-----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, CQKEnO5NsDHD6oBq5z2dA5kUoIT0EwP3LPfAsaEgi/IDfy7zAsNHp11sydiNf9ZK GxgNrbvw5xQkfDsqhyAGjA== 0000891020-97-000837.txt : 19970515 0000891020-97-000837.hdr.sgml : 19970515 ACCESSION NUMBER: 0000891020-97-000837 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970514 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WASHINGTON MUTUAL INC CENTRAL INDEX KEY: 0000933136 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTIONS, NOT FEDERALLY CHARTERED [6036] IRS NUMBER: 911653725 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-25188 FILM NUMBER: 97604894 BUSINESS ADDRESS: STREET 1: 1201 THIRD AVENUE CITY: SEATTLE STATE: WA ZIP: 98101 BUSINESS PHONE: 2064612000 MAIL ADDRESS: STREET 1: 1201 THIRD AVE STREET 2: 1201 THIRD AVE CITY: SEATTLE STATE: WA ZIP: 98101 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: May 14, 1997 Washington Mutual, Inc. ------------------------------------------------------ (Exact Name of Registrant as specified in its charter) Washington ------------------------------------------------------ 0-25188 91-1653725 - -------------------------------------------------------------------------------- Commission File Number IRS Identification No. 1201 Third Avenue, Seattle, Washington 98101 - -------------------------------------------------------------------------------- Address of Principal Executive Office Postal Code 206-461-2000 ------------------------------------------------------ Registrant's telephone number including area code 2 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS 99.1 Slide Presentation to Investment Analysts SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. WASHINGTON MUTUAL, INC. Date: May 14, 1997 By: /s/ Marc R. Kittner ---------------------------- Marc R. Kittner Senior Vice President and Corporate Counsel EX-99.1 2 SLIDE PRESENTATION TO INVESTMENT ANALYSTS 1 SLIDE 1 INVESTOR CONFERENCE DO THE MATH SLIDE 2 KERRY KILLINGER Chairman, President & Chief Executive Officer 2 SLIDE 1 GROWTH + VALUE + EXPERIENCE = WAMU SLIDE 2 GROWTH + VALUE + EXPERIENCE = WAMU WAMU PROFILE o SIZE -- Largest bank headquartered in the Pacific Northwest o MISSION -- To be the premier financial services organization in the western United States o BUSINESS LINES -- Consumer banking -- Small- to mid-size commercial banking -- Annuities -- Securities and insurance brokerage 3 SLIDE 1 GROWTH + VALUE + EXPERIENCE = WAMU WAMU PROFILE Total Assets $46.1 bn Total Deposits $24.3 bn Equity/Assets 5.27% Locations 590 Households 1.5 mm Marketplace WA, OR, CA, UT, ID, AZ, CO, NV, MT SLIDE 2 GROWTH + VALUE + EXPERIENCE = WAMU KEY STRATEGIES o Expand consumer and commercial banking franchises through internal growth and acquisitions o Maintain a high quality balance sheet o Improve operating efficiency o Limit sensitivity to interest rate movement o Achieve financial targets -- ROCE: (greater than)18% -- NPA/Total Assets: (less than)1% -- EPS growth 15% -- Common Equity/Assets (greater than)5% -- Efficiency Ratio (less than)50%
4 SLIDE 1 GROWTH + VALUE + EXPERIENCE = WAMU A GROWING MARKET FRANCHISE 1987* ----- o Assets $ 5.7 bn o Loans 3.0 bn o Deposits 3.5 bn o Equity 316.9 mm o Market Cap 211.9 mm Note: As of 12/31/87 SLIDE 2 GROWTH + VALUE + EXPERIENCE = WAMU A GROWING MARKET FRANCHISE 3/31/97* -------- o Assets $ 46.1 bn o Loans 32.2 bn o Deposits 24.3 bn o Equity 2.4 bn o Market Cap 5.7 bn Note: As of 12/31/97 5 SLIDE 1 GROWTH + VALUE + EXPERIENCE = WAMU DISTRIBUTION NETWORK BANKING OPERATIONS ------------------ o Consumer Banking Locations -- Traditional branches 343 -- In-store branches 84 -- Loan centers 103 --- 529 o Commercial Banking Locations -- Traditional branches 50 -- Business banking centers 13 --- 63 o Households Served 1.5 mm* Note: As of 3/31/97 SLIDE 2 GROWTH + VALUE + EXPERIENCE = WAMU SUCCESSFUL GROWTH THROUGH ACQUISITIONS ASSETS ACQUIRED INSTITUTION (in Millions) BRANCHES - -------- ----------- ------------- -------- 1988-92 10 Acquisitions $ 2,041.2 84 1993 Pioneer(a) 926.5 17 1993 Pacific First 5,861.3 129 1994 Far West 42.2(b) 3 1994 Summit(a) 188.1 4 1995 Olympus(a) 391.4 11 1995 Enterprise(a)(c) 153.8 1 1996 Western(a)(c) 776.3 42 1996 Utah Federal(a) 122.6 5 1996 American(a) 21,915.8 221 1997 United Western 414.9 9 --------- --- $32,235.3 526 (a) Pooling transaction (b) Branch acquisition only (c) Commercial bank 6 SLIDE 1 STOCK MARKET OUTPERFORMANCE Cumulative Total Return Comparison [CHART] (Assumes reinvestment of dividends) WAMU 100 $ 92.99 $281.20 $245.1 $1,066.19 $848.84 $2,318.92 $2,598.52 S&P Financial Index 100 108.49 167.02 171.14 317.68 340.45 708.78 783.97 S&P 500 Index 100 118.28 184.69 288.51 404.66 451.33 763.50 740.87 3/83 12/84 12/86 12/90 12/92 12/94 12/96 3/97
Source: Standard & Poor's Compustat * $100 invested 3/83 SLIDE 2 GROWTH + VALUE + EXPERIENCE = WAMU Stock Market Outperformance Total Annual Return Peer Comparison (4/19/90 - 3/31/97) [BAR GRAPH] 34.8% 28.6% 28.2% 26.1% 23.9% 23.8% 22.4% 20.4% WAMU NoB CCI WFC BAC USBC Key NB 19.3% 16.71% 16.08% 15.3% 13.5% 12.6% GWF ONE AHM SPX GDW WFSL Source: Bloomberg 7 SLIDE 1 INVESTOR CONFERENCE DO THE MATH 8 SLIDE 1 INVESTOR CONFERENCE DO THE MATH SLIDE 2 DEANNA OPPENHEIMER Executive Vice President Corporate Relations & Consumer Banking 9 SLIDE 1 THAT'S DIFFERENT, THAT'S WASHINGTON MUTUAL The Premier Consumer Banking Strategy in the West SLIDE 2 OVERVIEW: MARKET PRESENCE Washington Consumer Deposit Market Share [BAR GRAPH] 15.8% 14.5% 10.4% 9.6% 3.8% BAC WAMU USBC Keg WFC 10 SLIDE 1 OVERVIEW: MARKET PRESENCE Oregon Consumer Deposit Market Share(a) [BAR GRAPH] 26.4% 12.8% 9.5% 7.6% 7.0% USBC WFC WAMU Keg BAC (a) Percent dollar volume as of 6/96 Note: Excludes government and noninterest-bearing accounts SLIDE 2 OVERVIEW: MARKET PRESENCE California Consumer Deposit Market Share(a) [BAR GRAPH] 16.1% 10.9% 9.6% 8.0% 5.0% BAC WFC 5.9% AHM World 3.7% WAMU/GWF (a) Percent dollar volume as of 6/96 Note: Excludes government and noninterest-bearing accounts 11 SLIDE 1 THE WASHINGTON MUTUAL CONSUMER BANKING STRATEGY o Extend multi-channel distribution o Offer expansive, profitable product line o Deploy extensive sales & productivity tools o Take advantage of comprehensive research capabilities o Use aggressive retail-oriented marketing/branding SLIDE 2 DISTRIBUTION CHANNELS [PICTURE IMAGES] 12 SLIDE 1 MULTI-CHANNEL DISTRIBUTION Financial Centers o 427 financial centers throughout West -- 343 free-standing financial centers -- 84 in-store financial centers SLIDE 2 MULTI-CHANNEL DISTRIBUTION INVESTMENTS MORTGAGE LENDING CONSUMER LENDING MONEY MARKET CHECKING SAVINGS/CDs [IMAGES] 13 SLIDE 1 DISPEL THE MYTH . . . the full service branch lives! [PICTURE IMAGE OF BRANCH BUILDING] SLIDE 2 MULTI-CHANNEL DISTRIBUTION CASE STUDY; TANASBOURNE, OREGON, FINANCIAL CENTER* o 1,500 households o 1,300 checking accounts o $9.8 million in deposits o $10 million in consumer loans o $6.3 million in mortgage lending * First ten months of operation 14 SLIDE 1 MULTI-CHANNEL DISTRIBUTION IN-STORE FINANCIAL CENTERS [PICTURE IMAGE OF BRANCH SERVICE COUNTER] SLIDE 2 MULTI-CHANNEL DISTRIBUTION IN-STORE FINANCIAL CENTERS Benefits: o Quick entry vehicle o Lower construction cost o High passenger traffic o Partnerships with leading retail/grocery chains o Offer full range of products 15 SLIDE 1 MULTI-CHANNEL DISTRIBUTION alternative delivery [PICTURE IMAGE] SLIDE 2 MULTI-CHANNEL DISTRIBUTION TELEPHONE BANKING - SALES Products offered: o Consumer loans o Mortgage loans o Bank deposits o Proprietary mutual funds/annuities 16 SLIDE 1 MULTI-CHANNEL DISTRIBUTION TELEPHONE BANKING - SERVICE [BAR GRAPH] 3/94 3/95 3/96 3/97 -------- -------- -------- ---------- Total Calls 408,705 555,343 806,377 1,401,205 VRU Calls 53.0% 70.4% 69.3% 83.2% Note: Northwest operations only SLIDE 2 MULTI-CHANNEL DISTRIBUTION INTERACTIVE FINANCIAL CENTERS/KIOSKS o Currently piloting 3 locations o Testing: -- Technology design -- Optimal marketing support -- Customer acceptance and usage o Preliminary findings: -- Usage increases with active marketing promotion/introduction of concierge -- Users cross all age demographics -- Production must meet corporate performance standards prior to full roll-out 17 SLIDE I MULTI-CHANNEL DISTRIBUTION HOME BANKING The Integrion Network o Partnership with IBM o Members possess half of the banking households in North America o To be piloted in fourth quarter o Integration with web site/bill-paying service o Extension of Washington Mutual brand SLIDE 2 [SERVICES AVAILABLE GRAPHICS] - NO DIRECT DEPOSIT NEEDED - NO CHARGE FOR TALKING TO US - NO MONTHLY SERVICE FEES - NO MINIMUM BALANCE 18 SLIDE 1 SALES & PRODUCTIVITY TOOLS [GRAPHICS] SLIDE 2 SALES AND PRODUCTIVITY TOOLS o Leading-edge technology o Highly effective incentive compensation plan o Proven sales training o Exportable sales culture 19 SLIDE 1 HIGHLY EFFECTIVE INCENTIVE COMPENSATION PLAN o Motivates producers o Rewards: -- Profitability -- Cross-sell -- Production -- Efficiency -- Customer service SLIDE 2 HIGHLY EFFECTIVE INCENTIVE COMPENSATION PLAN DEPOSITOR FEE INCOME [BAR GRAPH] (Dollars in Millions) 1994 $28.5 1995 $57.5 1996 $79.0 3/31/96 $16.8 3/31/97 $22.6 Note: Northwest operations only 20 SLIDE 1 HIGHLY EFFECTIVE INCENTIVE COMPENSATION PLAN CONSUMER LENDING [BAR GRAPH] (Dollars in Millions) 1994 $ 997.8 1995 $ 967.7 1996 $1,268.3 3/31/96 $ 237.4 3/31/97 $ 333.1 Note: Northwest operations only SLIDE 2 HIGHLY EFFECTIVE INCENTIVE COMPENSATION PLAN HOUSEHOLDS/PRODUCTION FTE [BAR GRAPH] March '94 225 March '95 255 March '96 270 March '97 281 Note: Northwest operations only 21 SLIDE 1 HIGHLY EFFECTIVE INCENTIVE COMPENSATION PLAN CUSTOMER SERVICE SKILLS [BAR GRAPH] Comparison to competitors: Greeting skills Competition WAMU ----------- ---- Stand to greet customer 70% 85% Introduce self to customer 72% 83% Ask customer's name 69% 78% Use customer's name 60% 74% Shake hands 66% 79% Source: SG Marketing Jan. 1997 SLIDE 2 HIGHLY EFFECTIVE INCENTIVE COMPENSATION PLAN SELLING SKILLS [BAR GRAPH] Competition WAMU ----------- ---- Ask 2+ Q's identifying needs 67% 85% Resolve objections 84% 95% Ask to open account 61% 82% Source: SG Marketing Jan. 1997 22 SLIDE 1 SALES AND PRODUCTIVITY TOOLS Sales training/Exportable sales culture [GRAPHIC] SLIDE 2 HOUSEHOLD GROWTH EXCLUSIVE OF ACQUISITIONS [BAR GRAPH] 1994 23,332 1995 62,442 1996 86,616 Q 1/96 12,040 Q 1/97 26,709 Note: Northwest operations only 23 SLIDE 1 THAT'S DIFFERENT, THAT'S WASHINGTON MUTUAL The Premier Consumer Banking Strategy in the West SLIDE 2 INVESTOR CONFERENCE DO THE MATH 24 SLIDE 1 INVESTOR CONFERENCE DO THE MATH SLIDE 2 LINDY J. FRIEDLANDER, PH.D. Senior Vice President Corporate Research & Development 25 SLIDE 1 RESEARCH AND DEVELOPMENT SLIDE 2 EXTENSIVE RESEARCH CAPABILITIES o New product introductions o Site assessment o Retention of acquired households o Product positioning for advertising o Brand imaging o Identification of market opportunities 26 SLIDE 1 NEW PRODUCT INTRODUCTIONS Case Study: Free Checking Evolution of the Product: o July 1991 - Free Relationship Checking * Increase services per household * Increase checking penetration o September 1994 - "Free Checking" * 1994 Research: 51% of the general population said they'd be "very likely" to switch banks to secure Free Checking * Appealed most to people under age 55 * Likely to drive additional fee income SLIDE 2 NEW PRODUCT INTRODUCTIONS Case Study: Free Checking Requirements for Profitability: o Enforce strict fee waiver policy o Provide automatic overdraft protection o Offer free VISA(R) check card o Price other fees near top of market 27 SLIDE 1 NEW PRODUCT INTRODUCTIONS Non-Interest Checking Base
Dec '94 Dec '96 ------- ------- Fee Income* Old Base $ 7.81 $ 9.82 New Base $ 8.24 $14.64 Balance Old Base $1,012 $1,188 New Base $ 733 $ 878
Note: All figures reflect per-account averages *Does not include all ancillary fees attributable to new checking accounts. SLIDE 2 CHECKING ACCOUNT GROWTH Northwest operations 120,000 116,965 100,000 82,375 80,000 60,000 55,561 40,000 34,358 20,000 20,718 0 1994 1995 1996 Q 196 Q 197
Note: Reflects growth in checking account base, excluding acquisitions. 28 SLIDE 1 CHECKING ACCOUNT GROWTH American Savings Bank 35,000 30,000 31,113 25,000 20,000 15,000 10,000 5,000 0 -2,403 -5,000 Q 196 Q 197
Note: Reflects growth in checking account base, excluding acquisitions. SLIDE 2 SITE ASSESSMENT Market Potential Modeling o Rank geographic census tracts in WM markets o Overlay demographic and competitive information o Use local market knowledge o Match appropriate delivery channel to market 29 SLIDE 1 SITE ASSESSMENT Market Potential Modeling: Insight Gained o Potential to generate new business - New site or acquisition - Focus on intensifying sales efforts o Where to adjust distribution channels - Monitor life cycles of markets - Relocations, consolidations, changes in delivery channel SLIDE 2 RETENTION OF ACQUIRED HOUSEHOLDS Research used to determine: - Product retention - Product revision - Product mapping - Identification of customer concerns - Cross-sell opportunities 30 SLIDE 1 RETENTION OF ACQUIRED HOUSEHOLDS Combined household growth six months after a large acquisition* 108% 106% 4% 104% 102% 100% 98% 11/91 5/92 96% Washington Mutual/Crossland Savings *At least 10,000 households SLIDE 2 RETENTION OF ACQUIRED HOUSEHOLDS Combined household growth six months after a large acquisition* 106% 104% 2% 102% 100% 98% 4/82 10/92 96% Washington Mutual/Great Northwest Bank *At least 10,000 households 31 SLIDE 1 RETENTION OF ACQUIRED HOUSEHOLDS Combined household growth six months after a large acquisition* 106% 104% Level 102% 100% 98% 3/93 9/93 96% Washington Mutual/Pacific First Bank/Pioneer Savings *At least 10,000 households SLIDE 2 RETENTION OF ACQUIRED HOUSEHOLDS Combined household growth six months after a large acquisition* 108% 106% 4% 104% 102% 100% 4/85 10/95 98% 96% Washington Mutual/Olympus Bank *At least 10,000 households 32 SLIDE 1 RETENTION OF ACQUIRED HOUSEHOLDS COMBINED HOUSEHOLD GROWTH: WASHINGTON MUTUAL/AMERICAN SAVINGS BANK 108% 3% 106% 104% 102% 100% 12/96 3/97 98% 96% WASHINGTON MUTUAL/AMERICAN SAVINGS BANK Note: Three months following 12/96 close SLIDE 2 A CROSS-SELLING OPPORTUNITY ACQUIRED HOUSEHOLDS INCREASED SERVICES PER HOUSEHOLD AT NEWLY ACQUIRED INSTITUTIONS SINCE 1992 o Great Northwest Bank 55% o Pioneer Savings 49% o Pacific First Bank 44% Note: Institutions with 10,000 households or more 33 SLIDE 1 PRODUCT POSITIONING FOR ADVERTISING CASE STUDY: FREE CHECKING TOP 3 "PET PEEVES" OF NON-CUSTOMERS: o Being charged unreasonable fees o Being inflexible and bureaucratic o Only caring about making a profit off of you SLIDE 2 PRODUCT POSITIONING FOR ADVERTISING CASE STUDY: FREE CHECKING DECISIONS: o Aggressively promote Washington Mutual's Free Checking o Point out competition's "Free Checking" comes with strings attached 34 SLIDE 1 PRODUCT POSITIONING FOR ADVERTISING CASE STUDY: HOME EQUITY KEY QUESTIONS: o How do we sell more home equity loans? o What do consumers use them for? o What messages would work? SLIDE 2 PRODUCT POSITIONING FOR ADVERTISING CASE STUDY: HOME EQUITY WHERE DO CUSTOMERS GATHER INFORMATION? Banker 69% Friends 20% Mail 15% Newspaper 12% Finance Co. 9% TV 6% Radio 4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 35 SLIDE 1 PRODUCT POSITIONING FOR ADVERTISING CASE STUDY: HOME EQUITY What are customers willing to use home equity loans for: Home Imprv [ ] 93% Debt Consol. [ ] 70% Medical [ ] 57% Education [ ] 57% Car [ ] 35% Furn/Applian [ ] 21% Boat/RV [ ] 16% Vacation [ ] 9% 0% 20% 40% 60% 80% 100% SLIDE 2 PRODUCT POSITIONING FOR ADVERTISING CASE STUDY: HOME EQUITY Decisions: o Advertise heavily in branches o Don't promote use of home equity for "frivolous" items 36 SLIDE 1 BRAND IMAGE o How is Washington Mutual viewed by consumers? o What are the company's competitive strengths? o How should the company position itself? SLIDE 2 BRAND IMAGE FOCUS GROUPS Findings of customers & non-customers: o Non-customers usually chose cold, self-serving or mechanized pictures to illustrate their bank o Washington Mutual customers usually chose warm, caring and trustworthy scenes o Attitudes were consistent in all markets 37 SLIDE 1 BRAND IMAGE FOCUS GROUPS How the competition is viewed: o Automated o Mechanized o Overworked SLIDE 2 BRAND IMAGE FOCUS GROUPS How the competition is viewed: o Stiff o Arrogant o Cold 38 SLIDE 1 BRAND IMAGE FOCUS GROUPS How Washington Mutual is viewed: o Casual o Comfortable o At home SLIDE 2 BRAND IMAGE FOCUS GROUPS How Washington Mutual is viewed: o Caring o Warm o Personal 39 SLIDE 1 BRAND IMAGE FOCUS GROUPS Customers/non-customers; California/Northwest: o Want warm & caring service o Want advanced technology and convenience o Want less complicated bank o Want fees to be fair SLIDE 2 IDENTIFICATION OF MARKET OPPORTUNITIES Survey question: "Using a 1-to-5 scale with 1 meaning it does not describe your feelings at all and 5 meaning it describes your feelings completely, how much would you agree that "Brand X" is a bank you'd recommend to your friends?" 40 SLIDE 1 Identification of Market Opportunities Would you recommend your primary bank to a friend? 100% 80% 88% 60% 40% 20% 43% 49% 0% B of A [CA] Wells Fargo [CA] Wash. Mutual [ WA/OR]
SLIDE 2 Identification of Market Opportunities Would you recommend your primary bank to a friend? 100% 80% 88% 60% 40% 20% 53% 19% 0% B of A/Seafirst [WA/OR] Wells Fargo [WA/OR] Wash. Mutual [WA/OR]
41 SLIDE 1 Research and Development SLIDE 2 INVESTOR CONFERENCE do the math 42 SLIDE 1 INVESTOR CONFERENCE do the math SLIDE 2 Brad Davis Senior Vice President Marketing and Corporate Relations 43 SLIDE 1 WASHINGTON MUTUAL MARKETING - "Real People Talking to Real People" * Human/genuine * Approachable * Non "Bank-like" SLIDE 2 WASHINGTON MUTUAL MARKETING [GRAPHIC] Keeping the Northwest safe for Free Checking [WASHINGTON MUTUAL LOGO] 44 SLIDE 1 WASHINGTON MUTUAL MARKETING [GRAPHIC] SLIDE 2 WASHINGTON MUTUAL MARKETING [GRAPHIC] 45 SLIDE 1 WASHINGTON MUTUAL MARKETING [GRAPHIC] SLIDE 2 WASHINGTON MUTUAL MARKETING [GRAPHIC] 46 SLIDE 1 WASHINGTON MUTUAL MARKETING [GRAPHIC] SLIDE 2 WASHINGTON MUTUAL MARKETING [GRAPHIC] Keeping the Northwest safe for truth, justice and FREE CHECKING [WASHINGTON MUTUAL LOGO] 47 SLIDE 1 WASHINGTON MUTUAL MARKETING [GRAPHIC] SLIDE 2 WASHINGTON MUTUAL MARKETING [GRAPHIC] Keeping the Northwest safe for truth, justice and Free Checking [WASHINGTON MUTUAL LOGO] 48 SLIDE 1 WASHINGTON MUTUAL MARKETING [GRAPHIC] A WASHINGTON MUTUAL COMMERCIAL WE'LL BE WAITING TO SEE SLIDE 2 WASHINGTON MUTUAL MARKETING [GRAPHIC] 49 SLIDE 1 WASHINGTON MUTUAL MARKETING [GRAPHIC OF 3 POSTERS] THOSE FELLERS AT YER BANK keeping you from not having DIRECT DEPOSIT? TIRED OF BEING hog tied by DIRECT DEPOSIT REQUIREMENTS? PAYIN' TO TALK TO A TELLER giving you A RAW HIDE? SLIDE 2 WASHINGTON MUTUAL MARKETING [GRAPHIC] Keeping the Northwest safe for Free Checking [WASHINGTON MUTUAL LOGO] 50 SLIDE 1 WASHINGTON MUTUAL MARKETING [GRAPHIC] NO-HASSLE SASS-FREE CHECKING ACCOUNT KIT The Fastest Little AUTOMATIC PAYMENT FORM IN THE WEST SLIDE 2 WASHINGTON MUTUAL MARKETING [GRAPHIC] NOW OPENING A free CHECKING ACCOUNT is so easy, you could do it on horseback. ------------------ (But we wouldn't recommend it) 51 SLIDE 1 WASHINGTON MUTUAL MARKETING [BAR GRAPH] Bank Advertising Recall (First Mention Awareness) 1992 1993 1994 1995 ---- ---- ---- ---- Washington Mutual 25% 24% 25% 20% SeaFirst 32% 41% 34% 32% King County SLIDE 2 WASHINGTON MUTUAL MARKETING [BAR GRAPH] Bank Advertising Recall (First Mention Awareness) Washington Mutual 42% SeaWest 22% Nov. 1996 King County 52 SLIDE 1 WASHINGTON MUTUAL MARKETING [BAR GRAPH] Bank Advertising Recall (First Mention Awareness) Washington Mutual 33% Wells Fargo 26% Nov. 1996 Portland SLIDE 2 Product Positioning [GRAPHIC] 53 WASHINGTON MUTUAL MARKETING -------------------------------------------- | | | | | DO | | THE 0 (0) = 0 | | MATH: | | | | | | | | FREE CHECKING from WASHINGTON MUTUAL | | | -------------------------------------------- WASHINGTON MUTUAL MARKETING [DO THE MATH AD] 54 WASHINGTON MUTUAL MARKETING At some banks, AMERICAN SAVINGS BANK PRESENTS "FREE CHECKING" doesn't add up R E A L L Y F R E E [CHECKING CHARGES] C H E C K I N G --------------- D O T H E M A T H [COMPARISON TABLE] WASHINGTON MUTUAL MARKETING - ------------------------------------------ | DO | | THE 0 (0) = 0 | | MATH: | | | | FREE CHECKING from WASHINGTON MUTUAL | - ------------------------------------------ --------------------- | | | DO THE MATH: | | | -------------------------------------------------- | FREE | | CHECKING | | 0 x 0 = 0 from | | WASHINGTON | | MUTUAL | ------------------------------------- 55 WASHINGTON MUTUAL MARKETING D O COMPARE AMERICAN SAVINGS BANK FREE CHECKING WITH YOUR CHECKING ACCOUNT THE MATH: AND SEE HOW MUCH YOU COULD BE SAVING. 0 + 0 = 0 [Comparison Chart] [AMERICAN SAVINGS BANK LOGO] WASHINGTON MUTUAL MARKETING D O T H E M A T H 0 - 0 = 0 0 + 0 = 0 0 x 0 = 0 FREE CHECKING from WASHINGTON MUTUAL 56 SLIDE 1 CROSS SELLING SLIDE 2 WASHINGTON MUTUAL MARKETING QUICK QUICK APPROVAL APPROVAL REMODELING HOME EQUITY LOAN FOR DETAILS, STOP BY THIS STORE'S FINANCIAL CENTER. 57 SLIDE 1 WASHINGTON MUTUAL MARKETING ["Introducing Savings" ad] SLIDE 2 WASHINGTON MUTUAL MARKETING MONEY FOR P I Z Z A (OH, YEAH, AND TUITION.) 58 SLIDE 1 WASHINGTON MUTUAL MARKETING H O M E E Q U I T Y KITCHEN SALE SLIDE 2 WASHINGTON MUTUAL MARKETING M O N E Y D E C I S I O N S [Ad] 59 SLIDE 1 WASHINGTON MUTUAL MARKETING ["Pump Up Your Checking Account" ad] SLIDE 2 WASHINGTON MUTUAL MARKETING P L U S P A C K A G E 60 SLIDE 1 BRAD DAVIS Senior Vice President Marketing and Corporate Relations SLIDE 2 THE END 61 SLIDE 1 INVESTOR CONFERENCE D O T H E M A T H SLIDE 2 CAPITAL & PRODUCTION Washington Mutual Lending Machine 62 SLIDE 1 CRAIG DAVIS Executive Vice President Lending and Financial Services SLIDE 2 LENDING STRATEGY o Offer a broad product line o Gain new customers -- build market share o Focus on service/relationships o Deliver through multiple channels o Maintain asset quality o Improve efficiency o Use capital to grow portfolio o Retain higher margin loans/sell low margin loans o Increase proportion of adjustable rate loans 63 SLIDE 1 CONSOLIDATED LOAN ORIGINATIONS* 45% increase $ 14 $13.6 12 10 8 $8.3 $8.4 6 17% increase 4 $4.3 $5.0 2 0 1994 1995 1996 YTD YTD APR. 96 APR. 97 *in billions SLIDE 2 LENDING VOLUME BY TYPE [PIE CHART] SFR Adjustable 45% SFR Fixed 27% Consumer 10% SFR Custom 6% SFR Builder 4% Multi-family 4% Non-res RE 2% Commercial 2% 64 SLIDE 1 BROAD PRODUCT LINE Residential Mortgage Lending Broad line allows the "machine" to adapt and switch to consumers' choices 30/15 Year FHA/VA Bridge Loans COFI ARM 1/3/5-Year ARM Lines of Credit Treasury ARM MTA ARM Portfolio No Closing Costs 97% LTV Conforming Down Payment Assistance Alt. Doc Jumbo SLIDE 2 SFR MORTGAGE ACTIVITY* [BAR GRAPH] 46% Increase 8% Increase $6.3 $6.8 $9.9 $3.2 $3.5 1994 1995 1996 YTD YTD APR. 96 APR. 97 65 SLIDE 1 RESIDENTIAL LENDING MARKET SHARE Washington [BAR GRAPH]
1994 Market Share* 1997 Market Share** 9.60% 4.40% 3.99% 15.32% 6.13% 2.35% WAMU Countrywide Norwest WAMU Norwest Countrywide
* Year end ** Year-to-date Feb. SLIDE 2 RESIDENTIAL LENDING MARKET SHARE Oregon [BAR GRAPH]
1994 Market Share* 1997 Market Share** 5.85% 5.08% 4.73% 10.80% 5.60% 3.79% BofA WAMU Norwest WAMU Norwest BofA
* Year end ** Year-to-date Feb. 12 66 SLIDE 1 RESIDENTIAL LENDING MARKET SHARE California [BAR GRAPH]
1994 Market Share 1997 Market Share 7.00% 4.31% 3.35% 8.83% 4.85% 2.98% BofA Home ASB BofA ASB World Savings
SLIDE 2 RESIDENTIAL LENDING MARKET SHARE Utah [BAR GRAPH]
1994 Market Share* 1997 Market Share** 8.84% 6.85% 0.00% 5.48% 4.83% 4.28% First Zion WAMU WAMU Norwest Countrywide Security
* Year end ** Year-to-date Feb. 13 67 SLIDE 1 RESIDENTIAL LENDING MARKET SHARE King County* [BAR GRAPH] *1996 Year end 17.11% 2.66% 5.82% 2.35% WAMU Bank of America Norwest World Savings SLIDE 2 MARKET SHARE GROWTH How has this been accomplished? o Price o Asset quality o Distribution 68 SLIDE 1 PRICING ANALYSIS 30-Year Conforming Fixed Rate Institution Rate 30-Day Lock Equiv. Yield - -------------------------------------------------------------------- Home Savings 8.150 0.750 8.317 Countrywide 8.125 1.125 8.375 Washington Fed 8.250 0.625 8.389 Bank of America 8.250 0.897 8.449 WASHINGTON MUTUAL 8.250 0.875 8.444 Chase Manhattan 8.250 1.125 8.500 Norwest 8.375 0.875 8.569 AVERAGE 8.243 0.832 8.428 *Washington state - 4/10/97 - The Heitman Group SLIDE 2 PRICING ANALYSIS 5/1 Year CMT Adjustable Institution Rate 30-Day Lock Equiv. Yield - -------------------------------------------------------------------- Home Savings 7.450 0.750 7.600 Great Western 7.500 0.875 7.675 MellonBank 7.500 0.875 7.675 Countrywide 7.500 1.000 7.700 WASHINGTON MUTUAL 7.750 0.625 7.875 Chase Manhattan 7.875 1.125 8.100 Bank of America 8.125 1.250 8.375 AVERAGE 7.671 0.929 7.857 *Washington state - The Heitman Group 69 SLIDE 1 ASB PRICING ANALYSIS COFI Three Month ARM Effective Institution Rate Margin Points Cap Margin - ------------------------------------------------------------------ 1st Nationwide 4.950 2.500 0.06 11.58 2.15 Downey 3.950 2.450 0.88 11.95 2.24 Great Western 3.950 2.450 1.00 11.95 2.27 Coast 4.450 2.450 1.00 11.95 2.29 PNC Mtg 6.250 2.400 1.00 11.45 2.35 AMERICAN 4.950 2.500 1.00 11.95 2.37 World 5.250 2.500 1.00 11.95 2.39 Home 4.150 2.650 1.00 11.95 2.47 Stockton 4.000 2.750 1.00 11.00 2.55 California - 4/10/97 BISYS Research SLIDE 2 LENDING DISTRIBUTION STRATEGY A Multi-Channel Approach ----- [GRAPHIC] 70 SLIDE 1 LENDING DISTRIBUTION STRATEGY o Financial Centers o Home Loan Centers o Wholesale SLIDE 2 LENDING DISTRIBUTION STRATEGY [PIE CHART] WAMU SFR Originations by Channel Wholesale 24% FCs 28% 71 SLIDE 1 LENDING DISTRIBUTION STRATEGY [PIE CHART] ASB SFR Originations by Channel Wholesale 53% Loan Centers 47% SLIDE 2 LENDING DISTRIBUTION STRATEGY Multi-state lending Colorado Springs Denver Boulder Las Vegas Reno Tucson Phoenix Mesa 72 SLIDE 1 LENDING DISTRIBUTION STRATEGY [MULTI-STATE GROWTH LINE GRAPH] In Millions ARIZONA COLORADO NEVADA ------- -------- ------ MARCH '96 2.4 APRIL 9.1 MAY 11.6 JUNE 11.8 JULY 15.8 AUGUST 13.0 SEPTEMBER 16.1 OCTOBER 19.3 NOVEMBER 17.3 2.5 DECEMBER '96 16.6 6.7 6.0 JANUARY '97 14.8 10.4 6.2 FEBRUARY 15.1 15.7 9.0 MARCH 16.1 19.9 9.1 APRIL 26.8 25.9 16.5 SLIDE 2 MORTGAGE DISTRIBUTION THROUGH FINANCIAL CENTERS Coming Soon to California!! 73 SLIDE 1 WASHINGTON MUTUAL: THE ASB PERSPECTIVE WAMU brings: o Capital o Technology o Expanded Distribution Philosophy SLIDE 2 ASB SFR ORIGINATIONS* [BAR GRAPH] 1994 $4.2 1995 $4.4 1996 $5.5 (26% increase) YTD Apr. 96 $1.7 YTD Apr. 97 $2.0 (14% increase) * in billions 74 SLIDE 1 STEVEN P. FREIMUTH Executive Vice President of Lending Administration SLIDE 2 BROAD PRODUCT LINE Consumer Lending Products o Home Equity Loans and Lines of Credit o Manufactured Homes o Unsecured Personal Lines of Credit o Auto, Boat and RV o Education 75 SLIDE 1 CONSUMER LENDING ACTIVITY [BAR GRAPH] 1994 $939 1995 $888 1996 $1,268 (41% increase) YTD Apr. 96 $357 YTD Apr. 97 $478 (33% increase) *In millions - WMB and WMBfsb SLIDE 2 BROAD PRODUCT LINE Consumer Lending: New California Opportunities: o Expanded product line o Opportunities for cross-selling consumer loans to ASB mortgage customers o Explosive growth in applications in California since January 76 SLIDE 1 CALIFORNIA CONSUMER LENDING [BAR GRAPH] GROWTH IN APPLICATIONS AUG SEP OCT NOV DEC JAN FEB MAR APR --- --- --- --- --- --- --- --- --- 71 82 87 120 109 138 153 158 457 SLIDE 2 BROAD PRODUCT LINE MULTI-FAMILY LENDING o Higher margin than residential mortgage lending o Expertise in local markets o Long-term relationships o Smaller loans, diversified geographic reach reduces risk o Average loan amount -- $650,000 -- $750,000 77 SLIDE 1 MULTI-FAMILY LENDING ACTIVITY* 45% increase 8% increase ------------------ --------------- YTD YTD 1994 1995 1996 APR.96 APR.97 ---- ---- ---- ------ ------ $618 $349 $505 $173 $186.2 *in millions (new originations only) -- consolidated SLIDE 2 BROAD PRODUCT LINE CONSTRUCTION FINANCE o Builder Banking: * Land Development * Residential Construction o Custom Construction * One Loan Customs * Rehabilitation Loans * Remodel 78 SLIDE 1 BUILDER BANKING A Market Leader in the Northwest o Long-standing relationships with builders o Specialize in small to medium-size builders o Less competitive and more profitable market o Risk is spread out over many builders and markets o Great source for permanent mortgage loans SLIDE 2 BUILDER CONSTRUCTION ACTIVITY* 45% INCREASE 20% INCREASE ------------------- --------------- YTD YTD 1994 1995 1996 APR.96 APR.97 ---- ---- ---- ------ ------ $329 $352 $510 $176 $211 * in millions -- WMB and WMBish 79 SLIDE 1 CUSTOM CONSTRUCTION o One loan from construction to occupancy o Advantage over mortgage companies o Higher margins help augment loan portfolio o Customer base provides cross-sell opportunities o Expertise provides for low cost and low risk SLIDE 2 CUSTOM CONSTRUCTION ACTIVITY* 34% increase 36% increase ------------------ --------------- YTD YTD 1994 1995 1996 APR.96 APR.97 ---- ---- ---- ------ ------ $706 $584 $780 $185 $250 *in millions -- WMB and WMBfsb 80 SLIDE 1 BROAD PRODUCT LINE Niche Lending o Risk based pricing o Higher margin business o Flexibility to place non-conforming loans in portfolio o Credit risk controls in place o Low cost process through existing delivery system SLIDE 2 NICHE LENDING ACTIVITY* 455% increase 57% increase -------------------- ------------- 1994 1995 1996 Q1 96 Q1 97 ---- ---- ------ ------ ------ $ - $57.7 $320.0 $76.0 $120.0 *in millions - WMB and WMBfsb (Niche Lending began 8/95) 81 SLIDE 1 MAINTAIN ASSET QUALITY o Experienced staff with local knowledge o High utilization of credit scoring models o Diversification of product o Geographic dispersion SLIDE 2 MAINTAIN ASSET QUALITY WMI NPA/Assets Ratio (in millions) [BAR GRAPH] 1994 418.7 1.12% 1995 338.9 0.81% 1996 329.5 0.74% Q1 1997 334.6 0.73% 82 SLIDE 1 IMPROVE EFFICIENCY Reengineered Process o Simplify and standardize the process o Eliminate non-value added documentation o "LoanWorks" leading-edge technology o Macro vs. micro credit analysis SLIDE 2 IMPROVE EFFICIENCY LoanWorks capabilities o Sales screens for product comparisons o Single entry of data o Download of existing customer data o Autofills credit report information o Immediate loan approvals 83 SLIDE 1 IMPROVE EFFICIENCY LoanWorks capabilities o All regulatory disclosures o Electronic order out of title, mortgage insurance and appraisal o Electronic transfer of loan file o Five day loan closings from start to finish SLIDE 2 IMPROVE EFFICIENCY Loan Servicing o Outsourced to Alltel * Industry leader * Unlimited capacity o On-site staff available for customer service o AutoPay increased to 60% of portfolio 84 SLIDE 1 LOAN SERVICING [LINE GRAPH] LOANS PER FTE 1/96 2/96 3/96 4/96 5/96 6/96 7/96 8/96 9/96 10/96 11/96 12/96 1/97 - ---- ---- ---- ---- ---- ---- ---- ---- ---- ----- ----- ----- ---- 1669 1668 1687 1683 1761 1731 1694 1729 1743 1810 1848 1897 1908 SLIDE 2 CAPITAL & PRODUCTION Washington Mutual Lending Machine 85 SLIDE 1 INVESTOR CONFERENCE do the math 86 SLIDE 1 INVESTOR CONFERENCE do the math SLIDE 2 SALLY JEWELL Executive Vice President for the Commercial Banking Division President of Western Bank 87 SLIDE 1 WASHINGTON MUTUAL AND WESTERN BANK A Winning Combination SLIDE 2 BUSINESS OWNERS WANT o Reliability and predictability * "Be there when I need you." o Stability * "Give me a banker who understands my business, not a revolving door." o Accuracy and timeliness * "Make banking service hassle-free." 88 SLIDE 1 SHIFTING CUSTOMER LOYALTIES o Traditionally, customers were loyal to an institution o Today, loyalty is directed more toward individuals o Small business clients are more willing to move with their bankers SLIDE 2 COMMERCIAL BANKING o Western Bank * Shared resources as a division of Washington Mutual Bank * Separate branding strategy * Experienced commercial bankers * 50 full-service/13 BBCs * Assets = $1.1 billion 89 SLIDE 1 WESTERN'S IMPORTANCE TO WM o Higher margins/returns o Lower cost of deposits o Cross referrals and higher combined market share o People-oriented customer service philosophy o Diversification SLIDE 2 COMMERCIAL BANKING VISION o Build "Super Community Bank" * Commercial banking expertise * Community banking friendliness, flexibility and simplicity 90 SLIDE 1 COMMERCIAL BANKING VISION o Full service for small- and medium-sized businesses and individuals o High touch, responsive service, premium pricing SLIDE 2 COMMERCIAL BANKING VISION o Local identity and market knowledge o Inspired, team-oriented people who make decisions that benefit the client and the company 91 SLIDE 1 ACCOMPLISHING OUR VISION o Concentrate on clients who value service and quality more than price and convenience o Listen to clients and provide tools to meet their needs SLIDE 2 ACCOMPLISHING OUR VISION o Environment that attracts smart, committed people o Shared information at all levels o Pride in our people/services * Price for quality 92 SLIDE 1 WESTERN BANK TODAY o Full Service Commercial Bank Branches * Shared Transaction and Referral Financial Center (STAR) [o] BBC/STAR Combination [GRAPHICS] [*] Business Banking Center SLIDE 2 LEVERAGING THE INFRASTRUCTURE o 13 Business Banking Centers o 52 STAR locations o Plan for 100 STARs by year end o Attracts deposits o Generates cross referrals o Minimal operations impact [GRAPHICS] 93 SLIDE 1 MARKET STRATEGY o Two brands o Western Bank focuses on community-based commercial banking o WM and ASB focus on consumer banking o Internal cooperation captures greater market share SLIDE 2 RESULTS performance [GRAPHICS] [WESTERN BANK LOGO] 94 SLIDE 1 LOANS - AVERAGE BALANCE [BAR GRAPH] 1994 1995 1996 Q1 96 Q1 97 ---- ---- ---- ----- ----- (in millions) $482 $565 $745 $619 $957 SLIDE 2 ASSET QUALITY Non Performing Assets/Total Assets [BAR GRAPH] Peer Group 1993 1994 1995 1996 ---- ---- ---- ---- 2.01% 1.58% 1.21% 1.17% Western Bank 1993 1994 1995 1996 ---- ---- ---- ---- 0.16% 0.07% 0.12% 0.13% 95 SLIDE 1 ASSET QUALITY Net Loan Charge Offs/Total Loans [GRAPH] 1993 1994 1995 1996 ----- ----- ----- ----- Western Bank 0.05% 0.01% 0.09% 0.09% Peer Group 0.78% 0.46% 0.37% 0.41% SLIDE 2 DEPOSITS - AVERAGE BALANCE [BAR GRAPH] (in millions) 1994 $750 1995 $781 1996 $886 Q1 96 $838 Q1 97 $953 96 SLIDE 1 ADJUSTED NET INCOME AFTER TAX [BAR GRAPH] (in millions) 1994 $10.7 1995 $12.7 1996 $13.2 Q1 96 $ 2.968 Q1 97 $ 3.409 SLIDE 2 FUTURE OPPORTUNITIES o Gain Market Share * Disruption caused by commercial bank mergers * Blend of expansion with select acquisitions * Growth in existing markets o Washington, Oregon, Idaho, Utah * Explore new markets o California o Increase product penetration in client base 97 SLIDE 1 WASHINGTON MUTUAL AND WESTERN BANK. A WINNING COMBINATION [GRAPHIC] SLIDE 2 WASHINGTON MUTUAL AND WESTERN BANK A Winning Combination 98 SLIDE 1 INVESTOR CONFERENCE do the math 99 SLIDE 1 INVESTOR CONFERENCE do the math SLIDE 2 LIANE WILSON Executive Vice President Corporate Operations 100 SLIDE 1 AN INFRASTRUCTURE FOR GROWTH The Washington Mutual Technology Platform SLIDE 2 AN INFRASTRUCTURE FOR GROWTH [GRAPHIC] Enable Growth and Stability Focus on Core Consumer Banking Business Study/Reformulate Business Processes Deploy Technology 101 SLIDE 1 FOCUS ON CORE CONSUMER BANKING BUSINESS Objectives: o Improve efficiency o Help predict costs o Allow employees to serve customers better o Increase value to shareholders SLIDE 2 STUDY / REFORMULATE BUSINESS PROCESSES o Effort began in 1992 o Ongoing process o Includes all areas of Washington Mutual Business * Lending * Deposits * Transactions * Administration * Acquisitions 102 SLIDE 1 STUDY / REFORMULATE BUSINESS PROCESSES Case Study: Loan Originations o Studied each step of loan origination process o Reduced number of hand-offs and repetitive steps o Result: Average loan origination time reduced from 45 days to 25 days without additional technology SLIDE 2 DEPLOY TECHNOLOGY Underlying Philosophy: o Keep employees focused on core consumer banking business o Continue to reformulate business processes o Utilize technology partnerships 103 SLIDE 1 WASHINGTON MUTUAL TECHNOLOGY After [COMPUTER SCREEN GRAPHIC] SLIDE 2 THE UNIVERSAL WORKSTATION Advantages: o Uses graphical interface like a PC o Reduces cycle times for processing and training 104 SLIDE 1 THE UNIVERSAL WORKSTATION Advantages: o Consolidates customer information services o Improves ability to serve rapidly growing customer base SLIDE 2 LOANWORKS Advantages: o Intuitive system o Initiates each step of loan process o Loan originations completed in five days 105 SLIDE 1 LOANWORKS [COMPUTER SCREEN GRAPHIC] SLIDE 2 LOANWORKS [COMPUTER SCREEN GRAPHIC] 106 SLIDE 1 LOANWORKS [COMPUTER SCREEN GRAPHIC] SLIDE 2 LOANWORKS [COMPUTER SCREEN GRAPHIC] 107 SLIDE 1 LOANWORKS [COMPUTER SCREEN GRAPHIC] SLIDE 2 LOANWORKS [COMPUTER SCREEN GRAPHIC] 108 SLIDE 1 VISUAL BANKER Advantages: o Provides comprehensive customer information o Reduces "re-keying" of information o Enhances cross-selling process SLIDE 2 VISUAL BANKER [COMPUTER SCREEN GRAPHIC] 109 SLIDE 1 VISUAL BANKER [COMPUTER SCREEN GRAPHIC] SLIDE 2 VISUAL BANKER [COMPUTER SCREEN GRAPHIC] 110 SLIDE 1 VISUAL BANKER [COMPUTER SCREEN GRAPHIC] SLIDE 2 TRANSACTION PLATFORM Advantages: o Provides comprehensive customer information o "Re-keying" reduced 111 SLIDE 1 USING PARTNERSHIPS TO DEPLOY TECHNOLOGY o Reduces risks and costs * Enables new technology to be introduced in a timely fashion * Allows company to pay for processing at today's volume rather than tomorrow's capacity * Makes newest technology available at lower capital cost o Provides access to industry leaders o Enables additional growth SLIDE 2 USING PARTNERSHIPS TO DEPLOY TECHNOLOGY Partnership: IBM o Infrastructure management * Voice/data network management o Desktop management o Help desk o Training 112 SLIDE 1 USING PARTNERSHIPS TO DEPLOY TECHNOLOGY Partnership: IBM o Developed underlying platform for Visual Banker o Co-partner in development of transaction platform SLIDE 2 USING PARTNERSHIPS TO DEPLOY TECHNOLOGY Partnership: IBM o Technology provider for the Integrion Financial Network * Consortium of 16 large banks: WAMU founding member * Members possess half of the banking households in North America * Will test network's on-line banking service in 4th quarter '97 113 SLIDE 1 USING PARTNERSHIPS TO DEPLOY TECHNOLOGY Partnership: Hogan o Provides customer information system o System for all deposit products o ATM/Debit card management system SLIDE 2 USING PARTNERSHIPS TO DEPLOY TECHNOLOGY Partnership: Hogan o WAMU first bank nationally to convert to publicly available release 2.0 * Allows for significant expansion of customer base * Year 2000-compliant 114 SLIDE 1 USING PARTNERSHIPS TO DEPLOY TECHNOLOGY Partnership: AllTel o Servicing system for: * Residential mortgages * Consumer loans * Commercial real estate loans SLIDE 2 USING PARTNERSHIPS TO DEPLOY TECHNOLOGY Partnership: EDS o Item processing o Posting for mail-in payment o Statement processing o Research and return items 115 SLIDE 1 GROWTH AND STABILITY Acquisition Integration: A Washington Mutual Business Process o Groundwork laid at due diligence o Areas/constituents addressed: * Financial/asset quality * Customer base composition * Systems compatibility * Customers/employees/shareholders * Sales/corporate culture o Successfully repeated 22 times since 1983 SLIDE 2 GROWTH AND STABILITY Case Study: American Savings Bank [TIMELINE GRAPHIC] Jul. 22, '96 Announced Definitive Agreement Jul. 24, '96 Initial Integration Planning with Exec. Teams Sep. 15, '96 WAMU/ASB Integration Team Planning Meeting Oct. 15, '96 Tactical Integration Plans Due from Team Leads Dec. 15, '96 Detailed Integration Plans Due from Team Leads Dec. 20, '96 Transaction Closed 116 SLIDE 1 GROWTH AND STABILITY Case Study: American Savings Bank [TIMELINE GRAPHIC] Dec. 20, '96 Jan. 17, '97 WAMU Marketing Strategy Introduced in Calif. Feb. 19, '97 Investment Portfolio Converted to WAMU Platform Mar. 31, '97 Payroll/Human Resources Systems Conversion Apr. 7, '97 Network Technology Hardware Installation Began Apr. 14, '97 Loan Servicing Test Apr. 30, '97 Sales/Employee Training Completed May 17, '97 Deposit Systems Conversion Test SLIDE 2 GROWTH AND STABILITY Case Study: American Savings Bank [TIMELINE GRAPHIC] May 17, '97 Jun. 2, '97 Account Conversion Materials Mailed to Customers Jul. 3, '97 Deposit Accounts Conversion Jul. 7, '97 Network/Branch Technology Goes Online Aug. 6, '97 Loan Account Conversion 117 SLIDE 1 AN INFRASTRUCTURE FOR GROWTH The Washington Mutual Technology Platform SLIDE 2 INVESTOR CONFERENCE do the math 118 SLIDE 1 INVESTOR CONFERENCE do the math SLIDE 2 Bill Longbrake Chief Financial Officer Executive Vice President Corporate Finance 119 SLIDE 1 FINANCIAL OVERVIEW The Success Story Continues SLIDE 2 [GRAPHIC] Note: All figures for "WMB" reflect the collective operations of Washington Mutual Bank and Washington Mutual Bank, fsb 120 SLIDE 1 FINANCIAL MANAGEMENT STRATEGY Five-Year Financial Target: 1995 - 2000 Results Target 3/31/97 ----------------------------------------------- ROCE >18.00% 19.42% Efficiency ratio <50.00 49.10 One-year GAP <(10.00) (.76) Common equity/assets >5.00 5.02 EPS Growth 15.00 SLIDE 2 FEE INCOME STRATEGY o Focus on increasing retail banking fees o Aggressively market free checking accounts o Vigorously cross-sell securities and annuity products 121 SLIDE 1 FEE INCOME STRATEGY Retail Banking Fees First Quarter 1997 ($ In Millions) ASB WMB WMI -------------------------------------------------------- Depositor fees $ 6.0 $22.6 $28.6 Total retail banking fees $14.2 $33.7 $47.9 Total fee income $22.5 $46.9 $69.4 Retail banking fees % change 1996 Q1 to 1997 Q1 0% 25% 16% SLIDE 2 FEE INCOME STRATEGY Free Checking Profitability Per Account* Revenue: Overdraft, ATM, other $206 Interest income 60** ---- Total 266 Expenses: Financial centers 93 Corporate support 80 Net losses 25 Interest expense 0 ---- Total 198 ---- Earnings Contribution $ 68 ---- Average balance $900 ==== * Based on 1996 Q1 data ** Assumes 88% invested in earning assets at yield net of loan origination and servicing expenses 122 SLIDE 1 FEE INCOME STRATEGY Growth in Number of Transaction Accounts at WMB [BAR GRAPH] 3Q95 1Q97 Interest Checking 180,922 210,420 Free Checking 286,195 428,772 SLIDE 2 EXPENSE AND PRODUCTIVITY STRATEGY Financial Centers o Marketing * Drive more business and revenue through established infrastructure o Customers * Increase retention * Provide high quality service * Cross-sell multiple services 123 SLIDE 1 EXPENSE AND PRODUCTIVITY STRATEGY Financial Centers o Technology * Reduce cost per transaction * Reduce errors * Improve service times o Employees * Compensate managers for increasing profitability per employee SLIDE 2 EXPENSE AND PRODUCTIVITY STRATEGY Support Operations o Focus on vital few, maintain bias to do a few things well o Outsource non-core competencies o Measure productivity * Expect improvement, reward achievement o Re-engineer work processes 124 SLIDE 1 EXPENSE AND PRODUCTIVITY STRATEGY Support Operations o Think and act like owners o Provide key managers and employees equity ownership * Stock purchase at discount * Restricted stock grants SLIDE 2 EXPENSE AND PRODUCTIVITY STRATEGY Number of Applications Underwritten per Underwriter FTE [BAR GRAPH] WMB 320 High Performers 145 Low Performers 65 Source: 1996 Mortgage Banking Best Practices by Arthur Andersen Note: Performer numbers based on number of applications underwritten per underwriter FTE 125 SLIDE 1 EXPENSE AND PRODUCTIVITY STRATEGY Retail Processing and Closing Productivity [BAR GRAPH] Avg. Days from Avg. Days from Application to Approval Application to Closing WMB 3 25 High Performance 23 40 Low Performance 32 54 Source: 1996 Mortgage Banking Best Practices by Arthur Andersen Note: Performer numbers based on average monthly volume of loans closed SLIDE 2 EXPENSE AND PRODUCTIVITY STRATEGY WMB Teller Transaction Productivity [LINE GRAPH] Mar-93 1555 Dec-93 1559 Sep-94 1793 Jun-95 2253 Mar-96 2286 Dec-96 2551 126 SLIDE 1 EXPENSE AND PRODUCTIVITY STRATEGY Production to Non-Production FTE at WMB [LINE GRAPH] 3/91 1.3 12/91 1.48 12/92 1.65 12/93 1.86 12/94 1.73 12/95 1.73 12/96 2.0 3/97 2.06 SLIDE 2 EXPENSE AND PRODUCTIVITY STRATEGY Operating Expense to Core Deposits + Loans [LINE GRAPH] 93 Q1 1.72% Q293 Pio/PFB 1.57% 94 Q1 1.59 Q2 Olympus 1.40% 95 Q1 1.35 Q4 ASB 1.32% 96 Q1 1.35 97 Q1 1.20 * Operating expenses include employee related cost, occupancy and other recurring expenses Note: Excludes nonbanking subsidiaries and Western Bank 127 SLIDE 1 EXPENSE AND PRODUCTIVITY STRATEGY Operating Expense to Revenue Ratio [BAR GRAPH] 1989 74.2% 1990 63.4 1991 57.6 1992 56.0 1993 53.2 1994 52.6 1995 52.7 1996 49.4 * Operating expenses include employee related cost, occupancy and other recurring expenses. Revenue includes net interest income, fees and other operating income SLIDE 2 LENDING STRATEGY o Dominate markets * Broad but basic product line * Service (shorten response times, reduce errors) o Focus - loans to individuals and small businesses * Single family homes * Home equity * Manufactured housing * Builder loans * Multi-family * Business 128 SLIDE 1 LENDING STRATEGY o Price to middle of the market o Drive down origination and servicing costs o Remix portfolio toward higher yielding loans and reduce securities o Sell tightly margined loans o Increase and migrate originations to ARM market sensitive indices SLIDE 2 LENDING STRATEGY Growth by Loan Originations (in Millions) [BAR GRAPH] Jan. - Apr. 1996 4,279 Jan. - Apr. 1997 4,953 16% 129 SLIDE 1 LENDING STRATEGY Growth in Loan Originations (in Millions) [BAR GRAPH] 1995 9,438 1996 13,647 Hypothetical % increase in 1997 originations @+14% 15,558 @+16% 15,831 @+18% 16,103 SLIDE 2 LENDING STRATEGY Loan Paydown Rates 1994 15.9% 1995 11.4% 1996 18.1% 1997 est.* 16.6% * Based on stable to rising interest rates and beginning of the year loan mix. 130 SLIDE 1 LENDING STRATEGY Net Loan Growth (in billions) 1997 Originations: Hypothetical % Increase from 1996 originations 1996 @+14% @+16% @+18% - --------------------------------------------------------------------------- Beginning loan balance $24.4 $30.7 $30.7 $30.7 Originations 13.6 15.6 15.8 16.1 Sales/Securitizations (3.0) (2.4) (2.4) (2.4) Paydown & REO Transfer (4.4) (5.1) (5.1) (5.1) ----- ----- ----- ----- Ending loan balance $30.7 $38.8 $39.0 $39.3 ===== ===== ===== ===== Net loan growth $ 6.3 $ 8.1 $ 8.3 $ 8.6 Asset growth ($) $ 6.9 $ 7.1 $ 7.4 (%) 15.5% 16.0% 16.6% SLIDE 2 LENDING STRATEGY Loan Mix - 1997 Q1 ASB WMB WMI ----- ----- ----- Residential 87.5% 60.2% 74.1% Construction 0.0 4.2 2.4 Multi-Family/CRE 11.3 12.9 12.1 Business 0.0 2.6 1.3 Consumer 1.2 19.4 10.1 ----- ----- ----- 100.0% 100.0% 100.0% 131 SLIDE 1 LENDING STRATEGY Loan Yields - 1997 Q1 [BAR GRAPH] ASB 7.45% WMB 8.50% WMI 7.98% SLIDE 2 LENDING STRATEGY Opportunities o Improve ARM yield at ASB o Increase ARM production at WMB o Implement WMB's higher margin loan programs at ASB 132 SLIDE 1 FUNDING STRATEGY Deposits o Build customer relationships o Lead with aggressive marketing of free checking o Increase proportion of total deposits in non-term accounts * Checking * Money market * Regular savings SLIDE 2 FUNDING STRATEGY Transaction and Savings Accouns to Total - March 31, 1997 [BAR GRAPH]
Transaction/Savings Time ------------------- -------- ASB 31.2% 68.8% WMB 54.3% 45.7% WMI 41.9% 58.1%
133 SLIDE 1 FUNDING STRATEGY Borrowings o Over $11 billion in liquidity available o Borrowings are mostly collateralized * Repurchase agreements * Federal home loan bank advances o Residential loans create additional liquidity and borrowing capacity SLIDE 2 FUNDING STRATEGY Rates Paid for Deposits and Borrowings - 1997 Q1 [BAR GRAPH]
Deposits Borrowings -------- ---------- ASB 4.7 % 5.63% WMB 3.98% 5.50% WMI 4.39% 5.56%
134 SLIDE 1 NET INTEREST SPREAD 1997 Q1
ASB WMB WMI ------ ----- ----- Loan yield 7.45% 8.50% 7.98% Deposit rate 4.69 3.98 4.38 ----- ----- ----- Spread 2.76% 4.52% 3.60% Loan yield 7.45% 8.50% 7.98% Borrowing rate 5.65 5.44 5.62 ----- ----- ----- Spread 1.80% 3.06% 2.36% Deposit/Loans 77.0% 72.0% 74.5%
SLIDE 2 NET INTEREST SPREAD Return on Capital - Alternative Strategies
Traditional Consumer (ASB) Bank (WMB) ----------- ---------- Loan yield 7.45% 8.50% Borrowing (95%) 5.65 5.44 Equity (5%) -0.0- -0.0- ------ ----- Spread 1.80 3.06 Margin 2.10 3.27 Credit losses (0.15) (0.23) Servicing, fees, gain 0.30 0.30 Core expenses (1.10) (1.30) ------ ------ Return before taxes 1.15 2.04 Taxes @ 38.1% (0.44) (0.78) ------ ------ Net return 0.71% 1.26% ====== ====== ROCE 14.2% 25.2%
135 SLIDE 1 INTEREST RATE RISK MANAGEMENT STRATEGY o Manage one-year GAP between 0 - (5%) o Limit volatility of net interest income to a 100 basis point rate change to less than 5 percent within 12 months o Increase the percent of adjustable-rate assets o Reduce repricing lags o Migrate adjustable rate assets to more market sensitive indices SLIDE 2 INTEREST RATE RISK MANAGEMENT STRATEGY Residential Loan Mix
Dec. 31, 1996 Mar. 31, 1997 74.8% 25.2% 75.3% 24.7% Dec. 31, 1997 [est.] 78.2% 21.8% [ ] Fixed [X] Adjustable
Assumes residential loan production mix and conforming fixed rate loans sales policy pursued during first four months of 1997 continued for entire year. 136 SLIDE 1 INTEREST RATE RISK MANAGEMENT STRATEGY ARM Index Considerations o ARM repricing lag is longer in COFI portfolio than in CMT portfolio * COFI lag is 3.2 months * CMT lag is 1.7 months o All new COFI adjustable-rate loans have a 2-month repricing lag o Menu of alternatives include: COFI, CMT, MTA, and LAMA SLIDE 2 INTEREST RATE RISK MANAGEMENT STRATEGY Advantages of COFI Index o Popular with customers o Limits payment volatility o Rates usually adjust monthly o Teaser rate period limited to 1-3 months o Negative amortization feature has had limited to no consequences 137 SLIDE 1 INTEREST RATE RISK MANAGEMENT STRATEGY Problems with COFI Index o Declining measurement base * 69 institutions, down from over 200 * Potential for index management o Changing composition of funding makes COFI less responsive to market changes o Marketing issues SLIDE 2 INTEREST RATE RISK MANAGEMENT STRATEGY Problems with CMT Index o Teaser rate periods last 1-2 years o 2% periodic rate cap can result in significant payment shock o Higher prepayment rates when loan fully indexes at 2.875% margin 138 SLIDE 1 INTEREST RATE RISK MANAGEMENT STRATEGY Fully Indexed Rates
Stabilized Index + Margin = Rate Rate - ---------------------------------------------------------------------- COFI 4.78 2.60 = 7.38 7.50 CMT 5.80 2.88 = 8.68 8.68 MTA 5.64 2.00 = 7.64 7.80 30-Year 8.25 8.25
SLIDE 2 INTEREST RATE RISK MANAGEMENT STRATEGY ARM Index Goals o Customer attractiveness of COFI ARM superior to CMT ARM o Prepayment risk less with COFI ARM, particularly when market rates are falling o CMT ARM profitability invariant relative to market o COFI ARM profitability declining relative to market 139 SLIDE 1 INTEREST RATE RISK MANAGEMENT STRATEGY ARM Index Goals o MTA index combines the best of both worlds o Current MTA margin is 200 basis points o MTA is more profitable than COFI o This strategy is being implemented as quickly as possible in a way that avoids disrupting loan production SLIDE 2 CAPITAL MANAGEMENT STRATEGY o Prudent to target Federal Reserve capital requirements for bank holding companies Well capitalized ---------------- Leverage ratio 5% Tier 1 Risk ratio 6 Tier 2 Risk ratio 10 o Exceed FDIC & OTS well-capitalized requirements for banking subsidiaries 140 SLIDE 1 CAPITAL MANAGEMENT STRATEGY Hypothetical Model [in millions] o Loan Growth Rate 14% 18% o Implied Asset Growth $6,903 $7,388 o Required Capital @ 5% $345 $369 o Retained Equity @ 19.4% ROCE* 303 303 ------ ------ o Prospective Capital "Shortfall" $42 $66 * Assumes 1997 Q1 ROCE adjusted for 30% dividend payout SLIDE 2 FINANCIAL MANAGEMENT OPPORTUNITIES Potential Margin Enhancements o Increase percent of deposits in transaction + accounts o Increase percent of assets in higher yielding loans + o Price competitively ARM loans with favorable indices + o Reduce low-yielding securities + o Increase percent of borrowings - o Result: Stable/increased interest margin 141 SLIDE 1 FINANCIAL MANAGEMENT OPPORTUNITIES Fee Income Prospects o Rises rapidly as free checking strategy gathers momentum at ASB o Annual increases should range from 15% to 30% SLIDE 2 FINANCIAL MANAGEMENT OPPORTUNITIES Operating Expense Prospects o Investment in implementing our consumer banking strategy raises expenses in 1997 o Consolidation economies from ASB will take full effect in the second half of 1997 o Productivity improvements will contain costs over time o Overall we expect expenses to rise about half as fast as asset growth 142 SLIDE 1 INVESTOR CONFERENCE do the math SLIDE 2 APPENDIX - LENDING STRATEGY Estimated Paydown Rates by Loan Type Single family: COFI ARM 12% Treasury ARM 15 Fixed rate 10 -- 12 Construction: Custom 15 Builder 175 Multi family 16 143 SLIDE 1 APPENDIX - LENDING STRATEGY Estimated Paydown Rates by Loan Type Business 80% Consumer: Home Equity 33 Manufactured Housing 12 Other 50 ---- 28 ---- Total Paydown Rate 16.6% SLIDE 2 APPENDIX - LENDING STRATEGY Asset Growth (in millions) Hypothetical % Increase in originations @+14% @+16% @+18% 1996 1997 1997 1997 - -------------------------------------------------------------------------------- Cash & equivalents $831 $613 $616 $619 Investment securities 1,506 1,739 1,748 1,756 MBS 10,467 9,106 9,106 9,106 Loans, net 30,331 38,437 38,669 38,900 Other assets 1,418 1,560 1,560 1,560 ------ ------ ------ ------ Total assets 44,553 51,455 51,699 51,941 Asset growth $ 6,902 $ 7,146 $ 7,388 15.5% 16.0% 16.6% Assumptions: Cash and equivalents - adjusted down for excess cash; grows at same rate as total assets Investment securities - grows at same rate as total assets MBS - paydowns are 13%; other assets grow at 10% -----END PRIVACY-ENHANCED MESSAGE-----