-----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, CUeI62sylqnczG5G+LF3CLXFQfox+LdmXtnyn0nV3bwy4FFPzOrVHG7AJBakn0B+ Qu7e5MLx6AnZ9PcE2JzEiw== 0000891020-97-000648.txt : 19970429 0000891020-97-000648.hdr.sgml : 19970429 ACCESSION NUMBER: 0000891020-97-000648 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970428 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970428 SROS: NASD SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREAT WESTERN FINANCIAL CORP CENTRAL INDEX KEY: 0000043512 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 951913457 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04075 FILM NUMBER: 97588982 BUSINESS ADDRESS: STREET 1: 9200 OAKDALE AVENUE CITY: CHATSWORTH STATE: CA ZIP: 91311 BUSINESS PHONE: 8187753411 MAIL ADDRESS: STREET 1: 9200 OAKDALE AVENUE CITY: CHATSWORTH STATE: CA ZIP: 91311 8-K 1 FORM 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): April 28, 1997 GREAT WESTERN FINANCIAL CORPORATION (Exact name of registrant as specified in its character) Delaware (State or other jurisdiction of incorporation or organization) 1-4075 95-1913457 (Commission file number) (I.R.S. Employer Identification No.) 9200 Oakdale Avenue Chatsworth, California 91311 (Address of principal (Zip Code) executive offices) (818) 775-3411 (Registrant's telephone number, including area code) Not applicable (Former name, former address and former fiscal year, if changed since last report) 2 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS 99.1 Materials to be used by Great Western Financial Corporation on an ongoing basis in presentations to the investment community. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. GREAT WESTERN FINANCIAL CORPORATION Date: April 28, 1997 By: /s/ J. Lance Erikson ---------------------------- J. Lance Erikson Executive Vice President, Secretary and General Counsel 3 Washington Mutual, Inc. [LOGO] Merger With [LOGO] Great Western Financial Corporation HIGH GROWTH CONSUMER BANKING April 28, 1997 4 FORWARD-LOOKING INFORMATION - -------------------------------------------------------------------------------- This presentation contains estimates of future operating results for 1997, 1998 and 1999 for both Washington Mutual, Inc. and Great Western Financial Corporation on a stand-alone and pro forma combined basis, as well as estimates of financial condition, operating efficiencies and revenue creation on a combined basis. These estimates constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995), which involve significant risks and uncertainties. Actual results may differ materially from the results discussed in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in WAMU's Current Report on Form 8-K dated March 6, 1997, and its Registration Statement on Form S-4, Registration No. 333-23221, as filed with the Securities and Exchange Commission, to which reference is hereby made. - -------------------------------------------------------------------------------- [LOGO] Washington Mutual 2 GREAT WESTERN [LOGO] 5 - -------------------------------------------------------------------------------- OVERVIEW OF WASHINGTON MUTUAL - -------------------------------------------------------------------------------- [LOGO] WASHINGTON MUTUAL 3 GREAT WESTERN [LOGO] 6 WAMU PROFILE - -------------------------------------------------------------------------------- Mission - To Be the Premier Financial Services Organization in the Western United States Business Lines - Consumer Banking - Small- to Mid-Size Commercial Banking - Annuities - Securities and Insurance Brokerage - -------------------------------------------------------------------------------- Washington Mutual [LOGO] GREAT WESTERN [LOGO] 4 7 KEY STRATEGIES - -------------------------------------------------------------------------------- - - Expand Consumer and Commercial Banking Franchises through Internal Growth and Acquisitions - - Maintain a High Quality Balance Sheet - - Improve Operating Efficiency - - Limit Sensitivity to Interest Rate Movements - - Achieve Financial Targets - ROCE: >18% NPA/Total Assets: <1.00% - EPS Growth: 15% One-Year Gap: >(10%) - Efficiency Ratio: <50% Common Equity/Assets: >5% - -------------------------------------------------------------------------------- Washington Mutual [LOGO] 5 GREAT WESTERN [LOGO] 8 EVOLUTION OF A SUPER-REGIONAL FRANCHISE - ------------------------------------------------------------------------------- [MAP OF THE WESTERN UNITED STATES] 1987(a) Assets $5.7B Loans 3.0B Deposits 3.5B Equity 316.9mm Stock Price 6.28 Market Capitalization 390.0mm [MAP OF THE WESTERN UNITED STATES] Q1: 1997 Assets $46.1B Loans 32.2B Deposits 24.3B Equity 2.4B Stock Price 48.31 Market Capitalization 5.7B (a) As of and for the latest twelve months ended 12/31/87. - ------------------------------------------------------------------------------- [LOGO] Washington Mutual GREAT WESTERN [LOGO] 6 9 HISTORY OF STRONG EARNINGS AND DIVIDEND GROWTH(a) - --------------------------------------------------------------------------------
[BAR GRAPH] CORE EPS(b) DIVIDENDS PER SHARE (CAGR: 16.5%) (CAGR: 28.5%) WAMU WAMU 1992 $1.84 $0.33 1993 $2.30 $0.50 1994 $2.62 $0.70 1995 $2.76 $0.77 1996 $3.39 $0.90
(a) Reflects numbers as originally reported (prior to restatement for pooling transactions). (b) Adjusted to exclude gains on sales, restructuring charges, the SAIF recapitalization charge and one-time asset write-offs. - ------------------------------------------------------------------------------- [LOGO] Washington Mutual 7 GREAT WESTERN [LOGO] 10 STOCK MARKET OUTPERFORMANCE - ------------------------------------------------------------------------------- 4/1/90 - 12/31/96 COMPARATIVE RETURN(a) [BAR GRAPH] WAMU ......... 34.0% NOB .......... 28.5% CCI .......... 28.4% WFC .......... 26.2% BAC .......... 24.5% KEY .......... 23.8% USBC ......... 21.5% NB ........... 18.8% ONE .......... 18.6% S&P .......... 15.5% AHM .......... 14.7% GWF .......... 14.2% GDW .......... 14.0% WFSL ......... 13.9%
Source: Bloomberg. (a) Total return assumes reinvestment of dividends. - ------------------------------------------------------------------------------- [LOGO] Washington Mutual 8 GREAT WESTERN [LOGO] 11 1997: Q1 UPDATE - -------------------------------------------------------------------------------- ($ in millions, except share data) Percentage 1996:Q1 1997:Q1 Change ------- ------- ---------- Net Income $ 88.8 $114.1 +28% Earnings per Share 0.74 0.93 +26% Net Interest Income 287.0 317.0 +10% Non Interest Income 57.0 75.4 +32% Depositor Fees 22.5 28.6 +27% Return on Average Common Equity 14.2% 19.4% -- Return on Average Assets 0.85% 1.01% -- Efficiency Ratio 52.6% 49.1% -- Net Interest Spread 2.75% 2.77% -- - -------------------------------------------------------------------------------- Washington Mutual [LOGO] GREAT WESTERN [LOGO] 9 12 1997: Q1 UPDATE (CONT'D) - -------------------------------------------------------------------------------- ($ in millions) Percentage 1996:Q1 1997:Q1 Change ------- ------- ---------- Average Assets $41,573 $45,025 +8% Average Loans 24,719 31,086 +26% Average Investments 14,910 12,035 (19%) Loan Originations: Total $2,993 $3,462 +16% Higher Margin Loan Products(a) 481 732 +52% Consumer 274 370 +35% Commercial 37 148 +302% Non Single-family/Total Originations 24% 31% -- NPAs $330 $335 +2% NPAs/Assets 0.78% 0.73% -- Reserves/(NPAs less REO) 108% 153% -- (a) Includes construction, multi-family, commercial real estate, consumer and commercial - -------------------------------------------------------------------------------- Washington Mutual [LOGO] GREAT WESTERN [LOGO] 10 13 1997: Q1 UPDATE (CONT'D) - -------------------------------------------------------------------------------- Percentage 1996:Q4 1997:Q1 Change ------- ------- ---------- Net New Checking Accounts Opened: WMB and WMBfsb 31,520 34,358 +9% American Savings 6,063 31,315 +416% ------- ------- ---------- Total 37,583 65,673 +75% Retail Checking Accounts: WMB and WMBfsb 608,365 651,474 +7 American Savings 237,617 268,932 +13% ------- ------- Total Retail Checking Accounts 845,982 920,406 +9 Households Served (2/28/97) (000s) 1,423 1,500 +5% Transaction(a)/Total Deposits 40% 42% - (a) Includes checking, savings and money market deposits - -------------------------------------------------------------------------------- Washington Mutual [LOGO] GREAT WESTERN [LOGO] 11 14 FRANCHISE POTENTIAL OF AMERICAN - ------------------------------------------------------------------------------ ($ in millions; accounts in thousands) [BAR GRAPH]
Retail Checking Accounts (CAGRs: 22.7%, 8.3%) WAMU WAMU & American ---- -------------- 1994 394 581 1995 489 721 1996 608 846 97:Q1 651 920 [BAR GRAPH] Depositor Fee Income (CAGRs: 66.5%, 18.5%)(a) WAMU WAMU & American ---- -------------- 1994 $29 $ 45 1995 $58 $ 79 1996 $79 $103 96:Q1 $17 $ 22 +27.3% 97:Q1 $23 $ 29
(a) For the two-year period from year-end 1994 to year-end 1996 - ------------------------------------------------------------------------------- [LOGO] Washington Mutual 12 GREAT WESTERN [LOGO] 15 - ----------------------------------------------------------------------------- GREAT WESTERN MERGER: OVERVIEW - ----------------------------------------------------------------------------- Washington Mutual [LOGO] GREAT WESTERN [LOGO] 13 16 TRANSACTION SUMMARY - -------------------------------------------------------------------------------- Fixed Exchange Ratio: 0.9x Implied Value Per GWF Share: $47.93(a) Caps/Collars: None Consideration: 100% common stock Accounting/Tax Treatment: Pooling of interests/Tax-free exchange Assumed Closing: 3rd Quarter 1997 Board Composition: Four GWF Directors to join WAMU Board Termination Fee: Up to $175 million plus expenses (a) Based on WAMU closing stock price of $53.25 on 3/5/97, the day prior to the announcement. Implied value is $42.08 based on WAMU closing stock price of $46.75 on 4/23/97. - -------------------------------------------------------------------------------- Washington Mutual [LOGO] 14 GREAT WESTERN [LOGO] 17 COMBINATION CREATES STRENGTH AND SCALE - -------------------------------------------------------------------------------- ($ in billions) At 3/31/97 -------------------------------------- WAMU GWF Pro Forma -------- -------- --------- Assets $46.0 $42.9 $88.5 Deposits $24.3 $28.2 $52.5 Market Capitalization at 3/5/97 $ 6.3 $ 6.2 $12.9 Banking and Lending Offices 557 571 1,128(a) Consumer Finance Offices -- 502 502 Households (mm) 1.5 2.7 4.2 Mutual Funds Under Management $ 1.5 $ 3.1 $ 4.6 LTM(b) Single Family Mortgage Originations $10.1 $ 6.5 $16.6 LTM(b) Total Loan Originations $14.1 $ 9.0 $23.1 (a) Before consolidations (b) Latest twelve months - -------------------------------------------------------------------------------- [LOGO] Washington Mutual 15 GREAT WESTERN [LOGO] 18 BENEFITS OF THE TRANSACTION - -------------------------------------------------------------------------------- PREMIER CONSUMER BANKING FRANCHISE - - Geographically diversified West Coast powerhouse - - National mortgage and consumer finance franchises CREATES SHAREHOLDER VALUE - - EPS accretion and accelerated earnings growth - - Strong, low risk balance sheet LOW RISK EXECUTION - - Strong management team with proven track record - - Thorough due diligence and business plan formulation - -------------------------------------------------------------------------------- [LOGO] Washington Mutual 16 GREAT WESTERN [LOGO] 19 - -------------------------------------------------------------------------------- GREAT WESTERN MERGER: A PREMIER CONSUMER BANKING FRANCHISE - -------------------------------------------------------------------------------- [LOGO] Washington Mutual GREAT WESTERN [LOGO] 17 20 STRONG WEST COAST AND FLORIDA FRANCHISES - -------------------------------------------------------------------------------- [MAPS OF THE WESTERN UNITED STATES AND FLORIDA SHOWING BRANCH LOCATIONS]
Deposits Deposit State ($B)(a) Share Rank - ------------ -------- ------- ---- California $34.6 9.2% 3 Washington 8.1 15.4% 2 Oregon 2.8 10.0% 3 Florida 7.1 4.0% 5 Other States 0.6 NA NA
Source: SNL Securities (a) June 30, 1996 deposit data updated for announced acquisitions through February 26, 1997. - -------------------------------------------------------------------------------- [LOGO] Washington Mutual 18 GREAT WESTERN [LOGO] 21 NATIONAL CONSUMER ORIGINATION FRANCHISE - -------------------------------------------------------------------------------- [MAP OF THE UNITED STATES SHOWING MORTGAGE LOAN OFFICES AND CONSUMER FINANCE LOCATIONS]
Mortgage Consumer Loan Finance State Offices Locations - ------------ -------- --------- California 107 28 Washington 30 0 Oregon 13 0 Florida 20 35 Other States 123 439 --- --- Total 293 502 === ===
Great Western: Black Box - Retail Mortgage Black Star - Wholesale Mortgage Shaded Box - Aristar Washington Mutual: Bullet - Mortgage Loan Offices - -------------------------------------------------------------------------------- [LOGO] Washington Mutual 19 GREAT WESTERN [LOGO] 22 SINGLE FAMILY MORTGAGE LENDING LEADERSHIP - ------------------------------------------------------------------------------- CALIFORNIA(a) [BAR GRAPH] BAC..........................8.8% WAMU/GWF.....................6.7% (WAMU = 4.8%, GWF = 1.9%) GDW..........................3.0% NOB..........................2.8% AHM..........................2.7%
WASHINGTON(b) [BAR GRAPH] WAMU/GWF....................16.5% (WAMU = 14.6%, GWF = 1.8%) NOB......................... 6.5% BAC......................... 4.0% MEL......................... 2.0% CCR......................... 1.9%
(a) Source: TRW Redi for year ended 12/31/96. (b) Source: RMS Information Services for year ended 12/31/96. - ------------------------------------------------------------------------------- [LOGO] Washington Mutual 20 GREAT WESTERN [LOGO] 23 SINGLE FAMILY MORTGAGE LENDING LEADERSHIP - ------------------------------------------------------------------------------- OREGON(a) [BAR GRAPH] WAMU/GWF.....................11.4% (WAMU=10.1%, GWF=1.3%) NOB.......................... 5.9% BAC.......................... 4.7% MEL.......................... 3.2% Premier Mortgage............. 2.5%
WEST COAST ORIGINATIONS ($ B)(b) [BAR GRAPH] WAMU/GWF.....................$11.8 (WAMU=$9.1, GWF=$2.7) BAC..........................$11.4 NOB..........................$ 4.9 GDW..........................$ 3.6 AHM..........................$ 3.2
(a) Source: RMS Information Services for year ended 12/31/96. (b) Source: RMS Information Services and TRW Redi for year ended 12/31/96. - ------------------------------------------------------------------------------- [LOGO] Washington Mutual 21 GREAT WESTERN [LOGO] 24 STRONG BUSINESS LINE FIT - ------------------------------------------------------------------------------- - -- CONSUMER LOAN PRODUCTS - Home Equity [WASHINGTON MUTUAL LOGO] - Consumer Finance [GREAT WESTERN LOGO] - Manufactured Housing [WASHINGTON MUTUAL LOGO] - Auto/Other [WASHINGTON MUTUAL LOGO] - -- NON-BANKING SERVICES - Mutual Funds [WASHINGTON MUTUAL LOGO] [GREAT WESTERN LOGO] - Annuities [WASHINGTON MUTUAL LOGO] [GREAT WESTERN LOGO] - Securities Brokerage [WASHINGTON MUTUAL LOGO] [GREAT WESTERN LOGO] - Credit Insurance [WASHINGTON MUTUAL LOGO] [GREAT WESTERN LOGO] - -- BUSINESS BANKING PRODUCTS - Small Business Lending [GREAT WESTERN LOGO] - Business Checking [GREAT WESTERN LOGO] - Community Banking [WASHINGTON MUTUAL LOGO] - -- RETAIL BANKING PRODUCTS - Transaction Accounts [WASHINGTON MUTUAL LOGO] [GREAT WESTERN LOGO] - Certificates/Savings [WASHINGTON MUTUAL LOGO] [GREAT WESTERN LOGO] - -- MORTGAGE LENDING - Single Family [WASHINGTON MUTUAL LOGO] [GREAT WESTERN LOGO] - Residential Construction [WASHINGTON MUTUAL LOGO] - Multi-Family [WASHINGTON MUTUAL LOGO] - ------------------------------------------------------------------------------- [LOGO] Washington Mutual 22 GREAT WESTERN [LOGO] 25 - -------------------------------------------------------------------------------- GREAT WESTERN MERGER: SHAREHOLDER VALUE CREATION - -------------------------------------------------------------------------------- [LOGO] Washington Mutual GREAT WESTERN[LOGO] 23 26 TESTED ASSUMPTIONS -- ATTRACTIVE RETURNS - ------------------------------------------------------------------------------- Assumptions Results - ------------------------------ ------------------------------ - - Cost savings of $340 - Double digit accretion million in 1999 in 1999 - - Additional fee income [ARROW] - Strong operating of $88 million in 1999 fundamentals - - Surplus capital - Maintains solid capital supports increased loan levels and flexibility retention - Strong NPA, loss reserve ratios - ------------------------------------------------------------------------------- [LOGO] Washington Mutual 24 GREAT WESTERN [LOGO] 27 EPS ACCRETION BASED ON DUE DILIGENCED ASSUMPTIONS - --------------------------------------------------------------------------------
($ in millions, except per share data) 1997P 1998P 1999P ----- ----- ----- WAMU Estimated Net Income(a) $471 $556 $623 GWF Estimated Net Income(a) 397 434 470 ----- ------ ------ Total Estimated Net Income 868 990 1,093 Net Income Available to Common 847 987 1,093 Cost Savings 9 125 204 Fee Income Opportunities 0 36 53 Earnings from Retained Capital and Loans 0 68 148 ----- ------ ------ Estimated Combined Net Income $856 $1,216 $1,497 ===== ====== ====== Stand Alone EPS $3.84 $4.58 $5.13 Estimated Combined EPS(b) $4.81 $5.90 % Accretion to First Call 5.0% 15.0% % EPS Growth 25.3% 22.7%
(a) First Call estimates for 1997 and 1998 before preferred dividends. 1999 estimates based on IBES growth rate of 12% and 10.5% for WAMU and GWF. (b) Based on 252.1mm pro forma shares outstanding in 1997, 253.1mm in 1998, and 253.8mm in 1999. EPS figures include 9.1mm GWF option shares. EPS accretion using option shares under the treasury stock method would be 6.3% and 16.6% in 1998 and 1999. - ------------------------------------------------------------------------------- [LOGO] Washington Mutual 25 GREAT WESTERN [LOGO] 28 CONFIDENCE IN EXECUTION - -------------------------------------------------------------------------------- / / Unique experience as an acquiror (22 transactions) / / Integration plan is underway / / Deposit/mortgage servicing systems are the same / / Network infrastructure is the same / / WAMU partnerships with: o IBM o EDS o ALLTEL / / Track record of fully integrating within 6 months of close - ------------------------------------------------------------------------------- [LOGO] Washington Mutual 26 GREAT WESTERN [LOGO] 29 COST SAVINGS BREAKDOWN - --------------------------------------------------------------------------------
($ in millions) 1999 ------------------ % of GWF Amount Op. Exp(a) ------ ---------- Administration/Finance $65 51% Lending 69 49 Corporate Operations 96 43 Retail Banking 99 27 Subsidiaries 11 7 ---- Total Pretax Cost Savings $340 Aftertax Cost Savings $204 Pretax Cost Savings as a % of: GWF Net Operating Expenses(b) 38% Combined 1997 G&A(c) 21%
(a) Based on GWF budgeted 1997 gross operating expenses. (b) Net operating expenses are net of loan origination costs which are deferred and amortized over the life of the loans and various reimbursable costs. (c) 1997 G&A net expense base of $900mm for GWF and $745mm for WAMU based on sampling of analyst reports. - ------------------------------------------------------------------------------- [LOGO] Washington Mutual 27 GREAT WESTERN [LOGO] 30 COST SAVINGS BREAKDOWN - -------------------------------------------------------------------------------- ($ in millions)
1999 Savings ------- CORPORATE ADMINISTRATION/FINANCE - - Consolidation of duplicate functions/premises - Corporate properties $16 - Executive management 7 - Corporate administrative staff 42 --- $65 === LENDING - - Loan office consolidations (approximately 100) and alignment of GWF's loan origination cost structure with WAMU's $52 - - Reduced servicing cost per loan 17 --- $69 ===
- -------------------------------------------------------------------------------- [LOGO]Washington Mutual 28 GREAT WESTERN[LOGO] 31 COST SAVINGS BREAKDOWN - -------------------------------------------------------------------------------- ($ in millions)
1999 Savings ------- CORPORATE OPERATIONS - - Consolidation and implementation of WAMU technology platform $50 - - Align GWF's cost of branch operations/economies of scale 26 - - Lower loan origination support and credit administration costs 20 --- $96 === CORPORATE MARKETING/RETAIL BANK - - Retail branch consolidation (approximately 100) $50 - - Advertising synergies 25 - - Duplicate staff functions 24 --- $99 ===
- -------------------------------------------------------------------------------- [LOGO]Washington Mutual 29 GREAT WESTERN[LOGO] 32 MERGER-RELATED CHARGES FACILITATE COST SAVINGS - -------------------------------------------------------------------------------
($ in millions) Additional Loan Loss Reserves $100 Severance and Management Payments 145 Facilities and Equipment 106 Other Expenses 92 ---- Total Expenses $443 Tax Effect (125) ---- Aftertax Expenses $318 ==== - -------------------------------------------------------------------------------
[LOGO] Washington Mutual 30 GREAT WESTERN [LOGO] 33 CONSUMER BANKING FEE INCOME OPPORTUNITIES - -------------------------------------------------------------------------------- ($ in millions)
1998 1999 ---- ---- Checking fee parity with WAMU fees (existing accounts) $13 $13 Implementation of WAMU free checking (new accounts) and cross-selling of related products 30 52 Improved sales/fees in securities subsidiaries 13 16 Enhanced fees from expanded loan production 4 7 --- --- Total Pretax $60 $88 Total Aftertax $36 $53
- -------------------------------------------------------------------------------- [LOGO] Washington Mutual GREAT WESTERN [LOGO] 31 34 NET INTEREST INCOME GROWTH - -------------------------------------------------------------------------------- - - Earnings retention results in strong capital growth - - Strong historical and projected loan originations create net loan growth - - Capital retention plus net loan growth at reasonable margins leads to increased net interest income - -------------------------------------------------------------------------------- [LOGO] Washington Mutual GREAT WESTERN [LOGO] 32 35 STRONG CAPITAL GENERATION AND GROWTH POTENTIAL - -------------------------------------------------------------------------------- ($ in millions)
12/31/96 1997P 1998P 1999P -------- ----- ----- ----- Beginning Combined Common Equity $4,710 $5,026 $5,926 Pro Forma Net Income 856 1,216 1,497 Aftertax Restructuring Charge (318) -- -- Common Dividends @ 26% Payout (223) (316) (389) ------ ------ ------ ------ Ending Combined Common Equity $4,710 $5,026 $5,926 $7,034 ====== ====== ====== ====== Asset Excess Common Equity Above 5% Growth Rate(a) Common Equity/Assets Ratio -------------- ----------------------------- 8% $305 $827 $1,527 10% 217 636 1,215 12% 130 442 892 14% 42 245 557
(a) Annual growth from 12/31/96 pro forma total assets of $87.4 billion - -------------------------------------------------------------------------------- [LOGO] Washington Mutual GREAT WESTERN [LOGO] 33 36 STRONG ORIGINATION CAPABILITIES - -------------------------------------------------------------------------------- ($ in billions) TOTAL LOAN ORIGINATIONS [BAR GRAPH]
WAMU GWF WAMU & GWF ---- ----- ---------- 1995.......... $ 9.4 $9.7 $19.1 +16% 1996.......... $13.6 $8.5 $22.1 96:Q1......... $ 3.0 $1.7 $ 4.7 +21% 97:Q1......... $ 3.5 $2.2 $ 5.7
NET ORIGINATIONS(a) [BAR GRAPH]
WAMU GWF WAMU & GWF ----- ----- ---------- 1995.......... $6.5 $4.5 $11.0 1996.......... $9.2 $2.2 $11.4 96:Q1......... $2.1 $0.3 $ 2.4 97:Q1......... $2.5 $0.8 $ 3.3
(a) Total originations less REO transfers, prepayments and paydowns. Net originations are not reduced for loans sold. - -------------------------------------------------------------------------------- Washington Mutual [LOGO] 34 GREAT WESTERN [LOGO] 37 1997:Q1 - ATTRACTIVE TRENDS IN LOAN ORIGINATION MIX - --------------------------------------------------------------------------------
[PIE CHART] [PIE CHART] 1996:Q1 1997:Q1 Single-family 75.6% 69.5% Multi-family/ECRE 5.7% 6.2% Construction 8.3% 9.4% Consumer 9.1% 10.7% Commercial 1.2% 4.3%
- -------------------------------------------------------------------------------- Washington Mutual [LOGO] GREAT WESTERN [LOGO] 35 38 LOAN RETENTION DRIVES GROWTH IN NET INTEREST INCOME - -------------------------------------------------------------------------------- ($ in millions)
1996A 1997P 1998P 1999P ------- ------- ------- -------- Combined Net Loan Growth $7,011 $6,600(c) $11,000 $11,400 Street Expectations of Net Loan Growth(a) -- $3,500 $ 3,600 3,800 ------ ------- ------- Net Loan Growth Above Street Expectations -- $3,100 $ 7,400 $ 7,600 Cumulative Average Net Loan Growth Above Street Expectations(b) $ 6,800 $14,300
(a) Assumes 4% asset (in loans) growth of combined companies. (b) Equals 100% of prior years and 50% of current year. (c) Combined net loan growth for 1997: Q1 was $2,288 million or approximately 35 percent of 1997P. - -------------------------------------------------------------------------------- [LOGO] Washington Mutual GREAT WESTERN [LOGO] 36 39 INCREMENTAL NET INTEREST INCOME - --------------------------------------------------------------------
1998 1999 ---------------- ---------------- Average Average Balance Yield Balance Yield ------- ----- ------- ----- Incremental Loans $6.8 7.25% $14.3 7.25% Incremental Liabilities 6.5 5.79 13.6 5.79 Incremental Capital(a) 0.3 0.00 0.7 0.00 Net Interest Income (Pretax) $113 $246 Net Interest Income (Aftertax) $ 68 $148 Net Interest Spread 1.46% 1.46% Net Interest Margin 1.66% 1.72%
(a) Includes the incremental capital supplied by Great Western acquisition - ------------------------------------------------------------------------------- [LOGO] Washington Mutual 37 GREAT WESTERN [LOGO] 40 1996 WAMU/ASB LOAN SPREADS - -------------------------------------------------------------------------------
% of Net Spread to Resi/Consumer Wholesale Production Matched Funding(a) ------------- ------------------ Residential Mortgage Fixed Rate 28% 1.15% COFI ARM's 36 1.35 Treasury ARM's 12 1.71 Multifamily 4 2.57 Construction -- Custom 6 1.91 Construction -- Spec. 4 5.54 Consumer Home Equity 5 2.48% Mfd Housing 3 1.61 Other 2 3.24 --- Total 100% 1.69%(b)
(a) Net spread after deducting origination, servicing and credit costs (b) Equivalent margin estimated to be 15-30 bps higher depending on capital allocation. - -------------------------------------------------------------------------------- [WASHINGTON MUTUAL LOGO] [GREAT WESTERN LOGO] 38 41 STRONG ASSET QUALITY AND RESERVES - ---------------------------------------------------------------------------- ($ in millions)
At March 31, 1997 --------------------------------------------------------- WAMU GWF Adjustments Pro Forma ---- --- ----------- --------- Non-Accrual $240 $424 - $664 Loans(a) Real Estate Owned 94 77 - 171 ---- ---- ---- NPAs $334 $501 - $835 ==== ==== ==== NPAs/Assets 0.73% 1.17% - 0.94% Loan Loss Reserves $367 $321 $100 $788 Reserves/NPLs(a) 153% 76% - 119% (a) Excluding restructured loans - --------------------------------------------------------------------------------- Washington Mutual [LOGO] GREAT WESTERN [LOGO]
39 42 A COMPELLING VALUATION - --------------------------------------------------------------------------------
1997P 1998P 1999P ----- ----- ----- EPS Estimates Before Great Western(a) $3.84 $4.58 $5.13 P/E Multiple(b) 12.2x 10.2x 9.1x EPS Pro Forma for Great Western $4.81 $5.90 P/E Multiple(b) 9.7x 7.9x
(a) First Call estimates for 1997 and 1998. 1999 based on IBES growth rate of 12%. (b) Based on closing stock price of $46.75 on 4/23/97. - ------------------------------------------------------------------------------- [LOGO] Washington Mutual 40 GREAT WESTERN [LOGO] 43 Washington Mutual, Inc. ("Washington Mutual") and certain other persons named below may be deemed to be participants in the solicitation of proxies in connection with the merger of Great Western Financial Corporation ("Great Western") and a wholly-owned subsidiary of Washington Mutual pursuant to which each outstanding share of Great Western common stock would be converted into 0.9 shares of Washington Mutual common stock (the "Merger"). The participants in this solicitation may include the directors of Washington Mutual (Douglas P. Beighle, David Bonderman, J. Taylor Crandall, Roger H. Eigsti, John W. Ellis, Daniel J. Evans, Anne V. Farrell, William P. Gerberding, Kerry K. Killinger, Samuel B. McKinney, Michael K. Murphy, William G. Reed, Jr. and James H. Stever); the following executive officers of Washington Mutual; Craig S. Davis, Steven P. Freimuth, Lee D. Lannoye, William A. Longbrake, Deanna W. Oppenheimer, Craig E. Tall and S. Liane Wilson; and the following other members of management of Washington Mutual; Karen Christensen, JoAnn DeGrande, William Ehrlich, James B. Fitzgerald, Marc R. Kittner and Douglas G. Wisdorf (collectively, the "Washington Mutual Participants"). As of the date of this communication, David Bonderman, J. Taylor Crandall and Kerry K. Killinger beneficially owned 394,141 shares 6,549,755 shares and 1,044,224 shares of Washington Mutual common stock, respectively. The remaining Washington Mutual Participants do not beneficially own, individually or in the aggregate, in excess of 1% of Washington Mutual's equity securities. Great Western and certain other persons named below may be deemed to be participants in the solicitation of proxies in connection with the Merger. The participants in this solicitation may include the directors of Great Western (James F. Montgomery, John F. Maher, Dr. David Alexander, H. Frederick Christie, Stephen E. Frank, John V. Giovenco, Firmin A. Gryp, Enrique Hernandez, Jr., Charles D. Miller, Dr. Alberta E. Siegal and Willis B. Wood, Jr.); the following executive officers of Great Western: J. Lance Erikson, Carl F. Geuther, Michael M. Pappas, A. William Schenck III, Ray W. Sims and Jaynie M. Studenmund; and the following other members of management of Great Western: Stephen F. Adams, Bruce F. Antenberg, Barry R. Barkley, Ian D. Campbell, Charles Coleman, Allen D. Meadows and John A. Trotter (collectively, the "Great Western Participants"). As of the date of this communication, James F. Montgomery and John F. Maher beneficially owned 680,488 shares and 611,762 shares of Great Western common stock, respectively (including shares subject to stock options exercisable within 60 days). The remaining Great Western Participants do not beneficially own, individually or in the aggregate, in excess of 1% of Great Western's equity securities. Washington Mutual has retained Lehman Brothers Inc. ("Lehman Brothers") to act as its financial advisor in connection with the Merger for which it received and may receive substantial fees as well as reimbursement of reasonable out-of-pocket expenses. In addition, Washington Mutual has agreed to indemnify Lehman Brothers and certain persons related to it against certain liabilities, including certain liabilities under the federal securities laws, arising out of its engagement. Lehman Brothers is an investment banking firm that provides a full range of financial services for institutional and individual clients. Lehman Brothers does not admit that it or any of its directors, officers or employees is a "participant" as defined in Schedule 14A promulgated under the Securities Exchange Act of 1934, as amended, in the proxy solicitation, or that Schedule 14A requires the disclosure of certain information concerning Lehman Brothers. In connection with Lehman Brothers' role as financial advisor to Washington Mutual, Lehman Brothers and the following investment banking employees of Lehman Brothers may communicate in person, by telephone or otherwise with a limited number of institutions, brokers or other 41 44 persons who are stockholders of Washington Mutual and Great Western: Steven B. Wolitzer, Philip R. Erlanger, Sanjiv Sobti, David J. Kim, Craig P. Sweeney and Daniel A. Trznadel. In the normal course of its business Lehman Brothers regularly buys and sells securities issued by Washington Mutual and its affiliates ("Washington Mutual Securities") and Great Western and its affiliates ("Great Western Securities") for its own account and for the account of its customers, which transactions may result from time to time in Lehman Brothers and its associates having a net "long" or net "short" position in Washington Mutual Securities, Great Western Securities, or option contracts or other derivatives in or relating to Washington Mutual Securities or Great Western Securities. As of April 21, 1997, Lehman Brothers had positions in Washington Mutual Securities and Great Western Securities as principal as follows: (i) net "short" 224 of Washington Mutual's common shares; (ii) net "long" 27,434 shares of Washington Mutual's 9.12% preferred stock; (iii) net "long" 124,964 shares of Great Western's 8.30% preferred stock. Great Western has retained Goldman, Sachs & Co. ("Goldman Sachs") and Merrill Lynch & Co. ("Merrill Lynch") to act as its financial advisors in connection with the Merger, as well as the merger proposal by H. F. Ahmanson & Company, for which they received and may receive substantial fees, as well as reimbursement of reasonable out-of-pocket expenses. In addition, Great Western has agreed to indemnify Goldman Sachs and Merrill Lynch and certain persons related to them against certain liabilities, including certain liabilities under the federal securities laws, arising out of their engagement. Each of Goldman Sachs and Merrill Lynch is an investment banking firm that provides a full range of financial services for institutional and individual clients. Neither Goldman Sachs nor Merrill Lynch admits that it or any of its directors, officers or employees is a "participant" as defined in Schedule 14A promulgated under the Securities Exchange Act of 1934, as amended, in the proxy solicitation, or that Schedule 14A requires the disclosure of certain information concerning Goldman Sachs and Merrill Lynch. In connection with Goldman Sach's role as financial advisor to Great Western, Goldman Sachs and the following investment banking employees of Goldman Sachs may communicate in person, by telephone or otherwise with a limited number of institutions, brokers or other persons who are stockholders of Great Western: Joe Wender, John Mahoney, Andy Gordon, Todd Owens and Andrea Vittorelli. In connection with Merrill Lynch's role as financial advisor to Great Western, Merrill Lynch and the following investment banking employees of Merrill Lynch may communicate in person, by telephone or otherwise with a limited number of institutions, brokers or other persons who are stockholders of Great Western: Herb Lurie, Louis S. Wolfe, Paul Wetzel, Frank V. McMahon, John Esposito, Christopher Del-Moral Niles and Kavita Gupta. In the normal course of their respective businesses Goldman Sachs and Merrill Lynch regularly buy and sell Great Western Securities and Washington Mutual Securities for its own account and for the accounts of its customers, which transactions may result from time to time in Goldman Sachs and its associates and Merrill Lynch and its associates having a net "long" or net "short" position in Great Western Securities, Washington Mutual Securities, or option contracts or other derivatives in or relating to Great Western Securities or Washington Mutual Securities. As of April 21, 1997, Goldman Sachs had positions in Great Western Securities and Washington Mutual Securities as principal as follows: (i) net "long" 9,173 of Great Western's common shares; (ii) net "Long" $1 million of Great Western's deposit notes; and (iii) net "long" 1,098 shares of Washington Mutual's common shares. As of April 21, 1997, Merrill Lynch had positions in Great Western Securities and Washington Mutual Securities as principal as follows: (i) net "long" 7,126 of Great Western's common shares; (ii) net "long" 1,600 shares of Great Western's 8.30% preferred stock; and (iii) net "long" 1,526 of Washington Mutual's common shares. 42 -----END PRIVACY-ENHANCED MESSAGE-----