WaMu Reports Fourth Quarter Earnings Per Share of $1.10 and 2006 Earnings Per Share of $3.64

Washington Mutual, Inc. (NYSE:WM) today reported fourth quarter 2006 net income of $1.06 billion, or $1.10 per diluted share, compared with net income of $865 million, or $0.85 per diluted share, in the fourth quarter of 2005. Net income for 2006 was $3.56 billion, or $3.64 per diluted share, compared with net income of $3.43 billion, or $3.73 per diluted share, in 2005. Fourth quarter 2006 earnings included an after tax gain of $415 million on the previously announced sale of WM Advisors, Inc., the company’s retail mutual fund asset-management company. The gain from the sale of WM Advisors more than offset fourth quarter and full year after tax charges of $100 million and $202 million, respectively, related to the company’s ongoing efficiency initiatives and after tax charges of $137 million associated with the sale in 2006 of a significant portion of the company’s mortgage servicing rights and the related facility and employee transfers. On Jan. 3, 2007, the company entered into an accelerated share repurchase agreement with a dealer, buying back $2.7 billion of its common stock. The company also increased its cash dividend to 54 cents per common share, up from 53 cents per share in the previous quarter. "We achieved solid performances in our Retail Banking, Card Services and Commercial Group businesses in the fourth quarter and for the full year despite a difficult interest rate and operating environment, which particularly impacted the results in our Home Loans business,” said Kerry Killinger, WaMu Chairman and CEO. "For the full year, we successfully reduced our cost structure and repositioned the balance sheet while continuing to expand our consumer and small business banking franchise. In 2006, we opened a record 1.23 million net new checking accounts, added a record 848,000 net new retail households and experienced strong cross-sales of the WaMu credit card to our retail banking customers.” Killinger noted that opportunities to grow the balance sheet at attractive risk-adjusted returns are limited, making the accelerated share repurchase transaction a superior use of capital. "Our outlook for 2007 reflects the strategic actions we took in 2006 to prepare the company for the future,” Killinger added. "Those decisive actions have positioned us well to deliver stronger operating performance in 2007.” FOURTH QUARTER AND FULL YEAR FINANCIAL SUMMARY AND HIGHLIGHTS   Financial Summary Three Months Ended Year Ended (in millions, except Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, per share data) 2006  2006  2005  2006  2005  Income Statement Net interest income $ 1,998  $ 1,947  $ 2,241  $ 8,121  $ 8,218  Provision for loan and lease losses 344  166  217  816  316  Noninterest income 1,592  1,570  1,526  6,377  5,097  Noninterest expense 2,257  2,184  2,214  8,807  7,620  Income from discontinued operations,net of taxes 418  9  8  444  38  Net income 1,058  748  865  3,558  3,432    Diluted earnings per common share $ 1.10  $ 0.77  $ 0.85  $ 3.64  $ 3.73    Balance Sheet Total assets, end of period $ 346,288  $ 348,877  $ 343,573  $ 346,288  $ 343,573  Average total assets 353,056  349,542  349,172  348,758  326,233  Average interest-earning assets 314,784  312,827  314,490  312,178  294,829  Average total deposits 214,801  208,912  196,799  203,829  186,023    Profitability Ratios Return on average common equity 16.03 % 11.47% 12.85% 13.52% 14.91% Net interest margin 2.58  2.53  2.88  2.60  2.79  Efficiency ratio 62.87  62.09  58.75  60.75  57.23  Nonperforming assets/total assets,end of period 0.80  0.69  0.57  0.80  0.57  Tangible equity/total tangible assets,end of period 6.04  5.86  5.62  6.04  5.62  Reduction of low margin loans accelerated in balance sheet repositioning. During the fourth quarter, $17.79 billion of medium-term adjustable-rate loans with a weighted average yield of approximately 5.75 percent that were held for investment were transferred to held for sale and targeted for sale in the first quarter. During the quarter, the company recognized a gain of $74 million related to the transfer of these assets and the associated derivatives executed to hedge this transaction. The sale of these loans is expected to increase the company’s net interest margin, improve the company’s interest rate risk profile and reduce its geographic credit concentration. In conjunction with the sale, the company also sold $4.73 billion of mortgage-backed securities with a weighted average yield of 5.26 percent at a slight gain. Sale of WM Advisors completed. On Dec. 31, WaMu completed the sale of its retail mutual fund asset-management company, WM Advisors, Inc., to the Principal Financial Group. The sale resulted in a pretax gain of $667 million which was included in income from discontinued operations, net of taxes. Company grows franchise while reducing overall cost structure. During the year, the company continued to grow its franchise, opening 144 new retail banking stores, adding 848,000 net new households and 3 million new card accounts while reducing its operating expense run rate. The company’s efficiency initiatives contributed to a reduction in headcount of more than 10,000, or 18 percent, during the year. Noninterest expense of $2.26 billion during the fourth quarter included charges related to the company’s efficiency initiatives of $155 million, without which the expense run rate would have been down 5 percent from the fourth quarter of 2005. Asset repricing contributes to a 5 basis point increase in net interest margin. During the fourth quarter the Fed funds rate remained unchanged and the yield curve continued to be inverted. The ongoing repricing of the company’s assets in the fourth quarter more than offset the slight increase in its cost of deposits and wholesale funding, leading to a 5 basis point increase in the net interest margin to 2.58 percent. For the full year, the 19 basis point decrease in the net interest margin to 2.60 percent from the prior year reflected increases in short-term interest rates during the first half of 2006. Net interest income was up 3 percent from the prior quarter due to the increase in the net interest margin but was down slightly year over year as the increase in average interest-earning assets was more than offset by margin compression. Strong account growth produces increased noninterest income. Reflecting the year’s record growth in checking accounts, depositor fees of $692 million in the fourth quarter were up 6 percent from the third quarter and at $2.57 billion for the year were up 17 percent from 2005. The company’s continued success in attracting credit card customers, including WaMu retail customers, contributed to an increase in managed card receivables and higher credit card fee income. Increase in nonperforming assets reflects more difficult credit environment. Weaker credit performance, particularly in the company’s single-family residential real estate loan portfolios, contributed to the rise in the level of nonperforming assets as a percentage of total assets to 80 basis points at year end from 69 basis points at Sept. 30 and 57 basis points at the end of 2005. The company continued its practice of selectively selling nonperforming loans, selling $176 million in the fourth quarter and $155 million in the third quarter. Provision driven by credit card growth. The increase in the fourth quarter provision for loan and lease losses to $344 million in part reflected the growth of the company’s on-balance sheet credit card receivables, which increased the provision by $95 million compared with the prior quarter. During the quarter, the company also revised its accounting for credit card receivables held for sale and refined its provisioning methodology for multi-family loans. The impact of these two changes was a net increase to the fourth quarter provision of $25 million. The increase in the provision for 2006 to $816 million from $316 million in 2005 was primarily due to the addition of the company’s credit card business acquired Oct. 1, 2005. Subprime mortgage industry significantly weakens during the fourth quarter. During the fourth quarter, subprime mortgage delinquencies continued to rise as credit conditions deteriorated in the subprime mortgage industry. Weakening subprime mortgage credit performance and market conditions negatively impacted the company’s fourth quarter pretax earnings by approximately $160 million. This result was driven by a reduction in fourth quarter gain on sale of approximately $110 million, as well as a reduction of approximately $50 million in the value of the company’s subprime mortgage residuals to a balance of $168 million at year end. FOURTH QUARTER AND FULL YEAR OPERATING SEGMENT RESULTS In the fourth quarter, the company adopted several new management accounting methodologies used for operating segment reporting. The company changed its funds transfer pricing methodology to better reflect current market interest rates and deposit pricing. The company’s new provisioning methodology eliminates the distinction that existed between segment and corporate reporting. The segment results for all periods have been restated to reflect these revisions. Retail Banking Group   Selected Segment Information Three Months Ended Year Ended (in millions,except accounts Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, and households) 2006  2006  2005  2006  2005  Net interest income $ 1,239  $ 1,260  $ 1,278  $ 5,171  $ 4,890  Provision for loan and lease losses 47  53  26  167  118  Noninterest income 774  738  730  2,919  2,580  Noninterest expense 1,103  1,079  1,100  4,380  4,187  Net income from continuing operations 544  546  553  2,228  1,994    Average loans $ 172,031  $ 180,839  $ 166,810  $ 177,473  $ 163,561  Average retail deposits 143,513  139,954  140,212  140,344  136,894  Net change in number of retailchecking accounts 179,784  307,433  203,190  1,231,564  902,447  Net change in retail households 123,000  256,000  143,000  848,000  633,000  Full year results show strong performance. While net income from continuing operations of $544 million was flat with the third quarter, it was up 12 percent year over year as the Retail Bank continued to successfully market its products and services to new and existing customers. Excluding the contribution from portfolio management, which has been impacted by rising short-term interest rates and an inverted yield curve, net income from continuing operations for the Retail Bank network was up 5 percent from the prior quarter and 22 percent in 2006 compared with 2005. WaMu Free Checking™ drives record checking account growth in 2006. During 2006, the company opened a record 1.23 million net new checking accounts, exceeding its stated goal of 1 million and up 36 percent from 902,447 net new accounts in 2005. During the second half of the year, the company broadened its retail sales focus on expanding customer relationships to products beyond deposits and home equity loans. As a result, the sale of home loans, credit cards and small business accounts has been very strong, increasing the Retail Bank’s cross sale ratio to 6.66 products and services at year end from 6.31 at the end of 2005. Continued solid growth in Retail Banking fees. Reflecting the continued successful marketing of WaMu’s products and services and an increase in fees, depositor and other retail banking fees in the Retail Bank were up over 6 percent from the third quarter and up 17 percent year over year. Card Services Group (managed basis)   Selected Segment Information Three Months Ended Year Ended Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, (in millions) 2006  2006  2005  2006  2005(1) Net interest income $ 664  $ 633  $ 645  $ 2,530  $ 645  Provision for loan and lease losses 555  345  454  1,647  454  Noninterest income 451  343  352  1,528  352  Noninterest expense 316  294  268  1,201  268  Net income 149  207  172  745  172    Average managed receivables $ 22,875  $ 21,706  $ 19,472  $ 21,294  $ 4,908  Period end managed receivables 23,501  21,921  19,973  23,501  19,973  30+ day managed delinquency rate 5.25% 5.53% 5.07% 5.25% 5.07% Managed net credit losses 5.84  5.68  7.28  5.83  7.28    1 2005 reflects the inclusion of Card Services as of the date of acquisition on Oct. 1. Card Services continues strong performance. Card Services reported net income of $149 million, reflecting the continued strong risk-adjusted return of the portfolio and growth in managed receivables. The quarter’s results included an increase to the provision of $95 million as the company retained a higher level of its receivables on balance sheet and an increase to the provision of $92 million related to the revised accounting for credit card receivables held for sale. The effect of the accounting policy revision on Card Services’ quarterly results was small, as the increase to the provision was largely offset by the revision’s impact on credit card noninterest income. Retail channel accelerates customer and loan growth. Card Services continued to successfully leverage the company’s Retail Bank franchise, which contributed to the opening of 839,000 new credit card accounts in the fourth quarter. New accounts were up 3 percent from the prior quarter and up 17 percent from last year’s fourth quarter, which was Card Services’ first quarter of operation as part of WaMu. Managed card receivables of $23.50 billion at Dec. 31 were up 7 percent from the prior quarter end and up 18 percent from the end of 2005. Card Services’ credit quality continues to be favorable. At 5.25 percent of period end managed receivables, the 30+ day managed delinquency rate was down from the prior quarter due to growth in managed receivables and completion of the sale of a portfolio of higher risk accounts. Managed net credit losses were 5.84 percent for the quarter, up from 5.68 percent in the third quarter as contractual and bankruptcy losses increased following the historically low levels earlier in the year. Commercial Group   Selected Segment Information Three Months Ended Year Ended Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, (in millions) 2006  2006  2005  2006  2005  Net interest income $ 189  $ 159  $ 183  $ 677  $ 731  Provision for loan and lease losses (69) (2) 9  (81) (26) Noninterest income 40  25  109  94  195  Noninterest expense 72  60  66  255  240  Net income 140  78  135  368  443    Loan volume $ 4,019  $ 3,104  $ 2,932  $ 12,854  $ 11,231  Average loans 37,552  32,414  30,928  33,137  30,154  Commercial Group posts solid performance for the quarter. Commercial Group net income of $140 million for the fourth quarter was up from $78 million in the prior quarter, including a $69 million reduction in the allowance for loan and lease losses due principally to provisioning methodology changes for multi-family loans. This reduction reflects the characteristics of the portfolio and the company’s long history of credit performance in this area. The decline in net income for all of 2006 versus 2005 reflected the negative impact to the net interest margin of the rise in short-term rates, but also the inclusion, in 2005, of a positive $80 million (on an after tax basis) in one time items. Loan volume up 29 percent for the quarter. Loan volume of $4.02 billion was up 29 percent from the prior quarter with CCBI contributing approximately one-third of the increase. Loan volume for the year totaled $12.85 billion, up 14 percent from 2005, primarily driven by strong growth in nonresidential lending. Balance sheet growth reflects acquisition of CCBI. Average loans increased 16 percent to $37.55 billion from the third quarter and increased 10 percent to $33.14 billion in 2006 compared with $30.15 billion in 2005. The growth in average loans reflected the impact of CCBI, which added $4.19 billion to the portfolio and continued growth of both multi-family and nonresidential mortgage lending. Home Loans Group   Selected Segment Information Three Months Ended Year Ended Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, (in millions)   2006    2006    2005    2006    2005  Net interest income $ 273  $ 275  $ 473  $ 1,174  $ 1,985  Provision for loan and lease losses 47  84  22  189  110  Noninterest income 126  314  327  1,297  2,426  Noninterest expense 534  529  678  2,302  2,608  Net income (122) (24) 57  (48) 1,029    Loan volume $ 34,897  $ 37,200  $ 48,701  $ 158,458  $ 202,697  Average loans 51,046  45,397  68,082  47,518  64,919  Home Loans net loss reflects industry-wide deterioration in the subprime mortgage business. The quarter’s net loss of $122 million reflected the continued slowing of the housing market and a significant weakening of overall subprime market conditions. The decline in noninterest income from the previous quarter reflected weakening subprime credit performance on loans originated or acquired through the company’s subprime channel and held for sale or previously sold. This deterioration in subprime credit negatively impacted the current quarter by approximately $160 million, driven by a reduction in fourth quarter gain on sale of approximately $110 million, as well as a reduction of approximately $50 million in the value of the company’s subprime residuals. . Slowing market impacts origination volume. The 6 percent decline in home loan volume from the prior quarter was largely in-line with industry volumes. The 22 percent decline in lending volume year over year reflected not only the slowdown in housing but also the company’s decision to reposition its correspondent business. Noninterest expense reduced during the year. Noninterest expense was down 12 percent year over year due to the continued success of the company’s efficiency initiatives, which included a 27 percent reduction in staffing. COMPANY UPDATES On Oct. 1, WaMu completed its acquisition of CCBI, a multi-family and small commercial real estate lending institution located in Southern California, in a cash transaction with a purchase price of $989 million. WaMu completed the sale of its retail mutual fund asset-management company, WM Advisors, Inc., to the Principal Financial Group on Dec. 31, 2006 for a pretax gain of $667 million. On Jan. 3, 2007, the company entered into an accelerated share repurchase agreement with a dealer pursuant to which it repurchased $2.7 billion of its common stock. WaMu’s Board of Directors declared a cash dividend of 54 cents per share on the company’s common stock, up from 53 cents per share in the previous quarter. Dividends on the common stock are payable on Feb. 15, 2007 to shareholders of record as of Jan. 31, 2007. In addition to declaring a dividend on the company’s common stock, the company will pay a dividend of $0.38 per depository share of Series K Preferred Stock to be payable on March 15, 2007 to holders of record on March 1, 2007. About WaMu WaMu, through its subsidiaries, is one of the nation’s leading consumer and small business banks. At Dec. 31, 2006, WaMu and its subsidiaries had assets of $346.29 billion. The company has a history dating back to 1889 and its subsidiary banks currently operate more than 2,600 consumer and small business banking stores throughout the nation. WaMu’s press releases are available at http://newsroom.wamu.com. Webcast information: A conference call to discuss the company’s financial results will be held on Wednesday, Jan. 17, 2007, at 5:00 p.m. ET and will be hosted by Kerry Killinger, chairman and chief executive officer and Tom Casey, executive vice president and chief financial officer. The conference call is available by telephone or on the Internet. The dial-in number for the live conference call is 877-352-5208. Participants calling from outside the United States may dial 210-234-0002. The passcode "WaMu” is required to access the call. Via the Internet, the conference call is available on the Investor Relations portion of the company’s web site at www.wamu.com/ir. A transcript of the prepared remarks will be available on the company’s web site prior to the call and archived for 30 days. A recording of the conference call will be available from 7:00 p.m ET on Wednesday, Jan. 17, 2007, through 11:59 p.m. ET on Saturday, Jan. 27, 2007. The recorded message will be available at 866-463-4104. Callers from outside the United States may dial 203-369-1380. Cautionary Statements This document contains forward-looking statements, which are not historical facts and pertain to future operating results. These forward-looking statements are within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about our plans, objectives, expectations and intentions and other statements contained in this document that are not historical facts. When used in this presentation, the words "expects,” "anticipates,” "intends,” "plans,” "believes,” "seeks,” "estimates,” or words of similar meaning, or future or conditional verbs, such as "will,” "would,” "should,” "could,” or "may” are generally intended to identify forward-looking statements. These forward-looking statements are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the results discussed in these forward-looking statements for the reasons, among others, discussed under the heading "Factors That May Affect Future Results” in Washington Mutual’s 2005 Annual Report on Form 10-K/A and "Cautionary Statements” in our Form 10-Q/A for the quarter ended Mar. 31, 2006 and Forms 10-Q for the quarters ended June 30, 2006 and Sept. 30, 2006 which include: Volatile interest rates and the impact on mortgage rates; Economic trends that negatively impact the real estate lending environment; Risks related to the option adjustable-rate mortgage product; Risks related to subprime lending; Operational risks; Risks related to credit card operations; Changes in the regulation of financial services companies, housing government-sponsored enterprises and credit card lenders; Competition from banking and nonbanking companies; General business and economic conditions, including movements in interest rates, the slope of the yield curve, and the potential overextension of housing prices in certain geographic markets; and Reputational risk. There are other factors not described in our 2005 Form 10-K/A and 2006 Forms 10-Q and which are beyond the Company’s ability to anticipate or control that could cause results to differ. WM-1 Washington Mutual, Inc. Selected Financial Information (dollars in millions, except per share data) (unaudited)       Quarter Ended     Year Ended Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, Dec. 31, Dec. 31,     2006    2006    2006    2006    2005    2006        2005  PROFITABILITY Net income $ 1,058  $ 748  $ 767  $ 985  $ 865  $ 3,558  $ 3,432  Net interest income 1,998  1,947  2,060  2,117  2,241  8,121  8,218  Noninterest income 1,592  1,570  1,578  1,638  1,526  6,377  5,097  Noninterest expense 2,257  2,184  2,229  2,138  2,214  8,807  7,620    Diluted earnings per common share: Income from continuing operations $ 0.66  $ 0.76  $ 0.78  $ 0.97  $ 0.84  $ 3.18  $ 3.69  Income from discontinued operations 0.44  0.01  0.01  0.01  0.01  0.46  0.04  Net income 1.10  0.77  0.79  0.98  0.85  3.64  3.73    Diluted weighted average number of common shares outstanding (in thousands) 955,817  967,376  975,504  1,003,460  1,011,395  975,406  919,238  Net interest margin 2.58% 2.53% 2.65% 2.75% 2.88% 2.60% 2.79% Dividends declared per common share 0.53  0.52  0.51  0.50  0.49  2.06  1.90  Book value per common share (period end)(1) 28.74  28.17  27.31  27.10  27.61  28.74  27.61  Return on average assets(2) 1.20% 0.86% 0.88% 1.15% 0.99% 1.02% 1.05% Return on average common equity(2) 16.03  11.47  11.82  14.69  12.85  13.52  14.91  Efficiency ratio(3)(4) 62.87  62.09  61.27  56.95  58.75  60.75  57.23    ASSET QUALITY (period end) Nonperforming assets(5) to total assets 0.80% 0.69% 0.62% 0.59% 0.57% 0.80% 0.57% Allowance as a percentage of total loans held in portfolio 0.72  0.64  0.68  0.68  0.74  0.72  0.74    CREDIT PERFORMANCE Provision for loan and lease losses $ 344  $ 166  $ 224  $ 82  $ 217  $ 816  $ 316  Net charge-offs 136  154  116  105  137  510  244    CAPITAL ADEQUACY (period end) Capital Ratios at WMI-consolidated level: Tangible equity to total tangible assets(6) 6.04% 5.86% 5.84% 5.75% 5.62% 6.04% 5.62% Estimated total risk-based capital to total risk-weighted assets(7) 11.78  11.10  11.26  10.77  10.80  11.78  10.80  Capital Ratios at WMB-bank only level (well-capitalized minimum)(8): Tier 1 capital to adjusted total assets (5.00%) 6.80  6.47  6.33  6.76  6.47  6.80  6.47  Adjusted tier 1 capital to total risk-weighted assets (6.00%) 8.26  8.12  8.13  8.92  8.49  8.26  8.49  Total risk-based capital to total risk-weighted assets (10.00%) 12.19  11.30  11.39  11.82  11.50  12.19  11.50    SUPPLEMENTAL DATA Average balance sheet: Total loans held in portfolio $ 239,265  $ 242,165  $ 242,334  $ 232,505  $ 227,568  $ 239,094  $ 215,434  Total interest-earning assets(3) 314,784  312,827  313,239  307,777  314,490  312,178  294,829  Total assets 353,056  349,542  348,664  343,660  349,172  348,758  326,233  Total deposits 214,801  208,912  200,252  191,034  196,799  203,829  186,023  Total stockholders' equity 26,700  26,147  25,958  26,825  26,949  26,406  23,024  Period-end balance sheet: Total loans held in portfolio, net of allowance for loan and lease losses 223,330  240,215  241,840  238,362  227,937  223,330  227,937  Total assets 346,288  348,877  350,884  348,401  343,573  346,288  343,573  Total deposits 213,956  210,882  204,558  200,002  193,167  213,956  193,167  Total stockholders' equity 26,969  26,458  26,131  25,819  27,279  26,969  27,279  Common shares outstanding at the end of period (in thousands)(9) 944,479  945,098  962,880  958,819  993,914  944,479  993,914  Employees at end of period 49,824  51,056  56,247  60,381  60,798  49,824  60,798    (1) Excludes six million shares held in escrow for all periods reported.   (2) Includes income from continuing and discontinued operations.   (3) Based on continuing operations.   (4) The efficiency ratio is defined as noninterest expense divided by total revenue (net interest income and noninterest income).   (5) Excludes nonaccrual loans held for sale.   (6) Excludes unrealized net gain/loss on available-for-sale securities and derivatives, goodwill and intangible assets (except MSR) and transition adjustments related to the adoption of FASB Statement No. 158, Employer's Accounting for Defined Benefit Pension and Other Postretirement Plans, as of December 31, 2006. Minority interests of $2.45 billion for December 31, 2006, $1.96 billion for September 30, 2006 and June 30, 2006 and $1.97 billion for March 31, 2006 are included in the numerator.   (7) The total risk-based capital ratio is estimated as if Washington Mutual, Inc. were a bank holding company subject to Federal Reserve Board capital requirements.   (8) Capital ratios for Washington Mutual Bank ("WMB") at December 31, 2006 are preliminary.   (9) Includes six million shares held in escrow for all periods reported. WM-2 Washington Mutual, Inc. Consolidated Statements of Income (dollars in millions, except per share data) (unaudited)         Quarter Ended Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,       2006    2006    2006    2006    2005  Interest Income Loans held for sale $ 520  $ 439  $ 398  $ 466  $ 676  Loans held in portfolio 4,048  4,008  3,884  3,576  3,431  Available-for-sale securities 392  379  368  322  303  Trading assets 102  140  165  198  185  Other interest and dividend income 148    139    120    95    73  Total interest income 5,210  5,105  4,935  4,657  4,668  Interest Expense Deposits 1,843  1,739  1,461  1,221  1,184  Borrowings   1,369    1,419    1,414    1,319    1,243  Total interest expense 3,212    3,158    2,875    2,540    2,427  Net interest income 1,998  1,947  2,060  2,117  2,241  Provision for loan and lease losses 344    166    224    82    217  Net interest income after provision for loan and lease losses 1,654  1,781  1,836  2,035  2,024  Noninterest Income Revenue from sales and servicing of home mortgage loans 164  118  222  263  418  Revenue from sales and servicing of consumer loans 372  355  424  376  409  Depositor and other retail banking fees 692  655  641  578  586  Credit card fees 182  165  152  138  139  Securities fees and commissions 54  52  56  52  47  Insurance income 30  31  33  33  37  Trading assets income (loss) (81) 68  (129) (13) (273) Gain (loss) from sales of other available-for-sale securities (1) (1) -  (7) 46  Other income 180    127    179    218    117  Total noninterest income 1,592  1,570  1,578  1,638  1,526  Noninterest Expense Compensation and benefits(1) 945  939  1,021  1,032  1,028  Occupancy and equipment 476  408  435  391  399  Telecommunications and outsourced information services 133  142  145  134  139  Depositor and other retail banking losses 64  57  51  56  60  Advertising and promotion 107  124  117  95  109  Professional fees 89  57  45  36  62  Other expense 443    457    415    394    417  Total noninterest expense 2,257  2,184  2,229  2,138  2,214  Minority interest expense 34    34    37    -    -  Income from continuing operations before income taxes 955  1,133  1,148  1,535  1,336  Income taxes 315    394    389    559    479  Income from continuing operations, net of taxes 640    739    759    976    857  Discontinued Operations(2) Income from discontinued operations before income taxes 2  14  12  15  12  Gain on disposition of discontinued operations 667  -  -  -  -  Income taxes 251    5    4    6    4  Income from discontinued operations, net of taxes 418    9    8    9    8  Net Income $ 1,058    $ 748    $ 767    $ 985    $ 865  Net Income Available to Common Stockholders $ 1,050    $ 748    $ 767    $ 985    $ 865    Basic Earnings Per Common Share: Income from continuing operations $ 0.68  $ 0.78  $ 0.80  $ 1.00  $ 0.87  Income from discontinued operations 0.45  0.01  0.01  0.01  0.01  Net income 1.13  0.79  0.81  1.01  0.88    Diluted Earnings Per Common Share: Income from continuing operations $ 0.66  $ 0.76  $ 0.78  $ 0.97  $ 0.84  Income from discontinued operations 0.44  0.01  0.01  0.01  0.01  Net income 1.10  0.77  0.79  0.98  0.85    Dividends declared per common share 0.53  0.52  0.51  0.50  0.49  Basic weighted average number of common shares outstanding (in thousands) 931,484  941,898  947,023  973,614  980,084  Diluted weighted average number of common shares outstanding (in thousands) 955,817  967,376  975,504  1,003,460  1,011,395      (1) As of January 1, 2006, the Company applied Statement of Financial Accounting Standards ("Statement") No. 123R, Share-Based Payment. Statement No. 123R requires an entity that previously had a policy of recognizing the effect of forfeitures as they occurred to estimate the number of outstanding instruments for which the requisite service is not expected to be rendered. The effect of this change in accounting principle amounted to $25 million and has been reflected as a decrease to compensation and benefits expense in the first quarter of 2006.   (2) Represents WM Advisors, Inc., the Company's retail mutual fund management business, which was sold in the fourth quarter of 2006. WM-3 Washington Mutual, Inc. Consolidated Statements of Income (dollars in millions, except per share data) (unaudited)           Year Ended Dec. 31, Dec. 31,           2006      2005  Interest Income Loans held for sale $ 1,824  $ 2,394  Loans held in portfolio 15,516  11,827  Available-for-sale securities 1,460  998  Trading assets 606  469  Other interest and dividend income   501      232  Total interest income 19,907  15,920  Interest Expense Deposits 6,263  3,728  Borrowings     5,523      3,974  Total interest expense   11,786      7,702  Net interest income 8,121  8,218  Provision for loan and lease losses   816      316  Net interest income after provision for loan and lease losses 7,305  7,902  Noninterest Income Revenue from sales and servicing of home mortgage loans 768  2,017  Revenue from sales and servicing of consumer loans 1,527  413  Depositor and other retail banking fees 2,567  2,193  Credit card fees 637  139  Securities fees and commissions 215  189  Insurance income 127  172  Trading assets loss (154) (257) Loss from sales of other available-for-sale securities (9) (84) Other income   699      315  Total noninterest income 6,377  5,097  Noninterest Expense Compensation and benefits(1) 3,937  3,701  Occupancy and equipment 1,711  1,520  Telecommunications and outsourced information services 554  449  Depositor and other retail banking losses 229  226  Advertising and promotion 443  315  Professional fees 227  181  Other expense   1,706      1,228  Total noninterest expense 8,807  7,620  Minority interest expense   105      -  Income from continuing operations before income taxes 4,770  5,379  Income taxes   1,656      1,985  Income from continuing operations, net of taxes   3,114      3,394  Discontinued Operations(2) Income from discontinued operations before income taxes 42  58  Gain on disposition of discontinued operations 667  -  Income taxes   265      20  Income from discontinued operations, net of taxes   444      38  Net Income   $ 3,558    $ 3,432  Net Income Available to Common Stockholders $ 3,550    $ 3,432    Basic Earnings Per Common Share: Income from continuing operations $ 3.27  $ 3.80  Income from discontinued operations   0.47    0.04  Net income 3.74  3.84    Diluted Earnings Per Common Share: Income from continuing operations $ 3.18  $ 3.69  Income from discontinued operations   0.46    0.04  Net income 3.64  3.73    Dividends declared per common share 2.06  1.90  Basic weighted average number of common shares outstanding (in thousands) 948,371  894,434  Diluted weighted average number of common shares outstanding (in thousands) 975,406  919,238      (1) As of January 1, 2006, the Company applied Statement of Financial Accounting Standards ("Statement") No. 123R, Share-Based Payment. Statement No. 123R requires an entity that previously had a policy of recognizing the effect of forfeitures as they occurred to estimate the number of outstanding instruments for which the requisite service is not expected to be rendered. The effect of this change in accounting principle amounted to $25 million and has been reflected as a decrease to compensation and benefits expense in the first quarter of 2006.   (2) Represents WM Advisors, Inc., the Company's retail mutual fund management business, which was sold in the fourth quarter of 2006. WM-4 Washington Mutual, Inc. Consolidated Statements of Financial Condition (dollars in millions) (unaudited)     Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,         2006    2006    2006    2006    2005  Assets Cash and cash equivalents $ 6,948  $ 6,649  $ 6,675  $ 5,868  $ 6,214  Federal funds sold and securities purchased under agreements to resell 3,743  5,102  4,112  3,995  2,137  Trading assets 4,434  5,391  7,445  9,958  10,999  Available-for-sale securities, total amortized cost of $25,073, $29,136, $28,504, $27,424, and $24,810:   Mortgage-backed securities 18,063  22,353  21,438  21,388  20,648  Investment securities   6,915    6,664    6,358    5,586    4,011  Total available-for-sale securities 24,978  29,017  27,796  26,974  24,659  Loans held for sale 44,970  23,720  23,342  25,020  33,582  Loans held in portfolio 224,960  241,765  243,503  240,004  229,632  Allowance for loan and lease losses   (1,630)   (1,550)   (1,663)   (1,642)   (1,695) Total loans held in portfolio, net of allowance for loan and lease losses 223,330  240,215  241,840  238,362  227,937  Investment in Federal Home Loan Banks 2,705  3,013  3,500  4,200  4,257  Mortgage servicing rights 6,193  6,288  9,162  8,736  8,041  Goodwill 9,050  8,368  8,339  8,298  8,298  Other assets   19,937    21,114    18,673    16,990    17,449  Total assets   $ 346,288    $ 348,877    $ 350,884    $ 348,401    $ 343,573  Liabilities Deposits: Noninterest-bearing deposits $ 33,386  $ 34,667  $ 35,457  $ 36,531  $ 34,014  Interest-bearing deposits   180,570    176,215    169,101    163,471    159,153  Total deposits 213,956  210,882  204,558  200,002  193,167  Federal funds purchased and commercial paper 4,778  5,282  6,138  6,841  7,081  Securities sold under agreements to repurchase 11,953  13,665  19,866  15,471  15,532  Advances from Federal Home Loan Banks 44,297  47,247  55,311  65,283  68,771  Other borrowings 32,852  33,883  27,995  24,872  23,777  Other liabilities 9,035  9,501  8,926  8,140  7,951  Minority interests(1)   2,448    1,959    1,959    1,973    15  Total liabilities 319,319  322,419  324,753  322,582  316,294  Stockholders' equity   26,969    26,458    26,131    25,819    27,279  Total liabilities and stockholders' equity   $ 346,288    $ 348,877    $ 350,884    $ 348,401    $ 343,573    (1) Primarily comprises perpetual non-cumulative preferred securities issued in 2006 by Washington Mutual Preferred Funding, LLC, an indirect subsidiary of Washington Mutual, Inc. WM-5 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)       Quarter Ended Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,     2006    2006    2006    2006    2005  Stockholders' Equity Rollforward Balance, beginning of period $ 26,458  $ 26,131  $ 25,819  $ 27,279  $ 22,259  Net income 1,058  748  767  985  865  Cumulative effect from the adoption of Statement No. 156, net of income taxes(1) -  -  -  35  -  Other comprehensive income (loss), net of income taxes (107) 419  (151) (219) (91) Cash dividends declared on common stock (496) (497) (486) (499) (480) Cash dividends declared on preferred stock (8) -  -  -  -  Common stock repurchased and retired -  (930) -  (2,108) (723) Common stock issued for acquisition -  -  -  -  5,030  Common stock issued 64  95  182  346  419  Preferred stock issued     -      492      -      -      -  Balance, end of period   $ 26,969    $ 26,458    $ 26,131    $ 25,819    $ 27,279    (1) As of January 1, 2006, the Company prospectively applied Statement of Financial Accounting Standards ("Statement") No. 156, Accounting for Servicing of Financial Assets. Statement No. 156 permits an entity to choose either to continue the practice of amortizing servicing assets and assess such assets for impairment, or to report servicing assets at fair value. The Company has elected to report its mortgage servicing assets at fair value. Statement No. 156 also permits the one-time transfer of available-for-sale securities being utilized as MSR risk management instruments to trading securities. The cumulative effects, net of income taxes, resulted in a $29 million increase to January 1, 2006 retained earnings from the MSR fair value election and a $6 million increase to January 1, 2006 accumulated other comprehensive income from the transfer of AFS securities, designated as MSR risk management instruments, to the trading portfolio. WM-6 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)           Quarter Ended         Year Ended Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, Dec. 31, Dec. 31,           2006      2006      2006      2006      2005    2006      2005  RETAIL BANKING GROUP Condensed income statement: Net interest income $ 1,239  $ 1,260  $ 1,324  $ 1,348  $ 1,278  $ 5,171  $ 4,890  Provision for loan and lease losses 47  53  13  54  26  167  118  Noninterest income 774  738  735  672  730  2,919  2,580  Inter-segment revenue 17  17  16  13  8  63  42  Noninterest expense     1,103      1,079      1,109      1,089      1,100    4,380      4,187  Income from continuing operations before income taxes 880  883  953  890  890  3,606  3,207  Income taxes     336      337      365      340      337    1,378      1,213  Income from continuing operations, net of taxes 544  546  588  550  553  2,228  1,994  Income from discontinued operations, net of taxes     12      9      8      9      8    38      38  Net income   $ 556    $ 555    $ 596    $ 559    $ 561  $ 2,266    $ 2,032  Performance and other data: Efficiency ratio 54.33% 53.57% 53.44% 53.57% 54.56% 53.72% 55.73% Average loans $ 172,031  $ 180,839  $ 182,972  $ 174,035  $ 166,810  $ 177,473  $ 163,561  Average assets 182,260  191,299  193,330  184,336  177,317  187,810  173,803  Average deposits: Checking deposits: Noninterest bearing 21,873  21,440  21,418  20,346  19,953  21,274  18,948  Interest bearing     33,010      34,792      37,518      40,343      43,192    36,391      46,400  Total checking deposits 54,883  56,232  58,936  60,689  63,145  57,665  65,348  Savings and money market deposits 41,442  38,317  38,143  37,433  36,594  38,843  35,772  Time deposits     47,188      45,405      41,724      40,940      40,473    43,836      35,774  Average total deposits 143,513  139,954  138,803  139,062  140,212  140,344  136,894  Loan volume 7,966  9,006  10,488  7,255  11,563  34,715    46,951  Employees at end of period 27,957  28,319  31,709  33,124  33,104  27,957  33,104  CARD SERVICES GROUP Managed basis(1) Condensed income statement: Net interest income $ 664  $ 633  $ 615  $ 619  $ 645  $ 2,530  $ 645  Provision for loan and lease losses 555  345  417  330  454  1,647  454  Noninterest income 451  343  389  344  352  1,528  352  Inter-segment expense 2  2  1  -  -  5  -      Noninterest expense     316      294      293      298      268    1,201      268  Income before income taxes 242  335  293  335  275  1,205  275      Income taxes     93      128      112      128      103    460      103  Net income   $ 149    $ 207    $ 181    $ 207    $ 172  $ 745    $ 172  Performance and other data: Efficiency ratio 28.41% 30.16% 29.19% 30.95% 26.86% 29.62% 26.86% Average loans $ 22,875  $ 21,706  $ 20,474  $ 20,086  $ 19,472  $ 21,294  $ 4,908  Average assets 25,472  24,236  23,044  22,764  22,198  23,888  5,595  Employees at end of period 2,676  2,731  2,597  2,871  3,124  2,676  3,124  Securitization adjustments Condensed income statement: Net interest income $ (437) $ (411) $ (405) $ (432) $ (409) $ (1,686) $ (409) Provision for loan and lease losses (280) (220) (217) (225) (259) (943) (259) Noninterest income 157  191  188  207  150  743  150  Performance and other data: Average loans (12,811) (12,169) (11,565) (12,107) (11,011) (12,165) (2,775) Average assets (11,035) (10,330) (9,753) (10,219) (9,267) (10,337) (2,336) Adjusted basis Condensed income statement: Net interest income $ 227  $ 222  $ 210  $ 187  $ 236  $ 844  $ 236  Provision for loan and lease losses 275  125  200  105  195  704  195  Noninterest income 608  534  577  551  502  2,271  502  Inter-segment expense 2  2  1  -  -  5  -      Noninterest expense     316      294      293      298      268    1,201      268  Income before income taxes 242  335  293  335  275  1,205  275      Income taxes     93      128      112      128      103    460      103  Net income   $ 149    $ 207    $ 181    $ 207    $ 172  $ 745    $ 172  Performance and other data: Average loans $ 10,064  $ 9,537  $ 8,909  $ 7,979  $ 8,461  $ 9,129  $ 2,133  Average assets 14,437  13,906  13,291  12,545  12,931  13,551  3,259  COMMERCIAL GROUP(2) Condensed income statement: Net interest income $ 189  $ 159  $ 166  $ 163  $ 183  $ 677  $ 731  Provision (reversal of reserve) for loan and lease losses (69) (2) (10) -  9  (81) (26) Noninterest income 40  25  17  12  109  94  195  Noninterest expense     72      60      57      67      66    255      240  Income before income taxes 226  126  136  108  217  597  712  Income taxes     86      48      52      41      82    229      269  Net income   $ 140    $ 78    $ 84    $ 67    $ 135  $ 368    $ 443  Performance and other data: Efficiency ratio 31.49% 32.21% 31.28% 38.47% 22.45% 33.20% 25.89% Average loans $ 37,552  $ 32,414  $ 31,505  $ 31,011  $ 30,928  $ 33,137  $ 30,154  Average assets 40,216  34,560  33,709  33,334  34,065  35,471  33,197  Average deposits 3,609  2,323  2,242  2,259  2,428  2,611  2,592  Loan volume 4,019  3,104  2,961  2,769  2,932  12,854  11,231  Employees at end of period 1,409  1,242  1,252  1,326  1,319  1,409  1,319    (This table is continued on "WM-7".) __________________________ (1) The managed basis presentation treats securitized and sold credit card receivables as if they were still on the balance sheet. The Company uses this basis in assessing the overall performance of this operating segment. Under this presentation, loans securitized and sold are added back to the balance sheet and the related interest, fee income and credit losses are added back to the income statement. These securitization adjustments are eliminated in the reconciliation of management accounting methodologies to the Company's GAAP financial results.   (2) Effective January 1, 2006, the Company reorganized its single family residential mortgage lending operations. This reorganization combined the Company's subprime mortgage origination business, Long Beach Mortgage, as well as its Mortgage Banker Finance lending operations with the Home Loans Group. Previously, these operations were reported within the Commercial Group. This change in organization was retrospectively applied to prior periods. WM-7 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)   (This table is continued from "WM-6".)       Quarter Ended Year Ended     Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, Dec. 31, Dec. 31,         2006      2006      2006      2006      2005  2006    2005  HOME LOANS GROUP(1) Condensed income statement: Net interest income $ 273  $ 275  $ 289  $ 337  $ 473  $ 1,174  $ 1,985  Provision for loan and lease losses 47  84  38  21  22  189  110  Noninterest income 126  314  458  399  327  1,297  2,426  Inter-segment expense 15  15  15  13  8  58  42  Noninterest expense       534      529      618      622      678    2,302        2,608  Income (loss) before income taxes (197) (39) 76  80  92  (78) 1,651  Income taxes (benefit)       (75)     (15)     30      31      35    (30)       622  Net income (loss)     $ (122)   $ (24)   $ 46    $ 49    $ 57  $ (48)   $   1,029  Performance and other data: Efficiency ratio 139.14% 92.14% 84.34% 85.97% 85.56% 95.38% 59.69% Average loans $ 51,046  $ 45,397  $ 43,907  $ 49,730  $ 68,082  $ 47,518  $ 64,919  Average assets 71,511  70,556  70,875  77,977  94,693  72,706  87,252  Average deposits 19,788  20,659  20,124  16,530  19,134  19,288  19,317  Loan volume 34,897  37,200  41,364  44,998  48,701  158,458  202,697  Employees at end of period 12,993  13,907  15,530  17,616  17,726  12,993  17,726  CORPORATE SUPPORT/TREASURY AND OTHER Condensed income statement: Net interest expense $ (64) $ (106) $ (60) $ (44) $ (50) $ (275) $ (97) Provision (reversal of reserve) for loan and lease losses (2) 1  (3) (1) -  (4) 4  Noninterest income (expense) 142  75  (88) 150  (14) 280  (172) Noninterest expense 232  222  152  62  102  669  317  Minority interest expense       34      34      37      -      -    105        -  Income (loss) from continuing operations before income taxes (186) (288) (334) 45  (166) (765) (590) Income tax benefit       86      121      133      1      70    342        263  Income (loss) from continuing operations, net of taxes (100) (167) (201) 46  (96) (423) (327) Income from discontinued operations, net of taxes       406      -      -      -      -    406        -  Net income (loss)     $ 306    $ (167)   $ (201)   $ 46    $ (96) $ (17)   $   (327) Performance and other data: Average loans $ 1,294  $ 1,245  $ 1,178  $ 1,142  $ 1,148  $ 1,215  $ 1,087  Average assets 46,414  41,041  39,355  37,414  32,142  41,080  30,723  Average deposits 47,891  45,976  39,083  33,183  35,025  41,586  27,220  Loan volume 144  58  82  24  96  308  278  Employees at end of period 4,789  4,857  5,159  5,444  5,525  4,789  5,525    RECONCILING ADJUSTMENTS Condensed income statement: Net interest income(2) $ 134  $ 137  $ 131  $ 126  $ 121  $ 530  $ 473  Provision (reversal of reserve) for loan and lease losses(3) 46  (95) (14) (97) (35) (159) (85) Noninterest income (expense)(4)       (98)     (116)     (121)     (146)     (128)   (484)       (434) Income (loss) before income taxes (10) 116  24  77  28  205  124  Income taxes (benefit)(5)       (39)     17      (37)     20      (8)   (39)       41  Net income     $ 29    $ 99    $ 61    $ 57    $ 36  $ 244    $   83  Performance and other data: Average loans(6) $ (1,573) $ (1,600) $ (1,601) $ (1,571) $ (1,555) $ (1,587) $ (1,573) Average assets(6) (1,782) (1,820) (1,896) (1,946) (1,976) (1,860) (2,001)   TOTAL CONSOLIDATED Condensed income statement: Net interest income $ 1,998  $ 1,947  $ 2,060  $ 2,117  $ 2,241  $ 8,121  $ 8,218  Provision for loan and lease losses 344  166  224  82  217  816  316  Noninterest income 1,592  1,570  1,578  1,638  1,526  6,377  5,097  Noninterest expense 2,257  2,184  2,229  2,138  2,214  8,807  7,620  Minority interest expense       34      34      37      -      -    105        -  Income from continuing operations before income taxes 955  1,133  1,148  1,535  1,336  4,770  5,379  Income taxes       315      394      389      559      479    1,656        1,985  Income from continuing operations, net of taxes 640  739  759  976  857  3,114  3,394  Income from discontinued operations, net of taxes       418      9      8      9      8    444        38  Net income     $ 1,058    $ 748    $ 767    $ 985    $ 865  $ 3,558    $   3,432  Performance and other data: Efficiency ratio 62.87% 62.09% 61.27% 56.95% 58.75% 60.75% 57.23% Average loans $ 270,414  $ 267,832  $ 266,870  $ 262,326  $ 273,874  $ 266,885  $ 260,281  Average assets 353,056  349,542  348,664  343,660  349,172  348,758  326,233  Average deposits 214,801  208,912  200,252  191,034  196,799  203,829  186,023  Loan volume 47,026  49,368  54,895  55,046  63,292  206,335  261,157  Employees at end of period 49,824  51,056  56,247  60,381  60,798  49,824  60,798    _____________________ (1) See note 2 on preceding table.   (2) Represents the difference between home loan premium amortization recorded by the Retail Banking Group and the amount recognized in the Company's Consolidated Statements of Income. For management reporting purposes, loans that are held in portfolio by the Retail Banking Group are treated as if they are purchased from the Home Loans Group. Since the cost basis of these loans includes an assumed profit factor paid to the Home Loans Group, the amortization of loan premiums recorded by the Retail Banking Group reflects this assumed profit factor and must therefore be eliminated as a reconciling adjustment.   (3) Represents the difference between the provision calculated using management accounting methodologies and those used in the Company's consolidated financial statements.   (4) Represents the difference between gain from mortgage loans recorded by the Home Loans Group and the gain from mortgage loans recognized in the Company's Consolidated Statements of Income. A substantial amount of loans originated or purchased by this segment are considered to be salable for management reporting purposes.   (5) Represents the tax effect of reconciling adjustments.   (6) Includes the inter-segment offset for inter-segment loan premiums that the Retail Banking Group recognized from the transfer of portfolio loans from the Home Loans Group.   WM-8 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)     Quarter Ended   Quarter Ended   Quarter Ended   Dec. 31, 2006   Sept. 30, 2006 Dec. 31, 2005 Interest Interest Interest Income/ Income/ Income/     Balance   Rate   Expense   Balance   Rate   Expense   Balance   Rate   Expense Average Balances and Weighted Average Interest Rates Assets   Interest-earning assets: Federal funds sold and securities purchased under agreements to resell $ 5,597  5.33% $ 76  $ 5,085  5.38% $ 70  $ 2,380  4.01% $ 24  Trading assets 4,855  8.39  102  6,264  8.92  140  10,330  7.13  185  Available-for-sale securities(1): Mortgage-backed securities 21,661  5.58  302  21,488  5.41  291  19,135  5.25  252  Investment securities 6,952  5.15  90  6,910  5.06  88  4,316  4.75  51  Loans held for sale 31,149  6.65  520  25,667  6.82  439  46,306  5.82  676  Loans held in portfolio: Loans secured by real estate: Home loans(2) 114,645  6.04  1,729  123,355  5.94  1,830  111,126  5.30  1,472  Specialty mortgage finance(3) 19,196  6.68  321  19,632  6.19  304  22,430  6.06  340  Home equity loans and lines of credit 54,636  7.56  1,040  53,221  7.54  1,010  50,449  6.55  831  Home construction(4) 2,060  6.62  34  2,059  6.41  33  2,008  6.35  32  Multi-family 30,348  6.52  494  27,100  6.42  435  25,312  5.77  365  Other real estate 6,732  6.88  118  5,696  6.76  98  4,953  7.38  92  Total loans secured by real estate 227,617  6.55  3,736  231,063  6.41  3,710  216,278  5.78  3,132  Consumer: Credit card 9,597  11.28  273  9,058  11.39  260  8,259  11.96  249  Other 280  12.54  9  284  12.57  9  654  10.79  18  Commercial 1,771  6.61  30  1,760  6.41  29  2,377  5.28  32  Total loans held in portfolio 239,265  6.75  4,048  242,165  6.60  4,008  227,568  6.02  3,431  Other 5,305  5.35  72  5,248  5.21  69  4,455  4.29  49  Total interest-earning assets(5) 314,784  6.60  5,210  312,827  6.51  5,105  314,490  5.92  4,668  Noninterest-earning assets: Mortgage servicing rights 6,230  7,201  7,680  Goodwill 9,011  8,339  8,247  Other assets(6) 23,031  21,175  18,755  Total assets $ 353,056  $ 349,542  $ 349,172  Liabilities Interest-bearing liabilities: Deposits: Interest-bearing checking deposits $ 33,098  2.78  232  $ 34,866  2.90  255  $ 43,302  2.23  243  Savings and money market deposits 53,314  3.34  449  49,144  3.19  396  43,831  2.09  231  Time deposits 93,415  4.90  1,162  90,001  4.77  1,088  74,300  3.77  710  Total interest-bearing deposits 179,827  4.05  1,843  174,011  3.95  1,739  161,433  2.90  1,184  Federal funds purchased and commercial paper 6,781  5.40  93  7,382  5.31  99  8,236  4.07  85  Securities sold under agreements to repurchase 12,177  5.43  169  15,676  5.39  216  15,330  4.09  160  Advances from Federal Home Loan Banks 46,005  5.31  625  52,886  5.28  711  70,113  4.06  726  Other 34,420  5.54  482  27,815  5.59  393  24,715  4.38  272  Total interest-bearing liabilities 279,210  4.53  3,212  277,770  4.48  3,158  279,827  3.42  2,427  Noninterest-bearing sources: Noninterest-bearing deposits 34,974  34,901  35,366  Other liabilities(7) 10,111  8,765  7,015  Minority interests 2,061  1,959  15  Stockholders' equity 26,700  26,147  26,949  Total liabilities and stockholders' equity $ 353,056  $ 349,542  $ 349,172  Net interest spread and net interest income 2.07  $ 1,998  2.03  $ 1,947  2.50  $ 2,241  Impact of noninterest-bearing sources 0.51  0.50  0.38  Net interest margin 2.58  2.53  2.88  _______________________________ (1) The average balance and yield are based on average amortized cost balances.   (2) Capitalized interest recognized in earnings that resulted from negative amortization within the Option ARM portfolio totaled $333 million, $296 million and $133 million for the quarters ended December 31, 2006, September 30, 2006 and December 31, 2005.   (3) Represents home loans purchased from dedicated subprime lenders and all loans originated by Long Beach Mortgage and held in its investment portfolio.   (4) Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence.   (5) Nonaccrual assets and related income, if any, are included in their respective categories.   (6) Includes assets of discontinued operations.   (7) Includes liabilities of discontinued operations. WM-9 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)     Year Ended Year Ended Dec. 31, 2006 Dec. 31, 2005 Interest Interest Income/ Income/   Balance Rate   Expense Balance Rate   Expense Average Balances and Weighted Average Interest Rates Assets Interest-earning assets: Federal funds sold and securities purchased under agreements to resell $ 4,718  5.20% $ 245  $ 2,154  3.42% $ 74  Trading assets 7,829  7.74  606  7,217  6.50  469  Available-for-sale securities(1): Mortgage-backed securities 21,288  5.40  1,150  16,347  4.80  784  Investment securities 6,238  4.96  310  4,506  4.74  214  Loans held for sale 27,791  6.56  1,824  44,847  5.34  2,394  Loans held in portfolio: Loans secured by real estate: Home loans(2) 120,320  5.83  7,011  110,326  4.97  5,485  Specialty mortgage finance(3) 19,602  6.25  1,226  20,561  5.90  1,214  Home equity loans and lines of credit 52,865  7.34  3,882  47,909  6.01  2,878  Home construction(4) 2,061  6.46  133  2,074  6.22  129  Multi-family 27,386  6.28  1,721  24,070  5.41  1,303  Other real estate 5,797  6.93  402  5,091  7.11  362  Total loans secured by real estate 228,031  6.30  14,375  210,031  5.41  11,371  Consumer: Credit card 8,733  11.19  977  2,082  11.96  249  Other 444  11.12  50  707  10.67  75  Commercial 1,886  6.06  114  2,614  5.04  132  Total loans held in portfolio 239,094  6.49  15,516  215,434  5.49  11,827  Other 5,220  4.90  256  4,324  3.65  158  Total interest-earning assets(5) 312,178  6.38  19,907  294,829  5.40  15,920  Noninterest-earning assets: Mortgage servicing rights 7,667  6,597  Goodwill 8,489  6,712  Other assets(6) 20,424  18,095  Total assets $ 348,758  $ 326,233  Liabilities Interest-bearing liabilities: Deposits: Interest-bearing checking deposits $ 36,477  2.63  960  $ 46,524  1.95  906  Savings and money market deposits 48,866  2.96  1,446  42,555  1.76  750  Time deposits 84,106  4.59  3,857  62,175  3.33  2,072  Total interest-bearing deposits 169,449  3.70  6,263  151,254  2.46  3,728  Federal funds purchased and commercial paper 7,347  5.06  371  5,314  3.56  190  Securities sold under agreements to repurchase 15,257  5.12  781  15,365  3.40  523  Advances from Federal Home Loan Banks 56,619  4.99  2,828  68,713  3.46  2,377  Other 28,796  5.36  1,543  21,603  4.09  884  Total interest-bearing liabilities 277,468  4.25  11,786  262,249  2.94  7,702  Noninterest-bearing sources: Noninterest-bearing deposits 34,380  34,769  Other liabilities(7) 8,865  6,177  Minority interests 1,639  14  Stockholders' equity 26,406  23,024  Total liabilities and stockholders' equity $ 348,758  $ 326,233  Net interest spread and net interest income 2.13  $ 8,121  2.46  $ 8,218  Impact of noninterest-bearing sources 0.47  0.33  Net interest margin 2.60  2.79  _______________________________ (1) The average balance and yield are based on average amortized cost balances.   (2) Capitalized interest recognized in earnings that resulted from negative amortization within the Option ARM portfolio totaled $1.07 billion and $292 million for the years ended December 31, 2006 and December 31, 2005.   (3) Represents home loans purchased from dedicated subprime lenders and all loans originated by Long Beach Mortgage and held in its investment portfolio.   (4) Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence.   (5) Nonaccrual assets and related income, if any, are included in their respective categories.   (6) Includes assets of discontinued operations.   (7) Includes liabilities of discontinued operations. WM-10 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)         Change fromSept. 30,2006to Dec. 31,2006   Dec. 31,2006   Sept. 30,2006 June 30,2006   Mar. 31,2006   Dec. 31,2005 Deposits Retail deposits: Checking deposits: Noninterest bearing $ 372  $ 22,838  $ 22,466  $ 22,450  $ 22,378  $ 20,752  Interest bearing   (1,038)   32,723    33,761  35,958    39,289    42,253  Total checking deposits (666) 55,561  56,227  58,408  61,667  63,005  Savings and money market deposits 2,462  41,943  39,481  37,664  38,197  36,664  Time deposits(1)   (540)   46,821    47,361  43,685    41,534    40,359  Total retail deposits 1,256  144,325  143,069  139,757  141,398  140,028  Commercial business and other deposits (656) 15,175  15,831  15,625  14,559  11,459  Wholesale deposits 3,972  44,638  40,666  37,024  31,277  29,917  Custodial and escrow deposits(2)   (1,498)   9,818    11,316  12,152    12,768    11,763  Total deposits   $ 3,074    $ 213,956    $ 210,882  $ 204,558    $ 200,002    $ 193,167    (1) Weighted average remaining maturity of time deposits was 9 months at December 31, 2006, 10 months at September 30, 2006, June 30, 2006 and March 31, 2006, and 11 months at December 31, 2005.   (2) Substantially all custodial and escrow deposits reside in noninterest-bearing checking accounts.   Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,           2006    2006    2006    2006    2005  Retail Deposit Accounts (number of accounts) Noninterest bearing checking 9,611,706  9,403,072  9,063,458  8,630,646  8,299,031  Interest bearing checking 1,503,365  1,532,215  1,564,396  1,593,018  1,584,476  Savings and money market       6,525,772    6,379,068    6,161,187    5,929,653    5,694,102  Total transaction accounts, end of period(1)       17,640,843    17,314,355    16,789,041    16,153,317    15,577,609    Net change in noninterest bearing checking accounts 208,634  339,614  432,812  331,615  181,111  Net change in checking accounts 179,784  307,433  404,190  340,157  203,190    (1) Transaction accounts include retail checking, small business checking, retail savings and small business savings.       Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,           2006    2006    2006    2006    2005  Retail Banking Stores Stores, beginning of period 2,225  2,201  2,168  2,140  2,051  Stores opened during the quarter 81  (1) 25  35  29  97  (2) Stores closed during the quarter       (81)   (1)   (2) (2) (1)   (8)   Stores, end of period       2,225    2,225    2,201    2,168    2,140      (1) Includes 26 retail banking stores acquired through the merger with Commercial Capital Bancorp.   (2) Includes two retail banking stores acquired through the merger with Providian Financial Corporation. These stores were not considered to be an integral component of Washington Mutual's retail banking franchise and were subsequently sold in April of 2006. WM-11 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)       Quarter Ended Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,     2006    2006    2006    2006    2005  Loan Volume Home loans: Short-term adjustable-rate loans(1): Option ARMs $ 9,487  $ 11,601  $ 11,256  $ 8,777  $ 12,565  Other ARMs   13    42    1,859    2,943    1,222  Total short-term adjustable-rate loans 9,500  11,643  13,115  11,720  13,787  Medium-term adjustable-rate loans(2) 17,323  16,707  16,041  14,865  14,581  Fixed-rate loans   7,351    8,818    13,695    17,605    22,061  Total home loan volume 34,174  37,168  42,851  44,190  50,429  Home equity loans and lines of credit 8,098  8,498  8,251  7,306  9,118  Home construction(3) 298  269  421  493  479  Multi-family 2,977  2,186  2,230  2,034  2,595  Other real estate   1,182    983    787    716    419  Total loans secured by real estate 46,729  49,104  54,540  54,739  63,040  Consumer(4) 23  26  36  49  79  Commercial   274    238    319    258    173  Total loan volume   $ 47,026    $ 49,368    $ 54,895    $ 55,046    $ 63,292  Loan Volume by Channel Retail $ 24,426  $ 22,239  $ 23,709  $ 22,580  $ 27,676  Wholesale 16,002  14,964  14,798  16,722  17,190  Purchased 6,398  11,560  12,033  7,318  10,092  Correspondent   200    605    4,355    8,426    8,334  Total loan volume by channel   $ 47,026    $ 49,368    $ 54,895    $ 55,046    $ 63,292  Refinancing Activity(5) Home loan refinancing $ 22,261  $ 20,104  $ 26,667  $ 26,871  $ 30,727  Home equity loans and lines of credit and consumer 599  689  161  215  219  Home construction loans 283  254  379  393  381  Multi-family and other real estate   1,254    763    799    774    831  Total refinancing   $ 24,397    $ 21,810    $ 28,006    $ 28,253    $ 32,158    (1) Short-term is defined as adjustable-rate loans that reprice within one year or less.   (2) Medium-term is defined as adjustable-rate loans that reprice after one year.   (3) Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence.   (4) Excludes credit card loan volume.   (5) Includes loan refinancing entered into by both new and pre-existing loan customers. WM-12 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)         Year Ended Dec. 31, Dec. 31,         2006      2005  Loan Volume Home loans: Short-term adjustable-rate loans(1): Option ARMs $ 41,122  $ 64,126  Other ARMs     4,856      3,800  Total short-term adjustable-rate loans 45,978  67,926  Medium-term adjustable-rate loans(2) 64,936  57,832  Fixed-rate loans     47,469      81,964  Total home loan volume 158,383  207,722  Home equity loans and lines of credit 32,153  39,721  Home construction(3) 1,481  1,352  Multi-family 9,428  9,755  Other real estate     3,668      1,599  Total loans secured by real estate 205,113  260,149  Consumer(4) 134  387  Commercial     1,088      621  Total loan volume   $ 206,335    $ 261,157  Loan Volume by Channel Retail $ 92,953  $ 116,425  Wholesale 62,486  74,229  Purchased 37,310  31,855  Correspondent     13,586      38,648  Total loan volume by channel   $ 206,335    $ 261,157  Refinancing Activity(5) Home loan refinancing $ 95,901  $ 119,918  Home equity loans and lines of credit and consumer 1,665  1,331  Home construction loans 1,310  1,094  Multi-family and other real estate     3,590      2,928  Total refinancing   $ 102,466    $ 125,271    (1) Short-term is defined as adjustable-rate loans that reprice within one year or less.   (2) Medium-term is defined as adjustable-rate loans that reprice after one year.   (3) Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence.   (4) Excludes credit card loan volume.   (5) Includes loan refinancing entered into by both new and pre-existing loan customers. WM-13 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)     Change from Sept. 30, 2006 toDec. 31, 2006 Dec. 31,2006 Sept. 30,2006 June 30,2006 Mar. 31,2006 Dec. 31,2005 Loans by Product Type Loans held in portfolio: Loans secured by real estate: Home: Short-term adjustable-rate loans(1): Option ARMs(2) $ (3,585) $ 63,557  $ 67,142  $ 69,224  $ 71,153  $ 71,201    Other ARMs   (1,284)   15,091    16,375    15,021    14,797        13,656  Total short-term adjustable-rate loans (4,869) 78,648  83,517  84,245  85,950  84,857  Medium-term adjustable-rate loans(3) (17,966) 29,774  47,740  52,032  49,391  41,511    Fixed-rate loans   (146)   9,782    9,928    9,424    8,660        8,922  Total home loans (22,981) 118,204  141,185  145,701  144,001  135,290  Home equity loans and lines of credit 560  54,924  54,364  52,981  51,872  50,851  Home construction(4) 5  2,082  2,077  2,082  2,095  2,037  Multi-family 2,754  30,161  27,407  26,749  26,151  25,601  Other real estate   876    6,745    5,869    5,537    5,353        5,035  Total loans secured by real estate(5) (18,786) 212,116  230,902  233,050  229,472  218,814  Consumer: Credit card 2,054  10,861  8,807  8,451  7,906  8,043  Other (5) 276  281  287  602  638  Commercial   (68)   1,707    1,775    1,715    2,024        2,137  Total loans held in portfolio(6) (16,805) 224,960  241,765  243,503  240,004  229,632  Less: allowance for loan and lease losses   (80)   (1,630)   (1,550)   (1,663)   (1,642)       (1,695) Total net loans held in portfolio (16,885) 223,330  240,215  241,840  238,362  227,937  Loans held for sale(7)   21,250    44,970    23,720    23,342    25,020        33,582  Total net loans   $ 4,365    $ 268,300    $ 263,935    $ 265,182    $ 263,382        $ 261,519    (1) Short-term is defined as adjustable-rate loans that reprice within one year or less.   (2) The total amount by which the unpaid principal balance of Option ARM loans exceeded their original principal amount was $852 million, $681 million, $474 million, $298 million, and $160 million at December 31, 2006, September 30, 2006, June 30, 2006, March 31, 2006 and December 31, 2005.   (3) Medium-term is defined as adjustable-rate loans that reprice after one year.   (4) Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence.   (5) Includes home loans purchased from dedicated subprime lenders and all loans originated by Long Beach Mortgage and held in its investment portfolio. Balances of such loans were $18.79 billion, $20.12 billion, $20.53 billion, $20.25 billion and $21.16 billion at December 31, 2006, September 30, 2006, June 30, 2006, March 31, 2006 and December 31, 2005.   (6) Includes net unamortized deferred loan origination costs of $1.48 billion, $1.61 billion, $1.62 billion, $1.61 billion, and $1.53 billion at December 31, 2006, September 30, 2006, June 30, 2006, March 31, 2006 and December 31, 2005.   (7) Fair value of loans held for sale was $45.06 billion, $23.80 billion, $23.35 billion, $25.03 billion, and $33.70 billion as of December 31, 2006, September 30, 2006, June 30, 2006, March 31, 2006 and December 31, 2005. WM-14 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)   Weighted Average Coupon Rate Sept. 30, 2006 Weighted Average Coupon Rate  Dec. 31,2005 Weighted Average Coupon Rate Change from Sept. 30, 2006 to Dec. 31, 2006 Dec. 31,2006 Selected Loans Secured by Real Estate and MBS Home loans held in portfolio: Short-term adjustable-rate loans(1): Option ARMs $ (3,585) $ 63,557  7.44% $ 67,142  7.13% $ 71,201  5.88% Other ARMs   (1,284)   15,091  7.17  16,375  7.01  13,656  6.43  Total short-term adjustable-rate loans (4,869) 78,648  7.39  83,517  7.11  84,857  5.97  Medium-term adjustable-rate loans(2) (17,966) 29,774  5.77  47,740  5.72  41,511  5.58  Fixed-rate loans   (146)   9,782  6.65  9,928  6.59  8,922  6.56  Total home loans held in portfolio (22,981) 118,204  6.92  141,185  6.60  135,290  5.89  Home equity loans and lines of credit: Short-term (Prime-based or treasury-based)(1) (1,618) 34,213  8.40  35,831  8.40  37,112  7.26  Fixed-rate loans   2,178    20,711  7.45  18,533  7.16  13,739  6.56  Total home equity loans and lines of credit 560  54,924  8.04  54,364  7.98  50,851  7.07  Multi-family loans held in portfolio: Short-term adjustable-rate loans(1): Option ARMs 197  9,164  7.18  8,967  6.95  9,529  5.74  Other ARMs   1,615    7,473  7.12  5,858  6.94  6,406  5.92  Total short-term adjustable-rate loans 1,812  16,637  7.15  14,825  6.95  15,935  5.81  Medium-term adjustable-rate loans(2) 851  11,757  5.68  10,906  5.59  8,118  5.29  Fixed-rate loans   91    1,767  6.44  1,676  6.45  1,548  6.59  Total multi-family loans held in portfolio   2,754    30,161  6.54  27,407  6.38  25,601  5.69  Total selected loans held in portfolio secured by real estate(3) (19,667) 203,289  7.17  222,956  6.90  211,742  6.15  Loans held for sale(4)   21,337    44,724  6.32  23,387  6.64  32,928  6.15  Total selected loans secured by real estate 1,670  248,013  7.01  246,343  6.88  244,670  6.15  MBS(5): Short-term adjustable-rate MBS(1) (2,026) 6,056  5.68  8,082  5.55  7,965  4.88  Medium-term adjustable-rate MBS(2) (2,844) 2,459  5.08  5,303  5.09  4,504  4.97  Fixed-rate MBS   580    9,548  5.27  8,968  5.31  8,179  5.11  Total MBS(6)   (4,290)   18,063  5.38  22,353  5.35  20,648  4.99  Total selected loans secured by real estate and MBS   $ (2,620)   $ 266,076  6.90  $ 268,696  6.75  $ 265,318  6.06    (1) Short-term is defined as adjustable-rate loans and MBS that reprice within one year or less.   (2) Medium-term is defined as adjustable-rate loans and MBS that reprice after one year.   (3) At December 31, 2006, September 30, 2006, and December 31, 2005, the adjustable-rate loans with lifetime caps were $169.60 billion, $190.36 billion, and $184.87 billion with a lifetime weighted average cap rate of 12.29%, 12.13% and 12.25%.   (4) Excludes credit card and student loans.   (5) Includes only those securities designated as available-for-sale. Excludes principal-only strips and interest-only strips.   (6) At December 31, 2006, September 30, 2006 and December 31, 2005, the par value of adjustable-rate MBS with lifetime caps were $8.17 billion, $13.20 billion and $12.46 billion with a lifetime weighted average cap rate of 10.54%, 10.41% and 10.31%.     Sept. 30,2006 Dec. 31,2005                     to Dec. 31, 2006     to Dec. 31, 2006   Rollforward of Loans Held for Sale Balance, beginning of period $ 23,720  $ 33,582  Mortgage loans originated, purchased and transferred from held in portfolio 47,091  138,620  Mortgage loans transferred to held in portfolio (1,156) (3,918) Mortgage loans sold and other(1) (24,599) (122,905) Net change in consumer loans held for sale               (86)         (409)       Balance, end of period               $ 44,970          $ 44,970          Rollforward of Home Loans Held in Portfolio Balance, beginning of period $ 141,185  $ 135,290  Loans originated, purchased and transferred from held for sale 6,990  45,204  Loan payments, transferred to held for sale and other               (29,971)         (62,290)       Balance, end of period               $ 118,204          $ 118,204          (1) The unpaid principal balance ("UPB") of home loans sold was $26.34 billion for the three months ended December 31, 2006 and $122.91 billion for the twelve months ended December 31, 2006. WM-15 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)   Quarter Ended                           Pro Forma Results Assuming Retrospective Application of SFAS No. 156 Detail of Revenue from Sales and Servicing of Home Mortgage Loans(1) Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,       2006    2006    2006    2006    2005  Gain from home mortgage loans and originated mortgage-backed securities, net of hedging and risk management instruments(2): Gain from home mortgage loans and originated mortgage-backed securities $ 64  $ 206  $ 190  $ 166  $ 218  Revaluation gain (loss) from derivatives economically hedging loans held for sale   91    (87)   61    43    20      Gain from home mortgage loans and originated mortgage-backed securities, net of hedging and risk management instruments   155    119    251    209    238  Home mortgage loan servicing revenue (expense): Home mortgage loan servicing revenue(3) 497  525  586  572  544  Change in MSR fair value due to payments on loans and other(1)   (375)   (410)   (460)   (409)   (483) Net mortgage loan servicing revenue 122  115  126  163  61  Change in MSR fair value due to valuation inputs or assumptions(1) (80) (469) 435  413  805  Revaluation gain (loss) from derivatives economically hedging MSR(1) (33) 353  (433) (522) (654) Adjustment to MSR fair value for MSR sale   -    -    (157)   -    -      Home mortgage loan servicing revenue (expense), net of MSR valuation changes and derivative risk management instruments   9    (1)   (29)   54    212  Total revenue from sales and servicing of home mortgage loans   $ 164    $ 118    $ 222    $ 263    450  Reconciliation from pro forma to GAAP results(1): Deduct: Increase in MSR fair value not recorded due to lower of cost or fair value accounting (39) Other 7  Total GAAP revenue from sales and servicing of home mortgage loans $ 418    Year Ended                         Pro Forma Results Assuming Retrospective Application of SFAS No. 156 Detail of Revenue from Sales and Servicing of Home Mortgage Loans(1) Dec. 31, Dec. 31,                   2006    2005  Gain from home mortgage loans and originated mortgage-backed securities, net of hedging and risk management instruments(2): Gain from home mortgage loans and originated mortgage-backed securities $ 626  $ 873  Revaluation gain from derivatives economically hedging loans held for sale               109    76      Gain from home mortgage loans and originated mortgage-backed securities, net of hedging and risk management instruments               735    949  Home mortgage loan servicing revenue (expense): Home mortgage loan servicing revenue(3) 2,181  2,110  Change in MSR fair value due to payments on loans and other(1)               (1,654)   (1,729) Net mortgage loan servicing revenue 527  381  Change in MSR fair value due to valuation inputs or assumptions(1) 299  1,538  Revaluation loss from derivatives economically hedging MSR(1) (636) (814) Adjustment to MSR fair value for MSR sale               (157)   -      Home mortgage loan servicing revenue, net of MSR valuation changes and derivative risk management instruments               33    1,105  Total revenue from sales and servicing of home mortgage loans               $ 768    2,054  Reconciliation from pro forma to GAAP results(1): Deduct: Increase in MSR fair value not recorded due to lower of cost or fair value accounting (57) Other 20  Total GAAP revenue from sales and servicing of home mortgage loans $ 2,017    (1) The results for the quarters ended December 31, 2006, September 30, 2006, June 30, 2006, March 31, 2006 and the year ended December 31, 2006 reflect the adoption of the fair value measurement method of accounting for mortgage servicing rights ("MSR") permitted by Statement of Financial Accounting Standards No. 156, Accounting for Servicing of Financial Assets, an amendment to FASB Statement No. 140. The Company adopted Statement No. 156 effective January 1, 2006, and the retrospective application of this Statement to prior periods is not permitted.  Management believes that due to the significant differences between the fair value measurement method and the amortization method of accounting for MSR, comparative information prepared on a similar basis of accounting is valuable to users of this financial information. The information for 2005 is a non-GAAP measure, and incorporates the following assumptions: 1) the fair value measurement method of accounting for MSR was in effect during 2005, 2) MSR are initially capitalized at fair value instead of allocated book value, and 3) the change in value of available-for-sale securities that were on the balance sheet at December 31, 2005 and designated as MSR risk management instruments are reported as revaluation gain (loss) on trading securities.  A reconciliation of the non-GAAP amounts to the previously disclosed GAAP results has been provided.   (2) Originated mortgage-backed securities represent available-for-sale securities retained on the balance sheet subsequent to the securitization of mortgage loans that were originated by the Company.   (3) Includes late charges and loan pool expenses (the shortfall of the scheduled interest required to be remitted to investors compared to what is collected from the borrowers upon payoff). WM-16 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)   Quarter Ended                     Pro Forma Results Assuming Retrospective Application of SFAS No. 156 Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,     2006    2006    2006    2006  2005  MSR Risk Management(1): Change in MSR fair value due to valuation inputs or assumptions(2) $ (80) $ (469) $ 435  $ 413  $ 805  Gain (loss) on MSR risk management instruments: Revaluation gain (loss) from derivatives (33) 353  (433) (522) (654) Revaluation gain (loss) from certain trading securities(2) (5) 39  (47) (42) (165) Loss from certain available-for-sale securities   -    (1)   -    -  -  Total gain (loss) on MSR risk management instruments   (38)   391    (480)   (564) (819) Total MSR risk management   $ (118)   $ (78)   $ (45)   $ (151) $ (14) Reconciliation from pro forma to GAAP results(2): Revaluation loss from certain trading securities $ (165) Add back: Decrease in value of trading securities assumed transferred from the available-for-sale securities portfolio             8  Total GAAP impact of MSR risk management trading securities             $ (157)   Year Ended                     Pro Forma Results Assuming Retrospective Application of SFAS No. 156 Dec. 31, Dec. 31,                 2006  2005  MSR Risk Management(1): Change in MSR fair value due to valuation inputs or assumptions(2) $ 299  $ 1,538  Gain (loss) on MSR risk management instruments: Revaluation loss from derivatives (636) (814) Revaluation loss from certain trading securities(2) (55) (233) Loss from certain available-for-sale securities               (1) (18) Total loss on MSR risk management instruments               (692) (1,065) Total MSR risk management               $ (393) $ 473  Reconciliation from pro forma to GAAP results(2): Revaluation loss from certain trading securities $ (233) Add back: Decrease in value of trading securities assumed transferred from the available-for-sale securities portfolio             10  Total GAAP impact of MSR risk management trading securities             $ (223)   (1) Excludes $157 million downward adjustment to MSR fair value recognized in the quarter ended June 30, 2006.   (2) Refer to footnote (1) on table WM-15. WM-17 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)     Quarter Ended       Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,     2006    2006    2006    2006        2005  Rollforward of Mortgage Servicing Rights(1)(2) Balance, beginning of period $ 6,288  $ 9,162  $ 8,736  $ 8,041  $ 7,042  Home loans: Additions 357  533  607  633  703  Change in MSR fair value due to payments on loans and other (375) (410) (460) (409) -  Change in MSR fair value due to valuation inputs or assumptions (80) (469) 435  413  -  Adjustment to MSR fair value for MSR sale -  -  (157) -  -  Fair value basis adjustment(3) -  -  -  57  -  Amortization -  -  -  -  (482) Impairment reversal -  -  -  -  353  Statement No. 133 MSR accounting valuation adjustments -  -  -  -  419  Sale of MSR 1  (2,527) -  -  -  Net change in commercial real estate MSR   2    (1)   1    1        6  Balance, end of period   $ 6,193    $ 6,288    $ 9,162    $ 8,736        $ 8,041  Rollforward of Valuation Allowance for MSR Impairment Balance, beginning of period $ -  $ -  $ -  $ 914  $ 1,312  Impairment reversal -  -  -  -  (353) Other-than-temporary impairment -  -  -  -  (43) Other   -    -    -    (914) (3)     (2) Balance, end of period   $ -    $ -    $ -    $ -        $ 914  Rollforward of Mortgage Loans Serviced for Others Balance, beginning of period $ 439,208  $ 570,352  $ 569,501  $ 563,208  $ 547,578  Home loans: Additions 25,833  29,899  30,949  35,026  51,642  Sale of servicing -  (141,842) (9) -  -  Loan payments and other (20,744) (19,288) (30,368) (29,063) (37,245) Net change in commercial real estate loans   399    87    279    330        1,233  Balance, end of period   $ 444,696    $ 439,208    $ 570,352    $ 569,501        $ 563,208    Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,     2006    2006    2006    2006        2005  Total Servicing Portfolio Mortgage loans serviced for others $ 444,696  $ 439,208  $ 570,352  $ 569,501  $ 563,208  Consumer loans serviced for others 12,415  13,112  12,644  12,194  11,421  Servicing on retained MBS without MSR 1,140  1,199  1,262  1,334  1,404  Servicing on owned loans 251,766  245,925  247,489  245,469  242,114  Subservicing portfolio   84,797    137,089    552    588        926  Total servicing portfolio   $794,814    $836,533    $832,299    $829,086        $819,073                        December 31, 2006   Weighted Unpaid Average                 Principal Balance       Servicing Fee Mortgage Loans Serviced for Others by Loan Type (in basis points, annual- ized) Agency 240,429  31  Private 169,315  52  Specialty home loans               34,952        50  Total mortgage loans serviced for others(4)               $ 444,696        41    (1) Net of valuation allowance for the quarter ended December 31, 2005.   (2) MSR as a percentage of mortgage loans serviced for others was 1.39%, 1.43%, 1.61%, 1.53%, and 1.43% at December 31, 2006, September 30, 2006, June 30, 2006, March 31, 2006, and December 31, 2005.   (3) The Company adopted Statement No. 156, Accounting for Servicing of Financial Assets, on January 1, 2006, and elected to measure mortgage servicing assets at fair value. In accordance with this Statement, this new accounting principle has been applied prospectively to all new and existing mortgage servicing assets. Upon adoption of the fair value election, the valuation allowance was written off against the recorded value of the MSR, and the $57 million difference between the net carrying value and fair value was recorded as an increase to the basis of the Company's mortgage servicing rights.   (4) Weighted average coupon rate was 6.28% at December 31, 2006. WM-18 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)       Quarter Ended Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,       2006    2006    2006    2006    2005    Allowance for Loan and Lease Losses Balance, beginning of quarter $ 1,550  $ 1,663  $ 1,642  $ 1,695  $ 1,264  Allowance transferred to loans held for sale (158) (125) (87) (30) (241) Allowance acquired through business combinations 30  -  -  -  592  Provision for loan and lease losses   344    166    224    82    217    1,766  1,704  1,779  1,747  1,832  Loans charged off: Loans secured by real estate: Home loans (16) (12) (11) (12) (6) Specialty mortgage finance(1) (52) (47) (21) (20) (15) Home equity loans and lines of credit (13) (8) (6) (4) (6) Home construction(2) (4) (3) -  -  -  Other real estate   (1)   (2)   -    (3)   (1)   Total loans secured by real estate (86) (72) (38) (39) (28) Consumer: Credit card (68) (98) (94) (63) (138) Other (3) (3) (6) (7) (8) Commercial   (9)   (6)   (4)   (8)   (16)   Total loans charged off (166)   (179) (142) (117) (190) Recoveries of loans previously charged off: Loans secured by real estate: Home loans -  -  1  -  -  Specialty mortgage finance(1) 4  -  1  1  1  Home equity loans and lines of credit 2  2  3  1  7  Multi-family -  -  1  -  -  Other real estate   -    -    1    1    -    Total loans secured by real estate 6  2  7  3  8  Consumer: Credit card 18  16  15  4  40  Other 3  4  3  4  3  Commercial   3    3    1    1    2    Total recoveries of loans previously charged off   30    25    26    12    53    Net charge-offs   (136)   (154)   (116)   (105)   (137)   Balance, end of quarter   $ 1,630    $ 1,550    $ 1,663    $ 1,642    $ 1,695      Net charge-offs (annualized) as a percentage of average loans held in portfolio 0.23  % 0.26  % 0.19  % 0.18  % 0.24  % Allowance as a percentage of total loans held in portfolio 0.72  0.64  0.68  0.68  0.74    (1) Represents home loans purchased from dedicated subprime lenders and all loans originated by Long Beach Mortgage and held in its investment portfolio.   (2) Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence. WM-19 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)   Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,     2006    2006    2006    2006    2005  Nonperforming Assets and Restructured Loans Nonaccrual loans(1)(2): Loans secured by real estate: Home loans $ 640  $ 568  $ 512  $ 490  $ 565  Specialty mortgage finance(3) 1,273  1,120  1,092  1,013  873  Home equity loans and lines of credit 241  163  103  91  87  Home construction(4) 27  35  31  15  10  Multi-family 46  31  19  21  25  Other real estate 51    53    56    69    70  Total nonaccrual loans secured by real estate 2,278  1,970  1,813  1,699  1,630  Consumer 1  1  1  6  8  Commercial 16    16    16    26    48  Total nonaccrual loans held in portfolio 2,295  1,987  1,830  1,731  1,686  Foreclosed assets(5) 480    405    330    309    276  Total nonperforming assets $ 2,775  $ 2,392  $ 2,160  $ 2,040  $ 1,962  As a percentage of total assets 0.80  % 0.69  % 0.62  % 0.59  % 0.57  % Restructured loans $ 18    $ 19    $ 20    $ 21    $ 22  Total nonperforming assets and restructured loans $ 2,793    $ 2,411    $ 2,180    $ 2,061    $ 1,984    (1) Nonaccrual loans held for sale, which are excluded from the nonaccrual balances presented above, were $185 million, $129 million, $122 million, $201 million, and $245 million at December 31, 2006, September 30, 2006, June 30, 2006, March 31, 2006, and December 31, 2005. Loans held for sale are accounted for at lower of aggregate cost or fair value, with valuation changes included as adjustments to noninterest income.   (2) Credit card loans are exempt under regulatory rules from being classified as nonaccrual because they are charged off when they are determined to be uncollectible, or by the end of the month in which the account becomes 180 days past due.   (3) Represents home loans purchased from dedicated subprime lenders and all loans originated by Long Beach Mortgage and held in its investment portfolio.   (4) Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence.   (5) Foreclosed real estate securing Government National Mortgage Association ("GNMA”) loans of $99 million, $129 million, $142 million, $167 million, and $79 million at December 31, 2006, September 30, 2006, June 30, 2006, March 31, 2006, and December 31, 2005 have been excluded. These assets are fully collectible as the corresponding GNMA loans are insured by the Federal Housing Administration ("FHA”) or guaranteed by the Department of Veteran’s Affairs ("VA”).