-----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, LOqPJgkCevdPzb5mXUeye6iw/+8rWinB18UJjwVilcwvVDFILnaaMGfTlBqiLT90 ug9zbNfqnGDaA7MmD+Qn+w== 0000907303-99-000006.txt : 19990726 0000907303-99-000006.hdr.sgml : 19990726 ACCESSION NUMBER: 0000907303-99-000006 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990629 ITEM INFORMATION: FILED AS OF DATE: 19990723 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: SEC FILE NUMBER: 001-14667 FILM NUMBER: 99669323 BUSINESS ADDRESS: STREET 1: 1201 THIRD AVENUE STREET 2: SUITE 1500 CITY: SEATTLE STATE: WA ZIP: 98101 BUSINESS PHONE: 2063774834 MAIL ADDRESS: STREET 1: 1201 THIRD AVE STREET 2: SUITE 1500 CITY: SEATTLE STATE: WA ZIP: 98101 8-K 1 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): June 29, 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 Presentation made by management of the registrant at an investor conference on June 29, 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 EX-99 2 SLIDE PRESENTATION Financial Summary Bill Longbrake Vice Chair and Chief Financial Officer Slide 1 Consumer Banking Retail Checking Accounts(a) [Bar Graph] In Thousands
12/31/96 12/31/97 12/31/98 3/31/99 Southwest/Southeast(b)(c) 2,612 2,596 3,004 3,060 Northwest(d) 608 766 908 941 Total 3,220 3,362 3912 4,001 Households 5,441 5,361 5,153 5,198
(a) Includes interest and noninterest-bearing checking accounts with the exception of government, commercial and pay-by-phone accounts (b) Southwest/Southeast refers to the operations of Washington Mutual Bank, FA (California, Florida and Texas) (c) Inclusive of sale of Florida branches and purchase of Coast Savings by AHM (d) Northwest refers to the combined operations of Washington Mutual Bank and Washington Mutual Bank fsb (Washington, Oregon, Idaho, Montana and Utah) Slide 2 Consumer Banking Depositor and Other Retail Banking Fee Income(a) [Bar Graph] Dollars in Millions
1996 1997 1998 Q1 1998(b) Q1 1999 Southwest/Southeast $281.6 $366.7 $411.7 $85.4 $120.5 Northwest $68.5 $103.5 $147.5 $31.9 $40.4 Total $350.1 $470.2 $559.2 $117.3 $160.9
(a) Does not include fees generated through the Company's consumer finance or commercial banking businesses (b) Inclusive of Ahmanson Florida accounts and purchase of Coast Savings by AHM Slide 3 Consumer Banking Net Retail Checking Account Growth [Bar Graph]
Q1 1998 Q2 1998 Q3 1998 Q4 1998 Q1 1999 Southwest/Southeast 76,530(a)(b) 25,668(b) 15,374(b) 40,765 60,838 Northwest 33,056 34,020 41,050 33,560 32,765
(a) Does not include 322,783 accounts acquired through Coast Savings in Q1 1998 (b) Does not include Ahmanson Florida accounts sold in Q3 1998 Slide 4 Consumer Banking Fee Income per "Free Checking" Account [Bar Graph]
Q1 1997 Q2 1997 Q3 1997 Q4 1997 Q1 1998 Q2 1998 Q3 1998 Q4 1998 Q1 1999 Northwest $39.59 $43.06 $48.50 $49.49 $44.90 $48.32 $49.79 $50.66 $46.71 Southwest/Southeast* $28.48 $27.48 $30.66 $42.55 $46.53 $43.24
*Inclusive of acquired branches when converted (AHM/Texas converted as of 2/99) Slide 5 Consumer Banking Transaction Accounts as a Percentage of Total Deposits* [Bar Graph]
1990 1991 1992 1993 1994 1995 1996 1997 1998 Q1 1999 Northwest 30.0% 33.9% 39.7% 45.8% 44.9% 45.4% 51.9% 55.9% 61.0% 62.7% Southwest/ Southeast* 32.3% 41.5% 46.7% 48.3%
*End of period percentages; does not include the Company's consumer finance or business subsidiaries; includes acquired companies only on a go-forward basis Slide 6 Consumer Banking Consumer Lending* [Bar Graph] Dollars In Millions
1996 1997 1998 Q1 1998 Q1 1999 Southwest/Southeast $718.5 $1,489.8 $1,759.0 $419.0 $353.8 Northwest $1,191.9 $1,400.0 $1,245.6 $252.8 $258.7 Total $1,910.4 $2,889.8 $3,004.6 $671.8 $612.5
*Consumer loan originations, not including SFR loans or loans originated through the Company's consumer finance or business subsidiaries Slide 7 Consumer Banking Consumer Loan Production* [Bar Graph] Dollars in Millions
Q1 1998 Q2 1998 Q3 1998 Q4 1998 Q1 1999 Southwest/Southeast $419.0 $554.0 $462.6 $323.4 $353.8 Northwest $252.8 $348.3 $360.7 $283.9 $258.7 Total $671.8 $902.3 $823.3 $607.3 $612.5
*Consumer loan originations, not including SFR loans or loans originated through the Company's consumer finance or business subsidiaries Slide 8 Mortgage Banking SFR Mortgage Loan Originations [Bar Graph] Dollars in Billions
1996 1997 1998 Q1 1998 Q1 1999 ARMs $13.4 $16.9 $18.4 $3.3 $5.2 FIXED $6.7 $8.9 $23.5 $5.3 $4.5 Total $20.1 $25.8 $41.9 $8.6 $9.7
Slide 9 Mortgage Banking Loan Servicing - Servicing Expense per Loan [Bar Graph]
Q1 1997 Q2 1997 Q3 1997 Q4 1997 Q1 1998 Q2 1998 Q3 1998 Q4 1998 Q1 1999 Northwest $11.36 $10.96 $10.86 $11.74 $12.69 $13.90 $13.50 $12.26 $11.88 Southwest/Southeast* $18.75 $22.30 $19.52 $16.78 $14.72 $17.69 $14.76 $13.66 $18.19
*Ahmanson data included as of February 1999 Slide 10 Financial Performance Consumer, Consumer Finance and Commercial Loans to Total Loans* [Bar Graph]
1990 1991 1992 1993 1994 1995 1996 1997 1998 Q1 1999 Northwest 35.1% 37.0% 33.5% 35.6% 32.0% 34.3% 34.1% 33.8% 29.8% 29.4% Southwest/Southeast 13.4% 15.8% 24.5% 24.6%
*End of period percentages; includes the Company's consumer finance and business subsidiaries; includes acquired companies only on a go-forward basis Slide 11 Financial Performance Net Interest Income [Bar Graph] Dollars in Millions
1996 1997 1998 Q1 1998 Q1 1999 Northwest 3,865.1 3,915.5 4,291.7 1,060.3 1,127.2 Net Interest Margin 2.96% 2.91% 2.88% 2.91% 2.79%
Slide 12 Financial Performance Fee and Servicing Income* [Bar Graph] Dollars in Millions
1996 1997 1998 Q1 1998 Q1 1999 Depositor and retail banking fees $358.9 $478.7 $568.4 $119.5 $163.4 Loan servicing and loan related income $222.3 $231.0 $228.5 $57.4 $52.6 Securities and insurance fees and commissions $231.2 $244.4 $251.3 $59.6 $70.2 Total $812.4 $954.1 $1,048.2 $236.5 $286.2
*Includes income generated through the Company's consumer finance and business subsidiaries Slide 13 Financial Performance Other Expense [Bar Graph] Dollars in Millions
1996 1997 1998 Q1 1998 Q1 1999 Transaction Related $782.8 $431.1 $508.3 $31.8 $23.8 Expense and SAIF Assessment (1996) Other Noninterest Expense $2,826.8 $2,695.6 $2,776.1 $642.9 $706.1 Total $3,609.6 $3,126.7 $3,284.4 $674.7 $729.9
Slide 14 Financial Performance Operating Efficiency Ratio - Reported* [Bar Graph] 1996 1997 1998 Q1 1998 Q1 1999 Operating 75.03% 61.84% 54.68% 49.16% 47.62% *Excludes amortization of intangible assets Slide 15 Financial Performance Operating Efficiency Ratio - Adjusted* [Bar Graph] 1996 1997 1998 Q1 1998 Q1 1999 Operating 58.37% 52.00% 45.94% 46.76% 46.01% *Excludes SAIF assessment (1996) and transaction-related charges and amortization of intangible assets (all periods); includes sales of retail deposit branch systems (1996-1998) Slide 16 Financial Performance Nonperforming Assets [Bar and Line Graph] Dollars in Millions 12/31/96 12/31/97 12/31/98 3/31/99 NPAs $1,651.4 $1,374.9 $1,212.7 $1,183.1 NPAs/Assets 1.20% 0.96% 0.73% 0.68% Slide 17 Financial Performance Loan Loss Reserve and Recourse Liability* [Bar and Line Graph] Dollars in Millions
12/31/96 12/31/97 12/31/98 03/31/99 As a % of Nonaccrual Loans 93% 109% 129% 134% Loan Loss Reserve $1,066.3 $1,047.8 $1,067.8 $1,069.7 Recourse Liability $27.9 $80.2 $144.3 $128.0
*The Company records a recourse liability to cover potential losses on loans securitized and retained in its MBS portfolio or sold to third parties Slide 18 Interest Rate Risk Washington Mutual has effectively managed its interest rate risk to produce a relatively stable net interest spread over the past three years, despite unstable market interest rate Net interest margin 1996 2.78% 1997 2.74% 1998 2.70% Slide 19 Interest Rate Risk Asset Mix as of March 31, 1999 Loans and MBS Portfolio Short-term ARMs: COFI $73,673.9 47% MTA, CMT & Other 21,051.4 13 Medium-term ARMs: MTA 15,625.1 10 CMT, COFI & Other 6,522.8 4 Fixed-Rate Loans: Loans 16,787.5 11 MBS 22,346.2 14 -------- -- $156,006.9 100% ========== === Slide 20 Interest Rate Risk Funding Book Concept Matches comparable duration assets and liabilities into portfolio Isolates mismatches into smaller monetary increments where they can be more easily tracked and managed Slide 21 Interest Rate Risk Risk inherent in the portfolio that must be actively managed (hedged) ARM index lag effect Lifetime time rate caps Modest exposure from fixed-rate portfolio Mortgage servicing asset Slide 22 Financial Performance Total Capitalization [Bar Graph] Dollars in Millions Total Equity
12/31/96 12/31/97 12/31/98 3/31/99 Holding Company Debt $996 $1,117 $762 $768 Trust Preferred $249 $937 $938 $939 Nonconvertible Preferred $478 $313 0 0 Common $6,948 7,288 9,344 $9,610 Total $8,671 $9,655 $11,044 $11,317 Common Equity/Total Assets 5.06% 5.08% 5.65% 5.51%
Slide 23 Washington Mutual Investor Meeting June 29, 1999 Slide 24 Washington Mutual Investor Meeting June 29, 1999 Slide 1 [Washington Mutual Logo] 1999-2000 Strategic Direction Kerry Killinger Chairman, President & CEO Slide 2 [Washington Mutual Logo] 1995 - 2000 Plan Mission To be one of the nation's premier financial services organizations by: providing exceptional service to customers making our communities better places to live and work recognizing outstanding efforts of employees delivering a superior long-term return to shareholders Slide 3 1995 - 2000 Plan Profile $174 billion in assets Nation's largest savings institution Nation's 8th-largest banking company Slide 4 [Washington Mutual Logo] 1995 - 2000 Plan Business Segments Consumer Banking Financial Services Mortgage Banking Commercial Banking and Commercial Real Estate Consumer Finance Slide 5 [Washington Mutual Logo] 1995 - 2000 Plan Key Strategies Profitably expand businesses through internal growth and acquisitions Maintain a high quality balance sheet Improve operating efficiency Limit sensitivity to interest rate movement Slide 6 [Washington Mutual Logo] 1995 - 2000 Plan Successes to Date Built California franchise Developed national mortgage franchise Acquired national consumer finance franchise Acquired and expanded regional commercial bank franchise Delivered strong returns to shareholders Slide 7 [Washington Mutual Logo] 1995 - 2000 Plan Challenges to Date Remixing a thrift-like balance sheet Managing a much larger company Deferring reengineering/technology initiatives Slide 8 [Washington Mutual Logo] 1995 - 2000 Plan Financial Targets Target Result (3/31/99) ROCE Greater than 18.00% 19.35%(a) EPS Growth Greater than 15.00 16.18(a)(b) Operating Efficiency Less than 50.00 46.01(a)(c) NPA/Total Assets Less than 1.00 0.68 Common Equity/Assets Greater than 5.00 5.51 WM Return/S&P 500 Greater than 100.0 (a) Results based on first quarter earnings from operations which equal reported earnings less transaction-related expenses (b) Increase in earnings from operations from Q1 '98 to Q1'99 (c) Excludes amortization of intangible assets Slide 9 [Washington Mutual Logo] Results Operating EPS Growth* [Bar Graph]
1996 1997 1998 1999 --------------------------- ---------------------------- ------------------------- ----------------- Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 15% EPS Growth $.46 $.48 $.49 $.51(1) $.53 $.55 $.57(2) $.59 $.61 $.63 $.65 $.68(3) $.70 Target Operating EPS $.49 $.51 $.51 $.65 $.62 $.64 $.56 $.63 $.69 $.73 $.76 $.74 $.79
* Excludes transaction-related expenses; includes acquired companies only on a go-forward basis; and Q3 1996 earnings exclude SAIF assessment (1) American Savings Acquisition (2) Great Western Acquisition (3) Ahmanson Acquisition Slide 10 [Washington Mutual Logo] Results WM Shareholder Return 1990 - Q1 `99 [Line Graph] 3`90 9`90 12`90 6`91 9`91 3`92 6'92 12'92 3'93 9'93 VM $100 $66 $77 $160 $229 $211 $255 $331 $315 $406 S&P 500 $100 $92 $100 $114 $120 $128 $130 $141 $147 $152 index 3'94 6'94 12'94 3'95 9'95 12'95 6'96 12'96 3'97 9'97 VM $292 $316 $264 $316 $424 $465 $489 $717 $804 $1170 S&P 500 $150 $150 $158 $173 $204 $216 $238 $266 $273 $344 index 12'97 6'98 9'98 3'99 VM $1075 $1107 $865 $1060 S&P 500 $354 $417 $375 $478 index Assumes $100 invested 3/31/90 and compounded on a quarterly basis Source: Bloomberg Slide 11 [Washington Mutual Logo] Results WM Shareholder Return [Bar Graph] C WM CMB WFC FTU AXP - ---- ---- ---- ---- ---- ---- 35.9% 30.1% 29.2% 27.9% 26.7% 23.9% BAC FLT JPM ONE SPX GDW BT - ----- ---- ---- ---- ---- ---- ---- 19.3% 19.2% 19.0% 18.9% 18.9% 15.8% 15.7% Source: Bloomberg. Total annual return peer comparison 4/1/90-3/31/99 Slide 12 [Washington Mutual Logo] Results WM Shareholder Return 1995 - Q1 '99 [Line Graph] Mar-95 Jun-95 Sep-95 Dec-95 Mar-96 Jun-96 WM $100.00 $120.17 $142.07 $161.48 $177.31 $183.95 $186.20 S&P 500 $100.00 $109.74 $120.21 $129.77 $137.58 $144.96 $151.47 Index Sep-96 Dec-96 Mar-97 Jun-97 Sep-97 Dec-97 Mar-98 WM $233.62 $273.19 $306.13 $380.60 $446.03 $409.73 $462.58 S&P 500 $156.15 $169.17 $173.70 $204.03 $219.31 $225.60 $257.08 Index Jun-98 Sep-98 Dec-98 Mar-99 WM $422.06 $329.62 $376.99 $403.75 S&P 500 $265.56 $239.15 $290.08 $304.43 Index Assumes $100 invested 1/1/95 and compounded on a quarterly basis Source: Bloomberg Slide 13 [Washington Mutual Logo] Results WM Shareholder Return 1998 - Q1 '99 [Line Graph] 12 `97 3 `98 6 `98 9 `98 12 `98 3 `99 WM $100.00 $112.90 $103.00 $80.44 $92.00 $98.52 S&P 500 Index $100.00 $113.95 $117.71 $106.01 $128.58 $134.99 Assumes $100 invested 1/1/98 and compounded on a quarterly basis Source: Bloomberg Slide 14 [Washington Mutual Logo] Results 1998 Stock Performance General under-performance by financial stocks Acquisition dilution/execution uncertainty Thrift-like balance sheet Flat yield curve Purchase of mortgage-backed securities No stock repurchase option Slide 15 [Washington Mutual Logo] Opportunities P/E Peer Comparison* [Bar Graph] SPX AXP C JPM BT WFC - --------------------------------------------------------------------------- 26.12 21.84 17.74 17.43 16.81 15.79 CMB BAC ONE FTU FLT GDW WM - ------------------------------------------------------------------------------- 15.73 15.03 13.98 13.39 13.11 12.18 11.99 * Based on 3/31/99 closing prices and 1999 First Call earnings estimates. Source for SPX: Bloomberg Slide 16 [Washington Mutual Logo] Opportunities Initiatives Successfully complete Ahmanson integration Achieve financial targets Re-mix balance sheet Carry out share repurchase program Aggressively communicate with capital markets Slide 17 [Washington Mutual Logo] Opportunities Operating Environment Economy Interest rates Stock market Competition Federal legislation State/local politics Slide 18 [Washington Mutual Logo] Opportunities Capital Deployment Alternatives Loan growth Acquisitions Share repurchase Wholesale asset purchases Slide 19 [Washington Mutual Logo] Future Initiatives Internet Considerations: Advertising Distribution Communications Pricing Margins Business Model Slide 20 [Washington Mutual Logo] Future Initiatives Internet Expand Internet banking Develop Internet mortgage origination Explore new business models Create new management information/communications systems Explore acquisition/joint venture opportunities Slide 21 [Washington Mutual Logo] Future Initiatives Organizational Changes Adjust management structure to reflect expanded size, scope and complexity Balance of business unit and corporate functional responsibilities Matrix management Slide 22 [Washington Mutual Logo] WM Management Senior management team expanded three-fold over past 3 years 66 senior managers 18 in place 3 years ago 13 promoted from within 20 from acquisitions 15 recruited Executive development program Slide 23 [Washington Mutual Logo] Today's Washington Mutual Strong competitive position Geographic and business line diversity Track record of delivering superior shareholder returns Reasonable P/E multiple suggests room for long-term appreciation Slide 24 [Washington Mutual Logo] Washington Mutual Investor Meeting June 29, 1999 Slide 25 [Washington Mutual Logo] Developing E-business at Washington Mutual Liane Wilson Vice Chair, Corporate Technology Slide 26 [Washington Mutual Logo] Updates Ahmanson Conversion 5,100 workstations 1.1 million ATM/VISA debit cards 2.8 million deposit accounts 634,500 loan accounts Slide 27 [Washington Mutual Logo] Updates Year 2000 Mission-critical systems compliant: 12/31/98 End-to-end testing: 1/1/99-12/31/99 Contingency plan validation: 6/30/99-12/31/99 Manage millennium rollover via Command Center: 12/31/99-3/31/2000 Slide 28 [Washington Mutual Logo] A Brief History Four Generations of Technology 1990s Networked PCs 1980s PCs 1970s Inquiry Screens 1960s Mainframe Slide 29 [Washington Mutual Logo] Current Technology "The Net" [4 photo flow chart showing internet connection with Washington Mutual, home and work] Slide 30 [Washington Mutual Logo] Current Technology Net Benefits Readily accessible information "Open" 24 x 7 Consumer acceptance of instability Slide 31 [Washington Mutual Logo] E-business at WM Vision [photo background] E-business = Customer Self Service Slide 32 [Washington Mutual Logo] E-business at WM Internal Customers Collaborative processing Information access Self-servicing Slide 33 [Washington Mutual Logo] E-business at WM External Customers Self-serve account opening Pay bills, transaction inquiries New channels for service Slide 34 [Washington Mutual Logo] E-business at WM Corporate Benefits Increased efficiency Opportunities to attract new business Enhance competitive position Slide 35 [Washington Mutual Logo] Developing E-business How it Works [flow chart linking Internet with: - other Companies/Information Sources - PalmPilots/Cell Phones - PC/Operating System - Proprietary Network (Internet) [shown being connected with Washington Mutual Information] - Washington Mutual Information Slide 36 [Washington Mutual Logo] Developing E-business Required Re-engineering New process information flows New Call Center system Data interchange with business partners Slide 37 [Washington Mutual Logo] Developing E-business The People Side [photo of men shaking hands] Slide 38 [Washington Mutual Logo] Washington Mutual Investor Meeting June 29, 1999 Slide 39 [Washington Mutual Logo] Consumer Banking Kim Kahmer Senior Vice President & CFO Consumer Banking Group Slide 40 [Washington Mutual Logo] Strategic Rationale High-growth financial centers are the corporate flagship to Washington Mutual's consumer-oriented brand Efficient distribution of broad-based product line, particularly higher-margin loans and fee-generating products Competitive advantage: high-touch community banking with a national franchise Slide 41 [Washington Mutual Logo] Business Line Overview Consumer-Oriented Products Transaction accounts Liquid and time deposits Annuities Home equity Consumer loans Manufactured housing loans Mortgage loans Small business banking Referral point for other business lines Slide 42 [Washington Mutual Logo] Business Line Overview Distribution Network [maps of states listed below] State Branches(a) ATMs(a) Deposit Share(b) Rank(b) California 703(c) 973 19.0% 1 Washington 180 213 18.2 2 Florida 122 189 3.9 4 Oregon 79 147 12.7 2 Texas 48 64 1.7 12 Other States 44 50 n/a n/a Total 1,176(c) 1,636 (a) As of 3/31/99 (b) Interest-bearing deposits, exclusive of IRA/Keogh and government deposits, as of 6/30/98 (c) Includes 161 branches to be consolidated in California Slide 43 [Washington Mutual Logo] Business Line Overview Automated Teller Machines [photo of ATM machine] ATM Network* = 1,636 Machines *Does not include Q2 '99 consolidations Slide 44 [Washington Mutual Logo] Business Line Overview Call Centers [maps showing location of Bothell, WA and Chatsworth, CA] Estimated Calls in 1999 = 200 million Sales calls = 200,000 Slide 45 [Washington Mutual Logo] Business Line Overview Internet Banking [photo of a PC] Integrion partnership brings industry standards with customer ownership Rolled out to California, Texas and Florida - all markets by fall Upgrade in test for summer rollout Slide 46 [Washington Mutual Logo] Competitive Advantages Net Retail Checking Account Growth [Bar Graph] Q1 `98 Q2 `98 Q3 `98 Q4 `98 Q1 `99 Northwest 33,056 34,020 41,050 33,560 32,765 Southwest/Southeast 76,530(a)(b) 25,668(b) 15,374)b) 40,765 60,838 (a) Does not include 322,783 accounts acquired through Coast in Q1 '98 (b) Does not include Ahmanson Florida accounts sold in Q3 `98 Slide 47 [Washington Mutual Logo] Competitive Advantages Free Checking Profitable for company, generating an average of $176 per account in net fee income Drives in households Opened 93,603 net new checking accounts during Q1 `99 Added 45,024 net new households during Q1 `99 WM recognized as bank with free checking by more than two-thirds of Northwest customers Slide 48 [Washington Mutual Logo] Competitive Advantages Depositor and Other Retail Banking Fee Income(a) [Bar Graph] Dollars in millions 1996 1997 1998 Q1 `98 Q1 `99 Northwest $68.5 $103.5 $147.5 $31.9 $40.4 Southwest/Southeast $281.6 $366.7 $411.7(b) 85.4 120.5 Total $350.1 $470.2 $559.2 $117.3 $160.9 (a) Does not include fees generated through the Company's consumer finance or commercial banking businesses (b) Inclusive of Ahmanson Florida accounts and purchase of Coast Savings by AHM Slide 49 [Washington Mutual Logo] Competitive Advantages Distinct Market Position [Bar Graph] Customers who would refer their friends to their bank WM Wells Fargo B of A 87% 53% 53% Source: WM Research Nov. 1998. Figures reflect responses within longest-standing markets. Slide 50 [Washington Mutual Logo] Competitive Advantages Strong West Coast Franchise Over 5 million households served More than one-quarter of all West Coast banking households have a deposit product with Washington Mutual [photo of house] Source: PSI, Washington Mutual Research Slide 51 [Washington Mutual Logo] Competitive Advantages "Top of Mind" Brand [photos of Seattle, Portland and Salt Lake City with "#1" by each photo] Source: WM Research Nov. 1998 Slide 52 [Washington Mutual Logo] Competitive Advantages "Top of Mind" Brand [photos of San Francisco (#1), Los Angeles (#2), San Diego (#2), Miami (#1) with number beside each photo as indicated] Source: WM Research Nov. 1998 Slide 53 [Washington Mutual Logo] Competitive Advantages Franchise Mentality Compensation program Synchronizes corporate and individual objectives Motivates over-achievement Incentive component unlimited Localized marketing Flexibility to tailor sales efforts and staffing for individual markets [photo of meeting between three people] Slide 54 [Washington Mutual Logo] Competitive Advantages Same-store Comparison Product Q1 `98 Q1 `99 Increase - ------------------------------------------------------------------- Lending $336,669 $950,721 182% Checking Acct 3,935 4,370 11% Fee Income $113,755 $176,538 55% Operating Exp $84,055 $87,462 4% FTE 10.1 10.2 1% Note: Former ASB and GW average financial centers Slide 55 [Washington Mutual Logo] Opportunities Move customers up the profitability scale by cross-selling the full product line Utilize Internet banking and new branching strategy to take franchise national Slide 56 [Washington Mutual Logo] Opportunities Continue to implement changes to increase revenue and lower expense Re-engineer staff positions Streamline procedures Easy reference guides New Visual Banker platform Acquire customers/employees who feel disenfranchised with other banks Slide 57 [Washington Mutual Logo] Future Initiatives Customer segmentation -- enhance revenues by realigning products and targeting them to specific households Better understand our customer base Enhance our direct mail and marketing efforts Further build brand identity among customers Slide 58 [Washington Mutual Logo] Future Initiatives Enhance revenues by further developing Internet banking product 80% of new Internet banking customers would recommend WM's product to their friends Next generation web site includes product applications that will increase sales Slide 59 [Washington Mutual Logo] Future Initiatives Continue promotion of Washington Mutual's brand Build on reputation of being trustworthy, friendly, caring and community minded July launch of new advertising campaign Slide 60 [Washington Mutual Logo] Future Initiatives Introduce a new de novo strategy Enter market through simultaneous openings of de novo financial centers Bring WM brand alive with retail store concept Test operations that increase customer service and lower costs [photo of WM de novo financial center] Slide 61 [Washington Mutual Logo] Washington Mutual Investor Meeting June 29, 1999 Slide 62 [Washington Mutual Logo] Mortgage Banking Craig Davis President Mortgage Banking and Financial Services Groups Slide 63 [Washington Mutual Logo] Strategy Five-year strategy focuses on building nationwide lending capacity and is designed to generate growth and income through: Leveraging portfolio lending strength Building critical credit risk management Investing in direct channels-Internet & call center Investing in technology Slide 64 [Washington Mutual Logo] Distribution Network [map of the U.S.] 29 states and District of Columbia Retail 190 home loan centers 1,200 loan consultants 1,000 consumer bank financial centers (7 states) Wholesale 23 wholesale offices 120 account managers Slide 65 [Washington Mutual Logo] Mortgage Banking Distribution* [pie chart] Wholesale Retail FCs HLCs 42% 58% 13% 45% * 3/31/99 Slide 66 [Washington Mutual Logo] Mortgage Banking Geographic Mix [pie chart] WA NY FL IL UT MA CO AZ CT OR TX Other CA - -- -- -- -- -- -- -- -- -- -- -- ----- -- 15% 2% 4% 4% 2% 2% 2% 2% 1% 6% 1% 7% 52% Slide 67 [Washington Mutual Logo] Mortgage Banking Loan Originations [Bar Graph] Dollars in billions 1995 1996 1997 1998 Q1 `98 Q1 `99 $20.1 $21.4 $27.2 $43.6 $8.2 $10.1 Slide 68 [Washington Mutual Logo] Origination and Market Share Top 5 Nationwide Originators, 1998 Dollars in billions Volume Share 1. Wells (Norwest) $109 7.7% 2. Countrywide 87 6.1 3. Chase Manhattan 85 6.0 4. Bank of America 79 5.5 5. Washington Mutual 43 3.0 Slide 69 [Washington Mutual Logo] National Mortgage Portfolio Lending Strategy Be the national portfolio lender of choice by leveraging multiple channels, superior credit risk management, technology and strong portfolio management to achieve superior and consistent profitability Slide 70 [Washington Mutual Logo] National Mortgage Portfolio Retail Lending Strategy Build long-term profitable relationships with Realtors Promote local underwriting and appraisal to support "Portfolio Power" Increase number of HLCs in major US markets with propensity for ARMs Increase niche and construction lending volume in appropriate markets Slide 71 [Washington Mutual Logo] National Mortgage Portfolio Wholesale Lending Strategy The Wholesale Lending Division serves the mortgage broker community Currently mortgage brokers are responsible for approximately 60% of nationwide mortgage originations Slide 72 [Washington Mutual Logo] National Mortgage Portfolio Wholesale Lending Strategy The Premiere Broker program builds franchise value Exclusive relationships High quality originations Target portfolio ARM originations and purchase transactions Slide 73 [Washington Mutual Logo] National Mortgage Portfolio Financial Center Strategy First mortgage loans originated through financial centers Low cost resource to originate loans from existing customer base Important distribution during "refi mania" Allows 100% commissioned sales personnel to concentrate on purchase business Expanded to California and Florida in Q3 `98 Slide 74 [Washington Mutual Logo] The Environment Changing Rules of the Game Major changes in Customer priorities Technology Secondary/ongoing changes relating to Regulatory/government Economic environment Competitors Slide 75 [Washington Mutual Logo] Changing Customer Preferences WM Mortgage Survey [Bar Graph] In the next few years many people will get their mortgage loan via . . .
ATM Phone with Video Kiosk Mail In-store Branch Rep.@ Your Phone with Internet Bank or Mort. Auto. System Home live Rep Co Office WM mortgage 6% 12% 14% 15% 21% 28% 28% 47% 56% customers Non-WM Mortgage 4% 16% 16% 20% 12% 33% 27% 50% 44% Customer
Source: Mercer Consulting Group Slide 76 [Washington Mutual Logo] Importance of Internet Online Mortgage Originations [Bar Graph] Customer preferences & technologies are changing... 1997 1998 2003/5 ---- ---- ------ $ 5B Other $ 4B E-Loan $70M Quicken $30M IMX Total $276M $10B $25B + ? Source: Mercer Consulting Group Slide 77 [Washington Mutual Logo] Retail/Wholesale Opportunities Current distribution channels have significant opportunity for expansion 1998 Volume WM Volume WM Mkt Share WM Rank WM ARM Share California $275 $20.9 7.7% 2 18.5% Illinois 65 1.2 1.9 7 4.9 Florida 60 1.4 2.3 7 5.9 Michigan 60 0.1 .3 49 .5 New York 55 0.7 1.4 11 1.9 Dollars in billions Slide 78 [Washington Mutual Logo] Retail/Wholesale Opportunities Current distribution channels have significant opportunity for expansion 1998 Volume WM Volume WM Mkt Share WM Rank WM ARM Share Texas $55 $0.8 1.5% 8 3.9% Ohio 55 0.0 .0 N/A .0 Massachusetts 45 0.6 1.4 11 1.5 New Jersey 40 0.2 .6 24 2.9 Washington 33 5.0 14.9 1 24.2 Dollars in billions Slide 79 [Washington Mutual Logo] Technology Technology and systems development is needed to support a significant number of stakeholders Customers Business partners Strategic partners Internal Slide 80 [Washington Mutual Logo] Conclusion/Next Steps Mortgage Banking has the opportunity to be a strong engine of value growth over the next five years Strategy leverages position as largest non-GSE portfolio lender Growth in SFR portfolio increases volume of high-value mortgage products to replace lower yielding purchased assets Slide 81 [Washington Mutual Logo] Conclusion/Next Steps (cont.) Requires investment in direct channels and technology Requires expansion of HLC & Wholesale channels Detailed planning and implementation for national portfolio lending strategy has begun Slide 82 [Washington Mutual Logo] Financial Services Craig Davis President Mortgage Banking and Financial Services Group Slide 83 [Washington Mutual Logo] Financial Services WM Financial Services WM Group of Funds Washington Mutual Insurance Services Slide 84 [Washington Mutual Logo] Strategy WM Financial Services Bank Broker/Dealer Follow Consumer Bank/leverage relationships 500 financial consultants in over 1,000 financial centers Focus on packaged products (funds/annuities) Higher profit margins Lower risk/account maintenance Slide 85 [Washington Mutual Logo] Strategy WM Financial Services Personal service including technology at point-of-sale Primary channel for sale of WM Group of Funds Slide 86 [Washington Mutual Logo] WM Financial Services Commission Income 1996 1997 1998 Q1 `99 Total Commissions $104m $118.12m $120.38m $37.70m Avg. Per Financial Consultant per Month $19,100 $21,000 $23,000 $26,300 Slide 87 [Washington Mutual Logo] Consumer Bank Annuity Program [Bar and line graph] Volume in millions Commissions in millions Q1 `98 Q2 `98 Q3 `98 Q4 `98 Q1 `99 Commissions .202 .321 .224 .496 2.215 Volume 4.340 7.340 5.117 11.652 47.802 Q1 `98 Q2 `98 Q3 `98 Q4 `98 Q1 `99 Licensed Bank Employees 76 76 180 272 530 Slide 88 [Washington Mutual Logo] WM Financial Services Product Mix* [pie chart] Life Insurance - 2% Fixed Annuities - 9% Securities - 7% Mutual Funds - 38% Variable Annuities 44% *As of 3/31/99 Slide 89 [Washington Mutual Logo] WM Group of Funds Improved Fund Sales Funds repackaged/new collateral system Built wholesaling organization Financial Center product merchandising & FC promotions Launched new variable annuity Slide 90 [Washington Mutual Logo] WM Group of Funds Percentage of Sales [Line graph]
Q4 '97 Q1 `98 Q2 `98 Q3 `98 Q4 `98 Q1 `99 Mutual Funds 32% 40% 44% 41% 42% 40% Variable Annuities 3% 3% 5% 5% 22% 22%
Slide 91 [Washington Mutual Logo] Washington Mutual Insurance Services Strategy Low cost/efficient provider of quality insurance products Homeowners Life and disability Auto Commercial Leverage mortgage banking and consumer banking relationships Increases customer retention by increasing product sales per household Slide 92 [Washington Mutual Logo] Pre-Tax Net Income* Dollars in millions
1996 1997 1998 Q1 '98 Q1 '99 WMIS 7,331 8,614 10,469 1.90 3.59 WM Group 5,337 4,634 8,986 1.28 1.50 WMFS 15,606 22,133 46,556 7.98 17.94 Total $28.27 $35.38 $66.01 $11.16 $23.03
* Includes Murphey Favre, ASBFS, GWFSC, Griffin Slide 93 [Washington Mutual Logo] Opportunities WM Financial Services Increase customer penetration 5% of WM deposit customers use WMFS 50% of WM deposit customers currently have investments Only 37% of WM deposit customers are aware that WM has an investment firm in the branches Leverage platform sales (CBAP) Develop online trading capabilities Slide 94 [Washington Mutual Logo] Opportunities Washington Mutual Insurance Services Mortgage Banking Internet (automated quotation for homeowners and mortgage life) Consumer Banking Credit Life Insurance - Integrate with consumer lending products/sales Slide 95 [Washington Mutual Logo] Financial Services Summary Growth strategy will focus on building profitable alliances with Consumer and Mortgage Banking to: Increase referrals and cross-sell complementary products Train sales force, when appropriate, for direct product sales, like the successful CBAP initiative Slide 96 [Washington Mutual Logo] Financial Services Summary Increased penetration of WM's current customer base is the key to growth Technology - sales platform and Internet - is critical to growth and product line. Can effectively leverage WM's Internet banking strategy Slide 97 [Washington Mutual Logo] Financial Services Summary Financial Services is an important element of WM's long-term strategy Product line diversifies revenue base by increasing fee income Cross-selling multiple products maximizes customer retention By successfully leveraging acquisitions, Financial Services' subsidiaries are more efficient and profitable and ready for growth Slide 98 [Washington Mutual Logo] Washington Mutual Investor Meeting June 29, 1999 Slide 99 [Washington Mutual Logo] Corporate Services Steve Freimuth Sr. Executive Vice President, Corporate Services Slide 100 [Washington Mutual Logo] Corporate Services Corporate Re-engineering Formation of cross-divisional team of senior managers Organize and prioritize work processes Identify opportunities to improve efficiency, customer service, cycle times Specific focus on processes having significant effect on revenues, expenses and customer service levels Slide 101 [Washington Mutual Logo] Corporate Services Corporate Credit Overview Economic climate is very positive Real estate values increasing in all markets Delinquencies continue to trend down REO sales are brisk Loss severity decreasing significantly Slide 102 [Washington Mutual Logo] Total Nonperforming Loans As a Percent of Total Loans [Bar Graph] 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 3/31/99 1.36% 1.33% 1.02% .87% .70% .65% Slide 103 [Washington Mutual Logo] Single Family Loans Nonperforming Loans As a Percent of Total Loans [Bar Graph] 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 3/31/99 1.37% 1.46% 1.11% .91% .71% .67% Slide 104 [Washington Mutual Logo] Apartment and Other CRE Nonperforming Loans As a Percent of Loan Type [Bar Graph] 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 3/31/99 1.59% .90% .54% .55% .42% .32% Slide 105 [Washington Mutual Logo] 2nd Mortgage & other Consumer Loans Nonperforming Loans As a Percent of Loan Type [Bar Graph] 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 3/31/99 .32% .32% .58% .62% .71% .85% Slide 106 [Washington Mutual Logo] Consumer Finance Loans Nonperforming Loans As a Percent of Loan Type [Bar Graph] 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 3/31/99 1.07% 1.21% 2.09% 1.97% 2.07% 2.01% Slide 107 [Washington Mutual Logo] Commercial Business Nonperforming Loans As a Percent of Loan Type [Bar Graph] 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 3/31/99 .39% .46% .32% .32% .66% .61% Slide 108 [Washington Mutual Logo] REO Trends Commercial [Line Graph] Dollars in millions 5'98 6'98 7'98 8'98 9'98 10'98 11'98 12'98 1'99 2'99 3'99 $72 $73 $63 $57 $53 $48 $49 $46 $44 $41 $52 Slide 109 [Washington Mutual Logo] REO Trends Residential [Line Graph] Dollars in millions 5'98 6'98 7'98 8'98 9'98 10'98 11'98 12'98 1'99 2'99 3'99 $274 $255 $243 $242 $236 $239 $237 $217 $223 $227 $223 Slide 110 [Washington Mutual Logo] Loss Severity Residential (Q1 `98 - Q1 `99) [Line Graph] Q1 `98 Q2 `98 Q3 `98 Q4 `98 Q1 `99 15.60% 12.90% 12.50% 11.00% 10.50% * Does not include the company's consumer finance subsidiaries; negative number indicates basis gain on sale(s) Slide 111 [Washington Mutual Logo] Loss Severity Commercial (Q1 `98 - Q1 `99) Q1 `98 Q2 `98 Q3 `98 Q4 `98 Q1 `99 21.30% 28.10% 10.30% 16.00% 12.00% * Does not include the company's consumer finance subsidiaries; negative number indicates basis gain on sale(s) Slide 112 [Washington Mutual Logo] Washington Mutual Investor Meeting June 29, 1999 Slide 113 [Washington Mutual Logo] Aristar [logo] A Washington Mutual Company Slide 114 [Washington Mutual Logo] Company Profile Headquartered in Tampa, Florida Founded in 1927 Portfolio lender - no securitization $2.8 billion in assets 498 offices in 24 states 2,600 employees as of 3/31/99 Slide 115 [Aristar Logo] [Washington Mutual Logo] Product Profile and Mix Personal unsecured (45%) Average balance, $2,078 Real estate (45%) 60% firsts and 40% seconds Average loan-to-value approximately 70% Average balance, $26,648 Sales finance (10%) 8,767 dealerships in 25 states Average balance, $797 Slide 116 [Aristar Logo] [Washington Mutual Logo] Receivables 12/31/98 [Map of United States highlighting states listed below] Texas 13.4% Tennessee 10.6 Colorado 9.2 North Carolina 9.0 California 6.0 South Carolina 5.7 Virginia 5.1 Louisiana 4.9 Mississippi 4.3 Florida 4.2 Other States 27.6 Slide 117 [Aristar Logo] [Washington Mutual Logo] Customer Demographic Profile Forty-four year old blue collar or lower-white collar worker Individual income of $30,000 and family income of $70,000 Over 65% home owners Low net worth Slide 118 [Aristar Logo] [Washington Mutual Logo] Customer Psycho-graphic Cash flow borrowers Intimidated by business with a bank Payment borrowers Want to be treated with dignity and respect Slide 119 [Aristar Logo] [Washington Mutual Logo] Customer-Mission To become a premier financial services company that provides a superior return to its shareholders by: Focusing on our high margin core products Become the low cost producer Superior execution Slide 120 [Aristar Logo] [Washington Mutual Logo] Financial targets ROA 3.0% ROE greater than 18.0 EPS Growth 15.0 Efficiency Ratio less than 40.0 Net Charge-off 2.8 Slide 121 [Aristar Logo] [Washington Mutual Logo] A Strong Fit With Washington Mutual's Growth Strategy Both companies' focus is on high-service consumer lending WM has traditionally been an "A" lender but is now generating potential sub-prime customers through its "free checking" marketing programs Slide 122 [Aristar Logo] [Washington Mutual Logo] A Strong Fit With Washington Mutual's Growth Strategy WM has excess capital it would like to deploy in its core businesses like consumer lending - recently announced a share repurchase program WM has historically been an acquirer and consolidator of financial services companies and that continues to be part of its strategic focus Slide 123 [Aristar Logo] [Washington Mutual Logo] Competitive Advantage "The Franchise" - customer relationship Number one position in small to mid-size markets Speed of service Flexibility of packaging Slide 124 [Aristar Logo] [Washington Mutual Logo] Strategy Nurture the Franchise Leveraging existing customer base by focusing on core products up-selling and cross-selling Promote a sales culture to improve the historically slow receivables growth rate Eliminate unprofitable ancillary products Slide 125 [Aristar Logo] [Washington Mutual Logo] Strategy Nurture the Franchise Enhance credit risk capabilities Become the low-cost producer Manage business mix Develop segmentation and target marketing capabilities Slide 126 [Aristar Logo] [Washington Mutual Logo] Strategy Expand the Franchise Expand national "Franchise" Reinforce our dominant position in small to mid-size markets Rationalize and expand branch network to new markets Diversify distribution beyond retail branch network Pursue acquisitions Slide 127 [Aristar Logo] [Washington Mutual Logo] Improving Credit Quality While Achieving Strong Loan Growth Record level organic growth over the past 10 months Credit quality not sacrificed Delinquency percentage at three-year low Credit standards tightened for newly originated business Strong improvements in underlying credit quality trends "At risk" portfolio managed aggressively Only major consumer finance company to exclusively use contractual terms as measure for delinquencies and charge offs Slide 128 [Aristar Logo] [Washington Mutual Logo] Washington Mutual Investor Meeting June 29, 1999 Slide 129 [Aristar Logo] [Washington Mutual Logo] -----END PRIVACY-ENHANCED MESSAGE-----