-----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, UFZmVWwV/4m3T+Yr4I8inFtyboNt2RsadgZA057xKNHLWoqzrkBBA5A0R5yH5gCb rBNvUtWEQ8V7TLKBVN/NDA== 0000907303-99-000020.txt : 19990827 0000907303-99-000020.hdr.sgml : 19990827 ACCESSION NUMBER: 0000907303-99-000020 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990825 ITEM INFORMATION: FILED AS OF DATE: 19990826 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: 99699930 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): August 25, 1999 WASHINGTON MUTUAL, INC. (Exact name of registrant as specified in its charter) WASHINGTON 1-14667 91-1653725 (State or other jurisdiction (Commission File No.) (IRS Employer of incorporation) Identification No.) 1201 Third Avenue, Seattle, Washington 98101 (Address of principal executive office) (206) 461-2000 (Registrant's telephone number including area code) Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (c) Exhibits 99.1 Printed materials from presentation made by management to investors and analysts. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. WASHINGTON MUTUAL, INC. By: /s/ Kerry K. Killinger Kerry K. Killinger Chairman, President and Chief Executive Officer EX-99 2 SLIDE PRESENTATION Financial Summary Bill Longbrake Vice Chair and Chief Financial Officer Consumer Banking Retail Checking Accounts(a) [Bar Graph] In Thousands
Q2 1998 Q3 1998 Q4 1998 Q1 1999 Q2 1999 Southwest/Southeast(b)(c) 2,943 2,958 2,999 3,060 3,113 Northwest(d) 833 874 908 941 966 Total 3,776 3,832 3,907 4,001 4,079 Households 3,714(e) 5,129 5,153 5,198 5,209(f)
(a) Includes interest and noninterest-bearing checking accounts with the exception of commercial checking accounts (b) Southwest/Southeast refers to the operations of Washington Mutual Bank, FA (California, Florida and Texas) (c) Inclusive of sale of Florida branches and purchase of Coast Savings by AHM (d) Northwest refers to the combined operations of Washington Mutual Bank and Washington Mutual Bank fsb (Washington, Oregon, Idaho, Montana and Utah) (e) Does not include Home Savings households (f) Households as of 5/31/99 Slide 1 Consumer Banking Depositor and Other Retail Banking Fee Income(a) [Bar Graph] Dollars in Millions
1996 1997 1998 YTD 6/98(b) YTD 6/99 Southwest/Southeast $281.6 $366.7 $411.7(b) $182.8 $253.7 Northwest $68.5 $103.5 $147.5 $67.3 $86.6 Total $350.1 $470.2 $559.2 $250.1 $340.3
(a) Includes fees generated through the Company's Consumer Banking segment only (b) Inclusive of Ahmanson Florida accounts and purchase of Coast Savings by AHM Slide 2 Consumer Banking Net Retail Checking Account Growth [Bar Graph]
Q1 1998 Q2 1998 Q3 1998 Q4 1998 Q1 1999 Q2 1999 Southwest/Southeast 76,231(a) 25,376 15,149(b) 40,678 60,897 53,329 Northwest 33,056 34,020 41,050 33,560 32,765 25,293
(a) Does not include 322,783 accounts acquired through Coast Savings in Q1 1998 (b) Does not include Ahmanson Florida accounts sold in Q3 1998 Slide 3 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 Q2 1999 Northwest $39.59 $43.06 $48.50 $49.49 $44.90 $48.32 $49.79 $50.66 $46.71 $50.32 Southwest/Southeast* $28.48 $27.48 $30.66 $42.55 $46.53 $43.24 $42.86
*Inclusive of acquired branches when converted Slide 4 Consumer Banking Transaction Accounts as a Percentage of Total Deposits* [Bar Graph]
1990 1991 1992 1993 1994 1995 1996 1997 1998 Q1 1999 Q2 1999 Northwest 30.0% 33.9% 39.7% 45.8% 44.9% 45.4% 51.9% 55.9% 61.0% 62.7% 63.0% Southwest/ Southeast* 32.3% 41.5% 46.7% 48.3% 52.6%
*End of period percentages; does not include the Company's Consumer Banking segment; includes acquired companies only on a go-forward basis Slide 5 Consumer Banking Consumer Lending* [Bar Graph] Dollars In Millions
1996 1997 1998 YTD 6/30/98 YTD 6/30/99 Southwest/Southeast $718.5 $1,489.8 $1,759.0 $973.0 $710.8 Northwest $1,191.9 $1,400.0 $1,245.6 $601.1 $591.1 Total $1,910.4 $2,889.8 $3,004.6 $1,574.1 $1,301.9
*Consumer loan originations, not including SFR loans or loans originated through the Company's consumer finance or commercial banking segments Slide 6 Consumer Banking Consumer Lending* [Bar Graph] Dollars in Millions
Q1 1998 Q2 1998 Q3 1998 Q4 1998 Q1 1999 Q2 1999 Southwest/Southeast $419.0 $554.0 $462.6 $323.4 $353.8 $357.0 Northwest $252.8 $348.3 $360.7 $283.9 $258.7 $332.4 Total $671.8 $902.3 $823.3 $607.3 $612.5 $689.4
*Consumer loan originations, not including SFR loans or loans originated through the Company's consumer finance or commercial banking segments Slide 7 Mortgage Banking SFR Mortgage Loan Originations [Bar Graph] Dollars in Billions
1996 1997 1998 YTD 6/30/98 YTD 6/30/99 ARMs $13.4 $16.9 $18.4 $8.4 $12.4 FIXED $6.7 $8.9 $23.5 $10.9 $8.3 Total $20.1 $25.8 $41.9 $19.3 $20.7
Slide 8 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 Q2 1999 Northwest $11.36 $10.96 $10.86 $11.74 $12.69 $13.90 $13.50 $12.26 $11.88 $13.46 Southwest/Southeast* $18.75 $22.30 $19.52 $16.78 $14.72 $17.69 $14.76 $13.66 $15.11 $13.77
*Ahmanson data included as of February 1999 Slide 9 Financial Performance Consumer, Consumer Finance and Commercial Loans to Total Loans* [Bar Graph]
1990 1991 1992 1993 1994 1995 1996 1997 1998 6/30/99 Northwest 35.1% 37.0% 33.5% 35.6% 32.0% 34.3% 34.1% 33.8% 29.8% 35.7% Southwest/Southeast 13.4% 15.8% 24.5% 23.3%
*End of period percentages for WMI consolidated; includes acquired companies only on a go-forward basis Slide 10 Financial Performance Net Interest Income and Margin [Bar Graph] Dollars in Millions
1996 1997 1998 YTD 6/30/98 YTD 6/30/99 $3,865.1 $3,915.5 $4,291.7 $2,150.0 $2,275.9 Net Interest Margin 2.96% 2.91% 2.88% 2.90% 2.76%
Slide 11 Financial Performance Fee and Servicing Income* [Bar Graph] Dollars in Millions
1996 1997 1998 YTD 6/30/98 YTD 6/30/99 Depositor and retail banking fees $358.9 $478.7 $568.4 $254.7 $345.6 Loan servicing and loan related income $222.3 $231.0 $228.5 $118.5 $103.3 Securities and insurance fees and commissions $231.2 $244.4 $251.3 $124.9 $149.8 Total $812.4 $954.1 $1,048.2 $498.1 $598.7
*WMI consolidated Slide 12 Financial Performance Other Expense [Bar Graph] Dollars in Millions
1996 1997 1998 YTD 6/03/98 YTD 6/30/99 Transaction Related $782.8 $431.1 $508.3 $56.3 $60.4 Expense and, 1996, SAIF Assessment Other Noninterest Expense $2,826.8 $2,695.6 $2,776.1 $1,346.2 $1,418.1 Total $3,609.6 $3,126.7 $3,284.4 $1,402.5 $1,478.5
Slide 13 Financial Performance Operating Efficiency Ratio - Reported* [Bar Graph] 1996 1997 1998 YTD 6/30/98 YTD 6/30/99 75.03% 61.84% 54.68% 49.30% 47.79% *Excludes amortization of intangible assets Slide 14 Financial Performance Operating Efficiency Ratio - Adjusted* [Bar Graph] 1996 1997 1998 YTD 6/30/98 YTD 6/30/99 Operating 58.37% 52.00% 45.94% 47.25% 45.77% *Excludes SAIF assessment in 1996 and transaction-related charges and amortization of intangible assets (all periods); includes gains on sales of retail deposit branch systems (1996-1998) Slide 15 Financial Performance Nonperforming Assets [Bar and Line Graph] Dollars in Millions 12/31/96 12/31/97 12/31/98 6/30/99 NPAs $1,651.4 $1,374.9 $1,212.7 $1,096.4 NPAs/Assets 1.20% 0.96% 0.73% 0.63% Slide 16 Financial Performance Loan Loss Reserve and Recourse Liability [Bar and Line Graph] Dollars in Millions
12/31/96 12/31/97 12/31/98 06/30/99 As a % of Nonaccrual Loans 93% 109% 129% 138% Loan Loss Reserve $1,066.3 $1,047.8 $1,067.8 $1,053.6
Slide 17 Interest Rate Risk Washington Mutual has effectively managed its interest rate risk to produce a relatively stable net interest spread over the past three years, despite unstable market interest rate Net interest spread: 1996 2.78% 1997 2.74% 1998 2.70% *As of 6/30/99 Slide 18 Interest Rate Risk Real Estate Loans and MBS* Loans and MBS Portfolio (Dollars in billions) Short-term ARMs: COFI $66.20 43% MTA, CMT & Other 20.85 13 Medium-term ARMs: MTA 20.50 13 CMT, COFI & Other 6.08 4 Fixed-Rate Loans: Loans 17.92 11 MBS 24.20 16 -------- -- $155.75 100% ========== === *As of 6/30/99 Slide 19 Interest Rate Risk Funding Book Concept Matches comparable duration assets and liabilities into portfolio Isolates mismatches into smaller monetary increments where they can be more easily tracked and managed Slide 20 Interest Rate Risk Risk inherent in the portfolio that must be actively managed (hedged) ARM index lag effect Lifetime time rate caps Modest exposure from fixed-rate portfolio Mortgage servicing asset Slide 21 Financial Performance Total Capitalization [Bar Graph] Dollars in Millions Total Equity
12/31/96 12/31/97 12/31/98 6/30/99 Holding Company Debt $1,663 $1,783 $1,385 $1,391 Trust Preferred $249 $937 $938 $940 Nonconvertible Preferred $478 $313 Common $6,948 7,288 9,344 $9,062 Total $9,338 $10,321 $11,667 $11,393 Common Equity/Total Assets 5.06% 5.08% 5.65% 5.18%
Slide 22 Washington Mutual Segment Presentations Washington Mutual Kerry Killinger Chairman, President & CEO Slide 1 [Washington Mutual Logo] WM Profile Mission To be one of the nation's premier financial services organizations Business Segments Consumer Banking Financial Services Mortgage Banking Commercial Banking and Commercial Real Estate (CRE) Consumer Finance Slide 2 WM Profile $175 billion in assets Nation's largest savings institution Nation's 8th-largest banking institution Slide 3 [Washington Mutual Logo] Key Strategies Profitably expand businesses through internal growth and acquisitions Maintain a high quality balance sheet Improve operating efficiency Limit sensitivity to interest rate movement Slide 4 [Washington Mutual Logo] Opportunities Economy Interest Rates Competition Federal legislation Slide 5 [Washington Mutual Logo] 1995-2000 Plan Financial Targets Target Results (6/30/99) ROCE(a) greater than 18.00% 19.71% EPS Growth greater than 15.00 15.11(b) Operating Efficiency (c) less than 50.00 45.77 NPA/Total Assets less than 1.00 0.63 Common Equity/Assets greater than 5.00 5.18 WM Return/S&P 500 greater than 100.00 (a) Based on annualized year-to-date earnings from operations which equal reported earnings less transaction-related expenses (b) Increase in earnings per share from operations from 1/1/99 through 6/30/99 over 1/1/98 through 6/30/98 (c) Excluding year-to-date amortization of intangible assets and transaction-related expenses Slide 6 [Washington Mutual Logo] 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 Operating EPS $.49 $.51 $.51 $.65(1) $.62 $.64 $.56(2) $.63 $.69 $.73 $.76 $.74(3) $.79 $.82
* Excludes transaction-related expenses; includes acquired companies only on a go-forward basis; and Q3 1996 earnings exclude SAIF assessment (1) American Savings Acquisition (2) Great Western Acquisition (3) Ahmanson Acquisition Slide 7 [Washington Mutual Logo] Results WM Shareholder Return 1990 - Q2 `99 [Line Graph] 6`90 12`90 6`91 12`91 6'92 12'92 6'93 12'93 6'94 12'94 WM 106 76.52 160.33 217.17 254.6 330.7 341.25 363.34 315.79 263.59 SPX 106.26 99.9 114.11 130.21 130.3 141.14 147.98 155.28 150.08 157.38 6'95 12'95 6'96 12'96 6'97 12'97 6'98 12'98 6'99 WM 373.55 465.49 488.58 716.66 998.08 1074.76 1106.9 989.53 $928.39 SPX 189.09 216.04 237.81 265.51 320.17 353.97 416.52 454.93 $511.16 Assumes $100 invested 3/31/90 and compounded on a quarterly basis Source: Bloomberg Slide 8 [Washington Mutual Logo] Results WM Shareholder Return [Bar Graph] C WFC CMB WM AXP FTU FLT - ----- ---- ---- ---- ---- ---- ---- 36.5% 29.9% 29.2% 27.3% 24.5% 24.3% 20.8% JPM ONE BAC SPX GDW - --- --- --- --- --- 20.3% 19.5% 19.3% 19.2% 15.7% Source: Bloomberg. Total annual return peer comparison 4/1/90-6/30/99 Slide 9 [Washington Mutual Logo] Results 1998 Stock Performance General under-performance by financial stocks Acquisition dilution/execution uncertainty Thrift-like balance sheet Flat yield curve Purchase of mortgage-backed securities No stock repurchase option Slide 10 [Washington Mutual Logo] Opportunities P/E Peer Comparison* [Bar Graph] SPX AXP WFC C CMB BAC FLT JPM ONE FTU GDW WM - --- --- --- --- --- --- --- --- --- --- --- --- 27.9 24.1 19.2 18.0 16.3 15.5 15.2 14.8 14.4 13.7 11.9 10.6 * Based on 6/30/99 closing prices and 1999 First Call earnings estimates Source for SPX: Bloomberg Slide 11 [Washington Mutual Logo] Future Initiatives Maximize franchise value Re-mix acquired balance sheet Execute share repurchase program Expand Internet banking and Internet mortgage origination Implement management reorganization Promote organic growth Slide 12 [Washington Mutual Logo] Future Initiatives Acquisition Criteria Accretive to earnings per share Consistent with business strategy No undue operational risks Capital and asset quality remain strong Slide 12-2 [Washington Mutual Logo] Pending Acquisition Long Beach Financial Corporation Speciality mortgage finance; 1998 net income of $30 million High quality balance sheet; specialization in subprime organization and servicing Strategic fit with WM; provides new wholesale channel which complements current retain channel Potential future asset generation Transaction details; aggregate value of $376 million at 5/31/99, purchase transaction; anticipate closing in early October Slide 13 [Washington Mutual Logo] Today's Washington Mutual Strong competitive position Geographic and business line diversity Track record of delivering superior shareholder returns Reasonable P/E multiple suggests room for long-term appreciation Slide 14 [Washington Mutual Logo] Developing E-business at Washington Mutual Liane Wilson Vice Chair, Corporate Technology Slide 15 [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 16 [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 17 [Washington Mutual Logo] A Brief History Four Generations of Technology 1990s Networked PCs 1980s PCs 1970s Inquiry Screens 1960s Mainframe Slide 18 [Washington Mutual Logo] Current Technology "The Net" [4 photo flow chart showing internet connection with Washington Mutual, home and work] Slide 19 [Washington Mutual Logo] Current Technology Net Benefits Readily accessible information "Open" 24 x 7 Consumer acceptance of instability Slide 20 [Washington Mutual Logo] E-business at WM Vision [photo background] E-business = Customer Self Service Slide 21 [Washington Mutual Logo] E-business at WM Internal Customers Collaborative processing Information access Self-servicing Slide 22 [Washington Mutual Logo] E-business at WM External Customers Self-serve account opening Pay bills, transaction inquiries New channels for service Slide 23 [Washington Mutual Logo] E-business at WM Corporate Benefits Increased efficiency Opportunities to attract new business Enhance competitive position Slide 24 [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 25 [Washington Mutual Logo] Developing E-Business Required Re-engineering New process information flows New Call Center system Data interchange with business partners Slide 25-2 [Washington Mutual Logo] Developing E-business The People Side [photo of men shaking hands] Slide 26 [Washington Mutual Logo] Consumer Banking Deanna Oppenheimer President Consumer Banking Group Slide 27 [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 28 [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 29 [Washington Mutual Logo] Business Line Overview Distribution Network [maps of states listed below] State Branches(a) ATMs(a) Deposit Share(b) Rank(b) California 545 815 13.8% 2 Washington 181 207 13.0 2 Florida 122 193 3.1 5 Oregon 78 95 9.3 2 Texas 48 64 1.0 12 Other States 43 46 n/a n/a Total 1,017 1,420 (a) As of 6/30/99 (b) Total deposits based on the annual June 1998 branch deposit reports, adjusted for branch ownership as of June 1999 Slide 30 [Washington Mutual Logo] Business Line Overview Automated Teller Machines [photo of ATM machine] ATM Network* = 1,420 Machines Slide 31 [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 = 260,000 Slide 32 [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 33 [Washington Mutual Logo] Competitive Advantages Net Retail Checking Account Growth [Bar Graph] Q1 `98 Q2 `98 Q3 `98 Q4 `98 Q1 `99 Q2 '99 Northwest 33,056 34,020 41,050 33,560 32,765 25,293 Southwest/Southeast 76,530(a) 25,376 15,149(b) 40,678 60,897 53,329 (a) Does not include 322,783 accounts acquired through Coast in Q1 '98 (b) Does not include Ahmanson Florida accounts sold in Q3 `98 Slide 34 [Washington Mutual Logo] Competitive Advantages Free Checking Profitable for company, generating an average of $183 per account per annum in net fee income Drives in households Opened 78,622 net new checking accounts during Q2 `99 WM recognized as bank with "Free Checking" by more than two-thirds of Northwest customers Slide 35 [Washington Mutual Logo] Competitive Advantages Depositor and Other Retail Banking Fee Income(a) [Bar Graph] 1996 1997 1998 Q2 `98 Q2 `99 Northwest $68.5 $103.5 $147.5 $67.3 $86.6 Southwest/Southeast $281.6 $366.7 $411.7(b) $182.8 $253.7 Total $350.1 $470.2 $559.2 $250.1 $340.3 (a) Includes fees generated through the Company's Consumer Banking segment only (b) Inclusive of Ahmanson Florida accounts and purchase of Coast Savings by AHM Slide 36 [Washington Mutual Logo] Competitive Advantages Distinct Market Position [Bar Graph] Customers who would refer their friends to their bank WM Wells Fargo B of A 87% 53% 53% Source: WM Research Nov. 1998. Figures reflect responses within longest-standing markets. Slide 37 [Washington Mutual Logo] Competitive Advantages Strong West Coast Franchise Over 5 million households served More than one-quarter of all West Coast banking households have a deposit product with Washington Mutual [photo of house] Source: PSI, Washington Mutual Research Slide 38 [Washington Mutual Logo] Competitive Advantages "Top of Mind" Brand [photos of Seattle, Portland and Salt Lake City with "#1" by each photo] Source: WM Research Nov. 1998 Slide 39 [Washington Mutual Logo] Competitive Advantages "Top of Mind" Brand [photos of San Francisco (#1), Los Angeles (#2), San Diego (#2), Miami (#1) with number beside each photo as indicated] Source: WM Research Nov. 1998 Slide 40 [Washington Mutual Logo] Competitive Advantages Franchise Mentality Compensation program Synchronizes corporate and individual objectives Motivates over-achievement Incentive component unlimited Localized marketing Flexibility to tailor sales efforts and staffing for individual markets [photo of meeting between three people] Slide 41 [Washington Mutual Logo] Competitive Advantages Same-store Comparison Product YTD 6/30/98 YTD 6/30/99 Increase - ------------------------------------------------------------------- Lending $571,579 $1,719,684 201% Checking Acct 3,891 4,408 13% Fee Income $297,685 $387,961 30% Operating Exp $169,213 $175,494 4% FTE 10.0 10.2 2% Note: Average of former ASB and GW financial centers Slide 42 [Washington Mutual Logo] Opportunities Move customers up the profitability scale by cross-selling the full product line Utilize Internet banking and new branching strategy to take franchise national Slide 43 [Washington Mutual Logo] Opportunities Continue to implement changes to increase revenue and lower expense Re-engineer staff positions Streamline procedures Easy reference guides New Visual Banker platform Acquire customers/employees who feel disenfranchised with other banks Slide 44 [Washington Mutual Logo] Future Initiatives Customer segmentation -- enhance revenues by realigning products and targeting them to specific households Better understand our customer base Enhance our direct mail and marketing efforts Further build brand identity among customers Slide 45 [Washington Mutual Logo] Future Initiatives Enhance revenues by further developing Internet banking product 80% of new Internet banking customers would recommend WM's product to their friends Next generation web site includes product applications that will increase sales Slide 46 [Washington Mutual Logo] Future Initiatives Continue promotion of Washington Mutual's brand Build on reputation of being trustworthy, friendly, caring and community minded July launch of new advertising campaign Slide 47 [Washington Mutual Logo] Future Initiatives Introduce a new de novo strategy Enter market through simultaneous openings of de novo financial centers Bring WM brand alive with retail store concept Test operations that increase customer service and lower costs [photo of WM de novo financial center] Slide 48 [Washington Mutual Logo] Mortgage Banking Craig Davis President Mortgage Banking and Financial Services Groups Slide 49 [Washington Mutual Logo] Mortgage Banking Strategy Five-year strategy focuses on building nationwide lending capacity and is designed to generate growth and income through: Leveraging portfolio lending strength Building critical credit risk management Investing in direct channels-Internet & call center Investing in technology Slide 50 [Washington Mutual Logo] Mortgage Banking Distribution Network [map of the U.S.] 29 states and District of Columbia Retail 190 home loan centers 1,200 loan consultants 1,000 consumer bank financial centers (7 states) Wholesale 23 wholesale offices 120 account managers Slide 51 [Washington Mutual Logo] Mortgage Banking(a) Distribution(b) [pie chart] Wholesale Retail FCs HLCs 44% 56% 12% 44% (a) SFR (b) 6/30/99 Slide 52 [Washington Mutual Logo] Mortgage Banking Geographic Mix [pie chart] WA NY FL IL UT MA CO AZ CT OR TX Other CA - -- -- -- -- -- -- -- -- -- -- -- ----- -- 15% 2% 4% 4% 2% 2% 2% 2% 1% 6% 1% 7% 52% Slide 53 [Washington Mutual Logo] Mortgage Banking SFR Loan Originations [Bar Graph] Dollars in billions 1995 1996 1997 1998 YTD 6/30/98 YTD 6/30/99 $20.1 $21.4 $27.2 $43.6 $20.1 $21.6 Slide 54 [Washington Mutual Logo] Mortgage Banking Origination and Market Share Top 5 Nationwide Originators 1998 Dollars in billions Volume Share 1. Wells (Norwest) $109 7.7% 2. Countrywide 87 6.1 3. Chase Manhattan 85 6.0 4. Bank of America 79 5.5 5. Washington Mutual 43 3.0 Slide 55 [Washington Mutual Logo] Mortgage Banking National Mortgage Portfolio Lending Strategy Be the national portfolio lender of choice by leveraging multiple channels, superior credit risk management, technology and strong portfolio management to achieve superior and consistent profitability Slide 56 [Washington Mutual Logo] Mortgage Banking National Mortgage Portfolio Retail Lending Strategy Build long-term profitable relationships with Realtors Promote local underwriting and appraisal to support "Portfolio Power" Increase number of HLCs in major US markets with propensity for ARMs Increase niche and construction lending volume in appropriate markets Slide 57 [Washington Mutual Logo] Mortgage Banking National Mortgage Portfolio Wholesale Lending Strategy The Wholesale Lending Division serves the mortgage broker community Currently mortgage brokers are responsible for approximately 60% of nationwide mortgage originations Slide 58 [Washington Mutual Logo] Mortgage Banking National Mortgage Portfolio Wholesale Lending Strategy The Premiere Broker program builds franchise value Exclusive relationships High quality originations Target portfolio ARM originations and purchase transactions Slide 59 [Washington Mutual Logo] Mortgage Banking National Mortgage Portfolio Financial Center Strategy First mortgage loans originated through financial centers Low cost resource to originate loans from existing customer base Important distribution during "refi mania" Allows 100% commissioned sales personnel to concentrate on purchase business Expanded to California and Florida in Q3 `98 Slide 60 [Washington Mutual Logo] Mortgage Banking The Environment Changing Rules of the Game Major changes in Customer priorities Technology Secondary/ongoing changes relating to Regulatory/government Economic environment Competitors Slide 61 [Washington Mutual Logo] Mortgage Banking Changing Customer Preferences [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 (February 1999) Slide 62 [Washington Mutual Logo] Mortgage Banking Importance of Internet Online Mortgage Originations [Bar Graph] Customer preferences & technologies are changing... 1997 1998 2003/5 ---- ---- ------ $ 5B Other $ 4B E-Loan $70M Quicken $30M IMX Total $276M $10B $250B + ? Source: Mercer Consulting Group Slide 63 [Washington Mutual Logo] Mortgage Banking Retail/Wholesale Opportunities Current distribution channels have significant opportunity for expansion Dollars in billions 1998 Volume WM Volume WM Mkt Share WM Rank WM ARM Share California $275 $20.9 7.7% 2 18.5% Illinois 65 1.2 1.9 7 4.9 Florida 60 1.4 2.3 7 5.9 Michigan 60 0.1 .3 49 .5 New York 55 0.7 1.4 11 1.9 Slide 64 [Washington Mutual Logo] Mortgage Banking Retail/Wholesale Opportunities Current distribution channels have significant opportunity for expansion Dollars in billions 1998 Volume WM Volume WM Mkt Share WM Rank WM ARM Share Texas $55 $0.8 1.5% 8 3.9% Ohio 55 0.0 .0 N/A .0 Massachusetts 45 0.6 1.4 11 1.5 New Jersey 40 0.2 .6 24 2.9 Washington 33 5.0 14.9 1 24.2 Slide 66 [Washington Mutual Logo] Mortgage Banking Technology Technology and systems development is needed to support a significant number of stakeholders Customers Business partners Strategic partners Internal Slide 66 [Washington Mutual Logo] Mortgage Banking Conclusion/Next Steps Mortgage Banking has the opportunity to be a strong engine of value growth over the next five years Strategy leverages position as largest non-GSE portfolio lender Growth in SFR portfolio increases volume of high-value mortgage products to replace lower yielding purchased assets Slide 67 [Washington Mutual Logo] Mortgage Banking Conclusion/Next Steps (cont.) Requires investment in direct channels and technology Requires expansion of HLC & wholesale channels Detailed planning and implementation for national portfolio lending strategy has begun Slide 68 [Washington Mutual Logo] Financial Services Craig Davis President Mortgage Banking and Financial Services Group Slide 69 [Washington Mutual Logo] Financial Services WM Financial Services WM Group of Funds Washington Mutual Insurance Services Slide 70 [Washington Mutual Logo] WM Financial Services Strategy Bank Broker/Dealer Follow Consumer Bank/leverage relationships 500 financial consultants in over 1,000 financial centers Focus on packaged products (funds/annuities) Higher profit margins Lower risk/account maintenance Slide 71 [Washington Mutual Logo] WM Financial Services Strategy Personal service including technology at point-of-sale Primary channel for sale of WM Group of Funds Slide 72 [Washington Mutual Logo] WM Financial Services Commission Income 1996 1997 1998 YTD 6/30/99 Total Commissions $104m $118.12m $120.38m $81.72m Avg. Per Financial Consultant per Month $19,100 $21,000 $23,000 $28,244 Slide 73 [Washington Mutual Logo] Financial Services Consumer Bank Annuity Program [Bar and line graph] Volume in millions Commissions in millions Q1 `98 Q2 `98 Q3 `98 Q4 `98 Q1 `99 Q2 '99 Commissions .202 .321 .224 .496 2.215 3.970 Volume 4.340 7.340 5.117 11.652 47.802 84.914 Q1 `98 Q2 `98 Q3 `98 Q4 `98 Q1 `99 Q2 '99 Licensed Bank Employees 76 76 180 272 530 699 Slide 74 [Washington Mutual Logo] WM Financial Services Product Mix* [pie chart] Life Insurance - 1% Fixed Annuities - 16% Securities - 7% Mutual Funds - 35% Variable Annuities 41% *As of 6/30/99 Slide 75 [Washington Mutual Logo] WM Group of Funds Improved Fund Sales Funds repackaged/new collateral system Built wholesaling organization Financial Center product merchandising & promotions Launched new variable annuity Slide 76 [Washington Mutual Logo] WM Group of Funds Percentage of Sales [Line graph]
Q4 '97 Q1 `98 Q2 `98 Q3 `98 Q4 `98 Q1 `99 Q2 '99 Mutual Funds 32% 40% 44% 41% 42% 40% 53% Variable Annuities 3% 3% 5% 5% 22% 22% 30%
Slide 77 [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 78 [Washington Mutual Logo] Financial Services Pre-Tax Net Income* Dollars in millions
1996 1997 1998 YTD 6/30/98 YTD 6/30/99 WMIS 7,331 8,614 10,469 4.73 6.76 WM Group 5,337 4,634 8,986 5.94 8.65 WMFS 15,606 22,133 46,556 20.8 38.8 Total $28.27 $35.38 $66.01 $31.47 $53.79
* Includes Murphey Favre, ASBFS, GWFSC, Griffin Slide 79 [Washington Mutual Logo] WM Financial Services Opportunities Increase customer penetration 5% of WM deposit customers use WMFS 50% of WM deposit customers currently have investments Only 37% of WM deposit customers are aware that WM has an investment firm in the branches Leverage platform sales (CBAP) Develop online trading capabilities Slide 80 [Washington Mutual Logo] Washington Mutual Insurance Services Opportunities Mortgage Banking Internet (automated quotation for homeowners and mortgage life) Consumer Banking Credit Life Insurance - Integrate with consumer lending products/sales Slide 81 [Washington Mutual Logo] Financial Services Summary Growth strategy will focus on building profitable alliances with Consumer and Mortgage Banking to: Increase referrals and cross-sell complementary products Train sales force, when appropriate, for direct product sales, like the successful CBAP initiative Slide 82 [Washington Mutual Logo] Financial Services Summary Increased penetration of WM's current customer base is the key to growth Technology - sales platform and Internet - is critical to growth and product line. Can effectively leverage WM's Internet banking strategy Slide 83 [Washington Mutual Logo] Financial Services Summary Financial Services is an important element of WM's long-term strategy Product line diversifies revenue base by increasing fee income Cross-selling multiple products maximizes customer retention By successfully leveraging acquisitions, Financial Services' subsidiaries are more efficient and profitable and ready for growth Slide 84 [Washington Mutual Logo] Corporate Services Steve Freimuth Sr. Executive Vice President, Corporate Services and Credit Quality Slide 85 [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 86 [Washington Mutual Logo] Credit Quality Corporate Credit Overview Economic climate is very positive Real estate values increasing in all markets Delinquencies continue to trend down REO sales are brisk Loss severity decreasing significantly Slide 87 [Washington Mutual Logo] Credit Quality Total Nonperforming Loans As a Percent of Total Loans [Bar Graph] 12/31/96 12/31/97 12/31/98 6/30/99 1.02% 0.87% 0.70% 0.63% Slide 88 [Washington Mutual Logo] Credit Quality Single Family Loans Nonperforming Loans As a Percent of Total Loans [Bar Graph] 12/31/96 12/31/97 12/31/98 6/30/99 1.11% 0.91% 0.71% 0.64% Slide 89 [Washington Mutual Logo] Credit Quality Apartment and Other CRE Nonperforming Loans As a Percent of Loan Type [Bar Graph] 12/31/96 12/31/97 12/31/98 6/30/99 0.54% 0.55% 0.42% 0.29% Slide 90 [Washington Mutual Logo] Credit Quality 2nd Mortgage & other Consumer Loans Nonperforming Loans As a Percent of Loan Type [Bar Graph] 12/31/96 12/31/97 12/31/98 6/30/99 .58% .62% .71% .77% Slide 91 [Washington Mutual Logo] Credit Quality Consumer Finance Loans Nonperforming Loans As a Percent of Loan Type [Bar Graph] 12/31/96 12/31/97 12/31/98 6/30/99 2.09% 1.97% 2.07% 1.96% Slide 92 [Washington Mutual Logo] Credit Quality Commercial Business Nonperforming Loans As a Percent of Loan Type [Bar Graph] 12/31/96 12/31/97 12/31/98 6/30/99 0.32% 0.32% 0.66% 0.56% Slide 93 [Washington Mutual Logo] Credit Quality REO Trends Commercial [Line Graph] Inventory Units 7'98 8'98 9'98 10'98 11'98 12'98 1'99 2'99 3'99 4'99 5'99 6'99 134 124 117 109 104 97 94 85 95 94 89 81 Slide 94 [Washington Mutual Logo] Credit Quality REO Trends Residential [Line Graph] Inventory Units 7'98 8'98 9'98 10'98 11'98 12'98 1'99 2'99 3'99 4'99 5'99 6'99 2,864 2,817 2,828 2,730 2,619 2,579 2,614 2,652 2,532 2,341 2,349 2,315 Slide 95 [Washington Mutual Logo] Loss Severity Residential (Q2 `98 - Q2 `99) [Line Graph] Q2 `98 Q3 `98 Q4 `98 Q1 `99 Q2 '99 12.9% 12.5% 11.0% 10.5% 8.4% - ----- ----- ----- ----- ----- * Does not include the Company's consumer finance subsidiary Slide 96 [Washington Mutual Logo] Credit Quality Loss Severity Commercial (Q2 `98 - Q2 `99) Q2 `98 Q3 `98 Q4 `98 Q1 `99 Q2 '99 28.1% 10.3% 16.0% 12.0% 24.9% * Does not include the Company's consumer finance subsidiary Slide 97 [Washington Mutual Logo] Commercial Banking Sally Jewell Executive Vice President Commercial Banking Division Slide 98 [Washington Mutual Logo] Strategic Rationale Leverages infrastructure to drive incremental business Enhances margin and returns Diversifies earnings, credit and interest rate risk Supports growth to deploy capital Expands WM's service and efficiency strengths to new clients Slide 99 [Washington Mutual Logo] Business Lines Flow Chart: Washington Mutual - Commerical Banking Division Washington Mutual A division of Washington Mutual Bank Commercial Real Estate Multi-family permanent loans A division of Washington Mutual CRE Construction (NW only) Commercial Permanent Loans (NW only) Full Service Commercial Banking Industrial Business lines/loans Retail Treasury Management Services Office International Trade Finance Community Banking (OR/ID branches) Slide 100 [Washington Mutual Logo] Commercial Banking Division Commerical Banking Division Consolidated First Quarter 1999 Total Assets(a) $19.3 billion Total Loans(a) $19.2 billion (before reserve) First Quarter Net Income after Tax (b) $52.3 billion (a) at 3/31/99 (b) Line of business results for first quarter including allocated corporate support expense Slide 101 [Washington Mutual Logo] Commercial Banking Division Portfolio by Type [pie chart] Apartments: 76% Other Real Estate: 15% Business: 9% Slide 102 [Washington Mutual Logo] Commercial Banking Division Loan Quality Measurements Net Loan Losses [bar graph] 1996 1997 1998 YTD 6/30/99 CRE-FA 0.63% 0.30% 0.13% 0.29% CRE-WMB 0.00% 0.00% 0.00% -0.04% Western 0.10% 0.13% 0.24% 0.28% Slide 103 [Washington Mutual Logo] Commercial Banking Division WM-CRE Locations(a) [maps of NW states marking locations of: 13 Commercial Real Estate Offices (Loan Portfolio = $16.7B) and 79 Commerical Banking Offices (Loan Portfolio = $1.9B(b)) (a) As of 6/30/99 (b) Average balances for six months ended 6/30/99 Slide 104 [Washington Mutual Logo] Commercial Banking Division Competitors Thrifts FNMA Freddie Mac Large Commercial Banks Slide 105 [Washington Mutual Logo] Commercial Real Estate CRE Owners Want Reliability and Predictability "Do what you say you will do" Stability "Keep the people and process consistent" Accuracy and Timeliness "Deliver on your promises" Slide 106 [Washington Mutual Logo] Commercial Real Estate Competitive Advantages Portfolio capacity and flexibility Fast turnaround through automated underwriting and processing Direct origination capability in the nation's best markets Large, low-risk, seasoned portfolio Market dominance and name recognition Slide 107 [Washington Mutual Logo] Commercial Real Estate Opportunities Mining the client base - deposits, renewals, new loans On-line application and processing via the Internet Secondary market sales to enhance yield and reduce risk Slide 108 [Washington Mutual Logo] Commercial Real Estate Opportunities Geographic expansion - wholesale and direct Diversification of product and property type Acquisitions to broaden origination capacity Slide 109 [Washington Mutual Logo] Commercial Real Estate Future Initiatives Construct a portfolio that will survive and generate target returns through the entire real estate cycle Cross-sales into deposit and other products - underway NW conversion to CA processing systems - 2000 Slide 110 [Washington Mutual Logo] Commercial Real Estate Future Initiatives Vendor relationships for on-line application and processing - underway Expand direct and wholesale lending into growing, stable markets - 2000-01 Development of portfolio sales to secondary market - 2000-01 Slide 111 [Washington Mutual Logo] Commercial Real Estate Future Initiatives Expand product mix to core CRE properties with dedicated, focused resources - underway Streamline renewals to capture 80%+ - underway Alliances/acquisitions for expansion and expertise Slide 112 [Washington Mutual Logo] Commercial Real Estate WB/WMBB Locations [Maps of NW states marking locations of 48 Full-Service Commercial Bank Branches and 31 Business Banking Centers] Coming Soon ....... 3 Additional Business Banking Centers in California 10 Business Banking Centers in California by year-end As of 6/30/99 Slide 113 [Washington Mutual Logo] Commercial Real Estate Average Loans [bar graph] Dollars in millions Compound Growth 1995 - June '99 = 38% 1996 1997 1998 YTD 6/30/99 $745 $1,141 $1,492 $1,775 Slide 114 [Washington Mutual Logo] Divisions of Washington Mutual Average Deposits [bar graph] Dollars in millions Compound Growth 1995 - June '99 = 17% 1996 1997 1998 YTD 6/30/99 $896 $1,006 $1,186 $1,364 Slide 115 [Washington Mutual Logo] Divisions of Washington Mutual Net Interest Margin [bar graph] 1996 1997 1998 YTD 6/30/99 5.96% 6.59% 6.26% 5.84% Slide 116 [Washington Mutual Logo] Divisions of Washington Mutual WB/WMBB Competitors Large and Regional Banks Community Banks Farm Credit Services Asset-based Lenders Slide 117 [Washington Mutual Logo] Divisions of Washington Mutual Business Owners Want [3 photographs] Reliability and predictability "Be there when I need you" Stability "Give me a banker who understands my business" Accuracy and timeliness "Make the service hassle-free" Slide 118 [Washington Mutual Logo] Divisions of Washington Mutual Shifting Customer Loyalties Traditionally, business customers were loyal to an institution Today, loyalty is directed more toward individuals Business Principals [arrow pointing to:] Banking Relationship Manager Business clients are more willing move with their bankers Slide 119 [Washington Mutual Logo] Divisions of Washington Mutual Commercial Banking Typical Customer Established, profitable businesses Typically in operation for 3+ years Customers with larger credit needs Typical range is $500k - $20MM (some less than $500k, some greater than $20MM) Smaller loans made through Washington Mutual and Commercial Banking SBA Lending Group Deposit customers (non-borrowing) with cash management needs Typical Business: - Manufacturing - Wholesale - Agri-business - Technology - Service - Export/Import Slide 120 [Washington Mutual Logo] Divisions of Washington Mutual Competitive Advantages WM STAR branch network - "A partnership for profitability" Balance sheet and lending capacity Ability to "cherry pick" profitable business Efficient, responsive, local delivery through BBCs with centralized back-room support Attractive environment for top bankers Slide 121 [Washington Mutual Logo] Divisions of Washington Mutual Typical BBC Structure [flow chart] Business Banking Manager Business Banking Officer Business Banking Officer Support Staff Business Banking Officer Credit Analyst Slide 122 [Washington Mutual Logo] Divisions of Washington Mutual Business Banking Centers Work in Progress 19 locations or 56% are less than 2 years old 11 locations or 32% are less than 1 year old (includes 7 new California locations) Slide 123 [Washington Mutual Logo] Divisions of Washington Mutual Business Banking Center Start-up Example
Annual Avg. Standard Model Year 1 (F) Year 2 (F) Year 3 (F) Avg. BBCs greater than 2 Yrs. Seattle BBC @ 3 Years ROA -1.1% 0.7% 1.3% 1.32% 1.71% ROE -17% 11% 19% 20% 22% Efficiency 124% 62% 41% 43% 33% ($ in Millions) Net Income $(.090) $.247 $891 $.769 $2.2 Avg. Loans 12 37 60 58 124 Avg. Deposits 3 9 14 22 42 Slide 124
[Washington Mutual Logo] Divisions of Washington Mutual Opportunities Geographic expansion - CA/TX/FL Streamline referrals and operations through common systems with financial centers Move up-market as both an agent and participant Capture new bankers through ongoing market disruption Jump-start new markets through acquisitions Slide 125 [Washington Mutual Logo] Divisions of Washington Mutual Challenges Meeting growth expectations "organically" Finding the "right" people in each market Modifying WM deposit systems for commercial clients Balancing growth with profitability Finding acquisitions which make economic sense Slide 126 [Washington Mutual Logo] Divisions of Washington Mutual Future Initiatives Become a meaningful contributor to Washington Mutual's long-term profitability Common name and common systems with the consumer bank within 3 years Expansion of BBC network - 50 in CA over 5 years; TX and FL expansion initiated in 2001 Slide 127 [Washington Mutual Logo] Divisions of Washington Mutual Future Initiatives Selective participation in NW corporate accounts - underway Strategic acquisitions of business banks Potential expansion into asset-based commercial lending Slide 128 [Washington Mutual Logo] Divisions of Washington Mutual Commercial Banking Vital Few Create an environment that builds, attracts and retains the best bankers in the business Provide the tools and support necessary to enable our team to focus on exceptional client service and sales. Build a reputation as the preferred financial partner for businesses and commercial real estate owners. Slide 129 [Washington Mutual Logo] Commerical Banking Division Commercial Banking Vital Few Integrate commercial banking into Washington Mutual's array of services Deliver exceptional financial performance to enhance our significance within Washington Mutual. Slide 130 [Washington Mutual Logo] Commerical Banking Division Conclusion Commerical Banking: Builds on WM's core strengths in service and distribution Enhances yields and long-term earnings potential for the company Seizes a market opportunity to fill a niche challenged by bank consolidation Slide 131 [Washington Mutual Logo] Commerical Banking Division Conclusion Commerical Banking: Supports diversification attractive to the stock market Is a great strategic fit! Slide 132 [Washington Mutual Logo] Commerical Banking Division Aristar [logo] A Washington Mutual Company Slide 133 [Washington Mutual Logo] Company Profile Headquartered in Tampa, Florida Founded in 1927 Portfolio lender - no securitization $2.9 billion in assets 493 offices in 24 states 2,630 employees as of 6/30/99 Slide 134 [Aristar Logo] Product Profile and Mix Personal unsecured (44%) Average balance = $2,288 Real estate (46%) 60% firsts and 40% seconds Average loan-to-value approximately 70% Average balance = $26,914 Sales finance (10%) 8,767 dealerships in 25 states Average balance = $780 Slide 135 [Aristar Logo] Receivables 6/30/99 [Map of United States highlighting states listed below] Tennessee 10.4% Colorado 10.1 Texas 9.9 North Carolina 8.9 California 7.7 Florida 7.4 South Carolina 5.7 Virginia 5.0 Louisiana 4.7 Mississippi 4.1 Other States 26.1 Slide 136 [Aristar Logo] Customer Demographic Profile Forty-four year old blue collar or lower-white collar worker Individual income of $30,000 and family income of $70,000 Over 65% home owners Low net worth Slide 137 [Aristar Logo] Customer Psycho-graphic Cash flow borrowers Intimidated by business with a bank Payment borrowers Want to be treated with dignity and respect Slide 138 [Aristar Logo] Mission To become a premier financial services company that provides a superior return to its shareholders by: Focusing on our high margin core products Become the low cost producer Superior execution Slide 139 [Aristar Logo] Financial targets ROA 3.0% ROE greater than 18.0 EPS Growth 15.0 Efficiency Ratio less than 40.0 Net Charge-off 2.8 Slide 140 [Aristar Logo] A Strong Fit With Washington Mutual's Growth Strategy Both companies' focus is on high-service consumer lending WM has traditionally been an "A" lender but is now generating potential sub-prime customers through its "Free Checking" marketing programs Slide 141 [Aristar Logo] A Strong Fit With Washington Mutual's Growth Strategy WM has excess capital it would like to deploy in its core businesses like consumer lending WM has historically been an acquirer and consolidator of financial services companies and that continues to be part of its strategic focus Slide 142 [Aristar Logo] Competitive Advantage "The Franchise" - customer relationship Number one position in small to mid-size markets Speed of service Flexibility of packaging Slide 143 [Aristar Logo] Strategy Nurture the Franchise Leveraging existing customer base by focusing on core products up-selling and cross-selling Promote a sales culture to improve the historically slow receivables growth rate Eliminate unprofitable ancillary products Slide 144 [Aristar Logo] Strategy Nurture the Franchise Enhance credit risk capabilities Become the low-cost producer Manage business mix Develop segmentation and target marketing capabilities Slide 145 [Aristar Logo] Strategy Expand the Franchise Expand national franchise Reinforce our dominant position in small to mid-size markets Rationalize and expand branch network to new markets Diversify distribution beyond retail branch network Pursue acquisitions Slide 146 [Aristar Logo] Improving Credit Quality While Achieving Strong Loan Growth Record level organic growth over the past 12 months Credit quality not sacrificed Delinquency percentage at three-year low Credit standards tightened for newly originated business Strong improvements in underlying credit quality trends "At risk" portfolio managed aggressively Only major consumer finance company to exclusively use contractual terms as measure for delinquencies and charge offs Slide 147 [Aristar Logo] -----END PRIVACY-ENHANCED MESSAGE-----