SEATTLE--(BUSINESS WIRE)--April 2, 2001--
Strengthens Washington Mutual's Position as National
Mortgage Leader; Fleet Will Continue to Offer
Mortgages to Customers in its Retail Bank Markets
In a move that enhances its position as a national leader in
mortgage originations and increases by more than 40 percent the
residential mortgages it services, Washington Mutual, Inc. (NYSE: WM)
today announced that it has signed an agreement to acquire Fleet
Mortgage Corp., a unit of FleetBoston Financial Corp. (NYSE: FBF), for
approximately $660 million in cash subject to certain closing
This transaction - along with its recent acquisitions of Bank
United Corp. and the mortgage operations of The PNC Financial Services
Group, Inc. - would increase Washington Mutual's residential mortgage
servicing portfolio to $451.5 billion, based on Dec. 31, 2000 data,
making it the nation's second largest mortgage servicing business.
As of year-end 2000 on an adjusted basis, Fleet Mortgage had
assets of approximately $6.0 billion. The transaction, which will be
accounted for as a purchase, is expected to be modestly accretive to
earnings per share in 2001. This estimate does not assume revenue
enhancements. Annual cost savings are anticipated to be approximately
30 percent of the acquired Fleet Mortgage expense base.
Following completion of the transaction, Fleet will continue to
originate mortgages in the markets served by its retail bank system.
Most of these mortgages will be serviced by Washington Mutual. Fleet
will continue its affordable housing programs and will maintain all
existing commitments for affordable mortgages.
"This acquisition solidifies Washington Mutual's position as one
of the nation's leading mortgage lenders," said Kerry Killinger, the
company's Chairman, President and Chief Executive Officer. "This one
move adds substantial scale to our mortgage servicing business in an
industry where economies of scale are increasingly important. The
acquisition further diversifies our revenue base, strengthening our
sources of recurring, noninterest income. We also significantly
enhance our correspondent lending capacity, rounding out our ability
to drive mortgage originations through retail, broker, and
correspondent channels alike," Killinger added.
The agreement calls for a franchise premium of $60 million over
the agreed-upon value of Fleet Mortgage's equity at the time of
closing. The adjusted book value of Fleet Mortgage's equity was
approximately $600 million at year-end 2000. Washington Mutual expects
to record goodwill of approximately $85 million, which includes $25
million of after-tax transaction-related expenses. Most of the
goodwill is tax deductible. As of March 30, 2001, the agreement values
the mortgage servicing rights at 1.83 percent of the acquired
portfolio, which totaled $129.2 billion at year-end 2000.
Washington Mutual will acquire the Fleet Mortgage correspondent
and broker mortgage origination channels, while Fleet will retain
ownership of its retail origination channel and Telesales Center in
the Northeast. The two companies will enter into an agreement through
which Washington Mutual will acquire much of Fleet's retail loan
originations on a correspondent basis.
"The sale of Fleet Mortgage will allow us to redeploy capital to
our higher growth core businesses," said Chad Gifford, President and
Chief Operating Officer of Fleet. "We will retain the retail
origination staff in our bank markets and we will continue to provide
our customers a range of mortgage products, including our affordable
mortgage programs," Mr. Gifford added. "Scale and efficiency will
determine the handful of successful competitors in the mortgage
industry of the future. Washington Mutual's commitment to the business
makes it an excellent partner."
Fleet expects to record a one-time after-tax loss of approximately
$200 million in the first quarter related to the sale of its mortgage
subsidiary, which includes valuation adjustments to the servicing
rights asset, writeoff of prior goodwill, and transaction costs. Last
year, Fleet Mortgage accounted for approximately 2 percent of Fleet's
The transaction also increases Washington Mutual's national
mortgage market share. Inclusive of its recent acquisitions of Bank
United and the mortgage operations of PNC, Washington Mutual captured
a 7.3 percent share of the national residential mortgage origination
market in 2000. On a pro forma basis with Fleet Mortgage, Washington
Mutual's market share would be 9.3 percent nationally, and its
originations would total $97.2 billion, based on year 2000 data.
Fleet Mortgage's seasoned correspondent lending network will
complement Washington Mutual's existing correspondent and broker
distribution channels. On a pro forma basis, the transaction would
increase Washington Mutual's correspondent originations nearly 75
percent, moving it to the second rank nationally, based on year 2000
data. Washington Mutual already ranks first in broker originations and
second in retail originations. In addition, Fleet Mortgage's primarily
fixed-rate loan production will further complement Washington Mutual's
ARM origination capacity.
Fleet Mortgage Corp., headquartered in Columbia, S.C., has more
than 2,500 employees, with servicing centers in Florence, S.C. and
Milwaukee, Wis. Fleet Mortgage's processing center in Providence, R.I.
will remain with Fleet.
Washington Mutual said that it plans to undertake a comprehensive
review of the combined operations to determine the optimal combination
of sales, service, and administrative resources.
The transaction has been approved by the Boards of Directors of
both companies, and is anticipated to close in the second quarter of
2001, subject to regulatory notifications, including the Office of
Thrift Supervision, the Federal Deposit Insurance Corporation, and
Hart-Scott-Rodino, as well as other customary closing conditions.
Morgan Stanley Dean Witter and Heller Ehrman White & McAuliffe LLP
represented Washington Mutual. Fleet was represented by Cohane
Rafferty Securities, LLC and Edwards & Angell, LLP.
About Fleet Mortgage Corp.
Fleet Mortgage, headquartered in Columbia, S.C., is a FleetBoston
Financial Corp. company. A national leader in the origination of
residential mortgage loans, the company provides mortgages through
retail offices in the Northeast, a national network of 1,000
correspondents, wholesale brokers nationwide, and its National
About Washington Mutual, Inc.
With a history dating back to 1889, Washington Mutual, Inc. is a
national financial services company that provides a diversified line
of products and services to consumers and small- to mid-sized
businesses. At Dec. 31, 2000, Washington Mutual and its subsidiaries
had consolidated assets of $194.72 billion. Washington Mutual
currently operates more than 2,000 consumer banking, mortgage lending,
commercial banking, consumer finance and financial services offices
throughout the nation.
FORWARD-LOOKING STATEMENTS: "This document contains
forward-looking statements, which are not historical facts and pertain
to future operating results. These forward-looking statements are
within the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements include, but are not limited
to, statements about our plans, objectives, expectations and
intentions and other statements contained in this document that are
not historical facts. When used in this document, the words "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates"
and similar expressions are generally intended to identify
forward-looking statements. These forward-looking statements are
inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control.
In addition, these forward-looking statements are subject to
assumptions with respect to future business strategies and decisions
that are subject to change. Actual results may differ materially from
the results discussed in these forward-looking statements for the
reasons, among others, discussed under the heading "Business-Factors
That May Affect Future Results" in Washington Mutual, Inc.'s 2000
Annual Report on Form 10-K, which include: the risk of the interest
rate environment further compressing our margin and adversely
affecting our net interest income; the risk of continued
diversification of our assets and adverse changes to credit quality;
competition from other financial services companies in all our
markets; the concentration of operations in California adversely
affecting our operating results if the California economy or real
estate market declines; the risk of our inability to integrate the
operations of Fleet Mortgage in an efficient manner and achieve the
projected cost savings; and the risk of an economic slowdown that
would adversely affect credit quality and loan originations."
Note to editors: A conference call discussing the transaction will
be held on Tuesday, April 3, 10:30 a.m. EDT. The dial-in number is
800.314.7867. The replay number is 719.457.0820 and the access code is
656840. A live audio webcast of the call is available online at
www.wamu.com. The call will also be archived on the company's Web site
at: Archived Audio Webcast. A replay of the call will be available
from approximately 2:00 p.m. EDT on April 3 until 9:00 p.m. EDT on
Today's news release and additional transaction details are
available on Washington Mutual's Web site, and, at no charge, through
the company's News On Demand System at 800.329.6236. (To view the Transaction Detail, you will need Acrobat Reader. If you do not have
Acrobat Reader, click here)
Washington Mutual / Fleet Mortgage
WM(1) Fleet Mortgage(2) WM/Fleet Mortgage
Servicing Rank (12/31/00) 4 8 2(3)
Servicing Portfolio (Bil.) $311.3 $143.9(3) $451.5(3)
Origination Rank (2000) 2 7 1(4)
2000 Originations (Bil.) $76.3 $23.4 $97.2(4)
2000 Originations By Channel
Correspondent Rank 3 6 2
Correspondent Fundings (Bil.) $22.7 $17.0 $39.7
Broker Rank 1 Not ranked 1
Broker Fundings (Bil.) $31.1 $3.9 $35.0
Retail Rank 2 Not ranked 2(4)
Retail Fundings (Bil.) $22.5 $2.5 $22.5(4)
1 Pro forma including recent acquisitions.
2 Pro forma including Summit Bancorp.
3 Pro forma including Fleet Mortgage's primary servicing portfolio,
sub-servicing of Fleet National Bank's owned loans and Fleet
Mortgage's loans pending sale to investors.
4 Fleet Mortgage's retail mortgage channel, which originated $2.5
billion of loans in 2000, is not part of the transaction and is
therefore not included in the pro forma results.
||Washington Mutual, Seattle
||Libby Hutchinson, 206/461-2484
||Investor Relations Contacts
||JoAnn DeGrande, 206/461-3186
||Ruthanne King, 206/461-6421
||Media and Investor Relations Contacts
||Jim Mahoney, 617/434-9552
||John Kahwaty, 617/434-3650
||Abernathy MacGregor Group, New York
||Steve Bruce / Mary Beth Kissane