UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934.
FOR THE TRANSITION PERIOD FROM _______________ TO ________________.
COMMISSION FILE NUMBER 1-14667
WASHINGTON MUTUAL, INC.
(Exact name of registrant as specified in its charter)
WASHINGTON 91-1653725
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1201 THIRD AVENUE, SEATTLE, WASHINGTON 98101
(Address of principal executive offices) (Zip Code)
(206) 461-2000
(Registrant's telephone number, including area code)
|
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the issuer's classes of common stock as of July 31, 2000:
Common Stock - 538,875,903(1)
(1) Includes the 12,000,000 shares held in escrow.
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
TABLE OF CONTENTS
Page
----
PART I
Item 1. Financial Statements...................................................................... 1
Consolidated Statements of Income -
Three and Six Months Ended June 30, 2000 and 1999.................................... 2
Consolidated Statements of Comprehensive Income -
Three and Six Months Ended June 30, 2000 and 1999.................................... 3
Consolidated Statements of Financial Condition -
June 30, 2000 and December 31, 1999.................................................. 4
Consolidated Statements of Stockholders' Equity -
Six Months Ended June 30, 2000 and 1999.............................................. 5
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2000 and 1999.............................................. 6
Notes to Consolidated Financial Statements............................................. 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..... 11
General................................................................................ 11
Results of Operations.................................................................. 11
Review of Financial Condition.......................................................... 18
Asset Quality.......................................................................... 20
Lines of Business...................................................................... 23
Interest Rate Sensitivity.............................................................. 27
Liquidity.............................................................................. 29
Capital Adequacy....................................................................... 30
Item 3. Quantitative and Qualitative Disclosures About Market Risk................................ 30
PART II
Item 4. Submission of Matters to a Vote of Security Holders....................................... 31
Item 6. Exhibits and Reports on Form 8-K.......................................................... 32
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PART I
ITEM 1. FINANCIAL STATEMENTS
In the opinion of management, the accompanying consolidated statements of financial condition and related interim consolidated statements of income, comprehensive income, stockholders' equity and cash flows reflect all adjustments (which include reclassifications and normal recurring adjustments) that are necessary for a fair presentation in conformity with generally accepted accounting principles ("GAAP"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements. Changes in these estimates and assumptions are considered reasonably possible and may have a material impact on the financial statements.
Certain reclassifications have been made to the 1999 financial statements to conform to the 2000 presentation. All significant intercompany transactions and balances have been eliminated.
The information included in this Form 10-Q should be read in conjunction with Washington Mutual, Inc.'s 1999 Annual Report on Form 10-K to the Securities and Exchange Commission. Interim results are not necessarily indicative of results for a full year. When we refer to "we" or "Washington Mutual" or the "Company" in this Form 10-Q, we mean Washington Mutual, Inc. and its consolidated subsidiaries.
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------- --------- -----------------------
2000 1999 2000 1999
----------- ----------- --------- -----------
(dollars in thousands, except per share amounts)
INTEREST INCOME
Loans ................................... $2,237,514 $2,013,372 $4,458,705 $4,041,874
Available-for-sale ("AFS") securities ... 702,647 646,322 1,394,891 1,185,334
Held-to-maturity ("HTM") securities ..... 333,187 258,416 672,283 505,793
Other interest and dividend income ...... 88,655 41,512 139,770 80,739
-----------------------------------------------------
Total interest income ................... 3,362,003 2,959,622 6,665,649 5,813,740
INTEREST EXPENSE
Deposits ................................ 803,068 792,694 1,590,923 1,606,321
Borrowings .............................. 1,467,044 1,018,220 2,898,125 1,931,516
------------------------------------------------------
Total interest expense .................. 2,270,112 1,810,914 4,489,048 3,537,837
------------------------------------------------------
Net interest income ..................... 1,091,891 1,148,708 2,176,601 2,275,903
Provision for loan losses ............... 44,076 42,857 85,238 84,557
------------------------------------------------------
Net interest income after
provision for loan losses ............. 1,047,815 1,105,851 2,091,363 2,191,346
NONINTEREST INCOME
Depositor and other retail banking fees.. 239,773 182,114 450,806 345,531
Securities fees and commissions ......... 83,516 69,364 166,089 128,886
Insurance fees and commissions .......... 10,836 10,269 22,315 20,939
Loan servicing income ................... 39,134 23,881 72,403 49,912
Loan related income ..................... 29,044 26,859 53,065 53,406
Gain on sale of loans ................... 80,671 28,021 141,899 66,383
Gain (loss) from securities ............. (1,758) 342 (23,324) (2,351)
Other income ............................ 19,027 23,268 40,054 53,556
------------------------------------------------------
Total noninterest income ................ 500,243 364,118 923,307 716,262
NONINTEREST EXPENSE
Compensation and benefits ............... 335,480 302,120 665,886 603,729
Occupancy and equipment ................. 148,080 137,160 300,581 272,064
Telecommunications and outsourced
information services .................. 77,359 67,180 154,286 137,244
Depositor and other retail banking losses 23,169 22,642 48,691 47,889
Transaction-related expense ............. - 36,569 - 60,371
Amortization of goodwill and other
intangible assets ..................... 27,137 23,262 53,883 48,635
Foreclosed asset (income) expense ....... (3,777) 1,956 (5,172) 5,750
Other expense ........................... 167,755 157,735 301,626 302,809
------------------------------------------------------
Total noninterest expense ............... 775,203 748,624 1,519,781 1,478,491
------------------------------------------------------
Income before income taxes .............. 772,855 721,345 1,494,889 1,429,117
Income taxes ............................ 282,093 268,671 545,635 532,325
------------------------------------------------------
NET INCOME .............................. $ 490,762 $ 452,674 $ 949,254 $ 896,792
======================================================
Net income attributable to common stock.. $ 490,762 $ 452,674 $ 949,254 $ 896,792
======================================================
Net income per common share:
Basic ................................... $0.92 $0.78 $1.75 $1.54
Diluted ................................. 0.92 0.78 1.75 1.54
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See Notes to Consolidated Financial Statements.
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ---------------------
2000 1999 2000 1999
--------- -------- -------- ---------
(in thousands)
Net income ........................................... $490,762 $452,674 $949,254 $896,792
Other comprehensive loss, net of income tax benefit:
Unrealized loss on securities:
Unrealized holding loss during the period, net
of deferred income tax benefit of $62,044,
$270,105, $199,917 and $310,087 .................. (99,890) (413,361) (321,825) (474,546)
Reclassification adjustment for realized loss (gain)
included in net income, net of income tax (benefit)
of $(1,134), $96, $(9,106) and $932 .............. 1,825 (146) 14,656 (1,427)
Amortization of market adjustment for
mortgage-backed securities ("MBS")
transferred from available for sale
to held to maturity, net of deferred
income tax of $868, $1,904, $1,709
and $4,384 ....................................... (1,364) (2,913) (2,685) (6,709)
-------- -------- -------- --------
(99,429) (416,420) (309,854) (482,682)
Minimum pension liability adjustment ............... (1) - 3,647 (1,760)
-------- -------- -------- --------
Other comprehensive loss ............................. (99,430) (416,420) (306,207) (484,442)
-------- -------- -------- --------
Comprehensive income ................................. $391,332 $ 36,254 $643,047 $412,350
======== ======== ======== ========
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See Notes to Consolidated Financial Statements.
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
(in thousands)
ASSETS
Cash and cash equivalents ...................................... $ 2,810,397 $ 3,040,167
Trading securities ............................................. 35,737 34,660
AFS securities, amortized cost of $42,287,418 and $42,564,180:
MBS ........................................................... 40,193,874 40,972,653
Investment securities ......................................... 450,087 411,665
HTM securities, fair value of $17,503,570 and $19,037,435:
MBS ........................................................... 17,888,680 19,263,413
Investment securities ......................................... 137,414 138,052
Loans:
Loans held in portfolio ....................................... 112,918,396 113,745,650
Loans held for sale ........................................... 1,746,486 793,504
Reserve for loan losses ....................................... (1,009,728) (1,041,929)
------------ ------------
Total loans, net of reserve for loan losses .................. 113,655,154 113,497,225
Mortgage servicing rights ...................................... 841,048 643,185
Foreclosed assets .............................................. 172,091 198,961
Premises and equipment ......................................... 1,539,702 1,558,649
Investment in Federal Home Loan Banks ("FHLBs") ................ 3,151,187 2,916,749
Goodwill and other intangible assets ........................... 1,134,406 1,199,854
Other assets ................................................... 3,677,413 2,638,397
------------ ------------
Total assets ................................................. $185,687,190 $186,513,630
============ ============
LIABILITIES
Deposits:
Checking accounts.............................................. $ 15,021,583 $ 13,489,471
Savings accounts and money market deposit accounts ("MMDAs")... 29,358,141 30,048,378
Time deposit accounts ......................................... 36,216,624 37,591,919
------------ -------------
Total deposits ............................................... 80,596,348 81,129,768
Federal funds purchased and commercial paper ................... 1,491,998 866,543
Securities sold under agreements to repurchase
("reverse repurchase agreements") ............................ 26,745,734 30,162,823
Advances from FHLBs ............................................ 59,324,779 57,094,053
Other borrowings ............................................... 6,780,208 6,203,197
Other liabilities .............................................. 2,196,358 2,004,567
------------ ------------
Total liabilities ............................................ 177,135,425 177,460,951
STOCKHOLDERS' EQUITY
Common stock, no par value: 1,600,000,000 shares authorized -
538,780,421 and 571,589,272 shares issued ..................... - -
Capital surplus - common stock ................................. 1,368,976 2,205,201
Accumulated other comprehensive loss:
Unrealized loss on securities ................................. (977,268) (667,414)
Minimum pension liability adjustment .......................... (3,383) (7,030)
Retained earnings .............................................. 8,163,440 7,521,922
------------ ------------
Total stockholders' equity ................................... 8,551,765 9,052,679
------------ ------------
Total liabilities and stockholders' equity ................... $185,687,190 $186,513,630
============ ============
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See Notes to Consolidated Financial Statements.
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
CAPITAL ACCUMULATED
SURPLUS- OTHER
COMMON COMPREHENSIVE RETAINED
TOTAL STOCK LOSS EARNINGS
----------- ---------- ------------ -----------
(in thousands)
BALANCE, December 31, 1999 ............. $9,052,679 $2,205,201 $(674,444) $7,521,922
Net income ............................. 949,254 - - 949,254
Cash dividends declared on common stock. (307,736) - - (307,736)
Common stock issued through employee
stock plans, including tax benefit .... 32,714 32,714 - -
Other comprehensive loss, net of
related income tax benefit ............ (306,207) - (306,207) -
Common stock repurchased and retired ... (868,939) (868,939) - -
---------- ---------- ---------- ----------
BALANCE, June 30, 2000 ................. $8,551,765 $1,368,976 $(980,651) $8,163,440
========== ========== ========== ==========
BALANCE, December 31, 1998 ............. $9,344,400 $2,994,653 $ 74,281 $6,275,466
Net income ............................. 896,792 - - 896,792
Cash dividends declared on common stock. (275,008) - - (275,008)
Common stock issued through employee
stock plans, including tax benefit .... 37,813 37,813 - -
Other comprehensive loss, net of
related income tax benefit ............ (484,442) - (484,442) -
Common stock repurchased and retired ... (457,993) (457,993) - -
---------- ---------- --------- ----------
BALANCE, June 30, 1999 ................. $9,061,562 $2,574,473 $(410,161) $6,897,250
========== ========== ========= ==========
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See Notes to Consolidated Financial Statements.
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
-------------------------
2000 1999
---------- ---------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...................................................................... $ 949,254 $ 896,792
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses ...................................................... 85,238 84,557
Gain on sale of loans .......................................................... (141,899) (66,383)
Loss from securities ........................................................... 23,324 2,351
Depreciation and amortization .................................................. 306,263 160,031
Stock dividends from FHLBs ..................................................... (114,453) (61,300)
Transaction-related expense .................................................... - 60,371
Decrease in trading securities ................................................. 2,003 9,658
Origination of loans held for sale.............................................. (3,761,054) (2,768,851)
Sales of loans held for sale.................................................... 2,797,138 5,976,890
Increase in other assets........................................................ (1,013,214) (323,036)
Increase (decrease) in other liabilities ....................................... 343,387 (1,334,810)
----------- ----------
Net cash (used) provided by operating activities .............................. (524,013) 2,636,270
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of AFS securities ..................................................... (46,710) (16,572,405)
Purchases of HTM securities ..................................................... (1,285) (86,510)
Sales of AFS securities ......................................................... 504,234 1,930,570
Maturities of AFS securities .................................................... 2,779 128,269
Maturities of HTM securities .................................................... 2,000 2,408
Principal payments on securities................................................. 4,092,337 7,009,769
Purchases of investment in FHLBs ................................................ (135,552) (335,502)
Purchases of loans............................................................... (2,796,305) (2,905,987)
Sales of loans................................................................... 13,026,626 25,215
Origination of loans, net of principal payments.................................. (12,557,081) (5,473,844)
Sales of foreclosed assets ...................................................... 141,019 189,896
Cash used for Alta .............................................................. (21,823) -
Purchases of premises and equipment, net ........................................ (113,605) (206,789)
---------- -----------
Net cash provided (used) by investing activities .............................. 2,096,634 (16,294,910)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in deposits ............................................................ (533,420) (2,366,827)
(Decrease) increase in short-term borrowings..................................... (5,347,664) 3,220,314
Proceeds from long-term borrowings............................................... 14,516,556 9,928,623
Repayments of long-term borrowings............................................... (11,523,939) (3,952,890)
Proceeds from FHLBs advances..................................................... 43,346,733 54,883,808
Repayments of FHLBs advances..................................................... (41,116,251) (48,408,331)
Cash dividends paid on common stock ............................................. (307,736) (275,008)
Repurchase of common stock ...................................................... (868,939) (457,993)
Other capital transactions ...................................................... 32,269 36,924
----------- -----------
Net cash (used) provided by financing activities .............................. (1,802,391) 12,608,620
----------- -----------
Decrease in cash and cash equivalents ......................................... (229,770) (1,050,020)
Cash and cash equivalents, beginning of period ................................ 3,040,167 2,756,974
----------- -----------
Cash and cash equivalents, end of period....................................... $ 2,810,397 $ 1,706,954
=========== ===========
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See Notes to Consolidated Financial Statements.
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
---------------------
2000 1999
-------- --------
(in thousands)
NONCASH ACTIVITIES
Loans exchanged for MBS ...................................... $3,012,795 $2,335,484
Loans exchanged for trading securities ....................... 2,607 -
Real estate acquired through foreclosure ..................... 135,756 197,818
Loans originated to facilitate the sale of foreclosed assets . 21,607 28,973
Loans held for sale originated to refinance existing loans ... 100,047 2,216,823
Loans held in portfolio originated to refinance existing loans 834,477 2,210,116
Trade date purchases not yet settled ......................... - 673,793
CASH PAID DURING THE PERIOD FOR
Interest on deposits.......................................... 1,539,223 1,551,258
Interest on borrowings........................................ 3,134,895 2,007,509
Income taxes ................................................. 4,642 473,518
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See Notes to Consolidated Financial Statements.
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: EARNINGS PER SHARE ("EPS")
Earnings per share ("EPS") are presented under two formats: earnings per
share and diluted earnings per share. Earnings per share are computed by
dividing net income by the weighted average number of common shares outstanding
during the period. Diluted earnings per share are computed by dividing net
income by the weighted average number of common shares outstanding during the
period plus the impact of potentially dilutive common shares, such as stock
options.
Information used to calculate EPS was as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- -----------------------
2000 1999 2000 1999
--------- --------- ------- --------
(dollars in thousands, except per share amounts)
Net income .................................. $490,762 $452,674 $949,254 $896,792
Weighted average shares
-----------------------
Basic weighted average number of common
shares outstanding ....................... 532,327,052 580,214,730 542,057,088 581,072,470
Dilutive effect of potential common shares.. 1,172,475 2,179,938 1,022,004 2,387,996
----------- ----------- ----------- -----------
Diluted weighted average number of common
shares outstanding ....................... 533,499,527 582,394,668 543,079,092 583,460,466
=========== =========== =========== ===========
Net income per common share
---------------------------
Basic and diluted .......................... $0.92 $0.78 $1.75 $1.54
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Options to purchase an additional 9,225,578 shares of common stock, with an exercise price ranging from $28.42 per share to $49.69 per share, were outstanding at June 30, 2000, but were not included in the computation of diluted EPS because their exercise prices were greater than the average market price of our common stock during the quarter ended June 30, 2000.
Additionally, as part of the business combination with Keystone Holdings, Inc., parent company of American Savings Bank, F.A., 12 million shares of common stock, with an assigned value of $27.74 per share, are held in an escrow for the benefit of the general and limited partners of Keystone Holdings, Inc., the Federal Savings and Loan Insurance Corporation Resolution Fund and their transferees. The conditions under which these shares can be released from escrow are related to the outcome of certain litigation and not based on earnings or market price. At June 30, 2000, the conditions were not met, and, therefore, the shares were not included in the above computations.
NOTE 2: OTHER BORROWINGS
As of both June 30, 2000 and December 31, 1999, other borrowings included Company-obligated mandatorily redeemable capital securities of the Company's subsidiary trusts holding solely $950.0 million aggregate liquidation amount of subordinated deferrable interest debentures of the Company.
In June 2000, through one of its subsidiaries, the Company issued a senior debt obligation totaling $450.0 million and bearing a fixed rate of 8.25%. The note is due on June 15, 2005.
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3: LINES OF BUSINESS
Washington Mutual is managed along five major lines of business: consumer
banking, mortgage banking, commercial banking, financial services, and consumer
finance. The treasury group, although not considered a line of business, is
responsible for the management of investments and interest rate risk.
Financial highlights by lines of business:
THREE MONTHS ENDED JUNE 30, 2000
---------------------------------------------------------------------------------------------------
CONSUMER MORTGAGE COMMERCIAL FINANCIAL CONSUMER TREASURY/
BANKING BANKING BANKING SERVICES FINANCE OTHER TOTAL
--------- --------- --------- --------- --------- ------------ ----------
(in thousands)
Condensed income statement:
Net interest income after
provision for loan losses $636,183 $193,159 $87,982 $ 89 $82,716 $47,686 $1,047,815
Noninterest income ...... 252,538 131,383 8,135 95,979 16,019 (3,811) 500,243
Noninterest expense ..... 456,126 133,761 29,789 64,380 71,198 19,949 775,203
Income taxes ............ 156,422 68,975 24,291 12,320 11,436 8,649 282,093
-------- --------- -------- ------- ------- ------- ----------
Net income .............. $276,173 $121,806 $42,037 $19,368 $16,101 $15,277 $ 490,762
======== ========= ======== ======= ======= ======= ==========
JUNE 30, 2000
------------------------------------------------------------------------------------------------------
Total assets ............ $83,142,652 $45,182,102 $20,926,385 $149,544 $9,061,127 $27,225,380 $185,687,190
=========== =========== =========== ======== ========== =========== ============
|
THREE MONTHS ENDED JUNE 30, 1999
-------------------------------------------------------------------------------------------------------
CONSUMER MORTGAGE COMMERCIAL FINANCIAL CONSUMER TREASURY/
BANKING BANKING BANKING SERVICES FINANCE OTHER TOTAL
---------- ------------ ------------ ------------ ---------- --------- ----------
(in thousands)
Condensed income statement:
Net interest income after
provision for loan losses $601,962 $216,275 $98,069 $ 501 $56,840 $132,204 $1,105,851
Noninterest income ........ 193,515 68,347 10,854 83,661 7,107 634 364,118
Transaction-related expense 24,992 9,352 283 722 - 1,220 36,569
Noninterest expense ....... 455,752 134,162 26,135 50,496 33,235 12,275 712,055
Income taxes .............. 116,841 52,386 30,726 12,485 11,934 44,299 268,671
-------- -------- ------- ------- -------- -------- ----------
Net income ................ $197,892 $ 88,722 $51,779 $20,459 $ 18,778 $ 75,044 $ 452,674
======== ======== ======= ======= ======== ======== ==========
|
DECEMBER 31, 1999
------------------------------------------------------------------------------------------------------
Total assets .............. $83,713,164 $46,373,128 $20,179,900 $123,525 $7,370,753 $28,753,160 $186,513,630
=========== =========== =========== ======== ========== =========== ============
SIX MONTHS ENDED JUNE 30, 2000
------------------------------------------------------------------------------------------------------
CONSUMER MORTGAGE COMMERCIAL FINANCIAL CONSUMER TREASURY/
BANKING BANKING BANKING SERVICES FINANCE OTHER TOTAL
--------- ------------ ---------- ---------- ---------- ---------- ----------
(in thousands)
Condensed income statement:
Net interest income after
provision for loan losses $1,249,875 $393,997 $177,808 $ 172 $163,053 $106,458 $2,091,363
Noninterest income ...... 476,679 222,345 12,844 191,330 46,989 (26,880) 923,307
Noninterest expense ..... 905,381 267,199 58,848 124,366 134,378 29,609 1,519,781
Income taxes ............ 296,159 125,900 48,096 26,515 30,912 18,053 545,635
---------- --------- -------- -------- -------- -------- ----------
Net income .............. $ 525,014 $223,243 $ 83,708 $ 40,621 $ 44,752 $ 31,916 $ 949,254
========== ========= ======== ======== ======== ======== ==========
|
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1999
------------------------------------------------------------------------------------------------------
CONSUMER MORTGAGE COMMERCIAL FINANCIAL CONSUMER TREASURY/
BANKING BANKING BANKING SERVICES FINANCE OTHER TOTAL
---------- --------- ---------- ---------- --------- ---------- --------
(in thousands)
Condensed income statement:
Net interest income after
provision for loan losses $1,199,360 $430,414 $199,256 $ 1,095 $111,004 $250,217 $2,191,346
Noninterest income ....... 373,580 142,482 18,878 154,491 13,786 13,045 716,262
Transaction-related expense 42,543 13,730 421 2,196 - 1,481 60,371
Noninterest expense ....... 903,047 275,309 51,968 96,540 67,984 23,272 1,418,120
Income taxes .............. 232,949 105,411 61,706 21,551 22,088 88,620 532,325
---------- -------- -------- -------- -------- -------- ----------
Net income ................ $ 394,401 $178,446 $104,039 $ 35,299 $ 34,718 $149,889 $ 896,792
========== ======== ======== ======== ======== ======== ==========
|
NOTE 4: RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED
Statement of Financial Accounting Standards ("SFAS") No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," was issued in June 2000 and amends the accounting and reporting standards of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," for certain derivative instruments and hedging activities. These amendments include the application of the normal purchases and sales exception in SFAS No. 133, and redefinition of hedged risk. SFAS No. 138 also amends SFAS No. 133 for decisions made by the Financial Accounting Standards Board relating to the Derivatives Implementation Group process. SFAS No. 138 will be adopted concurrently with SFAS No. 133 on January 1, 2001. The impact of these statements cannot be currently estimated and will be dependent upon the fair value, nature and purpose of the derivative instruments held by the Company as of December 31, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section contains forward-looking statements, which are not historical facts and pertain to our 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 report that are not historical facts. When used in this report, 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-Risk Factors" in our 1999 Annual Report on Form 10-K to the Securities and Exchange Commission, which are incorporated herein by reference.
GENERAL
Washington Mutual, Inc. is a financial services company committed to serving consumers and small to mid-sized businesses. Our banking subsidiaries, Washington Mutual Bank, FA ("WMBFA"), Washington Mutual Bank ("WMB") and Washington Mutual Bank fsb ("WMBfsb"), accept deposits from the general public, make residential loans, consumer loans, and limited types of commercial real estate loans (primarily loans secured by multi-family properties), and engage in certain commercial banking activities. Our consumer finance operations provide direct installment loans and related credit insurance services and purchase retail installment contracts. We originate, purchase, sell and service specialty mortgage finance loans through our subsidiaries, Washington Mutual Finance and Long Beach Mortgage. We also market annuities and other insurance products, offer full service securities brokerage, and act as the investment advisor to and the distributor of mutual funds.
We securitized or sold approximately $7.12 billion of seasoned residential loans during the second quarter. We retained approximately $1.06 billion of the securities from these transactions. This is in addition to the $8.69 billion of seasoned loans that we securitized or sold during the first quarter. We retained approximately $1.95 billion of the securities from these transactions. We continue our policy of selling primarily all of our fixed-rate single-family residential ("SFR") originations, as well as the specialty mortgage finance loans originated by our subsidiary Long Beach Mortgage. Our level of sales of specialty mortgage finance loans during the second quarter was below prior quarter levels in anticipation of receiving a better execution price during the subsequent period. We used the proceeds from the sales of our seasoned loans primarily to reduce our wholesale borrowings and to repurchase shares of our common stock.
RESULTS OF OPERATIONS
OVERVIEW. Our net income for the quarter and six months ended June 30, 2000 was $490.8 million and $949.3 million, compared with $452.7 million and $896.8 million for the same periods in 1999. We had basic and diluted earnings per share of $0.92 and $1.75 for the quarter and six months ended June 30, 2000, and $0.78 and $1.54 for the quarter and six months ended June 30, 1999.
NET INTEREST INCOME. Despite an increase in our average interest-earning assets to $177.80 billion for second quarter 2000 from $167.43 billion for the same period a year ago, net interest income declined approximately 5% in the second quarter of 2000 to $1.09 billion, compared with $1.15 billion in the second quarter of 1999. The decline in net interest income was due to the decrease in the net interest spread and margin. The net interest spread and margin were 2.30% and 2.43% for second quarter 2000, compared with 2.58% and 2.74% for the same period a year ago. Net interest income declined approximately 4% during the six months ended June 30, 2000 to $2.18 billion from $2.28 billion for the same period a year ago. This decline was also due to the decrease in the net interest spread and margin to 2.27% and 2.41% for the first half of 2000 from 2.60% and 2.76% for the first half of 1999.
The compression in the net interest spread and margin was primarily due to the fact that our liabilities reprice to market more quickly than our assets. Interest rates have risen rapidly over the past year, as evidenced by an increase in the average three-month London Interbank Offered Rate ("LIBOR") from 5.06% in the second quarter of 1999 to 6.61% in the second quarter of 2000 and by a 175 basis point increase in the federal funds rate from 4.75% in June 1999 to 6.50% in June 2000.
The cost of our interest-bearing liabilities increased 78 basis points to 5.27% for second quarter 2000 from 4.49% for the same period a year ago, driven primarily by a 109 basis point increase in the cost of borrowings. The cost of borrowings increased to 6.35% for second quarter 2000, compared with 5.26% for the same period a year ago. Similarly, the cost of our interest-bearing liabilities increased 63 basis points to 5.17% for the first six months of 2000 from 4.54% for the same period in 1999 as a result of an 87 basis point increase in the cost of borrowings. For the six months ended June 30, 2000, the cost of borrowings was 6.21%, up from 5.34% for the six months ended June 30, 1999.
The overall yield on our interest-earning assets increased 50 basis points during the second quarter of 2000, driven primarily by a 52 basis point increase in the yield on our loans to 7.88%, compared with 7.36% for the same period in 1999. The rise in the yield on our loan portfolio was in response to increases in treasury-based indices and the Cost of Funds Index of the Eleventh District Federal Home Loan Bank ("COFI"). There was also a 29 basis point increase in the yield on our mortgage-backed securities ("MBS") portfolio to 6.90%, compared with 6.61%. Also contributing to the overall increase in the yield on interest-earning assets during the second quarter was a 289 basis point increase in the yield on investment securities to 8.43%, compared with 5.54% for the same period in 1999. The majority of this increase was due to special dividends from the Federal Home Loan Bank ("FHLB") of San Francisco, which contributed approximately six basis points to the net interest margin for the quarter.
The yield on our interest-earning assets increased 30 basis points during the first half of 2000 primarily due to a 36 basis point increase in the yield on our loans to 7.76%, compared with 7.40% for the same period in 1999. The rise in the yield on loans was attributable to increases in treasury-based indices and COFI. Also contributing to the increase in the overall yield on our interest-earning assets was a 17 basis point increase in the yield on MBS and a 169 basis point increase in the yield on investment securities during the first six months of 2000.
Selected average financial balances and the net interest spread and margin
were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ---------------------------
2000 1999 2000 1999
---------- --------- -------- --------
(dollars in thousands)
Average balances:
Loans ....................................... $113,597,564 $109,523,390 $114,943,499 $109,400,323
MBS ......................................... 59,525,121 54,227,044 59,785,887 50,019,420
Investment securities and investment in FHLBs 4,674,386 3,681,555 4,397,455 3,646,188
------------ ------------ ------------ -----------
Total interest-earning assets .............. 177,797,071 167,431,989 179,126,841 163,065,931
Deposits ..................................... 80,338,406 83,920,105 80,653,178 84,103,172
Borrowings ................................... 92,903,373 77,666,546 93,815,288 72,861,536
------------ ------------ ------------ -----------
Total interest-bearing liabilities ......... 173,241,779 161,586,651 174,468,466 156,964,708
Total assets ................................ 183,712,586 173,205,859 185,044,732 168,748,350
Stockholders' equity ........................ 8,544,297 9,509,791 8,714,885 9,483,253
Weighted average yield on:
Loans ....................................... 7.88% 7.36% 7.76% 7.40%
MBS ......................................... 6.90 6.61 6.85 6.68
Investment securities and investment in FHLBs 8.43 5.54 7.24 5.55
Interest-earning assets .................... 7.57 7.07 7.44 7.14
Weighted average cost of:
Deposits .................................... 4.02 3.79 3.97 3.85
Borrowings .................................. 6.35 5.26 6.21 5.34
Interest-bearing liabilities ............... 5.27 4.49 5.17 4.54
Net interest spread ......................... 2.30 2.58 2.27 2.60
Net interest margin ......................... 2.43 2.74 2.41 2.76
The net interest spread is the difference between the weighted average
yield on our interest-earning assets and the weighted average cost of our
interest-bearing liabilities. The net interest margin measures our annualized
net interest income as a percentage of average interest-earning assets.
13
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The dollar amounts of interest income and interest expense fluctuate depending upon changes in amounts (volume) and upon changes in interest rates of our interest-earning assets and interest-bearing liabilities. The following table details changes attributable to (i) changes in volume (changes in average outstanding balances multiplied by the prior period's rate) and (ii) changes in rate (changes in average interest rate multiplied by the prior period's volume). Changes in rate/volume (changes in rate times the change in volume) were allocated proportionately to the changes in volume and the changes in rate.
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2000 VS. 1999 2000 VS. 1999
---------------------------------- -----------------------------------
INCREASE/(DECREASE) DUE TO INCREASE/(DECREASE) DUE TO
---------------------------------- -----------------------------------
VOLUME RATE TOTAL CHANGE VOLUME RATE TOTAL CHANGE
---------------------------------- -----------------------------------
(in thousands)
Interest income:
Loans ..................... $ 76,776 $147,366 $224,142 $211,744 $ 205,087 $416,831
MBS ....................... 90,255 40,639 130,894 333,937 43,113 377,050
Investment securities and
investment in FHLBs ...... 16,136 31,209 47,345 23,434 34,594 58,028
------- ------- ------- ------- -------- -------
Total interest income .... 183,167 219,214 402,381 569,115 282,794 851,909
Interest expense:
Deposits .................. (35,701) 46,075 10,374 (64,951) 49,553 (15,398)
Borrowings ................ 217,932 230,892 448,824 617,743 348,866 966,609
-------- -------- -------- -------- --------- --------
Total interest expense ... 182,231 276,967 459,198 552,792 398,419 951,211
-------- -------- -------- -------- --------- --------
Net interest income ..... $ 936 $(57,753) $(56,817) $ 16,323 $(115,625) $(99,302)
======== ======== ======== ======== ========= ========
|
NONINTEREST INCOME. Noninterest income was $500.2 million and $923.3
million for the quarter and six months ended June 30, 2000, compared with $364.1
million and $716.3 million for the same periods in 1999.
Noninterest income consisted of the following:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ----------------------
2000 1999 2000 1999
--------- --------- -------- ----------
(in thousands)
Depositor and other retail banking fees. $239,773 $182,114 $450,806 $345,531
Securities fees and commissions ........ 83,516 69,364 166,089 128,886
Insurance fees and commissions ......... 10,836 10,269 22,315 20,939
Loan servicing income .................. 39,134 23,881 72,403 49,912
Loan related income .................... 29,044 26,859 53,065 53,406
Gain on sale of loans .................. 80,671 28,021 141,899 66,383
Gain (loss) from securities ............ (1,758) 342 (23,324) (2,351)
Other income ........................... 19,027 23,268 40,054 53,556
-------- -------- -------- --------
Total noninterest income ............... $500,243 $364,118 $923,307 $716,262
======== ======== ======== ========
|
Depositor and other retail banking fees of $239.8 million for the second quarter of 2000 increased 32% from $182.1 million for the same period in 1999. Depositor and other retail banking fees of $450.8 million for the first six months of 2000 increased 30% from $345.5 million for the same period a year ago. We collected more debit card, ATM, overdraft protection, nonsufficient funds and other fees related to checking accounts. The number of checking accounts increased by over 482,000 or 12% to 4,561,235 at June 30, 2000 from 4,079,171 a year ago.
Securities fees and commissions were $83.5 million for the second quarter of 2000, up from $69.4 million for the second quarter of 1999. Securities fees and commissions increased to $166.1 million for the first half of 2000 from $128.9 million for the first half of 1999. During the quarter and six months ended June 30, 2000, there were higher sales of investment products and additional growth of assets under management by our investment management affiliate from $6.42 billion at June 30, 1999 to $8.09 billion at June 30, 2000.
Loan servicing income increased to $39.1 million for the second quarter of 2000 from $23.9 million for the comparable period in 1999. Loan servicing income was $72.4 million for the six months ended June 30, 2000, up from $49.9 million for the same period a year ago. These increases were primarily due to growth in loans serviced for others as a result of securitizations and loan sales. The impact of this portfolio growth was partially offset by an increase in the mortgage servicing rights amortization.
Gain on sale of loans increased by $52.7 million from $28.0 million during the second quarter of 1999 to $80.7 million during the second quarter of 2000. This increase was primarily attributable to the sale of $3.91 billion of seasoned adjustable-rate mortgages("ARMs") and $2.15 billion of securities created through the securitization of seasoned ARMs during the second quarter of 2000. Gain on sale of loans increased by $75.5 million from $66.4 million during the first six months of 1999 to $141.9 million during the first six months of 2000. This increase was primarily attributable to the sale of seasoned loans and securities during the second quarter and the sale of $1.71 billion of seasoned SFR loans and $5.03 billion of securities created through the securitization of seasoned ARMs during the first quarter of 2000.
NONINTEREST EXPENSE. Noninterest expense totaled $775.2 million and $1.52
billion for the quarter and six months ended June 30, 2000, compared with $748.6
million and $1.48 billion for the same periods in 1999.
Noninterest expense consisted of the following:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ----------------------
2000 1999 2000 1999
--------- --------- ---------- ----------
(in thousands)
Compensation and benefits .......... $335,480 $302,120 $ 665,886 $ 603,729
Occupancy and equipment ............ 148,080 137,160 300,581 272,064
Telecommunications and outsourced
information services .............. 77,359 67,180 154,286 137,244
Depositor and retail banking losses. 23,169 22,642 48,691 47,889
Transaction-related expense ........ - 36,569 - 60,371
Amortization of goodwill and
other intangible assets ........... 27,137 23,262 53,883 48,635
Foreclosed asset (income) expense .. (3,777) 1,956 (5,172) 5,750
Advertising and promotion .......... 41,837 28,883 62,598 55,733
Postage ............................ 24,852 21,333 48,367 43,384
Professional fees .................. 22,360 16,995 42,898 33,212
Regulatory assessments ............. 7,746 14,840 15,765 30,203
Office supplies .................... 7,449 9,285 16,228 17,133
Travel and training ................ 15,556 12,940 30,159 24,918
Proprietary mutual fund expense .... 8,257 5,854 16,094 13,444
Other expense ...................... 39,698 47,605 69,517 84,782
-------- -------- ---------- ----------
Total noninterest expense......... $775,203 $748,624 $1,519,781 $1,478,491
======== ======== ========== ==========
|
Compensation and benefits expense increased to $335.5 million for the second quarter of 2000 from $302.1 million for the same period in 1999. Compensation and benefits expense was $665.9 million for the first half of 2000, up from $603.7 million for the same period a year ago. The increases during the quarter and six months ended June 30, 2000 were primarily due to the acquisition of Long Beach Mortgage in October 1999, increased commission expense due to the higher volume of securities transactions and loan originations, and benefits expense.
Occupancy and equipment expense was $148.1 million for the second quarter of 2000, compared with $137.2 million for the same period in 1999. Occupancy and equipment expense was $300.6 million for the six months ended June 30, 2000, up from $272.1 million for the six months ended June 30, 1999. Computer system upgrades caused an increase in depreciation, equipment and maintenance expense.
Telecommunications and outsourced information services expense of $77.4 million for the second quarter of 2000 was up from $67.2 million for the comparable period in 1999. Telecommunications and outsourced information services expense increased to $154.3 million for the first six months of 2000 from $137.2 million for the same period a year ago. The increase reflects higher use of services resulting from new locations and a rate increase in our contract with IBM Global Services, effective January 1, 2000.
We completed the integration of H. F. Ahmanson & Co. in the fourth quarter of 1999. Therefore, there were no transaction-related expenses incurred in the quarter and six months ended June 30, 2000, compared with $36.6 million and $60.4 million for the same periods in 1999. During the second quarter and first six months of 1999, we incurred costs associated with contract and temporary employment services, severance, facilities and equipment impairment as well as other costs that were expensed as incurred.
Advertising and promotion expense increased to $41.8 million for second quarter 2000 from $28.9 million for the comparable period in 1999. Advertising and promotion expense was $62.6 million for the first half of 2000, up from $55.7 million for the first half of 1999. These increases were primarily due to additional costs associated with campaigns for various loan and deposit products.
Regulatory assessments declined to $7.7 million in second quarter 2000 from $14.8 million for the same period in 1999. Regulatory assessments were also down to $15.8 million for the first half of 2000 from $30.2 million for the first half of 1999. The overall assessment rate for Savings Association Insurance Fund deposits was significantly reduced in first quarter 2000, which caused a corresponding decrease in regulatory assessments.
TAXATION. Income taxes include federal and applicable state income taxes and payments in lieu of taxes. Income taxes of $282.1 million and $545.6 million for the quarter and six months ended June 30, 2000 represented an effective tax rate of 36.50%. Income taxes were $268.7 million and $532.3 million for the quarter and six months ended June 30, 1999, which represented an effective tax rate of 37.25%.
REVIEW OF FINANCIAL CONDITION
ASSETS. Our assets declined to $185.69 billion at June 30, 2000 from $186.51 billion at December 31, 1999.
SECURITIES. Our securities portfolio decreased by $2.11 billion to $58.71 billion during the six months ended June 30, 2000. This decline was due to paydowns, sales, and additional unrealized losses on the AFS investment portfolio in excess of the amount of MBS added to the portfolio. There were no purchases of MBS during the first half of 2000.
LOANS. Total loans at June 30, 2000 were $114.66 billion, up slightly from $114.54 billion at December 31, 1999. Due to loan sales and securitizations, loan balances have remained relatively constant. The activity during the first half of 2000 consisted of originations of new loans of $28.02 billion and purchases of $2.80 billion, offset by loan sales and securitizations of $19.19 billion, and loan payments of $11.51 billion.
Our current ARM products are primarily tied to treasury-based indices. The percentage of portfolio loans indexed to treasury averages is increasing due to the securitization and sale of COFI-based loans and the repayment of portfolio loans indexed to COFI. At June 30, 2000, 87% of real estate loans were adjustable rate, of which 66% were indexed to U.S. Treasury indices, 27% were indexed to COFI, and 7% to other indices. The remaining 13% of the real estate loan portfolio at June 30, 2000 were fixed rate. At December 31, 1999, 85% of real estate loans were adjustable rate, of which 52% were indexed to U.S. Treasury indices, 42% were indexed to COFI, and 6% to other indices. The remaining 15% of the year-end 1999 real estate loan portfolio were fixed rate.
Loan originations and purchases were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- ----------------------
2000 1999 2000 1999
--------- ---------- --------- ----------
(in millions)
Originated....................... $15,855.9 $13,663.5 $28,020.7 $25,543.5
Purchased........................ 2,092.0 1,801.6 2,796.3 3,102.4
--------- --------- --------- ---------
$17,947.9 $15,465.1 $30,817.0 $28,645.9
========= ========= ========= =========
|
Of total loan originations, SFR originations were $11.33 billion for the second quarter of 2000, compared with $11.00 billion for the same period in 1999. SFR originations were $19.83 billion for the first half of 2000, compared with $20.67 billion for the first half of 1999. Due to the higher interest rate environment and customer preference for short-term ARMs over fixed-rate loans, originations of short-term ARMs increased to $8.81 billion and $14.52 billion during the quarter and six months ended June 30, 2000, compared with $2.94 billion and $5.02 billion for the same periods a year ago.
The increase in loans purchased during the second quarter of 2000 was primarily due to purchases through our correspondent channels. The decline in loans purchased during the first six months of 2000 was primarily due to a reduction in purchased specialty mortgage finance loans.
SERVICING OF LOANS. Servicing rights are capitalized and amortized in proportion to, and over the period of, estimated future net servicing income. In order to determine the fair value of servicing rights, we use a valuation model that calculates the present value of expected cash flows. Key assumptions used in the valuation model include discount rates, prepayment speeds, and base servicing costs, which are reviewed quarterly. Prepayment speeds are determined from market sources for fixed-rate mortgages with similar coupons and a combination of internal historical data and market reports for ARMs. In addition, we use inflation rates, ancillary income per loan and default rates.
Changes in mortgage servicing rights ("MSR") for the quarter and six months ended June 30, 2000 were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 2000
------------------ -----------------
(in thousands)
Balance, beginning of period........ $767,596 $643,185
Additions...................... 102,428 252,880
Amortization................... (28,976) (55,017)
Impairment adjustment.......... - -
-------- --------
Balance, end of period.............. $841,048 $841,048
======== ========
|
Changes in the loan servicing portfolio with MSR for the quarter and six months ended June 30, 2000 were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 2000
------------------ -----------------
(in thousands)
Balance, beginning of period........ $64,272,993 $55,268,239
Additions...................... 8,431,858 19,057,277
Loan payments and other........ (2,204,608) (3,825,273)
----------- -----------
Balance, end of period(1)........... $70,500,243 $70,500,243
=========== ===========
|
(1) Balance at June 30, 2000 does not include approximately $8.26 billion of loans sold or securitized without capitalized MSR.
MSR increased to $841.0 million at June 30, 2000 from $767.6 million at March 31, 2000 and from $643.2 million at December 31, 1999. The additions to MSR during the first and second quarters of 2000 were primarily due to loan sales and securitizations. The weighted average servicing fee was approximately 39 basis points for the first half of 2000.
LIABILITIES. We primarily use customer deposits and wholesale borrowings to fund our loans and investments. Due to increased market competition for customer deposits, we have increasingly relied on wholesale borrowings. Deposits declined slightly to $80.60 billion at June 30, 2000 from $81.13 billion at year-end 1999. Savings accounts, MMDAs and checking accounts have increased as a percentage of total deposits to 55% at June 30, 2000, compared with 54% at December 31, 1999. These three products have the benefit of lower interest costs, compared with time deposit accounts. Even though transaction accounts are more liquid, we consider them to be the core relationship with our customers. In the aggregate, we view these core accounts to be a more stable source of long-term funding than time deposits.
Our wholesale borrowing portfolio decreased slightly to $87.56 billion at June 30, 2000, compared with $88.12 billion at year-end 1999. Due to relative pricing advantages, we generally used advances from FHLBs and reverse repurchase agreements as our primary funding vehicles.
ASSET QUALITY
PROVISION AND RESERVE FOR LOAN LOSSES. We analyze several important elements in determining the level of the provision for loan losses in any given period, such as current and historical economic conditions, asset quality trends, historical loan loss experience, and plans for problem loan administration and resolution. The results of the analysis indicated asset quality remained strong during the second quarter and first half of 2000.
Nonaccrual loans decreased to $801.5 million at June 30, 2000 from $827.0 million at December 31, 1999 and $820.4 million at June 30, 1999. Actual loss experience, as measured by net charge offs, decreased to $42.5 million for the second quarter of 2000 from $59.0 million for the second quarter of 1999. In addition, net charge offs decreased to $83.4 million for the six months ended June 30, 2000 from $104.0 million for the same period in 1999. Included in the 1999 periods were charge offs of $17.8 million in previously established specific reserves on four commercial real estate properties that were obtained through acquisitions. Excluding these charge offs, net charge offs would have increased slightly by $1.3 million for the second quarter and would have declined $2.8 million for the six-month period. Net charge offs as a percentage of average loans were 0.15% for second quarter 2000, down from 0.22% for second quarter 1999. In addition, net charge offs as a percentage of average loans were 0.15% for the first half of 2000, compared with 0.19% for the comparable period a year ago.
The provision for loan losses increased to $44.1 million and $85.2 million for the quarter and six months ended June 30, 2000 from $42.9 million and $84.6 million for the same periods in 1999. These increases were primarily due to an increase in the amount of specialty mortgage finance and commercial business loans, which typically have higher loss factors than SFR loans. During the second quarter and first half of 2000, we also originated more second mortgage and other consumer loans, which also typically have higher loss factors.
In the following table, identified allowances of $17.1 million and $34.0 million were included in the basis of loans sold and securitized during the quarter and six months ended June 30, 2000.
Changes in the reserve for loan losses were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- --------------------------
2000 1999 2000 1999
--------- --------- --------- -------
(dollars in thousands)
Balance, beginning of period .............. $1,025,244 $1,069,719 $1,041,929 $1,067,840
Provision for loan losses ................. 44,076 42,857 85,238 84,557
Identified allowance for loans sold or
securitized ............................. (17,094) - (34,024) 5,214
Loans charged off:
SFR and SFR construction ................ (5,554) (8,524) (12,321) (19,604)
Second mortgage and other consumer:
Banking subsidiaries .................. (9,923) (10,419) (20,570) (23,852)
Washington Mutual Finance ............. (28,178) (22,681) (55,284) (46,426)
Specialty mortgage finance .............. (788) (143) (1,376) (199)
Commercial business ..................... (3,663) (1,261) (4,443) (3,716)
Commercial real estate:
Apartments ............................ (563) (10,165) (1,732) (11,294)
Other commercial real estate .......... (615) (12,713) (1,003) (15,509)
-------- -------- -------- --------
(49,284) (65,906) (96,729) (120,600)
Recoveries of loans previously charged off:
SFR and SFR construction ................ 796 152 944 2,248
Second mortgage and other consumer:
Banking subsidiaries .................. 1,027 721 1,799 1,279
Washington Mutual Finance ............. 4,300 4,103 8,693 8,178
Specialty mortgage finance .............. 8 28 517 56
Commercial business ..................... 385 223 615 451
Commercial real estate:
Apartments ............................ 24 - 500 2,580
Other commercial real estate .......... 246 1,692 246 1,786
---------- ---------- ---------- ----------
6,786 6,919 13,314 16,578
---------- ---------- ---------- ----------
Net charge offs ........................... (42,498) (58,987) (83,415) (104,022)
---------- ---------- ---------- ----------
Balance, end of period .................... $1,009,728 $1,053,589 $1,009,728 $1,053,589
========== ========== ========== ==========
Net charge offs (annualized) as a percentage
of average loans....................... 0.15% 0.22% 0.15% 0.19%
|
JUNE 30, DECEMBER 31,
2000 1999
-------- -----------
Total reserve for loan losses as a percentage of:
Nonaccrual loans....................... 126% 126%
Nonperforming assets................... 104 102
Total loans
(exclusive of the reserve for loan losses) 0.88 0.91
|
At June 30, 2000, we had $16.70 billion of loans securitized and retained with recourse, and $4.43 billion of loans securitized and sold with recourse. At June 30, 2000, the liability for these recourse obligations was $106.3 million. When we securitize or sell loans with recourse, we retain the exposure for potential losses and, as a result, have established a recourse obligation. Because the loans underlying these securities are similar to the loans in our loan portfolio, we estimate our recourse obligation on these securities in a manner similar to the method we use for establishing the reserve for loan losses on our loan portfolio. The liability for this recourse obligation is included in "other liabilities."
Changes in the recourse liability were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- ------------------------
2000 1999 2000 1999
------- -------- -------- ---------
(in thousands)
Balance, beginning of period .................... $109,541 $127,966 $113,089 $144,257
Transfers ....................................... - - - (15,000)
Charge offs, net of provision for recourse losses (3,289) (5,963) (6,837) (7,254)
-------- -------- -------- --------
Balance, end of period .......................... $106,252 $122,003 $106,252 $122,003
======== ======== ======== ========
|
The total loss coverage represents the reserve for loan losses and recourse liability as a percentage of nonaccrual loans.
JUNE 30, DECEMBER 31,
2000 1999
-------- -----------
Total loss coverage percentage......... 139% 140%
|
NONPERFORMING ASSETS. Assets considered to be nonperforming include nonaccrual loans and foreclosed assets. When securitized loans or loans sold with recourse become nonperforming, we repurchase them and include them in nonaccrual loans. Management's classification of a loan as nonaccrual does not necessarily indicate that the principal of the loan is uncollectible in whole or in part. Loans are generally placed on nonaccrual status when they are four payments or more past due.
Nonperforming assets consisted of the following:
JUNE 30, DECEMBER 31,
2000 1999
--------- -----------
(dollars in thousands)
Nonaccrual loans:
SFR ................................. $527,888 $ 601,896
SFR construction..................... 17,734 18,017
Second mortgage and other consumer:
Banking subsidiaries............. 38,121 43,309
Washington Mutual Finance........ 61,211 54,817
Specialty mortgage finance........... 104,169 57,193
Commercial business.................. 15,716 9,826
Commercial real estate:
Apartment buildings.............. 14,534 21,956
Other commercial real estate..... 22,180 20,011
-------- ----------
801,553 827,025
Foreclosed assets...................... 172,091 198,961
-------- ----------
$973,644 $1,025,986
======== ==========
Nonperforming assets as a percentage
of total assets.................. 0.52% 0.55%
|
Specialty mortgage finance loans on nonaccrual status increased by $47.0 million during the first half of 2000 as a result of increasing loan purchases and originations. These portfolios were unseasoned loans and the amount of such loans that has become nonperforming was within our expectations. As these portfolios continue to season and as we add more specialty mortgage finance loans to our portfolio, the balance of nonperforming assets related to these loans is anticipated to increase. The increase in commercial business loans on nonaccrual status of $5.9 million was primarily related to two agricultural-related loans. Management closely monitors the performance of the loans in these portfolios.
LINES OF BUSINESS
We are managed along five major lines of business: consumer banking, mortgage banking, commercial banking, financial services, and consumer finance. Although we do not consider the treasury group to be a line of business, it manages investments and interest rate risk.
CONSUMER BANKING
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- ---------------------
2000 1999 2000 1999
--------- --------- --------- ---------
(in thousands)
Condensed income statement:
Net interest income after
provision for loan losses...... $636,183 $601,962 $1,249,875 $1,199,360
Noninterest income............... 252,538 193,515 476,679 373,580
Transaction-related expense...... - 24,992 - 42,543
Noninterest expense.............. 456,126 455,752 905,381 903,047
Income taxes..................... 156,422 116,841 296,159 232,949
-------- -------- ---------- ----------
Net income....................... $276,173 $197,892 $ 525,014 $ 394,401
======== ======== ========== ==========
JUNE 30, DECEMBER 31,
2000 1999
----------- ------------
(in thousands)
Total assets.....................$83,142,652 $83,713,164
=========== ===========
|
Net income for the second quarter of 2000 was $276.2 million, an increase of $78.3 million from $197.9 million for the second quarter of 1999. Net income for the six months ended June 30, 2000 was $525.0 million, an increase of $130.6 million from $394.4 million for the six months ended June 30, 1999. The increase during the quarter was primarily due to an increase of $59.0 million in noninterest income, a decline of $25.0 million in transaction-related expense and an increase of $34.2 million in net interest income after provision for loan losses. The increase during the six-month period was primarily due to an increase of $103.1 million in noninterest income, a decline of $42.5 million in transaction-related expense and an increase of $50.5 million in net interest income after provision for loan losses. The rise in noninterest income resulted from an increase in depositor and other retail banking fees. This increase was due to the consumer banking group collecting more overdraft protection, nonsufficient funds and other fees related to checking accounts on an increased number of deposit accounts. The number of checking accounts increased by over 482,000 or 12% to 4,561,235 at June 30, 2000 from 4,079,171 a year ago.
The increase in net interest income after provision for loan losses was primarily due to the increase in the net interest spread and margin. The yield on SFR loans for the consumer banking group responded more quickly than the cost of deposits to the rise in short-term interest rates during the quarter and six months ended June 30, 2000.
MORTGAGE BANKING
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- ---------------------
2000 1999 2000 1999
--------- --------- --------- ---------
(in thousands)
Condensed income statement:
Net interest income after
provision for loan losses...... $193,159 $216,275 $393,997 $430,414
Noninterest income............... 131,383 68,347 222,345 142,482
Transaction-related expense...... - 9,352 - 13,730
Noninterest expense.............. 133,761 134,162 267,199 275,309
Income taxes..................... 68,975 52,386 125,900 105,411
-------- -------- -------- --------
Net income....................... $121,806 $ 88,722 $223,243 $178,446
======== ======== ======== ========
JUNE 30, DECEMBER 31,
2000 1999
----------- ------------
(in thousands)
Total assets.....................$45,182,102 $46,373,128
=========== ===========
|
Net income for the second quarter of 2000 was $121.8 million, an increase of $33.1 million from $88.7 million for the second quarter of 1999. Net income for the first six months of 2000 was $223.2 million, an increase of $44.8 million from $178.4 million for the same period in 1999. The increase during the quarter was primarily due to an increase of $63.0 million in noninterest income, partially offset by a decrease in net interest income after provision for loan losses of $23.1 million. The increase during the six-month period was primarily due to an increase of $79.9 million in noninterest income, partially offset by a decrease in net interest income after provision for loan losses of $36.4 million.
Noninterest income increased primarily as a result of increased gain on sale of loans during the quarter and six months ended June 30, 2000. The gains during the second quarter of 2000 were generated by sales of $3.91 billion of seasoned ARMs and $2.15 billion of securities created through the securitization of seasoned ARMs. The increase in gain on sale of loans during the first half of 2000 was primarily attributable to the sale of seasoned loans and securities during the second quarter and the sale of $1.71 billion of seasoned SFR loans and $5.03 billion of securities created through the securitization of seasoned ARMs during the first quarter of 2000. The decline in net interest income was primarily due to the compression of the net interest spread and margin. The cost of borrowings for the mortgage banking group responded more quickly than the yield on ARMs to the rise in short-term interest rates during the quarter and six months ended June 30, 2000.
COMMERCIAL BANKING
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- ----------------------
2000 1999 2000 1999
--------- --------- --------- ----------
(in thousands)
Condensed income statement:
Net interest income after
provision for loan losses........ $87,982 $98,069 $177,808 $199,256
Noninterest income................. 8,135 10,854 12,844 18,878
Transaction-related expense........ - 283 - 421
Noninterest expense................ 29,789 26,135 58,848 51,968
Income taxes....................... 24,291 30,726 48,096 61,706
------- ------- -------- --------
Net income......................... $42,037 $51,779 $ 83,708 $104,039
======= ======= ======== ========
June 30, December 31,
2000 1999
-------- ------------
(in thousands)
Total assets.......................$20,926,385 $20,179,900
=========== ===========
|
Net income for the second quarter of 2000 was $42.0 million, a decrease of $9.8 million from $51.8 million for the second quarter of 1999. Net income for the first half of 2000 was $83.7 million, a decrease of $20.3 million from $104.0 million for the comparable period in 1999. The decrease during the quarter was primarily due to a decline of $10.1 million in net interest income after provision for loan losses, resulting from the compression of the net interest spread and margin in the commercial real estate portfolio where the repricing indices for the majority of the portfolio responded more slowly to the rise in short-term interest rates than the cost of borrowings. The decrease during the six-month period was primarily due to a decline of $21.4 million in net interest income after provision for loan losses for the reasons discussed above.
FINANCIAL SERVICES
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- ---------------------
2000 1999 2000 1999
--------- --------- --------- ---------
(in thousands)
Condensed income statement:
Net interest income after
provision for loan losses........ $ 89 $ 501 $ 172 $ 1,095
Noninterest income................. 95,979 83,661 191,330 154,491
Transaction-related expense........ - 722 - 2,196
Noninterest expense................ 64,380 50,496 124,366 96,540
Income taxes....................... 12,320 12,485 26,515 21,551
------- ------- -------- --------
Net income......................... $19,368 $20,459 $ 40,621 $ 35,299
======= ======= ======== ========
June 30, December 31,
2000 1999
-------- -----------
(in thousands)
Total assets....................... $149,544 $123,525
======== ========
|
Net income for the second quarter of 2000 was $19.4 million, a decrease of $1.1 million from $20.5 million for the second quarter of 1999. Net income for the first six months of 2000 was $40.6 million, an increase of $5.3 million from $35.3 million for the same period a year ago. Noninterest income was up during the quarter and six months ended June 30, 2000 as a result of an increase in securities fees and commissions. During these periods, there were higher sales of investment products and growth of assets under management. The increase in noninterest expense was primarily due to an increase in commission expense related to a higher volume of securities transactions.
CONSUMER FINANCE
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- ---------------------
2000 1999 2000 1999
--------- --------- --------- ---------
(in thousands)
Condensed income statement:
Net interest income after
provision for loan losses........ $82,716 $56,840 $163,053 $111,004
Noninterest income................. 16,019 7,107 46,989 13,786
Noninterest expense................ 71,198 33,235 134,378 67,984
Income taxes....................... 11,436 11,934 30,912 22,088
------- ------- -------- --------
Net income......................... $16,101 $18,778 $ 44,752 $ 34,718
======= ======= ======== ========
JUNE 30, DECEMBER 31,
2000 1999
---------- ------------
(in thousands)
Total assets.......................$9,061,127 $7,370,753
========== ==========
|
Net income for the second quarter of 2000 was $16.1 million, a decrease of $2.7 million from $18.8 million for the second quarter of 1999. Net income for the six months ended June 30, 2000 was $44.8 million, an increase of $10.1 million from $34.7 million for the six months ended June 30, 1999. The decrease for the quarter was attributable to an increase of $38.0 million in noninterest expense, partially offset by increases of $25.9 million in net interest income after provision for loan losses and $8.9 million in noninterest income. The increase for the six-month period was attributable to increases of $52.0 million in net interest income after provision for loan losses and $33.2 million in noninterest income, partially offset by an increase of $66.4 million in noninterest expense.
The increase in net interest income was due to an increase in average loans for second quarter 2000, compared with second quarter 1999. This increase was attributable to the growth in loans originated and purchased specialty mortgage finance loans. During the first quarter of 2000, the increase in noninterest income was primarily due to an increase in gain on sale of loans. Our level of sales of specialty mortgage finance loans during the second quarter was below prior quarter levels in anticipation of receiving a better execution price during the subsequent period. Accordingly, gain on sale of loans was less during the second quarter, but included an increase in loan-related income. The increase in noninterest expense during the quarter and six months ended June 30, 2000 was primarily due to Long Beach Mortgage operating expenses. Washington Mutual acquired Long Beach Mortgage on October 1, 1999. Since the transaction was accounted for as a purchase, Long Beach Mortgage operations were not included in the results for the quarter and six months ended June 30, 1999.
Total assets increased by $1.69 billion to $9.06 billion at June 30, 2000 from $7.37 billion at year-end 1999. Total assets increased by $5.10 billion from $3.96 billion at June 30, 1999. These increases were primarily due to loans originated by Long Beach Mortgage and purchases of specialty mortgage finance loans.
TREASURY/OTHER
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2000 1999 2000 1999
--------- --------- --------- -------
(in thousands)
Condensed income statement:
Net interest income after
provision for loan losses....... $47,686 $132,204 $106,458 $250,217
Noninterest income................ (3,811) 634 (26,880) 13,045
Transaction-related expense....... - 1,220 - 1,481
Noninterest expense............... 19,949 12,275 29,609 23,272
Income taxes...................... 8,649 44,299 18,053 88,620
------- -------- -------- --------
Net income........................ $15,277 $ 75,044 $ 31,916 $149,889
======= ======== ======== ========
JUNE 30, DECEMBER 31,
2000 1999
-------- ------------
(in thousands)
Total assets......................$27,225,380 $28,753,160
=========== ===========
|
INTEREST RATE SENSITIVITY
Our long-run profitability depends not only on the success of the services we offer to our customers and the credit quality of our loans and securities, but also the extent to which our earnings are not negatively affected by changes in interest rates. We engage in a comprehensive asset and liability management program that attempts to reduce the risk of significant decreases in net interest income caused by interest rate changes without unduly penalizing current earnings. As part of this strategy, we actively manage the amounts and maturities of our assets and liabilities.
A conventional view of interest rate sensitivity for savings institutions is the gap report, which indicates the difference between assets maturing or repricing within a period and total liabilities maturing or repricing within the same period. In assigning assets to maturity and repricing categories, we take into consideration expected prepayment speeds rather than contractual maturities. The balances reflect actual amortization of principal and do not take into consideration reinvestment of cash. Principal prepayments are the amounts of principal reduction over and above normal amortization. We have used prepayment assumptions based on market estimates and past experience with our current portfolio. Since our non-maturity deposits are not contractually subject to repricing, they have been allocated based on expected decay rates. Non-rate sensitive items such as the reserve for loan losses and deferred loan fees/costs are not included in the table. The balance of fixed-rate loans held for sale is included in the 0-3 months category.
JUNE 30, 2000
-------------------------------------------------------------------------------------
PROJECTED REPRICING
-------------------------------------------------------------------------------------
0-3 MONTHS 4-12 MONTHS 1-5 YEARS THEREAFTER TOTAL
---------- ----------- --------- ---------- -----
(dollars in thousands)
INTEREST-SENSITIVE ASSETS
Adjustable-rate loans (1) $56,104,874 $ 18,725,050 $19,330,764 $ 781,241 $ 94,941,929
Fixed-rate loans (1) 2,124,656 2,871,939 7,553,017 6,757,441 19,307,053
Adjustable-rate
securities (1), (2) 28,067,622 2,732,334 7,449,336 127,169 38,376,461
Fixed-rate securities (1) 917,760 2,487,024 9,521,061 12,401,089 25,326,934
Cash and cash equivalents 2,787,472 23,901 - - 2,811,373
----------- ------------ ----------- ----------- ------------
$90,002,384 $ 26,840,248 $43,854,178 $20,066,940 $180,763,750
=========== ============ =========== =========== ============
INTEREST-SENSITIVE LIABILITIES
Noninterest-bearing
checking accounts (3) $ 467,324 $ 1,158,246 $ 3,264,915 $ 3,790,451 $ 8,680,936
Interest-bearing checking accounts,
savings accounts and MMDAs (3) 3,904,855 7,708,930 14,910,037 9,174,966 35,698,788
Time deposit accounts 7,620,701 23,083,564 5,467,378 44,119 36,215,762
Short-term and
adjustable-rate borrowings 77,408,671 2,093,130 - - 79,501,801
Long-term fixed-rate
borrowings 2,015,854 6,847,819 2,758,701 3,257,223 14,879,597
Derivatives matched
against liabilities (18,210,050) 12,549,100 7,650,950 (1,990,000) -
----------- ------------ ----------- ----------- ------------
$73,207,355 $ 53,440,789 $34,051,981 $14,276,759 $174,976,884
=========== ============ =========== =========== ============
Repricing gap $16,795,029 $(26,600,541) $ 9,802,197 $ 5,790,181
============ ============ =========== ===========
Cumulative gap $16,795,029 $ (9,805,512) $ (3,315) $ 5,786,866
============ ============ =========== ===========
Cumulative gap as a
percentage of total assets 9.04% (5.28)% 0% 3.12%
Total assets $185,687,190
============
---------------------
(1) Based on scheduled maturity or scheduled repricing and estimated prepayments of
principal.
(2) Includes investment in FHLBs.
(3) Based on experience and anticipated decay rates of checking, savings, and
money market deposit accounts.
|
LIQUIDITY
Liquidity management focuses on the need to meet both short-term funding requirements and long-term growth objectives. Our long-term growth objectives are to attract and retain stable consumer deposit relationships and to maintain stable sources of wholesale funds. Because the interest rate environment of recent years has inhibited growth of consumer deposits, we have supported our growth through business combinations with other financial institutions and by increasing our use of wholesale borrowings.
We monitor our ability to meet short-term cash requirements using guidelines established by our Board of Directors. These guidelines ensure that short-term secured borrowing capacity is sufficient to satisfy unanticipated cash needs.
As presented in the Consolidated Statements of Cash Flows, the sources of liquidity vary between the comparable periods. The statement of cash flows includes operating, investing and financing categories. Cash flows from operating activities included net income for the six months ended June 30, 2000 of $949.3 million, $135.1 million for noncash items and $1.61 billion of other net cash outflows from operating activities. Cash flows from investing activities consisted mainly of both proceeds from sales and purchases of securities, and loan principal repayments and loan originations. For the six months ended June 30, 2000, cash flows from investing activities included sales, maturities and principal payments on securities totaling $4.60 billion. Loans originated and purchased for investment were in excess of repayments and sales by $2.33 billion. Cash flows from financing activities consisted of the net change in our deposit accounts and short-term borrowings, the proceeds from and repayments of long-term borrowings and FHLBs advances, and the repurchase of our common stock. For the six months ended June 30, 2000, the above mentioned financing activities decreased cash and cash equivalents by $1.53 billion on a net basis. Cash and cash equivalents were $2.81 billion at June 30, 2000. See "Consolidated Financial Statements - Consolidated Statements of Cash Flows."
At June 30, 2000, we were in a position to obtain approximately $38.18 billion in additional borrowings primarily through the use of collateralized borrowings and deposits of public funds using unpledged MBS and other wholesale borrowing sources.
CAPITAL ADEQUACY
Our capital (stockholders' equity) was $8.55 billion at June 30, 2000, down from $9.05 billion at December 31, 1999. In order to effectively deploy excess capital, we continue to repurchase our common stock. Since April 20, 1999, the inception of the repurchase program, we have repurchased a total of 66.3 million shares as part of our previously announced purchase programs totaling 111.3 million shares. During the second quarter of 2000, we repurchased 15.0 million shares of common stock at an average price of $26.94. These stock repurchases and the $309.9 million increase in the unrealized loss on AFS securities to $977.3 million were the primary factors in a decline of the ratio of stockholders' equity to assets to 4.61% at June 30, 2000 from 4.85% at December 31, 1999. The unrealized loss on AFS securities at December 31, 1999 was $667.4 million.
The regulatory capital ratios of WMBFA, WMB and WMBfsb and the minimum regulatory requirements to be categorized as well capitalized were as follows:
JUNE 30, 2000
----------------------------------------
WELL-CAPITALIZED
WMBFA WMB WMBFSB MINIMUM
----- --- ------ -------
Capital ratios:
Tier 1 capital to adjusted total assets (leverage). 5.55% 5.71% 7.37% 5.00%
Tier 1 capital to risk-weighted assets............. 9.94 10.00 12.26 6.00
Total capital to risk-weighted assets.............. 11.02 10.88 13.25 10.00
|
The total estimated risk-based capital for Washington Mutual, Inc. was 11.29% at June 30, 2000. This ratio is an estimate of what Washington Mutual, Inc.'s total risk-based capital would be if it were a bank holding company that complies with Federal Reserve capital requirements.
In addition, Washington Mutual Finance's industrial bank, First Community Industrial Bank, met all Federal Deposit Insurance Corporation requirements to be categorized as well capitalized at June 30, 2000.
Our federal savings bank subsidiaries are also required by Office of Thrift Supervision regulations to maintain tangible capital of at least 1.50% of assets. WMBFA and WMBfsb both satisfied this requirement at June 30, 2000.
Our broker-dealer subsidiaries are also subject to capital requirements. At June 30, 2000, both of our securities subsidiaries were in compliance with their applicable capital requirements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We believe that there have not been any material changes in quantitative and qualitative information about market risk since year-end 1999. In particular, the loan securitizations during the six months ended June 30, 2000 do not have a material impact on our interest rate risk profile.
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Washington Mutual, Inc. held its annual meeting of shareholders on April 18, 2000. A
brief description of each matter voted on and the results of the shareholder voting are set
forth below:
VOTES VOTES ABSTENTIONS/
FOR AGAINST NON-VOTES
--- ------- ---------
1. The election of seven directors set forth below:
Mary E. Pugh (term ending 2002) 475,705,556 - 8,053,153
Douglas P. Beighle (term ending 2003) 478,110,751 - 5,647,958
J. Taylor Crandall (term ending 2003) 378,200,343 - 105,558,366
Kerry K. Killinger (term ending 2003) 477,168,167 - 6,590,542
Michael K. Murphy (term ending 2003) 478,236,149 - 5,522,560
Elizabeth A. Sanders (term ending 2003) 478,242,695 - 5,516,014
Willis B. Wood, Jr. (term ending 2003) 475,676,821 - 8,081,888
2. Amendment to Washington Mutual's 1994
Stock Option Plan. 413,446,797 66,821,304 78,059,093
3. Amendment to Washington Mutual's Bonus
and Incentive Plan for Executive Officers
and Senior Management. 453,263,442 26,730,642 78,333,110
4. Amendment to Washington Mutual's
Restricted Stock Plan. 461,887,049 18,246,821 78,193,324
5. Ratification of the appointment of
Deloitte & Touche LLP as the Company's
Independent Auditors. 480,758,466 1,105,037 76,463,691
6. Amendment to the Nomination of Board Candidates. 31,513,293 357,252,761 169,561,140
7. Amendment to the Hiring of Proxy
Advisory Firm by Shareholder vote. 16,943,326 370,248,208 171,135,660
|
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Index of Exhibits on page 34.
(b) Reports on Form 8-K
During the second quarter of 2000, the Company filed a report on Form 8-K dated April 21, 2000. The report included under Item 7 of Form 8-K a press release announcing Washington Mutual's first quarter 2000 financial results and unaudited consolidated financial statements for the quarter ended March 31, 2000.
During the second quarter of 2000, the Company filed a report on Form 8-K dated April 4, 2000. The report included under Item 7 of Form 8-K an Underwriting Agreement dated March 30, 2000 between the Registrant and Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated for the Company to issue subordinated debt securities totaling $500.0 million and bearing a fixed rate of 8.25%. The notes are due on April 1, 2010.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on August 11, 2000.
WASHINGTON MUTUAL, INC.
By: /s/ FAY L. CHAPMAN
-------------------------------------
Fay L. Chapman
Senior Executive Vice President and
General Counsel
By: /s/ RICHARD M. LEVY
-------------------------------------
Richard M. Levy
Senior Vice President and Controller
(Principal Accounting Officer)
|
WASHINGTON MUTUAL, INC.
INDEX OF EXHIBITS
Exhibit No.
-----------
3.1 Restated Articles of Incorporation of the Company, as amended (the "Articles") (filed
as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999 and incorporated herein by reference. File No. 0-25188).
3.2 Restated bylaws of the Company, as amended.
4.1 Rights Agreement, dated October 16, 1990 (filed as an exhibit to the Company's
Current Report on Form 8-K dated November 29, 1994 and incorporated herein by
reference. File No. 0-25188).
4.2 Amendment No. 1 to Rights Agreement, dated October 31, 1994 (filed as an exhibit to
the Company's Current Report on Form 8-K dated November 29, 1994 and incorporated
herein by reference. File No. 0-25188).
4.3 Supplement to Rights Agreement, dated November 29, 1994 (filed as an exhibit to the
Company's current report on Form 8-K dated November 29, 1994 and incorporated herein
by reference. File No. 0-25188).
4.4 The registrant agrees to furnish the Securities and Exchange Commission,
upon request, with copies of all instruments defining the rights of
holders of long-term debt of Washington Mutual and its consolidated
subsidiaries.
27 Financial Data Schedule.
|
WASHINGTON MUTUAL, INC.
SECOND QUARTER 2000 AMENDEMENTS TO BYLAWS
(Amendments after September 30, 1999)
ARTICLE IV
Article IV, Section 4.11 of the Corporation's Bylaws was amended, effective 4/18/00, to read as follows:
Section 4.11. AUDIT COMMITTEE. The board of directors, at any regular meeting of the Board, shall elect from their number an Audit Committee of not less than three members, none of whom shall be employed by the corporation. At least annually the Board of Directors shall determine that each Committee member has the independence and other qualifications set forth in the Charter of the Audit Committee as approved by the Board, and in any supplemental statement that the Board may adopt with regard to the composition of the Committee.
The Audit Committee shall have the authorities and responsibilities and shall perform the functions specified in the Charter of the Audit Committee, as approved by the Board, and in any supplemental statement that the Board may adopt with regard to the functions of the Committee.
WASHINGTON MUTUAL, INC.
THIRD QUARTER 1999 AMENDMENTS TO BYLAWS
(Amendments after June 30, 1999)
ARTICLE III
Article III, Section 3.13 of the Corporation's Bylaws was amended, effective 9/21/99, to read as follows:
SECTION 3.13. NOTICE OF NOMINATION. Nominations for the election of directors and proposals for any new business to be taken up at any annual or special meeting of shareholders may be made by the board of directors of the corporation or by any shareholder of the corporation entitled to vote generally in the election of directors. In order for a shareholder of the corporation to make any such nomination or proposal at any annual meeting, the shareholder's nomination or proposal must be in writing and received at the Executive Offices of the corporation by the Secretary of the corporation not less than 120 days in advance of the date corresponding to the date in the previous year on which the corporation's proxy statement was released to security holders in connection with the previous year's annual meeting of security holders, except that if no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than 30 calendar days from the date of the previous year's annual meeting, a proposal shall be received by the corporation in accordance with the method set forth hereafter for proposals or nominations in advance of a special meeting of shareholders. In order for a shareholder of the corporation to make any nomination or proposal to be taken up at a special meeting of shareholders, the shareholder's nomination or proposal must be in writing and received at the Executive Offices of the corporation by the Secretary of the corporation not less than 45 days nor more than 75 days prior to any such meeting. Each such notice given by a shareholder with respect to nominations for the election of directors shall set forth (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee, and (iii) the number of shares of stock of the corporation which are beneficially owned by each such nominee.
ARTICLE V
Article V of the Corporation's Bylaws was amended and restated, effective 7/20/99, to read as follows:
ARTICLE V - OFFICERS
SECTION 5.1. RANKS AND TERMS IN OFFICE. The officers of the corporation shall be a Chief Executive Officer, a Chairman, a President of the Corporation, a General Auditor, a Controller, and such Vice Chairmen, Group Presidents, Senior Executive Vice Presidents, Executive Vice Presidents, Senior Vice Presidents, First Vice Presidents or Vice Presidents as the board of directors may designate and elect, or such other officers as the board of directors may designate and elect or the Chief Executive Officer may designate and appoint.
Officers shall serve until the termination of their employment or their earlier removal from service as officers. Any officer may be removed, with or without cause, by the board of directors, but such removal shall be without prejudice to the contractual rights, if any, of the person so removed. Any officer who has been elected by the board of directors may be suspended with or without pay by the Chief Executive Officer, and any other officer may be removed or suspended with or without pay by the Chief Executive Officer, but such removal or suspension shall be without prejudice to the contractual rights, if any, of the person so removed or suspended. The termination of any officer's employment shall constitute removal of such person from office, effective as of the date of termination of employment.
SECTION 5.2. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the corporation shall have direct supervision and management of its affairs and the general powers and duties of supervision and management usually vested in the Chief Executive officer of a corporation, subject to the Bylaws and policies of the corporation. The Chief Executive Officer shall be ex-officio a member of all committees except the Audit Committee and the Compensation and Stock Option Committee. The Chief Executive Officer shall perform such other duties as may be assigned by the board of directors. In the absence of the Chief Executive Officer, his duties shall be assumed by the President of the Corporation, and in their absence such duties shall be assumed by a person designated by the Chief Executive Officer or the board of directors.
SECTION 5.3. CHAIRMAN. The Chairman shall preside over all meetings of the board of directors. The Chairman shall preside over all meetings of the shareholders, which duty shall include the authority to adjourn such meetings. The Chairman shall perform such other duties as may be assigned by the board of directors or the Chief Executive Officer, or as may be set forth in the policies and procedural directives of the corporation. In the event of the Chairman's incapacity, the Chairman's duties shall be assumed by the Chief Executive Officer or, in the event of the Chief Executive Officer's incapacity, the duties of the Chairman shall be assumed by the President of the Corporation, and in their absence such duties shall be assumed by a person designated by the board of directors.
SECTION 5.4. PRESIDENT OF THE CORPORATION. The President of the Corporation shall perform such duties as may be assigned by the Chief Executive Officer or the board of directors, or as may be set forth in the policies and procedural directives of the corporation.
SECTION 5.5. GENERAL AUDITOR. The General Auditor shall supervise and maintain continuous audit control of the assets and liabilities of the corporation. He shall be responsible only to the board of directors in coordination with the Chief Executive officer. He shall perform such other duties as may be assigned to him by the Chief Executive Officer or the President of the Corporation from time to time, only to the extent that such other duties do not compromise the independence of audit control.
SECTION 5.6. CONTROLLER. The Controller shall be the chief accounting officer of the corporation and shall have supervisory control and direction of the general accounting, accounting procedure, budgeting and general bookkeeping, and shall be the custodian of the general accounting books, records, forms and papers. He shall also perform such other duties as may be assigned from time to time by the Chief Executive Officer, the President of the Corporation, a Vice Chairman, a Group President, a Senior Executive Vice President or an Executive Vice President, or as may be set forth in the policies and procedural directives of the corporation, only to the extent that such other duties do not compromise the independence of audit control.
SECTION 5.7. VICE CHAIRMEN, GROUP PRESIDENTS, SENIOR EXECUTIVE VICE PRESIDENTS, EXECUTIVE VICE PRESIDENTS. Any Vice Chairmen, Group Presidents, Senior Executive Vice Presidents, Executive Vice Presidents shall perform such duties as may be assigned from time to time by the Chief Executive Officer or the President of the Corporation, or as may be set forth in the policies and procedural directives of the corporation.
SECTION 5.8. SENIOR VICE PRESIDENTS, FIRST VICE PRESIDENTS AND VICE PRESIDENTS. Senior Vice Presidents, First Vice Presidents and Vice Presidents shall perform such duties as may be assigned from time to time by the Chief Executive Officer, the President of the Corporation, a Vice Chairmen, a Group President, a Senior Executive Vice President or a Executive Vice President, or as may be set forth in the policies and procedural directives of the corporation.
SECTION 5.9. SECRETARY AND ASSISTANT SECRETARY. The Secretary shall keep the minutes of all meetings of the board of directors and of the shareholders. He shall give such notices to the directors as may be required by law or by these Bylaws. He shall have the custody of the corporate seal, if any, and the contracts, papers and documents belonging to the corporation. He shall also perform such other duties as may be assigned from time to time by the Chief Executive Officer, the President of the Corporation, a Vice Chairman, a Group President, a Senior Executive Vice President or an Executive Vice President, or as may be set forth in the policies and procedural directives of the corporation. In the absence of the Secretary, the powers and duties of the Secretary shall devolve upon an Assistant Secretary or such person as shall be designated by the Chief Executive Officer.
SECTION 5.10. COMBINING OFFICES. An officer who holds one office may, with or without resigning from such existing office, be elected by the board of directors to hold, in addition to such existing office, the office of Chairman, Vice Chairman, Group President Senior Executive Vice President, Senior Vice President, First Vice President or Vice President. An officer who holds one office may, with or without resigning from such existing office, be appointed by the Chief Executive Officer to hold, in addition to such existing office, another office other than the office of Chairman, Vice Chairman, Group President Senior Executive Vice President, Senior Vice President, First Vice President or Vice President.
SECTION 5.11. OTHER OFFICERS. The other Officers shall perform such duties as may be assigned by the Chief Executive Officer, the President of the Corporation, a Vice Chairman, a Group President, a Senior Executive Vice President or an Executive Vice President, or as may be set forth in the policies and procedural directives of the corporation. The Chief Executive Officer may designate such functional titles to an officer, as the Chief Executive Officer deems appropriate from time to time.
SECTION 5.12. OFFICIAL BONDS. The corporation may be indemnified in the event of the dishonest conduct or unfaithful performance of an officer, employee, or agent by a corporate fidelity bond, the premiums for which may be paid by the corporation.
SECTION 5.13. EXECUTION OF CONTRACTS AND OTHER DOCUMENTS. The Chief
Executive Officer, the President of the Corporation, or any Vice Chairman, Group
President, or Senior Executive Vice President may from time to time designate
the officers, employees or agents of the corporation who shall have authority to
sign deeds, contracts, satisfactions, releases, and assignments of mortgages,
and all other documents or instruments in writing to be made or executed by the
corporation.
SECTION 5.14. RESIGNATION. Any officer may resign at any time by delivering written notice to the Chief Executive Officer, the President, the Secretary or the board of directors, or by giving oral notice at any meeting of the board. Any such resignation shall take effect at any subsequent time specified therein, or if the time is not specified, upon delivery thereof and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
SECTION 5.15. COMPENSATION OF OFFICERS AND EMPLOYEES. The compensation of officers and employees shall be fixed from time to time in such manner as the board of directors or the Compensation and Stock Option Committee shall determine. No officer shall be prevented from receiving a salary by reason of the fact that such officer is also a director of the corporation.
SECTION 5.16. VOTING OF SHARES HELD BY CORPORATION. Shares of another corporation held by this corporation may be voted in person or by proxy by the Chief Executive Officer, by the President of the Corporation, by a Vice Chairman, by a Group President, by a Senior Executive Vice President, by an Executive Vice President, or by a Senior Vice President.
WASHINGTON MUTUAL, INC.
AMENDMENTS TO BYLAWS
(Amendments since the September 28, 1994, adoption of Restated Bylaws; organized
according to the affected article and, within the section for each article,
organized chronologically)
Date of
Article Effect of Amendment Amendment
------- ------------------- ---------
Article II The board of directors of this corporation shall 1/16/96
consist of thirteen (13) directors.
Article II The board of directors of this corporation shall 12/17/96
consist of fifteen (15) directors.
Article II The board of directors of this corporation shall 4/15/97
consist of thirteen (13) directors.
Article II The board of directors of this corporation shall 6/17/97
consist of seventeen (17) directors.
Article II The board of directors of this corporation shall 7/15/97
consist of sixteen (16) directors.
Article II The board of directors of this corporation shall 4/21/98
consist of fifteen (15) directors.
Article II The board of directors of this corporation shall 9/15/98
consist of up to eighteen (18) directors.
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Article V of the Corporation's Bylaws was amended and restated, effective 6/15/99, to read as follows:
ARTICLE V - OFFICERS
SECTION 5.1. RANKS AND TERMS IN OFFICE. The officers of the corporation shall be a Chief Executive Officer, a Chairman, a President of the Corporation, a General Auditor, a Controller, and such Vice Chairmen, Group Presidents, Senior Executive Vice Presidents, Executive Vice Presidents, Senior Vice Presidents, First Vice Presidents or Vice Presidents as the board of directors may designate and elect, or such other officers as the board of directors may designate and elect.
Officers shall serve until the termination of their employment or their earlier removal from service as officers. Any officer may be removed, with or without cause, by the board of directors, but such removal shall be without prejudice to the contractual rights, if any, of the person so removed.
SECTION 5.2. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the corporation shall have direct supervision and management of its affairs and the general powers and duties of supervision and management usually vested in the Chief Executive officer of a corporation, subject to the Bylaws and policies of the corporation. The Chief Executive Officer shall be ex-officio a member of all committees except the Audit Committee and the Compensation and Stock Option Committee. The Chief Executive Officer shall perform such other duties as may be assigned by the board of directors. In the absence of the Chief Executive Officer, his duties shall be assumed by the President of the Corporation, and in their absence such duties shall be assumed by a person designated by the Chief Executive Officer or the board of directors.
SECTION 5.3. CHAIRMAN. The Chairman shall preside over all meetings of the board of directors. The Chairman shall preside over all meetings of the shareholders, which duty shall include the authority to adjourn such meetings. The Chairman shall perform such other duties as may be assigned by the board of directors or the Chief Executive Officer, or as may be set forth in the policies and procedural directives of the corporation. In the event of the Chairman's incapacity, the Chairman's duties shall be assumed by the Chief Executive Officer or, in the event of the Chief Executive Officer's incapacity, the duties of the Chairman shall be assumed by the President of the Corporation, and in their absence such duties shall be assumed by a person designated by the board of directors.
SECTION 5.4. PRESIDENT OF THE CORPORATION. The President of the Corporation shall perform such duties as may be assigned by the Chief Executive Officer or the board of directors, or as may be set forth in the policies and procedural directives of the corporation.
SECTION 5.5. GENERAL AUDITOR. The General Auditor shall supervise and maintain continuous audit control of the assets and liabilities of the corporation. He shall be responsible only to the board of directors in coordination with the Chief Executive officer. He shall perform such other duties as may be assigned to him by the Chief Executive Officer or the President of the Corporation from time to time, only to the extent that such other duties do not compromise the independence of audit control.
SECTION 5.6. CONTROLLER. The Controller shall be the chief accounting officer of the corporation and shall have supervisory control and direction of the general accounting, accounting procedure, budgeting and general bookkeeping, and shall be the custodian of the general accounting books, records, forms and papers. He shall also perform such other duties as may be assigned from time to time by the Chief Executive Officer, the President of the Corporation, a Vice Chairman, a Group President, a Senior Executive Vice President or an Executive Vice President, or as may be set forth in the policies and procedural directives of the corporation, only to the extent that such other duties do not compromise the independence of audit control.
SECTION 5.7. VICE CHAIRMEN, GROUP PRESIDENTS, SENIOR EXECUTIVE VICE PRESIDENTS, EXECUTIVE VICE PRESIDENTS. Any Vice Chairmen, Group Presidents, Senior Executive Vice Presidents, Executive Vice Presidents shall perform such duties as may be assigned from time to time by the Chief Executive Officer or the President of the Corporation, or as may be set forth in the policies and procedural directives of the corporation.
SECTION 5.8. SENIOR VICE PRESIDENTS, FIRST VICE PRESIDENTS AND VICE PRESIDENTS. Senior Vice Presidents, First Vice Presidents and Vice Presidents shall perform such duties as may be assigned from time to time by the Chief Executive Officer, the President of the Corporation, a Vice Chairmen, a Group President, a Senior Executive Vice President or a Executive Vice President, or as may be set forth in the policies and procedural directives of the corporation.
SECTION 5.9. SECRETARY AND ASSISTANT SECRETARY. The Secretary shall keep the minutes of all meetings of the board of directors and of the shareholders. He shall give such notices to the directors as may be required by law or by these Bylaws. He shall have the custody of the corporate seal, if any, and the contracts, papers and documents belonging to the corporation. He shall also perform such other duties as may be assigned from time to time by the Chief Executive Officer, the President of the Corporation, a Vice Chairman, a Group President, a Senior Executive Vice President or an Executive Vice President, or as may be set forth in the policies and procedural directives of the corporation. In the absence of the Secretary, the powers and duties of the Secretary shall devolve upon an Assistant Secretary or such person as shall be designated by the Chief Executive Officer.
SECTION 5.10. COMBINING OFFICES. An officer who holds one office may, with or without resigning from such existing office, be elected by the board of directors to hold another office.
SECTION 5.11. OTHER OFFICERS. The other Officers shall perform such duties as may be assigned by the Chief Executive Officer, the President of the Corporation, a Vice Chairman, a Group President, a Senior Executive Vice President or an Executive Vice President, or as may be set forth in the policies and procedural directives of the corporation. The Chief Executive Officer may designate such functional titles to an officer, as the Chief Executive Officer deems appropriate from time to time.
SECTION 5.12. OFFICIAL BONDS. The corporation may be indemnified in the event of the dishonest conduct or unfaithful performance of an officer, employee, or agent by a corporate fidelity bond, the premiums for which may be paid by the corporation.
SECTION 5.13. EXECUTION OF CONTRACTS AND OTHER DOCUMENTS. The Chief
Executive Officer, the President of the Corporation, or any Vice Chairman, Group
President, or Senior Executive Vice President may from time to time designate
the officers, employees or agents of the corporation who shall have authority to
sign deeds, contracts, satisfactions, releases, and assignments of mortgages,
and all other documents or instruments in writing to be made or executed by the
corporation.
SECTION 5.14. RESIGNATION. Any officer may resign at any time by delivering written notice to the Chief Executive Officer, the President, the Secretary or the board of directors, or by giving oral notice at any meeting of the board. Any such resignation shall take effect at any subsequent time specified therein, or if the time is not specified, upon delivery thereof and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
SECTION 5.15. COMPENSATION OF OFFICERS AND EMPLOYEES. The board of directors shall fix compensation of officers and may fix compensation of other employees from time to time. No officer shall be prevented from receiving a salary by reason of the fact that such officer is also a director of the corporation.
SECTION 5.16. VOTING OF SHARES HELD BY CORPORATION. Shares of another corporation held by this corporation may be voted in person or by proxy by the Chief Executive Officer, by the President of the Corporation, by a Vice Chairman, by a Group President, by a Senior Executive Vice President, by an Executive Vice President, or by a Senior Vice President.
Article IV, Section 4.3 of the Corporation's Bylaws was amended, effective 4/20/99, to read as follows:
SECTION 4.3 ANNUAL AND OTHER REGULAR MEETINGS. Regular meetings of the Board shall be held at two-thirty o'clock, or an earlier hour in the discretion of the Chairman or the President, on the third Tuesday of the months of January, February, April, June, July, September, October, and December unless such day is a legal holiday, in which case the meeting shall be held on the first business day thereafter, or unless such meeting has been canceled by the Chairman or the President upon giving notice to the members of the Board at least three calendar days before the date on which such meeting is scheduled. The date of any regular meeting may be changed to such other date within the month as shall be determined by the Chairman or the President, or in the absence of the Chairman or the President, by any three members of the Board, provided notice of the time and place of such meeting is given as provided in Section 4.4. In each year, the regular meeting on the day of the Annual Meeting of Shareholders shall be known as the Annual Meeting of the Board.
Article IV Sec. 4.14. CORPORATE RELATIONS COMMITTEE The 2/17/98
Section 4.14 Chairman, with the approval of the board of
directors, may appoint from among the members of the board
of the Corporation, a Corporate Relations Committee which
shall consist of no fewer than two Directors and shall
monitor the performance of voluntary commitments that the
Corporation has made to support its communities, and the
contributions by the Corporation to the Washington Mutual
Foundation.
Article IV Section 4.14. CORPORATE RELATIONS COMMITTEE. The 12/16/97
Section 4.14 Chairman, with the approval of the board of
directors, may appoint from among the members of the board
of the Corporation, a Corporate Relations Committee which
shall consist of no fewer than two Directors and shall have
supervisory control and direction of the performance of
voluntary commitments that the Corporation has made to
support its communities, and of contributions by the
Corporation to the Washington Mutual Foundation.
Article IV Section 4.15 CORPORATE DEVELOPMENT COMMITTEE. The 12/16/97
Section 4.15 Chairman, with the approval of the board of
directors, shall appoint from among the members of the
board a Corporate Development Committee which shall consist
of the Chairman of the Board and not less than two other
directors. The Corporate Development Committee shall
exercise all the authority of the Board: (A) with regard to
the authorization of negotiations and approval of the terms
of offers and agreements and of investments relating to
mergers and acquisitions not involving a change of control
of the Corporation; provided, that further action of the
board of directors shall be required for submission to
shareholders of a plan of merger or consolidation; and (B)
with regard to approval of the final terms, rights,
designations and preferences of stock to be issued by the
Corporation, provided, that prior action of the board of
directors shall be required to specify the maximum number
or value of the shares to be issued.
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Prior Article IV, Section 4.16 OTHER BOARD COMMITTEES. The Board of 12/16/97
Section 4.14 Directors may by resolution designate from among
renumbered as its members such other committees as the Board in
Article IV, its discretion may determine, each of which must
Section 4.16 have two or more members. To the extent provided
in such resolutions, each such committee shall have and may
exercise the authority of the board of directors, except as
limited by applicable law. The designation of any such
committee and the delegation thereto of authority shall not
relieve the Board of Directors, or any members thereof, of
any responsibility imposed by law. In addition, the
Chairman of the Board, with the approval of the Board of
Directors, may appoint from among the members of the Board
such committees as he deems appropriate.
Article IV Section 4.17 COMMITTEE PROCEDURES. Except as 12/16/97
Section 4.17 provided in the bylaws or in specific resolutions
of the Board of Directors, the committees of the Board
shall be governed by the same rules regarding meetings,
action without meetings, notice, waiver of notice, and
quorum and voting requirements as applied to the Board of
Directors.
Prior Article IV, Renumbered as Article IV, Sections 4.18 through 12/16/97
Sections 4.15 4.22, respectively.
through 4.19
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Article IV Section 4.4. SPECIAL MEETINGS. Special meetings 9/16/97
Section 4.4 of the board of directors may be called by the
board of directors, the chairman of the board, or the
president. The notice of a special meeting of the board of
directors shall state the date and time and, if the meeting
is not exclusively telephonic, the place of the meeting.
Unless otherwise required by law, neither the business to
be transacted at, nor the purpose of, any regular or
special meeting of the board of directors need be specified
in the notice or waiver of notice of such meeting. Notice
shall be given by the person or persons authorized to call
such meeting, or by the secretary at the direction of the
person or persons authorized to call such meeting. The
notice may be oral or written. If the notice is orally
communicated in person or by telephone to the director or
to the director's personal secretary or is sent by
electronic mail, telephone or wireless equipment, which
transmits a facsimile of the notice to the director's
electronic mail designation or telephone number appearing
on the records of the corporation, the notice of a meeting
shall be timely if sent no later than twenty-four (24)
hours prior to the time set for such meeting. If the notice
is sent by courier to the director's address appearing on
the records of the corporation, the notice of a meeting
shall be timely if sent no later than three (3) full days
prior to the time set for such meeting. If the notice is
sent by mail to the director's address appearing on the
records of the corporation, the notice of a meeting shall
be timely if sent no later than five (5) full days prior to
the time set for such meeting.
Article V Sec. 5.1 RANKS AND TERMS IN OFFICE. The officers 9/16/97
Sec. 5.1 of the corporation shall be a Chief Executive
Officer, a President, a controller, a General Auditor, a
Secretary and such Executive Vice Presidents, Senior Vice
Presidents, First Vice Presidents, Vice Presidents, or
other officers as the Board may designate.
The officers shall be elected by the board of directors, to
serve, unless earlier removed, until the next annual
meeting of directors and until the appointment and
qualification of their successors. Officers may be
terminated or removed at will at any time.
Article V Sec. 5.8 SENIOR VICE PRESIDENTS, FIRST VICE 9/16/97
Sec. 5.8 PRESIDENTS, AND VICE PRESIDENTS. Any Senior Vice
Presidents, First Vice Presidents, and Vice Presidents
shall perform such duties as may be specified in duly
adopted policies of the corporation or as may from time to
time be assigned to them by the Chief Executive Officer,
the President, or an Executive Vice President.
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Article V Sec. 5.12 CONTRACTS AND SATISFACTIONS. The Chief 9/16/97
Sec. 5.12 Executive Officer, the President, or any Executive
Vice President may from time to time designate the officers
or employees of Washington Mutual, Inc. who shall have
authority to sign deeds, contracts, satisfactions,
releases, and assignments of mortgages, and all other
instruments in writing to be made or executed by the
corporation.
Article V Section 5.2 CHIEF EXECUTIVE OFFICER. The Chief 4/15/97
Section 5.2 Executive Officer of the corporation shall have
direct supervision and management of its affairs and the
general powers and duties of supervision and management
usually vested in the Chief Executive Officer of a
corporation, subject to the Bylaws of the corporation. He
shall be ex-officio a member of all committees except the
Audit Committee and the Compensation and Stock Option
Committee. The Chief Executive Officer shall perform such
other duties as may be assigned by the board of directors.
In the absence of the Chief Executive Officer, his duties
shall be assumed by the President, and in their absence
such duties shall be assume by a person designated by the
Chief Executive Officer or the board of directors.
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Article IV Section 4.11. AUDIT COMMITTEE. The board of 2/18/97
Section 4.11 directors, at any regular meeting of the Board,
shall elect from their number an Audit Committee of not
less than three members, none of whom shall be employed by
the corporation. At least annually the Board of Directors
shall determine that each Committee member is independent
of management of the corporation and not a "large customer"
as defined by the Code of Federal Regulations, and that at
least two Committee members have banking or related
financial expertise.
The Audit Committee (a) shall review the basis for
the audited financial statements of the corporation; (b)
shall oversee the corporation's internal control structure,
its accounting and financial reporting process, its
independent audit function, and its compliance with
applicable laws and regulations; (c) shall cause such
examination of the records and affairs of the corporation
to be made for the purpose of determining its financial
condition as is necessary under applicable State and
Federal laws and regulations; (d) shall review compliance
with all corporate policies that have been approved by the
Board; and (e) shall have such other responsibilities as
required by law or regulation or as determined to be
necessary or appropriate in the judgment of the Board or
the Chairperson of the Committee, including but not limited
to ensuring the independence of the corporation's internal
audit functions.
In performing all of its responsibilities, the
Audit Committee may take whatever steps it deems necessary.
Among other things, the Audit Committee shall have
authority to require the assistance of the corporation's
General Auditor, of the corporation's Internal Audit
Department, of management, of the corporation's independent
public accountant, and of outside counsel to perform these
responsibilities.
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Article VIII This section is hereby amended so that the 2/20/96
Section 8.6 existing language is retained except that it is
identified as subparagraph (a), the final period in the
paragraph is replaced by a semicolon and the word "or", and
a new subparagraph (b) is added as follows:
(b) The corporation shall pay for or reimburse the
reasonable expenses incurred by any officer or employee of
the corporation, who is not a director, who is a party to a
proceeding in advance of final disposition of the proceeding
if: (1) such person furnishes the corporation with an
affidavit stating that (a) he or she was made a party to a
proceeding because he or she is or was an officer or
employee of the corporation, (b) he or she acted in good
faith, (c) the conduct in question was carried out in his or
her official capacity with the corporation, and (d) his or
her conduct was in the corporation's best interests, (2)
such person furnishes the corporation with a written
undertaking, executed personally, to repay the advance if it
is ultimately determined that such person did not meet the
standard of conduct set forth in the affidavit and (3) such
payment or reimbursement is approved in writing by the
President or the Chief Executive Officer of the corporation,
or by a designee of either of them.
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RESTATED
BYLAWS
OF
WASHINGTON MUTUAL, INC.
Originally adopted on SEPTEMBER 28, 1994 Restated on MARCH 16, 1995
TABLE OF CONTENTS
Article I. OFFICES...........................................................................1 Article II. NUMBER OF DIRECTORS..............................................................1 Article III. SHAREHOLDERS....................................................................1 Section 3.1 Annual Meeting................................................................1 Section 3.2 Special Meetings..............................................................1 Section 3.3 Place of Meetings.............................................................1 Section 3.4 Fixing of Record Date.........................................................1 Section 3.5 Voting Lists..................................................................2 Section 3.6 Notice of Meetings............................................................2 Section 3.7 Waiver of Notice..............................................................3 Section 3.8 Manner of Acting; Proxies.....................................................3 Section 3.9 Quorum........................................................................3 Section 3.10 Voting of Shares.............................................................3 Section 3.11 Voting for Directors.........................................................4 Section 3.12 Voting of Shares by Certain Holders..........................................4 Section 3.13 Notice of Nomination.........................................................5 Section 3.14 Action Without a Meeting.....................................................5 Article IV. BOARD OF DIRECTORS...............................................................5 Section 4.1 General Powers................................................................5 Section 4.2 Number, Tenure and Qualification..............................................5 Section 4.3 Annual and Other Regular Meetings.............................................5 Section 4.4 Special Meetings..............................................................6 Section 4.5 Waiver of Notice..............................................................6 Section 4.6 Quorum........................................................................6 Section 4.7 Manner of Acting..............................................................6 Section 4.8 Participation by Conference Telephone.........................................7 Section 4.9 Presumption of Assent.........................................................7 Section 4.10 Action by Board Without a Meeting............................................7 Section 4.11 Audit Committee..............................................................7 Section 4.12 Compensation and Stock Option Committee......................................7 Section 4.13 Directors' Loan & Investment Committee.......................................8 Section 4.14 Other Board Committees.......................................................9 Section 4.15 Resignation..................................................................9 Section 4.16 Removal......................................................................9 Section 4.17 Vacancies....................................................................9 Section 4.18 Compensation.................................................................9 |
Section 4.19 Chairman of the Board........................................................9 Article V. OFFICERS.........................................................................10 Section 5.1 Ranks and Terms in Office....................................................10 Section 5.2 Chief Executive Officer......................................................10 Section 5.3 President....................................................................10 Section 5.4 Senior Executive Vice President..............................................10 Section 5.5 Controller...................................................................10 Section 5.6 General Auditor..............................................................10 Section 5.7 Secretary and Assistant Secretary............................................11 Section 5.8 Executive Vice Presidents....................................................11 Section 5.9 Senior Vice Presidents and Vice Presidents...................................11 Section 5.10 Combining Offices...........................................................11 Section 5.11 Other Officers..............................................................11 Section 5.12 Official Bonds..............................................................11 Section 5.13 Contracts and Satisfactions.................................................11 Section 5.14 Resignation.................................................................11 Section 5.15 Compensation of Officers and Employees......................................12 Article VI. SHARES..........................................................................12 Section 6.1 Certificates for Shares......................................................12 Section 6.2 Issuance of Shares...........................................................12 Section 6.3 Beneficial Ownership.........................................................12 Section 6.4 Transfer of Shares...........................................................12 Section 6.5 Lost or Destroyed Certificates...............................................12 Section 6.6 Stock Transfer Records.......................................................12 Article VII. SEAL...........................................................................13 Article VIII. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS......................................................................................13 Section 8.1 Director's Right To Indemnification..........................................13 Section 8.2 Director's Burden of Proof and Procedure For Payment.........................14 Section 8.3 Right of Claimant to Bring Suit..............................................14 Section 8.4 Nonexclusivity of Rights.....................................................14 Section 8.5 Insurance, Contracts and Funding.............................................14 Section 8.6 Indemnification of Officers, Employees and Agents of the Corporation.........15 Section 8.7 Contract Right...............................................................15 Section 8.8 Severability.................................................................15 |
Article IX. BOOKS AND RECORDS...............................................................15 Article X. FISCAL YEAR......................................................................15 Article XI. VOTING OF SHARES OF ANOTHER CORPORATION.........................................15 Article XII. AMENDMENTS TO BYLAWS...........................................................16 |
BYLAWS
OF
WASHINGTON MUTUAL, INC.
ARTICLE I. OFFICES
The principal office and place of business of the corporation in the state of Washington shall be located at 1201 Third Avenue, Seattle, Washington 98101.
The corporation may have such other offices within or without the state of Washington as the board of directors may designate or the business of the corporation may require from time to time.
ARTICLE II. NUMBER OF DIRECTORS
The board of directors of this corporation shall consist of fifteen (15) directors.
ARTICLE III. SHAREHOLDERS
SECTION 3.1 ANNUAL MEETING. The annual meeting of the shareholders shall be held on the third Tuesday in the month of April in each year, beginning with the year 1995, at 10:00 a.m., or at such other date or time as may be determined by the board of directors, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in the state of Washington, the meeting shall be held on the next succeeding business day. If the election of directors is not held on the day designated herein for any annual meeting of the shareholders or at any adjournment thereof, the board of directors shall cause the election to be held at a meeting of the shareholders as soon thereafter as may be convenient.
SECTION 3.2 SPECIAL MEETINGS. Special meetings of the shareholders for any purpose or purposes unless otherwise prescribed by statute may be called by the Chairman, by the board of directors, or by the written request of any director or holders of at least twenty-five percent (25%) of the votes entitled to be cast on each issue to be considered at the special meeting.
SECTION 3.3 PLACE OF MEETINGS. Meetings of the shareholders shall be held at either the principal office of the corporation or at such other place within or without the state of Washington as the person or persons calling the meeting may designate.
SECTION 3.4 FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or
shareholders entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the board of
directors may fix in advance a date as the record date for any such
determination of shareholders, which date in any case shall not be more than
seventy (70) days and, in the case of a meeting of shareholders, not less than
20 days prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend or
distribution, the day before the first notice of a meeting is dispatched to
shareholders or the date on which the resolution of the board of directors
authorizing such dividend or distribution is adopted, as the case may be, shall
be the record date for such determination of shareholders. When a determination
of shareholders entitled to notice of or to vote at any meeting of shareholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof unless the board of directors fixes a new record date, which
it must do if the meeting is adjourned to a date more than one hundred twenty
(120) days after the date fixed for the original meeting.
The record date for determining shareholders entitled to take action without a meeting is the date the first shareholder signs the consent in lieu of meeting.
SECTION 3.5 VOTING LISTS. At least ten (10) days before each meeting of the shareholders, the officer or agent having charge of the stock transfer books for shares of the corporation shall prepare an alphabetical list of all its shareholders on the record date who are entitled to vote at the meeting or any adjournment thereof, arranged by voting group, and within each voting group by class or series of shares, with the address of and the number of shares held by each, which record for a period of ten (10) days prior to the meeting shall be kept on file at the principal office of the corporation or at a place identified in the meeting notice in the city where the meeting will be held. Such record shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder, shareholder's agent or shareholder's attorney at any time during the meeting or any adjournment thereof. Failure to comply with the requirements of this bylaw shall not affect the validity of any action taken at the meeting.
SECTION 3.6 NOTICE OF MEETINGS. Written or printed notice stating the date, time and place of a meeting of shareholders and, in the case of a special meeting of shareholders, the purpose or purposes for which the meeting is called, shall be given by the person or persons calling the meeting or by the Secretary at the direction of such person or persons to each shareholder of record entitled to vote at such meeting (unless required by law to send notice to all shareholders regardless of whether or not such shareholders are entitled to vote), not less than ten (10) days and not more than sixty (60) days before the meeting, except that notice of a meeting to act on an amendment to the articles of incorporation, a plan of merger or share exchange, a proposed sale, lease, exchange or other disposition of all or substantially all of the assets of the corporation other than in the usual course of business, or the dissolution of the corporation shall be given not less than twenty (20) days and not more than sixty (60) days before the meeting. Written notice may be transmitted by: Mail, private carrier or personal delivery; telegraph or teletype; or telephone, wire or wireless equipment which transmits a
facsimile of the notice. Such notice shall be effective upon dispatch if sent to the shareholder's address, telephone number, or other number appearing on the records of the corporation.
If an annual or special shareholders' meeting is adjourned to a different date, time or place, notice need not be given of the new date, time or place if the new date, time or place is announced at the meeting before adjournment unless a new record date is or must be fixed. If a new record date for the adjourned meeting is or must be fixed, however, notice of the adjourned meeting must be given to persons who are shareholders as of the new record date.
SECTION 3.7 WAIVER OF NOTICE. A shareholder may waive any notice
required to be given under the provisions of these bylaws, the articles of
incorporation or by applicable law, whether before or after the date and time
stated therein. A valid waiver is created by any of the following three methods:
(a) in writing signed by the shareholder entitled to the notice and delivered to
the corporation for inclusion in its corporate records; (b) by attendance at the
meeting, unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting; or (c) by failure to
object at the time of presentation of a matter not within the purpose or
purposes described in the meeting notice.
SECTION 3.8 MANNER OF ACTING; PROXIES. A shareholder may vote either in person or by proxy. A shareholder may vote by proxy by means of a proxy appointment form which is executed in writing by the shareholder, his agent, or by his duly authorized attorney-in-fact. All proxy appointment forms shall be filed with the secretary of the corporation before or at the commencement of meetings. No unrevoked proxy appointment form shall be valid after eleven (11) months from the date of its execution unless otherwise expressly provided in the appointment form. No proxy appointment may be effectively revoked until notice in writing of such revocation has been given to the secretary of the corporation by the shareholder appointing the proxy.
SECTION 3.9 QUORUM. At any meeting of the shareholders, a majority in interest of all the shares entitled to vote on a matter by the voting group, represented in person or by proxy by shareholders of record, shall constitute a quorum of that voting group for action on that matter. If less than a majority is represented, a majority of those represented may adjourn the meeting to such time and place as they may determine, without further notice, except as set forth in Section 3.6. Once a share is represented at a meeting, other than to object to holding the meeting or transacting business, it is deemed to be present for purposes of a quorum for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be fixed for the adjourned meeting. At such reconvened meeting, any business may be transacted which might have been transacted at the adjourned meeting. If a quorum exists, action on a matter is approved by a voting group if the votes cast within the voting group favoring the action exceed the votes cast within the voting group opposing the action, unless the question is one upon which a different vote is required by express provision of law or of the articles of incorporation or of these bylaws.
SECTION 3.10 VOTING OF SHARES. Each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders, except as may be otherwise provided in the articles of incorporation.
SECTION 3.11 VOTING FOR DIRECTORS. In the election of directors every shareholder of record entitled to vote at the election shall have the right to vote in person the number of shares owned by him for as many persons as there are directors to be elected and for whose election he has a right to vote. Shareholders entitled to vote at any election of directors shall have no right to cumulate votes. In any election of directors the candidates elected are those receiving the largest numbers of votes cast by the shares entitled to vote in the election, up to the number of directors to be elected by such shares.
SECTION 3.12 VOTING OF SHARES BY CERTAIN HOLDERS.
3.12.1 Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the board of directors of such corporation may determine. A certified copy of a resolution adopted by such directors shall be conclusive as to their determination.
3.12.2 Shares held by a personal representative, administrator, executor, guardian or conservator may be voted by such administrator, executor, guardian or conservator, without a transfer of such shares into the name of such personal representative, administrator, executor, guardian or conservator. Shares standing in the name of a trustee may be voted by such trustee, but no trustee shall be entitled to vote shares held in trust without a transfer of such shares into the name of the trustee.
3.12.3 Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by the receiver without the transfer thereof into his name if authority so to do is contained in an appropriate order of the court by which such receiver was appointed.
3.12.4 If shares are held jointly by three or more fiduciaries, the will of the majority of the fiduciaries shall control the manner of voting or appointment of a proxy, unless the instrument or order appointing such fiduciaries otherwise directs.
3.12.5 Unless the pledge agreement expressly provides otherwise, a shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.
3.12.6 Shares held by another corporation shall not be voted at any meeting or counted in determining the total number of outstanding shares entitled to vote at any given time if a majority of the shares entitled to vote for the election of directors of such other corporation is held by this corporation.
3.12.7 On and after the date on which written notice of redemption of redeemable shares has been dispatched to the holders thereof and a sum sufficient to redeem such shares has been deposited with a bank or trust company with irrevocable instruction and authority to pay the
redemption price to the holders thereof upon surrender of certificates therefor, such shares shall not be entitled to vote on any matter and shall be deemed to be not outstanding shares.
SECTION 3.13 NOTICE OF NOMINATION. Nominations for the election of directors and proposals for any new business to be taken up at any annual or special meeting of shareholders may be made by the board of directors of the corporation or by any shareholder of the corporation entitled to vote generally in the election of directors. In order for a shareholder of the corporation to make any such nomination or proposal at any annual meeting, the shareholder must first give notice thereof in writing, delivered or mailed by first class United States mail, postage prepaid (the "Required Method of Mailing"), to the Secretary of the corporation not less than 90 days in advance of the date corresponding to the date that the corporation's proxy statement was released to security holders in connection with the previous year's annual meeting of security holders, except that if no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than 30 calendar days from the date of the previous year's annual meeting, a proposal shall be received by the corporation in accordance with the method set forth hereafter for proposals or nominations in advance of a special meeting of shareholders. Notice of shareholder nominations or proposals to be taken up at a special meeting of shareholders must be delivered or mailed by the Required Method of Mailing to the Secretary of the corporation not less than ten days nor more than sixty days prior to any such meeting. Each such notice given by a shareholder with respect to nominations for the election of directors shall set forth (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee, and (iii) the number of shares of stock of the corporation which are beneficially owned by each such nominee.
SECTION 3.14 ACTION WITHOUT A MEETING. Any action permitted or required to be taken at a meeting of the shareholders may be taken without a meeting if one or more consents in writing setting forth the action so taken shall be signed by all the shareholders.
ARTICLE IV. BOARD OF DIRECTORS
SECTION 4.1 GENERAL POWERS. The business and affairs of the corporation shall be managed by its board of directors.
SECTION 4.2 NUMBER, TENURE AND QUALIFICATION. The number of directors set forth in Article II of these bylaws may be increased or decreased from time to time by amendment to or in the manner provided in these bylaws. No decrease, however, shall have the effect of shortening the term of any incumbent director unless such director resigns or is removed in accordance with the provisions of these bylaws. The directors shall be classified and shall hold such terms as set forth in the articles of incorporation. In all cases, directors shall serve until their successors are duly elected and qualified or until their earlier resignation, removal from office or death. Directors need not be residents of the state of Washington or shareholders of the corporation.
SECTION 4.3 ANNUAL AND OTHER REGULAR MEETINGS. Regular meetings of the board shall be held at two-thirty o'clock, or an earlier hour in the discretion of the Chairman or the
President, in the afternoon of the third Tuesday of the months of January, February, March, April, May, June, July, September, October, and December unless such day is a legal holiday, in which case the meeting shall be held on the first business day thereafter, or unless such meeting has been canceled by the Chairman or the President upon giving notice to the members of the board at least three calendar days before the date on which such meeting is scheduled. The date of any regular meeting may be changed to such other date within the month as shall be determined by the Chairman or the President, or in their absence by the Senior Executive Vice President, or in the absence of the Chairman, the President, and the Senior Executive Vice President, by any three members of the board, provided notice of the time and place of such meeting is given as provided in Section 4.4. In each year, the regular meeting on the day of the Annual Meeting of Shareholders shall be known as the Annual Meeting of the Board.
SECTION 4.4 SPECIAL MEETINGS. Special meetings of the board of directors may be called by the board of directors, the chairman of the board, or the president. Notice of special meetings of the board of directors stating the date, time and place thereof shall be given at least three (3) days prior to the date set for such meeting by the person or persons authorized to call such meeting, or by the secretary at the direction of the person or persons authorized to call such meeting. The notice may be oral or written. Oral notice may be communicated in person or by telephone, wire or wireless equipment, which does not transmit a facsimile of the notice. Oral notice is effective when communicated. Written notice may be transmitted by mail, private carrier, or personal delivery; telegraph or teletype; or telephone, wire, or wireless equipment which transmits a facsimile of the notice. Written notice is effective upon dispatch if such notice is sent to the director's address, telephone number, or other number appearing on the records of the corporation. If no place for such meeting is designated in the notice thereof, the meeting shall be held at the principal office of the corporation. Unless otherwise required by law, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting.
SECTION 4.5 WAIVER OF NOTICE. Any director may waive notice of any meeting at any time. Whenever any notice is required to be given to any director of the corporation pursuant to applicable law, a waiver thereof in writing signed by the director, entitled to notice, shall be deemed equivalent to the giving of notice. The attendance of a director at a meeting shall constitute a waiver of notice of the meeting except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully convened. A director waives objection to consideration of a particular matter at a meeting that is not within the purpose or purposes described in the meeting notice, unless the director objects to considering the matter when it is presented.
SECTION 4.6 QUORUM. A majority of the number of directors specified in or fixed in accordance with these bylaws shall constitute a quorum for the transaction of any business at any meeting of directors. If less than a majority shall attend a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice, and a quorum present at such adjourned meeting may transact business.
SECTION 4.7 MANNER OF ACTING. If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present is the act of the board of directors.
SECTION 4.8 PARTICIPATION BY CONFERENCE TELEPHONE. Directors may participate in a regular or special meeting of the board by, or conduct the meeting through the use of, any means of communication by which all directors participating can hear each other during the meeting and participation by such means shall constitute presence in person at the meeting.
SECTION 4.9 PRESUMPTION OF ASSENT. A director who is present at a meeting of the board of directors at which action is taken shall be presumed to have assented to the action taken unless such director's dissent shall be entered in the minutes of the meeting or unless such director shall file his written dissent to such action with the person acting as secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the corporation immediately after adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.
SECTION 4.10 ACTION BY BOARD WITHOUT A MEETING. Any action permitted or required to be taken at a meeting of the board of directors may be taken without a meeting if one or more written consents setting forth the action so taken, shall be signed, either before or after the action taken, by all the directors. Action taken by written consent is effective when the last director signs the consent, unless the consent specifies a later effective date.
SECTION 4.11 AUDIT COMMITTEE. The board of directors, at any regular meeting of the Board, shall elect from their number an Audit Committee of not less than three members, none of whom shall be employed by the corporation. At least annually the board of directors shall determine that each Committee member is independent of management of the corporation and not a "large customer" of the corporation or any of its subsidiaries as defined by the Code of Federal Regulations, and that at least two Committee members have banking or related financial management expertise.
The Audit Committee (a) shall review the basis for the audited financial statements of the corporation; (b) shall oversee the corporation's adherence to the laws and regulations governing the corporation's operations; (c) shall review compliance with all corporate policies that have been approved by the Board; and (d) shall have such other responsibilities as required by law or regulation or as determined necessary or appropriate in the judgment of the Board or the Chairperson of the Committee, including but not limited to ensuring the independence of the corporation's internal audit functions.
In performing all of its responsibilities, the Audit Committee may take whatever steps it deems necessary. Among other things, the Audit Committee shall have authority to require the assistance of the corporation's General Auditor, of management, of the corporation's independent public accountant, and of outside counsel to perform these responsibilities.
SECTION 4.12 COMPENSATION AND STOCK OPTION COMMITTEE.
The board of directors at any regular meeting of the board, shall elect from their number a Compensation and Stock Option Committee which committee shall have not less than three members, none of whom shall be employed by the corporation.
The Compensation and Stock Option Committee shall concern itself with all forms of compensation and benefits for officers and employees of the corporation. It shall serve as the Option Committee pursuant to the stock option plans of the corporation, and shall have oversight of the corporation's pension and retirement plans and such other plans as are subject to the Employees Retirement Income Security Act of 1974. The Compensation and Stock Option Committee shall determine the proper salaries which the Board is to establish for all officers of the corporation who are in Salary Grade 19 or higher, and shall have oversight of the determination of the compensation of other officers and employees of the corporation.
The Compensation and Stock Option Committee shall have all the authority of the Board of Directors to oversee the administration of and to amend policies that govern the corporation's employee relations (the "Employee Policies") following initial approval by the Board.
The compensation and Stock Option Committee shall report to the Board on any material amendment of the Employee Policies.
SECTION 4.13 DIRECTORS' LOAN & INVESTMENT COMMITTEE. At any regular meeting of the board, the Chairman of the Board, with the approval of the board of directors shall appoint from the members of the board a Directors' Loan & Investment Committee. The Committee shall consist of the Chairman and President (if he is a member of the board) of the Corporation and certain other members of the board, a majority of whom shall not be officers of the Corporation. The Chairman of the Board shall appoint a committee chairman who is not an officer of the Corporation.
The Committee Chairman shall coordinate with the Corporation's staff in the preparation of reports for the Committee and the Board.
The Committee shall have oversight of the officers of the Corporation who are responsible for the loans or investments of the Corporation and for managing the sale, exchange and other disposition of loans or investments.
Its power shall include, but not be limited to oversight of all securities and loan investments and dispositions, and all purchases of real estate and the disposition of all property, real or personal, tangible or intangible, acquired by the Corporation in satisfaction of debts owing to it or otherwise (except the Corporation premises or other real property acquired for use by the Corporation).
In connection with the monitoring of the Corporation's return on investments in subsidiaries and other Corporations, the Committee shall also have oversight of the officers of the Corporation who are responsible for such investments.
The Committee shall have authority to oversee the administration of the policies that govern the Corporation's loans or investments. The Committee shall have all the authority of the board of directors to amend such policies following initial approval by the Board.
SECTION 4.14 OTHER BOARD COMMITTEES. The board of directors may by resolution designate from among its members such other committees as the board in its discretion may determine, each of which must have two (2) or more members. All committees of the board shall be governed by the same rules regarding meetings, action without meetings, notice, waiver of notice, and quorum and voting requirements as applied to the board of directors, except that unless otherwise specified in the bylaws or the resolution creating the committee, notice of the date, time and place of the meeting may be given only one (1) day prior to the date set for the meeting. To the extent provided in such resolutions, each such committee shall have and may exercise the authority of the board of directors, except as limited by applicable law. The designation of any such committee and the delegation thereto of authority shall not relieve the board of directors, or any members thereof, of any responsibility imposed by law.
SECTION 4.15 RESIGNATION. Any director may resign at any time by delivering written notice to the chairman of the board, the president, the secretary, or the registered office of the corporation, or by giving oral notice at any meeting of the directors or shareholders. Any such resignation shall take effect at any subsequent time specified therein, or if the time is not specified, upon delivery thereof and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
SECTION 4.16 REMOVAL. At a meeting of the shareholders called expressly for that purpose, any director or the entire board of directors may be removed from office, with cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of the director or directors whose removal is sought. If the board of directors or any one or more directors is so removed, new directors may be elected at this same meeting.
SECTION 4.17 VACANCIES. A vacancy on the board of directors may occur by the resignation, removal or death of an existing director, or by reason of increasing the number of directors on the board of directors as provided in these bylaws. Except as may be limited by the articles of incorporation, any vacancy occurring in the board of directors may be filled by the affirmative vote of four-fifths of the remaining directors though less than a quorum. A director elected to fill a vacancy shall be elected for a team of office continuing only until the next election of directors by shareholders.
If the vacant office was held by a director or elected by holders of one or more authorized classes or series of shares, only the holders of those classes or series of shares are entitled to vote to fill the vacancy.
SECTION 4.18 COMPENSATION. By resolution of the board of directors, the directors may be paid a fixed sum plus their expenses, if any, for attendance at meetings of the board of directors or committee thereof, or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.
SECTION 4.19 CHAIRMAN OF THE BOARD. The Chairman shall preside at meetings of the board of directors. In the absence of the Chairman and the Chief Executive Officer, the directors
present may select someone from their number to preside. The Chairman shall be ex-officio a member of all committees, except the Audit Committee and the Compensation and Stock Option Committee. The Chairman shall perform such other duties as may be assigned by the board of directors.
ARTICLE V. OFFICERS
SECTION 5.1 RANKS AND TERMS IN OFFICE. The officers of the corporation shall be a Chief Executive Officer, a President, a Senior Executive Vice President, a Controller, a General Auditor, a Secretary and such Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, or other officers as the Board may designate.
The officers shall be elected by the board of directors, to serve, unless earlier removed, until the next annual meeting of directors and until the appointment and qualification of their successors. Officers may be terminated or removed at will at any time.
SECTION 5.2 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the corporation shall have direct supervision and management of its affairs and the general powers and duties of supervision and management usually vested in the Chief Executive officer of a corporation, subject to the Bylaws of the corporation. He shall be ex-officio a member of all committees. The Chief Executive Officer shall perform such other duties as may be assigned by the board of directors. In the absence of the Chief Executive Officer, his duties shall be assumed by the President, and in their absence such duties shall be assumed by a person designated by the Chief Executive Officer or the board of directors.
SECTION 5.3 PRESIDENT. The President shall perform such duties as may be assigned by the Chief Executive Officer or the board of directors. The President shall preside over all meetings of the shareholders, which duty shall include the authority to adjourn such meetings.
SECTION 5.4 SENIOR EXECUTIVE VICE PRESIDENT. The Senior Executive Vice President shall perform such duties as may be assigned to him or her by the Chief Executive Officer or the President.
SECTION 5.5 CONTROLLER. The Controller shall be the chief accounting officer of the corporation and shall have supervisory control and direction of the general accounting, accounting procedure, budgeting and general bookkeeping, and shall be the custodian of the general accounting books, records, forms and papers. He shall also perform such other duties as may from time to time be assigned to him by the Chief Executive Officer, the President, the Senior Executive Vice President or an Executive Vice President.
SECTION 5.6 GENERAL AUDITOR. The General Auditor shall supervise and maintain continuous audit control of the assets and liabilities of the corporation. He shall be responsible only to the board of directors in coordination with the Chief Executive officer. He shall perform such other duties as may be assigned to him by the Chief Executive Officer, the President, the
Senior Executive Vice President or an Executive Vice President, only to the extent that such other duties do not compromise the independence of audit control.
SECTION 5.7 SECRETARY AND ASSISTANT SECRETARY. The Secretary shall keep the minutes of all meetings of the board of directors and of the shareholders. He shall give such notices to the directors as may be required by law or by these Bylaws. He shall have the custody of the corporate seal, if any, and the contracts, papers and documents belonging to the corporation. He shall also perform such other duties as may from time to time be assigned to him by the Chief Executive Officer, the President, the Senior Executive Vice President or an Executive Vice President. In the absence of the Secretary, the powers and duties of the Secretary shall devolve upon an Assistant Secretary or such person as shall be designated by the Secretary or the Chief Executive Officer.
SECTION 5.8 EXECUTIVE VICE PRESIDENTS. Any Executive Vice President shall perform such duties as may be assigned to him by the Chief Executive Officer of the President.
SECTION 5.9 SENIOR VICE PRESIDENTS AND VICE PRESIDENTS. Any Senior Vice Presidents and Vice Presidents shall perform such duties as may be assigned to them by the Chief Executive Officer, the President, the Senior Executive Vice President or an Executive Vice President.
SECTION 5.10 COMBINING OFFICES. An officer whom the board of directors elects or has previously elected to hold one office may be elected by the board of directors to hold another office, with or without resigning from the previous office, as the board of directors shall determine upon a recommendation of the Chief Executive Officer.
SECTION 5.11 OTHER OFFICERS. The other Officers shall perform such duties as may be assigned to them by the Chief Executive Officer or the President. The Chief Executive Officer or the President may designate such functional titles to an Officer as he deems appropriate from time to time.
SECTION 5.12 OFFICIAL BONDS. The corporation may be indemnified in the event of the dishonest conduct or unfaithful performance of an officer, employee, or agent by a corporate fidelity bond, the premiums for which may be paid by the corporation.
SECTION 5.13 CONTRACTS AND SATISFACTIONS. The Chief Executive Officer, the President, or in their absence the Senior Executive Vice President, shall from time to time designate the officers or employees who shall have authority to sign deeds, contracts, satisfactions, releases, and assignments of mortgages, and all other instruments in writing to be made or executed by the corporation.
SECTION 5.14 RESIGNATION. Any officer may resign at any time by delivering written notice to the chairman of the board, the President, a Vice-president, the Secretary or the board of directors, or by giving oral notice at any meeting of the board. Any such resignation shall take effect at any subsequent time specified therein, or if the time is not specified, upon delivery thereof and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
SECTION 5.15 COMPENSATION OF OFFICERS AND EMPLOYEES. The board of directors shall fix compensation of officers and may fix compensation of other employees from time to time. No officer shall be prevented from receiving a salary by reason of the fact that such officer is also a director of the corporation.
ARTICLE VI. SHARES
SECTION 6.1 CERTIFICATES FOR SHARES. The shares of the corporation may be represented by certificates in such form as prescribed by the board of directors. Signatures of the corporate officers on the certificate may be facsimiles if the certificate is manually signed on behalf of a transfer agent, or registered by a registrar, other than the corporation itself or an employee of the corporation. All certificates shall be consecutively numbered or otherwise identified. All certificates shall bear such legend or legends as prescribed by the board of directors or these bylaws.
SECTION 6.2 ISSUANCE OF SHARES. Shares of the corporation shall be issued only when authorized by the board of directors, which authorization shall include the consideration to be received for each share.
SECTION 6.3 BENEFICIAL OWNERSHIP. Except as otherwise permitted by these bylaws, the person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes. The board of directors may adopt by resolution a procedure whereby a shareholder of the corporation may certify in writing to the corporation that all or a portion of the shares registered in the name of such shareholder are held for the account of a specified person or persons. Upon receipt by the corporation of a certification complying with such procedure, the persons specified in the certification shall be deemed, for the purpose or purposes set forth in the certification, to be the holders of record of the number of shares specified in place of the shareholder making the certification.
SECTION 6.4 TRANSFER OF SHARES. Transfer of shares of the corporation shall be made only on the stock transfer books of the corporation by the holder of record thereof or by his legal representative who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the secretary of the corporation, on surrender for cancellation of the certificate for the shares. All certificates surrendered to the corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled.
SECTION 6.5 LOST OR DESTROYED CERTIFICATES. In the case of a lost, destroyed or mutilated certificate, a new certificate may be issued therefor upon such terms and indemnity to the corporation as the board of directors may prescribe.
SECTION 6.6 STOCK TRANSFER RECORDS. The stock transfer books shall be kept at the principal office of the corporation or at the office of the corporation's transfer agent or registrar. The name and address of the person to whom the shares represented by any certificate, together
with the class, number of shares and date of issue, shall be entered on the stock transfer books of the corporation. Except as provided in these bylaws, the person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes.
ARTICLE VII. SEAL
This corporation need not have a corporate seal. If the directors adopt a corporate seal, the seal of the corporation shall be circular in form and consist of the name of the corporation, the state and year of incorporation, and the words "Corporate Seal."
ARTICLE VIII. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
SECTION 8.1 DIRECTOR'S RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is involved (including, without limitation, as a witness) in any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was a director of the corporation or, being or having been such a director, he or she is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director or in any other capacity while serving as a director, shall be indemnified and held harmless by the corporation against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts to be paid in settlement) actually and reasonably incurred or suffered by such person in connection therewith; provided, however, that (a) the corporation shall not indemnify any person from or on account of any acts or omissions of such person finally adjudged to be intentional misconduct or knowing violation of the law of such person, or from conduct of the person in violation of RCW 23B.08.310, or from or on account of any transaction with respect to which it is finally adjudged that such person personally received a benefit in money, property, or services to which such person was not legally entitled, and (b) except as provided in subsection 8.3 with respect to proceedings seeking to enforce rights to indemnification, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the board of directors of the corporation. Such indemnification shall continue as to a person who has ceased to be a director and shall inure to the benefit of his or her heirs, executors and administrators. If the Washington Business Corporation Act is amended to authorize further indemnification of directors, then directors of the corporation shall be indemnified to the fullest extent permitted by the Washington Business Corporation Act, as so amended.
SECTION 8.2 DIRECTOR'S BURDEN OF PROOF AND PROCEDURE FOR PAYMENT.
(a) The claimant shall be presumed to be entitled to indemnification under this Article upon submission of a written claim (and, in an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition, where the undertaking in (b) below has been tendered to the corporation) and thereafter the corporation shall have the burden of proof to overcome the presumption that the claimant is so entitled.
(b) The right to indemnification shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that the payment of such expenses in advance of the final disposition of a proceeding shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such director, to repay all amounts so advanced if it shall ultimately be determined that such director is not entitled to be indemnified under this Article or otherwise.
SECTION 8.3 RIGHT OF CLAIMANT TO BRING SUIT. If a claim under this Article is not paid in full by the corporation within sixty (60) days after a written claim has been received by the corporation, except in the case of a claim for expenses incurred in defending a proceeding in advance of its final disposition, in which case the applicable period shall be twenty (20) days, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, to the extent successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. Neither the failure of the corporation (including its board of directors, its shareholders or independent legal counsel) to have made a determination prior to the commencement of such action that indemnification of or reimbursement or advancement of expenses to the claimant is proper in the circumstances nor an actual determination by the corporation (including its board of directors, its shareholders or independent legal counsel) that the claimant is not entitled to indemnification or to the reimbursement or advancement of expenses shall be a defense to the action or create a presumption that the claimant is not so entitled.
SECTION 8.4 NONEXCLUSIVITY OF RIGHTS. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Articles of Incorporation, Bylaws, agreement, vote of shareholders or disinterested directors or otherwise.
SECTION 8.5 INSURANCE, CONTRACTS AND FUNDING. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Washington Business Corporation Act. The corporation may, without any shareholder action, enter into contracts with such director or officer in furtherance of the provisions of this Article and may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to
ensure the payment of such amounts as may be necessary to effect indemnification as provided in this Article.
SECTION 8.6 INDEMNIFICATION OF OFFICERS, EMPLOYEES AND AGENTS OF THE CORPORATION. The corporation may, by action of its board of directors from time to time, provide indemnification and pay expenses in advance of the final disposition of a proceeding to officers, employees and agents of the corporation or another corporation, partnership, joint venture trust or other enterprise with the same scope and effect as the provisions of this Article with respect to the indemnification and advancement of expenses of directors of the corporation or pursuant to rights granted pursuant to, or provided by, the Washington Business Corporation Act or otherwise.
SECTION 8.7 CONTRACT RIGHT. The rights to indemnification conferred in this Article shall be a contract right and any amendment to or repeal of this Article shall not adversely affect any right or protection of a director of the corporation for or with respect to any acts or omissions of such director or officer occurring prior to such amendment or repeal.
SECTION 8.8 SEVERABILITY. If any provision of this Article or any application thereof shall be invalid, unenforceable or contrary to applicable law, the remainder of this Article, or the application of such provision to persons or circumstances other than those as to which it is held invalid, unenforceable or contrary to applicable law, shall not be affected thereby and shall continue in full force and effect.
ARTICLE IX. BOOKS AND RECORDS
The corporation shall keep correct and complete books and records of account, stock transfer books, minutes of the proceedings of its shareholders and the board of directors and such other records as may be necessary or advisable.
ARTICLE X. FISCAL YEAR
The fiscal year of the corporation shall be the calendar year.
ARTICLE XI. VOTING OF SHARES OF ANOTHER CORPORATION
Shares of another corporation held by this corporation may be voted by the Chief Executive Officer, by the President, by the Senior Executive Vice President, by an Executive Vice President, or by a Senior Vice President, or by proxy appointment form executed by any of them, unless the directors by resolution shall designate some other person to vote the shares.
ARTICLE XII. AMENDMENTS TO BYLAWS
These bylaws may be altered, amended or repealed, and new bylaws may be adopted, by the board of directors, subject to the concurrent power of the shareholders, by at least two-thirds affirmative vote of the shares of the corporation entitled to vote thereon, to alter amend or repeal these bylaws or to adopt new bylaws.
The undersigned, being the secretary of the corporation, hereby certifies that these bylaws are the restated bylaws of WASHINGTON MUTUAL, INC., adopted by resolution of the directors on September 28, 1994 and amended on October 19, 1994, November 28, 1994 and December 20, 1994.
DATED this 16th day of March, 1995.
/s/ WILLIAM L. LYNCH ---------------------------------------- William L. Lynch, Secretary |
| ARTICLE 9 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 10-Q OF WASHINGTON MUTUAL, INC. FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 6 MOS |
| FISCAL YEAR END | DEC 31 2000 |
| PERIOD END | JUN 30 2000 |
| CASH | 2,559,225 |
| INT BEARING DEPOSITS | 251,172 |
| FED FUNDS SOLD | 0 |
| TRADING ASSETS | 35,737 |
| INVESTMENTS HELD FOR SALE | 40,643,961 |
| INVESTMENTS CARRYING | 18,026,094 |
| INVESTMENTS MARKET | 17,503,570 |
| LOANS | 114,664,882 |
| ALLOWANCE | 1,009,728 |
| TOTAL ASSETS | 185,687,190 |
| DEPOSITS | 80,596,348 |
| SHORT TERM | 0 |
| LIABILITIES OTHER | 2,196,358 |
| LONG TERM | 0 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 0 |
| OTHER SE | 8,551,765 |
| TOTAL LIABILITIES AND EQUITY | 185,687,190 |
| INTEREST LOAN | 4,458,705 |
| INTEREST INVEST | 2,067,174 |
| INTEREST OTHER | 139,770 |
| INTEREST TOTAL | 6,665,649 |
| INTEREST DEPOSIT | 1,590,923 |
| INTEREST EXPENSE | 4,489,048 |
| INTEREST INCOME NET | 2,176,601 |
| LOAN LOSSES | 85,238 |
| SECURITIES GAINS | 0 |
| EXPENSE OTHER | 1,519,781 |
| INCOME PRETAX | 1,494,889 |
| INCOME PRE EXTRAORDINARY | 949,254 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 949,254 |
| EPS BASIC | 1.75 |
| EPS DILUTED | 1.75 |
| YIELD ACTUAL | 2.41 |
| LOANS NON | 801,553 |
| LOANS PAST | 0 |
| LOANS TROUBLED | 0 |
| LOANS PROBLEM | 0 |
| ALLOWANCE OPEN | 1,041,929 |
| CHARGE OFFS | 96,729 |
| RECOVERIES | 13,314 |
| ALLOWANCE CLOSE | 1,009,728 |
| ALLOWANCE DOMESTIC | 0 |
| ALLOWANCE FOREIGN | 0 |
| ALLOWANCE UNALLOCATED | 0 |