SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) April 2, 2001
Washington 1-14667 91-1653725
---------------------------- --------------------- ------------------
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification No.)
|
Registrant's telephone number, including area code: (206) 461-2000
Item 9. Regulation FD Disclosure.
The materials set forth below represent:
(1) a press release announcing the signing of an agreement to acquire Fleet
Mortgage Corp. and
(2) an analyst/investor presentation.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
WASHINGTON MUTUAL, INC.
By: /s/ FAY L. CHAPMAN
---------------------------------
Fay L. Chapman
Executive Vice President and
General Counsel
Date: April 2, 2001
|
April 2, 2001
FOR IMMEDIATE RELEASE
WASHINGTON MUTUAL TO ACQUIRE FLEET MORTGAGE
STRENGTHENS WASHINGTON MUTUAL'S POSITION AS NATIONAL MORTGAGE LEADER;
FLEET WILL CONTINUE TO OFFER MORTGAGES TO CUSTOMERS IN ITS RETAIL BANK MARKETS
SEATTLE - In a move that enhances its position as a national leader in mortgage originations and increases by more than 40 percent the residential mortgages it services, Washington Mutual, Inc. (NYSE: WM) today announced that it has signed an agreement to acquire Fleet Mortgage Corp., a unit of FleetBoston Financial Corp. (NYSE: FBF), for approximately $660 million in cash subject to certain closing adjustments.
This transaction - along with its recent acquisitions of Bank United Corp. and the mortgage operations of The PNC Financial Services Group, Inc. - would increase Washington Mutual's residential mortgage servicing portfolio to $451.5 billion, based on Dec. 31, 2000 data, making it the nation's second largest mortgage servicing business.
As of year-end 2000 on an adjusted basis, Fleet Mortgage had assets of approximately $6.0 billion. The transaction, which will be accounted for as a purchase, is expected to be modestly accretive to earnings per share in 2001. This estimate does not assume revenue enhancements. Annual cost savings are anticipated to be approximately 30 percent of the acquired Fleet Mortgage expense base.
Following completion of the transaction, Fleet will continue to originate mortgages in the markets served by its retail bank system. Most of these mortgages will be serviced by Washington Mutual. Fleet will continue its affordable housing programs and will maintain all existing commitments for affordable mortgages.
"This acquisition solidifies Washington Mutual's position as one of the nation's leading mortgage lenders," said Kerry Killinger, the company's Chairman, President and Chief Executive Officer. "This one move adds substantial scale to our mortgage servicing business in an industry where economies of scale are increasingly important. The acquisition further diversifies our revenue base, strengthening our sources of recurring, noninterest income. We also significantly enhance our correspondent lending capacity, rounding out our ability to drive mortgage originations through retail, broker, and correspondent channels alike," Killinger added.
- more -
WM/FBF - 2
The agreement calls for a franchise premium of $60 million over the agreed-upon value of Fleet Mortgage's equity at the time of closing. The adjusted book value of Fleet Mortgage's equity was approximately $600 million at year-end 2000. Washington Mutual expects to record goodwill of approximately $85 million, which includes $25 million of after-tax transaction-related expenses. Most of the goodwill is tax deductible. As of March 30, 2001, the agreement values the mortgage servicing rights at 1.83 percent of the acquired portfolio, which totaled $129.2 billion at year-end 2000.
Washington Mutual will acquire the Fleet Mortgage correspondent and broker mortgage origination channels, while Fleet will retain ownership of its retail origination channel and Telesales Center in the Northeast. The two companies will enter into an agreement through which Washington Mutual will acquire much of Fleet's retail loan originations on a correspondent basis.
"The sale of Fleet Mortgage will allow us to redeploy capital to our higher growth core businesses," said Chad Gifford, President and Chief Operating Officer of Fleet. "We will retain the retail origination staff in our bank markets and we will continue to provide our customers a range of mortgage products, including our affordable mortgage programs," Mr. Gifford added. "Scale and efficiency will determine the handful of successful competitors in the mortgage industry of the future. Washington Mutual's commitment to the business makes it an excellent partner."
Fleet expects to record a one-time after-tax loss of approximately $200 million in the first quarter related to the sale of its mortgage subsidiary, which includes valuation adjustments to the servicing rights asset, writeoff of prior goodwill, and transaction costs. Last year, Fleet Mortgage accounted for approximately 2 percent of Fleet's consolidated earnings.
The transaction also increases Washington Mutual's national mortgage market share. Inclusive of its recent acquisitions of Bank United and the mortgage operations of PNC, Washington Mutual captured a 7.3 percent share of the national residential mortgage origination market in 2000. On a pro forma basis with Fleet Mortgage, Washington Mutual's market share would be 9.3 percent nationally, and its originations would total $97.2 billion, based on year 2000 data.
Fleet Mortgage's seasoned correspondent lending network will complement Washington Mutual's existing correspondent and broker distribution channels. On a pro forma basis, the transaction would increase Washington Mutual's correspondent originations nearly 75 percent, moving it to the second rank nationally, based on year 2000 data. Washington Mutual already ranks first in broker originations and second in retail originations. In addition, Fleet Mortgage's primarily fixed-rate loan production will further complement Washington Mutual's ARM origination capacity.
Fleet Mortgage Corp., headquartered in Columbia, S.C., has more than 2,500 employees, with servicing centers in Florence, S.C. and Milwaukee, Wis. Fleet Mortgage's processing center in Providence, R.I. will remain with Fleet.
- more -
WM/FBF - 3
Washington Mutual said that it plans to undertake a comprehensive review of the combined operations to determine the optimal combination of sales, service, and administrative resources.
The transaction has been approved by the Boards of Directors of both companies, and is anticipated to close in the second quarter of 2001, subject to regulatory notifications, including the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, and Hart-Scott-Rodino, as well as other customary closing conditions.
Morgan Stanley Dean Witter and Heller Ehrman White & McAuliffe LLP represented Washington Mutual. Fleet was represented by Cohane Rafferty Securities, LLC and Edwards & Angell, LLP.
ABOUT FLEET MORTGAGE CORP.
Fleet Mortgage, headquartered in Columbia, S.C., is a FleetBoston Financial Corp. company. A national leader in the origination of residential mortgage loans, the company provides mortgages through retail offices in the Northeast, a national network of 1,000 correspondents, wholesale brokers nationwide, and its National Telesales Center.
ABOUT WASHINGTON MUTUAL, INC.
With a history dating back to 1889, Washington Mutual, Inc. is a national financial services company that provides a diversified line of products and services to consumers and small- to mid-sized businesses. At Dec. 31, 2000, Washington Mutual and its subsidiaries had consolidated assets of $194.72 billion. Washington Mutual currently operates more than 2,000 consumer banking, mortgage lending, commercial banking, consumer finance and financial services offices throughout the nation.
FORWARD-LOOKING STATEMENTS: "This document 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 document, the words "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions 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 "Business-Factors That May Affect Future Results" in Washington Mutual, Inc.'s 2000 Annual Report on Form 10-K, which include: the risk of the interest rate environment further compressing our margin and adversely affecting our net interest income; the risk of continued diversification of our assets and adverse changes to credit quality; competition from other financial services companies in all our markets; the concentration of operations in California adversely affecting our operating results if the California economy or real estate market declines; the risk of our inability to integrate the operations of Fleet Mortgage in an efficient manner and achieve the projected cost savings; and the risk of an economic slowdown that would adversely affect credit quality and loan originations."
- more -
WM/FBF - 4
Note to editors: A conference call discussing the transaction will be held on Tuesday, April 3, 10:30 a.m. EDT. The dial-in number is 800.314.7867. The replay number is 719.457.0820 and the access code is 656840. A live audio webcast of the call is available online at www.wamu.com. The call will also be archived on the company's Web site at: ARCHIVED AUDIO WEBCAST. A replay of the call will be available from approximately 2:00 p.m. EDT on April 3 until 9:00 p.m. EDT on April 13.
Today's news release and additional TRANSACTION DETAILS are available on Washington Mutual's Web site, and, at no charge, through the company's News On Demand System at 800.329.6236. (To view the Transaction Detail, you will need Acrobat Reader. If you do not have Acrobat Reader, CLICK HERE.)
Media Contact Libby Hutchinson Steve Bruce/Mary Beth Kissane Washington Mutual Abernathy MacGregor Group 206.461.2484 212.371.5999 Investor Relations Contacts JoAnn DeGrande/Ruthanne King Washington Mutual 206.461.3186 / 206.461.6421 Media and Investor Relations Contacts Jim Mahoney/John Kahwaty Fleet 617.434.9552/617.434.3650 |
WASHINGTON MUTUAL / FLEET MORTGAGE
FACT SHEET
Pro Forma
WM(1) Fleet Mortgage(2) WM/Fleet Mortgage
------- ----------------- -----------------
Servicing Rank (12/31/00) 4 8 2(3)
Servicing Portfolio (Bil.) $311.3 $143.9(3) $451.5(3)
Origination Rank (2000) 2 7 1(4)
2000 Originations (Bil.) $76.3 $23.4 $97.2(4)
2000 Originations by Channel
----------------------------
Correspondent Rank 3 6 2
Correspondent Fundings (Bil.) $22.7 $17.0 $39.7
Broker Rank 1 Not ranked 1
Broker Fundings (Bil.) $31.1 $3.9 $35.0
Retail Rank 2 Not ranked 2(4)
Retail Fundings (Bil.) $22.5 $2.5 $22.5(4)
|
(1) Pro forma including recent acquisitions.
(2) Pro forma including Summit Bancorp.
(3) Pro forma including Fleet Mortgage's primary servicing portfolio, sub-servicing of Fleet National Bank's owned loans and Fleet Mortgage's loans pending sale to investors.
(4) Fleet Mortgage's retail mortgage channel, which originated $2.5 billion of loans in 2000, is not part of the transaction and is therefore not included in the pro forma results.
[WASHINGTON MUTUAL LOGO]
ACQUISITION OF FLEET MORTGAGE
ANALYST/INVESTOR PRESENTATION
April 2, 2001
ACQUISITION OF FLEET MORTGAGE
FORWARD-LOOKING STATEMENT
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 presentation that are not historical facts. When used in this presentation, the words "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions 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 "Business-Factors That May Affect Future Results" in Washington Mutual, Inc.'s 2000 Annual Report on Form 10-K, which include: the risk of the interest rate environment further compressing our margin and adversely affecting our net interest income; the risk of continued diversification of our assets and adverse changes to credit quality; competition from other financial services companies in all our markets; the concentration of operations in California adversely affecting our results if the California economy or real estate market declines; the risk of our inability to integrate the operations of Fleet Mortgage in an efficient manner and achieve the projected cost savings; and the risk of an economic slowdown that would adversely affect credit quality and loan originations.
ACQUISITION OF FLEET MORTGAGE
WASHINGTON MUTUAL STRATEGIC GOAL:
o ACHIEVING KEY OBJECTIVES WILL LEAD TO SIGNIFICANT VALUE CREATION FOR SHAREHOLDERS
o We measure success against four key objectives
- SERVICING MARKET SHARE: scale and customer retention are key components of driving servicing profitability
- ORIGINATION MARKET SHARE: product breadth, multiple channels and geographic diversity to attract a broad cross section of borrowers
- BRAND RECOGNITION: creates customer opportunities and enhances retention
- PROFITABILITY: scale efficiencies, pricing discipline and credit and interest rate risk management drive greater performance
ACQUISITION OF FLEET MORTGAGE
ACHIEVING WM'S STRATEGIC GOAL:
O WITH THE FLEET MORTGAGE TRANSACTION, WM HAS SIGNIFICANTLY ADVANCED ITS STRATEGIC OBJECTIVES
O LEADERSHIP ENABLES WM TO LEVERAGE STRENGTHS IN ALL INTEREST RATE ENVIRONMENTS:
- SERVICING/ORIGINATION BALANCE AND SCALE
- PORTFOLIO LENDER/MORTGAGE BANKER
- COMBINATION ARM AND FIXED-RATE PRODUCTION
- MULTIPLE DISTRIBUTION CHANNELS
o #2 in servicing as of 12/31/00(1)(2)
o #1 in originations during 2000(1)(3)
o Leading retail, broker and correspondent channel capabilities
o Balanced ARM and fixed-rate product mix
o Nationwide geographic presence
o Strengthens business model of hybrid portfolio lender and mortgage banker
NOTES
1. Source: Inside Mortgage Finance
2. Pro forma as of 12/31/00 including Bank United Corp., the mortgage
operations of The PNC Financial Services Group, Inc. and Fleet Mortgage's
primary servicing portfolio, sub-servicing of Fleet National Bank's owned
loans, Fleet Mortgage's loans pending sale to investors and the primary
servicing portfolio and sub-servicing of bank owned loans of Fleet's
acquisition of Summit Bancorp
3. Pro forma including Bank United Corp., the mortgage operations of The PNC
Financial Services Group, Inc. and the acquired operations of Fleet
Mortgage
ACQUISITION OF FLEET MORTGAGE
TRANSACTION SUMMARY
Purchase Price: $60MM over agreed upon value of equity at time of
closing (1)
Structure: 100% cash consideration; treated as purchase of
assets for tax purposes
Expected Closing Date: 2nd Quarter 2001
Conditioned Upon: Regulatory notifications, including OTS, FDIC and
Hart-Scott-Rodino
Earnings Impact: $0.01 accretion to GAAP earnings in 2001;
$0.04 accretion to GAAP earnings in 2002
Cost Savings: Anticipating annual cost savings of approximately
30% of the acquired Fleet Mortgage expense base
Revenue Enhancements: Expanded distribution of WM product lines (not
included in financial projections)
|
NOTE
1. Adjusted book value of Fleet Mortgage equity as of 12/31/00 was approximately
$600MM on an asset base of approximately $6 billion
ACQUISITION OF FLEET MORTGAGE
STRATEGIC RATIONALE
o Financially attractive transaction
o Continuation of strategy to grow mortgage business:
- 45% pick-up in servicing to #2 position (1)(2)
- Enhances nationwide multi-channel origination capabilities
- Accelerates geographic diversification
o Significant economies of scale and cost savings opportunities
o Opportunity to leverage Fleet Mortgage's operations:
- Correspondent lending and capital markets functions
- Added servicing capacity
NOTES
1. Source: Inside Mortgage Finance
2. Pro forma as of 12/31/00 including Bank United Corp., the mortgage operations
of The PNC Financial Services Group, Inc. and Fleet Mortgage's primary
servicing portfolio, sub-servicing of Fleet National Bank's owned loans,
Fleet Mortgage's loans pending sale to investors and the primary servicing
portfolio and sub-servicing of bank owned loans of Fleet's acquisition of
Summit Bancorp
ACQUISITION OF FLEET MORTGAGE
FINANCIALLY ATTRACTIVE TRANSACTION
o FINANCIAL ASSUMPTIONS:
- Anticipating annual cost savings of approximately 30% of the acquired Fleet Mortgage expense base
- Substantially all phased in by end of 2002
- Valuation of servicing rights consistent with WM standards:
- 1.83% of primary servicing portfolio as of March 30, 2001
- Weighted average coupon of 7.46%
- Equivalent to a servicing fee multiple of approximately 4.2x
- Weighted average servicing fee of 44 bps
- Estimated goodwill of approximately $85MM:
- $60MM in premium
- $21MM (after-tax) for severance and cancelled contracts
- $4MM (after-tax) for other transaction costs
- Substantially all of the goodwill is tax deductible
- No revenue synergies included
ACQUISITION OF FLEET MORTGAGE
FINANCIALLY ATTRACTIVE TRANSACTION
o FINANCIALLY COMPELLING:
- IRR > 20%
- Approximately 1.1x book equity (1)
- EPS Accretion (2)
- 2001: $0.01 GAAP
$0.01 Cash
- 2002: $0.04 GAAP
$0.04 Cash
NOTES
1. Based on adjusted book value of equity as of 12/31/00 of approximately $600MM
2. Based on First Call consensus estimates, 25% and 90% cost saves phase-in in
2001 and 2002, respectively
ACQUISITION OF FLEET MORTGAGE
ENHANCED LEADERSHIP POSITION
o #2 IN SERVICING
o #1 IN ORIGINATIONS
PRO FORMA WM/FLEET MORTGAGE RANKINGS
SERVICING AT 12/31/00(1)
SERVICING PORTFOLIO
RANK INSTITUTION $BN
1 Wells Fargo 452.6
2 WASHINGTON MUTUAL/FLEET MORTGAGE(3)(4) 451.5
3 Chase 361.6
4 Bank of America 335.9
WASHINGTON MUTUAL(3) 311.3
5 Countrywide 284.9
6 HomeSide 187.6
7 GMAC Mortgage 173.1
FLEET MORTGAGE(5) 143.9
8 First Nationwide Mortgage 112.0
9 ABN AMRO 109.2
10 CitiMortgage 94.2
11 Cendant Mortgage 81.2
12 National City 63.3
PRO FORMA WM/FLEET MORTGAGE RANKINGS
ORIGINATIONS 2000(1)
ORIGINATIONS
RANK INSTITUTION $BN
1 WASHINGTON MUTUAL/FLEET MORTGAGE(2)(3) 97.2
2 Wells Fargo 76.5
WASHINGTON MUTUAL(3) 76.3
3 Chase 76.0
4 Countrywide 61.7
5 Bank of America 51.8
6 ABN AMRO 23.8
FLEET MORTGAGE 23.4
7 Cendant Mortgage 22.1
8 HomeSide 21.6
9 National City 21.5
10 Dime/NorthAmerican 21.0
11 Golden West 19.8
12 CitiMortgage 19.7
|
NOTES
1. Source: Inside Mortgage Finance
2. Fleet Mortgage's retail originations of $2.5 billion retained by Fleet
National Bank
3. Pro forma including Bank United Corp. and the mortgage operations of The PNC
Financial Services Group, Inc.
4. Pro forma including Fleet Mortgage's primary servicing portfolio,
sub-servicing of Fleet National Bank's owned loans, Fleet Mortgage's loans
pending sale to investors and the primary servicing portfolio and
sub-servicing of bank owned loans of Fleet's acquisition of Summit Bancorp
5. Pro forma including Summit Bancorp acquisition
ACQUISITION OF FLEET MORTGAGE
ORIGINATIONS PICKUP
PRINCIPALLY ENHANCES CORRESPONDENT CHANNEL
PRO FORMA WM/FLEET MORTGAGE RANKINGS
RETAIL ORIGINATIONS 2000(1)
ORIGINATIONS
RANK INSTITUTION $BN
1 Wells Fargo 40.5
2 WASHINGTON MUTUAL(2) 22.5
3 Bank of America 21.5
4 Golden West 19.8
5 Countrywide 18.3
6 Cendant Mortgage 17.8
7 Chase 17.5
8 GMAC Mortgage 13.2
9 National City 12.4
10 CTX Mortgage 8.5
|
PRO FORMA WM/FLEET MORTGAGE RANKINGS
BROKER ORIGINATIONS 2000(1)
ORIGINATIONS
RANK INSTITUTION $BN
1 WASHINGTON MUTUAL/FLEET MORTGAGE(2) 35.0
WASHINGTON MUTUAL(2) 31.1
2 Countrywide 17.4
3 ABN AMRO 17.4
4 Wells Fargo 15.8
5 Bank of America 15.2
6 Chase 13.4
7 GreenPoint Mortgage 9.2
8 National City 9.1
9 North American 8.1
10 First Nationwide 5.8
FLEET MORTGAGE 3.9
|
PRO FORMA WM/FLEET MORTGAGE RANKINGS
CORRESPONDENT ORIGINATIONS 2000(1)
ORIGINATIONS
RANK INSTITUTION $BN
1 Chase 45.1
2 WASHINGTON MUTUAL/FLEET MORTGAGE(2) 39.7
3 Countrywide 26.0
WASHINGTON MUTUAL(2) 22.7
4 Wells Fargo 20.3
5 HomeSide Lending 18.6
FLEET MORTGAGE 17.0
6 Bank of America 15.2
7 CitiMortgage 11.3
8 Ohio Savings Bank 8.4
9 Principal Residential Mortgage 6.4
10 First Nationwide 5.8
|
NOTES
1. Source: Inside Mortgage Finance
2. Pro forma including Bank United Corp. and the mortgage operations of The PNC
Financial Services Group, Inc.
ACQUISITION OF FLEET MORTGAGE
LOW-RISK EXECUTION
o Straight forward integration process
o Opportunity to further leverage WM's technology platform (e.g., Optis(TM)) and strategic alliances
o Successful integration track record
o Integration dovetails well with Bank United Corp. and PNC Mortgage transaction, which are both on schedule
o Key personnel identified to accelerate transition and integration
o Strategic relationship with FleetBoston helps ensure smooth transition of franchise
ACQUISITION OF FLEET MORTGAGE
CONCLUSION
o Important step toward goal of leadership in mortgage lending
o Advances three-point mortgage strategy:
- Spread income from portfolio lending
- Loan servicing and insurance fee income
- Gain-on-sale income from mortgage banking activities
o Financially attractive transaction
o Significant economies of scale and cost savings opportunities