WaMu (NYSE:WM) today announced a second quarter 2008 net loss of $3.33 billion as it significantly increased its loan loss reserves by $3.74 billion to $8.46 billion. The quarter’s loss compares with the first quarter net loss of $1.14 billion and net income of $830 million during the second quarter of 2007. The quarter’s financial results reflect an elevated level of provisioning due in large part to changes in the company’s provisioning assumptions in response to continued declines in housing prices nationwide. These changes had the effect of accelerating provisions into the quarter. The quarter’s provision was $5.9 billion compared with $2.2 billion of net charge-offs. The company now expects the remaining cumulative losses in its residential mortgage portfolios to be toward the upper end of the range it disclosed in April, and continues to expect 2008 to be the peak year for provisioning.
The company’s tangible equity to total tangible assets capital ratio increased during the second quarter to 7.79 percent from 6.40 percent in the first quarter, resulting in approximately $7 billion of capital in excess of its targeted 5.50 percent level. The increase reflects the effects of the $7.2 billion capital raise, the reduction of the company’s balance sheet by $10 billion and the loss for the quarter. The company also maintained strong levels of liquidity during the quarter, with over $40 billion of readily available liquidity at quarter end.
“In the face of unprecedented housing and mortgage market conditions, we are continuing to execute on a comprehensive plan designed to ensure that we have strong capital and liquidity, an appropriately-sized expense base and a strong, profitable retail franchise,” said WaMu Chief Executive Officer Kerry Killinger. “Our recent $7.2 billion capital raise, combined with the other proactive steps we have taken this quarter to strengthen our banking franchise and further expense reductions, continue to move us toward achieving these goals.”
Killinger also said that the company now expects to realize annualized cost savings of approximately $1 billion which will contribute to improved pretax, pre-provision earnings. “We remain confident that we have sufficient capital to successfully manage our way through this challenging period,” Killinger added.
The company reported a second quarter diluted loss per share of $6.58, which included a previously disclosed one-time earnings per share reduction in the amount of $3.24 related to the company’s capital issuance in April. Excluding this one-time reduction, the company’s second quarter loss per common share was $3.34. This non-cash reduction in earnings per share, which resulted in a reclassification within stockholders’ equity, had no effect on the company’s capital ratios or the net loss recorded in the second quarter.
SECOND QUARTER FINANCIAL SUMMARY AND HIGHLIGHTS | ||||||||||||||||||||
Selected Financial Summary | Three Months Ended | |||||||||||||||||||
($ in millions, except per share data) | Jun. 30, |
Mar. 31, |
Dec. 31, |
Sept. 30, |
Jun. 30, | |||||||||||||||
Income Statement | ||||||||||||||||||||
Net interest income | $ | 2,296 | $ | 2,175 | $ | 2,047 | $ | 2,014 | $ | 2,034 | ||||||||||
Provision for loan losses | 5,913 | 3,511 | 1,534 | 967 | 372 | |||||||||||||||
Noninterest income | 561 | 1,569 | 1,365 | 1,379 | 1,758 | |||||||||||||||
Foreclosed asset expense | 217 | 155 | 133 | 82 | 56 | |||||||||||||||
Goodwill impairment charge | - | - | 1,775 | - | - | |||||||||||||||
All other noninterest expense | 2,186 | 1,997 | 2,258 | 2,109 | 2,082 | |||||||||||||||
Minority interest expense | 75 | 75 | 65 | 53 | 42 | |||||||||||||||
Income (loss) before income taxes | (5,534 | ) | (1,994 | ) | (2,353 | ) | 182 | 1,240 | ||||||||||||
Income taxes | (2,206 | ) | (856 | ) | (486 | ) | (4 | ) | 410 | |||||||||||
Net income (loss) | $ | (3,328 | ) | $ | (1,138 | ) | $ | (1,867 | ) | $ | 186 | $ | 830 | |||||||
Diluted earnings per common share | $ | (6.58 | ) | $ | (1.40 | ) | $ | (2.19 | ) | $ | 0.20 | $ | 0.92 | |||||||
Less : effect of conversion feature | (3.24 | ) | - | - | - | - | ||||||||||||||
Diluted earnings per common share excluding effect of conversion feature | $ | (3.34 | ) | $ | (1.40 | ) | $ | (2.19 | ) | $ | 0.20 | $ | 0.92 | |||||||
Balance Sheet | ||||||||||||||||||||
Total assets, end of period | $ | 309,731 | $ | 319,668 | $ | 327,913 | $ | 330,110 | $ | 312,219 | ||||||||||
Average total assets | 314,882 | 319,928 | 325,276 | 320,475 | 316,004 | |||||||||||||||
Average interest-earning assets | 285,503 | 285,265 | 287,988 | 283,263 | 279,836 | |||||||||||||||
Average total deposits | 184,610 | 184,304 | 185,636 | 198,649 | 206,765 | |||||||||||||||
Profitability Ratios | ||||||||||||||||||||
Return on average common equity | (69.25 | )% | (23.27 | )% | (32.64 | )% | 3.03 | % | 13.74 | % | ||||||||||
Net interest margin | 3.22 | 3.05 | 2.86 | 2.86 | 2.91 | |||||||||||||||
Efficiency ratio | 84.11 | 57.49 | 122.13 | 64.55 | 56.38 | |||||||||||||||
Nonperforming assets/total assets | 3.62 | 2.87 | 2.17 | 1.65 | 1.29 | |||||||||||||||
Allowance for loan losses/ nonperforming loans | 87.26 | 60.25 | 41.99 | 41.27 | 47.63 | |||||||||||||||
Tangible equity/total tangible assets | 7.79 | 6.40 | 6.67 | 5.60 | 6.07 |
- Capital ratios improve. The tangible equity to total tangible assets ratio at June 30 was 7.79 percent compared with 6.40 percent as of Mar. 31, reflecting the April capital raise of $7.2 billion and despite significant provisioning to cover credit costs. Also contributing to the improved capital ratios this quarter was a decrease in total assets of approximately $10 billion, which freed up approximately $550 million in capital. Additional asset reductions are expected as the company continues to prudently manage the size of its balance sheet.
- Net interest margin up 17 basis points to 3.22 percent. The quarter’s increase in net interest income to $2.30 billion was driven by the 17 basis point expansion in the net interest margin. The margin improved as decreases in rates paid on interest bearing liabilities outpaced the decline in asset yields, while generally lower cost retail deposits grew as a percentage of funding. This expansion occurred despite an increase in nonperforming loans from the first quarter.
- Company builds reserves to $8.46 billion. During the second quarter, the company increased the provision for loan losses to $5.91 billion from $3.51 billion in the first quarter. The company expects remaining cumulative losses in its residential mortgage portfolios to be at the upper end of the range of losses it disclosed at the time of its capital raise in April, and for 2008 to be the peak year for provisioning. The increase in provision for loan losses reflected the further decline in house prices which increased expected loss severities, increased delinquencies, reduced availability of credit, and the weakening economy. Total net charge-offs in the loan portfolio rose to $2.17 billion from $1.37 billion in the prior quarter. Nonperforming assets grew to 3.62 percent of total assets at June 30 from 2.87 percent at the end of the first quarter. At the same time, early stage delinquencies for the subprime and home equity portfolios showed early signs of stabilization in the quarter. Approximately one third of the second quarter provision for loan losses related to significant changes in key assumptions the company used to estimate incurred losses in its loan portfolio in response to the increasingly adverse credit trends. Specifically, the company shortened the historical time period used to evaluate default frequencies for its prime mortgage portfolio from a three-year period to a one-year period to reflect the evolving risk profile of the loan portfolio and adjusted its severity assumptions for all single family mortgages to reflect the continuing decline in home prices. Year to date, the company has provided $9.42 billion for loan losses in comparison with net charge-offs of $3.54 billion, increasing the reserve to $8.46 billion at June 30. As a percentage of loans held in portfolio, the reserve stands at 3.53 percent, up from 1.05 percent at the end of 2007. In addition, the company’s coverage ratio of the reserve to nonperforming loans was 87.26 percent, more than double the 41.99 percent at the end of last year.
- Decline in noninterest income reflects further market stress and restructuring of home loans business. Despite the 9 percent quarter over quarter increase in depositor and other retail banking fees, noninterest income of $561 million in the second quarter was down from $1.6 billion in the prior quarter. During the second quarter, the company recognized other than temporary impairment losses of $407 million in the company’s available-for-sale securities portfolio, compared with $67 million in the prior quarter. Net trading losses of $305 million were up from net losses of $216 million in the first quarter primarily due to a reduction in the value of retained interests from credit card securitizations reflecting market conditions. The decrease in revenue from the sales and servicing of home mortgage loans reflects lower volumes in the mortgage origination pipeline due to the company’s exit from wholesale lending and closing of its home loan centers. Also impacting the quarter was a $171 million provision for repurchase reserves, up from a provision of $56 million in the first quarter. Mortgage servicing revenue was down $247 million primarily due to declines in the value of MSR risk management instruments that more than offset the increase in the MSR fair value.
- Company expands expense initiatives targeting $1 billion in savings. Noninterest expense of $2.40 billion in the quarter included $207 million in restructuring and resizing costs related to Home Loans activities as well as other corporate initiatives and foreclosed asset expense of $217 million, up from $155 million in the first quarter. During the quarter, the company implemented a series of additional initiatives designed to significantly reduce expense levels going forward. These initiatives included the previously announced wholesale and home loans center closures and other savings across functions that primarily supported home loans activities that have been discontinued. These actions will result in total annualized cost savings of approximately $1 billion, while incurring restructuring and resizing costs of approximately $450 million, of which $207 million were recorded in the second quarter.
- Net loss per share includes one-time adjustment. The company reported a second quarter diluted net loss per share of $6.58, which included a one-time earnings per share non-cash reduction in the amount of $3.24 per common share. The reduction was recorded as a result of the June conversion of the preferred stock issued in connection with the company’s capital transaction in April. This non-cash adjustment, which had no effect on the company’s capital ratios or the net loss recorded in the second quarter, reduced retained earnings by $3.29 billion, with a corresponding increase to capital surplus-common stock. Excluding this one-time reduction, the company’s second quarter diluted net loss per common share was $3.34.
SECOND QUARTER SEGMENT RESULTS Retail Banking Group | ||||||||||||||||||
Selected Segment Information | Three Months Ended | |||||||||||||||||
($ in millions, except accounts and households) | Jun. 30, |
Mar. 31, |
Dec. 31, |
Sept. 30, |
Jun. 30, | |||||||||||||
Net interest income | $ | 1,210 | $ | 1,203 | $ | 1,262 | $ | 1,306 | $ | 1,291 | ||||||||
Provision for loan losses | 3,823 | 2,300 | 663 | 318 | 91 | |||||||||||||
Noninterest income | 842 | 775 | 850 | 833 | 820 | |||||||||||||
Inter-segment revenue | 7 | 9 | 5 | 9 | 16 | |||||||||||||
Noninterest expense | 1,232 | 1,221 | 1,212 | 1,149 | 1,131 | |||||||||||||
Income (loss) before income taxes | (2,996 | ) | (1,534 | ) | 242 | 681 | 905 | |||||||||||
Income taxes | (959 | ) | (491 | ) | (39 | ) | 225 | 340 | ||||||||||
Net income (loss) | $ | (2,037 | ) | $ | (1,043 | ) | $ | 281 | $ | 456 | $ | 565 | ||||||
Average loans | $ | 138,671 | $ | 142,720 | $ | 145,486 | $ | 147,357 | $ | 149,716 | ||||||||
Average retail deposits | 149,509 | 146,734 | 142,733 | 144,921 | 145,252 | |||||||||||||
Net change in number of retail checking accounts | 254,957 | 256,069 | 74,493 | 310,360 | 406,243 | |||||||||||||
Net change in retail households | 94,000 | 154,000 | 37,000 | 161,000 | 228,000 |
- Revenue growth driven by increase in depositor fee income, expenses held steady. Net interest income was up slightly from the first quarter as the drop in the overall cost of deposits outpaced the decline in variable rate loan yields. Noninterest income, comprised primarily of depositor and other retail banking fees, was up 9 percent quarter over quarter. Depositor fees totaled $767 million in the second quarter, up 9 percent from the seasonally slow first quarter. The company continues to have strong checking account growth adding 254,957 net new accounts in the quarter.
- Quarterly results adversely impacted by higher loan loss provisioning. The quarter’s net loss reflected the increase in the provision for loan losses due in large part to changes in the company’s provisioning assumptions in response to continued declines in housing prices nationwide.
- Average retail deposits up 2 percent. Average retail deposits of $149.51 billion were up $2.78 billion during the quarter reflecting the growth in money market accounts. Retail deposit balances at the end of the quarter were down $3.40 billion to $148.25 billion reflecting the reduction in higher cost promotional certificates of deposit during the quarter. The average cost of retail deposits during the quarter was 2.23 percent, down from 2.65 percent in the prior quarter.
Card Services Group (managed basis) | ||||||||||||||||||||
Selected Segment Information | Three Months Ended | |||||||||||||||||||
($ in millions) | Jun. 30, |
Mar. 31, |
Dec. 31, |
Sept. 30, |
Jun. 30, | |||||||||||||||
Net interest income | $ | 769 | $ | 765 | $ | 694 | $ | 674 | $ | 649 | ||||||||||
Provision for loan losses | 911 | 626 | 591 | 611 | 523 | |||||||||||||||
Noninterest income | 187 | 418 | 315 | 400 | 393 | |||||||||||||||
Inter-segment expense | 5 | 5 | - | - | - | |||||||||||||||
Noninterest expense | 297 | 260 | 338 | 364 | 306 | |||||||||||||||
Income (loss) before income taxes | (257 | ) | 292 | 80 | 99 | 213 | ||||||||||||||
Income taxes | (82 | ) | 93 | (12 | ) | 33 | 80 | |||||||||||||
Net income (loss) | $ | (175 | ) | $ | 199 | $ | 92 | $ | 66 | $ | 133 | |||||||||
Average managed receivables | $ | 26,314 | $ | 26,889 | $ | 26,665 | $ | 25,718 | $ | 24,234 | ||||||||||
Period end managed receivables | 26,430 | 26,378 | 27,239 | 26,227 | 24,987 | |||||||||||||||
30+ day managed delinquency rate | 7.05 | % | 6.89 | % | 6.47 | % | 5.73 | % | 5.11 | % | ||||||||||
Managed net credit losses | 10.84 | 9.32 | 6.90 | 6.37 | 6.49 |
- Revenue down primarily due to higher credit costs and valuation adjustments. Net interest income was flat with the prior quarter as lower funding costs were offset by a lower balance of average receivables and declines in interest rates charged on card receivables. Noninterest income was down from the prior quarter reflecting reduced value of retained interests due to market conditions. In addition, noninterest income during the first quarter included an $85 million benefit received from the company’s share of VISA’s IPO. Noninterest expense was flat with the prior quarter, excluding the $38 million partial recovery of VISA litigation expense recorded in that quarter.
- Provision up but delinquencies stabilizing. The increase in the provision to $911 million from $626 million reflected higher managed net credit losses and an increase in reported receivables as maturing securitizations resulted in on-balance sheet funding of new originations. Managed net credit losses of 10.84 percent reflected the increase in contractual and bankruptcy losses in the face of a weaker economy. Reflecting the previous actions taken to reduce the company’s loss exposure, the 30+ day managed delinquency rate of 7.05 percent was up slightly from the prior quarter.
- Total managed receivables flat with prior quarter. Total managed receivables at quarter end remained level at $26.43 billion. During the quarter, Card Services opened 755,301 new credit card accounts, up from 666,407 in the prior quarter. Approximately 35 percent of the new accounts came through the retail channel as the company continued to leverage its retail network.
Commercial Group | ||||||||||||||||||
Selected Segment Information | Three Months Ended | |||||||||||||||||
($ in millions) | Jun. 30, |
Mar. 31, |
Dec. 31, |
Sept. 30, |
Jun. 30, | |||||||||||||
Net interest income | $ | 203 | $ | 196 | $ | 200 | $ | 200 | $ | 208 | ||||||||
Provision for loan losses | 17 | 29 | 19 | 12 | 2 | |||||||||||||
Noninterest income | 5 | (8 | ) | (10 | ) | (34 | ) | 63 | ||||||||||
Noninterest expense | 63 | 68 | 66 | 67 | 74 | |||||||||||||
Income before income taxes | 128 | 91 | 105 | 87 | 195 | |||||||||||||
Income taxes | 41 | 29 | 11 | 28 | 73 | |||||||||||||
Net income | $ | 87 | $ | 62 | $ | 94 | $ | 59 | $ | 122 | ||||||||
Loan volume | $ | 3,768 | $ | 2,835 | $ | 4,800 | $ | 4,054 | $ | 4,348 | ||||||||
Average loans | 41,891 | 40,934 | 40,129 | 38,333 | 38,789 |
- Net income up $25 million to $87 million. Net interest income of $203 million was up modestly from the prior quarter due to loan growth and improved net interest margin. Noninterest income was up slightly from the first quarter as a result of lower trading asset write-downs and higher gain on sale driven by an increase in volume. The low level of noninterest expense continued to reflect ongoing expense efficiencies.
- Provision down, strong credit trends continue. The provision for loan losses was down for the quarter with a corresponding decline in net charge-offs. Charge-offs during the quarter remained low at an annualized rate of only 2 basis points reflecting the portfolio’s conservative underwriting, low loan-to-value ratios, and small balance lending.
- Loan volume and balances up. Loan volume of $3.77 billion was up 33 percent from the prior quarter and average loans of $41.89 billion were up 2 percent as the company continued to invest in this business.
Home Loans Group | ||||||||||||||||||||
Selected Segment Information | Three Months Ended | |||||||||||||||||||
($ in millions) | Jun. 30, |
Mar. 31, |
Dec. 31, |
Sept. 30, |
Jun. 30, | |||||||||||||||
Net interest income | $ | 240 | $ | 250 | $ | 229 | $ | 191 | $ | 211 | ||||||||||
Provision for loan losses | 1,637 | 907 | 511 | 323 | 101 | |||||||||||||||
Noninterest income | (97 | ) | 319 | 329 | 183 | 389 | ||||||||||||||
Inter-segment expense | 2 | 4 | 5 | 9 | 16 | |||||||||||||||
Noninterest expense(a) | 484 | 499 | 2,319 | 554 | 547 | |||||||||||||||
Income (loss) before income taxes | (1,980 | ) | (841 | ) | (2,277 | ) | (512 | ) | (64 | ) | ||||||||||
Income taxes | (635 | ) | (269 | ) | (312 | ) | (169 | ) | (24 | ) | ||||||||||
Net (loss) | $ | (1,345 | ) | $ | (572 | ) | $ | (1,965 | ) | $ | (343 | ) | $ | (40 | ) | |||||
Loan volume | $ | 8,462 | $ | 13,774 | $ | 19,089 | $ | 26,434 | $ | 35,938 | ||||||||||
Average loans | 54,880 | 55,672 | 52,278 | 43,737 | 43,312 | |||||||||||||||
(a) Includes $1.78 billion goodwill charge in fourth quarter 2007. |
- Results reflect reduced mortgage market participation. Net interest income fell slightly from the prior quarter reflecting a higher level of nonaccruals and a decline in loan balances on lower production. Noninterest income was down from the first quarter due to the decline in gain on sale from lower loan commitment volume and the increase in the provision for repurchase reserves reflecting an increase in repurchase demands related to prime home mortgage loans. The repurchase reserve totaled $283 million at the end of the quarter, up from $178 million at Mar. 31. The quarterly gain on sale variance was also impacted by $68 million in additional gains in the first quarter from sales of loans locked prior to the adoption of new accounting pronouncements impacting gain on sale recognition. Noninterest income also reflected mortgage servicing revenue down $247 million, primarily due to declines in the value of MSR risk management instruments that more than offset the increase in MSR fair value.
- Expense declines reflect consolidation of Home Loans business. Despite the increase in foreclosed asset expense to $149 million from $118 million, noninterest expense of $484 million in the second quarter was down 3 percent from the first quarter with the further consolidation of the home loans business. The number of employees was reduced to 7,338 at the end of the second quarter from 9,135 at the end of the first quarter.
- Credit costs remain elevated. The increase in the provision to $1.64 billion from $907 million in the first quarter was driven by an acceleration in delinquencies and charge-offs, while subprime delinquencies showed signs of stabilization during the quarter. Total charge-offs rose to $807 million, up $341 million from the prior quarter.
- Production volume reduced as a result of management’s actions. Home loans segment volume of $8.46 billion was down 39 percent from first quarter levels reflecting the company’s decision to exit wholesale lending and close all remaining home loan centers.
COMPANY UPDATES
- On July 22, WaMu announced that the Human Resources Committee of the Board of Directors determined that, in light of the company’s 2008 financial performance to date, including the impact of mortgage-related loan loss provisions and foreclosed asset expense, the company’s Chief Executive Officer, President and Chief Operating Officer and Chief Financial Officer will not receive annual incentive payments under the company's 2008 Leadership Bonus Plan.
- On July 15, WaMu’s Board of Directors declared a cash dividend of $0.01 per share on the company’s common stock. Dividends on the common stock are payable on Aug. 15, 2008 to shareholders of record as of Jul. 31, 2008. In addition to declaring a dividend on the company’s common stock, the company will pay a dividend of $0.2528 per depository share of Series K Preferred Stock to be payable on Sept. 15, 2008 to holders of record on Sept. 1, 2008, a dividend of $19.8056 per share of Series R Preferred Stock to be payable on Sept. 15, 2008 to holders of record on Sept. 1, 2008.
- On Jun. 27, WaMu announced that a search had been initiated to replace James Corcoran, President of the Retail Bank who left WaMu to pursue other career opportunities.
- On Jun. 24, WaMu shareholders approved an amendment to increase the number of authorized common stock from 1,600,000,000 to 3,000,000,000, the conversion of the Series S and Series T Perpetual Contingent Convertible Non-Voting Preferred Stock into common stock and the ability of the warrants to be exercised to purchase common stock. On Jun. 30, the Series S and Series T preferred stock was converted into common stock.
- On Jun. 4, WaMu announced that Michael S. Solender had been named the company’s Executive Vice President and Chief Legal Officer. Solender reports to Kerry Killinger, WaMu’s CEO, and is a member of the company’s Executive Committee.
- On Jun. 2, WaMu announced that effective Jul. 1, independent director Stephen E. Frank would assume the role of independent Board Chair while Kerry Killinger would continue to lead the company as Chief Executive Officer and serve as a director.
- On Jun. 2, WaMu announced that under its new majority voting standard, in uncontested director elections, nominees must receive a majority of votes cast to be re-elected.
- On Apr. 29, WaMu announced that it named John P. McMurray as the company’s Chief Enterprise Risk Officer.
ABOUT WAMU
WaMu, through its subsidiaries, is one of the nation’s leading consumer and small business banks. At Jun. 30, 2008, WaMu and its subsidiaries had assets of $309.73 billion. The company has a history dating back to 1889 and its subsidiary banks currently operate approximately 2,300 consumer and small business banking stores throughout the nation. WaMu’s financial reports and news releases are available at www.wamu.com/ir.
WEBCAST INFORMATION
A conference call to discuss the company’s financial results will be held on Tuesday, Jul. 22, 2008, at 5:00 p.m. ET and will be hosted by Kerry Killinger, Chief Executive Officer, Tom Casey, Executive Vice President and Chief Financial Officer and John McMurray, Executive Vice president and Chief Enterprise Risk Officer. The conference call is available by telephone or on the Internet. The dial-in number for the live conference call is 888-324-6919. Participants calling from outside the United States may dial 312-470-7289. The passcode “WaMu” is required to access the call. Via the Internet, the conference call is available on the Investor Relations portion of the company’s web site at www.wamu.com/ir. A recording of the conference call will be available from approximately 7:00 p.m. ET on Tuesday, Jul. 22, 2008 through 11:59 p.m. on Friday, Aug. 1, 2008. The recorded message will be available at 888-568-0151. Callers from outside the United States may dial 203-369-3462.
FORWARD LOOKING STATEMENTS
This presentation contains forward-looking statements, which are not historical facts and pertain to future operating results. These forward-looking statements are within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about our plans, objectives, expectations and intentions and other statements contained in this document that are not historical facts. When used in this presentation, the words “expects,”“anticipates,” “intends,”“plans,” “believes,”“seeks,” “estimates,” or words of similar meaning, or future or conditional verbs, such as “will,”“would,” “should,”“could,” or “may” are generally intended to identify forward-looking statements. These forward-looking statements are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the results discussed in these forward-looking statements for the reasons, among others, discussed under the heading “Factors That May Affect Future Results” in Washington Mutual’s 2007 Annual Report on Form 10-K, as amended, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 which include:
- Economic conditions that negatively affect housing prices and the job market that have resulted, and may continue to result, in deterioration in credit quality of the company's loan portfolio.
- Access to market-based liquidity sources that may be negatively impacted if market conditions persist or if further ratings downgrades occur and could lead to increased funding costs and reduced gain on sale.
- The need to raise additional capital due to significant additional losses which could have a dilutive effect on existing shareholders and could affect the ability to pay dividends.
- Changes in interest rates.
- Features of certain of the company’s loan products that may result in increased credit risk.
- Estimates used by the company to determine the fair value of certain of our assets that may prove to be imprecise and result in significant changes in valuation.
- Risks related to the company’s credit card operations that could adversely affect the credit card portfolio and our ability to continue growing the credit card business.
- Operational risk which may result in incurring financial and reputational losses.
- Failure to comply with laws and regulations.
- Changes in the regulation of financial services companies, housing government-sponsored enterprises, mortgage originators and servicers, and credit card lenders.
- General business, economic and market conditions and continued deterioration in these conditions.
- Damage to the company’s professional reputation and business as a result of allegations and negative public opinion as well as pending and threatened litigation.
- Significant competition from banking and nonbanking companies.
There are other factors not described in our 2007 Form 10-K, as amended, and Form 10-Q for the quarter ended March 31, 2008 which are beyond the company’s ability to anticipate or control that could cause results to differ.
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Washington Mutual, Inc. | |||||||||||||||||||||||||||||||
Selected Financial Information | |||||||||||||||||||||||||||||||
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Quarter Ended | Six Months Ended | ||||||||||||||||||||||||||||||
June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | June 30, | June 30, | |||||||||||||||||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | 2008 | 2007 | |||||||||||||||||||||||||
PROFITABILITY | |||||||||||||||||||||||||||||||
Net income (loss) | $ | (3,328 | ) | $ | (1,138 | ) | $ | (1,867 | ) | $ | 186 | $ | 830 | $ | (4,466 | ) | $ | 1,614 | |||||||||||||
Net interest income | 2,296 | 2,175 | 2,047 | 2,014 | 2,034 | 4,471 | 4,115 | ||||||||||||||||||||||||
Noninterest income | 561 | 1,569 | 1,365 | 1,379 | 1,758 | 2,129 | 3,299 | ||||||||||||||||||||||||
Noninterest expense | 2,403 | 2,152 | 4,166 | 2,191 | 2,138 | 4,555 | 4,244 | ||||||||||||||||||||||||
Diluted earnings per common share: | |||||||||||||||||||||||||||||||
Diluted earnings per common share | $ | (6.58 | ) | $ | (1.40 | ) | $ | (2.19 | ) | $ | 0.20 | $ | 0.92 | $ | (8.43 | ) | $ | 1.78 | |||||||||||||
Less: Effect of conversion feature(1) | (3.24 | ) | - | - | - | - | (3.51 | ) | - | ||||||||||||||||||||||
Diluted earnings per common share excluding effect of conversion feature | (3.34 | ) | (1.40 | ) | (2.19 | ) | 0.20 | 0.92 | (4.92 | ) | 1.78 | ||||||||||||||||||||
Diluted weighted average number of common shares outstanding (in thousands) | 1,016,081 | 856,923 | 855,532 | 876,002 | 893,090 | 936,502 | 896,304 | ||||||||||||||||||||||||
Net interest margin on a taxable-equivalent basis(2) | 3.22 | % | 3.05 | % | 2.86 | % | 2.86 | % | 2.91 | % | 3.14 | % | 2.85 | % | |||||||||||||||||
Dividends declared per common share | $ | 0.01 | $ | 0.15 | $ | 0.56 | $ | 0.56 | $ | 0.55 | $ | 0.16 | $ | 1.09 | |||||||||||||||||
Book value per common share (period end)(3) | 13.35 | 21.74 | 24.55 | 27.18 | 27.27 | 13.35 | 27.27 | ||||||||||||||||||||||||
Tangible common equity per common share (period end)(4) | 9.01 | 13.26 | 15.89 | 16.43 | 16.59 | 9.01 | 16.59 | ||||||||||||||||||||||||
Return on average assets | (4.23 | ) | % | (1.42 | ) | % | (2.30 | ) | % | 0.23 | % | 1.05 | % | (2.81 | ) | % | 1.00 | % | |||||||||||||
Return on average common equity | (69.25 | ) | (23.27 | ) | (32.64 | ) | 3.03 | 13.74 | (45.67 | ) | 13.36 | ||||||||||||||||||||
Efficiency ratio(5) | 84.11 | 57.49 | 122.13 | 64.55 | 56.38 | 69.01 | 57.24 | ||||||||||||||||||||||||
ASSET QUALITY | |||||||||||||||||||||||||||||||
Nonperforming assets(6) to total assets | 3.62 | % | 2.87 | % | 2.17 | % | 1.65 | % | 1.29 | % | 3.62 | % | 1.29 | % | |||||||||||||||||
Allowance as a percentage of loans held in portfolio | 3.53 | 1.94 | 1.05 | 0.80 | 0.73 | 3.53 | 0.73 | ||||||||||||||||||||||||
CREDIT PERFORMANCE | |||||||||||||||||||||||||||||||
Provision for loan losses | $ | 5,913 | $ | 3,511 | $ | 1,534 | $ | 967 | $ | 372 | $ | 9,423 | $ | 606 | |||||||||||||||||
Net charge-offs | 2,171 | 1,368 | 747 | 421 | 271 | 3,538 | 454 | ||||||||||||||||||||||||
CAPITAL ADEQUACY | |||||||||||||||||||||||||||||||
Capital Ratios for WMI: | |||||||||||||||||||||||||||||||
Tangible equity to total tangible assets(7) | 7.79 | % | 6.40 | % | 6.67 | % | 5.60 | % | 6.07 | % | 7.79 | % | 6.07 | % | |||||||||||||||||
Tier 1 capital to average total assets (leverage)(8) | 7.80 | 6.56 | 6.84 | 5.86 | 6.09 | 7.80 | 6.09 | ||||||||||||||||||||||||
Total risk-based capital to total risk-weighted assets(8) | 13.98 | 12.25 | 12.34 | 10.67 | 11.04 | 13.98 | 11.04 | ||||||||||||||||||||||||
Capital Ratios for WMB (well-capitalized minimum)(9): | |||||||||||||||||||||||||||||||
Tier 1 capital to adjusted total assets (leverage) (5.00%) | 7.10 | 6.94 | 7.05 | 6.41 | 7.52 | 7.10 | 7.52 | ||||||||||||||||||||||||
Adjusted Tier 1 capital to total risk-weighted assets (6.00%) | 8.44 | 8.13 | 8.33 | 7.62 | 8.77 | 8.44 | 8.77 | ||||||||||||||||||||||||
Total risk-based capital to total risk-weighted assets (10.00%) | 12.49 | 12.21 | 12.22 | 11.26 | 12.80 | 12.49 | 12.80 | ||||||||||||||||||||||||
SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||||
Average balance sheet: | |||||||||||||||||||||||||||||||
Total loans held in portfolio | $ | 241,737 | $ | 244,186 | $ | 241,690 | $ | 227,348 | $ | 216,004 | $ | 242,961 | $ | 219,292 | |||||||||||||||||
Total interest-earning assets | 285,503 | 285,265 | 287,988 | 283,263 | 279,836 | 285,384 | 287,724 | ||||||||||||||||||||||||
Total assets | 314,882 | 319,928 | 325,276 | 320,475 | 316,004 | 317,405 | 323,911 | ||||||||||||||||||||||||
Total deposits | 184,610 | 184,304 | 185,636 | 198,649 | 206,765 | 184,457 | 208,753 | ||||||||||||||||||||||||
Total stockholders' equity | 27,558 | 24,066 | 23,947 | 23,994 | 24,436 | 25,812 | 24,422 | ||||||||||||||||||||||||
Period-end balance sheet: | |||||||||||||||||||||||||||||||
Total loans held in portfolio, net | 231,171 | 238,100 | 241,815 | 235,243 | 213,434 | 231,171 | 213,434 | ||||||||||||||||||||||||
Total assets | 309,731 | 319,668 | 327,913 | 330,110 | 312,219 | 309,731 | 312,219 | ||||||||||||||||||||||||
Total deposits | 181,923 | 188,049 | 181,926 | 194,280 | 201,380 | 181,923 | 201,380 | ||||||||||||||||||||||||
Total stockholders' equity | 26,086 | 22,449 | 24,584 | 23,941 | 24,210 | 26,086 | 24,210 | ||||||||||||||||||||||||
Common shares outstanding at the end of period (in thousands)(10) | 1,705,344 | 882,610 | 869,036 | 868,802 | 875,722 | 1,705,344 | 875,722 | ||||||||||||||||||||||||
Employees at end of period | 43,198 | 45,883 | 49,403 | 49,748 | 49,989 | 43,198 | 49,989 | ||||||||||||||||||||||||
_______________________ | |||||||||||||||||||||||||||||||
(1) | This one-time earnings per share reduction represents a beneficial conversion feature that was recorded upon the June 2008 conversion of the preferred shares issued in connection with the April 2008 capital transaction. This non-cash adjustment, which had no effect on the Company's capital ratios or the net loss recorded in the second quarter, was provided to facilitate the comparison of earnings per share to the prior reporting periods presented on this schedule. | ||||||||||||||||||||||||||||||
(2) | Includes taxable-equivalent adjustments primarily related to tax-exempt income on U.S. states and political subdivisions securities and loans related to the Company's community lending and investment activities. The federal statutory tax rate was 35% for the periods presented. | ||||||||||||||||||||||||||||||
(3) | Excludes six million shares held in escrow. | ||||||||||||||||||||||||||||||
(4) | Excludes goodwill and intangible assets (except MSR). | ||||||||||||||||||||||||||||||
(5) | The efficiency ratio is defined as noninterest expense divided by total revenue (net interest income and noninterest income). | ||||||||||||||||||||||||||||||
(6) | Excludes nonaccrual loans held for sale. | ||||||||||||||||||||||||||||||
(7) | Excludes unrealized net gain/loss on available-for-sale securities and cash flow hedging instruments, goodwill and intangible assets (except MSR) and the impact from the adoption and application of FASB Statement No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans. Minority interests of $3.91 billion, $3.91 billion, $3.92 billion, $2.94 billion and $2.94 billion at June 30, 2008, March 31, 2008, December 31, 2007, September 30, 2007 and June 30, 2007 are included in the numerator. | ||||||||||||||||||||||||||||||
(8) | The capital ratios are estimated as if Washington Mutual, Inc. were a bank holding company subject to Federal Reserve Board capital requirements. | ||||||||||||||||||||||||||||||
(9) | Capital ratios for Washington Mutual Bank ("WMB") at June 30, 2008 are preliminary. | ||||||||||||||||||||||||||||||
(10) | Includes six million shares held in escrow. |
WM-2 | ||||||||||||||||||||
Washington Mutual, Inc. | ||||||||||||||||||||
Consolidated Statements of Income | ||||||||||||||||||||
(dollars in millions, except per share data) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Quarter Ended | ||||||||||||||||||||
June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | ||||||||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | ||||||||||||||||
Interest Income | ||||||||||||||||||||
Loans held for sale | $ | 52 | $ | 87 | $ | 160 | $ | 248 | $ | 421 | ||||||||||
Loans held in portfolio | 3,604 | 3,954 | 4,156 | 3,992 | 3,786 | |||||||||||||||
Available-for-sale securities | 335 | 357 | 380 | 392 | 351 | |||||||||||||||
Trading assets | 117 | 116 | 101 | 108 | 108 | |||||||||||||||
Other interest and dividend income | 94 | 77 | 79 | 116 | 82 | |||||||||||||||
Total interest income | 4,202 | 4,591 | 4,876 | 4,856 | 4,748 | |||||||||||||||
Interest Expense | ||||||||||||||||||||
Deposits | 1,115 | 1,329 | 1,464 | 1,650 | 1,723 | |||||||||||||||
Borrowings | 791 | 1,087 | 1,365 | 1,192 | 991 | |||||||||||||||
Total interest expense | 1,906 | 2,416 | 2,829 | 2,842 | 2,714 | |||||||||||||||
Net interest income | 2,296 | 2,175 | 2,047 | 2,014 | 2,034 | |||||||||||||||
Provision for loan losses | 5,913 | 3,511 | 1,534 | 967 | 372 | |||||||||||||||
Net interest income (expense) after provision for loan losses | (3,617 | ) | (1,336 | ) | 513 | 1,047 | 1,662 | |||||||||||||
Noninterest Income | ||||||||||||||||||||
Revenue (expense) from sales and servicing of home mortgage loans | (109 | ) | 411 | 358 | 161 | 300 | ||||||||||||||
Revenue from sales and servicing of consumer loans | 159 | 248 | 375 | 418 | 403 | |||||||||||||||
Depositor and other retail banking fees | 767 | 704 | 769 | 740 | 720 | |||||||||||||||
Credit card fees | 177 | 181 | 214 | 209 | 183 | |||||||||||||||
Securities fees and commissions | 64 | 58 | 63 | 67 | 70 | |||||||||||||||
Insurance income | 32 | 30 | 29 | 29 | 29 | |||||||||||||||
Loss on trading assets | (305 | ) | (216 | ) | (267 | ) | (153 | ) | (145 | ) | ||||||||||
Gain (loss) on other available-for-sale securities | (402 | ) | 18 | (261 | ) | (99 | ) | 7 | ||||||||||||
Gain (loss) on extinguishment of borrowings | 100 | 13 | - | 1 | (14 | ) | ||||||||||||||
Other income | 78 | 122 | 85 | 6 | 205 | |||||||||||||||
Total noninterest income | 561 | 1,569 | 1,365 | 1,379 | 1,758 | |||||||||||||||
Noninterest Expense | ||||||||||||||||||||
Compensation and benefits | 939 | 914 | 877 | 910 | 977 | |||||||||||||||
Occupancy and equipment | 460 | 358 | 488 | 371 | 354 | |||||||||||||||
Telecommunications and outsourced information services | 123 | 130 | 134 | 135 | 132 | |||||||||||||||
Depositor and other retail banking losses | 61 | 63 | 72 | 71 | 58 | |||||||||||||||
Advertising and promotion | 103 | 105 | 108 | 125 | 113 | |||||||||||||||
Professional fees | 57 | 39 | 89 | 52 | 55 | |||||||||||||||
Foreclosed asset expense | 217 | 155 | 133 | 82 | 56 | |||||||||||||||
Goodwill impairment charge | - | - | 1,775 | - | - | |||||||||||||||
Other expense | 443 | 388 | 490 | 445 | 393 | |||||||||||||||
Total noninterest expense | 2,403 | 2,152 | 4,166 | 2,191 | 2,138 | |||||||||||||||
Minority interest expense | 75 | 75 | 65 | 53 | 42 | |||||||||||||||
Income (loss) before income taxes | (5,534 | ) | (1,994 | ) | (2,353 | ) | 182 | 1,240 | ||||||||||||
Income taxes | (2,206 | ) | (856 | ) | (486 | ) | (4 | ) | 410 | |||||||||||
Net Income (Loss) | $ | (3,328 | ) | $ | (1,138 | ) | $ | (1,867 | ) | $ | 186 | $ | 830 | |||||||
Preferred dividends declared | (71 | ) | (65 | ) | (8 | ) | (8 | ) | (8 | ) | ||||||||||
Beneficial conversion feature | (3,290 | ) | - | - | - | - | ||||||||||||||
Net Income (Loss) Applicable to Common Stockholders | $ | (6,689 | ) | $ | (1,203 | ) | $ | (1,875 | ) | $ | 178 | $ | 822 | |||||||
Earnings Per Common Share: | ||||||||||||||||||||
Basic | $ | (6.58 | ) | $ | (1.40 | ) | $ | (2.19 | ) | $ | 0.21 | $ | 0.95 | |||||||
Diluted | (6.58 | ) | (1.40 | ) | (2.19 | ) | 0.20 | 0.92 | ||||||||||||
Dividends declared per common share | 0.01 | 0.15 | 0.56 | 0.56 | 0.55 | |||||||||||||||
Basic weighted average number of common shares outstanding (in thousands) | 1,016,081 | 856,923 | 855,518 | 857,005 | 868,968 | |||||||||||||||
Diluted weighted average number of common shares outstanding (in thousands) | 1,016,081 | 856,923 | 855,532 | 876,002 | 893,090 |
WM-3 | ||||||||
Washington Mutual, Inc. | ||||||||
Consolidated Statements of Income | ||||||||
(dollars in millions, except per share data) | ||||||||
(unaudited) | ||||||||
Six Months Ended | ||||||||
June 30, | June 30, | |||||||
2008 | 2007 | |||||||
Interest Income | ||||||||
Loans held for sale | $ | 138 | $ | 984 | ||||
Loans held in portfolio | 7,559 | 7,686 | ||||||
Available-for-sale securities | 691 | 682 | ||||||
Trading assets | 233 | 221 | ||||||
Other interest and dividend income | 171 | 183 | ||||||
Total interest income | 8,792 | 9,756 | ||||||
Interest Expense | ||||||||
Deposits | 2,443 | 3,495 | ||||||
Borrowings | 1,878 | 2,146 | ||||||
Total interest expense | 4,321 | 5,641 | ||||||
Net interest income | 4,471 | 4,115 | ||||||
Provision for loan losses | 9,423 | 606 | ||||||
Net interest income (expense) after provision for loan losses | (4,952 | ) | 3,509 | |||||
Noninterest Income | ||||||||
Revenue from sales and servicing of home mortgage loans | 302 | 425 | ||||||
Revenue from sales and servicing of consumer loans | 407 | 846 | ||||||
Depositor and other retail banking fees | 1,470 | 1,385 | ||||||
Credit card fees | 358 | 355 | ||||||
Securities fees and commissions | 122 | 131 | ||||||
Insurance income | 63 | 58 | ||||||
Loss on trading assets | (521 | ) | (253 | ) | ||||
Gain (loss) on other available-for-sale securities | (384 | ) | 41 | |||||
Gain (loss) on extinguishment of borrowings | 113 | (7 | ) | |||||
Other income | 199 | 318 | ||||||
Total noninterest income | 2,129 | 3,299 | ||||||
Noninterest Expense | ||||||||
Compensation and benefits | 1,853 | 1,979 | ||||||
Occupancy and equipment | 818 | 731 | ||||||
Telecommunications and outsourced information services | 253 | 261 | ||||||
Depositor and other retail banking losses | 124 | 119 | ||||||
Advertising and promotion | 208 | 211 | ||||||
Professional fees | 96 | 93 | ||||||
Foreclosed asset expense | 372 | 95 | ||||||
Other expense | 831 | 755 | ||||||
Total noninterest expense | 4,555 | 4,244 | ||||||
Minority interest expense | 151 | 85 | ||||||
Income (loss) before income taxes | (7,529 | ) | 2,479 | |||||
Income taxes | (3,063 | ) | 865 | |||||
Net Income (Loss) | $ | (4,466 | ) | $ | 1,614 | |||
Preferred dividends declared | (136 | ) | (15 | ) | ||||
Beneficial conversion feature | (3,290 | ) | - | |||||
Net Income (Loss) Applicable to Common Stockholders | $ | (7,892 | ) | $ | 1,599 | |||
Earnings Per Common Share: | ||||||||
Basic | $ | (8.43 | ) | $ | 1.83 | |||
Diluted | (8.43 | ) | 1.78 | |||||
Dividends declared per common share | 0.16 | 1.09 | ||||||
Basic weighted average number of common shares outstanding (in thousands) | 936,502 | 871,876 | ||||||
Diluted weighted average number of common shares outstanding (in thousands) | 936,502 | 896,304 |
WM-4 | ||||||||||||||||||||
Washington Mutual, Inc. | ||||||||||||||||||||
Consolidated Statements of Financial Condition | ||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | ||||||||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | ||||||||||||||||
Assets | ||||||||||||||||||||
Cash and cash equivalents | $ | 7,235 | $ | 10,089 | $ | 9,560 | $ | 11,370 | $ | 4,167 | ||||||||||
Federal funds sold and securities purchased under agreements to resell | 2,750 | 2,527 | 1,877 | 4,042 | 3,267 | |||||||||||||||
Trading assets | 2,308 | 2,483 | 2,768 | 3,797 | 5,534 | |||||||||||||||
Available-for-sale securities, total amortized cost of $25,756, $24,907, $27,789, $28,725 and $28,934: | ||||||||||||||||||||
Mortgage-backed securities | 18,241 | 18,140 | 19,249 | 20,562 | 20,393 | |||||||||||||||
Investment securities | 6,134 | 5,466 | 8,291 | 7,844 | 7,947 | |||||||||||||||
Total available-for-sale securities | 24,375 | 23,606 | 27,540 | 28,406 | 28,340 | |||||||||||||||
Loans held for sale | 1,877 | 4,941 | 5,403 | 7,586 | 19,327 | |||||||||||||||
Loans held in portfolio | 239,627 | 242,814 | 244,386 | 237,132 | 214,994 | |||||||||||||||
Allowance for loan losses | (8,456 | ) | (4,714 | ) | (2,571 | ) | (1,889 | ) | (1,560 | ) | ||||||||||
Loans held in portfolio, net | 231,171 | 238,100 | 241,815 | 235,243 | 213,434 | |||||||||||||||
Investment in Federal Home Loan Banks | 3,498 | 3,514 | 3,351 | 2,808 | 1,596 | |||||||||||||||
Mortgage servicing rights | 6,175 | 5,726 | 6,278 | 6,794 | 7,231 | |||||||||||||||
Goodwill | 7,284 | 7,283 | 7,287 | 9,062 | 9,056 | |||||||||||||||
Other assets | 23,058 | 21,399 | 22,034 | 21,002 | 20,267 | |||||||||||||||
Total assets | $ | 309,731 | $ | 319,668 | $ | 327,913 | $ | 330,110 | $ | 312,219 | ||||||||||
Liabilities | ||||||||||||||||||||
Deposits: | ||||||||||||||||||||
Noninterest-bearing deposits | $ | 31,112 | $ | 31,911 | $ | 30,389 | $ | 31,341 | $ | 33,557 | ||||||||||
Interest-bearing deposits | 150,811 | 156,138 | 151,537 | 162,939 | 167,823 | |||||||||||||||
Total deposits | 181,923 | 188,049 | 181,926 | 194,280 | 201,380 | |||||||||||||||
Federal funds purchased and commercial paper | 75 | 250 | 2,003 | 2,482 | 3,390 | |||||||||||||||
Securities sold under agreements to repurchase | 214 | 215 | 4,148 | 4,732 | 9,357 | |||||||||||||||
Advances from Federal Home Loan Banks | 58,363 | 64,009 | 63,852 | 52,530 | 21,412 | |||||||||||||||
Other borrowings | 30,590 | 32,710 | 38,958 | 40,887 | 40,313 | |||||||||||||||
Other liabilities | 8,566 | 8,072 | 8,523 | 8,313 | 9,212 | |||||||||||||||
Minority interests | 3,914 | 3,914 | 3,919 | 2,945 | 2,945 | |||||||||||||||
Total liabilities | 283,645 | 297,219 | 303,329 | 306,169 | 288,009 | |||||||||||||||
Stockholders' Equity | ||||||||||||||||||||
Preferred stock | 3,392 | 3,392 | 3,392 | 492 | 492 | |||||||||||||||
Capital surplus - common stock | 12,916 | 2,646 | 2,630 | 2,575 | 2,715 | |||||||||||||||
Accumulated other comprehensive loss | (1,079 | ) | (1,141 | ) | (359 | ) | (390 | ) | (568 | ) | ||||||||||
Retained earnings | 10,857 | 17,552 | 18,921 | 21,264 | 21,571 | |||||||||||||||
Total stockholders' equity | 26,086 | 22,449 | 24,584 | 23,941 | 24,210 | |||||||||||||||
Total liabilities and stockholders' equity | $ | 309,731 | $ | 319,668 | $ | 327,913 | $ | 330,110 | $ | 312,219 |
WM-5 | |||||||||||||||||||||
Washington Mutual, Inc. | |||||||||||||||||||||
Selected Financial Information | |||||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||
(unaudited) | |||||||||||||||||||||
Quarter Ended | |||||||||||||||||||||
June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | |||||||||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | |||||||||||||||||
Stockholders' Equity Rollforward | |||||||||||||||||||||
Balance, beginning of period | $ | 22,449 | $ | 24,584 | $ | 23,941 | $ | 24,210 | $ | 24,578 | |||||||||||
Net income (loss) | (3,328 | ) | (1,138 | ) | (1,867 | ) | 186 | 830 | |||||||||||||
Cumulative effect from the adoption of new accounting pronouncements | - | (36 | ) | (1) | - | - | - | ||||||||||||||
Other comprehensive income (loss), net of income taxes | 62 | (782 | ) | 31 | 177 | (300 | ) | ||||||||||||||
Cash dividends declared on common stock | (10 | ) | (130 | ) | (482 | ) | (485 | ) | (484 | ) | |||||||||||
Preferred stock activity: | |||||||||||||||||||||
Preferred share conversion(2) | (3,290 | ) | - | - | - | - | |||||||||||||||
Cash dividends declared | (71 | ) | (65 | ) | (8 | ) | (8 | ) | (8 | ) | |||||||||||
Total preferred stock activity | (3,361 | ) | (65 | ) | (8 | ) | (8 | ) | (8 | ) | |||||||||||
Cash dividends returned(3) | 4 | - | 15 | - | - | ||||||||||||||||
Common stock activity: | |||||||||||||||||||||
Capital surplus-common stock attributable to preferred share conversion(2) | 3,290 | - | - | - | - | ||||||||||||||||
Common stock issued(4) | 6,980 | 16 | 54 | 60 | 94 | ||||||||||||||||
Common stock repurchased and retired(5) | - | - | - | (199 | ) | (500 | ) | ||||||||||||||
Total common stock activity | 10,270 | 16 | 54 | (139 | ) | (406 | ) | ||||||||||||||
Preferred stock issued | - | - | 2,900 | - | - | ||||||||||||||||
Balance, end of period | $ | 26,086 | $ | 22,449 | $ | 24,584 | $ | 23,941 | $ | 24,210 | |||||||||||
(1) | As of January 1, 2008, the Company adopted FASB Statement No. 157, Fair Value Measurements ("Statement No. 157"), EITF Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements ("Issue No. 06-4") and EITF Issue No. 06-10, Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements ("Issue No. 06-10"). The cumulative effect, net of income taxes, from the adoption of Statement No. 157, Issue No. 06-4 and Issue No. 06-10 was $1 million, $(35) million and $(2) million. | ||||||||||||||||||||
(2) | The preferred share conversion adjustment represents a beneficial conversion feature that was recorded upon the June 2008 conversion of the preferred shares issued in connection with the April 2008 capital transaction. This non-cash conversion adjustment, which did not affect the net loss recorded in the second quarter of 2008, reduced retained earnings and correspondingly increased capital surplus-common stock. | ||||||||||||||||||||
(3) | Represents accumulated dividends on shares returned from escrow. | ||||||||||||||||||||
(4) | Includes 647 million shares of common stock converted on June 30, 2008 at $8.75 per share from 56,570 preferred shares issued in April 2008. | ||||||||||||||||||||
(5) | The Company repurchased zero shares of its common stock during the three months ended June 30, 2008, March 31, 2008 and December 31, 2007, and 7.2 million and 13.5 million shares of its common stock during the three months ended September 30, 2007 and June 30, 2007. At June 30, 2008, the total remaining common stock repurchase authority was 47.5 million shares. |
WM-6 | |||||||||||||||||||||||||||||
Washington Mutual, Inc. | |||||||||||||||||||||||||||||
Selected Financial Information | |||||||||||||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||
Quarter Ended | Six Months Ended | ||||||||||||||||||||||||||||
June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | June 30, | June 30, | |||||||||||||||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | 2008 | 2007 | |||||||||||||||||||||||
RETAIL BANKING GROUP | |||||||||||||||||||||||||||||
Condensed income statement: | |||||||||||||||||||||||||||||
Net interest income | $ | 1,210 | $ | 1,203 | $ | 1,262 | $ | 1,306 | $ | 1,291 | $ | 2,413 | $ | 2,575 | |||||||||||||||
Provision for loan losses | 3,823 | 2,300 | 663 | 318 | 91 | 6,122 | 153 | ||||||||||||||||||||||
Noninterest income | 842 | 775 | 850 | 833 | 820 | 1,617 | 1,571 | ||||||||||||||||||||||
Inter-segment revenue | 7 | 9 | 5 | 9 | 16 | 15 | 34 | ||||||||||||||||||||||
Noninterest expense | 1,232 | 1,221 | 1,212 | 1,149 | 1,131 | 2,453 | 2,201 | ||||||||||||||||||||||
Income (loss) before income taxes | (2,996 | ) | (1,534 | ) | 242 | 681 | 905 | (4,530 | ) | 1,826 | |||||||||||||||||||
Income taxes | (959 | ) | (491 | ) | (39 | ) | 225 | 340 | (1,450 | ) | 685 | ||||||||||||||||||
Net income (loss) | $ | (2,037 | ) | $ | (1,043 | ) | $ | 281 | $ | 456 | $ | 565 | $ | (3,080 | ) | $ | 1,141 | ||||||||||||
Performance and other data: | |||||||||||||||||||||||||||||
Efficiency ratio | 59.82 | % | 61.48 | % | 57.25 | % | 53.48 | % | 53.19 | % | 60.63 | % | 52.65 | % | |||||||||||||||
Average loans | $ | 138,671 | $ | 142,720 | $ | 145,486 | $ | 147,357 | $ | 149,716 | $ | 140,695 | $ | 152,445 | |||||||||||||||
Average assets | 145,800 | 151,609 | 155,100 | 157,194 | 159,515 | 148,704 | 162,264 | ||||||||||||||||||||||
Average deposits: | |||||||||||||||||||||||||||||
Checking deposits: | |||||||||||||||||||||||||||||
Noninterest bearing | 24,753 | 23,425 | 22,748 | 22,860 | 23,107 | 24,089 | 22,722 | ||||||||||||||||||||||
Interest bearing | 22,557 | 24,306 | 26,328 | 28,406 | 30,282 | 23,431 | 31,006 | ||||||||||||||||||||||
Total checking deposits | 47,310 | 47,731 | 49,076 | 51,266 | 53,389 | 47,520 | 53,728 | ||||||||||||||||||||||
Savings and money market deposits | 54,928 | 47,904 | 44,623 | 43,524 | 43,814 | 51,417 | 43,460 | ||||||||||||||||||||||
Time deposits | 47,271 | 51,099 | 49,034 | 50,131 | 48,049 | 49,185 | 47,456 | ||||||||||||||||||||||
Average deposits | 149,509 | 146,734 | 142,733 | 144,921 | 145,252 | 148,122 | 144,644 | ||||||||||||||||||||||
Loan volume | 655 | 1,238 | 3,417 | 5,172 | 5,760 | 1,893 | 10,338 | ||||||||||||||||||||||
Employees at end of period | 27,857 | 28,736 | 29,147 | 28,636 | 28,523 | 27,857 | 28,523 | ||||||||||||||||||||||
CARD SERVICES GROUP | |||||||||||||||||||||||||||||
Managed basis(1) | |||||||||||||||||||||||||||||
Condensed income statement: | |||||||||||||||||||||||||||||
Net interest income | $ | 769 | $ | 765 | $ | 694 | $ | 674 | $ | 649 | $ | 1,534 | $ | 1,290 | |||||||||||||||
Provision for loan losses | 911 | 626 | 591 | 611 | 523 | 1,537 | 912 | ||||||||||||||||||||||
Noninterest income | 187 | 418 | 315 | 400 | 393 | 604 | 867 | ||||||||||||||||||||||
Inter-segment expense | 5 | 5 | - | - | - | 9 | - | ||||||||||||||||||||||
Noninterest expense | 297 | 260 | 338 | 364 | 306 | 557 | 635 | ||||||||||||||||||||||
Income (loss) before income taxes | (257 | ) | 292 | 80 | 99 | 213 | 35 | 610 | |||||||||||||||||||||
Income taxes | (82 | ) | 93 | (12 | ) | 33 | 80 | 11 | 229 | ||||||||||||||||||||
Net income (loss) | $ | (175 | ) | $ | 199 | $ | 92 | $ | 66 | $ | 133 | $ | 24 | $ | 381 | ||||||||||||||
Performance and other data: | |||||||||||||||||||||||||||||
Efficiency ratio | 31.25 | % | 22.04 | % | 33.51 | % | 33.91 | % | 29.33 | % | 26.16 | % | 29.42 | % | |||||||||||||||
Average loans | $ | 26,314 | $ | 26,889 | $ | 26,665 | $ | 25,718 | $ | 24,234 | $ | 26,601 | $ | 23,921 | |||||||||||||||
Average assets | 28,844 | 29,244 | 28,961 | 28,206 | 26,762 | 29,044 | 26,403 | ||||||||||||||||||||||
Employees at end of period | 2,940 | 2,881 | 2,860 | 2,878 | 2,827 | 2,940 | 2,827 | ||||||||||||||||||||||
Securitization adjustments | |||||||||||||||||||||||||||||
Condensed income statement: | |||||||||||||||||||||||||||||
Net interest income | $ | (506 | ) | $ | (503 | ) | $ | (454 | ) | $ | (456 | ) | $ | (459 | ) | $ | (1,010 | ) | $ | (874 | ) | ||||||||
Provision for loan losses | (530 | ) | (470 | ) | (335 | ) | (288 | ) | (294 | ) | (1,000 | ) | (577 | ) | |||||||||||||||
Noninterest income | (24 | ) | 33 | 119 | 168 | 165 | 10 | 297 | |||||||||||||||||||||
Performance and other data: | |||||||||||||||||||||||||||||
Average loans | (16,872 | ) | (17,391 | ) | (16,007 | ) | (14,488 | ) | (13,888 | ) | (17,131 | ) | (13,201 | ) | |||||||||||||||
Average assets | (14,739 | ) | (15,075 | ) | (14,180 | ) | (12,841 | ) | (12,287 | ) | (14,907 | ) | (11,627 | ) | |||||||||||||||
Adjusted basis | |||||||||||||||||||||||||||||
Condensed income statement: | |||||||||||||||||||||||||||||
Net interest income | $ | 263 | $ | 262 | $ | 240 | $ | 218 | $ | 190 | $ | 524 | $ | 416 | |||||||||||||||
Provision for loan losses | 381 | 156 | 256 | 323 | 229 | 537 | 335 | ||||||||||||||||||||||
Noninterest income | 163 | 451 | 434 | 568 | 558 | 614 | 1,164 | ||||||||||||||||||||||
Inter-segment expense | 5 | 5 | - | - | - | 9 | - | ||||||||||||||||||||||
Noninterest expense | 297 | 260 | 338 | 364 | 306 | 557 | 635 | ||||||||||||||||||||||
Income (loss) before income taxes | (257 | ) | 292 | 80 | 99 | 213 | 35 | 610 | |||||||||||||||||||||
Income taxes | (82 | ) | 93 | (12 | ) | 33 | 80 | 11 | 229 | ||||||||||||||||||||
Net income (loss) | $ | (175 | ) | $ | 199 | $ | 92 | $ | 66 | $ | 133 | $ | 24 | $ | 381 | ||||||||||||||
Performance and other data: | |||||||||||||||||||||||||||||
Average loans | $ | 9,442 | $ | 9,498 | $ | 10,658 | $ | 11,230 | $ | 10,346 | $ | 9,470 | $ | 10,720 | |||||||||||||||
Average assets | 14,105 | 14,169 | 14,781 | 15,365 | 14,475 | 14,137 | 14,776 | ||||||||||||||||||||||
(This table is continued on "WM-7.") | |||||||||||||||||||||||||||||
__________________________ | |||||||||||||||||||||||||||||
(1) | The managed basis presentation treats securitized and sold credit card receivables as if they were still on the balance sheet. The Company uses this basis in assessing the overall performance of this operating segment. The managed basis presentation of the Card Services Group is derived by adjusting the GAAP financial information to add back securitized loan balances and the related interest, fee income and provision for credit losses. Such adjustments are eliminated as securitization adjustments when reporting GAAP results. |
WM-7 | |||||||||||||||||||||||||||||
Washington Mutual, Inc. | |||||||||||||||||||||||||||||
Selected Financial Information | |||||||||||||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||
Quarter Ended | Six Months Ended | ||||||||||||||||||||||||||||
(This table is continued from "WM-6.") | June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | June 30, | June 30, | ||||||||||||||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | 2008 | 2007 | |||||||||||||||||||||||
COMMERCIAL GROUP | |||||||||||||||||||||||||||||
Condensed income statement: | |||||||||||||||||||||||||||||
Net interest income | $ | 203 | $ | 196 | $ | 200 | $ | 200 | $ | 208 | $ | 400 | $ | 420 | |||||||||||||||
Provision for loan losses | 17 | 29 | 19 | 12 | 2 | 47 | (7 | ) | |||||||||||||||||||||
Noninterest income | 5 | (8 | ) | (10 | ) | (34 | ) | 63 | (3 | ) | 78 | ||||||||||||||||||
Noninterest expense | 63 | 68 | 66 | 67 | 74 | 131 | 148 | ||||||||||||||||||||||
Income before income taxes | 128 | 91 | 105 | 87 | 195 | 219 | 357 | ||||||||||||||||||||||
Income taxes | 41 | 29 | 11 | 28 | 73 | 70 | 134 | ||||||||||||||||||||||
Net income | $ | 87 | $ | 62 | $ | 94 | $ | 59 | $ | 122 | $ | 149 | $ | 223 | |||||||||||||||
Performance and other data: | |||||||||||||||||||||||||||||
Efficiency ratio | 30.34% | 36.09% | 34.39% | 40.26% | 27.42% | 33.07% | 29.89% | ||||||||||||||||||||||
Average loans | $ | 41,891 | $ | 40,934 | $ | 40,129 | $ | 38,333 | $ | 38,789 | $ | 41,413 | $ | 38,715 | |||||||||||||||
Average assets | 43,875 | 43,004 | 42,336 | 40,663 | 41,184 | 43,439 | 41,094 | ||||||||||||||||||||||
Average deposits | 6,632 | 7,474 | 9,762 | 13,816 | 15,294 | 7,053 | 13,671 | ||||||||||||||||||||||
Loan volume | 3,768 | 2,835 | 4,800 | 4,054 | 4,348 | 6,603 | 8,018 | ||||||||||||||||||||||
Employees at end of period | 1,342 | 1,358 | 1,502 | 1,524 | 1,508 | 1,342 | 1,508 | ||||||||||||||||||||||
HOME LOANS GROUP | |||||||||||||||||||||||||||||
Condensed income statement: | |||||||||||||||||||||||||||||
Net interest income | $ | 240 | $ | 250 | $ | 229 | $ | 191 | $ | 211 | $ | 490 | $ | 455 | |||||||||||||||
Provision for loan losses | 1,637 | 907 | 511 | 323 | 101 | 2,544 | 150 | ||||||||||||||||||||||
Noninterest income | (97 | ) | 319 | 329 | 183 | 389 | 221 | 550 | |||||||||||||||||||||
Inter-segment expense | 2 | 4 | 5 | 9 | 16 | 6 | 34 | ||||||||||||||||||||||
Noninterest expense | 484 | 499 | 2,319 | 554 | 547 | 983 | 1,069 | ||||||||||||||||||||||
Loss before income taxes | (1,980 | ) | (841 | ) | (2,277 | ) | (512 | ) | (64 | ) | (2,822 | ) | (248 | ) | |||||||||||||||
Income taxes | (635 | ) | (269 | ) | (312 | ) | (169 | ) | (24 | ) | (904 | ) | (93 | ) | |||||||||||||||
Net loss | $ | (1,345 | ) | $ | (572 | ) | $ | (1,965 | ) | $ | (343 | ) | $ | (40 | ) | $ | (1,918 | ) | $ | (155 | ) | ||||||||
Performance and other data: | |||||||||||||||||||||||||||||
Efficiency ratio | 344.70% | 88.26% | 419.52% | 151.63% | 93.71% | 139.26% | 110.07% | ||||||||||||||||||||||
Average loans | $ | 54,880 | $ | 55,672 | $ | 52,278 | $ | 43,737 | $ | 43,312 | $ | 55,275 | $ | 48,255 | |||||||||||||||
Average assets | 65,074 | 66,841 | 66,172 | 61,106 | 60,342 | 65,958 | 65,831 | ||||||||||||||||||||||
Average deposits | 5,202 | 5,469 | 6,714 | 7,780 | 8,372 | 5,335 | 8,436 | ||||||||||||||||||||||
Loan volume | 8,462 | 13,774 | 19,089 | 26,434 | 35,938 | 22,236 | 69,718 | ||||||||||||||||||||||
Employees at end of period | 7,338 | 9,135 | 11,812 | 12,668 | 13,150 | 7,338 | 13,150 | ||||||||||||||||||||||
CORPORATE SUPPORT/TREASURY AND OTHER | |||||||||||||||||||||||||||||
Condensed income statement: | |||||||||||||||||||||||||||||
Net interest income (expense) | $ | 254 | $ | 132 | $ | (18 | ) | $ | (39 | ) | $ | (4 | ) | $ | 386 | $ | (26 | ) | |||||||||||
Provision for loan losses | 55 | 119 | 85 | (9 | ) | (51 | ) | 173 | (25 | ) | |||||||||||||||||||
Noninterest income | (327 | ) | 86 | (201 | ) | (91 | ) | 60 | (241 | ) | 154 | ||||||||||||||||||
Noninterest expense | 327 | 104 | 231 | 57 | 80 | 431 | 191 | ||||||||||||||||||||||
Minority interest expense | 75 | 75 | 65 | 53 | 42 | 151 | 85 | ||||||||||||||||||||||
Loss before income taxes | (530 | ) | (80 | ) | (600 | ) | (231 | ) | (15 | ) | (610 | ) | (123 | ) | |||||||||||||||
Income taxes | (247 | ) | (68 | ) | (157 | ) | (46 | ) | (37 | ) | (316 | ) | (106 | ) | |||||||||||||||
Net income (loss) | $ | (283 | ) | $ | (12 | ) | $ | (443 | ) | $ | (185 | ) | $ | 22 | $ | (294 | ) | $ | (17 | ) | |||||||||
Performance and other data: | |||||||||||||||||||||||||||||
Average loans | $ | 1,648 | $ | 1,556 | $ | 1,482 | $ | 1,420 | $ | 1,367 | $ | 1,602 | $ | 1,356 | |||||||||||||||
Average assets | 47,151 | 45,525 | 48,173 | 47,532 | 41,789 | 46,338 | 41,335 | ||||||||||||||||||||||
Average deposits | 23,267 | 24,627 | 26,427 | 32,132 | 37,847 | 23,947 | 42,002 | ||||||||||||||||||||||
Loan volume | 84 | 143 | 171 | 113 | 72 | 226 | 179 | ||||||||||||||||||||||
Employees at end of period | 3,721 | 3,773 | 4,082 | 4,042 | 3,981 | 3,721 | 3,981 | ||||||||||||||||||||||
(This table is continued on "WM-8.") |
WM-8 | ||||||||||||||||||||||||||||||
Washington Mutual, Inc. | ||||||||||||||||||||||||||||||
Selected Financial Information | ||||||||||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||
Quarter Ended | Six Months Ended | |||||||||||||||||||||||||||||
(This table is continued from "WM-7.") | June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | June 30, | June 30, | |||||||||||||||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | 2008 | 2007 | ||||||||||||||||||||||||
RECONCILING ADJUSTMENTS | ||||||||||||||||||||||||||||||
Condensed income statement: | ||||||||||||||||||||||||||||||
Net interest income(1) | $ | 126 | $ | 132 | $ | 134 | $ | 138 | $ | 138 | $ | 258 | $ | 275 | ||||||||||||||||
Noninterest income (expense)(2) | (25 | ) | (54 | ) | (37 | ) | (80 | ) | (132 | ) | (79 | ) | (218 | ) | ||||||||||||||||
Income before income taxes | 101 | 78 | 97 | 58 | 6 | 179 | 57 | |||||||||||||||||||||||
Income taxes(3) | (324 | ) | (150 | ) | 23 | (75 | ) | (22 | ) | (474 | ) | 16 | ||||||||||||||||||
Net income | $ | 425 | $ | 228 | $ | 74 | $ | 133 | $ | 28 | $ | 653 | $ | 41 | ||||||||||||||||
Performance and other data: | ||||||||||||||||||||||||||||||
Average loans(4) | $ | (1,123 | ) | $ | (1,220 | ) | $ | (1,286 | ) | $ | (1,385 | ) | $ | (1,301 | ) | $ | (1,171 | ) | $ | (1,389 | ) | |||||||||
Average assets(4) | (1,123 | ) | (1,220 | ) | (1,286 | ) | (1,385 | ) | (1,301 | ) | (1,171 | ) | (1,389 | ) | ||||||||||||||||
TOTAL CONSOLIDATED | ||||||||||||||||||||||||||||||
Condensed income statement: | ||||||||||||||||||||||||||||||
Net interest income | $ | 2,296 | $ | 2,175 | $ | 2,047 | $ | 2,014 | $ | 2,034 | $ | 4,471 | $ | 4,115 | ||||||||||||||||
Provision for loan losses | 5,913 | 3,511 | 1,534 | 967 | 372 | 9,423 | 606 | |||||||||||||||||||||||
Noninterest income | 561 | 1,569 | 1,365 | 1,379 | 1,758 | 2,129 | 3,299 | |||||||||||||||||||||||
Noninterest expense | 2,403 | 2,152 | 4,166 | 2,191 | 2,138 | 4,555 | 4,244 | |||||||||||||||||||||||
Minority interest expense | 75 | 75 | 65 | 53 | 42 | 151 | 85 | |||||||||||||||||||||||
Income (loss) before income taxes | (5,534 | ) | (1,994 | ) | (2,353 | ) | 182 | 1,240 | (7,529 | ) | 2,479 | |||||||||||||||||||
Income taxes | (2,206 | ) | (856 | ) | (486 | ) | (4 | ) | 410 | (3,063 | ) | 865 | ||||||||||||||||||
Net income (loss) | $ | (3,328 | ) | $ | (1,138 | ) | $ | (1,867 | ) | $ | 186 | $ | 830 | $ | (4,466 | ) | $ | 1,614 | ||||||||||||
Performance and other data: | ||||||||||||||||||||||||||||||
Efficiency ratio | 84.11% | 57.49% | 122.13% | 64.55% | 56.38% | 69.01% | 57.24% | |||||||||||||||||||||||
Average loans | $ | 245,409 | $ | 249,160 | $ | 248,747 | $ | 240,692 | $ | 242,229 | $ | 247,284 | $ | 250,102 | ||||||||||||||||
Average assets | 314,882 | 319,928 | 325,276 | 320,475 | 316,004 | 317,405 | 323,911 | |||||||||||||||||||||||
Average deposits | 184,610 | 184,304 | 185,636 | 198,649 | 206,765 | 184,457 | 208,753 | |||||||||||||||||||||||
Loan volume | 12,969 | 17,990 | 27,477 | 35,773 | 46,118 | 30,958 | 88,253 | |||||||||||||||||||||||
Employees at end of period | 43,198 | 45,883 | 49,403 | 49,748 | 49,989 | 43,198 | 49,989 | |||||||||||||||||||||||
__________________________ | ||||||||||||||||||||||||||||||
(1) | Represents the difference between mortgage loan premium amortization recorded by the Retail Banking Group and the amount recognized in the Company's Consolidated Statements of Income. For management reporting purposes, certain mortgage loans that are held in portfolio by the Retail Banking Group are treated as if they are purchased from the Home Loans Group. Since the cost basis of these loans includes an assumed profit factor paid to the Home Loans Group, the amortization of loan premiums recorded by the Retail Banking Group reflects this assumed profit factor and must therefore be eliminated as a reconciling adjustment. | |||||||||||||||||||||||||||||
(2) | Represents the difference between gain from mortgage loans recorded by the Home Loans Group and gain from mortgage loans recognized in the Company's Consolidated Statements of Income. | |||||||||||||||||||||||||||||
(3) | Represents the tax effect of reconciling adjustments. | |||||||||||||||||||||||||||||
(4) | Represents the inter-segment offset for inter-segment loan premiums that the Retail Banking Group recognized upon transfer of portfolio loans from the Home Loans Group. |
WM-9 | |||||||||||||||||||||||||||||
Washington Mutual, Inc. | |||||||||||||||||||||||||||||
Selected Financial Information | |||||||||||||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||
Quarter Ended | |||||||||||||||||||||||||||||
June 30, 2008 | Mar. 31, 2008 | June 30, 2007 | |||||||||||||||||||||||||||
Interest | Interest | Interest | |||||||||||||||||||||||||||
Income/ | Income/ | Income/ | |||||||||||||||||||||||||||
Balance | Rate | Expense | Balance | Rate | Expense | Balance | Rate | Expense | |||||||||||||||||||||
Average Balances and Weighted Average Interest Rates | |||||||||||||||||||||||||||||
Assets (Taxable-Equivalent Basis(1)) | |||||||||||||||||||||||||||||
Interest-earning assets(2): | |||||||||||||||||||||||||||||
Federal funds sold and securities purchased under agreements to resell | $ | 2,161 | 2.15 | % | $ | 11 | $ | 2,118 | 3.48 | % | $ | 18 | $ | 3,964 | 5.39 | % | $ | 53 | |||||||||||
Trading assets | 2,404 | 19.50 | 117 | 2,726 | 17.10 | 116 | 4,995 | 8.67 | 108 | ||||||||||||||||||||
Available-for-sale securities(3): | |||||||||||||||||||||||||||||
Mortgage-backed securities | 19,190 | 5.67 | 271 | 18,945 | 5.80 | 275 | 19,177 | 5.39 | 259 | ||||||||||||||||||||
Investment securities | 5,287 | 5.06 | 67 | 6,316 | 5.39 | 85 | 7,382 | 5.15 | 95 | ||||||||||||||||||||
Loans held for sale | 3,672 | 5.62 | 52 | 4,974 | 6.98 | 87 | 26,225 | 6.43 | 421 | ||||||||||||||||||||
Loans held in portfolio: | |||||||||||||||||||||||||||||
Loans secured by real estate: | |||||||||||||||||||||||||||||
Home loans(4)(5) | 107,299 | 5.83 | 1,563 | 109,773 | 6.27 | 1,720 | 90,818 | 6.44 | 1,462 | ||||||||||||||||||||
Home equity loans and lines of credit(5) | 60,964 | 5.12 | 777 | 61,196 | 6.28 | 956 | 54,431 | 7.59 | 1,031 | ||||||||||||||||||||
Subprime mortgage channel(6) | 16,933 | 6.05 | 256 | 18,106 | 6.33 | 287 | 20,152 | 6.80 | 343 | ||||||||||||||||||||
Home construction(7) | 1,973 | 7.41 | 37 | 2,142 | 7.65 | 41 | 2,043 | 6.72 | 34 | ||||||||||||||||||||
Multi-family | 32,786 | 6.13 | 502 | 31,962 | 6.35 | 507 | 29,419 | 6.65 | 488 | ||||||||||||||||||||
Other real estate | 10,205 | 6.26 | 159 | 9,797 | 6.49 | 158 | 6,843 | 7.03 | 120 | ||||||||||||||||||||
Total loans secured by real estate | 230,160 | 5.73 | 3,294 | 232,976 | 6.31 | 3,669 | 203,706 | 6.84 | 3,478 | ||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||||
Credit card | 9,443 | 11.56 | 271 | 9,024 | 10.75 | 241 | 10,101 | 10.44 | 263 | ||||||||||||||||||||
Other | 180 | 16.85 | 8 | 195 | 17.47 | 8 | 254 | 12.44 | 8 | ||||||||||||||||||||
Commercial | 1,954 | 6.76 | 33 | 1,991 | 7.36 | 37 | 1,943 | 7.73 | 38 | ||||||||||||||||||||
Total loans held in portfolio | 241,737 | 5.98 | 3,606 | 244,186 | 6.49 | 3,955 | 216,004 | 7.02 | 3,787 | ||||||||||||||||||||
Other | 11,052 | 3.01 | 83 | 6,000 | 3.94 | 59 | 2,089 | 5.47 | 29 | ||||||||||||||||||||
Total interest-earning assets | 285,503 | 5.90 | 4,207 | 285,265 | 6.45 | 4,595 | 279,836 | 6.80 | 4,752 | ||||||||||||||||||||
Noninterest-earning assets: | |||||||||||||||||||||||||||||
Mortgage servicing rights | 6,115 | 5,882 | 6,782 | ||||||||||||||||||||||||||
Goodwill | 7,283 | 7,286 | 9,054 | ||||||||||||||||||||||||||
Other assets | 15,981 | 21,495 | 20,332 | ||||||||||||||||||||||||||
Total assets | $ | 314,882 | $ | 319,928 | $ | 316,004 | |||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||||||||||
Deposits: | |||||||||||||||||||||||||||||
Interest-bearing checking deposits | $ | 22,619 | 1.39 | 78 | $ | 24,384 | 1.75 | 107 | $ | 30,373 | 2.51 | 190 | |||||||||||||||||
Savings and money market deposits | 62,078 | 2.17 | 335 | 55,951 | 2.73 | 379 | 58,969 | 3.33 | 490 | ||||||||||||||||||||
Time deposits | 69,161 | 4.08 | 702 | 74,225 | 4.57 | 843 | 84,330 | 4.96 | 1,043 | ||||||||||||||||||||
Total interest-bearing deposits | 153,858 | 2.91 | 1,115 | 154,560 | 3.46 | 1,329 | 173,672 | 3.98 | 1,723 | ||||||||||||||||||||
Federal funds purchased and commercial paper | 79 | 3.05 | 1 | 1,009 | 3.62 | 9 | 2,169 | 5.36 | 29 | ||||||||||||||||||||
Securities sold under agreements to repurchase | 406 | 2.20 | 2 | 885 | 3.78 | 8 | 8,416 | 5.35 | 112 | ||||||||||||||||||||
Advances from Federal Home Loan Banks | 60,402 | 3.36 | 505 | 62,799 | 4.29 | 670 | 22,063 | 5.36 | 295 | ||||||||||||||||||||
Other | 30,839 | 3.69 | 283 | 34,048 | 4.71 | 400 | 39,886 | 5.57 | 555 | ||||||||||||||||||||
Total interest-bearing liabilities | 245,584 | 3.12 | 1,906 | 253,301 | 3.83 | 2,416 | 246,206 | 4.42 | 2,714 | ||||||||||||||||||||
Noninterest-bearing sources: | |||||||||||||||||||||||||||||
Noninterest-bearing deposits | 30,752 | 29,744 | 33,093 | ||||||||||||||||||||||||||
Other liabilities | 7,075 | 8,902 | 9,610 | ||||||||||||||||||||||||||
Minority interests | 3,913 | 3,915 | 2,659 | ||||||||||||||||||||||||||
Stockholders' equity | 27,558 | 24,066 | 24,436 | ||||||||||||||||||||||||||
Total liabilities and stockholders' equity | $ | 314,882 | $ | 319,928 | $ | 316,004 | |||||||||||||||||||||||
Net interest spread and net interest income on a taxable-equivalent basis | 2.78 | $ | 2,301 | 2.62 | $ | 2,179 | 2.38 | $ | 2,038 | ||||||||||||||||||||
Impact of noninterest-bearing sources | 0.44 | 0.43 | 0.53 | ||||||||||||||||||||||||||
Net interest margin on a taxable-equivalent basis | 3.22 | 3.05 | 2.91 | ||||||||||||||||||||||||||
__________________________ | |||||||||||||||||||||||||||||
(1) | Includes taxable-equivalent adjustments primarily related to tax-exempt income on U.S. states and political subdivisions securities and loans related to the Company’s community lending and investment activities. The federal statutory tax rate was 35% for the periods presented. | ||||||||||||||||||||||||||||
(2) | Nonaccrual assets and related income, if any, are included in their respective categories. | ||||||||||||||||||||||||||||
(3) | The average balance and yield are based on average amortized cost balances. | ||||||||||||||||||||||||||||
(4) | Capitalized interest recognized in earnings that resulted from negative amortization within the Option ARM portfolio totaled $255 million, $336 million and $344 million for the three months ended June 30, 2008, March 31, 2008 and June 30, 2007. | ||||||||||||||||||||||||||||
(5) | Excludes home loans and home equity loans and lines of credit in the subprime mortgage channel. | ||||||||||||||||||||||||||||
(6) | Represents mortgage loans purchased from recognized subprime lenders and mortgage loans originated under the Long Beach Mortgage name and held in the investment portfolio. | ||||||||||||||||||||||||||||
(7) | Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence. |
WM-10 | ||||||||||||||||||||
Washington Mutual, Inc. | ||||||||||||||||||||
Selected Financial Information | ||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Six Months Ended | ||||||||||||||||||||
June 30, 2008 | June 30, 2007 | |||||||||||||||||||
Interest | Interest | |||||||||||||||||||
Income/ | Income/ | |||||||||||||||||||
Balance | Rate | Expense | Balance | Rate | Expense | |||||||||||||||
Average Balances and Weighted Average Interest Rates | ||||||||||||||||||||
Assets (Taxable-Equivalent Basis(1)) | ||||||||||||||||||||
Interest-earning assets(2): | ||||||||||||||||||||
Federal funds sold and securities purchased under agreements to resell | $ | 2,139 | 2.81 | % | $ | 30 | $ | 3,947 | 5.39 | % | $ | 105 | ||||||||
Trading assets | 2,565 | 18.22 | 233 | 5,293 | 8.37 | 221 | ||||||||||||||
Available-for-sale securities(3): | ||||||||||||||||||||
Mortgage-backed securities | 19,068 | 5.74 | 546 | 18,821 | 5.44 | 511 | ||||||||||||||
Investment securities | 5,802 | 5.24 | 152 | 6,785 | 5.18 | 176 | ||||||||||||||
Loans held for sale | 4,323 | 6.40 | 138 | 30,810 | 6.40 | 984 | ||||||||||||||
Loans held in portfolio: | ||||||||||||||||||||
Loans secured by real estate: | ||||||||||||||||||||
Home loans(4)(5) | 108,536 | 6.05 | 3,283 | 94,074 | 6.45 | 3,033 | ||||||||||||||
Home equity loans and lines of credit(5) | 61,080 | 5.70 | 1,733 | 53,726 | 7.57 | 2,020 | ||||||||||||||
Subprime mortgage channel(6) | 17,519 | 6.19 | 543 | 20,381 | 6.74 | 686 | ||||||||||||||
Home construction(7) | 2,058 | 7.54 | 78 | 2,052 | 6.63 | 68 | ||||||||||||||
Multi-family | 32,374 | 6.23 | 1,009 | 29,621 | 6.61 | 979 | ||||||||||||||
Other real estate | 10,001 | 6.37 | 317 | 6,803 | 7.03 | 238 | ||||||||||||||
Total loans secured by real estate | 231,568 | 6.02 | 6,963 | 206,657 | 6.81 | 7,024 | ||||||||||||||
Consumer: | ||||||||||||||||||||
Credit card | 9,233 | 11.16 | 513 | 10,500 | 11.03 | 574 | ||||||||||||||
Other | 188 | 17.17 | 16 | 261 | 12.70 | 17 | ||||||||||||||
Commercial | 1,972 | 7.06 | 69 | 1,874 | 7.84 | 73 | ||||||||||||||
Total loans held in portfolio | 242,961 | 6.23 | 7,561 | 219,292 | 7.03 | 7,688 | ||||||||||||||
Other | 8,526 | 3.34 | 141 | 2,776 | 5.65 | 78 | ||||||||||||||
Total interest-earning assets | 285,384 | 6.18 | 8,801 | 287,724 | 6.80 | 9,763 | ||||||||||||||
Noninterest-earning assets: | ||||||||||||||||||||
Mortgage servicing rights | 5,998 | 6,545 | ||||||||||||||||||
Goodwill | 7,285 | 9,054 | ||||||||||||||||||
Other assets | 18,738 | 20,588 | ||||||||||||||||||
Total assets | $ | 317,405 | $ | 323,911 | ||||||||||||||||
Liabilities | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||
Deposits: | ||||||||||||||||||||
Interest-bearing checking deposits | $ | 23,502 | 1.58 | 184 | $ | 31,093 | 2.57 | 397 | ||||||||||||
Savings and money market deposits | 59,014 | 2.43 | 714 | 56,927 | 3.31 | 933 | ||||||||||||||
Time deposits | 71,693 | 4.33 | 1,545 | 87,960 | 4.96 | 2,165 | ||||||||||||||
Total interest-bearing deposits | 154,209 | 3.19 | 2,443 | 175,980 | 4.00 | 3,495 | ||||||||||||||
Federal funds purchased and commercial paper | 544 | 3.58 | 10 | 3,003 | 5.44 | 81 | ||||||||||||||
Securities sold under agreements to repurchase | 646 | 3.28 | 10 | 10,247 | 5.43 | 276 | ||||||||||||||
Advances from Federal Home Loan Banks | 61,600 | 3.83 | 1,175 | 29,019 | 5.37 | 773 | ||||||||||||||
Other | 32,443 | 4.23 | 683 | 36,366 | 5.62 | 1,016 | ||||||||||||||
Total interest-bearing liabilities | 249,442 | 3.48 | 4,321 | 254,615 | 4.46 | 5,641 | ||||||||||||||
Noninterest-bearing sources: | ||||||||||||||||||||
Noninterest-bearing deposits | 30,248 | 32,773 | ||||||||||||||||||
Other liabilities | 7,989 | 9,547 | ||||||||||||||||||
Minority interests | 3,914 | 2,554 | ||||||||||||||||||
Stockholders' equity | 25,812 | 24,422 | ||||||||||||||||||
Total liabilities and stockholders' equity | $ | 317,405 | $ | 323,911 | ||||||||||||||||
Net interest spread and net interest income on a taxable-equivalent basis | 2.70 | $ | 4,480 | 2.34 | $ | 4,122 | ||||||||||||||
Impact of noninterest-bearing sources | 0.44 | 0.51 | ||||||||||||||||||
Net interest margin on a taxable-equivalent basis | 3.14 | 2.85 | ||||||||||||||||||
__________________________ | ||||||||||||||||||||
(1) | Includes taxable-equivalent adjustments primarily related to tax-exempt income on U.S. states and political subdivisions securities and loans related to the Company’s community lending and investment activities. The federal statutory tax rate was 35% for the periods presented. | |||||||||||||||||||
(2) | Nonaccrual assets and related income, if any, are included in their respective categories. | |||||||||||||||||||
(3) | The average balance and yield are based on average amortized cost balances. | |||||||||||||||||||
(4) | Capitalized interest recognized in earnings that resulted from negative amortization within the Option ARM portfolio totaled $591 million and $706 million for the six months ended June 30, 2008 and June 30, 2007. | |||||||||||||||||||
(5) | Excludes home loans and home equity loans and lines of credit in the subprime mortgage channel. | |||||||||||||||||||
(6) | Represents mortgage loans purchased from recognized subprime lenders and mortgage loans originated under the Long Beach Mortgage name and held in the investment portfolio. | |||||||||||||||||||
(7) | Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence. |
WM-11 | |||||||||||||||||||||||||
Washington Mutual, Inc. | |||||||||||||||||||||||||
Selected Financial Information | |||||||||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||
Change from | |||||||||||||||||||||||||
Mar. 31, 2008 | June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | ||||||||||||||||||||
to June 30, 2008 | 2008 | 2008 | 2007 | 2007 | 2007 | ||||||||||||||||||||
Deposits | |||||||||||||||||||||||||
Retail deposits: | |||||||||||||||||||||||||
Checking deposits: | |||||||||||||||||||||||||
Noninterest bearing | $ | 304 | $ | 25,435 | $ | 25,131 | $ | 23,476 | $ | 23,721 | $ | 24,142 | |||||||||||||
Interest bearing | (1,916 | ) | 21,715 | 23,631 | 25,713 | 27,277 | 29,592 | ||||||||||||||||||
Total checking deposits | (1,612 | ) | 47,150 | 48,762 | 49,189 | 50,998 | 53,734 | ||||||||||||||||||
Savings and money market deposits | 6,699 | 58,016 | 51,317 | 44,987 | 43,360 | 43,617 | |||||||||||||||||||
Time deposits(1) | (8,488 | ) | 43,086 | 51,574 | 49,410 | 50,740 | 48,140 | ||||||||||||||||||
Total retail deposits | (3,401 | ) | 148,252 | 151,653 | 143,586 | 145,098 | 145,491 | ||||||||||||||||||
Commercial business and other deposits | (1,513 | ) | 8,892 | 10,405 | 11,267 | 16,536 | 19,186 | ||||||||||||||||||
Brokered deposits: | |||||||||||||||||||||||||
Consumer | 1,509 | 19,248 | 17,739 | 18,089 | 17,484 | 17,153 | |||||||||||||||||||
Institutional | (1,611 | ) | 100 | 1,711 | 2,515 | 8,107 | 11,025 | ||||||||||||||||||
Custodial and escrow deposits(2) | (1,110 | ) | 5,431 | 6,541 | 6,469 | 7,055 | 8,525 | ||||||||||||||||||
Total deposits | $ | (6,126 | ) | $ | 181,923 | $ | 188,049 | $ | 181,926 | $ | 194,280 | $ | 201,380 | ||||||||||||
(1) | Weighted average remaining maturity of time deposits was 6 months at June 30, 2008 and March 31, 2008, 7 months at December 31, 2007 and September 30, 2007 and 8 months at June 30, 2007. | ||||||||||||||||||||||||
(2) | Substantially all custodial and escrow deposits reside in noninterest-bearing checking accounts. | ||||||||||||||||||||||||
June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | |||||||||||||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | |||||||||||||||||||||
Retail Deposit Accounts (number of accounts) | |||||||||||||||||||||||||
Noninterest-bearing checking | 11,577,907 | 11,271,406 | 10,960,270 | 10,824,548 | 10,449,887 | ||||||||||||||||||||
Interest-bearing checking | 1,167,062 | 1,218,606 | 1,273,673 | 1,334,902 | 1,399,203 | ||||||||||||||||||||
Savings and money market | 7,474,547 | 7,293,256 | 7,118,349 | 7,087,311 | 6,936,870 | ||||||||||||||||||||
Total transaction accounts, end of period(1) | 20,219,516 | 19,783,268 | 19,352,292 | 19,246,761 | 18,785,960 | ||||||||||||||||||||
Net change in noninterest-bearing checking accounts | 306,501 | 311,136 | 135,722 | 374,661 | 466,574 | ||||||||||||||||||||
Net change in checking accounts | 254,957 | 256,069 | 74,493 | 310,360 | 406,243 | ||||||||||||||||||||
__________________________ | |||||||||||||||||||||||||
(1) | Transaction accounts include retail checking, small business checking, retail savings and small business savings. | ||||||||||||||||||||||||
June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | |||||||||||||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | |||||||||||||||||||||
Retail Banking Stores | |||||||||||||||||||||||||
Stores, beginning of period | 2,261 | 2,257 | 2,212 | 2,235 | 2,228 | ||||||||||||||||||||
Stores opened during the quarter | 14 | 9 | 50 | 10 | 11 | ||||||||||||||||||||
Stores closed during the quarter | (36 | ) | (5 | ) | (5 | ) | (33 | ) | (4 | ) | |||||||||||||||
Stores, end of period | 2,239 | 2,261 | 2,257 | 2,212 | 2,235 |
WM-12 | |||||||||||||||||
Washington Mutual, Inc. | |||||||||||||||||
Selected Financial Information | |||||||||||||||||
(dollars in millions) | |||||||||||||||||
(unaudited) | |||||||||||||||||
Quarter Ended | |||||||||||||||||
June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | |||||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | |||||||||||||
Loan Volume | |||||||||||||||||
Home loans: | |||||||||||||||||
Short-term adjustable-rate loans(1): | |||||||||||||||||
Option ARMs | $ | 11 | $ | 231 | $ | 3,945 | $ | 6,174 | $ | 7,888 | |||||||
Other ARMs | 14 | 19 | 10 | 111 | 22 | ||||||||||||
Total short-term adjustable-rate loans | 25 | 250 | 3,955 | 6,285 | 7,910 | ||||||||||||
Medium-term adjustable-rate loans(2) | 2,338 | 3,810 | 5,972 | 9,868 | 14,953 | ||||||||||||
Fixed-rate loans | 6,131 | 9,427 | 7,382 | 6,176 | 8,172 | ||||||||||||
Total home loan volume | 8,494 | 13,487 | 17,309 | 22,329 | 31,035 | ||||||||||||
Home equity loans and lines of credit | 541 | 1,297 | 4,619 | 8,544 | 9,988 | ||||||||||||
Home construction(3) | 8 | 128 | 378 | 483 | 426 | ||||||||||||
Multi-family | 2,686 | 2,250 | 3,412 | 2,856 | 3,067 | ||||||||||||
Other real estate | 1,106 | 728 | 1,487 | 1,285 | 1,246 | ||||||||||||
Total loans secured by real estate | 12,835 | 17,890 | 27,205 | 35,497 | 45,762 | ||||||||||||
Commercial | 134 | 100 | 272 | 276 | 356 | ||||||||||||
Total loan volume | $ | 12,969 | $ | 17,990 | $ | 27,477 | $ | 35,773 | $ | 46,118 | |||||||
Loan Volume by Channel | |||||||||||||||||
Retail | $ | 9,081 | $ | 10,585 | $ | 17,341 | $ | 21,223 | $ | 24,707 | |||||||
Wholesale | 3,732 | 7,091 | 9,536 | 13,387 | 17,020 | ||||||||||||
Purchased | 156 | 314 | 600 | 1,163 | 4,391 | ||||||||||||
Total loan volume by channel | $ | 12,969 | $ | 17,990 | $ | 27,477 | $ | 35,773 | $ | 46,118 | |||||||
Refinancing Activity(4) | |||||||||||||||||
Home loan refinancing | $ | 6,665 | $ | 10,779 | $ | 12,297 | $ | 14,722 | $ | 22,637 | |||||||
Home equity loans and lines of credit | 8 | 22 | 46 | 143 | 157 | ||||||||||||
Home construction loans | - | 1 | 30 | 30 | 20 | ||||||||||||
Multi-family and other real estate | 1,301 | 1,033 | 1,436 | 1,225 | 1,378 | ||||||||||||
Total refinancing | $ | 7,974 | $ | 11,835 | $ | 13,809 | $ | 16,120 | $ | 24,192 | |||||||
(1) | Short-term adjustable-rate loans reprice within one year. | ||||||||||||||||
(2) | Medium-term adjustable-rate loans reprice after one year. | ||||||||||||||||
(3) | Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence. | ||||||||||||||||
(4) | Includes loan refinancing entered into by both new and pre-existing loan customers. |
WM-13 | ||||||||||||
Washington Mutual, Inc. | ||||||||||||
Selected Financial Information | ||||||||||||
(dollars in millions) | ||||||||||||
(unaudited) | ||||||||||||
Six Months Ended | ||||||||||||
June 30, | June 30, | |||||||||||
2008 | 2007 | |||||||||||
Loan Volume | ||||||||||||
Home loans: | ||||||||||||
Short-term adjustable-rate loans(1): | ||||||||||||
Option ARMs | $ | 241 | $ | 15,666 | ||||||||
Other ARMs | 34 | 58 | ||||||||||
Total short-term adjustable-rate loans | 275 | 15,724 | ||||||||||
Medium-term adjustable-rate loans(2) | 6,148 | 28,519 | ||||||||||
Fixed-rate loans | 15,557 | 16,996 | ||||||||||
Total home loan volume | 21,980 | 61,239 | ||||||||||
Home equity loans and lines of credit | 1,839 | 17,590 | ||||||||||
Home construction(3) | 136 | 724 | ||||||||||
Multi-family | 4,936 | 5,729 | ||||||||||
Other real estate | 1,833 | 2,326 | ||||||||||
Total loans secured by real estate | 30,724 | 87,608 | ||||||||||
Commercial | 234 | 645 | ||||||||||
Total loan volume | $ | 30,958 | $ | 88,253 | ||||||||
Loan Volume by Channel | ||||||||||||
Retail | $ | 19,665 | $ | 45,878 | ||||||||
Wholesale | 10,824 | 31,767 | ||||||||||
Purchased | 469 | 10,608 | ||||||||||
Total loan volume by channel | $ | 30,958 | $ | 88,253 | ||||||||
Refinancing Activity(4) | ||||||||||||
Home loan refinancing | $ | 17,444 | $ | 45,190 | ||||||||
Home equity loans and lines of credit | 30 | 707 | ||||||||||
Home construction loans | 1 | 31 | ||||||||||
Multi-family and other real estate | 2,334 | 2,509 | ||||||||||
Total refinancing | $ | 19,809 | $ | 48,437 | ||||||||
(1) | Short-term adjustable-rate loans reprice within one year. | |||||||||||
(2) | Medium-term adjustable-rate loans reprice after one year. | |||||||||||
(3) | Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence. | |||||||||||
(4) | Includes loan refinancing entered into by both new and pre-existing loan customers. |
WM-14 | |||||||||||||||||||||||||
Washington Mutual, Inc. | |||||||||||||||||||||||||
Selected Financial Information | |||||||||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||
Change from | |||||||||||||||||||||||||
Mar. 31, 2008 | June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | ||||||||||||||||||||
to June 30, 2008 | 2008 | 2008 | 2007 | 2007 | 2007 | ||||||||||||||||||||
Loans Held in Portfolio | |||||||||||||||||||||||||
Loans secured by real estate: | |||||||||||||||||||||||||
Home: | |||||||||||||||||||||||||
Short-term adjustable-rate loans(1): | |||||||||||||||||||||||||
Option ARMs(2) | $ | (2,960 | ) | $ | 52,886 | $ | 55,846 | $ | 58,870 | $ | 58,137 | $ | 53,455 | ||||||||||||
Other ARMs | (404 | ) | 15,128 | 15,532 | 16,231 | 15,478 | 13,538 | ||||||||||||||||||
Total short-term adjustable-rate loans | (3,364 | ) | 68,014 | 71,378 | 75,101 | 73,615 | 66,993 | ||||||||||||||||||
Medium-term adjustable-rate loans(3) | (1,014 | ) | 39,203 | 40,217 | 39,373 | 37,717 | 29,647 | ||||||||||||||||||
Fixed-rate loans | (96 | ) | 11,761 | 11,857 | 12,005 | 11,813 | 9,505 | ||||||||||||||||||
Total home loans | (4,474 | ) | 118,978 | 123,452 | 126,479 | 123,145 | 106,145 | ||||||||||||||||||
Home equity loans and lines of credit | (1,059 | ) | 62,487 | 63,546 | 63,488 | 61,831 | 58,631 | ||||||||||||||||||
Home construction(4) | (186 | ) | 1,902 | 2,088 | 2,226 | 2,110 | 2,058 | ||||||||||||||||||
Multi-family | 616 | 33,144 | 32,528 | 31,754 | 30,831 | 29,290 | |||||||||||||||||||
Other real estate | 456 | 10,478 | 10,022 | 9,524 | 8,335 | 6,879 | |||||||||||||||||||
Total loans secured by real estate(5) | (4,647 | ) | 226,989 | 231,636 | 233,471 | 226,252 | 203,003 | ||||||||||||||||||
Consumer: | |||||||||||||||||||||||||
Credit card | 1,600 | 10,589 | 8,989 | 8,831 | 8,791 | 9,913 | |||||||||||||||||||
Other | (9 | ) | 177 | 186 | 205 | 224 | 243 | ||||||||||||||||||
Commercial | (131 | ) | 1,872 | 2,003 | 1,879 | 1,865 | 1,835 | ||||||||||||||||||
Total loans held in portfolio(6) | (3,187 | ) | 239,627 | 242,814 | 244,386 | 237,132 | 214,994 | ||||||||||||||||||
Less: allowance for loan losses | (3,742 | ) | (8,456 | ) | (4,714 | ) | (2,571 | ) | (1,889 | ) | (1,560 | ) | |||||||||||||
Total loans held in portfolio, net | $ | (6,929 | ) | $ | 231,171 | $ | 238,100 | $ | 241,815 | $ | 235,243 | $ | 213,434 | ||||||||||||
(1) | Short-term adjustable-rate loans reprice within one year. | ||||||||||||||||||||||||
(2) | The total amount by which the unpaid principal balance of Option ARM loans exceeded their original principal amount was $2.05 billion, $1.93 billion, $1.73 billion, $1.50 billion and $1.30 billion at June 30, 2008, March 31, 2008, December 31, 2007, September 30, 2007 and June 30, 2007. | ||||||||||||||||||||||||
(3) | Medium-term adjustable-rate loans reprice after one year. | ||||||||||||||||||||||||
(4) | Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence. | ||||||||||||||||||||||||
(5) | Includes subprime mortgage channel loans, comprising mortgage loans purchased from recognized subprime lenders and mortgage loans originated under the Long Beach Mortgage name and held in the investment portfolio as follows: | ||||||||||||||||||||||||
Subprime Mortgage Channel | June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | ||||||||||||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | |||||||||||||||||||||
Home loans | $ | 13,951 | $ | 15,032 | $ | 16,092 | $ | 17,285 | $ | 17,602 | |||||||||||||||
Home equity loans and lines of credit | 2,101 | 2,312 | 2,525 | 2,711 | 2,855 | ||||||||||||||||||||
Total | $ | 16,052 | $ | 17,344 | $ | 18,617 | $ | 19,996 | $ | 20,457 | |||||||||||||||
(6) | Includes net unamortized deferred loan costs of $1.31 billion, $1.42 billion, $1.45 billion, $1.44 billion and $1.58 billion at June 30, 2008, March 31, 2008, December 31, 2007, September 30, 2007 and June 30, 2007. |
WM-15 | |||||||||||||||||||||||||
Washington Mutual, Inc. | |||||||||||||||||||||||||
Selected Financial Information | |||||||||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||||||||
Change from | Average | Average | Average | ||||||||||||||||||||||
Mar. 31, 2008 | June 30, | Coupon | Mar. 31, | Coupon | June 30, | Coupon | |||||||||||||||||||
to June 30, 2008 | 2008 | Rate | 2008 | Rate | 2007 | Rate | |||||||||||||||||||
Selected Loans Secured by Real Estate | |||||||||||||||||||||||||
Home loans held in portfolio: | |||||||||||||||||||||||||
Short-term adjustable-rate loans(1): | |||||||||||||||||||||||||
Option ARMs | $ | (2,960 | ) | $ | 52,886 | 6.61 | % | $ | 55,846 | 7.30 | % | $ | 53,455 | 7.74 | % | ||||||||||
Other ARMs | (404 | ) | 15,128 | 6.70 | 15,532 | 6.94 | 13,538 | 7.28 | |||||||||||||||||
Total short-term adjustable-rate loans | (3,364 | ) | 68,014 | 6.63 | 71,378 | 7.22 | 66,993 | 7.65 | |||||||||||||||||
Medium-term adjustable-rate loans(2) | (1,014 | ) | 39,203 | 6.36 | 40,217 | 6.35 | 29,647 | 5.99 | |||||||||||||||||
Fixed-rate loans | (96 | ) | 11,761 | 6.70 | 11,857 | 6.75 | 9,505 | 6.71 | |||||||||||||||||
Total home loans held in portfolio | (4,474 | ) | 118,978 | 6.55 | 123,452 | 6.89 | 106,145 | 7.10 | |||||||||||||||||
Home equity loans and lines of credit: | |||||||||||||||||||||||||
Adjustable-rate | (410 | ) | 53,440 | 5.65 | 53,850 | 6.02 | 47,699 | 8.25 | |||||||||||||||||
Fixed-rate | (649 | ) | 9,047 | 7.61 | 9,696 | 7.67 | 10,932 | 7.70 | |||||||||||||||||
Total home equity loans and lines of credit | (1,059 | ) | 62,487 | 5.93 | 63,546 | 6.27 | 58,631 | 8.15 | |||||||||||||||||
Multi-family loans held in portfolio: | |||||||||||||||||||||||||
Short-term adjustable-rate loans(1): | |||||||||||||||||||||||||
Option ARMs | (634 | ) | 5,524 | 5.90 | 6,158 | 6.70 | 7,650 | 7.28 | |||||||||||||||||
Other ARMs | (353 | ) | 7,116 | 5.72 | 7,469 | 6.03 | 7,910 | 6.77 | |||||||||||||||||
Total short-term adjustable-rate loans | (987 | ) | 12,640 | 5.79 | 13,627 | 6.33 | 15,560 | 7.02 | |||||||||||||||||
Medium-term adjustable-rate loans(2) | 1,576 | 18,393 | 6.10 | 16,817 | 6.12 | 11,890 | 5.93 | ||||||||||||||||||
Fixed-rate loans | 27 | 2,111 | 6.19 | 2,084 | 6.22 | 1,840 | 6.35 | ||||||||||||||||||
Total multi-family loans held in portfolio | 616 | 33,144 | 5.99 | 32,528 | 6.22 | 29,290 | 6.53 | ||||||||||||||||||
Total selected loans held in portfolio secured by real estate(3) | (4,917 | ) | 214,609 | 6.28 | 219,526 | 6.61 | 194,066 | 7.33 | |||||||||||||||||
Loans held for sale(4) | (3,064 | ) | 1,877 | 5.72 | 4,941 | 5.73 | 18,999 | 6.39 | |||||||||||||||||
Total selected loans secured by real estate | $ | (7,981 | ) | $ | 216,486 | 6.28 | $ | 224,467 | 6.59 | $ | 213,065 | 7.25 | |||||||||||||
(1) | Short-term adjustable-rate loans reprice within one year. | ||||||||||||||||||||||||
(2) | Medium-term adjustable-rate loans reprice after one year. | ||||||||||||||||||||||||
(3) | At June 30, 2008, March 31, 2008 and June 30, 2007, adjustable-rate loans with lifetime caps were $180.93 billion, $182.93 billion and $158.24 billion with a lifetime weighted average cap rate of 12.67%, 12.60% and 12.96%. | ||||||||||||||||||||||||
(4) | Excludes credit card and student loans. | ||||||||||||||||||||||||
Mar. 31, 2008 | Dec. 31, 2007 | ||||||||||||||||||||||||
to June 30, 2008 | to June 30, 2008 | ||||||||||||||||||||||||
Rollforward of Loans Held for Sale | |||||||||||||||||||||||||
Balance, beginning of period | $ | 4,941 | $ | 5,403 | |||||||||||||||||||||
Mortgage loans originated, purchased and transferred from held in portfolio | 7,339 | 18,969 | |||||||||||||||||||||||
Mortgage loans transferred to held in portfolio | (27 | ) | (373 | ) | |||||||||||||||||||||
Mortgage loans sold and other(1) | (10,376 | ) | (21,092 | ) | |||||||||||||||||||||
Net change in consumer loans held for sale | - | (1,030 | ) | ||||||||||||||||||||||
Balance, end of period | $ | 1,877 | $ | 1,877 | |||||||||||||||||||||
Rollforward of Home Loans Held in Portfolio | |||||||||||||||||||||||||
Balance, beginning of period | $ | 123,452 | $ | 126,479 | |||||||||||||||||||||
Loans originated, purchased and transferred from held for sale | 1,525 | 3,790 | |||||||||||||||||||||||
Loan payments, transferred to held for sale and other | (5,999 | ) | (11,291 | ) | |||||||||||||||||||||
Balance, end of period | $ | 118,978 | $ | 118,978 | |||||||||||||||||||||
(1) | The unpaid principal balance ("UPB") of home loans sold was $9.85 billion and $19.85 billion for the three and six months ended June 30, 2008. |
WM-16 | |||||||||||||||||||||||||
Washington Mutual, Inc. | |||||||||||||||||||||||||
Selected Financial Information | |||||||||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||
Quarter Ended | |||||||||||||||||||||||||
Detail of Revenue (Expense) from Sales and Servicing of Home Mortgage Loans | June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | ||||||||||||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | |||||||||||||||||||||
Gain (loss) from home mortgage loans and originated mortgage-backed securities, net of hedging and risk management instruments: | |||||||||||||||||||||||||
Gain (loss) from home mortgage loans and originated mortgage-backed securities(1) | $ | (162 | ) | $ | 143 | $ | 7 | $ | (169 | ) | $ | 66 | |||||||||||||
Revaluation gain (loss) from derivatives economically hedging loans held for sale | 11 | (21 | ) | (12 | ) | (53 | ) | 126 | |||||||||||||||||
Gain (loss) from home mortgage loans and originated mortgage-backed securities, net of hedging and risk management instruments | (151 | ) | 122 | (5 | ) | (222 | ) | 192 | |||||||||||||||||
Home mortgage loan servicing revenue: | |||||||||||||||||||||||||
Home mortgage loan servicing revenue(2) | 438 | 470 | 490 | 516 | 526 | ||||||||||||||||||||
Change in MSR fair value due to payments on loans and other | (301 | ) | (230 | ) | (255 | ) | (351 | ) | (401 | ) | |||||||||||||||
Net home mortgage loan servicing revenue | 137 | 240 | 235 | 165 | 125 | ||||||||||||||||||||
Change in MSR fair value due to valuation inputs or assumptions | 542 | (499 | ) | (390 | ) | (201 | ) | 530 | |||||||||||||||||
Revaluation gain (loss) from derivatives economically hedging MSR | (637 | ) | 548 | 518 | 419 | (547 | ) | ||||||||||||||||||
Home mortgage loan servicing revenue, net of MSR valuation changes and derivative risk management instruments | 42 | 289 | 363 | 383 | 108 | ||||||||||||||||||||
Total revenue (expense) from sales and servicing of home mortgage loans | $ | (109 | ) | $ | 411 | $ | 358 | $ | 161 | $ | 300 | ||||||||||||||
Six Months Ended | |||||||||||||||||||||||||
Detail of Revenue from Sales and Servicing of Home Mortgage Loans | June 30, | June 30, | |||||||||||||||||||||||
2008 | 2007 | ||||||||||||||||||||||||
Gain (loss) from home mortgage loans and originated mortgage-backed securities, net of hedging and risk management instruments: | |||||||||||||||||||||||||
Gain (loss) from home mortgage loans and originated mortgage-backed securities(1) | $ | (19 | ) | $ | 214 | ||||||||||||||||||||
Revaluation gain (loss) from derivatives economically hedging loans held for sale | (9 | ) | 72 | ||||||||||||||||||||||
Gain (loss) from home mortgage loans and originated mortgage-backed securities, net of hedging and risk management instruments | (28 | ) | 286 | ||||||||||||||||||||||
Home mortgage loan servicing revenue: | |||||||||||||||||||||||||
Home mortgage loan servicing revenue(2) | 908 | 1,041 | |||||||||||||||||||||||
Change in MSR fair value due to payments on loans and other | (531 | ) | (757 | ) | |||||||||||||||||||||
Net home mortgage loan servicing revenue | 377 | 284 | |||||||||||||||||||||||
Change in MSR fair value due to valuation inputs or assumptions | 42 | 434 | |||||||||||||||||||||||
Revaluation loss from derivatives economically hedging MSR | (89 | ) | (579 | ) | |||||||||||||||||||||
Home mortgage loan servicing revenue, net of MSR valuation changes and derivative risk management instruments | 330 | 139 | |||||||||||||||||||||||
Total revenue from sales and servicing of home mortgage loans | $ | 302 | $ | 425 | |||||||||||||||||||||
(1) | Originated mortgage-backed securities represent available-for-sale securities retained on the balance sheet subsequent to the securitization of mortgage loans that were originated by the Company. | ||||||||||||||||||||||||
(2) | Includes contractually specified servicing fees (net of guarantee fees paid to housing government-sponsored enterprises, where applicable), late charges and loan pool expenses (the shortfall of the scheduled interest required to be remitted to investors and that which is collected from borrowers upon payoff). |
WM-17 | |||||||||||||||||||
Washington Mutual, Inc. | |||||||||||||||||||
Selected Financial Information | |||||||||||||||||||
(dollars in millions) | |||||||||||||||||||
(unaudited) | |||||||||||||||||||
Quarter Ended | |||||||||||||||||||
June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | |||||||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | |||||||||||||||
MSR Valuation and Risk Management: | |||||||||||||||||||
Change in MSR fair value due to valuation inputs or assumptions | $ | 542 | $ | (499 | ) | $ | (390 | ) | $ | (201 | ) | $ | 530 | ||||||
Gain (loss) on MSR risk management instruments: | |||||||||||||||||||
Revaluation gain (loss) from derivatives economically hedging MSR | (637 | ) | 548 | 518 | 419 | (547 | ) | ||||||||||||
Revaluation gain (loss) from certain trading securities | (2 | ) | - | - | 4 | (4 | ) | ||||||||||||
Total gain (loss) on MSR risk management instruments | (639 | ) | 548 | 518 | 423 | (551 | ) | ||||||||||||
Total changes in MSR valuation and risk management | $ | (97 | ) | $ | 49 | $ | 128 | $ | 222 | $ | (21 | ) | |||||||
Six Months Ended | |||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||
2008 | 2007 | ||||||||||||||||||
MSR Valuation and Risk Management: | |||||||||||||||||||
Change in MSR fair value due to valuation inputs or assumptions | $ | 42 | $ | 434 | |||||||||||||||
Loss on MSR risk management instruments: | |||||||||||||||||||
Revaluation loss from derivatives economically hedging MSR | (89 | ) | (579 | ) | |||||||||||||||
Revaluation loss from certain trading securities | (2 | ) | - | ||||||||||||||||
Total loss on MSR risk management instruments | (91 | ) | (579 | ) | |||||||||||||||
Total changes in MSR valuation and risk management | $ | (49 | ) | $ | (145 | ) |
WM-18 | |||||||||||||||||
Washington Mutual, Inc. | |||||||||||||||||
Selected Financial Information | |||||||||||||||||
(dollars in millions) | |||||||||||||||||
(unaudited) | |||||||||||||||||
Quarter Ended | |||||||||||||||||
June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | |||||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | |||||||||||||
Rollforward of Mortgage Servicing Rights(1) | |||||||||||||||||
Fair value, beginning of period | $ | 5,726 | $ | 6,278 | $ | 6,794 | $ | 7,231 | $ | 6,507 | |||||||
Home loans: | |||||||||||||||||
Additions | 205 | 181 | 127 | 116 | 592 | ||||||||||||
Change in MSR fair value due to payments on loans and other | (301 | ) | (230 | ) | (255 | ) | (351 | ) | (401 | ) | |||||||
Change in MSR fair value due to valuation inputs or assumptions | |||||||||||||||||
542 | (499 | ) | (390 | ) | (201 | ) | 530 | ||||||||||
Sale of MSR | - | (1 | ) | - | - | - | |||||||||||
Net change in commercial real estate MSR | 3 | (3 | ) | 2 | (1 | ) | 3 | ||||||||||
Fair value, end of period | $ | 6,175 | $ | 5,726 | $ | 6,278 | $ | 6,794 | $ | 7,231 | |||||||
Rollforward of Mortgage Loans Serviced for Others | |||||||||||||||||
Balance, beginning of period | $ | 449,126 | $ | 456,484 | $ | 463,436 | $ | 474,867 | $ | 467,782 | |||||||
Home loans: | |||||||||||||||||
Additions | 9,828 | 9,862 | 7,814 | 8,700 | 29,949 | ||||||||||||
Sale of servicing | - | (109 | ) | - | - | - | |||||||||||
Loan payments and other | (17,534 | ) | (17,177 | ) | (15,739 | ) | (20,716 | ) | (24,213 | ) | |||||||
Net change in commercial real estate loans | 181 | 66 | 973 | 585 | 1,349 | ||||||||||||
Balance, end of period | $ | 441,601 | $ | 449,126 | $ | 456,484 | $ | 463,436 | $ | 474,867 | |||||||
(1) | MSR as a percentage of mortgage loans serviced for others was 1.40%, 1.27%, 1.38%, 1.47% and 1.52% at June 30, 2008, March 31, 2008, December 31, 2007, September 30, 2007, and June 30, 2007. | ||||||||||||||||
June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | |||||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | |||||||||||||
Total Servicing Portfolio | |||||||||||||||||
Mortgage loans serviced for others | $ | 441,601 | $ | 449,126 | $ | 456,484 | $ | 463,436 | $ | 474,867 | |||||||
Consumer loans serviced for others | 15,842 | 17,390 | 17,379 | 16,078 | 14,745 | ||||||||||||
Servicing on retained MBS without MSR | 865 | 904 | 942 | 980 | 1,023 | ||||||||||||
Servicing on owned loans | 231,188 | 236,877 | 238,344 | 232,392 | 218,122 | ||||||||||||
Subservicing portfolio | 274 | 285 | 399 | 418 | 439 | ||||||||||||
Total servicing portfolio | $ | 689,770 | $ | 704,582 | $ | 713,548 | $ | 713,304 | $ | 709,196 | |||||||
June 30, 2008 | |||||||||||||||||
Unpaid | Weighted | ||||||||||||||||
Principal | Average | ||||||||||||||||
Balance | Servicing Fee | ||||||||||||||||
(in basis points, annualized) | |||||||||||||||||
Mortgage Loans Serviced for Others by Loan Type | |||||||||||||||||
Agency | $252,358 | 32 | |||||||||||||||
Private | 162,924 | 58 | |||||||||||||||
Subprime mortgage channel-home | 26,319 | 51 | |||||||||||||||
Total mortgage loans serviced for others(1) | $441,601 | 42 | |||||||||||||||
(1 | ) | Weighted average coupon rate was 6.13% at June 30, 2008. |
WM-19 | |||||||||||||||||||||
Washington Mutual, Inc. | |||||||||||||||||||||
Selected Financial Information | |||||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||
(unaudited) | |||||||||||||||||||||
Quarter Ended | |||||||||||||||||||||
June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | |||||||||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | |||||||||||||||||
Allowance for Loan Losses | |||||||||||||||||||||
Balance, beginning of quarter | $ | 4,714 | $ | 2,571 | $ | 1,889 | $ | 1,560 | $ | 1,540 | |||||||||||
Allowance transferred to loans held for sale | - | - | (105 | ) | (217 | ) | (81 | ) | |||||||||||||
Provision for loan losses | 5,913 | 3,511 | 1,534 | 967 | 372 | ||||||||||||||||
10,627 | 6,082 | 3,318 | 2,310 | 1,831 | |||||||||||||||||
Loans charged off: | |||||||||||||||||||||
Loans secured by real estate: | |||||||||||||||||||||
Home loans(1) | (687 | ) | (331 | ) | (105 | ) | (52 | ) | (21 | ) | |||||||||||
Home equity loans and lines of credit(1) | (726 | ) | (486 | ) | (249 | ) | (104 | ) | (55 | ) | |||||||||||
Subprime mortgage channel(2) | (572 | ) | (388 | ) | (277 | ) | (146 | ) | (103 | ) | |||||||||||
Home construction(3) | (3 | ) | (8 | ) | - | - | (1 | ) | |||||||||||||
Multi-family | (3 | ) | (4 | ) | (4 | ) | - | - | |||||||||||||
Other real estate | (1 | ) | (2 | ) | (1 | ) | (1 | ) | (1 | ) | |||||||||||
Total loans secured by real estate | (1,992 | ) | (1,219 | ) | (636 | ) | (303 | ) | (181 | ) | |||||||||||
Consumer: | |||||||||||||||||||||
Credit card | (169 | ) | (135 | ) | (126 | ) | (120 | ) | (106 | ) | |||||||||||
Other | (2 | ) | (2 | ) | (2 | ) | (2 | ) | (2 | ) | |||||||||||
Commercial | (51 | ) | (39 | ) | (32 | ) | (20 | ) | (15 | ) | |||||||||||
Total loans charged off | (2,214 | ) | (1,395 | ) | (796 | ) | (445 | ) | (304 | ) | |||||||||||
Recoveries of loans previously charged off: | |||||||||||||||||||||
Loans secured by real estate: | |||||||||||||||||||||
Home loans(1) | - | 1 | 4 | 1 | 1 | ||||||||||||||||
Home equity loans and lines of credit(1) | 17 | 9 | 4 | 3 | 3 | ||||||||||||||||
Subprime mortgage channel(2) | 3 | 1 | 4 | 1 | 11 | ||||||||||||||||
Home construction(3) | - | - | 2 | - | - | ||||||||||||||||
Other real estate | 1 | 1 | 2 | 2 | - | ||||||||||||||||
Total loans secured by real estate | 21 | 12 | 16 | 7 | 15 | ||||||||||||||||
Credit card | 16 | 12 | 31 | 14 | 15 | ||||||||||||||||
Commercial | 6 | 3 | 2 | 3 | 3 | ||||||||||||||||
Total recoveries of loans previously charged off | 43 | 27 | 49 | 24 | 33 | ||||||||||||||||
Net charge-offs | (2,171 | ) | (1,368 | ) | (747 | ) | (421 | ) | (271 | ) | |||||||||||
Balance, end of quarter | $ | 8,456 | $ | 4,714 | $ | 2,571 | $ | 1,889 | $ | 1,560 | |||||||||||
Net charge-offs (annualized) as a percentage of average loans held in portfolio | |||||||||||||||||||||
3.59 | % | 2.24 | % | 1.24 | % | 0.74 | % | 0.50 | % | ||||||||||||
Allowance as a percentage of loans held in portfolio | 3.53 | 1.94 | 1.05 | 0.80 | 0.73 | ||||||||||||||||
______________________ | |||||||||||||||||||||
(1) | Excludes home loans and home equity loans and lines of credit in the subprime mortgage channel. | ||||||||||||||||||||
(2) | Represents mortgage loans purchased from recognized subprime lenders and mortgage loans originated under the Long Beach Mortgage name and held in the investment portfolio. Charge-offs in the second quarter of 2007 include $26 million of amounts primarily related to uncollected borrower expenses incurred in prior periods by and owed to a third party loan servicer. | ||||||||||||||||||||
(3) | Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence. |
WM-20 | ||||||||||||||||
Washington Mutual, Inc. | ||||||||||||||||
Selected Financial Information | ||||||||||||||||
(dollars in millions) | ||||||||||||||||
(unaudited) | ||||||||||||||||
June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | ||||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | ||||||||||||
Nonperforming Assets | ||||||||||||||||
Nonaccrual loans(1)(2)(3): | ||||||||||||||||
Loans secured by real estate: | ||||||||||||||||
Home loans(4)(5) | $ | 4,757 | $ | 3,504 | $ | 2,302 | $ | 1,452 | $ | 991 | ||||||
Home equity loans and lines of credit(4) | 1,521 | 1,102 | 835 | 533 | 378 | |||||||||||
Subprime mortgage channel(6) | 3,008 | 2,882 | 2,721 | 2,356 | 1,707 | |||||||||||
Home construction(7) | 79 | 77 | 56 | 44 | 47 | |||||||||||
Multi-family | 181 | 142 | 131 | 120 | 69 | |||||||||||
Other real estate | 87 | 87 | 53 | 49 | 52 | |||||||||||
Total nonaccrual loans secured by real estate | 9,633 | 7,794 | 6,098 | 4,554 | 3,244 | |||||||||||
Consumer | 1 | 2 | 1 | 1 | 1 | |||||||||||
Commercial | 57 | 28 | 24 | 22 | 30 | |||||||||||
Total nonaccrual loans held in portfolio | 9,691 | 7,824 | 6,123 | 4,577 | 3,275 | |||||||||||
Foreclosed assets(8) | 1,512 | 1,357 | 979 | 874 | 750 | |||||||||||
Total nonperforming assets | $ | 11,203 | $ | 9,181 | $ | 7,102 | $ | 5,451 | $ | 4,025 | ||||||
Total nonperforming assets as a percentage of total assets | 3.62 | % | 2.87 | % | 2.17 | % | 1.65 | % | 1.29 | % | ||||||
______________________________ | ||||||||||||||||
(1) | Nonaccrual loans held for sale, which are excluded from the nonaccrual balances presented above, were $2 million, zero, $4 million, $7 million and $171 million at June 30, 2008, March 31, 2008, December 31, 2007, September 30, 2007 and June 30, 2007. Loans held for sale are accounted for at the lower of cost or fair value, with valuation changes included as adjustments to noninterest income. | |||||||||||||||
(2) | Credit card loans are exempt under regulatory rules from being classified as nonaccrual because they are charged off when they are determined to be uncollectible, or by the end of the month in which the account becomes 180 days past due. | |||||||||||||||
(3) | Includes nonaccrual restructured loans of $1.43 billion, $669 million, $633 million, $512 million and $152 million at June 30, 2008, March 31, 2008, December 31, 2007, September 30, 2007 and June 30, 2007. Excludes accruing restructured loans of $465 million, $372 million, $251 million, $269 million and $277 million at June 30, 2008, March 31, 2008, December 31, 2007, September 30, 2007 and June 30, 2007. | |||||||||||||||
(4) | Excludes home loans and home equity loans and lines of credit in the subprime mortgage channel. | |||||||||||||||
(5) | Includes nonaccrual Option ARM loans of $3.23 billion, $2.51 billion, $1.63 billion, $1.00 billion and $680 million at June 30, 2008, March 31, 2008, December 31, 2007, September 30, 2007 and June 30, 2007. | |||||||||||||||
(6) | Represents mortgage loans purchased from recognized subprime lenders and mortgage loans originated under the Long Beach Mortgage name and held in the investment portfolio. | |||||||||||||||
(7) | Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence. | |||||||||||||||
(8) | Foreclosed real estate securing Government National Mortgage Association (“GNMA”) loans of $21 million, $25 million, $37 million, $46 million and $49 million at June 30, 2008, March 31, 2008, December 31, 2007, September 30, 2007 and June 30, 2007 have been excluded. These assets are fully collectible as the corresponding GNMA loans are insured by the Federal Housing Administration (“FHA”) or guaranteed by the Department of Veterans Affairs (“VA”). |
Contacts:
Media Contact
Derek Aney
206-500-6094
(Seattle)
212-326-6075 (New York)
derek.aney@wamu.net
OR
Washington
Mutual, Inc.
Investor Relations Contact
Alan Magleby
206-500-4148
(Seattle)
212-702-6955 (New York)
alan.magleby@wamu.net