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) January 15, 2002
WASHINGTON MUTUAL, INC.
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(Exact name of registrant as specified in its charter)
Washington 1-14667 91-1653725
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(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification No.)
1201 Third Avenue
Seattle, Washington 98101
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(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (206) 461-2000
Item 9. Regulation FD Disclosure.
Registrant issued the following press release on January 15, 2002.
Washington Mutual Caps Most Profitable Year
with Record Quarterly Earnings;
Board Increases Cash Dividend
SEATTLE -- Washington Mutual, Inc. (NYSE: WM) today announced record
fourth-quarter earnings of $842 million, or 97 cents per diluted share, for the
period ended Dec. 31, 2001, up 56 percent on a per share basis from $497
million, or 62 cents per diluted share for the same period a year ago.
Annual earnings for 2001 were also a record at $3.11 billion, or $3.59
per diluted share, versus $1.90 billion, or $2.36 per diluted share in 2000.
Other financial highlights for the fourth quarter and the year included:
o return on average common equity in excess of 23 percent for the fourth
quarter and the year;
o record net checking account growth of 190,000 checking accounts for the
fourth quarter, and more than 1 million checking accounts for the year;
o increases of 31 percent and 32 percent in depositor and other retail
banking fees for the fourth quarter and the year, respectively; and
o record total loan volume of $59.12 billion for the fourth quarter, and
$174.04 billion for the year, which includes record volume in single-family
residential (SFR) and non-SFR categories.
"Our record performance in the fourth quarter of 2001 is a fitting end
to a spectacular year highlighted by record earnings, account growth and loan
volume," said Kerry Killinger, Washington Mutual's chairman, president and chief
executive officer. "It demonstrates the strength of our business strategy and
our ability to profitably expand our franchise through a combination of internal
growth and acquisitions. In addition, our employees clearly demonstrated their
ability to manage the company in a business climate that became more challenging
as the year progressed."
2
BOARD OF DIRECTORS INCREASES DIVIDEND
The board declared a cash dividend of 25 cents on the company's common
stock, up from 24 cents in the previous quarter. Dividends on the common stock
are payable Feb. 15, 2002 to shareholders of record as of Jan. 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 Feb. 19, 2002, to shareholders of record as of Feb. 15, 2002.
FOURTH-QUARTER RESULTS
Net Interest Income and Noninterest Income
Net interest income in the fourth quarter of 2001 was $2.03 billion, up
84 percent from $1.10 billion in the prior year's fourth quarter. For the year,
net interest income totaled $6.88 billion, compared with $4.31 billion in 2000.
The net interest spread was 3.84 percent in the most recent quarter,
compared with 2.29 percent for the same period a year earlier. The margin was
3.80 percent in the most recent quarter versus 2.42 percent in fourth quarter
2000.
Low long-term mortgage interest rates resulted in high levels of
refinancing activity during the most recent quarter, which led to higher actual
and anticipated prepayment rates within the company's mortgage servicing
portfolio. This resulted in higher amortization levels for the company's
mortgage servicing rights (MSR) asset during the fourth quarter and the addition
of $1.06 billion to the impairment reserve for MSR. Although the low mortgage
interest rates caused prepayment levels to rise, they also enabled the company
to generate high levels of salable fixed-rate loan volume, resulting in gain
from mortgage loans of $289 million during the quarter. This income, combined
with the additional gain of $442 million from securities, and a $496 million
pretax hedging gain (accounted for on a net-of-tax basis as an extraordinary
item under current accounting rules) from the early extinguishment of debt,
exceeded the amount of the MSR impairment.
3
"Our strategy of mitigating MSR impairments through the combination of
strong gain primarily on fixed-rate mortgages with additional gains from the
sale of securities and the liquidation of hedging instruments has worked
effectively," Killinger said, adding that the strategy is part of Washington
Mutual's ongoing business.
The net increase of more than 1 million checking accounts, year over
year, contributed to depositor and other retail banking fees of $353 million for
the quarter, up 31 percent from $269 million for the same period one year ago.
For the year, depositor and other retail banking fees totaled $1.29 billion, up
from $976 million for 2000.
Securities fees and commissions totaled $77 million in the most recent
quarter, up from $74 million in the fourth quarter of last year. For the year,
these fees and commissions totaled $303 million in 2001, versus $318 million in
2000.
Lending
During the most recent quarter, Washington Mutual produced record loan
volume, which totaled $59.12 billion, versus $17.31 billion for the fourth
quarter of 2000. For the year, total loan volume was a record $174.04 billion,
compared with $66.27 billion in 2000.
In the fourth quarter, single-family residential (SFR) loan volume
totaled $54.83 billion, versus $13.54 billion a year ago. SFR loan volume
totaled $155.82 billion in 2001, as compared with $52.42 billion in 2000.
Low mortgage interest rates continued to fuel a high volume of
refinancing activity. In the year 2001, loan volume for home refinancing was 67
percent of the SFR volume (excluding specialty mortgage finance and residential
construction), versus 34 percent for 2000. Of the SFR loan volume (excluding
specialty mortgage finance), 74 percent was for fixed-rate loans in 2001, versus
just 15 percent the previous year.
4
The volume of loans other than SFRs totaled $4.29 billion for the most
recent quarter, up 14 percent over $3.77 billion in the fourth quarter of 2000.
For the year, that volume was $18.22 billion, up 32 percent from $13.85 billion
for 2000.
Efficiency Ratio
The company's efficiency ratio (defined as total noninterest expense,
excluding amortization of intangible assets, as a percentage of net interest
income, noninterest income, and the extraordinary item) improved to 44.99
percent during the fourth quarter of 2001, compared with 48.22 percent for the
fourth quarter of 2000. For the year, the efficiency ratio (similarly
calculated) was 43.90, versus 47.97 one year ago.
Noninterest expense for the fourth quarter of 2001 totaled $1.33
billion, compared with $822 million in the fourth quarter of 2000. For the year,
noninterest expense totaled $4.62 billion, as compared with $3.13 billion for
2000. The growth in expenses was, in large part, a reflection of the company's
acquisitions during the year.
Balance Sheet and Capital Management
Reflecting the company's acquisitions in 2001, Washington Mutual's
consolidated assets were $242.51 billion at Dec. 31, 2001, up from $194.72
billion at year-end 2000.
During the fourth quarter, the company repurchased 7.3 million shares
of its common stock at an average price of $31.65.
At Dec. 31, 2001, transaction account balances, including checking,
savings and money market deposits, represented 66 percent of total deposits, up
from 58 percent at the end of 2001. Total deposits were $107.18 billion at the
end of the fourth quarter, up 35 percent from $79.57 billion at the end of the
fourth quarter of 2000, reflecting the company's acquisitions and strong
internal growth.
Stockholders' equity stood at $14.06 billion, or 5.8 percent of
consolidated assets at Dec. 31, 2001. In addition, capital ratios of the
company's banking subsidiaries continued to exceed the federal regulatory
requirements for classification as "well-capitalized" institutions, the highest
regulatory standard.
5
Credit Quality
In the fourth quarter, the company made a $200 million provision for
loan and lease losses, while net loan charge-offs during the period were $97
million. Nonperforming assets increased by $349 million to $2.38 billion at Dec.
31, 2001, as compared with $2.03 billion at Sept. 30, 2001, and $1.02 billion at
year-end 2000. The ratio of nonperforming assets to total assets was 0.98
percent at Dec. 31, 2001, versus 0.91 percent at the end of the third quarter,
and 0.52 percent at year-end 2000.
"The loan loss provision remains in excess of loan charge-offs," said
Killinger. "Management is comfortable with the loan loss reserve in light of the
risk profile of our loan portfolio, which is heavily weighted toward
single-family residential home loans secured by real estate."
Company Updates
o On Jan. 4, the company completed its acquisition of Dime Bancorp, Inc. The
acquisition creates a broad-based platform for Washington Mutual's retail
banking operations in the greater New York metropolitan area, the nation's
largest urban banking market. With the addition of the mortgage operations
of Dime's North American Mortgage Company, Washington Mutual has also
further strengthened its position as the nation's leading mortgage
franchise.
o On Dec. 11, Washington Mutual announced the signing of a definitive
agreement to acquire, for cash, $1.9 billion of assets of HomeSide Lending,
Inc., the U.S. mortgage unit of the National Australia Bank Limited (the
"National") (ASX: NAB; NYSE: NAB). In addition, Washington Mutual will
subservice HomeSide's $187.4 billion mortgage servicing portfolio,
representing approximately 2 million customers. The National will retain
its financial interest in the mortgage servicing rights to be subserviced
by Washington Mutual, the related hedges and certain other HomeSide assets
and liabilities.
o During the fourth quarter, the company launched its market entry into
Atlanta, Ga., by opening the first 20 of up to 80 Occasio financial stores
planned for that area over the next few years.
6
Outlook
"Our management team anticipates another year of record profitability
and solid growth for Washington Mutual in 2002," said Killinger. "In addition to
continuing to keep a watchful eye on credit quality, a particular area of focus
for the company will be successfully integrating the franchises that we've
recently acquired and ensuring a successful transition for new employees who are
now a part of the Washington Mutual family."
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 Dec. 31, 2001,
Washington Mutual and its subsidiaries had assets of $242.51 billion. The
company currently operates more than 2,300 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.
# # #
Webcast information: Investors may listen to Washington Mutual's investor
conference call on January 16, 2002, at 7:30 a.m. PST at www.wamu.com or by
dialing 1.888.391.7808, passcode "WaMu." International callers may dial
312.470.7056. A replay will be available shortly after the completion of the
call.
Media Contact: Libby Hutchinson
1-800-228-9268
(206) 461-2484
libby.hutchinson@wamu.net
Investor Contacts: JoAnn DeGrande
(206) 461-3186
joann.degrande@wamu.net
Ruthanne King
(206) 461-6421
ruthanne.king@wamu.net
7
Washington Mutual, Inc.
Consolidated Statements of Income
(dollars in millions, except per share data)
(Unaudited)
Quarter Ended Year Ended
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Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2001 2001 2000 2001 2000
----------------------------------------------------------------------
Interest Income
Loans $2,690 $2,808 $2,533 $11,233 $9,388
Available-for-sale
("AFS") securities 776 825 712 3,573 2,811
Held-to-maturity
("HTM") securities - - 321 - 1,319
Other interest and
dividend income 59 57 66 259 265
----------------------------------------------------------------------
Total interest
income 3,525 3,690 3,632 15,065 13,783
Interest Expense
Deposits 649 735 854 3,094 3,290
Borrowings 849 1,139 1,677 5,095 6,182
----------------------------------------------------------------------
Total interest
expense 1,498 1,874 2,531 8,189 9,472
----------------------------------------------------------------------
Net interest
income 2,027 1,816 1,101 6,876 4,311
Provision for loan
and lease losses 200 200 53 575 185
----------------------------------------------------------------------
Net interest income
after provision for
loan and lease
losses 1,827 1,616 1,048 6,301 4,126
Noninterest Income
Depositor and other
retail banking fees 353 333 269 1,290 976
Securities fees and
commissions 77 78 74 303 318
Insurance fees and
commissions 16 12 11 53 44
Net SFR loan servicing
income (expense) (1,042) (454) 34 (1,521) 134
Loan related income 109 93 34 349 117
Gain from mortgage
loans 289 275 64 967 262
Gain (loss) from
securities 442 317 13 861 (1)
Other income 90 84 51 325 134
----------------------------------------------------------------------
Total noninterest
income 334 738 550 2,627 1,984
Noninterest Expense
Compensation and
benefits 535 507 343 1,924 1,348
Occupancy and
equipment 228 202 157 804 604
Telecommunications and
outsourced information
services 119 111 87 441 323
Depositor and other
retail banking losses 45 37 29 144 105
Amortization of
goodwill and other
intangible assets 45 48 26 172 106
Other expense 359 249 180 1,132 640
----------------------------------------------------------------------
Total noninterest
expense 1,331 1,154 822 4,617 3,126
----------------------------------------------------------------------
Income before
income taxes and
extraordinary item 830 1,200 776 4,311 2,984
Income taxes 295 443 279 1,579 1,085
----------------------------------------------------------------------
Income before
extraordinary item 535 757 497 2,732 1,899
Extraordinary item -
gain on extinguishment
of debt, net of taxes
of $189 and $239 million
for quarter and year
ended December 31, 2001,
and $50 million for
quarter ended
September 30, 2001 307 75 - 382 -
----------------------------------------------------------------------
Net Income $842 $832 $497 $3,114 $1,899
======================================================================
Net Income Attributable
to Common Stock $840 $830 $497 $3,107 $1,899
======================================================================
Basic earnings per common
share:
Income before
extraordinary item $0.62 $0.88 $0.63 $3.20 $2.37
Extraordinary item 0.36 0.09 - 0.45 -
Net income 0.98 0.97 0.63 3.65 2.37
Diluted earnings per
common share:
Income before
extraordinary item $0.62 $0.85 $0.62 $3.15 $2.36
Extraordinary item 0.35 0.09 - 0.44 -
Net income 0.97 0.94 0.62 3.59 2.36
Dividends declared per
common share $0.24 $0.23 $0.20 $0.90 $0.76
Basic weighted average
number of common shares
outstanding
(in thousands) 856,014 859,497 788,789 850,245 801,262
Diluted weighted
average number of
common shares
outstanding
(in thousands) 868,951 879,374 796,466 864,658 804,695
8
Washington Mutual, Inc.
Selected Financial Information
(dollars in millions except for per share data)
(unaudited)
Quarter Ended Year Ended
------------- ----------
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2001 2001 2000 2001 2000
-------- -------- -------- -------- --------
Basic and Diluted Weighted Average Number of Common Shares Outstanding
(in thousands)
Basic weighted
average number
of common shares
outstanding 856,014 859,497 788,789 850,245 801,262
Dilutive effect
of potential
common shares
from:
Stock options 6,726 9,336 7,677 8,469 3,433
Premium Income
Equity
Securities(SM) 1,268 1,782 - 1,346 -
Trust Preferred
Income Equity
Redeemable
Securities(SM) 4,943 8,759 - 4,598 -
------ ------ ------ ------ ------
12,937 19,877 7,677 14,413 3,433
------ ------ ------ ------ ------
Dilutive weighted
average number of
common shares
outstanding 868,951 879,374 796,466 864,658 804,695
======= ======= ======= ======= =======
Year Ended Year Ended
Dec. 31, 2001 Dec. 31, 2000
------------- -------------
Stockholders' Equity Rollforward
Balance,
beginning
of period $ 10,166 $ 9,053
Net income 3,114 1,899
Cash dividends
declared on
common stock (774) (626)
Cash dividends
declared on
redeemable
preferred stock (7) -
Common stock
issued to
acquire Bank
United Corp. 1,389 -
Common stock
issued 197 89
Common stock
repurchased
and retired (231) (869)
Common stock
warrants issued,
net of costs 398 -
Other comprehensive
(loss) income,
net of tax (189) 620
------- -------
Balance, end of
period $ 14,063 $ 10,166
====== ======
9
Washington Mutual, Inc.
Selected Financial Information
(dollars in millions)
(unaudited)
Quarter Ended
---------------
Dec. 31, 2001 Sept. 30, 2001 Dec. 31, 2000
Balance Rate Balance Rate Balance Rate
--------------- ---------------- --------------
Average Balances and
Weighted Average
Interest Rates
Assets
Interest-earning
assets:
Loans(1):
SFR $ 103,594 6.39% $ 100,548 6.82% $ 83,313 7.69%
Specialty
mortgage
finance(2) 10,024 10.26 9,770 10.21 7,082 10.69
------- ------- -------
Total SFR 113,618 6.73 110,318 7.12 90,395 7.93
Other loans 41,306 7.54 41,612 8.11 32,224 9.21
------- ------- -------
Total Loans 154,924 6.94 151,930 7.38 122,619 8.26
Mortgage-backed
securities
("MBS") 31,188 6.29 37,863 6.83 56,230 7.20
Investment
securities
and other 27,951 4.92 17,006 5.54 5,197 6.71
------- ------- -------
Total
interest-earning
assets 214,063 6.58 206,799 7.13 184,046 7.89
Noninterest-earning
assets 22,272 21,658 8,082
------- ------- -------
Total
assets $ 236,335 $ 228,457 $ 192,128
======= ======= =======
Liabilities
Deposits:
Checking
accounts $ 30,535 0.71 $ 24,746 0.23 $ 14,299 0.45
Savings
accounts
and money
market
deposit
accounts
("MMDAs") 34,235 2.11 35,425 2.77 30,243 4.21
Time deposit
accounts 38,863 4.22 39,005 4.82 35,315 5.84
------- ------- -------
Total
deposits 103,633 2.48 99,176 2.94 79,857 4.25
Borrowings:
Securities sold
under agreements
to purchase
("repurchase
agreements") 29,677 2.31 27,353 3.29 29,708 6.72
Advances from
Federal Home
Loan Banks
("FHLBs") 64,338 3.17 62,614 4.17 56,185 6.68
Federal funds
purchased and
commercial paper 5,163 2.39 4,309 3.71 4,758 6.81
Other 14,357 3.61 15,459 5.51 9,202 6.52
------- ------- -------
Total
borrowings 113,535 2.96 109,735 4.12 99,853 6.68
------- ------- -------
Total
interest-bearing
liabilities 217,168 2.74 208,911 3.56 179,710 5.60
Noninterest-bearing
liabilities 4,778 5,492 2,750
------- ------- -------
Total
liabilities 221,946 214,403 182,460
Stockholders'
Equity 14,389 14,054 9,668
------- ------- -------
Total
liabilities
and
stockholders'
equity $ 236,335 $ 228,457 $ 192,128
======= ======= =======
Net interest spread 3.84 3.57 2.29
Net interest margin 3.80 3.53 2.42
(1) Nonaccrual loans were included in the average loan amounts
outstanding.
(2) Includes purchased sub-prime loan portfolios as well as first
mortgages originated by Washington Mutual Finance and Long Beach
Mortgage.
10
Washington Mutual, Inc.
Selected Financial Information
(dollars in millions)
(unaudited)
Year Ended
----------
Dec. 31, 2001 Dec. 31, 2000
Balance Rate Balance Rate
--------------------------------------------
Average Balances and
Weighted Average
Interest Rates
Assets
Interest-earning assets:
Loans(1):
SFR $ 98,494 7.01% $ 81,471 7.40%
Specialty
mortgage
finance(2) 9,054 10.32 5,352 11.11
------- -------
Total SFR 107,548 7.29 86,823 7.63
Other loans 40,766 8.32 30,919 8.94
------- -------
Total Loans 148,314 7.57 117,742 7.97
MBS 41,430 6.95 58,469 6.97
Investment securities
and other 17,625 5.43 4,598 6.90
------- -------
Total
interest-earning
assets 207,369 7.26 180,809 7.62
Noninterest-earning
assets 18,204 6,763
------- -------
Total assets $ 225,573 $ 187,572
======= =======
Liabilities
Deposits:
Checking accounts $ 23,502 0.51 $ 14,120 0.46
Savings accounts
and money market
deposit accounts
("MMDAs") 34,168 3.00 29,816 4.05
Time deposit
accounts 38,852 5.04 36,340 5.55
------- -------
Total deposits 96,522 3.21 80,276 4.10
Borrowings:
Securities sold
under agreements
to purchase
("repurchase
agreements") 29,582 4.04 28,491 6.33
Advances from
Federal Home
Loan Banks
("FHLBs") 63,859 4.58 56,979 6.33
Federal funds
purchased and
commercial paper 4,806 4.11 3,442 6.52
Other 13,289 5.85 7,198 7.59
------- -------
Total borrowings 111,536 4.57 96,110 6.43
------- -------
Total
interest-bearing
liabilities 208,058 3.93 176,386 5.37
Noninterest-bearing
liabilities 4,308 2,207
------- -------
Total liabilities 212,366 178,593
Stockholders' Equity 13,207 8,979
------- -------
Total liabilities
and stockholders'
equity $ 225,573 $ 187,572
======= =======
Net interest spread 3.33 2.25
Net interest margin 3.32 2.38
(1) Nonaccrual loans were included in the average loan amounts
outstanding.
(2) Includes purchased sub-prime loan portfolios as well as first
mortgages originated by Washington Mutual Finance and Long Beach
Mortgage.
11
Washington Mutual, Inc.
Consolidated Statements of Financial Condition
(dollars in millions, except per share data)
(unaudited)
Dec. 31, Sept. 30, Dec. 31,
2001 2001 2000
-----------------------------
Assets
Cash and cash equivalents $ 6,044 $ 3,723 $ 2,622
AFS securities:
MBS 28,568 37,217 40,349
Investment securities 29,781 10,662 1,810
HTM securities:
MBS -- -- 16,428
Investment securities -- -- 137
Loans held for sale 23,842 18,035 3,404
Loans:
Loans held in portfolio 132,991 132,900 119,626
Allowance for loan and
lease losses (1,404) (1,295) (1,014)
-------- -------- --------
Total loans held in
portfolio, net of
allowance for loan
and lease losses 131,587 131,605 118,612
Mortgage servicing rights
("MSR") 6,241 6,721 1,017
Investment in FHLBs 3,873 3,822 3,260
Goodwill and other
intangible assets 2,330 2,377 1,084
Other assets 10,240 9,476 5,993
-------- -------- --------
Total assets $ 242,506 $ 223,638 $ 194,716
======== ======== ========
Liabilities
Deposits:
Checking accounts $37,736 $25,575 $14,500
Savings accounts and
MMDAs 32,484 34,599 30,656
Time deposit accounts 36,962 39,559 34,418
-------- -------- --------
Total deposits 107,182 99,733 79,574
Federal funds purchased
and commercial paper 4,690 4,472 4,115
Securities sold under
repurchase agreements 39,447 18,675 29,756
Advances from FHLBs 61,182 65,623 57,855
Other borrowings 12,678 15,682 9,930
Other liabilities 3,264 4,924 3,320
-------- -------- --------
Total liabilities 228,443 209,109 184,550
Stockholders' equity 14,063 14,529 10,166
-------- -------- --------
Total liabilities and
stockholders' equity $242,506 $223,638 $194,716
======== ======== ========
Common shares outstanding at
end of period (in thousands)(1) 873,089 879,831 809,784
Book value per common share $ 16.45 $ 16.86 $ 12.84
Tangible book value per
common share 14.18 14.57 11.66
Full-time equivalent employees
at end of period 39,465 37,830 28,798
(1) Includes 18 million shares held in escrow that were not
included in the book value per share calculations.
12
Washington Mutual, Inc.
Selected Financial Information
(dollars in millions, except per share amounts)
(unaudited)
Note: The following analysis of reported and operating earnings is
based upon the Company's opinion and is intended to provide the user
additional information about the Company's operations. It is not
intended to replace traditional financial statement disclosures in
accordance with generally accepted accounting principles and may not
be comparable to similarly titled measures reported by other
companies.
Quarter Ended Year Ended
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2001 2001 2000 2001 2000
---------------------------------------------
Reported Financial Results
Net income $842 $832 $497 $3,114 $1,899
Net income per
common share $0.98 $0.97 $0.63 $3.65 $2.37
Net income per
diluted common share 0.97 0.94 0.62 3.59 2.36
Financial ratios on
reported financial
results:
Return on average
assets 1.43% 1.46% 1.03% 1.38% 1.01%
Return on average
common equity 23.36 23.64 20.56 23.53 21.15
Efficiency ratio(1),
excluding amortization
of goodwill and
other intangible assets 44.99 41.29 48.22 43.90 47.97
Efficiency ratio(1),
including amortization
of goodwill and
other intangible assets 46.58 43.09 49.78 45.61 49.66
Earnings from Operations, Excluding
Amortization of Goodwill and Other
Intangible Assets
Net income attributable
to common stock $840 $830 $497 $3,107 $1,899
Total amortization of
goodwill and other
intangible assets 45 48 26 172 106
Income tax expense (7) (6) (6) (29) (25)
------ ------ ------ ------ ------
Amortization of goodwill
and other intangible
assets, net of tax 38 42 20 143 81
------ ------ ------ ------ ------
Earnings from operations,
excluding amortization of
goodwill and other
intangible assets $878 $872 $517 $3,250 $1,980
====== ====== ====== ====== ======
Earnings per diluted
common share, excluding
amortization of goodwill
and other intangible
assets $1.01 $0.99 $0.65 $3.76 $2.46
Financial ratios on earnings
from operations:
Return on average assets 1.49% 1.53% 1.08% 1.44% 1.06%
Return on average common
equity 24.40 24.82 21.37 24.61 22.06
Quarter Ended Year Ended
Dec. 31, 2001 Dec. 31, 2001
-----------------------------
Pro Forma (2)
Income before income taxes
and extraordinary item $830 $4,311
Amortization of goodwill 34 136
------ ------
Income before income taxes and
extraordinary item, excluding
amortization of goodwill 864 4,447
Income tax expense (298) (1,594)
------ ------
Net income before extraordinary
item, excluding amortization
of goodwill 566 2,853
Extraordinary item, net of taxes 307 382
Redeemable preferred stock
dividends (2) (7)
------ ------
Net income attributable to
common stock, excluding
amortization of goodwill $871 $3,228
====== ======
Earnings per diluted common share,
excluding amortization of goodwill $1.00 $3.73
(1) Includes extraordinary item for 2001 periods.
(2) Represents pro forma impact to quarter-to-date and
year-to-date December 31, 2001 net income assuming application
of the recently issued business combinations accounting
standard, which eliminates the amortization of most goodwill
from net income.
13
Washington Mutual, Inc.
Selected Financial Information
(unaudited)
Dec. 31, Dec. 31,
2001 2000
----------------------------------------------------------------------
Capital Adequacy
Stockholders' equity/total assets 5.80% 5.22%
Stockholders' equity(1)/total assets(1) 5.89 5.24
Tangible common equity(1)(2) 5.14 4.79
Estimated total risk-based capital(3) 12.42 11.07
(1) Excludes unrealized net gain/loss on available-for-sale
securities and derivatives.
(2) Excludes goodwill and other intangible assets.
(3) Estimate of what WMI's total risk-based capital ratio would be
if it was a bank holding company that complies with Federal Reserve
Board capital requirements.
Dec. 31, Sept. 30, Dec. 31,
2001 2001 2000
----------------------------------------------------------------------
Retail Checking Accounts(4)
WMB and WMBfsb 1,182,385 1,158,646 1,104,947
WMB, FA 4,667,806 4,501,229 3,744,195
----------------------------------------------------------------------
Total retail checking accounts 5,850,191 5,659,875 4,849,142
======================================================================
Retail Checking Account Activity(4)
Net accounts opened during the
quarter:
WMB and WMBfsb 23,739 19,891 7,656
WMB, FA 166,577 177,438 98,384
----------------------------------------------------------------------
Net new retail checking accounts 190,316 197,329 106,040
======================================================================
(4) Retail checking accounts exclude commercial business accounts.
The information provided refers to the number of accounts, not dollar
volume.
14
Washington Mutual, Inc.
Selected Financial Information
(dollars in millions)
(unaudited)
Quarter Ended
----------------------------------------------------------------------
Dec. 31, Sept. 30, Dec. 31,
2001 2001 2000
----------------------------------------------------------------------
Loan Volume
Single-family residential ("SFR"):
Adjustable rate ("ARMs") $ 12,891 $ 9,120 $ 8,767
Fixed rate 39,280 30,781 2,861
Specialty mortgage finance (1) 2,654 3,186 1,913
----------------------------------------------------------------------
Total SFR loan volume 54,825 43,087 13,541
SFR construction:
Builder (2) 186 144 272
Custom (3) 118 142 142
Consumer 2,836 2,779 2,014
Commercial business 501 573 806
Commercial real estate:
Multi-family 561 424 411
Other commercial real estate 89 70 124
----------------------------------------------------------------------
Total loan volume $ 59,116 $ 47,219 $ 17,310
======================================================================
Loan Volume by Channel
Originated $ 35,138 $ 26,791 $ 15,666
Purchased/Correspondent 23,978 20,428 1,644
----------------------------------------------------------------------
Total loan volume by channel $ 59,116 $ 47,219 $ 17,310
======================================================================
Refinancing Activity (4)
SFR:
ARMs $ 10,623 $ 6,937 $ 3,825
Fixed rate 27,265 18,806 787
SFR construction 7 7 6
Commercial real estate 463 364 222
----------------------------------------------------------------------
Total refinances $ 38,358 $ 26,114 $ 4,840
======================================================================
SFR Loan Originations (5)
Short-term ARMs:
Treasury indices $ 5,606 $ 5,875 $ 6,452
COFI 429 501 1,434
Other 48 60 2
----------------------------------------------------------------------
Total short-term ARMs 6,083 6,436 7,888
Medium-term ARMs 6,383 2,457 435
Fixed-rate mortgages 16,840 12,301 2,664
----------------------------------------------------------------------
Total SFR loan originations $ 29,306 $ 21,194 $ 10,987
======================================================================
(1) Includes purchased sub-prime loan portfolios as well as first
mortgages originated by Washington Mutual Finance and Long Beach
Mortgage.
(2) Includes residential builder construction loans to borrowers who
are in the business of acquiring land and building homes for
resale.
(3) Includes 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.
(5) Does not include purchased and correspondent SFR loans and
specialty mortgage finance loans.
15
Year Ended
----------------------------------------------------------------------
Dec. 31, Dec. 31,
2001 2000
----------------------------------------------------------------------
Loan Volume
Single-family residential ("SFR"):
Adjustable rate ("ARMs") $ 37,224 $ 37,286
Fixed rate 107,538 6,631
Specialty mortgage finance (1) 11,059 8,501
----------------------------------------------------------------------
Total SFR loan volume 155,821 52,418
SFR construction:
Builder (2) 2,244 1,210
Custom (3) 630 639
Consumer 10,068 7,346
Commercial business 2,650 2,695
Commercial real estate:
Multi-family 2,053 1,601
Other commercial real estate 570 358
----------------------------------------------------------------------
Total loan volume $ 174,036 $ 66,267
======================================================================
Loan Volume by Channel
Originated $ 111,128 $ 59,263
Purchased/Correspondent 62,908 7,004
----------------------------------------------------------------------
Total loan volume by channel $ 174,036 $ 66,267
======================================================================
Refinancing Activity (4)
SFR:
ARMs $ 27,300 $ 13,299
Fixed rate 70,255 1,554
SFR construction 31 22
Commercial real estate 1,580 1,020
----------------------------------------------------------------------
Total refinances $ 99,166 $ 15,895
======================================================================
SFR Loan Originations (5)
Short-term ARMs:
Treasury indices $ 22,298 $ 25,596
COFI 1,863 6,036
Other 112 18
----------------------------------------------------------------------
Total short-term ARMs 24,273 31,650
Medium-term ARMs 12,012 3,932
Fixed-rate mortgages 51,227 6,415
----------------------------------------------------------------------
Total SFR loan originations $ 87,512 $ 41,997
======================================================================
(1) Includes purchased sub-prime loan portfolios as well as first
mortgages originated by Washington Mutual Finance and Long Beach
Mortgage.
(2) Includes residential builder construction loans to borrowers who
are in the business of acquiring land and building homes for
resale.
(3) Includes 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.
(5) Does not include purchased and correspondent SFR loans and
specialty mortgage finance loans.
16
Washington Mutual, Inc.
Selected Financial Information
(dollars in millions)
(unaudited)
Change from
Sept. 30,
2001
to Dec. 31, Dec. 31, Sept. 30, Dec. 31,
2001 2001 2001 2000
----------------------------------------------------------------------
Loans by Property Type and MBS
Loans held in portfolio:
SFR $ (152) $ 82,021 $ 82,173 $ 80,181
Specialty
mortgage finance 625 9,821 9,196 6,783
----------------------------------------------------------------------
Total SFR loans 473 91,842 91,369 86,964
SFR construction:
Builder (180) 2,127 2,307 1,040
Custom 37 475 438 391
Consumer 295 13,048 12,753 10,478
Commercial business 105 5,390 5,285 2,274
Commercial real estate:
Multi-family (555) 15,608 16,163 15,657
Other commercial
real estate (84) 4,501 4,585 2,822
----------------------------------------------------------------------
Total loans held in
portfolio 91 132,991 132,900 119,626
Less: allowance for
loan and lease losses (109) (1,404) (1,295) (1,014)
Loans securitized and
retained as MBS (3,322) 22,212 25,534 34,769
----------------------------------------------------------------------
Total net loans
held in portfolio
and loans
securitized and
retained as MBS (3,340) 153,799 157,139 153,381
Loans held for sale 5,807 23,842 18,035 3,404
----------------------------------------------------------------------
Total net loans
and loans
securitized and
retained as MBS 2,467 177,641 175,174 156,785
Purchased MBS (5,327) 6,356 11,683 22,008
----------------------------------------------------------------------
Total net loans
and MBS $ (2,860) $ 183,997 $ 186,857 $ 178,793
======================================================================
17
Washington Mutual, Inc.
Selected Financial Information
(dollars in millions)
(unaudited)
Sept. 30, 2001 Dec. 31, 2000
to Dec. 31, 2001 to Dec. 31, 2001
----------------------------------------------------------------------
Rollforward of Loans Held for Sale
Balance, beginning of period $ 18,035 $ 3,404
Loans added through acquisitions -- 10,385
Loans originated and purchased 48,391 128,419
Loans transferred from MBS 3,345 3,345
Loans transferred to loans
held in portfolio -- (1,210)
Loans sold or securitized (44,813) (117,195)
Loan payments and other (1,116) (3,306)
----------------------------------------------------------------------
Change in loans 5,807 20,438
----------------------------------------------------------------------
Balance, end of period $ 23,842 $ 23,842
======================================================================
Rollforward of Loans Held in Portfolio
Balance, beginning of period $ 132,900 $ 119,626
Loans added through acquisitions -- 12,334
Loans originated and purchased 10,725 45,617
Loans transferred from loans
held for sale -- 1,210
Loans securitized (428) (1,132)
Loan payments and other (10,206) (44,664)
----------------------------------------------------------------------
Change in loans 91 13,365
----------------------------------------------------------------------
Balance, end of period $ 132,991 $ 132,991
======================================================================
Rollforward of Mortgage Servicing Rights ("MSR")
Balance, beginning of period $ 6,721 $ 1,017
SFR:
Additions through acquisitions -- 4,818
Additions 1,013 3,323
Amortization (381) (1,006)
Impairment adjustment (1,057) (1,749)
Sales (59) (174)
Net change in commercial real
estate MSR 4 12
----------------------------------------------------------------------
Balance, end of period $ 6,241 $ 6,241
======================================================================
Rollforward of Loan Servicing Portfolio with MSR
Balance, beginning of period $ 371,677 $ 79,335
SFR:
Additions through acquisitions -- 255,434
Additions 45,596 143,235
Sales (2,414) (6,538)
Loan payments and other (36,790) (94,251)
Net change in commercial real
estate loan servicing portfolio 314 1,168
----------------------------------------------------------------------
Balance, end of period $ 378,383 $ 378,383
======================================================================
Dec. 31, 2001
Balance
----------------------------------------------------------------------
Total Servicing Portfolio
Loan servicing portfolio with MSR $ 378,383
Loan servicing portfolio without MSR 4,117
Servicing on retained MBS without MSR 8,155
Servicing on owned loans 144,333
----------------------------------------------------------------------
Total servicing portfolio $ 534,988
======================================================================
Dec. 31, 2001
---------------------------------------
Unpaid Principal Weighted Average
Balance Servicing Fee
----------------------------------------------------------------------
Total Servicing Portfolio,
Excluding Retained MBS without MSR (in basis points, annualized)
and Owned Loans
Government $ 61,541 52
Agency 242,075 45
Private 69,996 51
Long Beach 8,888 50
----------------------------------------------------------------------
Total servicing portfolio,
excluding retained MBS without MSR
and owned loans $ 382,500 47
======================================================================
18
Washington Mutual, Inc.
Selected Financial Information
(dollars in millions)
(unaudited)
Change from Dec. Sept. Dec.
Sept. 30, 31, % of 30, % of 31, % of
to Dec. 31, 2001 2001 total 2001 total 2000 total
----------------------------------------------------------------------
Real Estate Loans
and MBS(1)
Short-term ARMs:
COFI (3,442) $32,994 21% $36,436 23% $42,558 27%
Treasury
indices (3,384) 34,163 22 37,547 23 44,752 28
Other 2,563 13,491(2) 9 10,928(2) 7 8,081(2) 5
----------------------------------------------------------------------
Total short-
term ARMs (4,263) 80,648 52 84,911 53 95,391 60
Medium-term ARMs 6,879 41,585 26 34,706 22 28,992 18
Fixed-rate loans (1,755) 27,685 18 29,440 18 12,836 8
Fixed-rate MBS (4,187) 6,579 4 10,766 7 22,581 14
----------------------------------------------------------------------
Total real estate
loans and MBS (3,326) $156,497 100% $159,823 100% $159,800 100%
======================================================================
(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):
Dec. 31, 2001: $ 2.9
Sept. 30, 2001: 2.8
Dec. 31, 2000: 2.7
Quarter Ended Year Ended
----------------------------------------------------------------------
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2001 2001 2000 2001 2000
----------------------------------------------------------------------
SFR Mortgage Banking
Income
SFR loan
servicing income $ 448 $ 425 $ 85 $ 1,375 $ 295
Amortization
of MSR (381) (293) (33) (1,006) (121)
Impairment of MSR (1,057) (553) (9) (1,749) (9)
Other SFR loan
servicing
expense, net (52) (33) (9) (141) (31)
----------------------------------------------------------------------
Net SFR loan
servicing income
(expense) (1,042) (454) 34 (1,521) 134
Business and
financial hedges:
Gain from
mortgage loans 287 275 64 963 262
Gain from sale of
originated MBS 16 5 2 93 2
Gain (loss) from
sale of other AFS
securities 381 262 10 643 10
Pre-tax effect of
extraordinary gain 496 125 - 621 -
----------------------------------------------------------------------
Total SFR mortgage
banking income $ 138 $ 213 $ 110 $ 799 $ 408
======================================================================
19
Washington Mutual, Inc.
Selected Financial Information
(dollars in millions)
(unaudited)
Dec. 31, 2001 Dec. 31, 2000
----------------------------------------------------------------------
Balance Term(1) Balance Term(1)
----------------------------------------------------------------------
Deposits, Borrowings and (in months) (in months)
Derivatives Outstanding
Deposits:
Noninterest-bearing
checking accounts,
savings accounts,
MMDAs and time
deposit accounts $ 22,441 N/A $ 8,755 N/A
Interest-bearing
checking accounts,
savings accounts
and MMDAs 47,779 N/A 36,401 N/A
Interest-bearing time
deposit accounts 36,962 10 34,418 7
----------------------------------------------------------------------
Total deposits 107,182 79,574
Borrowings:
Adjustable(2) 48,014 2 57,219 1
Short-term fixed 49,569 1 30,457 2
Long-term fixed 20,414 72 13,980 48
----------------------------------------------------------------------
Total borrowings 117,997 101,656
----------------------------------------------------------------------
Total deposits and
borrowings $ 225,179 $ 181,230
======================================================================
Dec. 31, 2001 Dec. 31, 2000
----------------------------------------------------------------------
Notional Fair Term Notional Fair Term
Amount Value (1) Amount Value (1)
----------------------------------------------------------------------
Derivatives: (in months) (in months)
WM pay rate swaps:
Fixed rate $ 12,905 $ (9) 34 $ 11,008 $ (46) 9
Variable rate 3,627 224 2 2,890 140 2
----------------------------------------------------------------------
Total swaps 16,532 215 13,898 94
Caps\Corridors\
Swaptions 6,335 119 14 8,286 16 5
----------------------------------------------------------------------
Total derivatives $ 22,867 $ 334 $ 22,184 $ 110
======================================================================
(1) Terms used are remaining term for deposits, caps, corridors and
swaptions and term to reprice for borrowings and swaps.
(2) Adjustable-rate borrowings included notional values of $ 2.3
billion and $13.2 billion of embedded purchased interest rate floors
at December 31, 2001 and December 31, 2000. At December 31, 2001 and
December 31, 2000, $ 1.8 billion and $800 million, respectively, of
these contracts were effective. Contractual start dates for the
remaining floors begin September 15, 2002. Once effective, the floors
reprice every three months.
Adjustable-rate borrowings included notional values of $ 696 million
and $724 million of embedded purchased interest rate caps at December
31, 2001 and December 31, 2000. At December 31, 2001 and December 31,
2000, these interest rate caps were active. However, no contracts had
strike rates that were in effect.
Adjustable-rate borrowings included notional values of $ 5.9 billion
of embedded interest rate swaptions (options to enter into pay-fixed
swaps) at December 31, 2001 and none at December 31, 2000. These
options are exercisable upon maturity. Maturity dates range from June
6, 2003 to September 2, 2003.
20
Washington Mutual, Inc.
Selected Financial Information
(dollars in millions)
(unaudited)
Quarter Ended
----------------------------------------------------------------------
Dec. Sept. June Mar. Dec.
31, 30, 30, 31, 31,
2001 2001 2001 2001 2000
----------------------------------------------------------------------
Allowance for Loan
and Lease Losses
Balance, beginning
of quarter $ 1,295 $ 1,170 $ 1,158 $ 1,014 $ 1,012
Allowance acquired
through business
combinations/other 6 - (5) 120 -
Provision for loan
and lease losses 200 200 92 82 53
----------------------------------------------------------------------
1,501 1,370 1,245 1,216 1,065
Loans charged off:
SFR (3) (6) (14) (6) (5)
Specialty mortgage finance (10) (4) (5) (7) (3)
----------------------------------------------------------------------
Total SFR charge offs (13) (10) (19) (13) (8)
Consumer (57) (48) (50) (45) (45)
Commercial business (38) (19) (12) (4) (3)
Commercial real estate:
Other commercial
real estate - (5) (3) (3) -
----------------------------------------------------------------------
Total loans charged off (108) (82) (84) (65) (56)
Recoveries of loans
previously charged off:
SFR - - 1 1 -
Consumer 5 6 6 6 5
Commercial business 5 1 1 - -
Commercial real estate:
Other commercial
real estate 1 - 1 - -
----------------------------------------------------------------------
Total recoveries of
loans previously
charged off 11 7 9 7 5
----------------------------------------------------------------------
Net charge offs (97) (75) (75) (58) (51)
----------------------------------------------------------------------
Balance, end of quarter $ 1,404 $ 1,295 $ 1,170 $ 1,158 $ 1,014
======================================================================
Net charge offs
(annualized) as a
percentage of average
loans 0.25% 0.20% 0.20% 0.17% 0.16%
----------------------------------------------------------------------
Dec. Sept. June Mar. Dec.
31, 30, 30, 31, 31,
2001 2001 2001 2001 2000
----------------------------------------------------------------------
Allowance for loan and lease
losses as a percentage of:
Nonaccrual loans 65% 72% 86% 94% 117%
Nonperforming assets 59 64 75 81 99
Total loans held in
portfolio 1.06 0.97 0.89 0.87 0.85
21
Washington Mutual, Inc.
Selected Financial Information
(dollars in millions)
(unaudited)
Dec. 31, Sept. 30, Dec. 31,
2001 2001 2000
----------------------------------------------------------------------
Nonperforming Assets ("NPAs")
Nonaccrual loans:
SFR $1,041 $801 $509
Specialty mortgage finance 415 356 179
----------------------------------------------------------------------
Total SFR nonaccrual loans 1,456 1,157 688
SFR construction:
Builder 26 18 16
Custom 10 8 2
Consumer 148 130 117
Commercial business 159 126 12
Commercial real estate:
Multi-family 56 51 10
Other commercial real estate 298 321 21
----------------------------------------------------------------------
Total nonaccrual loans 2,153 1,811 866
Foreclosed assets:
SFR 107 110 97
Specialty mortgage finance 69 55 24
----------------------------------------------------------------------
Total SFR foreclosed assets 176 165 121
SFR construction:
Builder 4 4 -
Custom 1 - -
Consumer 20 25 22
Commercial business 10 9 -
Commercial real estate:
Multi-family - 1 1
Other commercial real estate 17 17 9
----------------------------------------------------------------------
Foreclosed assets 228 221 153
----------------------------------------------------------------------
Total NPAs $2,381 $2,032 $1,019
======================================================================
NPAs as a percentage of:
Total loans held in portfolio 1.79% 1.53% 0.85%
Total assets 0.98 0.91 0.52
22
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, thereto duly authorized.
WASHINGTON MUTUAL, INC.
By: /s/ Fay L. Chapman
--------------------------------
Fay L. Chapman
Senior Executive Vice President
Date: January 15, 2002
23