|
Financial
Summary
|
||||||||||||
|
Three
Months Ended
|
||||||||||||
|
(in
millions, except per share data)
|
June
30, 2007
|
Mar.
31, 2007
|
June
30, 2006
|
|||||||||
|
Income
Statement
|
||||||||||||
|
Net
interest income
|
$ |
2,034
|
$ |
2,081
|
$ |
2,060
|
||||||
|
Provision
for loan and lease losses
|
372
|
234
|
224
|
|||||||||
|
Noninterest
income
|
1,758
|
1,541
|
1,578
|
|||||||||
|
Noninterest
expense
|
2,138
|
2,105
|
2,229
|
|||||||||
|
Income
from continuing operations
|
830
|
784
|
759
|
|||||||||
|
Income
from discontinued
operations,
net of taxes
|
-
|
-
|
8
|
|||||||||
|
Net
income
|
830
|
784
|
767
|
|||||||||
|
Diluted
earnings per common share
|
$ |
0.92
|
$ |
0.86
|
$ |
0.79
|
||||||
|
Balance
Sheet
|
||||||||||||
|
Total
assets, end of period
|
$ |
312,219
|
$ |
319,985
|
$ |
350,884
|
||||||
|
Average
total assets
|
316,004
|
331,905
|
348,664
|
|||||||||
|
Average
interest-earning assets
|
279,836
|
295,700
|
313,239
|
|||||||||
|
Average
total deposits
|
206,765
|
210,764
|
200,252
|
|||||||||
|
Performance
Ratios
|
||||||||||||
|
Return
on average common equity
|
13.74 | % | 12.99 | % | 11.82 | % | ||||||
|
Net
interest margin
|
2.90
|
2.79
|
2.65
|
|||||||||
|
Efficiency
ratio
|
56.38
|
58.13
|
61.27
|
|||||||||
|
Nonperforming
assets/total assets
|
1.29
|
1.02
|
0.62
|
|||||||||
|
Tangible
equity/total tangible assets
|
6.07
|
5.78
|
5.84
|
|||||||||
|
·
|
New
production records set. During the second quarter, the Retail
Bank added a record 406,000 net new checking accounts, Card Services
opened a record 928,000 new credit card accounts, and the Commercial
Group
produced record loan volume of $4.3
billion.
|
|
·
|
Depositor
and other retail banking fees up 12 percent year over year. Since
the end of last year’s second quarter, the company added over 1.2 million
net new checking accounts to its retail base. This tremendous growth
in
new accounts helped drive depositor and other retail banking fees
up 12
percent year over year, or 16 percent after excluding a one-time
$21
million incentive payment recognized in the second quarter of last
year.
|
|
·
|
Net
interest margin expands 11 basis points to 2.90 percent. During
the first quarter, the company sold approximately $17.5 billion
of low
yielding loans. During the second quarter, the company improved
its
funding mix, which included reducing the average balance of FHLB
advances
by $14 billion and increasing lower cost retail deposits by $1.2
billion.
The result was a 13 basis point reduction in the company’s cost of funds,
which more than offset the 2 basis point decline in the yield on
interest-earning assets.
|
|
·
|
Home
Loans’ results improve. Second quarter results for Home Loans
were a loss of $37 million, an improvement from a loss of $113
million in
the prior quarter as a result of more stable market conditions
for
subprime loans in the second quarter. Net losses from the sales
of
subprime mortgage loans and adjustments to reflect changes in market
values of loans held for sale totaled $38 million. In addition,
the
company decreased the value of its subprime residuals by $93 million
for a
combined total loss for the quarter of $131 million, or about half
the
$252 million in losses recognized in the first
quarter.
|
|
·
|
Increase
in provision reflects credit card growth and soft housing market.
The quarter’s provision increased to $372 million from $234 million in the
prior quarter. With the strong growth in credit card receivables
held in
portfolio, the company increased the provision for loan losses
for credit
cards to $229 million from $106 million in the first quarter. The
mortgage
component of the provision continued to reflect the difficult housing
environment. Nonperforming assets as a percentage of total assets
increased to 1.29 percent from 1.02 percent at the end of the prior
quarter reflecting the continued softness of the housing market,
along
with a decrease in total assets.
|
|
·
|
Focus
on productivity reflects disciplined expense management. Second
quarter’s noninterest expense of $2.1 billion was down from the prior year
as the benefits of the company’s productivity initiatives continue to be
realized. At 56.38 percent, the company’s efficiency ratio for the second
quarter showed a significant improvement from 61.27 percent a year
ago and
reflected the company’s success in growing revenue and its continued focus
on productivity.
|
|
Selected
Segment Information
|
||||||||||||
|
Three
Months Ended
|
||||||||||||
|
(in
millions, except accounts and households)
|
June
30, 2007
|
Mar.
31, 2007
|
June
30, 2006
|
|||||||||
|
Net
interest income
|
$ |
1,283
|
$ |
1,275
|
$ |
1,323
|
||||||
|
Provision
for loan and lease losses
|
91
|
62
|
13
|
|||||||||
|
Noninterest
income
|
819
|
751
|
732
|
|||||||||
|
Noninterest
expense
|
1,139
|
1,075
|
1,109
|
|||||||||
|
Net
income from continuing operations
|
558
|
569
|
586
|
|||||||||
|
Average
loans
|
$ |
149,716
|
$ |
155,206
|
$ |
182,891
|
||||||
|
Average
retail deposits
|
145,252
|
144,030
|
138,803
|
|||||||||
|
Net
change in number of retail
checking
accounts
|
406,243
|
327,776
|
404,190
|
|||||||||
|
Net
change in retail households
|
228,000
|
195,000
|
259,000
|
|||||||||
|
·
|
Retail
Bank continues strong performance. With record account growth and
a 12 percent year over year increase in depositor fees, the Retail
Bank
delivered another strong quarter. The modest decline in net income
from a
year ago reflected an increase in credit costs, particularly for
home
equity lending, and the 3 percent decline in net interest income,
primarily as a result of the 18 percent decline in average
loans.
|
|
·
|
Checking
account growth at record level. During the second quarter, the
company added a record 406,000 net new checking accounts, up 24
percent
from the first quarter. The quarter’s growth was also up 1 percent from
the record set in the second quarter a year ago, which included
a full
quarter of WaMu’s new free checking product. The attractiveness of WaMu’s
free checking contributed to the 5 percent increase in average
retail
deposits from the prior year. The company’s success in attracting new
customers also led to an increase in the number of retail households,
up 2
percent from the end of the prior quarter and up 9 percent from
a year
earlier.
|
|
Selected
Segment Information
|
||||||||||||
|
Three
Months Ended
|
||||||||||||
|
(in
millions)
|
June
30, 2007
|
Mar.
31, 2007
|
June
30, 2006
|
|||||||||
|
Net
interest income
|
$ |
660
|
$ |
653
|
$ |
615
|
||||||
|
Provision
for loan and lease losses
|
523
|
388
|
417
|
|||||||||
|
Noninterest
income
|
393
|
474
|
389
|
|||||||||
|
Noninterest
expense
|
300
|
325
|
293
|
|||||||||
|
Net
income
|
141
|
256
|
181
|
|||||||||
|
Average
managed receivables
|
$ |
24,234
|
$ |
23,604
|
$ |
20,474
|
||||||
|
Period-end
managed receivables
|
24,987
|
23,597
|
21,095
|
|||||||||
|
30+
day managed delinquency rate
|
5.11 | % | 5.15 | % | 5.23 | % | ||||||
|
Managed
net credit losses
|
6.49
|
6.31
|
5.99
|
|||||||||
|
·
|
Card
Services’ fundamentals remain strong. Second quarter results
continued to show solid net interest income and expense containment.
The
decrease in net income from prior periods was due to a higher level
of
provisioning from the quarter’s strong growth in period-end receivables
and a reduction in noninterest income from the lower level of
securitization activity in the second
quarter.
|
|
·
|
Card
Services opens record number of new accounts. During the quarter,
Card Services opened a record 928,000 new credit card accounts.
Marketing
to WaMu customers is an important growth opportunity for Card Services
and
has accounted for approximately a third of production. Period-end
managed
receivables of $25 billion were up 6 percent from the first quarter
and up
18 percent from the prior year.
|
|
·
|
Credit
quality reflects strong economy. At 5.11 percent of period-end
managed receivables, the 30+ day managed delinquency rate was down
from
prior quarters due to the strong receivables growth in the quarter.
Net
credit losses of 6.49 percent during the quarter were up from prior
periods with an increase in contractual and bankruptcy
losses.
|
|
Selected
Segment Information
|
||||||||||||
|
Three
Months Ended
|
||||||||||||
|
(in
millions)
|
June
30, 2007
|
Mar.
31, 2007
|
June
30, 2006
|
|||||||||
|
Net
interest income
|
$ |
195
|
$ |
200
|
$ |
166
|
||||||
|
Provision
for loan and lease losses
|
2
|
(10 | ) | (10 | ) | |||||||
|
Noninterest
income
|
62
|
14
|
17
|
|||||||||
|
Noninterest
expense
|
74
|
74
|
57
|
|||||||||
|
Net
income
|
113
|
94
|
84
|
|||||||||
|
Loan
volume
|
$ |
4,348
|
$ |
3,671
|
$ |
2,961
|
||||||
|
Average
loans
|
38,789
|
38,641
|
31,505
|
|||||||||
|
·
|
Commercial
Group net income up 35 percent year over year. Net income of $113
million for the second quarter was up 35 percent from the same
quarter a
year ago and was up 20 percent compared with the prior quarter.
The
improved results primarily reflect the quarter’s higher gain on
sale.
|
|
·
|
Loan
volume hits record level. Record loan volume of $4.3 billion was
up 47 percent from a year ago and was up 18 percent from the prior
quarter
as a result of the strong growth in multi-family and commercial
real
estate loans.
|
|
Selected
Segment Information
|
||||||||||||
|
Three
Months Ended
|
||||||||||||
|
(in
millions)
|
June
30, 2007
|
Mar.
31, 2007
|
June
30, 2006
|
|||||||||
|
Net
interest income
|
$ |
215
|
$ |
245
|
$ |
290
|
||||||
|
Provision
for loan and lease losses
|
101
|
49
|
38
|
|||||||||
|
Noninterest
income
|
391
|
162
|
461
|
|||||||||
|
Noninterest
expense
|
548
|
521
|
617
|
|||||||||
|
Net
income (loss)
|
(37 | ) | (113 | ) |
50
|
|||||||
|
Loan
volume
|
$ |
31,541
|
$ |
30,609
|
$ |
41,747
|
||||||
|
Average
loans
|
43,312
|
53,254
|
43,988
|
|||||||||
|
·
|
Home
Loans shows improvement in a difficult environment. While the
quarter’s $37 million loss was an improvement from the loss of $113
million in the prior quarter, the difficult mortgage environment
continues
to pressure results. Net losses from the sales of subprime mortgage
loans
and adjustments to reflect changes in market values of loans held
for sale
totaled $38 million, which was a substantial improvement from net
losses
of $164 million in the first quarter. During the second quarter,
the
company reduced the value of its subprime residuals by $93 million
to a
balance of $79 million at quarter end. This decline in fair value
was
similar to the first quarter and reflected the poor performance
of
subprime loans and the slowdown in home price
appreciation.
|
|
·
|
Prime
business continues to improve. Gain on sale for the prime portion
of the business remained strong, but was down slightly primarily
on lower
sales volume. MSR valuation and risk management results improved
during
the quarter with the rise in long-term interest rates and lower
net
hedging costs.
|
|
·
|
Increase
in home loan volume reflects seasonal growth. Prime home loan
volume was up 7 percent from the first quarter, as the business
rebounded
from the typically low first quarter. Subprime mortgage production
for the
second quarter was down 30 percent from the prior quarter as the
company
has chosen to reduce its subprime exposure through this point in
the
cycle. Compared with a year ago, home loan volume was down as the
company
reduced not only its subprime lending, but also decided to exit
its
traditional correspondent business.
|
|
·
|
On
April 18, WaMu launched a $2 billion subprime borrowers’ assistance
program which offers a refinance opportunity at a discount to borrowers
who are current on their existing mortgage. The goal of the program
is to
keep as many borrowers as possible in their
homes.
|
|
·
|
On
April 26, WaMu launched its new Mortgage PlusTM
product
nationwide. The WaMu Mortgage Plus home loan is an all-in-one product
that
combines a mortgage with the flexibility of a built-in equity line
of
credit.
|
|
·
|
On
May 21, WaMu was named the bank with the best reputation in the
U.S.
According to U.S. consumers surveyed by Reputation Institute, WaMu’s
corporate reputation outranks its banking peers and was the only
bank
included in the top 50 best regarded companies in the United
States.
|
|
·
|
On
June 4, J.D. Power and Associates released their 2007 Retail Banking
Satisfaction Study. The results, which were reported by region,
placed
WaMu #1 in the Midwest and West/Pacific regions and #3 in the Mid-Atlantic
and Southwest regions.
|
|
·
|
On
July 17, WaMu’s Board of Directors declared a cash dividend of 56 cents
per share on the company’s common stock, up from 55 cents per share in the
previous quarter. Dividends on the common stock are payable on
August 15,
2007 to shareholders of record as of July 31, 2007. In addition
to
declaring a dividend on the company’s common stock, the company will pay a
dividend of $0.3956 per depository share of Series K Preferred
Stock to be
payable on Sept. 15, 2007 to holders of record on Sept. 1,
2007.
|
|
|
·
|
Volatile
interest rates and their impact on the mortgage banking
business;
|
|
|
·
|
Credit
risk;
|
|
|
·
|
Operational
risk;
|
|
|
·
|
Risks
related to credit card operations;
|
|
|
·
|
Changes
in the regulation of financial services companies, housing
government-sponsored enterprises and credit card
lenders;
|
|
|
·
|
Competition
from banking and nonbanking
companies;
|
|
|
·
|
General
business, economic and market conditions;
and
|
|
|
·
|
Reputational
risk.
|
|
Media
Contact
|
Investor
Relations Contact
|
|
Alan
Gulick
|
Alan
Magleby
|
|
Washington
Mutual
|
Washington
Mutual
|
|
206-500-2760
|
206-500-4148
(Seattle)
|
|
alan.gulick@wamu.net
|
212-702-6955
(New York)
|
|
alan.magleby@wamu.net
|