-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I+DgovvrDy1xrR0KPegi2cjPbXW4uZavCfWMz6y6Tg1e6cg8FqM/3PKmiMB1DlsC GNJ+9dvC3ZGrBjE4Q34kgQ== 0000907303-02-000173.txt : 20020719 0000907303-02-000173.hdr.sgml : 20020719 20020717200358 ACCESSION NUMBER: 0000907303-02-000173 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020716 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020718 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WASHINGTON MUTUAL INC CENTRAL INDEX KEY: 0000933136 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTIONS, NOT FEDERALLY CHARTERED [6036] IRS NUMBER: 911653725 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14667 FILM NUMBER: 02705113 BUSINESS ADDRESS: STREET 1: 1201 THIRD AVE STREET 2: STE 1500 CITY: SEATTLE STATE: WA ZIP: 98101 BUSINESS PHONE: 2064612000 MAIL ADDRESS: STREET 1: 1201 THIRD AVE STREET 2: SUITE 1500 CITY: SEATTLE STATE: WA ZIP: 98101 8-K 1 form8kjuly172002.txt 2ND QUARTER EARNINGS SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: July 16, 2002 Washington Mutual, Inc. (Exact name of registrant as specified in its charter) Washington 1-14667 91-1653725 (State or other jurisdiction of (Commission File (I.R.S. Employer incorporation) Number) Identification No.) 1201 Third Avenue, Seattle, Washington 98101 (Address of principal executive offices) (Zip Code) (206) 461-2000 (Registrant's telephone number, including area code) ITEM 5. OTHER EVENTS. On July 16, 2002, Washington Mutual, Inc. issued a press release reporting its results of operations for the second quarter of 2002. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits 99.1 Press release dated July 16, 2002 reporting results of operations for the quarter ended June 30, 2002. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. WASHINGTON MUTUAL, INC. Date: July 16, 2002 By: /s/ Fay L. Chapman ----------------------- Fay L. Chapman Senior Executive Vice President and General Counsel EX-99 3 exh991to8kjuly172002.txt PRESS RELEASE EXHIBIT 99.1 Washington Mutual Announces Record Quarterly Earnings; Board of Directors Increases Cash Dividend SEATTLE -- Washington Mutual, Inc. (NYSE: WM) today announced record quarterly earnings of $984 million, or $1.01 per diluted share, for the quarter ended June 30, 2002, up 11 percent on a per share basis from $798 million, or 91 cents per diluted share for the same period a year ago. Earnings for the second quarter of 2002 included a full quarter's results of the former operations of HomeSide Lending, Inc. (HomeSide), the U.S. mortgage unit of the National Australia Bank Limited, which Washington Mutual acquired in an asset acquisition on March 1, 2002. Comparative balances for 2001 also do not include results from Dime Bancorp, Inc. (Dime), which Washington Mutual acquired on January 4, 2002. In addition, new accounting rules eliminated the amortization of goodwill in 2002. The impact of goodwill amortization on net income in the second quarter of 2001 was $28 million, or 3 cents per diluted share. Highlights of the recently completed quarter included: o A return on average common equity of 20.78 percent; o Strong loan volume of $57.78 billion, an increase of 34 percent year over year; o A reduction in nonperforming assets of $152 million from the previous quarter; o Record noninterest income of $1.21 billion, including a 22 percent increase in depositor and other retail banking fees, year over year; and o Strong retail checking account growth of nearly 281,000 net new accounts. "Washington Mutual's strong second-quarter performance illustrates the continued financial strength of the company and our ability to successfully implement the key strategies in each of our core businesses," said Kerry Killinger, the company's chairman, president and CEO. "We are encouraged by the second quarter trend of improving asset quality; however, we continue to closely monitor our credit quality." - more - WM "It is equally rewarding to know that our team achieved these exceptional results while simultaneously completing the systems integration of the Dime Savings branch network in the greater New York area, paving the way for the successful growth we anticipate in the nation's largest metropolitan market," added Killinger. BOARD OF DIRECTORS INCREASES DIVIDEND Based on the company's continued strong operating fundamentals and financial performance, Washington Mutual's Board of Directors declared a cash dividend of 27 cents per share on the company's common stock, up from 26 cents per share in the previous quarter. Dividends on the common stock are payable August 15, 2002 to shareholders of record as of July 31, 2002. The board also declared a $0.90625 dividend on Washington Mutual's Series H Preferred Stock which, together with a related purchase contract adjustment payment of $0.09375, will result in an aggregate payment of $1.00 on each unit of the company's Premium Income Equity Securities (PIES). These amounts are payable on August 16, 2002, to shareholders of record as of August 15, 2002. SECOND-QUARTER RESULTS Net Interest and Noninterest Income Net interest income in the second quarter of 2002 was $2.10 billion, up 26 percent from $1.67 billion in the prior year's second quarter but down from $2.40 billion in the first quarter of 2002, as expected. The net interest spread for the quarter was 3.37 percent, compared with 2.80 percent for the same period a year earlier and 3.60 percent in the first quarter of 2002. The margin was 3.54 percent in the most recent quarter versus 3.21 percent in the second quarter of 2001 and 3.74 percent in the first quarter of 2002. The decline in the margin from the first quarter reflected the lag effect of last year's Federal Reserve rate cuts on asset yields and an increase in borrowing rates that resulted from the company's interest-rate risk management initiatives, which included extending the maturities of wholesale borrowings. Washington Mutual anticipates the margin compression to continue through year-end. - more - WM Depositor and other retail banking fees were $398 million, up 22 percent from $325 million a year earlier. During the second quarter, the company added nearly 281,000 net new retail checking accounts. Low residential mortgage rates enabled the company to generate a significant amount of salable fixed-rate SFR loan volume, resulting in gain from SFR mortgage loans of $220 million during the quarter. Anticipated prepayment rates within the company's mortgage servicing rights (MSR) portfolio resulted in the addition of $1.11 billion to the impairment reserve. However, the impairment was offset by the company's successful risk management activities. "We are pleased with the performance of our risk management activities and believe the company is well positioned to offset potential impairments to the value of the MSR should interest rates fall further," Killinger said. Washington Mutual continues to monitor the size of its MSR asset. As part of this active management, the company sold $711 million in excess servicing rights in a privately placed transaction for no material loss or gain. "The recent sale of excess servicing reflects our efforts to manage growth of our MSR asset," Killinger said. "Depending on market conditions and our desire to expand customer relationships, we may periodically sell -- or purchase - -- additional servicing in the future." Lending The second quarter saw total loan volume of $57.78 billion for the quarter, up 34 percent from $43.02 billion one year ago. SFR loan volume was $50.45 billion, up 35 percent from $37.27 billion one year ago, but down from the first quarter's record of $59.16 billion. Approximately 66 percent of the second-quarter's SFR volume (excluding specialty mortgage finance) represented fixed-rate mortgages. Lending volume for loans other than SFR remained strong, totaling $7.33 billion for the most recent quarter, up 27 percent over $5.75 billion in the second quarter of 2001. - more - WM Efficiency Ratio The efficiency ratio, defined as noninterest expense (excluding amortization of other intangible assets and, in 2001, amortization of goodwill) as a percentage of net interest income and noninterest income, was 47.45 percent in the most recent quarter compared with 43.40 percent in the second quarter of 2001. The second quarter's efficiency ratio, while up slightly from the previous quarter's 46.96 percent, partially reflected the early stages of the integration of the former HomeSide operations. Noninterest expense totaled $1.60 billion in the second quarter of 2002, compared with first quarter 2002's figure of $1.53 billion and $1.12 billion in the second quarter of 2001. Credit Quality Improves Killinger said that Washington Mutual's credit quality remains in line with the company's expectations. Total nonperforming assets were $2.51 billion at June 30, 2002, an improvement from $2.66 billion at March 31, 2002. The provision for loan and lease losses was $160 million, versus $92 million for the same period in the previous year, but down from $175 million in the first quarter of 2002. The allowance for loan and lease losses was $1.67 billion at June 30, 2002. Net loan charge offs for the second quarter were $116 million, compared with $99 million in the first quarter of 2002. Balance Sheet and Capital Management Consolidated assets at June 30, 2002 were $261.28 billion, compared with $275.22 billion at March 31, 2002, primarily reflecting the company's current effort to reduce long maturity Treasury and other investment securities in the low-rate environment. While total deposits were up only slightly to $129.07 billion at the end of the second quarter, retail deposits generated by the company's consumer banking operations were up $4.95 billion - or 4 percent - during the quarter. At June 30, 2002, deposits in checking, savings and money market accounts represented 72 percent of total deposits, compared with 68 percent at March 31, 2002. Stockholders' equity at June 30, 2002 totaled $19.59 billion and the capital ratios of Washington Mutual's banking subsidiaries continued to exceed regulatory requirements for classification as "well-capitalized," the highest regulatory standard. - more - WM During the quarter, the company repurchased 1.0 million shares of its common stock at an average price of $37.20 while maintaining the tangible common equity ratio above 5 percent. Company Updates o With the successful completion of the deposit conversion of the Dime network at the end of May, Killinger noted that the integration activities for the Dime's banking operations are essentially complete. o The company also successfully completed the conversion of the loan servicing records of the former mortgage operations of Fleet Financial, Inc. o During the quarter, Washington Mutual also signed 15 leases to open new Occasio locations in the greater New York area. Earlier this year, the company announced plans to open up to 40 financial stores in the greater New York area over the next year, which will extend its existing branch network of more than 120 retail financial centers in the market and complement its strong mortgage position in New York/New Jersey. o In April, the company announced plans to open 20 of 30 Occasio financial stores planned for the greater Denver area in 2002. o In June, Washington Mutual announced the appointment of Office of the Comptroller of the Currency (OCC) and former Office of Thrift Supervision (OTS) executive John Robinson as Executive Vice President of Corporate Risk Management within the company's Enterprise Risk Management group. Outlook "Our strong performance in the first half of 2002 bodes well for yet another record year for Washington Mutual," Killinger said. "We anticipate continued strong operating results from all of our core businesses as we continue to profitably grow and gain additional synergies from our recently completed acquisitions. "While asset growth in the current low-rate environment will likely be limited, we fully expect our fee-based sources of income to continue increasing around their double-digit pace of the first half of the year. In addition, we expect capital deployment to be directed toward opportunities that provide attractive returns at low risk to the company, such as the repurchase of our common stock." -more- WM With a history dating back to 1889, Washington Mutual is a national financial services company that provides a diversified line of products and services to consumers and small- to mid-sized businesses. At June 30, 2002, Washington Mutual and its subsidiaries had assets of $261.28 billion. Washington Mutual currently operates more than 2,500 consumer banking, mortgage lending, commercial banking, consumer finance and financial services offices throughout the nation. Washington Mutual's press releases are available at www.wamu.com. A live webcast of the company's quarterly earnings conference call will be held on Wednesday, July 17 at 10:30 a.m. Eastern Time at www.wamu.com or via phone at 1-888-391-7808. International callers may dial 1-603-395-0029. A recording of the conference call will be available after 1 p.m. Eastern Time on Wednesday, July 17, 2002 through 2:59 a.m. Eastern Time on Saturday, July 27, 2002 at 1-800-944-3084. Callers from outside the United States may dial 1-402-220-0303. Forward-Looking Statements This press release contains forward-looking statements, which are not historical facts and pertain to future operating results. These forward-looking statements are within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to statements about our plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts. When used in this press release, the words "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" or words of similar meaning, or future or conditional verbs, such as "will," "would," "should," "could," or "may" are generally intended to identify forward-looking statements. These forward-looking statements 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 these forward-looking statements for the reasons, among others, discussed under the heading, "Business Factors That May Affect Future Results" in Washington Mutual's 2001 Annual Report on Form 10-K which include: (1) changes in general business and economic conditions may significantly affect our earnings; (2) the risk of our inability to effectively manage the volatility of our mortgage banking business could adversely affect our earnings; (3) the risk of our inability to effectively integrate the operations and personnel of companies we have acquired could adversely affect our earnings and financial condition; (4) the concentration of our operations in California could adversely affect our operating results if the California economy or real estate market declines; (5) competition from other financial services companies in our markets could adversely affect our ability to achieve our financial goals; and (6) changes in the regulation of financial services companies could adversely affect our business. ### -more- WM Media Contact: Alan Gulick 206.377.3637 alan.gulick@wamu.net Investor Contacts: JoAnn DeGrande 206.461.3186 joann.degrande@wamu.net Ruthanne King 206.461.6421 ruthanne.king@wamu.net WM-1 Washington Mutual, Inc. Consolidated Statements of Income (dollars in millions, except per share data) (unaudited)
Quarter Ended Six Months Ended - ---------------------------------------------------------------------------------------------------------------------------------- June 30, Mar. 31, June 30, June 30, June 30, 2002 2002 2001 2002 2001 - ---------------------------------------------------------------------------------------------------------------------------------- Interest Income Loans $ 2,696 $ 2,854 $ 2,924 $ 5,550 $ 5,735 Available-for-sale ("AFS") securities 812 947 940 1,759 1,972 Other interest and dividend income 77 82 72 159 143 - ---------------------------------------------------------------------------------------------------------------------------------- Total interest income 3,585 3,883 3,936 7,468 7,850 Interest Expense Deposits 664 648 823 1,312 1,710 Borrowings 821 839 1,440 1,660 3,107 - ---------------------------------------------------------------------------------------------------------------------------------- Total interest expense 1,485 1,487 2,263 2,972 4,817 - ---------------------------------------------------------------------------------------------------------------------------------- Net interest income 2,100 2,396 1,673 4,496 3,033 Provision for loan and lease losses 160 175 92 335 175 - ---------------------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan and lease losses 1,940 2,221 1,581 4,161 2,858 Noninterest Income Depositor and other retail banking fees 398 361 325 759 604 Securities fees and commissions 98 82 76 180 149 Insurance income 39 47 23 86 43 Single-family residential ("SFR") mortgage banking (expense) income (733) 393 264 (340) 537 Portfolio loan related income 75 65 53 140 85 Gain (loss) from other AFS securities 137 (298) 5 (161) (44) Revaluation gain (loss) from derivatives 857 (15) 1 842 (2) Gain on extinguishment of securities sold under agreements to repurchase 121 74 - 195 - Net settlement income from interest-rate swaps 101 6 - 107 - Other income 115 92 58 208 183 - ---------------------------------------------------------------------------------------------------------------------------------- Total noninterest income 1,208 807 805 2,016 1,555 Noninterest Expense Compensation and benefits 732 690 466 1,422 882 Occupancy and equipment 283 288 190 571 373 Telecommunications and outsourced information services 134 139 105 273 211 Depositor and other retail banking losses 48 50 33 98 63 Amortization of goodwill - - 33 - 62 Amortization of other intangible assets 26 25 10 51 17 Professional fees 52 55 51 107 88 Advertising and promotion 69 44 51 113 83 Other expense 252 238 180 490 353 - ---------------------------------------------------------------------------------------------------------------------------------- Total noninterest expense 1,596 1,529 1,119 3,125 2,132 - ---------------------------------------------------------------------------------------------------------------------------------- Income before income taxes 1,552 1,499 1,267 3,052 2,281 Income taxes 568 549 469 1,117 842 - ---------------------------------------------------------------------------------------------------------------------------------- Net Income $ 984 $ 950 $ 798 $ 1,935 $ 1,439 ================================================================================================================================== Net Income Attributable to Common Stock $ 982 $ 948 $ 796 $ 1,931 $ 1,436 ================================================================================================================================== Net income per common share: Basic $ 1.03 $ 1.00 $ 0.93 $ 2.03 $ 1.70 Diluted 1.01 0.98 0.91 1.99 1.68 Dividends declared per common share $ 0.26 $ 0.25 $ 0.22 $ 0.51 $ 0.43 Basic weighted average number of common shares outstanding (in thousands) 954,662 947,653 857,912 951,177 842,611 Diluted weighted average number of common shares outstanding (in thousands) 974,153 963,242 872,762 968,717 855,029
WM-2 Washington Mutual, Inc. Consolidated Statements of Financial Condition (dollars in millions, except per share data) (unaudited)
June 30, 2002 Dec. 31, 2001 June 30, 2001 - ----------------------------------------------------------------------------------------------------------------------------------- Assets Cash and cash equivalents $ 4,709 $ 3,563 $ 3,741 Federal funds sold and securities purchased under resale agreements 314 2,481 824 AFS securities: Mortgage-backed securities ("MBS") 24,698 28,568 41,029 Investment securities 34,119 29,781 12,421 Loans held for sale 21,147 23,842 20,053 Loans: Loans held in portfolio 146,666 132,991 131,551 Allowance for loan and lease losses (1,665) (1,404) (1,170) - ----------------------------------------------------------------------------------------------------------------------------------- Total loans held in portfolio, net of allowance for loan and lease losses 145,001 131,587 130,381 Mortgage servicing rights ("MSR") 6,489 6,241 6,799 Investment in Federal Home Loan Banks ("FHLBs") 3,908 3,873 3,767 Goodwill 5,985 1,981 2,136 Other assets 14,911 10,589 8,147 - ----------------------------------------------------------------------------------------------------------------------------------- Total assets $ 261,281 $ 242,506 $ 229,298 =================================================================================================================================== Liabilities Deposits: Checking accounts $ 61,911 $ 37,736 $ 23,491 Savings accounts and money market deposit accounts ("MMDAs") 31,045 32,484 35,303 Time deposit accounts 36,113 36,962 38,160 - ----------------------------------------------------------------------------------------------------------------------------------- Total deposits 129,069 107,182 96,954 Federal funds purchased and commercial paper 3,775 4,690 4,080 Securities sold under agreements to repurchase ("repurchase agreements") 32,069 39,447 30,011 Advances from FHLBs 58,321 61,182 63,780 Other borrowings 14,017 12,576 15,831 Other liabilities 4,342 3,264 5,129 - ----------------------------------------------------------------------------------------------------------------------------------- Total liabilities 241,593 228,341 215,785 Redeemable preferred stock 102 102 102 Stockholders' equity 19,586 14,063 13,411 - ----------------------------------------------------------------------------------------------------------------------------------- Total liabilities, redeemable preferred stock, and stockholders' equity $ 261,281 $ 242,506 $ 229,298 =================================================================================================================================== Common shares outstanding at end of period (in thousands) (1) 974,188 873,089 878,366 Book value per common share $ 20.48 $ 16.45 $ 15.59 Tangible book value per common share 14.04 14.18 13.41 Full-time equivalent and leased employees at end of period 50,001 39,465 37,106 - --------------- (1) Includes 18 million shares held in escrow that were not included in the book value per share calculations.
WM-3 Washington Mutual, Inc. Selected Financial Information (dollars in millions, except per share data) (unaudited)
Six Months Ended - -------------------------------------------------------------------------------------------------------- June 30, June 30, 2002 2001 - -------------------------------------------------------------------------------------------------------- Stockholders' Equity Rollforward Balance, beginning of period $ 14,063 $ 10,166 Net income 1,935 1,439 Other comprehensive income, net of tax 231 259 Cash dividends declared on common stock (496) (361) Cash dividends declared on redeemable preferred stock (4) (3) Common stock repurchased and retired (37) - Common stock warrants issued, net of issuance costs - 398 Common stock issued for acquisitions 3,762 1,389 Common stock issued 132 124 - -------------------------------------------------------------------------------------------------------- Balance, end of period $ 19,586 $ 13,411 ========================================================================================================
Quarter Ended Six Months Ended - ------------------------------------------------------------------------------------------------------------------------------------ June 30, Mar. 31, June 30, June 30, June 30, 2002 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------------ Pro Forma (1) Income before income taxes $ 1,552 $ 1,499 $ 1,267 $ 3,052 $ 2,281 Add back: goodwill previously amortized - - 33 - 62 - ----------------------------------------------------------------------------------------------------------------------------------- Income before income taxes, excluding amortization of goodwill 1,552 1,499 1,300 3,052 2,343 Income taxes (568) (549) (474) (1,117) (850) - ----------------------------------------------------------------------------------------------------------------------------------- Net income, excluding amortization of goodwill 984 950 826 1,935 1,493 Redeemable preferred stock dividends (2) (2) (2) (4) (3) - ----------------------------------------------------------------------------------------------------------------------------------- Net income attributable to common stock, excluding amortization of goodwill $ 982 $ 948 $ 824 $ 1,931 $ 1,490 =================================================================================================================================== Net income per diluted common share, excluding amortization of goodwill $ 1.01 $ 0.98 $ 0.94 $ 1.99 $ 1.74 - ------------------------------------ (1) Represents pro forma impact to net income for the quarter-to-date June 30, 2002, March 31, 2002 and June 30, 2001 and to year-to-date June 30, 2002 and 2001, assuming that the adoption of Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets, which eliminates the amortization of goodwill from net income, was applied to all periods presented. SFAS No. 142 became effective on January 1, 2002.
WM-4 Washington Mutual, Inc. Selected Financial Information (dollars in millions, except per share amounts) (unaudited)
Quarter Ended - ------------------------------------------------------------------------------------------------------------------------------ June 30, Mar. 31, Dec. 31, Sept. 30, June 30, 2002 2002 2001 2001 2001 - ------------------------------------------------------------------------------------------------------------------------------ PROFITABILITY Net interest income $ 2,100 $ 2,396 $ 2,027 $ 1,816 $ 1,673 Net interest margin 3.54% 3.74% 3.80% 3.53% 3.21% Noninterest income $ 1,208 $ 807 $ 830 $ 863 $ 805 Noninterest expense 1,596 1,529 1,331 1,154 1,119 Net income 984 950 842 832 798 Net income per common share: Basic $ 1.03 $ 1.00 $ 0.98 $ 0.97 $ 0.93 Diluted 1.01 0.98 0.97 0.94 0.91 Basic weighted average number of common shares outstanding (in thousands) 954,662 947,653 856,014 859,497 857,912 Diluted weighted average number of common shares outstanding (in thousands) 974,153 963,242 868,951 879,374 872,762 Return on average assets 1.48% 1.34% 1.43% 1.46% 1.43% Return on average common equity 20.78 20.68 23.36 23.64 24.72 Efficiency ratio, excluding amortization of other intangible 47.45 46.96 44.99(4) 41.29(4) 43.40(4) Efficiency ratio, including amortization of other intangible 48.22 47.75 46.58(5) 43.09(5) 45.14(5) ASSET QUALITY Period end: Nonaccrual loans(6) $ 2,232 $ 2,391 $ 2,030 $ 1,726 $ 1,257 Foreclosed assets 274 267 228 221 203 Restructured loans 119 130 118 128 158 Total nonaccrual loans, foreclosed assets and restructured loans 2,625 2,788 2,376 2,075 1,618 Allowance for loan and lease losses 1,665 1,621 1,404 1,295 1,170 Allowance as a percentage of total loans held in portfolio 1.14% 1.11% 1.06% 0.97% 0.89% Quarter-to-date: Provision for loan and lease losses $ 160 $ 175 $ 200 $ 200 $ 92 Net charge offs (116) (99) (97) (75) (75) CAPITAL ADEQUACY Stockholders' equity/total assets 7.50% 6.59% 5.80% 6.50% 5.85% Stockholders' equity(1)/total assets(1) 7.51 6.80 5.89 6.24 5.77 Tangible common equity(1)(2)/total assets(1)(2) 5.28 4.69 5.14 5.41 5.00 Estimated total risk-based capital/ risk-weighted assets(3) 12.40 11.69 12.87 12.35 11.75 SUPPLEMENTAL DATA Average balance sheet: Average loans $ 168,879 $ 174,770 $ 154,924 $151,930 $ 148,704 Average interest-earning assets 236,504 255,175 214,063 206,799 207,549 Average total assets 266,357 284,208 236,335 228,457 223,842 Average interest-bearing deposits 108,231 102,085 83,934 80,409 79,335 Average noninterest-bearing deposits 22,417 21,767 19,699 18,767 15,494 Average stockholders' equity 18,913 18,347 14,389 14,054 12,887 Period end balance sheet: Total loans held in portfolio, net of allowance for loan and lease losses 145,001 144,743 131,587 131,605 130,381 Total loans held for sale 21,147 23,317 23,842 18,035 20,053 Total interest-earning assets 233,896 247,727 223,695 205,064 212,216 Total assets 261,281 275,223 242,506 223,638 229,298 Total interest-bearing deposits 108,441 107,174 84,741 81,062 79,269 Total noninterest-bearing deposits 20,628 21,836 22,441 18,671 17,685 Total stockholders' equity 19,586 18,128 14,063 14,529 13,411 Dividends declared per common share $ 0.26 $ 0.25 $ 0.24 $ 0.23 $ 0.22 - ----------------------- (1) Excludes unrealized net gain/loss on available-for-sale securities and derivatives. (2) Excludes goodwill and intangible assets other than MSR. (3) Estimate of what the total risk-based capital ratio would be if Washington Mutual, Inc. was a bank holding company that complies with Federal Reserve Board capital requirements. (4) Excludes amortization of goodwill. (5) Includes amortization of goodwill. (6) Excludes nonaccrual loans held for sale.
WM-5 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)
Quarter Ended - --------------------------------------------------------------------------------------------------------------------- June 30, 2002 Mar. 31, 2002 June 30, 2001 Balance Rate Balance Rate Balance Rate - --------------------------------------------------------------------------------------------------------------------- Average Balances and Weighted Average Interest Rates Assets Interest-earning assets: Federal funds sold and securities purchased under resale agreements $ 1,995 1.89% $ 1,139 1.63% $ 263 4.31% MBS(1) 22,471 5.96 25,248 5.39 43,051 7.26 Investment securities and other(1) 43,159 5.05 54,018 5.12 15,531 5.88 Loans(2): SFR 108,312 5.87 114,792 6.07 98,642 7.32 Specialty mortgage finance(3) 10,423 9.75 10,406 9.59 8,175 9.99 - ------------------------------------------------------------ ----------- ---------- Total SFR 118,735 6.21 125,198 6.36 106,817 7.53 SFR construction(4) 2,272 7.05 2,498 6.62 2,964 8.35 Second mortgage and other consumer: Banking subsidiaries 16,057 6.66 14,478 6.84 9,428 8.78 Washington Mutual Finance 2,566 16.50 2,557 16.66 2,518 16.86 Commercial business 4,963 5.54 5,647 5.52 5,045 7.58 Commercial real estate: Multi-family 17,432 5.98 17,552 6.35 17,121 8.09 Other commercial real estate 6,854 6.46 6,840 6.82 4,811 8.09 - ------------------------------------------------------------ ----------- ---------- Total loans 168,879 6.38 174,770 6.54 148,704 7.87 - ------------------------------------------------------------ ----------- ---------- Total interest-earning assets 236,504 6.06 255,175 6.11 207,549 7.59 Noninterest-earning assets: MSR 7,828 7,006 4,623 Goodwill 5,952 5,401 2,034 Other 16,073 16,626 9,636 - ------------------------------------------------------------ ----------- ---------- Total assets $266,357 $ 284,208 $ 223,842 ============================================================ =========== ========== Liabilities Interest-bearing liabilities: Deposits: Interest-bearing checking $ 36,991 2.65 $ 23,873 2.76 $ 6,097 1.46 Savings accounts and MMDAs 32,249 1.51 36,179 1.57 35,845 3.32 Time deposit accounts 38,991 3.06 42,033 3.33 37,393 5.41 - ------------------------------------------------------------ ----------- ---------- Total interest-bearing deposits 108,231 2.46 102,085 2.57 79,335 4.16 Federal funds purchased and commercial paper 3,562 1.75 5,565 1.83 4,661 4.56 Repurchase agreements 35,812 2.44 53,450 1.62 30,295 4.45 Advances from FHLBs 59,651 2.75 65,302 2.63 62,241 5.29 Other 13,976 5.14 14,156 5.10 12,813 7.20 - ------------------------------------------------------------ ----------- ---------- Total interest-bearing liabilities 221,232 2.69 240,558 2.51 189,345 4.79 Noninterest-bearing sources: Noninterest-bearing deposits 22,417 21,767 15,494 Other liabilities 3,795 3,536 6,116 Stockholders' equity 18,913 18,347 12,887 - ------------------------------------------------------------ ----------- ---------- Total liabilities and stockholders' equity $266,357 $ 284,208 $ 223,842 ============================================================ =========== ========== Net interest spread 3.37 3.60 2.80 Impact of noninterest-bearing sources 0.17 0.14 0.41 Net interest margin 3.54 3.74 3.21 - ------------------------------- (1) Yield is based on average amortized cost balances. (2) Nonaccrual loans were included in the average loan amounts outstanding. (3) Includes purchased subprime loan portfolios as well as first mortgages originated by Washington Mutual Finance and Long Beach Mortgage. (4) Includes custom construction loans to the intended occupant of a house to finance the house's construction and residential builder construction loans to borrowers who are in the business of acquiring land and building homes for resale.
WM-6 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)
Six Months Ended - ------------------------------------------------------------------------------------------------------------------------------------ June 30, 2002 June 30, 2001 Balance Rate Balance Rate - ------------------------------------------------------------------------------------------------------------------------------------ Average Balances and Weighted Average Interest Rates Assets Interest-earning assets: Federal funds sold and securities purchased under resale agreements $ 1,569 1.79% $ 349 5.55% MBS(1) 23,852 5.66 48,450 7.17 Investment securities and other(1) 48,559 5.08 12,341 5.97 Loans(2): SFR 111,538 5.97 94,925 7.49 Specialty mortgage finance(3) 10,404 9.67 7,825 10.05 - ------------------------------------------------------------------------------------------------ ----------- Total SFR 121,942 6.28 102,750 7.68 SFR construction(4) 2,384 6.82 2,706 8.60 Second mortgage and other consumer: Banking subsidiaries 15,277 6.75 9,114 8.90 Washington Mutual Finance 2,564 16.61 2,514 17.04 Commercial business 5,303 5.52 4,414 8.09 Commercial real estate: Multi-family 17,492 6.17 16,851 8.19 Other commercial real estate 6,847 6.64 4,464 8.32 - ------------------------------------------------------------------------------------------------ ----------- Total loans 171,809 6.47 142,813 8.04 - ------------------------------------------------------------------------------------------------ ----------- Total interest-earning assets 245,789 6.08 203,953 7.70 Noninterest-earning assets: MSR 7,419 3,734 Goodwill 5,614 1,694 Other 16,380 8,953 - ------------------------------------------------------------------------------------------------ ----------- Total assets $ 275,202 $218,334 ================================================================================================ =========== Liabilities Interest-bearing liabilities: Deposits: Interest-bearing checking $ 30,468 2.70 $ 6,247 1.65 Savings accounts and MMDAs 34,640 1.53 35,262 3.70 Time deposit accounts 40,504 3.20 36,506 5.59 - ------------------------------------------------------------------------------------------------ ----------- Total interest-bearing deposits 105,612 2.50 78,015 4.42 Federal funds purchased and commercial paper 4,558 1.80 4,876 5.23 Repurchase agreements 44,582 1.95 30,667 5.24 Advances from FHLBs 62,461 2.68 64,248 5.57 Other 14,066 5.12 11,644 7.07 - ------------------------------------------------------------------------------------------------ ----------- Total interest-bearing liabilities 231,279 2.59 189,450 5.13 Noninterest-bearing sources: Noninterest-bearing deposits 21,656 13,241 Other liabilities 3,666 3,468 Stockholders' Equity 18,601 12,175 - ------------------------------------------------------------------------------------------------ ----------- Total liabilities and stockholders' equity $ 275,202 $218,334 ================================================================================================ =========== Net interest spread 3.49 2.57 Impact of noninterest-bearing sources 0.16 0.37 Net interest margin 3.65 2.94 - ------------------------------- (1) Yield is based on average amortized cost balances. (2) Nonaccrual loans were included in the average loan amounts outstanding. (3) Includes purchased subprime loan portfolios as well as first mortgages originated by Washington Mutual Finance and Long Beach Mortgage. (4) Includes custom construction loans to the intended occupant of a house to finance the house's construction and residential builder construction loans to borrowers who are in the business of acquiring land and building homes for resale.
WM-7 Washington Mutual, Inc. Selected Financial Information (unaudited)
Quarter Ended Six Months Ended - ------------------------------------------------------------------------------------------------------------------------------------ June 30, Mar. 31, June 30, June 30, June 30, 2002 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------------ Basic and Diluted Weighted Average Number of Common Shares Outstanding (in thousands) Basic weighted average number of common shares outstanding 954,662 947,653 857,912 951,177 842,611 Dilutive effect of potential common shares from: Stock options 9,911 8,602 8,631 9,256 8,907 Premium Income Equity SecuritiesSM 1,671 1,360 1,529 1,516 1,166 Trust Preferred Income Equity Redeemable SecuritiesSM 7,909 5,627 4,690 6,768 2,345 - ------------------------------------------------------------------------------------------------------------------------------------ 19,491 15,589 14,850 17,540 12,418 - ------------------------------------------------------------------------------------------------------------------------------------ Diluted weighted average number of common shares outstanding 974,153 963,242 872,762 968,717 855,029 ====================================================================================================================================
WM-8 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)
Quarter Ended Six Months Ended - ----------------------------------------------------------------------------------------------------------------------------- June 30, Mar. 31, June 30, June 30, June 30, 2002 2002 2001 2002 2001 - ----------------------------------------------------------------------------------------------------------------------------- Loan Volume SFR: Adjustable rate ("ARMs") $ 16,093 $ 16,608 $ 7,968 $ 32,701 $ 15,213 Fixed rate 30,999 39,231 26,316 70,230 37,477 Specialty mortgage finance (1) 3,358 3,320 2,987 6,678 5,220 - ----------------------------------------------------------------------------------------------------------------------------- Total SFR loan volume 50,450 59,159 37,271 109,609 57,910 SFR construction: Builder (2) 589 417 839 1,006 1,914 Custom (3) 136 96 248 232 370 Second mortgage and other consumer: Banking subsidiaries 3,912 3,720 2,165 7,632 3,500 Washington Mutual Finance 536 452 505 988 954 Commercial business 598 643 819 1,241 1,575 Commercial real estate: Multi-family 1,242 864 850 2,106 1,402 Other commercial real estate 316 336 324 652 638 - ----------------------------------------------------------------------------------------------------------------------------- Total loan volume $ 57,779 $ 65,687 $ 43,021 $123,466 $ 68,263 ============================================================================================================================= Loan Volume by Channel Originated $ 39,667 $ 43,538 $ 29,147 $ 83,205 $ 49,761 Purchased/Correspondent 18,112 22,149 13,874 40,261 18,502 - ----------------------------------------------------------------------------------------------------------------------------- Total loan volume by channel $ 57,779 $ 65,687 $ 43,021 $123,466 $ 68,263 ============================================================================================================================= Refinancing Activity (4) SFR: ARMs $ 10,575 $ 14,157 $ 5,419 $ 24,732 $ 9,740 Fixed rate 16,584 25,933 17,895 42,517 24,185 SFR construction 15 13 10 28 16 Second mortgage and other consumer 687 641 82 1,328 141 Commercial real estate 537 322 392 859 577 - ----------------------------------------------------------------------------------------------------------------------------- Total refinances $ 28,398 $ 41,066 $ 23,798 $ 69,464 $ 34,659 ============================================================================================================================= SFR Loan Volume by Index: Short-term ARMs: Treasury indices $ 5,002 $ 6,480 $ 4,267 $ 11,482 $ 9,621 COFI 1,444 728 439 2,172 995 Other 1,824 1,494 5 3,318 14 - ----------------------------------------------------------------------------------------------------------------------------- Total short-term ARMs 8,270 8,702 4,711 16,972 10,630 Medium-term ARMs 10,615 10,428 4,423 21,043 7,623 Fixed-rate mortgages 31,565 40,029 28,137 71,594 39,657 - ----------------------------------------------------------------------------------------------------------------------------- Total SFR loan volume $ 50,450 $ 59,159 $ 37,271 $109,609 $ 57,910 ============================================================================================================================= (1) Includes purchased subprime loan portfolios as well as first mortgages originated by Washington Mutual Finance and Long Beach Mortgage. (2) Represents residential builder construction loans to borrowers who are in the business of acquiring land and building homes for resale. (3) Represents custom construction loans to the intended occupant of a house to finance the house's construction. (4) Includes loan refinancings entered into by both new and pre-existing loan customers.
WM-9 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)
Change from Mar. 31, 2002 June 30, Mar. 31, June 30, to June 30, 2002 2002 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------- Loans by Property Type and MBS Loans held in portfolio: SFR $ (1,322) $ 85,170 $ 86,492 $ 81,880 Specialty mortgage finance(1) 40 10,584 10,544 8,290 - ------------------------------------------------------------------------------------------------------------------------------- Total SFR loans (1,282) 95,754 97,036 90,170 SFR construction: Builder(2) (227) 1,761 1,988 2,468 Custom(3) (31) 372 403 322 Second mortgage and other consumer: Banking subsidiaries 1,609 16,655 15,046 9,681 Washington Mutual Finance 104 2,677 2,573 2,518 Commercial business (185) 5,045 5,230 5,074 Commercial real estate: Multi-family 339 17,567 17,228 16,581 Other commercial real estate (25) 6,835 6,860 4,737 - ------------------------------------------------------------------------------------------------------------------------------- Total loans held in portfolio 302 146,666 146,364 131,551 Less: allowance for loan and lease losses (44) (1,665) (1,621) (1,170) Loans securitized and retained as MBS (1,801) 19,344 21,145 28,518 - ------------------------------------------------------------------------------------------------------------------------------- Total net loans held in portfolio and loans securitized and retained as MBS (1,543) 164,345 165,888 158,899 Loans held for sale (2,170) 21,147 23,317 20,053 - ------------------------------------------------------------------------------------------------------------------------------- Total net loans and loans securitized and retained as MBS (3,713) 185,492 189,205 178,952 Purchased MBS 2,152 5,354 3,202 12,511 - ------------------------------------------------------------------------------------------------------------------------------- Total net loans and MBS $ (1,561) $190,846 $192,407 $ 191,463 =============================================================================================================================== (1) Includes purchased subprime loan portfolios as well as first mortgages originated by Washington Mutual Finance. (2) Represents residential builder construction loans to borrowers who are in the business of acquiring land and building homes for resale. (3) Represents custom construction loans to the intended occupant of a house to finance the house's construction.
WM-10 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)
Mar. 31, 2002 Dec. 31, 2001 to June 30, 2002 to June 30, 2002 - ------------------------------------------------------------------------------------------------------------------------- Rollforward of Loans Held for Sale Balance, beginning of period $ 23,317 $ 23,842 Loans added through acquisitions - 6,717 Loans originated and purchased/correspondent 41,440 86,133 Loans transferred from loans held in portfolio 355 738 Loans sold or securitized (43,533) (94,726) Loan payments and other (432) (1,557) - ------------------------------------------------------------------------------------------------------------------------- Change in loans (2,170) (2,695) - ------------------------------------------------------------------------------------------------------------------------- Balance, end of period $ 21,147 $ 21,147 ========================================================================================================================= Rollforward of Loans Held in Portfolio Balance, beginning of period $ 146,364 $ 132,991 Loans added through acquisitions - 16,225 Loans originated and purchased/correspondent 16,339 37,333 Loans transferred to loans held for sale (355) (738) Loans securitized (308) (4,246) Loan payments and other (15,374) (34,899) - ------------------------------------------------------------------------------------------------------------------------- Change in loans 302 13,675 - ------------------------------------------------------------------------------------------------------------------------- Balance, end of period $ 146,666 $ 146,666 =========================================================================================================================
WM-11 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)
Mar. 31, 2002 Dec. 31, 2001 to June 30, 2002 to June 30, 2002 - ----------------------------------------------------------------------------------------------------------------------------------- Rollforward of Mortgage Servicing Rights ("MSR")(1) Balance, beginning of period $ 7,955 $ 6,241 SFR: Additions through acquisitions - 926 Other additions 856 2,078 Amortization (504) (983) Impairment (1,107) (1,062) Sale of excess servicing (711) (711) - ----------------------------------------------------------------------------------------------------------------------------------- Balance, end of period(2) $ 6,489 $ 6,489 =================================================================================================================================== Rollforward of Valuation Allowance for MSR Impairment Balance, beginning of period $ 1,669 $ 1,714 Impairment 1,107 1,062 Sale of excess servicing (208) (208) - ----------------------------------------------------------------------------------------------------------------------------------- Balance, end of period $ 2,568 $ 2,568 =================================================================================================================================== Rollforward of Loan Servicing Portfolio with MSR Balance, beginning of period $459,375 $ 378,383 SFR: Additions through acquisitions - 49,242 Other additions 58,262 123,693 Loan payments and other (40,339) (74,038) Net change in commercial real estate loan servicing portfolio 11 29 - ----------------------------------------------------------------------------------------------------------------------------------- Balance, end of period $477,309 $ 477,309 =================================================================================================================================== June 30, 2002 Balance - ----------------------------------------------------------------------------------------------------------------------------------- Total Servicing Portfolio Loans serviced for others $ 477,309 Servicing on retained MBS without MSR 7,058 Servicing on owned loans 155,219 Subservicing portfolio 160,046 - ----------------------------------------------------------------------------------------------------------------------------------- Total servicing portfolio $ 799,632 ===================================================================================================================================
June 30, 2002 --------------------------------------------------------- Unpaid Principal Weighted Average Balance Servicing Fee - ----------------------------------------------------------------------------------------------------------------------------------- (in basis points, annualized) Loans Serviced for Others by Loan Type Government $ 76,993 52 Agency 300,928 37 Private 89,438 47 Specialty home loans 9,950 50 - ----------------------------------------------------------------------------------------------------------------------------------- Total loans serviced for others(3) $ 477,309 41 =================================================================================================================================== (1) Net of valuation allowance. (2) At June 30, 2002, aggregate MSR fair value was $6.49 billion. (3) Weighted average coupon (annualized) was 7.06% at June 30, 2002.
WM-12 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)
Change from Mar. 31, 2001 June 30, % of Mar. 31, % of June 30, % of to June 30, 2002 2002 total 2002 total 2001 total - ------------------------------------------------------------------------------------------------------------------------------------ Real Estate Loans and MBS (1) Short-term ARMs: COFI $ (1,052) $ 30,884 20% $ 31,936 20% $ 39,103 24% Treasury indices 2,507 37,969 24 35,462 22 39,719 24 Other (827) 11,283(2) 7 12,110(2) 8 11,503 (2) 7 - ------------------------------------------------------------------------------------------------------------------------------------ Total short-term ARMs 628 80,136 51 79,508 50 90,325 55 Medium-term ARMs (1,707) 43,481 28 45,188 29 35,621 22 Fixed-rate loans (2,508) 27,588 18 30,096 19 26,408 16 Fixed-rate MBS 1,038 4,511 3 3,473 2 12,256 7 - ------------------------------------------------------------------------------------------------------------------------------------ Total real estate loans and MBS $ (2,549) $155,716 100% $158,265 100% $164,610 100% ====================================================================================================================================
(1) Does not include specialty mortgage finance loans. (2) The balance included the following amount of securities retained which bear COFI to LIBOR basis risk (dollars in billions): June 30, 2002: $2.8 Mar. 31, 2002: 2.8 June 30, 2001: 2.8
Quarter Ended Six Months Ended - ------------------------------------------------------------------------------------------------- ----------------------- June 30, Mar. 31, June 30, June 30, June 30, 2002 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------- ----------------------- SFR Mortgage Banking (Expense) Income Loan servicing fees $ 560 $ 540 $ 309 $ 1,100 $ 505 Loan subservicing fees 38 15 3 53 3 Amortization of MSR (504) (479) (208) (983) (332) MSR (impairment) recovery (1,107) 45 (74) (1,062) (137) Other, net (78) (62) (42) (140) (61) - ------------------------------------------------------------------------------------------------- ----------------------- Net SFR loan servicing (expense) income (1,091) 59 (12) (1,032) (22) Loan related income 120 81 39 201 62 Gain from mortgage loans 220 251 215 471 402 Gain from sale of originated MBS 18 2 22 20 95 - ------------------------------------------------------------------------------------------------- ----------------------- Total SFR mortgage banking (expense) income $ (733) $ 393 $ 264 $ (340) $ 537 ================================================================================================= =======================
WM-13 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)
June 30, 2002 Dec. 31, 2001 June 30, 2001 - ------------------------------------------------------------------------------------------------------------------------------------ Balance Term (1) Balance Term (1) Balance Term (1) - ------------------------------------------------------------------------------------------------------------------------------------ (in months) (in months) (in months) Deposits and Borrowings Deposits: Noninterest-bearing deposits $ 20,628 N/A $ 22,441 N/A $ 17,685 N/A Interest-bearing checking accounts, savings accounts and MMDAs 72,328 N/A 47,779 N/A 41,109 N/A Interest-bearing time deposit accounts 36,113 14 36,962 10 38,160 6 - ------------------------------------------------------------------------------------------------------------------------------------ Total deposits(2) 129,069 107,182 96,954 Borrowings: Adjustable 58,340 1 48,014 2 51,513 1 Short-term fixed 24,588 2 49,569 1 49,348 2 Long-term fixed 25,254 60 20,312 72 12,841 100 - ------------------------------------------------------------------------------------------------------------------------------------ Total borrowings 108,182 117,895 113,702 - ------------------------------------------------------------------------------------------------------------------------------------ Total deposits and borrowings $ 237,251 $ 225,077 $ 210,656 ==================================================================================================================================== (1) Terms used are remaining term for deposits and term to reprice for borrowings. (2) Includes custodial and escrow deposits of $9.44 billion at June 30, 2002, $10.11 billion at December 31, 2001 and $8.23 billion at June 30, 2001.
June 30, Mar. 31, June 30, 2002 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------------ Retail Checking Accounts (1) WMB and WMBfsb 1,249,270 1,218,440 1,138,755 WMB, FA 5,568,273 5,318,195(2) 4,323,791 - ------------------------------------------------------------------------------------------------------------------------------------ Total retail checking accounts 6,817,543 6,536,635 5,462,546 ==================================================================================================================================== Retail Checking Account Activity (1) Net accounts opened during the quarter: WMB and WMBfsb 30,830 36,055 19,019 WMB, FA 250,078 650,389(2) 163,931 - ------------------------------------------------------------------------------------------------------------------------------------ Net new retail checking accounts 280,908 686,444 182,950 ==================================================================================================================================== (1) Retail checking accounts exclude commercial business accounts. The information provided refers to the number of accounts, not dollar volume. (2) Includes 358,846 checking accounts acquired from Dime.
WM-14 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)
Quarter Ended - ------------------------------------------------------------------------------------------------------------------------------- June 30, Mar. 31, Dec. 31, Sept. 30, June 30, 2002 2002 2001 2001 2001 - ------------------------------------------------------------------------------------------------------------------------------- Allowance for Loan and Lease Losses Balance, beginning of quarter $1,621 $ 1,404 $ 1,295 $ 1,170 $1,158 Allowance acquired through business combinations/other - 141 6 - (5) Provision for loan and lease losses 160 175 200 200 92 - ------------------------------------------------------------------------------------------------------------------------------- 1,781 1,720 1,501 1,370 1,245 Loans charged off: SFR (11) (11) (3) (6) (14) Specialty mortgage finance (8) (9) (10) (4) (5) - ------------------------------------------------------------------------------------------------------------------------------- Total SFR charge offs (19) (20) (13) (10) (19) Second mortgage and other consumer: Banking subsidiaries (22) (21) (16) (12) (16) Washington Mutual Finance (46) (43) (41) (36) (34) Commercial business (46) (26) (38) (19) (12) Commercial real estate: Other commercial real estate (5) (2) - (5) (3) - ------------------------------------------------------------------------------------------------------------------------------- Total loans charged off (138) (112) (108) (82) (84) Recoveries of loans previously charged off: SFR - - - - 1 Second mortgage and other consumer: Banking subsidiaries 3 3 1 1 1 Washington Mutual Finance 5 5 4 5 5 Commercial business 14 5 5 1 1 Commercial real estate: Other commercial real estate - - 1 - 1 - ------------------------------------------------------------------------------------------------------------------------------- Total recoveries of loans previously charged off 22 13 11 7 9 - ------------------------------------------------------------------------------------------------------------------------------- Net charge offs (116) (99) (97) (75) (75) - ------------------------------------------------------------------------------------------------------------------------------- Balance, end of quarter $1,665 $ 1,621 $ 1,404 $ 1,295 $1,170 =============================================================================================================================== Net charge offs (annualized) as a percentage of average loans held in portfolio 0.31% 0.26% 0.29% 0.22% 0.23% Allowance as a percentage of total loans held in portfolio 1.14% 1.11% 1.06% 0.97% 0.89%
WM-15 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)
June 30, 2002 Mar. 31, 2002 Dec. 31, 2001 Sept. 30, 2001 June 30, 2001 - ------------------------------------------------------------------------------------------------------------------------------------ Nonperforming Assets ("NPAs") and Restructured Loans Nonaccrual loans(1): SFR $ 1,092 $ 1,177 $ 974 $ 771 $ 602 Specialty mortgage finance(2) 420 418 358 301 272 - ------------------------------------------------------------------------------------------------------------------------------------ Total SFR nonaccrual loans 1,512 1,595 1,332 1,072 874 SFR construction: Builder(3) 44 57 26 18 19 Custom(4) 8 15 10 9 6 Second mortgage and other consumer: Banking subsidiaries 66 72 64 52 45 Washington Mutual Finance 88 91 84 78 71 Commercial business 177 186 159 126 68 Commercial real estate: Multi-family 65 51 56 51 26 Other commercial real estate 272 324 299 320 148 - ------------------------------------------------------------------------------------------------------------------------------------ Total nonaccrual loans 2,232 2,391 2,030 1,726 1,257 Foreclosed assets: SFR 114 126 107 110 120 Specialty mortgage finance 72 70 69 55 41 - ------------------------------------------------------------------------------------------------------------------------------------ Total SFR foreclosed assets 186 196 176 165 161 SFR construction: Builder 7 8 4 4 5 Custom - - 1 - - Second mortgage and other consumer: Banking subsidiaries 11 12 11 16 17 Washington Mutual Finance 8 9 9 8 8 Commercial business 11 13 10 10 - Commercial real estate: Multi-family - - - 1 1 Other commercial real estate 51 29 17 17 11 - ------------------------------------------------------------------------------------------------------------------------------------ Foreclosed assets 274 267 228 221 203 - ------------------------------------------------------------------------------------------------------------------------------------ Total NPAs $ 2,506 $ 2,658 $ 2,258 $ 1,947 $ 1,460 As a percentage of total assets 0.96% 0.97% 0.93% 0.87% 0.64% Restructured loans $ 119 $ 130 $ 118 $ 128 $ 158 - ------------------------------------------------------------------------------------------------------------------------------------ Total NPAs and restructured loans $ 2,625 $ 2,788 $ 2,376 $ 2,075 $ 1,618 ==================================================================================================================================== (1) Excludes nonaccrual loans held for sale of $114 million at June 30, 2002. Prior periods have been restated to reflect the exclusion of nonaccrual loans held for sale of $122 million, $123 million, $85 million and $106 million at March 31, 2002, December 31, 2001, September 30, 2001 and June 30, 2001. Loans held for sale are accounted for at lower of aggregate cost or market value, with valuation changes included as adjustments to gain from mortgage loans. (2) Includes purchased subprime loans as well as first mortgages originated by Washington Mutual Finance and Long Beach Mortgage. (3) Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale. (4) Represents construction loans made directly to the intended occupant of a single-family residence.
WM-16 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited) The Company uses interest rate contracts as tools to manage interest rate risk. The following tables summarize the notional amounts, maturities, net fair values, and weighted average interest rates and strike rates associated with these contracts. Interest rate contracts that are embedded with certain adjustable-rate borrowings, while not accounted for as derivatives under SFAS No. 133, have been included in the tables since they also function as interest rate risk management tools. The following estimated net fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies.
June 30, 2002 - ----------------------------------------------------------------------------------------------------------------------------------- Maturity Range - ----------------------------------------------------------------------------------------------------------------------------------- Counter- Total Net Fair Party Notional After Value Credit Risk Amount 2002 2003 2004 2005 2006 2006 - ----------------------------------------------------------------------------------------------------------------------------------- Interest Rate Contracts: Asset/Liability Management Pay-fixed swaps $ (356) $ 10 Contractual maturity $30,509 $ 713 $ 8,166 $ 8,834 $ 3,130 $4,708 $ 4,958 Weighted average pay rate 4.00% 4.44% 2.95% 4.03% 4.13% 4.39% 5.17% Weighted average receive rate 1.93% 1.94% 1.93% 1.90% 1.88% 1.92% 2.03% Receive-fixed swaps $ 332 $ 335 Contractual maturity $ 4,380 - $ 600 $ - $ 530 $1,000 $ 2,250 Weighted average pay rate 1.84% - 1.52% - 1.51% 1.90% 1.97% Weighted average receive rate 6.39% - 5.10% - 5.37% 6.81% 6.80% Interest rate caps/collars/ corridors $ - $ - Contractual maturity $ 755 $ 229 $ 271 $ 191 $ 64 - - Weighted average strike rate 7.52% 7.32% 7.62% 8.14% 5.94% - - Payor swaptions $ 30 $ 30 Contractual maturity (option) $5,000 - $ 5,000 - - - - Weighted average strike rate 6.12% - 6.12% - - - - Contractual maturity (swap) - - - - - $1,000 $ 4,000 Weighted average strike rate - - - - - 6.05% 6.14% Embedded pay-fixed swaps $ (71) $ - Contractual maturity $ 2,750 - - - - - 2,750 Weighted average pay rate 4.89% - - - - - 4.89% Weighted average receive rate 1.93% - - - - - 1.93% Embedded caps $ 1 $ 1 Contractual maturity $ 669 - $ 169 $ 500 - - - Weighted average strike rate 7.62% - 7.25% 7.75% - - - Embedded payor swaptions(1) $ 57 $ 57 Contractual maturity (option) $ 6,400 - $ 5,900 $ 500 - - - Weighted average strike rate 6.14% - 6.13% 6.21% - - - Contractual maturity (swap) - - - - - $3,750 $ 2,650 Weighted average strike rate - - - - - 5.99% 6.34% - ----------------------------------------------------------------------------------------------------------------------------------- Total asset/liability management $ (7) $ 433 $50,463 =================================================================================================================================== MSR Risk Management Receive-fixed swaps $ 533 $ 533 Contractual maturity $11,575 - - - - - $11,575 Weighted average pay rate 1.95% - - - - - 1.95% Weighted average receive rate 5.93% - - - - - 5.93% Floors $ 110 $ 110 Contractual maturity $ 3,750 - - - - - $ 3,750 Weighted average strike rate 6.15% - - - - - 6.15% Receiver swaptions $ 447 $ 447 Contractual maturity (option) $ 7,650 $2,000 $ 300 $ 300 $ 5,050 - - Weighted average strike rate 6.38% 5.83% 5.42% 5.99% 6.67% - - Contractual maturity (swap) - - - - - - $ 7,650 Weighted average strike rate - - - - - - 6.38% Embedded floors(2) $ 221 $ 221 Contractual maturity $ 8,600 - - - - - $ 8,600 Weighted average strike rate 6.02% - - - - - 6.02% - ----------------------------------------------------------------------------------------------------------------------------------- Total MSR risk management $ 1,311 $ 1,311 $31,575 =================================================================================================================================== Total interest rate contracts $ 1,304 $ 1,744 $82,038(3) =================================================================================================================================== (1) Embedded interest rate swaptions are exercisable upon maturity. (2) At June 30, 2002, none of these contracts were effective. $5.78 billion and $2.82 billion of these contracts will become effective in June 2003 and July 2003. Once effective, the floors reprice every three months. (3) Interest rate contracts decreased net interest income by $92 million and $129 million for the three months and six months ended June 30, 2002.
WM-17 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)
March 31, 2002 - ------------------------------------------------------------------------------------------------------------------------------------ Maturity Range - ------------------------------------------------------------------------------------------------------------------------------------ Counter- Total Net Fair Party Notional After Value Credit Risk Amount 2002 2003 2004 2005 2006 2006 - ------------------------------------------------------------------------------------------------------------------------------------ Interest Rate Contracts: Asset/Liability Management Pay-fixed swaps $ 126 $ 183 Contractual maturity $15,608 $ 813 $ 5,586 $ 3,534 $ 280 $4,448 $ 947 Weighted average pay rate 4.00% 4.65% 3.03% 4.46% 4.42% 4.39% 5.58% Weighted average receive rate 1.90% 1.89% 1.91% 1.89% 1.89% 1.89% 1.95% Receive-fixed swaps 190 239 Contractual maturity $ 4,628 $ 36 $ 620 $ 100 $ 560 $1,004 $2,308 Weighted average pay rate 1.93% 4.11% 1.59% 2.02% 1.83% 1.91% 2.02% Weighted average receive rate 6.29% 4.19% 5.17% 1.99% 5.48% 6.80% 6.78% Interest rate caps/collars/corridors - - Contractual maturity $ 935 $ 359 $ 271 $ 191 $ 64 $ 50 - Weighted average strike rate 7.38% 7.34% 7.62% 8.14% 5.94% 5.25% - Payor swaptions 104 104 Contractual maturity (option) $ 5,000 - $ 5,000 - - - - Weighted average strike rate 6.12% - 6.12% - - - - Contractual maturity (swap) - - - - - $1,000 $4,000 Weighted average strike rate - - - - - 6.05% 6.14% Embedded caps 1 1 Contractual maturity $ 683 - $ 183 $ 500 - - - Weighted average strike rate 7.62% - 7.25% 7.75% - - - Embedded payor swaptions(1) 136 136 Contractual maturity (option) $ 6,400 - $ 5,900 $ 500 - - - Weighted average strike rate 6.14% - 6.13% 6.21% - - - Contractual maturity (swap) - - - - - $3,750 $2,650 Weighted average strike rate - - - - - 5.99% 6.34% - ------------------------------------------------------------------------------------------------------------------------------------ Total asset/liability management $ 557 $ 663 $33,254 ==================================================================================================================================== MSR Risk Management Receive-fixed swaps $ (26) $ - Contractual maturity $ 6,300 - - - - - $6,300 Weighted average pay rate 2.01% - - - - - 2.01% Weighted average receive rate 6.02% - - - - - 6.02% Receiver swaptions 22 22 Contractual maturity (option) $ 1,500 $1,500 - - - - - Weighted average strike rate 5.88% 5.88% - - - - - Contractual maturity (swap) - - - - - - $1,500 Weighted average strike rate - - - - - - 5.88% Embedded floors (2) 121 121 Contractual maturity $ 5,150 - - - $ 650 - $4,500 Weighted average strike rate 6.33% - - - 5.13% - 6.50% - ------------------------------------------------------------------------------------------------------------------------------------ Total MSR risk management $ 117 $ 143 $12,950 ==================================================================================================================================== Total interest rate contracts $ 674 $ 806 $46,204(3) ==================================================================================================================================== (1) Embedded interest rate swaptions are exercisable upon maturity. (2) At March 31, 2002, $650 million of these contracts were effective. Contractual start dates for the remaining floors begin on March 18, 2003. Once effective, the floors reprice every three months. (3) Interest rate contracts decreased net interest income by $37 million for the quarter ended March 31, 2002.
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