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Apr-16-2008

CtW Invest Asks WaMu Board To Demand Resignations Of 2 Directors

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CONTENTS:

Mr. Stever chairs the human resources committee. (More...)
The nation's largest thrift, which reported a $1.1 billion loss for the first quarter and has been among the hardest hit by the subprime mortgage crisis, has come under heavy fire in recent months. (More...)
The moves have done little to placate angry shareholders. (More...)
The bank set aside less than half as much to cover bad loans in the year-ago period. (More...)
AFSCME, a 1.5 million-member-strong public service employee union, also questioned the board committee's decision to exclude charges related to the subprime crisis when calculating bonuses. (More...)
Card Services Group posted net income of $199 million, which declined from $249 million in the previous year. (More...)
During the meeting, shareholders re-elected the rest of the eligible board members, according to a preliminary count. (More...)
' Lehman Brothers Holdings CEO Richard Fuld joined a growing chorus of investment bank executives in saying the worst of the credit crisis is behind Wall Street. (More...)

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Mr. Stever chairs the human resources committee. CTW claims the board's failure to manage risk cost shareholders $28 billion in 2007, as WaMu shares lost 70% of their value. Earlier this month, WaMu, the largest U.S. savings and loan, was forced to obtain a $7 billion capital injection from private equity firm TPG and other investors. It also announced plans to slash 3,000 jobs, close its 186 stand-alone home loan offices and stop offering home loans through its brokers. The bank will also reduce its quarterly dividend to cent per share from 15 cents, saving $490 million in a year. Among several demands, the labor group wanted WaMu to exclude votes cast by brokers on behalf of their clients. [1] CtW Investment Group, a part of the Change to Win federation of unions that advocates on behalf of workers' investments in pension funds, previously asked shareholders to oppose the re-election of two WaMu board members. The investor has said that the two _ Mary Pugh, chair of WaMu's finance committee, and James Stever, chair of its human resources committee _ are responsible for the bank's failure to recognize and respond in a timely manner to the housing bubble and its effects on shareholder value. Earlier this month, the Seattle bank said it would raise $7 billion in capital, cut its dividend and alter its lending operations in an effort to shore up its capital position amid mounting losses tied to deterioration in the mortgage and credit markets.[2] As Washington Mutual kicked off its annual shareholder meeting in Seattle, a shareholder group appears to have won a surprising victory in its campaign against the thrift's board. In a press release sent out yesterday afternoon, WaMu announced that Mary Pugh, who served as a WaMu director for nine years'and as chair of its finance committee for three years'resigned from the board on Tuesday. CTW Investment Group, a union-backed assemblage, had been pressuring the WaMu board to immediately demand the resignation of any director who failed to receive a majority of in-favor votes in this year's proxy voting.[1] Activist shareholder CtW Investment Group was asking shareholders to vote against the re-election of Mary Pugh, chairwoman of Washington Mutual's finance committee. "She is not standing for re-election, and we thank her for her time here," Killinger said. Anne V. Farrell, also a board member, announced she was leaving in March, Killinger said.[3] For further information, visit http://www.ctwinvestmentgroup.com/ or contact Anna Mumford at 718-710-1773. CtW Investment Group Letter: Mr. William G. Reed Chairman, Governance Committee c/o Secretary William L. Lynch Washington Mutual Corporation 1301 Second Ave. Seattle, WA 98101 April 15, 2008 Dear Mr. Reed: Washington Mutual shareholders sent an unequivocal message today that they are ready for more independent and accountable Directors. As you know, the CtW Investment Group had urged shareholders to withhold from Ms. Mary E. Pugh in response to her Finance Committee's failure to oversee risk management, and from Mr. James E. Stever for attempting to insulate executive bonuses from the consequences of that risk management failure. While we commend the Board for promptly accepting Ms. Pugh's resignation, we believe she was not the only Director who failed to win re-election.[4] To ensure the integrity of the election, we call on the Washington Mutual Board to promptly request the resignation of any Director who fails to win a majority vote, excluding broker votes. As you know, the CtW Investment Group has urged shareholders to withhold from Directors Mary Pugh and James Stever at tomorrow's meeting based on their respective failures to independently oversee risk and maintain the link between pay and performance.[5] CtW Investment Group called on Washington Mutual Inc.' s board (WM) to release full election results and asked for the resignation of any director who failed to win a majority shareholder vote. The investment group said both Charles Lillis and James Stever failed to win re-election. This request comes after the board accepted the resignation of Mary Pugh.[6]

Investment Group Calls For Resignations Of James Stever And Charles Lillis WASHINGTON, April 16 /PRNewswire/ -- Pointing to unofficial election returns showing that shareholders rejected two additional WaMu Directors, James Stever and Charles Lillis, the CtW Investment Group called on the WaMu Board to immediately release full election results and demand the resignation of any directors who failed to win majority shareholder votes. "Washington Mutual shareholders sent an unequivocal message today that they are ready for more independent and accountable Directors," said CtW Investment Group Executive Director William Patterson.[4]

Stever was re-elected. "We commend Washington Mutuals board for promptly accepting Ms. Pughs resignation and urge them to also demand the resignation of any other directors who fail to win majority shareholder support," said CtW in a statement. The company also released its first quarter results today, announcing it lost $1.1 billion, or $1.40 per share.[7] The Seattle-based thrift lost $1.40 per share, compared with a profit of $784 million, or 86 cents per share, in the first quarter a year earlier. It was the bank's second consecutive quarterly loss, but Chairman and CEO Kerry Killinger promised shareholders that Washington Mutual will turn around within a year. "I know we've got the true grit in this company. We will get through this," Killinger told more than 2,000 shareholders gathered at Seattle's symphony hall for the bank's annual meeting.[8] NEW YORK (Reuters) - Responding to shareholder criticism, Washington Mutual Inc (WM.N: Quote, Profile, Research ) said it will consider mortgage-related losses in awarding performance bonuses to top executives, including Chief Executive Kerry Killinger. The board of the largest U.S. savings and loan had decided earlier this year that its human resources committee, which sets executive compensation, would not count mortgage-related credit losses and foreclosure costs in setting the bonuses. Among other executives eligible for these bonuses were Chief Operating Officer Stephen Rotella and Chief Financial Officer Thomas Casey. Such losses, however, have largely been responsible for the $3.01 billion loss that Seattle-based Washington Mutual suffered in the six months ended March 31, including $1.14 billion in the first quarter.[9] For the first 50 minutes of Washington Mutual Inc.' s annual shareholders meeting Tuesday, Chief Executive Kerry Killinger blamed the company's billion-dollar quarterly losses, and the resulting stock-price swoon, on "the worst market downturn since the Great Depression," which was much deeper than anyone expected and which swamped the steps WaMu took to protect itself. He also said the Seattle-based consumer bank and mortgage lender is at a turning point, and has taken steps, including raising $7 billion in new capital, to put the company on the road to recovery.[10] Killinger became chief executive in 1990 and chairman the next year. He adopted a pleading tone in responding to criticism of angry shareholders, who said management and directors should be accountable for the thrifts troubles and not be awarded big bonuses to executives while shareholders suffered losses. Shareholders also faulted him for raising $7 billion of new capital at a discount to market prices from investors including the private equity firm TPG. When Washington Mutual announced that investment on April 8, it also set plans to cut as many as 3,000 jobs and cut its dividend by 93 percent.[11] WaMu posted a $1.87 billion deficit in last year's fourth quarter. Chief executive Kerry Killinger diffused some investor concern about the lender's health Tuesday by closing the deal to raise new capital from a group led by David Bonderman's Texas Pacific Group Inc. He may still have to quell dissent from shareholders unhappy with a 74 percent drop in WaMu's stock in the past year and dilution caused by the TPG investment. "We have taken decisive actions to withstand this period of unprecedented credit losses," Killinger said in the statement.[12] The Seattle-based company also confirmed it closed a previously announced deal to raise $7 billion from a group of investors led by TPG Inc., a private-equity firm Texas Pacific Group. "By issuing $7 billion of additional capital, we have taken decisive actions to withstand this period of unprecedented credit losses, while maintaining strong liquidity," WaMu Chairman and Chief Executive Officer Kerry Killinger said in a statement. WaMu said it lost $1.14 billion, or $1.40 a share, in the period, compared to its net income of $784 million, or 86 cents a share, reported during the first quarter of 2007.[13]

WaMu also said it closed the previously announced $7 billion capital issuance to TPG Capital and to other investors, including many of WaMu's top institutional shareholders. With the proceeds of the offering, the company's capital ratios are expected to remain above its targeted levels, while it absorbs elevated credit costs in its loan portfolios in 2008 and 2009. The company also intends to continue to grow its national banking franchise. To rescue itself from the misery brought about by the sub prime crisis, WaMu had to cut its dividend, reduce thousands of jobs and sell preferred shares worth $3.7 billion.[14]

The American Federation of State, County and Municipal Employees union (AFSCME) is also seeking the removal of Stever and others on the Human Resources Committee over the company's executive pay plan that "holds top executives harmless for subprime mortgage losses incurred by the company that have significantly hurt shareholder returns," it reiterated in a letter on Monday to WaMu's board. WaMu has also come under fire recently for its executive pay practices. In a March filing with the Securities and Exchange Commission, the bank outlined performance metrics for this year's cash bonuses for Killinger and other executives. The filing said that 2008 bonuses for its four top executives will exclude specific targets for loan losses, excluding credit card losses, and that WaMu's board will "subjectively evaluate" the company's performance in credit risk management. The decision to exclude credit losses from its executives performance-based criteria sparked fury among investors and analysts, particularly as the company has taken huge provisions to protect itself from souring mortgage loans. WaMu's board of directors have also decided to include "specific credit-related targets" to the performance metrics of the 2008 bonus plans for its top executives, Killinger announced at the meeting.[15] The move was announced at the annual meeting of the nation's largest thrift by market capitalization, where Chairman and Chief Executive Kerry Killinger said the director who oversaw the board's finance committee during WaMu's plunge into subprime and adjustable-rate mortgages had resigned. Shareholders voted to ask Mr. Killinger to give up his role as chairman, as the bank continued to take a financial beating, with a first-quarter loss of $1.14 billion, or $1.40.[16] WaMu announced today that they lost $1.14 billion in the first-quarter and CEO Kerry Killinger said that nothing of this scale had happened "since the Great Depression." Comforting! "Nothing of this scale has happened since the Great Depression," Chief Executive Kerry Killinger said at WaMu's annual meeting. "This is the toughest credit cycle I have seen in my years in the industry." WaMu says it will cut 3,000 more jobs, including that of Mary Pugh, chair of their finance committee who "had been fiercely criticized for failing to protect Washington Mutual from overexposure to subprime and other risky mortgages," according to Reuters.[17] NEW YORK (Reuters) - Washington Mutual Inc (WM.N), the largest U.S. savings and loan, posted a $1.14 billion first-quarter loss on Tuesday, hurt by mounting credit losses as more mortgage borrowers fall behind on payments. The Seattle-based thrift also unexpectedly announced the resignation of Mary Pugh, a director who chaired its finance committee.[18] Just lucky, I guess. After the markets closed on Tuesday, Washington Mutual announced a first-quarter loss of $1.14 billion, and the resignation of a member of its board, Mary Pugh, who had headed the board's finance committee.[19]

"No constituency is happy. This thing has hurt." He asked shareholders to "calm down" and have faith the company has opportunity for growth and "terrific days ahead." WaMu plans to place far greater reliance on its retail branch network to gather deposits, sign up credit card customers and make loans. Restive shareholders got some of what they wanted. Mary Pugh, a former WaMu executive who runs a Seattle-based money management firm, had been targeted by a labor union pension advisory group because, as chairwoman of the finance committee, she was responsible for board oversight of risk management. The advisory group recommended that shareholders withhold their votes from Pugh; under current policy, director candidates whose affirmative votes aren't a majority of those cast have to submit their resignations.[10] CTW, which represents labor investment funds holding $1.4 trillion in assets and 4.6 million shares of WaMu, has asked shareholders to withhold votes from directors Mary Pugh and James Stever at today's meeting. The union group claims that their respective failures to oversee subprime-related risk and 'maintain the link between pay and performance' should cost them their jobs.[20] CtW Investment, which advises unions holding about 4.5 million Washington Mutual shares, has urged shareholders to withhold votes for directors Mary Pugh and James Stever for 'respective failures to independently oversee risk and maintain the link between pay and performance,' the letter said.[21] "Washington Mutual Directors must not hide behind broker votes to improperly seat Directors who do not win the support of the shareholders." The CtW Investment Group has urged shareholders to withhold from Directors Mary Pugh and James Stever based on their respective failures to independently oversee risk and maintain the link between pay and performance.[5]

Pugh is a former Washington Mutual employee and her company, Pugh Capital Management, has a long-standing business relationship with the bank. She resigned before the result of the vote on directors had been declared at the bank's annual shareholder meeting yesterday, according to CtW. William Patterson, executive director at CtW Investment Group, said: 'Shareholders at Washington Mutual sent an unequivocal message that they are ready for more independent and accountable directors.[22]

Groups representing government and union pension funds with stakes in Washington Mutual said leading into the annual meeting that some board members should be held accountable for not acting to protect the company amid mounting evidence that housing prices were set to collapse. They also felt other board members should be punished for doling out fat bonuses to executives while shareholders lost money. Cannon said the company's projections concerning home loans seemed appropriately conservative, but he wondered if the bank was being too optimistic about a turnaround in its credit card business, since the first quarter earnings report showed credit card losses were growing. "The (credit card) situation seems to be getting worse," he said.[8] The company also disclosed it would post a wider-than-expected loss for the first quarter and set aside $3.5 billion for mortgage defaults and foreclosures, $1.5 billion more than previously expected. Washington Mutual is one of several financial institutions under fire for risk management and executive compensation issues this year from shareholder groups, which have also called for changes at Citigroup Inc., Morgan Stanley, Merrill Lynch & Co., and Wachovia Corp. The chair of Citigroup's audit and risk committee, C. Michael Armstrong, is expected to step down in response, according to a Wall Street Journal report.[23] CtW had urged shareholders to withhold votes from Stever in response to poor executive compensation practices and the American Federation of State County and Municipal Employees had also urged withholds from Stever and Lillis. Washington Mutual said it made a net loss of $1.1bn in the first quarter of this year following a net loss of $1.9bn in the fourth quarter of last year.[22]

Washington Mutual yesterday reported a loss of $1.14 billion, or $1.40 a share, compared with profit of $784 million, or 86 cents, a year earlier. Non-performing assets, those no longer paying interest, climbed to 2.87 percent of total assets compared with 2.17 percent at the end of the year and 1.02 percent in last year's first quarter. The lender said that most of the increase came in prime loans, those made to borrowers with the best credit.[24] Washington Mutual investors have been bracing themselves for big losses and a change in management. Tuesday afternoon, they got what they were waiting for. After the close, Washington Mutual (nyse: WM - news - people ) reported a first-quarter net loss of $1.1 billion, or $1.40 per diluted share, as it doubled its bad loan provisions to $3.5 billion.[25] NEW YORK (CNNMoney.com) -- Washington Mutual chairman and CEO Kerry Killinger endured the wrath of frustrated shareholders Tuesday, but pleaded with investors to "have a little faith" in the bank's leadership. Addressing an incensed crowd at the company's annual shareholder meeting, Killinger stressed that leadership at the Seattle-based bank was working to turn around the company, even as it provided greater details about its previously announced $1.1 billion first-quarter loss.[26] The TPG Capital investment vehicle will purchase $2 billion in newly issued Washington Mutual securities, according to a release. Washington Mutual officials say they plan to continue growth of its bank branches. 'We're very pleased that TPG and these major investors have expressed their confidence in WaMu's underlying value and its growth potential,' said Kerry Killinger, Washington Mutual chairman and CEO, in a release. 'This substantial new capital, along with the other steps we are announcing today, will position us for a return to profitability as these elevated credit costs subside.[27]

Last week the nation's largest savings and loan took $7 billion dollars from investors to help it through the credit crisis. Washington Mutual Chief Executive Kerry Killinger has said the Seattle company tried to balance its risky subprime loans by focusing more on the retail banking business.[28] April 16 (Bloomberg) -- Washington Mutual Inc. Chief Executive Officer Kerry Killinger urged shareholders of the biggest U.S. savings and loan yesterday to show some "faith.'' Some of them called on top executives to step down after a 70 percent plunge in the stock, two dividend cuts and a forecast of $19 billion more in losses on home lending.[24]

The thrift set aside $3.51 billion for loan losses, up from $1.53 billion in the fourth quarter. "Nothing of this scale has happened since the Great Depression," Chief Executive Kerry Killinger said at WaMu's annual meeting. "This is the toughest credit cycle I have seen in my years in the industry."[18] Reflecting the turmoil at WaMu's annual meeting, one shareholder told Chief Executive Officer Kerry Killinger: "You have destroyed the bank. Pugh, a director since 1999, last week told the Puget Sound Business Journal that "more could have been done, in hindsight," to reduce the ailing savings and loan's exposure to delinquent home mortgages, but that she only controlled "a single vote, and that is my own."[29] During the meeting, Killinger said the company will revise the companys 2008 executive bonus plan which has been criticized for not taking into account the banks mortgage related losses. CtW, a pension fund with shares in the bank, had called for shareholders to withhold their votes for Pugh and fellow director James Stever, who heads the companys human resources committee.[7]

Mary Pugh, 48, who served on WaMus board of directors for nine years and as Chair of its Finance Committee for three years, resigned from the board Kerry Killinger, CEO, said during the banks annual shareholders meeting.[7] Killinger, however, announced at the beginning of the meeting that Mary E. Pugh, chair of the finance committee, had resigned from the board. A shareholder initiative calling for the chairman of the board and CEO of Washington Mutual to be different people also appeared to be passing, according to Killinger, who holds both jobs. During a conference call after the meeting, he called the proposition advisory, not mandatory.[8] Washington Mutual, which is based in Seattle, made the statement on Tuesday, when it also announced the resignation of a director, Mary Pugh, the chairwoman of the companys finance committee.[11] Updated from 4:57 p.m. EDT Washington Mutual WB director Mary Pugh has resigned, the company said Tuesday at an annual shareholder meeting marked by investor anger over the company's alleged missteps in the housing and credit crises.[15] Mary Pugh, a director whose re-election was opposed by a shareholder group, resigned Tuesday, the thrift said. The ratio of Washington Mutual's nonperforming assets, those no longer collecting interest, to total assets climbed to 2.87 percent from 1.02 percent in the year-ago quarter.[12]

With a 51 percent majority, shareholders at Washington Mutuals annual meeting approved a proposal by the SEIU Master Trust to ask the lenders board to appoint an independent director as chairman. That vote was a rebuke for Killinger and his board, which has long been considered strongly loyal to him. A Washington Mutual spokeswoman said the lender, which began operations 119 years ago, would consider the proposal at its next board meeting.[11] Washington Mutual Inc., the savings and loan that received a capital infusion last week, may find one or more board members will fail to win a majority vote at the company's annual meeting today, CtW Investment Group said in a letter to the lender.[21] Washington Mutual Inc.' s (WM) board was sent a letter by CtW Investment Group demanding it request the resignation of any directors who fail to win a majority vote, excluding broker votes, at Tuesday's annual meeting.[30] WASHINGTON, April 14 /PRNewswire/ -- Citing preliminary vote tallies, the CtW Investment Group sent a letter to the WaMu Board demanding that they request the resignation of any Directors who fail to win a majority vote, excluding broker votes, at tomorrow's annual meeting. The Group also announced that its Research Director, Richard Clayton, would be in Seattle to attend the meeting.[5]

CTW Investment Group, a union-backed assemblage, wants the WaMu board to immediately demand the resignation of any director who fails to receive a majority of in-favor votes. The group also wants WaMu to exclude votes cast by brokers on behalf of their clients.[20]

"Reports that WaMu spurned a takeover offer from JPMorgan in favor of a TPG deal that permits current management to stay in place underscore the need for a strong, independent and accountable Board that will put shareholder interests first," said CtW Investment Group Executive Director William Patterson.[5] Reports that WaMu spurned a takeover offer from JPMorgan in favor of a TPG deal that permits current management to stay in place further underscore the need for a strong, independent and accountable board that will put shareholder interests first. Last proxy season, when CVS/Caremark Director Roger Headrick faced withholds of over 50% once broker votes were excluded, he promptly resigned his position.[5]

The nation's largest thrift, which reported a $1.1 billion loss for the first quarter and has been among the hardest hit by the subprime mortgage crisis, has come under heavy fire in recent months. Under even more at today's shareholder meeting: "It's no longer a WaMu board," said Scott Adams, a representative from the American Federation of State, County and Municipal Employees ( AFSCME ), who was interrupted by applause. "It's more like a Wa-Me board, short for what's in it for me. [31] After posting a $1.87 billion fourth-quarter loss and projecting a $1.1 billion loss for the first quarter, Wamu appeared to some observers to be on a track toward either bankruptcy or a takeover. For all its mortgage-related troubles -- last week it said it would post a $3.5 billion loan-loss reserve for the first quarter -- Mr. Narter said the investor group likely took a long look at its vast retail banking network, where deposits grew $8 billion in the first quarter, and saw reason to believe the Seattle thrift company would return to profitability next year. "TPG is clearly looking for the end of the storm," he said.[32] Analysts on average expected a loss of $1.40 per share after WaMu on April 8 projected a loss of that size, or equal to about $1.1 billion. The company also said it will cut 3,000 jobs, slash its dividend 93 percent, and raise $7 billion from a group of investors including private equity firm TPG Inc to shore up capital.[18]

Executives and board members heard sounds that the usual tenant of the performance hall -- the Seattle Symphony -- typically doesn't: booing, jeers, catcalls and hisses. They also heard stinging critiques of the board's and management's performance, as well as considerable applause for those who delivered the rebukes. The annual meeting came on the same day that WaMu released first-quarter results, confirming its earlier announcement that the company lost $1.1 billion, or $1.40 a share, compared with a profit of $784 million, or 86 cents a share, a year ago.[10] WaMu (WM) posted a first-quarter loss of $1.1 billion, or $1.40 per share, compared to a profit of $784 million, or 86 cents per share a year ago.[33]

WaMu also reported a first quarter loss of $1.14 billion, or $1.40 a share, down from net income of $784 million, or 86 cents a share, a year earlier.[29]

The company also announced preliminary results in a release for the first quarter of 2008, expecting a net loss of about $1.1 billion, or $1.40 per diluted share; and a provision for loan losses of about $3.5 billion and expected charge-offs of $1.4 billion.[27] The bank said it would lose $1.1 billion during the first quarter and take a provision for loan losses of $3.5 billion. The bank has also cut its quarterly dividend to 1 cent from 15 cents to further shore up capital.[27] The Seattle-based bank already said it will lose about $1.1 billion during the first quarter. It plans to reserve $3.5 billion to cover loan losses during the first quarter.[34]

SEATTLE (AP) — Washington Mutual, the nation's largest savings and loan, said Tuesday it lost more than $1.1 billion in the first quarter as the struggling economy and flagging real estate values pummeled the bank's borrowers.[8] "I want people to calm down and have a little faith." Washington Mutual, which last week estimated a loss of about $1.1 billion for the quarter, said it needed to set aside $3.5 billion to cover bad loans in its $250 billion portfolio during the first quarter.[8]

Washington Mutual says it lost more than $1.1 billion in the first quarter as the struggling economy and flagging real estate values pummeled the bank's borrowers.[13]

The bank said the first quarter's results reflect a higher level of provisioning as steep declines in home values led to further deterioration in mortgage credit markets. This month buyout group TPG Capital led a group of investors buying a $7bn ('4.5bn) stake in Washington Mutual as the bank raised capital to shore up its balance sheet following the writedowns.[22]

The consumer bank and nation's largest mortgage lender has been hit by billions in defaults. Last week it secured $7 billion in new capital, closed its standalone home loan centers and laid off 3,000 workers. Washington Mutual is one of several financial institutions under fire for its risk management and executive compensation.[35] While TPG is investing $2 billion in Washington Mutual securities, the remaining $5 billion the company is expecting will come from existing investors already working with the company and some new, undisclosed investors, said Missy Latham, spokesperson for Washington Mutual. The company has two home loan centers in North Texas and both will close, one on McCollum Street in Irving and one at Park Cities in Dallas, Latham said.[27]

The company has ranked among the largest U.S. subprime mortgage companies. Those loans go to people with the weakest credit, and default rates set records in 2007. Washington Mutual had to write down the value of its home-loan unit by $1.6 billion in the fourth quarter.[12] The following is a summary of key developments and analyst opinion related to the period. OVERVIEW: In an effort to shore up its capital position amid mounting losses tied to deterioration in the mortgage and credit markets, Washington Mutual said earlier in the month it would raise $7 billion in capital, cut its dividend and alter its lending operations. Washington Mutual reduced its dividend to 1 cent from 15 cents, which will save it about $490 million annually.[34] NEW YORK (Thomson Financial) - Washington Mutual Inc. reported late Tuesday it swung to a first-quarter net loss of $1.14 billion, or $1.40 a share, from earnings of $784 million, or 86 cents a share, in the same period a year earlier.[36] Washington Mutual posted a first-quarter loss of $1.14 billion, or $1.40 per share, compared with a year-earlier profit of $784 million, or 86 cents a share.[11]

The lender's first-quarter loss equaled $1.14 billion, or $1.40 a share, compared with profit of $784 million, or 86 cents a year earlier, the company said in a statement Tuesday.[12]

Nonperforming assets -- including delinquent and defaulted loans -- grew to nearly 2.9 percent of total assets, compared with almost 2.2 percent at the end of 2007 and barely 1 percent in the year-ago quarter. In a conference call with analysts, executives warned that the company is starting to see signs of credit-quality "stress" in parts of its prime-mortgage portfolio (including California and Florida, major markets for WaMu), indicating that borrowers' difficulties in keeping up with payments are spreading from riskier subprime loans. The second billion-dollar quarterly loss, a stock price that has fallen from more than $44 a share less than a year ago to Tuesday's close of $10.66 a share, and a cut in the quarterly common-stock dividend from 56 cents a share to a penny, put many in the crowd in a foul mood.[10] The stock is down 71 percent over the past year, thousands of employees have been laid off, and just last week WaMu effectively sold half of itself to an investor group at a bargain-basement price. WaMu executives, who declined to comment for this story, blame the company's troubles on the rapid unraveling of the U.S. housing boom last year, and investors' subsequent loss of appetite for most mortgage-backed securities. Though they saw the train coming, they say, they couldn't get off the tracks in time. Interviews with former employees and Wall Street analysts, as well as reviews of internal documents and the company's financial history, suggest WaMu's crisis is largely of its own making. WaMu aggressively stepped up its lending in some of the riskiest loan types: short-term adjustable-rate mortgages, especially so-called "option ARMs"; home-equity loans and lines of credit; and subprime loans. Over the past four years, more than half of all real-estate loans WaMu made were in one of those higher-risk categories.[37]

"The option-ARM product," Killinger said on the conference call, "is a key flagship product for our company." Unfortunately for WaMu, its flagship was precisely the kind of loan most prone to sour once the housing boom ended, mortgage rates started going up, and borrowers couldn't make their payments, refinance their loans or sell their houses. Despite selling off hundreds of billions of dollars' worth of option ARMs to outside investors (who now are watching them blow up at alarmingly high rates), WaMu still has $58.9 billion of them on its books. About $44 billion of those loans were made using the "limited documentation" standard, under which borrowers don't have to provide the full range of financial disclosure typically required of conventional borrowers. In an e-mailed statement, a WaMu spokeswoman said the bank's option-ARM borrowers must "show they can afford" the payments when the interest rate resets after the discounted introductory period. She did not respond to a follow-up inquiry about how borrowers could demonstrate that without proving their income, assets or credit history. The company acknowledges in its annual report that such loans are more prone to go sour during economic downturns.[37]

The shareholders' case was underscored a week ago when WaMu, the country's biggest savings and loan, announced it would take a $7 billion cash injection from private equity group TPG and other investors.[23] In 2007 WaMu only needed to put aside half of that amount to cover bad loans. In its earnings release, WaMu said it closed a deal to receive $7 billion in capital from a group of investors, led by private-equity firm TPG Capital.[33]

TPG, a large buy-out group, led the $7 billion injection of capital into Washington Mutual (WaMu).[38] Washington Mutual announced April 8 that the company will raise $7 billion by selling equity securities to an investment vehicle managed by Fort Worth-based TPG Capital.[27] Amid the anticipated chargeoffs and lofty loan-loss provisions at many banking companies, analysts and investment strategists say there is reason to believe the financial sector may be on the cusp of better days. They see the recent spate of capital raising on Wall Street, punctuated last week by a $7 billion infusion for Washington Mutual Inc., as an encouraging sign that equity investors, taking a long-term view, believe many banking and thrift companies are approaching a turnaround and will not be casualties of the credit turmoil. These investors try to buy stakes in companies when the prospect of recovery is in view but still distant enough that prices are low, according to Bart Narter, a senior analyst at Celent LLC, a Boston research arm of Marsh & McLennan Cos. "Private equity will find the cash if they see a bargain and if they're seeing value," Mr. Narter said in an interview last week.[32]

A board director at Washington Mutual, the U.S. regional bank, has resigned following a campaign led by CtW Investment Group, an umbrella body that represents union pension funds, against banks that have written down billions of dollar related to the credit crisis.[22] Washington Mutual was unavailable for comment. Other banks on CtW Investment Group's sub-prime director focus list are Citigroup, Merrill Lynch, Bank of America, Wachovia and Morgan Stanley.[22]

CtW alleges that as heads of WaMu's committees responsible for risk management oversight and compensation plan design, the two directors "bear responsibility for Washington Mutual's failure to recognize and act in a timely manner on the risks to shareholder value presented by the housing bubble," it said in a March letter to other WaMu shareholders that was also released to the public. CtW alleged that the two directors played a part in "attempting to insulate executive bonuses from the consequences of this risk management failure."[15] "Washington Mutual has become the poster child of board failure to protect shareholders," said Dennak Murphy, a representative of the Service Employees International Union, in introducing a shareholder resolution to split the job of chairman and chief executive, titles Killinger currently holds. Washington Mutual "is no longer a WaMu board -- it's a WaMe board" said Scott Adams of the American Federation of State, County and Municipal Employees.[10] Washington Mutual Chief Executive Kerry Killinger and Stephen Frank, a board member, responded in a letter to shareholders that the company balanced risk by focusing more on the retail banking business starting in 2004.[23] Washington Mutual Chief Executive Kerry Killinger says the company tried to balance risk by focusing more on the retail banking business starting in 2004. It said last year it would exit the subprime business completely. WaMu stock is down more than 4 percent in this morning's trading.[35]

Washington Mutual shares rose 10 cents to $10.76 in after-hours trading. They had closed Tuesday up 31 cents, or 3 percent, at $10.66 on the New York Stock Exchange. Through the close, the shares have fallen 22 percent this year.[18] Washington Mutual shares rose 10 cents to $10.76 in after-hours trading. They had closed Tuesday up 31 cents, at $10.66. Through the close, the shares have fallen 22 percent this year. This article is copyrighted by International Business Times.[13] Washington Mutual's shares ended Tuesday up 31 cents, or 3 percent, to $10.66. In the last year they have traded between $44.66 and $8.72.[8]

"Why are you not being held accountable?'' Shareholders voted to remove Killinger from the post of chairman. Killinger took heated questions from holders over the deal he struck with a TPG Inc. -led group to raise $7 billion, almost doubling the shares outstanding. The Seattle-based lender slashed its dividend to 1 cent and the stock has fallen 73 percent in a year.[24] Shareholders' concerns about lackadaisical risk-management practices and lackluster stock performance came to a head last week after the company revealed plans to raise $7 billion by selling a stake to an investment group led by the private-equity firm TPG.[26]

The efforts by shareholders predated WaMu's startling news that it would receive $7 billion in cash from TPG and a number of existing investors, in a deal that would significantly dilute existing shareholders' stakes.[23] Institutional investors as well as current and former employees blasted the company's leadership, at times calling for Killinger's head. "What you've got to do is what real men do - when you face a situation like this you stand down," said one gentleman, whose remarks drew applause. Others questioned management's decision to raise capital from outside investors, asking why the company turned down a recent bid of about $7 billion from JPMorgan Chase, which was reported in the Wall Street Journal. "JPMorgan would make this company grow," said one current employee and shareholder.[26] WaMu Chairman and CEO Kerry Killinger faced some tough questions about the company's downward spiral and the recent decision to raise $7.2 billion in capital on terms that were criticized by several shareholders.[39]

Facing further deterioration in the company's home-equity and home-loan portfolios as well as rising delinquencies, WaMu said it was forced to set aside more money for bad loans. Killinger defended the plan to raise capital, telling analysts in conference call following the shareholder meeting that it was both a defensive move and a way of positioning the firm to capitalize on future opportunities. Those moves failed to calm angry investors on Tuesday.[26] The company had recommended shareholders vote against the measure. Earlier in the meeting, Killinger said the 2008 executive bonus plan, which has been roundly criticized for not taking into account WaMu's mortgage-related losses, will be revised to do so, though he didn't offer specifics. He predicted that a year from now, this month would be seen as a turning point for WaMu[39] While WaMu (NYSE: WM) executives stated at the meeting that all remaining directors had received a majority of the shareholder vote, an unofficial early tally provided by the company's proxy agent suggested otherwise.[29]

CtW also recommended withholding votes from directors Robert Kidder and Howard Davies as members of the audit committee following the bank's $9.4bn in sub-prime-related writedowns. At the meeting this month, Mack and all the other directors nominated on the proxy statement received at least 90% of shareholder votes in favor of reelection, according to a preliminary report.[22] Earlier today, director and finance committee chair Mary Pugh, who was responsible for monitoring the bank's risk management, resigned under pressure. Several shareholder groups and proxy watchers, including Proxy Governance, ISS and Change to Win (CtW) had all called for shareholders to withhold votes for her reelection.[31] CtW Investment Group has asked shareholders to vote against the re-election of Mary Pugh, chairwoman of WaMu's finance committee.[23] The resignation of Mary Pugh, who chaired WaMu'''s finance committee, represents a victory for shareholder groups seeking boardroom accountability for banks''' huge mortgage-related losses.[40] "The way we are going now is destructive." Shareholder activists did appear to walk away with one victory, as Mary Pugh, the head of the company's finance committee announced her resignation.[26] Trading assets for the two periods were $2.483 billion and $5.290 billion, respectively. The struggling thrift announced the resignation of Mary Pugh, a director who chaired its finance committee.[14] With the exception of Mary Pugh, whose resignation was announced at the start of the meeting, a preliminary vote count showed the directors received a majority of votes, Killinger announced from the stage. Pugh and director James Stever had come under particular fire for their roles chairing the board's finance and compensation committees, respectively.[39] Not only has CtW attempted to oust CEOs, including a failed campaign against Morgan Stanley's John Mack, but it has also focused attention on board members as well. Its most recent push is at WaMu where it is seeking the removal of directors Mary Pugh and James Stever, who deserve particular blame for WaMu's troubles, CtW argues, because they headed the directors' committee directly charged with overseeing risk.[41]

Ms. Pugh oversees the board's finance committee and Mr. Stever chairs the human resources committee. In a letter to WaMu director William Reed, chairman of company's governance committee, made public earlier today, CTW claimed its 'preliminary tallies' indicated that one or more directors may fail to win majority support at today's meeting.[20] Pugh, chairwoman of the bank's finance committee and a director since 1999, and fellow Director James Stever, chairman of WaMu's human resources committee, have come under fire from investors in light of losses the nation's largest thrift has taken as a result of the mortgage meltdown and housing decline.[15] The cash injection will help to shore up the bank's capital levels as it struggles with heavy losses on mortgage lending. The private-equity investment demonstrates the confidence these major investors have expressed in WaMu's underlying value and its growth potential, said WaMu CEO Kerry Killinger.[25] Citigroup Inc. got a $7.5 billion infusion from the investment arm of the Abu Dhabi government in November, and since last fall Merrill Lynch & Co. Inc. has raised nearly $13 billion from various sources, including the Kuwait Investment Authority. Though capital appears to be readily available, some companies stung badly by mortgage bets may be left to twist in the wind if they cannot prove to equity investors they have redeeming value, as Wamu apparently did with its retail network, Nancy Bush, the president of NAB Research LLC, said in an interview last week. At least a few companies are bound to follow the paths of Countrywide Financial Corp. and Bear Stearns Cos., which, left with no other alternatives, put themselves on the block at fire-sale prices, she said; others will simply go under. This could be the year that "the egregiously dumb banks die," Ms. Bush wrote in a research note last week.[32]

WaMu said the quarter's provision for loan losses increased to $3.51 billion, which "reflects an increase in delinquencies as the economy weakens, as well as a higher level of losses as home prices declined sharply from the start of the year." The bank also said that its managed net credit losses also increased, "reflecting the weakening economy and higher unemployment."[29] At the end of last year more than 56 percent of WaMu's loan portfolio, $138.4 billion, consisted of option ARMs, home-equity loans and subprimes. One analyst estimates that, largely due to such loans, more than $16 billion in future losses are embedded in WaMu's books.[37]

WaMu set aside $3.51 billion of provisions to cover potential loan losses as the economy and mortgage values continue to deteriorate.[13] WaMu's greater risk tolerance wasn't confined to the loans it made itself. In 2004, Dale George was a WaMu senior credit-risk officer in Irvine, Calif. Part of his job entailed assessing the financial condition of outside mortgage brokers to whom WaMu lent money to make loans. Such "warehouse lending" brought in billions of dollars in loans for WaMu to bundle up and resell. In an interview, George recalled he was asked to look at one Pennsylvania brokerage that did a lot of subprime business and was up for a $5 million loan. Because the firm's revenues and profits had fallen sharply, and because George believed the real-estate mania was already getting out of hand ("When things go south, they go south very quickly," George said), he recommended downgrading the firm's risk rating. That would have required WaMu to set aside money in case the brokerage couldn't repay its loan. His bosses weren't pleased. "They told me, 'Just do the write-up and sign off on it,' " he said.[37] Even with more than 2,000 branches in 15 states, said Jim Bradshaw of D.A. Davidson brokerage, WaMu didn't have enough cheap funding in the form of savings and checking accounts to write all the loans it wanted. It chose to loosen its own lending standards, buy loans from other banks and pay independent brokers to hustle up loans on its behalf. "It was easier to gear up on the production volume than it was to build branches," Bradshaw said. "They were building new branches like crazy for a while, and they still couldn't grow deposits at the same rate they were growing loans." Unfortunately for the buyers of those securitized mortgages, the performance steadily deteriorated as the housing boom reached then passed its bursting point last year. For analyst Bove, all this has a familiar ring: The mortgage business went through a similar, though smaller, boom-and-bust in the early 1990s. "All of these companies run into the same problem which is, ultimately, that poor people can't pay above-market mortgage rates," he said. "But every cycle, companies think they've figured out a way to underwrite these loans."[37] Banks of all sizes have been hit hard since the middle of 2007 with rising delinquencies and defaults among mortgages, especially home equity products and subprime mortgages - loans given to customers with poor credit history. Washington Mutual, formerly one of the nation's largest subprime lenders, said it will no longer accept mortgages from brokers through its wholesale lending channel. It will also close its freestanding home loan offices. It will instead focus its mortgage origination efforts through its retail bank branch and call center operations.[34] The rapid fall of Washington Mutual is one of the sadder Seattle business sagas. the venerable savings and loan has seen its market value drop an alarming 75-percent over the past year because of bad bets in the subprime market that went supernova. I talked to CEO Kerry Killinger a year and a half ago for my weekly CEO Spotlight series, and as the first reverberations were being felt from the trembling mortgage market, Killinger said they were being aggressive about lestening the banks exposure to risky home loans.[42]

Seattle-based Washington Mutual predicted uncollectible single-family home loans may be $12 billion to $19 billion in the next three to four years.[43] Washington Mutual said it could lose as much as $19 billion in the next three to four years on home loans depending on U.S. economic conditions.[24]

The company expects a 19 basis point increase in the net interest margin for the first quarter of 2008 to 3.05 percent, up from the fourth quarter of 2007, according to a release. Washington Mutual also expects its total deposits to increase about $6 billion, with an $8 billion increase in retail deposits, and a 15 percent increase to $1.6 billion from the last quarter of 2007 in noninterest income, according to a release.[27] The Seattle, Washington-based company reported a first quarter net loss of $1.14 billion or $1.40 per share, compared to net income of $784 million or $0.86 per share during the first quarter of 2007.[14] Results were in line with analysts expectations of a loss of $1.40 a share, after the bank said on April 8 that it projected a loss of that size, or equal to about $1.1 billion. The company also plans to cut 3,000 jobs and cut its dividend 93 percent.[13]

As expected, WaMu also on Tuesday recorded a first-quarter loss of $1.14 billion, or $1.40 a share, reflecting a higher level of provisioning as steep declines in home values led to further deterioration in mortgage credit markets. It also announced that it had closed the TPG deal.[15]

NEW YORK - Washington Mutual Inc. reported a first-quarter loss of $1.14 billion late Tuesday, as the lender continues to suffer from the mortgage meltdown and credit crisis.[13] Washington Mutual Inc., the Seattle-based thrift that recently secured a $7 billion capital infusion, posted its second consecutive quarterly loss as more customers fell behind on their mortgages.[12]

A product-by-product review of Washington Mutual's mortgage portfolio indicates the bank could lose between $17 billion and $23 billion from defaulting mortgages, Fotheringham wrote in a research note.[34]

Delinquencies in the division rose, a result that the company blamed on economic weakness and higher unemployment. WaMu also revealed that its results were helped by an $85 million gain from last month's record-setting Visa IPO. Washington Mutual is the second of six national banks and brokerages, including Citigroup ( C, Fortune 500 ), Merrill Lynch ( MER, Fortune 500 ) and JPMorgan Chase ( JPM, Fortune 500 ), due to report results this week.[26] Fotheringham estimates Washington Mutual will now lose $3.30 per share in 2008, compared with a previous estimate of a loss of $1 per share. His 2009 estimate is now for the bank to break even and to earn $1.25 per share in 2010.[34] Washington Mutual sold about 176 million shares of common stock to TPG at $8.75 per share, according to a release.[27]

Larry Kellner, chairman and CEO of Continental Airlines and former executive vice president and CEO of American Savings Bank, will become a board observer at the request of TPG, according to a release. Washington Mutual also announced several strategies to increase capital, including reducing the quarterly dividend rate to.01 cents per common share from.15 cents per common share, its most recent figure, according to a release.[27]

Despite sharp rebukes from shareholders during a question-and-answer session, Washington Mutual's board of directors was re-elected, according to a preliminary vote count announced during the meeting.[8] WASHINGTON -- A Washington Mutual Corp. shareholder, seeking greater accountability from the troubled bank, called for the resignation of any director whose re-election bid does not receive a majority of the votes cast at Wednesday's annual shareholder meeting.[2]

SEATTLE (AP) — Activist shareholders' attempts to unseat several Washington Mutual Inc. board members will come to a vote Tuesday when the thrift, badly battered by the subprime mortgage crisis, holds its annual meeting and reports what are expected to be abysmal first-quarter results.[23] Washington Mutual shareholders re-elected 12 board members at a contentious annual meeting today, but a narrow majority also endorsed a call for separating the jobs of chairman and CEO.[39]

SEATTLE -- Washington Mutual reports quarterly earnings tomorrow and holds its shareholders meeting in Seattle (at 1 p.m. at Benaroya Hall) where angry stockholders may try to unseat some board members.[35]

As Washington Mutual prepares to kick off its annual shareholder meeting today in Seattle, a shareholder group is increasing the pressure on the thrift's board.[20]

"The board of directors will take that into consideration," Killinger said, adding that nothing would change immediately. Fred Cannon, an analyst with Keefe, Bruyette & Woods, said he thought that statement was one of the most surprising developments in the Washington Mutual story this week, particularly since analysts were told about the poor results a week ago. "I think the story is what's going on with the shareholder vote and those corporate governance issues," Cannon said.[8] Under current NYSE rules, brokers may vote on behalf of certain shareholders in director elections. Last year such votes accounted for over 19% of the total at Washington Mutual. Given their potential to distort election results, the NYSE has attempted to change its rules to eliminate broker votes in director elections, but the SEC has so far failed to act on the proposal.[5]

Angry shareholders on Tuesday forced the resignation of a senior director at Washington Mutual as the chief executive of the troubled mortgage lender said market conditions were the worst since the Great Depression.[40] Washington Mutual Inc., under pressure from shareholders, will revise an incentive-pay program that shielded executives' cash bonuses from some costs tied to mortgage losses and foreclosures.[16] Washington Mutual had previously said 2008 bonuses for Killinger and other top executives may be shielded from the company's mortgage losses by excluding some loan-loss provisions for calculations.[24]

Washington Mutual is also one of the largest U.S. home loan providers. Speaking at Washington Mutual's annual meeting, Killinger said the human resources committee will "incorporate specific credit-related targets for which we are accountable" in setting executive bonuses, and that he supported the change.[9] Washington Mutual, the nation's largest savings and loan, said the head of the board's finance committee quit after the lender posted its second straight quarterly loss.[43] At Washington Mutual, CtW questioned the position of Mary Pugh, the only non-independent outside director, as chairwoman of the finance committee.[22] In a letter sent to the board on March 27, Change to Win argued that, as head of the finance committee, Pugh should have steered Washington Mutual away from riskier subprime waters.[19]

Killinger also announced on Tuesday that Mary Pugh, the head of the finance committee of WaMus board is stepping down.[13] Mary Pugh, head of the board's finance committee, quit under pressure Tuesday and shareholders voted to split Killinger's role of chairman and CEO.[43]

Activist shareholders who were pushing to oust WaMu's finance committee chairwoman, Mary E. Pugh, had something to celebrate.[25] Mary E. Pugh, chairwoman of the bank's finance committee, stepped down before the start of WaMu's volatile annual meeting in Seattle.[29]

"We believe the finance committee ought to have been pushing back much harder than it did," said Richard Clayton, CtW's research director, in an interview. CtW questioned Pugh's independence, given her investment management company's business relationship with WaMu.[23] CtW Investment also questioned Pugh's independence as a director, since WaMu was a former client of Pugh's fixed-income money management firm, Pugh Capital Management.[15]

Proxy advisory firms RiskMetrics Group, Glass Lewis, Proxy Governance and Egan Jones agree and each is calling on investors to withhold support for one or more WaMu directors. It remains to be seen if these advisers'or activist investors like CTW'can actually sway corporate elections. Other high-profile campaigns this year, such as the one staged against directors at investment bank Morgan Stanley, failed to gain support from shareholders.[20] CtW Investment Group, an activist pension fund investor, and other activist investors had called on shareholders to withhold votes for Pugh and Stever.[15] According to that tally -- released by union pension advisory group Change to Win Investment Group, which has lobbied against the company's board -- directors James Stever and Charles Lillis did not receive a majority of the shareholder vote.[29] The American Federation of State, County and Municipal Employees has urged shareholders to withhold from Mr. Stever and others on the Human Resources Committee. With early returns showing high withholds, we fear the Board may rely on "phantom votes" - those cast by brokers exercising discretion over uninstructed client shares - to improperly seat defeated Directors. We estimate that such votes accounted for 19% of the votes cast in the company's 2007 director election.[5] "Mr. Stever and other directors stressed the difficulty of determining an objective target for credit loss and foreclosure cost mitigation, and the importance of retaining talented executives," the group said. "We find these arguments unconvincing." A second group, the American Federation of State County and Municipal Employees, has asked shareholders to withhold votes from the board's entire five-member human resources committee, including Stever.[23]

Several shareholder advisory services had called on shareholders to withhold votes from one or more directors, including Pugh and James Stever. The latter leads the human resources committee, which sets executive compensation.[18] Director; Votes For; Votes Withhold; Percent Withheld Charles M. Lillis; 252,712,540; 264,682,272; 51.2% Mary E. Pugh; 197,378,364; 320,016,448; 61.9% James E. Stever; 254,195,288; 263,199,525; 50.9% As indicated above, preliminary returns show a majority of shareholders also withholding from Directors Stever and Charles M. Lillis - who were also opposed by AFSCME - once uninstructed broker votes are discounted. Such broker votes - those cast by brokers exercising discretion over certain client shares - have been described as "legalized ballot box stuffing" since most brokers reflexively support management. The NYSE has proposed their elimination in director elections for this reason.[4] CtW said shareholders also rejected directors James Stever and Charles Lillis as preliminary returns showed that shareholders withheld 51.2% of votes from Lillis, 61.9% from Pugh, and 50.9% from Stever.[22] Proxy advisers including RiskMetrics Group's ISS Governance Services, Glass Lewis & Co. and Egan Jones Proxy Services have joined CtW and AFSCME's campaign. Richard Ferlauto, director of corporate governance for AFSCME, said in an interview that after informal conversations with shareholders he expects "significant support." CtW's Clayton said he was "guardedly optimistic" that a majority of voters will oppose Pugh and Stever's re-election.[23]

The moves have done little to placate angry shareholders. CTW claims the board's failure to manage risk cost shareholders $28 billion in 2007, as WaMu shares lost 70% of their value. [20] Ousting directors charged with managing WaMu's exposure to risky mortgages won't restore the $28 billion or so in shareholder value that has evaporated between the end of 2006 and the close of trading Friday.[23]

Unfortunatly, the moves weren't swift enough to escape the cracks opening up underneath what had been a solid foundation for many years. Last year, WaMu suffered its first annual loss since 1984. 67-million dollars. thanks to a 1.8-billion dollar hole in the fourth quarter. Those fault lines are expanding rapidly. Killinger will report to shareholders today a loss of more than three billion in the first quarter, and Goldman Sachs predicts a loss this year of at least 11-billion dollars.[42] Addressing Killinger directly, Lannoye said: "You have destroyed the bank. Killinger did get an endorsement from Amber Gravett, who identified herself as both a WaMu employee and shareholder. She said Killinger had "fiercely protect(ed) the independence of Washington Mutual" from banks looking to gobble it up. Acknowledging that she herself might get booed for such a comment, she said Killinger and his team "are doing a wonderful job."[10] Washington Mutual Inc. CEO Kerry Killinger announced that WaMu was back on the "path of profitability" and that the housing crisis has had a profound affect on the bank even though it tried to prepare for the crunch. "It has been a very difficult period for all financial institutions.[3]

How fast the mighty fall. During Black History Month in February 2007, the Seattle Press-Intelligencer profiled Pugh, who runs her own fixed income investment company, Pugh Capital Management. Back then, Washington Mutual CEO Kerry Killinger would reminisce about how the two of them would make major investment decisions while playing horse at a basketball hoop set up near her corner office. "She would very often make smarter investment decisions than what the guys were doing on Wall Street," said Killinger.[19]

NEW YORK - A Washington Mutual Inc director resigned on Tuesday under pressure from shareholders who have faulted the company for its declining market value amid a sharp housing downturn. Get stories by e-mail on this topic.[7] When Washington Mutual's shareholders gather at Benaroya Hall on Tuesday, they'll confront a company in full crisis mode.[37]

At the Washington Mutual annual meeting today, the score on three key shareholder issues was activists three, bank zero.[31] SEATTLE -- Washington Mutual is holding its shareholders meeting in Seattle and announcing quarterly earnings after the market close.[28]

In letters to the thrift and shareholders, CtW argued that Washington Mutual's shift away from traditional mortgages and toward subprime, adjustable-rate and other higher-risk mortgages was ill-advised.[23]

My home mortgage is serviced by Countrywide and my bank is Washington Mutual. You would be hard put to find two companies that bet more recklessly on the housing boom, or were up to their necks deeper in risky subprime loans and exotic adjustable rate mortgages. Of course, I was unaware of these facts when I first started covering the housing bust.[19] Criticism also came from Lee Lannoye, Washington Mutual's former chief credit officer, who said the company loaded up on risky subprime loans that continue to punish earnings.[10] Credit cards, another indicator of consumer health, are showing signs of stress, Washington Mutual said. The company expects to see net losses in its credit card business of 9.5 percent to 10.5 percent.[24] In February, Washington Mutuals human resources committee, which sets executive pay, decided not to count mortgage-related credit losses and foreclosure costs in setting bonuses.[11]

Last month, the board's HR committee further enraged some shareholders when it shielded the 2008 bonuses for WaMu executives by rejiggering pay formulas to exclude the impact on profit of any further housing-related loan losses.[20] Maybe. Or it's possible investors are mostly upset with WaMu's recent revisions to its bonus plan for top executives. In March, WaMu enraged some shareholders when it announced it had rejiggered its executive pay formulas to exclude the impact on profit of any further housing-related loan losses.[1]

WaMu, despite being one of the nation's biggest home lenders, struggled to increase profits because of operational missteps incompatible technologies inherited from numerous acquisitions, a bungled hedging program, and delays in processing loan applications. In an Oct. 21, 2004, conference call, Chief Executive Kerry Killinger assured analysts and investors WaMu was turning around its lagging mortgage division. A key initiative, he said, was writing a lot more adjustable-rate mortgages, or ARMs especially option ARMs, a relatively new type of loan. With standard fixed-rate mortgages, the monthly payment is set to pay off both the loan balance and interest within the term of the loan typically 30 years.[37] Complaints from appraisers and an investigation by New York's attorney general say WaMu leaned on appraisers to inflate property values to support bigger mortgages. In August 2004, WaMu loosened its standards for fronting money to third-party mortgage brokers, allowing brokers with heavier debt loads to make more loans. WaMu, in public statements and investor presentations, stresses it first warned of a housing bubble in mid-2005 and sold billions of dollars' worth of the riskiest mortgages off its books. It continued to make new higher-risk loans at a fast clip until well into 2007 when the resale market for them abruptly evaporated.[37]

WaMu still has $19 billion of subprime loans, $43 billion of second-lien home equity credit and $58 billion of option-ARMs, Moody's Investors Service said April 10. Those loans include characteristics that make them more vulnerable to default, Moody's said.[12] WaMu made billions of dollars' worth of loans with only "limited documentation" of the borrowers' income, net worth or credit history. Such loans often called "liar loans" or "NINJA loans," for "no income, no job or assets" make up three-quarters of its $58.9 billion option-ARM portfolio.[37]

WaMu as the bank is known announced an agreement last week to raise $7 billion in capital by selling new stock to strengthen the companys balance sheet.[7] WHAT'S AHEAD: Goldman Sachs Group Inc. analyst James Fotheringham said the $7 billion capital raising effort should be sufficient to alleviate any cash reserve issues. The capital raising will dilute the company's stock, which led Fotheringham to slash his earnings forecasts for 2008, 2009 and 2010.[34]

The Wamu infusion brought the total raised by banking and brokerage companies since August to $142 billion, according to data compiled by Bloomberg News. This month Lehman Brothers said it raised $4 billion of capital through the sale of convertible preferred stock.[32]

WaMu's fourth quarter net loss was $1.87 billion or $2.19 per share.[14] Tuesday'''s report could disappoint the market, as analysts polled by Thomson Financial were looking for a smaller loss of $1.05 per share. Much of the loss stemmed from the bank being forced to set aside $3.5 billion to cover bad loans in its $250 billion portfolio.[33]

The first-quarter loss equaled $1.14 billion, or $1.40 a share, compared with profit of $784 million, or 86 cents, a year earlier.[43] WaMu, as the thrift is known, said the quarterly loss equaled $1.40 per share, and compared with a year-earlier profit of $784 million, or 86 cents.[18]

The company's net income plunged to $115 million or 86 cents per share from $554 million or $3.82 per share in the year-ago period.[14]

Shares of Johnson Controls Inc., which makes building and automotive systems, rose Wednesday after the company reported a 27 percent jump in fiscal secon. Agricultural chemicals and seed company Monsanto Co. said Wednesday its board approved a plan to repurchase up to $800 million in common stock over the n.[7] A group led by TPG Inc. of Fort Worth bought at least 40% of Wamu's stock at $8.75 a share, or a discount of about 30%, and landed a seat on the board.[32]

CTW Investment Group, which advises unions holding about 4.5 million shares, sent a letter Monday saying the company spurned a takeover by JPMorgan Chase & Co. in favor of the infusion from TPG, which diluted the stake of existing shareholders.[12] At Morgan Stanley, CtW Investment Group led a campaign to separate the role of chairman and chief executive, and urged shareholders to vote against John Mack to convey that message to the board.[22]

Shareholders aren't pleased with the results, and groups representing government and union pensions that have made large wagers on WaMu are pushing for the ouster of two key board members. The impact of the move may be more symbolic, there is no getting back the 28-billion dollars in lost shareholder value from the past year and a half, and WaMu is certain to have a new significant minority stakeholder in TPG, but the message will be made plain and clear to WaMu execs that there will be more pressure on their jobs. That may be a safer bet than a short-term c-d.[42] Groups representing government and union pension funds say some board members should be held accountable for not acting to protect the company amid mounting evidence that housing prices were set to collapse. Others should be punished for doling out fat bonuses to executives while shareholders lost money, they say.[23]

Killinger acknowledged that "no constituency is happy" with the company's results but asked stockholders to "have a little faith." Several proxy advisory firms had urged shareholders to withhold their votes from various board members.[39] Shareholders took WaMu CEO Kerry Killinger and the company's board to task for the weakened stock price and passing up an offer from JPMorgan Chase.[26]

We therefore urge the Board to immediately disclose detailed election returns, and to demand the resignation of any other Directors who failed to win majority shareholder support, excluding uninstructed broker votes. Getting to the bottom of this matter is particularly important given WaMu's majority vote policy, as high withholds cannot be dismissed as mere symbolic efforts, but rather indicate unambiguous shareholder opposition to a Director's continued service.[4] Brokers are able to vote on behalf of clients who do not fill out ballots. CtW estimates these types of votes accounted for 19 percent of total votes cast at last year's WaMu meeting, and that without them, some directors would not have received a majority mandate to serve.[2] 'To ensure the integrity of the election,' CTW added, WaMu should only count non-broker votes. The union argues that brokers, who are able to vote shares when they haven't received instructions from clients, counted for 19% of the votes cast in WaMu's 2007 director election.[20]

The letter said 'phantom votes' from brokers exercising uninstructed shares might 'improperly seat defeated directors.' Calls to Seattle-based Washington Mutual's spokesman Derek Aney were not immediately returned.[21] Shares of Washington Mutual traded up 31 cents Tuesday, or 3.0%, to close at $10.66.[25] Washington Mutual rose as much as 4 percent in New York Stock Exchange trading before falling 19 cents to $10.47 at 10 a.m.[24] STOCK PERFORMANCE: Shares of Washington Mutual fell 24 percent during the first quarter.[34] Washington Mutual, also known as WaMu, came under fire for rejecting a bid by JPMorgan Chase & Co., the third-largest U.S. bank, in favor of the share sale.[24]

At the end of the fourth quarter, Washington Mutual said the most it would set aside would be $2 billion.[24] Provision for loan losses rose to $3.51 billion from $1.53 billion in the fourth quarter and $234 million a year earlier.[36] For the largest U.S. savings and loan, provision for loan losses in the just concluded quarter surged to $3.511 billion from $234 million reported in the year-ago period.[14]

The lender set aside $3.51 billion for loan losses, up from $1.53 billion in the fourth quarter.[11]

Home-loan volume was $13.8 billion in the first quarter, down from $19 billion in the fourth quarter as the lender made fewer home-equity loans and adjustable-rate mortgages.[24] Net interest income for the first quarter advanced to $2.175 billion from $2.081 billion in the previous year.[14] Non-interest expense for the first quarter of 2008 rose to $2.152 billion from $2.105 billion.[14]

Far, the bank has only absorbed about $3 billion in losses, so Fotheringham predicts it will need to take an additional $14 billion in loss provisions during the remaining quarters of 2008.[34] The world's biggest banks have recorded $245 billion in asset writedowns and credit losses since the beginning of 2007 amid a slump in U.S. home prices and a credit-market contraction.[24]

Shares have fallen 72%, as the nation's largest thrift has been forced to recapitalize twice in the past four months, culminating in the events of last week, where a consortium of investors led by private equity firm TPG agreed to sink $7 billion into the struggling bank.[15] WaMu has 50 branches, $1.69 billion deposits and a 5.36 percent market share in Central Florida, according to the most recent FDIC data.[29] Held back by costs to spin off a unit, first-quarter net income declined 12 percent to $1.44 billion, or 25 cents a share, from $1.64 billion, or 28 cents, a year earlier, Intel said.[43]

Retail Banking Group reported a net loss of $1.043 billion, compared to profit of $576 million in the previous year.[14] Net interest income for the Commercial Group dropped to $196 million from $211 million and the group reported a non-interest loss of $8 million, compared to non-interest income of $15 million last year. Home Loans Group net interest income rose to $250 million from $244 million, while its non-interest income jumped to $319 million from $161 million.[14]

According to the old standards, brokers with more than $10 of debt for every dollar of net worth fell in the "watch" category, calling for a 1 percent loss reserve. More than $15 of debt for each dollar of net worth meant their loans were considered "impaired" calling for 5 percent of the loan amount to be put in WaMu's loss reserve. WaMu revised its rules in August 2004 to make acceptable any leverage ratio of 15-to-1 or less.[37] Pugh'''s departure came as WaMu reported a $1.1bn Q1 loss, reflecting a doubling in provisions for troubled loans to $3.5bn.[40]

Under the older, more conservative risk-rating system, a $10 million loan to a broker with a 15-to-1 debt ratio carried a $500,000 loss reserve.[37]

The company had average loans of $26.7 billion in that unit, according to the statement.[24] In 2006 and 2007, about half of all option ARM borrowers made minimum neg-am payments. Far from disappearing, those skipped interest and principal payments were added to the total amount borrowers owed and became assets on WaMu's balance sheet: The company booked nearly $2.5 billion in 2006 and 2007.[37] Congratulations to the WaMu shareholders. Now we need them to take their fire to all the other corporations whose executives view the company they're employed by as their own personal bank account.[31] "You should have taken the JPMorgan offer of $8 a share,'' a shareholder said. "JPMorgan would make this company grow into something we could all be proud of.''[24] Just last week, the company raised $7.2 billion from a consortium of private-equity firms and outside shareholders.[39]

The loss was in line with the companys forecast and matched analysts average forecasts. It came on top of a $1.87 billion loss in the previous quarter.[11] At the time, the company also said it would suffer a $1.1 billion loss.[26]

During the quarter, net charge-offs increased to $1.368 billion from $183 million in the same period last year.[14] In the same period last year, the company reported a profit of $784 million. The company revealed plans to cut its dividend to 1 cent from 15 cents.[26] The company pointed to a few positive points in the report, including growth in retail deposits and checking accounts, as well as expansion of net interest margins. The company also hopes to reduce expenses by at least $550 million a year from its plans to close all its home-loan centers, a move that will cut as many as 3,000 jobs.[10]

The bank set aside less than half as much to cover bad loans in the year-ago period. With the housing market suffering and the economy slowing, more consumers are missing payments on their bills, the company said. Killinger outlined the company's strategy for working through the mortgage crises: aggressive marketing of credit cards, continued growth in services to small businesses, and ongoing improvement in deposits at its retail branches. "We have a very solid foundation for success," he said. [8] TPG is also among a trio of big-name private-equity firms (Apollo and Blackstone are the others) that are reportedly negotiating with Citigroup to snap up $12 billion-worth of leveraged loans that have been stuck on the bank's balance sheet since the credit Markets ]] Markets froze.[38]

The provision for loan losses surged to $3.5 billion; the thrift set aside less than half as much to cover bad loans in the year-ago period.[12] WAMU is pretty guilty for writing lots of no doc loans when the economy was good. They quoted to a friend of mine for a no-doc loan with a sickening $7500 loan processing fee. As long as they paid the fee, the loan was theirs. Looks like they need some reform on looking the other way.[17] All told, short-term ARMs made up nearly a third of all home loans WaMu originated in that period. The company earned hefty fees for bundling the loans and selling them off to investors; the neg-am feature also swelled WaMu's coffers.[37] Critics claim that Pugh failed to protect the company from risky mortgages, along with subprime loans and adjustable-rate mortgages, which have all the companys finances in bad shape.[13] Critics had charged that Pugh and her committee did not do enough to steer the company away from high-risk loan products like subprime and adjustable-rate mortgages.[26]

Several shareholder advisory services had urged shareholders to withhold votes from Pugh, who was accused of not shielding the company enough from risky mortgages.[14] The bank's succumbing to executive pay criticism, the departure of Mary Pugh, and the high vote on the CEO-Chairman role is one more indication of a new era of shareholders' weight in the often arcane world of corporate governance. Just don't expect them to rest on these wins.[31] Not on your life. Corporate bylaws often hide rules that protect the board and executives from angry shareholders and hold them harmless from proxy votes that don't go their way. The hubris that WaMu's board showed when it tried to hold their executives above the subprime mess only shows how far these liars and criminals are willing to go.[31]

CtW and others also objected to the way WaMu's board formulated executive bonuses for 2007 and 2008. In filings with the Securities and Exchange Commission, WaMu said 2007 bonuses excluded charges related to the subprime crisis, as would those awarded in 2008. The board will base its awards in 2008 in part by "subjectively (evaluating) company performance in credit risk management," according to one document.[23] One other point of contention between investors and WaMu has been a board-approved executive bonus plan that, according to terms filed with the Securities and Exchange Commission, appeared to exclude loan-loss costs from performance goals in calculating payments.[10]

Washington Mutual has come under attack from some investors for executive pay and independence of board members.[12] Washington Mutual's board of directors will appoint Fort Worth's David Bonderman, a TPG founding partner, to the company's board, according to a release.[27] "While we commend Washington Mutual's Board for promptly accepting Mary E. Pugh's resignation, we believe that Charles M. Lillis and James E. Stever also failed to win re-election.[4] "To avoid a repeat failure by the compensation committee, we have called on Washington Mutual'''s board to immediately request the resignation of Committee Chairman James Stever."[31]

The group recommended stakeholders vote down the nominations of Pugh and James Stever to the company's board.[12] No reason was given, and Pugh wasn't available for comment. "She has served this company very, very well," Killinger said. Labor groups said their unofficial counts indicate that two other directors also failed to get a majority of votes cast.[10] Killinger announced at the close of the meeting that the remaining directors (excluding Pugh) all received majority votes.[10] We call on you to disclose detailed results of the Director elections, including the number of broker votes, at tomorrow's meeting, and to request the resignation of any Director who fails to win a true majority. Sincerely, William B. Patterson Executive Director CC: Kerry Killinger, Chairman and CEO Richard Ferlauto, AFSCME This is not a proxy solicitation and no proxies will be accepted.[5]

"Washington Mutual Directors must not hide behind broker votes to improperly seat Directors who do not win the support of the shareholders," the group said in a statement.[2] In an e-mail, Richard Ferlauto, director of pension and benefit policy at the American Federation of State, County, and Municipal Employees, said that according to the group's unofficial tally, Mr. Stever and director Charles Lillis, who sits on the finance, HR and corporate development committees, may not get a majority of votes in favor.[1] CtW asked shareholders to vote against James Stever, chairman of the human resources committee.[23] "It'''s disappointing that it took the concerted action of shareholders to correct the failure of the compensation committee," said CtW executive director William Patterson in a statement.[31] CtW had urged shareholders to withhold from Pugh in response to risk management failures and from Stever in response to poor executive compensation practices.[4] 'The Pugh resignation is a historic exercise of shareholder power targeted at unaccountable and ineffective directors,' Mr. Ferlauto noted. 'It shows that shareowners lay on the door step of directors the failure of oversight for risk management of subprime mortgage problems."[1] Pughs resignation constituted "a historic exercise of shareholder power targeted at unaccountable and ineffective directors," said Richard Ferlauto, director of corporate governance for the American Federation of State, County and Municipal Employees in Washington.[11] Pugh's resignation could be interpreted as a victory for the Change to Win Investment Group, a shareholder activist outfit representing the interests of pension funds affiliated with the unions that make up Change to Win (including the Teamsters, United Farm Workers and Service Employees International Union).[19] CtW Investment Group, part of the Change to Win federation of U.S. labor unions, has been leading an effort to hold Pugh and other executives accountable for not seeing the writing on the wall leading up to the mortgage meltdown.[25] One group that might like to see Killinger ousted is activist investor CtW Investment Group, a pension advisory firm for the Change to Win labor group.[41]

The investment, which essentially gave the new investors a 50 percent stake in the company, will "be more than enough to see us through the credit cycle," Killinger said.[39] The company also bowed to pressure from investors and governance experts in reversing a decision to ignore mortgage losses in awarding performance bonuses to top executives, including Killinger and the chief operating officer, Stephen Rotella.[11] Perhaps most notable: WaMu reversed a much-criticized decision to leave out the company's mortgage-related losses when calculating profits that determine executive bonuses for the year ahead.[31]

Stockholders angry over mortgage-related losses and a 75 percent drop in share value may try to unseat some members of the WaMu board at Tuesday's meeting.[28] WaMu is trying to stabilize the ground, using seven billion dollars from a private equity group that will threaten the stock price even more thanks to a flood of new shares.[42] CEO Kerry Killinger's plan to quell doubts about solvency by selling new shares to a group led by TPG irritated shareholders whose stakes were diluted by the deal.[43] CtW cited reports the lender spurned a takeover by New York-based JPMorgan Chase & Co. in favor of a capital infusion from buyout group Fort Worth, Texas-based TPG Inc. that diluted existing shareholders' interests.[21]

Pugh had been among the directors strongly criticized by shareholder groups upset about the thrift's mounting losses.[29] Shareholders at the bank's annual meeting also voted to to ask the board to appoint an independent director as chairman.[22] Proxy advisory services Glass, Lewis & Co. LLC and RiskMetrics Group/Institutional Shareholder Services have joined with CtW's WaMu position. (WaMu's annual meeting takes place after the stock market closes Tuesday.)[41] "As a result, management is held accountable for total company performance." Is today's WaMu meeting a tipping point for shareholder success? It's too early to tell, and WaMu's case is extreme.[31] "You have destroyed the company why are you not being held accountable?" asked Lee Lannoye, a shareholder and former WaMu executive vice president.[39]

"You have destroyed the bank,'' one shareholder said during the question-and-answer session at the company's investor day.[24] Alan Henry, a Florida investor who has filed a shareholder lawsuit, challenged Killinger to quit, and challenged other shareholders to "take the damn company back."[10] Kerry Killinger's remarks do little to soothe angry investors who went on the attack at Tuesday's annual shareholder meeting.[26]

Investors are also unhappy over the proposed capital infusion, charging that it would protect management and board jobs while diluting the stakes of existing shareholders. Murphy called it a "sweetheart deal" and said his union plans to oppose it.[10]

Mary Pugh, head of the board's finance committee, resigned after opposition from investors.[24] Pugh led the board's finance committee, and Stever heads the human resources committee.[12]

AFSCME, a 1.5 million-member-strong public service employee union, also questioned the board committee's decision to exclude charges related to the subprime crisis when calculating bonuses. "We find this approach difficult to understand, since subprime credit losses are the biggest problem the bank is facing. What's more, they're a problem for which current management is responsible," AFSCME Chairman Gerald McEntee wrote in a letter. Killinger and Frank explained in their own letter that 2008 bonuses don't take into account mortgage-related costs because housing prices and homeowner delinquencies "are affected by important and currently unpredictable sector-wide factors in the broader market and economy." [23]

For Seattleites, it isn't another mortgage chop-shop like Countrywide Financial or New Century. It's the 119-year-old thrift that taught generations of Seattle schoolchildren how to save through its "Bank Day" program, the homegrown institution with the folksy attitude whose ads for years featured Ellensburg's "Rodeo Grandmas." That's not the face WaMu presented to Wall Street investors. To them, it was a nationwide financial-services powerhouse that aimed its checking accounts, mortgages and other products squarely at Middle America.[37] The effect, George said, was to spur even more third-party lending on WaMu's behalf as real-estate frenzy intensified. "All the stuff that's happening now, we knew this was going to happen two years ago," he said. "Even though there was weakness in the market, they put their foot on the accelerator, because they were losing business to Countrywide and other lenders." Why was WaMu so eager to generate more and more mortgage loans? Because it could easily package them into bonds a process called securitization and sell them off to hedge funds and other institutional investors.[37]

WaMu made fewer subprime mortgages and sold other risky loans in 2006, and cut back on all types mortgage lending in 2007.[23] The newly financed equity will position us for a return to profitability as elevated credit costs subside. WaMu said it plans to focus more on its retail business, growing its branch network, close its remaining freestanding home loan offices and exit the wholesale lending business.[25] The writing was on the wall when WaMu got into early trouble with the home loan portfolio.[42]

George was fired two years later after questioning several other loans. Now employed by U.S. Bank in California, he has sued WaMu for age discrimination and unlawful retaliation.[37]

At the end of last year, WaMu announced it would exit the subprime business completely. Killinger and Frank also said WaMu and Pugh Capital Management ended their business relationship in 2006.[23] The company disclosed the closing of capital issuance to TPG Capital and revealed the resignation of its director Mary Pugh.[14] In a letter to Chairman William Reed, made public Tuesday, CtW asked the company to force the resignation of directors who do not get a majority of non-broker votes.[2] CTW demanded the resignation of any director who failed to win a majority of votes at Tuesday's annual meeting.[12]

'We fear the board may rely on 'phantom votes' to improperly seat defeated directors,' CTW said in the letter. It's unclear how the voting has gone so far, or what percentage of withhold votes Ms. Pugh received.[1] The chart below summarizes preliminary vote totals for Directors Pugh, Stever and Charles M. Lillis, excluding uninstructed broker votes.[4] Brokers may vote on behalf of certain shareholders in director elections, according to NYSE rules.[30] Early vote totals also showed that three directors failed to win a majority of shareholders' approval for re-election.[29] Shareholders rejected a proposal to require a majority vote to elect directors, taking into account "withheld" votes.[11]

Shareholders appeared to narrowly approve the shareholder resolution on splitting the CEO and board chairman's jobs. In a conference call with analysts, in response to a question as to which job he would give up, Killinger described the vote as advisory on a matter that the board will look at "in due course."[10] Shareholders managed to win big on three fronts. One of two shareholder proposals on the proxy ballot, a separation of the Chairman and CEO posts currently both held by Kerry Killinger, won 51% of the vote, a rare majority win for shareholders.[31]

The fact is, the likely sale of Nat City -- the latest talk centers around Bank of Nova Scotia -- will probably mean the departure of CEO Peter Paskind. As for WaMu, its recent equity infusion has critics calling for CEO Kerry Killinger's head over the massive dilution of the deal -- not to mention reports that he passed on an offer from Wall Street's current darling, J.P. Morgan Chase & Co.' s Jamie Dimon.[41]

The transactions highlight two things. One is the changed environment in which private-equity firms are operating. Frothy Markets, public-to-private deals and easy lending terms have given way to distressed prices and lesser degrees of leverage: TPG is using $2 billion of its own cash to take a minority stake in WaMu, which will remain firmly listed.[38] Option ARMs proved extraordinarily popular during the housing boom. Between April 2004 and the end of 2007, WaMu underwrote $184.8 billion of them, along with $9.5 billion of other short-term ARMs (those in which the rate resets within a year).[37] WaMu offered $3 billion of perpetual convertible preferred bonds in December.[24]

Segment-wise, Retail Banking Group net interest income declined to $1.203 billion from $1.284 billion, while non-interest income advanced to $775 million from $751 million.[14] Distressed debt is one of the areas taking up the slack left by shrinking volumes of splashy leveraged buy-outs. Shrugging off the embarrassment of seeing one of its fixed-income funds blow up in March, Carlyle Group this month closed a $1.4 billion fund to take advantage of bargain prices.[38]

Net interest income rose to $2.18 billion from last year's $2.08 billion.[36]

On average, 12 analysts polled by First Call/Thomson Financial expected a net loss of $1.05 per share for the quarter.[14] The company also issued an aggregate of about 55,000 shares of non-cumulative preferred stock at the purchase price and liquidation preference of $100,000 per share.[27] The need to move quickly ruled out a public stock offering, according to the person, who also said that JP Morgan's offer, reported to be worth as much as $8 per share, was rejected because it was actually significantly lower and was made with a number of conditions.[23]

In the year-earlier period, the Seattle, Wash. -based bank earned $784 million, or 86 cents per diluted share.[25] The Alabama-based bank said it reaped $91.2 million for the sale of Visa shares.[15]

WM closed Tuesday's regular trade at $10.66, up $0.31 or 3.00%, on 33.59 million shares.[14]

Shares rose 31 cents, or 3 percent, to close at $10.66. This article is copyrighted by International Business Times.[7] The mean estimate of analysts polled by Thomson Financial was for a loss of $1.05 a share for the period ended March 31.[36]

CtW works with pension funds associated with Change to Win, a federation of unions representing nearly six million workers in the U.S. The pension funds own approximately 4.6 million shares of WaMu's common stock.[15]

Nearly 2,500 investors and employees alike shared grievances about WaMu's poor performance and a seemingly disadvantageous capital injection led by private equity group TPG to shore up the struggling Seattle thrift.[15] Proxy advisory firms RiskMetrics Group, Glass Lewis, Proxy Governance and Egan-Jones had called on investors to withhold support for one or more WaMu directors.[1]

During the housing boom, investors couldn't get enough mortgage-backed securities. As lenders such as Countrywide and New Century Financial reported ever higher profits by generating and securitizing loans, analysts say, WaMu felt pressured to keep up.[37] The investor said President and Chief Operating Officer Stephen Rotella endorsed "risky'' loans including adjustable- rate mortgages. He called for Rotella to be fired and for his bonus to be revoked.[24]

My father has been a loan officer with various banks for around 30 years. I asked him last weekend what bank was going to fail next, and guess who he pointed the finger at. Luckily for him, the bank he's at didn't get into the whole sub-prime mess, so nobody at his bank has to worry about losing their jobs.[17]

All I want to know is when the serious layoffs of WaMu employees are going to start? As a shareholder I've been subsidizing some of the most lazy and incompetent people working for that bank.[31] WAMU executives changed the bonus formula for the company to ensure that the upper crust doesn't feel any pain. Their bonuses will be paid just as always.Meanwhile,the 3000 employees now walking the plank will get a nice new appliance carton to live in as they are shown the door by security guards.[17] WaMu's credit card unit, which was among the company's two divisions to report a profit, saw an uptick in the number of new accounts.[26] In 2005, when WaMu decided it needed to diversify beyond the mortgage business, it bought a credit-card company, Providian Financial, that targeted "subprime" customers those with weaker credit histories.[37] The case is in arbitration. WaMu declined to comment on his allegations. Documents George provided to The Seattle Times indicate the company eased its risk standards for outside mortgage brokers particularly regarding their leverage, or debt as a multiple of net worth.[37]

Seattle-based WaMu, one of the nation's biggest mortgage lenders and consumer bankers, lost money last year for the first time since 1984.[37] In showing confidence in Wamu, TPG took the risk that it jumped in too early. If writedowns do not subside by next year, Wamu might eat through its new capital and find itself hunting for more -- or searching for a buyer, Ms. Bush added.[32] The new investment will help boost the Seattle-based bank's capital after it has been ravaged by rising delinquencies and defaults among mortgages.[27] Investment bank Bear Stearns Companies Inc. (BSC), another victim of the sub prime crisis, said first quarter profit plunged 79% from the year-ago quarter, along with a 40% decline in revenues.[14] Washington Mutual Inc. reports earnings for the fiscal first quarter on Tuesday.[34] Nothing like a convert to accountability.) Blodget mentions a handful of other banks -- including Washington Mutual Inc. and National City Corp. -- that are also in trouble, but he doesn't target their CEOs directly.[41] Washington Mutual, the nation'''s largest thrift, provided more evidence of its troubles on Tuesday when it disclosed a wider loss than expected in its first-quarter results.[33] A man walks by a Washington Mutual branch in downtown Seattle on Tuesday April 15, 2008.[8] A Washington Mutual representative wasn't immediately available for comment.[30]

Card Services Group posted net income of $199 million, which declined from $249 million in the previous year. [14] Net interest income for the Card Services Group increased to $765 million from $641 million, whereas non-interest income dipped to $418 million from $474 million.[14] For the Commercial Group, net income declined to $62 million from $101 million.[14]

Reducing the quarterly dividend rate will save the company about $490 million annually.[27] Wachovia ( WB, Fortune 500 ) reported a surprising first-quarter loss of $350 million.[26]

Revenues for the quarter declined to $1.479 billion from $2.482 billion.[14] Cash and cash equivalents at the end of the just concluded quarter was $10.089 billion, compared to $4.047 billion at the end of March 31, 2007.[14] For the fourth quarter, net interest income was $2.047 billion, while non-interest income was $1.365 billion.[14]

The computer maker says it wants to pare $3 billion in costs through productivity and efficiency. It's shopping for a finance chief to help it hit the target.[20] Delta Air Lines and Northwest Airlines announced a $3 billion merger that creates the world's largest airline.[11]

Under the new system, only $60,000 had to be set aside for potential future losses.[37] The Boston-based investment manager beat consensus estimates, but shares slid after the company disclosed losses in a conference call.[15] Taking the plunge: Opportunity knocked and this entrepreneur rushed in. He didn't change his sales strategy. He changed his client strategy. Charles Myers bootstrapped his company after staggering losses on a business deal gutted the company'''s capital.[29]

Brendler anticipates mortgages losses are just beginning and the bank is facing continued losses throughout the year.[34] According to a person familiar with the matter, WaMu realized in recent weeks it would need more cash than expected to cover credit losses.[23]

"WaMu's executive compensation program is designed to align compensation with the company's current and long-term business strategy and goals," wrote one spokesperson in an email on March 25.[31] Killinger called WaMu's directors engaged and dedicated, and rejected the criticisms -- which drew boos.[10] Killinger, in a conference call, called the action "simply an advisory vote" and added, "The board of directors will take that into consideration and will look at that in due course."[11] Typically, votes cast by brokers tend to support a company's current slate of directors.[20] CtW is already calling on the company to release full election results and believes preliminary results may point to other directors failing to win a majority.[31] Shareholders were incensed. '''It doesn'''t make any sense to exclude some of the most significant lines of business they'''re in,''' says Richard Clayton, research director at CtW.[31]

Clayton said that regardless of Tuesday's outcome, shareholders should be pressing the company about why it accepted the TPG offer instead of one from JP Morgan Chase & Co., and why other shareholders were not invited to participate in a stock offering.[23] The company approached JP Morgan, TPG and other banks and private equity groups, according to the person, who was not authorized to speak publicly about the situation and asked not to be named.[23]

During the quarter, the company reported a jump in the number of new checking accounts, considered a valuable tool by banks to sell other products.[26]

I think he meant to say nothing of that scale has happened since last quarter which was a loss 1.87 billion. At least he found a scapegoat in Pugh.[17] Killinger announced that Mary Pugh resigned and was not standing for re-election.[3] Pugh's resignation was announced -- to applause -- before voting at the annual meeting.[10]

During the meeting, shareholders re-elected the rest of the eligible board members, according to a preliminary count. [7] The letter, which is below, cites preliminary election returns showing that shareholders withheld 51.2% from Mr. Lillis, 61.9% from Ms. Pugh, and 50.9% from Mr. Stever.[4]

Ten members of the bank's 12-member board, including Stever, appeared to have been re-elected by a majority vote, the bank said Tuesday.[15] Killinger said the board's human resources committee will set up specific credit-cost targets for executives to meet "for which we are accountable."[10] "2007 was an extraordinary and difficult year for WaMu, but I believe we are at the beginning of the road back," Killinger said.[39] The measure calling on WaMu to have an independent chairman passed by a preliminary tally of 51 percent, Killinger said.[39]

The 5 percent reserve requirement wouldn't kick in until the broker had more than $20 in debt for every dollar of net worth.[37]

' Lehman Brothers Holdings CEO Richard Fuld joined a growing chorus of investment bank executives in saying the worst of the credit crisis is behind Wall Street. [43]

SOURCES

1. Union activists win one, as WaMu director resigns - Financial Week
2. CtW Pressures WaMu Ahead of Meeting | Chron.com - Houston Chronicle
3. Live Blogging: WaMu's conference call (Dealscape)
4. CtW: Shareholders Rejected Two Additional WaMu Directors
5. CtW Investment Group: WaMu Board Should Demand Resignation of Directors Who Fail to Win a Majority
6. CtW Invest Asks WaMu Board To Demand Resignations Of 2 Directors
7. WaMu Finance Chair Resigns Under Pressure - International Business Times -
8. The Associated Press: Washington Mutual swings to 1Q loss on $3.5B provision
9. WaMu changes how it awards executive bonuses | Reuters
10. Angry WaMu shareholders take leaders to task
11. Washington Mutual shareholders ask chief to give up post of chairman - International Herald Tribune
12. WaMu posts 2nd consecutive quarterly loss- OregonLive.com
13. WaMu Reports $1.14 Bln 1Q Loss - International Business Times -
14. WaMu Posts Q1 Loss On Loan Loss Provision; Reveals Resignation Of Director - Update [WM] - RTTNews, Today's Top Stories, Global Newswires, ToDay's Top News,Global Business news .
15. WaMu Director Resigns Under Pressure | Banks | C MER MS WM - TheStreet.com
16. Free Preview - WSJ.com
17. Recession Watch: WaMu CEO Compares Mortgage Meltdown To The Great Depression
18. Washington Mutual posts $1.14 bln 1st-qtr loss - washingtonpost.com
19. Washington Mutual's bad day - How the World Works - Salon.com
20. Union group ups pressure on WaMu board - Financial Week
21. Two Washington Mutual directors may be voted down | TheNewsTribune.com | Tacoma, WA
22. Financial News and Information from Financial News Online US
23. The Associated Press: Groups Press for WaMu Board Ouster
24. Bloomberg.com: U.S.
25. Blood On The Floor At WaMu - Forbes.com
26. WaMu CEO tells shareholders to 'have faith' - Apr. 15, 2008
27. TPG Capital makes large WaMu investment move - Fort Worth Business Press
28. WaMu shareholders meeting in Seattle; board members on hot seat
29. WaMu loses $1.14B in Q1 - Orlando Business Journal:
30. CtW:WaMu Should Ask Directors Who Dont Win Majority To Resign
31. BusinessWeek Management IQ Shareholders Score at WaMu
32. Light at End of the Tunnel? - Articles - On Wall Street
33. WaMu Posts First-Quarter Loss
34. Earnings Preview: Washington Mutual - Forbes.com
35. Angry shareholders expected at WaMu meeting tomorrow in Seattle
36. Washington Mutual swings to 1Q loss on $3.5B provision for loan losses - Forbes.com
37. Business & Technology | Where WaMu went wrong | Seattle Times Newspaper
38. Restoration
39. Business & Technology | WaMu executives face tough questions | Seattle Times Newspaper
40. FT.com | WaMu board director forced out
41. Blodget goes after Wachovia CEO, but the field is larger (Dealscape)
42. Taking it to the bank MyNorthwest.com
43. Around the nation | Chron.com - Houston Chronicle

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