Washington Mutual Inc. said net income rose 37%, to $261 million, fueled by strong loan growth and improved fee income.

Excluding one-time charges related to acquisitions, earnings per share of 73 cents beat analysts' estimate by a penny.

"This is a very solid 1999 story, when the cost savings from the Ahmanson acquisition will kick in," said Thomas O'Donnell, an analyst with Salomon Smith Barney in New York. "If they are doing this well in this environment, Wamu will perform even stronger next year."

In an earnings report released late Tuesday, the Seattle thrift company said it completed its integration of Great Western Financial Corp. in the quarter. Wamu plans to close its $9.9 billion deal for H.F. Ahmanson & Co. in the fourth quarter.

Wamu said net interest income climbed 11%, to $727 million, reflecting record loan originations. The $103.4 billion-asset company said it lent $10.7 billion, a 32% jump, which it attributed to strong regional economies and itst rapidly growing franchise.

Net interest margin, however, fell 8 basis points, to 2.91%. The company said it intentionally slowed originations of shorter-term, higher-yielding consumer loans to "facilitate a smooth rollout of a new lending platform" at former Great Western branches.

Noninterest income climbed 33%, to $250 million. A net increase of 345,000 checking accounts helped boost retail banking fees 14%, to nearly $106 million.

Also improving fee income was Wamu's continued efforts to move away from time deposits toward transaction accounts. At the end of the quarter, checking, savings, and money market deposits represented 47% of total deposits, up from 42% a year earlier.

Gains on the sale of loans and leases quadrupled to $28 million in the second quarter, due to a strong demand for fixed-rate mortgages and Wamu's strategy of selling most of these assets off.

Also late Tuesday, Wamu's merger partner, Ahmanson, posted net income of $137 million, a 19% increase over the year-earlier period. Earnings per share of $1.12 beat Wall Street's expectations by 3 cents.

The results reflect strong gains in both interest income and fee income, as well as reduced credit costs, the Irwindale, Calif.-based thrift said. Ahmanson, the parent of Home Savings of America, funded $2.9 billion of loans in the quarter, up 113%.

Net interest income grew 5%, to $356.7 million, at the $52.8 billion- asset thrift. Ahmanson attributed the gain to an increase in interest- earning assets due to its acquisition of Coast Savings Financial Inc. and a wider net interest margin.

The average net interest margin was 2.80%, compared with 2.66% in the 1997 quarter and 2.77% in the first quarter of 1998. +++

Washington Mutual Inc. Seattle, Wash. Dollar amounts in millions (except per share) Second Quarter 2Q98 2Q97 Net income $261.3 $191.1 Per share 0.69 0.50 ROA 1.01% 0.85% ROE 18.94% 14.95% Net interest margin 2.91% 2.99% Net interest income 726.5 653.4 Noninterest income 249.8 188.1 Noninterest expense 502.7 472.2 Loss provision 46.4 50.0 Net chargeoffs 35.2 55.3 Year to Date 1998 1997 Net income $517.7 $370.8 Per share 1.37 0.98 ROA 1.03% 0.84% ROE 19.05% 14.66% Net interest margin 2.93% 3.04% Net interest income 1,439.3 1,312.9 Noninterest income 443.6 376.4 Noninterest expense 944.9 967.3 Loss provision 91.7 103.8 Net chargeoffs 35.2 55.4 Balance Sheet 6/30/98 6/30/97 Assets $103,397.0 $92,564.9 Deposits 50,461.1 51,762.9 Loans 70,282.9 64,799.2 Reserve/nonp. loans 116% 112% Nonperf. loans/loans 0.84% 0.92% Nonperf. assets/assets 0.74% 0.83% Nonperf. assets/loans + OREO NA NA Leverage cap. ratio NA NA Tier 1 cap. ratio NA NA Tier 1+2 cap. ratio NA NA ===

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