WaMu Reports Significant Build-Up of Reserves Contributing to Second Quarter Net Loss of $3.3 Billion

WaMu (NYSE:WM) today announced a second quarter 2008 net loss of $3.33 billion as it significantly increased its loan loss reserves by $3.74 billion to $8.46 billion. The quarter’s loss compares with the first quarter net loss of $1.14 billion and net income of $830 million during the second quarter of 2007. The quarter’s financial results reflect an elevated level of provisioning due in large part to changes in the company’s provisioning assumptions in response to continued declines in housing prices nationwide. These changes had the effect of accelerating provisions into the quarter. The quarter’s provision was $5.9 billion compared with $2.2 billion of net charge-offs. The company now expects the remaining cumulative losses in its residential mortgage portfolios to be toward the upper end of the range it disclosed in April, and continues to expect 2008 to be the peak year for provisioning. The company’s tangible equity to total tangible assets capital ratio increased during the second quarter to 7.79 percent from 6.40 percent in the first quarter, resulting in approximately $7 billion of capital in excess of its targeted 5.50 percent level. The increase reflects the effects of the $7.2 billion capital raise, the reduction of the company’s balance sheet by $10 billion and the loss for the quarter. The company also maintained strong levels of liquidity during the quarter, with over $40 billion of readily available liquidity at quarter end. "In the face of unprecedented housing and mortgage market conditions, we are continuing to execute on a comprehensive plan designed to ensure that we have strong capital and liquidity, an appropriately-sized expense base and a strong, profitable retail franchise,” said WaMu Chief Executive Officer Kerry Killinger. "Our recent $7.2 billion capital raise, combined with the other proactive steps we have taken this quarter to strengthen our banking franchise and further expense reductions, continue to move us toward achieving these goals.” Killinger also said that the company now expects to realize annualized cost savings of approximately $1 billion which will contribute to improved pretax, pre-provision earnings. "We remain confident that we have sufficient capital to successfully manage our way through this challenging period,” Killinger added. The company reported a second quarter diluted loss per share of $6.58, which included a previously disclosed one-time earnings per share reduction in the amount of $3.24 related to the company’s capital issuance in April. Excluding this one-time reduction, the company’s second quarter loss per common share was $3.34. This non-cash reduction in earnings per share, which resulted in a reclassification within stockholders’ equity, had no effect on the company’s capital ratios or the net loss recorded in the second quarter. SECOND QUARTER FINANCIAL SUMMARY AND HIGHLIGHTS   Selected Financial Summary   Three Months Ended ($ in millions, except per share data) Jun. 30,2008    Mar. 31,2008    Dec. 31,2007    Sept. 30,2007    Jun. 30,2007  Income Statement Net interest income $ 2,296 $ 2,175 $ 2,047 $ 2,014 $ 2,034 Provision for loan losses 5,913 3,511 1,534 967 372 Noninterest income 561 1,569 1,365 1,379 1,758 Foreclosed asset expense 217 155 133 82 56 Goodwill impairment charge - - 1,775 - - All other noninterest expense 2,186 1,997 2,258 2,109 2,082 Minority interest expense   75     75     65     53     42   Income (loss) before income taxes (5,534 ) (1,994 ) (2,353 ) 182 1,240 Income taxes   (2,206 )   (856 )   (486 )   (4 )   410   Net income (loss) $ (3,328 ) $ (1,138 ) $ (1,867 ) $ 186 $ 830   Diluted earnings per common share $ (6.58 ) $ (1.40 ) $ (2.19 ) $ 0.20 $ 0.92 Less : effect of conversion feature   (3.24 )   -     -     -     -   Diluted earnings per common share excluding effect of conversion feature $ (3.34 ) $ (1.40 ) $ (2.19 ) $ 0.20 $ 0.92   Balance Sheet Total assets, end of period $ 309,731 $ 319,668 $ 327,913 $ 330,110 $ 312,219 Average total assets 314,882 319,928 325,276 320,475 316,004 Average interest-earning assets 285,503 285,265 287,988 283,263 279,836 Average total deposits 184,610 184,304 185,636 198,649 206,765   Profitability Ratios Return on average common equity (69.25 )% (23.27 )% (32.64 )% 3.03 % 13.74 % Net interest margin 3.22 3.05 2.86 2.86 2.91 Efficiency ratio 84.11 57.49 122.13 64.55 56.38 Nonperforming assets/total assets 3.62 2.87 2.17 1.65 1.29 Allowance for loan losses/ nonperforming loans 87.26 60.25 41.99 41.27 47.63 Tangible equity/total tangible assets     7.79       6.40       6.67       5.60       6.07   Capital ratios improve. The tangible equity to total tangible assets ratio at June 30 was 7.79 percent compared with 6.40 percent as of Mar. 31, reflecting the April capital raise of $7.2 billion and despite significant provisioning to cover credit costs. Also contributing to the improved capital ratios this quarter was a decrease in total assets of approximately $10 billion, which freed up approximately $550 million in capital. Additional asset reductions are expected as the company continues to prudently manage the size of its balance sheet. Net interest margin up 17 basis points to 3.22 percent. The quarter’s increase in net interest income to $2.30 billion was driven by the 17 basis point expansion in the net interest margin. The margin improved as decreases in rates paid on interest bearing liabilities outpaced the decline in asset yields, while generally lower cost retail deposits grew as a percentage of funding. This expansion occurred despite an increase in nonperforming loans from the first quarter. Company builds reserves to $8.46 billion. During the second quarter, the company increased the provision for loan losses to $5.91 billion from $3.51 billion in the first quarter. The company expects remaining cumulative losses in its residential mortgage portfolios to be at the upper end of the range of losses it disclosed at the time of its capital raise in April, and for 2008 to be the peak year for provisioning. The increase in provision for loan losses reflected the further decline in house prices which increased expected loss severities, increased delinquencies, reduced availability of credit, and the weakening economy. Total net charge-offs in the loan portfolio rose to $2.17 billion from $1.37 billion in the prior quarter. Nonperforming assets grew to 3.62 percent of total assets at June 30 from 2.87 percent at the end of the first quarter. At the same time, early stage delinquencies for the subprime and home equity portfolios showed early signs of stabilization in the quarter. Approximately one third of the second quarter provision for loan losses related to significant changes in key assumptions the company used to estimate incurred losses in its loan portfolio in response to the increasingly adverse credit trends. Specifically, the company shortened the historical time period used to evaluate default frequencies for its prime mortgage portfolio from a three-year period to a one-year period to reflect the evolving risk profile of the loan portfolio and adjusted its severity assumptions for all single family mortgages to reflect the continuing decline in home prices. Year to date, the company has provided $9.42 billion for loan losses in comparison with net charge-offs of $3.54 billion, increasing the reserve to $8.46 billion at June 30. As a percentage of loans held in portfolio, the reserve stands at 3.53 percent, up from 1.05 percent at the end of 2007. In addition, the company’s coverage ratio of the reserve to nonperforming loans was 87.26 percent, more than double the 41.99 percent at the end of last year. Decline in noninterest income reflects further market stress and restructuring of home loans business. Despite the 9 percent quarter over quarter increase in depositor and other retail banking fees, noninterest income of $561 million in the second quarter was down from $1.6 billion in the prior quarter. During the second quarter, the company recognized other than temporary impairment losses of $407 million in the company’s available-for-sale securities portfolio, compared with $67 million in the prior quarter. Net trading losses of $305 million were up from net losses of $216 million in the first quarter primarily due to a reduction in the value of retained interests from credit card securitizations reflecting market conditions. The decrease in revenue from the sales and servicing of home mortgage loans reflects lower volumes in the mortgage origination pipeline due to the company’s exit from wholesale lending and closing of its home loan centers. Also impacting the quarter was a $171 million provision for repurchase reserves, up from a provision of $56 million in the first quarter. Mortgage servicing revenue was down $247 million primarily due to declines in the value of MSR risk management instruments that more than offset the increase in the MSR fair value. Company expands expense initiatives targeting $1 billion in savings. Noninterest expense of $2.40 billion in the quarter included $207 million in restructuring and resizing costs related to Home Loans activities as well as other corporate initiatives and foreclosed asset expense of $217 million, up from $155 million in the first quarter. During the quarter, the company implemented a series of additional initiatives designed to significantly reduce expense levels going forward. These initiatives included the previously announced wholesale and home loans center closures and other savings across functions that primarily supported home loans activities that have been discontinued. These actions will result in total annualized cost savings of approximately $1 billion, while incurring restructuring and resizing costs of approximately $450 million, of which $207 million were recorded in the second quarter. Net loss per share includes one-time adjustment. The company reported a second quarter diluted net loss per share of $6.58, which included a one-time earnings per share non-cash reduction in the amount of $3.24 per common share. The reduction was recorded as a result of the June conversion of the preferred stock issued in connection with the company’s capital transaction in April. This non-cash adjustment, which had no effect on the company’s capital ratios or the net loss recorded in the second quarter, reduced retained earnings by $3.29 billion, with a corresponding increase to capital surplus-common stock. Excluding this one-time reduction, the company’s second quarter diluted net loss per common share was $3.34. SECOND QUARTER SEGMENT RESULTS Retail Banking Group   Selected Segment Information   Three Months Ended ($ in millions, except accounts and households) Jun. 30,2008    Mar. 31,2008    Dec. 31,2007    Sept. 30,2007    Jun. 30,2007  Net interest income $ 1,210 $ 1,203 $ 1,262 $ 1,306 $ 1,291 Provision for loan losses 3,823 2,300 663 318 91 Noninterest income 842 775 850 833 820 Inter-segment revenue 7 9 5 9 16 Noninterest expense   1,232     1,221     1,212     1,149   1,131 Income (loss) before income taxes (2,996 ) (1,534 ) 242 681 905 Income taxes   (959 )   (491 )   (39 )   225   340 Net income (loss) $ (2,037 ) $ (1,043 ) $ 281 $ 456 $ 565   Average loans $ 138,671 $ 142,720 $ 145,486 $ 147,357 $ 149,716 Average retail deposits 149,509 146,734 142,733 144,921 145,252 Net change in number of retailchecking accounts 254,957 256,069 74,493 310,360 406,243 Net change in retail households     94,000       154,000       37,000       161,000     228,000 Revenue growth driven by increase in depositor fee income, expenses held steady. Net interest income was up slightly from the first quarter as the drop in the overall cost of deposits outpaced the decline in variable rate loan yields. Noninterest income, comprised primarily of depositor and other retail banking fees, was up 9 percent quarter over quarter. Depositor fees totaled $767 million in the second quarter, up 9 percent from the seasonally slow first quarter. The company continues to have strong checking account growth adding 254,957 net new accounts in the quarter. Quarterly results adversely impacted by higher loan loss provisioning. The quarter’s net loss reflected the increase in the provision for loan losses due in large part to changes in the company’s provisioning assumptions in response to continued declines in housing prices nationwide. Average retail deposits up 2 percent. Average retail deposits of $149.51 billion were up $2.78 billion during the quarter reflecting the growth in money market accounts. Retail deposit balances at the end of the quarter were down $3.40 billion to $148.25 billion reflecting the reduction in higher cost promotional certificates of deposit during the quarter. The average cost of retail deposits during the quarter was 2.23 percent, down from 2.65 percent in the prior quarter. Card Services Group (managed basis)   Selected Segment Information   Three Months Ended ($ in millions) Jun. 30,2008    Mar. 31,2008    Dec. 31,2007    Sept. 30,2007    Jun. 30,2007  Net interest income $ 769 $ 765 $ 694 $ 674 $ 649 Provision for loan losses 911 626 591 611 523 Noninterest income 187 418 315 400 393 Inter-segment expense 5 5 - - - Noninterest expense   297     260     338     364     306   Income (loss) before income taxes (257 ) 292 80 99 213 Income taxes   (82 )   93     (12 )   33     80   Net income (loss) $ (175 ) $ 199 $ 92 $ 66 $ 133   Average managed receivables $ 26,314 $ 26,889 $ 26,665 $ 25,718 $ 24,234 Period end managed receivables 26,430 26,378 27,239 26,227 24,987 30+ day managed delinquency rate 7.05 % 6.89 % 6.47 % 5.73 % 5.11 % Managed net credit losses     10.84       9.32       6.90       6.37       6.49   Revenue down primarily due to higher credit costs and valuation adjustments. Net interest income was flat with the prior quarter as lower funding costs were offset by a lower balance of average receivables and declines in interest rates charged on card receivables. Noninterest income was down from the prior quarter reflecting reduced value of retained interests due to market conditions. In addition, noninterest income during the first quarter included an $85 million benefit received from the company’s share of VISA’s IPO. Noninterest expense was flat with the prior quarter, excluding the $38 million partial recovery of VISA litigation expense recorded in that quarter. Provision up but delinquencies stabilizing. The increase in the provision to $911 million from $626 million reflected higher managed net credit losses and an increase in reported receivables as maturing securitizations resulted in on-balance sheet funding of new originations. Managed net credit losses of 10.84 percent reflected the increase in contractual and bankruptcy losses in the face of a weaker economy. Reflecting the previous actions taken to reduce the company’s loss exposure, the 30+ day managed delinquency rate of 7.05 percent was up slightly from the prior quarter. Total managed receivables flat with prior quarter. Total managed receivables at quarter end remained level at $26.43 billion. During the quarter, Card Services opened 755,301 new credit card accounts, up from 666,407 in the prior quarter. Approximately 35 percent of the new accounts came through the retail channel as the company continued to leverage its retail network. Commercial Group   Selected Segment Information   Three Months Ended ($ in millions) Jun. 30,2008    Mar. 31,2008    Dec. 31,2007    Sept. 30,2007    Jun. 30,2007  Net interest income $ 203 $ 196 $ 200 $ 200 $ 208 Provision for loan losses 17 29 19 12 2 Noninterest income 5 (8 ) (10 ) (34 ) 63 Noninterest expense   63   68     66     67     74 Income before income taxes 128 91 105 87 195 Income taxes   41   29     11     28     73 Net income $ 87 $ 62 $ 94 $ 59 $ 122   Loan volume $ 3,768 $ 2,835 $ 4,800 $ 4,054 $ 4,348 Average loans     41,891     40,934       40,129       38,333       38,789 Net income up $25 million to $87 million. Net interest income of $203 million was up modestly from the prior quarter due to loan growth and improved net interest margin. Noninterest income was up slightly from the first quarter as a result of lower trading asset write-downs and higher gain on sale driven by an increase in volume. The low level of noninterest expense continued to reflect ongoing expense efficiencies. Provision down, strong credit trends continue. The provision for loan losses was down for the quarter with a corresponding decline in net charge-offs. Charge-offs during the quarter remained low at an annualized rate of only 2 basis points reflecting the portfolio’s conservative underwriting, low loan-to-value ratios, and small balance lending. Loan volume and balances up. Loan volume of $3.77 billion was up 33 percent from the prior quarter and average loans of $41.89 billion were up 2 percent as the company continued to invest in this business. Home Loans Group   Selected Segment Information   Three Months Ended ($ in millions) Jun. 30,2008    Mar. 31,2008    Dec. 31,2007    Sept. 30,2007    Jun. 30,2007  Net interest income $ 240 $ 250 $ 229 $ 191 $ 211 Provision for loan losses 1,637 907 511 323 101 Noninterest income (97 ) 319 329 183 389 Inter-segment expense 2 4 5 9 16 Noninterest expense(a)   484     499     2,319     554     547   Income (loss) before income taxes (1,980 ) (841 ) (2,277 ) (512 ) (64 ) Income taxes   (635 )   (269 )   (312 )   (169 )   (24 ) Net (loss) $ (1,345 ) $ (572 ) $ (1,965 ) $ (343 ) $ (40 )   Loan volume $ 8,462 $ 13,774 $ 19,089 $ 26,434 $ 35,938 Average loans 54,880 55,672 52,278 43,737 43,312   (a) Includes $1.78 billion goodwill charge in fourth quarter 2007. Results reflect reduced mortgage market participation. Net interest income fell slightly from the prior quarter reflecting a higher level of nonaccruals and a decline in loan balances on lower production. Noninterest income was down from the first quarter due to the decline in gain on sale from lower loan commitment volume and the increase in the provision for repurchase reserves reflecting an increase in repurchase demands related to prime home mortgage loans. The repurchase reserve totaled $283 million at the end of the quarter, up from $178 million at Mar. 31. The quarterly gain on sale variance was also impacted by $68 million in additional gains in the first quarter from sales of loans locked prior to the adoption of new accounting pronouncements impacting gain on sale recognition. Noninterest income also reflected mortgage servicing revenue down $247 million, primarily due to declines in the value of MSR risk management instruments that more than offset the increase in MSR fair value. Expense declines reflect consolidation of Home Loans business. Despite the increase in foreclosed asset expense to $149 million from $118 million, noninterest expense of $484 million in the second quarter was down 3 percent from the first quarter with the further consolidation of the home loans business. The number of employees was reduced to 7,338 at the end of the second quarter from 9,135 at the end of the first quarter. Credit costs remain elevated. The increase in the provision to $1.64 billion from $907 million in the first quarter was driven by an acceleration in delinquencies and charge-offs, while subprime delinquencies showed signs of stabilization during the quarter. Total charge-offs rose to $807 million, up $341 million from the prior quarter. Production volume reduced as a result of management’s actions. Home loans segment volume of $8.46 billion was down 39 percent from first quarter levels reflecting the company’s decision to exit wholesale lending and close all remaining home loan centers. COMPANY UPDATES On July 22, WaMu announced that the Human Resources Committee of the Board of Directors determined that, in light of the company’s 2008 financial performance to date, including the impact of mortgage-related loan loss provisions and foreclosed asset expense, the company’s Chief Executive Officer, President and Chief Operating Officer and Chief Financial Officer will not receive annual incentive payments under the company's 2008 Leadership Bonus Plan. On July 15, WaMu’s Board of Directors declared a cash dividend of $0.01 per share on the company’s common stock. Dividends on the common stock are payable on Aug. 15, 2008 to shareholders of record as of Jul. 31, 2008. In addition to declaring a dividend on the company’s common stock, the company will pay a dividend of $0.2528 per depository share of Series K Preferred Stock to be payable on Sept. 15, 2008 to holders of record on Sept. 1, 2008, a dividend of $19.8056 per share of Series R Preferred Stock to be payable on Sept. 15, 2008 to holders of record on Sept. 1, 2008. On Jun. 27, WaMu announced that a search had been initiated to replace James Corcoran, President of the Retail Bank who left WaMu to pursue other career opportunities. On Jun. 24, WaMu shareholders approved an amendment to increase the number of authorized common stock from 1,600,000,000 to 3,000,000,000, the conversion of the Series S and Series T Perpetual Contingent Convertible Non-Voting Preferred Stock into common stock and the ability of the warrants to be exercised to purchase common stock. On Jun. 30, the Series S and Series T preferred stock was converted into common stock. On Jun. 4, WaMu announced that Michael S. Solender had been named the company’s Executive Vice President and Chief Legal Officer. Solender reports to Kerry Killinger, WaMu’s CEO, and is a member of the company’s Executive Committee. On Jun. 2, WaMu announced that effective Jul. 1, independent director Stephen E. Frank would assume the role of independent Board Chair while Kerry Killinger would continue to lead the company as Chief Executive Officer and serve as a director. On Jun. 2, WaMu announced that under its new majority voting standard, in uncontested director elections, nominees must receive a majority of votes cast to be re-elected. On Apr. 29, WaMu announced that it named John P. McMurray as the company’s Chief Enterprise Risk Officer. ABOUT WAMU WaMu, through its subsidiaries, is one of the nation’s leading consumer and small business banks. At Jun. 30, 2008, WaMu and its subsidiaries had assets of $309.73 billion. The company has a history dating back to 1889 and its subsidiary banks currently operate approximately 2,300 consumer and small business banking stores throughout the nation. WaMu’s financial reports and news releases are available at www.wamu.com/ir. WEBCAST INFORMATION A conference call to discuss the company’s financial results will be held on Tuesday, Jul. 22, 2008, at 5:00 p.m. ET and will be hosted by Kerry Killinger, Chief Executive Officer, Tom Casey, Executive Vice President and Chief Financial Officer and John McMurray, Executive Vice president and Chief Enterprise Risk Officer. The conference call is available by telephone or on the Internet. The dial-in number for the live conference call is 888-324-6919. Participants calling from outside the United States may dial 312-470-7289. 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 recording of the conference call will be available from approximately 7:00 p.m. ET on Tuesday, Jul. 22, 2008 through 11:59 p.m. on Friday, Aug. 1, 2008. The recorded message will be available at 888-568-0151. Callers from outside the United States may dial 203-369-3462. FORWARD LOOKING STATEMENTS This presentation 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 2007 Annual Report on Form 10-K, as amended, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 which include: Economic conditions that negatively affect housing prices and the job market that have resulted, and may continue to result, in deterioration in credit quality of the company's loan portfolio. Access to market-based liquidity sources that may be negatively impacted if market conditions persist or if further ratings downgrades occur and could lead to increased funding costs and reduced gain on sale. The need to raise additional capital due to significant additional losses which could have a dilutive effect on existing shareholders and could affect the ability to pay dividends. Changes in interest rates. Features of certain of the company’s loan products that may result in increased credit risk. Estimates used by the company to determine the fair value of certain of our assets that may prove to be imprecise and result in significant changes in valuation. Risks related to the company’s credit card operations that could adversely affect the credit card portfolio and our ability to continue growing the credit card business. Operational risk which may result in incurring financial and reputational losses. Failure to comply with laws and regulations. Changes in the regulation of financial services companies, housing government-sponsored enterprises, mortgage originators and servicers, and credit card lenders. General business, economic and market conditions and continued deterioration in these conditions. Damage to the company’s professional reputation and business as a result of allegations and negative public opinion as well as pending and threatened litigation. Significant competition from banking and nonbanking companies. There are other factors not described in our 2007 Form 10-K, as amended, and Form 10-Q for the quarter ended March 31, 2008 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       Six Months Ended       June 30, Mar. 31, Dec. 31, Sept. 30, June 30,   June 30, June 30,         2008       2008       2007       2007       2007         2008       2007     PROFITABILITY     Net income (loss) $ (3,328 ) $ (1,138 ) $ (1,867 ) $ 186 $ 830   $ (4,466 ) $ 1,614 Net interest income 2,296 2,175 2,047 2,014 2,034 4,471 4,115 Noninterest income 561 1,569 1,365 1,379 1,758 2,129 3,299 Noninterest expense 2,403 2,152 4,166 2,191 2,138 4,555 4,244 Diluted earnings per common share: Diluted earnings per common share $ (6.58 ) $ (1.40 ) $ (2.19 ) $ 0.20 $ 0.92 $ (8.43 ) $ 1.78 Less: Effect of conversion feature(1)   (3.24 )   -     -     -   -   (3.51 )   - Diluted earnings per common share excluding effect of conversion feature (3.34 ) (1.40 ) (2.19 ) 0.20 0.92 (4.92 ) 1.78 Diluted weighted average number of common shares outstanding (in thousands) 1,016,081 856,923 855,532 876,002 893,090 936,502 896,304 Net interest margin on a taxable-equivalent basis(2) 3.22 % 3.05 % 2.86 % 2.86 % 2.91 % 3.14 % 2.85 % Dividends declared per common share $ 0.01 $ 0.15 $ 0.56 $ 0.56 $ 0.55 $ 0.16 $ 1.09 Book value per common share (period end)(3) 13.35 21.74 24.55 27.18 27.27 13.35 27.27 Tangible common equity per common share (period end)(4) 9.01 13.26 15.89 16.43 16.59 9.01 16.59 Return on average assets (4.23 ) % (1.42 ) % (2.30 ) % 0.23 % 1.05 % (2.81 ) % 1.00 % Return on average common equity (69.25 ) (23.27 ) (32.64 ) 3.03 13.74 (45.67 ) 13.36 Efficiency ratio(5) 84.11 57.49 122.13 64.55 56.38 69.01 57.24   ASSET QUALITY Nonperforming assets(6) to total assets 3.62 % 2.87 % 2.17 % 1.65 % 1.29 % 3.62 % 1.29 % Allowance as a percentage of loans held in portfolio 3.53 1.94 1.05 0.80 0.73 3.53 0.73   CREDIT PERFORMANCE Provision for loan losses $ 5,913 $ 3,511 $ 1,534 $ 967 $ 372 $ 9,423 $ 606 Net charge-offs 2,171 1,368 747 421 271 3,538 454   CAPITAL ADEQUACY Capital Ratios for WMI: Tangible equity to total tangible assets(7) 7.79 % 6.40 % 6.67 % 5.60 % 6.07 % 7.79 % 6.07 % Tier 1 capital to average total assets (leverage)(8) 7.80 6.56 6.84 5.86 6.09 7.80 6.09 Total risk-based capital to total risk-weighted assets(8) 13.98 12.25 12.34 10.67 11.04 13.98 11.04 Capital Ratios for WMB (well-capitalized minimum)(9): Tier 1 capital to adjusted total assets (leverage) (5.00%) 7.10 6.94 7.05 6.41 7.52 7.10 7.52 Adjusted Tier 1 capital to total risk-weighted assets (6.00%) 8.44 8.13 8.33 7.62 8.77 8.44 8.77 Total risk-based capital to total risk-weighted assets (10.00%) 12.49 12.21 12.22 11.26 12.80 12.49 12.80   SUPPLEMENTAL DATA Average balance sheet: Total loans held in portfolio $ 241,737 $ 244,186 $ 241,690 $ 227,348 $ 216,004 $ 242,961 $ 219,292 Total interest-earning assets 285,503 285,265 287,988 283,263 279,836 285,384 287,724 Total assets 314,882 319,928 325,276 320,475 316,004 317,405 323,911 Total deposits 184,610 184,304 185,636 198,649 206,765 184,457 208,753 Total stockholders' equity 27,558 24,066 23,947 23,994 24,436 25,812 24,422 Period-end balance sheet: Total loans held in portfolio, net 231,171 238,100 241,815 235,243 213,434 231,171 213,434 Total assets 309,731 319,668 327,913 330,110 312,219 309,731 312,219 Total deposits 181,923 188,049 181,926 194,280 201,380 181,923 201,380 Total stockholders' equity 26,086 22,449 24,584 23,941 24,210 26,086 24,210 Common shares outstanding at the end of period (in thousands)(10) 1,705,344 882,610 869,036 868,802 875,722 1,705,344 875,722 Employees at end of period 43,198 45,883 49,403 49,748 49,989 43,198 49,989 _______________________ (1) This one-time earnings per share reduction represents a beneficial conversion feature that was recorded upon the June 2008 conversion of the preferred shares issued in connection with the April 2008 capital transaction. This non-cash adjustment, which had no effect on the Company's capital ratios or the net loss recorded in the second quarter, was provided to facilitate the comparison of earnings per share to the prior reporting periods presented on this schedule.   (2) Includes taxable-equivalent adjustments primarily related to tax-exempt income on U.S. states and political subdivisions securities and loans related to the Company's community lending and investment activities. The federal statutory tax rate was 35% for the periods presented.   (3) Excludes six million shares held in escrow.   (4) Excludes goodwill and intangible assets (except MSR).   (5) The efficiency ratio is defined as noninterest expense divided by total revenue (net interest income and noninterest income).   (6) Excludes nonaccrual loans held for sale.   (7) Excludes unrealized net gain/loss on available-for-sale securities and cash flow hedging instruments, goodwill and intangible assets (except MSR) and the impact from the adoption and application of FASB Statement No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans. Minority interests of $3.91 billion, $3.91 billion, $3.92 billion, $2.94 billion and $2.94 billion at June 30, 2008, March 31, 2008, December 31, 2007, September 30, 2007 and June 30, 2007 are included in the numerator.   (8) The capital ratios are estimated as if Washington Mutual, Inc. were a bank holding company subject to Federal Reserve Board capital requirements.   (9) Capital ratios for Washington Mutual Bank ("WMB") at June 30, 2008 are preliminary.   (10) Includes six million shares held in escrow. WM-2 Washington Mutual, Inc. Consolidated Statements of Income (dollars in millions, except per share data) (unaudited)             Quarter Ended June 30, Mar. 31, Dec. 31, Sept. 30, June 30,       2008       2008       2007       2007       2007   Interest Income Loans held for sale $ 52 $ 87 $ 160 $ 248 $ 421 Loans held in portfolio 3,604 3,954 4,156 3,992 3,786 Available-for-sale securities 335 357 380 392 351 Trading assets 117 116 101 108 108 Other interest and dividend income     94       77       79       116       82   Total interest income 4,202 4,591 4,876 4,856 4,748 Interest Expense Deposits 1,115 1,329 1,464 1,650 1,723 Borrowings     791       1,087       1,365       1,192       991   Total interest expense     1,906       2,416       2,829       2,842       2,714   Net interest income 2,296 2,175 2,047 2,014 2,034 Provision for loan losses     5,913       3,511       1,534       967       372   Net interest income (expense) after provision for loan losses (3,617 ) (1,336 ) 513 1,047 1,662 Noninterest Income Revenue (expense) from sales and servicing of home mortgage loans (109 ) 411 358 161 300 Revenue from sales and servicing of consumer loans 159 248 375 418 403 Depositor and other retail banking fees 767 704 769 740 720 Credit card fees 177 181 214 209 183 Securities fees and commissions 64 58 63 67 70 Insurance income 32 30 29 29 29 Loss on trading assets (305 ) (216 ) (267 ) (153 ) (145 ) Gain (loss) on other available-for-sale securities (402 ) 18 (261 ) (99 ) 7 Gain (loss) on extinguishment of borrowings 100 13 - 1 (14 ) Other income     78       122       85       6       205   Total noninterest income 561 1,569 1,365 1,379 1,758 Noninterest Expense Compensation and benefits 939 914 877 910 977 Occupancy and equipment 460 358 488 371 354 Telecommunications and outsourced information services 123 130 134 135 132 Depositor and other retail banking losses 61 63 72 71 58 Advertising and promotion 103 105 108 125 113 Professional fees 57 39 89 52 55 Foreclosed asset expense 217 155 133 82 56 Goodwill impairment charge - - 1,775 - - Other expense     443       388       490       445       393   Total noninterest expense 2,403 2,152 4,166 2,191 2,138 Minority interest expense     75       75       65       53       42   Income (loss) before income taxes (5,534 ) (1,994 ) (2,353 ) 182 1,240 Income taxes     (2,206 )     (856 )     (486 )     (4 )     410   Net Income (Loss)   $ (3,328 )   $ (1,138 )   $ (1,867 )   $ 186     $ 830   Preferred dividends declared (71 ) (65 ) (8 ) (8 ) (8 ) Beneficial conversion feature     (3,290 )     -       -       -       -   Net Income (Loss) Applicable to Common Stockholders   $ (6,689 )   $ (1,203 )   $ (1,875 )   $ 178     $ 822     Earnings Per Common Share: Basic $ (6.58 ) $ (1.40 ) $ (2.19 ) $ 0.21 $ 0.95 Diluted (6.58 ) (1.40 ) (2.19 ) 0.20 0.92   Dividends declared per common share 0.01 0.15 0.56 0.56 0.55 Basic weighted average number of common shares outstanding (in thousands) 1,016,081 856,923 855,518 857,005 868,968 Diluted weighted average number of common shares outstanding (in thousands) 1,016,081 856,923 855,532 876,002 893,090 WM-3 Washington Mutual, Inc. Consolidated Statements of Income (dollars in millions, except per share data) (unaudited)         Six Months Ended June 30, June 30,       2008       2007   Interest Income Loans held for sale $ 138 $ 984 Loans held in portfolio 7,559 7,686 Available-for-sale securities 691 682 Trading assets 233 221 Other interest and dividend income     171       183   Total interest income 8,792 9,756 Interest Expense Deposits 2,443 3,495 Borrowings     1,878       2,146   Total interest expense     4,321       5,641   Net interest income 4,471 4,115 Provision for loan losses     9,423       606   Net interest income (expense) after provision for loan losses (4,952 ) 3,509 Noninterest Income Revenue from sales and servicing of home mortgage loans 302 425 Revenue from sales and servicing of consumer loans 407 846 Depositor and other retail banking fees 1,470 1,385 Credit card fees 358 355 Securities fees and commissions 122 131 Insurance income 63 58 Loss on trading assets (521 ) (253 ) Gain (loss) on other available-for-sale securities (384 ) 41 Gain (loss) on extinguishment of borrowings 113 (7 ) Other income     199       318   Total noninterest income 2,129 3,299 Noninterest Expense Compensation and benefits 1,853 1,979 Occupancy and equipment 818 731 Telecommunications and outsourced information services 253 261 Depositor and other retail banking losses 124 119 Advertising and promotion 208 211 Professional fees 96 93 Foreclosed asset expense 372 95 Other expense     831       755   Total noninterest expense 4,555 4,244 Minority interest expense     151       85   Income (loss) before income taxes (7,529 ) 2,479 Income taxes     (3,063 )     865   Net Income (Loss)   $ (4,466 )   $ 1,614   Preferred dividends declared (136 ) (15 ) Beneficial conversion feature     (3,290 )     -   Net Income (Loss) Applicable to Common Stockholders   $ (7,892 )   $ 1,599     Earnings Per Common Share: Basic $ (8.43 ) $ 1.83 Diluted (8.43 ) 1.78   Dividends declared per common share 0.16 1.09 Basic weighted average number of common shares outstanding (in thousands) 936,502 871,876 Diluted weighted average number of common shares outstanding (in thousands) 936,502 896,304 WM-4 Washington Mutual, Inc. Consolidated Statements of Financial Condition (dollars in millions) (unaudited)           June 30, Mar. 31, Dec. 31, Sept. 30, June 30,       2008       2008       2007       2007       2007   Assets Cash and cash equivalents $ 7,235 $ 10,089 $ 9,560 $ 11,370 $ 4,167 Federal funds sold and securities purchased under agreements to resell 2,750 2,527 1,877 4,042 3,267 Trading assets 2,308 2,483 2,768 3,797 5,534 Available-for-sale securities, total amortized cost of $25,756, $24,907, $27,789, $28,725 and $28,934: Mortgage-backed securities 18,241 18,140 19,249 20,562 20,393 Investment securities     6,134       5,466       8,291       7,844       7,947   Total available-for-sale securities 24,375 23,606 27,540 28,406 28,340 Loans held for sale 1,877 4,941 5,403 7,586 19,327 Loans held in portfolio 239,627 242,814 244,386 237,132 214,994 Allowance for loan losses     (8,456 )     (4,714 )     (2,571 )     (1,889 )     (1,560 ) Loans held in portfolio, net 231,171 238,100 241,815 235,243 213,434 Investment in Federal Home Loan Banks 3,498 3,514 3,351 2,808 1,596 Mortgage servicing rights 6,175 5,726 6,278 6,794 7,231 Goodwill 7,284 7,283 7,287 9,062 9,056 Other assets     23,058       21,399       22,034       21,002       20,267   Total assets   $ 309,731     $ 319,668     $ 327,913     $ 330,110     $ 312,219   Liabilities Deposits: Noninterest-bearing deposits $ 31,112 $ 31,911 $ 30,389 $ 31,341 $ 33,557 Interest-bearing deposits     150,811       156,138       151,537       162,939       167,823   Total deposits 181,923 188,049 181,926 194,280 201,380 Federal funds purchased and commercial paper 75 250 2,003 2,482 3,390 Securities sold under agreements to repurchase 214 215 4,148 4,732 9,357 Advances from Federal Home Loan Banks 58,363 64,009 63,852 52,530 21,412 Other borrowings 30,590 32,710 38,958 40,887 40,313 Other liabilities 8,566 8,072 8,523 8,313 9,212 Minority interests     3,914       3,914       3,919       2,945       2,945   Total liabilities 283,645 297,219 303,329 306,169 288,009 Stockholders' Equity Preferred stock 3,392 3,392 3,392 492 492 Capital surplus - common stock 12,916 2,646 2,630 2,575 2,715 Accumulated other comprehensive loss (1,079 ) (1,141 ) (359 ) (390 ) (568 ) Retained earnings     10,857       17,552       18,921       21,264       21,571   Total stockholders' equity     26,086       22,449       24,584       23,941       24,210   Total liabilities and stockholders' equity   $ 309,731     $ 319,668     $ 327,913     $ 330,110     $ 312,219   WM-5 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)             Quarter Ended June 30, Mar. 31, Dec. 31, Sept. 30, June 30,       2008       2008       2007       2007       2007   Stockholders' Equity Rollforward Balance, beginning of period $ 22,449 $ 24,584 $ 23,941 $ 24,210 $ 24,578 Net income (loss) (3,328 ) (1,138 ) (1,867 ) 186 830 Cumulative effect from the adoption of new accounting pronouncements - (36 ) (1) - - - Other comprehensive income (loss), net of income taxes 62 (782 ) 31 177 (300 ) Cash dividends declared on common stock (10 ) (130 ) (482 ) (485 ) (484 ) Preferred stock activity: Preferred share conversion(2) (3,290 ) - - - - Cash dividends declared   (71 )   (65 )   (8 )   (8 )   (8 ) Total preferred stock activity (3,361 ) (65 ) (8 ) (8 ) (8 ) Cash dividends returned(3) 4 - 15 - - Common stock activity: Capital surplus-common stock attributable to preferred share conversion(2) 3,290 - - - - Common stock issued(4) 6,980 16 54 60 94 Common stock repurchased and retired(5)   -     -     -     (199 )   (500 ) Total common stock activity 10,270 16 54 (139 ) (406 ) Preferred stock issued     -       -       2,900       -       -   Balance, end of period   $ 26,086     $ 22,449     $ 24,584     $ 23,941     $ 24,210     (1) As of January 1, 2008, the Company adopted FASB Statement No. 157, Fair Value Measurements ("Statement No. 157"), EITF Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements ("Issue No. 06-4") and EITF Issue No. 06-10, Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements ("Issue No. 06-10"). The cumulative effect, net of income taxes, from the adoption of Statement No. 157, Issue No. 06-4 and Issue No. 06-10 was $1 million, $(35) million and $(2) million.   (2) The preferred share conversion adjustment represents a beneficial conversion feature that was recorded upon the June 2008 conversion of the preferred shares issued in connection with the April 2008 capital transaction. This non-cash conversion adjustment, which did not affect the net loss recorded in the second quarter of 2008, reduced retained earnings and correspondingly increased capital surplus-common stock.   (3) Represents accumulated dividends on shares returned from escrow.   (4) Includes 647 million shares of common stock converted on June 30, 2008 at $8.75 per share from 56,570 preferred shares issued in April 2008.   (5) The Company repurchased zero shares of its common stock during the three months ended June 30, 2008, March 31, 2008 and December 31, 2007, and 7.2 million and 13.5 million shares of its common stock during the three months ended September 30, 2007 and June 30, 2007. At June 30, 2008, the total remaining common stock repurchase authority was 47.5 million shares. WM-6 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)       Quarter Ended   Six Months Ended   June 30,   Mar. 31,   Dec. 31,   Sept. 30,   June 30, June 30,   June 30,       2008       2008       2007       2007       2007     2008       2007   RETAIL BANKING GROUP Condensed income statement: Net interest income $ 1,210 $ 1,203 $ 1,262 $ 1,306 $ 1,291 $ 2,413 $ 2,575 Provision for loan losses 3,823 2,300 663 318 91 6,122 153 Noninterest income 842 775 850 833 820 1,617 1,571 Inter-segment revenue 7 9 5 9 16   15 34 Noninterest expense     1,232       1,221       1,212       1,149       1,131     2,453       2,201   Income (loss) before income taxes (2,996 ) (1,534 ) 242 681 905 (4,530 ) 1,826 Income taxes     (959 )     (491 )     (39 )     225       340     (1,450 )     685   Net income (loss)   $ (2,037 )   $ (1,043 )   $ 281     $ 456     $ 565   $ (3,080 )   $ 1,141   Performance and other data: Efficiency ratio 59.82 % 61.48 % 57.25 % 53.48 % 53.19 % 60.63 % 52.65 % Average loans $ 138,671 $ 142,720 $ 145,486 $ 147,357 $ 149,716 $ 140,695 $ 152,445 Average assets 145,800 151,609 155,100 157,194 159,515 148,704 162,264 Average deposits: Checking deposits: Noninterest bearing 24,753 23,425 22,748 22,860 23,107 24,089 22,722 Interest bearing     22,557       24,306       26,328       28,406       30,282     23,431       31,006   Total checking deposits 47,310 47,731 49,076 51,266 53,389 47,520 53,728 Savings and money market deposits 54,928 47,904 44,623 43,524 43,814 51,417 43,460 Time deposits     47,271       51,099       49,034       50,131       48,049     49,185       47,456   Average deposits 149,509 146,734 142,733 144,921 145,252 148,122 144,644 Loan volume 655 1,238 3,417 5,172 5,760 1,893 10,338 Employees at end of period 27,857 28,736 29,147 28,636 28,523 27,857 28,523 CARD SERVICES GROUP Managed basis(1) Condensed income statement: Net interest income $ 769 $ 765 $ 694 $ 674 $ 649 $ 1,534 $ 1,290 Provision for loan losses 911 626 591 611 523 1,537 912 Noninterest income 187 418 315 400 393 604 867 Inter-segment expense 5 5 - - - 9 - Noninterest expense     297       260       338       364       306     557       635   Income (loss) before income taxes (257 ) 292 80 99 213 35 610 Income taxes     (82 )     93       (12 )     33       80     11       229   Net income (loss)   $ (175 )   $ 199     $ 92     $ 66     $ 133   $ 24     $ 381   Performance and other data: Efficiency ratio 31.25 % 22.04 % 33.51 % 33.91 % 29.33 % 26.16 % 29.42 % Average loans $ 26,314 $ 26,889 $ 26,665 $ 25,718 $ 24,234 $ 26,601 $ 23,921 Average assets 28,844 29,244 28,961 28,206 26,762 29,044 26,403 Employees at end of period 2,940 2,881 2,860 2,878 2,827 2,940 2,827   Securitization adjustments Condensed income statement: Net interest income $ (506 ) $ (503 ) $ (454 ) $ (456 ) $ (459 ) $ (1,010 ) $ (874 ) Provision for loan losses (530 ) (470 ) (335 ) (288 ) (294 ) (1,000 ) (577 ) Noninterest income (24 ) 33 119 168 165 10 297 Performance and other data: Average loans (16,872 ) (17,391 ) (16,007 ) (14,488 ) (13,888 ) (17,131 ) (13,201 ) Average assets (14,739 ) (15,075 ) (14,180 ) (12,841 ) (12,287 ) (14,907 ) (11,627 )   Adjusted basis Condensed income statement: Net interest income $ 263 $ 262 $ 240 $ 218 $ 190 $ 524 $ 416 Provision for loan losses 381 156 256 323 229 537 335 Noninterest income 163 451 434 568 558 614 1,164 Inter-segment expense 5 5 - - - 9 - Noninterest expense     297       260       338       364       306     557       635   Income (loss) before income taxes (257 ) 292 80 99 213 35 610 Income taxes     (82 )     93       (12 )     33       80     11       229   Net income (loss)   $ (175 )   $ 199     $ 92     $ 66     $ 133   $ 24     $ 381   Performance and other data: Average loans $ 9,442 $ 9,498 $ 10,658 $ 11,230 $ 10,346 $ 9,470 $ 10,720 Average assets 14,105 14,169 14,781 15,365 14,475 14,137 14,776     (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. The managed basis presentation of the Card Services Group is derived by adjusting the GAAP financial information to add back securitized loan balances and the related interest, fee income and provision for credit losses. Such adjustments are eliminated as securitization adjustments when reporting GAAP results. WM-7 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)                     Quarter Ended Six Months Ended (This table is continued from "WM-6.") June 30, Mar. 31, Dec. 31, Sept. 30, June 30, June 30, June 30,       2008     2008     2007     2007     2007   2008     2007   COMMERCIAL GROUP Condensed income statement: Net interest income $ 203 $ 196 $ 200 $ 200 $ 208 $ 400 $ 420 Provision for loan losses 17 29 19 12 2 47 (7 ) Noninterest income 5 (8 ) (10 ) (34 ) 63 (3 ) 78 Noninterest expense     63       68       66       67       74     131       148   Income before income taxes 128 91 105 87 195 219 357 Income taxes     41       29       11       28       73     70       134   Net income   $ 87     $ 62     $ 94     $ 59     $ 122   $ 149     $ 223   Performance and other data: Efficiency ratio 30.34%   36.09%   34.39%   40.26%   27.42%   33.07%   29.89%   Average loans $ 41,891 $ 40,934 $ 40,129 $ 38,333 $ 38,789 $ 41,413 $ 38,715 Average assets 43,875 43,004 42,336 40,663 41,184 43,439 41,094 Average deposits 6,632 7,474 9,762 13,816 15,294 7,053 13,671 Loan volume 3,768 2,835 4,800 4,054 4,348 6,603 8,018 Employees at end of period 1,342 1,358 1,502 1,524 1,508 1,342 1,508 HOME LOANS GROUP Condensed income statement: Net interest income $ 240 $ 250 $ 229 $ 191 $ 211 $ 490 $ 455 Provision for loan losses 1,637 907 511 323 101 2,544 150 Noninterest income (97 ) 319 329 183 389 221 550 Inter-segment expense 2 4 5 9 16 6 34 Noninterest expense     484       499       2,319       554       547     983       1,069   Loss before income taxes (1,980 ) (841 ) (2,277 ) (512 ) (64 ) (2,822 ) (248 ) Income taxes     (635 )     (269 )     (312 )     (169 )     (24 )   (904 )     (93 ) Net loss   $ (1,345 )   $ (572 )   $ (1,965 )   $ (343 )   $ (40 ) $ (1,918 )   $ (155 ) Performance and other data: Efficiency ratio 344.70%   88.26%   419.52%   151.63%   93.71%   139.26%   110.07%   Average loans $ 54,880 $ 55,672 $ 52,278 $ 43,737 $ 43,312 $ 55,275 $ 48,255 Average assets 65,074 66,841 66,172 61,106 60,342 65,958 65,831 Average deposits 5,202 5,469 6,714 7,780 8,372 5,335 8,436 Loan volume 8,462 13,774 19,089 26,434 35,938 22,236 69,718 Employees at end of period 7,338 9,135 11,812 12,668 13,150 7,338 13,150 CORPORATE SUPPORT/TREASURY AND OTHER Condensed income statement: Net interest income (expense) $ 254 $ 132 $ (18 ) $ (39 ) $ (4 ) $ 386 $ (26 ) Provision for loan losses 55 119 85 (9 ) (51 ) 173 (25 ) Noninterest income (327 ) 86 (201 ) (91 ) 60 (241 ) 154 Noninterest expense 327 104 231 57 80 431 191 Minority interest expense     75       75       65       53       42     151       85   Loss before income taxes (530 ) (80 ) (600 ) (231 ) (15 ) (610 ) (123 ) Income taxes     (247 )     (68 )     (157 )     (46 )     (37 )   (316 )     (106 ) Net income (loss)   $ (283 )   $ (12 )   $ (443 )   $ (185 )   $ 22   $ (294 )   $ (17 ) Performance and other data: Average loans $ 1,648 $ 1,556 $ 1,482 $ 1,420 $ 1,367 $ 1,602 $ 1,356 Average assets 47,151 45,525 48,173 47,532 41,789 46,338 41,335 Average deposits 23,267 24,627 26,427 32,132 37,847 23,947 42,002 Loan volume 84 143 171 113 72 226 179 Employees at end of period 3,721 3,773 4,082 4,042 3,981 3,721 3,981   (This table is continued on "WM-8.") WM-8 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)                       Quarter Ended Six Months Ended (This table is continued from "WM-7.") June 30, Mar. 31, Dec. 31, Sept. 30, June 30, June 30, June 30,         2008     2008     2007     2007     2007   2008     2007   RECONCILING ADJUSTMENTS Condensed income statement: Net interest income(1) $ 126 $ 132 $ 134 $ 138 $ 138 $ 258 $ 275 Noninterest income (expense)(2)     (25 )     (54 )     (37 )     (80 )     (132 )   (79 )     (218 ) Income before income taxes 101 78 97 58 6 179 57 Income taxes(3)     (324 )     (150 )     23       (75 )     (22 )   (474 )     16   Net income   $ 425     $ 228     $ 74     $ 133     $ 28   $ 653     $ 41   Performance and other data: Average loans(4) $ (1,123 ) $ (1,220 ) $ (1,286 ) $ (1,385 ) $ (1,301 ) $ (1,171 ) $ (1,389 ) Average assets(4) (1,123 ) (1,220 ) (1,286 ) (1,385 ) (1,301 ) (1,171 ) (1,389 )   TOTAL CONSOLIDATED Condensed income statement: Net interest income $ 2,296 $ 2,175 $ 2,047 $ 2,014 $ 2,034 $ 4,471 $ 4,115 Provision for loan losses 5,913 3,511 1,534 967 372 9,423 606 Noninterest income 561 1,569 1,365 1,379 1,758 2,129 3,299 Noninterest expense 2,403 2,152 4,166 2,191 2,138 4,555 4,244 Minority interest expense     75       75       65       53       42     151       85   Income (loss) before income taxes (5,534 ) (1,994 ) (2,353 ) 182 1,240 (7,529 ) 2,479 Income taxes     (2,206 )     (856 )     (486 )     (4 )     410     (3,063 )     865   Net income (loss)   $ (3,328 )   $ (1,138 )   $ (1,867 )   $ 186     $ 830   $ (4,466 )   $ 1,614   Performance and other data: Efficiency ratio 84.11%   57.49%   122.13%   64.55%   56.38%   69.01%   57.24%   Average loans $ 245,409 $ 249,160 $ 248,747 $ 240,692 $ 242,229 $ 247,284 $ 250,102 Average assets 314,882 319,928 325,276 320,475 316,004 317,405 323,911 Average deposits 184,610 184,304 185,636 198,649 206,765 184,457 208,753 Loan volume 12,969 17,990 27,477 35,773 46,118 30,958 88,253 Employees at end of period 43,198 45,883 49,403 49,748 49,989 43,198 49,989 __________________________ (1) Represents the difference between mortgage 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, certain mortgage 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.   (2) Represents the difference between gain from mortgage loans recorded by the Home Loans Group and gain from mortgage loans recognized in the Company's Consolidated Statements of Income.   (3) Represents the tax effect of reconciling adjustments.   (4) Represents the inter-segment offset for inter-segment loan premiums that the Retail Banking Group recognized upon transfer of portfolio loans from the Home Loans Group. WM-9 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)                             Quarter Ended June 30, 2008 Mar. 31, 2008 June 30, 2007 Interest Interest Interest Income/ Income/ Income/         Balance   Rate   Expense   Balance   Rate   Expense   Balance   Rate   Expense Average Balances and Weighted Average Interest Rates Assets (Taxable-Equivalent Basis(1)) Interest-earning assets(2): Federal funds sold and securities purchased under agreements to resell $ 2,161 2.15 % $ 11 $ 2,118 3.48 % $ 18 $ 3,964 5.39 % $ 53 Trading assets 2,404 19.50 117 2,726 17.10 116 4,995 8.67 108 Available-for-sale securities(3): Mortgage-backed securities 19,190 5.67 271 18,945 5.80 275 19,177 5.39 259 Investment securities 5,287 5.06 67 6,316 5.39 85 7,382 5.15 95 Loans held for sale 3,672 5.62 52 4,974 6.98 87 26,225 6.43 421 Loans held in portfolio: Loans secured by real estate: Home loans(4)(5) 107,299 5.83 1,563 109,773 6.27 1,720 90,818 6.44 1,462 Home equity loans and lines of credit(5) 60,964 5.12 777 61,196 6.28 956 54,431 7.59 1,031 Subprime mortgage channel(6) 16,933 6.05 256 18,106 6.33 287 20,152 6.80 343 Home construction(7) 1,973 7.41 37 2,142 7.65 41 2,043 6.72 34 Multi-family 32,786 6.13 502 31,962 6.35 507 29,419 6.65 488 Other real estate     10,205 6.26   159   9,797 6.49   158   6,843 7.03   120 Total loans secured by real estate 230,160 5.73 3,294 232,976 6.31 3,669 203,706 6.84 3,478 Consumer: Credit card 9,443 11.56 271 9,024 10.75 241 10,101 10.44 263 Other 180 16.85 8 195 17.47 8 254 12.44 8 Commercial     1,954 6.76   33   1,991 7.36   37   1,943 7.73   38 Total loans held in portfolio 241,737 5.98 3,606 244,186 6.49 3,955 216,004 7.02 3,787 Other     11,052 3.01   83   6,000 3.94   59   2,089 5.47   29 Total interest-earning assets 285,503 5.90 4,207 285,265 6.45 4,595 279,836 6.80 4,752 Noninterest-earning assets: Mortgage servicing rights 6,115 5,882 6,782 Goodwill 7,283 7,286 9,054 Other assets     15,981   21,495   20,332 Total assets   $ 314,882 $ 319,928 $ 316,004 Liabilities Interest-bearing liabilities: Deposits: Interest-bearing checking deposits $ 22,619 1.39 78 $ 24,384 1.75 107 $ 30,373 2.51 190 Savings and money market deposits 62,078 2.17 335 55,951 2.73 379 58,969 3.33 490 Time deposits     69,161 4.08   702   74,225 4.57   843   84,330 4.96   1,043 Total interest-bearing deposits 153,858 2.91 1,115 154,560 3.46 1,329 173,672 3.98 1,723 Federal funds purchased and commercial paper 79 3.05 1 1,009 3.62 9 2,169 5.36 29 Securities sold under agreements to repurchase 406 2.20 2 885 3.78 8 8,416 5.35 112 Advances from Federal Home Loan Banks 60,402 3.36 505 62,799 4.29 670 22,063 5.36 295 Other     30,839 3.69   283   34,048 4.71   400   39,886 5.57   555 Total interest-bearing liabilities 245,584 3.12   1,906 253,301 3.83   2,416 246,206 4.42   2,714 Noninterest-bearing sources: Noninterest-bearing deposits 30,752 29,744 33,093 Other liabilities 7,075 8,902 9,610 Minority interests 3,913 3,915 2,659 Stockholders' equity     27,558   24,066   24,436 Total liabilities and stockholders' equity   $ 314,882 $ 319,928 $ 316,004 Net interest spread and net interest income on a taxable-equivalent basis 2.78 $ 2,301 2.62 $ 2,179 2.38 $ 2,038 Impact of noninterest-bearing sources 0.44 0.43 0.53 Net interest margin on a taxable-equivalent basis 3.22 3.05 2.91 __________________________ (1) Includes taxable-equivalent adjustments primarily related to tax-exempt income on U.S. states and political subdivisions securities and loans related to the Company’s community lending and investment activities. The federal statutory tax rate was 35% for the periods presented.   (2) Nonaccrual assets and related income, if any, are included in their respective categories.   (3) The average balance and yield are based on average amortized cost balances.   (4) Capitalized interest recognized in earnings that resulted from negative amortization within the Option ARM portfolio totaled $255 million, $336 million and $344 million for the three months ended June 30, 2008, March 31, 2008 and June 30, 2007.   (5) Excludes home loans and home equity loans and lines of credit in the subprime mortgage channel.   (6) Represents mortgage loans purchased from recognized subprime lenders and mortgage loans originated under the Long Beach Mortgage name and held in the investment portfolio.   (7) 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-10 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)                       Six Months Ended June 30, 2008 June 30, 2007 Interest Interest Income/ Income/         Balance   Rate   Expense   Balance   Rate   Expense Average Balances and Weighted Average Interest Rates Assets (Taxable-Equivalent Basis(1)) Interest-earning assets(2): Federal funds sold and securities purchased under agreements to resell $ 2,139 2.81 % $ 30 $ 3,947 5.39 % $ 105 Trading assets 2,565 18.22 233 5,293 8.37 221 Available-for-sale securities(3): Mortgage-backed securities 19,068 5.74 546 18,821 5.44 511 Investment securities 5,802 5.24 152 6,785 5.18 176 Loans held for sale 4,323 6.40 138 30,810 6.40 984 Loans held in portfolio: Loans secured by real estate: Home loans(4)(5) 108,536 6.05 3,283 94,074 6.45 3,033 Home equity loans and lines of credit(5) 61,080 5.70 1,733 53,726 7.57 2,020 Subprime mortgage channel(6) 17,519 6.19 543 20,381 6.74 686 Home construction(7) 2,058 7.54 78 2,052 6.63 68 Multi-family 32,374 6.23 1,009 29,621 6.61 979 Other real estate     10,001 6.37   317   6,803 7.03   238 Total loans secured by real estate 231,568 6.02 6,963 206,657 6.81 7,024 Consumer: Credit card 9,233 11.16 513 10,500 11.03 574 Other 188 17.17 16 261 12.70 17 Commercial     1,972 7.06   69   1,874 7.84   73 Total loans held in portfolio 242,961 6.23 7,561 219,292 7.03 7,688 Other     8,526 3.34   141   2,776 5.65   78 Total interest-earning assets 285,384 6.18 8,801 287,724 6.80 9,763 Noninterest-earning assets: Mortgage servicing rights 5,998 6,545 Goodwill 7,285 9,054 Other assets     18,738   20,588 Total assets   $ 317,405 $ 323,911 Liabilities Interest-bearing liabilities: Deposits: Interest-bearing checking deposits $ 23,502 1.58 184 $ 31,093 2.57 397 Savings and money market deposits 59,014 2.43 714 56,927 3.31 933 Time deposits     71,693 4.33   1,545   87,960 4.96   2,165 Total interest-bearing deposits 154,209 3.19 2,443 175,980 4.00 3,495 Federal funds purchased and commercial paper 544 3.58 10 3,003 5.44 81 Securities sold under agreements to repurchase 646 3.28 10 10,247 5.43 276 Advances from Federal Home Loan Banks 61,600 3.83 1,175 29,019 5.37 773 Other     32,443 4.23   683   36,366 5.62   1,016 Total interest-bearing liabilities 249,442 3.48   4,321 254,615 4.46   5,641 Noninterest-bearing sources: Noninterest-bearing deposits 30,248 32,773 Other liabilities 7,989 9,547 Minority interests 3,914 2,554 Stockholders' equity     25,812   24,422 Total liabilities and stockholders' equity   $ 317,405 $ 323,911 Net interest spread and net interest income on a taxable-equivalent basis 2.70 $ 4,480 2.34 $ 4,122 Impact of noninterest-bearing sources 0.44 0.51 Net interest margin on a taxable-equivalent basis 3.14 2.85 __________________________ (1) Includes taxable-equivalent adjustments primarily related to tax-exempt income on U.S. states and political subdivisions securities and loans related to the Company’s community lending and investment activities. The federal statutory tax rate was 35% for the periods presented.   (2) Nonaccrual assets and related income, if any, are included in their respective categories.   (3) The average balance and yield are based on average amortized cost balances.   (4) Capitalized interest recognized in earnings that resulted from negative amortization within the Option ARM portfolio totaled $591 million and $706 million for the six months ended June 30, 2008 and June 30, 2007.   (5) Excludes home loans and home equity loans and lines of credit in the subprime mortgage channel.   (6) Represents mortgage loans purchased from recognized subprime lenders and mortgage loans originated under the Long Beach Mortgage name and held in the investment portfolio.   (7) 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-11 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)               Change from     Mar. 31, 2008 June 30, Mar. 31, Dec. 31, Sept. 30, June 30,       to June 30, 2008   2008     2008     2007     2007     2007   Deposits Retail deposits: Checking deposits: Noninterest bearing $ 304 $ 25,435 $ 25,131 $ 23,476 $ 23,721 $ 24,142 Interest bearing     (1,916 )     21,715       23,631       25,713       27,277       29,592   Total checking deposits (1,612 ) 47,150 48,762 49,189 50,998 53,734 Savings and money market deposits 6,699 58,016 51,317 44,987 43,360 43,617 Time deposits(1)     (8,488 )     43,086       51,574       49,410       50,740       48,140   Total retail deposits (3,401 ) 148,252 151,653 143,586 145,098 145,491 Commercial business and other deposits (1,513 ) 8,892 10,405 11,267 16,536 19,186 Brokered deposits: Consumer 1,509 19,248 17,739 18,089 17,484 17,153 Institutional (1,611 ) 100 1,711 2,515 8,107 11,025 Custodial and escrow deposits(2)     (1,110 )     5,431       6,541       6,469       7,055       8,525   Total deposits   $ (6,126 )   $ 181,923     $ 188,049     $ 181,926     $ 194,280     $ 201,380     (1) Weighted average remaining maturity of time deposits was 6 months at June 30, 2008 and March 31, 2008, 7 months at December 31, 2007 and September 30, 2007 and 8 months at June 30, 2007.   (2) Substantially all custodial and escrow deposits reside in noninterest-bearing checking accounts.   June 30, Mar. 31, Dec. 31, Sept. 30, June 30,           2008     2008     2007     2007     2007   Retail Deposit Accounts (number of accounts) Noninterest-bearing checking 11,577,907 11,271,406 10,960,270 10,824,548 10,449,887 Interest-bearing checking 1,167,062 1,218,606 1,273,673 1,334,902 1,399,203 Savings and money market         7,474,547       7,293,256       7,118,349       7,087,311       6,936,870   Total transaction accounts, end of period(1)         20,219,516       19,783,268       19,352,292       19,246,761       18,785,960     Net change in noninterest-bearing checking accounts 306,501 311,136 135,722 374,661 466,574 Net change in checking accounts 254,957 256,069 74,493 310,360 406,243 __________________________ (1) Transaction accounts include retail checking, small business checking, retail savings and small business savings.       June 30, Mar. 31, Dec. 31, Sept. 30, June 30,           2008     2008     2007     2007     2007   Retail Banking Stores Stores, beginning of period 2,261 2,257 2,212 2,235 2,228 Stores opened during the quarter 14 9 50 10 11 Stores closed during the quarter         (36 )     (5 )     (5 )     (33 )     (4 ) Stores, end of period         2,239       2,261       2,257       2,212       2,235   WM-12 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)                 Quarter Ended June 30, Mar. 31, Dec. 31, Sept. 30, June 30,     2008    2008    2007    2007    2007  Loan Volume Home loans: Short-term adjustable-rate loans(1): Option ARMs $ 11 $ 231 $ 3,945 $ 6,174 $ 7,888 Other ARMs     14     19     10     111     22 Total short-term adjustable-rate loans 25 250 3,955 6,285 7,910 Medium-term adjustable-rate loans(2) 2,338 3,810 5,972 9,868 14,953 Fixed-rate loans     6,131     9,427     7,382     6,176     8,172 Total home loan volume 8,494 13,487 17,309 22,329 31,035 Home equity loans and lines of credit 541 1,297 4,619 8,544 9,988 Home construction(3) 8 128 378 483 426 Multi-family 2,686 2,250 3,412 2,856 3,067 Other real estate     1,106     728     1,487     1,285     1,246 Total loans secured by real estate 12,835 17,890 27,205 35,497 45,762 Commercial     134     100     272     276     356 Total loan volume   $ 12,969   $ 17,990   $ 27,477   $ 35,773   $ 46,118 Loan Volume by Channel Retail $ 9,081 $ 10,585 $ 17,341 $ 21,223 $ 24,707 Wholesale 3,732 7,091 9,536 13,387 17,020 Purchased     156     314     600     1,163     4,391 Total loan volume by channel   $ 12,969   $ 17,990   $ 27,477   $ 35,773   $ 46,118 Refinancing Activity(4) Home loan refinancing $ 6,665 $ 10,779 $ 12,297 $ 14,722 $ 22,637 Home equity loans and lines of credit 8 22 46 143 157 Home construction loans - 1 30 30 20 Multi-family and other real estate     1,301     1,033     1,436     1,225     1,378 Total refinancing   $ 7,974   $ 11,835   $ 13,809   $ 16,120   $ 24,192   (1) Short-term adjustable-rate loans reprice within one year.   (2) Medium-term adjustable-rate loans 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) 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)                               Six Months Ended June 30, June 30,                   2008      2007  Loan Volume Home loans: Short-term adjustable-rate loans(1): Option ARMs $ 241 $ 15,666 Other ARMs               34     58 Total short-term adjustable-rate loans 275 15,724 Medium-term adjustable-rate loans(2) 6,148 28,519 Fixed-rate loans               15,557     16,996 Total home loan volume 21,980 61,239 Home equity loans and lines of credit 1,839 17,590 Home construction(3) 136 724 Multi-family 4,936 5,729 Other real estate               1,833     2,326 Total loans secured by real estate 30,724 87,608 Commercial               234     645 Total loan volume             $ 30,958   $ 88,253 Loan Volume by Channel Retail $ 19,665 $ 45,878 Wholesale 10,824 31,767 Purchased               469     10,608 Total loan volume by channel             $ 30,958   $ 88,253 Refinancing Activity(4) Home loan refinancing $ 17,444 $ 45,190 Home equity loans and lines of credit 30 707 Home construction loans 1 31 Multi-family and other real estate               2,334     2,509 Total refinancing             $ 19,809   $ 48,437   (1) Short-term adjustable-rate loans reprice within one year.   (2) Medium-term adjustable-rate loans 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) Includes loan refinancing entered into by both new and pre-existing loan customers. WM-14 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)         Change from   Mar. 31, 2008 June 30, Mar. 31, Dec. 31, Sept. 30, June 30,       to June 30, 2008 2008    2008    2007    2007    2007  Loans Held in Portfolio Loans secured by real estate: Home: Short-term adjustable-rate loans(1): Option ARMs(2) $ (2,960 ) $ 52,886 $ 55,846 $ 58,870 $ 58,137 $ 53,455   Other ARMs     (404 )     15,128       15,532       16,231       15,478       13,538   Total short-term adjustable-rate loans (3,364 ) 68,014 71,378 75,101 73,615 66,993 Medium-term adjustable-rate loans(3) (1,014 ) 39,203 40,217 39,373 37,717 29,647   Fixed-rate loans     (96 )     11,761       11,857       12,005       11,813       9,505   Total home loans (4,474 ) 118,978 123,452 126,479 123,145 106,145 Home equity loans and lines of credit (1,059 ) 62,487 63,546 63,488 61,831 58,631 Home construction(4) (186 ) 1,902 2,088 2,226 2,110 2,058 Multi-family 616 33,144 32,528 31,754 30,831 29,290 Other real estate     456       10,478       10,022       9,524       8,335       6,879   Total loans secured by real estate(5) (4,647 ) 226,989 231,636 233,471 226,252 203,003 Consumer: Credit card 1,600 10,589 8,989 8,831 8,791 9,913 Other (9 ) 177 186 205 224 243 Commercial     (131 )     1,872       2,003       1,879       1,865       1,835   Total loans held in portfolio(6) (3,187 ) 239,627 242,814 244,386 237,132 214,994 Less: allowance for loan losses     (3,742 )     (8,456 )     (4,714 )     (2,571 )     (1,889 )     (1,560 ) Total loans held in portfolio, net $ (6,929 )   $ 231,171     $ 238,100     $ 241,815     $ 235,243     $ 213,434     (1) Short-term adjustable-rate loans reprice within one year.   (2) The total amount by which the unpaid principal balance of Option ARM loans exceeded their original principal amount was $2.05 billion, $1.93 billion, $1.73 billion, $1.50 billion and $1.30 billion at June 30, 2008, March 31, 2008, December 31, 2007, September 30, 2007 and June 30, 2007.   (3) Medium-term adjustable-rate loans 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 subprime mortgage channel loans, comprising mortgage loans purchased from recognized subprime lenders and mortgage loans originated under the Long Beach Mortgage name and held in the investment portfolio as follows: Subprime Mortgage Channel June 30, Mar. 31, Dec. 31, Sept. 30, June 30,         2008    2008    2007    2007    2007  Home loans $ 13,951 $ 15,032 $ 16,092 $ 17,285 $ 17,602 Home equity loans and lines of credit       2,101       2,312       2,525       2,711       2,855   Total       $ 16,052     $ 17,344     $ 18,617     $ 19,996     $ 20,457     (6) Includes net unamortized deferred loan costs of $1.31 billion, $1.42 billion, $1.45 billion, $1.44 billion and $1.58 billion at June 30, 2008, March 31, 2008, December 31, 2007, September 30, 2007 and June 30, 2007. WM-15 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)               Weighted Weighted Weighted Change from Average Average Average   Mar. 31, 2008 June 30, Coupon Mar. 31, Coupon June 30, Coupon       to June 30, 2008     2008    Rate       2008    Rate       2007    Rate Selected Loans Secured by Real Estate Home loans held in portfolio: Short-term adjustable-rate loans(1): Option ARMs $ (2,960 ) $ 52,886 6.61 % $ 55,846 7.30 % $ 53,455 7.74 % Other ARMs     (404 )     15,128 6.70   15,532   6.94   13,538   7.28 Total short-term adjustable-rate loans (3,364 ) 68,014 6.63 71,378 7.22 66,993 7.65 Medium-term adjustable-rate loans(2) (1,014 ) 39,203 6.36 40,217 6.35 29,647 5.99 Fixed-rate loans     (96 )     11,761 6.70   11,857   6.75   9,505   6.71 Total home loans held in portfolio (4,474 ) 118,978 6.55 123,452 6.89 106,145 7.10 Home equity loans and lines of credit: Adjustable-rate (410 ) 53,440 5.65 53,850 6.02 47,699 8.25 Fixed-rate     (649 )     9,047 7.61   9,696   7.67   10,932   7.70 Total home equity loans and lines of credit (1,059 ) 62,487 5.93 63,546 6.27 58,631 8.15 Multi-family loans held in portfolio: Short-term adjustable-rate loans(1): Option ARMs (634 ) 5,524 5.90 6,158 6.70 7,650 7.28 Other ARMs     (353 )     7,116 5.72   7,469   6.03   7,910   6.77 Total short-term adjustable-rate loans (987 ) 12,640 5.79 13,627 6.33 15,560 7.02 Medium-term adjustable-rate loans(2) 1,576 18,393 6.10 16,817 6.12 11,890 5.93 Fixed-rate loans     27       2,111 6.19   2,084   6.22   1,840   6.35 Total multi-family loans held in portfolio     616       33,144 5.99   32,528   6.22   29,290   6.53 Total selected loans held in portfolio secured by real estate(3) (4,917 ) 214,609 6.28 219,526 6.61 194,066 7.33 Loans held for sale(4)     (3,064 )     1,877 5.72   4,941   5.73   18,999   6.39 Total selected loans secured by real estate   $ (7,981 )   $ 216,486 6.28 $ 224,467   6.59 $ 213,065   7.25   (1) Short-term adjustable-rate loans reprice within one year.   (2) Medium-term adjustable-rate loans reprice after one year.   (3) At June 30, 2008, March 31, 2008 and June 30, 2007, adjustable-rate loans with lifetime caps were $180.93 billion, $182.93 billion and $158.24 billion with a lifetime weighted average cap rate of 12.67%, 12.60% and 12.96%.   (4) Excludes credit card and student loans.     Mar. 31, 2008 Dec. 31, 2007                     to June 30, 2008     to June 30, 2008   Rollforward of Loans Held for Sale Balance, beginning of period $ 4,941 $ 5,403 Mortgage loans originated, purchased and transferred from held in portfolio 7,339 18,969 Mortgage loans transferred to held in portfolio (27 ) (373 ) Mortgage loans sold and other(1) (10,376 ) (21,092 ) Net change in consumer loans held for sale                   -             (1,030 )       Balance, end of period                 $ 1,877           $ 1,877           Rollforward of Home Loans Held in Portfolio Balance, beginning of period $ 123,452 $ 126,479 Loans originated, purchased and transferred from held for sale 1,525 3,790 Loan payments, transferred to held for sale and other                   (5,999 )           (11,291 )       Balance, end of period                 $ 118,978           $ 118,978           (1) The unpaid principal balance ("UPB") of home loans sold was $9.85 billion and $19.85 billion for the three and six months ended June 30, 2008. WM-16 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)                   Quarter Ended Detail of Revenue (Expense) from Sales and Servicing of Home Mortgage Loans June 30, Mar. 31, Dec. 31, Sept. 30, June 30,       2008      2008    2007    2007    2007  Gain (loss) from home mortgage loans and originated mortgage-backed securities, net of hedging and risk management instruments: Gain (loss) from home mortgage loans and originated mortgage-backed securities(1) $ (162 ) $ 143 $ 7 $ (169 ) $ 66 Revaluation gain (loss) from derivatives economically hedging loans held for sale     11         (21 )       (12 )       (53 )       126   Gain (loss) from home mortgage loans and originated mortgage-backed securities, net of hedging and risk management instruments (151 ) 122 (5 ) (222 ) 192 Home mortgage loan servicing revenue: Home mortgage loan servicing revenue(2) 438 470 490 516 526 Change in MSR fair value due to payments on loans and other     (301 )       (230 )       (255 )       (351 )       (401 ) Net home mortgage loan servicing revenue 137 240 235 165 125 Change in MSR fair value due to valuation inputs or assumptions 542 (499 ) (390 ) (201 ) 530 Revaluation gain (loss) from derivatives economically hedging MSR     (637 )       548         518         419         (547 ) Home mortgage loan servicing revenue, net of MSR valuation changes and derivative risk management instruments 42 289 363 383 108 Total revenue (expense) from sales and servicing of home mortgage loans   $ (109 )     $ 411       $ 358       $ 161       $ 300                               Six Months Ended Detail of Revenue from Sales and Servicing of Home Mortgage Loans June 30, June 30,                         2008    2007  Gain (loss) from home mortgage loans and originated mortgage-backed securities, net of hedging and risk management instruments: Gain (loss) from home mortgage loans and originated mortgage-backed securities(1) $ (19 ) $ 214 Revaluation gain (loss) from derivatives economically hedging loans held for sale                       (9 )       72   Gain (loss) from home mortgage loans and originated mortgage-backed securities, net of hedging and risk management instruments (28 ) 286 Home mortgage loan servicing revenue: Home mortgage loan servicing revenue(2) 908 1,041 Change in MSR fair value due to payments on loans and other                       (531 )       (757 ) Net home mortgage loan servicing revenue 377 284 Change in MSR fair value due to valuation inputs or assumptions 42 434 Revaluation loss from derivatives economically hedging MSR                       (89 )       (579 ) Home mortgage loan servicing revenue, net of MSR valuation changes and derivative risk management instruments 330 139 Total revenue from sales and servicing of home mortgage loans                     $ 302       $ 425     (1) 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.   (2) Includes contractually specified servicing fees (net of guarantee fees paid to housing government-sponsored enterprises, where applicable), late charges and loan pool expenses (the shortfall of the scheduled interest required to be remitted to investors and that which is collected from borrowers upon payoff). WM-17 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)           Quarter Ended June 30, Mar. 31, Dec. 31, Sept. 30, June 30,   2008      2008      2007      2007      2007    MSR Valuation and Risk Management: Change in MSR fair value due to valuation inputs or assumptions $ 542 $ (499 ) $ (390 ) $ (201 ) $ 530 Gain (loss) on MSR risk management instruments: Revaluation gain (loss) from derivatives economically hedging MSR (637 ) 548 518 419 (547 ) Revaluation gain (loss) from certain trading securities   (2 )     -       -       4       (4 ) Total gain (loss) on MSR risk management instruments   (639 )     548       518       423       (551 ) Total changes in MSR valuation and risk management $ (97 )   $ 49     $ 128     $ 222     $ (21 )                           Six Months Ended June 30, June 30,                           2008      2007    MSR Valuation and Risk Management: Change in MSR fair value due to valuation inputs or assumptions $ 42 $ 434 Loss on MSR risk management instruments: Revaluation loss from derivatives economically hedging MSR (89 ) (579 ) Revaluation loss from certain trading securities                           (2 )     -   Total loss on MSR risk management instruments                           (91 )     (579 ) Total changes in MSR valuation and risk management                         $ (49 )   $ (145 ) WM-18 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)         Quarter Ended June 30, Mar. 31, Dec. 31, Sept. 30, June 30,         2008      2008      2007      2007      2007    Rollforward of Mortgage Servicing Rights(1) Fair value, beginning of period $ 5,726 $ 6,278 $ 6,794 $ 7,231 $ 6,507 Home loans: Additions 205 181 127 116 592 Change in MSR fair value due to payments on loans and other (301 ) (230 ) (255 ) (351 ) (401 ) Change in MSR fair value due to valuation inputs or assumptions 542 (499 ) (390 ) (201 ) 530 Sale of MSR - (1 ) - - - Net change in commercial real estate MSR       3     (3 )   2     (1 )   3   Fair value, end of period     $ 6,175   $ 5,726   $ 6,278   $ 6,794   $ 7,231   Rollforward of Mortgage Loans Serviced for Others Balance, beginning of period $ 449,126 $ 456,484 $ 463,436 $ 474,867 $ 467,782 Home loans: Additions 9,828 9,862 7,814 8,700 29,949 Sale of servicing - (109 ) - - - Loan payments and other (17,534 ) (17,177 ) (15,739 ) (20,716 ) (24,213 ) Net change in commercial real estate loans       181     66     973     585     1,349   Balance, end of period     $ 441,601   $ 449,126   $ 456,484   $ 463,436   $ 474,867     (1) MSR as a percentage of mortgage loans serviced for others was 1.40%, 1.27%, 1.38%, 1.47% and 1.52% at June 30, 2008, March 31, 2008, December 31, 2007, September 30, 2007, and June 30, 2007.   June 30, Mar. 31, Dec. 31, Sept. 30, June 30,         2008      2008      2007      2007      2007    Total Servicing Portfolio Mortgage loans serviced for others $ 441,601 $ 449,126 $ 456,484 $ 463,436 $ 474,867 Consumer loans serviced for others 15,842 17,390 17,379 16,078 14,745 Servicing on retained MBS without MSR 865 904 942 980 1,023 Servicing on owned loans 231,188 236,877 238,344 232,392 218,122 Subservicing portfolio       274     285     399     418     439   Total servicing portfolio     $ 689,770   $ 704,582   $ 713,548   $ 713,304   $ 709,196                           June 30, 2008 Unpaid Weighted Principal Average                       Balance   Servicing Fee   (in basis points, annualized) Mortgage Loans Serviced for Others by Loan Type Agency $252,358 32 Private 162,924 58 Subprime mortgage channel-home                     26,319   51 Total mortgage loans serviced for others(1)                     $441,601   42   (1 ) Weighted average coupon rate was 6.13% at June 30, 2008. WM-19 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)       Quarter Ended June 30, Mar. 31, Dec. 31, Sept. 30, June 30,       2008       2008       2007       2007       2007     Allowance for Loan Losses Balance, beginning of quarter $ 4,714 $ 2,571 $ 1,889 $ 1,560 $ 1,540 Allowance transferred to loans held for sale - - (105 ) (217 ) (81 ) Provision for loan losses     5,913       3,511       1,534       967       372     10,627 6,082 3,318 2,310 1,831 Loans charged off: Loans secured by real estate: Home loans(1) (687 ) (331 ) (105 ) (52 ) (21 ) Home equity loans and lines of credit(1) (726 ) (486 ) (249 ) (104 ) (55 ) Subprime mortgage channel(2) (572 ) (388 ) (277 ) (146 ) (103 ) Home construction(3) (3 ) (8 ) - - (1 ) Multi-family (3 ) (4 ) (4 ) - - Other real estate     (1 )     (2 )     (1 )     (1 )     (1 )   Total loans secured by real estate (1,992 ) (1,219 ) (636 ) (303 ) (181 ) Consumer: Credit card (169 ) (135 ) (126 ) (120 ) (106 ) Other (2 ) (2 ) (2 ) (2 ) (2 ) Commercial     (51 )     (39 )     (32 )     (20 )     (15 )   Total loans charged off (2,214 )   (1,395 )   (796 )   (445 ) (304 ) Recoveries of loans previously charged off: Loans secured by real estate: Home loans(1) - 1 4 1 1 Home equity loans and lines of credit(1) 17 9 4 3 3 Subprime mortgage channel(2) 3 1 4 1 11 Home construction(3) - - 2 - - Other real estate     1       1       2       2       -     Total loans secured by real estate 21 12 16 7 15 Credit card 16 12 31 14 15 Commercial     6       3       2       3       3     Total recoveries of loans previously charged off     43       27       49       24       33     Net charge-offs     (2,171 )     (1,368 )     (747 )     (421 )     (271 )   Balance, end of quarter   $ 8,456     $ 4,714     $ 2,571     $ 1,889     $ 1,560       Net charge-offs (annualized) as a percentage of average loans held in portfolio 3.59 % 2.24 % 1.24 % 0.74 % 0.50 % Allowance as a percentage of loans held in portfolio 3.53 1.94 1.05 0.80 0.73 ______________________ (1) Excludes home loans and home equity loans and lines of credit in the subprime mortgage channel.   (2) Represents mortgage loans purchased from recognized subprime lenders and mortgage loans originated under the Long Beach Mortgage name and held in the investment portfolio. Charge-offs in the second quarter of 2007 include $26 million of amounts primarily related to uncollected borrower expenses incurred in prior periods by and owed to a third party loan servicer.   (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. WM-20 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)   June 30, Mar. 31, Dec. 31, Sept. 30, June 30,       2008      2008      2007      2007      2007    Nonperforming Assets Nonaccrual loans(1)(2)(3): Loans secured by real estate: Home loans(4)(5) $ 4,757 $ 3,504 $ 2,302 $ 1,452 $ 991 Home equity loans and lines of credit(4) 1,521 1,102 835 533 378 Subprime mortgage channel(6) 3,008 2,882 2,721 2,356 1,707 Home construction(7) 79 77 56 44 47 Multi-family 181 142 131 120 69 Other real estate     87     87     53     49     52   Total nonaccrual loans secured by real estate 9,633 7,794 6,098 4,554 3,244 Consumer 1 2 1 1 1 Commercial     57     28     24     22     30   Total nonaccrual loans held in portfolio 9,691 7,824 6,123 4,577 3,275 Foreclosed assets(8)     1,512     1,357     979     874     750   Total nonperforming assets   $ 11,203   $ 9,181   $ 7,102   $ 5,451   $ 4,025     Total nonperforming assets as a percentage of total assets 3.62 % 2.87 % 2.17 % 1.65 % 1.29 % ______________________________ (1) Nonaccrual loans held for sale, which are excluded from the nonaccrual balances presented above, were $2 million, zero, $4 million, $7 million and $171 million at June 30, 2008, March 31, 2008, December 31, 2007, September 30, 2007 and June 30, 2007. Loans held for sale are accounted for at the lower of 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) Includes nonaccrual restructured loans of $1.43 billion, $669 million, $633 million, $512 million and $152 million at June 30, 2008, March 31, 2008, December 31, 2007, September 30, 2007 and June 30, 2007. Excludes accruing restructured loans of $465 million, $372 million, $251 million, $269 million and $277 million at June 30, 2008, March 31, 2008, December 31, 2007, September 30, 2007 and June 30, 2007.   (4) Excludes home loans and home equity loans and lines of credit in the subprime mortgage channel.   (5) Includes nonaccrual Option ARM loans of $3.23 billion, $2.51 billion, $1.63 billion, $1.00 billion and $680 million at June 30, 2008, March 31, 2008, December 31, 2007, September 30, 2007 and June 30, 2007.   (6) Represents mortgage loans purchased from recognized subprime lenders and mortgage loans originated under the Long Beach Mortgage name and held in the investment portfolio.   (7) 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.   (8) Foreclosed real estate securing Government National Mortgage Association ("GNMA”) loans of $21 million, $25 million, $37 million, $46 million and $49 million at June 30, 2008, March 31, 2008, December 31, 2007, September 30, 2007 and June 30, 2007 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 Veterans Affairs ("VA”).