500 financial consultants in over 1,000 financial centers
Focus on packaged products (funds/annuities)
Higher profit margins
Lower risk/account maintenance
Slide 71
[Washington Mutual Logo]
<PAGE>
WM Financial Services
Strategy
Personal service including technology at point-of-sale
Primary channel for sale of WM Group of Funds
Slide 72
[Washington Mutual Logo]
<PAGE>
WM Financial Services
Commission Income
1996 1997 1998 YTD 6/30/99
Total Commissions $104m $118.12m $120.38m $81.72m
Avg. Per Financial
Consultant per Month $19,100 $21,000 $23,000 $28,244
Slide 73
[Washington Mutual Logo]
<PAGE>
Financial Services
Consumer Bank Annuity Program
[Bar and line graph]
Volume in millions
Commissions in millions
Q1 `98 Q2 `98 Q3 `98 Q4 `98 Q1 `99 Q2 '99
Commissions .202 .321 .224 .496 2.215 3.970
Volume 4.340 7.340 5.117 11.652 47.802 84.914
Q1 `98 Q2 `98 Q3 `98 Q4 `98 Q1 `99 Q2 '99
Licensed
Bank
Employees 76 76 180 272 530 699
Slide 74
[Washington Mutual Logo]
<PAGE>
WM Financial Services
Product Mix*
[pie chart]
Life Insurance - 1%
Fixed Annuities - 16%
Securities - 7%
Mutual Funds - 35%
Variable Annuities 41%
*As of 6/30/99
Slide 75
[Washington Mutual Logo]
<PAGE>
WM Group of Funds
Improved Fund Sales
Funds repackaged/new collateral system
Built wholesaling organization
Financial Center product merchandising & promotions
Launched new variable annuity
Slide 76
[Washington Mutual Logo]
<PAGE>
WM Group of Funds
Percentage of Sales
[Line graph]
<TABLE>
<CAPTION>
Q4 '97 Q1 `98 Q2 `98 Q3 `98 Q4 `98 Q1 `99 Q2 '99
<S> <C> <C> <C> <C> <C> <C> <C>
Mutual Funds 32% 40% 44% 41% 42% 40% 53%
Variable
Annuities 3% 3% 5% 5% 22% 22% 30%
</TABLE>
Slide 77
[Washington Mutual Logo]
<PAGE>
Washington Mutual Insurance Services
Strategy
Low cost/efficient provider of quality insurance products
Homeowners
Life and disability
Auto
Commercial
Leverage mortgage banking and consumer banking relationships
Increases customer retention by increasing product sales per household
Slide 78
[Washington Mutual Logo]
<PAGE>
Financial Services
Pre-Tax Net Income*
Dollars in millions
<TABLE>
<CAPTION>
1996 1997 1998 YTD 6/30/98 YTD 6/30/99
<S> <C> <C> <C> <C> <C>
WMIS 7,331 8,614 10,469 4.73 6.76
WM Group 5,337 4,634 8,986 5.94 8.65
WMFS 15,606 22,133 46,556 20.8 38.8
Total $28.27 $35.38 $66.01 $31.47 $53.79
</TABLE>
* Includes Murphey Favre, ASBFS, GWFSC, Griffin
Slide 79
[Washington Mutual Logo]
<PAGE>
WM Financial Services
Opportunities
Increase customer penetration
5% of WM deposit customers use WMFS
50% of WM deposit customers currently have investments
Only 37% of WM deposit customers are aware that WM has an investment firm
in the branches
Leverage platform sales (CBAP)
Develop online trading capabilities
Slide 80
[Washington Mutual Logo]
<PAGE>
Washington Mutual Insurance Services
Opportunities
Mortgage Banking
Internet (automated quotation for homeowners and mortgage life)
Consumer Banking
Credit Life Insurance - Integrate with consumer lending products/sales
Slide 81
[Washington Mutual Logo]
<PAGE>
Financial Services
Summary
Growth strategy will focus on building profitable alliances with Consumer and
Mortgage Banking to:
Increase referrals and cross-sell complementary products
Train sales force, when appropriate, for direct product sales, like the
successful CBAP initiative
Slide 82
[Washington Mutual Logo]
<PAGE>
Financial Services
Summary
Increased penetration of WM's current customer base is the key to growth
Technology - sales platform and Internet - is critical to growth and
product line. Can effectively leverage WM's Internet banking strategy
Slide 83
[Washington Mutual Logo]
<PAGE>
Financial Services
Summary
Financial Services is an important element of WM's long-term strategy
Product line diversifies revenue base by increasing fee income
Cross-selling multiple products maximizes customer retention
By successfully leveraging acquisitions, Financial Services' subsidiaries are
more efficient and profitable and ready for growth
Slide 84
[Washington Mutual Logo]
<PAGE>
Corporate Services
Steve Freimuth
Sr. Executive Vice President,
Corporate Services and Credit Quality
Slide 85
[Washington Mutual Logo]
<PAGE>
Corporate Services
Corporate Re-engineering
Formation of cross-divisional team of senior managers
Organize and prioritize work processes
Identify opportunities to improve efficiency, customer service, cycle times
Specific focus on processes having significant effect on revenues, expenses and
customer service levels
Slide 86
[Washington Mutual Logo]
<PAGE>
Credit Quality
Corporate Credit Overview
Economic climate is very positive
Real estate values increasing in
all markets
Delinquencies continue to trend down
REO sales are brisk
Loss severity decreasing significantly
Slide 87
[Washington Mutual Logo]
<PAGE>
Credit Quality
Total Nonperforming Loans
As a Percent of Total Loans
[Bar Graph]
12/31/96 12/31/97 12/31/98 6/30/99
1.02% 0.87% 0.70% 0.63%
Slide 88
[Washington Mutual Logo]
<PAGE>
Credit Quality
Single Family Loans
Nonperforming Loans
As a Percent of Total Loans
[Bar Graph]
12/31/96 12/31/97 12/31/98 6/30/99
1.11% 0.91% 0.71% 0.64%
Slide 89
[Washington Mutual Logo]
<PAGE>
Credit Quality
Apartment and Other CRE
Nonperforming Loans
As a Percent of Loan Type
[Bar Graph]
12/31/96 12/31/97 12/31/98 6/30/99
0.54% 0.55% 0.42% 0.29%
Slide 90
[Washington Mutual Logo]
<PAGE>
Credit Quality
2nd Mortgage
& other Consumer Loans
Nonperforming Loans
As a Percent of Loan Type
[Bar Graph]
12/31/96 12/31/97 12/31/98 6/30/99
.58% .62% .71% .77%
Slide 91
[Washington Mutual Logo]
<PAGE>
Credit Quality
Consumer Finance Loans
Nonperforming Loans
As a Percent of Loan Type
[Bar Graph]
12/31/96 12/31/97 12/31/98 6/30/99
2.09% 1.97% 2.07% 1.96%
Slide 92
[Washington Mutual Logo]
<PAGE>
Credit Quality
Commercial Business
Nonperforming Loans
As a Percent of Loan Type
[Bar Graph]
12/31/96 12/31/97 12/31/98 6/30/99
0.32% 0.32% 0.66% 0.56%
Slide 93
[Washington Mutual Logo]
<PAGE>
Credit Quality
REO Trends
Commercial
[Line Graph]
Inventory Units
7'98 8'98 9'98 10'98 11'98 12'98 1'99 2'99 3'99 4'99 5'99 6'99
134 124 117 109 104 97 94 85 95 94 89 81
Slide 94
[Washington Mutual Logo]
<PAGE>
Credit Quality
REO Trends
Residential
[Line Graph]
Inventory Units
7'98 8'98 9'98 10'98 11'98 12'98 1'99 2'99 3'99 4'99 5'99 6'99
2,864 2,817 2,828 2,730 2,619 2,579 2,614 2,652 2,532 2,341 2,349 2,315
Slide 95
[Washington Mutual Logo]
<PAGE>
Loss Severity
Residential (Q2 `98 - Q2 `99)
[Line Graph]
Q2 `98 Q3 `98 Q4 `98 Q1 `99 Q2 '99
12.9% 12.5% 11.0% 10.5% 8.4%
- ----- ----- ----- ----- -----
* Does not include the Company's consumer finance subsidiary
Slide 96
[Washington Mutual Logo]
<PAGE>
Credit Quality
Loss Severity
Commercial (Q2 `98 - Q2 `99)
Q2 `98 Q3 `98 Q4 `98 Q1 `99 Q2 '99
28.1% 10.3% 16.0% 12.0% 24.9%
* Does not include the Company's consumer finance subsidiary
Slide 97
[Washington Mutual Logo]
<PAGE>
Commercial Banking
Sally Jewell
Executive Vice President
Commercial Banking Division
Slide 98
[Washington Mutual Logo]
<PAGE>
Strategic Rationale
Leverages infrastructure to drive incremental business
Enhances margin and returns
Diversifies earnings, credit and interest rate risk
Supports growth to deploy capital
Expands WM's service and efficiency strengths to new clients
Slide 99
[Washington Mutual Logo]
<PAGE>
Business Lines
Flow Chart:
Washington Mutual - Commerical Banking Division
Washington Mutual A division of Washington Mutual Bank
Commercial Real Estate
Multi-family permanent loans A division of Washington Mutual
CRE Construction (NW only)
Commercial Permanent Loans (NW only) Full Service Commercial Banking
Industrial Business lines/loans
Retail Treasury Management Services
Office International Trade Finance
Community Banking
(OR/ID branches)
Slide 100
[Washington Mutual Logo] Commercial Banking Division
<PAGE>
Commerical Banking Division
Consolidated
First Quarter 1999
Total Assets(a) $19.3 billion
Total Loans(a) $19.2 billion
(before reserve)
First Quarter
Net Income after Tax (b) $52.3 billion
(a) at 3/31/99
(b) Line of business results for first quarter including allocated
corporate support expense
Slide 101
[Washington Mutual Logo] Commercial Banking Division
<PAGE>
Portfolio by Type
[pie chart]
Apartments: 76%
Other Real Estate: 15%
Business: 9%
Slide 102
[Washington Mutual Logo] Commercial Banking Division
<PAGE>
Loan Quality Measurements
Net Loan Losses
[bar graph]
1996 1997 1998 YTD 6/30/99
CRE-FA 0.63% 0.30% 0.13% 0.29%
CRE-WMB 0.00% 0.00% 0.00% -0.04%
Western 0.10% 0.13% 0.24% 0.28%
Slide 103
[Washington Mutual Logo] Commercial Banking Division
<PAGE>
WM-CRE Locations(a)
[maps of NW states marking locations of: 13 Commercial Real Estate
Offices (Loan Portfolio = $16.7B) and 79 Commerical Banking Offices
(Loan Portfolio = $1.9B(b))
(a) As of 6/30/99
(b) Average balances for six months ended 6/30/99
Slide 104
[Washington Mutual Logo] Commercial Banking Division
<PAGE>
Competitors
Thrifts
FNMA
Freddie Mac
Large Commercial Banks
Slide 105
[Washington Mutual Logo] Commercial Real Estate
<PAGE>
CRE Owners Want
Reliability and Predictability
"Do what you say you will do"
Stability
"Keep the people and process consistent"
Accuracy and Timeliness
"Deliver on your promises"
Slide 106
[Washington Mutual Logo] Commercial Real Estate
<PAGE>
Competitive Advantages
Portfolio capacity and flexibility
Fast turnaround through automated underwriting and processing
Direct origination capability in the nation's best markets
Large, low-risk, seasoned portfolio
Market dominance and name recognition
Slide 107
[Washington Mutual Logo] Commercial Real Estate
<PAGE>
Opportunities
Mining the client base - deposits, renewals, new loans
On-line application and processing via the Internet
Secondary market sales to enhance yield and reduce risk
Slide 108
[Washington Mutual Logo] Commercial Real Estate
<PAGE>
Opportunities
Geographic expansion - wholesale and direct
Diversification of product and property type
Acquisitions to broaden origination capacity
Slide 109
[Washington Mutual Logo] Commercial Real Estate
<PAGE>
Future Initiatives
Construct a portfolio that will survive and generate target returns through
the entire real estate cycle
Cross-sales into deposit and other products - underway
NW conversion to CA processing systems - 2000
Slide 110
[Washington Mutual Logo] Commercial Real Estate
<PAGE>
Future Initiatives
Vendor relationships for on-line application and processing - underway
Expand direct and wholesale lending into growing, stable markets - 2000-01
Development of portfolio sales to secondary market - 2000-01
Slide 111
[Washington Mutual Logo] Commercial Real Estate
<PAGE>
Future Initiatives
Expand product mix to core CRE properties with dedicated, focused
resources - underway
Streamline renewals to capture 80%+ - underway
Alliances/acquisitions for expansion and expertise
Slide 112
[Washington Mutual Logo] Commercial Real Estate
<PAGE>
WB/WMBB Locations
[Maps of NW states marking locations of 48 Full-Service Commercial Bank
Branches and 31 Business Banking Centers]
Coming Soon .......
3 Additional Business Banking Centers in California
10 Business Banking Centers in California by year-end
As of 6/30/99
Slide 113
[Washington Mutual Logo] Commercial Real Estate
<PAGE>
Average Loans
[bar graph]
Dollars in millions
Compound Growth
1995 - June '99 = 38%
1996 1997 1998 YTD 6/30/99
$745 $1,141 $1,492 $1,775
Slide 114
[Washington Mutual Logo] Divisions of Washington Mutual
<PAGE>
Average Deposits
[bar graph]
Dollars in millions
Compound Growth
1995 - June '99 = 17%
1996 1997 1998 YTD 6/30/99
$896 $1,006 $1,186 $1,364
Slide 115
[Washington Mutual Logo] Divisions of Washington Mutual
<PAGE>
Net Interest Margin
[bar graph]
1996 1997 1998 YTD 6/30/99
5.96% 6.59% 6.26% 5.84%
Slide 116
[Washington Mutual Logo] Divisions of Washington Mutual
<PAGE>
WB/WMBB Competitors
Large and Regional Banks
Community Banks
Farm Credit Services
Asset-based Lenders
Slide 117
[Washington Mutual Logo] Divisions of Washington Mutual
<PAGE>
Business Owners Want
[3 photographs]
Reliability and predictability
"Be there when I need you"
Stability
"Give me a banker who understands my business"
Accuracy and timeliness
"Make the service hassle-free"
Slide 118
[Washington Mutual Logo] Divisions of Washington Mutual
<PAGE>
Shifting Customer Loyalties
Traditionally, business customers were loyal to an institution
Today, loyalty is directed more toward individuals
Business Principals [arrow pointing to:] Banking Relationship Manager
Business clients are more willing move with their bankers
Slide 119
[Washington Mutual Logo] Divisions of Washington Mutual
<PAGE>
Commercial Banking
Typical Customer
Established, profitable businesses
Typically in operation for 3+ years
Customers with larger credit needs
Typical range is $500k - $20MM (some less than $500k, some greater than
$20MM)
Smaller loans made through Washington Mutual and Commercial Banking
SBA Lending Group
Deposit customers (non-borrowing) with cash management needs
Typical Business:
- Manufacturing
- Wholesale
- Agri-business
- Technology
- Service
- Export/Import
Slide 120
[Washington Mutual Logo] Divisions of Washington Mutual
<PAGE>
Competitive Advantages
WM STAR branch network -
"A partnership for profitability"
Balance sheet and lending capacity
Ability to "cherry pick" profitable business
Efficient, responsive, local delivery through BBCs with centralized
back-room support
Attractive environment for top bankers
Slide 121
[Washington Mutual Logo] Divisions of Washington Mutual
<PAGE>
Typical BBC Structure
[flow chart]
Business Banking Manager
Business Banking Officer Business Banking Officer Support Staff
Business Banking Officer Credit Analyst
Slide 122
[Washington Mutual Logo] Divisions of Washington Mutual
<PAGE>
Business Banking Centers
Work in Progress
19 locations or 56% are less than 2 years old
11 locations or 32% are less than 1 year old (includes 7 new California
locations)
Slide 123
[Washington Mutual Logo] Divisions of Washington Mutual
<PAGE>
Business Banking Center
Start-up Example
<TABLE>
<CAPTION>
Annual Avg. Standard Model Year 1 (F) Year 2 (F) Year 3 (F) Avg. BBCs greater than 2 Yrs. Seattle BBC @ 3 Years
<S> <C> <C> <C> <C> <C>
ROA -1.1% 0.7% 1.3% 1.32% 1.71%
ROE -17% 11% 19% 20% 22%
Efficiency 124% 62% 41% 43% 33%
($ in Millions)
Net Income $(.090) $.247 $891 $.769 $2.2
Avg. Loans 12 37 60 58 124
Avg. Deposits 3 9 14 22 42
Slide 124
</TABLE>
[Washington Mutual Logo] Divisions of Washington Mutual
<PAGE>
Opportunities
Geographic expansion - CA/TX/FL
Streamline referrals and operations through common systems with financial
centers
Move up-market as both an agent and participant
Capture new bankers through ongoing market disruption
Jump-start new markets through acquisitions
Slide 125
[Washington Mutual Logo] Divisions of Washington Mutual
<PAGE>
Challenges
Meeting growth expectations "organically"
Finding the "right" people in each market
Modifying WM deposit systems for commercial clients
Balancing growth with profitability
Finding acquisitions which make economic sense
Slide 126
[Washington Mutual Logo] Divisions of Washington Mutual
<PAGE>
Future Initiatives
Become a meaningful contributor to Washington Mutual's long-term profitability
Common name and common systems with the consumer bank within 3 years
Expansion of BBC network - 50 in CA over 5 years; TX and FL expansion
initiated in 2001
Slide 127
[Washington Mutual Logo] Divisions of Washington Mutual
<PAGE>
Future Initiatives
Selective participation in NW corporate accounts - underway
Strategic acquisitions of business banks
Potential expansion into asset-based commercial lending
Slide 128
[Washington Mutual Logo] Divisions of Washington Mutual
<PAGE>
Commercial Banking
Vital Few
Create an environment that builds, attracts and retains the best bankers
in the business
Provide the tools and support necessary to enable our team to focus on
exceptional client service and sales.
Build a reputation as the preferred financial partner for businesses and
commercial real estate owners.
Slide 129
[Washington Mutual Logo] Commerical Banking Division
<PAGE>
Commercial Banking
Vital Few
Integrate commercial banking into Washington Mutual's array of services
Deliver exceptional financial performance to enhance our significance within
Washington Mutual.
Slide 130
[Washington Mutual Logo] Commerical Banking Division
<PAGE>
Conclusion
Commerical Banking:
Builds on WM's core strengths in service and distribution
Enhances yields and long-term earnings potential for the company
Seizes a market opportunity to fill a niche challenged by bank
consolidation
Slide 131
[Washington Mutual Logo] Commerical Banking Division
<PAGE>
Conclusion
Commerical Banking:
Supports diversification attractive to the stock market
Is a great strategic fit!
Slide 132
[Washington Mutual Logo] Commerical Banking Division
<PAGE>
Aristar [logo]
A Washington Mutual Company
Slide 133
[Washington Mutual Logo]
<PAGE>
Company Profile
Headquartered in Tampa, Florida
Founded in 1927
Portfolio lender - no securitization
$2.9 billion in assets
493 offices in 24 states
2,630 employees
as of 6/30/99
Slide 134
[Aristar Logo]
<PAGE>
Product Profile and Mix
Personal unsecured (44%)
Average balance = $2,288
Real estate (46%)
60% firsts and 40% seconds
Average loan-to-value approximately 70%
Average balance = $26,914
Sales finance (10%)
8,767 dealerships in 25 states
Average balance = $780
Slide 135
[Aristar Logo]
<PAGE>
Receivables
6/30/99
[Map of United States highlighting states listed below]
Tennessee 10.4%
Colorado 10.1
Texas 9.9
North Carolina 8.9
California 7.7
Florida 7.4
South Carolina 5.7
Virginia 5.0
Louisiana 4.7
Mississippi 4.1
Other States 26.1
Slide 136
[Aristar Logo]
<PAGE>
Customer
Demographic Profile
Forty-four year old blue collar or lower-white collar worker
Individual income of $30,000 and family income of $70,000
Over 65% home owners
Low net worth
Slide 137
[Aristar Logo]
<PAGE>
Customer
Psycho-graphic
Cash flow borrowers
Intimidated by business with a bank
Payment borrowers
Want to be treated with dignity and respect
Slide 138
[Aristar Logo]
<PAGE>
Mission
To become a premier financial services company that provides a superior return
to its shareholders by:
Focusing on our high margin core products
Become the low cost producer
Superior execution
Slide 139
[Aristar Logo]
<PAGE>
Financial targets
ROA 3.0%
ROE greater than 18.0
EPS Growth 15.0
Efficiency Ratio less than 40.0
Net Charge-off 2.8
Slide 140
[Aristar Logo]
<PAGE>
A Strong Fit
With Washington Mutual's Growth Strategy
Both companies' focus is on high-service consumer lending
WM has traditionally been an "A" lender but is now generating potential
sub-prime customers through its "Free Checking" marketing programs
Slide 141
[Aristar Logo]
<PAGE>
A Strong Fit
With Washington Mutual's
Growth Strategy
WM has excess capital it would like to deploy in its core businesses like
consumer lending
WM has historically been an acquirer and consolidator of financial services
companies and that continues to be part of its strategic focus
Slide 142
[Aristar Logo]
<PAGE>
Competitive Advantage
"The Franchise" - customer relationship
Number one position in small to mid-size markets
Speed of service
Flexibility of packaging
Slide 143
[Aristar Logo]
<PAGE>
Strategy
Nurture the Franchise
Leveraging existing customer base by
focusing on core products
up-selling and cross-selling
Promote a sales culture to improve the historically slow receivables growth rate
Eliminate unprofitable ancillary products
Slide 144
[Aristar Logo]
<PAGE>
Strategy
Nurture the Franchise
Enhance credit risk capabilities
Become the low-cost producer
Manage business mix
Develop segmentation and target marketing capabilities
Slide 145
[Aristar Logo]
<PAGE>
Strategy
Expand the Franchise
Expand national franchise
Reinforce our dominant position in small to mid-size markets
Rationalize and expand branch network to new markets
Diversify distribution beyond retail branch network
Pursue acquisitions
Slide 146
[Aristar Logo]
<PAGE>
Improving Credit Quality
While Achieving Strong Loan Growth
Record level organic growth over the past 12 months
Credit quality not sacrificed
Delinquency percentage at three-year low
Credit standards tightened for newly originated business
Strong improvements in underlying credit quality trends
"At risk" portfolio managed aggressively
Only major consumer finance company to exclusively use contractual terms as
measure for delinquencies and charge offs
Slide 147
[Aristar Logo]
