WaMu Reports Third Quarter Earnings Per Share of $0.23

WaMu (NYSE:WM) announced today third quarter 2007 net income of $210 million, or $0.23 per diluted share, compared with net income of $748 million, or $0.77 per diluted share, in the third quarter of 2006. The company attributed the decline to a weaker housing market and disruptions in the capital markets. "We’re disappointed with our third quarter results but they reflect the increasingly difficult market conditions that are challenging the banking industry,” said WaMu Chairman and Chief Executive Officer Kerry Killinger. "Despite these challenges, our Retail Banking, Card Services and Commercial businesses delivered good operating performance during the quarter, and we continued to adapt our Home Loans business to meet market conditions.” Killinger added that the company remains focused on executing its long-term growth plans. The company also announced its Board of Directors declared a quarterly cash dividend on the company’s common stock of 56 cents per share. THIRD QUARTER FINANCIAL SUMMARY AND HIGHLIGHTS Selected Financial Information   Three Months Ended (in millions, except per share data) September 30, 2007   June 30, 2007   September 30, 2006 Income Statement Net interest income $ 2,014 $ 2,034 $ 1,947 Provision for loan and lease losses 967 372 166 Noninterest income 1,379 1,758 1,570 Noninterest expense 2,153 2,138 2,184 Net income 210 830 748   Diluted earnings per common share $ 0.23 $ 0.92 $ 0.77   Balance Sheet Total assets, end of period $ 330,110 $ 312,219 $ 348,877 Average total assets 320,475 316,004 349,542 Average interest-earning assets 283,263 279,836 312,827 Average total deposits 198,649 206,765 208,912   Performance Ratios Return on average common equity 3.45 % 13.74 % 11.47 % Net interest margin 2.86 2.90 2.53 Efficiency ratio 63.42 56.38 62.09 Nonperforming assets/total assets 1.65 1.29 0.69 Tangible equity/total tangible assets 5.61 6.07 5.86 Net interest margin of 2.86 percent reflects change in funding mix. The 4 basis point decline in the net interest margin from the second quarter was driven by an increase in the level of interest-earning assets funded by higher-cost wholesale borrowings. The increase in the margin from 2.53 percent in the third quarter of last year was primarily due to the upward repricing of the loan portfolio, which reflected the $17.5 billion sale of lower yielding, medium-term adjustable-rate home loans in the first quarter of 2007. Increase in provision reflects further weakness in the housing market. The quarter’s provision increased to $967 million from $372 million in the prior quarter in response to higher delinquencies and impacts from recent house price trends, as well as the $22.1 billion, or 10 percent, growth in the company’s loan portfolio during the quarter. The increase in the non-card portion of the provision to $644 million from $143 million in the second quarter was driven by further weakening in the housing market, primarily as it affects subprime and home equity loans. The company also increased the provision for loan losses for credit cards to $323 million from $229 million in the second quarter reflecting a higher level of delinquencies and a lower level of anticipated recoveries. Depositor and other retail banking fees continue to grow at double-digit pace. During the third quarter, the company added 310,000 net new checking accounts for year-to-date growth of over 1.0 million net new accounts, achieving in nine months its stated goal of adding more than one million net new checking accounts in 2007. The growth in WaMu Free CheckingTM helped drive, along with higher transaction fees, an increase in depositor and other retail banking fees of 13 percent from last year’s third quarter. Noninterest income reflects capital markets disruption. Noninterest income during the third quarter was impacted by the following: Downward adjustments of $147 million related to $17 billion in home, multi-family and other commercial real estate loans that were transferred from held for sale to the company’s investment portfolio; Net losses of $153 million in the company’s trading securities portfolio, including market valuation adjustments on capital markets assets, retained interests on credit cards and other residual interests; and, Impairment losses of $104 million on investment grade mortgage-backed securities designated as available for sale. Included in other noninterest income for the third quarter were losses, resulting from the decrease in interest rates, on derivatives economically hedging commercial real estate loans held for sale. The decline in total noninterest income was partially offset by strong third quarter results from MSR valuation and risk management. Disciplined expense management continues. The slight increase in third quarter’s noninterest expense to $2.2 billion reflects increasing foreclosure related expenses offset by continuing productivity improvements. THIRD QUARTER OPERATING SEGMENT RESULTS Retail Banking Group Selected Segment Information   Three Months Ended (in millions, except accounts and households) September 30, 2007   June 30, 2007   September 30, 2006 Net interest income $ 1,302 $ 1,283 $ 1,260 Provision for loan and lease losses 318 91 53 Noninterest income 833 819 738 Noninterest expense 1,155 1,137 1,079 Net income 453 559 555   Average loans $ 147,357 $ 149,716 $ 180,829 Average retail deposits 144,921 145,252 139,954 Net change in number of retail checking accounts 310,360 406,243 307,433 Net change in retail households 161,000 228,000 256,000 Solid operating results with a higher provision. The Retail Bank continued to perform well, which led to an increase in net interest income and a 13 percent year over year increase in depositor fees. The decline in net income was due to the increase in the provision related to both the home loan and home equity portfolios. Number of checking accounts up during the quarter. During the third quarter, the company added 310,000 net new checking accounts for year-to-date growth of over 1.0 million net new accounts, achieving in nine months its stated goal of adding more than one million net new checking accounts in 2007. The growth in WaMu Free CheckingTM also contributed to an increase in the number of retail households, up 2 percent from the end of the prior quarter and up 8 percent from a year earlier. Card Services Group (managed basis) Selected Segment Information   Three Months Ended (in millions) September 30, 2007   June 30, 2007   September 30, 2006 Net interest income $ 689 $ 660 $ 633 Provision for loan and lease losses 611 523 345 Noninterest income 399 393 343 Noninterest expense 320 300 294 Net income 102 141 207   Average managed receivables $ 25,718 $ 24,234 $ 21,706 Period-end managed receivables 26,227 24,987 22,234 30+ day managed delinquency rate 5.73 % 5.11 % 5.53 % Managed net credit losses 6.37 6.49 5.68 Results reflect strong growth in receivables despite market disruption. Noninterest income was up slightly from the second quarter. The increase in fee income from larger receivables balances was mostly offset by a $65 million downward adjustment to the company’s retained interests resulting from disruption in the capital markets. The increase in net interest income compared with prior periods reflected higher net finance charges from the higher balance of managed receivables. The increase in noninterest expense was driven by higher marketing costs which helped support the quarter’s record account openings. Record new account growth. During the quarter, Card Services opened a record 945,000 new credit card accounts. Marketing to WaMu customers continues to be an important growth opportunity for Card Services and accounted for approximately one third of production. Period-end managed receivables of $26.2 billion were up 5 percent from the second quarter and up 18 percent from the prior year. Credit quality reflects higher level of delinquencies. Net credit losses of 6.37 percent were down slightly from the second quarter as the third quarter’s substantial growth in managed receivables more than offset an increase in losses. At 5.73 percent of period-end managed receivables, the 30+ day managed delinquency rate was up from the prior quarter, due in part to seasonal trends. The quarter’s strong growth in period-end managed receivables, higher level of delinquencies, and a lower level of anticipated recoveries led to the increase in the quarter’s provision. Commercial Group Selected Segment Information   Three Months Ended (in millions) September 30, 2007   June 30, 2007   September 30, 2006 Net interest income $ 193 $ 195 $ 159 Provision for loan and lease losses 12 2 (2 ) Noninterest income (34 ) 62 25 Noninterest expense 67 74 60 Net income 54 113 78   Loan volume $ 4,054 $ 4,348 $ 3,104 Average loans 38,333 38,789 32,414 Decline in net income reflects capital markets pressure. Net income of $54 million was down from the prior quarter due to the decline in noninterest income and increase to the provision for loan losses. The $34 million loss in noninterest income was primarily due to a $21 million loss on sale of loans, net of hedging, compared with net gains in the second quarter of $63 million due to favorable hedging results. The increase in the provision was primarily due to the transfer of $2 billion of loans out of held for sale and into portfolio. Loan volume remains strong. Loan volume of $4.1 billion remained strong, down slightly from the record level in the second quarter as the company increased pricing in response to market conditions. The quarter’s lower level of loan production contributed to the decline in noninterest expense from the second quarter. Home Loans Group Selected Segment Information   Three Months Ended (in millions) September 30, 2007   June 30, 2007   September 30, 2006 Net interest income $ 183 $ 215 $ 276 Provision for loan and lease losses 323 101 84 Noninterest income 184 391 314 Noninterest expense 554 548 528 Net income (loss) (348 ) (37 ) (23 )   Loan volume $ 26,434 $ 35,857 $ 41,241 Average loans 43,737 43,312 45,407 Housing weakness and capital markets disruption challenge Home Loans’ profitability. The decline in net income was driven by lower noninterest income and higher credit costs. The company’s gain on sale of home mortgage loans decreased from a gain of $192 million in the second quarter to a loss of $222 million. During the quarter, the company recorded a $139 million downward adjustment on the $15 billion of loans transferred from held for sale into the segment’s portfolio. In addition, the company recorded a decrease in the value of its subprime residuals by $43 million to a balance of $37 million at the end of the quarter and recorded a loss of $62 million on trading securities associated with the company’s capital markets activities as the position was marked down due to widening credit spreads and the market’s reduced liquidity. Partially offsetting these items were strong results from MSR valuation and risk management of $222 million for the third quarter compared with a loss of $21 million in the prior quarter, reflecting the disruption in the capital markets and a slowdown in expected prepayments related to a weaker housing market, tighter underwriting standards across the industry, and higher nonconforming mortgage rates. The provision for loan losses increased to $323 million in the third quarter from $101 million in the prior quarter; the increase reflects rising delinquencies, home price trends, and the impact of nonconforming loans moved or added to the loan portfolio. The company retained most prime nonconforming loans in this segment rather than selling them. Drop in home loan volume reflects slowdown in housing and further credit tightening. Prime home loan volume was down 22 percent from the second quarter as refinance activity fell during the third quarter. Subprime mortgage production for the third quarter of only $483 million was down 80 percent from $2.4 billion in the prior quarter and down 95 percent from $9.4 billion a year ago. COMPANY UPDATES On Oct. 16, Washington Mutual Bank consented to the issuance of an order by the Office of Thrift Supervision requiring the Bank to comply with the Bank Secrecy Act and to strengthen and improve its programs and controls for compliance with the Act and related laws and regulations. The order does not impose any fines or restrictions on the Bank's business activities or growth initiatives. On Oct. 16, WaMu’s Board of Directors declared a cash dividend of 56 cents per share on the company’s common stock. Dividends on the common stock are payable on Nov. 15, 2007 to shareholders of record as of Oct. 31, 2007. In addition to declaring a dividend on the company’s common stock, the company will pay a dividend of $0.4041 per depository share of Series K Preferred Stock to be payable on Dec. 17, 2007 to holders of record on Dec. 3, 2007. On Oct. 1, WaMu implemented industry leading standards for mortgage brokers. The new program includes enhanced disclosure and a direct call program to every borrower who is represented by a broker prior to closing to review the key loan terms. On Sept. 24, John P. McMurray joined WaMu to serve as the company’s Chief Credit Officer. He reports to Ron Cathcart, Chief Enterprise Risk Officer. McMurray, a mortgage industry veteran, most recently was Senior Managing Director and Chief Risk Officer at Countrywide Financial Corporation. On Nov. 7, WaMu will hold its 2007 Investor Day for analysts and institutional investors. The event, scheduled to begin at 8:00 a.m. and conclude by 12:30 p.m. ET, will be held in New York at the Sheraton New York Hotel and Tower. ABOUT WAMU WaMu, through its subsidiaries, is one of the nation’s leading consumer and small business banks. At Sept. 30, 2007, WaMu and its subsidiaries had assets of $330.1 billion. The company has a history dating back to 1889 and its subsidiary banks currently operate approximately 2,700 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, Oct. 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 888-889-1955. 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 at least 30 days. A recording of the conference call will be available from 7:00 p.m. ET on Wednesday, Oct. 17, 2007, through 11:59 p.m. ET on Friday, Oct. 26, 2007. The recorded message will be available at 800-584-7315. Callers from outside the United States may dial 203-369-3816. 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 2006 Annual Report on Form 10-K and "Cautionary Statements” in our Forms 10-Q for the quarters ended March 31, 2007 and June 30, 2007 which include: Volatile interest rates and their impact on the mortgage banking business; Credit risk; Operational risk; 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, economic and market conditions; Reputational risk; and Liquidity risk. There are other factors not described in our 2006 Form 10-K and Forms 10-Q for the quarters ended March 31, 2007 and June 30, 2007 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   Nine Months Ended Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, Sept. 30, Sept. 30,           2007       2007       2007       2006       2006     2007       2006 PROFITABILITY Net income $ 210 $ 830 $ 784 $ 1,058 $ 748 $ 1,825 $ 2,501 Net interest income 2,014 2,034 2,081 1,998 1,947 6,131 6,123 Noninterest income 1,379 1,758 1,541 1,592 1,570 4,678 4,786 Noninterest expense 2,153 2,138 2,105 2,257 2,184 6,396 6,551   Diluted earnings per common share: Income from continuing operations $ 0.23 $ 0.92 $ 0.86 $ 0.66 $ 0.76 $ 2.02 $ 2.51 Income from discontinued operations - - - 0.44 0.01 - 0.03 Net income 0.23 0.92 0.86 1.10 0.77 2.02 2.54   Diluted weighted average number of common shares outstanding (in thousands) 876,002 893,090 899,706 955,817 967,376 889,534 981,997 Net interest margin 2.86 % 2.90 % 2.79 % 2.58 % 2.53 % 2.85 % 2.64 % Dividends declared per common share $ 0.56 $ 0.55 $ 0.54 $ 0.53 $ 0.52 $ 1.65 $ 1.53 Book value per common share (period end)(1) 27.21 27.27 27.30 28.21 27.65 27.21 27.65 Return on average assets 0.26 % 1.05 % 0.95 % 1.20 % 0.86 % 0.75 % 0.96 % Return on average common equity 3.45 13.74 12.99 16.03 11.47 10.10 12.68 Efficiency ratio(2)(3) 63.42 56.38 58.13 62.87 62.09 59.18 60.05   ASSET QUALITY Nonperforming assets(4) to total assets 1.65 % 1.29 % 1.02 % 0.80 % 0.69 % 1.65 % 0.69 % Allowance as a percentage of loans held in portfolio 0.80 0.73 0.71 0.72 0.64 0.80 0.64   CREDIT PERFORMANCE Provision for loan and lease losses $ 967 $ 372 $ 234 $ 344 $ 166 $ 1,574 $ 472 Net charge-offs 421 271 183 136 154 876 375   CAPITAL ADEQUACY Capital Ratios for WMI: Tangible equity to total tangible assets(5) 5.61 % 6.07 % 5.78 % 6.04 % 5.86 % 5.61 % 5.86 % Total risk-based capital to total risk-weighted assets(6) 10.53 11.04 11.17 11.77 11.10 10.53 11.10 Tier 1 capital to average total assets(6) 5.86 6.09 5.87 6.35 6.28 5.86 6.28 Capital Ratios for WMB (well-capitalized minimum)(7): Tier 1 capital to adjusted total assets (5.00%) 6.40 7.02 6.70 6.79 6.47 6.40 6.47 Adjusted tier 1 capital to total risk-weighted assets (6.00%) 7.47 8.14 7.88 8.28 8.12 7.47 8.12 Total risk-based capital to total risk-weighted assets (10.00%) 11.07 12.17 11.94 12.16 11.30 11.07 11.30   SUPPLEMENTAL DATA Average balance sheet: Total loans held in portfolio $ 227,348 $ 216,004 $ 222,617 $ 239,265 $ 242,165 $ 222,007 $ 239,037 Total interest-earning assets(2) 283,263 279,836 295,700 314,784 312,827 286,221 311,300 Total assets 320,475 316,004 331,905 353,056 349,542 322,753 347,310 Total deposits 198,649 206,765 210,764 214,801 208,912 205,348 200,131 Total stockholders' equity 23,994 24,436 24,407 26,700 26,147 24,278 26,308 Period-end balance sheet: Total loans held in portfolio, net 235,243 213,434 215,481 223,330 240,215 235,243 240,215 Total assets 330,110 312,219 319,985 346,288 348,877 330,110 348,877 Total deposits 194,280 201,380 210,209 213,956 210,882 194,280 210,882 Total stockholders' equity 23,965 24,210 24,578 26,969 26,458 23,965 26,458 Common shares outstanding at the end of period (in thousands)(8) 868,802 875,722 888,111 944,479 945,098 868,802 945,098 Employees at end of period 49,748 49,989 49,693 49,824 51,056 49,748 51,056 _______________________   (1) Excludes six million shares held in escrow.   (2) Based on continuing operations.   (3) The efficiency ratio is defined as noninterest expense divided by total revenue (net interest income and noninterest income).   (4) Excludes nonaccrual loans held for sale.   (5) Excludes unrealized net gain/loss on available-for-sale securities and derivatives, 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 $2.94 billion for September 30, 2007 and June 30, 2007, $2.45 billion for March 31, 2007 and December 31, 2006 and $1.96 billion for September 30, 2006 are included in the numerator.   (6) The capital ratios are estimated as if Washington Mutual, Inc. were a bank holding company subject to Federal Reserve Board capital requirements.   (7) Capital ratios for Washington Mutual Bank ("WMB") at September 30, 2007 are preliminary.   (8) 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     Sept. 30, June 30, Mar. 31, Dec. 31,   Sept. 30,           2007     2007     2007     2006       2006   Interest Income Loans held for sale $ 248 $ 421 $ 562 $ 515 $ 435 Loans held in portfolio 3,992 3,786 3,900 4,053 4,012 Available-for-sale securities 392 351 332 392 379 Trading assets 108 108 113 102 140 Other interest and dividend income     116     82     101     148       139   Total interest income 4,856 4,748 5,008 5,210 5,105 Interest Expense Deposits 1,650 1,723 1,772 1,843 1,739 Borrowings     1,192     991     1,155     1,369       1,419   Total interest expense     2,842     2,714     2,927     3,212       3,158   Net interest income 2,014 2,034 2,081 1,998 1,947 Provision for loan and lease losses     967     372     234     344       166   Net interest income after provision for loan and lease losses 1,047 1,662 1,847 1,654 1,781 Noninterest Income Revenue from sales and servicing of home mortgage loans 161 300 125 164 118 Revenue from sales and servicing of consumer loans 418 403 443 372 355 Depositor and other retail banking fees 740 720 665 692 655 Credit card fees 209 183 172 182 165 Securities fees and commissions 67 70 60 54 52 Insurance income 29 29 29 30 31 Gain (loss) on trading assets (153 ) (145 ) (108 ) (81 ) 68 Gain (loss) from sales of other available-for-sale securities (99 ) 7 35 (1 ) (1 ) Other income     7     191     120     180       127   Total noninterest income 1,379 1,758 1,541 1,592 1,570 Noninterest Expense Compensation and benefits 910 977 1,002 945 939 Occupancy and equipment 371 354 376 476 408 Telecommunications and outsourced information services 135 132 129 133 142 Depositor and other retail banking losses 71 58 61 64 57 Advertising and promotion 125 113 98 107 124 Professional fees 52 55 38 89 57 Other expense     489     449     401     443       457   Total noninterest expense 2,153 2,138 2,105 2,257 2,184 Minority interest expense     53     42     43     34       34   Income from continuing operations before income taxes 220 1,240 1,240 955 1,133 Income taxes     10     410     456     315       394   Income from continuing operations     210     830     784     640       739   Discontinued Operations(1) Income from discontinued operations before income taxes - - - 2 14 Gain on disposition of discontinued operations - - - 667 - Income taxes     -     -     -     251       5   Income from discontinued operations     -     -     -     418       9   Net Income   $ 210   $ 830   $ 784   $ 1,058     $ 748   Net Income Available to Common Stockholders   $ 202   $ 822   $ 777   $ 1,050     $ 748     Basic Earnings Per Common Share: Income from continuing operations $ 0.24 $ 0.95 $ 0.89 $ 0.68 $ 0.78 Income from discontinued operations   -     -     -     0.45       0.01   Net Income 0.24 0.95 0.89 1.13 0.79   Diluted Earnings Per Common Share: Income from continuing operations $ 0.23 $ 0.92 $ 0.86 $ 0.66 $ 0.76 Income from discontinued operations   -     -     -     0.44       0.01   Net Income 0.23 0.92 0.86 1.10 0.77   Dividends declared per common share 0.56 0.55 0.54 0.53 0.52 Basic weighted average number of common shares outstanding (in thousands) 857,005 868,968 874,816 931,484 941,898 Diluted weighted average number of common shares outstanding (in thousands) 876,002 893,090 899,706 955,817 967,376     __________________   (1) 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)             Nine Months Ended Sept. 30, Sept. 30,         2007       2006   Interest Income Loans held for sale $ 1,232 $ 1,292 Loans held in portfolio 11,678 11,480 Available-for-sale securities 1,075 1,068 Trading assets 329 503 Other interest and dividend income     299       354   Total interest income 14,613 14,697 Interest Expense Deposits 5,145 4,420 Borrowings     3,337       4,154   Total interest expense     8,482       8,574   Net interest income 6,131 6,123 Provision for loan and lease losses     1,574       472   Net interest income after provision for loan and lease losses 4,557 5,651 Noninterest Income Revenue from sales and servicing of home mortgage loans 586 603 Revenue from sales and servicing of consumer loans 1,264 1,155 Depositor and other retail banking fees 2,125 1,875 Credit card fees 564 456 Securities fees and commissions 197 161 Insurance income 87 97 Loss on trading assets (406 ) (74 ) Loss from sales of other available-for-sale securities (58 ) (8 ) Other income     319       521   Total noninterest income 4,678 4,786 Noninterest Expense Compensation and benefits 2,889 2,992 Occupancy and equipment 1,102 1,235 Telecommunications and outsourced information services 396 421 Depositor and other retail banking losses 190 165 Advertising and promotion 337 335 Professional fees 145 138 Other expense     1,337       1,265   Total noninterest expense 6,396 6,551 Minority interest expense     138       71   Income from continuing operations before income taxes 2,701 3,815 Income taxes     876       1,341   Income from continuing operations     1,825       2,474   Discontinued Operations(1) Income from discontinued operations before income taxes - 42 Income taxes     -       15   Income from discontinued operations     -       27   Net Income   $ 1,825     $ 2,501   Net Income Available to Common Stockholders   $ 1,802     $ 2,501     Basic Earnings Per Common Share: Income from continuing operations $ 2.08 $ 2.59 Income from discontinued operations   -       0.03   Net Income 2.08 2.62   Diluted Earnings Per Common Share: Income from continuing operations $ 2.02 $ 2.51 Income from discontinued operations   -       0.03   Net Income 2.02 2.54   Dividends declared per common share 1.65 1.53 Basic weighted average number of common shares outstanding (in thousands) 866,864 954,062 Diluted weighted average number of common shares outstanding (in thousands) 889,534 981,997 _________________________   (1)   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)           Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,       2007       2007       2007       2006       2006   Assets Cash and cash equivalents $ 11,370 $ 4,167 $ 4,047 $ 6,948 $ 6,649 Federal funds sold and securities purchased under agreements to resell 4,042 3,267 8,279 3,743 5,102 Trading assets 3,797 5,534 5,290 4,434 5,391 Available-for-sale securities, total amortized cost of $28,725, $28,934, $22,921, $25,073 and $29,136: Mortgage-backed securities 20,562 20,393 16,543 18,601 22,847 Investment securities     7,844       7,947       6,296       6,377       6,170   Total available-for-sale securities 28,406 28,340 22,839 24,978 29,017 Loans held for sale 7,586 19,327 26,874 44,970 23,720 Loans held in portfolio 237,132 214,994 217,021 224,960 241,765 Allowance for loan and lease losses     (1,889 )     (1,560 )     (1,540 )     (1,630 )     (1,550 ) Loans held in portfolio, net 235,243 213,434 215,481 223,330 240,215 Investment in Federal Home Loan Banks 2,808 1,596 2,230 2,705 3,013 Mortgage servicing rights 6,794 7,231 6,507 6,193 6,288 Goodwill 9,062 9,056 9,052 9,050 8,368 Other assets     21,002       20,267       19,386       19,937       21,114   Total assets   $ 330,110     $ 312,219     $ 319,985     $ 346,288     $ 348,877   Liabilities Deposits: Noninterest-bearing deposits $ 31,341 $ 33,557 $ 34,367 $ 33,386 $ 34,667 Interest-bearing deposits     162,939       167,823       175,842       180,570       176,215   Total deposits 194,280 201,380 210,209 213,956 210,882 Federal funds purchased and commercial paper 2,482 3,390 563 4,778 5,282 Securities sold under agreements to repurchase 4,732 9,357 8,323 11,953 13,665 Advances from Federal Home Loan Banks 52,530 21,412 24,735 44,297 47,247 Other borrowings 40,887 40,313 39,430 32,852 33,883 Other liabilities 8,289 9,212 9,694 9,035 9,501 Minority interests     2,945       2,945       2,453       2,448       1,959   Total liabilities 306,145 288,009 295,407 319,319 322,419 Stockholders' equity Preferred stock 492 492 492 492 492 Capital surplus - common stock 2,575 2,715 3,121 5,825 5,761 Accumulated other comprehensive loss (390 ) (568 ) (268 ) (287 ) (180 ) Retained earnings     21,288       21,571       21,233       20,939       20,385   Total stockholders' equity     23,965       24,210       24,578       26,969       26,458   Total liabilities and stockholders' equity   $ 330,110     $ 312,219     $ 319,985     $ 346,288     $ 348,877   WM-5 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)           Quarter Ended Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,       2007       2007       2007       2006       2006   Stockholders' Equity Rollforward Balance, beginning of period $ 24,210 $ 24,578 $ 26,969 $ 26,458 $ 26,131 Net income 210 830 784 1,058 748 Cumulative effect from the adoption of new accounting pronouncements - - (6 ) (1) (157 ) (2) - Other comprehensive income (loss), net of income taxes 177 (300 ) 19 50 419 Cash dividends declared on common stock (485 ) (484 ) (476 ) (496 ) (497 ) Cash dividends declared on preferred stock (8 ) (8 ) (7 ) (8 ) - Common stock repurchased and retired(3) (199 ) (500 ) (2,797 ) - (930 ) Common stock issued 60 94 92 64 95 Preferred stock issued     -       -       -       -       492   Balance, end of period   $ 23,965     $ 24,210     $ 24,578     $ 26,969     $ 26,458     _________________________   (1)   As of January 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes.   (2)   On December 31, 2006, the Company adopted Statement of Financial Accounting Standards ("Statement") No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans. Statement No. 158 requires an entity to recognize the overfunded or underfunded status of its defined benefit postretirement plans as an asset or liability in its statement of financial condition and to recognize changes, through comprehensive income, in that funded status in the year in which the changes occur. The cumulative effects, net of income taxes, resulted in a $274 million decrease to December 31, 2006 other assets and a $117 million decrease to December 31, 2006 other liabilities.   (3)   The Company repurchased 7.2 million, 13.5 million, 61.4 million, 1.7 million and 18.8 million shares of its common stock in the three months ended September 30, 2007, June 30, 2007, March 31, 2007, December 31, 2006 and September 30, 2006. At September 30, 2007, 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   Nine Months Ended   Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,   Sept. 30,   Sept. 30,       2007       2007       2007       2006       2006       2007       2006   RETAIL BANKING GROUP Condensed income statement: Net interest income $ 1,302 $ 1,283 $ 1,275 $ 1,239 $ 1,260 $ 3,861 $ 3,929 Provision for loan and lease losses 318 91 62 47 53 471 120 Noninterest income 833 819 751 774 738 2,404 2,140 Inter-segment revenue 14 21 22 17 17 57 47 Noninterest expense     1,155       1,137       1,074       1,100       1,079       3,367       3,268   Income from continuing operations before income taxes 676 895 912 883 883 2,484 2,728 Income taxes     223       336       342       337       337       901       1,043   Income from continuing operations 453 559 570 546 546 1,583 1,685 Income from discontinued operations     -       -       -       12       9       -       27   Net income   $ 453     $ 559     $ 570     $ 558     $ 555     $ 1,583     $ 1,712   Performance and other data: Efficiency ratio 53.75 % 53.56 % 52.43 % 54.22 % 53.55 % 53.26 % 53.44 % Average loans $ 147,357 $ 149,716 $ 155,206 $ 172,013 $ 180,829 $ 150,731 $ 179,216 Average assets 157,196 159,518 165,047 182,240 191,288 160,559 189,587 Average deposits: Checking deposits: Noninterest bearing 22,860 23,107 22,331 21,873 21,440 22,768 21,072 Interest bearing     28,406       30,282       31,739       33,010       34,792       30,130       37,531   Total checking deposits 51,266 53,389 54,070 54,883 56,232 52,898 58,603 Savings and money market deposits 43,524 43,814 43,103 41,442 38,317 43,482 37,967 Time deposits     50,131       48,049       46,857       47,188       45,405       48,358       42,706   Average deposits 144,921 145,252 144,030 143,513 139,954 144,738 139,276 Loan volume 6,469 5,753 5,079 5,331 4,965 17,301 16,274 Employees at end of period 28,263 28,131 27,837 27,629 27,998 28,263 27,998 CARD SERVICES GROUP Managed basis(1) Condensed income statement: Net interest income $ 689 $ 660 $ 653 $ 664 $ 633 $ 2,004 $ 1,866 Provision for loan and lease losses 611 523 388 555 345 1,523 1,092 Noninterest income 399 393 474 451 343 1,267 1,076 Inter-segment expense 5 5 4 2 2 14 4 Noninterest expense     320       300       325       316       294       946       884   Income before income taxes 152 225 410 242 335 788 962 Income taxes     50       84       154       92       128       288       368   Net income   $ 102     $ 141     $ 256     $ 150     $ 207     $ 500     $ 594   Performance and other data: Efficiency ratio 29.56 % 28.68 % 28.96 % 28.40 % 30.16 % 29.06 % 30.08 % Average loans $ 25,718 $ 24,234 $ 23,604 $ 22,875 $ 21,706 $ 24,527 $ 20,762 Average assets 28,206 26,762 26,039 25,472 24,236 27,010 23,354 Employees at end of period 2,878 2,827 2,579 2,611 2,667 2,878 2,667   Securitization adjustments Condensed income statement: Net interest income $ (456 ) $ (459 ) $ (414 ) $ (437 ) $ (411 ) $ (1,330 ) $ (1,249 ) Provision for loan and lease losses (288 ) (294 ) (282 ) (280 ) (220 ) (865 ) (662 ) Noninterest income 168 165 132 157 191 465 587 Performance and other data: Average loans (14,488 ) (13,888 ) (12,507 ) (12,811 ) (12,169 ) (13,635 ) (11,947 ) Average assets (12,841 ) (12,287 ) (10,961 ) (11,035 ) (10,330 ) (12,036 ) (10,101 )   Adjusted basis Condensed income statement: Net interest income $ 233 $ 201 $ 239 $ 227 $ 222 $ 674 $ 617 Provision for loan and lease losses 323 229 106 275 125 658 430 Noninterest income 567 558 606 608 534 1,732 1,663 Inter-segment expense 5 5 4 2 2 14 4 Noninterest expense     320       300       325       316       294       946       884   Income before income taxes 152 225 410 242 335 788 962 Income taxes     50       84       154       92       128       288       368   Net income   $ 102     $ 141     $ 256     $ 150     $ 207     $ 500     $ 594   Performance and other data: Average loans $ 11,230 $ 10,346 $ 11,097 $ 10,064 $ 9,537 $ 10,892 $ 8,815 Average assets 15,365 14,475 15,078 14,437 13,906 14,974 13,253   (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   Nine Months Ended (This table is continued from "WM-6.")   Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,   Sept. 30,   Sept. 30,       2007       2007       2007       2006       2006       2007       2006   COMMERCIAL GROUP Condensed income statement: Net interest income $ 193 $ 195 $ 200 $ 189 $ 159 $ 588 $ 488 Provision for loan and lease losses 12 2 (10 ) (69 ) (2 ) 5 (12 ) Noninterest income (34 ) 62 14 40 25 41 54 Noninterest expense     67       74       74       72       60       214       184   Income before income taxes 80 181 150 226 126 410 370 Income taxes     26       68       56       86       48       150       141   Net income   $ 54     $ 113     $ 94     $ 140     $ 78     $ 260     $ 229   Performance and other data: Efficiency ratio 41.88 % 28.77 % 34.52 % 31.49 % 32.21 % 34.03 % 33.92 % Average loans $ 38,333 $ 38,789 $ 38,641 $ 37,552 $ 32,414 $ 38,586 $ 31,774 Average assets 40,661 41,181 41,001 40,216 34,560 40,946 33,997 Average deposits 7,851 6,160 3,762 3,609 2,323 5,939 2,274 Loan volume 4,054 4,348 3,671 4,019 3,104 12,073 8,835 Employees at end of period 1,421 1,404 1,351 1,409 1,242 1,421 1,242 HOME LOANS GROUP Condensed income statement: Net interest income $ 183 $ 215 $ 245 $ 273 $ 276 $ 644 $ 904 Provision for loan and lease losses 323 101 49 47 84 474 141 Noninterest income 184 391 162 126 314 736 1,176 Inter-segment expense 9 16 18 15 15 43 43 Noninterest expense     554       548       521       534       528       1,622       1,765   Income (loss) before income taxes (519 ) (59 ) (181 ) (197 ) (37 ) (759 ) 131 Income taxes (benefit)     (171 )     (22 )     (68 )     (75 )     (14 )     (261 )     50   Net income (loss)   $ (348 )   $ (37 )   $ (113 )   $ (122 )   $ (23 )   $ (498 )   $ 81   Performance and other data: Efficiency ratio 154.63 % 92.82 % 133.90 % 138.93 % 92.00 % 121.30 % 86.65 % Average loans $ 43,737 $ 43,312 $ 53,254 $ 51,048 $ 45,407 $ 46,733 $ 46,419 Average assets 61,068 60,314 71,367 71,503 70,563 64,212 73,199 Average deposits 13,745 17,506 16,767 19,788 20,659 15,995 19,120 Loan volume 26,434 35,857 34,022 37,532 41,241 96,312 134,037 Employees at end of period 12,167 12,666 12,952 12,941 13,857 12,167 13,857 CORPORATE SUPPORT/TREASURY AND OTHER Condensed income statement: Net interest income (expense) $ (35 ) $ 2 $ (15 ) $ (64 ) $ (107 ) $ (49 ) $ (210 ) Provision for loan and lease losses (9 ) (51 ) 27 44 (94 ) (34 ) (207 ) Noninterest income (108 ) 43 81 142 75 16 137 Noninterest expense 57 79 111 235 223 247 450 Minority interest expense     53       42       43       34       34       138       71   Loss from continuing operations before income taxes (244 ) (25 ) (115 ) (235 ) (195 ) (384 ) (387 ) Income taxes (benefit)     (58 )     (40 )     (71 )     (103 )     (90 )     (170 )     (197 ) Loss from continuing operations (186 ) 15 (44 ) (132 ) (105 ) (214 ) (190 ) Income from discontinued operations     -       -       -       406       -       -       -   Net income (loss)   $ (186 )   $ 15     $ (44 )   $ 274     $ (105 )   $ (214 )   $ (190 ) Performance and other data: Average loans $ 1,420 $ 1,367 $ 1,345 $ 1,310 $ 1,245 $ 1,377 $ 1,063 Average assets 47,570 41,817 40,891 46,233 40,825 43,450 38,865 Average deposits 32,132 37,847 46,205 47,891 45,976 38,676 39,461 Loan volume 113 72 107 144 58 292 163 Employees at end of period 5,019 4,961 4,974 5,234 5,292 5,019 5,292   (This table is continued on "WM-8.") WM-8 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)         Quarter Ended   Nine Months Ended (This table is continued from "WM-7.") Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,   Sept. 30,   Sept. 30,         2007       2007       2007       2006       2006       2007       2006   RECONCILING ADJUSTMENTS Condensed income statement: Net interest income(1) $ 138 $ 138 $ 137 $ 134 $ 137 $ 413 $ 395 Noninterest income (expense)(2)     (63 )     (115 )     (73 )     (98 )     (116 )     (251 )     (384 ) Income before income taxes 75 23 64 36 21 162 11 Income taxes (benefit)(3)     (60 )     (16 )     43       (22 )     (15 )     (32 )     (64 ) Net income   $ 135     $ 39     $ 21     $ 58     $ 36     $ 194     $ 75   Performance and other data: Average loans(4) $ (1,385 ) $ (1,301 ) $ (1,479 ) $ (1,573 ) $ (1,600 ) $ (1,388 ) $ (1,591 ) Average assets(4) (1,385 ) (1,301 ) (1,479 ) (1,573 ) (1,600 ) (1,388 ) (1,591 )   TOTAL CONSOLIDATED Condensed income statement: Net interest income $ 2,014 $ 2,034 $ 2,081 $ 1,998 $ 1,947 $ 6,131 $ 6,123 Provision for loan and lease losses 967 372 234 344 166 1,574 472 Noninterest income 1,379 1,758 1,541 1,592 1,570 4,678 4,786 Noninterest expense 2,153 2,138 2,105 2,257 2,184 6,396 6,551 Minority interest expense     53       42       43       34       34       138       71   Income from continuing operations before income taxes 220 1,240 1,240 955 1,133 2,701 3,815 Income taxes     10       410       456       315       394       876       1,341   Income from continuing operations 210 830 784 640 739 1,825 2,474 Income from discontinued operations     -       -       -       418       9       -       27   Net income   $ 210     $ 830     $ 784     $ 1,058     $ 748     $ 1,825     $ 2,501   Performance and other data: Efficiency ratio 63.42 % 56.38 % 58.13 % 62.87 % 62.09 % 59.18 % 60.05 % Average loans $ 240,692 $ 242,229 $ 258,064 $ 270,414 $ 267,832 $ 246,931 $ 265,696 Average assets 320,475 316,004 331,905 353,056 349,542 322,753 347,310 Average deposits 198,649 206,765 210,764 214,801 208,912 205,348 200,131 Loan volume 37,070 46,030 42,879 47,026 49,368 125,978 159,309 Employees at end of period 49,748 49,989 49,693 49,824 51,056 49,748 51,056 __________________________   (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 Sept. 30, 2007 June 30, 2007 Sept. 30, 2006 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(1): Federal funds sold and securities purchased under agreements to resell $ 4,349 5.43 % $ 60 $ 3,964 5.39 % $ 53 $ 5,085 5.38 % $ 70 Trading assets 4,509 9.54 108 4,995 8.67 108 6,264 8.92 140 Available-for-sale securities(2) 28,536 5.49 392 26,559 5.28 351 28,398 5.33 379 Loans held for sale 13,344 7.41 248 26,225 6.43 421 25,667 6.75 435 Loans held in portfolio: Loans secured by real estate: Home loans(3)(4) 97,398 6.48 1,579 90,818 6.44 1,462 123,355 5.94 1,830 Home equity loans and lines of credit(4) 57,469 7.56 1,094 54,431 7.59 1,031 52,646 7.53 998 Subprime mortgage channel(5) 20,405 6.63 338 20,152 6.80 343 20,207 6.26 316 Home construction(6) 2,056 6.90 35 2,043 6.72 34 2,059 6.41 33 Multi-family 30,058 6.63 498 29,419 6.63 488 27,100 6.42 435 Other real estate   7,418 6.99   131   6,843 7.03   120   5,696 6.76   98 Total loans secured by real estate 214,804 6.83 3,675 203,706 6.83 3,478 231,063 6.41 3,710 Consumer: Credit card 10,332 10.28 268 10,101 10.44 263 9,058 11.39 260 Other 233 14.83 8 254 12.44 8 284 12.57 9 Commercial   1,979 8.25   41   1,943 7.73   37   1,760 7.33   33 Total loans held in portfolio 227,348 7.01 3,992 216,004 7.02 3,786 242,165 6.61 4,012 Other   5,177 4.33   56   2,089 5.47   29   5,248 5.21   69 Total interest-earning assets 283,263 6.84 4,856 279,836 6.79 4,748 312,827 6.51 5,105 Noninterest-earning assets: Mortgage servicing rights 6,901 6,782 7,201 Goodwill 9,056 9,054 8,339 Other assets   21,255   20,332   21,175 Total assets $ 320,475 $ 316,004 $ 349,542 Liabilities Interest-bearing liabilities: Deposits: Interest-bearing checking deposits $ 28,492 2.36 169 $ 30,373 2.51 190 $ 34,866 2.90 255 Savings and money market deposits 57,377 3.32 480 58,969 3.33 490 49,144 3.19 396 Time deposits   80,719 4.92   1,001   84,330 4.96   1,043   90,001 4.76   1,088 Total interest-bearing deposits 166,588 3.93 1,650 173,672 3.98 1,723 174,011 3.95 1,739 Federal funds purchased and commercial paper 2,991 5.40 41 2,169 5.36 29 7,382 5.31 99 Securities sold under agreements to repurchase 8,617 5.34 116 8,416 5.35 112 15,676 5.39 216 Advances from Federal Home Loan Banks 34,128 5.39 464 22,063 5.36 295 52,886 5.28 711 Other   40,567 5.60   571   39,886 5.57   555   27,815 5.59   393 Total interest-bearing liabilities 252,891 4.46   2,842 246,206 4.42   2,714 277,770 4.48   3,158 Noninterest-bearing sources: Noninterest-bearing deposits 32,061 33,093 34,901 Other liabilities 8,584 9,610 8,765 Minority interests 2,945 2,659 1,959 Stockholders' equity   23,994   24,436   26,147 Total liabilities and stockholders' equity $ 320,475 $ 316,004 $ 349,542 Net interest spread and net interest income 2.38 $ 2,014 2.37 $ 2,034 2.03 $ 1,947 Impact of noninterest-bearing sources 0.48 0.53 0.50 Net interest margin 2.86 2.90 2.53 _______________________________   (1) Nonaccrual assets and related income, if any, are included in their respective categories.   (2) The average balance and yield are based on average amortized cost balances.   (3) Capitalized interest recognized in earnings that resulted from negative amortization within the Option ARM portfolio totaled $345 million, $344 million and $296 million for the three months ended September 30, 2007, June 30, 2007 and September 30, 2006.   (4) Excludes home loans and home equity loans and lines of credit in the subprime mortgage channel.   (5) Represents mortgage loans purchased from recognized subprime lenders and mortgage loans originated under the Long Beach Mortgage name and held in the investment portfolio.   (6) 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)           Nine Months Ended Sept. 30, 2007 Sept. 30, 2006 Interest Interest Income/ Income/         Balance   Rate   Expense Balance   Rate   Expense Average Balances and Weighted Average Interest Rates Assets Interest-earning assets(1):   Federal funds sold and securities purchased underagreements to resell $ 4,083 5.41 % $ 165 $ 4,422 5.04 % $ 169 Trading assets 5,029 8.73 329 8,831 7.60 503 Available-for-sale securities(2) 26,593 5.39 1,075 27,160 5.24 1,068 Loans held for sale 24,924 6.59 1,232 26,659 6.45 1,292 Loans held in portfolio: Loans secured by real estate: Home loans(3)(4) 95,194 6.46 4,611 122,232 5.76 5,282 Home equity loans and lines of credit(4) 54,988 7.57 3,114 52,068 7.26 2,830 Subprime mortgage channel(5) 20,389 6.70 1,025 19,939 6.14 918 Home construction(6) 2,053 6.72 103 2,062 6.41 99 Multi-family 29,768 6.61 1,476 26,388 6.19 1,226 Other real estate     7,011 7.02   368   5,482 6.85   284 Total loans secured by real estate 209,403 6.82 10,697 228,171 6.22 10,639 Consumer: Credit card 10,443 10.78 842 8,442 11.16 704 Other 251 13.37 25 499 10.84 40 Commercial     1,910 7.98   114   1,925 6.67   97 Total loans held in portfolio 222,007 7.02 11,678 239,037 6.41 11,480 Other     3,585 5.01   134   5,191 4.74   185 Total interest-earning assets 286,221 6.81 14,613 311,300 6.30 14,697 Noninterest-earning assets: Mortgage servicing rights 6,665 8,151 Goodwill 9,054 8,313 Other assets     20,813   19,546 Total assets   $ 322,753 $ 347,310 Liabilities Interest-bearing liabilities: Deposits: Interest-bearing checking deposits $ 30,216 2.50 566 $ 37,615 2.59 728 Savings and money market deposits 57,079 3.31 1,413 47,367 2.81 997 Time deposits     85,520 4.95   3,166   80,970 4.42   2,695 Total interest-bearing deposits 172,815 3.98 5,145 165,952 3.55 4,420 Federal funds purchased and commercial paper 2,999 5.43 122 7,537 4.92 279 Securities sold under agreements to repurchase 9,698 5.40 392 16,294 4.95 612 Advances from Federal Home Loan Banks 30,740 5.38 1,237 60,197 4.84 2,203 Other     37,782 5.61   1,586   26,901 5.23   1,060 Total interest-bearing liabilities 254,034 4.46   8,482 276,881 4.11   8,574 Noninterest-bearing sources: Noninterest-bearing deposits 32,533 34,179 Other liabilities 9,222 8,445 Minority interests 2,686 1,497 Stockholders' equity     24,278   26,308 Total liabilities and stockholders' equity   $ 322,753 $ 347,310 Net interest spread and net interest income 2.35 $ 6,131 2.19 $ 6,123 Impact of noninterest-bearing sources 0.50 0.45 Net interest margin 2.85 2.64 _______________________________   (1) Nonaccrual assets and related income, if any, are included in their respective categories.   (2) The average balance and yield are based on average amortized cost balances.   (3) Capitalized interest recognized in earnings that resulted from negative amortization within the Option ARM portfolio totaled $1.05 billion and $735 million for the nine months ended September 30, 2007 and September 30, 2006.   (4) Excludes home loans and home equity loans and lines of credit in the subprime mortgage channel.   (5) Represents mortgage loans purchased from recognized subprime lenders and mortgage loans originated under the Long Beach Mortgage name and held in the investment portfolio.   (6) 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)         Changefrom June 30,2007 toSept. 30,   Sept. 30,   June 30,   Mar. 31,   Dec. 31, Sept. 30,         2007       2007       2007       2007       2006       2006   Deposits Retail deposits: Checking deposits: Noninterest bearing $ (421 ) $ 23,721 $ 24,142 $ 24,400 $ 22,838 $ 22,466 Interest bearing     (2,315 )     27,277       29,592       31,523       32,723       33,761   Total checking deposits (2,736 ) 50,998 53,734 55,923 55,561 56,227 Savings and money market deposits (257 ) 43,360 43,617 44,058 41,943 39,481 Time deposits(1)     2,600       50,740       48,140       47,262       46,821       47,361   Total retail deposits (393 ) 145,098 145,491 147,243 144,325 143,069 Commercial business and other deposits (2,650 ) 16,536 19,186 17,741 15,175 15,831 Brokered deposits: Consumer 331 17,484 17,153 18,995 22,299 22,430 Institutional (2,918 ) 8,107 11,025 17,256 22,339 18,236 Custodial and escrow deposits(2)     (1,470 )     7,055       8,525       8,974       9,818       11,316   Total deposits   $ (7,100 )   $ 194,280     $ 201,380     $ 210,209     $ 213,956     $ 210,882     (1)   Weighted average remaining maturity of time deposits was 7 months at September 30, 2007, 8 months at June 30, 2007, 9 months at March 31, 2007 and December 31, 2006 and 10 months at September 30, 2006.   (2)   Substantially all custodial and escrow deposits reside in noninterest-bearing checking accounts.   Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,             2007       2007       2007       2006       2006   Retail Deposit Accounts (number of accounts) Noninterest bearing checking 10,824,548 10,449,887 9,983,313 9,611,706 9,403,072 Interest bearing checking 1,334,902 1,399,203 1,459,534 1,503,365 1,532,215 Savings and money market         7,087,311       6,936,870       6,708,784       6,525,772       6,379,068   Total transaction accounts, end of period(1)       19,246,761       18,785,960       18,151,631       17,640,843       17,314,355     Net change in noninterest bearing checking accounts 374,661 466,574 371,607 208,634 339,614 Net change in checking accounts 310,360 406,243 327,776 179,784 307,433 _______________________________   (1)   Transaction accounts include retail checking, small business checking, retail savings and small business savings.   Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,             2007       2007       2007       2006       2006   Retail Banking Stores Stores, beginning of period 2,235 2,228 2,225 2,225 2,201 Stores opened during the quarter 10 11 6 81 (1) 25 Stores closed during the quarter         (33 )     (4 )     (3 )     (81 )     (1 ) Stores, end of period         2,212       2,235       2,228       2,225       2,225     (1)   Includes 26 retail banking stores acquired through the merger with Commercial Capital Bancorp. WM-12 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)         Quarter Ended     Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,         2007       2007       2007       2006       2006   Loan Volume Home loans: Short-term adjustable-rate loans(1): Option ARMs $ 5,865 $ 7,888 $ 7,777 $ 9,487 $ 11,601 Other ARMs     111       22       36       13       42   Total short-term adjustable-rate loans 5,976 7,910 7,813 9,500 11,643 Medium-term adjustable-rate loans(2) 10,177 14,953 13,567 17,323 16,707 Fixed-rate loans     6,176       8,172       8,824       7,351       8,818   Total home loan volume 22,329 31,035 30,204 34,174 37,168 Home equity loans and lines of credit 9,835 9,880 8,319 8,098 8,498 Home construction(3) 483 426 298 298 269 Multi-family 2,856 3,067 2,663 2,977 2,186 Other real estate     1,285       1,246       1,080       1,182       983   Total loans secured by real estate(4) 36,788 45,654 42,564 46,729 49,104 Consumer(5) 6 20 26 23 26 Commercial     276       356       289       274       238   Total loan volume   $ 37,070     $ 46,030     $ 42,879     $ 47,026     $ 49,368   Loan Volume by Channel Retail $ 22,520 $ 25,094 $ 21,809 $ 23,594 $ 21,776 Wholesale 13,387 16,545 14,853 16,834 15,427 Purchased 1,163 4,391 6,217 6,398 11,560 Correspondent     -       -       -       200       605   Total loan volume by channel   $ 37,070     $ 46,030     $ 42,879     $ 47,026     $ 49,368   Refinancing Activity(6) Home loan refinancing $ 14,722 $ 22,637 $ 22,552 $ 25,060 $ 23,993 Home equity loans and lines of credit and consumer 143 157 550 599 689 Home construction loans 30 121 276 283 254 Multi-family and other real estate     1,225       1,378       1,131       2,240       1,398   Total refinancing   $ 16,120     $ 24,293     $ 24,509     $ 28,182     $ 26,334     (1)   Short-term is defined as adjustable-rate loans that reprice within one year.   (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)   Includes mortgage loans purchased from recognized subprime lenders and mortgage loans originated under the Long Beach Mortgage name of $483 million, $2.45 billion, $3.48 billion, $6.07 billion and $9.40 billion for the three months ended September 30, 2007, June 30, 2007, March 31, 2007, December 31, 2006 and September 30, 2006.   (5)   Excludes credit card loan volume.   (6)   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)         Nine Months Ended     Sept. 30,   Sept. 30,         2007     2006 Loan Volume Home loans: Short-term adjustable-rate loans(1): Option ARMs $ 21,530 $ 33,106 Other ARMs     170     3,372 Total short-term adjustable-rate loans 21,700 36,478 Medium-term adjustable-rate loans(2) 38,697 47,613 Fixed-rate loans     23,171     40,119 Total home loan volume 83,568 124,210 Home equity loans and lines of credit 28,034 24,055 Home construction(3) 1,206 1,183 Multi-family 8,585 6,450 Other real estate     3,611     2,486 Total loans secured by real estate(4) 125,004 158,384 Consumer(5) 52 111 Commercial     922     814 Total loan volume   $ 125,978   $ 159,309 Loan Volume by Channel Retail $ 69,423 $ 67,344 Wholesale 44,785 47,668 Purchased 11,770 30,911 Correspondent     -     13,386 Total loan volume by channel   $ 125,978   $ 159,309 Refinancing Activity(6) Home loan refinancing $ 59,911 $ 77,529 Home equity loans and lines of credit and consumer 851 1,066 Home construction loans 426 1,026 Multi-family and other real estate     3,734     4,173 Total refinancing   $ 64,922   $ 83,794   (1)   Short-term is defined as adjustable-rate loans that reprice within one year.   (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)   Includes mortgage loans purchased from recognized subprime lenders and mortgage loans originated under the Long Beach Mortgage name of $6.42 billion and $24.69 billion for the nine months ended September 30, 2007 and September 30, 2006.   (5)   Excludes credit card loan volume.   (6)   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)       ChangefromJune 30,2007 to Sept. 30,   Sept. 30,   June 30,   Mar. 31, Dec. 31, Sept. 30,         2007       2007       2007       2007       2006       2006   Loans Held in Portfolio   Loans secured by real estate: Home: Short-term adjustable-rate loans(1): Option ARMs(2) $ 4,403 $ 57,858 $ 53,455 $ 58,130 $ 63,557 $ 67,142 Other ARMs     (2,826 )     10,712       13,538       13,501       15,091       16,375   Total short-term adjustable-rate loans 1,577 68,570 66,993 71,631 78,648 83,517 Medium-term adjustable-rate loans(3) 13,115 42,762 29,647 29,924 29,774 47,740 Fixed-rate loans     2,308       11,813       9,505       9,506       9,782       9,928   Total home loans 17,000 123,145 106,145 111,061 118,204   141,185 Home equity loans and lines of credit 3,200 61,831 58,631 56,123 54,924 54,364 Home construction(4) 52 2,110 2,058 2,071 2,082 2,077 Multi-family 1,541 30,831 29,290 29,515 30,161 27,407 Other real estate     1,456       8,335       6,879       6,728       6,745       5,869   Total loans secured by real estate(5) 23,249 226,252 203,003 205,498 212,116 230,902 Consumer: Credit card (1,122 ) 8,791 9,913 9,490 10,861 8,807 Other (19 ) 224 243 261 276 281 Commercial     30       1,865       1,835       1,772       1,707       1,775   Total loans held in portfolio (6) 22,138 237,132 214,994 217,021 224,960 241,765 Less: allowance for loan and lease losses     (329 )     (1,889 )     (1,560 )     (1,540 )     (1,630 )     (1,550 ) Total loans held in portfolio, net   $ 21,809     $ 235,243     $ 213,434     $ 215,481     $ 223,330     $ 240,215     (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 $1.50 billion, $1.30 billion, $1.12 billion, $888 million and $681 million at September 30, 2007, June 30, 2007, March 31, 2007, December 31, 2006 and September 30, 2006.   (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 Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,           2007       2007       2007     2006     2006   Home loans $ 17,285 $ 17,602 $ 17,610 $ 18,725 $ 20,083 Home equity loans and lines of credit         2,711       2,855       2,749     2,042     1,522   Total       $ 19,996     $ 20,457     $ 20,359   $ 20,767   $ 21,605     (6)   Includes net unamortized deferred loan origination costs of $1.33 billion, $1.33 billion, $1.43 billion, $1.48 billion and $1.61 billion at September 30, 2007, June 30, 2007, March 31, 2007, December 31, 2006 and September 30, 2006. WM-15           Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)         ChangefromJune 30,2007 toSept. 30,2007                             Sept. 30,2007   Weighted Average Coupon Rate     June 30,2007   Weighted Average Coupon Rate     Sept. 30,2006   Weighted Average Coupon Rate   Selected Loans Secured by Real Estate Home loans held in portfolio: Short-term adjustable-rate loans(1): Option ARMs $ 4,403 $ 57,858 7.62 % $ 53,455 7.74 % $ 67,142 7.13 % Other ARMs   (2,826 )     10,712 7.74   13,538   7.28   16,375   7.01 Total short-term adjustable-rate loans 1,577 68,570 7.64 66,993 7.65 83,517 7.11 Medium-term adjustable-rate loans(2) 13,115 42,762 6.30 29,647 5.99 47,740 5.72 Fixed-rate loans   2,308       11,813 6.74   9,505   6.71   9,928   6.59 Total home loans held in portfolio 17,000 123,145 7.09 106,145 7.10 141,185 6.60 Home equity loans and lines of credit: Short-term (Prime-based or treasury-based)(1) 1,451 36,446 8.06 34,995 8.47 35,831 8.40 Fixed-rate loans   1,749       25,385 7.69   23,636   7.68   18,533   7.16 Total home equity loans and lines of credit 3,200 61,831 7.91 58,631 8.15 54,364 7.98 Multi-family loans held in portfolio: Short-term adjustable-rate loans(1): Option ARMs (569 ) 7,081 7.25 7,650 7.28 8,967 6.95 Other ARMs   (614 )     7,296 6.77   7,910   6.77   5,858   6.94 Total short-term adjustable-rate loans (1,183 ) 14,377 7.01 15,560 7.02 14,825 6.95 Medium-term adjustable-rate loans(2) 2,701 14,591 6.03 11,890 5.93 10,906 5.59 Fixed-rate loans   23       1,863 6.31   1,840   6.35   1,676   6.45 Total multi-family loans held in portfolio   1,541       30,831 6.50   29,290   6.53   27,407   6.38 Total selected loans held in portfolio secured by real estate(3) 21,741 215,807 7.24 194,066 7.33 222,956 6.90 Loans held for sale(4)   (12,772 )     6,227 6.36 18,999   6.39     23,387 6.64 Total selected loans secured by real estate $ 8,969     $ 222,034 7.21 $ 213,065   7.25 $ 246,343   6.88   (1) Short-term adjustable-rate loans reprice within one year.   (2) Medium-term adjustable-rate loans reprice after one year.   (3) At September 30, 2007, June 30, 2007 and September 30, 2006, adjustable-rate loans with lifetime caps were $175.21 billion, $158.24 billion and $190.36 billion with a lifetime weighted average cap rate of 12.44%, 12.96% and 12.13%.   (4) Excludes credit card and student loans.     June 30,2007 Dec. 31,2006                     to Sept.30, 2007     to Sept.30, 2007   Rollforward of Loans Held for Sale Balance, beginning of period $ 19,327 $ 44,970 Mortgage loans originated, purchased and transferred from held in portfolio 14,370 73,948 Mortgage loans transferred to held in portfolio (17,004 ) (19,677 ) Mortgage loans sold and other(1) (10,138 ) (92,768 ) Net change in consumer loans held for sale                 1,031           1,113   Balance, end of period               $ 7,586         $ 7,586     Rollforward of Home Loans Held in Portfolio Balance, beginning of period $ 106,145 $ 118,204 Loans originated, purchased and transferred from held for sale 25,727 36,012 Loan payments, transferred to held for sale and other                 (8,727 )         (31,071 ) Balance, end of period               $ 123,145         $ 123,145     (1) The unpaid principal balance ("UPB") of home loans sold was $9.03 billion and $84.58 billion for the three and nine months ended September 30, 2007. WM-16 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)     Quarter Ended Detail of Revenue from Sales and Servicing of Home Mortgage Loans Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,     2007       2007       2007       2006       2006   Gain (loss) from home mortgage loans and originated mortgage-backed securities, net of hedging and risk management instruments(1): Gain (loss) from home mortgage loans and originated mortgage-backed securities $ (169 ) $ 66 $ 149 $ 64 $ 206 Revaluation gain (loss) from derivatives economically hedging loans held for sale   (53 )     126       (54 )     91       (87 ) Gain (loss) from home mortgage loans and originated mortgage-backed securities, net of hedging and risk management instruments (222 ) 192 95 155 119 Home mortgage loan servicing revenue (expense): Home mortgage loan servicing revenue(2) 516 526 514 497 525 Change in MSR fair value due to payments on loans and other   (351 )     (401 )     (356 )     (375 )     (410 ) Net mortgage loan servicing revenue 165 125 158 122 115 Change in MSR fair value due to valuation inputs or assumptions (201 ) 530 (96 ) (80 ) (469 ) Revaluation gain (loss) from derivatives economically hedging MSR   419       (547 )     (32 )     (33 )     353   Home mortgage loan servicing revenue (expense), net of MSR valuation changes and derivative risk management instruments 383 108 30 9 (1 ) Total revenue from sales and servicing of home mortgage loans $ 161     $ 300     $ 125     $ 164     $ 118                     Nine Months Ended Detail of Revenue from Sales and Servicing of Home Mortgage Loans Sept. 30, Sept. 30,                   2007       2006   Gain from home mortgage loans and originated mortgage-backed securities, net of hedging and risk management instruments(1): Gain from home mortgage loans and originated mortgage-backed securities $ 45 $ 563 Revaluation gain from derivatives economically hedging loans held for sale               20       17   Gain from home mortgage loans and originated mortgage-backed securities, net of hedging and risk management instruments 65 580 Home mortgage loan servicing revenue: Home mortgage loan servicing revenue(2) 1,557 1,683 Change in MSR fair value due to payments on loans and other               (1,109 )     (1,279 ) Net mortgage loan servicing revenue 448 404 Change in MSR fair value due to valuation inputs or assumptions 233 379 Revaluation loss from derivatives economically hedging MSR (160 ) (603 ) Adjustment to MSR fair value for MSR sale               -       (157 ) Home mortgage loan servicing revenue, net of MSR valuation changes and derivative risk management instruments 521 23 Total revenue from sales and servicing of home mortgage loans             $ 586     $ 603     (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 government housing-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   Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,       2007       2007       2007       2006       2006   MSR Valuation and Risk Management: Change in MSR fair value due to valuation inputs or assumptions $ (201 ) $ 530 $ (96 ) $ (80 ) $ (469 ) Gain (loss) on MSR risk management instruments: Revaluation gain (loss) from derivatives 419 (547 ) (32 ) (33 ) 353 Revaluation gain (loss) from certain trading securities 4 (4 ) 4 (5 ) 39 Loss from certain available-for-sale securities     -       -       -       -       (1 ) Total gain (loss) on MSR risk management instruments     423       (551 )     (28 )     (38 )     391   Total changes in MSR valuation and risk management   $ 222     $ (21 )   $ (124 )   $ (118 )   $ (78 )                   Nine Months Ended Sept. 30, Sept. 30,                   2007       2006   MSR Valuation and Risk Management(1): Change in MSR fair value due to valuation inputs or assumptions $ 233 $ 379 Loss on MSR risk management instruments: Revaluation loss from derivatives (160 ) (603 ) Revaluation gain (loss) from certain trading securities 4 (50 ) Loss from certain available-for-sale securities                 -       (1 ) Total loss on MSR risk management instruments                 (156 )     (654 ) Total changes in MSR valuation and risk management               $ 77     $ (275 )   (1)   Excludes $157 million downward adjustment to MSR fair value recognized in the nine months ended September 30, 2006. WM-18 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)       Quarter Ended       Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,         2007       2007       2007       2006       2006   Rollforward of Mortgage Servicing Rights(1) Balance, beginning of period $ 7,231 $ 6,507 $ 6,193 $ 6,288 $ 9,162 Home loans: Additions 116 592 760 357 533 Change in MSR fair value due to payments on loans and other (351 ) (401 ) (356 ) (375 ) (410 )   Change in MSR fair value due to valuation inputs or assumptions (201 ) 530 (96 ) (80 ) (469 ) Sale of MSR - - - 1 (2,527 ) Net change in commercial real estate MSR     (1 )     3       6       2       (1 ) Balance, end of period   $ 6,794     $ 7,231     $ 6,507     $ 6,193     $ 6,288   Rollforward of Mortgage Loans Serviced for Others Balance, beginning of period $ 474,867 $ 467,782 $ 444,696 $ 439,208 $ 570,352 Home loans: Additions 8,700 29,949 44,550 25,833 29,899 Sale of servicing - - - - (141,842 ) Loan payments and other (20,716 ) (24,213 ) (22,469 ) (20,744 ) (19,288 ) Net change in commercial real estate loans     585       1,349       1,005       399       87   Balance, end of period   $ 463,436     $ 474,867     $ 467,782     $ 444,696     $ 439,208       Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,         2007       2007       2007       2006       2006   Total Servicing Portfolio Mortgage loans serviced for others $ 463,436 $ 474,867 $ 467,782 $ 444,696 $ 439,208 Consumer loans serviced for others 16,078 14,745 13,645 12,415 13,112 Servicing on retained MBS without MSR 980 1,023 1,082 1,140 1,199 Servicing on owned loans 232,392 218,122 226,217 251,766 245,925 Subservicing portfolio     418       439       465       84,797       137,089   Total servicing portfolio   $ 713,304     $ 709,196     $ 709,191     $ 794,814     $ 836,533                         September 30, 2007                     Unpaid Principal Balance   Weighted Average Servicing Fee (in basis points, annualized) Mortgage Loans Serviced for Others by Loan Type Agency $ 247,878 31 Private 183,409 57 Subprime mortgage channel-home                   32,149   51 Total mortgage loans serviced for others(2)                 $ 463,436   43   (1)   MSR as a percentage of mortgage loans serviced for others was 1.47%, 1.52%, 1.39%, 1.39% and 1.43% at September 30, 2007, June 30, 2007, March 31, 2007, December 31, 2006 and September 30, 2006.   (2)   Weighted average coupon rate was 6.33% at September 30, 2007. WM-19 Washington Mutual, Inc. Selected Financial Information (dollars in millions) (unaudited)       Quarter Ended     Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,         2007       2007       2007       2006       2006   Allowance for Loan and Lease Losses Balance, beginning of quarter $ 1,560 $ 1,540 $ 1,630 $ 1,550 $ 1,663 Allowance transferred to loans held for sale (217 ) (81 ) (148 ) (158 ) (125 ) Allowance acquired through business combinations/other - - 7 30 - Provision for loan and lease losses     967       372       234       344       166     2,310 1,831 1,723 1,766 1,704 Loans charged off: Loans secured by real estate: Home loans(1) (52 ) (21 ) (35 ) (16 ) (12 ) Home equity loans and lines of credit(1) (104 ) (55 ) (29 ) (13 ) (8 ) Subprime mortgage channel(2) (146 ) (103 ) (40 ) (52 ) (47 ) Home construction(3) - (1 ) - (4 ) (3 ) Other real estate     (1 )     (1 )     -       (1 )     (2 )   Total loans secured by real estate (303 ) (181 ) (104 ) (86 ) (72 ) Consumer: Credit card (120 ) (106 ) (96 ) (68 ) (98 ) Other (2 ) (2 ) (3 ) (3 ) (3 ) Commercial     (20 )     (15 )     (9 )     (9 )     (6 )   Total loans charged off (445 )     (304 )   (212 )   (166 )   (179 ) Recoveries of loans previously charged off: Loans secured by real estate: Home loans(1) 1 1 1 - - Home equity loans and lines of credit(1) 3 3 3 2 2 Subprime mortgage channel(2) 1 11 1 4 - Other real estate     2       -       -       -       -     Total loans secured by real estate 7 15 5 6 2 Consumer: Credit card 14 15 16 18 16 Other - - 6 3 4 Commercial     3       3       2       3       3     Total recoveries of loans previously charged off     24       33       29       30       25     Net charge-offs     (421 )     (271 )     (183 )     (136 )     (154 )   Balance, end of quarter   $ 1,889     $ 1,560     $ 1,540     $ 1,630     $ 1,550         Net charge-offs (annualized) as a percentage of average loans held in portfolio 0.74 %   0.50 %   0.33 %   0.23 %   0.26 %   Allowance as a percentage of loans held in portfolio 0.80 0.73 0.71 0.72 0.64 ______________________________   (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.   (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)     Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,       2007       2007       2007       2006       2006   Nonperforming Assets Nonaccrual loans(1)(2): Loans secured by real estate: Home loans(3) $ 1,452 $ 991 $ 690 $ 640 $ 568 Home equity loans and lines of credit(3) 533 378 297 231 162 Subprime mortgage channel(4) 2,356 1,707 1,503 1,283 1,121 Home construction(5) 44 47 41 27 35 Multi-family 120 69 60 46 31 Other real estate     49       52       52       51       53   Total nonaccrual loans secured by real estate 4,554 3,244 2,643 2,278 1,970 Consumer 1 1 1 1 1 Commercial     22       30       28       16       16   Total nonaccrual loans held in portfolio 4,577 3,275 2,672 2,295 1,987 Foreclosed assets(6)     874       750       587       480       405   Total nonperforming assets(7)   $ 5,451     $ 4,025     $ 3,259     $ 2,775     $ 2,392     Total nonperforming assets as a percentage of total assets 1.65 % 1.29 % 1.02 % 0.80 % 0.69 % ______________________________   (1) Nonaccrual loans held for sale, which are excluded from the nonaccrual balances presented above, were $7 million, $171 million, $195 million, $185 million and $129 million at September 30, 2007, June 30, 2007, March 31, 2007, December 31, 2006 and September 30, 2006. 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) Excludes home loans and home equity loans and lines of credit in the subprime mortgage channel.   (4) Represents mortgage loans purchased from recognized subprime lenders and mortgage loans originated under the Long Beach Mortgage name and held in the investment portfolio.   (5) 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.   (6) Foreclosed real estate securing Government National Mortgage Association ("GNMA") loans of $46 million, $49 million, $72 million, $99 million and $129 million at September 30, 2007, June 30, 2007, March 31, 2007, December 31, 2006 and September 30, 2006 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").   (7) Excludes accruing restructured loans of $287 million, $285 million, $355 million, $330 million and $331 million at September 30, 2007, June 30, 2007, March 31, 2007, December 31, 2006 and September 30, 2006.