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): November 8, 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 slide presentation made by management to
investors and analysts on November 8, 1999.
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/ Fay L.Chapman
Fay L. Chapman
Executive Vice President and
General Counsel
Forward-Looking Statements
This presentation contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are not historical facts and pertain to future operating results of
Washington Mutual, Inc. and as such are inherently subject to significant
business, economic and competitive uncertainties and contingencies, many of
which are beyond our control. In addition, these forward-looking statements are
subject to assumptions with respect to future business strategies and decisions
that are subject to change. Actual results may differ materially from the
results discussed in this presentation for the reasons, among others, discussed
under the heading "Business-Risk Factors" in our 1998 Annual Report on Form
10-K, which reasons include failure to realize cost savings from acquisitions,
risks of expanding our consumer banking operations, concentration of our
activities in California, interest rate risk, competition, readiness for Year
2000 and changes to the credit quality of our loans and investments.
<PAGE>
Presentation of Financial Results
Third Quarter 1999 consolidated results for WM, which were announced October 20,
are reflected in the following presentations where appropriate.
Business segment results for the third quarter were not finalized at the time
these presentations were prepared. Accordingly, all business segment information
presented herein is limited to second quarter 1999. Third quarter business
segment results will be publicly disseminated in the company's third quarter
Form 10-Q which will be available after November 15.
<PAGE>
Investor Conference
[Washington Mutual Logo] what's next?
November 8, 1999
1
<PAGE>
[Washington Mutual Logo] what's next?
Investor Conference
Kerry Killinger
Chairman, President and CEO
2
<PAGE>
Five-Year Targets
1995 - 1999
Return on Equity greater than 18%
EPS Growth greater than 15%
Efficiency Ratio less than 50%
Nonperforming/Total Assets less than 1%
Common Equity/Total Assets greater than 5%
[Washington Mutual Logo]
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<PAGE>
Key Five-Year Initiatives
2000 - 2004
Remix the balance sheet
Diversify revenue sources
Reduce interest rate risk
Further improve operating efficiency
Actively manage credit risk
Employ capital strategies to effectively manage returns and risk
[Washington Mutual Logo]
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<PAGE>
Revised Five-Year Targets
1995-1999 2000-2004
Targets Targets
Return on Equity greater than 18% greater than 20%
EPS Growth greater than 15% greater than 13%
Efficiency Ratio less than 50% less than 45%
Nonperforming/Total Assets less than 1% less than 1%
Common Equity/Total Assets greater than 5% greater than 5%
Risk Based Capital* n/a greater than 11%
*BHC (Bank Holding Company) total regulatory risk-based capital ratio
[Washington Mutual Logo]
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<PAGE>
what's next?
Mortgage Banking
Financial Services
Consumer Finance
Commercial Banking
Consumer Banking
Customer Segmentation
eBusiness Strategies
Operating Efficiency/Credit
Financial Outlook
[Washington Mutual Logo]
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<PAGE>
Investor Conference
[Washington Mutual Logo] what's next?
November 8, 1999
[Washington Mutual Logo]
7
<PAGE>
what's next?
[picture of house] Mortgage Banking
Craig Davis
President
Mortgage Banking and
Financial Services Groups
[Washington Mutual Logo]
1
<PAGE>
Mortgage Banking
Strategy
The mortgage bank's five-year lending strategy will deliver profitable growth
through
Leveraging portfolio lending strength
Investing in new, low-cost distribution channels
Credit risk management
Targeting 20% ROE
[Washington Mutual Logo]
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<PAGE>
Mortgage Banking
Strategy
Revenue
originate higher-yielding portfolio ARMs to replace lower-yielding MBS
increase proportion of revenues coming from sale of loans and servicing
Credit Exposure
nationwide strategy to balance risk across regions and economic cycles
Distribution
increase access options for borrowers and business-to-business
relationships
[Washington Mutual Logo]
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<PAGE>
Mortgage Banking
Distribution Network
[Map of United States]
Retail
171 home loan centers
1,200 loan consultants
1,023 consumer bank financial centers
Wholesale
23 wholesale offices
120 account managers
Internet
wamumortgage.com
Call Center
Correspondent
[Washington Mutual Logo]
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<PAGE>
Mortgage Banking
Originations by Channel*
[pie chart]
Wholesale: 46%
FCs: 11%
HLCs: 43%
Retail: 54%
*Originations YTD 9/30/99
[Washington Mutual Logo]
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<PAGE>
Mortgage Banking
Geographic Mix*
[pie chart]
<TABLE>
<CAPTION>
WA NY FL IL UT MA CO AZ CT OR TX Other CA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
13.0% 2.0% 4.0% 4.0% 2.0% 2.0% 2.0% 2.0% 2.0% 6.0% 1.0% 8.0% 52.0%
</TABLE>
*Originations YTD 9/30/99
[Washington Mutual Logo]
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<PAGE>
Mortgage Banking
Geographic Mix
1998
Total SFR Market(a) WM(b)
State Rank Volume($B) Rank Share
California 1 $363 1 10%
Illinois 2 90 2 3
Florida 3 85 5 3
Massachusetts 8 54 3 3
Washington 9 53 1 12
Colorado 10 53 3 3
Arizona 17 39 5 3
Oregon 21 27 1 9
Connecticut 22 26 3 5
Utah 25 23 1 6
Source: (a) Inside Mortgage Finance
(b) Real Estate Solutions for the most current month available
[Washington Mutual Logo]
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<PAGE>
Market Position
Top 10 Mortgage Originators
Market
Rank Lender Volume(B)* Share
1 Chase $79.8 7.6%
2 Norwest 69.0 6.5
3 Countrywide 63.2 6.0
4 BofA 50.8 4.8
5 WAMU 31.3 3.0
6 Fleet 29.8 2.8
7 HomeSide 23.4 2.2
8 ABN AMRO 23.1 2.2
9 Cendant 21.2 2.0
10 Dime 19.1 1.8
*Originations YTD 9/30/99
Source: Inside Mortgage Finance
[Washington Mutual Logo]
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<PAGE>
Market Position
Top 10 Retail/
Broker Only Wholesale Lenders
Market Market
Rank Retail Share* Wholesale Share*
1 Norwest 7.5% Countrywide 7.9%
2 BofA 6.7 ABM AMRO 6.3
3 Countrywide 4.6 BofA 5.7
4 WAMU 3.7 WAMU 5.2
5 Chase 3.6 Chase 5.0
6 Cendant 3.3 Norwest 3.9
7 GMAC 2.5 Crossland 3.4
8 National City 1.9 Dime 3.3
9 FT Mortgage 1.9 FT Mortgage 3.0
10 Dime 1.6 First Nationwide 2.7
*Originations YTD 6/30/99
Source: National Mortgage News
[Washington Mutual Logo]
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<PAGE>
ARM Mix
WAMU vs. Market*
Jan. Feb. March April May June July
MKT 18% 17% 19% 20% 21% 27% 30%
WAMU 48% 52% 56% 59% 62% 71% 79%
*1999 monthly origination volume
Source: Real Estate Solutions
[Washington Mutual Logo]
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<PAGE>
Market Position
Top 5 ARM Lenders
Market
Rank Lender Volume(B)* Share
1 WAMU $ 12.5 8.2%
2 BofA 8.7 5.7
3 Chase 5.6 3.7
4 Golden West 3.9 2.6
5 First Nationwide 3.8 2.5
*Originations YTD 6/30/99
Source: Inside Mortgage Finance
[Washington Mutual Logo]
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Mortgage Banking
Profitability Components
[pie chart] YTD 6/30/99
Manufacturing* (Portfolio Lending) 68%
Loan Servicing and Other Loan-Related Income 17%
Mortgage Banking Income (Sale of Loans) 15%
*Excludes mortgage loans allocated to Consumer Banking
[Washington Mutual Logo]
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<PAGE>
Mortgage Banking
SFR Balance Sheet Mix
[pie chart] 9/30/99
Option ARMs Intermediate ARMs Jumbo FRM Other
54.0% 27.0% 17.0% 2.0%
[Washington Mutual Logo]
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Manufacturing
Profitability -- Option ARMs
ROA*
Interest spread 1.98%
Estimated credit losses (0.14%)
Servicing expenses (0.01%)
Other operating expenses (0.09%)
-------
Pretax return on assets 1.74%
After-tax return on assets 1.10%
*Estimate: YTD 9/30/99 annualized
[Washington Mutual Logo]
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<PAGE>
Mortgage Banking Income
Sale of Loans
Income on sale of loans (net) 1.09%
Warehouse interest income 0.01%
-----
Pretax marginal return 1.10%
After-tax marginal return 0.69%
YTD 9/30/99 loans sold $7.40B
*Includes value of retained mortgage servicing rights
[Washington Mutual Logo]
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<PAGE>
Mortgage Banking
Loans Serviced for Others
After-tax net income(a) $28.6M
Mortgage servicing rights(b) $492.6M
ROA(c) 11.59%
Loans serviced for others(b)(d) $52.4B
Mortgage servicing rights(b)/
Loans serviced for others(b)(d) 0.94%
(a) YTD 6/30/99
(b) As of 6/30/99
(c) Estimate: YTD 6/30/99 annualized
(d) Excludes loans securitized and held by WMI
[Washington Mutual Logo]
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<PAGE>
Mortgage Banking
SFR Servicing Portfolio*
[bar graph]
Dollars in billions
12/31/97 12/31/98 09/30/99
$165 $175 $179
* Includes loans held in portfolio and held for sale (exclusive of loans
serviced by others), loans securitized and retained (with and without recourse),
and loans serviced for others
[Washington Mutual Logo]
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<PAGE>
Mortgage Banking
Direct Cost Per Loan Serviced*
[bar/line graph]
Q1 1998 Q2 1998 Q3 1998 Q4 1998 Q1 1999 Q2 1999 Q3 1999
------- ------- ------- ------- ------- ------- -------
Cost per loan $68.00 $76.00 75 $68.00 $57.00 $55.00 $51.00
Loans serviced/FTE 1,134 1,076 1109 1,060 1,008 1,053 1,157
* Estimate: quarterly figures annualized
[Washington Mutual Logo]
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<PAGE>
Mortgage Banking
SFR Originations
[bar/line graph]
1996 1997 1998 1999*
WAMU ($ in Billions) $21.40 $27.20 $43.60 $44.00
Market ($ in Trillions) 0.8 0.8 1.5 1.2
*Estimate: YTD 9/30/99 annualized
Source: National Mortgage News
[Washington Mutual Logo]
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<PAGE>
Mortgage Banking
Direct Cost per Dollar Funded
[line graph]
1998 1999
Q1 Q2 Q3 Q4 Q1 Q2
Retail (bps) 87.3 94.6 92 84.5 83.2 81.2
Wholesale (bps) 17.8 17.3 17.1 17.4 15.5 15.5
Average loan size*
Retail $181,000
Wholesale $259,000
*YTD 6/30/99
[Washington Mutual Logo]
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<PAGE>
SFR Asset Quality
FICO Scores by Quarter
[bar graph]
3/97 6/97 9/97 12/97 3/98 6/98 9/98 12/98 3/99 6/99
695 703 710 712 720 709 709 714 708 703
Source: WM databases; origination data average per loan
[Washington Mutual Logo]
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<PAGE>
SFR Asset Quality
Portfolio LTV Composition
[bar graph]
0-60 61-70 71-75 76-80 81-90 91-95 95+ PMI
Original (a) 13% 19% 19% 32% 7% 1% 0% 10%
Adjusted (b) 18% 23% 19% 21% 8% 1% 0% 10%
(a) LTV at origination date
(b) Case-Shiller adjusted as of 6/30/99
[Washington Mutual Logo]
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<PAGE>
SFR Asset Quality
90+ Day Delinquencies
as a % of Total SFR Portfolio
[bar graph]
ARM* FRM* All
Market 0.87% 0.36% 0.74%
WAMU 0.78% 0.22% 0.60%
* ARM and FRM delinquencies exclude government loans
Source: MIC "A Market" LPS database 6/30/99, percent by dollar value of
portfolio
[Washington Mutual Logo]
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<PAGE>
[photo of a house] what's next
[Washington Mutual Logo]
24
<PAGE>
Mortgage Banking
Opportunities
Potential to improve net income and returns
Position WAMU as premier portfolio lender
Above-average returns
Leverage position to drive fee income higher
Focus on highest-margin SFR originations
Build national mortgage brand
[Washington Mutual Logo]
25
<PAGE>
Mortgage Banking
ROE by Product(a)(b)
[bar graph]
Option ARM Intermediate ARM FRM Subprime (c) SFR Construction
21.9% 17.0% 16.8% 23.1% 21.6%
(a) YTD 6/30/99
(b) Based on a 5% equity allocation
(c) Predominantly A-/B+ SFR loans originated by WAMU
[Washington Mutual Logo]
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<PAGE>
Mortgage Banking
Building a National Brand
"Power of Yes"
People Power
Product Power
Portfolio Power
[Washington Mutual Logo]
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<PAGE>
Product Innovation
Advantage 90
Unique product design to retain customers
Nationwide advertising campaign
Wall Street Journal
Newspaper, radio
Direct mail
[Washington Mutual Logo]
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<PAGE>
Product Innovation
Advantage 90 Originations
[bar graph]
Dollars in millions
Q1 99 Q2 99 Q3 99
Retail $74 $196 $307
Wholesale $58 $148 $212
Total: $132.5 $343.9 $519.1
[Washington Mutual Logo]
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<PAGE>
Mortgage Banking
Five-Year Business Targets
[bar graph]
Dollars in billions
1999(a)(b) 2004 (c)
Retail $24.3 $25.0
Wholesale $19.6 $30.0
Internet/Call Center $0.1 $12.0
Correspondent $8.0
Total: $44.0 $75.0
(a) Target for 1999
(b) Includes financial center originations
(c) Excludes financial center originations
[Washington Mutual Logo]
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<PAGE>
Five-Year Business Targets
Retail Channel
Dollars in billions
1999 2004
Volume(a)(b) $20.0 $25.0
Home Loan Centers 171 200
Loan Consultants 1,200 1,400
Support Staff 2,000 1,700
(a) Target for 1999
(b) Excludes financial center originations
[Washington Mutual Logo]
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<PAGE>
Five-Year Business Targets
Wholesale Channel
Dollars in billions
1999 2004
Volume* $19.6 $30.0
Wholesale Loan Centers 23 31
Account Managers 120 180
Support Staff 460 500
*Target for 1999
[Washington Mutual Logo]
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<PAGE>
Five-Year Business Targets
Internet/Call Center/Correspondent Channels
Dollars in billions
1999 2004
Internet/Call Center
Volume* $0.1 $12.0
Total staff 15 175
Correspondent
Volume N/A $8.0
Total staff N/A 50
* Target for 1999
[Washington Mutual Logo]
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<PAGE>
Mortgage Banking
Technology
New origination system to capitalize on emerging trends in the industry
Web-based
Portable
Credit risk management/risk-based pricing
[Washington Mutual Logo]
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<PAGE>
Mortgage Banking
Technology
Electronic connectivity to partners
Realtors
Mortgage brokers
Correspondent relationships
Electronic connectivity to vendors/ strategic alliances
Appraisal
Flood/mortgage/title insurance
GSEs
[Washington Mutual Logo]
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<PAGE>
Mortgage Banking
Five-Year Business Initiatives
Objectives
Increase loan originations to $75 billion
Grow nationwide market share to 7.5% of estimated $1 trillion market
Increase income from sales of loans and servicing
Maintain credit quality
Continue to invest in technology
[Washington Mutual Logo]
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<PAGE>
Mortgage Banking
Summary
Mortgage Banking will be a strong engine of value growth over the next five
years
Mortgage Banking will be a 20% ROE business
[Washington Mutual Logo]
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<PAGE>
what's next?
[picture of Wall St. street sign] Financial Services
Craig Davis
President
Mortgage Banking and
Financial Services Groups
[Washington Mutual Logo]
1
<PAGE>
Financial Services
Overview
Key drivers of fee income
WM Group of Funds
WM Financial Services
Washington Mutual Insurance Services
[Washington Mutual Logo]
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<PAGE>
WM Group of Funds
Profile*
The difference is experience
18 mutual funds
1 variable annuity
5 strategic asset management portfolios
$6.3B in assets under management
*As of 9/30/99
[Washington Mutual Logo]
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<PAGE>
WM Group of Funds
Pretax Operating Income
[bar/line graph]
Dollars in millions
1997 1998 YTD 9/30/98 YTD 9/30/99
$4.6 $9.0 $7.2 $13.4
(line showing 96% change from 1997 to 1998)
(line showing 85% change from YTD 9/30/98 to YTD 9/30/99)
[Washington Mutual Logo]
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<PAGE>
WM Group of Funds
Performance
Value orientation
Fund performance
12 of our 13 funds rank average or above
10 rated A/B
2 rated C
Source: Lipper Analytical Services as of 9/30/99
[Washington Mutual Logo]
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<PAGE>
WM Group of Funds
Net Flow as % of Assets Under Management*
[bar graph]
WM 6%
BAC -1%
ONE 6%
CMB -5%
WFC -1%
JPM 20%
FLT 4%
KEY -3%
C -26%
*YTD 8/31/99 sales less redemptions divided by 12/31/98 assets under management
Source: Strategic Insights, Aug. 1999
[Washington Mutual Logo]
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<PAGE>
WM Group of Funds
Distribution
National distribution
338 broker dealers
WM Financial Services
Consumer Banking Market - 500 financial consultants serving 1,023
financial centers
[Washington Mutual Logo]
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<PAGE>
WM Financial Services
Profile
We invest in relationships
Full-service broker dealer
Focus on Washington Mutual customer base
Primary sales channel for WM Group of Funds
Strategic partnerships with industry-leading mutual fund companies
[Washington Mutual Logo]
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<PAGE>
WM Financial Services
Pretax Operating Income
[bar/line graph]
Dollars in millions
1997 1998 YTD 9/30/98 YTD 9/30/99
$22.1 $47.2 $34.7 $63.9
(line showing 113% change from 1997 to 1998)
(line showing 84% change from YTD 9/30/98 to 9/30/99)
[Washington Mutual Logo]
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<PAGE>
WM Financial Services
Product Sales
[line graph]
Market share
Mutual Funds & Variable Annuities
<TABLE>
<CAPTION>
AIM
5/98 6/98 7/98 8/98 9/98 10/98 11/98 12/98 1/99 2/99 3/99 4/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3% 3% 4% 3% 4% 3% 3% 3% 4% 4% 4% 5%
5/99 6/99 7/99 8/99 9/99
5% 4% 5% 11% 5%
FRANKLIN / ALLIANZ
5/98 6/98 7/98 8/98 9/98 10/98 11/98 12/98 1/99 2/99 3/99 4/99
14% 16% 13% 13% 17% 16% 15% 13% 11% 8% 11% 8%
5/99 6/99 7/99 8/99 9/99
7% 9% 6% 6% 7%
HARTFORD
5/98 6/98 7/98 8/98 9/98 10/98 11/98 12/98 1/99 2/99 3/99 4/99
6% 9% 7% 8% 11% 10% 14% 14% 15% 16% 15% 11%
5/99 6/99 7/99 8/99 9/99
11% 15% 14% 14% 18%
PUTNAM
5/98 6/98 7/98 8/98 9/98 10/98 11/98 12/98 1/99 2/99 3/99 4/99
19% 11% 14% 13% 11% 12% 11% 10% 14% 12% 12% 10%
5/99 6/99 7/99 8/99 9/99
8% 6% 9% 7% 8%
KEMPER
5/98 6/98 7/98 8/98 9/98 10/98 11/98 12/98 1/99 2/99 3/99 4/99
9% 10% 11% 11% 11% 8% 8% 8% 9% 10% 7% 7%
5/99 6/99 7/99 8/99 9/99
5% 3% 3% 2% 3%
MFS
5/98 6/98 7/98 8/98 9/98 10/98 11/98 12/98 1/99 2/99 3/99 4/99
5% 6% 6% 6% 6% 6% 6% 6% 8% 9% 9% 8%
5/99 6/99 7/99 8/99 9/99
5% 6% 8% 5% 6%
OPPENHEIMER
5/98 6/98 7/98 8/98 9/98 10/98 11/98 12/98 1/99 2/99 3/99 4/99
3% 4% 4% 4% 3% 3% 2% 3% 3% 2% 2% 2%
5/99 6/99 7/99 8/99 9/99
1% 2% 2% 1% 2%
SAFECO
5/99 6/99 7/99 8/99 9/99
0 0% 0% 0%
VAN KAMPEN
5/98 6/98 7/98 8/98 9/98 10/98 11/98 12/98 1/99 2/99 3/99 4/99
5% 5% 6% 6% 7% 6% 6% 6% 5% 4% 4% 4%
5/99 6/99 7/99 8/99 9/99
3% 5% 6% 5% 4%
WM FUNDS
5/98 6/98 7/98 8/98 9/98 10/98 11/98 12/98 1/99 2/99 3/99 4/99
33% 33% 32% 32% 27% 35% 34% 36% 31% 34% 33% 42%
5/99 6/99 7/99 8/99 9/99
43% 49% 46% 45% 45%
OTHER
5/98 6/98 7/98 8/98 9/98 10/98 11/98 12/98 1/99 2/99 3/99 4/99
2% 2% 3% 3% 3% 2% 1% 2% 2% 2% 2% 2%
5/99 6/99 7/99 8/99 9/99
11% 1% 1% 2% 1%
</TABLE>
[Washington Mutual Logo]
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<PAGE>
Fixed Annuity Sales*
[bar graph]
Dollars in millions
1998 YTD 9/30/99
$23 $230
* Consumer Bank Annuity Program only
[Washington Mutual Logo]
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<PAGE>
Total Annuity Sales
Market Position
Dollars in millions
Bank Annuities(a)
1 First Union $924
2 Washington Mutual 922(b)
3 Citigroup 635
4 Chase Manhattan 622
5 Bank of America 616
6 Banc One 521
7 Wells Fargo 396
8 Fleet Financial 372
9 California Federal 276
10 Union Planters 266
(a) Investment sales YTD 6/30/99
(b) Includes WMFS and CBAP annuity sales
Source: Singer Annuity & Fund Database
[Washington Mutual Logo]
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<PAGE>
Mutual Fund Sales
Market Position
Dollars in millions
Bank(a) Long-term Mutual Funds (b)
1 Citigroup $2,986
2 Bank of America 2,837
3 JP Morgan 2,569
4 Chase Manhattan 2,322
5 Fleet Financial 2,043
6 Banc One 2,042
7 Wells Fargo 1,975
8 First Union 1,898
9 U.S. Bancorp 1,869
10 US Trust 1,113
11 Washington Mutual 960(b)
(a) Bank-owned broker dealers
(b) Investment sales YTD 6/30/99
Source: Singer Annuity & Fund Database
[Washington Mutual Logo]
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<PAGE>
WM Financial Services
Avg. Monthly Commissions
per Financial Consultant
[bar graph]
1997 1998 YTD 9/30/99
$21,000 $23,000 $29,000
[Washington Mutual Logo]
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<PAGE>
WM Financial Services
Operational Efficiency
1997 1998 YTD 9/30/99
Financial Consultants
to Back Office
Support Personnel 0.8 1.7 2.9
# Financial
Consultants
& Sales Staff 578 646 698
# Back Office
Personnel 735 375 242
[Washington Mutual Logo]
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<PAGE>
Washington Mutual
Insurance Services
Profile
Low-cost provider of quality insurance products
Leverage mortgage banking and consumer banking relationships
Customer retention
[Washington Mutual Logo]
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<PAGE>
Washington Mutual
Insurance Services
Pretax Operating Income
[bar/line graph]
Dollars in millions
1997 1998 YTD 9/30/98 YTD 9/30/99
$8.6 $10.5 $7.5 $9.8
(line showing 22% change from 1997 to 1998) (line showing 31% change from YTD
9/30/98 to YTD 9/30/99)
[Washington Mutual Logo]
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<PAGE>
Washington Mutual
Insurance Services
Premiums and Policies*
[bar graph]
Dollars in millions
YTD 6/30/98 YTD 6/30/99
Premiums $93.2 $94.5
Policies 239,000 248,000
*Premiums sold and policies written
[Washington Mutual Logo]
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<PAGE>
Financial Services Group
Pretax Operating Income
[bar/line graph]
Dollars in millions
1997 1998 YTD 9/30/98 YTD 9/30/99
WM Financial Services 22.133 47.176 34.693 63.948
WM Group of Funds 4.634 8.986 7.229 13.378
Washington Mutual
Insurance Services 8.614 10.469 7.486 9.811
Total $35.4 $66.6 $49.4 $87.1
(line showing 88% change from 1997 to 1998) (line showing 76% change from YTD
9/30/98 to YTD 9/30/99)
[Washington Mutual Logo]
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<PAGE>
[photo of Wall Street street sign) what's next?
[Washington Mutual Logo]
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<PAGE>
Financial Services Group
Future Opportunities
Increase pretax operating income 15-20% by
Increasing penetration of Washington Mutual households
Expanding national distribution of WM Group of Funds
Introducing online trading
Launching credit life insurance coverage
Limiting G&A expenses
[Washington Mutual Logo]
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<PAGE>
what's next?
(photo of business office] Consumer Finance Group
Craig Chapman
President and CEO
Washington Mutual Finance
[Washington Mutual Logo]
1
<PAGE>
Business Lines
[organizational chart for Consumer Finance Group]
Consumer Finance Group
- ------------------------------------------------------------------------
Washington Mutual Finance Long Beach Mortgage
- ---------------------------------- ---------------------------
Market Consumer Market Speciality Mortgage
Finance
Channel 518 Retail Channel 84 Wholesale
Branches Offices
Financing Portfolio Financing Wholesale
Size $3.1B Assets Size $3.1B originations*
*Estimate: YTD 9/30/99 annualized
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what's next?
[photo of business office] Washington Mutual
Finance
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WM Finance
Overview*
Headquartered in Tampa, FL; founded in 1927
Portfolio lender - no securitization
$3.1B in assets
518 offices in 24 states
2,600 employees
*As of 9/30/99
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WM Finance
Geographic Focus
[Map of United States]
Receivables*
Colorado 10.2% Florida 6.8%
Tennessee 10.0% South Carolina 5.5%
Texas 9.7% Virginia 4.8%
North Carolina 8.7% Louisiana 4.5%
California 7.7% Mississippi 4.1%
Other 28.0%
*As of 9/30/99
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WM Finance
Customer Demographic Profile
Forty-four-year-old blue collar or lower-income white collar worker
Household incomes of $70,000
Over 65% are homeowners
Lower net worth
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WM Finance
Customer Psychographic Profile
Cash flow and payment borrowers
Intimidated by banks
Want to be treated with dignity and respect
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WM Finance
Portfolio Growth
[bar graph]
Dollars in thousands
1996 1997 1998 YTD 9/30/98 YTD 9/30/99
$51,679 $135,568 $245,683 $104,470 $317,554
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WM Finance
One-Year Portfolio Growth*
[bar graph]
Personal Loan Real Estate Sales Finance
1998 12.36% 19.74% -16.37%
1999 18.94% 23.97% 1.75%
* 1998 figures represent growth between 9/30/97 and 9/30/98
1999 figures represent growth between 9/30/98 and 9/30/99
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WM Finance
Improvement in Direct Marketing Efficiency*
[bar graph]
Personal Loan Prospect Direct Mail 11.0%
Present Customer Renewal 8.5%
Sales Finance Conversion to Personal Loans 6.6%
* % reduction in cost per new loan for YTD 9/30/99 compared with YTD 9/30/98
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WM Finance
Current Customers*
[bar graph]
YTD 9/30/98 3.71%
YTD 9/30/99 4.48%
* Direct mail response rate for existing customers (personal loan)
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WM Finance
Total Portfolio 30+ Delinquency
[line graph]
<TABLE>
<CAPTION>
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 4.63% 4.65% 4.55% 4.52% 4.60% 4.70% 4.70% 4.81% 5.06% 4.92% 5.09% 4.99%
1998* 5.08% 4.98% 4.67% 4.68% 4.78% 4.87% 4.88% 5.01% 4.88% 4.75% 4.80% 4.76%
1999* 4.86% 4.60% 4.17% 4.23% 4.29% 4.28% 4.38% 4.33% 4.28%
</TABLE>
*Excludes VISA portfolio
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WM Finance
Total Portfolio 90+ Delinquency
[line graph]
<TABLE>
<CAPTION>
Jan. Feb. Mar. Apr. May June July Aug. Sep. Oct. Nov. Dec.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 2.01% 2.02% 2.02% 2.00% 2.00% 2.02% 2.01% 2.03% 2.08% 2.10% 2.10% 2.12%
1998* 2.18% 2.14% 2.07% 2.04% 2.06% 2.05% 2.04% 2.06% 2.05% 2.04% 2.00% 1.97%
1999* 1.95% 1.90% 1.84% 1.85% 1.82% 1.83% 1.85% 1.87% 1.83%
</TABLE>
*Excludes VISA portfolio
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WM Finance
First Payment Default Rate*
<TABLE>
<CAPTION>
Jan. Feb. Mar. Apr. May June July Aug. Sep. Oct. Nov. Dec.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 8.21% 8.03% 9.13% 9.23% 9.41% 9.33% 9.70% 10.99% 11.16% 12.09%
1998 11.36% 10.20% 8.76% 8.35% 9.26% 9.30% 9.89% 9.72% 9.63% 8.97% 8.63% 9.66%
1999 10.25% 9.40% 7.65% 6.85% 7.58% 8.26% 8.02% 7.71%
</TABLE>
* Total portfolio three-month average
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WM Finance
Vintage Curve(a)
[line graph]
<TABLE>
<CAPTION>
Jan. Feb. Mar. Apr. May June July Aug. Sep. Oct. Nov. Dec.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 9.02% 8.78% 9.77% 9.62% 9.52% 8.79% 8.26% 8.50% 8.41% 8.76%
1998(b) 8.55% 8.77% 9.05% 8.77% 8.51% 8.42% 8.86% 8.84% 8.13% 7.76% 7.58% 7.72%
1999(b) 7.45% 7.09% 7.20%
</TABLE>
(a) % of accounts 0-30 days delinquent 6 mos. after origination;
total portfolio three-month rolling average
(b) Excludes VISA portfolio
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WM Finance
Key Financial Targets
Long-Term
Target YTD 6/30/99
Efficiency Ratio less than 40.0% 39.5%
Net Charge Offs less than 2.8% 2.9%*
Return on Assets greater than 3.0% 2.3%*
*Estimate: YTD 6/30/99 annualized
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WM Finance
Peer Analysis
WM Finance(a) Peers(b)
Consumer Loan Growth Rate 13.0% 14.0%(c)
Net Interest Margin 11.2 7.5
Efficiency Ratio 39.5 50.2
Net Charge Offs 2.9 2.6
Net Income Growth 21.8 13.1
Return on Assets 2.3 2.0
Debt/Tangible Equity 5.2x 7.3x
Peers: American General Finance Corp., Associates Corp. No. Amer., Household
Finance Corp., Northwest Financial Inc., Commercial Credit Co. (Citigroup)
(a) YTD 6/30/99
(b) Source: SNL Database, Peer Analysis 6/30/99
(c) Not adjusted for acquisitions
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WM Finance
Efficiency Ratio
[line graph]
<TABLE>
<CAPTION>
Q1 96 Q3 96 Q1 97(a) Q3 97 Q1 98 Q3 98
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
48.48% 46.10% 48.01% 46.15% 47.47% 43.04% 46.19% 44.70% 44.88% 43.43% 40.76% 42.18%
Q1 99(b) Q3 99
40.97% 51.50% 39.00%
</TABLE>
(a) Includes $1.0M of legal reserve
(b) Includes $4.5M legal settlement and $2.2M one-time acctg. adjmts.
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WM Finance
Net Charge Offs as a % of Receivables
[line graph]
<TABLE>
<CAPTION>
Dec-97 Jan-98 Feb-98 Mar-98 Apr-98 May-98 Jun-98 Jul-98 Aug-98 Sep-98 Oct-98 Nov-98 Dec 98*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3.31% 3.10% 3.12% 3.15% 3.26% 3.00% 3.00% 2.92% 2.98% 3.01% 3.07% 3.40% 3.50%
Jan-99 Feb-99 Jun-99 Sep-99
3.22% 2.96% 2.93% 2.88%
</TABLE>
*Includes $900,000 one-time charge off
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WM Finance
Annualized Return on Avg. Assets
[bar graph]
Q1 98 Q2 98 Q3 93 Q4 98 Q1 99 Q2 99
2.00% 2.10% 2.20% 1.80%* 2.20% 2.30%
* Includes $4.5M legal settlement and $2.2M one-time acctg. adjmts.
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WM Finance
Investing for the Future
New infrastructure added 1998-1999 to maintain credit quality and improve
operating efficiency
Credit Risk Department
Data Warehouse
Centralization of Back Office
Alternative Lending Department
Lending Compliance Department
Training Department
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Long Beach Mortgage
Overview
Line of business
Specialty mortgage finance
First mortgage only
Whole loan sales
12 years in the industry
Historically a high ROE business
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Long Beach Mortgage
National Origination Franchise
[map of United States showing plot points for different regions]
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Long Beach Mortgage
Overview
Strategic complement to WM Finance
Nationwide production network of brokers in all 50 states
One of the largest wholesale originators of specialty mortgages
Potential consolidation platform for specialty mortgage market
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Long Beach Mortgage
Loan Origination Volume
[bar graph]
Dollars in millions
1996 1997 1998 1999*
$1,058 $1,686 $2,576 $3,083
*Estimate: YTD 9/30/99 annualized
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Long Beach Mortgage
Overview
Talented management team
Strong balance sheet
No long-term debt
Internally funded growth
Loan sales reduce exposure to default and prepayment risk
Recognized as the low-cost provider in specialty mortgage finance industry
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Long Beach Mortgage
G&A Expenses as a % of Loans Originated
[bar graph]
1996 1997 1998 YTD 6/30/99
3.29% 2.72% 2.82% 2.64%
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[photo of office] what's next?
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Consumer Finance Group
Strong Growth Expected
Five Year
Forecast CAGR
Assets in Portfolio $4.4B(a) 15-20%
Originations Sold $3.1B(b) 20-30%
Profits will grow faster than assets due to mortgage sales
Expected ROE of 20%-22%
(a) As of 9/30/99
(b) Estimate: YTD 9/30/99 annualized
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Consumer Finance Group
Key Initiatives
Organic growth is expected to be greater than market growth
Expand branch network geographically
Utilize new lead management systems
Consolidate back office
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Consumer Finance Group
Key Initiatives
Diversify distribution: direct mail, telemarketing
Expand Internet capabilities
Leverage core competencies
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Key Initiatives
Expand Internet Capabilities
[Picture of Washington Mutual "Easy Money!" screen]
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Key Initiatives
Expand Internet Capabilities
[Picture of Washington Mutual "LOANSLIVE.com" screen]
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Key Initiatives
Expand Internet Capabilities
[Picture of Long Beach Mortgage Company screen]
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Key Initiatives
Expand Internet Capabilities
[Picture of Financing USA screen]
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Key Initiatives
Leverage Core Competencies
Credit risk management
Risk selection, pricing and control
Multi-channel marketing
Customer origination and selection
Strong financial management
Total customer relationship profitability
Risk-based pricing and capital allocation
Dynamic asset management
Portfolio/capital markets flexibility
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Consumer Finance Group
Summary
Grow organically and through acquisitions
Leverage substantial investments and infrastructure
Generate high returns while managing credit risk on a larger asset base
Create value for WM shareholders
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what's next?
[photo of entrance to office building] Commercial Banking
Group
Sally Jewell
President
Commercial Banking
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Business Lines
[organizational chart for Commercial Banking Group]
Commercial Banking Group
Commercial Real Estate Commercial Banking
Multi-Family loans Full-Service commercial banking
Commercial property loans Business lines/loans
Commercial construction loans Treasury management services
International trade finance
Community banking (OR/ID branches)
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Commercial Banking Group
Strategic Objectives
Grow higher-yielding commercial banking assets
Drive incremental business through infrastructure leverage
Enhance overall margins and returns
Diversify earnings, credit and interest rate risk
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Commercial Banking Group
Overview
As of 6/30/99
Total Assets $19.1 billion
Total Loans
(before reserve) $18.8 billion
YTD 6/30/99
Net Income After Tax(a) $104 million
(a) Line of business results include allocated corporate support expense
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Commercial Banking Group
Portfolio Growth
9/30/99 2004 Five-Year
Current Projected Forecast
Type Mix Mix CAGR
- ----------- ----------- ---------- -------------
Apartments 76% 45-55% 3-7%
Other Commercial 24% 45-55% 25-35%
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what's next
[photo of entrance to office building] Commercial Real
Estate
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Commercial Real Estate
[map of northwestern states showing locations of sales offices]
13 sales offices (a) [marked with a triangle on map described above]
$2.1 billion in annual loan originations (b)
$16.8 billion loan portfolio (a)
(a) As of 9/30/99
(b) Estimate: YTD 9/30/99 annualized
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Commercial Real Estate
Market Position
Delivering efficient, profitable multi-family and commercial real estate loans
to investors and property management companies
Largest bank provider of multi-family loans in Western U.S.
Focused on smaller, high-yielding loans less than $10 million
Emerging provider for low-risk commercial property loans
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Commercial Real Estate
Competition
Fannie Mae DUS* lenders
Thrifts
Large commercial banks
Conduits
Commercial mortgage companies
* Delegated Underwriting and Servicing
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Commercial Real Estate
Strategic Advantages
Capacity and flexibility to respond to market opportunities
Strong origination capability in fast-growing western states
Large, low-risk, seasoned portfolio
Streamlined application, underwriting and closing processes
10-15 days faster than competitors
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Commercial Real Estate
Loan Portfolio
$2 + billion annual originations
$2 + billion annual run-off
[pie chart] 9/30/99
Apartments Other real estate
84% 16%
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Commercial Real Estate
Loan Quality Measurements
Nonperforming Assets as a % of Loans
[bar graph]
12/31/1996 12/31/1997 12/31/1998 9/30/1999
1.10% 0.93% 0.69% 0.56%
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Commercial Real Estate
Loan Quality Measurements
Net Loan Charge Offs as a % of Loans
[bar graph]
1996 1997 1998 YTD 9/30/99*
0.60% 0.28% 0.11% 0.19%
* Estimate: YTD 9/30/99 annualized; includes $17.8 million in previously
established specific reserves on four commercial real estate properties that
were obtained through acquisitions
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Commercial Real Estate
Current Business Initiatives
Expand product line into owner-occupied industrial properties
Implement more responsive interest rate indices and prepayment provisions where
competitive conditions permit
Centralize all processing and closing into one location
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Commercial Real Estate
Current Business Initiatives
Sell commercial banking deposit and treasury management products to property
management companies
Secure title/escrow company deposits
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Commercial Real Estate
Future Strategic Initiatives
Form asset purchase alliances with high-quality originators in selected markets
Add direct origination capacity in attractive markets where Washington Mutual
has an established presence
Establish securitization channel to enhance yield and actively manage assets
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Commercial Real Estate
Future Strategic Initiatives
Replace existing processing software with integrated Internet system
Establish eBusiness presence for selected markets and products
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what's next
[photo of entrance to office building] Commercial Banking
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Commercial Banking
WM Business Bank and Western Bank*
$2.01 billion in loans
$1.53 billion in deposits
[maps of northwestern states]
33 Business Banking Centers (initiated since 1996)-[marked with a square on map
described above]
48 Full-Service Commercial Bank Branches (most acquired 1996)-[marked with a
circle on map described above]
*As of 9/03/99
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Commercial Banking
Market Position
Developing and maintaining strong client relationships with mid-sized companies
focused on high-quality, personalized delivery of innovative financial
service solutions
Core business market
companies with $5M to $100M in sales
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Commercial Banking
Market Position
Respected alternative to large, commercial banks in WA, OR, ID and UT
New entrant to CA in 1999
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Commercial Banking
Competition
Large commercial banks
Community banks
Asset-based lenders
Farm Credit Services
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Commercial Banking
Strategic Advantages
Focused on profitable, loyal mid-sized business client base
Attractive environment for top performing bankers
Washington Mutual consumer branch delivery infrastructure
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Commercial Banking
Strategic Advantages
Leading-edge products tailored to business needs
International trade finance
Treasury management services
Portfolio capacity and flexibility
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Commercial Banking
Model for BBC Growth
Dollars in millions
Internal Model Actual Performance
------------------------ ----------------------
Annual Year Year Year BBCs Seattle BBC
Avgs. 1 2 3 > 2 Yrs @ 3 Yrs
- ------------ ------ ------ ------ -------- ----------
ROA (1.1%) 0.7% 1.3% 1.3% 1.7%
Efficiency 124.5 61.3 40.6 43.0 31.3
Loans $12.0 $37.0 $60.0 $56.9 $124.0
Deposits 2.8 8.5 13.8 22.0 42.4
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Commercial Banking
Average Loans
[bar graph]
Dollars in millions
CAGR 1995 - 9/30/99 = 37%
1995 1996 1997 1998 YTD 9/30/99
$565 $745 $1,141 $1,492 $1,835
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Commercial Banking
Average Loans
[bar graph]
Dollars in millions
CAGR 1995 - 9/30/99 = 37%
1995 1996 1997 1998 YTD 9/30/99
$565 $745 $1,141 $1,492 $1,835
[Washington Mutual Logo]
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Commercial Banking
Average Deposits
[bar graph]
Dollars in millions
CAGR 1995 - 9/30/99 = 18%
1995 1996 1997 1998 YTD 9/30/99
$791 $896 $1,006 $1,186 $1,478
[Washington Mutual Logo]
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Commercial Banking
Loan Quality Measurements
Nonperforming Assets as a % of Loans*
[bar graph]
1996 1997 1998 YTD 9/30/99
0.20% 0.25% 0.37% 0.53%
* Average NPAs and loans for periods presented
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Commercial Banking
Loan Quality Measurements
Net Loan Charge Offs as a % of Avg. Loans
[bar graph]
1996 1997 1998 YTD 9/30/99*
0.09% 0.13% 0.24% 0.25%
*Estimate: YTD 9/30/99 annualized
[Washington Mutual Logo]
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Commercial Banking
Current Business Initiatives
BBC expansion in California to generate $3 billion in incremental assets in five
years
Sale of under-performing community bank branches to generate gain-on-sale,
reduce annual expenses and enhance profitability
[Washington Mutual Logo]
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Commercial Banking
Current Business Initiatives
Automated systems interface between consumer and commercial systems to
facilitate deposit expansion, cross-sales and infrastructure leverage
Initiation of corporate banking team to participate in syndicated asset-based
credit facilities and other national relationships with acceptable profitability
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Commercial Banking
Future Strategic Initiatives
Washington Mutual branding when automated systems interface is implemented
Geographic expansion into all Washington Mutual consumer markets including Texas
and Florida
Strategic acquisitions focused on business banks in Washington Mutual consumer
markets and commercial finance opportunities
[Washington Mutual Logo]
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Commercial Banking
Future Strategic Initiatives
Expansion of corporate banking capabilities to agent and syndicate transactions
in markets where we have a presence
Strategic alliances to bring Washington Mutual portfolio capacity and
flexibility to well-established originators
Implementation of fully integrated eBusiness interface with commercial clients
to streamline communication, documentation and inquiry
[Washington Mutual Logo]
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Commercial Banking Group
Summary
Drives incremental business by leveraging Washington Mutual brand and
infrastructure
Diversifies earnings and offsets interest rate risk
Enhances yields through active asset management
[Washington Mutual Logo]
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Commercial Banking Group
Summary
Leverages portfolio capacity through strategic alliances for high-yielding
assets
Builds deposits through cross-sales and systems enhancements
Manages credit quality to ensure safety and soundness
Delivers great service through professional bankers equipped with
client-centered tools and technology
[Washington Mutual Logo]
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what's next?
[photo of a Washington Mutual branch] Consumer Banking
Deanna Oppenheimer
President
Consumer Banking Group
[Washington Mutual Logo]
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Consumer Banking
Mission
To be the preferred consumer bank in all our key markets and to do so with ever
increasing profitability
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Consumer Banking
Core element of noninterest income
Primary driver of new household growth
Flagship of Washington Mutual brand
Significant opportunities to enhance profitability
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Consumer Banking
Strategy
Profitably expand household base by maintaining double-digit cost per acquired
customer
Leverage existing customer base through aggressive cross-sales with emphasis on
higher-margin asset generation and fee-based services
Provide multiple distribution channels, while placing access in control of
customers
Offer personal service as a key competitive differentiator
[Washington Mutual Logo]
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Consumer Banking
Overview
[arrows connect the following information]
4.5 million households served
(1.4 customers/HH)*
1,023 locations
47 operating regions in 8 states
Common operating platform
*Consumer Banking households only as of 9/30/99
[Washington Mutual Logo]
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Consumer Banking
Overview - Distribution Network
[Map of United States]
Market
State FCs ATMs Position (b)
- --------- --------- ------ --------------
WA 183 210 #2
OR 78 95 3
ID/UT(a) 44 46 n/a
CA 547 843 2
FL 123 196 5
TX 48 64 12
Total 1,023 1,454
(a) As of 9/30/99 (includes 2 FCs and 3 ATMs sold in Montana)
(b) Total deposits based on the annual 6/30/98 branch deposit reports, adjusted
for branch ownership as of 9/30/99
[Washington Mutual Logo]
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Consumer Banking
Overview - Market Position*
Total WM
State # Housholds #Households %
WA 2,137,280 708,492 33.1
OR 1,136,554 304,206 26.8
CA 11,195,158 2,974,325 26.6
FL 2,652,517 649,118 24.5
ID/UT 838,755 109,002 13.0
TX 2,798,171 109,083 3.9
Weighted Avg. 26.5
*In counties where WM has FCs as of 9/30/99 (excludes Montana)
[Washington Mutual Logo]
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Consumer Banking
Overview - Channel Usage*
Transactions
In Millions % of Total
------------- -------------
Financial Centers 191.0 49.8
ATMs 76.0 19.8
Telephone Banking
IVR 98.2 25.6
Agent-Assisted 17.4 4.5
Internet 1.1 0.3
*YTD 9/30/99
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Consumer Banking
Net Income
Dollars in thousands
Condensed Income Statement YTD 6/30/99
- ----------------------------------- -----------------
Net interest income after
provision for loan losses $1,199,360
Other income* 373,580
Transaction-related exp. (42,543)
Other expense (903,047)
Income before taxes 627,350
Income taxes (232,949)
Net income $ 394,401
*Includes intra-company mortgage banking gains
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Consumer Banking
Fee Income*
[bar/line graph]
Dollars in millions
1997 1998 YTD 9/30/98 YTD 9/30/99
$470.2 $559.2 $398.0 $535.8
(line showing 18.9% change from 1997 to 1998) (line showing 34.6% change from
YTD 9/30/98 to YTD 9/30/99)
*Depositor and other retail banking fees
[Washington Mutual Logo]
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Consumer Banking
Expenses*
[bar/line graph]
Dollars in millions
YTD 6/30/98 YTD 6/30/99
$832.1 $903.0
(line showing 8.5% change from YTD 6/03/98 to 6/30/99)
*Excludes transaction-related expenses
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Consumer Banking
Other Income-to-Other Expense Ratio(a)(b)
[bar graph]
YTD 6/30/98 YTD 6/30/99
34.0% 41.4%
(a) Includes intra-company mortgage banking gains
(b) Excludes transaction-related expenses
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Consumer Banking
Loan Originations(a)
[bar graph]
Dollars in millions
1997 1998 YTD 9/30/98 YTD 9/30/99
Residental Loans $2,016.8 $5,102.1 $3,420.1 $3,387.7
Consumer Loans $2,564.7 $2,997.9 $2,361.0 $1,984.3
Total $4,582(b) $8,100(b) $5,781 $5,372
(a) Includes consumer and mortgage loan originations.
(b) Estimated loan production for GW and AHM prior to acquisition
[Washington Mutual Logo]
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Consumer Banking
Checking Account Growth*
[bar/line graph]
1997 1998 YTD 9/30/98 YTD 9/30/99
145,674 299,120 224,882 303,655
(line showing 105.3% change from 1997 to 1998) (line showing 35.0% change from
YTD 9/30/98 to YTD 9/30/99)
*Personal checking accounts only
[Washington Mutual Logo]
14
<PAGE>
Consumer Banking
New Customer Acquisition Cost*
Marketing $57
Direct overhead 26
Total per customer $83
*Estimate: YTD 9/30/99 annualized and forecasted Q4 expenses
[Washington Mutual Logo]
15
<PAGE>
Consumer Banking
Same-store Comparison(a)
YTD YTD
9/30/98 9/30/99 Increase
Lending $1,041,843 $2,583,867 148%
Checking Acct (#) 3,975 4,592 16%
Fee Income $ 416,202 $ 612,468 47%
Operating Exp(b) $ 250,062 $ 264,290 6%
FTE 10.0 10.3 3%
(a) Average of 331 unconsolidated former ASB and GW financial centers
(b) Based on WM financial center compensation model
[Washington Mutual Logo]
16
<PAGE>
[photo of Washington Mutual branch office] what's next?
[Washington Mutual Logo]
17
<PAGE>
Consumer Banking
Opportunities
Five-Year Targets
Increase consumer loan portfolio from$6 billion to $20 billion
Increase depositor fee income by 10 - 15% annually and drive
noninterest income-to-expense ratio to 60%
Grow retail deposits by $10 billion
Continue to re-mix deposit base: 60% transaction/40% time deposit
Significantly penetrate households with highest-growth potential
[Washington Mutual Logo]
18
<PAGE>
Opportunities
Consumer Lending
National National
WM* Avg. Avg. Balance
Home Equity
Penetration 2.7% 21% $23,636
Other Consumer
Loan Penetration 1.3% 57% $12,610
Total WM Opportunity $37 billion+
*Existing WM personal checking households only
Source: Raddon Financial Group (national averages)
[Washington Mutual Logo]
19
<PAGE>
Opportunities
Fee Income
Total Depositor Projected Projected
Fee Income/ Check Acct. Fee Income
YTD 9/30/99 Total Growth Per Check Acct.
Growth Rate Check Accts. 200-2004 2000-2004
NW 31% $194 10%+ $190
New
Markets 36% $171 10%+ $190
[Washington Mutual Logo]
20
<PAGE>
Opportunities
Deposit Flow -- Mature Market*
[slide graph]
Dollars in millions
1/31/98 9/30/99
$10,147 $11,428
*Northwest (Consumer Banking deposits only)
[Washington Mutual Logo]
21
<PAGE>
Opportunities
Deposit Flow -- New Markets*
[slide graph]
Dollars in millions
1/31/98 9/30/99
$69,410 $66,151
*CA/TX/FL (Consumer Banking deposits only)
[Washington Mutual Logo]
22
<PAGE>
Opportunities
Deposit Flow by Category*
[bar graph]
Dollars in millions
CDs MMA Savings Checking
Northwest ($333) $1,112 $501
CA/TX/FLA ($10,288) $5,854 $1,174
* 1/31/98 - 9/30/99 (Consumer Banking deposits only)
[Washington Mutual Logo]
23
<PAGE>
Opportunities
Deposit Growth
National National
WM Avg.* Avg. Avg. Balance
Savings & MMDA
Penetration 41% 74% $9,781
CD Penetration 13% 20% $24,964
Total WM Opportunity $16.8 billion+
*Existing WM personal checking households only
Source: Raddon Financial Group (national average)
[Washington Mutual Logo]
24
<PAGE>
Opportunities
Deposit Base -- Northwest*
Costs of Deposits
- ---------------------
9/30/99 3.55%
[pie chart] 9/30/99
CDs 36%
Transactions & Savings 64%
*Consumer Banking deposits only
[Washington Mutual Logo]
25
<PAGE>
Opportunities
Remix Deposit Base -- CA/TX/FL*
Cost of Deposits
- --------------------
1/31/98 4.32%
9/30/99 3.87%
[pie chart] 1/31/98
CDs 61%
Transactions & Savings 39%
[pie chart]9/30/99
CDs 49%
Transactions & Savings 51%
*Consumer Banking deposits only
[Washington Mutual Logo]
26
<PAGE>
Opportunities
Cross-sell Ratio*
[pictures of various consumer target ads/brochures] = 4.43
* As of 9/30/99; Consumer Banking households with tenure of 2 or more years
[Washington Mutual Logo]
27
<PAGE>
Opportunities
Cross-sell Ratio
[pie chart]
Accounts Elsewhere Early in Life Cycle Stable Relationship
43% 13% 44%
[Washington Mutual Logo]
28
<PAGE>
Opportunities
Cross-sell Ratio
1999 2004 Goal
- ------- -------------
4.43 5.00
[Washington Mutual Logo]
29
<PAGE>
Consumer Banking
Marketing
WM Brand = [picture of child with father] Warm, Caring, Personal
[Washington Mutual Logo]
30
<PAGE>
Video
[Washington Mutual Logo]
31
<PAGE>
Consumer Banking
"Top of Mind"
Ad Awareness*
[Pictures of skylines of the following cities with "#1" printed by each picture]
Seattle
San Francisco
Los Angeles
Miami
* As of October 1999; Unaided first-mention awareness
[Washington Mutual Logo]
32
<PAGE>
Consumer Banking
Local Marketing
Branch managers serve as local "presidents" of the company
Extensive marketing tools allow for localization of product lines
Community outreach matches marketing objectives
It makes a difference!
[Washington Mutual Logo]
33
<PAGE>
What's Next?
Customer
Segmentation
Dr. Lindy Friedlander
Senior Vice President
Corporate Research and Development
1
<PAGE>
Overview
Segmentation at Washington Mutual
Segment differences of new customers
Desired use of the branch, by segment
Keys to increasing segment profitability
[Washington Mutual Logo]
2
<PAGE>
Segmentation Types
Demographic
Propensity to buy
Behavioral
[Washington Mutual Logo]
3
<PAGE>
Distribution of WM Segments
<TABLE>
<CAPTION>
Fan Club Basic Young Basic Small Relatio- Relatio- Homes Evolvers
checking fee savers / borrowers ship ship & loans
drivers investors savers investors
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
East 2% 18% 16% 21% 4% 15% 3% 16% 5%
</TABLE>
[Washington Mutual Logo]
Source: WM Database July 1999
4
<PAGE>
Segment Characteristics
<TABLE>
<CAPTION>
Fan club Evolvers* Homes & Relationship Relationship Small Basic Young fee Basic
loans investors savers borrowers savers/ drivers checking
investors
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2% 5% 16% 3% 15% 4.00% 21% 16% 18%
</TABLE>
* Most Profitable
[Washington Mutual Logo]
Source: WM Database July 1999
5
<PAGE>
Segment: Fan Club
Highly cross-sold
High balances/investments
Longest tenure with WM
Frequent branch users
Many WM mortgage loans
[Washington Mutual Logo]
Source: WM Database July 1999
6
<PAGE>
Segment: Evolvers
Moderately cross-sold
Moderate balances/ investments
Frequent branch users
Many WM mortgage loans
Longer tenure with WM
[Washington Mutual Logo]
Source: WM Database July 1999
7
<PAGE>
Segment: Homes and Loans
Have WM mortgage loans
Some equity credit
No WM checking
Low cross-sells
[Washington Mutual Logo]
Source: WM Database July 1999
8
<PAGE>
Segment Characteristics
<TABLE>
<CAPTION>
Fan club Evolvers Homes & Relationship Relationship Small Basic Young Basic
loans investors savers* borrowers savers / fee checking
investors drivers
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2% 5% 16% 3% 15% 4.00% 21% 16% 18%
</TABLE>
* Very Profitable
[Washington Mutual Logo]
Source: WM Database July 1999
9
<PAGE>
Segment Characteristics
<TABLE>
<CAPTION>
Fan club Evolvers Homes & Relationship Relationship Small Basic Young fee Basic
loans investors savers borrowers savers / drivers* checking
investors
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2% 5% 16% 3% 15% 4.0% 21% 16% 18%
</TABLE>
*Profitable
[Washington Mutual Logo]
Source: WM Database July 1999
10
<PAGE>
Segment
Basic Savers/Investors
Low/moderate savings
Low/moderate CD/MMDA balances
Tend to be old or young
No checking with WM
Minimal WM loans
[Washington Mutual Logo]
Source: WM Database July 1999
11
<PAGE>
Segment
Young Fee Drivers
Free WM checking
Low deposit balances
Incur fairly high fees
Promising cross-sells
[Washington Mutual Logo]
Source: WM Database July 1999
12
<PAGE>
Segment
Basic Checking
Single-service Free Checking
Low deposit balances
Occasionally pay extra fees
[Washington Mutual Logo]
Source: WM Database July 1999
13
<PAGE>
Distribution of WM Segments
NW vs. New Markets
(CA/FL/TX)
<TABLE>
<CAPTION>
Fan club Evolvers Homes & Relationship Relationship Small Basic Young fee Basic checking
loans investors savers borrowers savers / drivers
investors
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NW Customers 2% 7% 16% 3% 14% 4% 18% 17% 19%
Newly 2% 4% 16% 4% 15% 4% 22% 15% 18%
acquired areas
</TABLE>
[Washington Mutual Logo]
Source: WM Database July 1999
14
<PAGE>
Distribution of WM Segments
New vs. Existing Customers
(CA/FL/TX)
<TABLE>
<CAPTION>
Fan club Evolvers Homes & Relationship Relationship Small Basic Young Basic
loans investors savers borrowers savers / fee checking
investors drivers
<S> <C> <C> <C> <C> <C> <C> <C> <C>
New Customers 1% 18% 5% 11% 0.3% 13% 25% 27%
(12 months)
Existing 2% 4% 16% 4% 15% 4% 22% 15% 18%
Customers
</TABLE>
[Washington Mutual Logo]
Source: WM Database July 1999
15
<PAGE>
Research into Segments
Survey of California Segments
Products owned at WM and elsewhere
Current, prior, and future use of branch, ATM, PC Banking, etc.
Internet habits and plans
Attitudes about life/financial matters
[Washington Mutual Logo]
Source: WM Database Jul-Aug. 1999
16
<PAGE>
Segment Demographics
Young Fee Driver
[Picture of young female]
young
single
getting educated
renter
lower income & assets
[Washington Mutual Logo]
Source: WM Segment Survey Jul-Aug. 1999
17
<PAGE>
Segment Demographics
Fan Club
[Picture of couple]
oldest segment
married
educated
homeowner
high income
high assets
[Washington Mutual Logo]
Source: WM Segment Survey Jul-Aug. 1999
18
<PAGE>
Attitude Profile of Segments
Young Fee Driver
[Picture of young female]
ambitious/adventurous
adopts new technologies quickly
Internet user
[Washington Mutual Logo]
Source: WM Segment Survey Jul-Aug. 1999
19
<PAGE>
Attitude Profile of Segment
Young Fee Driver
[Picture of young female]
far from peak earning potential
saving for a home, car, retirement, etc.
carries high debt/not financially secure
[Washington Mutual Logo]
Source: WM Segment Survey Jul-Aug. 1999
20
<PAGE>
Attitude Profile of Segment
Fan Club
[Picture of couple]
less ambitious/less adventurous
low debt/financially secure
at or near peak earning potential
[Washington Mutual Logo]
Source: WM Segment Survey Jul-Aug. 1999
21
<PAGE>
Attitude Profile of Segment
Fan Club
[Picture of couple]
established savings
less likely to adopt new technology
desires personal service when banking
[Washington Mutual Logo]
Source: WM Segment Survey Jul-Aug. 1999
22
<PAGE>
Segment Characteristics
WM Products as a Percentage of all Products
(WM vs Elsewhere)
<TABLE>
<CAPTION>
Fan club Evolvers Homes & Relationship Relationship Small Basic Young Basic
loans investors savers borrowers savers / fee checking
investors drivers
<S> <C> <C> <C> <C> <C> <C> <C> <C>
81% 56% 18% 60% 57% 58.0% 25% 37% 29%
</TABLE>
[Washington Mutual Logo]
Source: WM Branch Future Survey July-Aug. 1999
23
<PAGE>
Segment Characteristics
High End Segment Distribution
(if customers had everything at WM)
<TABLE>
<CAPTION>
Fan club Evolvers Homes & Relationship Relationship Small Basic Basic
loans investors savers borrowers savers / chk/Young fee
investors driver
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fan club 100% 90% 80% 30% 35% 40.0% 42% 39%
Evolvers 10% 15% 3% 11% 4%
</TABLE>
[Washington Mutual Logo]
Source: WM Branch Future Survey July-Aug. 1999
24
<PAGE>
Segment Migration
What should a bank do with customers in these six lower-profitability segments?
Fee them into profitability?
Force them into alternative channels?
Force them out the door?
Build profitable relationships!
[Washington Mutual Logo]
25
<PAGE>
Customer Categories
Those with solid relationships elsewhere
Those who are early in their life cycles
Stable relationship
Note: All three are profitable today
[pie chart]
Accts elsewhere Early in life cycle Stable
43% 13% 44%
[Washington Mutual Logo]
Source: WM Branch Future Survey July-Aug. 1999
26
<PAGE>
Segment Migration
Solid Relationships Elsewhere
Depends on bringing over existing relationships from competitors
Accelerated migration opportunity
People like "Duane"
[pie chart]
Accts elsewhere
43%
[Washington Mutual Logo]
Source: WM Branch Future Survey July-Aug. 1999
27
<PAGE>
Understanding "Duane"
Case Study
[Picture of male]
Duane (43) and his 18-year-old daughter opened Free Checking accounts last year
In March, his wife opened Free Checking
In June, got a $15,000 home equity line
In July, got a car loan
Now an Evolver. Profitability has tripled, with four services
[Washington Mutual Logo]
Source: WM Databases 1994-1999
28
<PAGE>
People like "Duane"
[Picture of male]
Married
Homeowner
Age 35 - 55
Income greater than $50K
Savings over $25K
4-year college degree
Half of Small Borrower and Basic Checking segments
[Washington Mutual Logo]
Source: WM Branch Future Survey July-Aug. 1999
29
<PAGE>
What they have elsewhere
Deposits/Investments
[bar graph]
Stocks/ bonds Mutual funds Money market CDs
Deposits/Investments 51% 49% 27% 17%
[Washington Mutual Logo]
Source: WM Branch Future Survey July-Aug. 1999
30
<PAGE>
What they have elsewhere
Deposits/Investments
[bar graph]
Mortgage Car loan PLC Home Equity
Loan Products 93% 37% 28% 23%
[Washington Mutual Logo]
Source: WM Branch Future Survey July-Aug. 1999
31
<PAGE>
Segment Migration
Early in Their Life Cycles
Younger, great promise for future
Need to develop relationships over time
These are people like "Doug"
[pie chart]
Early in life cycle
13%
[Washington Mutual Logo]
Source: WM Branch Future Survey July-Aug. 1999
32
<PAGE>
Understanding "Doug"
Case Study
[Picture of male]
Doug (31) opened a checking and savings account in 1994
Initial profitability was negative
Took out a line of credit in 1996
At 35, he took out a large manufactured home loan
Now, an Evolver with high profitability and five bank services
[Washington Mutual Logo]
Source: WM Databases 1994-1999
33
<PAGE>
Understanding "Diane"
Case Study
[Picture of female]
Diane (25) opened Free Checking in 1994
Initial profitability was negative
Minor profitability in subsequent years
In early 1999, upgraded to Gold Checking and took out a line of credit
Now (30), a Small Borrower with moderate profitability and four services
[Washington Mutual Logo]
Source: WM Database 1994-1999
34
<PAGE>
People like"Diane"
and "Doug"
[Pictures of male and female]
Single
Renter
Age under 35
Income $35 - $75K
Savings under $25K
4-year college degree
18% of Small Borrower & Young Fee Driver segments
[Washington Mutual Logo]
Source: WM Branch Future Survey July-Aug. 1999
35
<PAGE>
Likely to get in the next year
Brokerage investment Mortgage Money market PLC Car loan
Doug 35% 25% 16% 16% 14%
[Washington Mutual Logo]
Source: WM Branch Future Survey July-Aug. 1999
36
<PAGE>
Migration through Segments
[Flow Chart]
Homes and Loans
Evolvers
Fan Club
Relationship Savers
Relationship Investors
Small Borrowers
Young Fee Drivers
Basic Savers/Investors
Basic Checking
[Washington Mutual Logo]
Source: WM Databases 1994-1999
37
<PAGE>
Understanding "Don and Debbie"
Case Study
[Picture of family]
Don (51) & Debbie (43) got a mortgage loan in 1995 at a WM Home Loan Center
They added Interest Checking with auto-pay in 1998
Then they put over $30K in a money market account with us in 1999
From Homes & Loans to Evolver to Fan Club in 4 years!
[Washington Mutual Logo]
Source: WM Databases 1994-1999
38
<PAGE>
People like "Don and Debbie"
[Picture of family]
Married
Homeowner
Age 45 +
Income $50K +
Savings over $50K
Very educated
[Washington Mutual Logo]
Source: WM Branch Future Survey July-Aug. 1999
39
<PAGE>
Migration through Segments
New Free Checking Customers*
[Flow Chart]
Home and Loans
Evolvers
Fan Club
Relationship Savers
Relationship Investors
Small Borrowers
Young Fee Drivers
Basic Savers/Investors
Basic Checking
[Washington Mutual Logo]
Source; WM Databases 1994-1999
40
<PAGE>
New Free Checking Customers*
(Northwest Experience Since Launch)
[bar graph]
Dollars in millions
End 1994 Mid-1999
Total Dep 17.884392 36.639734
Mort. Lns 0.789077 78.480760
Cons. Lns 0.191224 17.448858
Fee Income 0.545613 1.891968
Invest 1.233159 3.270792
[Washington Mutual Logo]
* 8,619 Free Checking customers who joined WM Q4 94 and remained through May 99
Source: WM Database Dec. 1994; May 1999
41
<PAGE>
Segment Migration of Free Checking Customers*
(Northwest Experience Since Launch)
[bar graph]
End 1994 Mid-1999
Beginning segments 83% 64%
Relationship segments 17% 26%
Most profitable segments 10%
[Washington Mutual Logo]
* 8,619 Free Checking customers who joined WM Q4 94 and remained through May 99
Source: WM Database Dec. 1994; May 1999
42
<PAGE>
[Picture]
[graphic of computer terminals] Understanding Segments
Usage of the Branch
43
<PAGE>
Segment Characteristics
% of Branch Users by Segment
[bar graph]
<TABLE>
<CAPTION>
Fan club Evolvers Homes & Relationship Relationship Small Basic Young fee Basic Customer Non-
loans investors savers borrowers savers / drivers checking Average Customer
investor
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
89% 87% 74% 84% 79% 86.0% 73% 85% 85% 80% 74%
</TABLE>
[Washington Mutual Logo]
Source: WM Branch Future Survey July-Aug. 1999
44
<PAGE>
Understanding Segments
Branch usage: Good or bad?
[Washington Mutual Logo]
45
<PAGE>
Understanding Segments
WM Branch Visits Result in Cross-Sells
Deposit Customers Age 35-49
[bar/line graph]
No visits/month 1-4 visits/month 5+ visits/month
Avg. Loan $ $14K $17K $24K
Avg. Dep $ $1K $4K $10K
# Services* 3.3 4.7 7.0
# of Services*/HH
[Washington Mutual Logo]
*Number of retention products/services per household
Source: WM, FA Database July 1999
46
<PAGE>
Understanding Segments
Cross-Sell Ratio Index*
(based on monthly branch visits)
Visits WM Deposit Non-Customers
Customers
None 1 1
1-4 1.5 1
5+ 2.3 1
WM branch visits result in cross-sells
[Washington Mutual Logo]
*Index created by dividing all cross-sell ratios by ratios for non-branch users
Source: WM, FA Database July 1999; Branch Future Survey July-Aug. '99
47
<PAGE>
Summary
WM segmentation and survey research provide deep insight into customers
Excellent profitability potential among existing customer base
The branch is an integral part of our cross-sell program
[Washington Mutual Logo]
48
<PAGE>
what's next?
eBusiness Strategies
Kerry Killinger
Chairman, President and CEO
[Washington Mutual Logo]
1
<PAGE>
Vision
Use eBusiness to strengthen customer loyalty and customer service, to acquire
new customers and to innovate WAMU's business strategies within and across the
business units.
[Washington Mutual Logo]
2
<PAGE>
eBusiness Strategies
Framework
[arrows]
Defend Extend Innovate
[Washington Mutual Logo]
3
<PAGE>
what's next?
eBusiness Framework - Liane Wilson
WM Strategic Capital Fund - Craig Tall
Mortgage Banking and Financial Services - Craig Davis
Consumer Banking - Deanna Oppenheimer
[Washington Mutual Logo]
4
<PAGE>
what's next?
eBusiness Strategies
Kerry Killinger
Chairman, President & CEO
[Washington Mutual Logo]
5
<PAGE>
What's next?
[graphic of circuit board] eBusiness Framework
Liane Wilson
Vice Chair
Corporate Technology
1
<PAGE>
eBusiness Strategies
Framework
Defend
Current Websites
[Washington Mutual Logo]
2
<PAGE>
eBusiness Strategies
Framework
Defend
Current Websites
Extend
Integrated Customer Platform
Online/"Real-Time" Customer Info
[Washington Mutual Logo]
3
<PAGE>
eBusiness Strategies
Framework
Defend
Current Websites
Extend
Integrated Customer Platform
Online/"Real-Time" Customer Info
Innovate
Online Applications
Seamless end-to-end service
Customer self service
"eCare"
[Washington Mutual Logo]
4
<PAGE>
eBusiness Strategies
Framework
Defend
Current Websites
Extend
Integrated Customer Platform
Online/"Real-Time" Customer Info
Innovate
Online Applications
Seamless end-to-end service
Customer self service
"eCare"
Foundation
WAMUNET
e-Mail eCare Content Management
Single Sign-On Personalization
[Washington Mutual Logo]
5
<PAGE>
eCare
Philosophies
The key driver for online success is the customer experience
Customers want
Business to be quick and easy
Security
Simplicity not complexity
Service not technology
[Washington Mutual Logo]
6
<PAGE>
eCare
Philosophies
Make it quick and easy to convert "shoppers" to buyers
Leverage land-based enterprise
Offer intuitive self-service and personal care
[Washington Mutual Logo]
7
<PAGE>
Customer Relationship Management
RM Building Blocks
Data Warehouse WAMU [check mark]
[Washington Mutual Logo]
8
<PAGE>
Customer Relationship Management
RM Building Blocks
Data Warehouse WAMU [check mark]
Customer Profitability/Segmentation WAMU [check mark]
[Washington Mutual Logo]
9
<PAGE>
Customer Relationship Management
RM Building Blocks
Data Warehouse WAMU [check mark]
Customer Profitability/Segmentation WAMU [check mark]
Campaign Management Innovation Stage
[Washington Mutual Logo]
10
<PAGE>
Customer Relationship Management
RM Building Blocks
Data Warehouse WAMU [check mark]
Customer Profitability/Segmentation WAMU [check mark]
Campaign Management Innovation Stage
Contact Management Innovation Stage
[Washington Mutual Logo]
11
<PAGE>
What's next?
[graphic of circuit board] WM Strategic Capital Fund
Craig Tall
Vice Chair
Corporate Development
1
<PAGE>
WM Strategic Capital Fund
Purpose
"Search engine" for eBusiness opportunities that assist WM business managers in
Identifying emerging and "disruptive" technologies
Acquiring and retaining customers
Generating new assets/liabilities
Improving operating efficiency
Developing alternative supplier sources
[Washington Mutual Logo]
2
<PAGE>
WM Strategic Capital Fund
Purpose
"Search engine" for eBusiness opportunities that assist WM business managers in
Identifying potential acquisition targets
Generating economic returns consistent with venture capital returns
Making equity investments in private companies whose economic value
will be enhanced by Association with Washington Mutual
Potential revenue streams from WM or WM customers
[Washington Mutual Logo]
3
<PAGE>
WM Strategic Capital Fund
Fund Overview
Separate business unit responsible for the sourcing and measurement of the
investment program
Mix of business, technology and investment management experience
Initial commitment of up to $150 million
[Washington Mutual Logo]
4
<PAGE>
WM Strategic Capital Fund
Fund Overview
Primarily focused on financial service-related companies with preference for
products, services and technologies that can be used by WM or its customers
Ability to make commitments of up to $20 million per investment
Early or middle-life stage funding
[Washington Mutual Logo]
5
<PAGE>
WM Strategic Capital Fund
Business Model
WM Strategic Capital Fund
[arrow] Broad network of contracts
Share ideas/leads
Match investment opportunities to business needs
[arrow] Mortgage Banking
Consumer Banking
Commercial Banking
Consumer Finance
[Washington Mutual Logo]
6
<PAGE>
WM Strategic Capital Fund
Current Portfolio
Keystroke.com [Keystroke logo]
FT Ventures [BlueGill Technologies logo] [Avesta
Technologies logo] [ValiCert logo] [Servicesoft
Technologies logo] [Financial Engines logo]
[Washington Mutual Logo]
7
<PAGE>
WM Strategic Capital Fund
Keystroke Case Study
[horizontal graph of time period between 12/98 and 9/99, and related activity]
Between Dec 1998 and Mar 1999:
Mortgage Bank identifies Keystroke as potential partner
WM Initial Investment
Between Mar 1999 and June 1999:
Website Design Campaign
Between June 1999 and Sept 1999:
Website goes live
Sept 1999:
Keystroke new financing
[Washington Mutual Logo]
8
<PAGE>
WM Strategic Capital Fund
Keystroke Case Study
Accelerated website launch for Washington Mutual
Appreciation of 3x to 5x original investment
Keystroke leverages WM relationship with potential new customers
[Washington Mutual Logo]
9
<PAGE>
WM Strategic Capital Fund
Measures of Success
Strategic and financial value to WM as a going concern
Venture capital returns
Acceleration of WM's eBusiness capabilities
Identification of opportunities and threats
[Washington Mutual Logo]
10
<PAGE>
What's next?
[graphic of circuit board]
eBusiness Strategies
Craig Davis
President
Mortgage Banking and
Financial Services Groups
[Washington Mutual Logo]
1
<PAGE>
Mortgage Banking
Internet Strategy
Create an Internet based channel to achieve the following objectives:
Acquire new customers
Extend the "Power of Yes" to the online medium
Manufacture and distribute mortgages via the internet
Enable business-to-business relationships
[Washington Mutual Logo]
2
<PAGE>
Mortgage Banking
Internet Strategy
[graph of connecting/overlaying circles regarding "Consumer"]
Power of Yes = inform, approve, close
Attract:
Choice = Mortgage Brokers
Comfort = Correspondent Banks
Comfort = Real Estate Professionals
Care = Strategic Alliances
[Washington Mutual Logo]
3
<PAGE>
Mortgage Banking
Internet Growth Potential/Consumers
[bar graph]
Dollars in billions
CAGR: 129%
1998 2003
-------- --------
Online Home Purchases $100
Online Refinancing $4 $150
Sources: Mediamark Research International (MR), Deutsche Bank, Organic, Inc.
[Washington Mutual Logo]
4
<PAGE>
Internet Strategy
Target Segments
[Sectional chart-forming a square, of which square is divided in half
horizontally and vertically to form 4 internal squares, as illustrated below:
High
- ------------------------------------------------------------------------------
Refinancers
70-75%
Repeat Buyers
10-15%
- ------------------------------------------------------------------------------
Mortgage Savvy
First-Time Buyers
15-20%
- -----------------------------------------------------------------------------
Low Web Savvy High
[Washington Mutual Logo]
5
<PAGE>
Mortgage Banking
Current Online Presence
wamumortgage.com
Site launched in September
Sixty-day results
Application volume
Geographic reach
".com" current newspaper campaign
Chicago test - November
[Washington Mutual Logo]
6
<PAGE>
[graphic of circuit board] what's next?
[Washington Mutual Logo]
7
<PAGE>
Mortgage Banking
Internet Initiatives
Retained Organic, Inc. for ongoing development
Phase II business-to-business sites in development
Integrated back-end functionality in development
[Washington Mutual Logo]
8
<PAGE>
Mortgage Banking
www.wamumortgage.com
Site Objective Metrics for success
- ------------------ ---------------------------------------
Partner Increase in traffic via partners
Completed applications via partners
Promote Traffic growth
Total visits
Completed application growth
Average customer acquisition costs
Extend Brand Brand impression
Brand lift and affinity
Know the Customer Breadth and depth of customer knowledge
(sales, registered/repeat visitors, demographics)
[Washington Mutual Logo]
9
<PAGE>
[Washington Mutual Logo and graphic of circuit board]
invest1to1.com, a Washington Mutual Website
[Washington Mutual Logo]
10
<PAGE>
Financial Services
Website Objectives
Establish WAMU in the eBusiness financial services industry
Use as a distribution channel to acquire new clients
Increase customer loyalty and retention
Provide "stickiness" to all WAMU online customer segments
Enable business-to-business relationships
[Washington Mutual Logo]
11
<PAGE>
Financial Services
Website Functionality
[directional chart]
www.wamu.com
www.wamumortgage.com
Direct
www.wminsurance.com
[above items with an arrow pointing to "investor1to1.com"]
[Washington Mutual Logo]
12
<PAGE>
Financial Services
Website Functionality
[flow chart]
www.wamu.com
www.wamumortgage.com
Direct
www.wminsurance.com
[above items with an arrow pointing to "Invest1to1.com"]
Invest1to1.com/wmfs
wminsurance.com
wmgroupoffunds.com/sf
wmgroupoffunds.com/bd
[above items connected with arrow pointing to Invest1to1.com]
[Washington Mutual Logo]
13
<PAGE>
[graphic of circuit board] what's next
[Washington Mutual Logo]
14
<PAGE>
Financial Services
Internet Initiatives
Retained Webmotion as development firm
Leveraging FiServ and First Data back-end functionality
Phase I site in development for 11/15/99 Beta launch
Phase II launch of fully functional sites 03/00
[Washington Mutual Logo]
15
<PAGE>
WAMUmortgage.com
[graphic of circuit board and Washington Mutual logo] invest1to1.com
[Washington Mutual Logo]
16
<PAGE>
what's next?
[graphic of circuit board] eBusiness Strategies
Deanna Oppenheimer
President
Consumer Banking Group
[Washington Mutual Logo]
1
<PAGE>
what's next?
Internet Use Today
[bar graph]
WM Customer avg. 59%
Non-customer avg. 62%
Source: WM Branch Future Survey July-Aug 1999
[Washington Mutual Logo]
2
<PAGE>
what's next?
Internet Use Purchases
[Bar graph]
Non--customer avg. WM Customer avg.
Likely to purchase in the future 62% 56%
Have made an internet purchase 55% 50%
Source: WM Branch Future Survey July-Aug 1999
[Washington Mutual Logo]
3
<PAGE>
4
what's next?
Use of Financial Centers in 2002
[Bar graph]
More often Same-if use Less often Won't Use
WM Customers 14% 58% 15% 13%
Non-Customers 19% 52% 15% 14%
Source: WM Branch Future Survey July-Aug 1999
[Washington Mutual Logo]
4
<PAGE>
what's next?
Future Channel Usage*
[bar graph]
Drive-Up In-branch ATM PC Banking
Current Use 1.4 2.3 5.4 0.8
Est. Future Use 1.5 2.4 5.7 3.7
*among WM users
[Washington Mutual Logo]
5
<PAGE>
what's next?
www.wamu.com
Currently geared to
Power users
Existing customers
Current functionality
Product information
Account inquiry
Bill payment
Hot link to mortgage origination site
[Washington Mutual Logo]
6
<PAGE>
what's next?
www.wamu.com
[Slide graph] # of PC Banking Users
1000+ PC Banking enrollments per day
2/99 3/99 4/99 5/99 6/99 7/99 8/99 9/99
0 7,500 15,000 31,500 63,000 104,700 135,000 166,000
[Washington Mutual Logo]
7
<PAGE>
what's next?
www.wamu.com
Coming in Spring 2000
Online applications
"New look" site geared to power users and solution-based users alike
Site to be more reflective of brand
Begin migration to "eCare" service
[Washington Mutual Logo]
8
<PAGE>
what's next?
www.wamu.com
[Experience the WAMU.com Difference screen]
[Washington Mutual Logo]
9
<PAGE>
what's next?
www.wamu.com
[The Customer Service/ Live Chat with WAMU screen]
[Washington Mutual Logo]
10
<PAGE>
what's next?
www.wamu.com
[Learning Center screen]
[Washington Mutual Logo]
11
<PAGE>
what's next?
Appeal of Bank Philosophies
[bar chart:
Personal Convenience Internet
service bank bank only bank
Fan club 85% 15% 2%
Evolvers 82% 16% 3%
Homes & loans 83% 16% 2%
Relationship investors 89% 9% 2%
Relationship savers 87% 11% 2%
Source: WM Branch Future Survey July-Aug 1999
[Washington Mutual Logo]
12
<PAGE>
what's next?
Appeal of Bank Philosophies
[bar chart]
Personal Convenience Internet
service bank bank only bank
Small borrowers 81% 18% 1%
Basic savers/investors 75% 20% 5%
Young fee drivers 84% 14% 2%
Basic checking 84% 16% 0%
Non-customers 80% 11% 4%
Source: WM Branch Future Survey July-Aug 1999
[Washington Mutual Logo]
13
<PAGE>
[graphic of circuit board]
occasio, noun [Latin] favorable moment, occasion or opportunity
[Washington Mutual Logo]
14
<PAGE>
Occasio
Overview
First market: Las Vegas
20 financial centers
Modest capital expenditure of $10 to $12 million
20% ROE by end of Year 2
[Washington Mutual Logo]
15
<PAGE>
occasio
Objectives
Redefine "Consumer Banking"
Replicate successes in new and existing markets
Reduce operating costs while maximizing revenues
Realize synergy between land-based and online enterprises
[Washington Mutual Logo]
16
<PAGE>
occasio
Real Estate Strategies
Accelerate time to market
Locate stores in high traffic, grocery-anchored neighborhood centers
Sites selected for high visibility
[Washington Mutual Logo]
17
<PAGE>
occasio
Marketing Strategies
Create "buzz" - the bank created by consumers
Bring brand to life in branch design
Leverage marketing expenses over a large number of locations
Product focus on higher-margin asset generation and fee-based services
[Washington Mutual Logo]
18
<PAGE>
occasio
Customer Acceptance
Target audience 25-54 years old
Concept universally praised in focus groups
Target highly likely "to open accounts" or "take a serious look"
[Washington Mutual Logo]
19
<PAGE>
occasio
Market Potential
Dollars in Thousands
Year 2 Year 5
Idahoa Base Case*:
#HH 6,009 27,963
% Mkt Share 2.% 11.3%
Loan originations $27,930 $124,469
# Checking Accts. 5,391 24,992
Fee Income $ 750 $5,291
Deposit Balances $20,930 $82,712
Las Vegas Estimates:
#HH 35,299 70,597
% Mkt Share 7.5% 15.0%
Loan originations $212,458 $256,119
# Checking Accts. 32,202 64,405
Fee Income $4,508 $9,661
Deposit Balances $267,844 $474,466
*Idaho financial center results only
[Washington Mutual Logo]
20
<PAGE>
occasio
Market Potential
[bar chart]
% of consumers displeased with their bank
Idaho 5/94 California 1/96 Las Vegas 11/98
11% 18% 22%
Source: WM Surveys
[Washington Mutual Logo]
21
<PAGE>
What's next?
Operating Efficiency and Corporate Credit
Steve Freimuth
Senior Executive Vice President
Corporate Services
<PAGE>
Operating Efficiency
Revenue Growth
Active asset and equity management has driven significant net interest income
Double-digit fee income growth due to successful strategies in:
Consumer Banking
Mortgage Banking
Financial Services
Expense Management
Flat-to-declining G&A during recent acquisition integrations has produced
steadily improving operating efficiency
[Washington Mutual Logo]
2
<PAGE>
Operating Efficiency
Net Interest Income
[bar graph]
Dollars in millions
<TABLE>
<CAPTION>
1996 1997 1998 YTD 9/30/98 YTD 9/30/99
<S> <C> <C> <C> <C> <C>
$ in millions 3,865.10 3,915.50 4,291.70 3,213.40 3,395.60
</TABLE>
[Washington Mutual Logo]
3
<PAGE>
Operating Efficiency
Other Income*
[bar graph]
Dollars in millions
<TABLE>
<CAPTION>
1996 1997 1998 YTD 9/30/98 YTD 9/30/99
<S> <C> <C> <C> <C> <C>
Other Income $35.4 $64.3 $79.7 $60.8 $60.1
Depositor & Other Retail $358.9 $478.7 $568.4 $404.8 $543.9
Banking Fees
Securities & Insurance Fees $231.2 $244.4 $251.3 $189.8 $231.2
Mortgage Banking, Loan $271.5 $286.7 $361.6 $276.4 $232.8
Servicing & Loan-Related
Income
Total: $897.0 $1,074.1 $1,261.0 $931.8 $1,068.0
</TABLE>
[Washington Mutual Logo]
*Excludes gain on sale of assets and provision for recourse liability
4
<PAGE>
Operating Efficiency
G&A Expense*
[bar graph]
Dollars in millions
<TABLE>
<CAPTION>
1996 1997 1998 YTD 9/30/98 YTD 9/30/99
<S> <C> <C> <C> <C>
$2,742.5 $2,606.3 $2,671.9 $1,976.3 $2,032.8
</TABLE>
[Washington Mutual Logo]
*Excludes SAIF assessment in 1996, and transaction-related charges and
amortization of intangible assets (all periods)
[Washington Mutual Logo]
5
<PAGE>
Operating Efficiency
Efficiency Ratio - Adjusted*
[bar graph]
<TABLE>
<CAPTION>
1996 1997 1998 YTD 9/30/99
<S> <C> <C> <C>
58.37% 52.00% 45.94% 45.36%
</TABLE>
[Washington Mutual Logo]
*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).
6
<PAGE>
Operating Efficiency
Other Income*
as a % of G&A Expense
[bar graph]
<TABLE>
<CAPTION>
1996 1997 1998 YTD 9/30/98 YTD 9/30/99
<S> <C> <C> <C> <C>
32.71% 41.21% 47.20% 47.15% 52.54%
</TABLE>
[Washington Mutual Logo]
*Excludes gain on sale of assets and provision for recourse liability
7
<PAGE>
Operating Efficiency
Direct Sales and Support
to Overhead FTE
[slide graph]
<TABLE>
<CAPTION>
Q1 98 Q4 98 Q3 99
<S> <C> <C> <C> <C> <C> <C>
7.63 8.52 8.69 9.49 10.36 11.17 12.47
</TABLE>
[Washington Mutual Logo]
8
<PAGE>
Operating Efficiency
1999 Achievements
Consolidated 162 branches and closed AHM head office, reducing building
operating costs
Technology efficiencies
Overhead staff reductions
Reduced AHM loan servicing costs by 50%
Renegotiated key corporate contracts
[Washington Mutual Logo]
<PAGE>
9
Operating Efficiency
Opportunities for 2000
Consumer Banking
Back-office consolidations and efficiencies
20% reduction in transaction losses targeted
10-15% reduction in operational support areas targeted
Improve productivity and teller retention
Upgrade voice response unit and call center systems
[Washington Mutual Logo]
10
<PAGE>
Operating Efficiency
Opportunities for 2000
Mortgage Banking
Eliminated bottom 10% of sales staff (4Q 1999)
Increase automated appraisals from 12% to 50%
Increase automated underwritings from 25% to 50%
Improve productivity of retail lending support staff
Retail - 15% increase in loans funded per employee
Wholesale - 10% increase in loans funded per employee
[Washington Mutual Logo]
11
<PAGE>
Operating Efficiency
Opportunities for 2000
Corporate initiatives
Additional contract renegotiations
Further real estate efficiencies
Information technology efficiencies
Re-engineer human resources function
[Washington Mutual Logo]
12
<PAGE>
what's next?
[photo of tip of pen] Corporate Credit Risk
13
<PAGE>
Credit Risk Management
Current and historical statistics
Corporate structure
Controls over underwriting and credit concentration risk
Outlook for risk as balance sheet mix changes
[Washington Mutual Logo]
14
<PAGE>
Credit Risk Management
Loan and MBS Portfolio Mix
[pie charts]
12/30/93*
SFR SFR Construction Apartment & CRE Consumer
69% 3% 13% 15%
9/30/99
SFR Construction Apartment & CRE Consumer Consumer Finance Business
1% 10% 4% 2% 1%
[Washington Mutual Logo]
*Not restated for acquired companies
15
<PAGE>
Credit Risk Management
Portfolio by Geography
[pie chart] 9/30/99
<TABLE>
<CAPTION>
CA NW FL TX IL NE Other
<S> <C> <C> <C> <C> <C> <C>
59% 18% 3% 2% 2% 5% 11%
</TABLE>
[Washington Mutual Logo]
16
<PAGE>
Credit Risk Management
Nonperforming Assets
as a % of Total Assets
[bar graph]
1996 1997 1998 YTD 9/30/99
1.20% 0.96% 0.73% 0.58%
[Washington Mutual Logo]
17
<PAGE>
Credit Risk Management
Net Loan Charge Offs
as a % of Avg. Loans
[bar graph]
<TABLE>
<CAPTION>
1996 1997 1998 YTD 9/30/98* YTD 9/30/99*
<S> <C> <C> <C> <C>
0.48% 0.26% 0.17% 0.17% 0.18
</TABLE>
[Washington Mutual Logo]
*Estimate: YTD 9/30/98 and 9/30/99 annualized
18
<PAGE>
Credit Risk Management
Loan Loss Reserve and Recourse Liability*
[bar/line graph]
Dollars in millions
<TABLE>
<CAPTION>
12/31/1996 12/31/1997 12/31/1998 9/30/1999
<S> <C> <C> <C> <C>
Loan Loss Reserve $1,066.3 $1,047.8 $1,067.8 $1,051.4
Recourse Liability $27.9 $80.2 $144.3 $117.0
As a % of Nonaccrual 93% 109% 129% 140%
Loans
</TABLE>
[Washington Mutual Logo]
*The company records a recourse liability to cover potential losses on loans
securitized and retained in its MBS portfolio or sold to third parties
19
<PAGE>
[photo of tip of pen] what's next?
20
<PAGE>
Credit Risk Management
2004 Portfolio Target
[pie chart]
Mortgage Banking Consumer Commercial Consumer Finance
60-65% 8-10% 20-25% 10-15%
[Washington Mutual Logo]
21
<PAGE>
Credit Risk Management
Enhanced Underwriting Controls
Created new position - EVP & Chief Credit Risk Officer
Jim Vanasek
31 years in commercial banking
Experience in every facet of lending
Formerly with Norwest, PNC and First Interstate
[Washington Mutual Logo]
22
<PAGE>
Credit Risk Management
Enhanced Underwriting Controls
Jim Vanasek, Chief Credit Risk Officer
Mortgage Banking
Consumer Banking
Consumer Finance
Commercial Banking
[Washington Mutual Logo]
23
<PAGE>
Credit Risk Management
Summary
WM has a strong credit history
Growing expertise in managing a diverse portfolio
Confidence that we can control credit risk as the balance sheet grows and the
mix changes
[Washington Mutual Logo]
24
<PAGE>
what's next?
[photo of line graph] Financial Outlook
Bill Longbrake
Vice Chair and Chief Financial Officer
1
<PAGE>
Current Strategic Focus
Managing interest rate risk
Effectively managing capital
Operating efficiently
[Washington Mutual Logo]
2
<PAGE>
Interest Rate Risk
IRR is managed by matching portfolio asset and liability durations
Most short-term and medium-term assets are retained and most long-term assets
are sold
For example, at 9/30/99 the repricing mix of the $159.9 billion in real estate
loans and MBS was:
55% short-term
20% medium-term
14% MBS/CMOs
11% fixed-rate
[Washington Mutual Logo]
3
<PAGE>
Interest Rate Risk
Funding Books
IRR is managed through 17 "funding books" within the portfolio
Funding books match comparable duration assets and liabilities
Mismatches are isolated into smaller monetary increments and appropriate hedges
executed
Books are analyzed regularly and realigned for changes in market rates
[Washington Mutual Logo]
4
<PAGE>
Interest Rate Risk
Funding Books(a)
% of
Primary Total Funding Compostion
Funding Loans/ --------------------------
Books(b) MBS Capital Deposits Borrowings
Short(3) 59% 4% 61% 35%
Medium(5) 15 8 25 67
CMO (4) 13 - 35 65
Fixed (5) 13 4 51 45
-------
100%
(a) As of 6/30/99
(b) Numbers in parenthesis denote number of funding books within each catergory
[Washington Mutual Logo]
5
<PAGE>
Interest Rate Risk
Primary Risk Factors
Prepayment risk - medium-term and fixed-rate assets are most sensitive
Lag Risk - short-term asset indices typically adjust two to three months after
market rates change
Basis Risk - funding instruments do no always perfectly match asset rate indexes
Lifetime Cap Risk - ARM loans have lifetime maximum rates, typically 300 to 500
bps above the fully indexed initial rate
[Washington Mutual Logo]
6
<PAGE>
Prepayment Risk
Funding Books
[line graph] Principal Balance
<TABLE>
<CAPTION>
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Slow 25000 24900 24800 24700 24600 24500 24400 24300 24200
Expected 25000 24600 24200 23800 23400 23000 22600 22200 21800
Fast 25000 24250 23500 22750 22000 21250 20500 19750 19000
</TABLE>
[Washington Mutual Logo]
7
<PAGE>
Prepayment Risk
Funding Books
Rising rates slow prepayments and lengthen asset durations
Action: lengthen liability durations; add hedges
Falling rates speed up prepayments and shorten asset durations
Action: shorten liability durations
[Washington Mutual Logo]
8
<PAGE>
Prepayment Risk
Strategy
Analyze reasonable upper and lower bounds for interest rates and prepayment
speeds over three to five years
Generally, match the duration of assets with liabilities, capital and hedges for
the fastest prepayment scenario
Execute additional hedges if prepayments are expected to be faster than the
slowest scenario
Realign funding books as market rates and conditions change
[Washington Mutual Logo]
9
<PAGE>
Interest Rate Risk
50 bps Rate Increase*
Assumptions:
Fed raises short-term rates 25 bps in each of two consecutive quarters
Shape of yield curve does not change
Balance sheet size stays fairly constant
Mix of earning assets changes based on revised prepayment assumptions
All other revenue and expenses remain unchanged
[Washington Mutual Logo]
10
<PAGE>
Interest Rate Risk
Cumulative Impact of
Two Staggered 25 bps Rate Increases*
[line graph]
Percentage Decrease in Quarterly EPS
<TABLE>
<CAPTION>
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
25 bps Increase -4.5% -4.5% -3.4% -0.8% -0.6% -0.3% -0.3% 0.0% 0.0%
50 bps Increase -9.0% -7.9% -4.2% -1.4% -0.9% -0.6% -0.3% 0.0%
</TABLE>
*Example only
[Washington Mutual Logo]
11
<PAGE>
Interest Rate Risk
50 bps Rate Increase*
Depicts only the change to the net interest margin
Does not take into consideration actions available to management such as:
Increasing ARM margins
Changing the loan production mix through pricing
Additional portfolio loan
originations Additional hedge strategies
*Example only
[Washington Mutual Logo]
12
<PAGE>
Interest Rate Risk
50 bps Rate Increase*
When prepayments slow, loan servicing income would increase
The potential benefits of increased fee income and increased productivity are
also not included
*Example only
[Washington Mutual Logo]
13
<PAGE>
Effectively Managing Capital
Stock repurchases provide balance sheet management flexibility
Current MBS purchases support liquidity management
Purchased MBS portfolio declined by $1.7 billion during the third quarter
MBS portfolio sales may be considered
Repurchased 21 million shares at an average price of $35.95 during Q2 and Q3
1999
Capital levels are managed to exceed minimum regulatory guidelines (Federal
Reserve BHC* standards)
[Washington Mutual Logo]
14
<PAGE>
Operating Efficiently
Major focus of management
Re-engineering efforts focused on corporate support areas
Sales/FTE productivity is a critical element of each segment's goals
Expenses dropped by $49.2 million in the third quarter; $25.3 million from core
operations
FTE declined by 1,141
[Washington Mutual Logo]
15
<PAGE>
[photo of line graph] Financial Scorecard
[Washington Mutual Logo]
16
<PAGE>
Peer Comparison
Return on Equity*
[bar graph]
YTD 6/99
CMB 22.5%
C 21.9%
FTU 21.3%
ONE 21.0%
WM 19.7%
FLT 19.3%
JPM 19.1%
WFC 17.4%
BAC 17.2%
STI 14.0%
*YTD 6/30/99; excludes transaction-related expenses
[Washington Mutual Logo]
17
<PAGE>
Peer Comparison
Efficiency Ratio(a)(b)
[bar graph]
Efficiency Ratio 6/99
WM 45.8%
C 52.1%
ONE 52.2%
CMB 53.0%
BAC 55.5%
FLT 56.4%
FTU 56.7%
STI 56.9%
WFC 58.0%
JPM 63.1%
(a) YTD 6/30/99
(b) Other expenses, less transaction-related and amortization of intangible
assets, divided by net interest income and other income.
[Washington Mutual Logo]
18
<PAGE>
Peer Comparison
Total Regulatory Risk-Based Capital Ratio*
[bar graph]
Risk-Based Capital Ratio 6/99*
STI 12.7%
JPM 12.5%
C 12.1%
CMB 12.0%
WM 11.8%
ONE 11.4%
BAC 11.1%
FLT 11.1%
WFC 11.0%
FTU 10.0%
* As of 6/30/99
Source: SNL Securities as of June 1999, WM estimated
[Washington Mutual Logo]
19
<PAGE>
Successful Integrations
WM has significantly improved operating results of acquired companies
Dollars in millions
Prior to Acquisition(a)
--------------------------------------------
ASB GWFC AHM WM(b)
Total
Assets $19.5 $42.9 $46.7 $180.8
ROA 0.68% 0.63% 0.80% 1.10%
Efficiency
Ratio 56.9% 60.1% 53.8% 45.4%
ROE 11.6 10.0 15.9 20.2
(a) ASB, GWFC and AHM data for 1995, 1996 and 1997, respectively, adjusted for
one-time nonoperating events
(b) Based on YTD 9/30/99 operating results, excludes transaction-related
expenses
[Washington Mutual Logo]
20
<PAGE>
EPS Growth(a)
[bar graph]
1996
Q1 Q2 Q3 Q4
$0.49 $0.51 $0.51 $0.65*
1997
Q1 Q2 Q3 Q4
$0.62 $0.64 $0.56** $0.63
1998
Q1 Q2 Q3 Q4
$0.69 $0.73 $0.76 $0.74***
1999
Q1 Q2 Q3
$0.79 $0.82 $0.84
*American Acquisition
**Great Western Acquistion
***Ahmanson Acquisition
(a) Excludes transaction-related expenses; includes acquired companies only on a
go-forward basis, and Q3 1996 earnings exclude SAIF assessment
(b) CAGR calculated from 3/31/95 through 9/30/99
[Washington Mutual Logo]
21
<PAGE>
Scorecard*
Current
Five-Year Operating
Target Results
ROE greater than 18.00% 20.24% (a)
EPS Growth greater than 15.00% 16.75% (b)(c)
Efficiency Ratio less than 50.00% 45.36% (d)
NPAs/Total Assets less than 1.00% 0.58% (e)
Common Equity/
Total Assets greater than 5.00% 5.25% (e)(f)
Risk-Based Capital --- 11.45% (e)(g)
*See next slide for disclosures
[Washington Mutual Logo]
22
<PAGE>
Scorecard
Disclosures
(a) Estimate: YTD 9/30/99 annualized earnings from operations, which equal
reported earnings less transaction-related expenses
(b) Increase in earnings per share from operations from 1/1/99 through 9/30/99
over 1/1/98 through 9/30/98
(c) Excludes the gain on sale of Ahmanson Florida branches of $0.29 per share
during 1998
(d) YTD 9/30/99, excludes amortization of intangible assets and
transaction-related expenses
(e) As of 9/30/99
(f) Excludes unrealized loss on securities available for sale
(g) Estimate: BHC total regulatory risk-based capital ratio
[Washington Mutual Logo]
23
<PAGE>
what's next?
[photo of line graph] Business Segment
Scorecard
[Washington Mutual Logo]
24
<PAGE>
Business Segment Overview
Washington Mutual published its first segment financial results as of 12/31/98
Due to significant acquisitions during the last three years, results prior to
1999 do not reflect the strategies employed by Washington Mutual
[Washington Mutual Logo]
25
<PAGE>
Business Segment Overview
As business segments and product lines evolve, segment results will be restated
to align with the new management responsibilities
One realignment will occur effective 12/31/99. The responsibility for managing
correspondent specialty mortgage finance loans will be transferred from Treasury
to Consumer Finance.
[Washington Mutual Logo]
26
<PAGE>
Business Segment Overview
Five primary diversified lines of business
Business Line Primary Products/Services
Consumer Bank Consumer loans, fee-generating products, transaction
accounts, MMDAs and time deposits
Mortgage Bank Residential mortgage loans, internal and external
servicing
Commercial Bank Commercial real estate and business loans, commercial
fee-based banking products, deposits
Financial Services Commission-based financial advisors selling mutual
funds, annuities and insurance products; and mutual
fund management
Consumer Finance Multiple specialty mortgage finance, sales finance and
personal loans
[Washington Mutual Logo]
27
<PAGE>
Business Segments
Contribution to Net Income
Net Income YTD 6/30/99
Business -------------------------------------------
Segment Direct(a) Total(a) %
Consumer $655.3 $394.4 44%
Mortgage(b) 267.6 173.8 19
Commercial/CRE 111.1 104.0 12
Financial Services 35.4 35.3 4
Consumer Finance 32.8 32.4 4
Treasury/Other 165.6 156.9 17
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WM Consolidated $1,267.8 $896.8 100%
(a) "Direct" excludes "corporately managed" expenses; "Total" includes them
(b) After sale of "mortgage security" to Consumer Bank
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what's next?
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Key Five-Year Initiatives
Remix the balance sheet
Diversify revenue sources
Reduce interest rate risk
Further improve operating efficiency
Actively manage credit risk
Employ capital strategies to effectively manage returns and risk
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Remix the Balance Sheet
Manage balance sheet growth by
Retaining highest ROE single-family products
Building consumer finance and commercial real estate portfolios through internal
originations and strategic partnerships
Moderately growing the multi-family portfolio through risk-based pricing
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Remix the Balance Sheet
Manage balance sheet growth by
Increasing commercial loan portfolio through expansion in Consumer Banking
markets
Changing deposit mix by increasing balances of checking and money market
accounts
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Remix the Balance Sheet
Business Five-Year
Segment 9/30/99 Targets
- ------------- ---------- -------------
Mortgage 75% 60 - 65%
Commercial 17 20 - 25
Consumer 5 8 - 10
Consumer Finance 3 10 - 15
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Total Loans 100%
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Remix the Balance Sheet
Five-Year
Liabilities 9/30/99 Targets
- --------------------- ----------- -----------------
Deposits
Checking 7% 8-10%
Savings/MMDAs 18 20-25
CDs 22 18-15
Borrowings 53 55-60
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Total 100%
*Based on current interest rates and product pricing
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Diversify Revenue Sources
Increase the net interest margin by
Increasing proportion of higher yielding loans
Growing proportion of lower costing checking and money market accounts
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Diversify Revenue Sources
Reduce reliance on net interest margin by
Continuing to grow checking accounts and fee-based services
Building Financial Services revenue through greater customer penetration and
cross-sells
Increasing Mortgage Banking loan sales income and loan servicing fees with
higher production
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Diversify Revenue Sources
YTD Five-Year
9/30/99 Targets
------------ ----------------
Remix Loans and Deposits
Net Interest
Margin 2.72% 3.30 - 3.40%*
Increase Fee Income
Other Income/
Total Revenues 24% 28 - 32%
*Assumes current interest rate environment
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Reduce Interest Rate Risk
Balance sheet remix will significantly reduce interest rate risk
Reduce percentage of fixed and medium-term single-family loans
Increase commercial loans tied to Prime rate
Increase amount of shorter-term loans
Increase deposits with lower pricing sensitivity
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Reduce Interest Rate Risk
Growth in fee income and mortgage banking revenue will reduce reliance on net
interest income and decrease earnings volatility
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Operate Efficiently
Deploy technology solutions to improve productivity
Leverage infrastructure to support revenue growth
Offer accessible, low-cost customer transaction channels
Focus resources on high revenue growth initiatives
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Operate Efficiently
Portfolio Growth
Projected
Five-Year
Avg. Growth
-----------------
Total Assets 3-5%
Loan Production 12-15%
Checking Accounts 10-12%
Servicing Portfolio 20-25%
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Operate Efficiently
Revenue/Expense Growth
Projected
Five-Year
Avg. Growth
------------
Net Interest Income 9-12%
Other Income 12-15%
Other Expenses 6-8%
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Actively Manage Credit Risk
Continue to build in-house expertise for each major product segment:
Single-family
Multi-family and Commercial Real Estate
Commercial Business
Consumer
Specialty Mortgage Finance and Consumer Finance
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Actively Manage Credit Risk
Utilize statistical models to analyze risk
Use results to price products and set credit policy
Diversify risk through geographic and product expansion
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Actively Manage Credit Risk
Five-Year
Targets
NPAs/Total Assets(a) 0.58% less than 1.00%
Net Charge Offs(b) 15 bps 30-40 bps
(a) As of 9/30/99
(b) Estimate: YTD 9/30/99 annualized
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Employ Balanced
Capital Strategies
Maintain appropriate level of reserves and capital as asset risk profile changes
Manage Tier I and II regulatory capital levels to balance returns and risk
Access capital markets to build lower-cost Tier II capital at the subsidiary
banks
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Employ Balanced
Capital Strategies
Evaluate capital requirements for each segment based on risk parameters
Credit
Interest rate
Operating
Liquidity
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Employ Balanced
Capital Strategies
Focus will be on maximizing ROE and EPS growth, not balance sheet growth
Asset growth will focus on higher-yielding loans
Stock repurchases will be used to maximize returns
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Employ Balanced
Capital Strategies
Five-Year
9/30/99 Targets
------------ --------------
Common Equity/
Total Assets 5.25%(a) greater than 5.00%
Risk-Based Capital 11.45%(b) greater than 11.00%
(a) Excludes unrealized loss on securities available for sale
(b) Estimate: BHC total regulatory risk-based capital ratio
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Critical Five-Year Assumptions
2000-2004
Inflation and interest rates remain relatively low
3-month Treasury averages about 5.00%
The slope of the yield curve averages approximately 115 bps
Economic growth moderates slightly - no recession
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Critical Five-Year Assumptions
2000-2004
Credit losses increase modestly but do not reach recession levels
Stock repurchases are used to manage capital
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Projected Five-Year Results
2000-2004
Balance sheet growth will average 3 - 5% annually
Traditional SFR loan mix will decline toward 60% of total loans and MBS
Reserves will increase as loan portfolio is remixed
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Projected Five-Year Results
2000-2004
Common equity/total assets will rise toward 6% as risk profile changes
Other income will increase 12 - 15% annually
Other expenses will be managed to an annual increase of 6 - 8%
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Five-Year Targets
2000-2004
Previous New
Five-Year Five-Year
Targets Targets
--------------------- -------------------
ROE greater than 18% greater than 20%
EPS Growth greater than 15% greater than 13%
Efficiency Ratio less than 50% less than 45%
NPAs/Total Assets less than 1% less than 1%
Common Equity/Total Assets greater than 5% greater than 5%
Risk-Based Capital* -- greater than 11%
*BHC total regulatory risk-based capital ratio
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